AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
LOGIC MARINE CORPORATION
GENMAR LOGIC, LLC
AND
THE PARENT AND STOCKHOLDERS OF LOGIC MARINE CORPORATION
AS OF APRIL 30, 1999
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purchase of Assets and Assumption of Liabilities . . . . . . . . . . . .1
1.2 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Other Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1 Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 Earn-Out Consideration . . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Allocation of Purchase Price.. . . . . . . . . . . . . . . . . . . . . .7
2.4 Determination of and Procedures for Net Asset Adjustment; Payment. . . .7
2.5 Regulated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV PARTIES' CLOSING OBLIGATIONS . . . . . . . . . . . . . . . . . . 11
4.1 Seller's Obligations at Closing; Further Assurances. . . . . . . . . . 11
4.2 Purchaser's Obligations at Closing . . . . . . . . . . . . . . . . . . 14
ARTICLE V SELLER REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 15
5.1 Organization, Standing and Qualification . . . . . . . . . . . . . . . 15
5.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Transactions with Certain Persons. . . . . . . . . . . . . . . . . . . 15
5.4 Execution, Delivery and Performance of Agreement; Authority. . . . . . 16
5.5 Equitable Ownership Interests. . . . . . . . . . . . . . . . . . . . . 16
5.6 Ownership of Stockholder Interests.. . . . . . . . . . . . . . . . . . 16
5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Absence of Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . 17
5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 Absence of Changes or Events.. . . . . . . . . . . . . . . . . . . . . 17
5.11 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.12 Compliance with Laws and Other Instruments.. . . . . . . . . . . . . . 19
5.13 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.15 Patents and Other Intellectual Property. . . . . . . . . . . . . . . . 23
5.16 No Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.18 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.19 Business Description.. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.20 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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5.21 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.22 Absence of Certain Business Practices. . . . . . . . . . . . . . . . . 27
5.23 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.24 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 29
5.25 Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.26 Relationship with Related Persons. . . . . . . . . . . . . . . . . . . 32
5.27 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.28 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 34
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Authorization and Approval of Agreement. . . . . . . . . . . . . . . . 34
6.3 Execution Delivery and Performance of Agreement. . . . . . . . . . . . 35
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII PRECLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . . 35
7.2 Access to Information and Documents. . . . . . . . . . . . . . . . . . 36
7.3 Purchaser Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Directors and Stockholders Authorization; Change of Seller Name. . . . 37
7.5 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7 Pay Increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.8 Restrictions on New Contracts. . . . . . . . . . . . . . . . . . . . . 38
7.9 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.10 Payment and Performance of Obligations . . . . . . . . . . . . . . . . 38
7.11 Restrictions on Sale of Assets . . . . . . . . . . . . . . . . . . . . 38
7.12 Prompt Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.13 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.14 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.15 No Solicitation of Other Offers. . . . . . . . . . . . . . . . . . . . 39
7.16 Accounts Receivable and Payable. . . . . . . . . . . . . . . . . . . . 39
7.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.19 Filing Reports and Making Payments . . . . . . . . . . . . . . . . . . 39
7.20 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.21 Monthly Financial Statements . . . . . . . . . . . . . . . . . . . . . 40
7.22 [THIS SECTION INTENTIONALLY OMITTED.]. . . . . . . . . . . . . . . . . 40
7.23 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.24 Discontinued Operations and Environmental Conditions Insurance
Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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7.25 Physical Inventory as of April 30, 1999. . . . . . . . . . . . . . . . 41
7.26 Brunswick Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.27 Bulk Sales Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.28 Payment of Affiliate Liabilities . . . . . . . . . . . . . . . . . . . 42
7.29 Certain Parent Company Advances. . . . . . . . . . . . . . . . . . . . 42
7.30 Notification of Misrepresentation. . . . . . . . . . . . . . . . . . . 43
7.31 Filing of Income Tax Returns . . . . . . . . . . . . . . . . . . . . . 43
7.32 Dissolution of Joint Venture . . . . . . . . . . . . . . . . . . . . . 43
7.33 Filing and Delivery of UCC-3 Termination Statements by Parent. . . . . 43
7.34 Lease Renegotiation. . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.35 Transfer of Intellectual Property. . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII CONDITIONS TO PURCHASER'S OBLIGATIONS. . . . . . . . . . . . . . 44
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . 44
8.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . 44
8.3 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Approval by Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.5 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.6 Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.7 Environmental Audit. . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.8 [THIS SECTION INTENTIONALLY OMITTED.]. . . . . . . . . . . . . . . . . 45
8.9 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.10 Purchaser Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.11 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.12 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.13 Consents and Removal of Liens. . . . . . . . . . . . . . . . . . . . . 46
8.14 Employee Confidentiality and Non-disclosure Agreement. . . . . . . . . 46
8.15 Asset Acquisition Statement. . . . . . . . . . . . . . . . . . . . . . 46
8.16 [THIS SECTION INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . 46
8.17 Bulk Sales Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.18 Payments to Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 46
8.19 Employee Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.20 Purchaser Board Approval . . . . . . . . . . . . . . . . . . . . . . . 46
8.21 Filing of Income and Franchise Tax Returns . . . . . . . . . . . . . . 47
8.22 Dissolution of Joint Venture . . . . . . . . . . . . . . . . . . . . . 47
8.23 Filing and Delivery of UCC-3 Termination Statements by
Parent and Stockholders. . . . . . . . . . . . . . . . . . . . . . . . 47
8.24 Transfer of Intellectual Property. . . . . . . . . . . . . . . . . . . 47
8.25 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.26 Environmental Clean-up and Compliance. . . . . . . . . . . . . . . . . 48
8.27 OSHA Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . 48
9.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . 48
9.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . 48
9.3 Approval by Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 49
10.1 Indemnification by Seller, Parent and Stockholders . . . . . . . . . . 49
10.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . 51
10.3 Nature and Survival of Representations, Warranties and Covenants . . . 51
10.4 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . . . 52
10.5 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE XI TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.2 Return of Documents and Nondisclosure. . . . . . . . . . . . . . . . . 55
ARTICLE XII POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . 56
12.1 Further Acts and Assurances. . . . . . . . . . . . . . . . . . . . . . 56
12.2 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . . . 56
12.3 Non-Solicitation Agreement . . . . . . . . . . . . . . . . . . . . . . 56
12.4 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . 57
12.5 Reasonableness of Covenants. . . . . . . . . . . . . . . . . . . . . . 57
12.6 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.7 Blue Pencil Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.8 Maintenance and Payment of Insurance . . . . . . . . . . . . . . . . . 57
12.9 Performance of Seller's Warranty Work. . . . . . . . . . . . . . . . . 57
12.10 Performance of Seller's Contracts. . . . . . . . . . . . . . . . . . . 58
12.11 Covenant regarding Light Stability . . . . . . . . . . . . . . . . . . 58
ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.2 Legal and Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . 60
13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.6 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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13.9 Preservation of and Access to Records. . . . . . . . . . . . . . . . . 61
13.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.11 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.13 Scope of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.14 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.16 Parties in Interest and Assignment . . . . . . . . . . . . . . . . . . 62
13.17 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.19 Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE XIV DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
EXHIBIT A XXXX OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
EXHIBIT B LIABILITIES UNDERTAKING. . . . . . . . . . . . . . . . . . . . . . . .B-1
EXHIBIT C NON-COMPETITION AND CONTINUITYOF BUSINESS DEALINGS UNDERTAKING . . . .C-1
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AGREEMENT OF PURCHASE AND SALE OF ASSETS
This Agreement of Purchase and Sale of Assets ("Agreement") is dated May
12, 1999, to be effective as of April 30, 1999 by and among LOGIC MARINE
CORPORATION, a Delaware corporation ("Seller") and GENMAR LOGIC, LLC, a Delaware
limited liability company ("Purchaser"), the STOCKHOLDERS of Seller set forth
herein as signatories to this Agreement (the stockholders are herein
individually referred to as "Stockholder" and collectively as the
"Stockholders") and the PARENT (as defined herein) of Stockholders.
RECITALS
A. Seller is engaged in the design, manufacture, distribution and
sale of marine industry products, including without limitation various models of
unsinkable and UV protected fishing, skiing and sporting boats which utilizes
(among other things) proprietary rotational molding technologies (the
"Business").
B. Purchaser is a wholly-owned subsidiary of Genmar Industries, Inc.,
a Delaware corporation ("Genmar Industries"), which is a wholly-owned subsidiary
of Genmar Holdings, Inc., a Delaware corporation ("Genmar Holdings"), both of
which design, manufacture and distribute various marine industry boating
products worldwide.
C. Purchaser desires to purchase the Business, and all associated
operating assets of Seller, and assume certain liabilities and obligations of
Seller as set forth hereinbelow.
D. Seller desires to sell its Business, and all its associated
operating assets and to be relieved of certain of its liabilities and
obligations as set forth hereinbelow.
In consideration of the foregoing Recitals, the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged by the parties, the
parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES. Subject to the
exceptions and upon the terms and conditions set forth in this Agreement, (i)
Seller will sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser will purchase, at the Closing (as defined below), all of the Business,
Assets (as defined below), properties, goodwill, rights and interests of Seller
as a going concern, of every nature, kind and description, tangible and
intangible, wheresoever located and whether or not carried on or reflected in
the books and records of Seller, and (ii) Purchaser shall assume certain and
only those liabilities of Seller that are specifically set forth herein.
1.2 ASSETS.
(a) ASSETS. Purchaser will purchase (i) the assets set forth
on SCHEDULE 1.2(a)(i) hereto which include without limitation, cash, cash
equivalents (including certificates of deposit), accounts receivable,
inventory (raw materials, work in process and finished goods), furniture,
fixtures, equipment, real estate, all Patents and other Intellectual
Property and applications, all rights in and to all insurance policies,
Seller's documents and records, prepaid expenses, goodwill and other
rights or interests that may accrue to or constitute the Business (or are
used or useful in the Business) of Seller, and (ii) and assume Seller's
contractual rights, licenses, sales, dealer distribution, brokerage and
marketing, supply, freight and floor plan contracts and arrangements,
Intellectual Property rights, licenses, permits and approvals, and any
and all intangible rights and interests set forth on SCHEDULE 1.2(a)(ii)
hereto, all of which shall be assigned to Purchaser at the Closing, if
such rights and interests are by their terms assignable (the "Assets").
The Assets shall be sold to Purchaser free and clear of all liens,
Encumbrances and other interests, except for any Permitted Encumbrances
set forth herein.
(b) EXCLUDED ASSETS. Purchaser shall not purchase or assume:
(i) any existing claims or litigation against Seller of any kind or
nature, (ii) any breaches or defaults of any kind or nature of Seller
under any contract, (iii) any infringement, default or breach of any kind
or nature associated with Intellectual Property, (iv) any Benefit Plan or
other benefit arrangement or agreement, (v) the contracts and agreements
of Seller set forth on SCHEDULE 1.2(b) HERETO, and (vi) any Seller
deferred tax assets.
1.3 LIABILITIES.
(a) ASSUMED LIABILITIES. With the exception of all Excluded
Liabilities, as additional consideration for the transfer and delivery of
the Assets to Purchaser, it is the understanding of the parties that
Purchaser shall assume and agree to perform and pay when due (i) the
Liabilities set forth on the Final Balance Sheet, which include all
trade payables, accrued expenses, customer prepayments and other
Liabilities incurred by Seller in the Ordinary Course of Business, (ii)
all of Seller's contractual obligations, commitments and similar
arrangements (except for breaches or defaults of, or violations of
Applicable Law with respect to, such obligations or arrangements) which
are set forth on SCHEDULE 1.3(a) and are assigned to Purchaser pursuant
to its purchase and sale of the Assets, and (iii) Seller's obligations
under warranty for products sold by Seller (which Purchaser has agreed to
assume and perform pursuant to Section 12.9) (the "Assumed Liabilities").
(b) EXCLUDED LIABILITIES. Purchaser shall not assume any (i)
Debt Instruments (including accrued interest thereon), debts, trade
payables, accrued expenses, contractual obligations, commitments or
similar arrangements or other Liabilities to Parent, or to any of
Seller's Stockholders, Affiliates or professional advisors (attorneys,
accountants and the like), except for and only to the extent of the
account payable described in Section 7.29 hereof (ii) pending claims,
contingent liabilities (whether known or unknown), income or franchise
Tax
2
or similarly based Tax liabilities (except properly accrued but
unpaid payroll, sales and property taxes or payments in lieu thereof),
(iii) obligations under any employee Benefit Plan or arrangement, (iv)
obligations that arise from any Environmental Conditions, (v) any pending
or Threatened claims arising from any claim, Proceeding or Order, (vi)
any contractual obligations, commitments and similar arrangements not
specifically set forth on Schedule 1.3(a): notwithstanding the foregoing,
Purchaser shall assume payment responsibility for the amount owed to
Brunswick Corporation, but not the underlying promissory notes associated
therewith; (vii) breaches and/or defaults and violations of Applicable
Laws under or pursuant to any contractual obligation, commitment or
similar arrangement of Seller (viii) any obligations associated with any
letter of credit unless the collateral for such letter of credit is
included in the Assets and has been transferred to Purchaser's possession
and (ix) any deferred Tax liability (the "Excluded Liabilities").
1.4 OTHER CHARGES. Seller shall pay any charges imposed for the
purchase, assumption, assignment, transfer or other transactions arising from or
in connection with the purchase or assumption of the Assets or of any lease,
license, agreement, arrangement or other contract, including any additional
rent, transfer Tax or sales and use Tax. The foregoing shall include any
prepayment charges, assumption fees or other similar charges.
ARTICLE II
PURCHASE PRICE
2.1 CASH CONSIDERATION. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Seller's Assets by Seller to
Purchaser, and in reliance upon the representations and warranties, covenants
and other agreements made herein by Seller, Purchaser will, in full payment
thereof, remit to Seller at the Closing:
(i) Five Hundred Thousand Dollars ($500,000) (the "Cash
Consideration"), and
(ii) Purchaser's unsecured subordinated non-negotiable promissory
note made payable to Seller in the principal amount of Five Hundred Thousand
Dollars ($500,000) with annual interest thereon at a rate of eight percent (8%),
which principal and interest thereon shall be due and payable in full, subject
to certain offset rights of Purchaser as described herein in Section 2.2(d)
and/or in the promissory note, on the first annual anniversary date of the
Closing (the "Note"). During the period which the Note is outstanding,
Purchaser shall not incur secured debt or other liens against the Assets, except
for (a) the Encumbrances and secured interests of Purchaser's and/or its
Affiliates' working capital lender, (b) purchase money security interests
covering after acquired property, and (c) Purchaser's guaranty of the senior and
subordinated credit facilities of Genmar Holdings. Seller acknowledges and
agrees that liens on the Assets securing such credit facilities described in the
foregoing sentences (a), (b) and (c) immediately above are expressly permitted
under this Agreement.
The Cash Consideration shall be payable by cashier's or certified check
or by wire transfer of immediately available funds to a bank account to be
designated by Seller in writing at least three
3
(3) business days prior to the Closing Date. The Cash Consideration, the
Note and the Earn-Out Consideration (described in Section 2.2 below) are
referred to in this Agreement in the aggregate as the "Purchase Price."
Notwithstanding the foregoing, the Purchase Price shall be subject to
reduction by the amount that the Net Assets transferred to Purchaser at
Seller's historical cost (without adjustment for the effect of goodwill or a
"step-up" basis) are less than a NEGATIVE net asset amount of $589,000 (I.E.,
liabilities assumed hereunder exceed the assets purchased by Purchaser in an
amount greater than $589,000) (the "Net Asset Adjustment"). The Net Asset
Adjustment, the effect thereof, and the procedures to be followed by the
parties in relation thereto, shall be determined in accordance with Section
2.4 hereof.
2.2 EARN-OUT CONSIDERATION.
(a) EARN-OUT CONSIDERATION. For a period of three (3) years
from and after the Closing, Purchaser agrees to remit to Seller as
additional consideration and part of the aggregate Purchase Price
hereunder an amount equal to two percent (2%) of net sales revenues
(gross sales of Seller Products, less discounts, credits and returns)
("Annual Net Revenues"), from the sale of Seller's Logic (or any direct
successor) brand boats, parts and accessories, EXCLUDING the annual
published dealer list price of the engine (collectively the "Seller
Products") based upon the annual published dealer list price of the boat
(without engine) to a maximum of $450,000 (the "Earn-Out
Consideration").
Notwithstanding the foregoing, the Earn-Out Consideration that is
computed in accordance with this Agreement shall be reduced dollar for
dollar for the product warranty claims made in connection with the Seller
Products produced through the Closing Date by Seller in excess of the
$100,000 reserve to be booked to the Final Balance Sheet in accordance
with Section 2.4 hereof. The dollar value of product warranty claims
chargeable to Seller shall be cumulative and determined in the aggregate
based on product manufactured on or prior to the Closing Date (as defined
below).
The collection, retention and reporting of product warranty claim
information by Purchaser shall be classified by the year and the serial
number of the Seller Product manufactured. Product warranty claims for a
particular Seller Product shall include all warranty work, including
without limitation (A) replacement product, parts, labor, shipping and
similar costs paid, expended or incurred by Purchaser to third parties,
and (B) replacement product, parts, labor, shipping and similar costs of
Purchaser. Warranty work on engines shall not be included in the
computation of warranty claims. Purchaser shall maintain and make
available to Seller all documentation supporting the product warranty
claims described in this Section 2.2.
(b) PAYMENT OF EARN-OUT CONSIDERATION. The Earn-Out
Consideration will be paid on an annual basis in arrears, commencing 45
days after the first anniversary date of the Closing and continuing each
year thereafter for a period of three (3) years. The Earn-Out
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Consideration shall be paid by cashiers or certified check or by wire
transfer of immediately available funds to an account designated by
Seller in writing at least three (3) days prior to the payment due date.
The measurement period for determination of the Earn-Out Consideration
Annual Net Revenues shall be each one-year period commencing on the first
day after the Closing Date and ending upon each one-year period
thereafter; PROVIDED, HOWEVER, that in the event the Closing Date does
not fall on the last day of the month in which the Closing occurs, then
the measurement period for determination of the Earn-Out Consideration
Annual Net Revenues shall be the last day of the month closest to the
Closing Date (the "Annual Period"). Purchaser shall provide to Seller
monthly statements of net revenue earned and warranty claims paid
pertaining to the applicable marine products during each month during
each Annual Period within thirty (30) days after the previous month-end,
accompanied by supporting documentation thereto (the "Monthly Net Revenue
Statement"). Seller acknowledges and agrees that Purchaser utilizes a
4/4/5 week/monthly/quarterly accounting system whereby the
monthly/quarterly accounting cut-off date is the last Sunday of each
month (whether or not such Sunday is, in fact, the last day of the
month). Based on the foregoing, the anniversary date used for
measurement of the Annual Period and the applicable month ends hereunder
shall be the accounting month end date closest to (i) the anniversary of
the Closing Date and (ii) the actual calendar month end, as applicable.
Purchaser shall compile each of the monthly statements prepared during
each Annual Period (except for the final Annual Period, as set forth
below) and make any required or necessary year-end adjustments to net
revenue and/or warranty claims to produce a year-end Annual Net Revenue
statement (the "Year-End Statement"), which statement shall accompany the
payment of the Earn-Out Consideration, if any, or a statement of any
amount payable by Seller to Purchaser, if any, within forty-five (45)
days after the Annual Period. In the event cumulative warranty claims
which arise in connection with Seller Product manufactured on or prior to
the Closing Date exceed 1.3% of 1998 Net Revenue, Purchaser shall have
the right to project and estimate in good faith further product warranty
claims during the three (3) year Earn-Out Consideration Period to avoid
substantial overpayment of Earn-Out Consideration. At the end of the
three (3) year Earn-Out Consideration period, Purchaser shall prepare a
good faith estimate of warranty claims (based upon prior trends) for
Seller Products manufactured on or prior to the Closing Date and adjust
the year 3 Year-End Statement to reflect such estimates, which statement
shall be transmitted to Seller within the required forty-five (45) day
period and accompanied by all supporting documentation and by the payment
of Earn-Out Consideration, if any, or a statement of any amount payable
by Seller to Purchaser, if any. Purchaser shall have a period of nine
(9) months subsequent to the end of the three (3) year Earn-Out
Consideration period to continue to accumulate product warranty data for
the purpose of preparing an adjusted and final Year-End Statement. Such
statement shall be provided to Seller, and accompanied by (i) either a
payment, if any, or a statement of any amount payable by Seller to
Purchaser, if any, and (ii) supporting documentation thereto, within
forty-five (45) days after the end of such nine (9) month period.
