ASSET PURCHASE AGREEMENT
among
EARTH AND OCEAN SPORTS, INC.,
a Massachusetts corporation
("PURCHASER"),
O'BRIEN INTERNATIONAL, INC.,
a Washington corporation
("SELLER"),
and
MERIDIAN SPORTS INCORPORATED,
a Delaware corporation
("PARENT")
Date: July 31, 1997
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions....................................................1
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets........................................... 11
2.2 Excluded Assets.............................................. 13
2.3 Assumed Liabilities.......................................... 14
2.4 Closing...................................................... 15
2.5 Payment of Purchase Price.................................... 15
2.6 Consistent Treatment......................................... 19
2.7 Procedures for Purchased Assets Not
Transferable................................................. 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
3.1 Due Incorporation; Subsidiaries.............................. 20
3.2 Due Authorization............................................ 20
3.3 Consents and Approvals....................................... 20
3.4 Financial Statements......................................... 21
3.5 No Adverse Effects or Changes................................ 21
3.6 Title to Properties.......................................... 22
3.7 Real Property................................................ 23
3.8 Personal Property............................................ 25
3.9 Inventories.................................................. 25
3.10 No Third Party Options....................................... 26
3.11 Intellectual Property........................................ 26
3.12 Contracts.................................................... 27
3.13 Permits...................................................... 30
3.14 Insurance.................................................... 30
3.15 Employee Benefit Plans and Employment
Agreements................................................... 30
3.16 Employees.................................................... 32
3.17 Taxes........................................................ 33
3.18 No Defaults or Violations.................................... 33
3.19 Environmental Matters........................................ 34
3.20 Litigation; Product Liabilities.............................. 35
3.21 Related Parties.............................................. 36
3.22 Intercompany Services and Transactions....................... 36
3.23 Product Warranties........................................... 36
3.24 Brokers...................................................... 36
3.25 Customers and Suppliers...................................... 37
i
Page
3.26 Disclosure................................................... 37
3.27 Accounts Payable............................................. 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Due Incorporation............................................ 38
4.2 Due Authorization............................................ 38
4.3 Consents and Approvals....................................... 38
4.4 Brokers...................................................... 39
ARTICLE V
COVENANTS
5.1 Noncompetition; Confidentiality.............................. 39
5.2 Existence of Seller.......................................... 40
5.3 Use of Name.................................................. 40
5.4 Product Liability............................................ 40
5.5 Employees and Employee Benefits.............................. 41
5.6 Access....................................................... 46
5.7 Collection of Accounts Receivable............................ 46
5.8 Production of Witnesses and Individuals...................... 50
5.9 Environmental Matters........................................ 51
ARTICLE VI
INDEMNIFICATION
6.1 Survival..................................................... 51
6.2 Indemnification by Parent and Seller......................... 52
6.3 Indemnification by Purchaser................................. 52
6.4 Claims....................................................... 53
6.5 Third Party Claims; Assumption of De-
fense........................................................ 54
ARTICLE VII
MISCELLANEOUS
7.1 Expenses..................................................... 55
7.2 Amendment.................................................... 55
7.3 Notices...................................................... 55
7.4 Effect of Investigation...................................... 56
7.5 Waivers...................................................... 56
7.6 Counterparts................................................. 57
7.7 Interpretation............................................... 57
7.8 Applicable Law............................................... 57
7.9 Binding Agreement............................................ 57
7.10 No Third Party Beneficiaries................................. 58
7.11 Publicity.................................................... 58
ii
Page
7.12 Further Assurances............................................ 58
7.13 Severability.................................................. 59
7.14 Remedies Cumulative........................................... 59
7.15 Liability of Parent and Seller................................ 59
7.16 Allocation of Taxes........................................... 59
7.17 Forum......................................................... 59
7.18 Assignment.................................................... 60
7.19 Entire Understanding.......................................... 60
EXHIBITS
A - Xxxx of Sale and Assignment
B - Assumption Agreement
C - Intellectual Property Assignments
iii
SCHEDULES
1.1(e) - Permitted Exceptions -- Liens
1.1(f) - Permitted Exceptions -- Liens to be
Released at Closing
2.1(k) - Bank Accounts
2.2(a) - Excluded Assets -- Contracts and
Agreements
2.5(b) - Fixed Assets Memo
2.6 - Purchase Price Allocations
3.1 - Jurisdictions
3.3 - Consents and Approvals
3.3(a) - Consents and Approvals Not Received as of
the Closing Date
3.4 - Financial Statements
3.5 - No Adverse Effects or Changes
3.6 - Title to Properties -- Personal and Real
Property Leases
3.7(a) - Real Property -- Owned Real Property
and Leases
3.7(b) - Real Property -- Outstanding Payments Relat-
ed to Real Property
3.7(c) - Real Property -- Maintenance
3.8(a) - Personal Property -- Equipment and
Vehicles
3.8(b) - Personal Property -- Tooling
3.11 - Intellectual Property
3.11(a) - Intellectual Property - Trademark Licenses
3.11(b) - Intellectual Property - Patent and Trade-
xxxx Disputes
3.12 - Contracts
3.12(b) - Contracts -- Not in the Ordinary Course
3.13 - Permits
3.14 - Insurance
3.15(a) - Employee Benefit Plans and Employment
Agreements
3.15(b) - Employee Benefit Plans and Employment
Agreements -- Exception to "Employee
Pension Benefit Plan" Qualifications
3.16 - Employees
3.18 - No Defaults of Violations
3.19 - Environmental Matters
3.20(a) - Litigation
3.20(b) - Product Liability
3.21 - Related Parties
3.22 - Intercompany Services
3.23 - Product Warranties
3.25 - Customers and Suppliers
3.27 - Accounts Payable
4.3 - Purchaser Consents and Approvals
5.1 - Subsidiaries of Parent
5.7(b) - AR Reconciliation
iv
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 31st day of July, 1997, by
and among Earth and Ocean Sports, Inc., a Massachusetts corporation
("PURCHASER"), O'Brien International, Inc., a Washington corporation
("SELLER"), and Meridian Sports Incorporated, a Delaware corporation
("PARENT"). Certain capitalized terms used herein are defined in Article I
below.
W I T N E S S E T H:
WHEREAS, Purchaser wishes to purchase from Seller, and Seller
desires to sell to Purchaser, all of the Purchased Assets (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, agreements and warranties herein contained, the parties agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the
following meanings for the purposes of this Agreement:
"ACCOUNTS PAYABLE" shall have the meaning set forth in
Section 3.27 hereof.
"ACTIVE EMPLOYEE" shall have the meaning set forth in
Section 5.5 hereof.
"AFFILIATE" shall mean, with respect to any specified Person,
(a) any other Person which, directly or indirectly, owns or controls, is under
common ownership or control with, or is owned or controlled by, such specified
Person, (b) any other Person which is a director, officer or partner or is,
directly or indirectly, the beneficial owner of ten (10) percent or more of any
class or series of equity securities of the specified Person or a Person
described in clause (a) of this paragraph, or (c) any other Person of which the
specified Person is a director, officer or partner or is, directly or
indirectly, the beneficial owner of ten (10) percent or more of any class or
series of equity securities.
"AGREEMENT" shall mean this Asset Purchase Agreement,
including all exhibits and schedules hereto, as it may be amended from time to
time.
"AMENDED ARTICLES OF INCORPORATION" shall mean the Articles
of Incorporation, as amended, of Seller, as in effect on the date hereof.
"AR NOTICE" shall have the meaning set forth in Section 5.7
hereof.
"AR RECONCILIATION" shall have the meaning set forth in
Section 5.7 hereof.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 2.3 hereof.
"ASSUMPTION AGREEMENT" means the Assumption Agreement, to be
dated the Closing Date, substantially in the form of Exhibit B hereto.
"BENEFIT ARRANGEMENT" shall have the meaning set forth in
Section 3.15 hereof.
"XXXX OF SALE AND ASSIGNMENT" means the Xxxx of Sale and
Assignment, to be dated the Closing Date, substantially in the form of
Exhibit A hereto.
"BUSINESS" shall mean the business conducted by Seller as of
the date of this Agreement and during the one (1) year period prior to the date
hereof, including, without limitation, the manufacture and marketing of water
skis, wake boards, knee boards and related towable water sports products and
accessories.
"BUSINESS DAY" shall mean any day other than (a) any Saturday
or Sunday or (b) any other day on which banks located in New York City
generally are closed for business.
"BY-LAWS" shall mean the By-laws of the Seller, as in effect
on the date hereof.
"CASH" shall have the meaning set forth in Section 2.1
hereof.
"CLOSING" shall mean the consummation of the transactions
contemplated herein.
2
"CLOSING DATE" shall mean the date on which the Closing
occurs or is to occur.
"CLOSING DATE STATEMENT OF NET TANGIBLE EQUITY" shall have
the meaning set forth in Section 2.5 hereof.
"CLOSING NET TANGIBLE EQUITY" shall have the meaning set
forth in Section 2.5 hereof.
"CLOSING SCHEDULE" shall have the meaning set forth in
Section 2.5 hereof.
"CODE" shall mean the Internal Revenue Code of 1986,
as amended.
"CONTRACT" shall mean any contract, lease, commitment,
understanding, sales order, purchase order, agreement, indenture, mortgage,
note, bond, right, warrant, instrument, plan, permit or license, whether
written or oral, which is intended or purports to be binding and enforceable.
"CREDIT AGREEMENT" shall mean the Revolving Credit and
Security Agreement, dated as of March 17, 1997, between BNY Financial
Corporation and Seller.
"DEUTSCHE FINANCING AGREEMENT" shall have the meaning set
forth in Section 3.12 hereof.
"EMPLOYEE PENSION BENEFIT PLAN" shall have the meaning set
forth in Section 3.15 hereof.
"EMPLOYEE PLAN" shall have the meaning set forth in
Section 3.15 hereof.
"ENVIRONMENTAL LAW" shall mean any applicable Laws pertaining
to (a) the protection of the environment (including air, surface water, ground
water, land surface or subsurface strata), or the protection of natural
resources; (b) the treatment, storage, disposal, generation, transportation or
Release of Hazardous Substances; (c) the protection of wetlands; (d)
underground or other storage tanks or vessels, abandoned or discarded barrels,
containers and other closed receptacles; and including (e) the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C.
Section 9601 et seq.), the Resource Conservation and Recovery Act ("RCRA") (42
U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (33 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15
3
U.S.C. Section 7401 et seq.) and the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), and the regulations promulgated
pursuant to any of the foregoing, and any such applicable foreign, state or
local statutes, and the regulations promulgated pursuant thereto, as such laws
have been and may be amended or supplemented through the Closing Date.
"ENVIRONMENTAL PERMIT" shall mean any permit, license,
approval, consent or other authorization required by or pursuant to any
applicable Environmental Law.
"EQUIPMENT" shall have the meaning set forth in
Section 2.1 hereof.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" shall have the meaning set forth in
Section 3.15 hereof.
"ESTIMATED NET TANGIBLE EQUITY" shall have the meaning set
forth in Section 2.5 hereof.
"EXCLUDED ASSETS" shall have the meaning set forth in
Section 2.2 hereof.
"FINAL BALANCE SHEET" shall have the meaning set forth in
Section 2.5 hereof.
"FINANCIAL STATEMENTS" shall mean, collectively, Seller's
audited balance sheet at December 31, 1996, audited statement of operations,
audited statement of stockholder's equity, and audited statement of cash flows,
each for the twelve (12) month period ended Decem-ber 31, 1996, the respective
notes thereto, and the Interim Financial Statements.
"GAAP" shall mean U.S. generally accepted accounting
principles in effect on the date hereof.
"GOVERNMENTAL AUTHORITY" shall mean the government of the
United States or any foreign country, any state or political subdivision
thereof, or any entity, body or authority exercising executive, legislative,
judicial, regulatory, administrative or other governmental functions or any
court, department, commission, board, agency, instrumentality or administrative
body of any of the foregoing.
4
"HAZARDOUS SUBSTANCE" shall mean any substance, material or
waste which is regulated under any provision of any Environmental Law.
"INACTIVE EMPLOYEES" shall have the meaning set forth in
Section 5.5 hereof.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 2.1 hereof.
"INTELLECTUAL PROPERTY ASSIGNMENTS" shall mean the
assignments of the Intellectual Property, to be dated the Closing Date,
substantially in the form of Exhibit C hereto.
"INTERIM FINANCIAL STATEMENTS" shall mean, collectively,
Seller's unaudited statement of operations and unaudited statement of cash
flows, each for the five (5) month period ended May 31, 1997, the unaudited
balance sheet at May 31, 1997 (the "INTERIM BALANCE SHEET"), and the respective
notes thereto.
"INVENTORIES" shall have the meaning set forth in Section 2.1
hereof.
"IRS" shall have the meaning set forth in Section 5.5 hereof.
"LAW" shall mean any law, statute, regulation, ordinance,
rule, order, decree, judgment, consent decree, settlement agreement or
governmental requirement enacted, promulgated or entered into, agreed to or
imposed by any Governmental Authority.
"LEASED PREMISES" shall mean the property subject to the
Leases.
"LEASES" shall mean the leases described on Schedule 3.7(a)
hereto.
"LENDER" shall mean the financial institution granted Liens
against the Purchased Assets pursuant to the Credit Agreement.
"LIEN" shall mean any mortgage, lien, charge, restriction,
pledge, security interest, option, claim, easement, encroachment or
encumbrance.
"LOSS" or "LOSSES" shall mean all liabilities, losses
(excluding consequential damages), costs, claims,
5
damages, penalties and expenses (including reasonable attorneys' fees and
expenses and reasonable investigation and litigation costs incurred in relation
to the indemnified matter or in enforcing such indemnity).
