10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2002
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-2648

HON INDUSTRIES Inc.

An Iowa Corporation IRS Employer No. 42-0617510

414 East Third Street
P. O. Box 1109
Muscatine, IA 52761-0071
563/264-7400

Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, with par value of $1.00 per share.
Preferred Share Purchase Rights to purchase shares of Series A Junior Participating.
Preferred Stock, with par value of $1.00 per share.

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)    Yes  ý    No  o

        The aggregate market value of the voting stock held by nonaffiliates of the registrant, as of June 28, 2002, was: $1,220,433,171 assuming all 5% holders are affiliates.

        The number of shares outstanding of the registrant's common stock, as of March 3, 2003, was: 58,351,974.

Documents Incorporated by Reference

        Portions of the registrant's Proxy Statement dated March 24, 2003, for the May 5, 2003, Annual Meeting of Shareholders are incorporated by reference into Part III.

        Index of Exhibits is located on Page 61.

ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

PART I
		Page
Item 1.	Business	3
Item 2.	Properties	10
Item 3.	Legal Proceedings	11
Item 4.	Submission of Matters to a Vote of Security Holders	11
	Table I—Executive Officers of the Registrant	12
PART II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters	13
Item 6.	Selected Financial Data—Eleven-Year Summary	15
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	24
PART III
Item 10.	Directors and Executive Officers of the Registrant	25
Item 11.	Executive Compensation	25
Item 12.	Securities Ownership of Certain Beneficial Owners and Management	25
Item 13.	Certain Relationships and Related Transactions	25
PART IV
Item 14.	Controls and Procedures	26
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	26
Signatures		29
Certifications		31
Financial Statements		33
Financial Statement Schedules		60
Index of Exhibits		61

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ANNUAL REPORT ON FORM 10-K

PART I

ITEM 1.    BUSINESS

General

        HON INDUSTRIES Inc. ("HON" or the "Company") is an Iowa corporation incorporated in 1944. The Company is a provider of office furniture and hearth products. Approximately 76% of fiscal year 2002 net sales were in office furniture and 24% in hearth products. A broad office furniture product offering is sold to dealers, wholesalers, warehouse clubs, retail superstores, end-user customers, and federal and state governments. Dealer, wholesaler, and retail superstores are the major channels based on sales.

        Hearth products include wood-, pellet-, gas-burning and electric factory-built fireplaces, fireplace inserts, stoves, and gas logs. These products are sold through a national system of dealers, wholesalers, large regional contractors, and Company-owned retail outlets. In fiscal 2002, the Company had net sales of $1.7 billion, of which approximately $1.3 billion was attributable to office furniture products and $0.4 billion was attributable to hearth products. Please refer to Operating Segment Information in the Notes to Consolidated Financial Statements for further information about operating segments.

        The Company is organized into a corporate headquarters and operating units with offices, manufacturing plants, distribution centers, and sales showrooms in the United States, Canada, and Mexico. See Item 2. Properties, for additional related discussion. Five operating units, marketing under various brand names, participate in the office furniture industry. These operating units include: The HON Company, Allsteel Inc., Maxon Furniture Inc. (previously BPI Inc), The Gunlocke Company, and Holga Inc. Each of these operating units provides products which are sold through various channels of distribution and segments of the industry.

        Hearth & Home Technologies Inc. (previously Hearth Technologies Inc.) was created in October 1996 with the acquisition of Heat-N-Glo Fireplace Products, Inc. and its subsequent integration with the Company's Heatilator operation. On February 20, 1998, the Company acquired Aladdin Steel Products, Inc., a manufacturer of wood-, pellet-, and gas-burning stoves and inserts. On February 29, 2000, the Company completed the acquisition of two leading hearth products distributors, American Fireplace Company (AFC) and the Allied Group (Allied). AFC and Allied have been integrated under the trade name Fireside Hearth & Home. Fireside Hearth & Home sells, installs, and services a broad range of gas- and wood-burning fireplaces as well as fireplace mantels, surrounds, facings, and other accessories.

        HON International Inc. markets select products manufactured by the other various HON INDUSTRIES operating units outside the United States and Canada. It also operates foreign business development offices in Singapore, Japan, and Mexico.

        Since its inception, the Company has been committed to improvement in manufacturing and in 1992 introduced its process improvement approach known as Rapid Continuous Improvement ("RCI") which focuses on streamlining design, manufacturing, and administrative processes. The Company's RCI program, in which most members participate, has contributed to increased productivity, lower manufacturing costs, improved product quality, and workplace safety. In addition, the Company's RCI efforts enable it to offer short average lead times, from receipt of order to delivery and installation, for most of its products.

        The Company distributes its products through an extensive network of independent office furniture dealers, office products dealers, wholesalers and retailers. The Company is a supplier of office furniture to each of the largest nationwide chains of office products dealers, or "mega-dealers," which are Boise Cascade Corporation; Corporate Express Inc., A Buhrmann Company; Office Depot Business Services Group; and Staples Commercial Advantage. The Company is also a supplier to the Office Depot, Staples, and Office Max superstores.

        The Company's product development efforts are focused on developing and providing solutions that are sensitive to quality, aesthetics, style, purposeful design and on reducing the cost to manufacture existing products.

        An important element of the Company's success has been its member-owner culture, which has enabled it to attract, develop and retain skilled, experienced and efficient members. Each of the Company's eligible members own stock in the Company through a number of stock-based plans, including a member stock purchase plan and a profit-sharing retirement plan, which drives a unique level of commitment to the Company's success throughout the entire workforce. In addition, most production members are eligible for incentive bonuses.

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        For further financial-related information with respect to acquisitions, dispositions, and Company operations in general, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and the following captions included in the Notes to Consolidated Financial Statements, which are filed as part of this report: Nature of Operations, Business Combinations, and Operating Segment Information.

Industry

        According to the Business and Institutional Furniture Manufacturer's Association ("BIFMA"), U.S. office furniture industry shipments are estimated to be approximately $8,890,000,000 in 2002, a decrease of 19.0% compared to 2001, which was a 17.4% decrease from 2000 levels. The Company believes that the decrease was due to lower corporate profits and prevailing economic conditions.

        The U.S. office furniture market consists of two primary segments—the project or contract segment and the commercial segment. The project segment has traditionally been characterized by sales of office furniture and services to large corporations, such as for new office facilities, relocations, or department or office redesigns, which are frequently customized to meet specific client and designer preferences. Project furniture is generally purchased through office furniture dealers who typically prepare a custom-designed office layout emphasizing image and design. The selling process is often complex and lengthy and generally has several manufacturers competing for the same projects.

        The commercial segment of the market, in which the Company is a leader, primarily represents smaller orders of office furniture purchased by businesses and home office users on the basis of price, quality, selection, and quick delivery. Office products dealers, wholesalers and retailers, such as office products superstores, are the primary distribution channels in this market segment. Office furniture and products dealers publish periodic catalogs that display office furniture and products from various manufacturers.

Growth Strategy

        The Company's strategy is to build on its position as a leading manufacturer of office furniture and hearth products in North America. The components of this growth strategy are to introduce new products, build brand equity, continually reduce costs, provide outstanding customer satisfaction by focusing on the end-user, strengthen the distribution network, respond to global competition, pursue complementary strategic acquisitions, and enter markets not currently being served.

Employees/Members

        As of December 28, 2002, the Company employed approximately 8,800 persons, 8,500 of whom were members and 300 of whom were temporary personnel. Of the approximately 8,800 persons employed by the Company, 4,700 were in the Company's manufacturing operations. The Company employed approximately 400 members who were members of unions. The Company believes that its labor relations are good.

Products and Solutions

Office Furniture

        The Company designs, manufactures, and markets a broad range of office furniture in four basic categories: (i) storage, including vertical files, lateral files, pedestals, and high density filing; (ii) seating, including task chairs, executive desk chairs, conference/training chairs, and side chairs; (iii) office systems (typically modular and moveable workspaces with integrated work surfaces, space dividers, and lighting); and (iv) desks and related products, including tables, bookcases, and credenzas. The Company's products are sold through the Company's wholly owned subsidiaries—The HON Company, Allsteel Inc., Maxon Furniture Inc., The Gunlocke Company, and Holga Inc.

        The following is a description of the Company's major product categories and product lines:

Storage

        The Company offers a variety of storage options designed either to be integrated into the Company's office systems products or to function as freestanding furniture in office applications. The Company sells most of its freestanding storage through independent office products and office furniture dealers, nationwide chains of office products dealers, wholesalers, office products superstores, warehouse clubs, and mail order distributors.

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Seating

        The Company's seating line includes chairs designed for all types of office work. The chairs are available in a variety of frame colors, coverings, and a wide range of price points. Key customer criteria in seating includes superior design, ergonomics, aesthetics, comfort, and quality.

Office Systems

        The Company offers a complete line of office panel systems products in order to meet the needs of a wide spectrum of organizations. Systems may be used for team worksettings, private offices and open floor plans, and are typically modular and movable workspaces composed of adjustable partitions, work surfaces, desk extensions, storage cabinets and electrical lighting systems which can be moved, reconfigured and reused within the office. Panel systems offer a cost-effective and flexible alternative to traditional drywall office construction. A typical installation of office panels often includes associated sales of seating, storage, and accessories.

        The Company offers whole office solutions, movable panels, storage units, and work surfaces that can be installed easily and reconfigured to accommodate growth and change in organizations. The Company also offers consultative selling and design services for its office system products.

Desks and Related Products

        The Company's collection of desks and related products include stand-alone steel, laminate and wood furniture items, such as desks, bookshelves, credenzas and mobile desking, and are available in a range of designs and price points. The Company's desks and related products are sold to a wide variety of customers from those designing large office configurations to small retail and home office purchasers. The Company offers a variety of tables designed for use in conference rooms, private offices, training areas, team worksettings and open floor plans.

Hearth Products

        The Company is the largest U.S. manufacturer and marketer of metal prefabricated fireplaces and related products, primarily for the home, which it sells under the widely recognized Heatilator, Heat-N-Glo, and Quadra-Fire brand names.

        The Company's line of hearth products includes electric, wood-, pellet-, and gas-burning fireplaces and stoves, fireplace inserts, chimney systems, and related accessories. Heatilator and Heat-N-Glo are brand leaders in the two largest segments of the home fireplace market: vented-gas and wood fireplaces. The Company is the leader in "direct vent" fireplaces, which replace the chimney-venting system used in traditional fireplaces with a less expensive vent through an outer wall. See Business—Intellectual Property for additional details.

Manufacturing

        The HON Company manufactures office furniture in Alabama, California, Georgia, Iowa, Kentucky, North Carolina, Virginia, and Monterrey, Mexico. Allsteel Inc. manufactures office furniture in Iowa, Pennsylvania, and Tennessee. Holga Inc. manufactures office furniture in California. The Gunlocke Company manufactures office furniture in New York. Maxon Furniture Inc. manufactures office furniture in North Carolina and Washington. Hearth & Home Technologies Inc. manufactures hearth products in Iowa, Maryland, Minnesota, and Washington.

        The Company purchases raw materials and components from a variety of suppliers, and generally most items are available from multiple sources. Major raw materials and components include coil steel, bar stock, castings, lumber, veneer, particle board, fabric, paint, lacquer, hardware, plastic products, and shipping cartons.

        Since its inception, the Company has focused on making its manufacturing facilities and processes more flexible while at the same time reducing costs and improving product quality. In 1992, the Company adopted the principles of RCI, which focus on developing flexible and efficient design, manufacturing and administrative processes that remove excess cost. To achieve flexibility and attain efficiency goals, the Company has adopted a variety of production techniques including cellular manufacturing, focused factories, just-in-time inventory management, value engineering, business simplification, and 80/20 principles. The application of the RCI process has increased productivity by reducing set-up and processing times, square footage, inventory levels, product costs and delivery times, while improving quality and enhancing member safety. The Company's RCI process involves production and administrative employees, management, customers and suppliers. The Company has facilitators,

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coaches and consultants dedicated to the RCI process and strives to involve all members in the RCI process. In addition, the Company has organized a group that designs, fabricates, tests and installs proprietary manufacturing equipment. Manufacturing also plays a key role in the Company's concurrent product development process that primarily seeks to design new products for ease of manufacturability.

Product Development

        The Company's product development efforts are primarily focused on developing end-user solutions that are sensitive to quality, aesthetics, style, purposeful design, and on reducing the cost to manufacture existing products. The Company accomplishes this through improving existing products, extending product lines, applying ergonomic research, improving manufacturing processes, applying alternative materials and providing engineering support and training to its operating units. The Company conducts its product development efforts at both the corporate and operating unit level. At the corporate level, the staff at the Company's Stanley M. Howe Technical Center, working in conjunction with operating staff, seeks breakthrough developments in product design, manufacturability and materials usage. At the operating unit level, development efforts are focused on achieving incremental improvements in product features and manufacturing processes. The Company invested approximately $25.8 million, $21.4 million, and $18.9 million in product development during fiscal 2002, 2001, and 2000, respectively, and has budgeted in excess of $25 million for product development in fiscal 2003.

Intellectual Property

        As of December 28, 2002, the Company owned 245 U.S. and 118 foreign patents and had applications pending for 78 U.S. and 113 foreign patents. In addition, the Company holds registrations for 145 U.S. and 208 foreign trademarks and has applications pending for 35 U.S. and 41 foreign trademarks.

        The Company's principal office furniture products do not require frequent technical changes. The majority of the Company's office furniture patents are design patents which expire at various times depending on the patent's date of issuance. The Company believes that neither any individual office furniture patent nor the Company's office furniture patents in the aggregate are material to the Company's business as a whole.

        The Company's patents covering its hearth and home products, protect various technical innovations and expire at various times, depending upon each patent's date of filing. While the acquisition of patents reflects Hearth & Home Technologies Inc's position in the market as an innovation leader, the Company believes that neither any individual hearth and home product's patent nor the Company's hearth and home patents in the aggregate are material to the Company's business as a whole.

        The Company applies for patent protection when it believes the expense of doing so is justified, and the Company believes that the duration of its registered patents is adequate to protect these rights. The Company also pays royalties in certain instances for the use of patents on products and processes owned by others.

        The Company actively protects its trademarks that it believes have significant value.

Sales and Distribution: Customers

        In 2002, the Company's ten largest customers represented approximately 37% of its consolidated net sales. The substantial purchasing power exercised by large customers may adversely affect the prices at which the Company can successfully offer its products. In addition, there can be no assurance that the Company will be able to maintain its customer relationships as consolidation of its customers occur.

        The Company today sells its products through six principal distribution channels. The first channel, independent, local office furniture and office products dealers, specialize in the sale of a broad range of office furniture and office furniture systems, mostly to small- and medium-sized businesses, branch offices of large corporations, and home office owners.

        The second distribution channel comprises nationwide chains of office products dealers, or "mega-dealers," including Boise Cascade Corporation; Corporate Express Inc., A Buhrmann Company; Office Depot Business Services Group; and Staples Commercial Advantage. Many of the independent dealers and mega-dealer locations assist their customers with the evaluation of office space requirements, systems layout and product selection, and design and office solution services provided by professional designers.

        The third distribution channel, corporate accounts, is where the Company has the direct selling relationship with the end-user. Installation is normally provided through a dealer.

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        The fourth distribution channel, wholesalers, serve as distributors of the Company's products to independent dealers, mega-dealers and superstores. The Company sells to the nation's largest wholesalers, United Stationers and S.P. Richards, as well as to regional wholesalers. Wholesalers maintain inventory of standard product lines for resale to the various retailers. They also special order products from the Company in customer-selected models and colors. The Company's wholesalers maintain warehouse locations throughout the United States, which enable the Company to make its products available for rapid delivery to retailers anywhere in the country. One customer, United Stationers, accounted for approximately 14% of the Company's consolidated net sales in 2002, 2001, and 2000.

        The fifth distribution channel is retail stores, which include office products superstores such as Office Depot, Office Max, and Staples and warehouse clubs like Costco and Sam's Club.

        The sixth distribution channel consists of government-focused dealers that sell the Company's products to federal, state and local government offices.

        The Company's office furniture sales force consists of regional sales managers, salespersons, and firms of independent manufacturers' representatives who collectively provide national sales coverage. Sales managers and salespersons are compensated by a combination of salary and incentive bonus.

        Office products dealers, national wholesalers and retailers market their products over the internet and through catalogs published periodically. These catalogs are distributed to existing and potential customers. The Company believes that the inclusion of the Company's product lines in customer catalogs and e-business offers strong potential for increased sales of the listed product items due to the exposure provided.

        The Company also makes export sales through HON International Inc. to office furniture dealers and wholesale distributors serving select foreign markets. Distributors are principally located in Latin America and the Caribbean. Sales outside of the United States and Canada represented approximately 1% of net sales in fiscal 2002.

        Limited quantities of select finished goods inventories built to order awaiting shipment are at the Company's principal manufacturing plants and at its various distribution centers.

        Hearth & Home Technologies Inc. sells its fireplace and stove products through dealers, distributors and Company-owned retail outlets. The Company has a field sales organization of regional sales managers, salespersons, and firms of independent manufacturers' representatives.

        As of December 28, 2002, the Company had an order backlog of approximately $87.1 million which will be filled in the ordinary course of business within the first few weeks of the current fiscal year. This compares with $93.9 million as of December 29, 2001, and $111.2 million as of December 30, 2000. Backlog, in terms of percentage of net sales, was 5.1%, 5.2%, and 5.4%, for fiscal years 2002, 2001, and 2000, respectively. The Company's products are manufactured and shipped within a few weeks following receipt of order. The dollar amount of the Company's order backlog is therefore not considered by management to be a leading indicator of the Company's expected sales in any particular fiscal period.

        For a discussion of the seasonal nature of the Company's sales, see Operating Segment Information in the Notes to Consolidated Financial Statements.

Competition

        The office furniture industry is highly competitive, with a significant number of competitors offering similar products. The Company competes by emphasizing its ability to deliver compelling value products and unsurpassed customer service. In executing this strategy, the Company has two significant classes of competitors. First, the Company competes with numerous small- and medium-sized office furniture manufacturers that focus on more limited product lines and/or end-user segments and include Global Furniture Inc. (a Canadian company); Kimball Office Furniture Co.; Chromcraft; Paoli; and Teknion (a Canadian company), as well as Asian imports. Second, the Company competes with the large office furniture manufacturers which control a substantial portion of the market share in the project-oriented office furniture market, such as Steelcase Inc.; Haworth, Inc.; Herman Miller, Inc.; and Knoll, Inc. Products and brands offered by these project-oriented office furniture market participants have strong acceptance in the market place and have developed, and may continue to develop product designs to compete with the Company. The Company also faces significant price competition from its competitors and may encounter competition from new market entrants. There can be no assurance that the Company will be able to compete successfully in its markets in the future.

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        Hearth products, consisting of prefabricated fireplaces and related products, are manufactured by a number of national and regional competitors. The Company competes primarily against the other large manufacturers which include CFM Majestic Inc. (a Canadian company) and Lennox Industries Inc.

        Both office furniture and hearth products compete on the basis of performance, quality, price, complete and on-time delivery to the customer, and customer service and support. The Company believes that it competes principally by providing compelling value products designed to be among the best in their price range for product quality and performance, superior customer service, and short lead-times. This is made possible, in part, by the Company's significant on-going investment in product development, highly efficient and low cost manufacturing operations, and an extensive distribution network.

        The Company is one of the largest office furniture manufacturers in the United States, and believes that it is the largest manufacturer of middle-market furniture. The Company is also the largest manufacturer and marketer of fireplaces in the United States.

        For further discussion of the Company's competitive situation, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Effects of Inflation

        Certain business costs may, from time to time, increase at a rate exceeding the general rate of inflation. The Company's objective is to offset the effect of inflation on its costs primarily through productivity increases in combination with certain adjustments to the selling price of its products as competitive market and general economic conditions permit.

        Investments are routinely made in modernizing plants, equipment, support systems, and for RCI programs. These investments collectively focus on business simplification and increasing productivity which helps to offset the effect of rising material and labor costs. Ongoing cost control disciplines are also routinely employed. In addition, the last-in, first-out (LIFO) valuation method is used for most of the Company's inventories, which ensures the changing material and labor costs are recognized in reported income; and more importantly, these costs are recognized in pricing decisions.

Environmental

        The Company is subject to a variety of environmental laws and regulations governing discharges of air and water; the handling, storage, and disposal of hazardous or solid waste materials; and the remediation of contamination associated with releases of hazardous substances. Although the Company believes it is in material compliance with all of the various regulations applicable to its business, there can be no assurance that requirements will not change in the future or that the Company will not incur material costs to comply with such regulations. The Company has trained staff responsible for monitoring compliance with environmental, health, and safety requirements. The Company's environmental professionals work with responsible personnel at each manufacturing facility, the Company's environmental legal counsel, and consultants on the management of environmental, health and safety issues. The Company's ultimate goal is to reduce and, when practical, eliminate the creation of hazardous waste in its manufacturing processes.

        Compliance with federal, state, and local environmental regulations has not had a material effect on the capital expenditures, earnings, or competitive position of the Company to date. The Company does not anticipate that financially material capital expenditures will be required during fiscal year 2003 for environmental control facilities. It is management's judgment that compliance with current regulations should not have a material effect on the Company's financial condition or results of operations. However, the uncertainty of new environmental legislation and technology in this area makes it impossible to know with confidence.

Business Development

        The development of the Company's business during the fiscal years ended December 28, 2002, December 29, 2001, and December 30, 2000, is discussed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Available Information

        Information regarding the Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports, will be made available, free of charge, at the Company's internet website at www.honi.com, as soon as reasonably practicable after the Company electronically files such reports with or furnishes them to the Securities and Exchange Commission.

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ITEM 2.    PROPERTIES

        The Company maintains its corporate headquarters in Muscatine, Iowa, and conducts its operations at locations throughout the United States, Canada, and Mexico which house manufacturing, distribution, and retail operations and offices totaling an aggregate of approximately 8.6 million square feet. Of this total, approximately 2.1 million square feet are leased, including approximately 0.3 million square feet under a capital lease.

        Although the plants are of varying ages, the Company believes they are well maintained, are equipped with modern and efficient equipment, and are in good operating condition and suitable for the purposes for which they are being used. The Company has sufficient capacity to increase output at most locations by increasing the use of overtime and/or number of production shifts employed.

        The Company's principal manufacturing and distribution facilities (100,000 square feet in size or larger) are as follows:

Location	Approximate Square Feet	Owned or Leased	Description of Use
Cedartown, Georgia	547,014	Owned	Manufacturing wood/nonwood casegoods office furniture(1)
Chester, Virginia	382,082	Owned/ Leased(2)	Manufacturing nonwood casegoods office furniture(1)
Colville, Washington	125,000	Owned	Manufacturing stoves
Florence, Alabama	308,763	Owned	Manufacturing wood casegoods office furniture
Kent, Washington	189,062	Leased	Manufacturing systems office furniture
Lake City, Minnesota	235,000	Leased	Manufacturing metal prefabricated fireplaces(1)
Louisburg, North Carolina	176,354	Owned	Manufacturing wood casegoods office furniture
Milan, Tennessee	358,000	Leased	Manufacturing systems office furniture
Monterrey, Mexico	105,000	Owned	Manufacturing nonwood office seating
Mt. Pleasant, Iowa	288,006	Owned	Manufacturing metal prefabricated fireplaces(1)
Muscatine, Iowa	286,000	Owned	Manufacturing nonwood casegoods office furniture
Muscatine, Iowa	578,284	Owned	Warehousing office furniture(1)
Muscatine, Iowa	236,100	Owned	Manufacturing wood casegoods office furniture
Muscatine, Iowa	630,000	Owned	Manufacturing systems office furniture(1)
Muscatine, Iowa	237,800	Owned	Manufacturing nonwood office seating
Muscatine, Iowa	127,400	Owned	Manufacturing wood casegoods office furniture
Owensboro, Kentucky	311,575	Owned	Manufacturing wood office seating
Salisbury, North Carolina	129,000	Owned	Manufacturing systems office furniture
South Gate, California	520,270	Owned	Manufacturing nonwood casegoods and seating office furniture(1)
Wayland, New York	716,484	Owned	Manufacturing wood casegoods and seating office furniture(1)
West Hazleton, Pennsylvania	268,800	Owned	Manufacturing nonwood casegoods office furniture

(1)

Also includes a regional warehouse/distribution center

(2)

A capital lease

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        Other Company facilities, under 100,000 square feet in size, are located in various communities throughout the United States and Canada. These facilities total approximately 1,127,000 square feet with approximately 247,000 square feet used for the manufacture and distribution of office furniture and approximately 880,000 square feet for hearth products. Of this total, approximately 836,000 square feet are leased. In addition, the Company has two facilities that have been vacated. One is marketed for sale and the other is a leased facility. The Company also leases sales showroom space in office furniture market centers in several major metropolitan areas.

        The Company has a 40,000 square foot leased plant in Savage, Minnesota, and a 10,000 square foot leased plant in Wilmington, North Carolina, which are subleased.

        There are no major encumbrances on Company-owned properties. Refer to the Property, Plant, and Equipment note in the Notes to Consolidated Financial Statements for related cost, accumulated depreciation, and net book value data.

ITEM 3.    LEGAL PROCEEDINGS

        The Company is involved in various kinds of disputes and legal proceedings which have arisen in the course of its business, including pending litigation, preferential payment claims in customer bankruptcies, environmental remediation, taxes, and other claims. The Company currently has one preferential payment claim outstanding totaling approximately $7.6 million. The Company intends to vigorously contest this claim, however, the ultimate outcome or likelihood of this specific claim cannot be determined at this time. It is our opinion, after consultation with legal counsel, that additional liabilities, if any, resulting from these matters are not expected to have a material adverse effect on our financial condition, although such matters could have a material effect on our quarterly or annual operating results and cash flows when resolved in a future period.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

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PART I, TABLE I

EXECUTIVE OFFICERS OF THE REGISTRANT

December 28, 2002

Name	Age	Family Relationship	Position	Position Held Since	Other Business Experience During Past Five Years
Jack D. Michaels	65	None	Chairman of the Board President Chief Executive Officer Director	1996 1990 1991 1990
Stanley A. Askren	42	None	Executive Vice President President, Allsteel Inc.	2001 1999	Group Vice President (1998-99), The HON Company; President, Heatilator Division (1996-98), Hearth & Home Technologies Inc.
Peter R. Atherton	50	None	Vice President and Chief Technology Officer	2001	Manager, Manufacturing and Business Process Lab (1996-01), General Electric Company
David C. Burdakin	47	None	Executive Vice President President, The HON Company	2001 2000	President, HON Group (1999), Group Vice President, Steel Casegoods (1998-99), Group Vice President, Seating (1996-98), The HON Company
Jerald K. Dittmer	45	None	Vice President and Chief Financial Officer	2001	Vice President, Finance (2000-01); Group Vice President, Seating and Wood (1999-00), Vice President, Strategic Planning (1999), Vice President and General Manager, Oak Steel and Mt. Pleasant Plants (1998-99), Vice President, Information Technology (1997-98), The HON Company
Melinda C. Ellsworth	44	None	Vice President, Treasurer and Investor Relations	2002	Vice President, International Finance & Treasury (1998-02), Sunbeam Corporation; Vice President, Senior Relationship Manager (1997-98), ABN AMRO Bank, N.V.
Tamara S. Feldman	42	None	Vice President, Financial Reporting	2001	Assistant Controller, (1994-01)
Jeffrey D. Fick	41	None	Vice President, Member and Community Relations	1997
Malcolm C. Fields	41	None	Vice President and Chief Information Officer	2000	Vice President, Information Technology (1998-00), The HON Company; Manager, Technical Support Services (1997-98)
Robert D. Hayes	59	None	Vice President, Business Analysis and General Auditor	2001	Vice President, Internal Audit (1999-01); Vice President and Controller (1997-99), The HON Company
James I. Johnson	54	None	Vice President, General Counsel and Secretary	1997
Phillip M. Martineau	55	None	Executive Vice President President, Wood Group President, HON International Inc.	2000 2000 2002	President and Chief Executive Officer (1996-99), Arcsmith, Inc. (Illinois Tool Works)
Daniel C. Shimek	54	None	Executive Vice President President, Hearth & Home Technologies Inc.	2002 1996

12

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's common stock is listed for trading on the New York Stock Exchange (NYSE), trading symbol HNI. The Company moved to the NYSE, effective July 2, 1998, from the Nasdaq National Market System where the stock had traded under the symbol HONI. As of year-end 2002, the Company had 6,777 stockholders of record.

        Computershare Investor Services, L.L.C., Chicago, Illinois, serves as the Company's transfer agent and registrar of its common stock. Shareholders may report a change of address or make inquiries by writing or calling: Computershare Investor Services, L.L.C., P.O. Box 1689, Chicago, IL 60690-1689 or telephone 312/588-4991.

        Common Stock Market Prices and Dividends (Unaudited) and Common Stock Market Price and Price/Earnings Ratio (Unaudited) are presented in the Investor Information section which follows the Notes to Consolidated Financial Statements filed as part of this report.

        The Company expects to continue its policy of paying regular quarterly cash dividends. Dividends have been paid each quarter since the Company paid its first dividend in 1955. The average dividend payout percentage for the most recent three-year period has been 31% of prior year earnings. Future dividends are dependent on future earnings, capital requirements, and the Company's financial condition.

13

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14

ITEM 6.    SELECTED FINANCIAL DATA—ELEVEN-YEAR SUMMARY

		2002(a)			2001			2000
Per Common Share Data (Basic and Dilutive)
	Income before Cumulative Effect of Accounting Changes	$	1.55		$	1.26		$	1.77
	Cumulative Effect of Accounting Changes		—			—			—
	Net Income		1.55			1.26			1.77
	Cash Dividends		.50			.48			.44
	Book Value		11.08			10.10			9.59
	Net Working Capital		1.82			1.52			1.09
Operating Results (Thousands of Dollars)
	Net Sales	$	1,692,622		$	1,792,438		$	2,046,286
	Cost of Products Sold		1,092,743			1,181,140			1,380,404
	Gross Profit		599,879			611,298			665,882
	Interest Expense		4,714			8,548			14,015
	Income Before Income Taxes		140,554			116,261			165,964
	Income Before Income Taxes as a % of Net Sales		8.30	%		6.49	%		8.11	%
	Federal and State Income Taxes	$	49,194		$	41,854		$	59,747
	Effective Tax Rate		35.0	%		36.0	%		36.0	%
	Income before Cumulative Effect of Accounting Changes	$	91,360		$	74,407		$	106,217
	Net Income		91,360			74,407			106,217
	Net Income as a % of Net Sales		5.40	%		4.15	%		5.19	%
	Cash Dividends and Share Purchase Rights Redeemed	$	29,386		$	28,373		$	26,455
	Addition to (Reduction of) Retained Earnings		55,176			36,759			79,762
	Net Income Applicable to Common Stock		91,360			74,407			106,217
	% Return on Average Shareholders' Equity		14.74	%		12.76	%		19.77	%
	Depreciation and Amortization	$	68,755		$	81,385		$	79,046
Distribution of Net Income
	% Paid to Shareholders		32.16	%		38.13	%		24.91	%
	% Reinvested in Business		67.84	%		61.87	%		75.09	%
Financial Position (Thousands of Dollars)
	Current Assets	$	405,054		$	319,657		$	330,141
	Current Liabilities		298,680			230,443			264,868
	Working Capital		106,374			89,214			65,273
	Net Property, Plant, and Equipment		353,270			404,971			454,312
	Total Assets		1,020,552			961,891			1,022,470
	% Return on Beginning Assets Employed		14.83	%		12.04	%		19.63	%
	Long-Term Debt and Capital Lease Obligations	$	9,837		$	80,830		$	128,285
	Shareholders' Equity		646,893			592,680			573,342
	Retained Earnings		587,731			532,555			495,796
	Current Ratio		1.36			1.39			1.25
Current Share Data
	Number of Shares Outstanding at Year-End		58,373,607			58,672,933			59,796,891
	Weighted-Average Shares Outstanding During Year — basic		58,789,851			59,087,963			60,140,302
	Number of Shareholders of Record at Year-End		6,777			6,694			6,563
Other Operational Data
	Capital Expenditures (Thousands of Dollars)	$	25,885		$	36,851		$	59,840
	Members (Employees) at Year-End		8,828			9,029	(b)		11,543	(b)

(a)

Per SFAS No. 142 "Goodwill and Other Intangible Assets," the Company has ceased recording of goodwill and indefinite-lived Intangible amortization.

(b)

Includes acquisitions completed during year.

15

1999			1998			1997			1996			1995			1994			1993			1992
$	1.44		$	1.72		$	1.45		$	1.13		$	.67		$	.87		$	.69		$	.59
	—			—			—			—			—			—			.01			—
	1.44			1.72			1.45			1.13			.67			.87			.70			.59
	.38			.32			.28			.25			.24			.22			.20			.19
	8.33			7.54			6.19			4.25			3.56			3.17			2.83			2.52
	1.52			1.19			1.53			.89			1.07			1.27			1.23			1.23
$	1,800,931		$	1,706,628		$	1,362,713		$	998,135		$	893,119		$	845,998		$	780,326		$	706,550
	1,236,612			1,172,997			933,157			679,496			624,700			573,392			537,828			479,179
	564,319			533,632			429,556			318,639			268,419			272,606			242,498			227,371
	9,712			10,658			8,179			4,173			3,569			3,248			3,120			3,441
	137,575			170,109			139,128			105,267			65,517			86,338			70,854			61,893
	7.64	%		9.97	%		10.21	%		10.55	%		7.34	%		10.21	%		9.08	%		8.76	%
$	50,215		$	63,796		$	52,173		$	37,173		$	24,419		$	31,945		$	26,216		$	23,210
	36.5	%		37.50	%		37.50	%		35.31	%		37.27	%		37.00	%		37.00	%		37.50	%
$	87,360		$	106,313		$	86,955		$	68,094		$	41,098		$	54,393		$	44,638		$	38,683
	87,360			106,313			86,955			68,094			41,098			54,156			45,127			38,683
	4.85	%		6.23	%		6.38	%		6.82	%		4.60	%		6.43	%		5.78	%		5.47	%
$	23,112		$	19,730		$	16,736		$	14,970		$	14,536		$	13,601		$	12,587		$	12,114
	64,248			86,583			37,838			33,860			18,863			13,563			17,338			26,569
	87,360			106,313			86,955			68,094			41,098			54,156			45,127			38,683
	18.14	%		25.20	%		27.43	%		29.06	%		20.00	%		28.95	%		26.35	%		24.75	%
$	65,453		$	52,999		$	35,610		$	25,252		$	21,416		$	19,042		$	16,631		$	15,478
	26.46	%		18.56	%		19.25	%		21.98	%		35.37	%		25.11	%		27.89	%		31.32	%
	73.54	%		81.44	%		80.75	%		78.02	%		64.63	%		74.89	%		72.11	%		68.68	%
$	316,556		$	290,329		$	295,150		$	205,527		$	194,183		$	188,810		$	188,419		$	171,309
	225,123			217,438			200,759			152,553			128,915			111,093			110,759			91,780
	91,433			72,891			94,391			52,974			65,268			77,717			77,660			79,529
	455,591			444,177			341,030			234,616			210,033			177,844			157,770			145,849
	906,723			864,469			754,673			513,514			409,518			372,568			352,405			322,746
	16.94	%		23.74	%		28.27	%		25.93	%		17.91	%		24.72	%		22.14	%		22.18	%
$	124,173		$	135,563		$	134,511		$	77,605		$	42,581		$	45,877		$	45,916		$	50,961
	501,271			462,022			381,662			252,397			216,235			194,640			179,553			163,009
	416,034			351,786			265,203			227,365			193,505			174,642			161,079			143,741
	1.41			1.34			1.47			1.35			1.51			1.70			1.70			1.87
	60,171,753			61,289,618			61,659,316			59,426,530			60,788,674			61,349,206			63,351,692			64,737,912
	60,854,579			61,649,531			59,779,508			60,228,590			60,991,284			62,435,450			64,181,088			65,517,990
	6,737			5,877			5,399			5,319			5,479			5,556			4,653			4,534
$	71,474		$	149,717		$	85,491		$	44,684		$	53,879		$	35,005		$	27,541		$	26,626
	10,095			9,824	(b)		9,390	(b)		6,502	(b)		5,933			6,131			6,257			5,926

16

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion of the Company's historical results of operations and of its liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements of the Company and related notes.

Results of Operations

        The following table sets forth the percentage of consolidated net sales represented by certain items reflected in the Company's statements of income for the periods indicated.

Fiscal	2002		2001		2000
Net sales	100.0	%	100.0	%	100.0	%
Cost of products sold	64.6		65.9		67.5
Gross profit	35.4		34.1		32.5
Selling and administrative expenses	26.8		25.9		23.8
Restructuring related charges	0.2		1.3		—
Operating income	8.4		6.9		8.7
Interest expense (net)	0.1		0.4		0.6
Income before income taxes	8.3		6.5		8.1
Income taxes	2.9		2.3		2.9
Net income	5.4	%	4.2	%	5.2	%

        The Company has two reportable core operating segments: office furniture and hearth products. The Operating Segment Information note included in the Notes to Consolidated Financial Statements provides more detailed financial data with respect to these two segments.

Fiscal Year Ended December 28, 2002, Compared to Fiscal Year Ended December 29, 2001

Net Sales

        Net sales on a consolidated basis, decreased by 5.6% to $1.69 billion in 2002 from $1.79 billion in 2001. Office furniture net sales decreased 6.4% in 2002 to $1.28 billion from $1.37 billion in 2001. The decline in sales occurred in all sectors. The Business and Institutional Furniture Manufacturer's Association (BIFMA) reported a decrease in shipments of 19% in 2002 compared to 2001. The Company's share of the market based on reported office furniture shipments increased to 14.4% versus 12.4% in 2001. Net sales of hearth products decreased 2.9% to $.41 billion in 2002 from $.43 billion in 2001. The decrease was mainly due to the effect of pruning out less profitable product lines.

Gross Profit

        Gross profit dollars decreased 2% to $599.9 million in 2002 from $611.3 million in the prior year. The gross margin percentage increased to 35.4% for 2002 from 34.1% in 2001 despite a negative impact from increased steel prices, due to steel tariffs, of approximately $5 million during the second half of the year. The improvement in gross margin was a direct result of the continued net benefits of rapid continuous improvement, business simplification, new product introductions, and restructuring initiatives. During 2002, the Company recognized a loss on asset disposals into cost of products sold in the amount of approximately $5.0 million in relation to its continued rapid continuous improvement initiatives.

Selling and Administrative Expenses

        Selling and administrative expenses decreased by 2% to $454.2 million in 2002 from $464.2 million in 2001. Selling and administrative expenses, as a percent of net sales, increased to 26.8% in 2002 from 25.9% in the prior year. This increase was due to lower overall sales volume, increased investment in brand equity building and new product development, and increased incentive compensation of which a portion was for a debenture earn out related to a prior acquisition. Included in 2001 was $9 million of goodwill and certain other intangible amortization that is not included in 2002 due to a change in accounting standards effective December 30, 2001.

17

        Selling and administrative expenses include freight expense for shipments to customers, product development costs, and amortization expense of intangible assets. The Selling and Administrative Expenses note included in the Notes to Consolidated Financial Statements provides further information regarding the comparative expense levels for these major expense items.

Restructuring Related Charges

        During 2002, the Company recorded a pre-tax charge of approximately $5.4 million due to the shutdown of an office furniture facility in Jackson, Tennessee. A total of 125 members were terminated and received severance due to this shutdown. During the second quarter of 2002, a restructuring credit of approximately $2.4 million was taken back into income relating to a restructuring charge of $24.0 million that was recorded in second quarter 2001 for a restructuring plan that included consolidating physical facilities, discontinuing low volume product lines, and reducing the workforce. This credit was mainly due to the fact that the Company was able to exit a lease with a lessor at more favorable terms than originally estimated and the Company's ability to minimize the number of members terminated as compared to the original plan. The Restructuring Related Charges note included in the Notes to Consolidated Financial Statements provides further information.

Operating Income

        Operating income increased 16% to $142.7 million in 2002 from $123.1 million in 2001.    This increase is due to a $24 million restructuring charge in 2001 compared to a $3 million restructuring charge in 2002 and goodwill and indefinite-lived intangibles amortization of $9 million that is not included in 2002 due to a change in accounting standards. Operating profit in the office furniture segment increased in 2002 as a percent of net sales to 10.2% compared to 8.2% in 2001. The increase is due to cost reduction, new product introductions, and restructuring initiatives. Operating profit in the hearth products segment as a percent of sales increased to 10.8% compared to 9.2% in 2001 due to discontinuance of goodwill and indefinite-lived intangible amortization of approximately $7 million.

Net Income

        Net income increased by 23% to $91.4 million in 2002 from $74.4 million in the prior year. Included in 2001 was $5.8 million of goodwill and other intangible amortization expense that was not included in 2002 due to a change in accounting standards effective December 30, 2001. Also included in 2001 was an after tax restructuring charge of $15.4 million. Net income in 2002 was favorably impacted by a decrease in interest expense and a decrease in the effective tax rate in the fourth quarter to 35% from 36% in 2001 due to tax benefits associated with various federal and state tax credits. The Company currently expects the effective tax rate to remain at this level for 2003; however the resolution of certain federal and state tax credits could further affect the rate. Net income per common share increased by 23% to $1.55 in 2002 from $1.26 in 2001.

Fiscal Year Ended December 29, 2001, Compared to Fiscal Year Ended December 30, 2000

Net Sales

        Net sales, on a consolidated basis, decreased by 12% to $1.8 billion in 2001 from $2.0 billion in 2000. Office furniture net sales decreased 17% in 2001 to $1.37 billion from $1.65 billion in 2000. The decline in sales occurred in the retail, commercial and contract sectors. The office furniture industry reported a decrease in shipments of 17% in 2001 compared to 2000. Net sales of hearth products increased 8% to $.43 billion in 2001 from $.40 billion in 2000.

Gross Profit

        Gross profit dollars decreased 8% to $611.3 million in 2001 from $665.9 million in the prior year. The gross margin percentage increased to 34.1% for 2001 from 32.5% in 2000. The improvement in gross margin percentage is due to new product introductions, and rapid continuous improvement, cost containment and business simplification initiatives.

Selling and Administrative Expenses

        Selling and administrative expenses decreased by 5% to $464.2 million in 2001 from $487.8 million in the prior year. Selling and administrative expenses, as a percent of net sales, increased to 25.9% in 2001 from 23.8%

18

in 2000. This increase was due to lower overall sales volume, development of new products, and continued investment in sales and marketing expenses associated with the Company's business simplification, end-user focus and branding strategies.

        Selling and administrative expenses include freight expense for shipments to customers, product development costs, and amortization expenses of intangible assets. The Selling and Administrative Expenses note included in the Notes to Consolidated Financial Statements provides further information regarding the comparative expense levels for these major expense items.

Restructuring Related Charges

        During the second quarter of 2001, the Company recorded a pretax charge of $24.0 million, $15.4 million after tax or $0.26 per common share for a restructuring plan that involved consolidating physical facilities, discontinuing low volume product lines, and reduction of workforce. Included in this charge was the closedown of three of its office furniture facilities located in Williamsport, Pennsylvania, Tupelo, Mississippi, and Santa Ana, California. The charge included $16.2 million of asset impairments for manufacturing equipment that will be disposed of and $7.8 million of restructuring expenses. Included in the $7.8 million is $3.1 million for severance arising from the elimination of approximately 600 plant member positions, $0.8 million for other member-related costs, and $3.9 million for certain other expenses associated with the closing of facilities. The Restructuring Related Charges note included in the Notes to Consolidated Financial Statements provides further information.

Operating Income

        Operating income decreased almost 31% to $123.1 million in 2001 from $178.0 million in 2000. This decrease is due to lower overall sales volume, increased selling and administrative expenses, and a $24.0 million restructuring charge. Operating profit in the office furniture segment decreased in 2001 as a percent of net sales to 8.2% compared to 10.4% in 2000. The decrease is due to lower overall sales volume and a $22.5 million restructuring charge. Operating profit in the hearth products segment increased in 2001 as a percent of net sales to 9.2% compared to 7.6% in the prior year. This improvement is due to increased sales volume, simplification of the business structure and cost containment offset by a $1.5 million restructuring charge.

Net Income

        Net income decreased by 30% to $74.4 million in 2001 from $106.2 million in the prior year. The decrease is due to lower overall sales volume, increased selling and administrative expenses, and an after-tax restructuring charge of $15.4 million offset by reduced interest expense.

        Net income per common share decreased by 29% to $1.26 in 2001 from $1.77 for 2000. The Company's net income per share performance for 2001 benefited from the Company's common stock repurchase program.

Liquidity and Capital Resources

        During 2002, cash flow from operations was $202.4 million, which provided the funds necessary to meet working capital needs, invest in capital improvements, repay long-term debt, repurchase common stock, and pay increased dividends.

Cash Management

        Cash, cash equivalents, and short-term investments totaled $155.5 million in 2002 compared to $78.8 million at the end of 2001 and $3.2 million at the end of 2000. These funds, coupled with cash from future operations and additional long-term debt, if needed, are expected to be adequate to finance operations, planned improvement, and internal growth. The Company is not aware of any known trends or demands, commitments, events or uncertainties that are reasonably likely to result in its liquidity increasing or decreasing in any material way.

        The Company places special emphasis on the management and reduction of its working capital with a particular focus on trade receivables and inventory levels. The success achieved in managing receivables is in large part a result of doing business with quality customers and maintaining close communications with them. Trade receivables decreased from year-end 2000 levels due to decreased sales volume. The increase at year-end 2002 is due to increased sales volume in the fourth quarter compared to fourth quarter 2001. Trade receivable days outstanding have averaged approximately 37 days over the past three years. Inventory levels also decreased from year-end 2000 levels due to decreased sales volume. However, the Company is able to continue to improve on

19

inventory levels and turns as a result of a more efficient supply chain. Inventory turns were 23, 18, and 17 for 2002, 2001, and 2000, respectively. The increase in accounts payable and accrued expenses is due to increased accruals for warranty, marketing programs, and incentive based compensation.

Investments

        The Company acquired investments in 2002 that consist of investment grade equity and debt securities. Management classifies investments in marketable securities at the time of purchase and reevaluates such classification at each balance sheet date. Equity securities are classified as available-for-sale and are stated at current market value with unrealized gains and losses included as a separate component of equity, net of any related tax effect. Debt securities are classified as held-to-maturity and are stated at amortized cost. A table of holdings as of year end 2002 is included in the Cash, Cash Equivalents and Investments note included in the Notes to Consolidated Financial Statements.

Capital Expenditure Investments

        Capital expenditures were $25.9 million in 2002, $36.9 million in 2001, and $59.8 million in 2000. Expenditures during 2002, 2001, and 2000 have been consistently focused on machinery and equipment that is needed to support new products, process improvements, cost-savings initiatives, and creating more efficient production and warehousing capacity.

Acquisitions

        During 2001, the Company completed the acquisition of three small hearth product distributors for a total purchase price of approximately $7.6 million. The acquisitions were accounted for using the purchase method, and the results of the three distributors have been included in the Company's financial statements since the date of acquisition.

        On February 29, 2000, the Company completed the acquisition of two leading hearth products distributors, American Fireplace Company (AFC) and the Allied Group (Allied), establishing the Company as the leading manufacturer and distributor in the hearth products industry, for a purchase price of approximately $135 million.

Long-Term Debt

        Long-term debt, including capital lease obligations, was 2% of total capitalization at December 28, 2002, 12% at December 29, 2001, and 18% at December 30, 2000. The reduction in long-term debt during 2002 was due to debentures from an acquisition now being classified as current liabilities based on current due date and the retirement of Industrial Revenue Bonds and Urban Development Action Grants. The Company does not expect future capital resources to be a constraint on planned growth. Additional borrowing capacity of $136 million, less amounts used for designated letters of credit, is available through a revolving bank credit agreement in the event cash generated from operations should be inadequate to meet future needs. Certain of the Company's credit agreements include covenants that limit the assumption of additional debt and lease obligations. The Company has been and currently is in compliance with the covenants related to the debt agreements.

Contractual Obligations

        The following table discloses the Company's obligations and commitments to make future payments under contracts:

	Payments Due by Period
	Total		Less than 1	1-3 years	4-5 years	After 5 years
	(In thousands)
Long-Term Debt	$	49,117	40,564	5,946	161	2,446
Capital Lease Obligations		2,041	269	535	1,237	—
Operating Leases		63,495	14,128	21,346	12,287	15,734
Other Long-Term Obligations		32,356	15,802	11,496	848	4,210
Total		147,009	70,763	39,323	14,533	22,390

20

        Other long-term obligations include $14,537,000 of future minimum payments under a transportation service contract, $266,000 of financial guarantees with customers, $9,757,000 earn-out on convertible debentures included in current liabilities, and $7,796,000 of payments, included in long-term liabilities, due to members who are participants in the Company's salary deferral program.

Related Party Transactions

        The Company has convertible debentures, with earn-out features, in the amount of $40.4 million that are payable to former owners of businesses that were acquired by the Company. These individuals remain as members of the Company following the acquisitions. The obligation associated with the earn-out provision is approximately $9.8 million at December 28, 2002.

        The Company has operating leases for office and production facilities with annual rentals totaling $450,000 with the former owners of a business acquired in 1996. One of these individuals continues as an officer of a subsidiary of the Company following the acquisition.

Cash Dividends

        Cash dividends were $0.50 per common share for 2002, $0.48 for 2001, and $0.44 for 2000. Further, the Board of Directors announced a 4.0% increase in the quarterly dividend from $0.125 to $0.13 per common share effective with the February 28, 2003, dividend payment for shareholders of record at the close of business February 21, 2003. The previous quarterly dividend increase was from $0.12 to $0.125, effective with the March 1, 2002, dividend payment for shareholders of record at the close of business February 22, 2002. A cash dividend has been paid every quarter since April 15, 1955, and quarterly dividends are expected to continue. The average dividend payout percentage for the most recent three-year period has been 31% of prior year earnings.

Common Share Repurchases

        During 2002, the Company repurchased 614,580 shares of its common stock at a cost of approximately $15.7 million, or an average price of $25.60. The Board of Directors authorized an additional $100.0 million on February 14, 2001, for repurchases of the Company's common stock. As of December 28, 2002, approximately $62.8 million remained unspent. During 2001, the Company repurchased 1,472,937 shares at a cost of approximately $35.1 million, or an average price of $23.80. During 2000, the Company repurchased 837,552 shares at a cost of approximately $18.0 million, or an average price of $21.46.

Litigation and Uncertainties

        The Company has contingent liabilities that have arisen in the course of its business, including pending litigation, preferential payment claims in customer bankruptcies, environmental remediation, taxes, and other claims. The Company currently has one preferential payment claim outstanding totaling approximately $7.6 million. The Company intends to vigorously contest this claim, however, the ultimate outcome or likelihood of this specific claim cannot be determined at this time. It is our opinion, after consultation with legal counsel, that additional liabilities, if any, resulting from these matters are not expected to have a material adverse effect on our financial condition, although such matters could have a material effect on our quarterly or annual operating results and cash flows when resolved in a future period.

Critical Accounting Policies

        The Company's critical accounting policies include:

        Revenue recognition—The Company normally recognizes revenue upon the shipment of goods. In certain circumstances revenue is not recognized until the goods are received by the customer or upon installation and customer acceptance based on the terms of the sale agreement. Revenue includes freight charged to customers; related costs are included in selling and administrative expense. Rebates, discounts, and other marketing program expenses that are directly related to the sale are recorded as a deduction to net sales. Marketing program accruals require the use of management estimates and the consideration of contractual arrangements that are subject to interpretation. Customer sales that reach certain award levels can affect the amount of such estimates and actual results could differ from these estimates.

        Allowance for doubtful accounts—The allowance for receivables is developed based on several factors including overall customer credit quality, historical write-off experience and specific account analyses that project

21

the ultimate collectibility of the account. As such, these factors may change over time causing the reserve level to adjust accordingly. Additionally, in certain circumstances the Company may be subject to preferential payment claims that arise in customer bankruptcies, for which the ultimate outcome cannot be estimated and for which an estimated loss cannot be recorded until it is determined to be probable and reasonably estimable.

        Inventory valuation—The Company values its inventory at the lower of cost or market primarily by the last in, first out (LIFO) method. Additionally, the Company evaluates its inventory reserves in terms of excess and obsolete exposures. This evaluation includes such factors as anticipated usage, inventory turnover, inventory levels and ultimate product sales value. As such, these factors may change over time causing the reserve level to adjust accordingly.

        Long-lived assets—Long-lived assets are reviewed for impairment as events or changes in circumstances occur indicating that the amount of the asset reflected in the Company's balance sheet may not be recoverable. An estimate of undiscounted cash flows produced by the asset, or the appropriate group of assets, is compared to the carrying value to determine whether impairment exists. The estimates of future cash flows involve considerable management judgement and are based upon assumptions about expected future operating performance. The actual cash flows could differ from management's estimates due to changes in business conditions, operating performance, and economic conditions.

        Goodwill and other intangibles—The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. The Company has determined that the fair value of its reporting units exceeds the carrying values and therefore, no impairment of goodwill was recorded. The impairment tests performed require that the Company determine the fair market value of its trademarks and the fair market value of its reporting units for comparison to the carrying value of such net assets to assess whether an impairment exists. The methodologies used to estimate fair market value involve the use of estimates and assumptions, including projected cash flows, royalty rates and discount rates. Also pursuant to the standard, the Company has ceased recording goodwill and indefinite-lived intangibles amortization in 2002.

        Self-insurance reserves—The Company is partially self-insured for general liability, workers' compensation, and certain employee health benefits. The general and workers' compensation liabilities are managed through a wholly owned insurance captive; the related liabilities are included in the accompanying financial statements. The Company's policy is to accrue amounts equal to the actuarially determined liabilities. The actuarial valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical costs, and changes in actual experience could cause these estimates to change in the near term.

Recent Accounting Pronouncements

        During, 2002 the Financial Accounting Standards Board finalized SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" for exit and disposal activities that are initiated after December 31, 2002. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.

        The Financial Accounting Standards Board also issued SFAS No. 148 "Accounting for Stock-Based Compensation—Transition and Disclosure" during 2002. This Statement amends SFAS No. 123 "Accounting for Stock-Based Compensation" to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure requirements of this statement as of December 28, 2002.

        The Financial Accounting Standards Board also issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others". FIN 45 clarifies the requirements of SFAS No. 5 "Accounting for Contingencies" relating to the guarantor's accounting for and disclosure of the issuance of certain types of guarantees. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The disclosure provisions are effective for financial statements with years ending after December 15, 2002. The Company has included these disclosures in the Warranty and the Commitments and Contingencies notes.

22

        During 2001, the Financial Accounting Standards Board finalized SFAS No. 143, "Accounting for Asset Retirement Obligations," and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". The Company adopted Statement No. 144 on December 30, 2001, the beginning of its 2002 fiscal year. The Company intends to adopt Statement No. 143 on December 29, 2002, the beginning of its 2003 fiscal year. The adoption of SFAS No. 143 is not expected to have a material impact on the Company's financial statements.

Looking Ahead

        Global Insight (formerly DRI-WEFA), the Business and Institutional Furniture Manufacturer's Association (BIFMA) forecasting consultant, is projecting the office furniture industry to be up over 5% in 2003 compared to 2002, with a 2% decline in the first quarter in its forecast dated January 15, 2003. The Company expects to continue to outperform the industry, however, management anticipates that the unstable political and economic conditions will continue to challenge growth and profitability during the first half of 2003.

        The two primary channels for hearth products are the new home construction channel and the remodel/retail channel. Indications are that the housing market will remain at the current healthy level while the retail side, which is dependent on consumer confidence, is being hampered by the political instability. The Company feels that the first half of the year will be challenging for this segment as well. The Company is optimistic about the growth opportunities from new products and brand extensions into new markets. These markets include outdoor living products such as outdoor cooking systems and healthy home products such as a heat recovery system and a central vacuum system.

        The Company continues to see pressure on gross margins due to increased steel prices as a result of steel tariffs that were enacted in 2002. The Company continues to work to mitigate the potential negative impact through various initiatives, including alternative materials and suppliers.

        The Company continues to focus on long-term shareholder value by making investments for the future. These investments include new products, building brand equity, investigating new markets and expanding distribution.

23

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company has no material financial exposure to the various financial instrument market risks covered under this rule. Currently, the Company has no derivative financial instruments or off-balance sheet financing arrangements. For information related to the Company's long-term debt, refer to the Long-Term Debt disclosure in the Notes to Consolidated Financial Statements filed as part of this report.

        We are subject to interest rate risk on our investment portfolio. In 2002, an interest rate movement of 10% from our actual 2002 weighted-average interest rate would not have had a significant effect on the value of our interest sensitive investments, financial position, results of operations and cash flows as 85% of the investment portfolio are investments with maturities of 90 days or less.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements listed under Item 14 (a)(1) and (2) are filed as part of this report.

        The Summary of Unaudited Quarterly Results of Operations follows the Notes to Consolidated Financial Statements filed as part of this report.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        HON INDUSTRIES Inc., (the "Company") dismissed Arthur Andersen LLP, its independent auditors, effective May 7, 2002.

        In connection with the audits of the two most recent fiscal years, and during the interim period prior to dismissal, there were no disagreements with the former auditors on any matter or accounting principle or practice, financial statement disclosure, or auditing scope or procedure.

        The former auditor's report on the financial statements of the Company for each of the past two fiscal years was unqualified.

        The Company engaged PricewaterhouseCoopers LLP as its new independent auditor effective with the dismissal of its former auditors. During the Company's two most recent fiscal years and during the interim period prior to the engagement, there were no consultations with the newly engaged auditors with regard to either the application of accounting principle as to any specific transaction, either completed or proposed; the type of audit opinion that would be rendered on the Company's financial statements; or any matter of disagreements with the former auditors.

        The Company's Board of Directors approved management's recommendation to change auditors.

24

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information under the caption "Election of Directors" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2003, is incorporated herein by reference. For information with respect to executive officers of the Company, see Part I, Table I "Executive Officers of the Registrant."

        The information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2003, is incorporated herein by reference.

ITEM 11.    EXECUTIVE COMPENSATION

        The information under the captions "Election of Directors" and "Executive Compensation" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2003, is incorporated herein by reference.

ITEM 12.    SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information under the captions "Election of Directors" and "Beneficial Owners of Common Stock" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2003, is incorporated herein by reference.

        The information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2003, is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information under the caption "Certain Relationships and Related Transactions" of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 5, 2003, is incorporated herein by reference.

25

PART IV

ITEM 14.    CONTROLS AND PROCEDURES

        As of February 19, 2003, the Company's Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of December 28, 2002. Additionally, there has been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to December 28, 2002, including any corrective actions with regard to significant deficiencies and material weaknesses.

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)    Financial Statements

        The following consolidated financial statements of HON INDUSTRIES Inc. and Subsidiaries included in the Company's 2002 Annual Report to Shareholders are filed as a part of this report pursuant to Item 8:

	Page
Reports of Independent Accountants	33
Consolidated Statements of Income for the Years Ended December 28, 2002; December 29, 2001; and December 30, 2000	35
Consolidated Balance Sheets—December 28, 2002; December 29, 2001; and December 30, 2000	36
Consolidated Statements of Shareholders' Equity for the Years Ended December 28, 2002; December 29, 2001; and December 30, 2000	37
Consolidated Statements of Cash Flows for the Years Ended December 28, 2002; December 29, 2001; and December 30, 2000	38
Notes to Consolidated Financial Statements	39
Investor Information	57

    (2)    Financial Statement Schedules

        The following consolidated financial statement schedule of the Company and subsidiaries is attached pursuant to Item 14(d):

Schedule II Valuation and Qualifying Accounts for the Years Ended December 28, 2002; December 29, 2001; and December 30, 2000 60

        All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

(b)

Reports on Form 8-K

        There are no reports on Form 8-K filed during the last quarter of the period covered by this report.

26

(c)

Exhibits

        An exhibit index of all exhibits incorporated by reference into, or filed with, this Form 10-K appears on Page 63. The following exhibits are filed herewith:

Exhibit
(3ii)	By-Laws
(10xiii)	Indemnification Agreement of the Registrant
(10xiii)	Credit Agreement of the Registrant
(21)	Subsidiaries of the Registrant
(23)	Consent of Independent Public Accountants
(99B)	Executive Deferred Compensation Plan
(99C)	Forward Looking Statements
(99D)	Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

27

(THIS PAGE INTENTIONALLY LEFT BLANK)

28

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	HON INDUSTRIES Inc.
Date: March 24, 2003	By:	/s/  JACK D. MICHAELS Jack D. Michaels Chairman and CEO

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each Director whose signature appears below authorizes and appoints Jack D. Michaels as his or her attorney-in-fact to sign and file on his or her behalf any and all amendments and post-effective amendments to this report.