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Upon and after receipt of any Monthly Net Revenue Statement or any
Year-End Statement, Seller shall have not more than thirty (30) days
after receipt of any such statement to review Purchaser's books and
records pertinent to the computations arising under this Section 2.2 and
dispute the accuracy of such statement by written notice of dispute to
Purchaser in accordance with the notice provisions of this Agreement. In
the event that Seller does not dispute such statement, Seller shall be
deemed to have irrevocably waived its right to contest the statement
within the thirty (30) day designated period, notwithstanding any
contrary provision of this Agreement (including Section 13.17 hereof).
In the event that Seller and Purchaser are unable to resolve the disputed
matter within fifteen (15) days after the Seller notice is received and
the disputed matter involves an amount that exceeds $25,000., the parties
shall submit the matter to the Independent Accountants described in
Section 2.2(c) for a final determination under the rules and procedures
set forth in that Section, which determination shall be final,
nonappealable and irrevocably binding upon the parties.
(c) DISPUTE RESOLUTION FOR EARN-OUT CONSIDERATION. Purchaser
and Seller shall use good faith efforts to jointly resolve the
properly noticed objections and discrepancies arising from any Monthly
Net Revenue Statement or any Year End Statement within fifteen (15)
days of the receipt of a written statement of objections and
discrepancies sent in writing by Seller to Purchaser, which
resolution, if achieved, shall be fully and completely binding upon
all parties to this Agreement and not subject to further review,
appeal, or dispute. If Purchaser and the Seller are unable to resolve
Seller's objections and discrepancies to their mutual satisfaction
within such fifteen (15) day period, and the conditions set forth in
Section 2.2(b) hereof are met, then the matter shall be promptly
submitted to a mutually acceptable accounting firm of national
reputation with experience in the marine industry (the "Independent
Accountants"). In submitting a dispute to the Independent
Accountants, each of the parties shall concurrently furnish, at its
own expense, to the Independent Accountants and the other party such
documents and information as the Independent Accountants may request.
Each party may also furnish to the Independent Accountants such other
information and documents as it deems relevant, with the appropriate
copies and notification being concurrently given to the other party.
Neither party shall have or conduct any communication, either written
or oral, with the Independent Accountants without the other party
either being present or receiving a concurrent copy of any written
communication. The Independent Accountants may conduct a conference
concerning the objections and disagreements between the Seller and
Purchaser, at which conference each party shall have the right to
(i) present its documents, materials and other evidence (previously
provided to the Independent Accountants and the other party) and
(ii) to have present its or their advisors, accountants and/or counsel.
The Independent Accountants shall promptly (but not to exceed thirty
(30) days from the date of engagement of the Independent Accountants)
render a decision on the issues presented, and such decision shall be
final, nonappealable and irrevocably binding upon the parties. Each
party hereto shall be responsible for its own costs, fees and expenses
in connection with any proceeding conducted in accordance with this
Section. The cost of the Independent Accountants shall be shared
equally by the parties hereto.
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(d) RIGHT OF SET-OFF AND RECOUPMENT. In the event Purchaser
makes any claim for a Loss pursuant to Article X of this Agreement, or
any amount becomes or is estimated to become owing from Parent, any
Stockholder or Seller to Purchaser hereunder (including without
limitation pursuant to Section 7.24 hereof), Purchaser shall be
irrevocably entitled and is hereby instructed by Seller, Parent and each
Stockholder hereunder to offset (and exercise any other equitable rights,
including recoupment) the full dollar amount of any such claimed amount
or any paid or estimated Loss paid, incurred or which is estimated to
become payable or incurred by Purchaser, or which Purchaser becomes, or
may become, obligated to pay, against (i) the Earn-Out Consideration that
would otherwise be due and payable under this Section 2.2, (ii) the Note
or (iii) under Section 7.29 hereof. Notwithstanding and in furtherance
of the foregoing, in the event there is any unresolved claimed Loss made
by Purchaser at the end of the three (3) year Earn-Out Consideration
period, Purchaser shall be entitled to withhold the full dollar amount of
the claimed Loss from the final Earn-Out Consideration payment due to
Seller from Purchaser. In the event the claimed Loss is fully and
finally resolved, Purchaser shall promptly remit to Seller the excess of
any offset over the amount paid or legally owing by Purchaser.
2.3 ALLOCATION OF PURCHASE PRICE. On or promptly following the
Closing Date, Purchaser and Seller shall, in a reasonable manner after
appropriate consultation, determine the fair market value of the Assets, and
Purchaser and Seller shall allocate in writing the Purchase Price among the
Assets in accordance with the parties' determination and Section 1060 of the
Code. The Purchaser and Seller, as appropriate, shall file an Asset Acquisition
Statement on Form 8594 in accordance with Section 1060 of the Code (which
conforms with the parties' allocation) with their federal income Tax Returns for
the Tax year in which the Closing occurs and shall contemporaneously provide the
other party with a copy of the Form 8594 being filed. Each party agrees not to
assert, in connection with any Tax Return, claim, audit or similar Proceeding,
any allocation of the Purchase Price which differs from the allocation
determined by the parties hereunder.
2.4 DETERMINATION OF AND PROCEDURES FOR NET ASSET ADJUSTMENT; PAYMENT.
(a) Promptly following the Closing Date (but in any event
within forty-five (45) days after the Closing), Purchaser shall cause to
be prepared and delivered to Seller a certification (the "Closing
Certificate") prepared by an auditor (the "Auditor") selected by
Purchaser. The Closing Certificate shall include:
(i) A closing balance sheet (the "Final Balance Sheet")
prepared in accordance with Section 2.4(d) of this Agreement;
(ii) An itemized calculation and reconciliation of the
Net Assets shown on the Final Balance Sheet and the amount payable
to Purchaser, if any, pursuant to the Net Asset requirement set
forth in Section 2.1;
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(iii) In the event the Net Asset calculation results in a
decrease in the Purchase Price, such amount shall be computed in
the aggregate of the Net Asset shortfall computed in accordance
with Section 2.4(f);
(iv) Copies of all supplementary documents, work papers,
and other data relating to the Closing Certificate; and
(v) Such other supplementary evidence as Seller may
require either prior to or after delivery of the Closing
Certificate.
(b) In connection with the preparation of the Final Balance
Sheet and all other matters arising under the Closing Certificate, Seller
shall afford Purchaser and its representatives complete access to the
books, records, personnel and facilities of or pertaining to the Business
to permit the Auditor to review such information as is necessary or
desirable to prepare the Final Balance Sheet and all other statements
arising under the Closing Certificate.
(c) The Final Balance Sheet shall consist of the special
procedures report of the Auditor based on the special procedures used to
prepare the balance sheet of the Seller as of the close of business on
the Closing Date in accordance with Generally Accepted Accounting
Principles and without giving effect to the consummation of the
transactions contemplated hereby. The Auditor's statement on the Final
Balance Sheet shall not be qualified, except for the modifications to
Generally Accepted Accounting Principles mandated by this Agreement for
the proper presentation and calculation of the matters required to be
included with and in the Closing Certificate. The expense of the
preparation of the Final Balance Sheet by the Auditor shall be borne by
Purchaser. The parties hereby acknowledge and agree that, regardless of
whether it is otherwise required by Generally Accepted Accounting
Principles, or whether it is inconsistent with the past accounting
practices of Seller, the Final Balance Sheet shall not contain accruals
for the expenses associated with the preparation of the Final Balance
Sheet.
In furtherance of the foregoing, the Closing Date balance sheet
used as the basis for Final Balance Sheet prepared by the Auditor shall
reflect the following adjustments to and/or departures from Generally
Accepted Accounting Principles:
(i) Accounts receivable shall be credited to reflect a
reserve appropriate for the age and collectibility of such
receivables and retained earnings shall be debited;
(ii) The investment in Logic Tools, LLC, a Limited
Liability Company, shall be eliminated by a credit to the asset
account and retained earnings will be debited;
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(iii) professional fees payable for the preparation of
income tax returns shall be credited in the amount of $10,000 and
a corresponding debit in the same amount shall be made to retained
earnings;
(iv) a product warranty claim reserve account will be
credited in the amount of $100,000 and a corresponding debit in
the same amount shall be made to retained earnings;
(v) an accrual for up-front floor plan interest will be
established and credited in the amount of $15,000 and a
corresponding debit in the same amount shall be made to retained
earnings;
(vi) capitalize improperly expensed overhead and labor
costs by a debit to inventory and a credit to retained earnings;
(vii) eliminate the reserve for previously expensed and
scrapped tanks by a debit to inventory and a credit to retained
earnings;
(viii) establish inventory reserve accounts for (x) 5% of
the amount of raw materials, (y) 100% of the amount of test boats
and attached engines that are not anticipated to be sold in future
period(s) and (z) 50% of the amount of all slow moving inventory,
by a credit to inventory and a corresponding debit to retained
earnings;
(ix) Deferred tax assets shall be eliminated by a credit
to the Deferred Tax Asset account and a debit to retained
earnings;
(x) Deferred tax liabilities shall be eliminated by a
debit to the Deferred Tax Liability account and a credit to
retained earnings;
(xi) Accrued liabilities shall be credited for the
premium cost of the insurance required to be obtained under
Sections 7.24(a) and (b) in an amount not less than $27,000 and
retained earnings shall be debited in the full amount of such
premium cost;
(xii) Accrued liabilities shall be credited for the
estimated cost(s) of compliance with Sections 8.26 and 8.27
hereof, with a corresponding debit to retained earnings;
(xiii) The loans, advances, accrued interest and accounts
payable to Affiliates, in particular those payable to Parent and
the Stockholders, with the exception of the advance amount
described in Section 7.29 hereof, shall be
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eliminated by a debit to the loan, advance or account payable
aggregate amount and a credit to retained earnings;
(xiv) Common stock, additional paid in Capital, and each
series of preferred stock shall be eliminated by a debit to all
such accounts and a credit to retained earnings; and
(xv) Retained earnings shall be eliminated.
(d) If Seller concludes that any material matter reported in
the Closing Certificate is not accurate, Seller shall, within thirty (30)
days after its receipt of the Closing Certificate (the "Response
Period"), deliver to Purchaser a written statement setting forth a
specific description of each of its objections and each of any
discrepancies believed to exist. If no notice of any objections or
discrepancies is given within the Response Period, then the calculations
set forth in the Closing Certificate shall be controlling for all
purposes of this Agreement, and Seller shall pay the Purchaser the
amount, if any, which it is obligated to pay in accordance with the
Closing Certificate pursuant to SECTION 2.5 (f) below.
(e) Purchaser and Seller shall use good faith efforts to
jointly resolve the properly noticed objections and discrepancies within
fifteen (15) days of the receipt of the written statement of objections
and discrepancies, which resolution, if achieved, shall be fully and
completely binding upon all parties to this Agreement and not subject to
further review, appeal, or dispute. If Purchaser and Seller are unable to
resolve the objections and discrepancies to their mutual satisfaction
within such fifteen (15) day period, then the matter shall be submitted
to the Independent Accountants in the manner contemplated by Section
2.2(c) herein above.
(f) Within five (5) days of the earlier to occur of (i) any
failure to object to the Closing Certificate within the Response Period,
or (ii) receipt of the Independent Accountant's decision with respect to
such dispute, if Seller is determined to owe an amount to Purchaser,
Seller shall pay such amount to Purchaser. All amounts owed by Seller to
Purchaser in accordance with this SECTION 2.4 shall be paid by certified
or bank cashier's check or by wire transfer of immediately available
funds with interest computed thereon from the Date of Closing at the
prime rate charged on the date the payment becomes due by US Bank
National Association, Minneapolis. Minnesota. In the event the amount
determined to be owing by Seller to Purchaser hereunder is not paid
within such five (5) day period, Purchaser shall have the right to
offset/recoup such amount, plus interest thereon, against any amount
owing or to be owed to Seller, any Stockholder or Parent under this
Agreement.
2.5 REGULATED PAYMENTS. Purchaser shall have the right to withhold
such amounts as may be required by Applicable Law from the Purchase Price to be
remitted to Seller hereunder and to remit such amounts to the appropriate
authority specified by such Applicable Law. The
10
determination as to whether such withholding is required shall be made by
Purchaser's counsel and Purchaser shall have the irrevocable right to rely on
the advice of its counsel.
ARTICLE III
CLOSING
The closing ("Closing") shall take place at 10:00 A.M., local time, on
the ___ day of May, 1999, to be effective as of April 30, 1999 at the offices of
legal counsel of Seller (as set forth in Section 13.1 hereof) or at such other
time and place as the parties may agree. The day on which the Closing takes
place is herein referred to as the "Closing Date."
ARTICLE IV
PARTIES' CLOSING OBLIGATIONS
4.1 SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.
(a) CLOSING DELIVERABLES. At the Closing, Seller and the
Stockholders will deliver to Purchaser:
(i) a cashier's or certified check drawn by Seller to
the order of Purchaser in the aggregate amount of all of Seller's
cash on hand and in banks less an amount equal to all uncleared
checks which have been drawn by Seller prior to the Closing in
payment of liabilities of Seller which are assumed by Purchaser
hereunder (and Seller agrees to retain in such banks an amount
equal to such uncleared checks until such checks are cleared) or,
at Purchaser's option, an assignment of all of Seller's bank
accounts in form and substance satisfactory to Purchaser;
(ii) a Xxxx of Sale and the ancillary documents set forth
as schedules thereto duly executed by Seller in the form(s) of and
set forth in Exhibit A annexed hereto;
(iii) such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance
satisfactory to Purchaser's counsel, as shall be effective to vest
in Purchaser good and marketable title to Seller's Assets
including without limitation;
(1) Assignment and Assumption Agreement(s) for
permits, licenses and authorizations;
(2) Trademark or trade name assignment(s);
(3) Patent and other Intellectual Property
assignment(s);
(4) vehicle title and valid assignment(s)
thereof.
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(iv) all contracts, files and other data and documents
pertaining to Seller's Assets, except Seller's minute books and
ownership ledger records (which may be delivered at the offices of
Seller);
(v) executed assignment and assumption agreements
transferring all contracts and agreements of Seller to be assumed
by Purchaser;
(vi) all consents required to convey, assign and
transfer, in a form and substance satisfactory to Purchaser's
counsel, all contracts and agreements of Seller to be assumed by
Purchaser;
(vii) a certificate signed by the Seller dated as of the
Closing Date, to the effect that the representations and
warranties made by the Seller in this Agreement and in any
document, instrument and/or agreements to be executed and/or
delivered by Seller pursuant to this Agreement are true, complete
and correct at and as of the Closing with the same force and
effect as those representations and warranties made on the date
hereof and that Seller has conformed and complied with all of its
respective covenants, agreements, and obligations under this
Agreement which are to be performed and complied with by the
Seller at or prior to the Closing;
(viii) Documentation as required under this Agreement with
respect to the following:
(A) filing of Seller Tax returns as set forth in
Section 7.31;
(B) the dissolution of Logic Tools, LLC as set
forth in Section 7.32;
(C) the filing and delivery of UCC-3 termination
statements as set forth in Section 7.33;
(D) the amended lease and waivers as set forth in
Section 7.34;
(E) the matters related to the transfer and
licensing of certain Intellectual Property as
set forth in Section 7.35;
(F) the change of Seller's corporate and all
assumed names as set forth in Section 7.4(b);
(G) the appointment of the agent for service of
process as set forth in Section 7.9.
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(ix) the duly executed written opinion letter of counsel
to Seller as contemplated by Section 8.5 of this Agreement, dated
as of the Closing Date, addressed to Purchaser;
(x) a Release by the Seller, the Parent and each of the
Stockholders in favor of Purchaser in a form acceptable to the
parties and their respective counsel;
(xi) executed confidentiality, Non-disclosure and
non-competition agreements of certain management and
administrative employees entering into employment with the
Purchaser (or working in the Business) in a form acceptable to
Purchaser and its counsel;
(xii) a copy certified by the secretary of (i) Seller,
(ii) each Stockholder, and (iii) Parent of the duly adopted
resolutions of the Board of Directors of each such entity
approving this Agreement and authorizing the execution and
delivery of this Agreement, including the documents, instruments,
certificates and agreements to be executed and/or delivered by the
respective entity pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;
(xiii) certificates of good standing and tax clearance
certificates for Seller and each Stockholder issued by the
Secretary of State (or equivalent authority) of the state or
sovereign government of such Seller or Stockholder's
incorporation, as applicable, each dated within ten (10) days
prior to the closing;
(xiv) such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under
local law.
(b) ADDITIONAL ASSURANCES. At any time and from time to time
after the Closing, at Purchaser's request and without further
consideration, Seller and the Stockholders will execute and deliver such
other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Purchaser may reasonably deem
necessary or desirable in order to more effectively transfer, convey and
assign to Purchaser, and to confirm Purchaser's title to, the Assets, to
put Purchaser in actual possession and operating control thereof and to
assist Purchaser in exercising all rights with respect thereto. After
the Closing, at reasonable times and on reasonable notice, Seller shall
have access to the books and records pertaining to its operations prior
to the Closing, and Purchaser shall retain such books and records for a
period of three (3) years after the Closing.
(c) COLLECTION OF RECEIVABLES. Seller agrees that Purchaser
shall have the right and authority to collect for its own account all
receivables and other items which shall be transferred to Purchaser as
provided herein and to endorse with the name of Seller any checks
received on account of any such receivables or other items. Seller and
each Stockholder
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agrees that it will promptly transfer and deliver to Purchaser any cash
or other property which Seller or a Stockholder mayreceive in respect of
such receivables or other items.
4.2 PURCHASER'S OBLIGATIONS AT CLOSING.
(a) CLOSING DELIVERABLES. At the Closing, Purchaser shall
deliver to Seller:
(i) a cashier's or certified check or wire transfer of
immediately available funds in the amount of the Cash
Consideration;
(ii) the Note;
(iii) a certificate signed by a duly authorized officer of
Purchaser, dated as of the Closing Date, to the effect that the
representations and warranties made by Purchaser in this Agreement
and in any document, instrument and/or agreement to be executed
and/or delivered by Purchaser pursuant to this Agreement are true,
complete and correct at and as of the Closing Date with the same
force and effect as those representations and warranties made on
the date hereof and that Purchaser has performed and complied with
all of its covenants, agreements and obligations under this
Agreement which are to be performed and complied with by Purchaser
on or prior to the Closing;
(iv) a copy certified by the secretary of Purchaser of
the duly adopted resolutions of the Board of Directors of
Purchaser approving this Agreement and authorizing the execution
and delivery of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the
Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;
(v) a duly executed written opinion letter of counsel to
the Purchaser as contemplated by Section 9.4 of this Agreement,
dated as of the Closing Date, addressed to the Seller;
(vi) executed assignment and assumption agreements
transferring all contracts and agreements of Seller to be assumed
by Purchaser;
(vii) certificate of good standing issued by the Secretary
of State of the state of Purchaser's organization dated within ten
(10) days prior to the Closing;
(viii) the executed agreement of Purchaser regarding its
liabilities undertaking; and
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(ix) such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under
federal or local law or regulations.
ARTICLE V
SELLER REPRESENTATIONS AND WARRANTIES
As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and
warrants to Purchaser that each and all of the following representations and
warranties are true and correct as of the date of this Agreement and will be
true and correct as of the Closing Date:
5.1 ORGANIZATION, STANDING AND QUALIFICATION. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware; it has all requisite power and authority and is entitled to
carry on its business as now being conducted and to own, lease or operate its
properties as and in the places where such business is now conducted and such
properties are now owned, leased or operated; and it is duly qualified,
licensed or domesticated and in good standing as a foreign company authorized
to do business in the jurisdictions listed on SCHEDULE 5.1 annexed hereto,
which are the only jurisdictions where the nature of the activities conducted
by it or the character of the properties owned, leased or operated by it
require such qualification, licensing or domestication. Seller has delivered
to Purchaser true and complete copies of Seller's articles of organization
and all amendments thereto, certified by the Secretary of State of the State
of Delaware, and the bylaws of Seller as presently in effect, certified as
true and correct by Seller's Secretary.