"MATERIAL ADVERSE CHANGE" shall mean a change in the
business, operations, assets, liabilities, results of operations, cash flows or
financial condition of Seller or the Business, which could reasonably be
expected to be materially adverse, other than the adverse reaction of any
customer or supplier of Seller to the fact that Purchaser is acquiring the
Purchased Assets.
"MATERIAL CONTRACTS" shall mean the Contracts to which Seller
is a party or to which its assets are subject, all of which are listed,
described or required to be listed or described in Section 3.12 of this
Agreement or any schedule thereto except Contracts calling for aggregate
payments of less than $25,000.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in
Section 3.15 hereof.
"NET TANGIBLE EQUITY" shall mean the tangible assets included
in the Purchased Assets reduced by the amount of the Assumed Liabilities, as at
the date of determination, determined in accordance with Section 2.5 hereof.
"OUT OF SEASON GOODS" shall have the meaning set forth in
Section 2.5 hereof.
"PARENT SAVINGS PLAN" shall have the meaning set forth in
Section 3.15 hereof.
"PERMITS" shall have the meaning set forth in Section 2.1
hereof.
"PERMITTED EXCEPTIONS" shall mean (a) easements, covenants,
rights-of-way, claims and other encumbrances of record specifically disclosed
on the Title Report, (b) zoning, building and other similar governmental
restrictions applicable to the Real Property, (c) any conditions shown on the
Survey, (d) Taxes and general and special assessments not yet due and payable
and not in default on the date of determination and payable without penalty and
interest, (e) Liens set forth on Schedule 1.1(e) hereto, (f) Liens set forth on
Schedule 1.1(f) hereto, provided that such Liens shall be released on or prior
to the Closing Date and shall not constitute Per-
6
mitted Exceptions following the Closing Date, and (g) in the case of tangible
personal property, those irregularities in title that do not, individually or
in the aggregate, materially detract in any way from the value of, or impair in
any way the use by Purchaser of, such tangible personal property.
"PERSON" shall mean any individual, corporation,
proprietorship, firm, partnership, limited partnership, limited liability
company, trust, association, Governmental Authority or other entity.
"POST-CLOSING ENVIRONMENTAL CONDITIONS" shall mean (i) any
environmental liability at the Real Property or the Leased Premises arising
from acts or omissions first occurring after the Closing Date and (ii) any
liability under any Environmental Law caused by the shipment of Hazardous
Substances following the Closing Date from the Real Property or the Leased
Premises.
"PRE-CLOSING ENVIRONMENTAL CONDITIONS" shall mean any
liability under any Environmental Laws (i) relating to off-site disposal of
Hazardous Substances from the Real Property or from any property leased, or
previously owned or leased, by Seller, (ii) relating to conditions disclosed on
Schedule 3.19 hereto, or (iii) caused by Seller, or any condition at the Real
Property, or from any property leased, or previously owned or leased, by
Seller, consisting of the presence or Release on or prior to the Closing Date
of Hazardous Substances on, under or emanating from the Real Property or from
any property leased, or previously owned or leased, by Seller, arising from or
related to conditions or circumstances existing, or actions taken, on or before
the Closing Date, that are discovered by Purchaser and disclosed to Seller
within four (4) years after the Closing Date in accordance with Section 5.9
hereof.
"PRIME RATE" shall have the meaning set forth in Section 2.5
hereof.
"PURCHASE PRICE" shall have the meaning set forth in
Section 2.5 hereof.
"PURCHASED ASSETS" shall have the meaning set forth in
Section 2.1 hereof.
"PURCHASER SAVINGS PLAN" shall have the meaning set forth in
Section 5.5 hereof.
7
"PURCHASER'S AUDITORS" shall have the meaning set forth in
Section 2.5 hereof.
"PURCHASER'S PLANS" shall have the meaning set forth in
Section 5.5 hereof.
"REAL PROPERTY" shall mean all of Seller's right, title and
interest in and to the premises owned by Seller, identified on Schedule 3.7(a)
hereto, together with all rights, privileges, appurtenances and easements
pertaining thereto, and all buildings, plants, facilities, fixtures,
structures, improvements and other real property situated or located at such
location.
"RECEIVABLE" shall mean each individual account
receivable included in Receivables.
"RECEIVABLES" shall have the meaning set forth in Section 2.2
hereof.
"REFEREE" shall have the meaning set forth in Section 2.5
hereof.
"RELEASE" shall mean any release, spill, efflu-ent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the environment or movement through or in the air, soil,
surface water or ground water or other property.
"REMEDIAL ACTION" shall mean all actions, including any
studies, investigations, capital expenditures and/or operational expenditures,
required by a Governmental Authority or required under any Environmental Law,
to (a) clean up, remove, treat, or in any other way ameliorate or address any
Hazardous Substances or other substance in the environment; (b) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger the public health or
environment; or (c) bring a Person into compliance with any Environmental Law.
"SAVINGS TRANSFER DATE" shall have the meaning set forth in
Section 5.5 hereof.
"SCHEDULE OF ESTIMATED NET TANGIBLE EQUITY" shall have the
meaning set forth in Section 2.5 hereof.
"SEC" shall have the meaning set forth in
Section 3.3 hereof.
8
"SELLER ASSIGNED CONTRACTS" shall have the meaning set forth
in Section 2.1 hereof.
"SELLER'S AUDITORS" shall have the meaning set forth in
Section 2.5 hereof.
"SELLER'S LIABILITIES" shall mean all debts, claims,
obligations or other liabilities of Seller or any of its Affiliates, absolute
or contingent, known or unknown, including, without limitation:
(a) all liabilities with respect to any Taxes, including
state, local or federal Taxes (including interest, penalties and
additions to such Taxes) for, or properly attributable to, any periods
ending on or prior to the Closing Date (including, with respect to any
taxable period that includes but does not end on the Closing Date,
Taxes with respect to the portion of such period that includes and
ends on the Closing Date calculated as if such taxable period ended at
the consummation of the Closing on the Closing Date), including any
Taxes payable by Seller as a result of the consummation of the
transactions contemplated by this Agreement (except to the extent that
Purchaser expressly assumes responsibility for taxes pursuant to
Section 7.1 hereof);
(b) subject to the provisions of Section 5.9 hereof, all
liabilities arising from Pre-Closing Environmental Conditions;
(c) all accounts payable not constituting Assumed
Liabilities and all liabilities for borrowed funds;
(d) all liabilities (i) retained by Seller pursuant to this
Agreement or (ii) under any Excluded Asset;
(e) all liabilities and obligations for product liability
matters to the extent that Seller retains such liabilities and
obligations pursuant to Section 5.4(a) hereof; and
(f) all liabilities relating to any litigation pending as of
the Closing Date against Seller including, without limitation, the
matters set forth on Schedule 3.20(b) hereto, except for litigation
(i) described on Schedule 3.20(a) hereto and (ii) to the extent
arising out of warranty claims insofar as
9
such warranty claims are assumed by Purchaser under Section 2.3(b)
hereof or other claims for which accruals are provided on the Closing
Schedule.
"SUBSIDIARY" shall mean with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which more than 50% of either the equity interests in, or the voting control
of, such corporation or other organization is, directly or indirectly, through
subsidiaries or otherwise, beneficially owned by such Person.
"SURVEY" shall mean the survey for the Real Property dated
February 25, 1997 and prepared by Triad Associates.
"TAX RETURN" shall mean any report, return or other
information required to be supplied to a Governmental Authority in connection
with any Taxes.
"TAXES" shall mean all taxes, charges, fees, duties
(including customs duties), levies or other general or special assessments,
including without limitation, income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, license, payroll, environmental, capital stock, disability,
employee's income withholding, other withholding, unemployment and Social
Security taxes, which are imposed by any Governmental Authority, and such term
shall include any interest, penalties or additions to tax attributable thereto.
"TITLE REPORT" shall mean the title policy for the Real
Property issued by Chicago Title Insurance Company, dated July 23, 1997, and
bearing commitment number 485130.
"TOOLING" shall have the meaning set forth in Section 2.1
hereof.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in
Section 5.5 hereof.
"VEHICLES" shall have the meaning set forth in Section 2.1
hereto.
10
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets. Subject to the terms and conditions
of this Agreement, at the Closing, Seller shall sell, assign, convey, transfer
and deliver to Purchaser, and Purchaser shall purchase, acquire and take
assignment and delivery of, the Purchased Assets. The "PURCHASED ASSETS" shall
mean all assets of Seller at the Closing Date other than the Excluded Assets,
wherever located and in whatever form, real, personal, tangible or intangible,
including, without limitation, all of Seller's right, title and interest in and
to the following:
(a) The Real Property;
(b) Equipment. All machinery, equipment, furniture,
telephones, spare and replacement parts, supplies, maintenance
equipment, computer equipment, materials and other personal property
located or usually located at the Real Property or the Leased Premises
or otherwise used in connection with or necessary to the Business
(collectively, the "EQUIPMENT"), including the Equipment described on
Schedule 3.8(a) hereto;
(c) Vehicles. All trucks, trailers, automobiles and
other vehicles of Seller used in connection with the Business
(collectively, the "VEHICLES"), including the Vehicles described on
Schedule 3.8(a) hereto;
(d) Inventories. All inventories, wherever located,
including all raw materials, work in process, finished goods and
supplies inventories (the "INVENTORIES");
(e) Information and Records. All records, files, notebooks,
confidential and nonconfidential information (including electronic
information), price lists, marketing information, sales records,
customer lists and files (including customer credit and collection
information), legal and accounting records, personnel and labor
relations records, employee benefits and compensation plans and
records, environmental control, monitoring and test records, plats and
surveys of the Real Property, plans and designs of buildings,
structures, fixtures and equipment, tax records, historical and
financial
11
records and files, and all other proprietary information related
to, or used in connection with, the Business;
(f) Intellectual Property. The name "O'Brien" and any
derivation thereof, and all tradenames, trade dress, corporate names
and logos, trademarks, service marks, patents, copyrights (and any
registrations with any Governmental Authority of, and applications for
registration pending with respect to, any of the foregoing), trade
secrets, mask works, technology, inventions, processes, designs,
know-how, computer software and data, formulas, prototypes,
enhancements, improvements, or other tangible work product or
technology or process developed, created or otherwise acquired in
connection with the design, research and development, market research
or marketing of products of the Business, goodwill, any licenses
related to any of the foregoing, to the extent assignable, and all
other intangible intellectual property assets related to the Business,
including (without limitation) those items described on Schedule 3.11
hereto, including such rights to xxx and recover for past infringement
or misappropriation thereof, whether presently pending or not, and to
receive all income, royalties, damages and payments for past and
future infringements thereof (collectively, the "INTELLECTUAL
PROPERTY");
(g) Permits. To the extent assignable, all licenses, permits,
variances, interim permits, permit applications, approvals or other
authorizations under any Law applicable to the Business or otherwise
required in connection with the Business or the ownership or operation
of the Purchased Assets, including those listed on Schedule 3.13
hereto (the "PERMITS");
(h) Contracts. All contracts of the Seller related to the
Business ("SELLER ASSIGNED CONTRACTS"), including, without limitation,
all contracts set forth on Schedule 3.12 hereto, the Leases set forth
on Schedule 3.7(a) hereto (for which Purchaser and Seller agree no
consideration is being given with respect thereto), the leases set
forth on Schedule 3.6 hereto, all marketing or promotional contracts,
all contracts for the purchase of goods, services and materials
entered into in the ordinary course of the Business, all contracts for
the sale of goods or services entered into in the ordinary
12
course of the Business and all customer deposits relating thereto, the
Deutsche Financing Agreement listed on Schedule 3.12 hereto and the
retention agreements listed on Schedule 3.15(a) hereto;
(i) Tooling. All tools, dies, molds, plugs and castings
(collectively, the "TOOLING") used in connection with the Business,
including, without limitation, the Tooling described on Schedule
3.8(b) hereto;
(j) Phone Numbers. All phone numbers and facsimile numbers
used in the Business;
(k) Cash. All of Seller's cash and cash equivalents on hand
including all cash held in the bank accounts of Seller, all of which
are listed on Schedule 2.1(k) hereto, and all xxxxx cash located at
operating facilities of the Business ("CASH"); and
(l) Other Assets. To the extent not included in the
foregoing, any assets which were included in the Interim Balance Sheet
and all other assets of Seller (except for Excluded Assets), including
the Seller Assigned Contracts and any warranties or other rights,
claims, demands or causes of action relating to the Purchased Assets.
2.2 Excluded Assets. Notwithstanding the foregoing, Seller
shall not assign and transfer, and Purchaser shall not take assignment of (a)
any Contract or agreement listed on Schedule 2.2(a) hereto, (b) all books and
records of Seller to the extent related to the other Excluded Assets (other
than the books and records relating to the Receivables, to which Seller hereby
grants Purchaser the right to use and maintain such books and records as
contemplated by this Agreement) or the Seller's Liabilities and not to the
Purchased Assets or Assumed Liabilities, (c) all claims of Seller for refunds,
credits, carrybacks or carryforwards in connection with any Taxes for tax
periods ending on or prior to the Closing Date and the proceeds thereof, (d)
all insurance policies, binders and related prepaid expenses and any amounts
receivable in respect of such insurance policies, (e) all rights, claims,
demands and causes of action which Seller or any of its Affiliates may have
against any Person to the extent related to any of the Seller's Liabilities or
any Excluded Assets, including all proceeds remitted to Seller or any of its
Affiliates from
13
claims, rights, demands and causes of action with respect thereto, or to any
Assumed Liability to the extent Purchaser has been fully indemnified by Seller
with respect to such Assumed Liability, (f) all accounts receivable, notes
receivable and other receivables as of the Closing Date (the "RECEIVABLES")
arising from the operation of the Business, (g) the litigation bond of BNY
Financial Corporation with respect to the action entitled O'Brien
International, Inc. v. Migros Genossenschaftsbund pending in Switzerland, (h)
any right or interest whatsoever to or in the name "Xxxxxxx Skis, Inc." and (i)
all deferred financing costs arising in connection with the Credit Agreement
(collectively, the "EXCLUDED ASSETS"). The Excluded Assets shall be retained by
Seller and are not being sold or assigned to Purchaser hereunder.