Signature	Title	Date
/s/  JACK D. MICHAELS Jack D. Michaels	Chairman and CEO, Principal Executive Officer, and Director	3/24/03
/s/  STANLEY A. ASKREN Stanley A. Askren	President, Chief Operating Officer and Director	3/24/03
/s/  JERALD K. DITTMER Jerald K. Dittmer	Vice President, Chief Financial Officer, and Principal Accounting Officer	3/24/03
/s/  GARY M. CHRISTENSEN Gary M. Christensen	Director	3/24/03
/s/  ROBERT W. COX Robert W. Cox	Director	3/24/03
/s/  CHERYL A. FRANCIS Cheryl A. Francis	Director	3/24/03
/s/  M. FAROOQ KATHWARI M. Farooq Kathwari	Director	3/24/03
/s/  ROBERT L. KATZ Robert L. Katz	Director	3/24/03

29

/s/  DENNIS J. MARTIN Dennis J. Martin	Director	3/24/03
/s/  ABBIE J. SMITH Abbie J. Smith	Director	3/24/03
/s/  RICHARD H. STANLEY Richard H. Stanley	Director	3/24/03
/s/  BRIAN E. STERN Brian E. Stern	Director	3/24/03
/s/  RONALD V. WATERS, III Ronald V. Waters, III	Director	3/24/03
/s/  LORNE R. WAXLAX Lorne R. Waxlax	Director	3/24/03

30

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Sarbanes-Oxley Act Section 302

        I, Jack D. Michaels, Chairman and Chief Executive Officer of HON INDUSTRIES Inc., certify that:

        1.    I have reviewed this annual report on Form 10-K of HON INDUSTRIES Inc.;

        2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and

        3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; and

        4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a.    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly, during the period in which this annual report is being prepared;

        b.    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

        c.    presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and

        5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:

        a.    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

        b.    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.    The registrant's other certifying officer and I have indicated in this annual report whether there are significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 24, 2003 /s/ Jack D. Michaels Name: Jack D. Michaels
Title: Chairman and Chief Executive Officer

31

CERTIFICATION OF CHIEF FINANCIAL OFFICER
Sarbanes-Oxley Act Section 302

        I, Jerald K. Dittmer, Vice President and Chief Financial Officer of HON INDUSTRIES Inc., certify that:

        1.    I have reviewed this annual report on Form 10-K of HON INDUSTRIES Inc.;

        2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and

        3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; and

        4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

        a.    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly, during the period in which this annual report is being prepared;

        b.    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

        c.    presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and

        5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:

        a.    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

        b.    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

        6.    The registrant's other certifying officer and I have indicated in this quarterly report whether there are significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 24, 2003 /s/ Jerald K. Dittmer Name: Jerald K. Dittmer
Title: Vice President and Chief Financial Officer

32

Report of Independent Accountants

To the Board of Directors and Shareholders,
HON INDUSTRIES Inc.:

        In our opinion, the accompanying consolidated balance sheet as of December 28, 2002, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended present fairly, in all material respects, the financial position of HON INDUSTRIES Inc. and its subsidiaries as of December 28, 2002, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements of the Company as of December 29, 2001, and December 30, 2000, and for each of the periods ended December 29, 2001 and December 30, 2000, prior to the adjustments discussed in the Goodwill and Other Intangible Assets note, were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those financial statements in their report dated February 1, 2002.

        As disclosed in the Goodwill and Other Intangible Assets note, the Company changed the manner in which it accounts for goodwill and other intangible assets upon adoption of the accounting guidance of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, on December 30, 2001.

        As discussed above, the financial statements of HON INDUSTRIES Inc., as of December 29, 2001, and December 30, 2000, and for each of the periods ended December 29, 2001, and December 30, 2000, were audited by other independent accountants who have ceased operations. As described in the Goodwill and Other Intangible Assets note, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards (Statement) No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of December 30, 2001. We audited the transitional disclosures described in the Goodwill and Other Intangible Assets note. In our opinion, the transitional disclosures for 2001 and 2000 in the Goodwill and Other Intangible Assets note are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 financial statements taken as a whole.

PricewaterhouseCoopers LLP

Chicago, Illinois
January 31, 2003

33

Predecessor Auditor (Arthur Andersen LLP) Opinion

        The following report is a copy of a report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP. In 2002, the corporation adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). As discussed in the Goodwill and Other Intangible Assets note, the company has presented the transitional disclosures for 2001 and 2000 required by SFAS No. 142. The Arthur Andersen LLP report does not extend to these changes to the 2001 and 2000 consolidated financial statements. The adjustments to the 2001 and 2000 consolidated financial statements were reported on by PricewaterhouseCoopers LLP as stated in their report appearing herein.

Report of Independent Accountants

To the Board of Directors and Shareholders of HON INDUSTRIES Inc.

        We have audited the accompanying consolidated balance sheets of HON INDUSTRIES Inc. and subsidiaries as of December 29, 2001, December 30, 2000, and January 1, 2000*, and the related consolidated statements of income, shareholders equity, and cash flows for each of the fiscal years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of HON INDUSTRIES Inc. and subsidiaries as of December 29, 2001, December 30, 2000, and January 1, 2000*, and the results of its operations and its cash flows for each of the three fiscal years then ended in conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Chicago, Illinois
February 1, 2002

*

The January 1, 2000 consolidated financial statements are not required to be presented in the 2002 Annual Report.

34

HON INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

		For the Years
		2002		2001		2000
		(Amounts in thousands, except for per share data)
Net sales		$	1,692,622	$	1,792,438	$	2,046,286
Cost of products sold			1,092,743		1,181,140		1,380,404
	Gross Profit		599,879		611,298		665,882
Selling and administrative expenses			454,189		464,206		487,848
Restructuring related charges			3,000		24,000		—
	Operating Income		142,690		123,092		178,034
Interest income			2,578		1,717		1,945
Interest expense			4,714		8,548		14,015
	Income Before Income Taxes		140,554		116,261		165,964
	Income taxes		49,194		41,854		59,747
	Net Income	$	91,360	$	74,407	$	106,217
	Net Income Per Common Share—Basic & Diluted	$	1.55	$	1.26	$	1.77

The accompanying notes are an integral part of the consolidated financial statements.

35

HON INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			As of Year-End
			2002		2001		2000
			(Amounts in thousands of dollars and shares)
Assets
Current Assets
	Cash and cash equivalents		$	139,165	$	78,838	$	3,181
	Short-term investments			16,378		—		—
	Receivables			181,096		161,390		211,243
	Inventories			46,823		50,140		84,360
	Deferred income taxes			10,101		14,940		19,516
	Prepaid expenses and other current assets			11,491		14,349		11,841
		Total Current Assets		405,054		319,657		330,141
Property, Plant, and Equipment				353,270		404,971		454,312
Goodwill				192,395		214,337		216,371
Other Assets				69,833		22,926		21,646
		Total Assets	$	1,020,552	$	961,891	$	1,022,470
Liabilities and Shareholders' Equity
Current Liabilities
	Accounts payable and accrued expenses		$	252,145	$	216,184	$	240,540
	Income taxes			3,740		6,112		12,067
	Note payable and current maturities of long-term debt			41,298		6,715		10,408
	Current maturities of other long-term obligations			1,497		1,432		1,853
		Total Current Liabilities		298,680		230,443		264,868
Long-Term Debt				8,553		79,570		126,093
Capital Lease Obligations				1,284		1,260		2,192
Other Long-Term Liabilities				28,028		18,306		18,749
Deferred Income Taxes				37,114		39,632		37,226
Commitments and Contingencies
Shareholders' Equity
Preferred stock—$1 par value
	Authorized: 1,000
	Issued: None
Common stock—$1 par value				58,374		58,673		59,797
	Authorized: 200,000
	Issued and outstanding 2002—58,374; 2002—58,673; 2000—59,797
Additional paid-in capital				549		891		17,339
Retained earnings				587,731		532,555		495,796
Accumulated other comprehensive income				239		561		410
	Total Shareholders' Equity			646,893		592,680		573,342
	Total Liabilities and Shareholders' Equity		$	1,020,552	$	961,891	$	1,022,470

The accompanying notes are an integral part of the consolidated financial statements.

36

HON INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

			Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Total Shareholders' Equity
			(Amounts in thousands)
Balance, January 1, 2000			$	60,172		$	24,981		$	416,034		$	84		$	501,271
Comprehensive income:
	Net income									106,217						106,217
	Other comprehensive income												326			326
Comprehensive income																106,543
Cash dividends										(26,455	)					(26,455	)
Common shares—treasury:
	Shares purchased			(838	)		(17,135	)								(17,973	)
	Shares issued under Members Stock
		Purchase Plan and stock awards		463			9,493									9,956
Balance, December 30, 2000				59,797			17,339			495,796			410			573,342
Comprehensive Income:
	Net income									74,407						74,407
	Other comprehensive income												151			151
Comprehensive income																74,558
Cash dividends										(28,373	)					(28,373	)
Common shares—treasury:
	Shares purchased			(1,473	)		(24,311	)		(9,275	)					(35,059	)
	Shares issued under Members Stock
		Purchase Plan and stock awards		349			7,863									8,212
Balance, December 29, 2001				58,673			891			532,555			561			592,680
Comprehensive income:
	Net income									91,360						91,360
	Other comprehensive income (loss)												(322	)		(322	)
Comprehensive income																91,038
Cash dividends										(29,386	)					(29,386	)
Common shares—treasury:
	Shares purchased			(614	)		(8,324	)		(6,798	)					(15,736	)
	Shares issued under Members Stock
		Purchase Plan and stock awards		315			7,982									8,297
Balance, December 28, 2002			$	58,374		$	549		$	587,731		$	239		$	646,893

The accompanying notes are an integral part of the consolidated financial statements.

37

HON INDUSTRIES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

				For the Years
				2002			2001			2000
				(Amounts in thousands)
Net Cash Flows From (To) Operating Activities:
	Net income			$	91,360		$	74,407		$	106,217
	Noncash items included in net income:
		Depreciation and amortization			68,755			81,385			79,046
		Other postretirement and postemployment benefits			2,246			1,757			1,572
		Deferred income taxes			2,321			6,962			(7,213	)
		Loss on sales, retirements and impairments of property, plant and equipment			8,976			16,200			—
		Stock issued to retirement plan			5,750			—			—
		Other—net			2,613			109			90
	Changes in working capital, excluding acquisition and disposition:
		Receivables			(19,414	)		47,897			3,961
		Inventories			2,348			35,048			6,410
		Prepaid expenses and other current assets			2,431			(1,661	)		(1,616	)
		Accounts payable and accrued expenses			37,857			(26,149	)		5,483
		Income taxes			(2,370	)		(5,957	)		11,808
	Increase (decrease) in other liabilities				(482	)		(2,198	)		(838	)
			Net cash flows from (to) operating activities		202,391			227,800			204,920
Net Cash Flows From (To) Investing Activities:
	Capital expenditures				(25,885	)		(36,851	)		(59,840	)
	Capitalized software				(65	)		(1,757	)		(2,192	)
	Acquisition spending, net of cash acquired				—			(8,748	)		(134,696	)
	Short-term investments—net				(16,377	)		—			—
	Long-term investments				(22,493	)		—			—
Other—net					924			343			(3	)
		Net cash flows from (to) investing activities			(63,896	)		(47,013	)		(196,731	)
Net Cash Flows From (To) Financing Activities:
	Purchase of HON INDUSTRIES common stock				(15,736	)		(35,059	)		(17,973	)
	Proceeds from long-term debt				825			36,218			155,181
	Payments of note and long-term debt				(35,967	)		(87,365	)		(147,458	)
	Proceeds from sale of HON INDUSTRIES common stock to members				2,096			9,449			9,529
	Dividends paid				(29,386	)		(28,373	)		(26,455	)
			Net cash flows from (to) financing activities		(78,168	)		(105,130	)		(27,176	)
Net increase (decrease) in cash and cash equivalents					60,327			75,657			(18,987	)
Cash and cash equivalents at beginning of year					78,838			3,181			22,168
Cash and cash equivalents at end of year					139,165			78,838			3,181
Supplemental Disclosures of Cash Flow Information:
	Cash paid during the year for:
	Interest			$	5,062		$	8,646		$	13,395
	Income taxes			$	48,598		$	40,916		$	54,634

The accompanying notes are an integral part of the consolidated financial statements.

38

HON INDUSTRIES INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Nature of Operations

        HON INDUSTRIES Inc., with its subsidiaries (the Company), is a provider of office furniture and hearth products. Both industries are reportable segments; however, the Company's office furniture business is its principal line of business. Refer to the Operating Segment Information note for further information. Office furniture products are sold through a national system of dealers, wholesalers, mass merchandisers, warehouse clubs, retail superstores, end-user customers, and to federal and state governments. Dealer, wholesaler, and retail superstores are the major channels based on sales. Hearth products include electric, wood-, pellet-, and gas-burning factory-built fireplaces, fireplace inserts, stoves, and gas logs. These products are sold through a national system of dealers, wholesalers, large regional contractors, and Company-owned retail outlets. The Company's products are marketed predominantly in the United States and Canada. The Company exports select products to a limited number of markets outside North America, principally Latin America and the Caribbean, through its export subsidiary; however, based on sales, these activities are not significant.

Summary of Significant Accounting Policies

Principles of Consolidation and Fiscal Year-End

        The consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

        The Company's fiscal year ends on the Saturday nearest December 31. Fiscal year 2002 ended on December 28, 2002; 2001 ended on December 29, 2001; and 2000 ended on December 30, 2000.

Cash, Cash Equivalents and Investments

        Cash and cash equivalents generally consist of cash, money market accounts, and debt securities. These securities have original maturity dates not exceeding three months from date of purchase. The Company has short-term investments with maturities of less than one year and also has investments with maturities greater than one year that are included in Other Assets on the consolidated balance sheet. Management classifies investments in marketable securities at the time of purchase and reevaluates such classification at each balance sheet date. Equity securities are classified as available-for-sale and are stated at current market value with unrealized gains and losses included as a separate component of equity, net of any related tax effect. Debt securities are classified as held-to-maturity and are stated at amortized cost. The specific identification method is used to determine realized gains and losses on the trade date. Short-term investments include municipal bonds, money market preferred stock and U.S. treasury notes. Long-term investments include U.S. government securities, municipal bonds, certificates of deposit and asset-and mortgage-backed securities.

        At December 28, 2002, cash, cash equivalents and investments consisted of the following (cost approximates market value):

		Cash and cash equivalents		Short-term investments		Long-term investments
		(In thousands)
Held-to-maturity securities
Municipal bonds		$	82,300	$	1,900	$	5,396
U.S. government securities							11,995
Certificates of deposit							400
Available-for-sale securities
U.S. treasury notes					3,478
Money market preferred stock					11,000
Asset and mortgage-backed securities							7,098
Cash & Money Market Accounts			56,865
	Total	$	139,165	$	16,378	$	24,889

39

        The 2001 and 2000 cash and cash equivalents generally consisted of cash and commercial paper.

Receivables

        Accounts receivables are presented net of an allowance for doubtful accounts of $9,570,000, $16,576,000, and $11,237,000 for 2002, 2001, and 2000, respectively.

Inventories

        Inventories are valued at the lower of cost or market, determined principally by the last-in, first-out (LIFO) method.

Property, Plant, and Equipment

        Property, plant, and equipment are carried at cost. Depreciation has been computed using the straight-line method over estimated useful lives: land improvements, 10 - 20 years; buildings, 10 - 40 years; and machinery and equipment, 3 - 12 years.

Long-Lived Assets

        Long-lived assets are reviewed for impairment as events or changes in circumstances occur indicating that the amount of the asset reflected in the Company's balance sheet may not be recoverable. An estimate of undiscounted cash flows produced by the asset, or the appropriate group of assets, is compared to the carrying value to determine whether impairment exists. The estimates of future cash flows involve considerable management judgement and are based upon assumptions about expected future operating performance. The actual cash flows could differ from management's estimates due to changes in business conditions, operating performance, and economic conditions. Asset impairment charges connected with the Company's restructuring activities are discussed in the Restructuring Related Charges note. These assets included real estate, manufacturing equipment and certain other fixed assets. The Company's continuous focus on improving the manufacturing process tends to increase the likelihood of assets being replaced; therefore, the Company is constantly evaluating the expected lives of its equipment. The Company recorded losses on the disposal of assets in the amount of approximately $5 million during 2002 as a result of its continuous rapid improvement initiatives.

Goodwill and Other Intangible Assets

        The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. The Company has determined that the fair value of its reporting units exceeds the carrying values and therefore, no impairment of goodwill was recorded. The impairment tests performed require that the Company determine the fair market value of its trademarks and the fair market value of its reporting units for comparison to the carrying value of such net assets to assess whether an impairment exists. The methodologies used to estimate fair market value involve the use of estimates and assumptions, including projected cash flows, royalty rates and discount rates. Also pursuant to the standard, the Company has ceased recording goodwill and indefinite-lived intangibles amortization in 2002.

Product Warranties

        The Company issues certain warranty policies on its furniture and hearth products that provides for repair or replacement of any covered product or component that fails during normal use because of a defect in design, materials or workmanship. A warranty reserve is determined by recording a specific reserve for known warranty issues and an additional reserve for unknown claims that are expected to be incurred based on historical claims

40

experience. Actual claims incurred could differ from the original estimates, requiring adjustments to the reserve. Activity associated with warranty obligations was as follows in 2002:

(In thousands)
Balance at the beginning of the period	$	5,632
Accruals for warranties issued during the period		6,542
Accrual related to pre-existing warranties		2,686
Settlements made during the period		(6,455	)
Balance at the end of the period	$	8,405

Revenue Recognition

        Revenue is normally recognized upon shipment of goods to customers. In certain circumstances revenue is not recognized until the goods are received by the customer or upon installation and customer acceptance based on the terms of the sales agreement. Revenue includes freight charged to customers; related costs are in selling and administrative expense. Rebates, discounts, and other marketing program expenses that are directly related to the sale are recorded as a deduction to net sales. Marketing program accruals require the use of management estimates and the consideration of contractual arrangements that are subject to interpretation. Customer sales that reach certain award levels can affect the amount of such estimates and actual results could differ from these estimates.

Product Development Costs

        Product development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. These costs include salaries, contractor fees, building costs, utilities and administrative fees. The amounts charged against income were $25,849,000 in 2002, $21,415,000 in 2001, and $18,911,000 in 2000.

Stock-Based Compensation

        The Company accounts for its stock option plan using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," which results in no charge to earnings when options are issued at fair market value. The Company has adopted the disclosure requirements of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure."

Income Taxes

        The Company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes." This Statement uses an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements.

Earnings Per Share

        Basic earnings per share are based on the weighted-average number of common shares outstanding during the year. Shares potentially issuable under options have been considered outstanding for purposes of the diluted earnings per share calculation.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The more significant areas requiring the use of management estimates relate to allowance for doubtful accounts, inventory reserves, marketing program accruals, warranty

41

accruals, accruals for self-insured medical claims, workers' compensation, general liability and auto insurance claims, and useful lives for depreciation and amortization. Actual results could differ from those estimates.

Self-Insurance

        The Company is partially self-insured for general liability, workers' compensation, and certain employee health benefits. The general and workers' compensation liabilities are managed through a wholly owned insurance captive; the related liabilities are included in the accompanying consolidated financial statements. The Company's policy is to accrue amounts equal to the actuarially determined liabilities. The actuarial valuations are based on historical information along with certain assumptions about future events. Changes in assumptions for such matters as legal actions, medical costs, and changes in actual experience could cause these estimates to change in the near term.

Recent Accounting Pronouncements

        During 2002, the Financial Accounting Standards Board finalized SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" for exit and disposal activities that are initiated after December 31, 2002. This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.

        The Financial Accounting Standards Board also issued SFAS No. 148 "Accounting for Stock-Based Compensation-Transition and Disclosure" during 2002. This Statement amends SFAS No. 123 "Accounting for Stock-Based Compensation" to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure requirements of this statement as of December 28, 2002.

        The Financial Accounting Standards Board also issued Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Other". FIN 45 clarifies the requirements of SFAS No. 5 "Accounting for Contingencies" relating to the guarantor's accounting for and disclosure of the issuance of certain types of guarantees. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The disclosure provisions are effective for financial statements with years ending after December 15, 2002. The Company has included these disclosures in the Warranty and the Commitments and Contingencies notes.

        During 2001, the Financial Accounting Standards Board finalized SFAS No. 143, "Accounting for Asset Retirement Obligations," and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Company adopted Statement No. 144 on December 30, 2001, the beginning of its 2002 fiscal year. The Company intends to adopt Statement No. 143 on December 29, 2002, the beginning of its 2003 fiscal year. The adoption of SFAS No. 143 is not expected to have a material impact on the Company's financial statements.

        In 2000, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs," that all amounts billed to a customer in a sale transaction related to shipping and handling, if any, represent revenues earned for the goods provided and should be classified as revenue. The Company implemented the above EITF consensus effective with the fourth quarter 2000 and has restated prior periods to reflect the change. The adoption of this consensus did not have a material impact on the Company's financial statements. In 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which was amended in June 2000 by SFAS No. 138. The Company adopted this Statement in January 2001 as required by the Statement. The adoption of this Statement did not have any impact on the Company's financial statements.

Reclassifications

        Certain amounts in 2000 have been reclassified to conform to the 2001 presentation.

42

Restructuring Related Charges

        During 2002, the Company recorded a pretax charge of approximately $5.4 million due to the shutdown of an office furniture facility in Jackson, Tennessee. A total of 125 members were terminated and received severance due to this shutdown.

        During the second quarter of 2001, the Company recorded a pretax charge of $24.0 million or $0.26 per diluted share for a restructuring plan that involved consolidating physical facilities, discontinuing low-volume product lines, and reductions of workforce. Included in the charge was the closedown of three of its office furniture facilities located in Williamsport, Pennsylvania; Tupelo, Mississippi; and Santa Ana, California. During the second quarter of 2002, a restructuring credit of approximately $2.4 million was taken back into income relating to this charge. This was mainly due to the fact that the Company was able to exit a lease with a lessor at more favorable terms than originally estimated and the Company's ability to minimize the number of members terminated as compared to the original plan.

        The following table details the change in restructuring reserve for the last two years:

	Severance Costs			Other Member Related Costs			Facility Termination & Other Costs			Asset Impairment Write-downs			Total
	(In thousands)
Restructuring reserve at December 31, 2000	$	—		$	—		$	—		$	—		$	—
Restructuring charge		3,090			850			3,860			16,200			24,000
Cash payments		(2,322	)		(433	)		(2,328	)		—			(5,083	)
Charge against assets		—			—			—			(16,200	)		(16,200	)
Restructuring reserve at December 29, 2001	$	768		$	417		$	1,532		$	—		$	2,717
Restructuring charge		737			—			3,328			1,300			5,365
Restructuring credit		(852	)		(366	)		(1,147	)		—			(2,365	)
Cash payments		(653	)		(51	)		(1,526	)		—			(2,230	)
Charge against assets		—			—			—			(1,300	)		(1,300	)
Restructuring reserve at December 28, 2002	$	—		$	—		$	2,187		$	—		$	2,187

Business Combinations

        During 2001, the Company completed the acquisition of three small hearth product distributors for a total purchase price of approximately $7.6 million. The acquisitions were accounted for using the purchase method, and the results of the three distributors have been included in the Company's financial statements since the date of acquisition.

        On February 29, 2000, the Company completed the acquisition of its Hearth Services division, which consists of two leading hearth products distributors, American Fireplace Company (AFC) and the Allied Group (Allied), establishing the Company as the leading manufacturer and distributor in the hearth products industry. The Company acquired AFC and Allied for approximately $135 million in cash and debt including acquisition costs. The acquisition has been accounted for using the purchase method, and the results of AFC and Allied have been included in the Company's financial statements since the date of acquisition. Management finalized its integration plan related to the acquisition during the first quarter of 2001. The excess of the consideration paid over the fair value of the business of $21 million was recorded as goodwill and was being amortized on a straight-line basis over 20 years through December 29, 2001.

        Assuming the acquisition of American Fireplace Company and Allied Group had occurred on January 2, 2000, the beginning of the Company's 2000 fiscal year, instead of the actual dates reported above, the Company's pro forma consolidated net sales would have been approximately $2.1 billion for 2000. Pro forma consolidated net income and net income per share for 2000 would not have been materially different than the reported amounts.

43

Inventories

	2002			2001			2000
	(In thousands)
Finished products	$	30,747		$	33,280		$	48,990
Materials and work in process		26,266			26,469			46,497
LIFO reserve		(10,190	)		(9,609	)		(11,127	)
	$	46,823		$	50,140		$	84,360

Property, Plant, and Equipment

	2002		2001		2000
	(In thousands)
Land and land improvements	$	21,566	$	21,678	$	18,808
Buildings		208,124		212,352		202,189
Machinery and equipment		494,354		494,458		514,293
Construction and equipment installation in progress		10,227		14,247		27,547
		734,271		742,735		762,837
Less: allowances for depreciation		381,001		337,764		308,525
	$	353,270	$	404,971	$	454,312

Goodwill and Other Intangible Assets

        The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001, the beginning of its 2002 fiscal year. Pursuant to this standard, the Company has completed an assessment of the categorization of its existing intangible assets and goodwill. In addition, the Company completed an analysis of the fair value of its reporting units using both a discounted cash flow analysis and market multiple approach and has determined that the fair value of its reporting units exceeds the carrying values and therefore, no impairment of goodwill was recorded. Also pursuant to the standard, the Company has ceased recording of goodwill and indefinite-lived intangibles amortization in 2002.

        The Company also owns a trademark having a net value of $8.1 million as of December 28, 2002 and December 29, 2001. The trademark had a net carrying amount of $8.3 million as of December 30, 2000. The fair value of the trademark exceeds the carrying value of the trademark and thus, no impairment was recorded. The trademark is deemed to have an indefinite useful life because it is expected to generate cash flows indefinitely. The Company ceased amortizing the trademark in 2002.

        The table below summarizes amortizable definite-lived intangible assets, which are reflected in Other Assets in the Company's consolidated balance sheets:

	2002
	(In thousands)
Patents	$	16,450
License agreements and other		26,076
Less: accumulated amortization		13,980
Net intangible assets	$	28,546

        Amortization expense for definite-lived intangibles for 2002, 2001, and 2000 was $2,690,100, $2,200,200, and $2,124,700, respectively. Amortization expense is estimated to be approximately $2.7 million per year for each of the next five years.

44

        The goodwill at December 29, 2001, included other intangible assets that are required to be accounted for as assets apart from goodwill under SFAS No. 142. The following table summarizes the reclassification:

		Net Book Value December 29, 2001		SFAS 142 Reclassification			Net book value as modified for SFAS 142 December 29, 2001
		(In thousands)
Goodwill		$	214,337	$	(27,643	)	$	186,694
License agreements and other (included in Other Assets)			3,049		19,564			22,613
Trademarks (included in Other Assets)			—		8,079			8,079
Patents (included in Other Assets)			8,574		—			8,574
	Total	$	225,960	$	—		$	225,960

        The changes in the carrying amount of goodwill since December 29, 2001, are as follows by reporting segment:

	Office Furniture		Hearth Products			Total
	(In thousands)
Balance as of December 29, 2001 (after SFAS 142 reclassification)	$	43,611	$	143,083		$	186,694
Goodwill increase during period				5,710			5,710
Net goodwill disposed of during period		—		(9	)		(9	)
Balance as of December 28, 2002	$	43,611	$	148,784		$	192,395

        The goodwill increase in 2002 relates to additional purchase consideration associated with debentures issued in connection with a prior acquisition.

        The following schedule reports the adjusted net income for the goodwill and indefinite-lived trademark amortization effect:

	2002		2001		2000
	(In thousands)
Reported net income	$	91,360	$	74,407	$	106,217
Add back: Goodwill amortization, net of tax		—		5,611		4,742
Add back: Trademark amortization, net of tax		—		149		149
Adjusted net income	$	91,360	$	80,167	$	111,108
Basic and diluted earnings per share:
Reported net income	$	1.55	$	1.26	$	1.77
Goodwill & trademark amortization, net of tax		—		.10		.08
Adjusted net income	$	1.55	$	1.36	$	1.85

45

Accounts Payable and Accrued Expenses

		2002		2001		2000
		(In thousands)
Trade accounts payable		$	66,204	$	53,660	$	67,540
Compensation			20,686		13,663		15,781
Profit sharing and retirement expense			26,788		26,020		25,041
Vacation pay			14,095		13,881		14,560
Marketing expenses			59,224		54,861		65,931
Casualty
	self-insurance expense		10,973		17,189		12,216
Other accrued expenses			54,175		36,910		39,471
		$	252,145	$	216,184	$	240,540

Long-Term Debt

	2002		2001		2000
	(In thousands)
Industrial development revenue bonds, various issues, payable through 2018 with interest at 1.49-5.40% per annum	$	7,938	$	23,995	$	24,633
Note payable to bank, revolving credit agreement with interest at a variable rate*		—		—		46,000
Convertible debentures payable to individuals, due in 2003 with interes at 5.5% per annum		40,443		58,074		58,074
Other notes and amounts		736		3,285		5,673
Total debt		49,117		85,354		134,380
Less: current portion		40,564		5,784		8,287
Long-term debt	$	8,553	$	79,570	$	126,093

*

Borrowings under the Company's $200,000,000 revolving bank credit agreement were repaid in full in 2001, however, the credit line remained available until June 2002. In May 2002, the Company entered into a new $136,000,000, four year revolving bank credit agreement.

        Aggregate maturities of long-term debt are as follows:

(In thousands)
2003	$	40,564
2004		242
2005		5,704
2006		102
2007		59
Thereafter		2,446

        The convertible debentures are payable to the former owners of businesses that were acquired by the Company. These individuals continue as members of the Company following the acquisitions. The convertible debentures are convertible into cash. The debentures contain certain conversion features that are recorded as earned.

        Certain of the above borrowing arrangements include covenants which limit the assumption of additional debt and lease obligations. The Company has been and currently is in compliance with the covenants related to these debt agreements. The fair value of the Company's outstanding long-term debt obligations at year-end 2002 approximates the recorded aggregate amount.

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Selling and Administrative Expenses

	2002		2001		2000
	(In thousands)
Freight expense for shipments to customers	$	98,876	$	103,489	$	137,197
Amortization of intangible and other assets		4,317		12,646		10,679
Product development costs		25,849		21,415		18,911
Other selling and administrative expenses		325,147		326,656		321,061
	$	454,189	$	464,206	$	487,848

Income Taxes

        Significant components of the provision for income taxes are as follows:

		2002		2001		2000
		(In thousands)
Current:
	Federal	$	38,966	$	32,393	$	62,172
	State		3,473		2,442		3,931
			42,439		34,835		66,103
Deferred			6,755		7,019		(6,356	)
		$	49,194	$	41,854	$	59,747

        A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:

	2002		2001		2000
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal tax effect	1.6		1.6		1.5
Credit for increasing research activities	(1.6	)	—		—
Extraterritorial income exclusion	(1.0	)	—		—
Other—net	1.0		(0.6	)	(0.5	)
Effective tax rate	35.0	%	36.0	%	36.0	%

47

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:

			2002			2001			2000
			(In thousands)
Net long-term deferred tax liabilities:
	Tax over book depreciation		$	(34,398	)	$	(38,759	)	$	(37,509	)
	OPEB obligations			3,581			3,197			3,157
	Compensation			3,821			2,519			2,079
	Goodwill			(14,173	)		(5,550	)		(4,183	)
	Other—Net			4,055			(1,039	)		(770	)
		Total net long-term deferred tax liabilities		(37,114	)		(39,632	)		(37,226	)
Net current deferred tax assets:
	Workers' compensation, general, and product liability accruals			1,517			1,119			4,183
	Vacation accrual			4,617			4,002			4,632
	Integration accruals			—			(3,766	)		(3,205	)
	Inventory differences			5,101			1,969			2,404
	Plant closing accruals			821			3,302			—
	Deferred income			(3,820	)		—			—
	Other—net			1,865			8,314			11,502
Total net current deferred tax assets				10,101			14,940			19,516
Net deferred tax (liabilities) assets			$	(27,013	)	$	(24,692	)	$	(17,710	)

Shareholders' Equity and Earnings Per Share

		2002	2001	2000
Common Stock, $1 Par Value
	Authorized	200,000,000	200,000,000	200,000,000
	Issued and outstanding	58,373,607	58,672,933	59,796,891
Preferred Stock, $1 Par Value
	Authorized	1,000,000	1,000,000	1,000,000
	Issued and outstanding	—	—	—

        The Company purchased 614,580; 1,472,937; and 837,552 shares of its common stock during 2002, 2001, and 2000, respectively. The par value method of accounting is used for common stock repurchases. The excess of the cost of shares acquired over their par value is allocated to Additional Paid-In Capital with the excess charged to Retained Earnings.

        In 2002 the denominator for the basic earnings per share calculation was 58,789,851. There were 250,769 potentially dilutive shares from stock options plans, making the denominator for diluted earnings per share 59,040,620. Certain exercisable and non-exercisable stock options were not included in the computation of diluted EPS for fiscal year 2002, because the option prices were greater than the average market prices for the periods. The number of stock options outstanding, which met this criterion for 2002 was 30,000 with a range of per share exercise prices of $28.25-$32.22.

        Components of other comprehensive income (loss) consist of the following:

	2002			2001		2000
	(In thousands)
Foreign currency translation adjustments—net of tax		—		$	109	$	118
Change in unrealized gains on marketable securities—net of tax	$	(322	)		42		208
Other comprehensive income (loss)	$	(322	)	$	151	$	326

48

        In May 1997, the Company registered 400,000 shares of its common stock under its 1997 Equity Plan for Non-Employee Directors. This plan permits the Company to issue to its non-employee directors options to purchase shares of Company common stock, restricted stock of the Company, and awards of Company stock. The plan also permits non-employee directors to elect to receive all or a portion of their annual retainers and other compensation in the form of shares of Company common stock. During 2002, 2001, and 2000, 6,358; 7,446; and 6,948 shares of Company common stock were issued under the plan, respectively.

        Cash dividends declared and paid per share for each year are:

(In dollars)	2002		2001		2000
Common shares	$	.50	$	.48	$	.44

        Shares of common stock were issued in 2002, 2001, and 2000 pursuant to a members' stock purchase plan as follows:

	2002		2001		2000
Shares issued		43,388		85,385		90,059
Average price per share	$	23.63	$	20.51	$	21.10

        During 2002, shareholders approved the 2002 Members' Stock Purchase Plan. Under the new plan, 800,000 shares of common stock were registered for issuance to participating members. Beginning on June 30, 2002, rights to purchase stock are granted on a quarterly basis to all members who have one year of employment eligibility and work a minimum of 20 hours a week. The price of the stock purchased under the plan is 85% of the closing price on the applicable purchase date. No member may purchase stock under the plan in an amount which exceeds the lesser of 20% of his/her gross earnings or a maximum fair value of $25,000 in any calendar year. During 2002, 47,419 shares of common stock were issued under the plan at an average price of $22.58. An additional 752,581 shares were available for issuance under the plan at December 28, 2002.

        The Company has a shareholders rights plan which will expire August 20, 2008. The plan becomes operative if certain events occur involving the acquisition of 20% or more of the Company's common stock by any person or group in a transaction not approved by the Company's Board of Directors. Upon the occurrence of such an event, each right entitles its holder to purchase an amount of common stock of the Company with a market value of $400 for $200, unless the Board authorizes the rights be redeemed. The rights may be redeemed for $0.01 per right at any time before the rights become exercisable. In certain instances, the right to purchase applies to the capital stock of the acquirer instead of the common stock of the Company. The Company has reserved preferred shares necessary for issuance should the rights be exercised.

        The Company has entered into change in control employment agreements with corporate officers and certain other key employees. According to the agreements, a change in control occurs when a third person or entity becomes the beneficial owner of 20% or more of the Company's common stock or when more than one-third of the Company's Board of Directors is composed of persons not recommended by at least three-fourths of the incumbent Board of Directors. Upon a change in control, a key employee is deemed to have a two-year employment with the Company, and all his or her benefits are vested under Company plans. If, at any time within two years of the change in control, his or her position, salary, bonus, place of work, or Company-provided benefits are modified, or employment is terminated by the Company for any reason other than cause or by the key employee for good reason, as such terms are defined in the agreement, then the key employee is entitled to receive a severance payment equal to two times annual salary and the average of the prior two years' bonuses.

Stock-Based Compensation

        Under the Company's 1995 Stock-Based Compensation Plan, as amended and restated effective November 10, 2000, the Company may award options to purchase shares of the Company's common stock and grant other stock awards to executives, managers, and key personnel. The Plan is administered by the Human Resources and Compensation Committee of the Board of Directors. Restricted stock awarded under the plan is expensed ratably over the vesting period of the awards. Stock options awarded to employees under the Plan must be at exercise

49

prices equal to or exceeding the fair market value of the Company's common stock on the date of grant. Stock options are generally subject to four-year cliff vesting and must be exercised within 10 years from the date of grant.

        The Company accounts for this plan under the recognition and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation," as amended by FASB Statement No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure",to stock-based employee compensation.

		2002			2001			2000
		(In thousands)
Net income, as reported		$	91.4		$	74.4		$	106.2
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(2.2	)		(1.4	)		(1.1	)
Pro forma net income		$	89.2		$	73.0		$	105.1
Earnings per share:
	Basic-as reported	$	1.55		$	1.26		$	1.77
	Basic-pro forma	$	1.52		$	1.24		$	1.75
	Diluted-as reported	$	1.55		$	1.26		$	1.77
	Diluted-pro forma	$	1.51		$	1.24		$	1.75

        The weighted-average fair value of options granted during 2002, 2001, and 2000 estimated on the date of grant using the Black-Scholes option-pricing model was $11.74, $9.70, and $9.25, respectively. The fair value of 2002, 2001, and 2000 options granted is estimated on the date of grant using the following assumptions: dividend yield of 1.65% to 2.06%, expected volatility of 34.32% to 38.37%, risk-free interest rate of 5.13% to 6.56%, and an expected life of 10 to 12 years depending on grant date.

        The status of the Company's stock option plans is summarized below:

		Number of Shares		Weighted-Average Exercise Price
Outstanding at January 1, 2000		407,750		$	24.30
Granted		532,500			20.13
Exercised		(22,000	)		23.80
Forfeited		—			—
Outstanding at December 30, 2000		918,250		$	21.90
Granted		266,500			23.39
Exercised		(17,500	)		18.31
Forfeited		(37,000	)		21.57
Outstanding at December 29, 2001		1,130,250			22.32
Granted		290,000			25.77
Exercised		—			—
Forfeited		(17,000	)		21.69
Outstanding at December 28, 2002		1,403,250		$	23.03
Options exercisable at:
	December 28, 2002	156,250		$	25.02
	December 29, 2001	105,000			24.86
	December 30, 2000	—			—

50

        The following table summarizes information about fixed stock options outstanding at December 28, 2002:

Options Outstanding						Options Exercisable
Range of Exercise Prices		Number Outstanding	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number Exercisable at December 28, 2002
$	24.50-$28.25	105,000	4.0 years	$	24.86	105,000
$	32.22	20,000	5.1 years	$	32.22	20,000
$	23.31-$23.47	238,750	5.9 years	$	23.47	11,250
$	18.31-$26.69	493,000	7.1 years	$	20.28	15,000
$	23.32-$25.27	259,500	8.0 years	$	23.40	5,000
$	25.75-$25.77	287,000	9.1 years	$	25.77	—

Retirement Benefits

        The Company has defined contribution profit-sharing plans covering substantially all employees who are not participants in certain defined benefit plans. The Company's annual contribution to the defined contribution plans is based on employee eligible earnings and results of operations and amounted to $23,524,000, $24,826,000, and $24,400,000 in 2002, 2001, and 2000, respectively.

        The Company sponsors defined benefit plans which include a limited number of salaried and hourly employees at certain subsidiaries. The Company's funding policy is generally to contribute annually the minimum actuarially computed amount. Net pension costs relating to these plans were $0 for 2002, 2001, and 2000. The actuarial present value of obligations, less related plan assets at fair value, is not significant.

        The Company also participates in a multiemployer plan, which provides defined benefits to certain of the Company's union employees. Pension expense for this plan amounted to $309,000, $310,000, and $308,500 in 2002, 2001, and 2000, respectively.

51

Postretirement Health Care

        In accordance with the guidelines of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," the following table sets forth the funded status of the plan, reconciled to the accrued postretirement benefits cost recognized in the Company's balance sheet at:

	2002			2001			2000
	(In thousands)
Reconciliation of benefit obligation:
Obligation at beginning of year	$	17,351		$	12,229		$	20,237
Service cost		398			278			182
Interest cost		1,091			941			882
Benefit payments		(1,356	)		(952	)		(981	)
Actuarial (gains) losses		133			3,042			(5,888	)
Current year prior service cost		—			1,813			(2,203	)
Obligation at end of year	$	17,617		$	17,351		$	12,229
Funded status:
Funded status at end of year	$	17,617		$	17,351		$	12,229
Unrecognized transition obligation		(5,942	)		(6,523	)		(7,103	)
Unrecognized prior-service cost		(1,352	)		(1,582	)		(1,813	)
Unrecognized gain (loss)		(539	)		(364	)		5,457
Net amount recognized	$	9,784		$	8,882		$	8,770
Net periodic postretirement benefit cost include:
Service cost	$	398		$	278		$	182
Interest cost		1,091			941			882
Amortization of transition obligation over 20 years		581			581			581
Amortization of prior service cost		230			230			—
Amortization of (gains) and losses		(10	)		(474	)		(539	)
Net periodic postretirement benefit cost	$	2,290		$	1,556		$	1,106

        The discount rates at fiscal year-end 2002, 2001, and 2000 were 6.5%, 6.5%, and 8.0%, respectively. The Company payment for these benefits has reached the maximum amounts per the plan; therefore, healthcare trend rates have no impact on company cost.

52

Leases

        The Company leases certain warehouse, plant facilities and equipment. Commitments for minimum rentals under noncancelable leases at the end of 2001 are as follows:

	Capitalized Leases		Operating Leases
	(In thousands)
2003	$	269	$	14,128
2004		274		11,801
2005		261		9,545
2006		221		7,428
2007		1,016		4,859
Thereafter		—		15,734
Total minimum lease payments		2,041	$	63,495
Less: amount representing interest		606
Present value of net minimum lease payments, including current maturities of $151	$	1,435

        Property, plant, and equipment at year-end include the following amounts for capitalized leases:

	2002		2001		2000
	(In thousands)
Buildings	$	3,299	$	3,299	$	3,299
Machinery and equipment		196		15,805		15,805
		3,495		19,104		19,104
Less: allowances for depreciation		2,514		17,052		14,655
	$	981	$	2,052	$	4,449

        Rent expense for the years 2002, 2001, and 2000 amounted to approximately $13,683,000, $13,387,000, and $15,428,000, respectively. The Company has operating leases for office and production facilities with annual rentals totaling $450,000 with the former owners of a business acquired in 1996. One of the individuals continues as an officer of a subsidiary of the Company. Contingent rent expense under both capitalized and operating leases (generally based on mileage of transportation equipment) amounted to $787,000, $869,000, and $941,000 for the years 2002, 2001, and 2000, respectively.

Commitments and Contingencies

        The Company utilizes letters of credit in the amount of $27 million to back certain financing instruments, insurance policies and payment obligations. The letters of credit reflect fair value as a condition of their underlying purpose and are subject to fees competitively determined.

        The Company entered into a three year transportation service contract with a contract carrier in May, 2002. The Company is contingently liable for future minimum payments totaling $14,537,000 under this contract. The Company is also contingently liable for $266,000 of financing arrangements with certain customers.

        The Company has contingent liabilities which have arisen in the course of its business, including pending litigation, preferential payment claims in customer bankruptcies, environmental remediation, taxes, and other claims. The Company currently has one preferential payment claim outstanding totaling approximately $7.6 million. The Company intends to vigorously contest this claim, however, the ultimate outcome or likelihood of this specific claim cannot be determined at this time. It is our opinion, after consultation with legal counsel, that additional liabilities, if any, resulting from these matters are not expected to have a material adverse effect on

53

our financial condition, although such matters could have a material effect on our quarterly or annual operating results and cash flows when resolved in a future period.

Significant Customer

        One office furniture customer accounted for approximately 14% of consolidated net sales in each year.

Operating Segment Information

        In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," management views the Company as being in two operating segments: office furniture and hearth products, with the former being the principal segment. The office furniture segment manufactures and markets a broad line of metal and wood commercial and home office furniture which includes storage products, desks, credenzas, chairs, tables, bookcases, freestanding office partitions and panel systems, and other related products. The hearth products segment manufactures and markets a broad line of manufactured gas-, pellet-, and wood-burning fireplaces and stoves, fireplace inserts, gas logs, and chimney systems principally for the home.

        The Company's hearth products segment is somewhat seasonal with the third (July-September) and fourth (October-December) fiscal quarters historically having higher sales than the prior quarters. In fiscal 2002, 53% of consolidated net sales of hearth products were generated in the third and fourth quarters.

        For purposes of segment reporting, intercompany sales transfers between segments are not material, and operating profit is income before income taxes exclusive of certain unallocated corporate expenses. These unallocated corporate expenses include the net costs of the Company's corporate operations, interest income, and interest expense. Management views interest income and expense as corporate financing costs and not as an operating segment cost. In addition, management applies an effective income tax rate to its consolidated income before income taxes so income taxes are not reported or viewed internally on a segment basis. Identifiable assets by segment are those assets applicable to the respective industry segments. Corporate assets consist principally of cash and cash equivalents, short-term investments, and corporate office real estate and related equipment.

        No geographic information for revenues from external customers or for long-lived assets is disclosed since the Company's primary market and capital investments are concentrated in the United States.

54

        Reportable segment data reconciled to the consolidated financial statements for the years ended 2002, 2001, and 2000 is as follows:

	2002			2001			2000
	(In thousands)
Net sales:
Office furniture	$	1,279,059		$	1,366,312		$	1,649,937
Hearth products		413,563			426,126			396,349
	$	1,692,622		$	1,792,438		$	2,046,286
Operating profit:
Office furniture(a)	$	130,014		$	112,405		$	171,647
Hearth products(a)		44,852			39,282			30,232
Total operating profit		174,866			151,687			201,879
Unallocated corporate expenses		(34,312	)		(35,426	)		(35,915	)
Income before income taxes	$	140,554		$	116,261		$	165,964
Identifiable assets:
Office furniture	$	494,559		$	526,712		$	638,075
Hearth products		305,326			320,199			327,528
General corporate(b)		220,667			114,980			56,867
	$	1,020,552		$	961,891		$	1,022,470
Depreciation and amortization expense:
Office furniture	$	48,546		$	58,658		$	58,926
Hearth products		13,993			20,389			18,109
General corporate(b)		6,216			2,338			2,011
	$	68,755		$	81,385		$	79,046
Capital expenditures:
Office furniture	$	17,183		$	29,785		$	39,361
Hearth products		6,132			7,149			17,643
General corporate		2,570			(83	)		2,836
	$	25,885		$	36,851		$	59,840

(a)

Included in operating profit for the office furniture segment are pretax charges of $3.0 million and $22.5 million for closing of facilities and impairment charges in 2002 and 2001, respectively. Included in operating profit for the hearth products segment is a pretax charge of $1.5 million for closing of facilities and impairment charges in 2001.

(b)

In 2002 the Company's information technologies departments became a shared service at the corporate level. The costs continue to be charged out to the segments, however the assets and related deprecation are now classified as general corporate.

55

Summary of Unaudited Quarterly Results of Operations

        The following table presents certain unaudited quarterly financial information for each of the past 12 quarters. In the opinion of the Company's management, this information has been prepared on the same basis as the consolidated financial statements appearing elsewhere in this report and includes all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial results set forth herein. Results of operations for any previous quarter are not necessarily indicative of results for any future period.

		First Quarter			Second Quarter			Third Quarter			Fourth Quarter
		(In thousands, except per share data)
Year-End 2002:
	Net sales	$	399,139		$	399,299		$	446,274		$	447,910
	Cost of products sold		259,398			256,696			285,996			290,653
	Gross profit		139,741			142,603			160,278			157,257
	Selling and administrative expenses		110,425			111,320			117,274			115,170
	Restructuring related charges(income)		3,900			(900	)		—			—
	Operating income		25,416			32,183			43,004			42,087
	Interest income (expense)—net		(580	)		(710	)		(577	)		(269	)
	Income before income taxes		24,836			31,473			42,427			41,818
	Income taxes		8,941			11,330			15,274			13,649
	Net income		15,895			20,143			27,153			28,169
	Net income per common share	$	.27		$	.34		$	.46		$	.48
	Weighted-average common shares outstanding		58,777			58,918			59,140			58,546
	As a Percentage of Net Sales
	Net sales		100	%		100	%		100	%		100	%
	Gross profit		35.0			35.7			35.9			35.1
	Selling and administrative expenses		27.7			27.9			26.3			25.7
	Restructuring related charges		1.0			(.2	)		—			—
	Operating income		6.4			8.1			9.6			9.4
	Income taxes		2.2			2.8			3.4			3.0
	Net income		4.0			5.0			6.1			6.3
Year-End 2001:
	Net sales	$	461,997		$	444,196		$	459,352		$	426,893
	Cost of products sold		311,711			292,789			298,427			278,213
	Gross profit		150,286			151,407			160,925			148,680
	Selling and administrative expenses		119,050			118,983			114,759			111,414
	Restructuring related charges		—			24,000			—			—
	Operating income		31,236			8,424			46,166			37,266
	Interest income (expense)—net		(2,700	)		(1,832	)		(1,375	)		(924	)
	Income before income taxes		28,536			6,592			44,791			36,342
	Income taxes		10,273			2,373			16,125			13,083
	Net income	$	18,263		$	4,219		$	28,666		$	23,259
	Net income per common share	$	.31		$	.07		$	.48		$	.40
	Weighted-average common shares outstanding		59,448			59,205			59,048			58,651
	As a Percentage of Net Sales
	Net sales		100.0	%		100.0	%		100.0	%		100.0	%
	Gross profit		32.5			34.1			35.0			34.8
	Selling and administrative expenses		25.8			26.8			25.0			26.1
	Restructuring related charges		—			5.4			—			—
	Operating income		6.8			1.9			10.1			8.7

56

	Income taxes		2.2			0.5			3.5			3.1
	Net income		4.0			0.9			6.2			5.4
Year-End 2000 (a):
	Net sales	$	481,523		$	509,649		$	535,322		$	519,792
	Cost of products sold		329,416			343,842			354,367			352,779
	Gross profit		152,107			165,807			180,955			167,013
	Selling and administrative expenses		111,214			125,513			124,197			126,924
	Operating income		40,893			40,294			56,758			40,089
	Interest income (expense)—net		(2,550	)		(3,688	)		(3,303	)		(2,529	)
	Income before income taxes		38,343			36,606			53,455			37,560
	Income taxes		13,803			13,188			19,234			13,522
	Net income	$	24,540		$	23,418		$	34,221		$	24,038
	Net income per common share	$	.41		$	.39		$	.57		$	.40
	Weighted-average common shares outstanding		60,186			60,145			60,162			60,069
As a Percentage of Net Sales
	Net sales		100.0	%		100.0	%		100.0	%		100.0	%
	Gross profit		31.6			32.5			33.8			32.1
	Selling and administrative expenses		23.1			24.6			23.2			24.4
	Operating income		8.5			7.9			10.6			7.7
	Income taxes		2.9			2.6			3.6			2.6
	Net income		5.1			4.6			6.4			4.6

(a)

First quarter 2000 includes partial quarterly results of operation of American Fireplace Company and the Allied Group acquisitions acquired February 29, 2000.

INVESTOR INFORMATION

Common Stock Market Prices and Dividends (Unaudited)

Quarterly 2002—2001

2002 by Quarter	High		Low		Dividends per Share
1st	$	29.12	$	24.55	$	.125
2nd		30.85		25.45		.125
3rd		28.67		23.80		.125
4th		29.20		22.88		.125
Total Dividends Paid					$	.500

2001 by Quarter	High		Low		Dividends per Share
1st	$	26.50	$	22.00	$	.12
2nd		26.45		22.44		.12
3rd		26.15		19.96		.12
4th		28.85		20.00		.12
Total Dividends Paid					$	.48

57

Common Stock Market Price and Price/Earnings Ratio (Unaudited)

Fiscal Years 2002—1992

	Market Price*			Price/Earnings Ratio
Year			Earnings per Share*
	High	Low		High	Low
2002	30.85	22.88	1.55	20	15
2001	28.85	19.96	1.26	23	16
2000	27.88	15.56	1.77	16	9
1999	29.88	18.75	1.44	21	13
1998	37.19	20.00	1.72	22	12
1997	32.13	15.88	1.45	22	11
1996	21.38	9.25	1.13	19	8
1995	15.63	11.50	.67	23	17
1994	17.00	12.00	.87	20	14
1993	14.63	10.75	.70	21	15
1992	11.75	8.25	.59	20	14
Eleven-Year Average				21	13

*

Adjusted for the effect of stock splits

58

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of HON INDUSTRIES Inc.

Our audits of the consolidated financial statements referred to in our report dates January 31, 2003, appearing in this Annual Report on Form 10-K also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K (Schedule II). In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

The financial statement schedule of HON INDUSTRIES Inc. for the years ended December 29, 2001 and December 30, 2000, were audited by other independent accountants who have ceased operations. Those independent accounts expressed an unqualified opinion on the financial statement scheduled in their report dated February 1, 2002.

/s/PricewaterhouseCoopers LLP

Chicago, Illinois
January 31, 2003

Report of Predecessor Auditor (Arthur Andersen LLP) on Financial Statement Schedule

The following report is a copy of a report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP. This report applies to supplemental Schedule II Valuation and Qualifying Accounts for the years ended December 29, 2001, and December 30, 2000.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of HON INDUSTRIES Inc.

We have audited in accordance with auditing standards generally accepted in the United States, the financial statements of HON INDUSTRIES Inc. included in this registration statement and have issued our report thereon dated February 1, 2002. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The amounts included in Schedule II in this Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the consolidated financial statements. These supporting schedules have been subjected to the auditing procedures applied in the audit of the consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the consolidated financial statements taken as a whole.

/s/Arthur Andersen LLP

Chicago, Illinois
February 1, 2002

59

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

HON INDUSTRIES INC. AND SUBSIDIARIES

December 28, 2002

COL. A	COL. B		COL. C			COL. D			COL. E
			ADDITIONS
DESCRIPTION	BALANCE AT BEGINNING OF PERIOD		(1) CHARGED TO COSTS AND EXPENSES		(2) CHARGED TO OTHER ACCOUNTS (DESCRIBE)	DEDUCTIONS (DESCRIBE)			BALANCE AT END OF PERIOD
	(In thousands)
Reserves deducted in the consolidated balance sheet from the assets to which they apply:
Year ended December 28, 2002:     Allowance for doubtful accounts	$	16,576	$	3,327		$	10,333	(A)	$	9,570
Year ended December 29, 2001:     Allowance for doubtful accounts	$	11,237	$	7,287		$	1,948	(A)	$	16,576
Year ended December 30, 2000:     Allowance for doubtful accounts	$	3,568	$	8,726		$	1,057	(A)	$	11,237

Note A: Excess of accounts written off over recoveries

60

ITEM 14(a)(3)—INDEX OF EXHIBITS

Exhibit Number	Description of Document	Page Number
(3i)	Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 3(i) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 3, 1999	—
(3ii)	By-Laws of the Registrant, as amended	—
(4i)	Rights Agreement dated as of August 13, 1998, by and between the Registrant and Harris Trust and Savings Bank, as Rights Agent, incorporated by reference to Exhibit 4.1 to Registration Statement on Form 8-A filed August 14, 1998, as amended by Form 8-A/A filed September 14, 1998, incorporated by reference to Exhibit 4.1 on Form 8-K filed August 10, 1998	—
(10i)	1995 Stock-Based Compensation Plan, as amended effective November 10, 2000, incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report on Form 10-K for the year ended December 30, 2000	—
(10ii)	1997 Equity Plan for Non-Employee Directors, incorporated by reference to Exhibit B to the Registrant's proxy statement dated March 28, 1997, related to the Registrant's Annual Meeting of Shareholders held on May 13, 1997	—
(10iii)	Form of Registrant's Change in Control Agreement, incorporated by reference to Exhibit 10 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994	—
(10iv)	Executive Long-Term Incentive Compensation Plan of the Registrant, incorporated by reference to Exhibit 99B to the Registrant's Annual Report on Form 10-K for the year ended December 30, 1995	—
(10v)	ERISA Supplemental Retirement Plan of the Registrant, incorporated by reference to Exhibit 99C to the Registrant's Annual Report on Form 10-K for the year ended December 30, 1995	—
(10vi)	2002 Members Stock Purchase Plan of the Registrant, incorporated by reference to Exhibit B to the Registrant's proxy statement dated March 22, 2002, related to the Registrant's Annual Meeting of Shareholders held on May 6, 2002	—
(10vii)	Agreement as Consultant and Director, dated November 15, 1995, between the Registrant and Robert L. Katz, incorporated by reference to the same numbered exhibit filed with the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 28, 1996	—
(10viii)	Form of Director and Officer Indemnification Agreement of the Registrant	—

61

(10ix)	Form of Common Stock Grant Agreement of the Registrant, incorporated by reference to the same numbered exhibit filed with the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 28, 1996	—
(10x)	Form of HON INDUSTRIES Inc. Stock-Based Compensation Plan Stock Option Award Agreement of the Registrant, incorporated by reference to the same numbered exhibit filed with the Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 28, 1996	—
(10xi)	Stock Purchase Agreement of the Registrant, dated September 18, 1985, as amended by amendment dated February 11, 1991, between the Registrant and Stanley M. Howe, incorporated by reference to Exhibit 10(xi) to the Registrant's Annual Report on Form 10-K for the year ended January 3, 1998	—
(10xii)	Real Estate Contract of the Registrant, dated November 15, 1997, between the Registrant and Terrence L. and Loretta B. Mealy, incorporated by reference to Exhibit 10(xii) to the Registrant's Annual Report on Form 10-K for the year ended January 3, 1998	—
(10xiii)	$136,000,000 Credit Agreement, dated May 10, 2002; Deutsche Bank Trust Company Americas, as Administrative Agent, The Northern Trust Company, as Syndication Agent, National City Bank of Michigan/Illinois as Documentation Agent, and various lending institutions	—
(10xiv)	HON INDUSTRIES Inc. Profit-Sharing Retirement Plan of the Registrant as amended effective January 1, 2001, incorporated by reference to Exhibit 10(xiv) to the Registrant's Annual Report on 10-K for the year ended December 29, 2001	—
(10xv)	HON INDUSTRIES Inc. Long-Term Performance Plan of the Registrant, incorporated by reference to the same numbered exhibit filed with the Registrant's Annual Report on Form 10-K for the fiscal year ended December 30, 2000	—
(16)	Letter of Former Accountant, incorporated by reference to the Registrant's Report on Form 8-K dated May 7, 2002	—
(21)	Subsidiaries of the Registrant	—
(23)	Consent of Independent Public Accountants	—
(99A)	Executive Bonus Plan of the Registrant as amended and restated on May 1, 2000, incorporated by reference to the same numbered exhibit filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended April 1, 2000	—
(99B)	Executive Deferred Compensation Plan of the Registrant as amended and restated on November 7, 2002	—
(99C)	Forward-Looking Statements	—
(99D)	Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	—

62

QuickLinks

TABLE OF CONTENTS
PART I

ITEM 1. BUSINESS

ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

ITEM 6. SELECTED FINANCIAL DATA—ELEVEN-YEAR SUMMARY

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PART IV

ITEM 14. CONTROLS AND PROCEDURES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

SIGNATURES
CERTIFICATION OF CHIEF EXECUTIVE OFFICER Sarbanes-Oxley Act Section 302
CERTIFICATION OF CHIEF FINANCIAL OFFICER Sarbanes-Oxley Act Section 302
HON INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
HON INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
HON INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
HON INDUSTRIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
HON INDUSTRIES INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS HON INDUSTRIES INC. AND SUBSIDIARIES December 28, 2002

EX-3.II

                                                                     EXHIBIT 3ii

                                     BY-LAWS

                                       OF

                               HON INDUSTRIES Inc.

                          Adopted on September 7, 1960.
   Amended on April 23, 1964, April 28, 1966, August 13, 1969, April 15, 1970,
     February 12, 1976, July 23, 1976, January 11, 1977, February 13, 1977,
         April 18, 1977, July 28, 1977, July 29, 1977, October 27, 1977,
      February 27, 1978, February 19, 1979, August 1, 1979, March 3, 1980,
      April 30, 1980, October 29, 1980, August 3, 1982, January 31, 1983,
       October 31, 1983, October 30, 1984, February 5, 1985, May 6, 1985,
              February 4, 1986, August 5, 1986, February 15, 1988,
        July 7, 1988, March 13, 1990, February 11, 1991, April 29, 1991,
 July 29, 1991, May 5, 1992, November 2, 1992, May 11, 1993, February 14, 1994,
          May 10, 1994, November 13, 1995, May 14, 1996, May 12, 1997,
      March 4, 1998, July 29, 1998, November 10, 2000, November 7, 2002 and
                                February 12, 2003

                    ARTICLE 1. OFFICES AND PLACES OF BUSINESS

     SECTION 1.01. PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Corporation shall be located in such place, within or without the State
of Iowa, as shall be fixed by or pursuant to authority granted by the Board of
Directors from time to time.

     SECTION 1.02. REGISTERED OFFICE. The registered office of the Corporation
required by the Iowa Business Corporation Act to be maintained in the State of
Iowa may be, but need not be, the same as its principal place of business. The
registered office may be changed from time to time by the Board of Directors as
provided by law.

     SECTION 1.03. OTHER PLACES. The Corporation may conduct its business, carry
on its operations, have offices, carry out any or all of its purposes, and
exercise any or all of its powers anywhere in the world, within or without the
State of Iowa.



                             ARTICLE 2. SHAREHOLDERS

     SECTION 2.01. ANNUAL MEETING. The annual meeting of the shareholders shall
be held in each year at such time and place as shall be fixed by the Board of
Directors or by the Chairman of the Board of Directors; provided, however, that
the annual meeting shall not be scheduled on a legal holiday in the state where
held. Any previously scheduled annual meeting may be postponed by resolution of
the Board of Directors and on public notice given prior to the date previously
scheduled for such annual meeting. At the annual meeting, the shareholders shall
elect Directors as provided in Section 3.02 and may conduct any other business
properly brought before the meeting. (As amended 4/23/64, 8/1/79, 10/31/83, and
4/29/91.)

     SECTION 2.02. SPECIAL MEETINGS. Special meetings of the shareholders, for
any purpose or purposes, may be called, and the time and place thereof fixed by
the Board of Directors or by the holders of not less than one-tenth of the
outstanding shares entitled to vote at the meeting. Business conducted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice of the meeting. Any previously scheduled special meeting of shareholders
may be postponed by resolution of the Board of Directors and public notice given
prior to the date previously scheduled for such special meeting of shareholders.
(As amended 4/23/64, 8/1/79, and 4/29/91.)