5.2 SUBSIDIARIES. Seller has no subsidiaries except those listed
on SCHEDULE 5.2. Seller has no interest, direct or indirect, and has no
commitment to purchase any interest, direct or indirect, in any other
corporation or in any partnership, joint venture or other business enterprise
or entity other than as set forth on SCHEDULE 5.2. The Business carried on
by Seller has not been conducted through any other direct or indirect
subsidiary or Affiliate of Seller.
5.3 TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth on
SCHEDULE 5.3, Seller has not since its inception, directly or indirectly,
purchased, leased from others or otherwise acquired any property or obtained any
services from, or sold, leased to others or otherwise disposed of any property
or furnished any service, or otherwise dealt with (except with respect to
remuneration for services rendered as a manager, officer or employee of Seller),
in the Ordinary Course of Business or otherwise, (i) any Stockholder or
Affiliate of Seller or (ii) any Person who, directly or indirectly, alone or
together with others, controls, is controlled by or is under common control with
Seller or any past or present Stockholder or Affiliate of Seller. Except as set
forth on SCHEDULE 5.3, Seller does not owe any amount to, or have any contract
with or commitment to, any of its stockholders, managers, officers, employees or
consultants (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the Ordinary Course of
Business), and none of such Persons owes any amount to Seller. Except as set
forth on SCHEDULE 5.3, no part of the
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property or assets of any past or present Stockholder or any direct or
indirect subsidiary or Affiliate of any Stockholder has, since Seller's
inception, been used by Seller.
5.4 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT; AUTHORITY.
Neither the execution, delivery nor performance of this Agreement by Seller
or Stockholder will, with or without the giving of notice or the passage of
time, or both, conflict with, result in a default, right to accelerate or
loss of rights under, or result in, cause or create any Liability,
reassessment or revaluation of assets, lien, charge or Encumbrance pursuant
to, any provision of Seller's articles of organization or bylaws or any
franchise, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule, regulation, Order, Proceeding, judgment, decree or
other legal or contractual requirement to which Seller or Stockholder is a
party or by which any of them or the Seller's Assets may be bound or
affected. Seller and each of the Stockholders have the full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby, all Proceedings and other actions required to be taken
to authorize the execution, delivery and performance of this Agreement and
the agreements relating hereto have been properly taken and this Agreement
constitutes a valid and binding obligation of Seller and each Stockholder,
enforceable against them in accordance with its terms.
5.5 EQUITABLE OWNERSHIP INTERESTS. SCHEDULE 5.5 lists the names
and addresses of all Persons who now have or have ever had any equitable
interest in Seller from Seller's organization and inception to the Closing
Date.
5.6 OWNERSHIP OF STOCKHOLDER INTERESTS. Except as set forth in
SCHEDULE 5.6, as of the date hereof and as of the Closing, the Stockholders
are and will be the lawful record and beneficial owners of all stockholder
and equity interests of, in and to Seller, free and clear of any liens,
claims, Encumbrances or restrictions of any kind, and all of such interests
are validly issued and outstanding, fully paid and nonassessable. SCHEDULE
5.6 also sets forth a full, complete and correct list of (a) all past and
current stockholders of Seller, including the dates of such stockholder's
period of ownership, the amount invested by such stockholder, the amount at
which such stockholder's interest was purchased or redeemed, whether the
transaction was a redemption or a third party purchase and any amount owing
to such stockholder for any closed purchase(s) by either Seller or a third
party purchaser (including the Stockholders), and (b) any and all documents
and correspondence arising from or related thereto.
5.7 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.7 are: (i)
the unaudited balance sheets of Seller as of December 31, 1998, 1997 and 1996
and the unaudited statement of earnings for the respective fiscal years then
ended, including any notes thereto, and (ii) the unaudited balance sheet of
the Seller as of March 31, 1999 and the unaudited statement of earnings for
the three-month period then ended. All of the foregoing are hereinafter
collectively referred to as the "Financial Statements." The Financial
Statements have been prepared from, and are in accordance with, the books and
records of Seller and present fairly the financial position and results of
operations of Seller as of the dates and for the periods indicated, in each
case in conformity with Generally Accepted Accounting Principles,
consistently applied.
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5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent reflected or reserved against on the face of the Final Balance Sheet
(excluding the notes thereto) or set forth on SCHEDULE 5.8 annexed hereto or
otherwise specifically described in Section 1.3(a) hereof, as of the Final
Balance Sheet Date Seller had no debts, liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature whatsoever,
including, without limitation, any foreign or domestic Tax liabilities or
deferred Tax liabilities incurred in respect of or measured by Seller's
income, or its period prior to the close of business on the Final Balance
Sheet Date or any other debts, liabilities or obligations relating to or
arising out of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed on or
before the Final Balance Sheet Date, whether or not then known, due or
payable. None of the Seller's employees is now or, will by the passage of
time hereafter become, entitled to receive any severance pay attributable to
services rendered prior to the Final Balance Sheet Date except as disclosed
on the face of the Final Balance Sheet (excluding the notes thereto).
Without in any way limiting the Excluded Liabilities hereunder, Seller and
Purchaser acknowledge and agree that Purchaser does not and shall not assume,
or become in any way obligated for, the payment of any Tax of Seller based on
income, franchise or any other similarly imposed Liability for Taxes of any
Governmental Body.
5.9 TAXES. All taxes, including, without limitation, income,
property, sales, use, franchise, value added, employees' income withholding
and social security taxes, imposed by the United States or by any foreign
country or by any state, municipality, subdivision or instrumentality of the
United States or of any foreign country, or by any other taxing authority and
all interest and penalties thereon ("Taxes" or "Tax"), which are due and
presently payable by Seller, whether disputed or not, have been paid in full,
all Tax Returns required to be filed in connection therewith have been
accurately prepared and duly and timely filed and all deposits required by
law to be made by Seller with respect to employees' withholding and other
Taxes have been duly made. Seller has not been delinquent in the payment of
any foreign or domestic Tax, assessment or governmental charge or deposit and
has no Tax deficiency or claim outstanding, proposed or assessed against it,
and there is no basis for any such deficiency or claim. Seller's federal
income Tax Returns have been filed timely with the Internal Revenue Service
for all of its fiscal years through the year ended December 31, 1998, there
is not now in force any extension of time with respect to the date on which
any Tax Return was or is due to be filed by or with respect to Seller, or any
waiver or agreement by it for the extension of time for the assessment of any
Tax, and Seller is not a "consenting corporation" within the meaning of
Section 341(f)(1) of the Code. Seller is not the subject of or party to any
Tax or Tax related claim, audit or Proceeding.
5.10 ABSENCE OF CHANGES OR EVENTS. Except as set forth in SCHEDULE
5.10 annexed hereto, since December 31, 1998, Seller has conducted its
Business only in the Ordinary Course of Business consistent with its prior
practices and has not:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for capital
expenditures described in subparagraph (k) of this Section 5.10 and
current liabilities for trade or business obligations incurred in
connection with the purchase of goods or services in the Ordinary Course
of Business and
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consistent with its prior practice, none of which Liabilities, in any
case or in the aggregate, materially and adversely affects the
Business, liabilities or financial condition of Seller;
(b) discharged or satisfied any lien, charge or Encumbrance
other than those then required to be discharged or satisfied, or paid any
obligation or Liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities shown on the
Final Balance Sheet and current liabilities incurred since the Final
Balance Sheet Date in the Ordinary Course of Business and consistent with
its prior practice;
(c) declared or made any distribution to its past or present
stockholders or upon or in respect of any stockholder interests, or
purchased, retired or redeemed, or obligated itself to purchase, retire
or redeem, any of its stockholder interests or other securities;
(d) mortgaged, pledged or subjected to lien, charge, security
interest or any other Encumbrance or restriction any of its property,
Business or assets, tangible or intangible, except for the existing
mortgages, liens and security interests or any other Encumbrances that
are listed and described on SCHEDULE 5.10;
(e) sold, transferred, leased to others or otherwise disposed
of any of its assets, except for inventory sold in the Ordinary Course of
Business, without Purchaser's prior written consent, or canceled or
compromised any debt or claim or waived or released any right of
substantial value;
(f) received any notice of termination of any contract, lease
or other agreement or suffered any damage, destruction or loss (whether
or not covered by insurance) which, in any case or in the aggregate, has
had a Material Adverse Effect on the Assets, operations or prospects of
Seller;
(g) encountered any labor union organizing activity, had any
actual or Threatened employee strikes, work stoppages, slow-downs or
lock-outs, or had any material change in its relations with its
employees, agents, customers or suppliers or with any governmental
authorities or self-regulatory organizations;
(h) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any United States
or foreign license, Patent, Copyright, Trademark, trade name, invention
or similar Intellectual Property rights, or modified any existing rights
with respect thereto;
(i) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed
or orally promised to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any stockholder,
director, officer, employee, salesman, distributor or other agent of
Seller;
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(j) issued or sold any stockholder interests or other
securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities
of any Person or any interest in any business enterprise, or otherwise
made any loan or advance to or investment in any Person,
(k) made any capital expenditure or capital additions or
betterments in excess of an aggregate of $25,000;
(l) changed its banking or safe deposit arrangements;
(m) without Purchaser's prior consent, instituted, settled or
agreed to settle any litigation, action or Proceeding before any court or
Governmental Body relating to Seller or its property;
(n) failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior practice and
prudent business practices prevailing in the industry, or made any
purchase commitment in excess of the normal, ordinary and usual
requirements of its Business or at any price in excess of the then
current market price or upon terms and conditions more onerous than those
usual and customary in the industry, or made any material change in its
selling, pricing, advertising or personnel practices inconsistent with
its prior practice and prudent business practices prevailing in the
industry;
(o) suffered any Material Adverse Change;
(p) entered into any transaction, contract or commitment or
paid or agreed to pay, other than in the Ordinary Course of Business, any
brokerage, finder's fee, Taxes or other expense in connection with, or
incurred any severance pay obligations by reason of, this Agreement or
the transactions contemplated hereby; or
(q) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a) through (p)
above.
5.11 LITIGATION. Except as set forth in SCHEDULE 5.11 annexed hereto,
there is no claim, Proceeding, Order, decree or judgment in progress, pending
or in effect, or to the Knowledge of Seller or either of the Stockholders
Threatened, against or relating to Seller, its officers, directors or employee,
its properties, assets or Business or the transactions contemplated by this
Agreement, and neither Seller nor either of the Stockholders knows or has reason
to be aware of any basis for the same.
5.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set forth
in SCHEDULE 5.12 annexed hereto, Seller has complied with all Applicable Laws
and, Orders, judgments and decrees now or hereafter applicable to its Business,
properties or operations as presently conducted. Neither the ownership nor use
of Seller's properties nor the conduct of its Business conflicts with the rights
of any other Person, or violates, or with or without the giving of notice or the
passage of time, or
19
both, will violate, conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of its certificate of
incorporation or by-laws as presently in effect, or any lien, Encumbrance,
mortgage, deed of trust, lease, license, agreement, understanding, law,
ordinance, rule or regulation, or any Order, judgment or decree to which
Seller is a party or by which it may be bound or affected. Neither Seller
nor either of the Stockholders has Knowledge of any Applicable Laws,
Proceedings or Orders which would be applicable to its Business, operations
or properties and which could have a Material Adverse Effect on or cause a
Material Adverse Change to Seller or the Business either before or within one
(1) year after the Closing.
5.13 TITLE TO PROPERTIES. Except for the leaseholds listed and
described on SCHEDULE 5.14(a), Seller has good, marketable and insurable
title to all the properties and assets, including the Assets, it owns or uses
in its Business or purports to own, including, without limitation, those
reflected in its books and records and in the Financial Statements (except
inventory sold after the Financial Statements date in the Ordinary Course of
Business). Except as set forth on SCHEDULE 5.13, none of such properties and
assets are subject to any mortgage, pledge, lien, charge, security interest,
Encumbrance, restriction, lease, license, easement, liability or adverse
claim of any nature whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise, except (i) mortgages or security interests
shown on the Balance Sheet as securing specific liabilities or obligations or
(ii) those imperfections of title and Encumbrances, if any, which,
individually or in the aggregate, (A) are not substantial in character,
amount or extent and do not, materially detract from the value of the
properties subject thereto, (B) do not interfere with either the present and
continued use of such property or the conduct of Seller's normal operations
and (C) have arisen only in the Ordinary Course of Business. All of the
properties and assets owned, leased or used by Seller are in good operating
condition and repair, are suitable for the purposes used, are adequate and
sufficient for all current operations of Seller and are directly related to
the Business of Seller described in Schedule 5.19.
5.14 SCHEDULES. Attached hereto as SCHEDULE 5.14 is a separate
schedule containing an accurate and complete list and description of:
(a) All real estate in which Seller has a leasehold or other
interest or which is used by Seller in connection with the operation of
its Business, together with a description of each lease, sublease,
license, or any other instrument under which Seller claims or holds such
leasehold or other interest or right to the use thereof or pursuant to
which Seller has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof.
(b) As of a date no earlier than February 28, 1999, all of
Seller's receivables (which shall include accounts receivable, loans
receivable and any advances), together with detailed information as to
each such listed receivable which has been outstanding for more than 30
days.
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(c) All machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than inventory and
supplies), owned, leased or used by Seller, setting forth with respect to
all such listed property a summary description of all leases,
Encumbrances, charges, restrictions, covenants and conditions relating
thereto, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.
(d) All Patents, Patent applications, licenses, Trademarks,
Trademark registrations, service marks, service names, trade names,
Copyrights and Copyright registrations, and applications for any of the
foregoing, wholly or partially owned or held by Seller or used in the
operation of Seller's Business as described in Section 5.15(d).
(e) All fire, theft, casualty, liability (including products
liability) and other insurance policies insuring Seller or its properties
or interests therein, specifying with respect to each such policy the
name of the insurer, the risk insured against, the limits of coverage,
the deductible amount (if any), the premium rate and the date through
which coverage will continue by virtue of premiums already paid. Except
as disclosed in SCHEDULE 5.14(e), such policies are with reputable
insurers, provide adequate coverage for all normal risks incident to
Seller's assets, properties and Business operations and are in character
and amount at least equivalent to that carried by Persons engaged in a
business subject to the same or similar perils or hazards.
(f) All sales agency, dealer or distributorship agreements or
franchises or agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound.
(g) All contracts, agreements, commitments or licenses relating
to Intellectual Property to which Seller is a party or by which it is
bound.
(h) All loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, leases or lease purchase agreements to
which Seller is a party or by which it is bound.
(i) All contracts, agreements, and commitments, whether or not
fully performed, in respect of the issuance, sale or transfer of
stockholder interests, bonds or other securities of Seller or pursuant to
which Seller has acquired any substantial portion of its Business or
assets.
(j) All contracts, agreements, commitments or other
understandings or arrangements to which Seller is a party or by which it
or any of its property is bound or affected but excluding (i) purchase
orders and commitments for raw materials, parts (including motors) and
supplies made in the Ordinary Course of Business involving payments or
receipts by Seller of less than $50,000 in any single case but not more
than $100,000 in the aggregate, (ii) contracts entered into in the
Ordinary Course of Business and
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involving payments or receipts by Seller of less than $2,500 in the
case of any single contract but not more than $10,000 in the
aggregate, (iii) contracts entered into in the Ordinary Course of
Business which are terminable by Seller on less than 30 days' notice
without any penalty or consideration and involving payments or
receipts by Seller of less than $2,500 in the case of any single
contract but not more than $10,000 in the aggregate, and (iv) sales
orders or commitments for the sale of manufactured boats, parts or
accessories made in the Ordinary Course of Business upon Seller's
normal price and terms.
(k) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or retirement
plans, employee stock options or stock purchase plans and group life,
health and accident insurance and other employee benefit plans
agreements, arrangements or commitments, whether or not legally binding,
including, without limitation, holiday, vacation, Christmas and other
bonus practices, to which Seller is a party or is bound or which relate
to the operation of Seller's Business.
(l) The names, title and current annual salary rates of all
Persons (including independent commission agents) acting as employees in
Seller's Business, whether or not leased from a third party vendor,
showing separately for each such Person the amounts paid or payable as
salary, bonus payments and any indirect compensation for the year ended;
and
(m) The name of each bank in which Seller has an account or
safe deposit box and the names of all Persons authorized to draw thereon
or have access thereto; and the names of all Persons, if any, holding Tax
or other powers of attorney from Seller and a summary of the terms
thereof.
All of the contracts, agreements, leases, licenses and commitments required
to be listed on SCHEDULE 5.14 (other than those which have been fully
performed) are valid and binding, enforceable in accordance with their
respective terms, in full force and effect and, except as otherwise specified
in SCHEDULE 5.14, validly assignable to Purchaser without the consent of any
other party so that, after the assignment thereof to Purchaser pursuant
hereto, Purchaser will be entitled to the full benefits thereof. Except as
disclosed in SCHEDULE 5.14, none of the payments required to be made under
any such contract, agreement, lease, license or commitment has been prepaid
more than 30 days prior to the due date of such payment thereunder, and there
is not thereunder any existing default, or event which, after notice or lapse
of time, or both, would constitute a default or a basis for force majeure or
other claim of excusable delay or non-performance thereunder or result in a
right to accelerate or loss of rights, and none of such contracts,
agreements, leases, licenses or commitments is, either when considered singly
or in the aggregate with others, unduly burdensome, onerous or materially
adverse to Seller's Business, properties, assets, earnings or prospects or
likely, either before or after the Closing, to result in any material loss or
liability. None of Seller's existing or completed contracts is subject to
renegotiation with any Governmental Body. True and complete copies of all
such contracts, agreements, leases, licenses and other documents listed on
SCHEDULE .5.14 (together with any and all amendments thereto) have been
delivered to Purchaser and identified with a reference to this Section 5.14
of this Agreement.
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5.15 PATENTS AND OTHER INTELLECTUAL PROPERTY.
(a) DEFINITION OF INTELLECTUAL PROPERTY. "Intellectual
Property" shall mean (i) all inventions, whether Patentable or
unpatentable (and whether or not reduced to practice), all
improvements thereto, and all "Patents" including all Patents and
Patent disclosures and applications, and registered design and
registered design applications, together with all reissuance,
continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (ii) all "Trademarks," including registered or
unregistered Trademarks, registered or unregistered servicemarks, and
all translations, adaptations, deviations, combinations, applications,
registrations and renewals in connection with any registered or
unregistered Trademark or servicemark, and all trade names, trade
dress and logos, (iii) all "Copyrights," meaning all registered
Copyrights, Copyright applications, Copyrightable works, and
unregistered Copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection therewith, (v)
all Confidential Information, (vi) all computer software and software
licenses (including data and related documentation), (vii) all other
similar proprietary rights, and (viii) all copies and tangible
embodiments of the foregoing, in whatever form or medium.
(b) POSSESSION, RIGHTS AND OWNERSHIP. To the Knowledge of
Seller, with an obligation of investigation, Seller possesses all
Intellectual Property necessary for the conduct of its Business as
presently conducted, including all licenses and rights to use any
Intellectual Property necessary for the Business as presently conducted.
Seller is the sole and exclusive owner of all right, title and interest
in and to the Intellectual Property owned by it, free and clear of all
Encumbrances, other than as set forth on SCHEDULE 5.15 hereof. Except as
set forth on SCHEDULE 5.15, no right of the Purchaser in the Intellectual
Property used in the Business will be impaired or encumbered in any
material way by reason of the consummation of the transactions
contemplated hereby.