2.3 Assumed Liabilities. At the Closing, Purchaser shall
assume, and agree to pay, perform, fulfill and discharge, the following
obligations of Seller:
(a) all liabilities and obligations of Seller under the
Seller Assigned Contracts and Permits (other than to the extent such
obligations would be a violation of Law);
(b) all liabilities and obligations of Seller for warranty
claims for goods sourced, manufactured or sold by Seller on or before
the Closing Date;
(c) all employment-related liabilities and obligations of a
nature required by GAAP to be disclosed on a balance sheet and
those assumed pursuant to Section 5.5 hereof;
(d) (i) all liabilities and obligations of Seller that are
reflected on the Interim Balance Sheet (except those liabilities and
obligations relating to the Credit Agreement) unless such liabilities
and obligations have been paid or discharged prior to the Closing
Date, and (ii) such categories of liabilities and obligations incurred
in the ordinary course of the Business consistent with past practice
since the date of the Interim Balance Sheet, including, without
limitation, all accounts payable, accrued expenses, trade obligations
and allowances, other than for uncollectible accounts (i.e., bad
debts), related to the Receivables;
14
(e) any liabilities arising from any Post-
Closing Environmental Conditions at the Real Proper-
ty or the Leased Premises; and
(f) liabilities and obligations for product liability matters
to the extent that Purchaser assumes such liabilities and obligations
pursuant to Section 5.4(b) hereof.
The obligations of Purchaser under this Section 2.3 shall be referred to
collectively as the "ASSUMED LIABILITIES" and shall not include the Seller's
Liabilities which are being retained by Seller. Except as specifically set
forth above, neither Purchaser nor any of its Affiliates shall assume or
otherwise be liable in respect of any debt, claim, obligation or other
liability of Seller or any of its Affiliates whatsoever, including any payable,
debt, tort, violation of Law or breach of any Contract.
2.4 Closing. The Closing shall take place at the offices of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 10:00 a.m., New York City time, on July 31, 1997 or at such other time
and place as shall be agreed upon in writing by the parties hereto. The
Closing, and all transactions to occur at the Closing, shall be deemed to have
taken place at, and shall be effective as of, the close of business on the
Closing Date.
2.5 Payment of Purchase Price.
(a) Two (2) days prior to the Closing Date, Seller will
deliver to Purchaser a schedule (the "SCHEDULE OF ESTIMATED NET
TANGIBLE EQUITY") setting forth Seller's good faith estimate of the
Net Tangible Equity as of the Closing Date (the "ESTIMATED NET
TANGIBLE EQUITY"). Simultaneous with the Closing, in consideration for
the transfer of the Purchased Assets to Purchaser, Purchaser shall pay
to: (i) BNY Financial Corporation, by wire transfer in immediately
available funds to The Bank of New York, 00 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, Account Number 8090653114, Routing Number 000000000, Reference
O'Brien International, Inc., an amount equal to the amount of all
outstanding amounts due under the Credit Agreement as of the Closing
Date and (ii) Seller, by wire transfer in immediately available funds
to Parent's Account Number 3750330166, Routing Number 000000000 at
NationsBank of Texas, N.A., an amount equal to the Estimated Net
Tangible Equity as
15
set forth on the Schedule of Estimated Net Tangible Equity plus
$400,000 (the "PURCHASE PRICE") less any amounts remitted to BNY
Financial Corporation pursuant to this Section 2.5(a).
(b) As soon as practicable and in no event later than
forty-five (45) days after the Closing Date, Seller shall deliver to
Purchaser (i) a balance sheet as of the Closing Date of Seller (the
"FINAL BALANCE SHEET") and (ii) a schedule, with notes thereto,
derived from such Final Balance Sheet setting forth the Net Tangible
Equity as of the Closing Date (the "CLOSING DATE STATEMENT OF NET
TANGIBLE EQUITY"). Inventories reflected on the Closing Date Statement
of Net Tangible Equity will be stated at direct standard cost plus
capitalized fixed cost. Purchaser and Seller agree that in lieu of any
other Inventory reserve, the Closing Date Statement of Net Tangible
Equity shall reflect a reserve of $325,000 against the Inventory.
Purchaser and Seller agree that the net fixed assets included in the
Closing Date Statement of Net Tangible Equity will include the 1989
write-up calculated on a basis consistent with the Interim Financial
Statements and the memo set forth on Schedule 2.5(b) hereto. The
warranty reserve will be $500,000 in the Closing Date Statement of Net
Tangible Equity. Purchaser and Seller and their respective
representatives will jointly determine the time of, and will observe
and participate in, all physical inventories taken in connection with
the preparation of the Final Balance Sheet and Closing Date Statement
of Net Tangible Equity. The Final Balance Sheet and Closing Date
Statement of Net Tangible Equity delivered pursuant to this Section
2.5 shall be audited and accompanied by a report of Ernst & Young LLP,
Seller's independent accountants ("SELLER'S AUDITORS") which states
that the Purchased Assets and Assumed Liabilities included therein and
the related notes thereto are stated, without exception, in accordance
with GAAP or otherwise in accordance with this Agreement, except that
such notes may be limited in nature, consistent with the Financial
Statements. In rendering the foregoing audit and report, Seller's
Auditors shall permit Xxxxxx Xxxxxxxx LLP, Purchaser's independent
accountants ("PURCHASER'S AUDITORS"), to review at their request,
following receipt of the report of Seller's Auditors, all workpapers,
schedules and calculations of Seller's Auditors related to such
report.
16
(c) If Purchaser does not dispute such audited Closing Date
Statement of Net Tangible Equity within the time period and in the
manner described below, such Closing Date Statement of Net Tangible
Equity will be the "CLOSING SCHEDULE." If Purchaser disputes such
Closing Date Statement of Net Tangible Equity or any item included
therein, such dispute shall be resolved in the following manner:
(i) Purchaser shall notify Seller in writing within
twenty-one (21) days after Purchaser's receipt of the Closing
Date Statement of Net Tangible Equity, which notice shall
specify in reasonable detail the nature of the dispute;
(ii) during the thirty (30) day period following
Seller's receipt of such notice, Seller and Purchaser shall
attempt to resolve such dispute; and
(iii) if at the end of such thirty (30) day period
Seller and Purchaser shall have failed to resolve such
dispute in writing, the matter shall be referred to the
offices of Price Waterhouse LLP (the "REFEREE"). The Referee
shall act as an arbitrator and shall issue its report
resolving all disputes as to the Closing Date Statement of
Net Tangible Equity within thirty (30) days after such
dispute is referred to it. The Closing Date Statement of Net
Tangible Equity, as modified by any adjustments determined to
be appropriate by the Referee, shall then be the Closing
Schedule. Each of the parties hereto shall bear all costs and
expenses incurred by it in connection with such arbitration,
except that the fees and expenses of the Referee hereunder
shall be borne equally by Seller and Purchaser. This
provision for arbitration shall be specifically enforceable
by the parties. The decision of the Referee in accordance
with the provisions hereof shall be final and binding (absent
manifest error) and there shall be no right of appeal
therefrom.
(d) From the Closing Date until the final determination of
the Closing Schedule, each party hereto will grant to the other and
its respective representatives reasonable access during usual business
hours to the agents and employees of such party
17
and to the books, records and files of the Business in its possession
to enable such party to review and otherwise satisfy itself as to the
accuracy of the Closing Date Statement of Net Tangible Equity and
the preparation thereof.
(e) In the event that the Net Tangible Equity as reflected on
the Closing Schedule (the "CLOSING NET TANGIBLE EQUITY") is less than
the Estimated Net Tangible Equity used for purposes of determining the
Purchase Price pursuant to Section 2.5(a) hereof, then the amount of
the Purchase Price, as previously determined pursuant to Section
2.5(a) hereof, shall be decreased by the amount by which the Closing
Net Tangible Equity is less than the Estimated Net Tangible Equity. In
the event that the Closing Net Tangible Equity is more than the
Estimated Net Tangible Equity used for purposes of determining the
Purchase Price pursuant to Section 2.5(a) hereof, then the amount of
the Purchase Price, as previously determined pursuant to Section
2.5(a) hereof, shall be increased by the amount by which the Closing
Net Tangible Equity is more than the Estimated Net Tangible Equity. No
later than five (5) days after the date of the final determination of
the Closing Schedule, Seller or Parent shall pay Purchaser or
Purchaser shall pay Seller, as appropriate, by wire transfer of
immediately available funds, the amount of such deficiency or excess,
as the case may be, with interest thereon at a per annum rate equal to
the Prime Rate, accrued from the Closing Date to the date of payment.
The "PRIME RATE" shall mean the rate announced by The Chase Manhattan
Bank, N.A., as its corporate base interest rate at New York, New York
then in effect.
2.6 Consistent Treatment. The parties hereto shall allocate
the Purchase Price among the Purchased Assets and the covenant not to compete
set forth in Section 5.1 hereof in accordance with Schedule 2.6 hereto, treat
and report the transactions contemplated by this Agreement in all respects
consistently with such allocation upon all Tax Returns and for purposes of any
Taxes and not take any action inconsistent with such obligation.
2.7 Procedures for Purchased Assets Not Transferable. If,
either by virtue of the provisions thereof or under applicable Law, any of the
Contracts or any other property or rights included in the Purchased Assets
18
are not assignable or transferable without the consent of some other Person,
Seller shall diligently use all commercially reasonable efforts to obtain such
consent prior to the Closing Date and Purchaser shall use all commercially
reasonable efforts to assist in that endeavor. If any such consent cannot be
obtained prior to the Closing Date and the Closing occurs, this Agreement and
the related instruments of transfer shall not constitute an assignment or
transfer thereof, but Seller shall diligently use all commercially reasonable
efforts for a period of nine (9) months following the Closing Date to obtain
such consent as soon as possible after the Closing Date or otherwise obtain for
Purchaser the practical benefit of such property or rights and Purchaser shall
use all commercially reasonable efforts to assist in that endeavor. With
respect to each Contract for which a necessary consent has not been obtained
prior to the Closing, Seller shall obtain for Purchaser, at no additional cost
to Purchaser, the benefits of such Contract (including all payments due to
Seller thereunder) until such consent is obtained. With respect to any right
under such Contract (including any right to payment), at Purchaser's request,
Seller shall institute legal proceedings to enforce such rights; provided that
such litigation shall be at the sole cost of Purchaser and Purchaser shall
control the conduct of such litigation. Except as so requested, Seller shall
have no obligation to take such action. Furthermore, until such consent is
obtained, Purchaser shall not assume Seller's obligations with respect to such
Contract but shall, as Seller's agent and on behalf of Seller, pay, perform and
discharge fully Seller's obligations thereunder to the extent that such
obligations would have otherwise constituted Assumed Liabilities. Without
Purchaser's prior written consent, Seller shall take no action to terminate or
modify any such Contract.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller jointly and severally represent and warrant
to Purchaser, as of the date of this Agreement, as follows:
3.1 Due Incorporation; Subsidiaries. Parent and Seller are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and possess all requisite power and
authority to own, lease and operate their respective
19
properties and to carry on their respective businesses as they are now being
owned, leased, operated and conducted. Seller has no subsidiaries and is duly
licensed or qualified to do business and is in good standing as a foreign
corporation in each jurisdiction set forth on Schedule 3.1 hereto, which are
the only jurisdictions where the nature of the properties owned, leased or
operated by it or the Business requires such licensing or qualification and the
failure to be so qualified would cause a Material Adverse Change to the
Purchased Assets or the Business.
3.2 Due Authorization. Parent and Seller have full power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Parent and
Seller of this Agreement have been duly and validly approved by all necessary
corporate action and by any necessary action of its stockholders. Parent and
Seller have duly and validly executed and delivered this Agreement. This
Agreement constitutes the legal, valid and binding obligation of Parent and
Seller, enforceable against each of them in accordance with its terms, except
as such en-forceability may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally, or (b) equitable limitations on
the availability of specific remedies.
3.3 Consents and Approvals. No consent, authorization or
approval of, filing or registration with, or cooperation from, any Governmental
Authority or any other Person not a party to this Agreement is necessary in
connection with the execution and delivery of this Agreement and the
consummation by Parent and Seller of the transactions contemplated hereby,
other than (a) the consents set forth on Schedule 3.3 hereto, (b) as required
by applicable requirements of the Securities and Exchange Commission (the
"SEC") or the National Association of Securities Dealers, and (c) filings and
consents that may be required under any Environmental Law necessitated by the
transactions contemplated herein. Except for matters set forth on Schedule 3.3
hereto, the execution, delivery and performance by Seller and Parent of this
Agreement does not and will not (i) violate or conflict with, result in a
breach or termination of, constitute a default under or permit cancellation of
any Seller Assigned Contract, (ii) result in the creation of any Lien upon any
of the Purchased Assets or (iii) violate or conflict with any provision of the
Amended Articles of Incorporation or By-laws of Seller. Schedule
20
3.3(a) hereto sets forth the agreements which require consents in order to be
assigned for which such consents have not been received by Seller as of the
Closing Date.
3.4 Financial Statements. Except as set forth on Schedule 3.4
hereto, the Financial Statements have been prepared in accordance with GAAP
consistently applied and present fairly the financial position, assets and
liabilities of Seller as of the dates thereof and the revenues, expenses,
results of operations and cash flows of Seller, for the periods covered
thereby. The Financial Statements are in accordance with the books and records
of Seller and do not reflect any transactions which are not bona fide
transactions. Except as set forth on Schedule 3.4 hereto or in the respective
Financial Statements, Seller does not have any material liabilities, debts,
claims or obligations, whether accrued, absolute, contingent or otherwise,
whether due or to become due, other than trade payables to third parties and
accrued expenses incurred in the ordinary course of business since the date of
the Interim Financial Statements. Schedule 3.4 hereto sets forth true and
correct copies of the Financial Statements.