     SECTION 2.03. PLACE OF SHAREHOLDERS' MEETINGS. Any annual meeting or
special meeting of shareholders may be held at any place, either within or
without the State of Iowa. The place of each meeting of shareholders shall be
fixed as provided in these By-laws, or by a waiver or waivers of notice fixing
the place of such meeting and signed by all shareholders entitled to vote at
such meeting. If no designation is made of the place of a meeting of
shareholders, the place of meeting shall be the registered office of the
Corporation in the State of Iowa.

     SECTION 2.04. NOTICE OF SHAREHOLDERS' MEETINGS. Written or printed notice
stating the place, day, and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days (unless a longer period shall be required by
law) nor more than sixty days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. (As amended 4/29/91.)

     SECTION 2.05. CLOSING OF TRANSFER BOOKS; FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books



shall be closed for at least fifteen days immediately preceding such meeting. In
lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than seventy days and, in case of a meeting
of shareholders, not less than fifteen days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the Board of Directors does not provide that the stock transfer books shall
be closed and does not fix a record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the record date for such
determination of shareholders shall be seventy days prior to the date fixed for
such meeting or seventy days prior to the date of payment of such dividend, as
the case may be. When any record date is fixed for any determination of
shareholders such determination of shareholders shall be made as of the close of
business on the record date. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section,
such determination shall apply to any adjournment thereof. (As amended 4/30/80,
8/3/82 and 4/29/91.)

     SECTION 2.06. VOTING LIST. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten days prior to such meeting shall be kept on file
at the registered office of the Corporation and shall be subject to inspection
by any shareholder at any time during usual business hours. Such list shall also
be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meeting of shareholders. Failure to comply with the requirements of
this Section shall not affect the validity of any action taken at such meeting.
(As amended 4/29/91.)

     SECTION 2.07. QUORUM OF SHAREHOLDERS. Except as otherwise expressly
provided by the Articles of Incorporation or these By-laws, a majority of the
outstanding common shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at any meeting of shareholders.

     SECTION 2.08. ADJOURNED MEETINGS. Any meeting of shareholders may be
adjourned from time to time and to any place, without further notice, by the
chairman of the meeting or by the affirmative vote of the holders of a majority
of the outstanding common shares entitled to vote and represented at the
meeting, even if less than a quorum. At any adjourned meeting at which a quorum
shall be present, any business may be transacted which might have been
transacted at the meeting as originally notified. (As amended 4/29/91.)

     SECTION 2.09. VOTE REQUIRED FOR ACTION. The vote required for the adoption
of any motion or resolution or the taking of any action at any meeting of
shareholders shall be as provided in the Articles of Incorporation. However,
action may be taken on the following procedural matters by the affirmative vote
of the holders of a majority of the outstanding



common shares entitled to vote and represented at the meeting, even if less than
a quorum: election or appointment of a Chairman or temporary Secretary of the
meeting (if necessary), or adoption of any motion to adjourn or recess the
meeting or any proper amendment of any such motion. Whenever the minutes of any
meeting of shareholders shall state that any motion or resolution was adopted or
that any action was taken at such meeting of shareholders, such minutes shall be
prima facie evidence that such motion or resolution was duly adopted or that
such action was duly taken by the required vote, and such minutes need not state
the number of shares voted for and against such motion, resolution, or action.

     SECTION 2.10. PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote either in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney in fact. Each such proxy
shall be filed with the Secretary of the Corporation or the person acting as
Secretary of the meeting, before or during the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.

     SECTION 2.11. SHAREHOLDERS' VOTING RIGHTS. Each outstanding share entitled
to vote shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders, except as otherwise provided in the Articles of
Incorporation. Voting rights for the election of Directors shall be as provided
in Section 3.02 and in the Articles of Incorporation. (As amended 2/12/76.)

     SECTION 2.12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as the By-laws of such corporation may prescribe, or, in the
absence of such provision, as the Board of Directors of such corporation may
determine.

Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so be contained in
an appropriate order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

Treasury shares shall not be voted at any meeting or counted in determining the
total number of outstanding shares at any given time.

     SECTION 2.13. ORGANIZATION. The Chairman of the Board of Directors or the
Vice-Chairman or the President or a Vice-President, as provided in these
By-laws, shall preside at each meeting of shareholders; but if the Chairman of
the Board of Directors, the Vice-Chairman, the President, and each
Vice-President shall be absent or refuse to act, the shareholders may elect or
appoint a Chairman to preside at the meeting. The Secretary or an Assistant
Secretary, as provided in these By-laws, shall act as Secretary of each meeting
of shareholders; but if the Secretary and each Assistant Secretary shall be
absent or refuse to act, the



shareholders may elect or appoint a temporary Secretary to act as Secretary of
the meeting. (As amended 4/23/64 and 8/1/79.)

     SECTION 2.14. WAIVER OF NOTICE BY SHAREHOLDERS. Whenever any notice
whatsoever is required to be given to any shareholder of the Corporation under
any provision of law or the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether signed before or after the time of the meeting or event of which notice
is required, shall be deemed equivalent to the giving of such notice. Neither
the business to be conducted at, nor the purpose of, any annual or special
meeting of shareholders need be specified in any waiver of notice of such
meeting. The attendance of any shareholder, in person or by proxy, at any
meeting of shareholders shall constitute a waiver by such shareholder of any
notice of such meeting to which such shareholder would otherwise be entitled,
and shall constitute consent by such shareholder to the place, day, and hour of
such meeting and all business which may be conducted at such meeting, unless
such shareholder attends such meeting and objects at such meeting to any
business conducted because the meeting is not lawfully called or convened. (As
amended 4/29/91.)

     SECTION 2.15. POSTPONEMENT OF SHAREHOLDERS' MEETINGS. Any meeting of the
shareholders may be postponed prior to the record date by the Board of Directors
or by the Chairman. Written or printed notice of the postponement shall be
delivered not less than 10 days nor more than 60 days before the date set for
the meeting, either personally or by mail to each shareholder of record entitled
to vote. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his or her address as
it appears on the stock transfer books of the Corporation, with postage thereon
prepaid. (As adopted 2/11/91.)

     SECTION 2.16. NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.

     (a)  ANNUAL MEETING OF SHAREHOLDERS.

          (1)  Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (i) pursuant to
the Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors, or (iii) by any shareholder of the Corporation who was a shareholder
of record at the time of giving of notice provided for in this By-law, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this By-law.

          (2)  For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to Subsection 2.15(a)(1)(iii), the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice shall be delivered to the
Secretary at the principal executive offices of the Corporation not less than
sixty days nor more than ninety days prior to the first anniversary of the
preceding year's annual meeting of shareholders; provided, however, that, if the
date of the annual meeting is advanced by more than thirty days or delayed by
more than sixty days from such anniversary date, notice by the shareholder, to
be timely, must be so delivered not earlier



than ninety days prior to such annual meeting and not later than the close of
business on the later of the sixtieth day prior to such annual meeting or the
tenth day following the date on which public announcement of the date of such
meeting is first made. Such shareholder's notice shall set forth:

               (i)  as to each person whom the shareholder proposes to nominate
for election or reelection as a Director, all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected;

               (ii) as to any other business that the shareholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting, and any material interest of such shareholder in such business and the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, the name and address of such
shareholder and of such beneficial owner as they appear on the Corporation's
books, and the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.

          (3)  Notwithstanding anything in the second sentence of Subsection
2.15(a)(2) to the contrary, if the number of Directors to be elected to the
Board of Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all the nominees for Director or
specifying the size of the increased Board of Directors at least seventy days
prior to the first anniversary of the preceding year's annual meeting of
shareholders, a shareholder's notice required by this By-law shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it is delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
tenth day following the date on which such public announcement is first made by
the Corporation.

     (b)  SPECIAL MEETINGS OF SHAREHOLDERS. Nominations of persons for election
to the Board of Directors may be made at a special meeting of shareholders at
which Directors are to be elected pursuant to the Corporation's notice of
meeting (1) by or at the direction of the Board of Directors or (2) by any
shareholder of the Corporation who was a shareholder of record at the time of
giving of notice provided for in this By-law, who is entitled to vote at the
meeting, and who complies with the notice procedures set forth in this By-law.
Nominations by shareholders of persons for election to the Board of Directors
may be made at such a special meeting of shareholders if the shareholder's
notice required by Subsection 2.15(a)(2) is delivered to the Secretary at the
principal executive offices of the Corporation no earlier than ninety days prior
to such special meeting and not later than the close of business on the later of
the sixtieth day prior to such special meeting or the tenth day following the
date on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors



to be elected at such meeting.

     (c)  APPOINTMENT OF INSPECTORS. The Chairman shall appoint one or more
inspectors to act at a meeting of Shareholders and make a written report of the
inspectors' determinations. Each inspector shall sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of the inspector's ability. The inspector or inspectors shall: (1)
ascertain the number of shares outstanding and the voting power of each, (2)
determine the shares represented at the meeting, (3) determine the validity of
proxies and ballots, (4) count all votes, and (5) determine the results. (As
adopted 2/12/03.)

     (d)  GENERAL.

          (1)  Only persons who are nominated in accordance with the procedures
set forth in this By-law shall be eligible to serve as Directors, and only such
business shall be conducted at a meeting of shareholders as shall have been
brought before the meeting in accordance with the procedures set forth in these
By-laws. Except as otherwise provided by law, the Articles of Incorporation, or
the By-laws of the Corporation, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in these By-laws and, if any proposed nomination or business is not in
compliance with these By-laws, to declare that such defective proposal or
nomination shall be disregarded. (As adopted 2/12/03).

          (2)  The Chairman shall determine the order of business for the
meeting and Shall have the authority to establish rules for the conduct of the
meeting. Such rules and the conduct of any meeting of shareholders shall be fair
to the shareholders. When elections are conducted at the meeting, the Chairman
shall announce the meeting when the polls close for each matter upon which a
vote is taken; if no such announcement is made, the polls will be deemed to have
closed at the final adjournment of the meeting. No ballots, proxies, votes or
revocations or changes to any ballots, proxies or votes will be accepted after
the polls have closed. (As adopted 2/12/03.)

          (3)  For purposes of this By-law, "public announcement" means
disclosure in a press release reported by the Dow Jones News Service, Associated
Press, or comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14, or 15(d) of the Exchange Act.

          (4)  Notwithstanding the foregoing provisions of this By-law, a
shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this By-law. Nothing in this By-law shall be deemed to affect any
rights of shareholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act. (As adopted
4/19/91.)

                          ARTICLE 3. BOARD OF DIRECTORS



     SECTION 3.01. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors. The Board of Directors may exercise
all such powers of the Corporation and may do all such lawful acts and things as
are not by law or the Articles of Incorporation or these By-laws expressly
required to be exercised or done by the shareholders.

     SECTION 3.02. ELECTION OF DIRECTORS. Subject to the Articles of
Incorporation, the common shareholders shall elect one class of Directors at
each annual meeting of shareholders. At each election of Directors, each common
shareholder entitled to vote shall have the right to vote, in person or by
proxy, the number of common shares owned by him and entitled to vote, for as
many persons as the number of the class to be elected. Cumulative voting shall
not be permitted. The election of Directors may be conducted by written ballot,
but need not be conducted by written ballot unless required by a rule or motion
adopted by the shareholders. (As amended 2/12/76.)

     SECTION 3.03. NUMBER, TERMS, CLASSIFICATION, AND QUALIFICATIONS. Subject to
the Articles of Incorporation:

     (a)  The number of Directors shall be thirteen. (As amended 10/29/80,
1/31/83, 2/5/85, 8/5/86, 3/13/90, 5/5/92, 11/2/92, 5/11/93, 2/14/94, 5/10/94,
11/13/95, 5/14/96, 3/4/98, 7/29/98, 11/7/02 and 2/12/03.)

     (b)  The Directors shall be divided into three classes, each of which shall
be as nearly equal in number as possible. The term of office of one class shall
expire in each year. At each annual meeting of the shareholders a number of
Directors equal to the number of the class whose term expires at the annual
meeting shall be elected for a term ending when Directors are elected at the
third succeeding annual meeting. Section 6.03 of the Articles of Incorporation
shall apply if there is a failure in any one or more years to elect one or more
Directors or to elect any class of Directors. (As amended 2/4/86.)

     (c)  The number of Directors may be increased or decreased from time to
time by amendment of this Section, but no decrease shall have the effect of
shortening the term of any incumbent Director. Any new Directorships shall be
assigned to classes, and any decrease in the number of Directors shall be
scheduled, in such a manner that the three classes of Directors shall be as
nearly equal in number as possible.

     (d)  The term of each Director shall begin at the time of his election.
Unless sooner removed as provided in the Articles of Incorporation or elected to
fill a vacancy with a shorter unexpired term pursuant to Section 3.04, each
Director shall serve for a term ending when Directors are elected at the third
succeeding annual meeting of shareholders.

However, any Director may resign at any time by delivering his written
resignation to the Chairman, Vice-Chairman, President, or Secretary of the
Corporation. The resignation shall take effect immediately upon delivery, unless
it states a later effective date. (As amended 8/1/79.)



     (e)  Directors need not be residents of the State of Iowa or shareholders
of the Corporation. (As amended 4/23/64, 4/15/70, 2/12/76, 7/23/76, 1/11/77,
4/18/77, 7/28/77, 7/29/77, 2/27/78, and 2/4/86.)

     SECTION 3.04. VACANCIES IN BOARD. Any vacancy occurring in the Board of
Directors for any reason, and any Directorship to be filled by reason of an
increase in the number of Directors, may be filled by the affirmative vote of a
majority of the Directors then in office even if less than a quorum
(notwithstanding Sections 3.09 and 3.11). Except as otherwise provided in
Section 6.03 of the Articles of Incorporation, a Director elected as provided in
this Section shall be elected for the unexpired term of his predecessor in
office or the unexpired term of the class of Directors to which his new
Directorship is assigned. However, if a Director is elected to fill a vacancy
caused by the resignation of a predecessor whose resignation has not yet become
effective, the new Director's term shall begin when his predecessor's
resignation becomes effective. (As amended 4/23/64 and 2/12/76.)

     SECTION 3.05. REGULAR MEETINGS. A regular meeting of the Board of Directors
may be held without notice other than this Section, promptly after and at the
same place as each annual meeting of shareholders. Other regular meetings of the
Board of Directors may be held at such time and at such places as shall be fixed
by (or pursuant to authority granted by) resolution or motion adopted by the
Board of Directors from time to time, without notice other than such resolution
or motion. However, unless both the time and place of a regular meeting shall be
fixed by the Board of Directors, notice of such meeting shall be given as
provided in Section 3.08.

     SECTION 3.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called, and the time and place thereof fixed, by the Chairman of the
Board of Directors or the Vice-Chairman or the President or the Secretary or by
a majority of the Directors then in office. (As amended 4/23/64 and 8/1/79.)

     SECTION 3.07. PLACE OF MEETINGS. Any regular meeting or special meeting of
the Board of Directors may be held at any place, either within or without the
State of Iowa. The place of each meeting of the Board of Directors shall be
fixed as provided in these By-laws, or by waiver or waivers of notice fixing the
place of such meeting and signed by all Directors then in office. If no
designation is made of the place of a meeting of the Board of Directors, the
place of meeting shall be the registered office of the Corporation in the State
of Iowa.

     SECTION 3.08. NOTICE OF SPECIAL MEETINGS. Written or printed notice stating
the place, day, and hour of a special meeting of the Board of Directors shall be
delivered before the time of the meeting, either personally or by mail or by
telegram, by or at the direction of the President, the Secretary, or the officer
or persons calling the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the Director at
his address as it appears on the records of the Corporation, with postage
thereon prepaid. If given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company, addressed to
the Director at his address as it appears on the records of the



Corporation. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice of such
meeting. (As amended 7/7/88.)

     SECTION 3.09. QUORUM. Except as otherwise expressly provided by the
Articles of Incorporation or these By-laws, a majority of the number of
Directors fixed by these By-laws shall constitute a quorum at any meeting of the
Board of Directors.

     SECTION 3.10. ADJOURNED MEETINGS. Any meeting of the Board of Directors may
be adjourned from time to time and to any place, without further notice, by the
affirmative vote of a majority of the Directors present at the meeting, even if
less than a quorum. At any adjourned meeting at which a quorum shall be present,
any business may be conducted which might have been transacted at the meeting as
originally notified. (As amended 4/29/91.)

     SECTION 3.11. VOTE REQUIRED FOR ACTION. Except as otherwise provided in
these By-laws, the affirmative vote of a majority of the number of Directors
fixed by these By-laws shall be required for and shall be sufficient for the
adoption of any motion or resolution or the taking of any action at any meeting
of the Board of Directors. However, the following actions may be taken by the
affirmative vote of a majority of the Directors present at the meeting, even if
less than a quorum: election or appointment of a Chairman or temporary Secretary
of the meeting (if necessary), or adoption of any motion to adjourn or recess
the meeting or any proper amendment of any such motion. Whenever the minutes of
any meeting of the Board of Directors shall state that any motion or resolution
was adopted or that any action was taken at such meeting of the Board of
Directors, such minutes shall be prima facie evidence that such motion or
resolution was duly adopted or that such action was duly taken by the required
vote, and such minutes need not state the number of Directors voting for and
against such motion, resolution, or action.

     SECTION 3.12. VOTING. Each Director (including, without limiting the
generality of the foregoing, any Director who is also an officer of the
Corporation and any Director presiding at a meeting) may vote on any question at
any meeting of the Board of Directors, except as otherwise expressly provided in
these By-laws. (As amended 4/23/64.)

     SECTION 3.13. ORGANIZATION. The Chairman of the Board of Directors or the
Vice-Chairman or the President or a Vice-President, as provided in these
By-laws, shall preside at each meeting of the Board of Directors; but if the
Chairman of the Board of Directors, the Vice-Chairman, the President, and each
Vice-President shall be absent or refuse to act, the Board of Directors may
elect or appoint a Chairman to preside at the meeting. The Secretary or an
Assistant Secretary, as provided in these By-laws, shall act as Secretary of
each meeting of the Board of Directors; but if the Secretary and each Assistant
Secretary shall be absent or refuse to act, the Board of Directors may elect or
appoint a temporary Secretary to act as Secretary of the meeting. (As amended
4/23/64 and 8/1/79.)

     SECTION 3.14. RULES AND ORDER OF BUSINESS. The Board of Directors may adopt
such rules and regulations, not inconsistent with applicable law or the Articles
of Incorporation or



these By-laws, as the Board of Directors deems advisable for the conduct of its
meetings. Except as otherwise expressly required by law or the Articles of
Incorporation or these By-laws or such rules or regulations, meetings of the
Board of Directors shall be conducted in accordance with Robert's Rules of
Order, Revised (as further revised from time to time). Unless otherwise
determined by the Board of Directors, the order of business at the first meeting
of the Board of Directors held after each annual meeting of shareholders, and at
other meetings of the Board of Directors to the extent applicable, shall be as
follows:

          (1)  Roll call or other determination of attendance and quorum.

          (2)  Proof of notice of meeting.

          (3)  Reading and action upon minutes of preceding meeting and any
other unapproved minutes.

          (4)  Report of President.

          (5)  Reports of other officers and committees.

          (6)  Election of officers.

          (7)  Unfinished business.

          (8)  New business.

          (9)  Adjournment.

Failure to comply with the requirements of this Section shall not affect the
validity of any action taken at any meeting unless (a) specific and timely
objection is made at the meeting and (b) the person complaining thereto sustains
direct and material damage by reason of such failure.

     SECTION 3.15. PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof at which
action on any corporate matter is taken, shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered or certified mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.

     SECTION 3.16. WAIVER OF NOTICE BY DIRECTORS. Whenever any notice whatsoever
is required to be given to any Director of the Corporation under any provision
of law or the Articles of Incorporation or these By-laws, a waiver thereof in
writing signed by the Director or Directors entitled to such notice, whether
signed before or after the time of the meeting or event of which notice is
required, shall be deemed equivalent to the giving of such notice. Neither the



business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in any waiver of notice of such meeting. The
attendance of any Director at any meeting of the Board of Directors shall
constitute a waiver by such Director of any notice of such meeting to which such
Director would otherwise be entitled, and shall constitute consent by such
Director to the place, day, and hour of such meeting and all business which may
be conducted at such meeting, unless such Director attends such meeting and
objects at such meeting to any business conducted because the meeting is not
lawfully called or convened. (As amended 4/29/91.)

     SECTION 3.17. INFORMAL ACTION BY DIRECTORS. Any action required by law or
the Articles of Incorporation or these By-laws to be taken by vote of or at a
meeting of the Board of Directors, or any action which may or could be taken at
a meeting of the Board of Directors (or of a committee of Directors), may be
taken without a meeting if a consent in writing setting forth the action so
taken shall be signed by all of the Directors then in office (or all of the
members of such committee, as the case may be). Such consent shall have the same
force and effect as unanimous vote. The signing by each such Director (or by
each member of such committee) of any one of several duplicate originals or
copies of the instrument evidencing such consent shall be sufficient. The
written instrument or instruments evidencing such consent shall be filed with
the Secretary, and shall be kept by the Secretary as part of the minutes of the
Corporation. Such action shall be deemed taken on the date of such written
instrument or instruments as stated therein, or on the date of such filing with
the Secretary, whichever of such two dates occurs first. (As amended 4/23/64.)

     SECTION 3.18. COMMITTEES. The Board of Directors, by resolution adopted by
the affirmative vote of a majority of the number of Directors fixed by Section
3.03, may designate one or more committees (including, without limiting the
generality of the foregoing, an Executive Committee). Each committee shall
consist of two or more Directors elected or appointed by the Board of Directors.
To the extent provided in such resolution as initially adopted and as thereafter
supplemented or amended by further resolution adopted by a like vote, any such
committee shall have and may exercise, when the Board of Directors is not in
session, all the authority and powers of the Board of Directors. However, no
committee shall have or exercise any authority prohibited by law.

No member of any committee shall continue to be a member thereof after he ceases
to be a Director of the Corporation.

Unless otherwise ordered by the Board of Directors, the affirmative vote or
consent in writing of all members of a committee shall be required for the
adoption of any motion or resolution or the taking of any action by any such
committee, except that an alternate member may take the place of any absent
member to the extent hereinafter provided.

The Board of Directors may elect or appoint one or more Directors as alternate
members of any such committee. Any such alternate member may take the place of
any absent member, upon request by the Chairman of the Board of Directors or the
Vice-Chairman or the President or the Chairman of such committee. The vote or
consent in writing of such alternate member in the absence of such member shall
have the same effect as the vote or consent in writing of such



member. (As amended 8/1/79.)

The Board of Directors may at any time increase or decrease the number of
members of any committee, fill vacancies therein, remove any member thereof,
adopt rules and regulations therefor, or change the functions or terminate the
existence thereof. The designation of any committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors or any Director
of any responsibility imposed by law. (As amended 4/23/64.)

     SECTION 3.19. COMPENSATION. The Board of Directors may fix or provide for
reasonable compensation of any or all Directors for services rendered to the
Corporation as Directors, officers, or otherwise, including, without limiting
the generality of the foregoing, payment of expenses of attendance at meetings
of the Board of Directors or committees, payment of a fixed sum for attendance
at each meeting of the Board of Directors or a committee, salaries, bonuses,
pensions, pension plans, pension trusts, profit-sharing plans, stock bonus
plans, stock option plans (subject to approval of the shareholders if required
by law), and other incentive, insurance, and welfare plans, whether or not on
account of prior services rendered to the Corporation. No such compensation
shall preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefor.

                               ARTICLE 4. OFFICERS

     SECTION 4.01. NUMBER AND DESIGNATION. The officers of the Corporation shall
be a Chairman of the Board of Directors, a Vice-Chairman, a President, one or
more Vice-Presidents, a Secretary, a Treasurer, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers as the
Board of Directors deems advisable. (As amended 4/23/64 and 8/1/79.)

     SECTION 4.02. ELECTION OR APPOINTMENT OF OFFICERS. At the first meeting of
the Board of Directors held after each annual meeting of shareholders, the Board
of Directors shall elect the officers specifically referred to in Section 4.01,
shall appoint certified public accountants to perform the annual audit, and
shall elect or appoint such other officers and agents as the Board deems
advisable. If in any year the election of officers does not take place at such
meeting, such election shall be held as soon thereafter as may be convenient. In
addition, the Board of Directors may from time to time elect, appoint, or
authorize any officer to appoint such other officers and agents as the Board
deems advisable. Any election may be conducted by ballot, but need not be
conducted by ballot unless required by a rule, regulation, or motion adopted by
the Board of Directors. (As amended 3/3/80.)

     SECTION 4.03. TENURE AND QUALIFICATIONS. Each officer, unless sooner
removed as provided in Section 4.04, shall hold office until his successor shall
be elected or appointed and shall qualify. However, any officer may resign at
any time by filing his written resignation with the President or Secretary of
the Corporation; and such resignation shall take effect immediately upon such
filing, unless a later effective date is stated therein. Officers need not be
residents of the State of Iowa or Directors or shareholders of the Corporation.
Any two or more offices may be held by the same person.



     SECTION 4.04. REMOVAL. Any officer or agent of the Corporation may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights.

     SECTION 4.05. VACANCIES. Any vacancy occurring in any office for any reason
may be filled by the Board of Directors.

     SECTION 4.06. DUTIES AND POWERS OF OFFICERS. Except as otherwise expressly
provided by law or the Articles of Incorporation or these By-laws, the duties
and powers of all officers and agents of the Corporation shall be determined and
defined from time to time by the Board of Directors. Unless otherwise determined
by the Board of Directors, the officers referred to in the following Sections
shall have the duties and powers set forth in the following Sections, in
addition to all duties and powers of such officers prescribed by law or by the
Articles of Incorporation or other provisions of these By-laws. However, the
Board of Directors may from time to time alter, add to, limit, transfer to
another officer or agent, or abolish any or all of the duties and powers of any
officer or agent of the Corporation (including, without limiting the generality
of the foregoing, the duties and powers set forth in the following Sections and
in other provisions of these By-laws). Any person who holds two or more offices
at the same time may perform or exercise any or all of the duties and powers of
either or both of such offices in either or both of such capacities.

     SECTION 4.07. CHAIRMAN OF THE BOARD OF DIRECTORS; VICE-CHAIRMAN; CHIEF
EXECUTIVE OFFICER; PRESIDENT.

     (a)  The Chairman of the Board of Directors shall preside at all meetings
of shareholders and of the Board of Directors. He shall be responsible for
making recommendations concerning Board policies and committees, shall maintain
Board liaison with the Chief Executive Officer and the President, and, when
required, because of the inability of the Chief Executive Officer to act or
otherwise, shall have the same powers as the Chief Executive Officer on behalf
of the Corporation. He may from time to time, unless otherwise ordered by the
Board, authorize or direct the Vice-Chairman, Chief Executive Officer or
President to perform any of the duties or exercise any of the powers of the
Chairman. (As amended 10/27/77, 10/30/84, 2/15/88, 7/29/91 and 2/12/03.)

     (b)  The Vice-Chairman shall preside at meetings of the shareholders or of
the Board in the absence of the Chairman. He shall also perform such other
duties as the Chairman may authorize or direct. (As amended 7/29/91.)

     (c)  The Chief Executive Officer shall be the principal executive officer
of the



Corporation. Subject only to the Board of Directors, he shall be in charge of
the business of the Corporation; he shall see that all Corporation policies and
all orders and resolutions of the Board are carried into effect except in those
instances in which that responsibility is specifically assigned to some other
person by the Board of Directors; and, in general, he shall discharge all duties
incident to the office of the chief executive officer of the Corporation and
such other duties as may be prescribed by the Board from time to time. In the
absence of the Chairman and Vice-Chairman, the Chief Executive Officer shall
preside at meetings of shareholders and of the Board. (As amended 2/12/03.)

     (d)  The President shall be the principal operating officer of the
Corporation and, subject only to the Board of Directors and to the Chief
Executive Officer, he shall have the general authority over and general
management and control of the property, business and affairs of the Corporation.
In general, he shall discharge all duties incident to the office of the
principal operating officer of the Corporation and such other duties as may be
prescribed by the Board of Directors and the Chief Executive Officer from time
to time. In the absence of the Chairman, Vice-Chairman, and Chief Executive
Officer, the President shall preside at all meetings of shareholders and Board
of Directors. In the absence of the Chairman and the Chief Executive Officer or
in the event of their disability, or inability to act, or to continue to act,
the President shall perform the duties of the Chief Executive Officer, and when
so acting, shall have all of the powers of and be subject to all of the
restrictions upon the office of the Chief Executive Officer. Except in those
instances in which the authority to execute is expressly delegated to another
officer or agent of the Corporation or a different mode of execution is
expressly prescribed by the Board of Directors or these By-laws, he may employ,
appoint and discharge such employees, agents, attorneys and accountants (except
the certified public accountants appointed by the Board pursuant to Section
4.02) for the Corporation as he deems necessary or advisable, and shall
prescribe their authority, duties, powers, and compensation, including, if
appropriate, the authority to perform some or all of the duties or exercise some
or all of the powers of the President; and may make and enter into on behalf of
the Corporation all deeds, conveyances, mortgages, leases, contracts,
agreements, bonds, reports, releases, and other documents or instruments which
may in his judgment be necessary or advisable in the ordinary course of the
Corporation's business or which shall be authorized by the Board. (As amended
7/29/91 and 2/12/03.)

     SECTION 4.08. VICE-PRESIDENTS. Two or more Vice Presidents, one or more of
whom may also be designated as Executive Vice President or Senior Vice
President, each of whom shall have such duties and powers as may be prescribed
from time to time by the President or the Board of Directors. (As amended
4/23/64, 10/27/77 and 11/10/00.)

     SECTION 4.09. SECRETARY. The Secretary:

     (a)  shall, when present, act as Secretary of each meeting of the
shareholders and of the Board of Directors;

     (b)  shall keep as permanent records the minutes of the meetings of the
shareholders



and the Board of Directors, a record of all actions taken by the shareholders
and the Board of Directors without a meeting, and a record of all actions taken
by a committee of the Board of Directors in place of the Board of Directors on
behalf of the Corporation in one or more books provided for that purpose; (As
amended 2/12/03.)

     (c)  shall see that all notices are duly given and that lists of
shareholders are made and filed as required by law or the Articles of
Incorporation or these By-laws;

     (d)  shall be custodian of and authenticate the corporate records of the
Corporation as required by the Iowa Business Corporation Act and the seal of the
Corporation and shall, when duly authorized, see that the seal is affixed to any
instrument requiring it; (As amended 2/12/03.)

     (e)  shall keep a record of the Directors, giving the names and business
addresses of all Directors; and (As amended 4/23/64, 2/19/79 and 2/12/03.)

     (f)  shall have all the usual duties and powers of the Secretary of a
corporation and such duties and powers as may be prescribed from time to time by
the Chief Executive Officer, the President or the Board of Directors. (As
amended 2/19/79 and 2/12/03.)

     SECTION 4.10. TREASURER. The Treasurer:

     (a)  shall have charge and custody of and be responsible for all funds,
securities, and Evidences of indebtedness belonging to the Corporation;

     (b)  shall receive and give receipts for moneys due and payable to the
Corporation from any source whatever;

     (c)  shall see that all such moneys are deposited in the name of and to the
credit of the Corporation in such depositories as shall be designated by or
pursuant to authority granted by the Board of Directors;

     (d)  shall cause the funds of the Corporation to be disbursed when and as
duly authorized to do so;

     (e)  shall see that correct and complete books of account and financial
statements are kept and prepared in accordance with generally accepted
accounting principles except to the extent such duties are assigned by the
President to other officers or employees of the Corporation; (As amended
2/13/77.)

     (f)  shall have all the usual duties and powers of the Treasurer of a
corporation and such duties and powers as may be prescribed from time to time by
the President or the Board of Directors; (As amended 2/13/77.)



     (g)  shall keep at the registered office or principal place of business of
the Corporation a record of its shareholders (which shall be part of the stock
transfer books of the Corporation), giving the names and addresses of all
shareholders and the number and class of the shares held by each; and (As
amended 2/19/79.)

     (h)  shall have charge of the stock transfer books of the Corporation, and
shall record the issuance and transfer of shares, except to the extent that such
duties shall be delegated by the Board of Directors to a transfer agent or
registrar. (As amended 2/19/79.)

     SECTION 4.11. ASSISTANT SECRETARIES. In the absence of the Secretary or in
the event of his death or inability or refusal to act, the Assistant Secretary
(or, if there shall be more than one, the Assistant Secretaries in the order
designated by the Board of Directors from time to time, or, in the absence of
any such designation, in the order in which their names shall appear in the
minutes showing their election) shall perform the duties and exercise the powers
of the Secretary. Each Assistant Secretary shall also have such duties and
powers as may be prescribed from time to time by the Secretary or the President
or the Board of Directors. (As amended 4/23/64.)

     SECTION 4.12. ASSISTANT TREASURERS. In the absence of the Treasurer or in
the event of his death or inability or refusal to act, the Assistant Treasurer
(or, if there shall be more than one, the Assistant Treasurers in the order
designated by the Board of Directors from time to time, or, in the absence of
any such designation, in the order in which their names shall appear in the
minutes showing their election) shall perform the duties and exercise the powers
of the Treasurer. Each Assistant Treasurer shall also have such duties and
powers as may be prescribed from time to time by the Treasurer or the President
or the Board of Directors. (As amended 4/23/64.)

     SECTION 4.13. COMPENSATION. The Board of Directors may fix or provide for,
or may authorize any officer to fix or provide for, reasonable compensation of
any or all of the officers and agents of the Corporation, including, without
limiting the generality of the foregoing, salaries, bonuses, payment of
expenses, pensions, pension plans, pension trusts, profit-sharing plans, stock
bonus plans, stock option plans (subject to approval of the shareholders if
required by law), and other incentive, insurance, and welfare plans, whether or
not on account of prior services rendered to the Corporation. (As amended
4/23/64.)

     SECTION 4.14. BOND. The Board of Directors may require an officer or agent
to give a bond for the faithful performance of his duties, in such amount and
with such surety or sureties as the Board of Directors deems advisable.

                       ARTICLE 5. SHARES AND CERTIFICATES

     SECTION 5.01. ISSUANCE OF AND CONSIDERATION FOR SHARES. Shares and
securities convertible into shares of the Corporation may be issued for such
consideration as shall be fixed from time to time by the Board of Directors, and
may be issued to such persons as may be designated from time to time by or
pursuant to authority granted by the Board of Directors,



except as otherwise required by law or the Articles of Incorporation or these
By-laws. (As amended 5/12/97.)

     SECTION 5.02. RESTRICTIONS ON ISSUANCE OF SHARES AND CERTIFICATES. No share
of the Corporation shall be issued until such share is fully paid as provided by
law. (As amended 5/12/97.)

No fractional share or certificate representing any fractional share shall be
issued unless expressly authorized by the Board of Directors.

No new certificate shall be issued in place of any certificate until the old
certificate for a like number of shares shall have been surrendered and
cancelled, except as otherwise provided in Section 5.04.

     SECTION 5.03. CERTIFICATES REPRESENTING SHARES. Each shareholder shall be
entitled to a certificate or certificates representing the shares of the
Corporation owned by him. Certificates representing shares of the Corporation
shall be in such form as shall be determined by or pursuant to authority granted
by the Board of Directors. Each certificate shall be signed by the President or
a Vice-President and by the Secretary or an Assistant Secretary, and the
corporate seal may be affixed thereto. All certificates shall be consecutively
numbered or otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, and the number and class of shares and
date of issuance, shall be entered on the stock transfer books of the
Corporation.

     SECTION 5.04. LOST, DESTROYED, STOLEN, OR MUTILATED CERTIFICATES. The Board
of Directors may authorize a new certificate to be issued in place of any
certificate alleged to have been lost, destroyed, or stolen, or which shall have
been mutilated, upon production of such evidence and upon compliance with such
conditions as the Board of Directors may prescribe.

     SECTION 5.05. TRANSFER OF SHARES. Shares of the Corporation shall be
transferable only on the stock transfer books of the Corporation, by the holder
of record thereof or by his duly authorized attorney or legal representative
(who shall furnish such evidence of authority to transfer as the Corporation or
its agent may reasonably require), upon surrender to the Corporation for
cancellation of the certificate representing such shares, duly endorsed or with
a proper written assignment or power of attorney duly executed and attached
thereto, and with such proof of the authenticity of signatures as the
Corporation or its agent may reasonably require. The Corporation shall cancel
the old certificate, issue a new certificate to the person entitled thereto, and
record the transaction on its stock transfer books. However, if the applicable
law permits shares to be transferred in a different manner, then to the extent
required to comply with such law all references in this Section to "shares"
shall mean the rights against the Corporation inherent in or arising out of such
shares.

     SECTION 5.06. SHAREHOLDERS OF RECORD; CHANGE OF NAME OR ADDRESS. The
Corporation shall be entitled to recognize the exclusive right of a person shown
on its stock transfer books as the holder of shares to receive notices and
dividends, to vote as such holder, and to have and



exercise all other rights deriving from such shares, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not it shall have actual or constructive notice
thereof. Unless the context or another provision of these By-laws clearly
indicates otherwise, all references in these By-laws to "shareholders" and
"holders" shall mean the shareholders of record as shown on the stock transfer
books of the Corporation.

Each shareholder and each Director shall promptly notify the Secretary in
writing of his correct address and any change in his name or address from time
to time. If any shareholder or Director fails to give such notice, neither the
Corporation nor any of its Directors, officers, agents, or employees shall be
liable or responsible to such shareholder or Director for any error or loss
which might have been prevented if such notice had been given. (As amended
4/23/64.)

     SECTION 5.07. REGULATIONS. The Board of Directors may adopt such rules and
regulations, not inconsistent with applicable law or the Articles of
Incorporation or these By-laws, as it deems advisable concerning the issuance,
transfer, conversion, and registration of certificates representing shares of
the Corporation.

                         ARTICLE 6. GENERAL PROVISIONS

     SECTION 6.01. SEAL. The corporate seal shall be circular in form and shall
have inscribed thereon the name of the Corporation and the words "Corporate
Seal" and "Iowa". The seal may be affixed by causing it or a facsimile thereof
to be impressed or reproduced or otherwise.

     SECTION 6.02. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by the Board of Directors from time to time.

     SECTION 6.03. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on the outstanding shares in the
manner and upon the terms and conditions provided by law and the Articles of
Incorporation.

     SECTION 6.04. EXECUTION OF DOCUMENTS AND INSTRUMENTS. All deeds and
conveyances of real estate, mortgages of real estate, and leases of real estate
(for an initial term of five years or more) to be executed by the Corporation
shall be signed in the name of the Corporation by the Chairman of the Board of
Directors or the Vice-Chairman or the President or a Vice-President and signed
or attested by the Secretary or an Assistant Secretary, and the corporate seal
shall be affixed thereto.

All other documents or instruments to be executed by the Corporation (including,
without limiting the generality of the foregoing, contracts, agreements, bonds,
reports, notices, releases, promissory notes, and evidences of indebtedness; and
deeds, conveyances, mortgages, and leases other than those referred to in the
preceding sentence) shall be signed in the name of the Corporation by any one or
more of the officers of the Corporation, with or without the corporate



seal.

However, from time to time the Board of Directors or the Chairman of the Board
of Directors or the Vice-Chairman or the President may alter, add to, limit,
transfer to another officer or agent, or abolish the authority of any officer or
officers to sign any or all documents or instruments, or may authorize the
execution of any document or instrument by any person or persons, with or
without the corporate seal, and such action may be either general or confined to
specific instances. (As amended 4/23/64 and 8/1/79.)

     SECTION 6.05. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by or pursuant to authority granted by the Board of Directors. Such
authorization may be either general or confined to specific instances.

     SECTION 6.06. CHECKS AND DRAFTS. All checks and drafts issued in the name
of the Corporation shall be signed by such person or persons and in such manner
as shall be authorized by or pursuant to authority granted by the Board of
Directors.

     SECTION 6.07. VOTING OF SHARES OWNED BY CORPORATION. Any shares or
securities of any other corporation or company owned by this Corporation may be
voted at any meeting of shareholders or security holders of such other
corporation or company by the Chairman of the Board of Directors of this
Corporation. Whenever in the judgment of the Chairman of the Board of Directors
it shall be advisable for the Corporation to execute a proxy or waiver of notice
or to give a consent with respect to any shares or securities of any other
corporation or company owned by this Corporation, such proxy, waiver, or consent
shall be executed in the name of this Corporation, as directed by the Chairman
of the Board of Directors, without necessity of any authorization by the Board
of Directors. Any person or persons so designated as the proxy or proxies of
this Corporation shall have full right, power, and authority to vote such shares
or securities on behalf of this Corporation. In the absence of the Chairman of
the Board of Directors or in the event of his death or inability to act, the
Vice-Chairman may perform the duties and exercise the powers of the Chairman of
the Board of Directors under this Section. The provisions of this Section shall
be subject to any specific directions by the Board of Directors. (As amended
4/23/64 and 8/1/79.)

     SECTION 6.08. DIRECTOR CONFLICT OF INTEREST.

     (a)  A conflict of interest transaction is a transaction with the
     corporation in which a Director of the Corporation has a direct or indirect
     interest. A conflict of interest transaction is not voidable by the
     Corporation solely because of the Director's interest in the transaction if
     any one of the following is true:

          (1)  The material facts of the transaction and the Director's interest
          were disclosed or known to the Board of Directors or a committee of
          the Board of Directors and the Board of Directors or committee
          authorized, approved or ratified the transaction.



          (2)  The material facts of the transaction and the Director's interest
          were disclosed or known to the shareholders entitled to vote and the
          shareholders authorized, approved or ratified the transaction.

          (3)  The transaction was fair to the Corporation.

     (b)  For purposes of these By-laws, a Director of the Corporation has an
     indirect interest in a transaction if either of the following is true:

          (1)  Another entity in which the Director has a material financial
          interest or in which the Director is a general partner is a party to
          the transaction.

          (2)  Another entity of which the Director is a director, officer or
          trustee is a party to the transaction and the transaction is or should
          be considered by the Board of Directors of the Corporation.

     (c)  For purposes of subsection a(1), a conflict of interest transaction is
     authorized, approved or ratified if it receives the affirmative vote of a
     majority of the Directors on the Board of Directors or on the committee,
     who have no direct or indirect interest in the transaction, but a
     transaction may not be authorized, approved or ratified under this section
     by a single Director. If a majority of the Directors who have no direct or
     indirect interest in the transaction vote to authorize, approve or ratify
     the transaction, a quorum is present for the purpose of taking action. The
     presence of, or a vote cast by, a Director with a direct or indirect
     interest in the transaction does not affect the validity of any action
     taken under subsection a(1), if the transaction is otherwise authorized,
     approved or ratified as provided in that subsection.

     (d)  For purposes of subsection a(2), a conflict of interest is authorized,
     approved or ratified if it receives the vote of a majority of the shares
     entitled to be counted under this subsection. Shares owned by or voted
     under the control of a Director who has a direct or indirect interest in
     the transaction, and shares owned by or voted under the control of an
     entity described in subsection b(1) shall not be counted in a vote of
     shareholders to determine whether to authorize, approve or ratify a
     conflict of interest transaction under subsection a(2). The vote of those
     shares, however, is counted in determining whether the transaction is
     approved under other sections of these By-laws. A majority of the shares,
     whether or not present, that are entitled to be counted in a vote on the
     transaction under this subsection constitutes a quorum for the purpose of
     taking action under this section. (As adopted 2/12/03.)

     SECTION 6.09. LIMITATION OF OFFICERS' LIABILITY. An officer shall not be
liable as an officer to the Corporation or its shareholders for any decision to
take or not to take action, or any failure to take any action, if the duties of
the officer are performed in compliance with the standards of conduct for
officers prescribed in the Iowa Business Corporation Act. (As amended 2/12/03.)



     SECTION 6.10. INDEMNIFICATION. The Corporation may indemnify a Director or
officer of the Corporation who is a party to a proceeding against liability
incurred by such Director or officer in the proceeding to the maximum extent now
or hereafter permitted by and in the manner prescribed by the Iowa Business
Corporation Act, including the advancement of expenses. Without limiting the
generality of the foregoing, the Corporation may enter into indemnification
agreements consistent with the Iowa Business Corporation Act with each Director
of the Corporation and such officers of the Corporation as the Board of
Directors deems appropriate from time to time. (As amended 2/12/03.)

     SECTION 6.11. RELIANCE ON DOCUMENTS. Each Director and officer shall, in
the performance of his duties, be fully protected in relying and acting in good
faith upon the books of account or other records of the Corporation, or reports
made or financial statements presented by any officer of the Corporation or by
an independent public or certified public accountant or firm of such accountants
or by an appraiser selected with reasonable care by the Board of Directors or by
any committee thereof; and each Director and officer is hereby expressly
relieved from any liability which might otherwise exist or arise from or in
connection with any such action.

     SECTION 6.12. EFFECT OF PARTIAL INVALIDITY. If a court of competent
jurisdiction shall adjudge to be invalid any clause, sentence, paragraph,
section, or part of the Articles of Incorporation or these By-laws, such
judgment or decree shall not affect, impair, invalidate, or nullify the
remainder of the Articles of Incorporation or these By-laws, but the effect
thereof shall be confined to the clause, sentence, paragraph, section, or part
so adjudged to be invalid.

     SECTION 6.13. DEFINITIONS. Any word or term which is defined in the Iowa
Business Corporation Act shall have the same meaning wherever used in the
Articles of Incorporation or in these By-laws, unless the context or another
provision of the Articles of Incorporation or these By-laws clearly indicates
otherwise. Wherever used in the Articles of Incorporation or in these By-laws,
unless the context or another provision of the Articles of Incorporation or
these By-laws clearly indicates otherwise, the use of the singular shall include
the plural, and vice versa; and the use of any gender shall be applicable to any
other gender. Wherever used in the Articles of Incorporation or in these
By-laws, the word "written" shall mean written, typed, printed, duplicated, or
reproduced by any process. (As amended 4/23/64.)

     SECTION 6.14. AUTHORITY TO CARRY OUT RESOLUTIONS AND MOTIONS. Each
resolution or motion adopted by the shareholders or by the Board of Directors
shall be deemed to include the following provision, unless the resolution or
motion expressly negates this provision: The officers of the Corporation are
severally authorized on behalf of the Corporation to do all acts and things
which may be necessary or convenient to carry out this resolution (motion),
including, without limitation, the authority to make, execute, seal, deliver,
file, and perform all appropriate contracts, agreements, certificates,
documents, and instruments.

The foregoing provision shall automatically be a part of the resolution or
motion even though not stated in the minutes; and any officer may state or
certify that the foregoing provision is included in the resolution or motion.
(Added entire section 8/3/82.)



                             ARTICLE 7. AMENDMENTS

     SECTION 7.01. RESERVATION OF RIGHT TO AMEND. The Corporation expressly
reserves the right from time to time to amend these By-laws, in the manner now
or hereafter permitted by the provisions of the Articles of Incorporation and
these By-laws, whether or not such amendment shall constitute or result in a
fundamental change in the purposes or structures of the Corporation or in the
rights or privileges of shareholders or others or in any or all of the
foregoing. All rights and privileges of shareholders or others shall be subject
to this reservation. Wherever used in these By-laws with respect to the By-laws,
the word "amend," "amended," or "amendment" includes and applies to the
amendment, alteration, or repeal of any or all provisions of the By-laws or the
adoption of new By-laws. (As amended 4/28/66.)

     SECTION 7.02. PROCEDURE TO AMEND. Any amendment to these By-laws may be
adopted at any meeting of the Board of Directors by the affirmative vote of a
majority of the number of Directors fixed by Section 3.03. No notice of any
proposed amendment to the By-laws shall be required. (As amended 4/28/66.)

EX-10.VIII

                                                                  EXHIBIT 10viii

                               HON INDUSTRIES INC.
                               INDEMNITY AGREEMENT

          This Indemnity Agreement, effective as of ___________, 20___ (this
"Agreement"), between HON INDUSTRIES Inc., an Iowa corporation ("Corporation"),
and ______________ ("Indemnitee").

                                   WITNESSETH:

          WHEREAS, Indemnitee is or will become a director or an officer of the
Corporation and, as such, is or will be performing valuable services for or on
behalf of the Corporation; and

          WHEREAS, Indemnitee is willing to perform or continue to perform such
services, and may from time to time perform additional services, for or on
behalf of the Corporation on the condition that Indemnitee is indemnified as
provided in this Agreement; and

          WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to fully effectuate the indemnity provided in
this Agreement; and

          WHEREAS, all capitalized terms used in this Agreement are used herein
as defined in Section 15 hereof;

          NOW THEREFORE, in order to induce Indemnitee to serve or continue to
serve the Corporation as a director or an officer and in consideration of the
mutual promises set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Corporation and the
Indemnitee hereby agree as follows:

          1.   SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a director
or an officer of the Corporation for so long as Indemnitee is duly appointed or
elected and qualified in accordance with the applicable provisions of the
Articles of Incorporation, as amended ("Articles of Incorporation"), and
By-laws, as amended ("By-laws"), of the Corporation or until such time as
Indemnitee resigns or otherwise ceases to be a director or an officer.
Indemnitee may from time to time also perform other services at the request or
for the convenience of the Corporation. Following the termination of
Indemnitee's service as a director or an officer of the Corporation by reason of
resignation or otherwise, the Corporation shall continue to be obligated to
indemnify Indemnitee under this Agreement for acts occurring while Indemnitee
was serving as a director or an officer of the Corporation. Nothing in this
Agreement shall confer upon the Indemnitee the right to continue in the employ
of the Corporation or affect the right of the Corporation to terminate the
Indemnitee's employment at any time in the sole discretion of the Corporation
with or without cause.



          2.   INDEMNIFICATION. Subject to the limitations set forth in this
Section 2 and in Section 6 of this Agreement, the Corporation hereby agrees to
indemnify Indemnitee to the fullest extent permitted by applicable law and the
Articles of Incorporation and the By-laws, as the same may be amended from time
to time from and against any and all Expenses and Liabilities in the event
Indemnitee was, is or becomes a party to or witness or other participant in, or
is threatened to be made a party to or witness or other participant in, or
otherwise with respect to any Proceeding relating to or arising out of
Indemnitee's being or having been a director or an officer of the Corporation or
as to action taken in another capacity while serving as such director or
officer. The right to indemnification conferred in this Agreement shall be
presumed to have been relied upon by Indemnitee in Indemnitee's agreeing to
serve, or serving, or continuing to serve, or having served, as a director or an
officer of the Corporation and shall be enforceable as a contract right. Without
in any way limiting the scope of the indemnification otherwise provided by this
Section 2, if and whenever Indemnitee is or was a party or is threatened to be
made a party to any Proceeding (including without limitation any Proceeding
brought by or in the right of the Corporation) because Indemnitee is or was a
director or an officer of the Corporation or because of any act or omission by
Indemnitee in any such capacity, the Corporation shall indemnify Indemnitee to
the fullest extent permitted by applicable law against all Expenses and
Liabilities actually and reasonably incurred by or on behalf of Indemnitee in
connection with the investigation, defense, settlement or appeal of the
Proceeding. In addition to the foregoing, the rights of Indemnitee to
indemnification provided in this Agreement shall include those rights set forth
in Sections 3 and 8 hereof. Notwithstanding anything in this Agreement to the
contrary and prior to a Change in Control, Indemnitee shall not be entitled to
indemnification pursuant to this Agreement in connection with any claim
initiated by Indemnitee against the Corporation or any director or officer of
the Corporation unless the Corporation has joined in or consented to the
initiation of such claim; provided, however, that the Corporation shall
indemnify Indemnitee against any and all Expenses and, if requested by
Indemnitee in writing, shall advance, in accordance with the terms of this
Agreement, such Expenses to Indemnitee, which are incurred by Indemnitee in
connection with any claim asserted against or action brought by Indemnitee for
(i) indemnification or advance payment of Expenses by the Corporation under this
Agreement or any other agreement, by-law or articles of incorporation now or
hereafter in effect and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Corporation, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance payment or insurance recovery, as the case may be.

          3.   ADVANCEMENT OF EXPENSES; ESTABLISHMENT OF TRUST; LETTER OF
CREDIT.

          a.   ADVANCEMENT OF EXPENSES. All reasonable Expenses incurred by or
on behalf of Indemnitee shall be advanced to Indemnitee from time to time by the
Corporation to the fullest extent permitted by applicable law within 20 days
after the receipt by the Corporation of a written request for the advancement of
any such Expenses, whether before or after final disposition of a Proceeding
(except to the extent that there has been a Final Adverse Determination that
Indemnitee is not entitled to be indemnified for any such Expenses), including
without limitation any Proceeding brought by or in the right of the Corporation.
The written request for an advancement of Expenses under this Section 3(a) shall
contain reasonable details of the Expenses incurred by or on behalf of
Indemnitee for which advancement is thereby

                                        2


requested. By executing such a request, Indemnitee shall be deemed to have made
such written affirmation of Indemnitee's good faith belief that Indemnitee has
met the standard of conduct required by law to be met to entitle Indemnitee to
such advancement of Expenses (including, without limiting the generality of the
foregoing, Indemnitee's written affirmation of Indemnitee's good faith belief
that Indemnitee has met the standard of conduct described in Section 490.851 of
the Iowa Business Corporation Act). Advancement of Expenses by the Corporation
in connection with any Proceeding shall be made only upon delivery to the
Corporation of a written undertaking, executed personally or on Indemnitee's
behalf, to repay the advance if it is ultimately determined that Indemnitee did
not meet the standard of conduct required for indemnification under the Iowa
Business Corporation Act. Such undertaking must be an unlimited general
obligation of Indemnitee that need not be secured and may be accepted without
reference to financial ability to make repayment; provided, however, that under
no circumstances shall Indemnitee be deemed to have undertaken to repay to the
Corporation Expenses for which Indemnitee has the right to be indemnified under
this Agreement or otherwise.

          b.   ESTABLISHMENT OF TRUST. Upon receipt of a written request from
Indemnitee for advancement of Expenses or indemnification pursuant to this
Agreement, the Corporation shall create a grantor trust (the "Trust"), the
trustee of which shall be chosen by Indemnitee. Upon receipt of any such written
request from Indemnitee, the Corporation shall from time to time fund the Trust
in amounts sufficient to satisfy any and all Expenses and Liabilities that are
reasonably anticipated at the time of such request and for which the Corporation
may indemnify Indemnitee under this Agreement. The amount or amounts to be
deposited in the Trust pursuant to this funding obligation shall be determined
by mutual agreement of Indemnitee and the Corporation or, if Indemnitee and the
Corporation are unable to reach such agreement, by Independent Legal Counsel
selected by Indemnitee and shall be used exclusively for the uses and purposes
set forth in the Trust. The terms of the Trust shall provide that:

               (1)  the Trust shall not be revoked or the principal thereof
invaded without the consent of Indemnitee and the Corporation;

               (2)  Indemnitee shall not have any preferred claim to, or any
beneficial ownership in, any assets of the Trust prior to the time that such
assets are paid to Indemnitee as provided in the Trust;

               (3)  within ten days of a request by Indemnitee, the trustee of
the Trust shall advance to Indemnitee amounts sufficient to satisfy any and all
Expenses, provided that Indemnitee shall have executed and delivered to the
Corporation the written affirmation and the written undertaking required by
Section 3(a) of this Agreement;

               (4)  the Trust shall continue to be funded by the Corporation in
accordance with the funding obligations set forth in this Section 3(b);

               (5)  the trustee of the Trust shall promptly pay to Indemnitee
any amounts to which Indemnitee shall be entitled pursuant to this Agreement;
and

                                        3


               (6)  all unexpended funds in the Trust shall revert to the
Corporation on a final determination either by Independent Legal Counsel
selected by Indemnitee or by a court of competent jurisdiction that Indemnitee
has been fully indemnified with respect to the Proceeding giving rise to the
establishment of the Trust under the terms of this Agreement.

          c.   LETTER OF CREDIT. In order to secure the obligations of the
Corporation to indemnify and advance Expenses to Indemnitee pursuant to this
Agreement, the Corporation shall obtain at its expense at the time of any Change
in Control an irrevocable standby letter of credit naming Indemnitee as the sole
beneficiary ("Letter of Credit"). The Letter of Credit shall be in an
appropriate amount not less than $1,000,000, shall be issued by a financial
institution having assets in excess of $100,000,000 and shall contain terms and
conditions reasonably acceptable to Indemnitee. The Letter of Credit shall
provide that Indemnitee may from time to time draw certain amounts thereunder,
upon written certification by Indemnitee to the issuer of the Letter of Credit
that Indemnitee has made written request to the Corporation for an amount not
less than the amount Indemnitee is drawing under the Letter of Credit, that the
Corporation has failed or refused to provide Indemnitee with such amount in full
within 20 days after receipt of such request, and that Indemnitee believes that
Indemnitee is entitled under the terms of this Agreement to the amount that
Indemnitee is drawing under the Letter of Credit. The issuance of the Letter of
Credit shall not in any way diminish the obligation of the Corporation to
indemnify Indemnitee against Expenses and Liabilities to the full extent
required by this Agreement or otherwise. Once the Corporation has obtained the
Letter of Credit, the Corporation shall at its expense maintain and renew the
Letter of Credit or a substitute letter of credit meeting the criteria of this
Section 3(c) during the term of this Agreement, so that the Letter of Credit
shall have an initial term of five years, shall be renewed for successive
five-year terms, and shall always have at least one year of its term remaining
after the termination of this Agreement.

          4.   PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.

          a.   Upon making a request for indemnification, Indemnitee shall be
presumed to be entitled to indemnification under this Agreement and the
Corporation shall have the burden of proof to overcome such presumption in
reaching any contrary determination. The partial or complete disposition of any
Proceeding by judgment, order, settlement, arbitration award, conviction,
dismissal, or acceptance of a plea of nolo contendere or its equivalent, shall
not affect such presumption and, except as may be provided in Section 6 of this
Agreement, shall not be determinative that the Indemnitee failed to meet any
requisite standard of conduct and shall not establish a presumption with regard
to any other factual matter relevant to determining the right of Indemnitee to
indemnification under this Agreement or otherwise.

          b.   If the person or persons empowered to make a determination
pursuant to Section 5 of this Agreement shall have failed to make the requested
determination within 30 days after any judgment, order, settlement, arbitration
award, conviction, dismissal, acceptance of a plea of nolo contendere or its
equivalent, or other partial or complete disposition of any Proceeding or any
other event that could enable the Corporation to determine the right of
Indemnitee to be indemnified under this Agreement or otherwise, the requisite
determination that

                                        4


Indemnitee has the right to such indemnification shall be deemed to have been
made, provided that such thirty-day period may be extended for a reasonable time
(not to exceed an additional 30 days), if the person or persons so empowered to
make such a determination in good faith require such additional time to obtain
or evaluate documentation or information relating thereto, and provided further
that the foregoing provisions of this Section 4(b) shall not apply if the
determination of entitlement to indemnification is to be made by the
shareholders of the Corporation pursuant to Section 5(b) of this Agreement and
(i) within 15 days after receipt by the Corporation of the request for such
determination, the Board of Directors resolves to submit such determination to
the shareholders for their consideration at an annual meeting to be held within
75 days after such receipt, and such determination is made thereat, or (ii) a
special meeting of shareholders is called within 15 days after such receipt for
the purpose of making such determination and is held for such purpose within 60
days after having been so called, and such determination is made thereat.

          5.   PROCEDURE FOR DETERMINATION OF RIGHT OF INDEMNITEE TO BE
INDEMNIFIED.

          a.   Whenever Indemnitee believes that Indemnitee has a right to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Indemnitee for the determination of the right of Indemnitee to be indemnified
pursuant to this Agreement. In any event, Indemnitee shall submit such request
for indemnification within a reasonable time, which shall not exceed five years
after any judgment, order, settlement, arbitration award, conviction, dismissal,
acceptance of a plea of nolo contendere or its equivalent, or other final
disposition of any Proceeding. Upon receipt of any such request for
indemnification, the General Counsel or other appropriate officer of the
Corporation shall promptly advise the Board of Directors in writing that
Indemnitee has made such request. Determination of the right of Indemnitee to
indemnification shall be made not later than 30 days after the receipt by the
Corporation of such written request for indemnification; provided, however, that
any request for indemnification for Liabilities (other than amounts paid in
settlement) with respect to a particular Proceeding shall be made only after a
determination thereof has been made in that particular Proceeding. If it is so
determined that Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within 10 days after such determination.

          b.   The Corporation shall be entitled to select the forum in which
the right of Indemnitee to indemnification will be heard; provided, however, if
such forum is selected after a Change in Control of the Corporation, Independent
Legal Counsel shall determine whether Indemnitee has the right to
indemnification. The forum shall be any one of the following:

               (1)  the shareholders of the Corporation, other than shareholders
who are parties to the Proceeding with respect to which the Indemnitee has
claimed indemnification;

               (2)  a majority of a quorum of the Board of Directors consisting
of Disinterested Directors;

                                        5


               (3)  Independent Legal Counsel, who shall make the determination
in a written opinion; or

               (4)  a panel of three arbitrators, one selected by the
Corporation, another by Indemnitee and the third by the first two arbitrators
selected or, if for any reason three arbitrators are not selected within 30 days
after the appointment of the first arbitrator, then selection of additional
arbitrators shall be made by the American Arbitration Association. If any
arbitrator resigns or is unable to serve in such capacity for any reason, the
American Arbitration Association shall select a replacement. The arbitration
shall be conducted pursuant to the commercial arbitration rules of the American
Arbitration Association then in effect.