(c) NO PROCEEDINGS, DISCLOSURE OR INFRINGEMENT. Seller has not
received any notice of any event, inquiry, investigation or Proceeding
Threatening the validity or exclusivity, where applicable, of any
Intellectual Property. Except as set forth on SCHEDULE 5.15, Seller has
taken all reasonable and prudent steps to protect the Intellectual
Property from infringement by any other Person. Except as set forth on
SCHEDULE 5.15 no other Person (i) has the right (including a license) to
use any of the Intellectual Property with respect to the goods and
services on which they are now being used in Seller's Business either in
identical form or in such near resemblance thereto as to be likely, when
applied to the goods of any such Person, to cause confusion with such
Intellectual Property, or cause a mistake or to deceive, (ii) has
notified the Seller that it claims any ownership or right to use such
Intellectual Property, or (iii) to Seller's or either Stockholder's
Knowledge, is infringing on any Intellectual Property in any material
respect. Except as set forth in SCHEDULE 5.15, Seller has full ownership
rights and interests in and to all of the trade secrets used in the
Business of Seller, which trade secrets have not been disclosed to or to
Seller's Knowledge appropriated or used by any Person other than Seller.
The use of the Intellectual Property utilized in the Seller's Business
has not conflicted and does not now conflict with, infringe
23
upon or otherwise violate in any material respect, the rights of any
third party. Except as set forth on SCHEDULE 5.15, no legal Proceeding
has been instituted against, or notice or claim received by Seller,
that alleges that the use by Seller of the Intellectual Property (or
any Intellectual Property or process) used in Seller's Business
infringes upon or otherwise violates the rights of a third party,
other than any such Proceeding or notice or claim that has been
disposed of without the imposition of any continuing adverse event on
the Seller's Business.
(d) PROPRIETARY RIGHTS. Schedule 5.14(d) identifies each
Patent, Trademark and Copyright owned or used by the Seller. SCHEDULE
5.14(d) sets forth: (i) for each Patent, the issue number, issue date,
normal expiration date (if applicable) and subject matter for each
country in which such Patent has been issued, or, if applicable, the
application number and date of filing for each country, (ii) for each
Trademark (A) the description, the application, serial number or
registration number, the class of goods covered and the issue and
expiration or renewal (as applicable) date for each country in which the
Trademark has been applied for or registered, (B) the description of each
Trademark for which registration has not been sought, (iii) for each
registered Copyright, the application or issue number and the date of
filing for each country in which a Copyright has been registered. True
and correct copies of all Patents, Trademarks and Copyrights (including
all pending applications) evidencing Intellectual Property which have
been registered or issued by a governmental agency to or for the Seller
have been provided to the Purchaser. Except as to applications pending,
all of the Patents, registered Trademarks and registered Copyrights have
been duly and validly issued. All of the pending Patent applications
have been duly filed. SCHEDULE 5.14(d) also identifies all material
licenses and license rights to which the Seller is a party or pursuant to
which it is bound.
5.16 NO GUARANTIES. Except as set forth in SCHEDULE 5.16, none of
the obligations or liabilities of Seller is guaranteed by, or subject to a
similar contingent liability to, any other Person, nor has Seller or any
Stockholder guaranteed, or otherwise become contingently liable for, the
obligations or liabilities of any other Person in connection with the
Business.
5.17 INVENTORY. All items of Seller's inventory and related
supplies (including raw materials, work-in-process and finished goods) so
counted and included for valuation as of such date are (a) merchantable, or
suitable and usable for the production or completion of merchantable
products, for sale in the Ordinary Course of Business as first quality goods
at normal xxxx-ups, (b) not obsolete or below standard quality, (c) reflected
on the basis of a complete physical count, and (d) valued at the lower of
cost (on a first-in, first-out basis) or market in accordance with Generally
Accepted Accounting Principles. Seller's Assets include a sufficient but not
an excessive quantity of each type of such inventory and supplies in order to
meet the normal requirements of Seller's Business and operations for a period
of not less than one (1) nor more than three (3) months.
5.18 RECEIVABLES. All receivables of Seller (including accounts
receivable, loans receivable and advances) which are reflected in the Final
Balance Sheet, and all such receivables which will have arisen since the date
thereof, shall have arisen only from bona fide transactions in
24
the ordinary course of Seller's Business and shall be (or have been) fully
collected when due, net of any amount of allowance for doubtful accounts (bad
debt reserve), without resort to litigation and without offset or
counterclaim, in the aggregate face amounts thereof except to the extent of
the normal allowance for doubtful accounts with respect to accounts
receivable computed as a percentage of sales consistent with marine industry
standards.
5.19 BUSINESS DESCRIPTION. Schedule 5.19 contains an accurate and
substantially complete summary description of the name of each material
customer and supplier of Seller, the loss of which might materially and
adversely affect Seller's Business.
5.20 RECORDS. The books of account and other records of Seller are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, and there have been no transactions
involving the Business of Seller which properly should have been set forth
therein and which have not been accurately so set forth. The foregoing does
not apply to or otherwise supplement the representation regarding the
financial statements of Seller.
5.21 REAL ESTATE. Seller does not now and has never owned real
estate. With respect to each parcel of real estate leased by Seller (the
"LEASED REAL ESTATE"):
(a) SCHEDULE 5.14(a) contains a complete and accurate
description of each written or oral lease regarding Leased Real Estate;
(b) Except as set forth on SCHEDULE 5.21 hereto, there are no
public improvements affecting any parcel of Leased Real Estate including,
but not limited to, water, sewer, sidewalk, street, alley, curbing,
landscaping or related improvements, which have been commenced and/or
completed and for which an assessment has not been levied against the
Leased Real Estate or, to Seller's Knowledge, which may be levied against
the Leased Real Estate after the date of this Agreement;
(c) There are no deferred property Taxes or assessments with
respect to the Leased Real Estate which may or will become due and
payable as a result of the consummation of the transaction contemplated
hereby;
(d) The Leased Real Estate is free and clear of any and all
Encumbrances, except (i) those Encumbrances set forth in SCHEDULE 5.21
hereto, (ii) municipal zoning ordinances, recorded easements for public
utilities and recorded building and use restrictions and covenants,
(iii) general real estate Taxes and installments of special assessments
payable in the year of Closing, and (iv) minor survey exceptions,
licenses, easements or reservations of, or rights of others for, oil, gas
minerals, ores or metals, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions on the use of real property, minor defects in title or
other similar charges not interfering in any material respect with the
Ordinary Course of Business of the Seller or with the use of the Leased
Real Estate (collectively the "PERMITTED ENCUMBRANCES"). The Permitted
Encumbrances and those Encumbrances set forth in SCHEDULE 5.21 hereto do
not individually
25
or in the aggregate materially impair or prohibit the Seller's current
use of the Leased Real Estate;
(e) Except as set forth in SCHEDULE 5.21 hereto, there are no
condemnation Proceedings pending or, to which the Seller has Knowledge,
Threatened with respect to all or any part of the Leased Real Estate;
(f) To the Seller's Knowledge, except for the Permitted
Encumbrances and those Encumbrances set forth in SCHEDULE 5.21 hereto,
there are no private restrictions, covenants, or reservations which
materially and adversely affect the use or occupancy of all or any part
of the Leased Real Estate;
(g) To Seller's Knowledge, and except as set forth on SCHEDULE
5.21 hereto, there are no Applicable Laws requiring repair, alteration or
correction of any existing condition on the Leased Real Estate and there
are no conditions that could give rise to the same;
(h) To the Seller's Knowledge, except as set forth in SCHEDULE
5.21 hereto, (a) there are no structural, mechanical or other defects of
material significance in any of the buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, located the Leased
Real Estate, and (b) all such buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, will be until the
Closing Date, maintained in good repair, working order and condition,
ordinary wear and tear excepted;
(i) Except as set forth in SCHEDULE 5.21 hereto, the
improvements on the Leased Real Estate and the Seller's use thereof
comply in all material respects with any and all building, zoning,
subdivision, traffic, parking, land use, occupancy, health and other
Applicable Laws (excluding Environmental Laws which are subject to the
representations set forth in Section 5.24) pertaining to the Leased Real
Estate or to the development, construction, management, use and
operations of the improvements thereon;
(j) Except as set forth in SCHEDULE 5.21 hereto, the
improvements located on the Leased Real Estate, including fences,
driveways and other structures occupied or used by Seller, are wholly
within the boundary lines of the Leased Real Estate and such improvements
and the Seller's present uses thereof do not in any material respect
infringe upon the rights of any other Person;
(k) To Seller's Knowledge, except as set forth in SCHEDULE 5.21
hereto, no buildings, fences, driveways or other structures of any
adjoining owner encroach upon any part of the Leased Real Estate; and
26
(l) Except as set forth in SCHEDULE 5.21 hereto, to the
Knowledge of Seller, the Seller has all operating permits necessary for
the operation of the Business, and all such permits are current, except
where the failure to have any such current operating permit in good order
would not have a Material Adverse Effect on the Seller. To the Knowledge
of Seller, except as set forth in SCHEDULE 5.21, the Seller has all
easements, or access through public utility easements, on to private
property, construction permits, highway crossing licenses and permits
(and other similar licenses and permits) and right-of-way-licenses
reasonably necessary to conduct the Business, except where the failure to
have any such easement on to private property, construction permits,
highway crossing licenses and permits (and other similar licenses and
permits), and right-of-way licenses would not have a Material Adverse
Effect.
5.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Seller nor any
director, officer, employee or agent of Seller, nor any other Person acting
on its behalf, has, directly or indirectly, since inception has given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help
or hinder the Business of Seller (or assist Seller in connection with any
actual or proposed transaction) which (a) might subject Seller to any damage
or penalty in any civil, criminal or governmental litigation or Proceeding,
(b), if not given in the past, might have had an adverse effect on the
Assets, Business or operations of Seller as reflected in the Financial
Statements or (c), if not continued in the future, might adversely affect
Seller's assets, Business, operations or prospects or which might subject
Seller to suit or penalty in any private or governmental litigation or
Proceeding.
5.23 EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. Except as described in SCHEDULE 5.23
hereto, the Seller does not maintain or contribute to any Benefit Plans.
Without limiting the generality of the foregoing provision of this
Section, except as described in SCHEDULE 5.23 hereto, there are no
pension plans, welfare plans or employee benefit plans qualified under
Section 401(a) of the Code to which the Seller is required to contribute.
The Seller does not and will not have any unfunded Liability for services
rendered prior to the Closing Date under any Benefit Plans. The Seller
is not in any material default under any Benefit Plan. Except as set
forth in Schedule 5.23, neither the Seller, nor any entity now or
formerly part of a controlled group with the Seller, within the meaning
of Section 412(c)(11)(B)(ii) of the Code, maintains or has ever
maintained a "defined benefit plan," as defined in Section 3(35) of
ERISA, that is subject to Section 412 of the Code and Section 302 of
ERISA. Except as set forth in SCHEDULE 5.23 hereto, neither the Seller
nor any of its "subsidiaries" contributes to or has any Liability
(including but not limited to withdrawal Liability) with respect to any
multi-employer plan (as defined in Section 4064(a) of ERISA or Section
4001(a)(3) of ERISA). Other than claims for benefits in ordinary course,
there are no actions, suits, disputes, arbitrations or other material
claims pending or, to Seller's' Knowledge, Threatened with respect to any
Benefit Plan. For purposes of this Section, "subsidiaries" shall include
all corporations and all trades or businesses (whether or not
incorporated) which may be liable for any income Tax, loss of Tax
deduction, excise Taxes, penalties or other similar
27
consequences under ERISA (as hereinafter defined) or under the Code by
reason of its ownership affiliation with the Seller.
(b) OTHER PLANS. The Seller have made available to the
Purchaser information relating to deferred compensation, incentive
compensation and other fringe benefit plans, if any, sponsored or
maintained by the Seller or on behalf of employees working in Seller's
Business. Except as set forth in SCHEDULE 5.23, there are no present or
former employees of the Seller who are entitled to (i) any pensions or
other benefits to be paid after termination of employment, including
termination on account of disability (except as otherwise required under
Section 601 of ERISA), (ii) deferred compensation payments, or (iii) any
other form of compensation which arises from or incident to the
transactions contemplated hereunder.
(c) BENEFIT PLAN DOCUMENTS. The Seller has made available to
the Purchaser the following documents, as they may have been amended to
the date hereof, embodying or relating to each Benefit Plan listed in
SCHEDULE 5.23 hereto: (i) all written plan documents for each such
Benefit Plan, including all amendments to each such Benefit Plan, any
related trust agreements, group annuity contracts, insurance policies or
other funding agreements or arrangements; (ii) the most recent
determination letter received from the Internal Revenue Service, if any,
as to the qualified status of any such Benefit Plan under Section 401(a)
of the Code; (iii) the current summary plan description, if any, for each
such Benefit Plan; and (iv) the most recent annual return/report on form
5500, 5500-C or 5500-R, if any, for each such Benefit Plan.
(d) PROHIBITED TRANSACTIONS. The Seller has not, nor, to the
Seller's Knowledge, has any other "disqualified person" or "party in
interest", as defined in Section 4975(e)(2) of the Code and Section 3(14)
of ERISA, respectively, engaged in a "prohibited transaction," as such
term is defined in Section 4975 of the Code and Section 406 of ERISA,
with respect to any Benefit Plan listed on SCHEDULE 5.23 hereto subject
to ERISA, which could reasonably be expected to subject the Seller to a
material Tax or penalty on prohibited transactions imposed by either
Section 502(i) of ERISA or Section 4975 of the Code. The execution and
delivery by the Seller of this Agreement and the consummation of the
transactions contemplated hereby will not (i) involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Code with respect to any Benefit Plan listed on SCHEDULE 5.23 hereto,
or (ii) accelerate the payment of any benefits under any Benefit Plan
listed on SCHEDULE 5.23 hereto.
(e) FIDUCIARY DUTY. Neither Seller nor any other fiduciary of
any Benefit Plan listed on SCHEDULE 5.23 hereto has engaged in any
transaction with respect to such Benefit Plan or failed to act in a
manner with respect to such Benefit Plan which could reasonably be
expected to subject the Seller to any material Liability for a breach of
fiduciary duty under ERISA or any other Applicable Law.
28
(f) COBRA. The Seller has complied in all material respects
with the coverage continuation requirements of Sections 601 through 609
of ERISA, Section 5980B of the Code, and the requirements of any similar
state law regarding continued insurance coverage, and the Seller has
incurred no material Liability with respect to its failure to offer or
provide continued coverage in accordance with the foregoing requirements,
nor is there any suit pending, or to the Seller's Knowledge, Threatened,
with respect to such requirements.
(g) TRIGGERING OF OBLIGATION AND OTHER BINDING COMMITMENTS.
Except as set forth in SCHEDULE 5.23, the consummation of the
transactions contemplated by this Agreement will not entitle any current
or former employee of the Seller to severance pay, unemployment
compensation or any other payment, or accelerate the time of payment or
vesting, or increase the amount of compensation due to any such employee
(other than Stockholder, which amount if any shall not be payable by
Purchaser) or former employee.
5.24 ENVIRONMENTAL MATTERS.
(a) Except as set forth in SCHEDULE 5.24 hereto, the Seller has
never generated, transported, stored, handled, disposed of or contracted
for the disposal of any Hazardous Materials. Except as set forth in
SCHEDULE 5.24 hereto, to the Knowledge of Seller, no employee of the
Seller or any individual working in Seller's business operation has, in
the course and scope of employment or engagement with the Seller, been
exposed to any Hazardous Materials in such a manner as to be harmed
thereby (whether such harm is now known to exist or will be discovered in
the future). Except as set forth on SCHEDULE 5.24 hereto, the Seller is
not listed as a potentially responsible party under CERCLA or any
comparable or similar U.S. federal or state statute, the Seller has not
received notice of such a listing and the Seller have no Knowledge of any
facts or circumstances which could give rise to such a listing.
(b) Except as set forth on SCHEDULE 5.24 hereto, the Leased
Real Estate has been operated by the Seller and is in compliance in all
material respects with all Applicable Laws, including Environmental Laws
and all Applicable Laws relating to underground and/or above ground
petroleum storage tanks. Except as set forth on SCHEDULE 5.24 hereto,
the Seller otherwise complies in all material respects with all
Environmental Laws. Seller has obtained or has taken appropriate steps,
as required by Environmental Laws and Applicable Laws, to obtain all
environmental, health and safety permits, consents, approvals, licenses
and other authorizations necessary for the ownership and operation of the
Business, all of the permits and other such authorizations are in good
standing, and the Seller is in compliance in all material respects with
such permits and other such authorizations. Except as set forth in
SCHEDULE 5.24, and to Seller's Knowledge, the Leased Real Estate is free
of any and all Environmental Conditions and Hazardous Materials and is
not subject to any Environmental Claim or "Super-Fund" type Encumbrances
by any Person arising from the release or Threatened release of any
Hazardous Materials in, on, about or under the Leased Real Estate.
29
(c) All of the third parties with which the Seller has
arranged, engaged or contracted to accept, treat, transport, store,
dispose or remove any pollutant generated or present at the Leased Real
Estate, or which otherwise participate or have participated in activities
or conduct related to the Leased Real Estate or the Business, were
properly permitted at the relevant time to perform the foregoing
activities or conduct.
(d) There are not currently and to Seller's Knowledge, with the
obligation of inquiry and investigation, never have been any xxxxx or
underground and/or above ground storage tanks (whether or not currently
in use) on any parcel of real estate (including the Leased Real Estate)
and, to the extent such xxxxx or tanks are described in SCHEDULE 5.24,
all such xxxxx and tanks are, in sound condition and are not leaking.
(e) No part of any parcel of Leased Real Estate is now being
used, nor to Seller's Knowledge, with the obligation of inquiry and
investigation, has any parcel of Leased Real Estate ever been used, as a
landfill, dump or other disposal, storage, transfer, treating or handling
area for any Hazardous Materials, or as a gasoline service station or a
facility for selling, dispensing, storing, transferring, treating or
handling Hazardous Materials.
(f) Except as set forth in SCHEDULE 5.24 hereto, Seller is not
subject to any investigation, nor has the Seller received any written
notification within the past two years of any judicial or administrative
Proceeding, notice, Order, judgment, decree or settlement, alleging or
addressing (i) any violation of Environmental Laws or (ii) any
Environmental Claims or liabilities and costs arising from the release or
Threatened release of any Hazardous Materials. To the Knowledge of
Seller, there has been no release of any Hazardous Materials in a
reportable quantity under Environmental Laws at, to or from the Leased
Real Estate.
(g) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, with the obligation of inquiry and investigation, there is not
constructed, placed, deposited, stored, disposed or located on the Leased
Real Estate any asbestos in any form.
(h) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, with the obligation of inquiry and investigation, there is not
constructed, placed, deposited, stored, disposed nor located on the
Leased Real Estate any polychlorinated biphenyls ("PCBs") or
transformers, capacitors, ballasts, or other equipment which contain
dielectric fluid containing PCBs.
(i) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, with the obligation of inquiry and investigation, there is not
constructed, placed, deposited, stored, disposed nor located on the
Leased Real Estate any insulating material containing urea formaldehyde.
30
(j) As used in this Agreement including Section 12.8 hereof,
the terms "Environmental Claims", "Environmental Conditions",
"Environmental Laws" and "Hazardous Materials" shall be defined as
follows:
(i) "Environmental Claims" shall mean administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation,
investigations or Proceedings, consent decrees, judgments,
administrative Orders or agreements, arising under any
Environmental Law or any permit issued under any such Law,
including (A) Environmental Claims by Governmental Agencies for
enforcement, cleanup, removal, response, remedial or other actions
or Damages pursuant to any applicable Environmental Law, and (B)
Environmental Claims by any third party seeking Damages or
injunctive relief resulting from Environmental Conditions or
arising from alleged injury or threat of injury to health, safety
or the environment.
(ii) "Environmental Conditions" shall mean the presence
or introduction into the environment of any Hazardous Materials
(and any resulting air, soil, groundwater or surface water
contamination without regard to location to which such resulting
contamination has migrated or spread) as a result of which the
Seller has or may become liable to any Person or by reason of
which the Seller or any assets of the Seller may suffer or be
subjected to any Encumbrance or Losses.