3.5 No Adverse Effects or Changes. Except as listed on
Schedule 3.5 hereto, since the date of the Interim Financial Statements, Seller
has not (a) suffered any damage or destruction to, or loss of, any of its
assets or properties (whether or not covered by insurance) in excess of
$25,000; (b) permitted the imposition of a Lien (other than Permitted
Exceptions) on, or disposed of, any of its material assets (other than sales
of Inventories in the ordinary course of the Business, consistent with past
practice); (c) terminated or entered into any Material Contract; (d) cancelled,
waived, released or otherwise compromised any trade debt, receivable or
claim exceeding $25,000 individually or $50,000 in the aggregate; (e) made or
committed to make any capital expenditures or capital additions or betterments
in excess of $25,000 in the aggregate, whether individually or as a part of
related transactions; (f) entered into, adopted, amended (except as may be
required by Law and except for immaterial amendments) or terminated any bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increased in any manner the compensation or
21
fringe benefits of any director, officer or employee or paid any benefit not
required by any existing plan and arrangement (except for normal salary
increases consistent with past practice) or entered into any contract,
agreement, commitment or arrangement to do any of the foregoing; (g) disposed
of or permitted the lapse in registration of any Intellectual Property; (h)
experienced any Material Adverse Change in the accounts receivable or accounts
payable; (i) changed its accounting methods, systems, policies, principles or
practices; (j) incurred indebtedness (other than for floor plan repurchase
obligations and trade payables in the ordinary course of the Business); (k)
requested or advised any customer to accelerate or reschedule any purchase
order or established pattern of purchases other than in the ordinary course of
the Business, consistent with past practices of Seller; or (l) otherwise
experienced a Material Adverse Change.
3.6 Title to Properties. Seller has good and marketable title
to, or a valid leasehold interest in, the Real Property and Leased Premises
listed or referenced on Schedule 3.7(a) hereto and on the Closing Date, subject
to the terms and conditions of this Agreement, Seller will convey such good and
marketable title, or valid leasehold interest, as the case may be, in and to
the Real Property and Leased Premises (except for any lease set forth on
Schedule 3.3(a) hereto), to Purchaser free and clear of all Liens, claims and
encumbrances, other than Permitted Exceptions. In addition, Seller owns, or has
a valid leasehold interest in, all of the assets listed or referenced on
Schedules 3.6, 3.8(a), and 3.8(b), hereto and owns the Inventories, and on the
Closing Date, subject to the terms and conditions of this Agreement, Seller
will convey all of its ownership or leasehold interest, as the case may be, in
and to the Inventory and the assets listed on Schedules 3.6, 3.8(a), and 3.8(b)
hereto (except for any lease set forth on Schedule 3.3(a) hereto), to Purchaser
free and clear of all Liens, claims and encumbrances, other than Permitted
Exceptions. The Purchased Assets include (other than assets which are the
subject of the leases set forth on Schedule 3.6 hereto and Inventories disposed
of in the ordinary course of the Business since the date of the Interim Balance
Sheet and the Excluded Assets) (a) all of the tangible and intangible assets,
properties and rights used in connection with or material to the Business and
(b) all of the tangible and intangible assets, properties and rights reflected
in the Interim Balance Sheet. Except as set forth on Schedules 3.12, and 3.14
hereto,
22
no other Person (including Parent or any of its Affiliates) owns any assets,
properties or rights relating to or used in the Business, performs or furnishes
services for the benefit of the Business, or is a party to or otherwise enjoys
rights under any Contracts or arrangements pertaining to the operation of
Seller or the Business. Subject to the provisions of Section 2.7 hereof and
except for any agreement set forth on Schedule 3.3(a) hereto, the Xxxx of Sale
and Assignment, deeds, endorsements and other instruments of transfer delivered
at the Closing by Seller to Purchaser will be sufficient to transfer to
Purchaser all of Seller's right, title and interest, legal and beneficial, in
and to the Purchased Assets, free and clear of any Lien (except for Permitted
Exceptions). Except as set forth on Schedule 3.6 hereto, all tangible personal
property of Seller (including all tooling, molds and dies) is located at the
Real Property and the Leased Premises. Except for the Excluded Assets, the
Purchased Assets are all of the assets adequate to operate the Business in
accordance with Seller's past practices, in all respects. Seller enjoys
peaceful and undisturbed possession under all leases set forth on Schedules 3.6
hereto, subject to the terms thereof.
3.7 Real Property.
(a) Seller operates the Business at the Real Property and at
the Leased Premises. Except as set forth on Schedule 3.19 hereto, no
written notice has been received by Seller or Parent from any
Governmental Authority requiring any alteration of the Real Property
or the Leased Premises that has not been fully complied with. Other
than the Real Property and the Leases, Seller has no interest in any
other real property. The Leases and the Real Property cover all of the
real estate leased, used or occupied by Seller in connection with the
Business. Each of the Leases is in full force and effect and Seller
holds a valid and existing leasehold interest under each of the
Leases. Seller is not in material default, and no circumstances exist
which would result in such default (including upon the giving of
notice or the passage of time, or both), and no Person has, to the
knowledge of Seller, asserted the existence of any default under any
of the Leases, and no other party to the Leases has the right to
terminate or accelerate performance under or otherwise modify any of
the Leases. To Seller's knowledge, no lessor under any of the Leases
is in de-
23
fault under any of such Leases in its duties to the lessee.
(b) Seller has good and marketable legal and beneficial title
to the Real Property free and clear of all Liens and exceptions to
title, except for the Permitted Exceptions which individually or in
the aggregate will not materially detract in any way from the value
of, or impair in any way the use by Purchaser of, the Real Property.
Upon consummation of the Closing, Purchaser shall have good and
marketable legal and beneficial title to the Real Property, free and
clear of all exceptions to title and all Liens (other than Permitted
Exceptions, which, after consummation of the Closing, shall not
include the Deed of Trust to BNY Financial Corporation,
successor-in-interest to The Bank of New York Commercial Corporation
and financing statements reflecting the interests of BNY Financial
Corporation as noted on the Title Report). Seller, as title holder to
the Real Property, has valid and enforceable rights of ingress and
egress to and from the Real Property, adequate to operate the
Business. Seller has provided Purchaser with true and complete copies
of the most recent title insurance commitments or policies and surveys
in the possession of Seller for the Real Property, but Seller makes no
representations as to the accuracy or completeness thereof. Except as
set forth on Schedule 3.7(b) hereto, all contractors, subcontractors,
suppliers and others who have performed services or labor or have
supplied materials in connection with Seller's acquisition,
development, ownership or management of the Real Property have been
paid in full, will be paid in full prior to the Closing or any such
unpaid liabilities will be included in the calculation of Closing Net
Tangible Equity.
(c) Except as set forth on Schedule 3.7(c) hereto, to the
knowledge of Seller, the buildings, plants, facilities, fixtures,
structures and improvements on the Real Property and the Leased
Premises are in good operating condition and repair (normal wear and
tear excepted). Except as identified in the Title Report and the
Survey, to the knowledge of Seller, none of the buildings, plants,
facilities, fixtures, structures and improvements or appurtenances on
the Real Property or any equipment therein, the operation thereof or
any operation conducted therein, in each case as presently con-
24
ducted, violates any restrictive covenant or any provision of any Law
(including Environmental Law (which is addressed in Section 3.19
hereof)). Except as set forth on the Title Report or the Survey, the
Real Property and all improvements thereon do not encroach on any
property owned by others. Except as set forth on the Title Report or
the Survey, no property or improvement of any other Person encroaches
on the Real Property. No condemnation proceeding is pending or, to the
knowledge of Seller or Parent, threatened with respect to the Real
Property or the Leased Premises or any portion thereof.
3.8 Personal Property. Set forth on Schedule 3.8(a) hereto
are the Equipment and Vehicles used or held for use in connection with the
Business. Set forth on Schedule 3.8(b) hereto is a description of the Tooling
used in connection with the Business. Except as disclosed on Schedule 3.7(c)
hereto, all of the tangible assets (whether owned or leased) included in the
Purchased Assets (a) are suitable for the purposes for which such assets are
presently used in the Business, and (b) have been maintained and are in good
operating condition and repair (normal wear and tear excepted).
3.9 Inventories. All of the Inventory, whether spare parts,
finished goods, work in process, raw materials or supplies, was produced or
acquired by Seller for use in connection with the ordinary course of the
Business. All Inventories of Seller are fairly reflected in the inventory
accounts on the Interim Balance Sheet, consistent with past practice, valued at
direct standard cost plus capitalized fixed cost less (i) reserves to adjust
inventories, including slow moving and obsolete inventories, to the lower of
cost or market in accordance with GAAP and (ii) a last-in, first-out valuation
reserve of $205,000 calculated as of December 31, 1996.
3.10 No Third Party Options. There are no agreements,
options, commitments or rights with, of or to any Person (other than Purchaser)
to acquire any of Seller's assets, properties or rights or shares except for
those Contracts entered into for the sale of Inventories in the ordinary course
of the Business, consistent with past practice.
3.11 Intellectual Property. Schedule 3.11 hereto includes
a true and complete list as of the Closing Date of all of the patents, patent
applications, trade names, trademark registrations, trademark applica-
25
tions, copyright registrations, copyright applications and licenses therefor
included in the Intellectual Property and used in the conduct of the Business.
(a) Except for consumer off-the-shelf software used in the
Business, Seller owns or has a valid right to use all of the
Intellectual Property set forth on Schedule 3.11 hereto, and on the
Closing Date, subject to the terms and conditions of this Agreement,
Seller will convey all of its ownership interest in, or right to use,
the Intellectual Property set forth on Schedule 3.11 hereto to
Purchaser, free and clear of all Liens (other than Permitted
Exceptions). Except as disclosed on Schedules 3.11 and 3.11(a) hereto,
all of the Intellectual Property is valid and enforceable and is not
subject to any license, royalty or other agreement, and Seller has not
granted any license or agreed to pay or receive any royalty in respect
of any of such Intellectual Property. The patents set forth on
Schedule 3.11 are not encumbered by any co-ownership or shop rights.
Except as otherwise indicated on Schedule 3.11 hereto, all
registration and maintenance fees that have become due and payable to
any Governmental Authority with respect to any Intellectual Property
set forth on Schedule 3.11 hereto have been paid and no act or
omission has occurred to cancel, impair, dedicate to the public or
entitle any Governmental Authority to cancel, modify, forfeit or hold
abandoned any such Intellectual Property except for any of the
foregoing which is not reasonably likely to cause a Material Adverse
Change. To the knowledge of Seller, as of the Closing Date, there are
no interference, opposition, reexamination, reissue or other conflict
proceedings pending or, threatened, involving the Intellectual
Property. Except as set forth on Schedule 3.11(b) hereto, as of the
Closing Date, there is no pending or, to the knowledge of Seller,
threatened, claim or litigation contesting the validity or
enforceability of, or asserting the misuse of, any of the Intellectual
Property. Seller owns or possesses, and Seller will transfer to the
Purchaser at the Closing adequate rights to, all Intellectual Property
necessary to conduct the Business as presently conducted.
(b) Except as set forth on Schedule 3.11(b) hereto, to the
knowledge of Seller, the products manufactured or sold by Seller and
any process, method, part, design, material or other Intellectual
26
Property it employs, and the marketing and use by Seller of any such
product, service or other intellectual property, do not infringe any
intellectual property or confidential or proprietary rights of
another. Except as set forth on Schedule 3.11(b) hereto, as of the
Closing Date, there is no pending or, to the knowledge of Seller,
threatened claim or litigation contesting Seller's right to use any
Intellectual Property and Seller has not received any notice
contesting its right to use any of the Intellectual Property. To the
knowledge of Seller and Parent, except as set forth on Schedule
3.11(b) hereto, no products manufactured or activities conducted by
any other Person infringe on the Intellectual Property.
3.12 Contracts.
(a) Schedule 3.12 hereto lists, as of the date hereof, all
the Contracts and arrangements of the following types to which Seller
is a party, by which it is bound, or to which any of its assets or
properties is subject:
(i) any labor agreement;
(ii) any Contract or arrangement of any kind with
any employee, officer, director or stockholder of Seller or
any of the Affiliates of such individuals, or any Contract or
other arrangement of any kind with Parent or any Affiliate of
Parent;
(iii) any Contract or arrangement with a sales
representative, manufacturer's representative, distributor,
dealer, broker, sales agency, advertising agency or other
Person engaged in sales, distribution or promotional
activities, or any Contract to act as one of the foregoing on
behalf of any Person (other than purchase and sales orders
and other Contracts of a type listed in clause (iv) below);
(iv) any Contract or arrangement of any nature
having an aggregate value in excess of $50,000 or not
terminable on notice of thirty (30) days or less;
(v) any indenture, credit agreement, loan
agreements note, mortgage, security agreement,
27
letter of credit, loan commitment, guaranty, repurchase
agreement or other Contract or arrangement relating to the
borrowing of funds, an extension of credit or financing,
pledging of assets or guarantying the obligations of any
Person;
(vi) any Contract or arrangement involving Seller
as a participant in a partnership, joint venture or other
cooperative undertaking;
(vii) any Contract or arrangement involving any
restrictions on Seller with respect to the geographical area
of operations or scope or type of business of Seller;
(viii) any power of attorney or agency agreement or
arrangement pursuant to which a Person is granted the
authority to act for or on behalf of Seller, or Seller is
granted the authority to act for or on behalf of any Person;
(ix) any Contract granting to any Person a right at
such Person's option to purchase or acquire any asset (other
than Inventory in the ordinary course of the Business) or
property of Seller (or interest therein);
(x) any Contract for capital improvements or expenditures
in excess of $50,000 individually or $100,000 in the
aggregate;
(xi) any Contract for which the full performance
thereof may extend beyond sixty (60) days from the date of
this Agreement (other than purchase and sales orders in the
ordinary course of the Business);
(xii) any Contract not made in the ordinary course
of the Business which is to be performed in whole or in part
at or after the date of this Agreement other than the
Contracts described on Schedule 3.14 hereto;
(xiii) the Floorplan Repurchase Agreement, dated
February 28, 1995, between Parent and Deutsche Financial
Services, Inc., as successor to ITT Commercial Finance, a
division of ITT Industries of Canada Ltd., pursuant to
28
which purchases of Inventory from Seller by Eastern
Marketing, Ltd. are financed by Deutsche Financial Services,
Inc. (the "DEUTSCHE FINANCING AGREEMENT");
(xiv) any Contract or arrangement relating to
management support, facilities support or similar
arrangement; and
(xv) any Contract whereby any Person agrees (A) not
to compete with Seller or (B) to maintain the confidentiality
of any information of Seller.