          6.   SPECIFIC LIMITATIONS ON INDEMNIFICATION. Notwithstanding anything
in this Agreement to the contrary, the Corporation shall not be obligated under
this Agreement to make any payment to Indemnitee for indemnification with
respect to any Proceeding:

          a.   to the extent that payment is actually made to Indemnitee under
any insurance policy, or is made to Indemnitee by the Corporation or an
affiliate of the Corporation otherwise than pursuant to this Agreement;
provided, however, notwithstanding the availability of any such insurance,
Indemnitee also may claim indemnification from the Corporation pursuant to this
Agreement by assigning to the Corporation any claims under any such insurance to
the extent Indemnitee is paid by the Corporation;

          b.   if a court in such Proceeding has entered a judgment or other
adjudication that is final and has become nonappealable and establishes that the
claim of Indemnitee for indemnification arose from (1) a breach by Indemnitee of
Indemnitee's duty of loyalty to the Corporation or its shareholders, (2) acts or
omissions of Indemnitee that were not in good faith or involved intentional
misconduct or knowing violations of the law, (3) a transaction in which
Indemnitee derived an improper personal benefit, or (4) liability of Indemnitee
to the Corporation pursuant to Section 490.833 of the Iowa Business Corporation
Act (or any successor provision thereto);

          c.   prior to the occurrence of a Change in Control, for Liabilities
in connection with any Proceeding settled without the consent of the
Corporation, which shall not be unreasonably withheld; or

          d.   for an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934, as amended.

          7.   FEES AND EXPENSES OF INDEPENDENT LEGAL COUNSEL. The Corporation
shall pay the reasonable fees and expenses of Independent Legal Counsel or a
panel of three arbitrators, if Independent Legal Counsel or a panel of
arbitrators is retained to make a determination of the right of Indemnitee to
indemnification pursuant to Section 5(b) of this Agreement, and to fully
indemnify such Independent Legal Counsel or panel of arbitrators

                                        6


against any and all expenses and losses incurred by any of them and arising out
of or relating to this Agreement or their engagement pursuant hereto.

          8.   REMEDIES OF INDEMNITEE.

          a.   If a determination is made pursuant to Section 5 of this
Agreement that Indemnitee is not entitled to indemnification, or if advances of
Expenses are not made to Indemnitee pursuant to this Agreement, or if payment is
not timely made following a determination that Indemnitee has a right to
indemnification pursuant to this Agreement, or if Indemnitee otherwise seeks
enforcement of this Agreement, Indemnitee shall be entitled to a final
adjudication in an appropriate court of the State of Iowa of the remedy sought.
Alternatively, unless the determination was made by a panel of arbitrators
pursuant to Section 5(b)(4) of this Agreement, Indemnitee may elect to seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
commercial arbitration rules of the American Arbitration Association then in
effect, and the decision of such arbitrator shall be rendered within 90 days
following the filing of the demand for arbitration. The Corporation shall not
oppose the right of Indemnitee to seek any such adjudication or arbitration
award. In any such proceeding or arbitration, Indemnitee shall be presumed to be
entitled to indemnification under this Agreement and the Corporation shall have
the burden of proof to overcome such presumption.

          b.   If a determination that Indemnitee is not entitled to
indemnification, in whole or in part, has been made pursuant to Section 5, the
decision in the judicial proceeding or arbitration provided in Section 8(a)
shall be made de novo and Indemnitee shall not be prejudiced by reason of a
determination that Indemnitee is not entitled to indemnification.

          c.   If a determination that Indemnitee is entitled to indemnification
has been made pursuant to Section 5 or is deemed to have been made pursuant to
Section 4 or otherwise pursuant to this Agreement, the Corporation shall be
bound by such determination in the absence of a misrepresentation of a material
fact by Indemnitee.

          d.   The Corporation shall be precluded from asserting that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable, and the Corporation shall stipulate in any such court or before any
such arbitrator that the Corporation is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary.

          e.   Expenses reasonably incurred by Indemnitee in connection with the
request of Indemnitee for indemnification under, seeking enforcement of, or to
recover damages for breach of, this Agreement shall be borne by the Corporation
when and as incurred by Indemnitee irrespective of any Final Adverse
Determination that Indemnitee is not entitled to indemnification.

                                        7


          9.   INSURANCE.

          a.   MAINTENANCE OF INSURANCE. The Corporation represents that it
presently maintains certain policies of directors' and officers' liability
insurance. Subject only to the provisions of this Section 9, the Corporation
agrees that, during the Indemnification Period, the Corporation shall use its
best efforts to purchase and maintain in effect for the benefit of Indemnitee
one or more valid, binding and enforceable policies of directors' and officers'
liability insurance providing coverage that, in scope and amount and all other
respects, is no less favorable than that presently provided. Notwithstanding the
foregoing, prior to the occurrence of a Change in Control, the Corporation shall
not be required to maintain such policies of directors' and officers' liability
insurance if such insurance is not reasonably available or if it is in good
faith determined by the Board of Directors that:

               (1)  the premium cost of maintaining such insurance is
substantially disproportionate to the amount of coverage provided thereunder; or

               (2)  the protection provided by such insurance is so limited by
exclusions, deductions or otherwise that there is insufficient benefit to
warrant the cost of maintaining such insurance.

          Notwithstanding anything in this Agreement to the contrary, to the
extent that and for so long as the Corporation shall choose to continue to
maintain any policy of directors' and officers' liability insurance during the
Indemnification Period, the Corporation shall maintain similar and equivalent
insurance for the benefit of Indemnitee during the Indemnification Period
(regardless of whether such similar or equivalent insurance is more or less
favorable to Indemnitee than the existing policy or policies of such insurance
maintained by the Corporation).

          b.   ADDITIONAL INDEMNIFICATION IN LIEU OF INSURANCE. If the
Corporation discontinues any policy or policies of directors' and officers'
liability insurance referred to in Section 9(a) of this Agreement or limits in
any way the scope or amount of the coverages provided thereunder, or such
policies or coverages provided thereunder become unavailable in whole or in part
for any reason, the Corporation agrees to hold harmless and indemnify Indemnitee
for the remainder of the Indemnification Period to the full extent of the
coverage that would otherwise have been provided for the benefit of Indemnitee
if the insurance specified in Section 9(a) hereof had been maintained.

          10.  MODIFICATION, WAIVER, TERMINATION AND CANCELLATION. No
supplement, modification, termination, cancellation or amendment of this
Agreement shall be binding unless executed in writing by both Indemnitee and the
Corporation. No waiver of any provision of this Agreement shall constitute or be
deemed to be (a) a waiver of any other provision of this Agreement or (b) a
continuing waiver.

                                        8


          11.  SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all such papers as may be
reasonably required and shall do all such other things as may be reasonably
necessary to secure such rights, including the execution of such documents as
may be reasonably necessary to enable the Corporation to effectively bring suit
to enforce such rights.

          12.  NOTICE BY INDEMNITEE AND DEFENSE OF CLAIM. Indemnitee shall
promptly notify the Corporation in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any civil, criminal, administrative or investigative matter, but the
omission to so notify the Corporation shall not relieve the Corporation of any
liability that it may have to Indemnitee if such omission does not materially
prejudice the rights of the Corporation. If such omission does materially
prejudice the rights of the Corporation, the Corporation shall be relieved from
liability under this Agreement only to the extent of such prejudice, and no such
omission will relieve the Corporation from any liability that it may have to
Indemnitee otherwise than under this Agreement. With respect to any Proceeding
as to which Indemnitee notifies the Corporation of the commencement thereof:

          a.   The Corporation will be entitled to participate therein at its
own expense; and

          b.   The Corporation, jointly with any other indemnifying party
similarly notified, will be entitled to assume the defense of Indemnitee therein
with counsel reasonably satisfactory to Indemnitee; provided, however, that the
Corporation shall not be entitled to assume the defense of Indemnitee in any
Proceeding if there has been a Change in Control or if Indemnitee has reasonably
concluded that there may be a conflict of interest between the Corporation and
Indemnitee with respect to the Proceeding. After notice to Indemnitee from the
Corporation of its election to assume the defense of Indemnitee therein, the
Corporation will not be liable to Indemnitee under this Agreement for any
Expenses subsequently incurred by Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation or as otherwise provided
below. Indemnitee shall have the right to employ his or her own counsel in any
such Proceeding, but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Indemnitee unless:

               (1)  the employment of counsel by Indemnitee has been authorized
by the Corporation;

               (2)  Indemnitee has reasonably concluded that counsel employed by
the Corporation may not adequately represent Indemnitee; or

                                        9


               (3)  the Corporation has not in fact employed counsel to assume
the defense of Indemnitee in the Proceeding or has not in fact assumed such
defense or is not acting with reasonable diligence in connection therewith; in
each of which cases, the fees and expenses of such counsel shall be borne by the
Corporation.

          c.   The Corporation shall not settle any Proceeding in any manner
that would impose any liability, penalty or limitation on Indemnitee without the
written consent of Indemnitee; provided, however, that Indemnitee will not
unreasonably withhold consent to any proposed settlement.

          13.  NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (a)
delivered by hand and receipted for by the party to whom such notice or other
communication shall have been directed or (b) mailed by registered mail with
postage prepaid.

          a.   If to Indemnitee, to:


          b.   If to the Corporation, to:

               HON INDUSTRIES Inc.
               414 East Third Street
               Muscatine, Iowa 52761-7109
               Attention: General Counsel

or to such other address as may be hereafter furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.

          14.  NONEXCLUSIVITY. The rights of Indemnitee under this Agreement
shall not be deemed exclusive of any other rights to which Indemnitee may be
entitled under the Business Corporation Act of the State of Iowa, the Articles
of Incorporation or By-laws of the Corporation, or any Agreements, vote of
shareholders, resolution of the Board of Directors or otherwise and, to the
extent that during the Indemnification Period the rights of the then existing
directors and officers are more favorable to such directors or officers than the
rights currently provided to Indemnitee thereunder or under this Agreement,
Indemnitee shall be entitled to the full benefits of such more favorable rights.

                                       10


          15.  CERTAIN DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the following meanings:

          a.   "Change in Control" means:

               (1)  The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Corporation entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (1), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any corporation controlled
by the Corporation or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of
this Section 15(a); or

               (2)  individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least two-thirds
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote of at least three-quarters of
the directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

               (3)  consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's asets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the

                                       11


Corporation or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or

               (4)  approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.

          b.   "Disinterested Director" means a director of the Corporation who
is not or was not a party to the Proceeding with respect to which
indemnification is being sought by Indemnitee.

          c.   "Expenses" shall include all direct and indirect costs (including
but not limited to attorneys' fees, retainers, court costs, transcript fees,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage costs, delivery service fees, all
other disbursements or out-of-pocket expenses and reasonable compensation for
time spent by Indemnitee for which Indemnitee is otherwise not compensated by
the Corporation or any third party) actually and reasonably incurred in
connection with the investigation, defense, settlement or appeal of a Proceeding
or establishing or enforcing a right to Indemnification under this Agreement,
applicable law or otherwise; provided, however, that Expenses shall not include
any Liabilities.

          d.   "Final Adverse Determination" means a determination that
Indemnitee is not entitled to indemnification pursuant to Section 5 of this
Agreement and either (i) a final, nonappealable adjudication in an Iowa court or
decision of an arbitrator pursuant to Section 8(a) of this Agreement shall have
denied the right of Indemnitee to indemnification under this Agreement or (ii)
Indemnitee shall have failed to file a complaint in an Iowa court or seek an
arbitration award pursuant to Section 8(a) hereof within 120 days after the
determination made pursuant to Section 5 hereof.

          e.   "Indemnification Period" means the period of time during which
Indemnitee shall serve as a director or officer of the Corporation and for so
long thereafter as Indemnitee may be subject to any Proceeding.

          f.   "Independent Legal Counsel" means special legal counsel who is
selected by the Board of Directors by vote of a majority of a quorum consisting
of Disinterested Directors or, if such quorum cannot be obtained, by vote of a
majority of the full Board of Directors, including directors who are not
Disinterested Directors, and is approved by Indemnitee (which approval shall not
be unreasonably withheld) or, if there has been a Change in Control, selected by
Indemnitee and approved by the Board of Directors (which approval shall not be
unreasonably withheld), and who is not presently and has not in the five years
preceding such selection been

                                       12


retained to represent (i) the Corporation or any of its subsidiaries or
affiliates, or Indemnitee or any corporation or entity as to which Indemnitee is
or was a director, officer, partner or employee, or any subsidiary or affiliate
of such a corporation or entity, in any material matter or (ii) any other party
to the Proceeding giving rise to the claim for indemnification with respect to
which such counsel is being selected. Notwithstanding the foregoing, Independent
Legal Counsel shall not include any person who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine the
right of Indemnitee to indemnification under this Agreement.

          g.   "Liabilities" means liabilities of any type whatsoever, including
but not limited to any judgments, fines, ERISA excise taxes and penalties,
penalties and amounts paid in settlement (including all interest assessments and
other charges paid or payable in connection with or in respect of such
judgments, fines, penalties or amounts paid in settlement), incurred with
respect to any Proceeding.

          h.   "Proceeding" means any threatened, pending or completed action,
claim, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other formal or informal civil,
criminal, administrative or investigative proceeding that is associated with
Indemnitee being or having been a director or officer of the Corporation.

          16.  BINDING EFFECT; DURATION AND SCOPE OF AGREEMENT. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by
Indemnitee and the Corporation and their respective successors and assigns
(including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business or assets of the
Corporation), spouses, heirs, executors, personal representatives and
administrators and other legal representatives. This Agreement shall continue in
effect during the Indemnification Period, regardless of whether Indemnitee
continues to serve as a director or officer of the Corporation.

          17.  SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be illegal, invalid or otherwise unenforceable for any reason
whatsoever:

          a.   the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and

          b.   the provisions of this Agreement shall be construed so as to give
effect to the fullest extent legally possible to the intent of any provisions
held to be illegal, invalid or otherwise unenforceable.

          18.  GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Iowa.

                                       13


          19.  ENTIRE AGREEMENT. This Agreement represents the entire Agreement
between the Corporation and Indemnitee, and there are no other Agreements,
contracts or understandings between them with respect to the subject matter of
this Agreement, except as specifically referred to herein or as provided in
Section 14 hereof.

          IN WITNESS WHEREOF, this Indemnity Agreement is executed by the
Corporation and the Indemnitee as of the date first written above.

                                  HON INDUSTRIES Inc.


                                  By
                                    --------------------------------------------
                                      Name:
                                      Title:


                                  INDEMNITEE


                                  ----------------------------------------------
                                     Name:

                                       14

EX-10.XIII

                                                                  EXHIBIT 10xiii

                                                                  EXECUTION COPY

                               HON INDUSTRIES INC.

                              --------------------

                                  $136,000,000

                                CREDIT AGREEMENT

                            DATED AS OF MAY 10, 2002

                              --------------------

                          VARIOUS LENDING INSTITUTIONS,

                      DEUTSCHE BANK TRUST COMPANY AMERICAS,
                    AS ADMINISTRATIVE AGENT AND ISSUING BANK,

                         DEUTSCHE BANK SECURITIES INC.,
                   AS LEAD ARRANGER AND BOOK RUNNING MANAGER,

                           THE NORTHERN TRUST COMPANY,
                      AS SYNDICATION AGENT AND ISSUING BANK

                                       AND

                    NATIONAL CITY BANK OF MICHIGAN/ILLINOIS,
                             AS DOCUMENTATION AGENT



                                TABLE OF CONTENTS



                                                                                      PAGE
                                                                                  
                                       I. DEFINITIONS

1.1.     Defined Terms...................................................................1
1.2.     Accounting Terms, Financial Statements.........................................26
1.3.     Other Definitional Terms.......................................................26

                              II. AMOUNT AND TERMS OF CREDITS

2.1.     Revolving Credit Borrowings....................................................26
2.2.     Swing Line Borrowings..........................................................28
2.3.     Competitive Borrowings.........................................................30
2.4.     Letters of Credit..............................................................34
2.5.     Extension of Revolving Commitments.............................................40
2.6.     Termination or Reduction of Commitments; Incremental Facility..................40
2.7.     Optional Prepayments...........................................................42
2.8.     Repayment of Loans; Mandatory Prepayments; Evidence of Debt....................43
2.9.     Interest Rates and Payment Dates...............................................44
2.10.    Facility Fee...................................................................45
2.11.    Computation of Interest and Fees...............................................45
2.12.    Conversion and Continuation Options............................................45
2.13.    Minimum Amounts of Eurodollar Borrowings.......................................46
2.14.    Inability to Determine Interest Rate...........................................46
2.15.    Pro Rata Treatment and Payments................................................47
2.16.    Illegality.....................................................................48
2.17.    Increased Costs................................................................48
2.18.    Taxes..........................................................................49
2.19.    Funding Indemnity..............................................................51
2.20.    Notice of Amounts Payable; Relocation of Lending Office........................52
2.21.    Replacement of Affected Lenders................................................52

                            III. REPRESENTATIONS AND WARRANTIES

3.1.     Corporate Existence; Compliance with Law.......................................53
3.2.     Corporate Power; Authorization; No Violation...................................53
3.3.     Binding Effect.................................................................53
3.4.     Purpose of Loans...............................................................54
3.5.     Subsidiaries...................................................................54
3.6.     Indebtedness...................................................................54
3.7.     Financial Statements; Financial Condition; Undisclosed Liabilities;
         Projections, etc...............................................................54
3.8.     No Material Litigation.........................................................56
3.9.     Performance of Agreements......................................................56
3.10.    Taxes..........................................................................56


                                      - i -


                                                                                  
3.11.    Governmental Regulation........................................................56
3.12.    Ownership of Property; Liens...................................................56
3.13.    Intellectual Property..........................................................57
3.14.    Disclosure.....................................................................57
3.15.    ERISA..........................................................................57
3.16.    Labor Relations................................................................57
3.17.    Insurance......................................................................58
3.18.    Public Utility Holding Company Act.............................................58

                                  IV. CONDITIONS OF CREDIT

4.1.     Conditions Precedent to Effectiveness..........................................58
4.2.     Certain Conditions Precedent to Each Loan and Letter of Credit.................60

                                  V. AFFIRMATIVE COVENANTS

5.1.     Financial Statements...........................................................61
5.2.     Certificates; Other Information................................................62
5.3.     Notices........................................................................63
5.4.     Conduct of Business and Maintenance of Existence...............................63
5.5.     Payment of Obligations.........................................................64
5 6.     Inspection of Property, Books and Records......................................64
5.7.     ERISA..........................................................................65
5.8.     Insurance......................................................................66
5.9.     Environmental Laws.............................................................66
5.10.    Additional Subsidiary Guarantors...............................................67

                                   VI. NEGATIVE COVENANTS

6.1.     Financial Condition Covenants..................................................67
6.2.     Indebtedness of Subsidiaries...................................................68
6.3.     Guarantee Obligations..........................................................69
6.4.     Liens..........................................................................69
6.5.     Fundamental Changes............................................................70
6.6.     Restricted Payments............................................................70
6.7.     Distributions from Subsidiaries................................................70
6.8.     Sales of Assets and Subsidiary Stock...........................................71
6.9.     Investments....................................................................71
6.10.    Transactions with Affiliates...................................................71
6.11.    Sale-Leasebacks................................................................72
6.12.    Fiscal Year....................................................................72
6.13.    Amendments to Organizational Documents.........................................72
6.14.    Accounting Changes.............................................................72
6.15.    Lines of Business..............................................................73

                                   VII. EVENTS OF DEFAULT

7.1.     Events of Default..............................................................73



                                     - ii -


                                                                                  
7.2.     Rescission of Acceleration.....................................................76
7.3.     Rights Not Exclusive...........................................................77

                                 VIII. ADMINISTRATIVE AGENT

8.1.     Appointment and Authorization..................................................77
8.2.     Nature of Duties...............................................................77
8.3.     Liability of Administrative Agent..............................................78
8.4.     Reliance by Administrative Agent...............................................78
8.5.     Notice of Default..............................................................79
8.6.     Credit Decision................................................................79
8.7.     Indemnification................................................................80
8.8.     Administrative Agent in Individual Capacity....................................80
8.9.     Resignation by Administrative Agent............................................81
8.10.    Syndication Agent, Documentation Agent and Arranger............................81

                                     IX. MISCELLANEOUS

9.1.     No Waiver; Modifications in Writing............................................82
9.2.     Further Assurances.............................................................83
9.3.     Notices, Etc...................................................................83
9.4.     Costs, Expenses and Taxes; Indemnity...........................................84
9.5.     Confirmations..................................................................86
9.6.     Transfer of Notes..............................................................86
9.7.     Adjustments; Set-off...........................................................87
9.8.     Execution in Counterparts......................................................88
9.9.     Binding Effect; Assignment; Entire Agreement...................................88
9.10.    Consent to Jurisdiction; WAIVER OF JURY TRIAL..................................91
9.11.    Governing Law..................................................................92
9.12.    Registry.......................................................................92
9.13.    Severability of Provisions.....................................................92
9.14.    Headings.......................................................................93
9.15.    Independent Nature of Lenders' Rights..........................................93
9.16.    Survival of Representations....................................................93
9.17.    Confidentiality................................................................93
9.18.    Waiver of Immunities...........................................................94



                                     - iii-


Schedules

Schedule 1.1       --    Revolving Commitments
Schedule 2.4       --    Existing Letters of Credit
Schedule 3.5       --    Subsidiaries
Schedule 3.6       --    Indebtedness
Schedule 3.7(d)    --    Projections
Schedule 6.2(c)    --    Outstanding  Subsidiary Indebtedness
Schedule 6.3(e)    --    Guarantee Obligations
Schedule 6.4       --    Permitted Liens
Schedule 6.7(a)    --    Certain Restrictions
Schedule 9.3       --    Addresses for Notice; Payment and Lending Offices

Exhibits

Exhibit 1.1        --    Form of Subsidiary Guarantee Agreement
Exhibit 2.1(c)     --    Form of Revolving Note
Exhibit 2.1(d)     --    Form of Notice of Borrowing
Exhibit 2.2(b)     --    Form of Swing Line Note
Exhibit 2.2(e)     --    Form of Swing Line Loan Participation Certificate
Exhibit 2.3(a)     --    Form of Competitive Bid Note
Exhibit 2.3(b)     --    Form of Competitive Bid Request
Exhibit 2.3(c)     --    Form of Invitation for Competitive Bids
Exhibit 2.3(d)     --    Form of Competitive Bid
Exhibit 2.3(f)     --    Form of Competitive Bid Accept/Reject Letter
Exhibit 2.4(c)     --    Form of Request for Letter of Credit
Exhibit 2.6(c)     --    Form of Joinder Agreement
Exhibit 2.18(c)    --    Form of Section 2.18(c)(iii) Certificate
Exhibit 4.1(f)     --    Form of Opinions of Jones, Day, Reavis & Pogue and
                         Stanley, Lande & Hunter
Exhibit 4.1(j)     --    Form of CT Letter
Exhibit 4.1(k)     --    Form of Officer's Certificate
Exhibit 5.2(b)     --    Form of Certificate of Financial Officer
Exhibit 9.9        --    Form of Assignment and Assumption Agreement

                                     - iv -


                                CREDIT AGREEMENT

     This CREDIT AGREEMENT, dated as of May 10, 2002, among HON INDUSTRIES INC.,
an Iowa corporation ("BORROWER"), the several banks and other financial
institutions from time to time parties to this Agreement (the "LENDERS"),
DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking corporation, as letter
of credit issuer, DEUTSCHE BANK TRUST COMPANY AMERICAS, a New York banking
corporation, as administrative agent for the Lenders hereunder (in such
capacity, the "ADMINISTRATIVE AGENT"), THE NORTHERN TRUST COMPANY, an Illinois
banking corporation, as syndication agent (in such capacity, the "SYNDICATION
AGENT") and as letter of credit issuer, and NATIONAL CITY BANK OF
MICHIGAN/ILLINOIS, a national banking association, as documentation agent (in
such capacity, the "DOCUMENTATION AGENT").

     The parties hereto hereby agree as follows:

                                 I. DEFINITIONS

     1.1.      DEFINED TERMS.

     As used in this Agreement, the following terms shall have the following
meanings, such meanings to be equally applicable to both the singular and plural
forms of the terms defined:

               "ADMINISTRATIVE AGENT": as defined in the preamble.

               "AFFILIATE": with respect to any Person, any Person or group
     acting in concert in respect of the Person in question that, directly or
     indirectly, controls or is controlled by or is under common control with
     such Person. For the purposes of this definition, "control" (including,
     with correlative meanings, the terms "controlled by" and "under common
     control with") shall mean the possession, directly or indirectly, of the
     power to direct or cause the direction of management and policies of a
     Person, whether through the ownership of voting securities or by contract
     or otherwise.

               "AGENT-RELATED PERSONS": as defined in SECTION 8.3.

               "AGGREGATE REVOLVING COMMITMENTS": as of any date of calculation,
     an amount equal to $136,000,000, as the same may be reduced or increased
     from time to time pursuant to SECTION 2.6 hereof or terminated pursuant to
     SECTION 7.1 hereof.

               "AGREEMENT": this Agreement, as amended, supplemented or
     otherwise modified from time to time.

               "APPLICABLE FACILITY FEE": at any date, .125% of the aggregate
     Revolving Commitments of the Lenders.

               "APPLICABLE MARGIN": as defined in SECTION 2.9(e).



               "ASSET DISPOSITION": any sale, lease, transfer or other
     disposition (or series of related sales, leases, transfers or dispositions)
     of shares of Capital Stock of a Subsidiary of Borrower (other than
     directors' qualifying shares), property or other assets (each referred to
     for the purposes of this definition as a "disposition") by Borrower or any
     of its Subsidiaries the fair market value of which, as determined in good
     faith by the board of directors of Borrower or such Subsidiary, as the case
     may be, exceeds $10,000,000, other than (i) a disposition by a Subsidiary
     to Borrower or by Borrower or a Subsidiary to a Wholly-Owned Subsidiary,
     (ii) a disposition of property or other assets at fair market value in the
     ordinary course of business, including non-exclusive licenses to use
     trademarks, trade names or other similar property of Borrower or its
     Subsidiaries and (iii) a disposition of obsolete property, property no
     longer used in business or other assets in the ordinary course of business.

               "ASSIGNEE": an Eligible Assignee which is an "ASSIGNEE" party to
     an Assignment and Assumption Agreement pursuant to SECTION 9.9.

               "ASSIGNMENT AND ASSUMPTION AGREEMENT": an Assignment and
     Assumption Agreement substantially in the form of EXHIBIT 9.9 annexed
     hereto and made a part hereof made by any applicable Lender, as assignor
     and such Lender's assignee in accordance with SECTION 9.9, with such
     modifications (including, without limitation, additional representations,
     warranties and covenants) as such assignor Lender and assignee Lender may
     agree to from time to time which solely affect the relative rights and/or
     obligations of the assignor Lender and assignee Lender as between
     themselves.

               "ATTORNEY COSTS": all reasonable fees and disbursements of any
     law firm or other external counsel and the reasonable allocated cost of
     internal legal services, including all reasonable disbursements of internal
     counsel.

               "ATTRIBUTABLE DEBT": as of the date of determination thereof in
     connection with a Sale and Leaseback Transaction occurring after the
     Closing Date, the greater of (1) the fair value of the assets subject to
     such transaction (as determined in good faith by the applicable lessee) and
     (2) the present value (discounted according to GAAP at the cost of debt
     implied in the lease) of the obligations of the lessee for rental payments
     during the term of any applicable lease.

               "AVAILABLE REVOLVING COMMITMENT": as to any Lender at any time,
     an amount in Dollars equal to the excess, if any, of (i) such Lender's
     Revolving Commitment OVER (ii) the Lender's Commitment Percentage of the
     Exposure Amount.

               "BANKRUPTCY CODE": Title 11 of the United States Code entitled
     Bankruptcy as now or hereafter in effect or any successor thereto.

               "BANKRUPTCY EVENT OF DEFAULT": any Event of Default described in
     SECTION 7.1(g) or (h).

               "BASE RATE": the higher of (i) the Prime Lending Rate and (ii)
     the Federal Funds Effective Rate plus one-half of one percent (1/2%).

                                      - 2 -


               "BASE RATE LOANS": Revolving Loans bearing interest at a rate
     determined by reference to the Base Rate or Swing Line Loans, as the
     context shall require.

               "BOARD": the Board of Governors of the Federal Reserve System (or
     any successor thereto).

               "BORROWER": as defined in the preamble.

               "BORROWING": a group of Loans of a single Type made by the
     Lenders or the Swing Line Lender, as appropriate (or, in the case of a
     Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have
     been accepted pursuant to SECTION 2.3), on a single date and as to which a
     single Interest Period is in effect.

               "BT": Deutsche Bank Trust Company Americas, a New York banking
     corporation.

               "BUSINESS DAY": a day other than a Saturday, Sunday or other day
     on which commercial banks in New York City are authorized or required by
     law to close; PROVIDED, HOWEVER, that when used in connection with a
     Eurodollar Loan, the term "Business Day" shall also exclude any day on
     which banks are not open for dealings in dollar deposits in the London
     interbank market.

               "CAPITAL LEASE": as applied to any Person, any lease of any
     property (whether real, personal or mixed) by that Person as lessee which
     would, in conformity with GAAP, be required to be accounted for as a
     capital lease on the balance sheet of that Person.

               "CAPITAL STOCK": with respect to any Person, any and all shares,
     interests, participations, rights in or other equivalents (however
     designated) of such Person's capital stock, partnership interests,
     membership interests or other equivalent interests and any rights (other
     than debt securities convertible into or exchangeable for capital stock or
     such interests), warrants or options exchangeable for or convertible into
     such capital stock or other interests.

               "CASH ACCOUNT": as defined in SECTION 7.1.

               "CHANGE OF CONTROL": (i) the sale, lease or transfer of all or
     substantially all of the Borrower's assets to any person or "group" (as
     such term is used in Section 13(d)(3) of the Exchange Act), (ii) the
     liquidation or dissolution of the Borrower, (iii) any person or such
     "group" acquiring beneficial ownership (within the meaning of Rule 13d-3
     promulgated by the SEC under the Exchange Act) of 20% or more of the issued
     and outstanding shares of the Borrower's Voting Securities; or (iv) during
     any period of twelve consecutive calendar months, individuals who at the
     beginning of such period constituted the Borrower's board of directors
     (together with any new directors whose election by the Borrower's board of
     directors or whose nomination for election by the Borrower's stockholders
     was approved by a vote of at least two-thirds of the directors then still
     in office who either were directors at the beginning of such period or
     whose election or nomination for election was previously so approved) cease
     for any reason other than death or disability to constitute a majority of
     the directors then in office.

                                      - 3 -


               "CLOSING DATE": May 10, 2002.

               "CODE": the Internal Revenue Code of 1986, as amended from time
     to time.

               "COMMITTED LOAN": any Revolving Loan or Swing Line Loan.

               "COMMITMENT": as to any Lender at any time, the aggregate of such
     Lender's outstanding Revolving Commitment and its Swing Line Commitment.

               "COMMITMENT PERCENTAGE": as to any Lender at any time, the
     percentage which such Lender's Revolving Commitment then constitutes of the
     Aggregate Revolving Commitments (or, at any time after the Revolving
     Commitments shall have expired or terminated, the percentage which the
     aggregate principal amount of such Lender's Loans and L/C Participations
     then outstanding constitutes of the aggregate principal amount of the Loans
     then outstanding and the then current L/C Outstandings; PROVIDED, HOWEVER,
     that for purposes of determining the amount of a Lender's Loans, Swing Line
     Loans shall be deemed to be held not by the Swing Line Lender, but rather
     each Lender shall be deemed to hold the amount of Swing Line Loans equal to
     its Commitment Percentage of the Swing Line Loans then outstanding).

               "COMMITMENT PERIOD": the period from and including the date
     hereof to but not including the Termination Date.

               "COMMODITY PRICE PROTECTION AGREEMENT" any Contractual Obligation
     or other arrangement designed to protect Borrower or any of its
     Subsidiaries from fluctuations in the price of commodities.

               "COMPETITIVE BID": an offer by a Lender to make a Competitive
     Loan pursuant to SECTION 2.3 in the form of EXHIBIT 2.3(d).

               "COMPETITIVE BID ACCEPT/REJECT LETTER": a notification made by
     Borrower pursuant to SECTION 2.3(f) in the form of EXHIBIT 2.3(f).

               "COMPETITIVE BID LENDERS": those Lenders listed on SCHEDULE 1.1
     hereto as a Competitive Bid Lender, and such other Lenders which become
     Competitive Bid Lenders by notice to the Administrative Agent and the
     Borrower.

               "COMPETITIVE BID NOTE": as defined in SECTION 2.3(a).

               "COMPETITIVE BID RATE": as to any Competitive Bid made by a
     Lender pursuant to SECTION 2.3, (i) in the case of a Eurodollar Competitive
     Loan, the Eurodollar Rate PLUS (or MINUS) the Margin, and (ii) in the case
     of a Fixed Rate Competitive Loan, the fixed rate of interest offered by the
     Lender making such Competitive Bid.

               "COMPETITIVE BID REQUEST": a request made pursuant to SECTION
     2.3(b) in the form of EXHIBIT 2.3(b).

                                      - 4 -


               "COMPETITIVE BORROWING": a Borrowing consisting of a Competitive
     Loan or concurrent Competitive Loans from the Lender or Lenders whose
     Competitive Bids for such Borrowing have been accepted by Borrower under
     the bidding procedure described in SECTION 2.3.

               "COMPETITIVE LOAN": a Loan (which shall be a Eurodollar
     Competitive Loan or a Fixed Rate Competitive Loan) made by a Lender
     pursuant to the bidding procedure described in SECTION 2.3.

               "CONSOLIDATED DEBT": Indebtedness for money borrowed of the
     Borrower and its Subsidiaries that should be shown on the liability side of
     a consolidated balance sheet of the Borrower and its Subsidiaries prepared
     in accordance with GAAP, PLUS (without duplication) the amount of
     Indebtedness of the type described in CLAUSE (iii) of the definition
     thereof, PLUS (without duplication) Attributable Debt.

               "CONSOLIDATED EBITDA": without duplication for any Person for any
     period for which such amount is being determined, Consolidated Net Income
     or Consolidated Net Loss for such period PLUS the sum of the amounts for
     such period of (i) Consolidated Interest Expense, (ii) provision for taxes
     based on income, (iii) depreciation expense, and (iv) amortization expense,
     minus any non-cash non-operating income for such period to the extent
     included in Consolidated Net Income or Consolidated Net Loss, and EXCLUDING
     (a) any gain or loss recognized in respect of post-retirement benefits as a
     result of the application of FASB 106, (b) any foreign currency translation
     adjustments as a result of the application of FASB 52, (c) nonrecurring and
     extraordinary losses and gains and (d) any gains or losses arising under
     FASB 133 or FASB 138, all as determined on a consolidated basis for such
     Person and its consolidated Subsidiaries in accordance with GAAP. For
     purpose of this definition, "CONSOLIDATED EBITDA" shall be calculated after
     giving effect on a PRO FORMA basis to any Purchase as if such Purchase
     occurred on the first day of the applicable period on the same basis as is
     required in CLAUSES (A) THROUGH (C) for the PRO FORMA test under CLAUSE
     (vi) of the definition of "PERMITTED INVESTMENTS".

               "CONSOLIDATED INTEREST EXPENSE": with respect to any Person, for
     any period for which such amount is being determined, total interest
     expense of such Person and its Subsidiaries on a consolidated basis in
     accordance with GAAP for such period.

               "CONSOLIDATED NET INCOME" and "CONSOLIDATED NET LOSS": for any
     Person for any period for which such amount is being determined, the net
     income (loss) of such Person and its consolidated Subsidiaries during such
     period determined on a consolidated basis for such period taken as a single
     accounting period in accordance with GAAP, PROVIDED that there shall be
     excluded (i) income (or loss) of any Person (other than a consolidated
     Subsidiary of such Person) in which any other Person (other than such
     Person or any of its consolidated Subsidiaries) has a joint interest,
     except to the extent of the amount of dividends or other distributions
     actually paid to such Person or any of its consolidated Subsidiaries by
     such other Person during such period, (ii) the income (or loss) of any
     Person accrued prior to the date it becomes a consolidated Subsidiary of
     such Person or is merged into or consolidated with such Person or any of
     its consolidated

                                      - 5 -


     Subsidiaries or the Person's assets are acquired by such Person or any of
     its consolidated Subsidiaries and (iii) the income of any consolidated
     Subsidiary of such Person to the extent that the declaration or payment of
     dividends or similar distributions by that consolidated Subsidiary of the
     income is not at the time permitted by operation of the terms of its
     charter or any agreement, instrument, judgment, decree, order, statute,
     rule or governmental regulation applicable to that consolidated Subsidiary.

               "CONSOLIDATED NET TANGIBLE ASSETS": the total assets shown on the
     balance sheet of the Borrower and its consolidated Subsidiaries, determined
     on a consolidated basis in accordance with GAAP as of the end of the Most
     Recent Fiscal Quarter of the Borrower, less (i) all current liabilities and
     minority interests and (ii) goodwill and other intangibles.

               "CONSOLIDATED NET WORTH": the total amount shown on the balance
     sheet of the Borrower and its consolidated Subsidiaries, determined on a
     consolidated basis in accordance with GAAP, as of the end of the Most
     Recent Fiscal Quarter of the Borrower, as (i) the par or stated value of
     all outstanding Capital Stock of such Person, PLUS (ii) paid-in capital or
     capital surplus relating to such Capital Stock, PLUS (iii) any retained
     earnings or earned surplus, LESS (A) any accumulated deficit, (B) any
     amounts attributable to Redeemable Stock and (C) any amounts attributable
     to Exchangeable Stock, excluding, where applicable, any adjustments in
     respect of foreign currency translation.

               "CONTAMINANT": any material with respect to which any
     Environmental Law imposes a duty, obligation or standard of conduct,
     including without limitation any pollutant, contaminant (as those terms are
     defined in 42 U.S.C. Section 9601(33)), toxic pollutant (as that term is
     defined in 33 U.S.C. Section 1362(13)), hazardous substance (as that term
     is defined in 42 U.S.C. Section 9601(14)), hazardous chemical (as that term
     is defined by 29 CFR Section 1910.1200(c)), hazardous waste (as that term
     is defined in 42 U.S.C. Section 6903(5)), or any state or local equivalent
     of such laws and regulations, including, without limitation, radioactive
     material, special waste, polychlorinated biphenyls, asbestos, petroleum,
     including crude oil or any petroleum-derived substance, (or any fraction
     thereof), waste, or breakdown or decomposition product thereof, or any
     constituent of any such substance or waste, including but not limited to
     polychlorinated biphenyls and asbestos.

               "CONTRACTUAL OBLIGATION": as to any Person, any provision of any
     security issued by such Person or of any agreement, instrument or other
     undertaking to which such Person is a party or by which it or any of its
     property is bound or to which it may be subject.

               "CURRENCY PROTECTION AGREEMENT": any foreign exchange contract,
     currency swap agreement, or other financial agreement or arrangement
     designed to protect Borrower or any of its Subsidiaries against
     fluctuations in currency values.

               "DEBTS": all liabilities, whether matured or unmatured,
     liquidated or unliquidated, absolute, fixed or contingent.

                                      - 6 -


               "DEFAULT RATE": a variable rate per annum which shall be two
     percent (2%) per annum PLUS either (i) the then applicable interest rate
     hereunder in respect of the amount on which the Default Rate is being
     assessed, or (ii) if there is no such applicable interest rate, the Base
     Rate, but in no event in excess of that permitted by applicable law.

               "DOLLARS" and "$": dollars in lawful currency of the U.S.

               "DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower that is
     incorporated under the laws of any State of the U.S., the District of
     Columbia or any territory or possession of the U.S.

               "DRAWING": as defined in SECTION 2.4(e).

               "EFFECTIVE DATE": the effective date of the applicable Assignment
     and Assumption Agreement, as defined therein.

               "ELIGIBLE ASSIGNEE": (i) a commercial bank organized under the
     laws of the U.S., or any State thereof, (ii) a commercial bank organized
     under the laws of any other country which is a member of OECD, or a
     political subdivision of any such country; PROVIDED, HOWEVER, that such
     bank is acting through a branch or agency located in the country in which
     it is organized or another country which is also a member of the OECD or
     the Cayman Islands, (iii) the central bank of any country which is a member
     of the OECD, (iv) a finance company or other financial institution or fund
     (whether a corporation, limited liability company, partnership, trust or
     other entity) that is engaged in making, purchasing or otherwise investing
     in commercial loans in the U.S. in the ordinary course of its business, (v)
     an insurance company organized under the laws of the U.S. (or any State
     thereof), (vi) a savings bank or savings and loan association organized
     under the laws of the U.S., or any State thereof, (vii) any Lender party to
     this Agreement, (viii) any Affiliate of any Lender party to this Agreement,
     and (ix) any other Person approved by Administrative Agent and Borrower,
     such approval not to be unreasonably withheld; PROVIDED, HOWEVER, that an
     affiliate of Borrower shall not qualify as an Eligible Assignee.

               "ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local
     or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
     decrees, requirements of any Governmental Authority or other Requirements
     of Law regulating, relating to or imposing liability or standards of
     conduct concerning protection of human health or the environment, as now or
     may at any time hereafter be in effect that are applicable to the Borrower
     or its Subsidiaries.

               "ERISA": the Employee Retirement Income Security Act of 1974, as
     amended from time to time.

               "ERISA AFFILIATE": each trade or business (whether or not
     incorporated) which together with the Borrower or a Subsidiary of the
     Borrower would be deemed to be a "single employer" within the meaning of
     Section 4001(b)(1) of ERISA or would be included in a "controlled group of
     corporations," a group of "trades or businesses under common control" or an
     "affiliated service group" within the meaning of Section 414(b),

                                      - 7 -


     (c), (m) or (o) of the Code. Unless otherwise qualified, all references to
     an "ERISA Affiliate" in this Agreement shall refer to an ERISA Affiliate of
     the Borrower or any Subsidiary.

               "EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
     Eurodollar Loan, the aggregate (without duplication) of the maximum rates
     (expressed as a decimal fraction) of reserve requirements in effect on such
     day (including, without limitation, basic, supplemental, marginal and
     emergency reserves under any regulations of the Board or other Governmental
     Authority having jurisdiction with respect thereto) dealing with reserve
     requirements prescribed for Eurocurrency funding (currently referred to as
     "Eurocurrency liabilities" in Regulation D of such Board) maintained by a
     member bank of the Federal Reserve System.

               "EURODOLLAR BORROWING": a Borrowing comprised of Eurodollar
     Loans.

               "EURODOLLAR COMPETITIVE LOAN": any Competitive Loan bearing
     interest at a rate determined by reference to the Eurodollar Rate.

               "EURODOLLAR LOAN": any Eurodollar Competitive Loan or Eurodollar
     Revolving Loan.

               "EURODOLLAR RATE": the arithmetic average (rounded upwards to the
     nearest 1/16 of 1%) of the offered quotation, if any, to first class banks
     in the Eurodollar market by BT for Dollar deposits of amounts in
     immediately available funds comparable to the principal amount of the
     applicable Eurodollar Loan for which the Eurodollar Rate is being
     determined with maturities comparable to the Interest Period for which such
     Eurodollar Rate will apply, as of approximately 11:00 A.M. (New York City
     time) on the applicable Interest Rate Determination Date. The determination
     of the Eurodollar Rate by Administrative Agent shall be conclusive and
     binding on Borrower absent manifest error.

               "EURODOLLAR RESERVE RATE": with respect to each day during each
     Interest Period pertaining to a Eurodollar Loan, a rate per annum
     determined for such day in accordance with the following formula (rounded
     upward to the nearest 1/100th of 1%):

                           Eurodollar Rate
               ---------------------------------------
               1.00 - Eurocurrency Reserve Requirements

               "EURODOLLAR REVOLVING LOAN": any Revolving Loan bearing interest
     at a rate determined by reference to the Eurodollar Rate.

               "EVENT OF DEFAULT": any of the events specified in SECTION 7.1;
     PROVIDED, HOWEVER, that any requirement for the giving of notice, the lapse
     of time, or both, or any other condition, has been satisfied.

               "EXCHANGE ACT": the Securities Exchange Act of 1934, as amended
     and codified in U.S.C. 78a ET SEQ. and as hereafter amended from time to
     time.

                                      - 8 -


               "EXCHANGEABLE STOCK": any Capital Stock which is exchangeable or
     convertible into another security (other than Capital Stock of Borrower
     which is neither Exchangeable Stock nor Redeemable Stock).

               "EXISTING CREDIT FACILITY AGREEMENT": that certain Credit
     Agreement dated as of June 11, 1997 among the Borrower and Bankers Trust
     Company, as Syndication Agent and Administrative Agent, and various Lending
     Institutions.

               "EXISTING CREDIT FACILITY REFINANCING": the termination of the
     Existing Credit Facility Agreement.

               "EXISTING CREDIT FACILITY TERMINATION DOCUMENTS": the documents
     entered into with respect to the termination of the commitments under the
     Existing Credit Facility Agreement, the repayment of the loans thereunder,
     the release of any guaranties and security with respect thereto, if any,
     and any consents required in connection therewith.

               "EXPOSURE AMOUNT": for any date, an amount equal to the aggregate
     principal amount of Loans then outstanding PLUS the L/C Outstandings for
     such date.

               "FEDERAL FUNDS EFFECTIVE RATE": for any period, a fluctuating
     interest rate per annum equal for each day during such period to the
     weighted average of the rates on overnight Federal funds transactions with
     members of the Federal Reserve System arranged by Federal funds brokers, as
     published for such day (or, if such day is not a Business Day, for the next
     preceding Business Day) by the Federal Reserve Bank of New York, or, if
     such rate is not so published for any day which is a Business Day, the
     average of the quotations for such day on such transactions received by BT,
     as Administrative Agent, from three Federal funds brokers of recognized
     standing selected by it.

               "FINANCIAL OFFICER": with respect to any Person, the chief
     financial officer, principal accounting officer, a financial vice
     president, treasurer or assistant treasurer of such Person.

               "FIXED RATE COMPETITIVE LOAN": any Competitive Loan bearing
     interest at a fixed percentage rate per annum specified by the Lender
     making such Loan in its Competitive Bid.

               "GAAP": generally accepted accounting principles in the U.S. as
     in effect from time to time. If any changes in GAAP or the application
     thereof from that used in the preparation of the financial statements
     referred to in SECTION 5.1(a) hereof occur after the Closing Date and such
     changes result in, in the judgment of Administrative Agent, a material
     change in the calculation of any financial covenants or restrictions set
     forth in this Agreement, then the parties hereto agree to enter into and
     diligently pursue negotiations in order to amend such financial covenants
     and restrictions so as to equitably reflect such changes, with the desired
     result that the criteria for evaluating the financial condition and results
     of operations of Borrower and its Subsidiaries shall be the same after such
     changes as if such changes had not been made.

                                      - 9 -


               "GOVERNMENTAL AUTHORITY": any nation or government, any state or
     other political subdivision thereof and any entity exercising executive,
     legislative, judicial, regulatory or administrative functions of
     government.

               "GUARANTEE OBLIGATIONS": as to any Person, without duplication,
     any direct or indirect obligation of such Person guaranteeing or intended
     to guarantee any Indebtedness, Capital Lease or operating lease, dividend
     or other obligation ("PRIMARY OBLIGATIONS") of any other Person (the
     "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
     including, without limitation, any obligation of such Person, whether or
     not contingent:

                       (i)    to purchase any such primary obligation or any
               property constituting direct or indirect security therefor;

                       (ii)   to advance or supply funds:

                              (a)    for the purchase or payment of any such
                       primary obligation, or

                              (b)    to maintain working capital or equity
                       capital of the primary obligor or otherwise to maintain
                       the net worth or solvency of the primary obligor,

                       (iii)  to purchase property, securities or services
               primarily for the purpose of assuring the owner of any such
               primary obligation of the ability of the primary obligor to make
               payment of such primary obligation; or

                       (iv)   otherwise to assure or hold harmless the owner of
               such primary obligation against loss in respect thereof.

     Guarantee Obligations shall include, without limitation and without
     duplication:

                       (1)    any direct or indirect liability, contingent or
               otherwise of that Person:

                              (a)    with respect to any indebtedness, lease,
                       dividend, letter of credit or other obligation of such
                       primary obligor if the primary purpose or intent thereof
                       by the Person incurring the Guarantee Obligation is to
                       provide assurance to the obligee of such obligation of
                       another that such obligation of another will be paid or
                       discharged, or that any agreements relating thereto will
                       be complied with, or that the holders of such obligation
                       will be protected (in whole or in part) against loss in
                       respect thereof, or

                              (b)    under any letter of credit, performance
                       bonds, surety bonds or similar obligations issued for the
                       account of that Person or for which that Person is
                       otherwise liable for reimbursement thereof,

                                     - 10 -


                       (2)    the direct or indirect guarantee, endorsement
               (otherwise than for collection or deposit in the ordinary course
               of business), co-making, discounting with recourse or sale with
               recourse by such Person of the obligation of such primary
               obligor; and

                       (3)    any liability of such Person for the obligations
               of such primary obligor through any agreement (contingent or
               otherwise):

                              (a)    to purchase, repurchase or otherwise
                       acquire such obligation or any security therefor, or to
                       provide funds for the payment or discharge of such
                       obligation (whether in the form of loans, advances, stock
                       purchases, capital contributions or otherwise),

                              (b)    to maintain the solvency or any balance
                       sheet item, level of income or financial condition of
                       such primary obligor, or

                              (c)    to make take-or-pay or similar payments if
                       required regardless of non-performance by any other party
                       or parties to an agreement, if in the case of any
                       agreement described under clauses (a) or (b) of this
                       clause (3) the primary purpose or intent thereof is as
                       described in the preceding sentence.

     Notwithstanding the foregoing, as to the Borrower or any of its
     Subsidiaries, Guarantee Obligations of the Borrower shall not include any
     direct or indirect obligation of the Borrower with respect to any
     obligation of any Subsidiary of the Borrower and Guarantee Obligations of
     any Subsidiary of the Borrower shall not include any direct or indirect
     obligation of such Subsidiary with respect to any obligation of any other
     Subsidiary of Borrower.

               The amount of any Guarantee Obligation at any time shall be
     deemed to be an amount equal to the lesser at such time of (y) the stated
     or determinable amount of the primary obligation in respect of which such
     Guarantee Obligation is made or (z) the maximum amount for which such
     Person may be liable pursuant to the terms of the instrument embodying such
     Guarantee Obligation; or, if not stated or determinable, the maximum
     reasonably anticipated liability in respect thereof.

               "HEARTH-TECH": Hearth Technologies, Inc, a corporation organized
     under the laws of Iowa and formerly known as Heatilator, Inc.

               "INDEBTEDNESS": as applied to any Person (without duplication):

                       (i)    all indebtedness of such Person for borrowed
               money;

                       (ii)   the deferred and unpaid balance of the purchase
               price of assets or services (other than trade payables and other
               accrued liabilities incurred in the ordinary course of business
               that are not overdue by more than 90 days unless being contested
               in good faith) which purchase price is (y) due more than six
               months from the date of incurrence of the obligation in respect
               thereof or (z) evidenced by a note or a similar written
               instrument;

                                     - 11 -


                       (iii)  that portion of obligations of such Person with
               respect to Capital Leases which is or should be classified as a
               liability on a balance sheet in accordance with GAAP;

                       (iv)   all indebtedness secured by any Lien on any
               property owned by such Person, whether or not such indebtedness
               has been assumed by such Person or is nonrecourse to such Person;

                       (v)    notes payable and drafts accepted representing
               extensions of credit whether or not representing obligations for
               borrowed money (other than such notes or drafts for the deferred
               purchase price of assets or services which does not constitute
               Indebtedness pursuant to CLAUSE (ii) above);

                       (vi)   indebtedness or obligations of such Person, in
               each case, evidenced by bonds, notes or similar written
               instrument;

                       (vii)  Guarantee Obligations of such Person as an account
               party in respect of letters of credit and bankers' acceptances
               and all Guarantee Obligations of such Person with respect to
               obligations of the type referred to in clauses (i) through (vi)
               above of other Persons other than, in each case, commercial or
               standby letters of credit or the functional equivalent thereof
               issued in connection with performance, bid or advance payment
               obligations incurred in the ordinary course of business,
               including, without limitation, performance requirements under
               workers compensation or similar laws;

                       (viii) Guarantee Obligations of such Person not paid when
               due or no longer contingent; and

                       (ix)   obligations of such Person under Currency
               Protection Agreements, Interest Rate Protection Agreements or
               Commodity Price Protection Agreements.

               "INSOLVENT": with respect to any Person, that the present fair
     saleable value of the assets of such Person is less than the amount that
     will be required to pay the probable liability on existing Debts of such
     Person or such Person is unable to pay its Debts, as such Debts become
     absolute and matured.

               "INTELLECTUAL PROPERTY": as defined in SECTION 3.13.

               "INTERCOMPANY GUARANTEE": Guarantee Obligations of the Borrower
     or any of its Subsidiaries which, in the case of the Borrower, are owing to
     any Wholly-Owned Subsidiary and which, in the case of any Subsidiary of the
     Borrower, are owing to the Borrower or any of its Wholly-Owned
     Subsidiaries.

               "INTERCOMPANY INDEBTEDNESS": Indebtedness of the Borrower or any
     of its Subsidiaries which, in the case of the Borrower, is owing to any
     such Subsidiary and which, in the case of any Subsidiary of the Borrower,
     is owing to the Borrower or any of its other Subsidiaries.

                                     - 12 -


               "INTEREST PAYMENT DATE": (a) as to any Base Rate Loan or fees
     referred to in SECTION 2.4(f)(i), the last Business Day of each March,
     June, September and December to occur while such Loan is outstanding and on
     the date all of the Loans hereunder are paid in full, (b) as to any
     Eurodollar Loan or Fixed Rate Competitive Loan, the last day of the
     Interest Period applicable thereto and (c) as to any Eurodollar Loan or
     Fixed Rate Loan having an Interest Period longer than three months or 90
     days, as the case may be, each day which is three months or 90 days, as the
     case may be, after the first day of the Interest Period applicable thereto;
     PROVIDED, HOWEVER, that, in addition to the foregoing, each of (x) the date
     upon which the Revolving Commitments have been terminated, the Loans have
     been paid in full and the L/C Obligations have been secured by cash or cash
     equivalents delivered to the Administrative Agent and (y) the Termination
     Date shall be deemed to be an "INTEREST PAYMENT DATE" with respect to any
     interest which is then accrued hereunder.

               "INTEREST PERIOD": (a) with respect to any Eurodollar Loan:

                       (i)    initially, the period commencing on the borrowing
               or conversion date, as the case may be, with respect to such
               Eurodollar Loan and ending, in the case of any Eurodollar Loan,
               one, two, three or six months thereafter, as selected by the
               Borrower in its Notice of Borrowing, notice of conversion or
               Competitive Bid Request, as the case may be, given with respect
               thereto; and

                       (ii)   thereafter, with respect to Eurodollar Revolving
               Loans, each period commencing on the last day of the next
               preceding Interest Period applicable to such Eurodollar Revolving
               Loan and ending one, two, three or six months thereafter, as
               selected by the Borrower by irrevocable notice to the
               Administrative Agent not less than three Business Days prior to
               the last day of the then current Interest Period with respect
               thereto; and

               (b)     with respect to any Fixed Rate Competitive Loan, the
     period commencing on the borrowing date with respect to such Fixed Rate
     Competitive Loan and ending such number of days thereafter (which shall be
     not less than fifteen days or more than 180 days after the date of such
     borrowing) as shall be selected by the Borrower in its Competitive Bid
     Request given with respect thereto;

     PROVIDED, HOWEVER, that all of the foregoing provisions relating to
     Interest Periods are subject to the following:

                       (1)    if any Interest Period would otherwise end on a
               day that is not a Business Day, such Interest Period shall be
               extended to the next succeeding Business Day unless, in the case
               of an Interest Period pertaining to a Eurodollar Loan, the result
               of such extension would be to carry such Interest Period into
               another calendar month in which event such Interest Period shall
               end on the immediately preceding Business Day; and

                       (2)    in the case of an Interest Period pertaining to a
               Eurodollar Loan, any Interest Period that begins on the last
               Business Day of a calendar month (or

                                     - 13 -


               on a day for which there is no numerically corresponding day in
               the calendar month at the end of such Interest Period) shall end
               on the last Business Day of a calendar month.

     Notwithstanding anything to the contrary contained in this Agreement, no
     Interest Period shall be selected by the Borrower which ends on a date
     after the Termination Date.

               "INTEREST RATE DETERMINATION DATE": the date for calculating the
     Eurodollar Rate for an Interest Period, which date shall be the second
     Business Day prior to the first day of the related Interest Period for such
     Eurodollar Loan.

               "INTEREST RATE PROTECTION AGREEMENT": any interest rate swap
     agreement, interest rate cap agreement or other financial agreement or
     arrangement designed to protect Borrower or any of its Subsidiaries against
     fluctuations in interest rates.

               "INVESTMENT": as applied to any Person, any direct or indirect
     purchase or other acquisition by that Person of, or a beneficial interest
     in, stock or other securities of any other Person, or a capital
     contribution by that Person to any other Person or any direct or indirect
     loan or advance to any other Person or any purchase by that Person of all
     or a significant part of the assets of a business conducted by another
     Person. The amount of any Investment by any Person shall be the original
     Investment (including the amount of any liability assumed to the extent
     that such liability would be reflected on a balance sheet prepared in
     accordance with GAAP) PLUS the cost of all additions, thereto, without any
     adjustments for increases or decreases in value, or write-ups, write-downs
     or write-offs with respect to such Investment.

               "INVITATION FOR COMPETITIVE BIDS": an invitation made by the
     Borrower pursuant to SECTION 2.3(c) in the form of EXHIBIT 2.3(c).

               "IRS": the United States Internal Revenue Service, or any
     successor or analogous organization.

               "ISSUING BANK": Deutsche Bank Trust Company Americas or The
     Northern Trust Company, as the case may be.

               "L/C OUTSTANDINGS": at any time, the sum of (i) the Stated Amount
     of all outstanding Letters of Credit and (ii) the aggregate amount of all
     Unpaid Drawings in respect of all Letters of Credit.

               "L/C PARTICIPANT": as defined in SECTION 2.4(d).

               "L/C PARTICIPATION": as defined in SECTION 2.4(d).

               "LENDERS": as defined in the preamble.

               "LENDING OFFICE": with respect to each Lender, the office
     specified opposite such Lender's name on SCHEDULE 9.3 annexed to and made a
     part of this Agreement with

                                     - 14 -


     respect to each type of Loan, or such other office as such Lender may
     designate in writing from time to time to Borrower and Administrative Agent
     with respect thereto.

               "LETTER OF CREDIT" has the meaning set forth in SECTION 2.4(a).

               "LEVEL I STATUS": exists at any date if the Borrower's Most
     Recent Ratio of Consolidated Debt to Consolidated EBITDA was less than or
     equal to 1.0 to 1.0.

               "LEVEL II STATUS": exists at any date if the Borrower's Most
     Recent Ratio of Consolidated Debt to Consolidated EBITDA was less than or
     equal to 1.5 to 1.0 but greater than 1.0 to 1.0.

               "LEVEL III STATUS": exists at any date if the Borrower's Most
     Recent Ratio of Consolidated Debt to Consolidated EBITDA was greater than
     1.5 to 1.0.

               "LIEN": any judgment lien or execution, attachment, levy,
     distraint or similar legal process and any mortgage, pledge, security
     interest, encumbrance, lien, option, charge or deposit arrangement (other
     than a deposit in the ordinary course of business and not intended as
     security) of any kind (including, without limitation, any conditional sale
     or other title retention agreement or lease in the nature thereof, any sale
     of receivables with recourse (in whole or in part) against the seller or
     any other Person except the account debtors, any filing or agreement to
     file a financing statement as debtor under the UCC or any similar statute
     other than to reflect ownership by a third party of property leased to
     Borrower or any of its Subsidiaries under a lease which is not in the
     nature of a conditional sale or title retention agreement, or any
     subordination arrangement in favor of another Person).

               "LOAN": a Competitive Loan, a Revolving Loan or a Swing Line
     Loan, as the context shall require; collectively, the "Loans."

               "LOAN DOCUMENTS": this Agreement, the Notes, the Subsidiary
     Guarantee Agreement and any other instruments, documents and agreements
     referred to herein or therein or related hereto or thereto.

               "LOAN PARTY": the Borrower or any Subsidiary thereof which is a
     party to any Loan Document.

               "MAJORITY LENDERS": at any time, Lenders whose Commitment
     Percentages represent at least 51%.

               "MARGIN": as to any Eurodollar Competitive Loan, the margin to be
     added to or subtracted from the Eurodollar Rate in order to determine the
     interest rate applicable to such Loan, as specified in the Competitive Bid
     relating to such Loan.

               "MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
     business, condition (financial or otherwise), assets, liabilities, property
     or operations of the Borrower and its Subsidiaries taken as a whole, (b)
     the ability of the Borrower or any Subsidiary to perform its obligations
     under any Loan Document to which it is a party, or

                                     - 15 -


     (c) the validity or enforceability of this Agreement, any Note, or the
     Subsidiary Guarantee Agreement or the rights or remedies of the
     Administrative Agent and the Lenders hereunder or thereunder.

               "MATERIAL ASSET DISPOSITION": any Asset Disposition of all or any
     substantial part of the assets of the Borrower and its Subsidiaries, taken
     as a whole, to any Person (other than the Borrower or any of its
     Subsidiaries). For purposes of this definition, any subsidiary or the
     assets of a business operation which, in each case, if separately counted
     would constitute a "significant subsidiary" within the meaning of Rule 1-02
     of Regulation S-X promulgated by the United States Securities and Exchange
     Commission shall be deemed to constitute a "substantial part of the assets"
     of the Borrower and its Subsidiaries, taken as a whole.

               "MATERIAL SUBSIDIARY": a Subsidiary, including its subsidiaries,
     which meets any of the following conditions:

                       (i)    the Borrower's and its Subsidiaries' other
               investments in and advances to the Subsidiary exceed 15 percent
               of the total assets of the Borrower and its Subsidiaries as of
               the end of the most recently completed fiscal year (for a
               proposed business combination to be accounted for as a pooling of
               interests, this condition is also met when the number of common
               shares exchanged or to be exchanged by the Borrower exceeds 15
               percent of its total common shares outstanding at the date the
               combination is initiated); or

                       (ii)   the Borrower's and its other Subsidiaries'
               proportionate share of the total assets (after intercompany
               eliminations) of the subsidiary exceeds 15 percent of the total
               assets of the Borrower and its Subsidiaries consolidated as of
               the end of the most recently completed fiscal year; or

                       (iii)  the Borrower's and its other Subsidiaries' equity
               in the income from continuing operations before income taxes,
               extraordinary items and cumulative effect of a change in
               accounting principle of the Subsidiary exceeds 15 percent of such
               income of the Borrower and its Subsidiaries consolidated for the
               most recently completed fiscal year.