(iii) "Environmental Laws" shall mean all Applicable Laws
and any Order that (A) regulates or relates to the protection or
clean-up of the environment; the use, treatment, generation,
storage, transportation, handling, disposal or release of
Hazardous Materials, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other
natural resources; or the health and safety of Persons or
property, including protection of the health and safety of
employees insofar as such health and safety laws may apply to
matters affecting the natural environment; or (B) imposes
Liability with respect to any of the foregoing, including without
limitation CERCLA; RCRA; the Federal Water Pollution Control Act,
as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances
Control Act, 15 U.S.C. Section 2601 ET SEQ.; the Clean Air Act, 42
U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42
U.S.C. Section 300f ET SEQ.; the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 ET SEQ.; and the Occupational Safety and
Health Act of 1970, as amended, as it applies to an effect upon
the natural environment, 29 U.S.C. Section 651 ET SEQ.; or any
other federal, state or local law of similar effect, each as
amended from time to time.
(iv) "Hazardous Materials" shall mean (A) any petroleum
or petroleum products, asbestos in any form, and polychlorinated
biphenyls; (B) any radioactive substance; (C) any toxic,
infectious, reactive, corrosive, ignitible or flammable chemical
or chemical compound; and (D) any chemicals, materials or
substances, whether solid, liquid or gas defined as or included in
the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous
31
wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any
applicable Environmental Law.
5.25 DEBT INSTRUMENTS. SCHEDULE 5.25 is a true, correct and
complete list showing the names of the parties and outstanding indebtedness
as of the respective dates set forth on SCHEDULE 5.25 under all mortgages,
indentures, notes, guarantees and other obligations for or relating to
borrowed money, purchase money debt (including conditional sales contract and
capital leases) or covenants not to compete (the "Debt Instruments") for or
under which the Seller is primarily or secondarily obligated. The Seller has
previously delivered to Purchaser true, complete and correct copies of each
of the Debt Instruments. Except as described in SCHEDULE 5.25, Seller has
performed all of the material obligations required to be performed by it, and
is not in material breach or default under any of the provisions of any of
the Debt Instruments, and there has not occurred any event which, (with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute such a breach or default.
5.26 RELATIONSHIP WITH RELATED PERSONS. Except as set forth in
SCHEDULE 5.26 hereto, none of the members of the Board of Directors,
officers, and employees of the Seller, Parent or any Stockholder, nor their
Related Persons, have any interest in any of the properties or assets of the
Seller (other than the interest conferred under law solely as a consequence
of a Person's status as a stockholder of Seller) and, to Seller's, Parent's
or either of the Stockholders' Knowledge, do not own, of record or as a
beneficial owner, an equity interest or any other financial or profit
interest in any Person that (i) has had business dealings or a material
financial interest in any transaction with the Seller or, (ii) has engaged or
is engaged in competition with the Seller with respect to any line of
products or services of the Seller in any market presently served by the
Seller (a "Competing Business") (except for less than five percent (5%) of
the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market). To the
Knowledge of the Seller, and except as set forth on SCHEDULE 5.26 hereto, no
Stockholder, member of the Board of Directors, or officer of the Seller and
none of their Related Persons is a party to any Contract with, or has any
claim or right against, the Seller, other than the rights officer and members
of the Board of Directors of the Seller have with respect to indemnification
under state law. All money owed by the Seller to its Stockholders, member of
the Board of Directors, or officers, or their Related Persons, (other than
for salary) are for bona fide debts and are set forth in SCHEDULE 5.26 hereto.
5.27 LABOR MATTERS. Seller has no employees and, as a result, has
no collective bargaining agreements to which the Seller is a party. Except
as set forth in SCHEDULE 5.27, since inception of Seller, Seller has not
employed any employees and has not experienced any attempt to organize any
employees for the purpose of collectively bargaining or entering into a labor
contract on behalf of such employees. As of the date hereof, there is no
employee or other activity by Persons working in Seller's Business which may
be adverse to Seller, including labor strikes or disturbances, pending or, to
the Knowledge of Seller, Threatened against Seller or the Person with whom
Seller contracts for labor. Except as set forth on SCHEDULE 5.27, there are
no disputes or grievances subject to any grievance procedure, unfair labor
practice proceedings, arbitration or litigation under such agreements, or as
a result of such attempts to organize, which have not been finally resolved,
settled
32
or otherwise disposed of. Seller is in compliance in all material respects
with all Applicable Laws respecting employment practices, employment
documentation, terms and conditions of employment and wages and hours. There
are no labor practice charges or complaints against or affecting Seller
pending before any applicable Governmental Body and, there are no material
facts or information which would have a reasonable probability of giving rise
thereto.
5.28 YEAR 2000 COMPLIANCE.
(a) YEAR 2000. Seller has conducted an inventory (or
inventories) and/or other investigations of any and all Computer Systems
used or held for use by Seller in order to determine which parts of such
Computer Systems are not Year 2000 Compatible and to estimate the cost of
rendering such Computer Systems Year 2000 Compatible prior to January 1,
2000. A true, correct and complete copies of any written reports or
other documentation resulting from such inventory and/or other
investigations, as well as all cost estimates of compliance, are set
forth in SCHEDULE 5.28.
Except as set forth in SCHEDULE 5.28, the Computer Systems of
Seller (i) presently function properly and produce accurate and complete
calculations and data and (ii) are Year 2000 Compatible. Seller has made
inquiries of and has received responses from each of its major suppliers
and customers regarding Year 2000 Compatibility issues. True, correct
and complete copies of any correspondence and/or agreements with any
suppliers or customers relating to Year 2000 Compatibility issues are set
forth in SCHEDULE 5.28.
(b) CALENDAR FUNCTIONS. Except as set forth on SCHEDULE 5.28,
all Software, hardware and equipment used by Seller in connection with or
necessary to the conduct of Business that contains or calls on a calendar
functions, including but not limited to any function that is indexed to a
computer processing unit clock, provides specific days, dates or times,
or calculates spans of dates and times, is and will be able to record,
store, process, calculate, compare, sequence and provide true and
accurate day, date and time data from, into and between the twentieth and
twenty-first centuries, including but not limited to with respect to the
years 1999, 2000 and 2001 and leap year calculations.
(c) DEFINITIONS. The following definitions shall apply to this
Section 5.28:
(i) "Software" means all computer software, including
but not limited to, application software and system software,
including all source code and object code versions thereof, in
any and all forms and media, whether recorded on paper,
magnetic media or other electronic or non-electronic media
(including data and related documentation, user manuals,
training manuals, flow charts, diagrams, descriptive tests and
programs, computer print-outs, underlying tapes, computer
databases and similar items), integrated circuits, embedded
systems, and other electromechanical or processor based systems.
33
(ii) "Year 2000 Compatible" (and variations thereof)
shall mean, with respect to any Computer System, that such
Computer Systems (i) record, store, process and provide true and
accurate dates and calculations for dates and spans of dates, (ii)
is and will be able to operate on a basis comparable to its
current operation during and after calendar year 2000 A.D.,
including, but not limited to, leap years, and (iii) shall not end
abnormally or provide invalid or incorrect results as a result of
date data which represents or references (or fails to represent or
reference) different centuries or more than one century.
(iii) "Computer System" shall, with respect to any Person,
mean any and all computer software programs, semiconductor chips,
microprocessors, embedded microcontrollers and other hardware
containing programming instructions of any kind, whether owned or
licensed or otherwise held by such Person for use.
5.29 DISCLOSURE. No representation or warranty by Seller contained
in this Agreement, nor any statement or certificate furnished or to be
furnished by Seller or Stockholder to Purchaser or its representatives in
connection herewith or pursuant hereto, contains or will contain any untrue
statement of a material fact, or omit or will omit to state any material fact
required to make the statements herein or therein contained not misleading or
necessary in order to provide a prospective purchaser of the Business of the
Seller with adequate information as to Seller and its condition (financial
and otherwise), properties, assets, liabilities, Business and prospects, and
Seller and Stockholder have disclosed to Purchaser in writing all material
adverse facts known to them relating to the same. The representations and
warranties contained in this Article V or elsewhere in this Agreement or any
document delivered pursuant hereto shall not be affected or deemed waived by
reason of the fact that Purchaser and/or its representatives knew or should
have known that any such representation or warranty is or might be inaccurate
in any respect, notwithstanding any investigation by or due diligence
materials provided to or obtained by Purchaser.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:
6.1 ORGANIZATION. Purchaser is a limited liability company
organized, existing and in good standing under the laws of Delaware and has
full power and authority to enter into this Agreement and the related
agreements referred to herein and to carry out the transactions contemplated
by this Agreement and to carry on its Business as now being conducted and to
own, lease or operate its properties.
6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. All Proceedings or
action required to be taken by Purchaser relating to the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been taken at or prior to the Closing.
34
6.3 EXECUTION DELIVERY AND PERFORMANCE OF AGREEMENT. Neither the
execution, delivery nor performance of this Agreement by Purchaser will, with
or without the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any lien, charge or Encumbrance pursuant to, any
provision of Purchaser's certificate of incorporation or by-laws or any
franchise, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule or regulation or any Order, judgment or decree to which
Purchaser is a party or by which it may be bound or affected. Purchaser has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, all Proceedings required to be taken by
Purchaser to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto, have been properly taken and
this Agreement constitutes a valid and binding obligation of Purchaser.
6.4 LITIGATION. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative Proceeding, nor
any Order, decree or judgment in progress, pending or in effect, or to the
Knowledge of Purchaser Threatened, against or relating to Purchaser in
connection with or relating to the transactions contemplated by this
Agreement, and Purchaser does not know or have any reason to be aware of any
basis for the same.
ARTICLE VII
PRECLOSING COVENANTS
7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING.
(a) Prior to the Closing, Seller shall conduct its Business and
affairs only in the ordinary course and consistent with its prior
practice and shall maintain, keep and preserve its assets and properties
in good condition and repair and maintain insurance thereon in accordance
with present practices, and Seller and each Stockholder will use their
best efforts (i) to preserve the Business and organization of Seller
intact, (ii) to keep available to Purchaser the services of Seller's
present officers, employees, agents and independent contractors, (iii) to
preserve for the benefit of Purchaser the goodwill of Seller's suppliers,
customers, landlords and others having business relations with it, (iv)
to cooperate with Purchaser and use reasonable efforts to assist
Purchaser in obtaining the consent of any landlord or other party to any
lease or contract with Seller where the consent of such landlord or other
party may be required by reason of the transactions contemplated hereby
and (v) to cooperate with Purchaser in its efforts to obtain the
financing. Without limiting the generality of the foregoing, prior to the
Closing Seller will not without Purchaser's prior written approval:
(i) change its certificate of organization or other
governing documents or merge or consolidate or obligate itself to
do so with or into any other entity;
35
(ii) enter into any contract, agreement, commitment or
other understanding or arrangement except for those of the type
which would not have to be listed and described under subparagraph
(j) of Section 5.14 above; or
(iii) perform, take any action or incur or permit to exist
any of the acts, transactions, events or occurrences of the type
(A) described in subparagraphs (a), (b), (c), (d), (e), (h), (i),
(j), (k), (l), (m), (n), (p) or (q) of Section 5.10 of this
Agreement which would have been inconsistent with the
representations and warranties set forth therein had the same
occurred after the Balance Sheet Date and prior to the date hereof
or (B) described in Section 5.3 of this Agreement which would be
required to be set forth on SCHEDULE 5.3 hereof.
(b) Seller shall give Purchaser prompt written notice of any
change in any of the information contained in the representations and
warranties made in Article V or elsewhere in this Agreement or the
Schedules referred to herein which occurs prior to the Closing.
(c) Seller shall, and each Stockholder will cause Seller to,
consult with and follow the recommendations of Purchaser with respect to
(i) the cancellation of contracts, agreements; commitments or other
understandings or arrangements to which Seller is a party, including,
without limitation, purchase orders for any item of inventory and
commitments for capital expenditures or improvements, (ii) the
commencement in one or more of Seller's locations of the orderly and
gradual discontinuance of particular items or operations and (iii)
purchasing, pricing or selling policy including, without limitation,
selling merchandise at discounts; PROVIDED, HOWEVER, that nothing
contained in this subsection (c) shall require Seller to take or fail to
take any action that, in Seller's reasonable judgment, is likely to give
rise to a substantial penalty or a claim for damages by any third party
against Seller, or is likely to result in losses or reduced profits to
Seller, or is otherwise likely to prejudice in any material respect or
unduly interfere with the conduct of Seller's Business and operations in
the ordinary course consistent with prior practice, or is likely to
result in a breach by Seller of any of its representations, warranties or
covenants contained in this Agreement (unless any much breach is first
waived in writing by Purchaser).
7.2 ACCESS TO INFORMATION AND DOCUMENTS. Upon reasonable notice
and during regular business hours, Seller will give Purchaser and Purchaser's
attorneys, accountants and other representatives full access to Seller's
personnel and all properties, documents, contracts, books and records of
Seller and will furnish Purchaser with copies of such documents (certified as
complete and correct by Seller's officers if so requested) and with such
information with respect to the affairs of Seller as Purchaser may from time
to time request, and Purchaser will not improperly disclose the same prior to
the Closing. Any such furnishing of such information to Purchaser or any
investigation by Purchaser shall not affect Purchaser's right to rely on any
representations and warranties made in this Agreement or in connection
herewith or pursuant hereto.
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7.3 PURCHASER LOANS. Seller acknowledges and agrees that Purchaser
may, at its sole option, advance funds to Seller to facilitate payment of
Seller trade accounts payable that are negotiated and compromised to
Purchaser's satisfaction prior to or on the date of Closing. In the event
such advances are remitted to Seller by Purchaser, Seller shall execute a
secured promissory note payable to Purchaser, Uniform Commercial Code
financing statements, a pledge agreement and such other documents and
instruments deemed reasonable, customary and necessary by Purchaser to secure
the advance. Any and all advances remitted by Purchaser shall be used solely
for the payment of trade accounts payable approved in advance in writing by
Purchaser. The promissory note given by Seller in exchange for Purchaser's
advance(s) shall (i) not be subordinated to any other debt of Seller, (ii)
bear interest at 8% per annum with a due date of May 31, 1999, (iii) be
secured by a blanket lien on Seller's assets and (iv) be guaranteed by
Seller's Shareholders and the Parent. In the event the transaction does not
close on or before May 31, 1999, or this Agreement is terminated for any
reason pursuant to Article XI hereof, the promissory note shall become
immediately due and payable as of such date, along with a service charge
equal to 5% of the savings on the difference between the trade account
payable at the gross amount and the amount actually paid, and Seller shall
immediately remit the entire unpaid principal balance of the promissory note,
the service charge and accrued interest on the promissory note to Purchaser
by wire transfer of immediately available funds.
7.4 DIRECTORS AND STOCKHOLDERS AUTHORIZATION; CHANGE OF SELLER NAME.
(a) At or prior to the Closing, Seller will deliver to
Purchaser a copy of the resolutions of its Board of Directors and the
resolutions or consents of Parent and each Stockholder, together with any
and all required resolutions or consents of the Board of Directors
thereof, approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby, duly
certified by an officer of Seller, Parent and each of the Stockholders,
as applicable.
(b) At least ten (10) days prior to the Closing, Seller and the
Stockholders will deliver to Purchaser a duly executed and acknowledged
certificate of amendment to Seller's Certificate of Incorporation and all
other appropriate documents which are required, necessary or desirable to
change Seller's corporate name (or any assumed name) to a new name
bearing no resemblance to its present name so as to make Seller's present
name available to Purchaser. Purchaser is hereby authorized to file such
certificates or other documents (at Seller's expense) in order to
effectuate such change of name at or after the Closing as Purchaser shall
elect.
7.5 NON-COMPETITION AGREEMENT. Seller, Parent and each Stockholder
shall execute and deliver to Purchaser at or prior to the Closing a
Non-Competition and Continuity of Business Dealings Undertaking in the form
of Exhibit C annexed hereto.
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7.6 ENCUMBRANCES. Seller shall not, directly or indirectly,
perform or fail to perform any act which could reasonably be expected to
result in the creation or imposition of any Encumbrance on any of the
properties or assets of Seller or otherwise adversely affect the
marketability of the Seller's title to any of its properties or assets.
7.7 PAY INCREASES. Except normal increases in the Ordinary Course
of Business, the Seller or its agent or contractor shall not, without the
prior written consent of Purchaser, grant any increase in the salaries or
rate of pay to any of its employees, grant any increase in any benefits or
establish, adopt, enter into, make any new grants or awards under, or amend
any collective bargaining agreement, employment agreement or Benefit Plan for
the benefit of any of its employees.
7.8 RESTRICTIONS ON NEW CONTRACTS. Except with the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld,
delayed or conditioned, the Seller shall not enter into any contract, incur
any Liability, assume, guarantee or otherwise become liable or responsible
for any Liability of any other Person, make any loans, advances or capital
contributions to any other Person (except for extensions of credit to its
customers in the Ordinary Course of Business), or waive any right or enter
into any other transaction, in each case other than in the Ordinary Course of
Business and consistent with the Seller's normal business practices. Without
limiting the foregoing, for the purposes of this Agreement, any contract
involving the sum of $25,000 or more shall be deemed to be outside the
Ordinary Course of Business.
7.9 SERVICE OF PROCESS. Seller, Parent and each Stockholder shall
each appoint and maintain for a minimum period of four (4) years, paid in
advance, an agent for service of process within the State of North Carolina.
Seller shall provide evidence satisfactory to Purchaser and its counsel of
such appointment at the Closing.
7.10 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Seller shall timely pay
and discharge all invoices, bills and other monetary Liabilities in a manner
presently customary to Seller's present business practices.
7.11 RESTRICTIONS ON SALE OF ASSETS. Seller shall not sell, assign,
transfer, lease, sublease, pledge or otherwise encumber or dispose of any of
its properties or assets, except for the sale of inventory in the Ordinary
Course of Business and at regular prices.
7.12 PROMPT NOTICE. Seller shall promptly notify Purchaser in
writing upon becoming aware of any of the following: (i) any claim, demand
or other Proceeding that may be brought, Threatened, asserted or commenced
against Seller, its officers or directors; (ii) any changes in the accuracy
of the representations and warranties made by Seller or any Stockholder in
this Agreement; (iii) any Proceeding or any complaint praying for an
Injunction restraining or enjoining the consummation of the transactions
contemplated hereby; or (iv) any notice from any Person of its intention to
institute an investigation into, or institute a Proceeding to restrain or
enjoin the consummation of the transactions contemplated hereby or to nullify
or render ineffective this Agreement or such transactions if consummated.
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7.13 CONSENTS. As soon as reasonably practicable and in any event
on or before the Closing Date, Seller will to obtain or cause to be obtained
all of the consents and approvals of all Persons necessary for the Seller to
consummate the transactions contemplated hereby, including the consents and
approvals required under any contract, agreement, license, permit or
governmental grant.
7.14 COPIES OF DOCUMENTS. Seller agrees that as soon as reasonably
possible following the execution hereof, it shall furnish or make available
to Purchaser a true, complete and accurate copy of each Operating Contract
and any additional Contract listed on SCHEDULE 5.14 hereto.
7.15 NO SOLICITATION OF OTHER OFFERS. Seller will not, and will not
permit its Stockholders, representatives, investment bankers, agents and
Affiliates to, directly or indirectly, (i) solicit or encourage submission of
or any inquiries, proposals or offers by, (ii) participate in any
negotiations with, (iii) afford any access to the properties, books or
records of the Seller to, (iv) accept or approve, or (v) otherwise assist,
facilitate or encourage, or enter into any Contract with, any Person or group
(other than Purchaser and its Affiliates, agents and representatives), in
connection with any Acquisition Proposal. In addition, the Seller will not,
and will not permit its Stockholders, representatives, investment bankers,
agents and Affiliates to, directly or indirectly, make or authorize any
statement, recommendation or solicitation in support of any Acquisition
Proposal made by any Person or group (other than Purchaser). In addition,
Seller will immediately cease any and all existing activities, discussions or
negotiations with any parties with respect to any of the foregoing. In the
event Seller receives any Acquisition Proposal, such proposal shall be
immediately forwarded in its entirety to Purchaser. "Acquisition Proposal"
means any proposal relating to the possible acquisition of the Seller either
by way of merger, purchase of capital stock of Seller, purchase of all or
substantially all of the assets of Seller, or otherwise.