(b) All of the Material Contracts are in full force and
effect and constitute the legal, valid and binding obligations of
Seller and, to the knowledge of Seller, the other parties thereto. All
of the Material Contracts are enforceable in accordance with their
respective terms, except as such enforce-ability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and by
equitable limitations on the availability of specific remedies. No
termination notice has been delivered by any party to a Material
Contract to any other party to such Material Contract with respect to
such Material Contract. Seller has delivered to Purchaser true and
complete copies of each written Material Contract and a complete and
accurate written description of any Material Contract not reduced to
writing. Notwithstanding anything to the contrary in this Section
3.12, accounts receivable and product warranties shall be deemed not
to be Material Contracts or Contracts for purposes of this Section
3.12. Except as set forth on Schedule 3.12(b) hereto, since the date
of the Interim Balance Sheet, Seller has not entered into any Contract
other than in the ordinary course of the Business, consistent with
past practice.
3.13 Permits. Schedule 3.13 hereto is an accurate and
complete list as of the date hereof of all Permits held by Seller and used in
the Business. Except for such Permits, to Seller's knowledge, there are no
permits, licenses, consents or authorizations, whether federal, state, local or
foreign, which are necessary for the lawful operation of the Business,
consistent with past practice. Seller is in full compliance in all material
respects with all requirements and limitations under
29
such Permits. No employee, officer, director or Affiliate of Seller owns or
has any interest in any such Permit.
3.14 Insurance. Schedule 3.14 hereto contains an accurate and
complete list as of the date hereof of all policies, currently in force, of
fire, liability, worker's compensation, public and product liability, title and
other forms of insurance owned, held by or applicable to Seller, its assets or
the Business. Seller has heretofore delivered to Purchaser an accurate summary
description of all such policies, including all current occurrence-based
policies applicable to Seller or the Business. All such policies are in full
force and effect.
3.15 Employee Benefit Plans and Employment Agreements.
The following terms, as used herein, have the following meanings:
"BENEFIT ARRANGEMENT" means an employment, severance or
similar contract, arrangement or policy and each plan or arrangement
providing for severance, insurance coverage (including any
self-insured arrangements), worker's compensation, disability
benefits, supplemental unemployment benefits, vacation benefits,
pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights or
other forms of incentive compensation or post-retirement insurance,
compensation or benefits that (i) is not an Employee Plan and (ii) is
maintained or contributed to by Seller or any of its ERISA Affiliates.
"EMPLOYEE PENSION BENEFIT PLAN" means each "employee pension
benefit plan" as that term is defined in Section 3(2) of ERISA, that
is an Employee Plan, as defined below.
"EMPLOYEE PLAN" means each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, that (i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by Seller
or any of its ERISA Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" of any entity means any other entity that,
together with such entity, would be
30
treated as a single employer under Section 414 of the Code.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(a) ERISA Representations. Seller hereby represents and
warrants to Purchaser that Schedule 3.15(a) hereto lists each Employee
Plan and each Benefit Arrangement that covers any employee or former
employee of Seller and copies or descriptions of all of which have
previously been furnished or made available to Purchaser. With respect
to each Employee Plan, Seller has provided an accurate summary
description of such plan. With respect to the Meridian Sports
Incorporated Retirement Incentive Savings Plan (the "PARENT SAVINGS
PLAN"), Seller has also provided to Purchaser the most recently filed
Form 5500 and Internal Revenue Service determination letter.
(b) With respect to the Parent Savings Plan, except as set
forth on Schedule 3.15(b) hereto:
(i) the Parent Savings Plan is intended to be tax
qualified under Section 401(a) and 501(a) of the Code,
complies and has been administered in form and in operation
in all material respects with all applicable requirements of
law, including Sections 401(a) and 501(a) of the Code, and no
event has occurred which is reasonably expected to cause the
Parent Savings Plan to fail to so comply with such
requirements;
(ii) there are no material actions, suits or claims
(other than routine claims for benefits) pending or, to the
knowledge of Seller, threatened involving the Parent Savings
Plan or the assets thereof and Seller has no knowledge of any
facts which are reasonably expected to give rise to any such
actions, suits or claims (other than routine claims for
benefits); and
(iii) no "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code has
occurred.
31
(c) With respect to each of the Employee Plans or Benefit
Arrangements, as applicable:
(i) no material tax under Section 4980B of the Code
has been incurred in respect of any Employee Plan that is a
group health plan, as defined in Section 5000(b)(1) of the
Code; and
(ii) all contributions and payments accrued under
the Parent Savings Plan, determined in accordance with prior
funding and accrual practices, as adjusted to include
proportional accruals for the period ending on the Closing
Date, will be discharged and paid on or prior to the Closing
Date except to the extent (i) reflected on the Final Balance
Sheet or (ii) retained by Seller.
(d) With respect to each of Seller's Employee Plans which is
either a Multiemployer Plan or a plan subject to Title IV of ERISA:
(i) no accumulated funding deficiency, whether or
not waived, exists with respect to any such Employee Plan;
and
(ii) Seller has not incurred nor reasonably expects
to incur any liability under such Employee Plans which could
become a liability of Purchaser.
3.16 Employees. Schedule 3.16 hereof contains a true,
complete and accurate list of the names, titles, annual compensation and all
bonuses and similar payments made for the current and preceding two (2) years
for each director and officer of Seller and each employee of Seller who has an
annual base salary of $75,000 or more. Except as disclosed on Schedule 3.16
hereof, there is no, and during the past two (2) years there has been no, labor
strike, picketing, dispute, slow-down, work stoppage, union organization
effort, grievance filing or proceeding, or other labor difficulty actually
pending or, to the knowledge of Seller, threatened against or involving Seller.
Seller is not a party to any collective bargaining agreement and no such
agreement determines the terms and conditions of the employment of employees of
Seller. No collective bargaining agent has been certified as a representative
of any employees of Seller and no representation campaign or election is now in
progress with respect to any employees of Seller. As
32
of April 30, 1997, Seller had approximately 116 full-time employees and
approximately 34 temporary employees. No employee subject to an employment
contract listed on Schedule 3.15(a) hereto serves, or has served within the
past two (2) years, as an officer, director, employee or agent of any Affiliate
of Seller. Except as set forth on Schedule 3.16 hereto, Seller has not received
notice that any of its executive employees intends to terminate his employment
with Seller or would not be willing to work for Purchaser.
3.17 Taxes. Except for current Taxes not due and payable
through the Closing (such Taxes to be paid when due by Seller), Seller has paid
to, and where necessary collected or withheld and remitted to, the proper
Governmental Authority all material Taxes related to taxable periods or
portions thereof ending on or before the Closing Date (including governmental
charges, assessments and required contributions of Seller with respect to the
Business) that may result in the filing of a Lien on the Purchased Assets or
that may result in the imposition of transferee or other liability on Purchaser
for the payment of such Taxes.
3.18 No Defaults or Violations. Except as disclosed on
Schedule 3.18 hereto:
(a) Seller is not in breach or default under the terms of any
Material Contract to which it is a party or by which it is bound, no
event has occurred or circumstance exists which, with notice or lapse
of time or both, would constitute a breach or default by Seller under
any such Material Contract, and, to the knowledge of Seller, no other
party to any such Material Contract is in breach or default under any
such Material Contract.
(b) Except for environmental matters (which are covered by
Section 3.19 hereof), Seller is in compliance in all material respects
with, and no material violation exists under, any Laws applicable to
Seller or the Business, and Seller is not aware that any event has
occurred or circumstance exists which, with or without notice or lapse
of time or both, would constitute a material violation under any such
Law.
(c) No notice from any Governmental Authority has been
received within the past two years claiming any material violation
of any Law or requiring any
33
material work, construction or expenditure, or asserting any Tax,
assessment or penalty, with respect to Seller.
3.19 Environmental Matters. Except as disclosed on
Schedule 3.19 hereto:
(a) Seller has not used or stored any, and there are no,
Hazardous Substances in, on, or at the Real Property or the Leased
Premises, except for substances which are used or are to be used in
the ordinary course of business (which inventories have been stored,
used and disposed of in accordance with all applicable Environmental
Laws and Environmental Permits). There is not now at the Real Property
or the Leased Premises any (i) underground storage tank or surface
impoundments, (ii) asbestos-containing materials or (iii)
polychlorinated biphenyls, except in compliance with applicable
Environmental Laws.
(b) No notice has been received from any Governmental
Authority or any other Person that Seller is responsible (or
potentially responsible) for any Remedial Action at any location or
that the Real Property or the Leased Premises is required or may be
required to be subject to Remedial Action. Included within the Permits
are all Environmental Permits necessary for the operation of the
Business as presently operated. There is no (i) civil, criminal or
administrative claim, suit, proceeding or investigation (including a
request for information) pending or, to the knowledge of Seller,
threatened with respect to the Business, the Real Property or the
Leased Premises relating in any way to any Environmental Laws or
Environmental Permits and Seller does not know of any fact or
circumstance which would give rise to any such claim, suit, proceeding
or investigation, or (ii) outstanding written orders or Contracts with
any Governmental Authority relating in any way to Environmental Laws
or Environmental Permits. Seller has timely filed all reports and
notifications required to be filed with respect to, and obtained and
maintained all Environmental Permits required for, the Real Property
and the Leased Premises, all improvements on the foregoing and all
operations conducted therein, and has generated and maintained all
required records and data under all applicable Environmental Law, and
all operations conducted therein are in compliance in all material
respects with such Environmental Laws.
34
(c) During the period that Seller has owned the Real Property
or leased the Leased Premises and, to Seller's knowledge, during any
period prior thereto, no condition has existed or event has occurred
with respect to the Real Property or the Leased Premises that could,
with or without notice, passage of time or both, give rise to any
present or future liability with respect to the Real Property or the
Leased Premises pursuant to any Environmental Law.
3.20 Litigation; Product Liabilities.
(a) Except as disclosed on Schedules 3.20(a) and 3.20(b)
hereto, as of the Closing Date, there are no actions, suits,
arbitrations, regulatory proceedings or other litigation, proceedings
or governmental investigations pending or, to the knowledge of Seller,
threatened against or affecting Seller or any of its officers,
directors, employees, agents or stockholders in their capacity as
such, or any of its properties or businesses. Seller is not aware of
any facts or circumstances which may give rise to any of the
foregoing. Except as set forth on Schedule 3.20(a) hereto, all of the
proceedings pending or threatened against Seller are covered by
insurance policies and are being defended by Seller, subject to such
deductibles, self-insured retention or similar arrangements as are set
forth in such policies. Schedule 3.20(a) hereto is a complete and
accurate list as of the date hereof of all pending actions asserted by
Seller. Except as disclosed on Schedule 3.20(a) hereto, Seller is not
subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other Governmental Authority.
Seller has not entered into any agreement to settle or compromise any
proceeding pending or threatened against it which has involved any
obligation other than the payment of money or for which Seller has any
continuing obligation. As of the date hereof, there are no claims,
actions, suits, proceedings or investigations pending or, to the
knowledge of Seller or Parent, threatened by or against Seller or
Parent relating to this Agreement or the transactions contemplated
hereby or thereby.
(b) Schedule 3.20(b) hereto sets forth a summary of all
product liability claims currently pending or, to the knowledge of
Seller, threatened against Seller. Except as set forth on Schedule
35
3.20(b) hereto, Seller is aware of no occurrence, event or condition
relating to the manufacture, sale or distribution of water skis, wake
boards, knee boards and related towable water sports products and
accessories which is reasonably likely to give rise to one or more
product liability claims which could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Change.
3.21 Related Parties. Except as disclosed on Schedule 3.21
hereto, neither Parent nor any of its Affiliates have or claim to have any
direct or indirect interest in any other Person which conducts a business
similar to, has any Contract or arrangement with, or does business or is
involved in any way with, Seller. Schedule 3.21 hereto contains a complete and
accurate description as of the date hereof of all such Persons, interests,
arrangements and other matters.
3.22 Intercompany Services and Transactions. Schedule 3.22
hereto contains a complete and accurate list, as of the date hereof, of all
agreements or arrangements (whether written or unwritten) relating to all
intercompany services and transactions existing between Seller and any of its
Affiliates during the past two (2) years.
3.23 Product Warranties. Schedule 3.23 hereto sets forth
copies of all product warranties issued for Seller's products sold during the
past two (2) years.
3.24 Brokers. Neither Purchaser nor any Affiliate of
Purchaser has or shall have any liability or otherwise suffer or incur any Loss
as a result of or in connection with any brokerage or finder's fee or other
commission of any Person retained by Parent, Seller or any of their respective
Affiliates in connection with any of the transactions contemplated by this
Agreement.