               "MODIFICATION": as defined in SECTION 9.1.

               "MOODY'S": Moody's Investors Service, Inc. or any successor to
     the rating agency business thereof.

               "MOST RECENT FISCAL QUARTER": as of any date of determination,
     the most recent fiscal quarter for which financial statements of the
     Borrower have been filed with the SEC or, in any event, if such date of
     determination occurs 45 or more days after the end of the most recent
     fiscal quarter, the most recent fiscal quarter ending prior to such date of
     determination.

               "MOST RECENT RATIO OF CONSOLIDATED DEBT TO CONSOLIDATED EBITDA":
     at any date, the ratio of Consolidated Debt as of the end of the most
     recently ended fiscal quarter

                                     - 16 -


     of the Borrower for which financial statements have been delivered pursuant
     to SECTION 5.1 (after giving effect to all payments made on such date) to
     Consolidated EBITDA for the period of four consecutive fiscal quarters
     ending on the last day of the most recently ended fiscal quarter of the
     Borrower for which financial statements have been delivered pursuant to
     SECTION 5.1; PROVIDED, HOWEVER, that on the date of any Purchase, the "MOST
     RECENT RATIO OF CONSOLIDATED DEBT TO CONSOLIDATED EBITDA" shall be
     recalculated effective until the date of delivery of the next quarterly
     financial statements as the ratio of Consolidated Debt as of the date of
     any such Purchase (and after giving effect to any Indebtedness incurred or
     assumed in connection therewith) to Consolidated EBITDA for the four fiscal
     quarter period ending as of the most recently ended fiscal quarter for
     which financial statements have been delivered pursuant to SECTION 5.1
     (calculated on a PRO FORMA basis as set forth in the definition of
     Consolidated EBITDA after giving effect to the Purchase); PROVIDED,
     FURTHER, HOWEVER, that if the Borrower fails to deliver such financial
     statements as required by ARTICLE V and further fails to remedy such
     default within five days of notice thereof from the Administrative Agent,
     then, without prejudice to any other rights of any Lender hereunder, the
     "Most Recent Ratio of Consolidated Debt to Consolidated EBITDA" shall be
     deemed to be greater than 1.5 to 1.0 as of the date such financial
     statements were required to be delivered under SECTION 5.1.

               "MULTIEMPLOYER PLAN": any plan described in Section 4001(a)(3) of
     ERISA to which contributions are or, within the immediately preceding six
     years, have been made or required by the Borrower or any of its
     Subsidiaries or ERISA Affiliates.

               "NET PROCEEDS": the aggregate cash proceeds received from any
     Material Asset Disposition (including, without limitation, cash received by
     way of deferred payment pursuant to a note receivable, conversion of
     non-cash consideration, cash payments in respect of purchase price
     adjustments or otherwise, but only as and when such cash is received) by
     the Borrower or any Subsidiary minus the reasonable costs and expenses
     incurred in connection therewith and any provision for taxes in respect
     thereof made in accordance with GAAP.

               "NON-CONVERTIBLE CAPITAL STOCK": with respect to any corporation,
     any non-convertible Capital Stock of such corporation and any Capital Stock
     of such corporation convertible solely into non-convertible common stock of
     such corporation; PROVIDED, HOWEVER, that Non-Convertible Capital Stock
     shall not include any Redeemable Stock or Exchangeable Stock.

               "NON-EXCLUDED TAXES": any present or future taxes, levies,
     imposts, duties or other charges of whatever nature imposed, collected,
     withheld or assessed by any Governmental Authority other than franchise
     taxes and taxes based on, or measured by, net income imposed on the
     Administrative Agent, any Issuing Bank or any applicable Lender pursuant to
     the income or franchise tax laws of (i) the U.S., (ii) the jurisdiction of
     such Person's incorporation or organization, (iii) the jurisdiction where
     such Person's principal executive office or Lending Office is located or
     (iv) any political subdivision or taxing authority of any one of the
     foregoing.

               "NON-US PERSON": as defined in SECTION 2.18(c).

                                     - 17 -


               "NOTES": means, respectively (i) individually, each Revolving
     Note, Swing Line Note or Competitive Bid Note and (ii) collectively, all
     such promissory notes.

               "NOTICE OF BORROWING": means a request by the Borrower in the
     form of EXHIBIT 2.1(d).

               "OBLIGATIONS": all Loans, L/C Outstandings and other
     Indebtedness, advances, debts, liabilities, obligations, covenants and
     duties owing by any Loan Party to any Lender, any Issuing Bank, the
     Administrative Agent or any other Person required to be indemnified under
     any Loan Document, of any kind or nature, present or future, whether or not
     evidenced by any note, guaranty or other instrument, arising under this
     Agreement or under any other Loan Document, whether or not for the payment
     of money, whether arising by reason of an extension of credit, loan,
     guaranty, indemnification or in any other manner, whether direct or
     indirect (including those acquired by assignment), absolute or contingent,
     due or to become due, now existing or hereafter arising and however
     acquired.

               "OECD": the Organization for Economic Cooperation and
     Development.

               "PAYMENT OFFICE": the address for payments of Loans and
     reimbursement of Unpaid Drawings set forth on SCHEDULE 9.3 hereto in
     relation to the Administrative Agent, or such other address as
     Administrative Agent may from time to time specify in accordance with
     SECTION 9.3.

               "PBGC": the Pension Benefit Guaranty Corporation created by
     Section 4002(a) of ERISA or any successor thereto.

               "PERMITTED ENVIRONMENTAL GUARANTEE OBLIGATIONS": obligations of
     the Borrower with respect to letters of credit or other similar instruments
     issued in support of liabilities under Environmental Laws up to an
     aggregate face amount at any one time outstanding of $20,000,000.

               "PERMITTED INVESTMENTS": any of the following Investments:

                       (i)    any evidence of Indebtedness, maturing not more
               than three (3) years after the date of acquisition thereof,
               issued by the U.S., or an instrumentality or agency thereof and
               guaranteed fully as to principal, interest and premium, if any,
               by the U.S.;

                       (ii)   any certificate of deposit that is denominated in
               Dollars, maturing not more than three (3) years after the date of
               purchase, issued by a Lender or a commercial banking institution
               which is a member of the Federal Reserve System and which has a
               combined capital and surplus and undivided profits of not less
               than $200,000,000;

                       (iii)  commercial paper, maturing not more than two
               hundred seventy (270) days after the date of acquisition, issued
               by a corporation organized and existing under the laws of any
               State of the U.S. or the District of Columbia or

                                     - 18 -


               Canada, which is denominated in Dollars, with a rating, at the
               date of acquisition thereof, of "Prime-2" (or better) according
               to Moody's, or "A-2" (or better) according to S & P;

                       (iv)   asset-backed securities and/or mortgage-backed
               securities which have a maturity or for which the holder thereof
               has the right to put such securities not more than three years
               after the date of acquisition, which is denominated in Dollars,
               and which is rated, at the date of acquisition thereof, "Prime-2"
               (or better) according to Moody's, or "A-2" (or better) according
               to S&P.

                       (v)    securities of the type described in CLAUSES (i)
               THROUGH (iv), inclusive, above purchased under agreements to
               resell such securities to any broker/dealer or any commercial
               bank, if such broker/dealer or bank has an uninsured, unsecured
               and unguaranteed rating at the time of the acquisition of
               "Prime-2" (or better) according to Moody's, or "A-2" (or better)
               according to S & P;

                       (vi)   shares of mutual funds registered under the
               Investment Company Act of 1940, as amended, or collective trust
               funds maintained by commercial banks, in each case whose only
               assets are obligations of the type described in CLAUSES (i)
               THROUGH (v), inclusive, above;

                       (vii)  Intercompany Indebtedness and Intercompany
               Guaranties to the extent permitted by SECTION 6.2(a) and SECTION
               6.3(g);

                       (viii) Investments made solely as a result of mergers,
               acquisitions or consolidations permitted under SECTION 6.5;

                       (ix)   any purchase of all or a significant part of the
               assets of a business conducted by another Person which as a
               result of such Investment becomes a Wholly-Owned Subsidiary of
               the Borrower or, except as permitted under SECTION 6.5, any
               merger, consolidation or amalgamation with any other Person (any
               such purchase, Investment or merger a "PURCHASE"); PROVIDED,
               HOWEVER, that such a Purchase shall not be permitted unless, (i)
               after giving effect thereto on a PRO FORMA basis for the period
               (the "PRO FORMA PERIOD") of four fiscal quarters ending with the
               fiscal quarter for which financial statements have most recently
               been delivered (or were required to be delivered) under
               SECTION 5.1 (on the basis that (A) Indebtedness incurred or
               assumed in connection with such Purchase was incurred or assumed
               at the beginning of the Pro Forma Period, (B) if such
               Indebtedness bears interest at a floating rate, interest expense
               for the Pro Forma Period shall be calculated at the rate in
               effect on the date of such Purchase, and (C) all income and
               expenses associated with the assets or entity acquired in
               connection with such Purchase for the most recently ended four
               fiscal quarter period for which such income and expense amounts
               are available (with good faith estimates thereof being permitted
               if financial statements indicating such amounts are not
               available) shall be treated as being earned or incurred by
               Borrower over the Pro Forma Period on a PRO FORMA basis), no
               Event of Default or Unmatured

                                     - 19 -


               Event of Default would exist hereunder; (ii) the Borrower and its
               Subsidiaries have complied with the requirement of SECTION 5.1
               hereof with respect to any required execution of the Subsidiary
               Guarantee Agreement; and (iii) such Purchase has been approved by
               the board of directors of the Person to be acquired;

                       (x)    loans or advances to employees made in the
               ordinary course of business;

                       (xi)   Investments in overnight time deposits and
               Eurodollar deposits in branches or offices of banking
               institutions described in CLAUSE (ii) above;

                       (xii)  Investments in Subsidiaries;

                       (xiii) Investments in an aggregate amount at any time not
               to exceed $50,000,000 in any evidence of Indebtedness the
               interest on which is exempt from federal income taxation under
               the Code, of issuers with long-term debt ratings, at any date of
               determination, of "A2" (or better) according to Moody's or "A"
               (or better) according to S&P and/or auction rate preferred stock
               issued by a corporation or association organized and existing
               under the laws of any State of the U.S. or the District of
               Columbia, with a long-term debt rating, at any date of
               determination, of "A2" (or better) according to Moody's or "A"
               (or better) according to S&P;

                       (xiv)  loans to and Guarantee Obligations for the account
               of distributors made in the ordinary course of business in an
               amount as to each distributor not in excess of the greater of
               purchases for the preceding three months or projected three
               months of purchases;

                       (xv)   Investments made by Pearl City Insurance Company
               that would be Permitted Investments pursuant to clauses (i)
               through (x) above but for the maturity limitations set forth for
               any of such investments; and

                       (xvi)  Investments not otherwise permitted hereunder in
               an aggregate amount outstanding at any time outstanding not to
               exceed 15% of Consolidated Tangible Net Assets.

               "PERMITTED LIENS": any of the following Liens:

                       (i)           Liens for property taxes and assessments or
               governmental charges or levies and Liens securing claims or
               demands of mechanics and materialmen; PROVIDED, HOWEVER, payment
               thereof is not later than the time required by SECTION 5.5;

                       (ii)          Liens in an aggregate amount not to exceed
               $35,000,000 at any time of or resulting from any judgment or
               award, the time for the appeal or petition for rehearing of which
               shall not have expired, or in respect of which Borrower or a
               Subsidiary of Borrower shall at any time in good faith be

                                     - 20 -


               prosecuting an appeal or proceeding for a review and in respect
               of which a stay of execution pending such appeal or proceeding
               for review shall have been secured;

                       (iii)         Liens incidental to the conduct of business
               or the ownership of properties and assets (including Liens in
               connection with worker's compensation, unemployment insurance and
               other like laws, warehousemen's and attorneys' liens and
               statutory landlords' liens) and Liens to secure the performance
               of bids, tenders or trade contracts, or to secure statutory
               obligations, surety or appeal bonds or other Liens of like
               general nature incurred in the ordinary course of business and
               not in connection with the borrowing of money; PROVIDED, HOWEVER,
               in each case, the obligation secured is not overdue or, if
               overdue, is being contested in good faith by appropriate actions
               or proceedings;

                       (iv)          minor survey exceptions or minor
               encumbrances, easements or reservations, or rights of others for
               rights-of-way, utilities and other similar purposes, or zoning or
               other restrictions as to the use of real properties, which
               customarily exist on properties of corporations engaged in
               similar activities and similarly situated and which do not in any
               event materially impair their use in the operation of the
               business of Borrower and its Subsidiaries;

                       (v)           Liens securing Indebtedness of a Subsidiary
               of the Borrower to Borrower or to another Subsidiary of the
               Borrower;

                       (vi)          Liens existing as of the Closing Date and
               reflected on SCHEDULE 6.4 hereto and Liens incurred in connection
               with the refinancing of Indebtedness secured thereby so long as
               no such Lien extends to any property not subject thereto as of
               the Closing Date (other than improvements thereto or, if required
               by the terms of the document or instrument creating or governing
               such Lien as in effect on the Closing Date, additions thereto and
               replacements and substitutions therefor);

                       (vii)         customary rights of setoff, revocation,
               refund or chargeback under deposit agreements or under the UCC of
               banks or other financial institutions where the Borrower or its
               Subsidiaries maintain deposits in the ordinary course of
               business; and

                       (viii)        Liens not described in CLAUSES (i) THROUGH
               (vii); PROVIDED, HOWEVER, that the aggregate amount of
               Indebtedness secured by Liens permitted under this clause (viii),
               when added (without duplication) to (A) the aggregate amount of
               Indebtedness then outstanding and permitted under SECTION
               6.2(d),(B) the amount of Guarantee Obligations outstanding and
               permitted under SECTION 6.3(g), and (C) the aggregate amount of
               all Attributable Debt of Borrower and its Subsidiaries then
               outstanding, shall not exceed 15% of Consolidated Net Tangible
               Assets.

               "PERSON": an individual or a corporation, limited liability
     company, partnership, trust, incorporated or unincorporated association,
     joint venture, joint stock company,

                                     - 21 -


     government (or an agency or political subdivision thereof) or other entity
     of any kind provided; references to Persons include their respective
     permitted successors and assigns or, in the case of governmental Persons,
     Persons succeeding to the relevant functions of such persons.

               "PLAN": any plan described in Section 4021(a) of ERISA and not
     excluded pursuant to Section 4021(b) thereof, which may hereafter be or has
     been established or maintained, within the immediately preceding six years,
     or to which contributions are or, within the immediately preceding six
     years, have been made, by Borrower or any of its Subsidiaries or ERISA
     Affiliates, but not including any Multiemployer Plan.

               "PLAN ADMINISTRATOR": has the meaning assigned to the term
     "administrator" in Section 3(16)(A) of ERISA.

               "PLAN SPONSOR": has the meaning assigned to the term "plan
     sponsor" in Section 3(16)(B) of ERISA.

               "PRIME LENDING RATE": the rate which BT announces from time to
     time as its prime lending rate, base rate or equivalent, as in effect from
     time to time. The Prime Lending Rate is a reference rate and does not
     necessarily represent the lowest or best rate actually charged to any
     customer. Any Lender may make commercial loans or other loans at rates of
     interest at, above or below the Prime Lending Rate. The Prime Lending Rate
     shall change automatically and without notice from time to time as and when
     BT changes its prime lending rate, base rate or equivalent.

               "PRO FORMA PERIOD": as defined in CLAUSE (ix) of the definition
     of "PERMITTED INVESTMENTS".

               "PURCHASE": as defined in CLAUSE (ix) of the definition of
     "PERMITTED INVESTMENTS".

               "QUALIFIED ASSETS" as defined in SECTION 2.8(b).

               "REDEEMABLE STOCK": any Capital Stock that by its terms or
     otherwise is required to be redeemed on or prior to the first anniversary
     of the Termination Date (as the same may be extended pursuant to the terms
     hereof) or is redeemable at the option of the holder thereof at any time on
     or prior to the first anniversary of such Termination Date.

               "REFUNDED SWING LINE LOANS": as defined in SECTION 2.2(d).

               "REGISTER": as defined in SECTION 9.12.

               "REGULATION D", "REGULATION T", "REGULATION U" and "REGULATION
     X"; Regulations D, T, U and X, respectively, of the Board as from time to
     time in effect and any successor to all or a portion of any thereof.

                                     - 22 -


               "RELEASE": any release, spill, emission, leaking, pumping,
     pouring, emptying, dumping, injection, deposit, disposal, discharge,
     dispersal, escape, leaching or migration in violation of any Environmental
     Law into the indoor or outdoor environment or into or out of any property
     of the Borrower or its Subsidiaries or any location to which the Borrower
     or any Subsidiary has transported or arranged for the transportation of any
     Contaminant, including the movement of Contaminants through or in the air,
     soil, surface water, groundwater or property of the Borrower or its
     Subsidiaries, any adjacent property or any location to which the Borrower
     or any Subsidiary has transported or arranged for the transportation of any
     Contaminant.

               "REMEDIAL ACTION": actions required under applicable
     Environmental Laws to (i) clean up, remove, treat or in any other way
     address Contaminants in the indoor or outdoor environment, (ii) prevent or
     minimize the Release or threat of Release of Contaminants so they do not
     migrate or endanger or threaten to endanger public health or welfare or the
     indoor or outdoor environment; or (iii) perform pre-remedial or
     post-remedial studies and investigations and post-remedial monitoring and
     care or any other studies, reports or investigations relating to
     Contaminants.

               "REPORTABLE EVENT": a "reportable event" described in
     Section 4043(b) of ERISA unless notice of such event is not required by the
     regulations thereunder or receipt of a notice of withdrawal liability with
     respect to a Multiemployer Plan pursuant to Section 4202 of ERISA.

               "REQUEST FOR A LETTER OF CREDIT": as defined in SECTION 2.4(c).

               "REQUIREMENT OF LAW": as to any Person, any law (including common
     law), treaty, rule or regulation or determination of an arbitrator or a
     court or other Governmental Authority, including without limitation, any
     Environmental Law, in each case applicable to or binding upon such Person
     or any of its property or to which such Person or any of its property is
     subject.

               "REVOLVING COMMITMENT": as to any Lender, the obligation of such
     Lender to (a) make Revolving Loans to the Borrower, (b) participate in
     Swing Line Loans made to the Borrower, and (c) participate in Letters of
     Credit issued by the Issuing Banks on the application of the Borrower, in
     an aggregate principal and/or Stated Amount at any one time outstanding not
     to exceed the amount set forth opposite such Lender's name on SCHEDULE 1.1
     under the heading "REVOLVING COMMITMENT", as such amount may be increased
     or reduced from time to time in accordance with the terms hereof.

               "REVOLVING LOANS": as defined in SECTION 2.1(a).

               "REVOLVING NOTE": as defined in SECTION 2.1(c).

               "SALE AND LEASEBACK TRANSACTION": any arrangement, directly or
     indirectly, with any Person whereby a seller or transferor shall sell or
     otherwise transfer any real or personal property and then or thereafter
     lease, or repurchase under an extended purchase contract, conditional sales
     or other title retention agreement, the same or similar property.

                                     - 23 -


               "S&P": Standard & Poor's Ratings Services, a division of the
     McGraw Hill Companies, Inc. or any successor to the rating agency business
     thereof.

               "SEC": as defined in SECTION 5.2(d).

               "STATE": any state of the United States, the District of
     Columbia, and the Commonwealth of Puerto Rico.

               "STATED AMOUNT": with respect to any Letter of Credit as of any
     date of determination, the maximum amount available to be drawn thereunder
     in accordance with its terms (assuming compliance by the drawer with such
     terms).

               "STATUS": as to the Borrower, the existence of Level I Status,
     Level II Status, or Level III Status, as the case may be.

               "SUBSIDIARY": as to any Person, any corporation of which at least
     a majority of the outstanding stock having by the terms thereof ordinary
     voting power to elect a majority of the board of directors of such
     corporation (irrespective of whether or not at the time stock of any other
     class or classes of such corporation shall have or might have voting power
     by reason of the happening of any contingency) is at the time owned by such
     Person, or by one or more Subsidiaries, or by such Person and one or more
     Subsidiaries. Unless otherwise qualified, all references to a "Subsidiary"
     or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
     Subsidiaries of Borrower.

               "SUBSIDIARY GUARANTEE AGREEMENT": the Subsidiary Guarantee
     Agreement in substantially the form of EXHIBIT 1.1 hereto, dated as of the
     date hereof, made by the Subsidiary Guarantors in favor of the
     beneficiaries named therein, as the same may be amended, supplemented or
     otherwise modified from time to time in accordance with its terms and the
     terms hereof.

               "SUBSIDIARY GUARANTOR": individually, each of the Subsidiaries of
     the Borrower identified on SCHEDULE 3.5 as a Material Subsidiary signatory
     to the Subsidiary Guarantee Agreement and such other Material Subsidiaries
     from time to time party to such Agreement and collectively, all of such
     Material Subsidiaries.

               "SWING LINE COMMITMENT": of the Swing Line Lender at any date,
     the obligation of the Swing Line Lender to make Swing Line Loans pursuant
     to SECTION 2.2 in the amount referred to therein.

               "SWING LINE LENDER": BT.

               "SWING LINE LOANS": as defined in SECTION 2.2(a).

               "SWING LINE LOAN PARTICIPATION CERTIFICATE": a certificate,
     substantially in the form of EXHIBIT 2.2(e).

               "SWING LINE NOTE": as defined in SECTION 2.2(b).

                                     - 24 -


               "SYNDICATION DATE": as defined in the preamble.

               "SYNDICATION DATE": as defined in SECTION 2.1(b).

               "TERMINATION DATE": the earlier to occur of

               (a)     May 10, 2006, subject to any extension pursuant to
     SECTION 2.5 hereof; and

               (b)     the date on which the Revolving Commitments shall
     otherwise terminate in accordance with the provisions of this Agreement.

               "TERMINATION EVENT" means (i) a Reportable Event (other than a
     Reportable Event not subject to the provisions for 30-day notice to the
     PBGC under such regulations), or (ii) the withdrawal of the Borrower or any
     of its ERISA Affiliates from a Plan during a plan year in which it was a
     "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii)
     the filing of a notice of intent to terminate a Plan in a distress
     termination under Section 4041 of ERISA, or (iv) the institution of
     proceedings to terminate a Plan by the PBGC, or (v) any other event or
     condition which might constitute grounds under Section 4042 of ERISA for
     the involuntary termination of, or the appointment of a trustee to
     administer, any Plan, or (vi) the imposition of liability of Borrower or
     any of its ERISA Affiliates pursuant to Sections 4064 or 4069 of ERISA,
     which, in the case of any event described in clauses (i) through (vi)
     above, would cause the sum of the Borrower's and its ERISA Affiliates'
     liabilities (after giving effect to the tax consequences thereof) resulting
     from or otherwise associated with such event to exceed $10,000,000.

               "TRANSACTION": shall mean and include each of the Borrowings
     occurring on the Closing Date, the Existing Credit Facility Refinancing,
     and the payment of fees and expenses in connection with the foregoing.

               "TYPE": as to any Loan, its nature as a Base Rate Loan or a
     Eurodollar Loan, and as to any Competitive Loan, its nature as a Eurodollar
     Competitive Loan or a Fixed Rate Competitive Loan.

               "UNMATURED EVENT OF DEFAULT": an event, act, condition or
     occurrence which with the giving of notice or the lapse of time (or both)
     would become an Event of Default.

               "UNMATURED BANKRUPTCY EVENT OF DEFAULT": an event, act, condition
     or occurrence which with the giving of notice or the lapse of time (or
     both) would become a Bankruptcy Event of Default.

               "UNPAID DRAWING" has the meaning set forth in SECTION 2.4(e).

               "U.S.": the United States of America, its territories, its
     possessions and all other areas subject to its jurisdiction.

                                     - 25 -


               "VOTING SECURITIES": any class of Capital Stock of a Person
     pursuant to which the holders thereof have, at the time of determination,
     the general voting power under ordinary circumstances to vote for the
     election of directors, managers, trustees or general partners of such
     Person (irrespective of whether or not at the time any other class or
     classes will have or might have voting power by reason of the happening of
     any contingency).

               "WHOLLY-OWNED SUBSIDIARY": with respect to any Person, any
     Subsidiary of such Person, all of the outstanding shares of capital stock
     of which (other than qualifying shares required to be owned by directors)
     are at the time owned directly or indirectly by such Person and/or one or
     more Wholly-Owned Subsidiaries of such Person; PROVIDED, HOWEVER, that if
     (i) all of the outstanding shares of capital stock of Hearth-Tech cease to
     be owned by the Borrower and one or more Wholly-Owned Subsidiaries of the
     Borrower solely because of the issuance by Hearth-Tech of capital stock as
     permitted by SECTION 6.8, and (ii) Hearth-Tech remains consolidated with
     the Borrower for financial purposes in accordance with GAAP, Hearth-Tech
     and each of its Wholly-Owned Subsidiaries shall be deemed to be a
     Wholly-Owned Subsidiary of the Borrower.

               "WITHDRAWAL LIABILITY": liability to a Multiemployer Plan as a
     result of a complete or partial withdrawal from such Multiemployer Plan, as
     such terms are defined in Part I of Subtitle E of Title IV of ERISA.

               "WRITTEN" or "IN WRITING": any form of written communication or a
     communication by means of a telecopier device or authenticated telex,
     telegraph or cable.

     1.2.      ACCOUNTING TERMS, FINANCIAL STATEMENTS.

     All accounting terms used herein shall have the respective meanings given
to them in accordance with GAAP, unless otherwise provided herein. All
computations and determinations for purposes of determining compliance with the
financial requirements of this Agreement shall be made in accordance with GAAP,
unless otherwise provided herein.

     1.3.      OTHER DEFINITIONAL TERMS.

     The words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Article, Section, Recital,
Schedule, Exhibit and like references are to this Agreement unless otherwise
specified.

                         II. AMOUNT AND TERMS OF CREDITS

     2.1.      REVOLVING CREDIT BORROWINGS.

     (a)       Revolving Commitments.

     Subject to the terms and conditions hereof, each Lender having a Revolving
Commitment hereunder severally agrees to make revolving loans in Dollars
("REVOLVING LOANS") to the Borrower from time to time during the Commitment
Period in an aggregate principal amount at

                                     - 26 -


any one time outstanding which, when added to such Lender's Commitment
Percentage of the Exposure Amount to be outstanding immediately after giving
effect to the use of proceeds of such Revolving Loans, does not exceed the
amount of such Lender's Revolving Commitment. During the Commitment Period, the
Borrower may use the Revolving Commitments by borrowing, repaying and, to the
extent permitted, prepaying the Revolving Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
Notwithstanding anything to the contrary contained in this Agreement, in no
event (after giving effect to the use of proceeds of any Borrowing) shall (i)
any Lender's Commitment Percentage of a Borrowing of Revolving Loans exceed such
Lender's Available Revolving Commitment at the time of such Borrowing or (ii)
the aggregate Exposure Amount at any one time outstanding exceed the Aggregate
Revolving Commitments of all Lenders then in effect.

     (b)       REVOLVING LOANS. The Revolving Loans may from time to time be (i)
Eurodollar Revolving Loans, (ii) Base Rate Loans, or (iii) a combination
thereof, as determined by the Borrower and notified to the Administrative Agent
in accordance with SECTIONS 2.1(d) AND 2.12; PROVIDED, HOWEVER, that no
Revolving Loan shall be made as a Eurodollar Revolving Loan after the day that
is one month prior to the Termination Date and that no Revolving Loan maintained
as a Eurodollar Revolving Loan having an Interest Period greater than one month
may be incurred prior to the earlier of (1) the 30th day after the Closing Date
or (2) that date upon which the Syndication Agent determines in its sole
discretion (and notifies the Borrower) that the primary syndication has been
completed, (the "SYNDICATION DATE").

     (c)       REVOLVING NOTES. The Revolving Loans made by each Lender shall be
evidenced by a promissory note of the Borrower, substantially in the form of
EXHIBIT 2.1(c), with appropriate insertions as to payee, date and principal
amount (a "REVOLVING NOTE"), payable to the order of such Lender and in a
principal amount equal to the lesser of (i) the amount of the initial Revolving
Commitment of such Lender and (ii) the aggregate unpaid principal amount of all
Revolving Loans made by such Lender. Each Lender is hereby authorized to record
the date, Type and amount of each Revolving Loan made by such Lender, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Revolving Loans, the length of each Interest
Period with respect thereto, on the schedule annexed to and constituting a part
of its Revolving Note (or otherwise on the records of such Lender), and any such
recordation shall (in the absence of manifest error) constitute prima facie
evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that
the failure of a Lender to make any such recordation on its Revolving Note shall
not affect the obligations of the Borrower thereunder or under this Agreement.
Each Revolving Note shall (x) be dated the date hereof, (y) be stated to mature
on the Termination Date and (z) provide for the payment of interest in
accordance with SECTION 2.9.

     (d)       PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may borrow
Revolving Loans under the Revolving Commitments during the Commitment Period on
any Business Day; PROVIDED, HOWEVER, that Borrower shall give the Administrative
Agent irrevocable Notice of Borrowing (which Notice of Borrowing must be
received by the Administrative Agent (a) prior to 12:00 Noon, New York City
time, three Business Days prior to the requested borrowing date, if all or any
part of the requested Revolving Loans are to be Eurodollar Revolving Loans, or
(b) prior to 10:00 A.M., New York City time, on the requested borrowing date
with respect to Base Rate Borrowings), specifying (i) the amount to be borrowed,
(ii) the

                                     - 27 -


requested borrowing date, (iii) whether the Borrowing is to be of Eurodollar
Revolving Loans, Base Rate Loans, or a combination thereof and (iv) if the
Borrowing is to be entirely or partly of Eurodollar Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor (such notice to be promptly confirmed in writing if
given telephonically). Each Borrowing under the Revolving Commitments shall be
in an amount equal to (x) in the case of Base Rate Loans, $5,000,000 or a whole
multiple of $1,000,000 in excess thereof (or, if the then aggregate Available
Revolving Commitments are less than $5,000,000, such lesser amount) and (y) in
the case of Eurodollar Revolving Loans, $5,000,000 or a whole multiple of
$1,000,000 in excess thereof; PROVIDED, HOWEVER, that any Borrowing of Revolving
Loans to be used solely to pay the aggregate amount of Swing Line Loans then
outstanding may be in the aggregate principal amount of such Swing Line Loans.
Upon receipt of any such Notice of Borrowing from the Borrower, the
Administrative Agent shall promptly notify each Lender thereof. More than one
Borrowing may be incurred on any date. At no time shall there be outstanding
more than five (5) Borrowings of Eurodollar Revolving Loans. Each Lender will
make the amount of its Commitment Percentage of each Borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in SCHEDULE 9.3 prior to 12:00 Noon, New York
City time, on the borrowing date requested in accordance with the provisions of
this SECTION 2.1(d) by the Borrower in funds immediately available to the
Administrative Agent. Such Borrowing will then (on the same borrowing date) be
made available to the Borrower by the Administrative Agent's crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent.

     2.2.      SWING LINE BORROWINGS.

     (a)       SWING LINE COMMITMENT. Subject to the terms and conditions
hereof, the Swing Line Lender in its individual capacity agrees to make swing
line loans in Dollars ("SWING LINE LOANS") to the Borrower on any Business Day
from time to time during the Commitment Period in an aggregate principal amount
at any one time outstanding not to exceed $10,000,000; PROVIDED, HOWEVER, that
in no event may the amount of any Borrowing of Swing Line Loans (i) exceed the
aggregate Available Revolving Commitments of all Lenders immediately prior to
such Borrowing (after giving effect to the use of proceeds thereof) or (ii)
cause the outstanding Revolving Loans of any Lender, when added to such Lender's
Commitment Percentage of the then outstanding Swing Line Loans (after giving
effect to the use of proceeds of such Swing Line Loans) to exceed such Lender's
Revolving Commitment. Amounts borrowed by the Borrower under this SECTION 2.2
may be repaid and, to but excluding the Termination Date, reborrowed.

     (b)       SWING LINE NOTE. The Swing Line Loans shall be evidenced by a
promissory note of the Borrower substantially in the form of EXHIBIT 2.2(b),
with appropriate insertions (the "SWING LINE NOTE"), payable to the order of the
Swing Line Lender and representing the obligation of the Borrower to pay the
aggregate unpaid principal amount of the Swing Line Loans, with interest thereon
as prescribed in SECTION 2.9(a). The Swing Line Lender is hereby authorized to
record the borrowing date, the amount of each Swing Line Loan and the date and
amount of each payment or prepayment of principal thereof, on the schedule
annexed to and constituting a part of the Swing Line Note (or otherwise on the
records of the Swing Line Lender) and, in the absence of manifest error, any
such recordation shall constitute PRIMA FACIE

                                     - 28 -


evidence of the accuracy of the information so recorded; PROVIDED, HOWEVER, that
the failure of the Swing Line Lender to make such recordation (or any error in
such recordation) shall not affect the obligations of the Borrower hereunder or
under the Swing Line Note. The Swing Line Note shall (a) be dated the date
hereof, (b) be stated to mature on the Termination Date and (c) bear interest
for the period from the Closing Date on the unpaid principal amount thereof from
time to time outstanding at the applicable interest rate per annum determined as
provided in, and payable as specified in, SECTION 2.9(a).

     (c)       PROCEDURE FOR SWING LINE BORROWING. The Swing Line Loans shall be
made and maintained as Base Rate Loans and, notwithstanding SECTION 2.12, shall
not be entitled to be converted into any other Type of Loan. The Borrower shall
give the Swing Line Lender irrevocable Notice of Borrowing (which Notice of
Borrowing must be received by the Swing Line Lender prior to 12:00 Noon, New
York City time), on the requested borrowing date (which shall be a Business Day)
specifying the amount of each requested Swing Line Loan, which shall be in a
minimum amount of $1,000,000 or a multiple thereof (such notice to be promptly
confirmed in writing if given telephonically). Upon receipt of any such Notice
of Borrowing from the Borrower, the Administrative Agent shall promptly notify
the Swing Line Lender thereof. The proceeds of each Swing Line Loan will then
(on the requested borrowing date) be made available to the Borrower by the Swing
Line Lender by crediting the account of the Borrower on the books of the office
of the Swing Line Lender specified in SCHEDULE 9.3 with such proceeds.

     (d)       REFUNDING OF SWING LINE LOANS. The Swing Line Lender, at any time
in its sole and absolute discretion, may on behalf of the Borrower (which hereby
irrevocably directs the Swing Line Lender to so act on its behalf) request each
Lender (including the Swing Line Lender) to make a Revolving Loan in an amount
equal to such Lender's Commitment Percentage of the principal amount of the
Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date such
Notice of Borrowing is given; PROVIDED, HOWEVER, that such notice shall be
deemed to have automatically been given upon the occurrence of a Bankruptcy
Event of Default. Unless a Bankruptcy Event of Default shall have occurred (in
which event the procedures of SECTION 2.2(e) shall apply) and regardless of
whether the conditions precedent set forth in this Agreement to the making of a
Revolving Loan are then satisfied, each Lender shall make the proceeds of its
Revolving Loan available to the Swing Line Lender at its office specified in
SCHEDULE 9.3 prior to 11:00 A.M., New York City time, in funds immediately
available on the Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Loans shall be immediately applied to repay the
Refunded Swing Line Loans.

     (e)       PARTICIPATION IN SWING LINE LOANS. If, prior to the making of a
Revolving Loan pursuant to SECTION 2.2(d), a Bankruptcy Event of Default shall
have occurred or if for any other reason a Revolving Loan cannot be made
pursuant to SECTION 2.2(d), then, subject to the provisions of SECTION 2.2(f)
below, each Lender will, on the date such Revolving Loan was to have been made,
purchase (without recourse or warranty) from the Swing Line Lender an undivided
participating interest in the Refunded Swing Line Loan in an amount equal to its
Commitment Percentage of such Refunded Swing Line Loan. Upon request, each
Lender will immediately transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation and upon receipt thereof the
Swing Line Lender will deliver to such Lender a

                                     - 29 -


Swing Line Loan Participation Certificate dated the date of receipt of such
funds and in such amount.

     (f)       LENDERS' OBLIGATIONS UNCONDITIONAL. Each Lender's obligation to
make Revolving Loans in accordance with SECTION 2.2(d) and to purchase
participating interests in accordance with SECTION 2.2(e) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Borrower or any
other Person for any reason whatsoever; (ii) the occurrence or continuance of
any Event of Default or Unmatured Event of Default; (iii) any adverse change in
the condition (financial or otherwise) of the Borrower or any other Person; (iv)
any breach of this Agreement by the Borrower or any other Person; (v) any
inability of the Borrower to satisfy the conditions precedent to borrowing set
forth in this Agreement on the date upon which such participating interest is to
be purchased or (vi) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. If any Lender does not make
available to the Swing Line Lender the amount required pursuant to SECTION
2.2(d) OR 2.2(e) above, as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Lender, together with
interest thereon for each day from the date of non-payment until such amount is
paid in full at the Federal Funds Effective Rate for the first two Business Days
and at the Base Rate thereafter. Notwithstanding the foregoing provisions of
this SECTION 2.2(f), no Lender shall be required to make a Revolving Loan to the
Borrower for the purpose of refunding a Swing Line Loan pursuant to SECTION
2.2(d) above or to purchase a participating interest in a Swing Line Loan
pursuant to SECTION 2.2(e) above if an Event of Default or Unmatured Event of
Default has occurred and is continuing and, prior to the making by the Swing
Line Lender of such Swing Line Loan, the Swing Line Lender has received written
notice from such Lender specifying that such Event of Default or Unmatured Event
of Default has occurred and is continuing, describing the nature thereof and
stating that, as a result thereof, such Lender shall cease to make such Refunded
Swing Line Loans and purchase such participating interests, as the case may be;
PROVIDED, HOWEVER, that the obligation of such Lender to make such Refunded
Swing Line Loans and to purchase such participating interests shall be
reinstated upon the earlier to occur of (i) the date upon which such Lender
notifies the Swing Line Lender that its prior notice has been withdrawn and (ii)
the date upon which the Event of Default or Unmatured Event of Default specified
in such notice no longer is continuing in accordance with the terms hereof.

     2.3.      COMPETITIVE BORROWINGS.

     (a)       The Competitive Bid Option. In addition to the Revolving Loans
which may be made available pursuant to Section 2.1, the Borrower may, as set
forth in this Section 2.3, request the Competitive Bid Lenders to make offers to
make Competitive Loans in Dollars to the Borrower during the Commitment Period;
PROVIDED, HOWEVER, that at no time shall the aggregate amount of Competitive
Loans exceed 50% of the Aggregate Revolving Commitments; PROVIDED, FURTHER, that
at no time shall the aggregate Exposure Amount exceed the Aggregate Revolving
Commitments then in effect. The Lenders may, but shall have no obligation to,
make such offers, and the Borrower may, but shall have no obligation to, accept
any such offers in the manner set forth in this Section 2.3. Upon the request of
any Competitive Bid Lender, the Borrower shall execute and deliver a promissory
note with respect to Competitive Loans to be made by such Lender, substantially
in the form of EXHIBIT 2.3(a) with appropriate insertions as

                                     - 30 -


to payee and date (a "Competitive Bid Note") payable to the order of such Lender
and in a principal amount equal to the aggregate unpaid principal amount of all
Competitive Loans, if any, made by such Lender.

     (b)       COMPETITIVE BID REQUEST. When the Borrower wishes to request
offers to make Competitive Loans under this SECTION 2.3, it shall transmit to
the Administrative Agent a Competitive Bid Request to be received no later than
12:00 Noon (New York City time) on (x) the fourth Business Day prior to the
requested date of borrowing in the case of a Borrowing of Eurodollar Competitive
Loans or (y) the second Business Day prior to the requested date of borrowing in
the case of a Borrowing of Fixed Rate Competitive Loans, specifying:

               (i)     the proposed date of Borrowing, which shall be a Business
     Day,

               (ii)    the aggregate principal amount of such Borrowing, which
     shall be $20,000,000 or a multiple of $5,000,000 in excess thereof,

               (iii)   whether the Borrowing then being requested is to be of
     Eurodollar Competitive Loans or Fixed Rate Competitive Loans or some
     combination thereof, and

               (iv)    the duration of the Interest Period applicable thereto,
     subject to the provisions of the definition of "INTEREST PERIOD" contained
     in SECTION 1.1.

A Competitive Bid Request that does not conform substantially to the format of
EXHIBIT 2.3(b) may be rejected by the Administrative Agent in its sole
discretion, and the Administrative Agent shall promptly notify the Borrower of
such rejection. The Borrower may request offers to make Competitive Loans for
more than one Interest Period in a single Competitive Bid Request. No
Competitive Bid Request shall be given within three Business Days of any other
Competitive Bid Request.

     (c)       INVITATION FOR COMPETITIVE BIDS. Promptly after its receipt of a
Competitive Bid Request (but, in any event, no later than 3:00 P.M. (New York
City time), on the date of the Administrative Agent's receipt of such
Competitive Bid Request, conforming to the requirements of SECTION 2.3(b) above,
the Administrative Agent shall send to each of the Competitive Bid Lenders an
Invitation for Competitive Bids which shall constitute an invitation by the
Borrower to each such Lender to bid, on the terms and conditions of this
Agreement to make Competitive Loans pursuant to the Competitive Bid Request;
PROVIDED, HOWEVER, that unless such Competitive Bid Lender or any Affiliate of
such Lender has Revolving Loans or a Revolving Commitment hereunder, such
Competitive Bid Lender shall not be eligible to participate in competitive
bidding hereunder.

     (d)       Submission and Contents of Competitive Bids.

               (i)     Each Lender to which an Invitation for Competitive Bids
     is sent may submit a Competitive Bid containing an offer or offers to make
     Competitive Loans in response to such Invitation for Competitive Bids. Each
     Competitive Bid must comply with the requirements of this SECTION 2.3(d)
     and must be submitted to the Administrative Agent at its offices specified
     in SCHEDULE 9.3 not later than 11:00 A.M. (New York City time) on (x) the
     third Business Day prior to the requested date of borrowing in the case of

                                     - 31 -


     a Borrowing of Eurodollar Competitive Loans, or (y) one Business Day prior
     to the requested date of borrowing in the case of a Borrowing of Fixed Rate
     Competitive Loans; PROVIDED, HOWEVER, that any Competitive Bids submitted
     by the Administrative Agent in the capacity of a Lender may only be
     submitted if the Administrative Agent notifies Borrower of the terms of the
     offer or offers contained therein not later than fifteen minutes prior to
     the deadline for the other Lenders. A Competitive Bid submitted by a Lender
     pursuant to this SECTION 2.3(d) shall be irrevocable.

               (ii)    Each Competitive Bid shall be in substantially the form
     of EXHIBIT 2.3(d) and shall specify:

                       (A)    the date of the proposed Borrowing,

                       (B)    the principal amount of the Competitive Loan for
               which each such offer is being made, which principal amount (w)
               may be greater than, equal to or less than, the Revolving
               Commitment of the quoting Lender, (x) must be in a minimum
               principal amount of $1,000,000 or a multiple of $1,000,000 in
               excess thereof, (y) may not exceed the principal amount of
               Competitive Loans for which offers were requested and (z) if more
               than one offer is quoted by such Lender, may be subject to a
               limitation as to the maximum aggregate principal amount of
               Competitive Loans for which offers being made by such quoting
               Lender may be accepted,

                       (C)    in the case of a Borrowing of Eurodollar
               Competitive Loans, the Margin offered for each such Competitive
               Loan, expressed as a percentage (specified in increments of
               1/1,000th of 1%) to be added to or subtracted from such base
               rate, which margin shall include the incremental rate, if any,
               necessary to compensate such Lender for any then applicable
               reserve or other similar requirements,

                       (D)    in the case of a Borrowing of Fixed Rate
               Competitive Loans, the rate of interest per annum (specified in
               increments of 1/1,000th of 1%) offered for each such Competitive
               Loan, and

                       (E)    the identity of the quoting Lender.

A Competitive Bid may set forth up to five separate offers by the quoting Lender
with respect to each Interest Period specified in the related Invitation for
Competitive Bids. Any Competitive Bid shall be disregarded by the Administrative
Agent if the Administrative Agent determines that it: (A) is not substantially
in the form of EXHIBIT 2.3(d) or does not specify all of the information
required by SECTION 2.3(d)(ii); (B) contains qualifying, conditional or similar
language (except for a limitation on the maximum principal amount which may be
accepted); (C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Competitive Bids or (D) arrives after the time set
forth in SECTION 2.3(d)(i).

     (e)       NOTICE TO BORROWER. The Administrative Agent shall promptly (and,
in any event, by 11:30 A.M. (New York City time) on the date of receipt of
Competitive Bids notify the Borrower, by telecopy, of all the Competitive Bids
made, the Competitive Bid Rate and the

                                     - 32 -


principal amount of each Competitive Loan in respect of which a Competitive Bid
was made and the identity of the Lender that made each bid. The Administrative
Agent shall send a copy of all Competitive Bids to the Borrower for its records
as soon as practicable after completion of the bidding process set forth in this
SECTION 2.3.

     (f)       ACCEPTANCE AND NOTICE BY BORROWER. The Borrower may in its sole
discretion, subject only to the provisions of this SECTION 2.3(f), accept or
reject any Competitive Bid referred to in SECTION 2.3(e) above. The Borrower
shall notify the Administrative Agent by telephone, confirmed immediately
thereafter by telecopy in the form of a Competitive Bid Accept/Reject Letter,
whether and to what extent it wishes to accept any or all of the bids referred
to in paragraph (e) above not later than (x) 1:00 P.M. (New York City time), on
(x) the third Business Day prior to the requested date of borrowing in the case
of a Borrowing of Eurodollar Competitive Loans, or (y) one Business Day prior to
the requested date of borrowing in the case of a Borrowing of Fixed Rate
Competitive Loans; PROVIDED, HOWEVER, that:

               (i)     the failure by the Borrower to give such notice shall be
     deemed to be a rejection of all the bids referred to in SECTION 2.3(e)
     above;

               (ii)    the aggregate principal amount of the Competitive Bids
     accepted by the Borrower may not exceed the lesser of (A) the principal
     amount set forth in the related Competitive Bid Request and (B) the excess,
     if any, of the aggregate Revolving Commitments of all Lenders then in
     effect over the aggregate principal amount of all Loans outstanding
     immediately prior to the making of such Competitive Loans (after giving
     effect to the use of proceeds thereof),

               (iii)   the principal amount of each Competitive Borrowing must
     be $20,000,000 or a whole multiple of $5,000,000 in excess thereof,

               (iv)    unless there are any limitations contained in a quoting
     Lender's Competitive Bid, the Borrower may not accept a Competitive Bid
     made at a particular Competitive Bid Rate if it has decided to reject any
     portion of a bid made at a lower Competitive Bid Rate for the same Interest
     Period, and

               (v)     the Borrower may not accept any Competitive Bid that is
     disregarded by the Administrative Agent pursuant to SECTION 2.3(d) (ii) or
     that otherwise fails to comply with the requirements of this Agreement.

A notice given by the Borrower pursuant to this SECTION 2.3(f) shall be
irrevocable.

     (g)       ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two or
more Lenders with the same Competitive Bid Rates for a greater aggregate
principal amount than the amount in respect of which such offers are accepted
for the related Interest Period, the principal amount of Competitive Loans in
respect of which such offers are accepted shall be allocated by the
Administrative Agent among such Lenders as nearly as possible (in integral
multiples of $1,000,000), as the Administrative Agent may deem appropriate in
proportion to the aggregate principal amounts of such offers.

                                     - 33 -


     (h)       NOTIFICATION OF ACCEPTANCE. The Administrative Agent shall
promptly (and, in any event, by 2:00 P.M. (New York City time) on the date of
receipt of the Competitive Bid Accept/Reject Letter notify each bidding Lender
whether or not its Competitive Bid has been accepted (and if so, in what amount
and at what Competitive Bid Rate), and each successful bidder will thereupon
become bound, subject to the other applicable conditions hereof, to make the
Competitive Loan in respect of which its bid has been accepted.

     (i)       FUNDING OF THE COMPETITIVE LOANS. Each Lender that has received
notice pursuant to SECTION 2.3(h) that its Competitive Bid has been accepted
shall make the amounts of such Loans available to the Administrative Agent for
the account of the Borrower at the Administrative Agent's Payment Office by
12:00 Noon (New York City time) on such date of Borrowing, by payment in funds
immediately available to and freely transferable to the Administrative Agent.
Unless any applicable condition specified in ARTICLE IV has not been satisfied,
the proceeds of all such Loans will then (on the same borrowing date) be made
available to the Borrower by the Administrative Agent at such office by
crediting the account of the Borrower with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.

     (j)       NO ADDITIONAL RIGHTS. Nothing in this SECTION 2.3 shall be
construed as a right of first offer in favor of the Lenders or otherwise to
limit the ability of the Borrower to request and accept any other credit
facilities from any Person (including any of the Lenders); PROVIDED, HOWEVER,
that no Event of Default or Unmatured Event of Default would otherwise arise or
exist as a result of the Borrower executing, delivering or performing under such
other credit facilities.

     (k)       REDUCTION OF AVAILABLE REVOLVING COMMITMENTS. Each outstanding
Competitive Loan shall reduce PRO TANTO the aggregate Available Revolving
Commitment of all the Lenders, but shall not otherwise reduce or affect the
Available Revolving Commitment or Commitment Percentage of any Lender which
makes a Competitive Loan.

     2.4.      LETTERS OF CREDIT.

     (a)       General Provisions Relating to Letters of Credit

               (i)     Subject to and upon the terms and conditions set forth
     herein, the Borrower may request that either Issuing Bank (such
     determination to be made in the Borrower's sole discretion) issue, at any
     time and from time to time on and after the Closing Date and prior to the
     30th day prior to the Termination Date, for the account of the Borrower, an
     irrevocable standby or direct-pay letter of credit, in a form customarily
     used by such Issuing Bank or in such other form as is reasonably acceptable
     to such Issuing Bank (each such letter of credit, a "LETTER OF CREDIT" and,
     collectively, the "LETTERS OF CREDIT"). All Letters of Credit shall be
     denominated in Dollars and shall be issued on a sight basis only. SCHEDULE
     2.4 contains a description of all letters of credit which were issued by
     the Northern Trust Company and outstanding for the account of the Borrower
     on the Closing Date (each such letter of credit an "EXISTING LETTER OF
     CREDIT"). Subject to the terms and conditions hereof, each Existing Letter
     of Credit shall be deemed to be a Letter of Credit issued hereunder. At any
     time the Borrower needs a letter of credit, it shall first request a Letter
     of Credit to be issued hereunder, unless the

                                     - 34 -


     Borrower shall not be in compliance with SECTION 2.4(b)(i) as a result of
     the issuance of such Letter of Credit.

               (ii)    Subject to and upon the terms and conditions set forth
     herein, each Issuing Bank agrees that it will, at any time and from time to
     time on and after the Closing Date and prior to the 30th day prior to the
     Termination Date, following its receipt of a Request for Letter of Credit,
     issue for account of the Borrower, one or more Letters of Credit as are
     permitted to remain outstanding hereunder without giving rise to an Event
     of Default or an Unmatured Event of Default, PROVIDED that an Issuing Bank
     shall not be under any obligation to issue any Letter of Credit if at the
     time of such issuance:

                       (1)    any order, judgment or decree of any governmental
               authority or arbitrator shall purport by its terms to enjoin or
               restrain such Issuing Bank from issuing such Letter of Credit or
               any Requirement of Law applicable to such Issuing Bank or any
               request or directive (whether or not having the force of law)
               from any governmental authority with jurisdiction over such
               Issuing Bank shall prohibit, or request that such Issuing Bank
               refrain from, the issuance of letters of credit generally or such
               Letter of Credit in particular or shall impose upon such Issuing
               Bank with respect to such Letter of Credit any restriction or
               reserve or capital requirement (for which such Issuing Bank is
               not otherwise compensated hereunder) not in effect with respect
               to such Issuing Bank on the date hereof, or any unreimbursed
               loss, cost or expense which was not applicable or in effect with
               respect to such Issuing Bank as of the date hereof and which such
               Issuing Bank reasonably and in good faith deems material to it;
               or

                       (2)    such Issuing Bank shall have received from the
               Borrower, any other Loan Party or the Majority Lenders prior to
               the issuance of such Letter of Credit notice of the type
               described in the second sentence of SECTION 2.4(c)(ii) below.

     (b)       Maximum L/C Outstandings; Final Maturities.

     Notwithstanding anything to the contrary contained in this Agreement, (i)
no Letter of Credit shall be issued, the Stated Amount of which, when added to
the aggregate L/C Outstandings (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the Letter of Credit in question) at
such time would (x) exceed $50,000,000 or (y) cause the aggregate Exposure
Amount to exceed the Aggregate Revolving Commitments then in effect, and (ii)
each Letter of Credit shall by its terms terminate on or before the earlier of
(x) the date which occurs 12 months after the date of the issuance thereof
(although any such Letter of Credit may be extendible for successive periods of
up to 12 months, but, in each case, not beyond the third Business Day prior to
the Termination Date, on terms acceptable to the applicable Issuing Bank) and
(y) three Business Days prior to the Termination Date.

     (c)       Request for Letters of Credit; Minimum Stated Amount.

               (i)     Whenever the Borrower desires that a Letter of Credit be
     issued for its account, the Borrower shall give the Administrative Agent at
     the Payment Office and the

                                     - 35 -


     applicable Issuing Bank at least five Business Days' (or such shorter
     period as is acceptable to such Issuing Bank) written notice thereof by
     delivering a Request for Letter of Credit substantially in the form of
     EXHIBIT 2.4(c) (including by way of facsimile).

               (ii)    The making of each Request for Letter of Credit shall be
     deemed to be a representation and warranty by the Borrower to the Lenders
     that such Letter of Credit may be issued in accordance with, and will not
     violate the requirements of, SECTION 2.4(b) above. Unless the applicable
     Issuing Bank has received notice from the Administrative Agent, the
     Borrower, any other Loan Party or the Majority Lenders before it issues a
     Letter of Credit that one or more of the conditions specified in SECTION
     4.2 are not then satisfied, or the issuance of such Letter of Credit would
     violate SECTION 2.4(b) above, then such Issuing Bank shall, subject to the
     terms and conditions of this Agreement, issue the requested Letter of
     Credit for the account of the Borrower in accordance with such Issuing
     Bank's usual and customary practices. Upon the issuance of or modification
     or amendment to any Letter of Credit, the applicable Issuing Bank shall
     promptly notify the Borrower and the Administrative Agent, in writing, of
     such issuance, modification or amendment and such notice shall be
     accompanied by a copy of such issuance, modification or amendment, as the
     case may be. Promptly after receipt of such notice the Administrative Agent
     shall notify the L/C Participants, in writing, of such issuance,
     modification or amendment.

               (iii)   The initial Stated Amount of each Letter of Credit shall
     not be less than $50,000 or such lesser amount as is acceptable to the
     applicable Issuing Bank.

     (d)       Letter of Credit Participations.

               (i)     Immediately upon the issuance by an Issuing Bank of any
     Letter of Credit, such Issuing Bank shall be deemed to have sold and
     transferred to each Lender (including each Issuing Bank in its capacity (if
     any) as a Lender) (and each such Lender in its capacity under this SECTION
     2.4(d), an "L/C PARTICIPANT"), and each such L/C Participant shall be
     deemed irrevocably and unconditionally to have purchased and received from
     such Issuing Bank, without recourse or warranty, an undivided interest and
     participation, to the extent of such L/C Participant's Commitment
     Percentage, in such Letter of Credit, each drawing or payment made
     thereunder and the obligations of the Borrower under this Agreement with
     respect thereto, and any security therefor or guaranty pertaining thereto
     (each, an "L/C PARTICIPATION").

               (ii)    In determining whether to pay under any Letter of Credit,
     the applicable Issuing Bank shall not have any obligation relative to the
     other Lenders other than to confirm that any documents required to be
     delivered under such Letter of Credit appear to have been delivered and
     that they appear to substantially comply on their face with the
     requirements of such Letter of Credit. Any action taken or omitted to be
     taken by an Issuing Bank under or in connection with any Letter of Credit
     issued by it shall not create for such Issuing Bank any resulting liability
     to the Borrower, any other Loan Party, any Lender or any other Person
     unless such action is taken or omitted to be taken with gross negligence or
     willful misconduct (as determined by a court of competent jurisdiction in a
     final and non-appealable decision).

                                     - 36 -


               (iii)   In the event that an Issuing Bank makes any payment under
     any Letter of Credit issued by it and the Borrower shall not have
     reimbursed such amount in full to such Issuing Bank pursuant to SECTION
     2.4(e)(i) below, such Issuing Bank shall promptly notify the Administrative
     Agent, which shall promptly notify each L/C Participant of such failure,
     and each L/C Participant shall promptly and unconditionally pay to such
     Issuing Bank the amount of such L/C Participant's Commitment Percentage of
     such unreimbursed payment in Dollars and in same day funds. If the
     Administrative Agent so notifies, prior to 12:00 Noon (New York time) on
     any Business Day, any L/C Participant required to fund a payment under a
     Letter of Credit, such L/C Participant's shall make available to such
     Issuing Bank in Dollars such L/C Participant's Commitment Percentage of the
     amount of such payment prior to 5:00 P.M. (New York time) on such Business
     Day in same day funds. If and to the extent such L/C Participant shall not
     have so made its Commitment Percentage of the amount of such payment
     available to such Issuing Bank, such L/C Participant agrees to pay to such
     Issuing Bank, forthwith on demand such amount, together with interest
     thereon, for each day from such date until the date such amount is paid to
     such Issuing Bank at the overnight Federal Funds Effective Rate for the
     first three days and at the interest rate applicable to Loans that are
     maintained as Base Rate Loans for each day thereafter. The failure of any
     L/C Participant to make available to the applicable Issuing Bank its
     Commitment Percentage of any payment under any Letter of Credit shall not
     relieve any other L/C Participant of its obligation hereunder to make
     available to such Issuing Bank its Commitment Percentage of any payment
     under any Letter of Credit on the date required, as specified above, but no
     L/C Participant shall be responsible for the failure of any other L/C
     Participant to make available to such Issuing Bank such other L/C
     Participant's Commitment Percentage of any such payment.

               (iv)    Whenever an Issuing Bank receives a payment of a
     reimbursement obligation as to which it has received any payments from the
     L/C Participants pursuant to SECTION 2.4(d)(iii) above, such Issuing Bank
     shall pay to each such L/C Participant which has paid its Commitment
     Percentage thereof, in Dollars and in same day funds, an amount equal to
     such L/C Participant's share (based upon the proportionate aggregate amount
     originally funded by such L/C Participant to the aggregate amount funded by
     all L/C Participants) of the principal amount of such reimbursement
     obligation and interest thereon accruing after the purchase of the
     respective participations.

               (v)     Upon the request of any L/C Participant, the
     Administrative Agent shall furnish to such L/C Participant copies of any
     Letter of Credit or amendment thereto, and such other documentation as may
     reasonably be requested by such L/C Participant.

               (vi)    The obligations of the L/C Participants to make payments
     to each Issuing Bank with respect to Letters of Credit shall be irrevocable
     and not subject to any qualification or exception whatsoever and shall be
     made in accordance with the terms and conditions of this Agreement under
     all circumstances, including, without limitation, any of the following
     circumstances:

                       (1)    any lack of validity or enforceability of this
               Agreement or any of the other Loan Documents;

                                     - 37 -


                       (2)    the existence of any claim, setoff, defense or
               other right which the Borrower or any of its Subsidiaries may
               have at any time against a beneficiary named in a Letter of
               Credit, any transferee of any Letter of Credit (or any Person for
               whom any such transferee may be acting), the Administrative
               Agent, any Lender, or any other Person (including any Issuing
               Bank, except for its gross negligence or willful misconduct, as
               determined by a court of competent jurisdiction in a final and
               non-appealable decision), whether in connection with this
               Agreement, any Letter of Credit, the transactions contemplated
               herein or any unrelated transactions (including any underlying
               transaction between the Borrower or any Subsidiary of the
               Borrower and the beneficiary named in any such Letter of Credit);

                       (3)    any draft, certificate or any other document
               presented under any Letter of Credit proving to be forged,
               fraudulent, invalid or insufficient in any respect or any
               statement therein being untrue or inaccurate in any respect;

                       (4)    the surrender or impairment of any security for
               the performance or observance of any of the terms of any of the
               Loan Documents; or

                       (5)    the occurrence of any Event of Default or
               Unmatured Event of Default.

     (e)       Agreement to Repay Letter of Credit Drawings.

               (i)     If an Issuing Bank should make any payment or
     disbursement under any Letter of Credit issued by it (each such amount, so
     paid until reimbursed, an "UNPAID DRAWING"), then, PROVIDED that (x) no
     Bankruptcy Event of Default or Unmatured Bankruptcy Event of Default shall
     have occurred and be continuing, in which case the Unpaid Drawing shall be
     due and payable immediately without presentment, demand, protest or notice
     of any kind (all of which are hereby waived by the Borrower) and (y) the
     Unpaid Drawing is not less than $500,000, and regardless of whether the
     conditions precedent set forth in this Agreement to the making of a
     Revolving Loan are then satisfied, the Unpaid Drawing shall be refinanced
     as a Revolving Loan in an equivalent amount to the Unpaid Drawing, and the
     Borrower shall at such time be deemed to have issued to the Administrative
     Agent a Request for Borrowing in respect of such Unpaid Drawing in
     accordance with SECTION 2.1(d). Any Loans made under this SECTION 2.4(e)(i)
     shall be subject to all the provisions concerning Loans in this ARTICLE II,
     except as provided otherwise in this SECTION 2.4(e) and except that
     applicable restrictions as to minimum amounts shall not apply to such
     Loans.