7.16 ACCOUNTS RECEIVABLE AND PAYABLE. Seller shall not accelerate
the collection of its accounts receivable or delay the payments of its
accounts payable or other Liabilities, in each case arising out of the
operation of the Business in a manner which would be inconsistent with past
practice.
7.17 INVENTORY. Seller shall maintain the levels of inventory,
materials and supplies used in the Business consistent with past practice.
7.18 INSURANCE. Seller shall maintain in full force and effect all
insurance coverages for the Seller's properties and assets substantially
comparable to coverages existing on the date hereof.
7.19 FILING REPORTS AND MAKING PAYMENTS. Seller shall timely file
all required reports and notices with each and every applicable Governmental
Body and timely make all payments due and owing to each such Governmental
Body, including, but not by way of limitation, any filings, notices and/or
payments required by reason of the transactions contemplated by this
Agreement.
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7.20 CAPITAL EXPENDITURES. Seller shall not make any capital
expenditures in excess of $10,000 individually or $25,000 in the aggregate
without the Purchaser's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned.
7.21 MONTHLY FINANCIAL STATEMENTS. Within twenty-one (21) days of
the close of each month, Seller shall deliver to Purchaser a balance sheet
and income statement for disclosing the financial position and results of
operations of Seller for the preceding month and year-to-date which shall be
prepared on a basis consistent with the Financial Statements identified on
SCHEDULE 5.7 hereof and consistent with the prior months and year-to-date
Financial Statements.
7.22 [THIS SECTION INTENTIONALLY OMITTED.]
7.23 LITIGATION. From the date hereof and through the Closing Date,
the Seller will notify the Purchaser in writing of any actions or Proceedings
of the type required to be described in Section 5.11 of this Agreement, that,
from the time hereof, are, to the Seller's Knowledge, Threatened or commenced
against the Seller or against any officer, director or employee of the Seller
relating to the Business or the Seller.
7.24 DISCONTINUED OPERATIONS AND ENVIRONMENTAL CONDITIONS INSURANCE
COVERAGE.
(a) DISCONTINUED OPERATIONS (TAIL) INSURANCE COVERAGE. Seller
shall purchase and maintain a discontinued operations (tail) insurance
policy or policies for a period of six (6) years on and after the Closing
Date at such coverages and coverage levels (not less than $1 million per
occurrence and $5 million in the aggregate) and with an insurer
reasonably acceptable to Purchaser, which policy or policies shall insure
Seller (and Purchaser as an additional insured) against any and all
liability, including products liability, for, at a minimum, all acts,
occurrences and omissions of Seller arising from, in connection with or
incident to, without limitation, the design, manufacture, marketing,
product branding, distribution or sale of any and all Seller Products, or
Seller workmanship, prior to and including the Closing Date. Such policy
or policies of insurance shall be applicable to direct Losses of Seller
and Losses arising from or in connection with any and all third party
claim(s). Seller and Purchaser agree that (i) Seller shall be
responsible and liable for any and all Losses arising from such claims
and Proceedings the factual basis for which arose in any way from the
manufacture of Seller Product on or prior to the Closing Date and (ii)
Purchaser shall be responsible and liable only for Losses arising from
claims and Proceedings the factual basis of which arises only from
Purchaser's manufacture of products after the Closing Date. In the
event that Purchaser purchases and maintains the insurance policy or
policies required by this Section 7.24(a), the payment provisions and
offset rights described in Section 7.24(b) below shall be applicable to
and govern the provisions of this Section 7.24(a); PROVIDED, HOWEVER,
that notwithstanding the foregoing, Seller and Purchaser have agreed that
Purchaser shall be responsible for payment of the premium cost of the
insurance described herein above and in Section 7.24(b) below pursuant to
an accrual in the approximate amount of a $27,000 liability which will be
reported on the Final Balance Sheet.
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Any amounts in excess of the $27,000 accrual shall be subject to
Purchaser's offset and recoupment rights.
(b) ENVIRONMENTAL CONDITIONS INSURANCE COVERAGE. Purchaser
shall, at its option, purchase and maintain an environmental conditions
insurance policy or policies which is anticipated to insure Purchaser in
the post-Closing period following the Closing Date against certain
insurable losses from any Environmental Condition that arises from, in
connection with or incident to the ownership and/or operation by
Purchaser of the Leased Real Estate transferred to Purchaser pursuant to
this Agreement. The coverage amount of any such policy or policies shall
not exceed, individually or in the aggregate, $3 million. The method of
and party responsible for payment of the insurance policy premiums due
under such policy or policies is set forth in Section 7.24(a) above.
(c) MISCELLANEOUS INSURANCE MATTERS. The following shall apply
equally to Sections 7.24(a) and (b) above. Each of the policy or
policies described in Section 7.24(a) and (b) shall provide for advance
written notice of at least thirty (30) days to both Seller and Purchaser
of any expiration or termination of the policy or policies required or
described hereunder. Any amount of a deductible that becomes or may
become payable or is paid by Purchaser under such insurance policy or
policies, where such payable or paid amount arises from, in connection
with or is incident to any coverage claim pertaining to the first or
second year of such policy or policies' coverage, shall be, at
Purchaser's option, deducted from any Earn-Out Consideration, the Note or
any other amounts that may be owed or owing between Purchaser on the one
hand and either Seller, any Stockholder or Parent on the other hand;
otherwise such deductible amount shall be promptly remitted to Purchaser
by Seller in cash in the manner prescribed for payments elsewhere in this
Agreement. In the event Seller, who is charged with the responsibility
to maintain the insurance required hereunder fails to do so, for any
reason, Purchaser may, at its election, purchase and/or pay for such
insurance coverage at the expense of and chargeable to Seller. Seller
shall provide to Purchaser at the Closing, and each anniversary thereof,
and at any other time upon the reasonable request of Purchaser, evidence
of such past and current coverage and the policy or policies issued.
7.25 PHYSICAL INVENTORY AS OF APRIL 30, 1999. On or about April 30,
1999, in any event as of April 30, 1999, Seller shall have conducted a
comprehensive physical inventory of all inventory items and supplies of
Seller (the "Physical Inventory"). Seller shall have accurately counted and
properly priced and costed the Physical Inventory in accordance with
Generally Accepted Accounting Principles. Purchaser and its representatives
will review and test the Physical Inventory count and shall test the pricing,
extension and final calculation of the Physical Inventory. The Physical
Inventory shall be determined and valued in accordance with Generally
Accepted Accounting Principles and shall include only those inventory items
of Seller that are good, useable and merchantable quality, and shall not
include obsolete, damaged or discontinued items, nor shall any inventory be
valued if such inventory does not meet quality control standards applicable
to Seller's Business or the marine industry. Purchaser shall determine, in
its sole discretion, whether it is satisfied with the value, quantity and
quality of the Physical Inventory and Seller's report, which report shall
include all necessary or required supporting documentation used, prepared or
obtained
41
in connection with the Physical Inventory. In the event the physical
inventory is conducted prior to April 30, 1999, the parties acknowledge and
agree that the Auditor shall perform an inventory roll-forward in accordance
with Generally Accepted Accounting Principles in order to prepare the Final
Balance Sheet.
7.26 BRUNSWICK NOTE. Seller has made, executed and delivered to
Brunswick Corporation that certain promissory note dated January 9, 1997 in
the principal amount of $500,000 (the "Brunswick Note"). As of February 28,
1999 the unpaid principal amount of the Brunswick Note was approximately
$354,120. On or about November, 1997, the terms of the Brunswick Note were
renegotiated and Brunswick Corporation proposed a revised promissory note
dated November 29, 1997 in the principal amount of approximately $449,150
(the "Renegotiated Brunswick Note"). The Renegotiated Brunswick Note was not
executed or delivered by Seller and, notwithstanding this fact, Seller has
remitted payments to Brunswick on the Brunswick Note under the terms of the
unexecuted Renegotiated Brunswick Note. Seller shall, prior to the Closing,
continue to perform in accordance with the terms of the Renegotiated Note.
Purchaser shall not assume either the Brunswick Note nor the Renegotiated
Note; provided, however, that Purchaser covenants and agrees to assume the
underlying amount due to Brunswick Corporation as of the effective date of
this Agreement.
7.27 BULK SALES ACT. Seller shall comply with any and all
requirements and Applicable Laws pertaining to or arising under the Uniform
Bulk Sales Act as adopted and effective in the State of North Carolina and
all jurisdictions that regulate Seller's Business activities to the
satisfaction of Purchaser and its counsel.
7.28 PAYMENT OF AFFILIATE LIABILITIES. Seller shall not make any
payment or transfer of any Assets, or accrue any form of Liability of any
kind or nature, to Parent or any Stockholder or any Affiliate of Parent,
Seller or any Stockholder from the date hereof through the Closing Date. In
furtherance (but not in limitation) and in clarification of the foregoing,
Seller shall not make any repayment of the Liabilities characterized on
Seller's February 28, 1999 unaudited financial statement entitled "Loan
payable Sumberdaya" (account 2305), "PT Sumberdaya New Logic" (account 2306)
or "Loan Shareholder" (account 2310).
7.29 CERTAIN PARENT COMPANY ADVANCES. As of the date hereof, Seller
represents and warrants that Parent has advanced $250,000 to Seller for
working capital to be used in the continuing operations of Seller. In the
event that the transactions described hereunder proceed to a Closing and the
transactions are closed, upon the Closing Purchaser shall assume the advances
made by Parent as a trade account payable to a maximum aggregate amount of
$250,000. Subject to the following sentence of this Section 7.29, such
account payable shall be payable to Parent within one-hundred twenty (120)
days after the Closing Date. Parent hereby irrevocably waives any and all
rights it may have as a creditor or otherwise under any Bulk Sale or transfer
law of any state, including North Carolina, and Parent further acknowledges
and agrees that it shall be estopped from asserting any rights to payment,
collection or other action with respect to its advances except as set forth
in (and subject to the provisions of ) this Agreement. In the event
Purchaser makes any claim for a Loss pursuant to Article X of this Agreement,
or any amount becomes or is estimated to become owing
42
from Seller, Parent or any Stockholder to Purchaser hereunder, Purchaser
shall be irrevocably entitled and is hereby instructed by Seller to offset
(and exercise other equitable rights, including recoupment) the full dollar
amount of any such claimed amount so owing of any Loss paid or estimated by
Purchaser, or which Purchaser becomes, or may become, legally obligated to
pay, against the account payable to Parent described in this Section 7.29.
7.30 NOTIFICATION OF MISREPRESENTATION. Each Stockholder and Seller
agree to promptly notify the Purchaser in writing of any material inaccuracy
or misrepresentation made by Seller in this Agreement of which either
Stockholder or the Seller becomes aware prior to the Closing Date and which
could result in a Material Adverse Effect with respect to the Seller.
7.31 FILING OF INCOME TAX RETURNS. Seller shall engage its
independent accountants for the purpose of properly filing all income and
franchise Tax returns, and pay all Taxes and associated charges thereto, if
any, for all Federal, state and local authorities for all years prior to
December 31, 1998 prior to the Closing. Such returns shall be filed not
later than thirty (30) days following the Closing Date. Seller shall provide
documentary evidence of such filings and payment(s) to Purchaser in a form
satisfactory to Purchaser and its counsel.
7.32 DISSOLUTION OF JOINT VENTURE. Seller shall properly and
lawfully dissolve the joint venture entity Logic Tools, LLC, a Delaware
limited liability company, prior to the Closing. Seller shall provide
documentary evidence of such dissolution and the disposition of any assets of
such joint venture to Purchaser in a form satisfactory to Purchaser and its
counsel. All Intellectual Property of Logic Tools, LLC shall be transferred
to Seller free of any Encumbrances.
7.33 FILING AND DELIVERY OF UCC-3 TERMINATION STATEMENTS BY PARENT.
Any and all UCC-1 financing statements, and all similar documents or
instruments of any kind or nature, filed by Parent and any Stockholder shall
be terminated by appropriate and effective filings with the applicable
Governmental Body and/or by delivery to Seller of such other documents or
instruments which effectively cancel and terminate any interest or
encumbrance within ten (10) days prior to the Closing. Documentary evidence
of such filings satisfactory to Purchaser and its counsel shall have been
provided to Purchaser at least three (3) business days prior to the Closing.
7.34 LEASE RENEGOTIATION. The Lease Agreement dated November 1,
1995 by and between Xxxxxx Xxxxxxx, Xxxx Xxxxxx and Xxxxxxx Xxxxxx and Seller
shall be amended to the satisfaction of Purchaser and its counsel, and such
amendment shall include at a minimum (i) a reduction of rent under such
lease, (ii) the compromise of past due rents due and payable to the landlord,
(iii) landlord's written waiver of estoppel certificate with respect to all
prior defaults, and (iv) landlord's affirmation of Seller's and Purchaser's
right of quiet enjoyment of the leased property.
7.35 TRANSFER OF INTELLECTUAL PROPERTY. All Intellectual Property
that is owned or licensed by the Stockholder Allied Plastics International,
Ltd. ("Allied") which pertains to, is used or arises in connection with or is
incident to Seller's Business (in particular all Intellectual Property that
is the subject of that certain Technology and Patent License Agreement by and
between Seller and Allied dated November 12, 1994, the "IP License
Agreement") shall be transferred to Purchaser hereunder.
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In furtherance of the foregoing (i) Allied shall transfer all of its
Intellectual Property to Seller at the Closing, (ii) Seller and Allied shall
enter into a license agreement pursuant to which Allied shall be licensed
solely for use of the licensed Intellectual Property in Asia, and (iii)
Seller and Allied will terminate the IP License Agreement and, in connection
with such termination, Allied shall waive all unpaid royalties, fees and
other charges that are, may be or may in the future become owing by Seller to
Allied (and/or any successor, assignee, transferee or Affiliate of Allied).
Seller shall (i) provide documentary evidence of the foregoing to Purchaser
and its counsel at least three (3) business days prior to the Closing and
(ii) obtain the approval of Purchaser and its counsel of the documents and
instruments used to accomplish the foregoing prior to the execution of
binding documents and instruments.
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS
Unless waived by Purchaser in writing, each and every obligation of
Purchaser to be performed at the Closing shall be subject to the satisfaction
at or prior thereto of each and all of the following conditions precedent:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by Seller in this Agreement, including
the documents, instruments and agreements to be executed and/or delivered by
Seller pursuant to this Agreement, shall be true and correct in all material
respects at and as of the Closing with the same force and effect as though
such representations and warranties had been made or given at and as of the
Closing.
8.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Seller and
Stockholder shall have performed and complied with all of their respective
covenants, agreements and obligations under this Agreement which are to be
performed or complied with by them at or prior to the Closing, including the
execution and/or delivery of the documents, instruments and agreements
specified in Section 4.1 hereof, or in such documents, instruments and
agreements, all of which shall be reasonably satisfactory in form and
substance to counsel for Purchaser.
8.3 NO MATERIAL ADVERSE EFFECT. As of the Closing Date, nothing
shall have occurred which, in the sole judgment of Purchaser could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
8.4 APPROVAL BY COUNSEL. All actions, Proceedings, instruments and
documents required of Seller or a Stockholder to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related
legal matters shall have been reasonably satisfactory to and approved by
counsel for Purchaser, and such counsel shall have been furnished with such
certified copies of actions and Proceedings and such other instruments and
documents as they shall have reasonably requested.
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8.5 LEGAL OPINION. Purchaser shall have received an opinion from
the counsel for the Seller and its Stockholders, dated as of the Closing
Date, in form and substance satisfactory to the Purchaser in Purchaser's
reasonable commercial discretion. Such opinion shall be addressed to
Purchaser and The Bank of New York, the agent under Genmar Holdings' senior
and subordinated credit facilities.
8.6 COMPANY ACTION. Purchaser shall have received (a) a
certificate of the Secretary of Seller as to the incumbency and signatures of
the officers and directors, and (b) a good standing certificate of existence
issued by the Secretary of State of the State of Delaware and any other
jurisdiction in which Seller is qualified to or required to be qualified to
do business and (c) if available from any Governmental Body of the State of
Delaware, a Tax clearance certificate in a form acceptable to counsel to
Purchaser.
8.7 ENVIRONMENTAL AUDIT. Subject to the other provisions contained
in this Section, Seller shall permit Purchaser or any reasonably qualified
environmental consultant designated by Purchaser (the "ENVIRONMENTAL
AUDITOR") to conduct a Phase I environmental audit, and, if determined by the
Purchaser, in its sole discretion, to be necessary, a Phase II environmental
audit (collectively, the "AUDIT") of the Leased Real Estate prior to Closing.
Beginning immediately after the execution hereof, the Environmental Auditor
shall have full and free access to the Leased Real Estate, upon reasonable
notice. Purchaser shall pay all fees and expenses of the Environmental
Auditor. Purchaser shall have the right to conduct soil borings, install
monitoring xxxxx and to otherwise test the Leased Real Estate to its sole
satisfaction. Purchaser shall have the undisputed and sole right, in its
absolute discretion, to terminate this Agreement if the Audit discloses facts
or conditions (i) that purportedly violate or with substantial likelihood
could violate any Applicable Laws or that disclose a material Environmental
Condition, (ii) which could reasonably be expected to have a Material Adverse
Effect on the Seller or Purchaser, or (iii) that are inconsistent in any
material respect with the representations and warranties of the Seller set
forth herein. In the event Purchaser receives a written Audit report(s), and
any supplements or amendments thereto, full and complete copies of such Audit
report and its supplements or amendments, if any, shall be promptly provided
to Seller.
8.8 [THIS SECTION INTENTIONALLY OMITTED.]
8.9 DUE DILIGENCE. Purchaser shall (a) have received all due
diligence information and documentation requested from Seller and/or the
Stockholders, (b) have completed all due diligence investigation (including,
without limitation those related to title and Environmental Conditions) and
(c) be satisfied, in its sole discretion, with its investigation of the
Seller.
8.10 PURCHASER FINANCING. Purchaser shall have received a firm
commitment for financing of the transactions contemplated hereunder and the
consent of its lender(s) to enter into the transactions, if required under
any lender loan documents.
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8.11 DELIVERIES AT CLOSING. Seller and/or the Stockholders, as
applicable, shall have delivered all documents and instruments, and all other
written matter, required pursuant to the terms of this Agreement to be
delivered at or prior to the Closing.
8.12 PROCEEDINGS. No Proceeding before any Governmental Body or
other Person shall be pending, challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly (a) restrain or prohibit
the consummation of the transactions contemplated hereby, or (b) seeks
material damages or adverse conditions.
8.13 CONSENTS AND REMOVAL OF LIENS. Seller shall have obtained
consents to the assignment and continuation of all contracts and agreements
which, in the reasonable judgment of Purchaser or its counsel, require such
consents, including appropriate binders or consents as to policies of
insurance to be assigned to Purchaser under this Agreement. Seller shall
have obtained satisfaction and discharge of all Encumbrances, and shall have
obtained all governmental and private authorizations that Purchaser deems
necessary or desirable in order to own and operate and conduct the Business
of Seller, in Purchaser's hands, substantially on the basis heretofore owned,
operated and conducted, and as proposed to be owned, operated and conducted
by Purchaser.
8.14 EMPLOYEE CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT.
Purchaser shall have received executed confidentiality and non-disclosure
agreements of all exempt (management and administrative) employees of Seller
who will or may become employed by Purchaser upon the Closing.
8.15 ASSET ACQUISITION STATEMENT. Purchaser shall have received the
completed Asset Acquisition Statement described in Section 2.3 hereof, or a
schedule thereof acceptable to Purchaser, in either or each case executed by
Seller.
8.16 [THIS SECTION INTENTIONALLY OMITTED]
8.17 BULK SALES ACT. Seller shall have complied with all Applicable
Laws pertaining to or arising under the bulk sales laws of the jurisdictions
which regulate Seller's Business activities.