3.25 Customers and Suppliers. Schedule 3.25 hereto sets forth
the twenty (20) largest suppliers and all material sole source suppliers and
the twenty (20) largest customers of the Business. The relationship of Seller
with each of such suppliers and each of its customers is a good commercial
working relationship and no supplier or customer has, since June 30, 1996,
cancelled or otherwise terminated or reduced, or threatened in writing to
cancel or otherwise terminate or reduce, its relationship with Seller. Seller
does not have knowledge or reason to believe that any such supplier or customer
36
intends to cancel or otherwise substantially modify its relationship with
Seller or the Business or limit its services, supplies or materials to Seller
or the Business, or its usage or purchase of the services and products of the
Business either as a result of the transactions contemplated hereby or
otherwise.
3.26 Disclosure. None of this Agreement, the Financial
Statements, any schedule, exhibit or certificate attached hereto or delivered
in accordance with the terms hereof or thereof contains any untrue statement of
a material fact or omits any statement of a material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading.
3.27 Accounts Payable. Except as set forth on Schedule 3.27
hereto, a true and complete list of all accounts payable of the Business (the
"Accounts Payable") as of July 25, 1997 is set forth on Schedule 3.27 hereto.
Each of the Accounts Payable is valid and represents a bona fide purchase of
goods by, or performance of services for, Seller, arising in the ordinary
course of the Business, consistent with past practice. No material Accounts
Payable is more than fifteen (15) days overdue and there are no material claims
or disputes with regard to any such Accounts Payable. During the one hundred
and eighty (180) days prior to the Closing Date, Seller has paid and discharged
its Accounts Payable and other contractual commitments in the ordinary course
of the Business, consistent with its past practice. Neither Seller nor any of
its Affiliates have requested or received within the one hundred and eighty
(180) day period prior to the Closing Date the extension or temporary
forbearance of any Accounts Payable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent and Seller, as of
the date of this Agreement and as of the Closing Date (such representations and
warranties being remade on the Closing Date), as follows:
4.1 Due Incorporation. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organiza-
37
tion with all requisite power and authority to own, lease and operate its
properties and to carry on its business as they are now being owned, leased,
operated and conducted.
4.2 Due Authorization. Purchaser has full power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Purchaser of this Agreement
have been duly and validly approved by all necessary corporate action.
Purchaser has duly and validly executed and delivered this Agreement. This
Agreement constitutes the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally or (b) equitable limitations on the availability of specific
remedies.
4.3 Consents and Approvals. No consent, authorization or
approval of, filing or registration with, or cooperation from, any Governmental
Authority or any other Person not a party to this Agreement is necessary in
connection with the execution, delivery and performance by Purchaser of this
Agreement and the consummation by Purchaser of the transactions contemplated
hereby or thereby, other than (a) the consents set forth on Schedule 4.3 hereto
(each of which will be obtained prior to Closing), (b) as required by
applicable requirements of the SEC and (c) filings and consents that may be
required under any environmental, health or safety law or regulation
necessitated by the transactions contemplated herein. The execution, delivery
and performance by Purchaser of this Agreement does not and will not (i)
violate or conflict with, result in a breach or termination of, constitute a
default under or permit cancellation of any material contract to which
Purchaser is a party or to which any of its assets is subject, or (ii) violate
or conflict with any provision of Purchaser's Certificate of Incorporation or
By-laws.
4.4 Brokers. Purchaser has used X.X. Xxxxxxxxxx & Co., Inc.
in connection with the transactions contemplated hereby. Payment of the fees
and expenses of X.X. Xxxxxxxxxx & Co., Inc. in connection with the transactions
contemplated hereby is solely the obligation of Purchaser.
38
ARTICLE V
COVENANTS
5.1 Noncompetition; Confidentiality.
(a) In order to induce Purchaser to enter into this
Agreement, each of Parent and Seller expressly covenants and agrees
that for a period of three (3) years from and after the Closing Date,
neither Seller, Parent, nor any of Parent's Subsidiaries (for so long
as they remain Subsidiaries) will directly or indirectly, without the
prior express written consent of Purchaser, (i) own, manage, operate,
join, control, consult with or participate in or be connected with any
business, individual, partnership, firm, corporation or other entity
which is engaged in the Business, wholly or partly, in Canada,
Mexi-co, the United States, Europe or Asia, (ii) disturb or attempt to
disturb any business relationship between any third party and
Purchaser or any of its Affiliates in connection with the Business, or
(iii) solicit, hire or encourage any officer or employee employed by
the Business to leave the employ or retention of the Business. Nothing
in Section 5.1(a)(i) or (ii) above shall limit, prohibit or restrict
the operation of the respective businesses of the present Subsidiaries
of Meridian Sports Incorporated set forth on Schedule 5.1 hereto in
substantially the same manner as such businesses are operated on the
date hereof, provided, however, that neither Parent, Seller nor any of
Parent's Subsidiaries will engage in the manufacture or marketing of
water skis, wake boards and knee boards and related towable water
sports products and accessories (except for the manufacture or
marketing of any accessory with the "MasterCraft" logo).
(b) Except to the extent expressly required by Law, Parent
and Seller shall, and shall cause their Affiliates to, keep secret and
confidential indefinitely all non-public information concerning
Purchaser, the Business, the Intellectual Property and the Purchased
Assets and not disclose the same, either directly or indirectly, to
any other Person, or use the same in any way.
(c) Parent and Seller expressly agree that the remedies at
law for any breach of the provisions of this Section 5.1 would be
inadequate and that, in addition to any other remedies that Purchaser
may
39
have, Purchaser shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damages or
posting bond. To the extent that any part of this Section 5.1 may be
invalid, illegal or unenforceable for any reason, it is intended that
such part shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part, if more limited in scope,
would have been enforceable. Parent and Seller acknowledge that
Purchaser would not enter into this Agreement unless Parent and Seller
agreed to the provisions of this Section 5.1.
5.2 Existence of Seller. Seller will remain in existence for
not less than twelve (12) months following the Closing Date and will maintain a
net worth of not less than $1 million during that time.
5.3 Use of Name. From and after the Closing Date, Parent,
Seller, their respective Affiliates and any provider of services to Seller,
Parent or their respective Affiliates will not directly or indirectly use in
any manner any name, trade name, trademark, service xxxx or logo used by the
Business or any word or logo that is similar in sound or appearance. Promptly
after the Closing Date, Seller shall file an amendment to its Amended Articles
of Incorporation changing its name to a name which does not resemble "O'Brien"
in any way.
5.4 Product Liability.
(a) Seller is and shall be solely responsible for any and all
claims for injury (including, without limitation, death) or claims for
damage, direct or consequential, resulting from or connected with
goods manufactured or sold or products-related services provided by
Seller, to the extent that such injury or damage occurs on or before
the Closing Date.
(b) Purchaser is and shall be solely responsible for any and
all claims for injury (including, without limitation, death) or claims
for damage, direct or consequential, resulting from or connected with
goods manufactured or sold or products-related services provided by
Seller, to the extent that such injury or damage occurs after the
Closing Date.
40
5.5 Employees and Employee Benefits.
(a) On or prior to the Closing Date, Purchaser shall offer
employment to active employees of the Business; provided that, subject
to this Section 5.5, Purchaser may terminate at any time after the
Closing Date the employment of any employee who accepts such offer.
For purposes of this Section 5.5, the term "ACTIVE EMPLOYEE" shall
mean any Person who, on the Closing Date, is actively employed by
Seller or who is on disability leave, authorized leave of absence,
military service or lay-off with recall rights as of the Closing Date,
but shall exclude any former employee or any other Person who has been
on unauthorized leave of absence or who has terminated his or her
employment, retired or died before the Closing Date. Any such offers
shall be at such employee's current salary or wage levels and on such
other terms and conditions as Purchaser provides to its similarly
situated employees. The employees who accept and commence employment
with Purchaser are hereinafter collectively referred to as the
"TRANSFERRED EMPLOYEES." Seller will not take any action that would
impede, hinder, interfere or otherwise compete with Purchaser's effort
to hire any Transferred Employees. Purchaser shall not assume
responsibility for any Transferred Employee until such employee
commences employment with Purchaser, which assumption shall be
retroactive to the Closing.
(b) Except as expressly set forth herein, Seller shall retain
all obligations and liabilities under the Employee Plans and Benefit
Arrangements in respect of each employee or former employee (including
any beneficiary thereof) who is not a Transferred Employee. Except as
expressly set forth herein, Seller or its designated Affiliate shall
retain all liabilities and obligations in respect of benefits accrued
prior to the Closing Date by Transferred Employees under the Employee
Plans and Benefit Arrangements, and neither Purchaser nor any of its
Affiliates shall have any liability with respect thereto. Except as
expressly set forth herein, no assets of any Employee Plan or Benefit
Arrangement shall be transferred to Purchaser or any of its Affiliates
or to any plan of Purchaser or any of its Affiliates.
41
(c) With respect to the Transferred Employees (including any
beneficiary or dependent thereof), except as otherwise assumed
pursuant to Section 2.3 hereof or this Section 5.5, Seller shall
retain (i) all liabilities and obligations arising under any group
life, accident, medical, dental or disability plan or similar
arrangement (whether or not insured) to the extent that such liability
or obligation relates to contributions or premiums accrued (whether or
not payable), or to claims incurred (whether or not reported), prior
to the Closing Date, (ii) all liabilities and obligations arising
under any worker's compensation arrangement to the extent such
liability or obligation relates to the period prior to the Closing
Date, including liability for any retroactive xxxxxxx'x compensation
premiums attributable to such period and (iii) all other liabilities
and obligations arising under the Employee Plans and the Benefit
Arrangements to the extent any such liability or obligation relates to
the period prior to the Closing Date.
(d) The Parent Savings Plan covers current and former
employees of Parent and certain of its Affiliates, including the
Seller. Effective as of the Closing Date, Parent shall amend the
Parent Savings Plan to cease all accruals of benefits in respect of
the Transferred Employees. As soon as practicable after the Closing
Date, the account balances including earnings thereon through the date
of transfer, of the Transferred Employees under the Parent Savings
Plan, shall be transferred to a defined contribution plan of Purchaser
(the "Purchaser Savings Plan"). Such transfer shall be effected in
accordance with applicable law and regulations and Purchaser shall
make or cause to be made, and Seller shall make or cause to be made,
any required filings in connection therewith. Purchaser or one of its
Affiliates may require, as a condition to the acceptance of any such
transfer, evidence satisfactory to Purchaser of the qualified status
of the Parent Savings Plan, including, without limitation, a copy of a
favorable determination letter from the Internal Revenue Service (the
"IRS") and an opinion of counsel that the Parent Savings Plan has in
operation remained qualified at all relevant times. In consideration
of such transfer, Purchaser or one of its Affiliates shall assume
liability for the payment of the Transferred Employees account
balances to Transferred Employee under the Parent Savings
42
Plan. Each of the parties hereto shall pay its own expenses in
connection with such transfer. Neither Purchaser nor any of its
Affiliates shall assume any other obligations or liabilities arising
under or attributable to the 401(k) Plan, the same to be retained or
assumed by Seller.
Purchaser and Parent agree that for the period from the
Closing Date to the date of the actual transfer of assets provided for
under this Section 5.5(d) (the "SAVINGS TRANSFER DATE"), the Parent
Savings Plan shall be liable for any benefit payment that becomes due
to a Transferred Employee under such plan, and that after the transfer
of assets provided for under this Section 5.5(d), the Purchaser
Savings Plan shall be liable for any benefit payment that becomes due
to any Transferred Employee. In the event that benefit payments are
made when they become due from the Parent Savings Plan to a
Transferred Employee under this Section 5.5(d), the amount of assets
to be transferred from such plan shall be reduced by an amount equal
to such benefit payment. For the period from the Closing Date to the
Savings Transfer Date, the amount of such transfer shall be equitably
adjusted to reflect gains or losses allocable to such amount (as
determined by the actuary for the Parent Savings Plan in its sole
discretion).
Upon the transfer of cash or such other assets provided
hereunder, Parent shall have no further liability to the Transferred
Employees or to the Purchaser in connection with the accrued benefits
transferred.
(e) To the extent applicable, Transferred Employees (and
their eligible dependents) shall be given credit under employee
benefit plans, programs, policies and arrangements, including vacation
pay plans, that are established or maintained by Purchaser for the
benefit of Transferred Employees (the "PURCHASER'S PLANS") for their
service with Seller (i) for purposes of eligibility to participate and
vesting (but not benefit accrual (except for vacation pay, severance,
other fringe benefits and the Purchaser Savings Plan)) to the extent
such service was taken into account under a corresponding Seller's
Plan, and (ii) for purposes of satisfying any waiting periods,
evidence of insurability requirements or the application of any
pre-existing
43
conditions limitations and shall be given credit for amounts paid
under a corresponding Seller's Plan during the same period for
purposes of applying deductibles, co-payments and out-of-pocket
maximums as though such amounts had been paid in accordance with the
terms and conditions of the plans, programs, policies and arrangements
maintained by Purchaser.
(f) The parties hereto expressly acknowledge that Purchaser
shall be obligated to (i) provide COBRA coverage to all active
employees (or their eligible dependents) that do not become
Transferred Employees or former employees (or their eligible
dependents) who are eligible for or are currently receiving such COBRA
coverage, and (ii) pay all liabilities in respect of any Transferred
Employee terminated for any reason on or after the Closing Date,
including without limitation, any severance benefits triggered as a
result of the transactions contemplated under this Agreement, COBRA,
any liability triggered under any unemployment compensation or other
government-mandated benefits relating to the termination of any
Transferred Employee's employment on or after the Closing Date,
including, without limitation, the Worker Adjustment and Retraining
Notification Act of 1988.
(g) To the extent requested by Purchaser in writing prior to
the Closing Date and to the extent that Seller is unable to assign
such Employee Plans and Benefit Arrangements to Purchaser, Seller
agrees to use its best efforts to continue coverage to Transferred
Employees under the Employee Plans and Benefit Arrangements that
currently provide for fully insured welfare plan coverage for the
period commencing on the Closing Date and ending on Decem-ber 31, 1997
or until such earlier time as Purchaser or its designated Affiliate
can assume responsibility for such insurance in an orderly manner.