               (ii)    If the Unpaid Drawing is an amount less than $500,000,
     then the Borrower agrees to reimburse the applicable Issuing Bank, by
     making payment to the Administrative Agent in immediately available funds
     at the Payment Office, not later than one Business Day following receipt by
     the Borrower of notice of payment or disbursement by such Issuing Bank in
     respect of a Letter of Credit (PROVIDED that no such notice shall be
     required to be given if a Bankruptcy Event of Default or Unmatured
     Bankruptcy Event of Default shall have occurred and be continuing, in which
     case the

                                     - 38 -


     Unpaid Drawing shall be due and payable immediately without presentment,
     demand, protest or notice of any kind (all of which are hereby waived by
     the Borrower)), with interest on the amount so paid or disbursed by such
     Issuing Bank, to the extent not reimbursed prior to 12:00 Noon (New York
     time) on the date of such payment or disbursement, from and including the
     date paid or disbursed to but excluding the date such Issuing Bank was
     reimbursed by the Borrower therefor at the Default Rate in accordance with
     SECTION 2.9(f). Each Issuing Bank shall give the Borrower prompt written
     notice of each Drawing under any Letter of Credit issued by it, PROVIDED
     that the failure to give any such notice shall in no way affect, impair or
     diminish the Borrower's obligations hereunder.

               (iii)   The obligations of the Borrower under this SECTION 2.4(e)
     to reimburse each Issuing Bank with respect to drafts, demands and other
     presentations for payment under Letters of Credit issued by it (each a
     "DRAWING") (including, in each case, interest thereon) shall be absolute
     and unconditional under any and all circumstances and irrespective of any
     setoff, counterclaim or defense to payment which the Borrower or any of its
     Subsidiaries may have or have had against any Lender (including in its
     capacity as an Issuing Bank or as an L/C Participant), including, without
     limitation, any defense based upon the failure of any drawing under a
     Letter of Credit to conform to the terms of the Letter of Credit or any
     nonapplication or misapplication by the beneficiary of the proceeds of such
     Drawing; PROVIDED, HOWEVER, that the Borrower shall not be obligated to
     reimburse either Issuing Bank for any wrongful payment made by such Issuing
     Bank under a Letter of Credit issued by it as a result of acts or omissions
     constituting willful misconduct or gross negligence on the part of such
     Issuing Bank (as determined by a court of competent jurisdiction in a final
     and non-appealable decision).

     (f)       Letter of Credit Fees.

               (i)     For each Letter of Credit issued by either Issuing Bank,
     the Borrower shall pay to the Administrative Agent, for the account of each
     Lender in accordance with such Lender's Commitment Percentage, from the
     Borrower's own funds, a fee equal to the Applicable Margin for Eurodollar
     Loans per annum (based on a 360 day year for the actual number of elapsed
     days) TIMES the Stated Amount of all outstanding Letters of Credit, which
     shall be payable quarterly in arrears on the Interest Payment Date; and to
     the applicable Issuing Bank, for such Issuing Bank's account, from the
     Borrower's own funds, a fee in the amount of 0.10% per annum (based on a
     360 day year for the actual number of days elapsed) TIMES the Stated Amount
     of all outstanding Letters of Credit, which shall be payable quarterly in
     arrears on the Interest Payment Date.

               (ii)    The Borrower agrees to pay to each Issuing Bank, for its
     own account, upon each payment under, issuance of, or amendment to, any
     Letter of Credit issued by it, such amount as shall at the time of such
     event be the administrative charge and the reasonable out of pocket
     expenses which such Issuing Bank is generally imposing in connection with
     such occurrence with respect to letters of credit.

                                     - 39 -


     2.5.      EXTENSION OF REVOLVING COMMITMENTS.

     Upon the written request of the Borrower, received by the Administrative
Agent not less than sixty days prior to the then current Termination Date and
subject to the consent of each Lender willing to grant such request, the
Termination Date shall be extended to the date which is three years from the
date which is thirty days from the date of such request. The Administrative
Agent shall transmit such request to each Lender within one Business Day. The
Lenders shall respond through the Administrative Agent to any such request of
the Borrower within thirty days of the Borrower's request. Any Lender not
responding within thirty days shall be deemed to have declined the request. At
the option of the Borrower, any declining Lender's Revolving Commitment may be
assumed, in whole or in part, by one or more existing Lenders or other lenders
acceptable to the Borrower and the Administrative Agent, upon compliance with
SECTION 9.9; PROVIDED, HOWEVER, Assignee shall pay the $3,500 processing fee
required by SECTION 9.1(b). If any such Revolving Commitment is not so replaced
within thirty (30) days of the Lender's response, then, at the Borrower's
option, either (i) the Borrower shall give prompt written notice to each Lender
of its decision to withdraw such request and the Aggregate Revolving Commitments
shall terminate on the then current Termination Date or (ii) the Borrower shall
give prompt notice of termination of the Revolving Commitment to each and every
Lender that has not consented to the extension (to the extent it has not been
assumed), with a copy to the Administrative Agent, and shall prepay the Loans of
such Lenders on three Business Days' prior notice to such Lenders and the
Administrative Agent, which shall reduce the Aggregate Revolving Commitments
accordingly (to the extent not assumed), (i) reallocate such Lender's Commitment
Percentage of the L/C Outstandings in accordance with SECTION 2.4(d) as if a new
Letter of Credit were issued in such amount for the account of the Borrower, and
(ii) if such reallocation results in the aggregate Exposure Amount exceeding the
Aggregate Revolving Commitments, secure such excess amount by cash or cash
equivalents delivered to and pledged to the Administrative Agent in a manner
satisfactory to the Administrative Agent concurrently with the effectiveness of
such termination, and the Termination Date shall be extended in accordance with
this SECTION 2.5 for the remaining Aggregate Revolving Commitments and SCHEDULE
1.1 shall be amended accordingly; PROVIDED, HOWEVER, that notwithstanding
anything in this SECTION 2.5 to the contrary, in the event that less than the
Majority Lenders consent to any extension hereunder, the Borrower shall be
deemed to have withdrawn its request and the Aggregate Revolving Commitments
shall terminate on the then current Termination Date.

     2.6.      TERMINATION OR REDUCTION OF COMMITMENTS; INCREMENTAL FACILITY.

     (a)       The Borrower shall have the right, upon not less than one
Business Day's notice to the Administrative Agent, to terminate the Revolving
Commitments or from time to time to proportionately and permanently reduce the
unutilized portion of the Revolving Commitments; PROVIDED, HOWEVER, that no such
reductions or termination of the Revolving Commitments shall be permitted if,
after giving effect thereto and to any prepayment or payment of the Loans made
on the effective date thereof, the then outstanding aggregate principal amount
of Loans PLUS the L/C Outstandings would exceed the Aggregate Revolving
Commitments then in effect. Any such reduction shall be in a minimum amount
equal to $10,000,000 and in increments of $5,000,000 in excess thereof and shall
reduce permanently the Revolving Commitments then in effect.

                                     - 40 -


     (b)       In the event of certain refusals by a Lender to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Majority Lenders as provided
SECTION 9.1(b), the Borrower shall have the right, upon five (5) Business Days'
prior written notice to the Administrative Agent (which notice the
Administrative Agent shall promptly transmit to each of the Lenders), to
terminate the entire Revolving Commitment of such Lender, so long as all Loans,
together with accrued and unpaid interest, fees and all other amounts, due and
owing to such Lender are repaid, (i) the Lender's Commitment Percentage of the
L/C Outstandings is reallocated in accordance with SECTION 2.4(d) as if a new
Letter of Credit in such amount were issued for the account of the Borrower, and
(ii) if such reallocation results in the aggregate Exposure Amount exceeding the
Aggregate Revolving Commitments, such excess amount is secured by cash or cash
equivalents delivered to and pledged to the Administrative Agent in a manner
satisfactory to the Administrative Agent concurrently with the effectiveness of
such termination, at which time SCHEDULE 1.1 shall be deemed modified to reflect
such changed amounts. At such time, such Lender shall no longer constitute a
"LENDER" for purposes of this Agreement, except with respect to indemnifications
under this Agreement which shall survive as to such repaid Lender.

     (c)       Prior to the Termination Date and upon at least 10 days' prior
written notice to the Administrative Agent (which notice shall be promptly
transmitted by the Administrative Agent to each Lender), the Borrower shall have
the right, subject to the terms and conditions set forth below (and at its sole
cost and expense), to increase the Aggregate Revolving Commitment; PROVIDED that
(a) no Event of Default or Unmatured Event of Default shall exist at the time of
the request or the proposed increase, (b) such increase must be in a minimum
amount of $5,000,000 and in integral multiples of $1,000,000 above such amount,
(c) the Aggregate Revolving Commitment shall not be increased to an amount
greater than TWO HUNDRED TWENTY-FIVE MILLION DOLLARS ($225,000,000), (d) no
individual Lender's Revolving Commitment may be increased without such Lender's
written consent, (e) the Borrower shall execute and deliver such Revolving
Note(s) as are necessary to reflect the increase in the Aggregate Revolving
Commitment, (f) such changes shall be made to reflect the revised Aggregate
Revolving Commitment and revised Commitment Percentages and (g) if any Revolving
Loans are outstanding at the time of an increase in the Aggregate Revolving
Commitment, the Lender(s) (or new Lender(s)) taking the amount of the increase
in the Aggregate Revolving Commitment shall purchase from existing Lenders a
portion of the existing Revolving Loans in an amount necessary such that, after
giving effect to the increase in the Aggregate Revolving Commitment, each Lender
will hold its Commitment Percentage of outstanding Revolving Loans. In the event
that any such purchase occurs on a date other than the end of an Interest Period
in respect of any Eurodollar Revolving Loan, the Borrower shall pay any amounts
that would be owing to any Lender pursuant to SECTION 2.19 as if such purchase
were a prepayment.

Any such increase in the Aggregate Revolving Commitment shall apply, at the
option of the Borrower, to (x) the Revolving Commitment of one or more existing
Lenders; PROVIDED that any Lender whose Revolving Commitment is being increased
must consent in writing thereto and if more than one existing Lender wishes to
participate in such increase, then such increase shall be allocated pro rata
among such Lenders (based on the amount by which each such Lender was willing to
increase its Revolving Commitment) and/or (y) the creation of a new Revolving
Commitment to one or more institutions that are not existing Lenders; PROVIDED
that any such institution (A) must be reasonably acceptable to the
Administrative Agent and (B) must become

                                     - 41 -


a Lender under this Agreement by execution and delivery of a joinder agreement
in the form attached hereto as Exhibit 2.6(c) or of counterparts to this
Agreement in a manner acceptable to the Borrower and the Administrative Agent.

     2.7.      OPTIONAL PREPAYMENTS.

     (a)       REVOLVING LOANS. The Borrower may, at any time and from time to
time, prepay the Revolving Loans, in whole or in part, without premium or
penalty (but subject to the provisions of SECTION 2.19, with respect to
Eurodollar Loans), upon irrevocable notice to the Administrative Agent no later
than 11:00 A.M. (New York time) at least three Business Days' prior to such
prepayment specifying the date and amount of such prepayment, and with respect
to Base Rate Loans, upon irrevocable notice to the Administrative Agent no later
than 11:00 A.M. (New York time) on the date of such prepayment, specifying the
date and amount of such prepayment for such Loans (such notice to be promptly
confirmed in writing if given telephonically). Upon receipt of any such notice,
the Administrative Agent shall promptly notify each Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with any amounts payable pursuant to
SECTION 2.19. Partial prepayments of Revolving Loans shall be in an aggregate
principal amount of $5,000,000 and in increments of $1,000,000 in excess
thereof.

     (b)       COMPETITIVE LOANS. Notwithstanding anything to the contrary
contained herein, the Borrower shall not prepay any Competitive Loans except (i)
pursuant to ARTICLE VII or (ii) with the consent of the Lender holding such
Competitive Loan, with payment of any amount payable under SECTION 2.19 or
payment of such other amount as the Borrower and such Lender shall agree.

     (c)       SWING LINE LOANS. Upon notice (such notice to be promptly
confirmed in writing if given telephonically) to the Administrative Agent, the
Borrower may prepay (without premium or penalty) any Swing Line Loans on any
Business Day not later than 11:00 A.M. (New York time). Partial prepayments of
Swing Line Loans shall be in an aggregate principal amount of $1,000,000 or a
whole multiple thereof.

     (d)       PREPAYMENT OF NON-CONSENTING LENDER. In the event of certain
refusals by a Lender to consent to certain proposed changes, waivers, discharges
or terminations with respect to this Agreement which have been approved by the
Majority Lenders as provided in SECTION 9.1(b), the Borrower shall have the
right, upon five (5) Business Days' prior written notice to the Administrative
Agent (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), to repay all Loans, together with accrued and unpaid interest,
fees and all other amounts due and owing to such Lender in accordance with said
SECTION 9.1(b), so long as (A) in the case of the repayment of Loans of any
Lender pursuant to this SECTION 2.7(d), the Revolving Commitment of such Lender
is terminated concurrently with such repayment and (B) (i) the Lender's
Commitment Percentage of the L/C Outstandings is reallocated in accordance with
SECTION 2.4(d) as if a new Letter of Credit in such amount were issued for the
account of the Borrower, and (ii) if such reallocation results in the aggregate
Exposure Amount exceeding the Aggregate Revolving Commitments, such excess
amount is secured by cash or cash equivalents delivered to and pledged to the
Administrative Agent in a manner satisfactory to the Administrative Agent
concurrently with the effectiveness of such termination, at which time
SCHEDULE 1.1 shall be deemed modified to reflect such changed amounts.

                                     - 42 -


     2.8.      REPAYMENT OF LOANS; MANDATORY PREPAYMENTS; EVIDENCE OF DEBT.

     (a)       The Borrower hereby unconditionally promises to pay to each
Lender (i) on the Termination Date, the unpaid principal amount of each Loan
(including, without limitation, each Swing Line Loan) made by such Lender and
(ii) on the last day of the applicable Interest Period, the unpaid principal
amount of each Competitive Loan made by such Lender. The Borrower hereby further
agrees to pay interest in immediately available funds at the office of the
Administrative Agent on the unpaid principal amount of such Loans from time to
time from the date hereof until payment in full thereof at the rates per annum,
and on the dates, set forth in SECTION 2.9.

     (b)       The Borrower shall repay the Revolving Loans and permanently
reduce the aggregate outstanding Revolving Commitments by the amount equal to
the Net Proceeds received by the Borrower and its Subsidiaries from any Material
Asset Disposition within 30 days following receipt thereof by Borrower or any of
its Subsidiaries PROVIDED, that, at the option of the Borrower and so long as no
Event of Default or Unmatured Event of Default shall have occurred and be
continuing, the Borrower may use or cause the appropriate Subsidiary to use the
Net Proceeds to purchase assets useful in the business of the Borrower and its
Subsidiaries or to purchase all the equity interests of a Person owning such
assets (with such assets or interests collectively referred to as "QUALIFIED
ASSETS") within 365 days after the consummation (and with the Net Proceeds) of
such sale, conveyance or disposition, and in the event the Borrower elects to
exercise its right to purchase Qualified Assets with the Net Proceeds pursuant
to this clause, the Borrower shall deliver a certificate of a responsible
officer to the Administrative Agent within 30 days following the receipt of Net
Proceeds setting forth the amount of the Net Proceeds which the Borrower expects
to use to purchase Qualified Assets during such 365 day period. If and to the
extent that the Borrower has elected to reinvest Net Proceeds as permitted
above, then on the date which is 365 days following the receipt of the Net
Proceeds, the Borrower shall (1) deliver a certificate of a responsible officer
to the Administrative Agent certifying as to the amount and use of such Net
Proceeds actually used to purchase Qualified Assets and (2) deliver to the
Administrative Agent, for application in accordance with this clause, an amount
equal to the remaining unused Net Proceeds.

     (c)       At any time that the aggregate principal amount of all Loans
outstanding PLUS the aggregate amount of L/C Outstandings exceeds the Aggregate
Revolving Commitments then in effect, the Borrower shall, within one Business
Day of the earlier of the Borrower's learning thereof or of the request of the
Administrative Agent, immediately prepay the Loans to the extent necessary to
reduce the sum of the aggregate principal amount of all Loans outstanding PLUS
the aggregate amount of L/C Outstandings to an amount that is no more than the
Aggregate Revolving Commitments then in effect.

     (d)       Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to the
appropriate Lending Office of such Lender resulting from each Loan made by such
Lending Office of such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lending Office of such Lender
from time to time under this Agreement.

                                     - 43 -


     (e)       The Administrative Agent shall maintain the Register pursuant to
SECTION 9.9(c), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount of each Loan made
hereunder, the Type of each Loan made and the Interest Period applicable
thereto, (ii) the amount of such Lender's Commitment Percentage of the L/C
Outstandings, (iii) the amount of any principal or interest due and payable or
to become due and payable from Borrower to each Lender hereunder and (iv) the
amount of any sum received by the Administrative Agent hereunder from the
Borrower and each Lender's share thereof.

     (f)       The entries made in the Register and accounts maintained pursuant
to SECTIONS 2.8(d) AND (e) shall, to the extent permitted by applicable law, be
prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or
the Administrative Agent to maintain such account, such Register or such
subaccount, as applicable, or any error therein, shall not in any manner affect
the obligation of Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Lender in accordance with the terms of this Agreement.

     2.9.      INTEREST RATES AND PAYMENT DATES.

     (a)       BASE RATE LOANS. Each Base Rate Loan (including, without
limitation, each Swing Line Loan) shall bear interest at a rate per annum equal
to the Base Rate.

     (b)       EURODOLLAR LOANS. The Loans comprising each Eurodollar Borrowing
shall bear interest at a rate per annum equal to (i) in the case of each
Eurodollar Revolving Loan, the Eurodollar Rate for the Interest Period in effect
for such Borrowing PLUS the Applicable Margin and (ii) in the case of each
Eurodollar Competitive Loan, the Eurodollar Rate for the Interest Period in
effect for such Borrowing PLUS (or MINUS, as the case may be) the Margin offered
by the Lender making such Loan and accepted by Borrower pursuant to SECTION 2.3.

     (c)       FIXED RATE COMPETITIVE LOANS. Each Fixed Rate Competitive Loan
shall bear interest at a rate per annum equal to the fixed rate of interest
offered by the Lender making such Loan and accepted by Borrower pursuant to
SECTION 2.3.

     (d)       PAYMENT OF INTEREST. Interest on each Loan shall be payable in
arrears on each Interest Payment Date; PROVIDED, HOWEVER, that interest accruing
pursuant to SECTION 2.9(f) shall be payable from time to time on demand.
Interest shall also be payable on the date of any prepayment of Loans for the
portion of the Loans so prepaid and upon payment (including prepayment) in full
thereof and, during the existence of any Event of Default, interest on any Loan
shall be payable on demand.

     (e)       APPLICABLE MARGIN. The "APPLICABLE MARGIN" with respect to each
Eurodollar Revolving Loan at any date shall be the applicable percentage amount
set forth in the table below based upon the Status on such date:

                                APPLICABLE MARGIN

                                                EURODOLLAR
                             STATUS               LOANS

                                     - 44 -


                             Level I                .75%
                             Level II               .85%
                             Level III              .95%

     (f)       POST-MATURITY INTEREST. If all or a portion of (i) the principal
amount of any Loan or Unpaid Drawings, (ii) any interest payable thereon or
(iii) any facility fee or other amount payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at the Default Rate from the date of such non-payment
until such amount is paid in full (after as well as before judgment). For
purposes of this Agreement, principal shall be "overdue" only if not paid in
accordance with the provisions of SECTION 2.4(e) OR 2.8, as the case may be.

     2.10.     FACILITY FEE.

     The Borrower shall pay to the Administrative Agent for the ratable account
of the Lenders, a facility fee equal to the Applicable Facility Fee. On the last
Business Day of each March, June, September and December and on the Termination
Date (or, if earlier, on the date upon which the Revolving Commitments are
terminated, the Loans are paid in full and the Letters of Credit are
surrendered), the Borrower shall pay to the Administrative Agent, for the
ratable benefit of the Lenders, the portion of such facility fee which accrued
during the quarterly period most recently ended (or, in the case of the payment
due on the Termination Date, the portion thereof ending on such date). Such
facility fee shall be based upon the aggregate Revolving Commitments of the
Lenders from time to time, regardless of the utilization from time to time
thereunder.

     2.11.     COMPUTATION OF INTEREST AND FEES.

     Interest on all Loans and Unpaid Drawings shall be computed on the basis of
the actual number of days elapsed over a year of 360 days or, on any date when
the Base Rate is determined by reference to the Prime Lending Rate a year of 365
or 366 days as appropriate (in each case including the first day but excluding
the last day). Each determination of an interest rate by Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. All fees shall be
computed on the basis of a year composed of twelve 30-day months. The
Administrative Agent shall, at any time and from time to time upon request of
the Borrower, deliver to the Borrower a statement showing the quotations used by
the Administrative Agent in determining any interest rate applicable to
Revolving Loans pursuant to this Agreement. Each change in the Applicable Margin
applicable to Loans or the Applicable Facility Fee as a result of a change in
the Borrower's Status shall become effective on the date upon which such change
in Status occurs.

     2.12.     CONVERSION AND CONTINUATION OPTIONS.

     (a)       The Borrower may elect on any Business Day to convert Revolving
Loans of one Type to Revolving Loans of another Type by giving the
Administrative Agent at least three Business Days' prior irrevocable notice of
such election in the case of any conversion to a Eurodollar Revolving Loan, and
prior irrevocable notice not later than 11:00 A.M. (New York City time) on the
date of conversion in the case of any conversion to Base Rate Loans (such

                                     - 45 -


notice to be promptly confirmed in writing if given telephonically); PROVIDED,
HOWEVER, that any such conversion of Eurodollar Revolving Loans may, subject to
the third succeeding sentence, only be made on the last day of an Interest
Period with respect thereto. Any such notice of conversion to Eurodollar
Revolving Loans shall specify the length of the initial Interest Period or
Interest Periods therefor, which may not, until after the earlier of (i) the
30th day after the Closing Date and (ii) the Syndication Date, exceed one month.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Revolving Loans
and Base Rate Loans may be converted as provided herein; PROVIDED, HOWEVER, that
(i) no Loan may be converted into a Eurodollar Revolving Loan when any Event of
Default has occurred and is continuing, (ii) any such conversion may only be
made if, after giving effect thereto, SECTION 2.13 shall not have been
contravened, (iii) any such conversion may only be made if, after giving effect
thereto, no more than five (5) Borrowings of Eurodollar Revolving Loans would be
outstanding and (iv) no Loan may be converted into a Eurodollar Revolving Loan
after the date that is one month prior to the scheduled Termination Date.

     (b)       Any Eurodollar Revolving Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "INTEREST PERIOD" set forth in SECTION 1.1, of
the length of the next Interest Period to be applicable to such Loans; PROVIDED,
HOWEVER, that no Eurodollar Revolving Loan may be continued as such (i) when any
Event of Default has occurred and is continuing or (ii) after the date that is
one month prior to the Termination Date and; PROVIDED, FURTHER, that if the
Borrower shall fail to give any required notice as described above in this
paragraph or if such continuation is not permitted pursuant to the preceding
proviso such Eurodollar Revolving Loans shall be automatically converted to Base
Rate Loans on the last day of such then expiring Interest Period.

     2.13.     MINIMUM AMOUNTS OF EURODOLLAR BORROWINGS.

     All borrowings, conversions and continuations of Revolving Loans hereunder
and all selections of Interest Periods hereunder shall be in such amounts and be
made pursuant to such elections so that, after giving effect thereto, the
aggregate principal amount of the Revolving Loans comprising each Eurodollar
Borrowing shall be equal to $5,000,000 or a multiple of $1,000,000 in excess
thereof.

     2.14.     INABILITY TO DETERMINE INTEREST RATE.

     If the Eurodollar Rate cannot be determined by the Administrative Agent in
the manner specified in the definition of the term "EURODOLLAR RATE" contained
in SECTION 1.1 of this Agreement, the Administrative Agent shall give telecopy
or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter. Until such time as the Eurodollar Rate can be determined
by the Administrative Agent in the manner specified in the definition of such
term contained in said SECTION 1.1, no further Eurodollar Loans shall be
continued as such at the end of the then current Interest Period or (other than
any Eurodollar Loans previously requested and with respect to which the
Eurodollar Rate previously was determined) shall be made, nor shall the Borrower
have the right to convert Base Rate Loans to Eurodollar Loans.

                                     - 46 -


     2.15.     PRO RATA TREATMENT AND PAYMENTS.

     (a)       PRO RATA PAYMENTS. Each Borrowing of Revolving Loans from the
Lenders hereunder (including any conversion or continuation of a Revolving
Loan), each payment by Borrower on account of any facility fee hereunder and
(except as provided in SECTION 2.5, SECTION 2.7(d) OR SECTION 2.21) any
reduction of the Revolving Commitments of the Lenders shall be made PRO RATA
according to the respective Commitment Percentages of the Lenders. Each payment
(including each prepayment) by the Borrower on account of principal of and
interest on the Revolving Loans shall be made PRO RATA according to the
respective outstanding principal amounts of the Revolving Loans then held by the
Lenders. Except as provided in SECTION 2.5, SECTION 2.7(d) or SECTION 2.21, each
payment by the Borrower on account of principal of and interest on any Borrowing
of Competitive Loans shall be made PRO RATA among the Lenders participating in
such Borrowing according to the respective principal amounts of their
outstanding Competitive Loans comprising such Borrowing. Each payment by the
Borrower on account of principal of or interest on the Swing Line Loans shall be
made to the Swing Line Lender, and each payment by the Borrower on account of
Unpaid Drawings and interest thereon shall be made to the applicable Issuing
Bank.

     (b)       TIME AND PLACE OF PAYMENTS. All payments (including prepayments)
to be made by Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set-off or counterclaim and shall be
made prior to 12:00 Noon, New York City time, on the due date thereof to (i) the
Administrative Agent, for the account of the relevant Lenders, at the
Administrative Agent's office specified in SECTION 9.3 or (ii) the applicable
Issuing Bank, for its account, at such Issuing Bank's office specified in
SECTION 9.3, as required by the provisions hereof and in either case in
immediately available funds. The Administrative Agent shall distribute payments
received by it to the relevant Lenders promptly upon receipt. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to principal and Unpaid Drawings,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.

     (c)       FUNDING ASSUMPTIONS. Unless the Administrative Agent shall have
been notified in writing by any Lender prior to the deadline for funding a
Borrowing that such Lender will not make the amount that would constitute its
Commitment Percentage of such Borrowing available to the Administrative Agent,
the Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is not made available to the Administrative Agent by the
required time on the borrowing date therefor, such Lender shall pay to the
Administrative Agent, on demand, such amount with interest thereon at a rate
equal to the daily average Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the Administrative Agent.
A certificate of the Administrative Agent submitted to any Lender with respect
to any amounts owing under this SECTION 2.15 shall be conclusive in the absence
of manifest error. If

                                     - 47 -


such Lender's Commitment Percentage of such Borrowing is not made available to
the Administrative Agent by such Lender within three Business Days of such
borrowing date, the Administrative Agent shall be entitled to recover such
amount with interest thereon as set forth above, on demand, from the Borrower.

     2.16.     ILLEGALITY.

     Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
shall make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Agreement, such Lender shall give notice thereof to the
Administrative Agent and the Borrower describing the relevant provisions of such
Requirement of Law, following which (a) the commitment of such Lender hereunder
to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base
Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's
Loans then outstanding as Eurodollar Loans (including, without limitation, such
Lender's Eurodollar Competitive Loans in the case of CLAUSE (ii) below), if any,
shall be converted automatically to Base Rate Loans (i) on the respective last
days of the then current Interest Periods with respect to such Loans or (ii)
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to SECTION 2.19.

     2.17.     INCREASED COSTS.

     (a)       CHANGE IN LAW. If (i) there shall be any increase in the cost to
any Lender of agreeing to make or making, funding or maintaining any Loans, or
purchasing or maintaining any participation therein or in the Letters of Credit,
or (ii) any reduction in any amount receivable in respect thereof, and such
increased cost or reduced amount receivable is due to either:

               (x)     the introduction of or any change in any law or
     regulation, or in the interpretation thereof, after the date hereof; or

               (y)     the compliance with any guideline or request made after
     the date hereof from any central bank or other Governmental Authority
    (whether or not having the force of law);

then (subject to the provisions of SECTION 2.20) the Borrower shall from time to
time, upon demand by such Lender pay such Lender additional amounts sufficient
to compensate such Lender for such increased cost or reduced amount receivable.

     (b)       CAPITAL REQUIREMENTS. If any Lender shall have reasonably
determined that (i) the applicability of any law, rule, regulation or guideline
adopted after the date hereof pursuant to or arising out of the July 1988 paper
of the Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards," or
(ii) the adoption after the date hereof of any other law, rule, regulation or
guideline regarding capital adequacy affecting such Lender, or (iii) any change
arising after the date hereof in any such law, rule, regulation or guideline or
in the interpretation or administration

                                     - 48 -


of any of the foregoing by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
(iv) compliance by such Lender (or any Lending Office of such Lender), or any
holding company for such Lender which is subject to any of the capital
requirements described above, with any request or directive of general
application issued after the date hereof regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital or on the capital of any such holding company as a direct
consequence of such Lender's obligations hereunder to a level below that which
such Lender or any such holding company could have achieved but for such
adoption, change or compliance (taking into consideration such Lender's policies
and the policies of such holding company with respect to capital adequacy) by an
amount deemed by such Lender to be material, then (subject to the provisions of
SECTION 2.20) the Borrower shall pay to such Lender from time to time such
additional amounts as such Lender notifies the Borrower will compensate such
Lender or any such holding company for any such reduction suffered.

     (c)       RESERVE REQUIREMENTS. In the event that any Governmental
Authority shall impose any Eurocurrency Reserve Requirements which increase the
cost to any Lender of making or maintaining Eurodollar Loans, then (subject to
the provisions of SECTION 2.20) the Borrower shall thereafter pay in respect of
the Eurodollar Loans of such Lender a rate of interest based upon the Eurodollar
Reserve Rate (rather than upon the Eurodollar Rate). From and after the delivery
to the Borrower of the certificate required by SECTION 2.20(a), all references
contained in this Agreement to the Eurodollar Rate shall be deemed to be
references to the Eurodollar Reserve Rate with respect to each such affected
Lender.

     2.18.     TAXES

     (a)       Except as provided in SECTION 2.18(c) any payments made by the
Borrower under this Agreement (including, without limitation, payments on
account of principal and interest and fees) shall be made free and clear of, and
without deduction or withholding for or on account of, any Non-Excluded Taxes.
If any Non-Excluded Taxes are required to be withheld from any amount payable to
any Lender or any Issuing Bank hereunder, or the Administrative Agent on their
behalf, except as provided in SECTION 2.18(c), the amount so payable to such
Person shall be increased to the extent necessary to yield to such Person (after
payment of all Non-Excluded Taxes) interest or any such other amount payable
hereunder at the rate or in the amount specified in or pursuant to this
Agreement. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as practicable thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Issuing Bank or such
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower cannot obtain,
through its reasonable best efforts, an original receipt from the taxing
authority, it shall provide other evidence of payment reasonably acceptable to
the Administrative Agent. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other documentary evidence, the
Borrower shall indemnify the Administrative Agent, the Issuing Banks and the
Lenders for any incremental taxes, interest or penalties that may become payable
by the Administrative Agent, any Issuing Bank or any Lender as a result of any
such failure. The agreements in this SECTION 2.18 shall survive the termination
of this Agreement and the payment of all other amounts payable hereunder.

                                     - 49 -


     (b)       Without prejudice to the provisions of SECTION 2.18(a), if any
Issuing Bank or any Lender, or the Administrative Agent on their behalf, is
required by law to make any payment of Non-Excluded Taxes with respect to any
payment received hereunder or under any Note by such Issuing Bank, such Lender,
or the Administrative Agent on their behalf, or if any liability for
Non-Excluded Taxes with respect to any such payment is imposed, levied or
assessed against any Issuing Bank, any Lender or the Administrative Agent on
their behalf, the Borrower will promptly indemnify such person against such
Non-Excluded Taxes, together with any interest, penalties and expenses
(including reasonable counsel fees and expenses) payable or incurred in
connection therewith, including any Non-Excluded Taxes of any Issuing Bank or
any Lender arising by virtue of payments under this SECTION 2.18(b), computed in
a manner consistent with SECTION 2.18(a). A certificate as to the amount of such
payment by such Issuing Bank, such Lender, or the Administrative Agent on their
behalf, absent manifest error, shall be final, conclusive and binding upon all
parties hereto for all purposes.

     (c)       Each Lender and Issuing Bank that is not a United States person
(as defined in Section 7701(a)(30) of the Code) (each such Lender or Issuing
Bank is referred to as a "NON-US PERSON") shall deliver to each of the Borrower
and the Administrative Agent on or prior to the Closing Date, or in the case of
a Lender that is an Assignee of an interest under this Agreement pursuant to
SECTION 2.21 OR 9.9 (unless the Assignee was already a Lender immediately prior
to such assignment), on the date of such assignment to such Lender, (i) two
accurate and complete original signed copies of IRS Form W-8ECI (or successor
form) certifying such Non-US Person's entitlement to a complete exemption from
United States withholding tax with respect to payments to be made under this
Agreement and under any Note because the income is effectively connected with a
United States trade or business, (ii) two accurate and complete original signed
copies of IRS W-8BEN (or successor form) certifying such Non-US Person's
entitlement to a complete exemption from, or a reduction of, United States
withholding tax with respect to payments to be made under this Agreement and
under any Note because such payments are exempt from, or subject to reduced
rates of, withholding under an applicable tax treaty, or (iii) if the Non-US
Person is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code,
(x) a certificate substantially in the form of EXHIBIT 2.18(c)(iii) certifying
such Non-US Person's entitlement to a complete exemption from United States
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of interest to be made under this Agreement and under any Note (any
such certificate, a "SECTION 2.18(c)(iii) CERTIFICATE") and (y) two accurate and
complete original signed copies of IRS Form W-8BEN (or successor form). In
addition, each Non-US Person shall from time to time after the Closing Date,
when a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect, deliver to each of
the Borrower and the Administrative Agent two new accurate and complete original
signed copies of IRS Form W-8ECI, or Form W-8BEN and a SECTION 2.18(c)(iii)
Certificate (if applicable), as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Non-US Person
to a continuing exemption from or reduction in United States withholding tax
with respect to payments under this Agreement and any Note, or it shall
immediately notify the Borrower and the Administrative Agent of its inability to
deliver any such form or certificate. Notwithstanding anything to the contrary
contained in SECTION 2.18(a), but subject to SECTION 9.9 and the immediately
succeeding sentence, the Borrower shall be entitled, to the extent it is
required to do so by law, to deduct or withhold income or similar taxes imposed
by the United States (or any political subdivision or taxing authority thereof
or therein) from interest, fees or other amounts payable hereunder for the

                                     - 50 -


account of any Non-US Person to the extent that such Non-US Person has not
timely provided to the Borrower the applicable IRS forms or certificates
described in this SECTION 2.18(c) that establish a complete exemption from such
deduction or withholding and the Borrower shall have no gross-up or indemnity
obligation under SECTION 2.18(a) with respect to such deduction or withholding
except as provided below. Notwithstanding anything to the contrary contained in
the preceding sentence or elsewhere in this SECTION 2.18 and except as set forth
in SECTION 9.9, Borrower shall gross-up or indemnify each Non-US Person in the
manner set forth in SECTION 2.18(a) in respect of any Non-Excluded Taxes
deducted or withheld by it as a result of any changes after the Closing Date or
the date of the assignment, as applicable, in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of Non-Excluded Taxes.

     (d)       Each Non-US Person shall, as promptly as practicable after it
becomes aware of the occurrence of any event or the existence of any condition
that would cause the Borrower to make a payment in respect of any Non-Excluded
Taxes to such Non-US Person pursuant to SECTION 2.18(a) or a payment in
indemnification for any Non-Excluded Taxes pursuant to SECTION 2.18(b), use
reasonable efforts to make, fund or maintain the Loan (or portion thereof) of
such Non-US Person with respect to which the aforementioned payment is or would
be made through another Lending Office of such Non-US Person if as a result
thereof the additional amounts which would otherwise be required to be paid by
the Borrower in respect of such Loans (or portions thereof) pursuant to SECTION
2.18(a) OR 2.18(b) would not be payable; PROVIDED, HOWEVER, that, as determined
by such Non-US Person in its sole discretion, reasonably exercised, the making,
funding or maintaining of such Loans (or portions thereof) through such other
Lending Office would not otherwise materially adversely affect such Loans or
such Non-US Person. The Borrower agrees to pay all reasonable expenses incurred
by any Lender in utilizing another Lending Office of such Lender pursuant to
this SECTION 2.18(d).

     2.19.     FUNDING INDEMNITY.

     Subject to the provisions of SECTION 2.20(a), the Borrower agrees to
indemnify each Lender and to hold each Lender harmless from any loss or
reasonable expense which such Lender may sustain or incur as a consequence of
(a) default by the Borrower in making a borrowing of, conversion into or
continuation of any Loan hereunder after the Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Borrower in making any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making of a voluntary or involuntary prepayment of Eurodollar Loans or Fixed
Rate Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification shall be in an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding the Applicable Margin included therein) over (ii) the
amount of interest (as determined by such Lender) which would have accrued to
such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in

                                     - 51 -


the relevant interest rate market. This covenant shall survive the termination
of this Agreement and the payment of all other amounts payable hereunder.

     2.20.     NOTICE OF AMOUNTS PAYABLE; RELOCATION OF LENDING OFFICE.

     (a)       Notice. In the event that any Lender becomes aware that any
amounts are or will be owed to it pursuant to SECTION 2.16, 2.17, 2.18(a) OR
2.19 or that it is unable to make Eurodollar Revolving Loans, then it shall
promptly notify the Borrower thereof and, as soon as possible thereafter, such
Lender shall submit to the Borrower a certificate indicating the amount owing to
it and the calculation thereof. The amounts set forth in such certificate shall
be prima facie evidence of the obligations of the Borrower hereunder.

     (b)       RELOCATION. If a Lender claims any additional amounts payable
pursuant to SECTION 2.16, 2.17 OR 2.18(a) or that it is unable to make
Eurodollar Revolving Loans, it shall use its reasonable efforts (consistent with
legal and regulatory restrictions) to avoid the need for paying such additional
amounts or such inability, including changing the jurisdiction of its applicable
Lending Office; PROVIDED, HOWEVER, that the taking of any such action would not,
in the sole judgment of the Lender, be disadvantageous to such Lender.

     2.21.     REPLACEMENT OF AFFECTED LENDERS.

     If any Lender is owed increased costs under SECTION 2.16 OR 2.17, or the
Borrower is required to make any payments under SECTION 2.18 to any Lender
materially in excess of those to the other Lenders or such Lender is required to
make Loans as Base Rate Loans or (y) as provided in SECTION 9.1(b) in the case
of certain refusals by a Lender to consent to certain proposed amendment,
changes, supplements, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Majority Lenders, the Borrower shall
have the right, if no Event of Default or Unmatured Event of Default then
exists, to replace such Lender (the "REPLACED LENDER") with one or more other
Eligible Assignee or Eligible Assignees (collectively, the "REPLACEMENT LENDER")
acceptable to Administrative Agent, PROVIDED that (i) at the time of any
replacement pursuant to this SECTION 2.21, the Replacement Lender shall enter
into one or more assignment agreements, in form and substance satisfactory to
Administrative Agent, pursuant to which the Replacement Lender shall acquire all
of the Commitment and outstanding Loans and L/C Participations of the Replaced
Lender and (ii) all obligations of Borrower owing to the Replaced Lender
(including, without limitation, such increased costs and excluding those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being paid) shall be paid in full to
such Replaced Lender concurrently with such replacement. Upon the execution of
the respective assignment documentation, the payment of amounts referred to in
CLAUSES (i) AND (ii) above and, if so requested by the Replacement Lender,
delivery to the Replacement Lender of the appropriate Note or Notes executed by
Borrower (which shall be noted by the Administrative Agent in the Register), the
Replacement Lender shall become a Lender hereunder and, the Replaced Lender
shall cease to constitute a Lender hereunder, except with respect to
indemnification provisions under this Agreement, which shall survive as to such
Replaced Lender.

                                     - 52 -


                       III. REPRESENTATIONS AND WARRANTIES

     To induce the Administrative Agent, each Issuing Bank and each Lender to
enter into this Agreement, to issue the Letters of Credit and to make the Loans,
Borrower hereby represents and warrants to Administrative Agent, each Issuing
Bank and each Lender, and hereby agrees, as follows:

     3.1.      CORPORATE EXISTENCE; COMPLIANCE WITH LAW.

     Each of the Borrower and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified and
in good standing as a foreign corporation, and is duly authorized to do
business, in each jurisdiction where the ownership or leasing of property or the
character of its operations makes such qualification necessary, except where the
failure to so qualify would not reasonably be expected to have a Material
Adverse Effect and (d) is in compliance with all Requirements of Law except to
the extent that all failures to comply therewith would not reasonably be
expected to have a Material Adverse Effect.

     3.2       CORPORATE POWER; AUTHORIZATION; NO VIOLATION.

     The execution, delivery and performance by each Loan Party of this
Agreement and the other Loan Documents to which it is a party (i) are within
such Loan Party's corporate power, (ii) have been duly authorized by all
necessary corporate, shareholder and other action on the part of each Person
whose authorization is required, (iii) do not violate any Requirement of Law or
any material Contractual Obligation applicable to such Loan Party, (iv) will not
result in or require the creation or imposition of any Lien of any nature upon
or with respect to any of the properties now owned or hereafter acquired by such
Person and (v) will not require any authorization or approval or other action
by, or notice to or filing or registration with, any Governmental Authority
(other than those which have been obtained and are in force and effect).

     3.3.      BINDING EFFECT.

     This Agreement has been, and the other Loan Documents to which any Loan
Party is a party will be when executed and delivered, duly executed and
delivered on behalf of the Borrower and the other Loan Parties thereto. This
Agreement constitutes, and the other Loan Documents to which any Loan Party is a
party when executed and delivered will constitute, a legal, valid and binding
obligation of the Borrower and the other Loan Parties party thereto, enforceable
against the Borrower and such other Loan Parties in accordance with their
respective terms, except as enforcement thereof may be subject to (i) the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity or
at law).

                                     - 53 -


     3.4.      PURPOSE OF LOANS.

     The proceeds of the Loans shall be used by the Borrower to (i) repay
existing indebtedness and (ii) for general corporate and working capital
purposes. The Letters of Credit will be used to secure obligations, other than
Indebtedness, incurred in the ordinary course of business of the Borrower and
its Subsidiaries. No proceeds of any of the Loans will be used for "buying,"
"purchasing," or "carrying," any "margin stock" within the respective meanings
of each of the quoted terms under Regulations T, U or X of the Board as now and
from time to time hereafter in effect or for any purpose which might cause any
of the loans or extensions of credit under this Agreement to be considered a
"purpose credit" within the meaning of Regulation T, U or X of the Board.

     3.5.      SUBSIDIARIES.

     SCHEDULE 3.5 annexed hereto and made a part hereof is a complete and
correct list of all Subsidiaries of the Borrower as of the Closing Date and
separately identifies all Material Subsidiaries of the Borrower as of the
Closing Date. As of the Closing Date, all of such Subsidiaries are Wholly-Owned
Subsidiaries of the Borrower and Domestic Subsidiaries of the Borrower except as
otherwise indicated on such SCHEDULE 3.5. There does not exist any consensual
encumbrance or restriction (PROVIDED, however, that a requirement that a
Subsidiary give the holders of any Indebtedness of such Subsidiary not more than
30 days prior written notice of its intention to pay a dividend to its
stockholders shall not be deemed to constitute such an encumbrance or
restriction) on the ability of (i) any Subsidiary of the Borrower to pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or to pay any Indebtedness owed to the Borrower or a Subsidiary
of the Borrower, (ii) any Subsidiary of the Borrower to make loans or advances
to the Borrower or any of the Borrower's Subsidiaries or (iii) the Borrower or
any of its Subsidiaries to transfer any of its properties or assets to the
Borrower or any of its Subsidiaries, except for such encumbrances or
restrictions permitted by SECTION 6.7 or existing under or by reason of (x)
applicable law, (y) this Agreement or the other Loan Documents or (z) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of the Borrower or a Subsidiary of Borrower.

     3.6.      INDEBTEDNESS.

     SCHEDULE 3.6 annexed hereto and made a part hereof is a complete and
correct list of all Indebtedness of the Borrower and its Subsidiaries which, in
any individual instance exceeds $1,000,000 in principal amount and which is
outstanding as of the Closing Date (other than Indebtedness which shall be
prepaid with the proceeds of Revolving Loans made on the Closing Date).

     3.7.      FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED
LIABILITIES; PROJECTIONS, ETC.

     (a)       FINANCIAL STATEMENTS. The balance sheet of the Borrower at
December 30, 2000 and December 29, 2001 and March 30, 2002 and the related
statements of operations, cash flows and shareholders' equity of the Borrower
for the Fiscal Year or other period ended on such dates,

                                     - 54 -


as the case may be, copies of which have been furnished to the Lenders prior to
the date hereof which, in the case of the December 30, 2000 and December 29,
2001 statements, have been examined by Arthur Andersen & LLP, independent
certified public accountants, who delivered an unqualified opinion in respect
thereto, were prepared in accordance with GAAP (subject, in the case of interim
statements, to normal recurring adjustments) in effect on the date such
statements were prepared and fairly present the consolidated financial condition
and results of operations of the Borrower and its Subsidiaries at such dates and
for the periods then ended. Since December 29, 2001, there has been no Material
Adverse Effect.

     (b)       SOLVENCY. On and as of the Closing Date, after giving effect to
the Transaction and to all Indebtedness (including the Loans) being incurred,
and to be incurred (and the use or proceeds thereof), and Liens created, and to
be created, by the Borrower in connection with the transactions contemplated
hereby, (i) the sum of the assets, at a fair valuation, of the Borrower will
exceed its debts; (ii) the Borrower has not incurred nor intends to, nor
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature; and (iii) the Borrower will have sufficient capital with which to
conduct its business. For purposes of this SECTION 3.7(b) "debt" means any
liability on a claim, and "claim" means (y) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured (including all obligations, if any, under any Plan or the
equivalent for unfunded past serviced liability, and any other unfunded medical
and death benefits) or (z) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.

     (c)       NO UNDISCLOSED LIABILITIES. Except as fully reflected in the
financial statements and the notes related thereto delivered pursuant to
SECTION 3.7(a) and on SCHEDULE 3.7(d) there were as of the Closing Date (and
after giving effect to the Transaction and the other transactions contemplated
hereby) no liabilities or obligations with respect to the Borrower of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, would be material to the
Borrower. As of the Closing Date (and after giving effect to the Transaction and
the other transaction contemplated hereby), the Borrower does not know of any
basis for the assertion against the Borrower or any of its Subsidiaries of any
liability or obligation of any nature whatsoever that is not fully reflected in
the financial statements or the notes related thereto delivered pursuant to
SECTION 3.7(a) and on SCHEDULE 3.6 which, either individually or in the
aggregate, could be material to the Borrower.

     (d)       PROJECTIONS. On and as of the Closing Date, the financial
projections, attached hereto as SCHEDULE 3.7(d) and previously delivered to the
Administrative Agent and the Lenders (the "PROJECTIONS") have been prepared on a
basis consistent with the financial statements referred to in SECTION 3.7(a) and
are based on good faith estimates and assumptions made by the management of the
Borrower, and there are no statements or conclusions in any of the Projections
which are based upon or include information known to the Borrower to be
misleading or which fail to take into account material information regarding the
matters reported therein. On the Closing Date, the Borrower believed that the
Projections were reasonable and attainable, it being understood that uncertainty
is inherent in any forecasts or projections and that no assurance can be given
that the results set forth in the Projections will actually be obtained.

                                     - 55 -


     3.8.      NO MATERIAL LITIGATION.

     There are no actions, suits, proceedings or investigations pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any of its Subsidiaries or any of its or their respective properties or assets
before any arbitrator or Governmental Authority or against any of its or their
respective properties or revenues (a) with respect to this Agreement or any
other Loan Document or any of the actions contemplated hereby or thereby, or (b)
which would reasonably be expected to have a Material Adverse Effect.

     3.9.      PERFORMANCE OF AGREEMENTS.

     Neither the Borrower nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Contractual Obligation of the Borrower or any of its
Subsidiaries and no event or condition has occurred or become known or exists
which with notice or the lapse of time or both would constitute such a default
except where such default or defaults, if any, would not reasonably be expected
to have a Material Adverse Effect.

     3.10.     TAXES.

     The Borrower and each of its Subsidiaries has filed or caused to be filed
all material tax returns and reports which are required to be filed, and has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its properties or assets and all other material taxes,
fees and other charges imposed on its or any of their respective properties by
any Governmental Authority other than those the amount or validity of which are
currently being contested in good faith by appropriate proceedings diligently
pursued and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower and/or its Subsidiaries, as applicable,
and no tax Lien has been filed or received. There is no proposed tax assessment
against the Borrower or any of its Subsidiaries which would reasonably be
expected to have a Material Adverse Effect.

     3.11.     GOVERNMENTAL REGULATION.

     Neither the Borrower nor any of its Subsidiaries is an "investment company"
or a company "controlled" by a company required to be registered as an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and neither the Borrower nor any of its Subsidiaries is engaged
directly or indirectly, principally, or as one of its important activities, in
the business of extending, or arranging for the extension of, credit for the
purposes of purchasing or carrying any margin stock, within the meaning of
Regulation T, U or X of the Board.

     3.12.     OWNERSHIP OF PROPERTY; LIENS.

     Each of the Borrower and its Subsidiaries has good and marketable title in
fee simple to, or a valid leasehold interest in, all its material real property,
and good title to, or a valid leasehold interest in, all its other material
property, and none of such property is subject to any Lien except for Permitted
Liens.

                                     - 56 -


     3.13.     INTELLECTUAL PROPERTY.

     The Borrower and each of its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, technology, know-how, patents and processes
necessary for the conduct of its business as currently conducted, except for
those the failure to own or be licensed to use, which would not reasonably be
expected to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property, nor does the Borrower know of any valid basis
for any such claim, except, in each case, any claim which would not reasonably
be expected to have a Material Adverse Effect. To the Borrower's or any of its
Subsidiaries knowledge, the use of such Intellectual Property by the Borrower
and its Subsidiaries does not infringe on the rights of any Person, except for
such claims and infringements that, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.

     3.14.     DISCLOSURE.

     This Agreement and any other document, certificate or statement furnished
to the Administrative Agent or any Lender by or on behalf of the Borrower or any
of its Subsidiaries, taken as a whole, do not contain any untrue statement of a
material fact and do not omit to state a material fact necessary in order to
make the statements contained herein and therein not misleading when made. There
is no fact known to the Borrower or any of its Subsidiaries which now has or in
the future would reasonably be expected to have (so far as Borrower or any of
its Subsidiaries can now reasonably foresee) a Material Adverse Effect which has
not been set forth in this Agreement, in the other documents and certificates
furnished to the Administrative Agent and each Lender specifically for use in
connection with the transactions contemplated hereby.

     3.15.     ERISA.

     The Borrower and each of its ERISA Affiliates are in compliance in all
material respects with applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder with respect to all Plans
and, to the best of the Borrower's knowledge, all Multiemployer Plans, except
where noncompliance would not reasonably be expected to have a Material Adverse
Effect. No Termination Event has occurred or is reasonably expected to occur
with respect to any Plan. The sum of the "amounts of unfunded benefit
commitments" (as defined in Section 4001(a)(18) of ERISA) under all Plans
(excluding each Plan with an amount of unfunded benefit commitments of zero or
less) is not more than $20,000,000. The aggregate Withdrawal Liability of the
Borrower or any of its Subsidiaries or ERISA Affiliates under all Multiemployer
Plans is not more than $20,000,000.

     3.16.     LABOR RELATIONS.

     Except to the extent that such practices, circumstances, events or
questions would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, (a) neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice and (b) no significant
strike, labor dispute, slowdown or stoppage is pending against the Borrower or
any of

                                     - 57 -


its Subsidiaries or, to the best knowledge of Borrower, threatened against the
Borrower or any of its Subsidiaries.

     3.17.     INSURANCE.

     Except as otherwise permitted by SECTION 5.8, the properties of the
Borrower and its Subsidiaries are insured with financially sound and reputable
insurance companies, in such amounts, with such deductibles and covering such
risks as are customarily carried by Persons engaged in the same or similar
businesses.

     3.18.     PUBLIC UTILITY HOLDING COMPANY ACT.

     Neither the Borrower nor any of its Subsidiaries is a "holding company," or
a "subsidiary  company" of a "holding  company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.

                            IV. CONDITIONS OF CREDIT

     4.1.      CONDITIONS PRECEDENT TO EFFECTIVENESS.

     This Agreement shall become effective upon the satisfaction of each of the
following conditions:

     (a)       LOAN DOCUMENTS. The Administrative Agent shall have received each
of:

               (i)     this Agreement, executed and delivered by a duly
     authorized officer of Borrower and each Lender;

               (ii)    for the account of each Lender, a Revolving Note
     conforming to the requirements hereof and executed by a duly authorized
     officer of the Borrower;

               (iii)   for the account of BT, a Swing Line Note conforming to
     the requirements hereof and executed by a duly authorized officer of the
     Borrower;

               (iv)    the Subsidiary Guarantee Agreement, executed and
     delivered by a duly authorized officer of each Subsidiary Guarantor party
     thereto; and

               (v)     all other Loan Documents.

     (b)       CORPORATE PROCEEDINGS. The Administrative Agent shall have
received (i) a copy of the resolutions, in form and substance satisfactory to
the Administrative Agent, of the board of directors of the Borrower and each
Subsidiary Guarantor authorizing (x) the execution, delivery and performance of
this Agreement, the Notes and the other Loan Documents to which it is a party
and (y) the borrowings and other extensions of credit contemplated hereunder,
certified by the Secretary or an Assistant Secretary of the Borrower as of the
Closing Date, which certificate shall state that the resolutions thereby
certified have not been amended, revoked, or rescinded and shall be in form and
substance satisfactory to the Administrative

                                     - 58 -


Agent and (ii) copies of all documents and papers, including records of
corporate proceedings, governmental approvals, good standing certificates, and
bring down telegrams, if any, which the Administrative Agent reasonably may have
requested in connection therewith, such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.

     (c)       CORPORATE DOCUMENTS. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of the Borrower and each Subsidiary
Guarantor, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of such Person.

     (d)       INCUMBENCY CERTIFICATE. The Administrative Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each Loan
Party, dated the Closing Date, as to the incumbency and signature of the
officers of such Person executing the Loan Documents to which it is a party and
any certificate or other documents to be delivered by it pursuant thereto.

     (e)       FEES. The Administrative Agent shall have received, for the
accounts of Lenders and the Administrative Agent, all accrued fees and expenses
due and owing hereunder or in connection herewith to the Lenders and the
Administrative Agent.

     (f)       LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinions of Jones, Day,
Reavis & Pogue special counsel to the Borrower, and Stanley, Lande & Hunter,
special Iowa counsel to the Borrower substantially in the form of EXHIBIT
4.1(f). Such legal opinions shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require and such counsel delivering the foregoing legal opinion is
expressly instructed to deliver its opinion for the benefit of each of the
Administrative Agent and the Lenders.

     (g)       TERMINATION OF EXISTING CREDIT FACILITY. The Administrative Agent
shall have received evidence satisfactory to it that the Borrower and its
Subsidiaries will terminate or will otherwise be released from its obligations
under the Existing Credit Facility Agreement, and that all agreements made by
the Borrower and its Subsidiaries in connection with the provision of credit
support and collateral security with respect thereto will be released and
terminated.

     (h)       APPROVALS. All necessary governmental (domestic and foreign) and
third party approvals in connection with the Agreement and the transactions
contemplated by the Loan Documents and the Existing Credit Facility Termination
Documents and otherwise referred to herein or therein shall have been obtained
and remain in effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority which restrains,
prevents or imposes materially adverse conditions upon the consummation of all
or any part of the Transaction or the other transactions contemplated by the
Loan Documents and the Existing Credit Facility Termination Documents and
otherwise referred to herein or therein. Additionally, there shall not exist any
judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon all or any part of the Transaction,
the transactions contemplated by the

                                     - 59 -


Loan Documents and the Existing Credit Facility Termination Documents or the
making of the Loans.

     (i)       LITIGATION. No litigation by any entity (private or governmental)
shall be pending or, to the best knowledge of the Borrower, threatened with
respect to this Agreement, any of the Loan Documents or any of the Existing
Credit Facility Documents or any documentation executed in connection herewith
or the transactions contemplated hereby (including, without limitation, the
Transaction), or with respect to any of the Existing Credit Facility Agreement
or the obligations being refinanced in connection with the consummation of the
Transaction or which the Administrative Agent or the Majority Lenders shall
determine could reasonably be expected to have a Material Adverse Effect.

     (j)       APPOINTMENT OF AGENT. The Administrative Agent shall have
received a letter from CT Corporation System, presently located at 111 Eighth
Avenue, 13th Floor, New York, New York 10011, substantially in the form of
EXHIBIT 4.1(j) hereto, indicating its consent to its appointment by the Borrower
as its agent to receive service of process as specified in SECTION 9.10 of this
Agreement.

     (k)       OFFICER'S CERTIFICATE. The Administrative Agent shall have
received a certificate executed by a responsible officer on behalf of the
Borrower, dated the date of this Agreement and in the form of EXHIBIT 4.1(k)
hereto, stating that the representations and warranties set forth in ARTICLE III
hereof are true and correct as of the date of the certificate, that no Event of
Default or Unmatured Event of Default has occurred and is continuing and that
the conditions of SECTION 4.1 hereof have been fully satisfied (except that no
opinion need be expressed as to the Administrative Agent's or Majority Lenders'
satisfaction with any document, instrument or other matter).

     (l)       ADVERSE CHANGE. On or prior to the Closing Date, nothing shall
have occurred (and neither the Administrative Agent nor any Lender shall have
become aware of any facts or conditions not previously known) which the
Administrative Agent or the Majority Lenders shall determine has or reasonably
could be expected to have a Material Adverse Effect.

     (m)       ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, and the other Loan Documents shall
be satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received such other documents and legal opinions
in respect of any aspect or consequence of the transactions contemplated hereby
or thereby as the Administrative Agent or any Lender (acting through the
Administrative Agent) shall reasonably request.

     4.2.      CERTAIN CONDITIONS PRECEDENT TO EACH LOAN AND LETTER OF CREDIT.

     The agreement of each Lender to make a Loan (including, without limitation,
its initial Loans hereunder, but other than any Revolving Loan the proceeds of
which are to be used exclusively to repay Refunded Swing Line Loans or Unpaid
Drawings) and of each Issuing Bank to issue Letters of Credit is subject to the
satisfaction of the following conditions precedent:

                                     - 60 -


     (a)       REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Borrower and each Loan Party contained herein and in the other
Loan Documents shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as of
the date of the making of such Loan, except to the extent such representations
and warranties specifically relate to an earlier date in which case such
representations and warranties were true and correct in all material respects as
of such earlier date;

     (b)       NO EVENTS OF DEFAULT. There shall exist no Event of Default or
Unmatured Event of Default;

     (c)       AVAILABLE REVOLVING COMMITMENT. After giving effect to the Loans
and/or Letters of Credit requested to be made, no Lender will have an Available
Revolving Commitment which is less than zero; and

     (d)       OTHER MATTERS. The Administrative Agent shall have received such
other documents or legal opinions as the Administrative Agent may reasonably
request, all in form and substance reasonably satisfactory to the Administrative
Agent and its counsel including, with respect to Revolving Loans, a Notice of
Borrowing in accordance with the provisions of SECTION 2.1(d) hereof.

     Each Notice of Borrowing or Competitive Bid Request and the acceptance by
Borrower of the proceeds thereof and each Request for Letter of Credit and the
acceptance by the Borrower of the issuance thereof shall constitute a
representation and warranty by the Borrower, as of the date of the Loans
comprising such Borrowing or the date of the issuance of the Letter of Credit,
as applicable, that the conditions specified in SECTIONS 4.2(a), (b) AND (c)
have been satisfied.

                            V. AFFIRMATIVE COVENANTS

     The Borrower hereby agrees that, so long as the Revolving Commitments
remain in effect, any Loan remains outstanding and unpaid, any L/C Outstanding
remains or any other amount is owing to the Administrative Agent, any Issuing
Bank or any Lender hereunder, Borrower shall:

     5.1.      FINANCIAL STATEMENTS.

     Furnish to each Lender:

     (a)       ANNUAL STATEMENTS. As soon as available, but in any event within
120 days after the end of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of Borrower and its consolidated Subsidiaries as at
the end of such year and the related consolidated statements of income, retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year; and

     (b)       QUARTERLY STATEMENTS. As soon as available, but in any event not
later than 60 days after the end of each of the first three quarterly periods of
each fiscal year of the Borrower, the unaudited consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated statements of income, retained

                                     - 61 -


earnings and of cash flows of the Borrower and its consolidated Subsidiaries for
such quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous year
(except with respect to balance sheet figures which shall be in comparative form
for the previous audited period only);

all such financial statements shall be complete and correct in all material
respects and shall be prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by the accountants preparing such statements or Financial Officer, as
the case may be, and disclosed therein) and, in the case of the consolidated
financial statements referred to in SECTION 5.1(a), accompanied by a report
thereon of independent certified public accountants of recognized national
standing, which report shall contain no qualifications with respect to the
continuance of the Borrower and its Subsidiaries as going concerns and shall
state that such financial statements present fairly the financial position of
the Borrower and its Subsidiaries as at the dates indicated and the results of
their operations and cash flow for the periods indicated in conformity with GAAP
and that the examination by such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards.