8.18 PAYMENTS TO AFFILIATES. Seller shall not have transferred or
remitted any Assets or other property, including cash, to Parent any
Stockholder or any Affiliate of Parent or a Stockholder for any purpose from
or after November 30, 1998.
8.19 EMPLOYEE ARRANGEMENTS. Purchaser shall be satisfied, in its
sole discretion, that adequate arrangements have been made at a reasonable
cost to retain and continue the services of substantially all of the
individuals working in Seller's Business (either as leased employees or
otherwise).
8.20 PURCHASER BOARD APPROVAL. Purchaser shall receive the consent
of its Board of Directors to consummate the transactions contemplated herein.
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8.21 FILING OF INCOME AND FRANCHISE TAX RETURNS. Seller shall
properly file all income and franchise Tax returns, and pay all Taxes and
associated charges thereto, if any, for all federal, state and local
authorities for all years prior to December 31, 1998 prior to the Closing.
Seller shall provide documentary evidence of such filings and payment(s) to
Purchaser in a form satisfactory to Purchaser and its counsel.
8.22 DISSOLUTION OF JOINT VENTURE. Seller shall properly and
lawfully dissolve the joint venture entity Logic Tools, LLC, a Delaware
limited liability Company, prior to the Closing. Seller shall provide
documentary evidence of such dissolution and the disposition of any assets of
such joint venture to Purchaser in a form satisfactory to Purchaser and its
counsel. All Intellectual Property of Logic Tools, LLC shall be transferred
to Seller free of any Encumbrances.
8.23 FILING AND DELIVERY OF UCC-3 TERMINATION STATEMENTS BY PARENT
AND STOCKHOLDERS. Any and all UCC-1 financing statements, and all similar
documents or instruments of any kind or nature, filed by Parent and any
Stockholder shall be terminated by appropriate and effective filings with the
applicable Governmental Body and/or by delivery to Seller of such other
documents or instruments which effectively cancel and terminate any interest
or other encumbrance within ten (10) days prior to the Closing. Documentary
evidence of such filings satisfactory to Purchaser and its counsel shall be
promptly provided to Purchaser at least three (3) business days prior to the
Closing.
8.24 TRANSFER OF INTELLECTUAL PROPERTY. All Intellectual Property
that is owned or licensed by Allied which pertains to, is used or arises in
connection with or is incident to Seller's Business (in particular all
Intellectual Property that is the subject of the IP License Agreement) shall
be transferred to Purchaser hereunder. In furtherance of the foregoing (i)
Allied shall transfer all of its Intellectual Property to Seller at the
Closing, (ii) Seller and Allied shall enter into a license agreement pursuant
to which Allied shall be licensed solely for use of the licensed Intellectual
Property in Asia, and (iii) Seller and Allied will terminate the IP License
Agreement and, in connection with such termination, Allied shall waive all
unpaid royalties, fees and other charges that are, may be or may in the
future become owing by Seller to Allied (and/or any successor, assignee,
transferee or Affiliate of Allied). Seller shall (i) provide documentary
evidence of the foregoing to Purchaser and its counsel at least three (3)
business days prior to the Closing and (ii) obtain the approval of Purchaser
and its counsel of the documents and instruments used to accomplish the
foregoing prior to the execution of binding documents and instruments.
8.25 SERVICE OF PROCESS. At or before the Closing, Seller, Parent
and each Stockholder shall each appoint an agent for service of process
within the State of North Carolina for a period of four (4) years immediately
after the Closing. All fees for such service shall be prepaid in advance.
Seller, Parent and each Stockholder covenant, pledge and agree that such
agent after the Closing shall be its authorized agent for service of process
whether or not (i) such fees remain paid or current, or (ii) the agent
notifies Seller, Parent or any Stockholder that such relationship is
terminated for any reason.
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8.26 ENVIRONMENTAL CLEAN-UP AND COMPLIANCE. Seller shall (i) cause
to have tested and properly dispose of the water-filled floatation chemical
drums located outside of Seller's plant operating facility, (ii) properly
dispose of all foam chemicals no longer used in Seller's Business operations,
and (iii) obtain all necessary authorizations and documentation evidencing
Seller's compliance and authority with Applicable Laws regulating industrial
waste discharge.
8.27 OSHA COMPLIANCE. Seller shall adopt, implement and maintain an
OSHA compliance program that conforms to Applicable Law satisfactory to
Purchaser.
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATIONS
Unless waived by Seller in writing, each and every obligation of
Seller or the Stockholder to be performed at the Closing shall be subject to
the satisfaction at or prior thereto of each and all of the following
conditions precedent:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by Purchaser in this Agreement, including
the documents, instruments and agreements to be executed and/or delivered by
Purchaser pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing with the same force and effect as
though such representations and warranties had been made or given at and as
of the Closing.
9.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Purchaser shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by it at or
prior to the Closing, including the execution and/or delivery of the
documents, instruments and agreements specified in Section 4.2 hereof, or in
such documents, instruments and agreements, all of which shall be reasonably
satisfactory in form and substance to counsel for Seller.
9.3 APPROVAL BY COUNSEL. All actions, Proceedings, instruments and
documents required of Purchaser to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters
shall have been reasonably satisfactory to and approved by counsel for
Seller, and such counsel shall have been furnished with such certified copies
of actions and Proceedings and such other instruments and documents as they
shall have reasonably requested.
9.4 LEGAL OPINION. Seller shall have received an opinion from the
counsel for the Purchaser, dated as of the Closing Date, in form and
substance satisfactory to the Seller in the Seller's reasonable commercial
discretion.
9.5 PURCHASE PRICE. Purchaser shall have (i) delivered to the
Seller the Cash Consideration and (ii) the Note.
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ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER, PARENT AND STOCKHOLDERS. Seller,
Parent and each Stockholder jointly and severally hereby agree to defend,
indemnify and hold Purchaser and its Affiliates harmless from, against and in
respect of (and shall on demand reimburse Purchaser for):
(a) any and all losses, costs, expenses (including without
limitation, reasonable attorneys fees and disbursements of counsel),
liabilities, damages, fines, penalties, charges, assessments, judgments,
settlements, claims, causes of action, Proceedings, Orders and other
obligations of any kind or nature (individually a "Loss" and collectively
"Losses") arising from, in connection with, or suffered or incurred by
Purchaser (i) by reason of any untrue representation, breach of warranty
or nonfulfillment of any covenant or other agreement by Seller or a
Stockholder contained herein or in any certificate, document or
instrument delivered to Purchaser pursuant hereto or in connection
herewith, or (ii) which would not have been suffered or incurred if such
representation or warranty were true and not breached or if such covenant
or other agreement were fully performed;
(b) any and all Losses suffered or incurred by Purchaser in
respect of or in connection with any Liabilities of Seller not expressly
assumed by Purchaser pursuant to the terms of this Agreement and/or the
Liabilities Undertaking;
(c) any and all Liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
date of the Closing hereunder or which arise after the Closing but which
are based upon or arise from any act, omission, transaction,
circumstance, production or sale of goods or services, state of facts or
other condition which occurred or existed on or before the date of the
Closing, whether or not then known, due or payable, except to the extent
(i) reflected or reserved against on the face of the Final Balance Sheet
(excluding the notes thereto) or incurred after the Final Balance Sheet
Date in connection with the purchase of goods or service in the Ordinary
Course of Business and in conformity with the representations, warranties
and covenants of Seller contained in this Agreement (or a Schedule
hereto), (ii) expressly assumed by Purchaser pursuant to the terms of
this Agreement and/or the Liabilities Undertaking, (iii) the Liability
involves warranty work performed by Purchaser pursuant to Section 12.9
hereof, or (iv) and only to the extent covered by an applicable policy of
insurance from which Purchaser has been paid or will be paid a specific
amount;
(d) the amount of any and all receivables (net of applicable
reserves) of the Seller which are not collected in accordance with the
provisions contained in Section 5.18 hereof;
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(e) any and all Losses suffered or incurred by Purchaser by
reason of or in connection with any claim for a finder's fee or brokerage
or other commission arising by reason of any services alleged to have
been rendered to or at the instance of Seller or any Stockholder with
respect to this Agreement or any of the transactions contemplated hereby;
(f) any and all Losses suffered or incurred by Purchaser (i) by
reason of any claim for severance pay or unpaid wages or salaries
accruing or incurred or triggered by a discharge at any time prior to
upon the Closing or (ii) relating to any claim or Proceeding of any
Seller employee arising from any act, occurrence or event the basis of
which is dated at any time prior to or on attributable to services
performed the Closing;
(g) any and all Losses suffered or incurred by Purchaser which
arise from, are incurred in connection with or are incident to any
products liability claim not fully covered by an applicable policy of
insurance paid or payable to Purchaser that in any way arises from,
without limitation, Seller or Stockholder products designed,
manufactured, distributed or sold on or prior to the Closing Date;
(h) any and all Losses from any matter arising from Seller's
creation, operation of, maintenance or other association with any Benefit
Plans;
(i) any and all Losses incurred in connection with or arising
from third party claims, including those concerning Seller's Intellectual
Property transferred or to be transferred to Purchaser pursuant to this
Agreement;
(j) any and all Losses incurred in connection with or that
arises from any claim or Proceeding by any former or future stockholder
of Seller;
(k) any and all Proceedings, Orders, claims, demands,
assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this indemnity;
(l) any and all Losses incurred in connection with Seller
Product warranty claims relating to Seller Products produced prior to the
Closing Date incurred by Purchaser in excess of $100,000; PROVIDED,
HOWEVER, this right of indemnification shall not limit or otherwise
affect Purchaser's right of offset, recoupment or proper calculation as
set forth in this Agreement;
(m) any and all Losses incurred in connection with the
operation or dissolution of Logic Tools, LLC; and
(n) any and all Losses arising from or in connection with any
Intellectual Property of Seller, Allied or Logic Tools, LLC, including
all incidental, consequential and other Losses arising from an inability
to use or exploit any Intellectual Property.
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Notwithstanding the foregoing, neither the Seller or the Stockholders shall
be liable to Purchaser for any breaches of representations or warranties (i)
if the aggregate amount of all the Losses of Purchaser based thereon or
resulting therefrom is less than $5,000 (the "Liability Exception");
PROVIDED, HOWEVER, that such Liability Exception shall not apply to or
include any Losses in excess of $5,000 in the aggregate or those in respect
of misrepresentations or breaches of warranty contained in Sections 5.9,
5.13, 5.23, 5.24, 5.28, 5.29 and/or 7.29 hereof, as to which Seller, Parent
and the Stockholders shall be jointly and severally liable in full hereunder,
or (ii) for any amount that exceeds, in the aggregate, the Purchase Price
under this Agreement (but only to the extent of such excess).
10.2 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify, defend, and hold Seller harmless from, against and in respect of
(and shall on demand reimburse them for):
(a) Any and all Losses resulting from any untrue
representation, breach of warranty or non-fulfillment of any covenant or
agreement by Purchaser contained herein or in any certificate, document
or instrument delivered to Seller hereunder;
(b) Any and all liabilities or obligations of Seller
specifically assumed by Purchaser pursuant to this Agreement; and
(c) Any and all actions, suits, Proceedings, claims, demands,
assessments, judgements, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this indemnity.
10.3 NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Each of the representations and warranties of the parties
contained in this Agreement and in any Exhibit, Schedule, certificate,
instrument or document delivered by or on behalf of any of the parties hereto
pursuant to this Agreement and the transactions contemplated hereby shall
survive the Closing of the transactions contemplated hereby and any
investigation made by the parties or their agents for a period of forty-five
(45) months after the Closing, after which no claim for indemnification for
any misrepresentation, or for the breach of any representation or warranty
under this Agreement, may be brought, and no action with respect thereto may
be commenced, and no party shall have any Liability or obligation with
respect thereto, unless (i) the Indemnified Party gave written notice to the
Indemnifying Party specifying with particularity the misrepresentation or a
breach of representation or warranty claimed on or before the expiration of
such period; (ii) the claim relates to a breach of any representation or
warranty contained in Sections 5.9, 5.11, 5.23 or 5.24, in which case the
right to indemnification shall survive until the expiration of the applicable
statute of limitations, plus sixty (60) days thereafter, for each and any of
the foregoing whether for breach of contract or the Loss cause of action
arising in connection with any third party Proceeding; or (iii) the claim
relates to any representation or warranty in Sections 5.1, 5.4, 5.6 and 5.13,
in which case the right to indemnification shall survive indefinitely. The
covenants and agreements (exclusive of representations and warranties, or any
agreement contained within a representation or warranty, set forth in Article
V hereof) set forth in this Agreement shall survive indefinitely.
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10.4 PROCEDURE FOR INDEMNIFICATION. Subject to rights of offset,
recoupment or calculation set forth in this Agreement, in the event a party
intends to seek indemnification pursuant to the provisions of Sections 10.1
or 10.2 hereof (the "INDEMNIFIED PARTY"), the Indemnified Party shall
promptly give notice hereunder to the other party (the "INDEMNIFYING PARTY")
after obtaining written notice of any claim, investigation, or the service of
a summons or other initial or continuing legal or administrative process or
Proceeding in any action instituted against the Indemnified Party as to which
recovery or other action may be sought against the Indemnifying Party because
of the indemnification provided for in Section 10.1 or 10.2 hereof, and, if
such indemnity shall arise from the claim of a third party, the Indemnified
Party shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting from such claim; PROVIDED, HOWEVER, that
the Indemnified Party shall not be required to permit such an assumption of
the defense of any claim or litigation which, if not first paid, discharged
or otherwise complied with, would with substantial certainty result in a
material interruption or disruption of the Business of the Indemnified Party,
taken as a whole, or any material part thereof. Notwithstanding the
foregoing, the right to indemnification hereunder shall not be affected by
any failure of the Indemnified Party to give such notice (or by delay by the
Indemnified Party in giving such notice) unless, and then only to the extent
that, the rights and remedies of the Indemnifying Party shall have been
prejudiced as a result of the failure to give, or delay in giving, such
notice. Failure by the Indemnifying Party to notify the Indemnified Party of
its election to defend any such claim or action by a third party within
twenty (20) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its
right to defend such claim or action.
If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the obligations of the
Indemnifying Party hereunder as to such claim, investigation or Proceeding
shall include taking all steps necessary in the defense or settlement of such
claim, investigation or Proceeding and holding the Indemnified Party harmless
from and against any and all damages caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment entered in
connection with such claim, investigation or Proceeding, except where, and
only to the extent that, the Indemnifying Party has been prejudiced by the
actions or omissions of the Indemnified Party. The Indemnifying Party shall
not, in the defense of such claim or any Proceeding resulting therefrom,
consent to entry of any judgment (other than a judgment of dismissal on the
merits without costs) except with the written consent of the Indemnified
Party (which consent shall not be unreasonably withheld, delayed or
conditioned) or enter into any settlement (except with the written consent of
the Indemnified Party)(which consent shall not be unreasonably withheld,
delayed or conditioned) unless (i) there is no finding or admission of any
violation of law and no material effect on any claims that could reasonably
be expected to be made against the Indemnified Party (ii) the sole relief
provided is monetary damages and (iii) the settlement shall include the
giving by the claimant or the plaintiff to the Indemnified Party a release
from all Liability in respect to such claim or litigation.
If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the Indemnified Party shall be
entitled to participate in the defense of the claim, but solely by observation
and comment to the Indemnifying Party, and the counsel selected by the
Indemnified Party shall not appear on its behalf in any Proceeding arising
hereunder. The
52
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it to participate in its defense unless any of the following
shall apply: (i) the employment of such counsel shall have been authorized in
writing by the Indemnifying Party; or (ii) the Indemnifying Party's legal
counsel shall advise the Indemnifying Party in writing, with a copy to the
Indemnified Party, that there is a conflict of interest that would make it
inappropriate under applicable standards of professional conduct to have
common counsel. If clause (i) or (ii) in the immediately preceding sentence
is applicable, then the Indemnified Party may employ separate counsel at the
expense of the Indemnifying Party to represent the Indemnified Party, but in
no event shall the Indemnifying Party be obligated to pay the costs and
expenses of more than one such separate counsel for any one complaint, claim,
action or Proceeding in any one jurisdiction.
If the Indemnifying Party does not assume the defense of any such
claim by a third party or litigation resulting therefrom after receipt of
notice from the Indemnified Party, the Indemnified Party may defend against
such claim or litigation in such manner as it reasonably deems appropriate,
and unless the Indemnifying Party shall deposit with the Indemnified Party a
sum equivalent to the total amount demanded in such claim or litigation plus
the Indemnified Party's estimate of the cost (including attorneys' fees) of
defending the same, the Indemnified Party may settle such claim or Proceeding
on such terms as it may reasonably deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of such
settlement and for all costs (including attorneys' fees), expenses and
damages incurred by the Indemnified Party in connection with the defense
against or settlement of such claim, investigation or litigation, or if any
such claim or litigation is not so settled, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of any judgment
rendered with respect to any claim by a third party in such litigation and
for all costs (including attorneys' fees), expenses and damage incurred by
the Indemnified Party in connection with the defense against such claim or
litigation, whether or not resulting from, arising out of, or incurred with
respect to, the act of a third party.
Each party shall cooperate in good faith and in all respects with each
Indemnifying Party and its representatives (including without limitation its
counsel) in the investigation, negotiation, settlement, trial and/or defense
of any Proceedings (and any appeal arising therefrom) or any claim. The
parties shall cooperate with the other in any notifications to and
information requests of any insurers. No individual representative of any
Person, or their respective Affiliates shall be personally liable for any
Loss under this Agreement, except as specifically agreed to by said
individual representative.
10.5 DISPUTE RESOLUTION. In the event a dispute involving a
monetary amount in excess of $50,000 arises under this Agreement, except with
respect to matters arising under SECTIONS 2.2(c), 2.4 OR 12.12 hereof, such
disputes shall be resolved in the manner set forth in this SECTION 10.5.
(a) If a dispute arises under this Agreement, including any
question regarding the existence, validity, interpretation or termination
hereof, which is not described as an exception in this SECTION 10.5,
Purchaser and Seller may invoke the dispute resolution procedure set
forth in this SECTION 10.5 by giving written notice to the other party.
The parties shall enter into discussions concerning this dispute. If the
dispute is not resolved as
53
a result of such discussions within ten (10) days, an attempt will be
made to resolve the matter by a formal nonbinding mediation with an
independent neutral mediator agreed to by the parties. If the parties
cannot agree on a mediator within a period of ten (10) days after
expiration of the ten (10) day period for resolution by discussion,
then either party may apply to any court of competent jurisdiction for
appointment of a mediator, which appointment shall be binding and
nonappealable. Upon commencement of the mediation process, the
parties shall promptly communicate with respect to a procedure and
schedule for the conduct of the Proceeding and for the exchange of
documents and other information related to the dispute. The mediation
process shall be deemed ended if the dispute has not been resolved
within thirty (30) days after appointment of the mediator.
(b) All claims, disputes or other matters in question between
the parties to this Agreement arising out of or relating to this
Agreement which are not resolved by mediation in accordance with SECTION
10.5(a) within thirty (30) days after appointment of the mediator shall
be submitted for, subject to and decided by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association currently in effect as of the date of this Agreement ("AAA
Rules"), except to the extent those rules are inconsistent with this
SECTION 10.5. Any arbitration must be held in Minneapolis, Minnesota by
a single arbitrator mutually selected by the parties hereto or, if the
parties hereto cannot agree on the appointment of such arbitrator within
ten (10) days following the date notice of the dispute is given by a
party to the adverse party, an arbitrator selected according to the AAA
Rules. The arbitrator's award shall be final, conclusive and binding
upon all parties to this Agreement, and judgment may be entered upon it
in accordance with the Federal Arbitration Act any court of general
jurisdiction in Minnesota, or in any United States District Court having
jurisdiction in Minnesota. The arbitrator shall be required to provide
in writing to the parties the basis for the award or Order of such
arbitrator, and a court reporter shall record all hearings (unless
otherwise agreed to by the parties), with such record constituting the
official transcript of such Proceedings. Seller and Purchaser
specifically desire this Arbitration clause to be governed by the United
States Federal Arbitration Act, and not by the arbitration laws of any
state.