Purchaser shall pay all premium costs directly to the insurer and
shall, upon 10 days notice, reimburse Seller for Seller's costs
reasonably incurred in continuing to provide such insurance. Such
continuation of insurance shall not affect the allocation of
liabilities and obligations as set forth in this Section 5.5.
Purchaser shall use all reasonable efforts to arrange for such
insurance coverage as promptly as possible in order to avoid using
Seller's services under this section.
44
(h) (i) Seller and Purchaser agree to take all actions
reasonably necessary to accomplish the transactions contemplated by
this Section 5.5(h) and (ii) Purchaser shall assume all liabilities
and obligations under the retention agreements, each dated February
19, 1997 between Seller, Parent and each of Xxxx Xxxxxxxxx, Xxx
Xxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxx, Xxxxxx XxXxxxxxx, Xxxx Xxxxxx and
Xxxx Xxxxxx.
(i) Except as provided in this Section 5.5, nothing in this
Agreement shall limit or restrict in any way the rights of Purchaser
to modify, amend, terminate or establish employee benefit plans,
programs, policies or arrangements, in whole or in part, at any time
after the Closing Date.
(j) All provisions contained in this Agreement with respect
to employee benefit plans or employee compensation are included for
the sole benefit of the respective parties hereto and do not and shall
not create any right in any other person, including, but not limited
to, any Transferred Employee, any participant in any benefit or
compensation plan or any beneficiary thereof.
(k) Seller shall not discourage any employee from accepting
employment with Purchaser.
(l) Each of Seller and Purchaser agree that it will apply the
alternative procedures contained in Section 5 of the Revenue Procedure
84-77, 1984-2 C.B. 753. Purchaser shall furnish to each Continuing
Employee a Form W-2 disclosing all wages and other compensation paid
(and taxes withheld thereon) for the periods (i) beginning January 1,
1997 and ending the Closing Date, and (ii) beginning the day after the
Closing Date and ending on December 31, 1997, provided that Seller
shall indemnify Purchaser for all liability with respect to
information provided by Seller.
45
5.6 Access.
(a) From and after the Closing Date, Purchaser will permit
Seller and Seller's representatives and agents to have reasonable
access, at all reasonable times, to the books, accounts, records,
properties, operations, facilities and personnel pertaining to the
Business and will furnish Seller with such financial and operating
data concerning the Business as Seller shall from time to time
reasonably request in connection with, but not limited to (i) the
preparation of any tax return, (ii) any audit or other investigation
by any taxing authority or any required reports or submissions to
governmental bodies with respect to Seller or the Business relating to
periods prior to the Closing Date, (iii) any third party claims and
investigations and insurance relating thereto, (iv) the preparation of
the Final Balance Sheet and Closing Date Statement of Net Tangible
Equity, and (v) the collection by Purchaser of the Receivables,
including Seller's verification of the AR Reconciliation, preparation
of any AR Notice and resolution of any dispute relating to Purchaser's
collection of the Receivables.
(b) From and after the Closing Date, Seller will make
available to Purchaser and Purchaser's representatives and agents all
books and records of Seller to the extent related to the Excluded
Assets or the Seller's Liabilities as may be reasonably requested by
Purchaser in connection with the preparation of financial statements
relating to the Business. In addition, at Purchaser's request and at
its sole cost and expense, Seller will use its best efforts to cause
Seller's Auditors to provide Purchaser with information or material
regarding the Business, including, but not limited to, financial
statements, trial balances or other accounting records relating to the
Business, reasonably requested from Seller's Auditors by Purchaser.
5.7 Collection of Accounts Receivable.
(a) No later than ten (10) days after the Closing Date,
Purchaser will furnish to Seller an aging report for all Receivables,
reflecting for each account the name of the customer, the age and
outstanding balance as of the Closing Date and the underlying detail
comprising the outstanding balance as of the Closing Date. Purchaser
shall, from and
46
after the Closing through and including November 30, 1997, use its
best efforts to collect the Receivables on behalf of Seller.
(b) (i) Payments received by Purchaser in connection with the
Receivables shall be credited to the related Receivable as
follows. If such payment or any accompanying documents
specify the invoice or other item for which such payment is
being made, such payment shall be applied in the accounting
detail records to such invoice or other item. If such payment
or any accompanying documents do not specify the invoice or
other item for which such payment is being made, Purchaser
shall make prompt inquiry of the customer, requesting such
information. If Purchaser has not received the necessary
information from the customer, within sixty (60) days of
receipt of payment, then the applicable payment shall be
credited in the accounting detail records to the oldest
outstanding Receivable relating to that customer.
(ii) Notwithstanding the application of payments to
specified invoices or other items in the accounting detail
records, payments from customers included in Receivables
received by Purchaser shall be remitted to Seller until each
such Receivable is fully collected. If, due to the receipt of
cash from customers included in the Receivables by Seller, no
additional amount is due to Seller from the customer making
payment, then Seller shall immediately forward such payment
to Purchaser. If either Purchaser or Seller receives payments
of Receivables related to an insolvent account debtor, the
payments will be deposited or remitted to the account of
Seller to the extent that such amount was included in
Receivables on the Closing Date and was not subsequently
collected by or remitted to Seller provided that, in no event
will Seller receive a higher percentage of the Receivables
than the percentage of debt recoverable by such account
debtor's creditors in general.
(iii) On a monthly basis, not later than the tenth
Business Day of each month, Purchaser will provide to Seller
an aging of Receivables as of the end of the prior month with
a recon-
47
ciliation of cash applied and credits issued against the
Receivables to cash remitted to Seller by Purchaser in
respect of such Receivables, in the form of Schedule 5.7(b)
hereto (the "AR RECONCILIATION").
(c) If Purchaser or Seller has received notice of a billing
dispute with respect to a particular invoice, Purchaser will notify
Seller or Seller will notify Purchaser, as the case may be, and
payments shall be applied by Purchaser to such invoice in the manner
set forth above only if the dispute is resolved on or before November
30, 1997. If the customer does not pay a particular invoice in full
and if the customer has indicated to Purchaser or Seller that the
shortfall is in respect of a warranty claim or other liability assumed
by Purchaser hereunder (including, but not limited to, freight,
cooperative advertising credits or discounts), then Purchaser shall
make payment to Seller within five (5) Business Days in an amount
equal to such shortfall, provided that, if the cumulative unremitted
shortfall is less than $10,000, Purchaser may remit such amount on a
monthly basis, not later than the fifth Business Day of the following
month.
(d) Purchaser shall remit by wire transfer daily the
aggregate amount of all cash, checks, drafts or other similar items of
payment received by Purchaser as funds become available that are to be
applied against the Receivables for the account of Seller to an
account, whose account number has been provided to Purchaser by
Seller. If the aggregate amount to be remitted to Seller on any day is
less than $10,000, Purchaser may remit such amount on the next
Business Day on which funds are required to be remitted to Seller.
Purchaser shall not, without the prior consent of Seller, take any
action that would adversely affect the ability of Seller, or Purchaser
on behalf of Seller, to collect the Receivables, including, but not
limited to, the granting of returns, markdowns, allowances or similar
customer concessions which could result in a credit being asserted
with respect to any of the Receivables. Purchaser's best efforts in
the collection of the Receivables shall be the collection methods
consistently applied in the Business for the collection of accounts
receivable of the Business, consistent with past practice, but
Purchaser shall not be required to institute suit or incur any
extraordi-
48
nary expenses in connection therewith. On or about December 1, 1997,
Purchaser shall transfer to Parent any documentation relating to any
Receivable uncollected, in whole or in part, as of that date.
(e) If any payment is received by Seller in respect of a
Receivable, Seller shall immediately notify Purchaser thereof, and if
(i) such payment is related to an account receivable of Purchaser
rather than to a Receivable of Seller and (ii) all Receivables from
such customer as of the Closing Date have been collected and remitted
to Seller or if Seller has received notice of a dispute relating to
the unpaid Receivables, then Seller shall immediately forward such
payment to Purchaser in accordance with Purchaser's instructions.
After November 30, 1997, Purchaser shall remit to Seller only such
payments received that (i) are specifically identified by the customer
as being a payment of a Receivable transferred to Seller pursuant to
this Section 5.7(d) and (ii) had not previously been remitted to
Seller.
(f) Within forty five (45) days after Purchaser transfers to
Parent any documentation relating to any Receivable, Seller shall, at
its option, review the application of payments and credits against
such Receivable and provide a written notice to Purchaser setting
forth for such Receivable the nature and amount of any difference (the
"AR NOTICE"). Purchaser and Seller will have thirty (30) days to
resolve the differences set forth in the AR Notice. If the differences
are not resolved by the Purchaser and Seller within the thirty (30)
day period, the AR Notice will be referred to the Referee for
resolution. The Referee shall act as an arbitrator and shall issue its
report resolving all differences set forth in the AR Notice within
thirty (30) days after such dispute is referred to it. Each of the
parties hereto shall bear all costs and expenses incurred by it in
connection with such arbitration, except that the fees and expenses of
the Referee hereunder shall be borne equally by Seller and Purchaser.
This provision for arbitration shall be specifically enforceable by
the parties. The decision of the Referee in accordance with the
provisions hereof shall be final and binding (absent manifest error)
and there shall be no right of appeal therefrom.
49
5.8 Production of Witnesses and Individuals.
(a) From and after the Closing Date, Purchaser shall use
reasonable efforts to make available to Seller, upon written request
and upon reasonable notice, the employees of the Business for fact
finding, consultation and interviews and, if required, as witnesses,
in each case to the extent that any such person may reasonably be
required in connection with any action, claim, suit, arbitration,
subpoena, discovery request, proceeding or investigation in which
Seller may from time to time be involved relating to the Business,
Seller's Liabilities or the Excluded Assets. Unless required by
Governmental Authority, no provided employee shall be required to
travel or to spend more than two (2) Business Days on any one occasion
in fulfilling Purchaser's obligations hereunder. Seller agrees to
reimburse Purchaser for all reasonable out-of-pocket expenses (but not
labor charges or salary payments) incurred by Purchaser in connection
with providing employees pursuant to this Section 5.8.
(b) From and after the Closing Date, Parent and Seller shall
use reasonable efforts to make available to Purchaser, upon written
request and upon reasonable notice, the employees of Parent or Seller
for fact finding, consultation and interviews and, if required, as
witnesses to the extent that any such person may reasonably be
required in connection with any action, claim, suit, arbitration,
subpoena, discovery request, proceeding or investigation in which
Purchaser may from time to time be involved relating to the Business,
the Assumed Liabilities or the Purchased Assets. Unless required by a
Governmental Authority, no provided employee shall be required to
travel or spend more than two (2) Business Days on any one occasion in
fulfilling Parent's and Seller's obligations hereunder. Purchaser
agrees to reimburse Parent for all reasonable out-of-pocket expenses
(but not labor charges or salary payments) incurred by Parent or
Seller in connection with provided employees pursuant to this Section
5.8.
50
5.9 Environmental Matters. Purchaser shall provide Seller
with notice of any Pre-Closing Environmental Condition which is a Seller's
Liability pursuant to clause (b) of the definition of the term "Seller's
Liability" in Section 1.1 of this Agreement within thirty (30) days of
Purchaser's receipt of written notice of the facts giving rise to such
environmental liability, or, in the case of third-party claims, Purchaser's
receipt of written notice from a third party of a claim with respect to a
Pre-Closing Environmental Condition. The failure of Purchaser to give notice
shall not relieve Seller of its obligations with respect to such Pre-Closing
Environmental Condition except to the extent Seller has been prejudiced by such
failure.
ARTICLE VI
INDEMNIFICATION
6.1 Survival. The representations and warran-ties of the
parties in this Agreement or in any document delivered pursuant hereto shall
survive the Closing until twelve (12) months after the Closing Date, provided,
however, that such time limitation shall not apply to the representations and
warranties set forth in (a) Section 3.6 hereof (such representations and
warranties to survive forever),(b) Section 3.19 hereof (such representations
and warranties to survive until the second anniversary of the Closing Date) or
(c) Section 3.17 hereof (such representations and warranties to survive for the
period of the statute of limitations applicable thereto). After the end of the
relevant survival period specified above, Seller's and Parent's obligations to
Purchaser and its Affiliates under this Article VI with respect to such
representations and warranties shall expire and terminate. Notwithstanding
anything in this Agreement to the contrary, Purchaser's obligation to indemnify
Seller against the Assumed Liabilities shall survive forever and the obligation
of Seller and Parent to indemnify Purchaser against the Seller's Liabilities
shall survive forever.
6.2 Indemnification by Parent and Seller. Parent and Seller
jointly and severally agree to indemnify, defend and hold harmless each of the
Purchaser and its Affiliates against any Losses relating to or arising out of:
(a) any breach of any representation or warranty made by
Parent or Seller in this Agreement or
51
any document delivered to Purchaser at the Closing pursuant to this
Agreement, provided, however, that neither Parent nor Seller shall
have any liability under this Section 6.2(a) with respect to breaches
of such representations and warranties until the Losses arising out of
such breaches equal or exceed $175,000 in the aggregate, at which
point Purchaser shall be entitled to recover all Losses in excess of
such $175,000, provided, further, that (i) the foregoing limitation
shall not apply to Losses arising out of any breaches of the
representations and war-ranties set forth at Sections 3.6, 3.17, and
3.19 hereof, and (ii) Seller shall have no indemnification obligation
pursuant to this Section 6.2(a) for aggregate Losses in excess of the
Purchase Price, provided that the foregoing limitation shall not apply
to Losses arising out of any breaches of the representations and
warranties set forth at Sections 3.6, 3.17 and 3.19 hereof;
(b) any breach of any covenant made by Parent or Seller in
this Agreement or any document delivered to Purchaser at the
Closing pursuant to this Agreement;
(c) the bulk sales Laws of any jurisdiction applicable to the
transactions contemplated herein, and any Laws of any jurisdiction
imposing liability on Purchaser for Seller's Taxes, including the
failure to comply with any such Laws;
(d) Seller's Liabilities, including any Remedial Action
taken by Purchaser with respect to Pre-Closing Environmental
Conditions; and
(e) any damage to any Purchased Assets relating to the
removal of any Excluded Assets from the Real Property.