     5.2.      CERTIFICATES; OTHER INFORMATION.

     Furnish to each Lender (or, if specified below, to the Administrative
Agent):

     (a)       ACCOUNTANT'S CERTIFICATES. Concurrently with the delivery of the
financial statements referred to in SECTION 5.1(a), (i) to the extent not
contrary to the then current recommendations of the American Institute of
Certified Public Accountants, a certificate from an independent certified public
accountant of nationally recognized standing selected by the Borrower, stating
that, in the course of their annual audit of the books and records of the
Borrower, no Event of Default or Unmatured Event of Default has come to their
attention which was continuing at the end of such fiscal year or on the date of
their certificate, or if such an Event of Default or Unmatured Event of Default
has come to their attention, the certificate shall indicate the nature of such
Event of Default or Unmatured Event of Default and the action which Borrower
proposes to take with respect thereto, and (ii) a letter, in form satisfactory
to the Administrative Agent from such accountants with respect to reliance on
such accountant's certificate and report on the annual consolidated financial
statements referred to in this SECTION 5.2;

     (b)       OFFICER'S CERTIFICATE. Concurrently with the delivery of the
financial statements referred to in SECTIONS 5.1(a) and (b), a certificate of a
Financial Officer substantially in the form of EXHIBIT 5.2(b) stating that, to
the best of such Financial Officer's knowledge, (i) such financial statements
present fairly, in accordance with GAAP, the financial condition and results of
operations of the Borrower and its Subsidiaries for the period referred to
therein (subject, in the case of interim statements, to normal recurring
adjustments) and (ii) that no Event of Default or Unmatured Event of Default has
occurred, except as specified in such certificates, which shall set forth
detailed computations to the extent necessary to establish Borrower's compliance
with the covenants set forth in SECTION 6.1 of this Agreement;

                                     - 62 -


     (c)       AUDIT REPORTS AND STATEMENTS. Promptly following the Borrower's
receipt thereof, copies of all consolidated financial or other consolidated
reports or statements, if any, submitted to the Borrower or any of its
Subsidiaries by independent public accountants relating to any annual or interim
audit of the books of the Borrower or any of its Subsidiaries;

     (d)       PUBLIC FILINGS. Within 20 days after the same become public,
copies of all financial statements, filings, registrations and reports which the
Borrower may make to, or file with, the United States Securities and Exchange
Commission ("SEC") or any successor or analogous Governmental Authority;

     (e)       STATUS. Within five Business Days after the occurrence thereof,
written notice to the Administrative Agent of any change in Status; PROVIDED,
HOWEVER, that the failure to provide such notice shall not delay or otherwise
affect any change in the Applicable Margin or other amount payable hereunder
which is to occur upon a change in Status pursuant to the terms of this
Agreement; and

     (f)       OTHER REQUESTED INFORMATION. Such other information respecting
the respective properties, business affairs, financial condition and/or
operations of the Borrower or any of its Subsidiaries as the Administrative
Agent or any Lender may from time to time reasonably request.

     5.3.      NOTICES.

     Promptly upon obtaining knowledge thereof, give notice to the the
Administrative Agent (which shall promptly provide a copy of such notice to each
Lender) of:

     (a)       EVENT OF DEFAULT OR UNMATURED EVENT OF DEFAULT. The occurrence of
any Event of Default or Unmatured Event of Default, accompanied by a statement
of a Financial Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.

     (b)       LITIGATION AND RELATED MATTERS. The commencement of, or any
material development in any action, suit, proceeding or investigation pending or
threatened against or affecting the Borrower or any of its Subsidiaries or any
of their respective properties before any arbitrator or Governmental Authority,
in which the amount involved that the Borrower reasonably determines is not
covered by insurance is $20,000,000 or more, or which, if determined adversely
to the Borrower or any of its Subsidiaries, would reasonably be expected to have
a Material Adverse Effect.

     (c)       NOTICE OF CHANGE OF CONTROL. Each occasion that there shall occur
a Change of Control, and such notice shall set forth in reasonable detail the
particulars of each such occasion.

     5.4.      CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.

     Continue to engage in business of the same general type as now conducted by
it and preserve, renew and keep in full force and effect its and each
Subsidiary's corporate existence and take all reasonable action to maintain all
rights, privileges and franchises material to its and those of each of its
Subsidiaries' businesses except as otherwise permitted pursuant to
SECTIONS

                                     - 63 -


6.5 AND 6.8 and comply and cause each of its Subsidiaries to comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith would not in the aggregate reasonably be expected to
have a Material Adverse Effect.

     5.5       PAYMENT OF OBLIGATIONS

     Pay or discharge or otherwise satisfy at maturity or, to the extent
permitted hereby, prior to maturity or before they become delinquent, as the
case may be, and cause each of its Subsidiaries to pay or discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be:

               (i)     all its and their respective Indebtedness;

               (ii)    all taxes, assessments and governmental charges or levies
     imposed upon any of them or upon any of their income or profits or any of
     their respective properties or assets prior to the date on which penalties
     attach thereto; and

               (iii)   all lawful claims prior to the time they become a Lien
     (other than Permitted Liens) upon any of their respective properties or
     assets;

PROVIDED, HOWEVER, that neither the Borrower nor any of its Subsidiaries shall
be required to pay or discharge any such Indebtedness, tax, assessment, charge,
levy or claim (i) while the same is being contested by it in good faith and by
appropriate proceedings diligently pursued so long as the Borrower or such
Subsidiary, as the case may be, shall have set aside on its books adequate
reserves in accordance with GAAP (segregated to the extent required by GAAP)
with respect thereto and title to any material properties or assets is not
jeopardized in any material respect or (ii) the nonpayment of which would not
reasonably be expected to result in a Material Adverse Effect.

     5.6       INSPECTION OF PROPERTY, BOOKS AND RECORDS.

     Keep, or cause to be kept, and cause each of its Subsidiaries to keep or
cause to be kept, adequate records and books of account, in which complete
entries are to be made reflecting its and their business and financial
transactions, such entries to be made in accordance with sound accounting
principles consistently applied and will permit, and cause each of its
Subsidiaries to permit, the Administrative Agent, any Issuing Bank and any
Lender or their respective representatives, at any reasonable time, and from
time to time at the reasonable request of such Person made to the Borrower and
upon reasonable notice, to visit and inspect its and their respective
properties, to examine and make copies of and take abstracts from its and their
records and books of account, and to discuss its and their respective affairs,
finances and accounts with its and their principal officers, directors and
independent public accountants (and by this provision the Borrower authorizes
such accountants to discuss with the Administrative Agent, the Issuing Banks and
the Lenders and such representatives the affairs, finances and accounts of the
Borrower and its Subsidiaries; PROVIDED, HOWEVER, that prior to the occurrence
and continuance of an Event of Default, all such discussions shall take place in
the presence of a Financial Officer of Borrower).

                                     - 64 -


     5.7.      ERISA.

     (a)       As soon as practicable and in any event within thirty days after
the Borrower or any of its Subsidiaries or ERISA Affiliates knows or has reason
to know that a Reportable Event has occurred with respect to any Plan, deliver,
or cause such Subsidiary or ERISA Affiliate to deliver, to the Administrative
Agent a certificate of a responsible officer of Borrower or such Subsidiary or
ERISA Affiliate, as the case may be, setting forth the details of such
Reportable Event and the action, if any, which the Borrower or such Subsidiary
or ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given;

     (b)       Upon the request of any Lender made from time to time, deliver,
or cause each Subsidiary or ERISA Affiliate to deliver, to each Lender a copy of
the most recent actuarial report completed and annual report filed with respect
to any Plan;

     (c)       As soon as possible and in any event within ten (10) days after
the Borrower or any of its Subsidiaries or ERISA Affiliates knows or has reason
to know that any of the following have occurred or is reasonably likely to occur
with respect to any Plan:

               (i)     the Plan Sponsor intends to terminate such Plan, unless
     the liability to be incurred by the Borrower, its Subsidiaries or ERISA
     Affiliates in connection with such termination will not exceed $20,000,000
     in the aggregate,

               (ii)    the PBGC has instituted or will institute proceedings
     under Section 4042 of ERISA to terminate such Plan.

               (iii)   that an accumulated funding deficiency (as defined in
     Section 3.02(a) of ERISA and Section 412(a) of the Code) has been incurred
     or that on application may be or has been made to the Secretary of the
     Treasury for a waiver or modification of the minimum funding standard
     (including any required installment payments) or on extension of any
     amortization period under Section 412 of the Code, or

               (iv)    that the Borrower, or any Subsidiary of the Borrower or
     any ERISA Affiliate will or may incur any liability (including, but not
     limited to, contingent or secondary liability) to or on account of the
     termination of or withdrawal from a Plan under Section 401(a)(29), 4971,
     4975 or 4980 of the Code or Section 409 or 502(1) of ERISA, other than any
     liability not exceeding $20,000,000 in the aggregate,

the Borrower shall deliver, or cause such Subsidiary or ERISA Affiliate to
deliver, to Administrative Agent a written notice thereof; and

     (d)       As soon as possible and in any event within thirty days after the
Borrower or any of its Subsidiaries or ERISA Affiliates knows or has reason to
know that any of them has caused a complete withdrawal or partial withdrawal
(within the meaning of Sections 4203 and 4205, respectively, of ERISA) from any
Multiemployer Plan, unless the liability to be incurred by the Borrower, its
Subsidiaries or ERISA Affiliates in connection with such withdrawal will not
exceed $20,000,000 in the aggregate the Borrower shall deliver, or cause such
Subsidiary or ERISA Affiliate to deliver, to the Administrative Agent a written
notice thereof.

                                     - 65 -


     (e)       For purposes of this SECTION 5.7, the Borrower shall be deemed to
have knowledge of all facts known by the Plan Administrator of any Plan of which
the Borrower is the Plan Sponsor, and each Subsidiary and ERISA Affiliate of the
Borrower shall be deemed to have knowledge of all facts known by the Plan
Administrator of any Plan of which such Subsidiary or ERISA Affiliate,
respectively, is a Plan Sponsor.

     (f)       In addition to its other obligations set forth in this
SECTION 5.7, the Borrower shall, and shall cause each of its Subsidiaries and
ERISA Affiliates to,

               (i)     furnish to the Administrative Agent, promptly after
     delivery of the same to the PBGC, a copy of any delinquency notice pursuant
     to Section 412(n)(4) of the Code,

               (ii)    correct any such failure to satisfy funding requirements
     or delinquency referred to in SECTION 5.7(c)(iii) above and
     SECTION 5.7(f)(i) above within ninety (90) days after the occurrence
     thereof, except where the failure to so satisfy would not reasonably be
     expected to have a Material Adverse Effect, and

               (iii)   comply in good faith with the requirements set forth in
     Section 4980B of the Code and with Sections 601(a) and 606 of ERISA, except
     where the failure to so comply could not reasonably be expected to have a
     Material Adverse Effect.

     5.8.      INSURANCE.

     The Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, or such
types and in such amounts as are customarily carried under similar circumstances
by such other Persons. Such insurance shall be maintained with financially sound
and reputable insurers, except that a portion of such insurance program (not to
exceed that which is customary in the case of companies engaged in the same or
similar business or having similar properties similarly situated) may be
effected through self-insurance, PROVIDED adequate reserves therefor, in
accordance with GAAP, are maintained.

     5.9.      ENVIRONMENTAL LAWS.

     (a)       Comply with in all material respects, and cause its Subsidiaries
to comply with in all material respects, and, in each case take reasonable steps
to ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws and obtain and comply in all
material respects with and maintain, and take reasonable steps to ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect;

     (b)       Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders, directives and information requests of all Governmental Authorities
regarding Environmental Laws except to the extent that the same are

                                     - 66 -


being contested in good faith by appropriate proceedings and the pendency of
such proceedings would not reasonably be expected to have a Material Adverse
Effect; and

     (c)       Defend, indemnify and hold harmless the Administrative Agent, the
Issuing Banks and the Lenders, and their respective employees, agents, officers
and directors, from and against any and all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower, any of its
Subsidiaries or their respective properties, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation, reasonable attorneys' and consultants' fees, investigation and
laboratory fees, costs arising from any Remedial Actions, court costs and
litigation expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful misconduct of the party seeking indemnification
therefor. The agreements in this SECTION 5.9(c) shall survive repayment of the
Notes and all other Obligations.

     5.10.     ADDITIONAL SUBSIDIARY GUARANTORS.

     In the event any Person shall hereafter become a Material Subsidiary, the
Borrower shall, within 30 days, cause such Material Subsidiary to become a party
to the Subsidiary Guarantee Agreement and deliver such other corporate
authorization documents as the Administrative Agent may reasonably request.

                             VI. NEGATIVE COVENANTS

     The Borrower hereby agrees that, so long as the Revolving Commitments
remain in effect, any Loan remains outstanding and unpaid, any L/C Outstanding
remains or any other amount is owing to the Administrative Agent, any Issuing
Bank or any Lender hereunder, Borrower shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly:

     6.1.      FINANCIAL CONDITION COVENANTS.

     (a)       MAINTENANCE OF CONSOLIDATED NET WORTH. Permit Consolidated Net
Worth on the last day of any fiscal quarter to be less than the sum of (i)
$500,000,000 PLUS (ii) the amount equal to 33% of the aggregate Consolidated Net
Income of Borrower and its consolidated Subsidiaries since December 31, 2001;
PROVIDED, HOWEVER, that in the event that the Borrower and its consolidated
Subsidiaries have a Consolidated Net Loss for any fiscal quarter, Consolidated
Net Income for purposes only of SECTION 6.1(a)(ii) shall be deemed to be zero
for such fiscal quarter.

     (b)       LEVERAGE RATIO. Permit the ratio of (a) Consolidated Debt on the
last day of any fiscal quarter of Borrower (after giving effect to all payments
and prepayments made on such date) to (b) Consolidated EBITDA for the period of
four consecutive fiscal quarters ending on the last day of any fiscal quarter of
the Borrower to exceed 2.50 to 1.0.

     (c)       INTEREST COVERAGE RATIO. Permit the ratio of (i) Consolidated
EBITDA for the period of four consecutive fiscal quarters ending on the last day
of any fiscal quarter of the Borrower to (ii) Consolidated Interest Expense for
such period to be less than 5.00 to 1.0.

                                     - 67 -


     6.2.      INDEBTEDNESS OF SUBSIDIARIES

     Permit any Subsidiary of the Borrower to incur, directly or indirectly, or
suffer to exist any Indebtedness except:

     (a)       Intercompany Indebtedness; PROVIDED, however, that in the event
of any subsequent issuance or transfer of any Capital Stock which results in the
holder of such Indebtedness ceasing to be a Subsidiary of the Borrower or any
subsequent transfer of such Indebtedness (other than to the Borrower or any of
its Subsidiaries) such Indebtedness shall be required to be permitted under
another provision of this SECTION 6.2; PROVIDED, FURTHER, HOWEVER, that in the
case of Intercompany Indebtedness consisting of a loan or advance to the
Borrower, each such loan or advance shall be subordinated to the indefeasible
payment in full of all of the Borrower's obligations pursuant to this Agreement
and the other Loan Documents, and each such loan or advance shall be on open
account and shall not be evidenced by a promissory note or other instrument;

     (b)       Indebtedness constituting Guarantee Obligations permitted under
Sections 6.3(b) or (e);

     (c)       Indebtedness outstanding on the date hereof and listed on
SCHEDULE 6.2(c) hereto and any Indebtedness resulting from the refinancing of
any such Indebtedness; PROVIDED, HOWEVER, that (i) the principal amount of any
such refinancing Indebtedness (as determined as of the date of the incurrence of
such refinancing Indebtedness in accordance with GAAP) does not exceed the
principal amount of the Indebtedness refinanced thereby on such date and (ii) in
the case of any such refinancing Indebtedness which is in excess of $20,000,000,
either (A) the covenants, defaults and similar provisions applicable to such
refinancing Indebtedness or obligations are no more restrictive in any material
respect taken as a whole than the provisions contained in this Agreement and do
not conflict in any material respect with the provisions of this Agreement or
(B) such refinancing Indebtedness is otherwise upon terms and subject to
definitive documentation which is in form and substance reasonably satisfactory
to the Administrative Agent;

     (d)       obligations under Currency Protection Agreements, Interest Rate
Protection Agreements or Commodity Price Protection Agreements entered into in
the ordinary course of business in notional amounts reasonably related to
assets, expenses or liabilities of the Borrower or any of its Subsidiaries or in
anticipation of any debt offering or asset transactions; and

     (e)       Indebtedness of Subsidiaries in addition to that described in
SECTIONS 6.2(a) THROUGH (c); PROVIDED, HOWEVER, that the aggregate principal
amount of the Indebtedness permitted under this SECTION 6.2(d), when added
(without duplication) to (i) all Indebtedness outstanding secured by Liens and
permitted under clause (viii) of the definition of "Permitted Liens", (ii) the
amount of Guarantee Obligations outstanding and permitted under SECTION 6.3(g)
and (iii) the aggregate amount of all Attributable Debt of the Borrower and its
Subsidiaries then outstanding, does not exceed 15% of Consolidated Net Tangible
Assets.

                                     - 68 -


     6.3.      GUARANTEE OBLIGATIONS.

     Permit any Subsidiary of the Borrower to create or become or be liable with
respect to any Guarantee Obligation except:

     (a)       Guarantee Obligations resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;

     (b)       Guarantee Obligations to or for the benefit of the Administrative
Agent and the Lenders hereunder or under the other Loan Documents;

     (c)       Guarantee Obligations arising under customary indemnification
provisions (express or implied) in respect of Contractual Obligations governing
transactions otherwise required or not prohibited by the terms of this Agreement
and customary indemnities in connection with underwritings or similar
transactions;

     (d)       Guarantee Obligations arising in the ordinary course of its
business and consistent with past practices (regardless of the theory of
liability) from the manufacture, sale, handling, distribution or use of any
product manufactured, sold or otherwise dealt with, or any service provided by
such Subsidiary;

     (e)       Guarantee Obligations in existence on the date hereof and
identified on SCHEDULE 6.3(e) hereto and any renewal or replacement of such
Guarantee Obligations to the extent that the amount of any such Guarantee
Obligations so extended or renewed is not increased thereby;

     (f)       Guarantee Obligations with respect to commercial or standby
letters of credit or functionally equivalent obligations, in each case, issued
or reimbursement obligations incurred in connection with (i) performance, bid or
advance payment obligations incurred in the ordinary course of business
including, without limitation, performance requirements under workers
compensation or similar laws or (ii) Indebtedness permitted under SECTION 6.2;

     (g)       Intercompany Guarantees; and

     (h)       In addition to the Guarantee Obligations permitted by
SECTIONS 6.3(a) THROUGH 6.3(g), other Guarantee Obligations; PROVIDED that the
aggregate liability of all Subsidiaries of the Borrower in respect of the
Guarantee Obligations permitted by this SECTION 6.3(g), when added (without
duplication) to (i) all Indebtedness outstanding secured by Liens and permitted
under CLAUSE (viii) of the definition of "PERMITTED LIENS", (ii) the aggregate
amount of Indebtedness then outstanding and permitted under SECTION 6.2(d), and
(iii) the aggregate amount of Attributable Debt of the Borrower and its
Subsidiaries then outstanding, shall not exceed 15% of Consolidated Net Tangible
Assets.

     6.4.      LIENS.

     Except for Permitted Liens, create, incur, assume or suffer to exist or
agree to create, incur or assume any Lien in, upon or with respect to any of its
properties or assets (including, without limitation, any securities or debt
instruments of any of its Subsidiaries), whether now

                                     - 69 -


owned or hereafter acquired, or assign or otherwise convey any right to receive
income to secure any obligation.

     6.5.      FUNDAMENTAL CHANGES.

     Enter into any merger, consolidation or amalgamation, or liquidate, wind-up
or dissolve itself (or suffer any liquidation or dissolution); convey, sell,
assign, transfer or otherwise dispose of all or substantially all of the
property, business or assets of the Borrower and its Subsidiaries; or make any
material change in its present method of conducting business; PROVIDED, HOWEVER,
that as long as immediately after giving effect to such transaction, the
resulting, surviving or transferee Person shall have Consolidated Net Worth in
an amount which is not less than the Consolidated Net Worth of such Person prior
to such transaction:

     (a)       any Subsidiary of the Borrower may be merged or consolidated with
or into Borrower (PROVIDED, HOWEVER, that the Borrower shall be the continuing
or surviving corporation) or with or into any one or more Wholly-Owned
Subsidiaries of the Borrower (PROVIDED, HOWEVER, that the (i) Wholly-Owned
Subsidiary or Subsidiaries shall be the continuing or surviving corporation and
(ii) in the case of any merger or consolidation between Subsidiaries at least
one of that is a Subsidiary Guarantor, a Subsidiary Guarantor shall be the
surviving Person); and

     (b)       any Wholly-Owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other Wholly-Owned Subsidiary of the Borrower
(other than Hearth-Tech if any of its outstanding capital stock is not owned by
the Borrower and its Wholly-Owned Subsidiaries).

     6.6.      RESTRICTED PAYMENTS.

     Either: (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock or to the direct or indirect holders of its Capital
Stock (except dividends or distributions payable solely in its Non-Convertible
Capital Stock or in options, warrants or other rights to purchase its
Non-Convertible Capital Stock and except dividends or distributions payable to
the Borrower or a Subsidiary of the Borrower) or (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the Borrower or any
Subsidiary of the Borrower or any Indebtedness of the Borrower that is
subordinated to the Obligations (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being hereinafter referred to as a "RESTRICTED PAYMENT"); PROVIDED, HOWEVER,
that, the Borrower or any Subsidiary of the Borrower may make Restricted
Payments during such time as no Event of Default or Unmatured Event of Default
has occurred and is continuing or would result therefrom.

     6.7.      DISTRIBUTIONS FROM SUBSIDIARIES.

     Create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary of the
Borrower to (i) pay dividends or make any other distributions on its Capital
Stock (PROVIDED, HOWEVER, that a requirement that a Subsidiary give the holders
of any Indebtedness of such Subsidiary not more than thirty days prior written
notice of its intention to pay a dividend to its stockholders shall not be
deemed to

                                     - 70 -


constitute a consensual encumbrance or restriction) or pay any Indebtedness or
other obligation owed to the Borrower or any of its other Subsidiaries, (ii)
make any loans or advances to the Borrower or any of its other Subsidiaries, or
(iii) transfer any of its property or assets to the Borrower or any of its other
Subsidiaries, except:

     (a)       any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Closing Date and reflected on SCHEDULE 6.7(a) hereto;

     (b)       any encumbrance or restriction with respect to a Subsidiary of
the Borrower pursuant to an agreement relating to any Indebtedness issued by
such Subsidiary on or prior to the date on which such Subsidiary became a
Subsidiary of the Borrower or was acquired by the Borrower (other than
Indebtedness issued as consideration in, or to provide all or any portion of the
funds utilized to consummate, the transaction or series of related transactions
in contemplation of or pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Borrower) and outstanding on such date;

     (c)       any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease; and

     (d)       in the case of CLAUSE (iii) above, restrictions contained in
security agreements securing Indebtedness of a Subsidiary of the Borrower to the
extent such restrictions restrict the transfer of the property subject to such
security agreements.

     6.8.      SALES OF ASSETS AND SUBSIDIARY STOCK.

     Make any Asset Disposition unless the Borrower or such Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the board of directors of such
Person (including a determination as to the value of all noncash consideration),
of the shares and assets subject to such Asset Disposition. The Net Proceeds of
any Material Asset Disposition shall be applied in the manner set forth in
SECTION 2.8(b). Notwithstanding the foregoing, Hearth-Tech may issue such shares
of its capital stock as are necessary in connection with any conversion related
to those certain $12,000,000 in original aggregate principal amount of 7%
Convertible Debentures of Heatilator, Inc. and/or those certain $53,000,000 in
original aggregate principal amount of 5.5% Convertible Debentures of
Hearth-Tech.

     6.9.      INVESTMENTS.

     Make any Investments except for Permitted Investments.

     6.10.     TRANSACTIONS WITH AFFILIATES.

     Conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Borrower or any legal or
beneficial owner of 5% or more of any class of Capital Stock of the Borrower or
with any Affiliate of such owner (other than a Wholly-Owned Subsidiary of the
Borrower or an employee stock ownership plan for the benefit of employees of

                                     - 71 -


the Borrower or any of its Subsidiaries) unless the terms of such business,
transaction or series of transactions are (i) as favorable to the Borrower or
such Subsidiary as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with an
unrelated third person or, if such transaction is not one which by its nature
could be obtained from such person, is on fair and reasonable terms and (ii) are
in the ordinary course of business or, if not in the ordinary course of
business, are set forth in writing and the board of directors of the Borrower or
such Subsidiary, as the case may be, has determined in good faith that such
business or transaction or series of transactions meets the applicable criteria
set forth in CLAUSE (i) above; PROVIDED that if any of the outstanding capital
stock of Hearth-Tech is not owned by the Borrower and its Wholly-Owned
Subsidiaries, all transactions of the Borrower or any of its Subsidiaries (other
than Hearth-Tech or any of its Subsidiaries) with Hearth-Tech and any of its
Subsidiaries (other than any transactions in the ordinary course of business
consistent with the past practice of Hearth-Tech and its Wholly-Owned
Subsidiaries and transactions between Hearth-Tech and its Wholly-Owned
Subsidiaries) shall comply with this SECTION 6.10.

     6.11.     SALE-LEASEBACKS.

     Lease any property as lessee in connection with a Sale and Leaseback
Transaction entered into after the Closing Date if, at the time of such entering
into and after giving effect thereto, Attributable Debt for such Sale and
Leaseback Transaction and for all Sale and Leaseback Transactions so entered
into by the Borrower and its Subsidiaries during the immediately preceding 365
day period, when added (without duplication) to (i) all Indebtedness outstanding
secured by Liens and permitted under CLAUSE (viii) of the definition of
"PERMITTED LIENS", (ii) the aggregate amount of Indebtedness then outstanding
and permitted under SECTION 6.2(d) and (iii) the amount of Guarantee Obligations
outstanding and permitted under SECTION 6.3(g) shall exceed 15% of Consolidated
Net Tangible Assets.

     6.12.     FISCAL YEAR.

     Change the fiscal year of the Borrower.

     6.13.     AMENDMENTS TO ORGANIZATIONAL DOCUMENTS.

     Amend, modify or waive, or permit any amendment, modification or waiver as
to any material provision of its articles of incorporation, by-laws or other
similar governing documents if such amendment, modification or waiver would
adversely affect the interests of the Administrative Agent or the Lenders.

     6.14.     ACCOUNTING CHANGES.

     Make or permit to be made any change in accounting policies affecting the
presentation of financial statements or reporting practices from those employed
by it on the date hereof, unless (i) such change is required by GAAP, (ii) such
change is disclosed to the Lenders through the Administrative Agent or otherwise
and (iii) relevant prior financial statements that are affected by such change
are restated (in form and detail satisfactory to Administrative Agent) as may be
required by GAAP to show comparative results.

                                     - 72 -


     6.15.     LINES OF BUSINESS.

     Enter into or acquire any line of business which is not reasonably related
to the businesses engaged in as of the date hereof.

                             VII. EVENTS OF DEFAULT

     7.1.      EVENTS OF DEFAULT.

     If any of the events, acts, conditions or occurrences (each, an "EVENT OF
DEFAULT") hereinafter set forth shall occur or exist (for any reason whatsoever,
and whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in accordance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

     (a)       FAILURE TO MAKE PAYMENTS WHEN DUE. (i) The Borrower shall default
in the payment when due of principal of any Loan or any reimbursement of a
Drawing, in either case in accordance with the terms hereof; or (ii) the
Borrower shall default in the payment when due of interest on any Loan or any
reimbursement of a Drawing in accordance with the terms hereof and such default
shall continue for five (5) days after the date when due; or (iii) the Borrower
shall default in the payment when due of any other amount owing hereunder or any
other Loan Document and such default shall continue for ten (10) days after the
date when due; or

     (b)       REPRESENTATIONS. Any representation or warranty made or deemed to
be made by the Borrower or any Loan Party herein or in any document, instrument
or certificate delivered pursuant hereto shall prove to have been incorrect or
misleading in any material respect on or as of the date made or deemed made; or

     (c)       Breach of Certain Covenants. The Borrower shall fail to perform
or comply with any term or condition contained in Article VI other than
nonconsensual Liens under Section 6.4; or

     (d)       OTHER DEFAULTS UNDER AGREEMENT OR LOAN DOCUMENTS. The Borrower or
any of its Subsidiaries shall default in the performance or observance of any
term, covenant, condition or agreement contained in this Agreement (other than
as provided in SECTIONS 7.1(a), (b) OR (c) above), and such default shall
continue unremedied for a period of 30 days after written notice thereof shall
have been given to the Borrower by the Administrative Agent or the Majority
Lenders; or

     (e)       DEFAULT UNDER OTHER AGREEMENTS. The Borrower or any of its
Subsidiaries (i) shall default in the payment when due (after giving effect to
any applicable grace period), whether at stated maturity or otherwise, of
principal or interest in respect of Indebtedness having an aggregate principal
amount of $20,000,000 or more; or (ii) shall fail to perform or observe any
other condition or covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any such Indebtedness, if the
effect of any such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause (determined without regard to whether any
notice of

                                     - 73 -


acceleration or similar notice is required), such Indebtedness to be declared to
be due and payable prior to its stated maturity, or cash collateral in respect
thereof to be demanded; or

     (f)       JUDGMENTS. One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving, individually or in
the aggregate, a liability of $20,000,000 or more and all such judgments or
decrees shall not have been vacated, discharged or stayed pending appeal within
sixty (60) days from the entry thereof but in any event prior to the
commencement of enforcement proceedings; or

     (g)       VOLUNTARY INSOLVENCY, ETC. The Borrower or any of its Material
Subsidiaries shall become insolvent, generally fail to pay, or state in writing
or publicly its inability or unwillingness to pay, its debts as they become due
or call a meeting of creditors for the purpose of adjusting its debts; or the
Borrower or any of its Material Subsidiaries shall become insolvent or shall
voluntarily commence any proceeding or file any petition under any bankruptcy,
insolvency or similar law seeking dissolution or reorganization or the
appointment of a receiver, trustee, custodian or liquidator for it or a
substantial portion of its property, assets or business, or to effect a plan or
other arrangement with its creditors, or shall file any answer admitting the
jurisdiction of the court and the material allegations of an involuntary
petition filed against it in any bankruptcy, insolvency or similar proceeding,
or shall be adjudicated bankrupt, or shall make a general assignment for the
benefit of creditors, or shall consent to, or acquiesce in the appointment of, a
receiver, trustee, custodian or liquidator for a substantial portion of its
property, assets or business; or

     (h)       INVOLUNTARY INSOLVENCY, ETC. Involuntary proceedings or an
involuntary petition shall be commenced or filed against the Borrower or any of
its Material Subsidiaries under any bankruptcy, insolvency or similar law or
seeking the dissolution or reorganization of it or the appointment of a
receiver, trustee, custodian or liquidator for it or of a substantial part of
its property, assets or business, or any writ, judgment, warrant of attachment,
execution or similar process shall be issued or levied against a substantial
part of its property, assets or business, and such proceedings or petition shall
not be dismissed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded, within sixty
(60) days after commencement, filing or levy, as the case may be or any order
for relief shall be entered in any such proceeding; or

     (i)       UNENFORCEABILITY. This Agreement shall cease for any reason to be
full force and effect (other than by reason of the satisfaction of all the
Borrower's and its Subsidiaries' obligations thereunder) or the Borrower or any
of its Subsidiaries or any other Person (other than the Lenders or the
Administrative Agent) shall disavow its obligations under any provision hereof
or thereof, or shall deny that it has any or further obligations under any
provision thereof, or shall contest the validity or enforceability of any
provision thereof; or

     (j)       ERISA.

               (i)     A Reportable Event or Reportable Events, or a failure to
     make a required installment or other payment (within the meaning of
     Section 412(n)(l) of the Code), shall have occurred with respect to any
     Plan or Plans that would reasonably be expected to result in liability of
     the Borrower to the PBGC or to a Plan in an aggregate amount

                                     - 74 -


     exceeding $20,000,000 and the Administrative Agent shall have notified the
     Borrower in writing that (x) the Majority Lenders have made a determination
     that, on the basis of such Reportable Event or Reportable Events or such
     failure to make a required payment, there are reasonable grounds (A) for
     the termination of such Plan or Plans by the PBGC, (B) for the appointment
     by the appropriate United States District Court of a trustee to administer
     such Plan or Plans or (C) for the imposition of a lien in favor of a Plan
     and (y) as a result thereof an Event of Default exists hereunder; or a
     Termination Event shall have occurred; or

               (ii)    The Borrower or any ERISA Affiliate shall have been
     notified by the sponsor of a Multiemployer Plan that it has incurred
     Withdrawal Liability to such Multiemployer Plan and the amount of the
     Withdrawal Liability specified in such notice, when aggregated with all
     other Withdrawal Liabilities (determined as of the date or dates of such
     notification), exceeds $20,000,000; or

               (iii)   The Borrower or any ERISA Affiliate shall have been
     notified by the sponsor of a Multiemployer Plan that such Multiemployer
     Plan is in reorganization or is being terminated, within the meaning of
     Title IV of ERISA, if solely as a result of such reorganization or
     termination the aggregate annual contributions of Borrower and its ERISA
     Affiliates to all Multiemployer Plans that are then in reorganization or
     have been or are being terminated have been or will be increased over the
     amounts required to be contributed to such Multiemployer Plans for their
     most recently completed plan years by an amount exceeding $20,000,000; or

     (k)       CHANGE OF CONTROL. A Change of Control shall occur; or

     (l)       ENVIRONMENTAL DEFAULT. The Borrower or any of its Subsidiaries
shall be the subject of any proceeding or investigation pertaining to the
Release by the Borrower or any of its Subsidiaries, or any other Person of any
Contaminant into the environment, or any violation of any Environmental Law,
which, in either case, would reasonably be expected to have a Material Adverse
Effect.

THEN, and in any such event (except a Bankruptcy Event of Default) and at any
time thereafter while an Event of Default is continuing, the Administrative
Agent may with the consent of Majority Lenders, and at the direction of the
Majority Lenders shall, take one or more of the following actions:

               (i)     declare the obligation of the Issuing Banks to issue or
     renew Letters of Credit and of each Lender to make Loans (other than to
     fund drawings under L/C Outstandings or to refinance Swing Line Advances)
     to be terminated, whereupon such obligation shall be terminated;

               (ii)    declare the unpaid principal amount of all outstanding
     Loans, all interest accrued and unpaid thereon and immediately all other
     amounts payable under the Loan Documents to be immediately due and payable
     without presentment, demand, protest or other notice of any kind, all of
     which are hereby expressly waived by the Company and demand cash
     collateralization of the L/C Outstandings; and

                                     - 75 -


               (iii)   exercise on behalf of itself and the Lenders all rights
     and remedies available to it and the Lenders under the Loan Documents or
     applicable law;

PROVIDED, HOWEVER, that if a Bankruptcy Event of Default shall occur, the result
which would occur upon the giving of notice by the Administrative Agent to the
Borrower, as specified in CLAUSES (i) or (ii) above, shall occur automatically
without the giving of any such notice. Promptly following the making of any such
declaration, the Administrative Agent shall give notice thereof to the Borrower
and each Lender, but failure to notify any Person shall not impair the effect of
such declaration.

     If any Lender which made a Competitive Loan shall suffer an Event of
Default under SECTION 7.1(a) due to Borrower's failure to pay any amount of
principal of or interest on any Competitive Loan, such Lender may send a written
request to Administrative Agent to obtain approval of the Majority Lenders to
terminate the Revolving Commitments and, if such approval is not obtained within
ten Business Days after the date such request is received, the requesting Lender
(or assignee) may commence enforcement of such default by any and all legal
means. Any payments received after the Lenders have taken action pursuant to
CLAUSE (ii) above shall be allocated ratably among the Committed Loans and the
Competitive Loans.

     Upon the occurrence of any Event of Default (and PROVIDED the Loans are
accelerated), the Company shall immediately pay to the Agent, for the benefit of
the Lenders, an amount (the "L/C OUTSTANDINGS AMOUNT") equal to the aggregate
L/C Outstandings, and upon receipt of the payment of the L/C Outstandings
Amount, the Agent shall deposit such funds in an interest-bearing cash account
(the "CASH ACCOUNT") in the name of the Company maintained with the Agent as to
which the Company shall have NO right of withdrawal EXCEPT as provided below.
The Company hereby irrevocably authorizes and directs the Agent to apply amounts
on deposit in the Cash Account in reimbursement of draws on the outstanding
Letters of Credit as such draws are made. Upon expiration or surrender of a
Letter of Credit or drawing and reimbursement in full of all draws thereunder,
the Administrative Agent shall reapply the amount held in respect of that Letter
of Credit to pay any and all Obligations then due and owing and, if all Loans
and other Obligations (other than Obligations in respect of remaining L/C
Outstandings which are fully secured by amounts in the Cash Account) have been
paid in full, the Administrative Agent shall release the remaining portion of
the amount held in respect of that Letter of Credit to the Borrower. Upon
expiration or surrender of all Letters of Credit or drawing and reimbursement in
full of all draws thereunder and of all Obligations, the balance, if any, of
amounts then on deposit in the Cash Account and any interest accrued thereon
shall then be returned to the Company (to the extent any funds remain in the
Cash Account after application of such funds as provided above).

     7.2.      RESCISSION OF ACCELERATION.

     Anything in SECTION 7.1 to the contrary notwithstanding, the Administrative
Agent shall, at the request of the Majority Lenders, rescind and annul any
acceleration of the Notes under this Agreement by written instrument filed with
the Borrower; PROVIDED, HOWEVER, that at the time such acceleration is so
rescinded and annulled:

                                     - 76 -


               (i)     all past due interest and principal, if any, on the Notes
     and all other sums payable under this Agreement (except any principal and
     interest on any Notes which has become due and payable solely by reason of
     such acceleration) shall have been duly paid, and

               (ii)    no other Event of Default shall have occurred and be
     continuing which shall not have been waived in accordance with this
     Agreement.

     7.3.      RIGHTS NOT EXCLUSIVE.

     The rights provided for in this Agreement and the other Loan Documents are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other instrument, document
or agreement now existing or hereafter arising.

                           VIII. ADMINISTRATIVE AGENT

     8.1.      APPOINTMENT AND AUTHORIZATION.

     Each Lender hereby irrevocably appoints, designates and authorizes BT as
Administrative Agent (and each holder of any Note by the acceptance of such Note
shall be deemed irrevocably to have authorized the Administrative Agent) to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto
(including, without limitation, to give notices and take such actions on behalf
of the Majority Lenders as are consented to in writing by the Majority Lenders).
The Administrative Agent may perform any of its duties hereunder, or under the
other Loan Documents, by or through its agents or employees.

     8.2.      NATURE OF DUTIES.

     The Administrative Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement. The duties of the Administrative
Agent shall be mechanical and administrative in nature. EACH LENDER HEREBY
ACKNOWLEDGES AND AGREES THAT THE ADMINISTRATIVE AGENT SHALL NOT HAVE, BY REASON
OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, A FIDUCIARY RELATIONSHIP TO OR IN
RESPECT OF ANY LENDER. Nothing in any of the Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of any of the Loan Documents
except as expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of the Borrower
in connection with the making and the continuance of the Loans, the issuance of
Letters of Credit, and the acquisition of the L/C Participations hereunder and
shall make its own appraisal of the creditworthiness of the Borrower, and the
Administrative Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its possession before
making of the Loans and the issuance of the Letters of Credit or at any time or
times thereafter. The Administrative Agent will promptly

                                     - 77 -


notify each Lender at any time that the Majority Lenders have instructed it to
act or refrain from acting pursuant to ARTICLE VII.

     8.3.      LIABILITY OF ADMINISTRATIVE AGENT.

     The Administrative Agent, its Affiliates, or any of their respective
officers, directors, employees, agents, affiliates or attorneys-in-fact
(collectively, the "AGENT-RELATED PERSONS") shall not (i) be liable to any of
the Lenders for any action taken or omitted to be taken by any of them under or
in connection with this Agreement or any other Loan Document (except for their
own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Lenders for any recital, statement, representation or
warranty made by the Borrower or Affiliate of the Borrower, or any officer
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or the execution, validity, effectiveness,
genuineness, enforceability, collectibility or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Borrower to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the terms or provisions contained in, or conditions of,
this Agreement or any other Loan Document, or the financial condition of the
Borrower, or the existence or possible existence of any Unmatured Event of
Default or Event of Default unless requested to do so by the Majority Lenders,
or to inspect the properties, books or records of the Borrower or any of its
Subsidiaries or Affiliates.

     8.4.      RELIANCE BY ADMINISTRATIVE AGENT.

     (a)       The Lenders agree that the Administrative Agent shall be entitled
to rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may at any time request
instructions from the Lenders with respect to actions or approvals (including
the failure to act or approve) which by the terms of any of the Loan Documents
the Administrative Agent is permitted or required to take or to grant. The
Lenders agree that the Administrative Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Majority Lenders
as it deems appropriate and, if it so requests, it shall first be indemnified
to its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Lenders agree that the Administrative Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement or
any other Loan Document in accordance with a request or consent of the Majority
Lenders and such request or consent and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.

     (b)       For purposes of determining compliance with the conditions
specified in SECTIONS 4.1 AND 4.2, each Lender that has executed this Agreement
shall be deemed to have consented to,

                                     - 78 -


approved or accepted or to be satisfied with each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lender, unless an officer of the Administrative Agent,
responsible for the transactions contemplated by the Loan Documents shall have
received notice from the Lender prior to the initial Borrowing and/or issuance
of the initial Letter of Credit specifying in reasonable detail its objection
thereto and either such objection shall not have been withdrawn by notice to the
Administrative Agent to that effect, or the Lender shall not have made available
to the Administrative Agent an amount equal to the Lender's Commitment
Percentage of such Borrowing.

     8.5.      NOTICE OF DEFAULT.

     The Administrative Agent shall not be deemed to have knowledge or notice of
the occurrence of any Event of Default or Unmatured Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Administrative Agent for the account of the Lenders, unless
the Administrative Agent shall have received written notice from a Lender or the
Borrower referring to this Agreement, describing such Event of Default or
Unmatured Event of Default and stating in the case of an Event of Default that
such notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders. The Administrative Agent shall take such action with respect to
such Event of Default or Unmatured Event of Default as shall be requested by the
Majority Lenders in accordance with ARTICLE VII or any other provision of this
Agreement; PROVIDED, HOWEVER, that unless and until the Administrative Agent
shall have received any such request, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Event of Default or Unmatured Event of Default as it shall deem
advisable or in the best interest of the Lenders.

     8.6.      CREDIT DECISION.

     Each Lender expressly acknowledges that none of the Agent-Related Persons
has made any representation or warranty to it and that no act by the
Agent-Related Person, hereinafter taken, including any review of the affairs of
the Borrower and its Subsidiaries shall be deemed to constitute any
representation or warranty by such Agent-Related Person to any Lender. Each
Lender represents to Administrative Agent that it has, independently and without
reliance upon Administrative Agent and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated thereby, and made its
own decision to enter into this Agreement and extend credit to the Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon the Administrative Agent, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower or
its Subsidiaries. Except for notices, reports and other documents expressly
herein required to be furnished to the Lenders by the Administrative Agent, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the

                                     - 79 -


business, prospects, operations, property, financial and other condition or
creditworthiness of the Borrower which may come into the possession of any of
the Agent-Related Persons.

     8.7.      INDEMNIFICATION.

     The Lenders shall indemnify upon demand the Agent-Related Persons (to the
extent not reimbursed by or on behalf of the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to each Lender's
Commitment Percentage from and against any and all liabilities, obligations,
losses, damages, claims, penalties, actions, judgments, suits, costs, and
reasonable expenses and disbursements of any kind whatsoever which may at any
time (including at any time following the repayment of the Loans) be imposed on,
incurred by or asserted against any such Person any way relating to or arising
out of this Agreement or any document contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by any such Person under or in connection with any of the foregoing;
PROVIDED, HOWEVER, that no Lender shall be liable for the payment to the
Agent-Related Persons of any portion of such liabilities, obligations, losses,
damages, claims, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any reasonable costs
or out-of-pocket expenses (including Attorney Costs) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Borrower. Without limiting the generality of the foregoing, if the IRS or any
authority of the U.S. or other jurisdiction asserts a claim that the
Administrative Agent did not properly withhold tax from amounts paid to or for
the account of any Lender (because the appropriate form was not delivered, was
not properly executed, or because such Lender failed to notify the
Administrative Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Lender shall indemnify the Administrative Agent fully for all amounts paid,
directly or indirectly, by Administrative Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Administrative Agent under this SECTION 8.7, together
with all Attorney Costs. The obligation of the Lenders in this SECTION 8.7 shall
survive the payment of all Obligations hereunder and termination of the
Agreement.

     8.8.      ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY.

     The Administrative Agent and its Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, acquire equity
interests in and generally engage in any kind of banking, trust, financial
advisory or other business with the Borrower and its Subsidiaries and Affiliates
as though the Administrative Agent were not Administrative Agent hereunder and
without notice to the Lenders. With respect to its Loans, Letters of Credit and
L/C Participations, the Administrative Agent shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Administrative Agent hereunder or under any other Loan
Document, including, without limitation, the

                                     - 80 -


acceptance of fees or other consideration for services without having to account
for the same to any of the Lenders. The terms "Lender" and "Lenders" shall
include BT in its individual capacity.

     8.9.      RESIGNATION BY ADMINISTRATIVE AGENT.

     (a)       The Administrative Agent may resign from the performance of all
its functions and duties hereunder at any time by giving fifteen(15) Business
Days' prior written notice to the Borrower and the Lenders. Such resignation
shall take effect upon the acceptance by a successor Administrative Agent of
appointment pursuant to SECTION 8.9(b) OR (c) or as otherwise provided below.

     (b)       Upon any such notice of resignation, the Majority Lenders shall
appoint a successor Administrative Agent who shall (unless an Event of Default
has occurred and is continuing) be satisfactory to Borrower and shall be an
incorporated bank or trust company.

     (c)       If a successor Administrative Agent shall not have been so
appointed within said 15 Business Day period, the Administrative Agent, with the
consent of Borrower, shall then appoint a successor Administrative Agent who
shall serve as Administrative Agent until such time, if any, as the Majority
Lenders, with the consent of Borrower, appoint a successor Administrative Agent
as provided above.

     (d)       If no successor Administrative Agent has been appointed pursuant
to SECTION 8.9(b) OR (c) by the 20th Business Day after the date such notice of
resignation was given by the Administrative Agent, the Administrative Agent's
resignation shall become effective and the Majority Lenders shall thereafter
perform all the duties of Administrative Agent hereunder until such time, if
any, as the Majority Lenders, with the consent of Borrower, appoint a successor
Administrative Agent as provided above.

     (e)       Upon the effective date of such resignation, only such successor
Administrative Agent shall succeed to all the rights, powers and duties of the
retiring Administrative Agent and the term "ADMINISTRATIVE AGENT" shall mean
such successor agent and the retiring Administrative Agent's rights, powers and
duties in such capacity shall be terminated. After any retiring Administrative
Agent resigns hereunder as Administrative Agent the provisions of this
ARTICLE VIII and SECTION 9.4 shall inure to their respective benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement; except with respect to indemnification provisions under
this Agreement which shall survive as to such resigning Administrative Agent.

     8.10.     SYNDICATION AGENT, DOCUMENTATION AGENT AND ARRANGER.

     Notwithstanding anything contained herein which may be construed to the
contrary, neither the Syndication Agent nor the Documentation Agent nor the
Arranger shall exercise any of the rights or have any of the responsibilities of
the Administrative Agent hereunder, or any other rights or responsibilities
other than their respective rights and responsibilities as Lenders hereunder.

                                     - 81 -


                                IX. MISCELLANEOUS

     9.1.      NO WAIVER; MODIFICATIONS IN WRITING.

     (a)       No failure or delay on the part of the Administrative Agent or
any Lender in exercising any right, power or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies provided for in
this Agreement are cumulative and are not exclusive of any remedies that may be
available to the Administrative Agent or any Lender at law or in equity or
otherwise. No amendment, modification, supplement, termination or waiver of or
to any provision of this Agreement or any Note, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be consented to by
or on behalf of the Majority Lenders and, in the case of an amendment,
supplement, modification or termination (other than in accordance with the
express provisions of this Agreement) the Borrower; PROVIDED, HOWEVER, that the
consent of all of the Lenders shall be required to effect any amendment,
modification, supplement, termination, waiver or consent, as the case may be
(any of the foregoing, a "MODIFICATION"), which has the effect of

               (i)     reducing the aggregate principal amount of, or interest
     rate on, any of the Notes or any reimbursement due in connection with a
     Drawing or releasing any Subsidiary Guarantor (other than as a result of a
     transaction permitted by SECTION 6.5 or an Asset Disposition made in
     accordance with the terms of this Agreement) or the aggregate amount of any
     fees provided for in this Agreement, except that any Modification that has
     the effect of reducing the aggregate amount of any fees payable to
     Administrative Agent for its own account shall require only the consent of
     Administrative Agent;

               (ii)    extending the stated final maturity of any of the
     Revolving Commitments or the Revolving Notes or any reimbursement due in
     connection with a Drawing or the date of any portion of any payment of
     principal of, or interest or fees in respect of, any of the Revolving
     Commitments or the Notes or the Letters of Credit (other than by way of (a)
     Modification of any provision for, or having the effect of requiring, any
     mandatory prepayment of any portion of any Loan, or (b) Modification or
     waiver of any Event of Default (other than an Event of Default described in
     SECTION 7.1(a)(i) or any Bankruptcy Event of Default, or Unmatured
     Bankruptcy Event of Default); or

               (iii)   changing this proviso or the first sentence of
     SECTION 9.9(a), reduce the percentage specified in the definition of the
     term "MAJORITY LENDERS", or the definition of the terms "REVOLVING
     COMMITMENT" or "COMMITMENT PERCENTAGE";

PROVIDED, HOWEVER, that the consent of the Administrative Agent shall be
required to effect any Modification that has the effect of (x) increasing the
duties or obligations of the Administrative Agent, (y) increasing the standard
of care or performance required on the part of the Administrative Agent, or (z)
reducing or eliminating the indemnities, exculpations or immunities to which the
Administrative Agent is entitled; PROVIDED, FURTHER, that no Modification shall
increase the Revolving Commitment of any Lender over the amount thereof then in
effect

                                     - 82 -


without the consent of such Lender (it being understood that waivers or
modifications of conditions precedent, covenants, Events of Default or Unmatured
Events of Default shall not constitute an increase of the Commitment of any
Lender, and that an increase in the available portion of any Commitment of any
Lender shall not constitute an increase in the Commitment of such Lender);
PROVIDED, FURTHER, HOWEVER, that any Modification which has the effect of
reducing the aggregate principal amount of, or interest rate on, any of the
Competitive Loans shall only require the consent of the Competitive Lender
making such Competitive Loan.

     Any Modification of or to any provision of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
made or given and only if in writing. Except where notice is specifically
required by this Agreement, no notice to or demand on the Borrower or any other
Person in any case shall entitle the Borrower or such other Person to any other
or further notice or demand in similar or other circumstances.

     (b)       If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
SECTIONS 9.1(a)(i) THROUGH (iii), inclusive, the consent of the Majority Lenders
is obtained but the consent of one or more of such other Lenders whose consent
is required is not obtained, then Borrower shall have the right, so long as all
non-consenting Lenders whose individual consent is required are treated as
described in either CLAUSES (A) OR (B) below, to either (A) replace each such
non-consenting Lender or Lenders with one or more Replacement Lenders pursuant
to SECTION 2.21 so long as at the time of such replacement, each such
Replacement Lender consents to the proposed amendment, modification, supplement,
waiver, discharge, termination or other change or (B) terminate such
non-consenting Lender's Revolving Commitment and repay all outstanding Loans of
such Lender which gave rise to the need to obtain such Lender's consent, (i)
reallocate such Lender's Commitment Percentage of the L/C Outstandings in
accordance with SECTION 2.4(d) as if a new Letter of Credit in such amount were
issued for the account of the Borrower, and (ii) if such reallocation results in
the aggregate Exposure Amount exceeding the Aggregate Revolving Commitments,
secure such excess amount by cash or cash equivalents delivered to and pledged
to the Administrative Agent in a manner satisfactory to the Administrative Agent
concurrently with the effectiveness of such termination, at which time
SCHEDULE 1.1 shall be deemed modified to reflect such changed amounts.

     9.2.      FURTHER ASSURANCES.

     The Borrower agrees to do, and to cause each Subsidiary to do, such further
acts and things and to execute, acknowledge and deliver to the Lenders and/or
the Administrative Agent such assignments, agreements, documents, powers,
instruments and opinions of counsel as any such Person may reasonably require or
deem advisable to carry into effect the purposes of this Agreement or any of the
Loan Documents or to better assure and confirm unto the Administrative Agent and
/or the Lenders, as applicable, their respective rights, powers and remedies
under this Agreement.

     9.3.      NOTICES, ETC.

     Except where telephonic instructions or notices are authorized herein to be
given, all notices, demands, instructions and other communications required or
permitted to be given to or

                                     - 83 -


made upon any party hereto or any other Person shall be in writing and (except
for written confirmations of telephonic instructions or notices and financial
statements pertaining to Borrower, which may be sent by telex or first-class
mail, postage prepaid) shall be personally delivered or sent by registered or
certified mail, postage prepaid, return receipt requested, or by a reputable
courier delivery service, or by prepaid telex, TWX or telegram (with messenger
delivery specified in the case of a telegram), or by telecopier, and shall be
deemed to be given for purposes of this Agreement on the third day after deposit
in registered or certified mail, postage prepaid, and otherwise on the day that
such writing is delivered or sent to the intended recipient thereof, or in the
case of notice delivered by telecopy, upon completion of transmission with a
copy of such notice also being delivered under any of the methods provided
above, all in accordance with the provisions of this SECTION 9.3, PROVIDED that
any notice, request or demand to or upon the Administrative Agent or the Lenders
pursuant to SECTIONS 2.1, 2.2, 2.3, 2.4, 2.6 OR 2.12 shall not be effective
until received. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this Section, notices, demands,
instructions and other communications in writing shall be given to or made upon
the respective parties hereto at their respective addresses (or to their
respective telex, TWX or telecopier numbers) indicated on SCHEDULE 9.3 attached
hereto or in any applicable Assignment and Assumption Agreement and, in the case
of telephonic instructions or notices, by calling the telephone number or
numbers indicated for such party on SCHEDULE 9.3 attached hereto.

     9.4.      COSTS, EXPENSES AND TAXES; INDEMNITY.

     (a)       The Borrower agrees to pay promptly upon request, at any time and
from time to time, all reasonable costs and expenses of the Administrative Agent
in connection with the negotiation, preparation, printing, typing, reproduction,
execution, delivery and administration of the Loan Documents, any amendments or
waivers thereto and any other agreements or documents that may be delivered,
from time to time, in connection therewith or to implement any provision
thereof, including, without limitation, reasonable allocated costs of staff
counsel, the reasonable fees and expenses of Willkie Farr & Gallagher, special
counsel to the Administrative Agent, and any local counsel retained by them,
from time to time with respect to advising the Administrative Agent as to its
rights and responsibilities under or in respect of any Loan Document (including,
without limitation, the reasonable fees and expenses of any accountants,
environmental engineers, consultants, appraisers or other Persons retained by
any of them and of which Borrower or its counsel shall have been notified prior
to such retention; PROVIDED, HOWEVER, that after the occurrence and during the
continuance of an Event of Default no such notice shall be required) and all
such costs and expenses incurred by any Lender in connection with (i) any and
all amounts which the Administrative Agent or any Lender has paid relative to
the curing of any Event of Default resulting from the acts or omissions of the
Borrower or any of its Affiliates under any Loan Document, (ii) the enforcement
of any Loan Document and the perfection and preservation of the rights of the
Administrative Agent or any Lender hereunder or thereunder. In addition, the
Borrower agrees to pay promptly upon request, at any time and from time to time,
after the occurrence and during the continuance of an Event of Default, all
reasonable costs and expenses of the Administrative Agent and the Lenders
(including, without limitation, Attorney Costs and the reasonable fees and
expenses of any accountants, environmental engineers, consultants, appraisers or
other Persons retained by any of them) in connection with (A) the enforcement of
any Lien granted pursuant to any Loan Document, (B) the collection of any
Obligation or (C) with respect to advising the

                                     - 84 -


Administrative Agent and the Lenders as to their respective rights and
responsibilities under or in respect of any of the Loan Documents. In addition,
the Borrower shall pay, upon the request of the Administrative Agent, any and
all stamp, transfer and other taxes or fees payable or determined to be payable
in connection with the execution, delivery, filing and recording of any
instrument or document that may be delivered in connection with this Agreement
and/or the Notes and/or the Letters of Credit, and agrees to save the
Administrative Agent and each Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying, or omission
to pay, such taxes, fees and expenses.

     (b)       The Borrower will indemnify and hold harmless the Administrative
Agent and each Lender and each director, officer, employee, agent and Affiliate
of the Administrative Agent and each Lender (collectively, the "INDEMNIFIED
PERSONS") from and against all losses, claims, damages, penalties, causes of
action, obligations, costs, expenses or liabilities (including, without
limitation, Attorney Costs and reasonable expenses, consultant fees and
investigation fees) (collectively, "EXPENSES") to which such Indemnified Person
shall become subject, insofar as such Expenses (or actions, suits or
proceedings, including, without limitation, any inquiry or investigation or
claim in respect thereof, whether or not any Indemnified Person is named as a
party) arise out of, in any way relate to, or result from the transactions
contemplated by this Agreement and to reimburse each Indemnified Person upon its
demand, for any legal or other expenses incurred in connection with
investigating, preparing to defend or defending any such loss, claim, damage,
liability, action or claim; PROVIDED, HOWEVER, that Borrower shall have no
obligation to an Indemnified Person hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of any such
Indemnified Person; and PROVIDED, FURTHER, HOWEVER, that no Indemnified Person
may settle any such action, suit or proceeding without the consent of Borrower
which consent shall not be unreasonably withheld or delayed. If an action, suit
or proceeding arising from any of the foregoing is brought against any
Indemnified Person, Borrower shall, if requested by such Indemnified Person,
resist and defend at its own expense such action, suit or proceeding or cause
the same to be resisted and defended by counsel reasonably satisfactory to such
Indemnified Person. Each Indemnified Person shall have the right to employ its
own counsel to investigate and control the defense of any matter covered by such
indemnity and the reasonable fees and expenses of such counsel shall be at the
expense of the indemnifying party, PROVIDED, HOWEVER, that in any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, Borrower shall not be liable for
fees and expenses of more than one counsel (in addition to any local counsel),
which counsel shall be designated by the Administrative Agent PROVIDED, FURTHER,
HOWEVER, each Indemnified Person shall have the right to employ separate counsel
in any such inquiry, action, claim or proceeding and to control the defense
thereof, and the reasonable fees and expenses of such counsel shall be at the
expense of the Borrower if (i) the Borrower shall have agreed in writing to pay
such fees and expenses or (ii) such Indemnified Person shall have notified the
Borrower that it has been advised by counsel that there may be one or more legal
defenses available to such Indemnified Person that are different from or
additional to those available to the other Indemnified Persons and that such
common representation would adversely impact the adequacy of the proposed
representation. If the Borrower shall fail to do, or cause to be done, any act
or thing which it has covenanted to do or cause to be done under this Agreement
or any representation or warranty on the part of the Borrower contained in any
Loan Document shall be breached, the Administrative Agent may (but shall not be
obligated to) do the same or cause it to be done or remedy any such breach, and
may expend its own funds for such

                                     - 85 -


purpose, and will use its best efforts to give prompt written notice to the
Borrower that it proposes to take such action; PROVIDED, HOWEVER, that any
failure by the Administrative Agent to do any such act or thing or give any such
notice shall not relieve the Borrower of any such obligations and shall not
impose or result in the imposition of any liability on the Administrative Agent
or any Lender. Any and all amounts so expended by the Administrative Agent shall
be due and payable by the Borrower promptly upon the Administrative Agent's
demand therefor, together with interest thereon at a rate per annum equal to the
Default Rate during the period from and including the date so demanded by the
Administrative Agent to the date of repayment. To the extent that the
undertaking to indemnify, pay or hold harmless the Administrative Agent or
Lender as set forth in this SECTION 9.4 may be unenforceable because it is
violative of any law or public policy, Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.

     (c)       The obligations of Borrower under this SECTION 9.4 and the other
indemnification obligations of the Borrower under this Agreement shall be
effective and binding on Borrower irrespective of whether any Loans are made and
shall survive (i) the termination of this Agreement and the discharge of
Borrower's other obligations hereunder and under the Notes and L/C
Participations and (ii) the assignment by any Lender of any of its interests
herein pursuant to SECTION 9.9(c) with respect to any acts, omissions and/or
events occurring or arising prior to the Effective Date of such assignment.

     (d)       Nothing contained in this SECTION 9.4 shall be deemed to limit or
reduce any indemnity in favor of the Administrative Agent or any Lender
contained in any other Loan Document or agreement.

     9.5.      CONFIRMATIONS.

     Each of the Borrower and each holder of a Note agrees, from time to time,
upon written request received by it from the other, to confirm to the other in
writing (with a copy of each such confirmation to the Administrative Agent) the
aggregate unpaid principal amount of the Loans then outstanding under such Note
and each such holder agrees, from time to time, upon written request received by
it from the Borrower, to make the Notes held by it (including any schedules (or
continuation thereof) attached thereto) available for reasonable inspection by
the Borrower at the office of such holder.

     9.6.      TRANSFER OF NOTES.

     In the event that the holder of any Revolving Note (including any Lender)
shall transfer such Note, it shall immediately advise the Administrative Agent
and the Borrower of such transfer, and the Administrative Agent and the Borrower
shall be entitled conclusively to assume that no transfer of any Note has been
made by any holder (including any Lender) unless and until the Administrative
Agent and the Borrower shall have received written notice to the contrary. Each
transferee of any Note shall take such Note subject to the provisions of this
Agreement and to any Modification or other action taken under this Agreement
prior to the receipt by the Administrative Agent and the Borrower of written
notice of such transfer by each previous holder of such Note and, except as
expressly otherwise provided in such notice, the Administrative Agent and the
Borrower shall be entitled conclusively to assume that the

                                     - 86 -


transferee named in such notice shall thereafter be vested with all rights and
powers under this Agreement with respect to the Loans of the Lender named as the
payee of the Note which is the subject of such transfer.

     9.7.      ADJUSTMENTS; SET-OFF.

     (a)       If, other than as expressly set forth elsewhere herein, any
Lender shall obtain on account of the Loans made by it or its L/C Participations
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) in excess of its pro rata share of payments on account
of the Loans (including Competitive Loans) and L/C Participations obtained by
all the Lenders, such Lender shall forthwith (x) notify Administrative Agent of
such fact, and (y) purchase from the other Lenders such participations in the
Loans and L/C Participations of the other Lenders as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them;
PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Lender, such purchase shall to that
extent be rescinded and each other Lender shall repay to the purchasing Lender
the purchase price paid thereto together with an amount equal to such paying
Lender's Commitment Percentage (according to the proportion of (i) the amount of
such paying Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender, of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The
Administrative Agent will keep records (which shall be conclusive and binding in
the absence of manifest error), of participations purchased pursuant to this
SECTION 9.7 and will in each case promptly notify the Lenders and Borrower
following any such purchases. Any payments received after the Lenders have taken
action pursuant to this SECTION 9.7 shall be allocated ratably among the
Revolving Loans, the Competitive Loans, the Swing Line Loans and the L/C
Participations of all the Lenders.

     (b)       The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this SECTION 9.7 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to SECTION 9.7(d)) with respect to such participation as
fully as if such Lender were the direct creditor of Borrower in the amount of
such participation.

     (c)       Nothing herein shall require any Lender to exercise any right of
set-off or similar rights or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
Indebtedness or obligation of Borrower.

     (d)       In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower or
any other Person, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon the occurrence of an Event of Default
to set-off and apply against any Obligations any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, whether matured or unmatured, of the Borrower
to such Lender, any amount owing from such Lender or any branch or agency
thereof to or for the credit or account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Administrative Agent

                                     - 87 -


after any such set-off and application made by such Lender; PROVIDED, HOWEVER,
that the failure to give such notice shall not affect the validity of such
set-off and application.

     9.8.      EXECUTION IN COUNTERPARTS.

     This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Agreement and it shall not be necessary in making proof of this Agreement to
produce more than one such counterpart or counterparts bearing the signatures of
all of the parties thereto.

     9.9.      BINDING EFFECT; ASSIGNMENT; ENTIRE AGREEMENT.

     (a)       This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
assigns; PROVIDED, HOWEVER, that the Borrower may not assign or transfer any of
its interest, or delegate any of its duties or obligations, under this Agreement
without the prior written consent of all of the Lenders signatory hereto. Except
as expressly provided to the contrary in this Agreement, this Agreement shall
not be construed so as to confer any right or benefit upon any Person other than
the parties hereto and their respective successors and permitted assigns.

     (b)       Subject to SECTION 2.20(b) hereof, any Lender may make, carry or
transfer Loans at, to or for the account of any of its branch offices or the
office of an Affiliate of such Lender.

     (c)       Any Lender may at any time and from time to time, assign to any
other Lender or, with the prior written consent of the Borrower (which consent
shall not be required if an Event of Default or Unmatured Event of Default has
occurred and is continuing) and the Administrative Agent, which consents shall
not be unreasonably withheld, assign to any other Eligible Assignee, all or any
ratable part of the Loans, L/C Participations and Revolving Commitments and the
other rights and obligations of such Lender with respect thereto, and shall
thereupon be released from, its obligations attributable to such rights under
this Agreement and the other Loan Documents (including, without limitation, the
applicable ratable portion of its Commitment Percentage of any or all of the
Revolving Loans and Swing Line Loans under this Agreement); PROVIDED, HOWEVER,
that

               (i)     each such assignment (other than to another Lender or, to
     the extent such assignment provides the Borrower with recourse to the
     assigning Lender, any Affiliate thereof) shall be in the amount of
     $5,000,000 or any larger amount or shall be an assignment of all (but not
     less than all) of such Lender's rights and obligations under this Agreement
     and the other Loan Documents;

               (ii)    an administrative fee of $3,500 shall have been paid to
     BT, as Administrative Agent, for BT's account, by the assigning Lender or
     its assignee in connection with each such assignment; and

               (iii)   the parties to each such assignment shall execute and
     deliver to the Administrative Agent (with a copy to the Borrower), for
     recording in the Register, an

                                     - 88 -


     Assignment and Assumption Agreement. From and after the "Effective Date"
     specified in such Assignment and Assumption Agreement (x) the assignee
     thereunder shall be and become a "LENDER" under, and party to, this
     Agreement and shall have all of the rights and obligations of a Lender
     hereunder (to the extent of the assignment effected by such Assignment and
     Assumption Agreement), and its address for notice purposes and Lending and
     Payment Offices shall be as set forth in such Assignment and Assumption
     Agreement and (y) the applicable Loans, L/C Participations, Commitment
     Percentages and Available Revolving Commitments shall be adjusted to
     reflect such assignment. By executing and delivering an Assignment and
     Assumption Agreement, the Lender that is assignor thereunder and the
     assignee thereunder confirm to the other parties hereto that such assignee
     is an Eligible Assignee.

     (d)       The Administrative Agent shall maintain at its address referred
to in SCHEDULE 9.3 a copy of each Assignment and Assumption Agreement delivered
to and accepted by it. At the request of any assigning Lender, the
Administrative Agent shall acknowledge, agree and consent to any Assignment and
Assumption Agreement that appears to comply with the provisions of this
SECTION 9.9, and upon receipt by Administrative Agent of notice from the
assigning Lender of the effectiveness of such assignment, Administrative Agent
shall record the information contained therein in the Register. Coincident with
the delivery of an Assignment and Assumption Agreement to the Administrative
Agent for acceptance and registration of assignment or transfer of all or part
of a Loan, or as soon thereafter as practicable, the assigning or transferor
Lender shall surrender the Note evidencing such Loan. The Borrower, at its own
expense, after receipt of notice from the assigning Lender of the effectiveness
of such assignment, shall execute and deliver, to the assignor Lender and the
assignee Lender in exchange for the Note or Notes that were assigned in part,
replacement Notes and new Notes, as the case may be, payable to the order of the
assignor Lender and the assignee Lender, respectively, reflecting their
respective Commitment Percentage of the Loans that were the subject of such
assignment. Such replacement Notes and new Notes shall be dated such Effective
Date of the applicable Assignment and Assumption Agreement and shall otherwise
be in substantially the form required by this Agreement.

     (e)       Each Assignee that is a Non-U.S. Person, by executing and
delivering an Assignment and Assumption Agreement,

               (i)     agrees to execute and deliver to the Administrative
     Agent, as promptly as practicable, four signed copies (two for the
     Administrative Agent and two for delivery by the Administrative Agent to
     the Borrower) of IRS Form W-8ECI or Form W-8BEN (or any successor form or a
     Section 2.18(c)(iii) Certificate) claiming complete exemption from
     withholding and deduction for or on account of United States Federal taxes
     on or in respect of payments of principal and interest under or in respect
     of this Agreement (it being understood that if the applicable form is not
     so delivered, payments under or in respect of this Agreement may be subject
     to withholding and deduction and the Borrower shall have no indemnity or
     gross-up obligation under SECTION 2.18(a) with respect to such withholding
     and deduction);

               (ii)    represents and warrants to the Borrower and the
     Administrative Agent that the form so delivered is true and accurate and
     that, as of the Effective Date of the

                                     - 89 -


     applicable Assignment and Assumption Agreement, each of such assignee
     Lender's Lending Offices is entitled to receive payments of principal and
     interest under or in respect of this Agreement without withholding or
     deduction for or on account of any taxes imposed by the U.S.;

               (iii)   agrees to deliver annually hereafter to each of the
     Borrower and the Administrative Agent not later than December 31 of the
     year preceding the year to which it will apply, two further properly
     completed signed copies of IRS Form W-8ECI or Form W-8BEN (or any successor
     form or a Section 2.18(c)(iii) Certificate), as appropriate, unless an
     event has occurred which renders the relevant form inapplicable (it being
     understood that if the applicable form is not so delivered, payments under
     or in respect of this Agreement may be subject to withholding and deduction
     and the Borrower shall have no indemnity or gross-up obligation under
     SECTION 2.18(a) with respect to such withholding and deduction);

               (iv)    agrees to promptly notify the Borrower and the
     Administrative Agent in writing if it ceases to be entitled to receive
     payments of principal and interest under or in respect of this Agreement
     without withholding or deduction for or on account of any taxes imposed by
     the U.S. or any political subdivision in or of the U.S. (it being
     understood that payments under or in respect of this Agreement may be
     subject to withholding and deduction in such event);

               (v)     acknowledges that in the event it ceases to be exempt
     from withholding and/or deduction of such taxes, the Administrative Agent
     may withhold and/or deduct the applicable amount from any payments to which
     such assignee Lender would otherwise be entitled, without any liability to
     such assignee Lender therefor; and

               (vi)    agrees to indemnify the Borrower and the Administrative
     Agent from and against any and all liabilities, obligations, losses,
     damages, penalties, actions, judgments, suits, costs or expenses that
     result from such assignee Lender's breach of any such representation,
     warranty or agreement.

     (f)       A Competitive Bid Lender may sell, transfer, assign or grant
participations to any Eligible Assignee in all or any part of the Competitive
Loans made by it; PROVIDED, HOWEVER, that in the case of any sale, transfer or
assignment, the Borrower and the Administrative Agent shall be entitled to treat
such Competitive Bid Lender as the holder of such Competitive Loans for all
purposes hereunder until notified of such sale or assignment. Upon notice to the
Borrower and the Administrative Agent, any Lender may assign all or any portion
of its rights and obligations to participate in competitive bidding pursuant to
SECTION 2.3 to a Subsidiary or Affiliate pursuant to an assignment and
assumption agreement in form satisfactory to Administrative Agent. From and
after the effective date specified in such assignment and assumption agreement,
the assignee thereunder (i) shall be and become a "LENDER" under, and party to,
this Agreement and (ii) shall be subject to the provisions of each subparagraph
of SECTION 9.9(e).

     (g)       Any Lender party to this Agreement, from time to time and without
the consent of Borrower or any other Person, may pledge or assign for security
purposes any portion of its Loans or any other interests in this Agreement and
the other Loan Documents to any Federal

                                     - 90 -


Reserve Bank and may, subject to SECTION 9.9(h), sell participations in its
Loans or any other interests in this Agreement and the other Loan Documents to
another Lender or other Person.

     (h)       In the case of a participation, (i) the Lender shall remain a
"LENDER" for all purposes hereunder and the participant shall not constitute a
"Lender" hereunder and the participant shall not have any rights under this
Agreement or any Note, as applicable, or any other Loan Document delivered in
connection therewith (the participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto) and all amounts payable by
Borrower with respect to increased costs, capital adequacy and funding losses of
any of the Lenders pursuant to this Agreement shall be determined as if the
Lender had not sold such participation and (ii) no participant or participants,
other than an Affiliate of such Lender, shall be entitled, directly or
indirectly, under such agreement with a Lender to require that such Lender
obtain its participant's consent to any Modification of or under this Agreement,
any Note, as applicable, other than those Modifications that are referred to in
SECTIONS 9.1(a)(i) AND (ii), excluding Modifications that waive the
applicability of any post-default increase in interest rates.

     (i)       This Agreement and the other Loan Documents constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.

     9.10.     CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.

     (a)       The Borrower hereby irrevocably and unconditionally submits to
the nonexclusive jurisdiction of any United States Federal or New York State
court sitting in New York County in any action or proceeding arising out of or
relating to this Agreement or any Note, and the Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of such action or proceeding
may be heard and determined in any such United States Federal or New York State
court. Any action or proceeding brought against the Administrative Agent, any
Issuing Bank or any Lender shall be brought in such United States Federal or New
York State court. The Borrower hereby irrevocably appoints CT Corporation System
(the "PROCESS AGENT"), with an office on the date hereof at 111 Eighth Avenue,
13th Floor, New York, New York 10011, as its authorized agent and
attorney-in-fact to receive on behalf of the Borrower and its property service
of copies of the summons and complaint and any other process which may be served
in any such action or proceeding brought in any court in or of the State of New
York. Such service may be made by mailing by certified mail or delivering a copy
of such process to the Borrower in care of the Process Agent at the Process
Agent's above address and the Borrower hereby irrevocably authorizes and directs
the Process Agent to accept such service on its behalf and agrees that the
failure of the Process Agent to give any notice of any such service to the
Borrower shall not impair or affect the validity of such service or of any
judgment rendered in any action or proceeding based thereon. As an alternative
method of service, the Borrower also irrevocably consents to the service of any
and all process in any such action or proceeding brought in any court in or of
the State of New York by the delivery of copies of such process to Borrower at
its address specified in SCHEDULE 9.3 or by certified or registered mail
directed to such address. If for any reason CT Corporation System shall cease to
act as Process Agent or shall cease to maintain an office in the Borough of
Manhattan, New York, New York, the Borrower shall appoint forthwith, in the
manner provided for herein, a successor Process Agent qualified to act as an
agent for service of process with respect to all courts in and of the

                                     - 91 -


State of New York. Nothing herein shall affect the right of the Administrative
Agent, any Issuing Bank, any Lender or any holder of a Note to serve process in
any other manner permitted by law or otherwise proceed against Borrower in any
other jurisdiction.

     (b)       THE PARTIES HERETO HEREBY EXPRESSLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN RESPECT OF ANY ACTION UNDER OR COUNTERCLAIM RELATING TO THIS
AGREEMENT OR ANY NOTE OR LETTER OF CREDIT, AND THE BORROWER HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OR MAINTAINING OF
ANY SUCH ACTION OR PROCEEDING IN THE RESPECTIVE JURISDICTIONS REFERENCED IN
SECTION 9.10(a).

     9.11.     GOVERNING LAW.

     THIS AGREEMENT AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH SUCH LAWS OF SAID
STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

     9.12.     REGISTRY.

     The Borrower hereby designates Administrative Agent to serve as Borrower's
agent, solely for purposes of SECTION 9.9(d) and this SECTION 9.12 to maintain
at its address referred to in SCHEDULE 9.3 a register on which it will record
the names and addresses of the Lenders, the Revolving Commitment from time to
time of each of the Lenders, the Loans and L/C Participations made by each of
the Lenders and each repayment in respect of the principal amount of the Loans
and L/C Participations of each Lender (THE "REGISTER"). Failure to make any such
recordation, or any error in such recordation shall not affect Borrower's
obligations in respect of such Loans or L/C Participations. The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Lenders and the Administrative Agent may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement and the other Loan Documents. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice to the Administrative Agent. The
Borrower agrees to indemnify the Administrative Agent from and against any and
all losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under SECTION 9.9(d) and this SECTION 9.12.

     9.13.     SEVERABILITY OF PROVISIONS.

     Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

                                     - 92 -


     9.14.     HEADINGS.

     The Table of Contents and Article and Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.

     9.15.     INDEPENDENT NATURE OF LENDERS' RIGHTS.

     The amounts payable at any time under this Agreement to the Administrative
Agent and each Lender shall be separate and independent debts; each Lender shall
be entitled to protect and enforce its rights arising out of this Agreement; and
it shall not be necessary for the Administrative Agent or any other Lender to be
joined as an additional party in any proceeding for such purpose.

     9.16.     SURVIVAL OF REPRESENTATIONS.

     Unless a longer period is provided herein, all covenants, agreements and
representations in this Agreement shall survive the making by the Lenders of the
Loans, the issuance of the Letters of Credit and the execution and delivery to
the Administrative Agent for the account of the Lenders of the Notes evidencing
the Loans, regardless of any investigation made by the Administrative Agent or
the Lenders and of the Administrative Agent's and the Lenders' access to any
information, and shall continue in full force and effect until the final and
indefeasible payment in full of the Notes and all of the Borrower's Obligations
under this Agreement and the termination of the Revolving Commitments in their
entirety.

     9.17.     CONFIDENTIALITY.

     Each of the Lenders severally agrees to use reasonable efforts to keep
confidential all non-public information pertaining to the Borrower or its
Subsidiaries which is provided to it by the Borrower or its Subsidiaries, and
shall not intentionally disclose such information to any Person except:

               (i)     to the extent such information is public when received by
     such Lender or becomes public thereafter due to the act or omission of any
     party other than such Lender;

               (ii)    to the extent such information is independently obtained
     from a source other than the Borrower or any of its Subsidiaries and such
     information from such source is not, to such Lender's knowledge, subject to
     an obligation of confidentiality or, if such information is subject to an
     obligation of confidentiality, that disclosure of such information is
     permitted;

               (iii)   to counsel, auditors or accountants retained by the
     Administrative Agent or any Lender or to Affiliates of any Lender in
     connection with transactions contemplated by this Agreement, PROVIDED they
     agree to keep such information confidential as if such Affiliates were
     Lenders party to this Agreement and to financial institution regulators,
     including examiners of any Lender or the Administrative Agent or any
     Affiliate in the course of examinations of such Persons;

                                     - 93 -


               (iv)    in connection with any litigation or the enforcement or
     preservation of the rights of the Administrative Agent or any Lender under
     this Agreement;

               (v)     to the extent required by any applicable statute, rule or
     regulation or court order (including, without limitation, by way of
     subpoena) or pursuant to the request of any regulatory or governmental
     authority having jurisdiction over any Lender; PROVIDED, HOWEVER, that such
     Lender shall endeavor (if not otherwise prohibited by law) to notify
     Borrower prior to any disclosure made pursuant to this SECTION 9.17(v),
     except that no Lender shall be subject to any liability whatsoever for any
     failure to so notify Borrower; or

               (vi)    to the extent disclosure to other financial institutions
     is appropriate in connection with any proposed or actual assignment or
     grant of a participation by any of the Lenders of interests in this
     Agreement and/or any Note to such other financial institutions (who will in
     turn be required to agree to maintain confidentiality as if they were
     Lenders party to this Agreement).

     9.18.     WAIVER OF IMMUNITIES.

     Subject to SECTION 9.10 of this Agreement, each Lender waives, in relation
to any action or proceeding arising out of or relating to this Agreement or any
Note, any sovereign immunity or other immunity to suit or to execution or
attachment to which such Lender or any of its property may be or become
entitled.

                                     - 94 -


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                     HON INDUSTRIES INC.


                                     By: /s/ Melinda C. Ellsworth
                                         ----------------------------
                                     Name:  Melinda C. Ellsworth
                                            ------------------------------------
                                     Title: VP, Treasurer & Investor Relations
                                           -------------------------------------

                                     - 95 -


                                     DEUTSCHE BANK TRUST COMPANY
                                     AMERICAS, individually as a Lender, as an
                                     Issuing Bank and as Administrative Agent


                                     By: /s/ William W. Archer
                                         ---------------------------------------
                                     Name: William W. Archer
                                           -------------------------------------
                                     Title:
                                           -------------------------------------

                                     - 96 -


                                     THE NORTHERN TRUST COMPANY,
                                     individually as a Lender, as an
                                     Issuing Bank and as Syndication Agent


                                     By: /s/ Mark E. Taylor
                                         ----------------------------
                                     Name:    MARK E. TAYLOR
                                          ---------------------------
                                     Title:   VICE PRESIDENT
                                           --------------------------

                                     - 97 -


                                     NATIONAL CITY BANK OF
                                     MICHIGAN/ILLINOIS, as a Lender and as
                                     Documentation Agent


                                     By:  /s/ Brent A. Eichelberger
                                         ----------------------------
                                     Name:  BRENT A. EICHELBERGER
                                          ---------------------------
                                     Title: PRESIDENT, QUAD CITIES
                                           --------------------------

                                     - 98 -


                                     BNP PARIBAS


                                     By: /s/ Jo Ellen Bender
                                        -----------------------------
                                        Name:  Jo Ellen Bender
                                        Title: Managing Director


                                     By:  /s/ Christine L. Howatt
                                        -----------------------------
                                        Name:  Christine L. Howatt
                                        Title: Director

                                     - 99 -


                                     WELLS FARGO BANK, N.A.


                                     By: /s/ Larry Brandt
                                         ----------------------------
                                     Name:  Larry Brandt
                                          ---------------------------
                                     Title: Vice President
                                           --------------------------

                                     - 100 -


                                     FIRST NATIONAL BANK OF MUSCATINE


                                     By:  /s/ D. Scott Ingstad
                                         ----------------------------
                                     Name:    D. Scott Ingstad
                                          -----------------------------
                                     Title:   President & CEO
                                        -----------------------------

                                     - 101 -


                                     WACHOVIA BANK,
                                     NATIONAL ASSOCIATION


                                     By: /s/ Paige Mesaros
                                         ----------------------------
                                     Name:  PAIGE MESAROS
                                           --------------------------
                                     Title: VICE PRESIDENT
                                           --------------------------

                                     - 102 -


                                     BANK OF AMERICA N.A.


                                     By: /s/ B. Guy Stapleton
                                         ----------------------------
                                     Name:    B. Guy Stapleton
                                          ---------------------------
                                     Title:   Managing Director
                                           --------------------------

                                     - 103 -

EX-21

                                                                      EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT



                                                Country/State
Subsidiary                                      Of Incorporation    Doing Business As
- ----------                                      ----------------    -----------------
                                                              
Allied Fireside, Inc.                           Wisconsin           Allied Fireside, Inc.

Allsteel Inc                                    Illinois            Allsteel Inc.

Maxon Furniture Inc.                            Iowa                Maxon Furniture Inc.

The Gunlocke Company                            Iowa                The Gunlocke Company

Hearth & Home Technologies Inc.                 Iowa                Hearth & Home Technologies Inc.

Hearth & Home Technologies Europe Ltd.          Hungary             Inactive

HFM Partners                                    Iowa                HFM Partners

HNI Services L.L.C.                             Iowa                HNI Services L.L.C.

HTI Hungary L.L.C.                              Iowa                Inactive

Holga Inc.                                      Iowa                Holga Inc.

The HON Company                                 Iowa                The HON Company

HON INDUSTRIAS S.de R.L.de C.V.                 Mexico              HON INDUSTRIAS S.de R.L.de C.V.

HON INDUSTRIAS III S.de R.L.de C.V.             Mexico              HON INDUSTRIAS S.de R.L.de C.V.

HON INDUSTRIES (Canada) Inc.                    Canada              HON INDUSTRIES (Canada) Inc.

HON International Inc.                          Iowa                HON International Inc.

HON INDUSTRIES (Asia) L.L.C.                    Iowa                Inactive

HON Mexico Holdings Inc.                        Iowa                HON Mexico Holdings Inc.

HON (Mexico) L.L.C.                             Iowa                HON (Mexico) L.L.C.

HON Technology Inc.                             Iowa                HON Technology Inc.

Pearl City Insurance Company                    Vermont             Pearl City Insurance Company

River Bend Capital Corporation                  Iowa                River Bend Capital Corporation

T. M. Export Inc.                               Barbados            T. M. Export Inc.

FWP L.L.C.                                      Iowa                Inactive

HON Internacional de Mexico S.de R.L.de C.V.    Mexico              HON Internacional de Mexico
                                                                    S.de R.L.de C.V.

Hearth Technologies (Ohio) Inc.                 Iowa                Inactive

EX-23

                                                                      EXHIBIT 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to incorporation by reference in the Registration Statements
on Form S-8 (No.033-61305, No. 333-27121, No. 333-31366 and No. 333-91682) of
HON INDUSTRIES Inc. of our reports dated January 31, 2003 relating to the
financial statements and financial statement schedule, which appear in this
Form 10-K.

PricewaterhouseCoopers LLP


Chicago, Illinois
March 24, 2003

EX-99.B

                                                                     EXHIBIT 99B


                      EXECUTIVE DEFERRED COMPENSATION PLAN

                               HON INDUSTRIES INC.


               As Amended and Restated Effective November 7, 2002



                                TABLE OF CONTENTS



                                                                                 Page
                                                                                 ----
                                                                                
1.   AMENDMENT AND RESTATEMENT......................................................1
     1.1.   Amendment and Restatement...............................................1
     1.2.   Purposes................................................................1
     1.3.   Application of the Plan.................................................1

2.   DEFINITIONS....................................................................1
     2.1.   Definitions.............................................................1
     2.2.   Gender and Number.......................................................3

3.   ELIGIBILITY AND PARTICIPATION..................................................3
     3.1.   Eligibility.............................................................3
     3.2.   Participation...........................................................3
     3.3.   Partial Year Participation..............................................4

4.   DEFERRAL OPPORTUNITY...........................................................4
     4.1.   Deferral Amount.........................................................4
     4.2    Annual Compensation Deferral Election...................................4
     4.3.   Adjustment in Deferred Amount...........................................5
     4.4.   Deferral of Receipt of Shares under Stock-Based Compensation Plans......6
     4.5.   Length of Deferral......................................................7
     4.6    Form of Payment.........................................................7
     4.7.   Termination from Service Other Than Retirement or Death.................8
     4.8.   Death Benefit...........................................................8
     4.9.   Financial Hardship......................................................8
     4.10.  Distribution With Financial Penalty.....................................9
     4.11.  Financial Determination................................................10
     4.12.  Vesting................................................................10
     4.13.  Funding................................................................10
     4.14.  Deduction Issues.......................................................11

5.   INDIVIDUAL ACCOUNTS...........................................................11
     5.1.   Participants' Accounts.................................................11
     5.2.   Charges Against Accounts...............................................11
     5.3.   Participant Statements.................................................11

6.   ADMINISTRATION................................................................11
     6.1.   Administration.........................................................11
     6.2.   Decisions Binding......................................................11
     6.3.   Expenses...............................................................11
     6.4.   Indemnification and Exculpation........................................12

7.   BENEFICIARY DESIGNATION.......................................................12
     7.1.   Designation of Beneficiary.............................................12


                                       -i-


                                                                                
     7.2.   Death of Beneficiary...................................................12
     7.3.   Ineffective Designation................................................12

8.   WITHHOLDING OF TAXES..........................................................12

9.   CHANGE IN CONTROL. AMENDMENT, AND TERMINATION.................................12
     9.1.   Change in Control......................................................12
     9.2    Plan Amendment and Termination.........................................14

10.  CLAIMS PROCEDURE..............................................................14
     10.1.  Initial Claim..........................................................14
     10.2.  Denial of Claim........................................................14
     10.3.  Review of Claim Denial.................................................14

11.  MISCELLANEOUS.................................................................14
     11.1.  Unfunded Plan..........................................................14
     11.2.  Nontransferability.....................................................15
     11.3.  Successors.............................................................15
     11.4.  Severability...........................................................15
     11.5.  Applicable Law.........................................................15



                                      -ii-


                               HON INDUSTRIES INC.
                      EXECUTIVE DEFERRED COMPENSATION PLAN

1.   AMENDMENT AND RESTATEMENT

     1.1.   AMENDMENT AND RESTATEMENT. HON INDUSTRIES Inc., an Iowa corporation
(the "Company"), hereby amends and restates, effective as of November 7, 2002
(the "Effective Date"), the HON INDUSTRIES Inc. Executive Deferred Compensation
Plan (the "Plan"), a deferred compensation plan for its eligible employees. The
Plan was most recently amended and restated effective November 9, 2000.

     1.2.   PURPOSES. The purpose of the Plan is to give eligible executives the
opportunity to defer the receipt of compensation to supplement their retirement
savings and to achieve their personal financial planning goals.

     1.3.   APPLICATION OF THE PLAN. The terms of the Plan, as amended and
restated, shall apply only to eligible executives who are in the active employ
of an Employer on and after the Effective Date; provided, however, changes in
distribution options that are effective November 8, 2002 will apply to former
employees who still have an Account under the Plan.

2.   DEFINITIONS

     2.1.   DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meaning set forth below and, when the defined meaning is intended, the
term is capitalized:

     (a)    "Account" shall mean the aggregate of the individual bookkeeping
            Cash Subaccount, Transferable Stock Subaccount, and Nontransferable
            Stock Subaccount established for each Participant, including any
            subaccounts of the Cash Subaccount, Transferable Stock Subaccount
            and Nontransferable Stock Subaccount established under the Plan, for
            the purpose of crediting a Participant's deferrals and earnings
            hereunder, as further described in Section 5.1.

     (b)    "Annual Bonus" means bonus awards awarded by the Company to a
            Participant as provided in the HON INDUSTRIES Inc. Executive Bonus
            Plan, or any successor plan thereto.

     (c)    "Base Salary" means the annualized salary as of the close of each
            Plan Year, including all regular basic wages before reduction for
            any amounts deferred on a tax-qualified or nonqualified basis,
            payable in cash to a Participant for services rendered to an
            Employer during the Plan Year. Base Salary shall exclude bonuses,
            incentive compensation, special fees or awards, allowances, or any
            other



            form of premium or incentive pay, or amounts designated by an
            Employer as payment toward or reimbursement of expenses.

     (d)    "Board of Directors" means the board of directors of the Company.

     (e)    "Cash Profit Sharing" means amounts paid by the Company under the
            HON INDUSTRIES Inc. Cash Profit Sharing Plan, or any successor plan
            thereto.

     (f)    "Code" means the Internal Revenue Code of 1986, as amended from time
            to time, or any successor thereto.

     (g)    "Committee" means the Human Resources and Compensation Committee of
            the Board of Directors or a delegate of such Committee.

     (h)    "Compensation" means the remuneration paid or awarded to the
            Participant by an Employer as Base Salary, Annual Bonus, Cash Profit
            Sharing or as an LTIP Award or LTP Award.

     (i)    "Company" means HON INDUSTRIES Inc., an Iowa corporation.

     (j)    "Deferred Amount" means, with respect to a Participant, the
            Compensation deferred for a Plan Year under the Plan pursuant to the
            Participant's election in accordance with Section 4.2 for such Plan
            Year.

     (k)    "Employer" means the Company, and any Subsidiary which adopts the
            Plan or which continues the Plan as a successor under Section 11.3.

     (l)    "ERISA" means the Employee Retirement Income Security Act of 1974,
            as amended from time to time, or any successor thereto.

     (m)    "LTP Award" means any payment made pursuant to the HON INDUSTRIES
            Long-Term Performance Plan.

     (n)    "LTIP Award" means any payment made pursuant to the HON INDUSTRIES
            Inc. Executive Long-Term Incentive Compensation Plan.

     (o)    "Net Shares" means the difference between the number of shares of
            Stock subject to a stock option exercise and the number of shares of
            Stock delivered to the Company to satisfy the stock option exercise
            price less any shares used to satisfy the minimum amount of FICA or
            withholding taxes due upon the stock option exercise as may be
            elected by the Participant.

     (p)    "Participant" means an individual who satisfies the requirements of
            Section 3.1.

     (q)    "Plan Year" means the consecutive 12-month period beginning each
            January 1 and ending December 31.

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     (r)    "Prime Rate" means the interest rate charged by the Northern Trust
            Company, Chicago, Illinois on corporate loans made to their best
            customers as of the first business day coincident with or
            immediately following the January 1 of each Plan Year.

     (s)    "Retirement" means the discontinuance of employment with the Company
            and its Subsidiaries after the attainment of age 65, or age 55 with
            ten years of service with an Employer.

     (t)    "Subsidiary" means a corporation which is wholly owned by the
            Company.

     (u)    "Stock" means the Company's common stock, $1.00 par value.

     (v)    "Termination from Service" means the discontinuance of employment
            with the Company and its Subsidiaries by reason of resignation,
            discharge, Retirement, disability, or death. A transfer of
            employment from the Company or a Subsidiary to another Subsidiary
            shall not constitute a Termination from Service.

     (w)    "Stock Unit" means the notational unit representing the right to
            receive one share of Stock.

     2.2.   GENDER AND NUMBER. Except when otherwise indicated by the context,
any masculine term used in the Plan also shall include the feminine gender; and
the definition of any plural shall include the singular and the singular shall
include the plural.

3.   ELIGIBILITY AND PARTICIPATION

     3.1.   ELIGIBILITY. Subject to Section 9.1, participation in the Plan shall
be limited to those executive employees of an Employer who are eligible to
participate in the HON INDUSTRIES Inc. Executive Bonus Plan.

     3.2.   PARTICIPATION. Eligible executive employees shall be notified of
their ability to participate prior to the beginning of each Plan Year in which
they are eligible, or as soon as administratively possible thereafter.

     No employee shall have the right to be selected to participate in the Plan
or, having been so selected, to be selected to participate in any future Plan
Year. Further, nothing in the Plan shall interfere with or limit in any way the
right of an Employer to terminate any Participant's employment at any time, nor
confer upon any Participant a right to continue in the employ of an Employer,
and all Participants shall remain subject to change of salary and other terms of
employment, transfer, change of job, discipline, layoff, discharge, or any other
change of status.

     In the event a Participant ceases to be eligible for continued
participation in the Plan for any reason, such individual shall become an
inactive Participant, retaining all the rights relating to previous deferrals as
described under the Plan, except the right to make any further deferrals,

                                       -3-


until such time that such individual again is determined by the Committee to be
an active Participant.

     3.3.   PARTIAL YEAR PARTICIPATION. In the event that an individual becomes
eligible to participate in the Plan after the beginning of a Plan Year, an
Employer may allow such individual to elect a deferral amount pursuant to
Section 4.2 for such Plan Year within thirty (30) calendar days after the
individual becomes eligible to so participate (but before the end of such Plan
Year). An election submitted pursuant to this Section 3.3 shall apply only to
Compensation earned or awarded for the Plan Year during the period subsequent to
the date on which a valid election to defer is received by the Employer from
that Participant.

4.   DEFERRAL OPPORTUNITY

     4.1.   DEFERRAL AMOUNT. A Participant may elect to defer all or a portion
of his Compensation earned or awarded for a Plan Year, as set forth in
Section 4.2.

     4.2    ANNUAL COMPENSATION DEFERRAL ELECTION.

     (a)    For each Plan Year, each Participant may elect to defer the payment
of one or more components of Compensation earned or awarded for a Plan Year as
set forth in Section 4.2(b) by filing a form in accordance with rules prescribed
by the Committee. The election shall specify the percentage or dollar amount of
the Deferred Amount that is to be credited to the Cash Subaccount and the
Transferable Stock Subaccount.

     (b)    Each Participant's election shall specify:

            (1)   The Deferred Amount, expressed as percentage or a flat dollar
                  amount of each of:

                  (A)   The Participant's Base Salary earned during the Plan
                        Year (or such shorter period commencing on the date of
                        the Participant's election under this Section);

                  (B)   The Participant's Annual Bonus awarded for the Plan
                        Year;

                  (C)   The Participant's Cash Profit Sharing payable during the
                        Plan Year;

                  (D)   The Participant's LTIP Award which is paid during the
                        Plan Year (for the prior award period);

                  (E)   The Participant's LTP Award which is paid during the
                        Plan Year (for the prior award period); and

                  (F)   Any other amounts designated by the Company from time to
                        time.

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            (2)   The Participant must elect an annualized Deferred Amount of at
                  least $10,000.

     (c)    Any election to defer amounts specified in Section 4.2(b) for any
Plan Year shall be made at any time before the commencement of such Plan Year
and shall be effective as of the beginning of such Plan Year. Subject to Section
4.6(d), an election under this Section 4.2 shall be irrevocable with respect to
the Deferred Amount for the Plan Year for which the election is in effect.

     (d)    All Participants that are anticipated to have a balance after
January 1, 2004 shall be asked to file an election specifying the Future Plan
Years or events at which time Deferred Amounts will be payable. The election
shall also specify the form of payment. All Participants with an Account under
the Plan prior to January 1, 2003, shall, by December 31, 2002, file with the
Plan a new election which shall supersede all prior elections. Any new election
must specify a distribution date no sooner than January 1, 2004. A Participant's
election shall control the time and form of the Participant's distribution
except as provided in Section 4.6(d).

     4.3.   ADJUSTMENT IN DEFERRED AMOUNT.

     (a)    The Deferred Amount credited to the Participant's Cash Subaccount
shall be credited as of the last day of each month with earnings, computed on a
monthly basis and compounded monthly, in an amount equal to the product of the
ending monthly balance credited to the Participant's Cash Subaccount, multiplied
by a rate equal to one (1) percentage point above the current Prime Rate.

     (b)    The Deferred Amount credited to the Participant's Transferable Stock
Subaccount shall be invested in that number of whole and fractional Stock Units
determined by dividing the amount (expressed in dollars) of the Deferred Amount
(and any earnings credited to such amount) by the closing market price of a
share on the Company's quarterly dividend payment date. Deferred Amounts to be
credited to the Participant's Transferable Stock Subaccount on the next
quarterly dividend payment date shall be credited with earnings in the same
manner as Deferred Amounts credited to the Participant's Cash Subaccount. If the
national exchange on which the Stock is traded is not open for business on a
quarterly dividend payment date, then the closing market price on the most
recent date on which the exchange was open shall be used. The Transferable Stock
Subaccount shall be so invested on the date the Deferred Amount would otherwise
have been paid to the Participant. On each date when the Company pays a cash
dividend, the Transferable Stock Subaccount shall be credited with a number of
additional Stock Units determined under the following sentence. The number of
additional Stock Units is equal to the amount of cash dividends paid by the
Company on such date on that number of Stock Units credited to the Transferable
Stock Subaccount on the record date for the dividend payment, divided by the
closing market price per share of Stock on the date the dividend is paid.
Appropriate adjustments in the Transferable Stock Subaccount shall be made as
equitably required to prevent dilution or enlargement of the subaccount from any
stock dividend, stock split, reorganization or other such corporate transaction
or event.

                                       -5-


     (c)    A Participant may transfer amounts between the Cash Subaccount and
the Transferable Stock Subaccount pursuant to this Section 4.3(c). Once each
calendar quarter, during the trading window selected by management for Section
16 officers, each Participant may:

            (1)   elect to convert a portion or all of the Stock Units credited
                  to the Participant's Transferable Stock Subaccount to an
                  equivalent hypothetical cash amount, based upon the closing
                  price of a share of Stock on the date the election is received
                  by the Company, and such hypothetical cash amount shall be
                  added to the Participant's Cash Subaccount, or

            (2)   elect to convert a portion or all of the amount credited to
                  the Participant's Cash Subaccount to an equivalent number of
                  Stock Units, based upon the closing price of a share of Stock
                  on the date the election is received by the Company, and such
                  Stock Units shall be added to the Participant's Transferable
                  Stock Subaccount.

     (d)    Earnings shall be credited to a Participant's Cash Subaccount and
dividends shall be credited to a Participant's Transferable Stock Subaccount
until such time as the final payment from the Account.

     4.4    DEFERRAL OF RECEIPT OF SHARES UNDER STOCK-BASED COMPENSATION PLANS.
This Section establishes special procedures for deferring the delivery and
receipt of Stock which Participants may receive pursuant to an award under the
HON INDUSTRIES Inc. Stock-Based Compensation Plan or any similar Plan the
Company may from time to time adopt. The Stock awards are governed by the stock
plan under which they are granted. No stock options, restricted stock or
derivative stock awards are authorized to be issued under the Plan. Participants
who elect to defer receipt of Stock will have no rights as stock holders of the
Company with respect to allocations made to their Nontransferable Stock
Subaccounts established under this Section except the right to receive dividend
equivalent allocations as hereafter described.

     (a)    The Committee shall establish procedures for making deferral
elections with respect to awards and such procedures may vary depending on the
nature of the award. Such procedures shall establish the amount of time prior to
the date a Participant would be in constructive receipt of the shares subject to
the award that a Participant must make a deferral election. Any such election
involving shares which have been issued (e.g., restricted stock awards) shall be
conditioned on the Participant transferring the shares to the Company.

     (b)    This paragraph provides additional rules with respect to the
deferral of receipt of Stock upon the exercise of a nonqualified stock option. A
Participant can elect to defer receipt of Net Shares of Stock resulting from a
stock-for-stock exercise of an exercisable stock option issued to the
Participant by completing and submitting to the Company an irrevocable stock
option deferral election by a date which is at least six months in advance of
the date of exercise of the stock option and in the calendar year prior to the
date of the exercise of the stock option. The stock option exercise must occur
on or prior to the expiration date of the stock option and must be accomplished
by delivering by the attestation method, on or prior to the exercise date,

                                       -6-


shares of Stock which have been personally owned by the Participant for at least
six months prior to the exercise date and have not been used in a stock swap in
the prior six months. At the time of the deferral election the Participant may
designate that some of the shares subject to the stock option shall be used to
satisfy FICA or any other taxes due upon the stock option exercise but only to
the extent of the minimum amount required under applicable withholding
regulations. A Participant's deferral election shall not be effective if the
stock option as to which the Participant has made the deferral election
terminates prior to the exercise date selected by the Participant. If the
Participant dies or fails to deliver shares of Stock which have been personally
owned by the Participant at least six months prior to the exercise date (and
have not been used in a stock swap in the prior six months) in payment of the
exercise price, then the deferral election shall not be effective.

     (c)    A Nontransferable Stock Subaccount will be established for each
Participant with respect to each deferral election made pursuant to this Section
4.4. For each Net Share deferred, a Stock Unit will be credited as of the date
of the stock option exercise to the Nontransferable Stock Subaccount so
established. The Committee shall adjust the Nontransferable Stock Subaccount of
each Participant to reflect dividends payable with respect to the Stock from
time to time in the same manner described in Section 4.3(b) with respect to
Transferable Stock Subaccounts. Amounts credited to a Participant's
Nontransferable Stock Subaccount may not be converted to the Cash Subaccount.

     4.5.   LENGTH OF DEFERRAL. Each Participant must elect the subsequent Plan
Year in which a Deferred Amount, and earnings credited thereon, is payable. The
length of each period commencing on the date of the Participant's election and
ending on the date of payment with respect to a Deferred Amount and earnings
thereon, as elected by a Participant, for a Plan Year shall be not less than one
(1) year following the end of the Plan Year for which the election is made.

     4.6    FORM OF PAYMENT.

     (a)    Subject to Section 4.6, each Deferred Amount, and earnings thereon,
shall be payable, pursuant to the Participant's election under Section 4.2, in
the form of either:

            (1)   a single sum payment, or

            (2)   monthly, quarterly or annual installment payments of a
                  specified dollar amount or number of shares.

     Amounts from the Cash Subaccount are payable in cash. Amounts from the
Transferable Stock Subaccount and Nontransferable Stock Subaccount shall be
payable in Stock, except fractional shares shall be distributed in the form of
cash. The Company shall reduce the amount of any cash or Stock payment to the
extent the Company deems appropriate for federal, state or local tax withholding
or other purposes required by law or authorized by the Participant.

     (b)    If the Participant elects payment in the form of annual installment
payments, the initial installment payment shall be made on January 31 of the
Plan Year selected by the Participant. The remaining annual installment payments
shall be made in January each year thereafter until the Participant's entire
Account has been paid. If the Participant elects payment

                                       -7-


in the form of installments, the installment payments will be made on the
closest regular payroll date selected by the Company. The minimum annualized
installment payments of stock, cash or both, shall have a value of $25,000. If
on January 31 of the Plan Year the balance of such Participant's Account is less
than $25,000 the entire balance will be paid to the Participant. In any event,
the remaining balance of a Participant's Account shall be paid on the 25th
anniversary of the first payment.

     (c)    During the installment payment period, earnings and dividends shall
be credited with respect to the Participant's Account in the manner provided in
Section 4.3(a) and (b). [The amount of each installment payment shall be equal
to the balance remaining in the Participant's Account (or, if the election is
with respect to a subaccount, such subaccount) immediately prior to each such
payment, multiplied by a fraction, the numerator of which is one (1), and the
denominator of which is the number of installment payments remaining, with the
last installment consisting of the balance of the Participant's Account (or, as
applicable, subaccount)].

     (d)    A Participant may change an election with respect to payment of a
Deferred Amount and earnings thereon to any frequency or amount otherwise
permitted under the Plan, provided that such election is made more than one year
prior to the date for payment commencement previously elected by the Participant
with respect to such Deferred Amount and earnings thereon, and provided that any
new deferral period resulting from such a change in election shall not end less
than one (1) year following the end of the Plan Year in which such new election
is made. The Committee, at its sole discretion, may determine for any reason
that such change in election will not be allowed. If the requirements for
changing an election set forth in this paragraph are not satisfied, a
Participant's election of the form and timing of payment with respect to a
Deferred Amount may not be changed or revoked.

     4.7.   TERMINATION FROM SERVICE OTHER THAN RETIREMENT OR DEATH.
Notwithstanding any election by a Participant pursuant to Section 4.2, in the
case of any Participant who incurs a Termination from Service during a Plan Year
for any reason other than Retirement or Death, payment of the Participant's
Account shall be made in a single sum payment (regardless of the form otherwise
elected by the Participant) as soon as administratively reasonable in conformity
with normal payroll schedules.

     4.8.   DEATH BENEFIT. If a Participant dies with all or a portion of his
Account unpaid, the remaining amount shall be paid to his beneficiary, as
designated in accordance with Article 7, in the form (lump sum or installments)
and time elected by the Participant under Section 4.6. Notwithstanding the
foregoing, the Committee may alter the form and timing of any payments after
taking into account the circumstances of the Participant's death and the welfare
of the Participant's beneficiary. Upon the death of a Participant all rights and
privileges of the Participant contained in Article 4, shall inure to the benefit
of such Participant's designated beneficiary in accordance with Article 7.

     4.9.   FINANCIAL HARDSHIP. The Committee shall have the sole authority to
alter the timing or manner of payment of a Participant's Account in the event
that the Participant (or the Participant's beneficiary, if the Participant has
died)

                                       -8-


establishes, to the satisfaction of the Committee, severe financial and/or
medical hardship at the time of distribution. In such event the Committee may:

     (a)    Provide that all or a portion of any Deferred Amount and earnings
thereon be paid immediately in a single sum payment, or

     (b)    Provide that all or a portion of the installments payable over a
period of time shall be paid immediately in a single sum payment; or

     (c)    Provide for such other installment payment schedule as deemed
appropriate by the Committee under the circumstances.

     However, the amount distributed pursuant to this Section shall not exceed
that amount which is reasonably necessary, as determined by the Committee, for
the Participant or beneficiary to meet the financial and/or medical hardship at
the time of distribution. A request for a payment for hardship reasons must be
accompanied or supplemented by such evidence of hardship as the Committee may
reasonably require.

     The severity of the financial and/or medical hardship shall be judged by
the Committee. Severe financial and/or medical hardship will be deemed to exist
in the event of the Participant's or beneficiary's long and serious illness,
impending bankruptcy, or other similar unforeseeable and extraordinary
circumstances arising as a result of events beyond the control of the
Participant or beneficiary. The Committee's decision with respect to the
severity of financial and/or medical hardship and the manner in which, if at
all, the payment of deferred amounts shall be altered or modified, shall be
final, conclusive, and not subject to appeal.

     4.10.  DISTRIBUTION WITH FINANCIAL PENALTY.

     (a)    The Participant (or the Participant's Beneficiary who is receiving
installment payments under the Plan) may elect, in writing, to withdraw all or a
portion of a Participant's Account at any time prior to the time such Account
otherwise becomes payable under the Plan, provided the conditions specified in
this Section 4.10 are satisfied. Withdrawal's will be made first from the Cash
Subaccount, then the Transferable Stock Subaccount, and then the Nontransferable
Stock Subaccount.

     (b)    In the event of a withdrawal pursuant to Section 4.10(a), the
Participant shall forfeit from the Participant's Account an amount equal to 10%
of the amount of the withdrawal or accelerated distribution, as the case may be.
The forfeited amount shall be deducted from the Participant's Account prior to
giving effect to the requested withdrawal or acceleration. Neither the
Participant nor the Participant's Beneficiary shall have any right or claim to
the forfeited amount, and the Company shall have no obligation whatsoever to the
Participant, the Participant's Beneficiary or any other person with regard to
the forfeited amount.

     (c)    In no event shall the amount withdrawn in accordance with Section
4.10(a) be less than the lesser of (i) 25% of the amount credited to such
Participant's Account immediately prior to the withdrawal or (ii) $10,000.
Notwithstanding the foregoing, if the Participant is not

                                       -9-


employed at the time of the request for withdrawal, the Participant must
withdraw the entire remaining balance of the Participant's Account.

     (d)    In the event of a withdrawal pursuant to Section 4.10(a), a
Participant who is otherwise eligible to make deferrals of Compensation under
this Plan shall be prohibited from making such deferrals with respect to the
remainder of the current Plan Year and the Plan Year immediately following the
Plan Year during which the withdrawal was made, and any election previously made
by the Participant with respect to deferrals of Compensation for such Plan Years
of the Plan shall be void and of no effect.

     4.11.  FINANCIAL DETERMINATION. As soon as practicable after a Triggering
Event, the value of each Participant's Account (determined as of the last day of
the month preceding the date of payment) shall be paid in full to such
Participant and/or such Participant's beneficiary as promptly as practicable,
and the Plan shall terminate. For purposes of this Section, a "Triggering Event"
shall include any of the followings:

     (a)    A lender to the Company notifies the Company of default under a
credit agreement and the default is not cured within 90 days.

     (b)    As of any fiscal quarter the Company's coverage for the most recent
trailing four quarters falls below 2.0 to 1.0 as calculated by Consolidated
Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) divided by
Consolidated Interest Expense. For purposes of this calculation non-cash
writeoffs shall be excluded.

     (c)    As of any fiscal quarter the Company's ratio of Total Assets to
Total Liabilities, as reflected on the Company's balance sheet, becomes less
than 1 to 1.

     4.12.  VESTING. A Participant shall have a full and immediate
nonforfeitable interest in his Account at all times.

     4.13.  FUNDING. The Company's obligations under the Plan shall in every
case be an unfunded and unsecured promise to pay. Each Participant's or
beneficiary's rights under the Plan shall be no greater than those of general,
unsecured creditors of the Company. The amount of each Participant's Account
shall be reflected on the accounting records of the Employer but shall not be
construed to create, or require the creation of, a trust, custodial or escrow
account. No Participant shall have any right, title, or interest whatever in or
to any investment reserves, accounts, or funds that the Employer may purchase,
establish, or accumulate, and, except as provided in the next sentence, no Plan
provision or action taken pursuant to the Plan shall create or be construed to
create a trust or a fiduciary relationship of any kind between an Employer and a
Participant or any other person. All amounts paid under the Plan shall be paid
in cash from the general assets of an Employer, and an Employer shall not be
obligated under any circumstances to fund its financial obligations under the
Plan, except that, notwithstanding the foregoing, the Company shall be obligated
not later than upon the occurrence of a Change in Control (as defined in Section
9.1(b)), to transfer assets to one or more irrevocable grantor trusts
established by the Company in an amount at least sufficient to provide for the
obligations of the Employers under the Plan as of the date of such transfer and,

                                      -10-


effective as of such date, the provision contained in Section 4.11 shall be null
and void. The assets of any such trust shall at all times be subject to the
claims of the general unsecured creditors of the Employers and not be subject to
the prior claim of any Participant or beneficiary under the Plan. Any such trust
so established and the rights and obligations of any individual, the Employers,
and the trustee in such trust shall be governed exclusively by such trust;
provided that the provisions of the Plan shall govern exclusively the rights of
a Participant or beneficiary to benefits under the Plan.

     4.14.  DEDUCTION ISSUES. Notwithstanding the foregoing provisions of this
Article 4, if the deduction of all or any portion of any payment otherwise due
to be made by the Company under the Plan would be disallowed solely by reason of
Section 162(m) of the Code, but for the operation of this Section, then such
payment (or portion thereof) shall be deferred and made at the earliest time
that Section 162(m) would not apply to disallow the corresponding deduction by
the Company.

5.   INDIVIDUAL ACCOUNTS

     5.1.   PARTICIPANTS' ACCOUNTS. The Company shall establish and maintain an
Account for each Participant under the Plan for the benefit of such Participant,
consisting of a Cash Subaccount, Transferable Stock Subaccount and
Nontransferable Stock Subaccount. Each such subaccount shall be credited with a
Participant's Deferred Amount at the time such amounts otherwise would have been
paid to the Participant had such amounts not been deferred, and shall be
credited with earnings in accordance with Section 4.3.

     5.2.   CHARGES AGAINST ACCOUNTS. There shall be charged against each
Participant's Account any payments made to the Participant or to a Participant's
beneficiary.

     5.3.   PARTICIPANT STATEMENTS. Statements that identify the Participant's
Account balance shall be provided to Participants on a quarterly basis in
writing or by electronic means as determined by the Committee.

6.   ADMINISTRATION

     6.1.   ADMINISTRATION. This Plan shall be administered by the Committee.
The Committee shall have full power to construe and interpret the Plan, to
decide questions arising under the Plan, and to take such other action as may be
appropriate to carry out the purposes of the Plan.

     6.2.   DECISIONS BINDING. All determinations and decisions made by the
Committee, pursuant to the provisions of the Plan shall be final, conclusive,
and binding on all persons, including the Company, its owners, employees,
Participants and their estates and beneficiaries.

     6.3.   EXPENSES. The expenses of administering the Plan shall be borne by
the Company.

                                      -11-


     6.4.   INDEMNIFICATION AND EXCULPATION. The agents, officers, directors,
and employees of the Company and its Subsidiaries and the Committee shall be
indemnified and held harmless by the Company against and from any and all loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
them in connection with or resulting from any claim, action, suit, or proceeding
to which they may be a party or in which they may be involved by reason of any
action taken or failure to act under this Plan and against and from any and all
amounts paid by them in settlement (with the Company's written approval) or paid
by them in satisfaction of a judgment in any such action, suit or proceeding.
The foregoing provision shall not be applicable to any person if the loss, cost,
liability, or expense is due to such person's gross negligence or willful
misconduct.

7.   BENEFICIARY DESIGNATION

     7.1.   DESIGNATION OF BENEFICIARY. Each Participant shall be entitled to
designate a beneficiary or beneficiaries who, upon the Participant's death, will
receive the amounts that otherwise would have been paid to the Participant under
the Plan. All designations shall be signed by the Participant, and shall be in a
form prescribed by the Committee. The Participant may change his or her
designation of beneficiary at any time, on a form prescribed by the Committee.
The filing of a new beneficiary designation form by a Participant shall
automatically revoke all prior designations by that Participant.

     7.2.   DEATH OF BENEFICIARY. In the event that all the beneficiaries named
by a Participant, pursuant to Section 7.1 herein, predecease the Participant,
the deferred amounts that would have been paid to the Participant shall be paid
to the Participant's estate.

     7.3.   INEFFECTIVE DESIGNATION. In the event the Participant does not
designate a beneficiary, or for any reason such designation is ineffective in
whole or in part, the ineffectively designated amounts shall be paid to the
Participant's estate.

8.   WITHHOLDING OF TAXES

     The Company shall have the right to deduct from all payments made pursuant
to the Plan such amounts as it may reasonably estimate as sufficient to satisfy
federal, state and local tax withholding requirements.

9.   CHANGE IN CONTROL, AMENDMENT, AND TERMINATION

     9.1.   CHANGE IN CONTROL.

     (a)    A Participant shall retain rights to payment of all Deferred
Amounts, including earnings credited in accordance with this Plan, in the event
of a Change in Control.

     (b)    For purposes of the Plan, a "Change in Control" means

                                      -12-


     (i)    the acquisition by any individual, entity or group (with the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (a) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (b) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change in Control: (a) any acquisition directly from the
Company, (b) any acquisition by the Company, (c) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (d) any acquisition by any corporation
pursuant to a transaction which complies with clauses (a), (b) and (c) of
subsection (iii) of this paragraph; or

     (ii)   individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least two-thirds of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least three-quarters of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

     (iii)  consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (a) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (b) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (c) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

                                      -13-


     (iv)   approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

     9.2    PLAN AMENDMENT AND TERMINATION. The Board of Directors or the
Committee has the authority to amend, modify, and/or terminate the Plan at any
time. No amendment or termination of the Plan shall in any manner adversely
affect any Participant's interest in his Account, without the consent of the
Participant. Without limiting the foregoing, the Board of Directors may, in its
sole discretion, terminate the Plan in its entirety, in which case the value of
each Participant's Account shall be paid in full to such Participant and/or such
Participant's beneficiary as promptly as practicable, or the Board of Directors
may freeze the Plan by precluding any further deferral elections and/or other
credits, but otherwise maintain the balance of the provisions of the Plan.

10.  CLAIMS PROCEDURE

     10.1.  INITIAL CLAIM. Payments under the Plan shall be paid in accordance
with the provisions of the Plan. The Participant, or a beneficiary designated
pursuant to Article 7 or any other person claiming through the Participant,
shall mail or deliver to the Committee a written request for benefits under this
Plan. Such claim shall be reviewed by the Committee or its delegate.

     10.2.  DENIAL OF CLAIM. If the claim is denied, in full or in part, the
Committee or its delegate shall provide a written notice within ninety (90) days
setting forth the specific reasons for denial, and any additional material or
information necessary to perfect the claim, and an explanation of why such
material or information is necessary, all appropriate information and an
explanation of the steps to be taken if a review of the denial is desired.

     10.3.  REVIEW OF CLAIM DENIAL. If the claim is denied and a review by the
Board of Directors is desired, the Participant (or beneficiary) shall notify the
Board of Directors or its delegate in writing within sixty (60) days (a claim
shall be deemed denied if the Board of Directors does not take any action within
the aforesaid ninety (90) day period) after receipt of the written notice of
denial. In requesting a review, the Participant or his beneficiary may request a
review of the Plan document or other pertinent documents, may submit any written
issues and comments, may request an extension of time for such written
submission of issues and comments, and may request that a hearing be held, but
the decision to hold a hearing shall be within the sole discretion of the Board
of Directors.

11.  MISCELLANEOUS

     11.1.  UNFUNDED PLAN. This Plan is intended to be an unfunded plan
maintained primarily to provide deferred compensation benefits for "a select
group of management or highly compensated employees" within the meaning of
Sections 201, 301, and 401 of ERISA, and therefore is further intended to be
exempt from the provisions of Parts 2, 3, and 4 of Title I of ERISA.
Accordingly, the Plan shall terminate and no further benefits shall accrue
hereunder in the event it is determined by a court of competent jurisdiction

                                      -14-


or by an opinion of counsel to the Company that such balance of the Plan
constitutes an employee pension benefit plan within the meaning of Section 3(2)
of ERISA, which is not so exempt. In addition, in the absolute discretion of the
Committee, the vested benefit of each Participant accrued under such balance of
the Plan on the date of termination shall be paid immediately to such
Participant in a lump sum.

     11.2.  NONTRANSFERABILITY. A Participant's rights or interests in the Plan
may not be sold, transferred, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. In no event shall
the Company make any payment under the Plan to any assignee or creditor of a
Participant or to any assignee or creditor of a Participant's beneficiary.

     11.3.  SUCCESSORS. All obligations of the Company under the Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.

     11.4.  SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included. If in the opinion of
counsel for the Company, a provision of the Plan would result in the
constructive receipt of income due to a change in applicable law or regulations
such provision shall be deemed to be of no effect with respect to any Deferred
Amounts which would be affected by such change in law or regulation.

1.5. APPLICABLE LAW. To the extent not preempted by federal law, the Plan shall
be governed and construed in accordance with the laws of the state of Iowa.

     IN WITNESS WHEREOF, the Company has caused this instrument to be executed
and its corporate seal to be hereunder affixed this 7th day of November, 2002.

                                         HON INDUSTRIES Inc.


                                         By:
                                             -----------------------------------

                                         Title:
                                                --------------------------------


ATTEST:

                                      -15-


Title:
       ----------------------------

                                      -16-

EX-99.C

                                                                  (EXHIBIT 99.C)

Forward Looking Statements

Statements in this report that are not strictly historical, including statements
as to plans, objectives, and future financial performance, are "forward-looking"
statements that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
known and unknown risks, which may cause the Company's actual results in the
future to differ materially from expected results. These risks include, among
others:

- -    competition within the office furniture and fireplace industries, including
     competition from imported products and competitive pricing;

- -    increases in the cost of raw materials, including steel, which is the
     Company's largest raw material category;

- -    increases in the cost of health care benefits provided by the Company;

- -    reduced demand for the Company's storage products caused by changes in
     office technology; including the change from paper record storage to
     electronic record storage;

- -    the effects of economic conditions, including the current recessionary
     environment, on demand for office furniture, customer insolvencies and
     related bad debts and claims against the Company that it received
     preferential payments;

- -    changes in demand and order patterns from the Company's customers,
     particularly its top ten customers, which represented approximately 37% of
     net sales in 2002;

- -    issues associated with acquisitions and integration of acquisitions;

- -    the ability of the Company to realize cost savings and productivity
     improvements from its cost containment and business simplification
     initiatives;

- -    the ability of the Company to realize financial benefits from investments
     in new products;

- -    the ability of the Company's distributors and dealers to successfully
     market and sell the Company's products;

- -    the availability and cost of capital to finance planned growth; and

- -    other risks, uncertainties, and factors described from time to time in the
     Company's filings with the Securities and Exchange Commission.

We caution the reader that the above list of factors may not be exhaustive. The
Company does not assume any obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise.

EX-99.D

                                                                  (EXHIBIT 99.D)

                    Certification of CEO and CFO Pursuant to
                             18 U.S.C. Section 1350,
                             as Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the Annual Report on Form 10-K of HON INDUSTRIES Inc. (the
"Company") for the period ended December 28, 2002, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), Jack D. Michaels, as
Chairman and Chief Executive Officer of the Company, and Jerald K. Dittmer, as
Vice President and Chief Financial Officer of the Company, each hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


                                        /s/ Jack D. Michaels
                                       -----------------------------------------
                                       Name:  Jack D. Michaels
                                       Title: Chairman and Chief
                                              Executive Officer
                                       Date:  March 24, 2003


                                        /s/ Jerald K. Dittmer
                                       -----------------------------------------
                                       Name:  Jerald K. Dittmer
                                       Title: Vice President and Chief Financial
                                              Officer
                                       Date:  March 24, 2003

This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.