6.3 Indemnification by Purchaser. Purchaser agrees to
indemnify, defend and hold harmless Parent and Seller and each of their
respective Affiliates against any Losses relating to or arising out of:
(a) any breach of any representation or warranty made by
Purchaser in this Agreement or any document delivered to Seller at the
Closing pursuant to this Agreement, provided, however, that Purchaser
shall have no liability under this Section 6.3(a) with respect to
breaches of such representations and
52
warranties until the Losses arising out of such breaches equal or
exceed $175,000 in the aggregate, at which point Parent and Seller
shall be entitled to recover all Losses in excess of such $175,000,
provided, further, that Purchaser shall have no indemnification
obligation pursuant to this Section 6.3(a) for aggregate Losses in
excess of the Purchase Price;
(b) any breach of any covenant made by Purchaser in this
Agreement or any document delivered to Seller at the Closing pursuant
to this Agreement; and
(c) any Assumed Liability.
6.4 Claims. The provisions of this Section shall be subject
to Section 6.5 below. As soon as is reasonably practicable after becoming aware
of a claim for indemnification under this Agreement (including a claim or suit
by a third party) the indemnified Person shall promptly give notice to the
indemnifying Person of such claim. The failure of the indemnified Person to
give notice shall not relieve the indemnifying Person of its obligations under
this Article VI except to the extent that the indemnifying Person shall have
been prejudiced thereby. If the indemnifying Person does not object in writing
to such indemnification claim within 60 calendar days of receiving notice
thereof, the indemnified Person shall be entitled to recover from the
indemnifying Person the amount of such claim, and no later objection by the
indemnifying Person shall be permitted. If the indemnifying Person agrees that
it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the indemnifying Person shall promptly pay to the
indemnified Person the lesser amount, without prejudice to the indemnified
Person's claim for the difference. Upon receipt of an indemnification notice
pursuant to this Section 6.4 of a claim requiring Remedial Action, the
indemnifying party shall have the right to assume the management and control of
such Remedial Action. All such management and control actions taken shall be
subject to the reasonable approval of Purchaser. In addition, following the
Closing, Purchaser agrees to give prompt notice to Seller of the assertion of
any claim, or the commencement of any suit, action, proceeding, investigation
or audit with respect to any Tax Return for any period or portion thereof
ending on or before the Closing Date, and shall cooperate fully in any such
action by furnishing or making available records,
53
books of account or other materials or taking such other actions as may be
necessary or helpful for the defense against the assertions of any taxing
authority as to any consolidated, combined or separate Tax Return for such
periods.
6.5 Third Party Claims; Assumption of Defense. The
indemnifying Person may, at its own expense, (a) defend, contest or otherwise
protect the indemnified party against any claim, suit, action or proceeding and
(b) upon notice to the indemnified Person, and the indemnifying Person's
delivering to the indemnified Person a written agreement that the indemnified
Person is entitled to indemnification pursuant to Section 6.2 or 6.3 above for
all Losses arising out of such claim, suit, action or proceeding and that the
indemnifying Person shall be liable for the entire amount of any Loss, may at
any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof and, in the event of a claim requiring Remedial
Action, assume the management and control of such Remedial Action (any actions
taken in the course of such management and control shall be subject to the
reasonable approval of Purchaser); provided, however, that (i) the indemnifying
Person's counsel is reasonably satisfactory to the indemnified Person, and (ii)
the indemnifying Person shall thereafter consult with the indemnified Person
upon the indemnified Person's reasonable request for such consultation from
time to time with respect to such claim, suit, action or proceeding. If the
indemnifying Person assumes such defense, the indemnified Person shall have the
right (but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
indemnifying Person. If representation by the indemnifying Person's counsel of
both the indemnifying Person and the indemnified Person would present such
counsel with a conflict of interest, then such indemnified Person may employ
separate counsel to represent or defend it in any such claim, action, suit or
proceeding and the indemnifying Person shall pay the fees and disbursements of
such separate counsel. Whether or not the indemnifying Person chooses to assume
the defense of any such claim, suit, action or proceeding, all of the parties
hereto shall cooperate in the defense or prosecution thereof. Any settlement or
compromise made or caused to be made by the indemnified Person or the
indemnifying Person, as the case may be, of any such claim, suit, action or
proceeding of the kind referred to in this Section 6.5 shall also be binding
upon the indemnifying Person or the indemnified Person, as the case may
54
be, in the same manner as if a final judgment or decree had been entered by a
court of competent jurisdiction in the amount of such settlement or compromise.
The indemnifying Person shall not be permitted to settle or compromise any
claim, suit, action or proceeding without obtaining the prior written consent
of the indemnified Person, which shall not be unreasonably withheld or delayed;
provided, however, in the event that the settlement offer will result in the
indemnified Person having no losses (monetary or otherwise) or continuing
obligations with respect to the claim, suit, action or proceeding, the
indemnifying Person shall be permitted to settle or compromise such claim,
suit, action or proceeding without the prior written consent of the indemnified
Person.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall bear its own expenses with respect to the
transactions contemplated hereby. Purchaser shall pay all sales, use, stamp,
transfer, service, recording, real estate and like taxes or fees, if any,
imposed in connection with the transfer of the Purchased Assets, provided, that
Seller shall promptly reimburse Purchaser for one-half of all such taxes and
fees upon request therefor.
7.2 Amendment. This Agreement may be amended,
modified or supplemented only by written agreement of the
parties.
7.3 Notices. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in writing and shall
be deemed to have been given, (a) when received if given in person or by
courier or a courier service, (b) on the date of transmission if sent by telex,
facsimile or other wire transmission or (c) three (3) Business Days after being
deposited in the U.S. mail, certified or registered mail, postage prepaid:
55
(a) If to Parent or Seller,
addressed as follows:
Meridian Sports Incorporated
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) If to Purchaser, addressed as follows:
Earth and Ocean Sports, Inc.
00 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Xx.
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
7.4 Effect of Investigation. Any due diligence review, audit
or other investigation or inquiry undertaken or performed by or on behalf of
Purchaser shall not limit, qualify, modify or amend the representations,
warranties or covenants of, or indemnities by, Parent or Seller made pursuant
to this Agreement, irrespective of the knowledge and information received (or
which should have been received) therefrom by Purchaser.
7.5 Waivers. The failure of a party to require performance
of any provision shall not affect its right at a later time to enforce the
same. No waiver by
56
a party of any condition or of any breach of any term, covenant, representation
or warranty contained in this Agreement shall be effective unless in writing.
No waiver in any one or more instances shall be deemed to be a further or
continuing waiver of any such condition or breach in other instances or a
waiver of any other condition or breach of any other term, covenant,
representation or warranty. Consummation of the transactions contemplated
herein shall not be deemed a waiver of a breach of or inaccuracy in any
representation, warranty or covenant or of any party's rights and remedies with
regard thereto, unless such breach or inaccuracy was waived in accordance with
the second sentence of this Section 7.5.
7.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Interpretation. The headings preceding the text of
Articles and Sections included in this Agreement and the headings to Schedules
attached to this Agreement are for convenience only and shall not be deemed
part of this Agreement or be given any effect in interpreting this Agreement.
The use of the masculine, feminine or neuter gender shall not limit any
provision of this Agreement. The use of the terms "including" or "include"
shall in all cases herein mean "including, without limitation" or "include,
without limitations" respectively. If any representation or warranty is
qualified by knowledge, the party making such representation or warranty hereby
confirms that it has made a diligent inquiry into the matter addressed by the
representation or warranty. No specific representation, warranty or covenant
contained herein shall limit the generality or applicability of a more general
representation, warranty or covenant contained herein. A breach of or
inaccuracy in any representation, warranty or covenant shall not be affected by
the fact that any more general or less general representation, warranty or
covenant was not also breached or inaccurate. The language in all parts of this
Agreement shall be construed, in all cases, according to its fair meaning. The
parties acknowledge that each party and its counsel have reviewed and revised
this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.
57
7.8 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of law thereof.
7.9 Binding Agreement. This Agreement shall
be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
7.10 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto and their respective successors and
assigns and no provision of this Agreement shall be deemed to confer rights
upon any other Person.
7.11 Publicity. The parties shall cooperate on the form,
content, timing and manner of any press release or releases issued in respect
of this Agreement. Nothing in this Section shall prevent such parties from
discussing such transactions with those Persons whose approval, agreement or
opinion, as the case may be, is required for consummation of such transactions.
7.12 Further Assurances. Upon the request of Purchaser,
Parent and Seller will, on and after the Closing Date, execute and deliver to
Purchaser such other documents, further releases, assignments and other
instruments as may be required or deemed appropriate by Purchaser and Seller to
effect or evidence transfer and assignment to Purchaser of all or any of the
Purchased Assets and to otherwise carry out the purposes of this Agreement. At
the request of Seller or Parent, the Purchaser will, on or after the Closing
Date, execute and deliver such other documents, further releases, assignments
and other instruments as may be required or deemed appropriate by Seller in
order effectively to assume from Seller all of the Assumed Liabilities, to
confirm Seller's right, title and interest in and to the Excluded Assets and to
otherwise carry out the purposes of this Agreement. Seller hereby constitutes
and appoints, effective as of the Closing Date, Purchaser and its successors
and assigns (including Xxxxxxx National Life Insurance Company) as the true and
lawful attorney of Seller with full power of substitution in the name of
Purchaser or in the name of Seller, but for the benefit of Purchaser (i) to
collect for the account of Purchaser any items of Purchased Assets, (ii) to
execute and deliver, from time to time after the Closing Date, such documents
and instruments as may be necessary to more effectively convey the Purchased
Assets, or any of them, to
58
Purchaser or its assigns, and (iii) to institute and prosecute all proceedings
which Purchaser may in its sole discretion deem proper in order to assert or
enforce any right, title or interest in, to or under the Purchased Assets, and
to defend or compromise any and all actions, suits or proceedings in respect of
the Purchased Assets. Purchaser shall be entitled to retain for its account any
amounts collected pursuant to the foregoing powers, including any amounts
payable as interest in respect thereof. To the extent requested in writing,
Purchaser shall, at Seller's cost and expense, provide Seller with copies of
records relating to the Purchased Assets related to the period prior to
Closing.
7.13 Severability. If any provision of this Agreement shall
be held invalid, illegal or unenforce-able, the validity, legality or
enforceability of the other provisions hereof shall not be affected thereby,
and there shall be deemed substituted for the provision at issue a valid, legal
and enforceable provision as similar as possible to the provision at issue.
7.14 Remedies Cumulative. The remedies provided in this
Agreement shall be cumulative and shall not preclude the assertion or exercise
of any other rights or remedies available by law, in equity or otherwise.
7.15 Liability of Parent and Seller. Whenever this Agreement
requires Seller or Parent to take any action, such requirement will be deemed
to include an undertaking on the part of each of Parent and Seller. Parent and
Seller shall be jointly and severally liable for all of the obligations to be
performed by any of them under this Agreement and any representation or
warranty made by any of them.
7.16 Allocation of Taxes. Real, personal and intangible
property Taxes for any portion of a taxable year or period that begins before
and ends after the Closing Date shall be apportioned between Seller and
Purchaser in accordance with the principles set forth in Section 164(d) of the
Code.
7.17 Forum. Purchaser, Seller and Parent agree that any suit,
action or proceeding (a) brought by Seller or Parent in connection with or
arising out of this Agreement shall be brought solely in the Federal Courts of
the District of Delaware (or in the State Courts of New Castle County,
Delaware, solely in the event that the Federal Courts lack subject matter
juris-
59
diction over such action, suit or proceeding), and (b) brought by Purchaser in
connection with or arising out of this Agreement shall be brought solely in the
Federal Courts of the District of Delaware (or in the State Courts of New
Castle County, solely in the event that the Federal Courts lack subject matter
jurisdiction over such action, suit or proceeding). Each of Purchaser, Seller
and Parent consent to the jurisdiction of such Courts for any such suit, action
or proceeding. Each of Purchaser, Seller and Parent irrevocably waives any
defenses of lack of personal jurisdiction, improper venue or forum non
conveniens as to any such action, suit or proceeding brought in the Courts
specified in the preceding sentence. Each of Purchaser, Seller and Parent also
irrevocably agrees that service of process in any such action, suit or
proceeding shall be deemed good and effective if made in any manner (other than
by mail) specified for delivery of written notice pursuant to Section 7.3
hereof.
7.18 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Purchaser may assign this Agreement or any of its rights hereunder to
any of its direct or indirect wholly owned subsidiaries. In the event of such
assignment, Purchaser shall be responsible for all obligations of such
subsidiary and shall continue to be bound in all respects by the provisions
hereof. Neither Seller nor Parent may assign this Agreement without the written
consent of Purchaser. Purchaser may assign its rights and privileges under this
Agreement to Xxxxxxx National Life Insurance Company or to any other Person
providing financing to Purchaser in connection with the transactions
contemplated in this Agreement. In the event of such assignment, Purchaser
shall continue to be bound in all respects by the provisions hereof.
7.19 Entire Understanding. This Agreement
sets forth the entire agreement and understanding of the
parties hereto and supersedes any and all prior agree-
ments, arrangements and understandings among the parties.
* * * *
60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
EARTH AND OCEAN SPORTS, INC.
By: /s/ Xxxxxx X. Xxxx
-----------------------------
Name: Xxxxxx X. Xxxx
Title: Chairman
O'BRIEN INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
MERIDIAN SPORTS INCORPORATED
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: /s/ Xxxxxx X. Xxxxx
Title: Vice President and
Controller
61