(c) Seller and Purchaser agree and consent that any legal
action, suit or Proceeding seeking to enforce this SECTION 10.5 or to
confirm or contest any arbitration award shall be instituted and
adjudicated solely and exclusively in any court of general jurisdiction
in Minnesota, or in the United States District Court having jurisdiction
in Minnesota and Seller and Purchaser agree that venue will be proper in
such courts and waive any objection which they may have now or hereafter
to the venue of any such suit, action or Proceeding in such courts, and
irrevocably consents and agrees to the jurisdiction of said courts in any
such suit, action or Proceeding. Seller and Purchaser further agree to
accept and acknowledge service of any and all process which may be served
in any such suit, action or Proceeding in said courts, and also agree
that service of process or notice upon them shall be deemed in every
respect effective service of process or notice upon them, in any suit,
action, Proceeding or arbitration demand, if given or made: (i) according
to Applicable Law; (ii) according to the AAA Rules; (iii) by a person
over the age of eighteen who personally
54
serves such notice or service of process on Seller or Purchaser, as the
case may be; or (iv) by certified mail, return receipt requested, mailed
to Seller or Purchaser, as the case may be, at their respective
addresses set forth in this Agreement.
(d) In the event of arbitration filed or instituted between the
parties pursuant to this SECTION 10.5, the prevailing party will be
entitled to receive from the adverse party all costs, damages and
expenses, including reasonable attorney's fees, incurred by the
prevailing party in connection with that action or Proceeding whether or
not the controversy is reduced to judgment or award. The prevailing
party will be that party who is determined by the arbitrator to have
prevailed on the major disputed issues.
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned after the date of this
Agreement, but not later than the Closing:
(a) by mutual written consent of all parties hereto;
(b) by Purchaser if any of the conditions provided for in
Article VIII of this Agreement have not been timely met and have not been
waived in writing by Purchaser on or before the Date of Closing;
(c) by Seller if any of the conditions provided for in Article
IX of this Agreement have not been timely met and have not been waived in
writing by Seller on or before the Date of Closing; and
(d) by either Purchaser or Seller if the Closing shall not have
occurred on or before May 31, 1999.
In the event of termination or abandonment by any party as provided in this
Section 11.1, written notice shall forthwith be given to the other party and,
except as otherwise specifically provided herein, including the provisions of
Section 7.3, each party shall pay its own expenses incident to preparation or
consummation of this Agreement and the transactions contemplated hereunder
and neither party shall have any Liability to the other hereunder, except
such Liability as may arise as a result of a breach hereof.
11.2 RETURN OF DOCUMENTS AND NONDISCLOSURE. If this Agreement is
terminated for any reason pursuant to Section 11.1 hereto, each party shall
return all documents and materials which shall have been furnished by or on
behalf of the other party, and each party hereby covenants that it will not
disclose to any Person any confidential or proprietary information about the
other party or any information about the transactions contemplated hereby,
except insofar as may be necessary
55
to assert its rights hereunder or to comply with Applicable Laws or pursuant
to the distraint of an Order or Proceeding.
ARTICLE XII
POST-CLOSING COVENANTS
12.1 FURTHER ACTS AND ASSURANCES. The parties agree that, at any
time and from time to time, on and after the Closing Date, upon the
reasonable request of the other party, they will do or cause to be done all
such further acts and things and execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered any and all papers, documents,
instruments, agreements, assignments, transfers, assurances and conveyances
as may be necessary or desirable to carry out and give effect to the
provisions and intent of this Agreement. In addition, from and after the
Closing Date, the Purchaser will afford to the Seller and its attorneys,
accountants and other representatives access, during normal business hours,
to such personnel, books and records relating to the Seller as may reasonably
be required in connection with the preparation of financial information or
the filing of Tax Returns and will cooperate in all reasonable respects in
connection with claims, Orders and Proceeding asserted by or against third
parties, relating to the transactions contemplated hereby.
12.2 NON-COMPETITION AGREEMENT. During the period of four (4) years
from and after the Closing Date, Seller, Parent and each of the Stockholders
on behalf of themselves and all their Affiliates covenant and agree that they
(and their respective Affiliates) will not, without the Purchaser's prior
written consent, directly or indirectly, or individually or collectively lend
its credit, advice or assistance, or engage in any activity or act in any
manner (including but not limited to, as an individual, owner, sole
proprietor, founder, associate, promoter, partner, joint venturer,
shareholder, officer, director, trustee, manager, employer, employee,
licensor, licensee, principal, agent, salesman, broker, representative,
consultant, advisor, investor or otherwise for the purpose of establishing,
operating or managing any Person that is engaged in competitive activities)
competitive with the present or future Business of the Purchaser, including
Seller's Business therein. Seller, Parent and each Stockholder acknowledge
and agree that this Section 12.2 shall be geographically applicable to
worldwide competition.
12.3 NON-SOLICITATION AGREEMENT. During the period of thirty-six
(36) months from and after the Closing Date, Seller , Parent and each of the
Stockholders covenant and agree that they (including their respective
Affiliates) will not, whether for their own account or for the account of any
other Person, directly or indirectly interfere (including the hiring of any
employee) with Purchaser's relationship with or endeavor to divert or entice
away from the Purchaser any Person (i) who or which at any time during the
term of such Person's prior employment by or affiliation with the Seller, is
or was an employee, vendor, supplier or customer of or otherwise in the habit
of dealing with the Seller or (ii) who is an employee, vendor, supplier or
customer of, or otherwise is in the habit of dealing with the Purchaser.
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12.4 CONFIDENTIAL INFORMATION. Seller and each of the Stockholders
understand and agree that the Business of Seller is based upon specialized
work and that as officers, directors, employees or Stockholders of Seller
they received, had access to and/or contributed to Confidential Information
and trade secrets. The Stockholders and Seller agree that at all times from
and after the Closing Date, they shall keep secret all such Confidential
Information and that they will not directly or indirectly Use or Disclose the
same to any Person without first obtaining the written consent of the
Purchaser. At any time the Purchaser may so request, the Stockholders and
Seller shall turn over to the Purchaser all books, notes, memoranda, manuals,
notebooks, tables, drawings, calculations, records and other documents made,
compiled by or delivered to any Stockholder or the Seller and containing or
concerning any Confidential Information, including copies thereof, in their
possession, it being agreed that the same and all information contained
therein are at all times the exclusive property of Purchaser.
12.5 REASONABLENESS OF COVENANTS. Stockholders and Seller each
acknowledge and agree that the geographic scope and period of duration of the
restrictive covenants contained in Sections 12.2, 12.3 and 12.4 of this
Agreement are both fair and reasonable and that the interests sought to be
protected by the Purchaser are legitimate business interests entitled to be
protected. Stockholders and Seller further each acknowledge and agree that
the Purchaser would not have purchased the Assets and assumed the Liabilities
pursuant to this Agreement unless each Stockholder and Seller had agreed to
be irrevocably bound by the covenants contained in such Sections.
12.6 INJUNCTIVE RELIEF. The parties agree that the remedy of
damages at law for the breach by any party of any of the covenants contained
in Sections 12.2, 12.3 or 12.4 is an inadequate remedy. In recognition of
the irreparable harm that a violation by any party of any of the covenants,
agreements or obligations arising under Sections 12.2, 12.3 or 12.4 would
cause the Purchaser or the other party, each party agrees that in addition to
any other remedies or relief afforded by law, an Injunction against an actual
or Threatened violation or violations may be issued against them and every
other Person concerned thereby, it being the understanding of the parties
that both damages and Injunction shall be proper modes of relief and are not
to be considered alternative remedies.
12.7 BLUE PENCIL DOCTRINE. In the event that any of the restrictive
covenants contained in this Article shall be found by a court of competent
jurisdiction to be unreasonable by reason of its extending for too great a
period of time or over too great a geographic area or by reason of its being
too extensive in any other respect, then such restrictive covenant shall be
deemed modified to the minimum extent necessary to make it reasonable and
enforceable under the circumstances.
12.8 MAINTENANCE AND PAYMENT OF INSURANCE. Seller shall cooperate
with and have a continuing obligation to Purchaser to obtain and maintain,
the insurance policies described in Section 7.24.
12.9 PERFORMANCE OF SELLER'S WARRANTY WORK. After the Closing,
Purchaser shall perform or cause there to be performed on Seller's behalf,
but without obligation on the part of Seller to pay or reimburse Purchaser
therefor except as specifically set forth in (and as limited by) this
Agreement, any and all repairs to or replacements of products manufactured by
Seller and sold prior to Closing
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for which Seller is responsible under any standard product warranty or
guarantee extended by Seller in the normal course of Seller's Business to
dealers or purchasers of Seller's products.
12.10 PERFORMANCE OF SELLER'S CONTRACTS. Purchaser shall either
fully and timely perform each of the contracts it has assumed pursuant to
this Agreement after the Closing or cause the same to be terminated without
liability to Seller or its guarantors (or shall otherwise cause Seller and
its guarantors to be relieved and released from any further obligation or
liability thereunder), excepting those liabilities arising from any breach or
default by Seller prior to Closing which Purchaser shall not have otherwise
affirmatively agreed to assume, including any obligation of Seller arising
after the Closing to repurchase any products sold by Seller under any
commitments or arrangements made by Seller with any parties providing floor
plan or similar financing for Seller's dealers.
12.11 COVENANT REGARDING LIGHT STABILITY. Seller covenants that
Seller's Products meet all UV-8 type protection light stability
characteristics and specifications for LL-8460/8461 pellet power (xxxxx
formulated) such that the chemical changes to and degradation of Seller's
Products as a result of exposure to the ultraviolet (UV) portion of light
will not change or degrade any Seller Product. Purchaser is presently
conducting such tests. In the event Purchaser's testing of Seller's Products
results in a determination that Seller's products do not meet the required
standards, and it can be reasonably anticipated such that the Seller Product
will incur product warranty, product liability or return sale claims,
Purchaser shall have the right to accrue the estimated amount anticipated to
be incurred in connection therewith and offset such accrual against the
Earn-out Consideration, the Note, the amount due to Parent under 7.29 hereof
or any other amount that may be owed OR owing or to become owing to any of
Seller, Parent of the Stockholders. The foregoing accrual, however, shall
not limit Purchaser's claims for Losses hereunder or pursuant to any
ancillary document or instrument hereto. In the event any such claims are
made against Purchaser as a result of Seller's breach of the foregoing
covenant (i) the $100,000 reserve for product warranty claims described in
Section 2.2 hereof shall not apply and (ii) Purchaser shall be indemnified
for any and all such claims, losses and any costs of remediation (including
incidental or consequential damages) arising from, in connection with or
incident to such breach.
ARTICLE XIII
MISCELLANEOUS
13.1 NOTICES. All notices, demands and other communications
provided for hereunder shall be in writing and shall be given by either
personal delivery, via facsimile transmission (receipt telephonically
confirmed), by nationally recognized overnight courier (prepaid), or by
certified or registered first class mail, postage prepaid, return receipt
requested, sent to each party, at its address as set forth below or at such
other address or in such other manner as may be designated by such party in a
written notice to each of the other parties. All such notices, demands and
communications shall be effective when personally delivered, one (1) business
day after delivery to the overnight courier, upon telephone confirmation of
facsimile transmission or upon receipt after dispatch by mail to the party to
whom the same is so given or made:
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If to Seller: Logic Marine Corporation
c/o P. T. Sumberdaya Pacific Corporation
00 Xxxxx Xxxx, Xxxxxxx
Xxxxxxx 00000, Xxxxxxxxx
Attention: Xxxx Xxxxxxxx, Chairman
If to Stockholders: Allied Plastics International, Ltd. or
Cheshire Holdings, Ltd.
c/o P. T. Sumberdaya Pacific Corporation
00 Xxxxx Xxxx, Xxxxxxx
Xxxxxxx 00000, Xxxxxxxxx
Attention: Xxxx Xxxxxxxx, Chairman
with copy to: The Xxxxxxx Xxxxxxxxxx Law Firm PLLC
One Exchange Plaza
000 Xxxxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
If to Parent: P. T. Sumberdaya Pacific Corporation
00 Xxxxx Xxxx, Xxxxxxx
Xxxxxxx 00000, Xxxxxxxxx
Attention: Xxxx Xxxxxxxx, Chairman
If to Purchaser: Genmar Logic, LLC
x/x Xxxxxx Xxxxxxxx, Xxx.
Xxxxx 0000
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. XxXxxxxxx, Esq.
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with copy to: Xxxxxx and Xxxxxx P.A.
2400 IDS Center
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
13.2 LEGAL AND OTHER COSTS.
(a) In the event that any party (the "Defaulting Party")
defaults in his or its obligations under this Agreement and, as a result
thereof, the other party (the "Non-Defaulting Party") seeks to legally
enforce his or its rights hereunder against the Defaulting Party, then,
in addition to all damages and other remedies to which the Non-Defaulting
Party is entitled by reason of such default, the Defaulting Party shall
promptly pay to the Non-Defaulting Party an amount equal to all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the
Non-Defaulting Party in connection with such enforcement.
(b) In the event that the Non-Defaulting Party is
entitled to receive an amount of money by reason of the Defaulting
Party's default hereunder, then, in addition to such amount of money, the
Defaulting Party shall promptly pay to the Non-Defaulting Party a sum
equal to interest on such amount of money accruing at the rate of 2% per
month (but if such rate is not permitted under the laws of the State of
Delaware, then at the highest rate which is permitted to be paid under
the laws of the State of Delaware) during the period between the date
such payment should have been made hereunder and the date of the actual
payment thereof.
13.3 ENTIRE AGREEMENT. This writing constitutes the entire
agreement of the parties with respect to the subject matter hereof and may
not be modified, amended or terminated except by a written agreement
specifically referring to this Agreement signed by all of the parties hereto.
13.4 GOVERNING LAW. This Agreement, including all the documents,
instruments and agreements to be executed and/or delivered by the parties
hereto, shall be construed, governed by and enforced in accordance with the
internal laws of the state of Delaware, without giving effect to the
principles of comity or principles of conflicts of laws thereof.
13.5 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of each corporate party hereto, its successors and assigns,
and each individual party hereto and his heirs, personal representatives,
successors and assigns.
13.6 COOPERATION. Each party hereto shall cooperate, shall take
such further action and shall execute and deliver such further documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.
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13.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
taken together shall be deemed one and the same original.
13.8 AMENDMENTS. No purported amendment, modification or waiver of
any provision of this Agreement, or any of the documents, instruments or
agreements to be executed by the parties pursuant hereto shall be effective
unless in a writing specifically referring to this Agreement and signed by
all of the parties and all amendments thereof shall be governed by and
construed in accordance with the law of the State of Delaware applicable to
contracts made and to be performed therein.
13.9 PRESERVATION OF AND ACCESS TO RECORDS. The Purchaser shall
preserve all books and records of the Seller for a period of six (6) years
after the Closing Date; PROVIDED, HOWEVER, Purchaser may destroy any part or
parts of such records upon obtaining written consent of Seller for such
destruction, which consent shall not be unreasonably withheld. Such records
shall be made available to Seller and their representatives at all reasonable
times during normal business hours of the Seller during said six-year period
with the right at their expense to make abstracts from and copies thereof.
13.10 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the
consummation of the transactions contemplated hereby shall be approved by
both Purchaser and Seller prior to the release of such public announcements,
and each party agrees to cooperate with the other party as appropriate to
comply with all Applicable Laws. Subsequent to the date of receipt of all
consents and approvals of each Governmental Body necessary to consummate this
transaction, Purchaser may make such announcements and/or advertisements as
Purchaser, in its sole discretion, deems necessary.
13.11 COSTS. Except as otherwise provided in this Agreement, each
party hereto shall pay their own costs and expenses incurred in connection
with negotiating and preparing this Agreement and consummating the
transactions contemplated hereby, including but not limited to fees and
disbursements of their attorneys, accountants and investment bankers.
13.12 HEADINGS. The headings of the articles, sections and
subsections of this Agreement are intended for the convenience of the parties
only and shall in no way be held to explain, modify, construe, limit, amplify
or aid in the interpretation of the provisions hereof. The terms "this
Agreement," "hereof," "herein," "hereunder," "hereto" and similar expressions
refer to this Agreement as a whole and not to any particular article,
section, subsection or other portion hereof and include the Schedules and
Exhibits hereto and any document, instrument or agreement executed and/or
delivered by the parties pursuant hereto.
13.13 SCOPE OF AGREEMENT. Unless the context otherwise requires, all
references in this Agreement or in any Schedule or Exhibit hereto, to the
assets, properties, operations, Business, financial statements, employees,
books and records, accounts receivable, accounts payable, Contracts
61
or other attributes of the Business of the Seller shall mean such items or
attributes as they are used in, apply to, or relate to all Businesses of the
Seller.
13.14 NUMBER AND GENDER. Unless the context otherwise requires,
words importing the singular number shall include the plural and vice versa
and words importing the use of any gender shall include all genders.
13.15 SEVERABILITY. In the event that any provision of this
Agreement is declared or held by any court of competent jurisdiction to be
invalid or unenforceable, such provision shall be severable from, and such
invalidity or unenforceability shall not be construed to have any effect on,
the remaining provisions of this Agreement, unless such invalid or
unenforceable provision goes to the essence of this Agreement, in which case
the entire Agreement may be declared invalid and not binding upon any of the
parties.
13.16 PARTIES IN INTEREST AND ASSIGNMENT. Nothing expressed or
implied in this Agreement is intended or shall be construed to confer any
rights or remedies under or by reason of this Agreement upon any Person other
than (i) Purchaser, Purchaser's Affiliates and Genmar Holdings' lenders under
the senior and subordinated credit facilities of Genmar Holdings, (ii)
Seller, (iii) the Stockholders and (iv) Parent and their respective heirs,
personal representatives, successors and permitted assigns. Nothing in this
Agreement is intended to relieve or discharge the Liabilities of any third
Person to Purchaser or Seller. This Agreement and any rights or interests
arising from or in connection with this Agreement shall (i) not be assignable
by Seller, Parent or the Stockholders and any such purported assignment shall
be null and void and of no force or effect, (ii) be assignable by Purchaser
in its sole discretion, including any assignment to Genmar Holdings' lenders
under the senior and subordinated credit facilities of Genmar Holdings.
13.17 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may
be waived only by a written instrument executed by the party waiving
compliance. Any such waiver shall only be effective in the specific instance
and for the specific purpose for which it was given and shall not be deemed a
waiver of any other provision hereof or of the same breach or default upon
any recurrence thereof. No failure on the part of a party hereto to exercise
and no delay in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
13.18 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" shall mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the
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same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or covenant.
13.19 FACSIMILE SIGNATURES. Due to the parties' geographic
locations, the parties hereto have agreed that signatures for execution of
this Agreement and any certificate, instrument and other document entered
into and/or delivered pursuant to or in connection with this Agreement, may
be provided by facsimile; and upon receipt of such facsimile signature, the
party accepting such signature shall be entitled to rely on the execution
thereof and such signature will be binding and effective as if the original
counterpart had been transmitted and/or delivered.
ARTICLE XIV
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified:
"AAA RULES" - has the meaning set forth in Section 10.5(b) of this
Agreement.
"ACCOUNTANT" - has the meaning set forth in Section 2.4 of this
Agreement.
"ACQUISITION PROPOSAL" - means any proposal relating to the possible
acquisition of Seller whether by way of merger, purchase of capital stock of
Seller representing fifty percent (50%) or more of the voting power or equity
of Seller, purchase of all or substantially all of the assets of Seller, or
otherwise.
"AFFILIATE" - when used in reference to a specified Person, means any
Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with the specified
Person.
"AGREEMENT" - has the meaning set forth in the introductory paragraph
hereof.
"ALLIED" - has the meaning set forth in Section 7.35 of this Agreement.
"ANNUAL NET REVENUES" - has the meaning set forth in Section 2.2(a) of
this Agreement.
"ANNUAL PERIOD" - has the meaning set forth in Section 2.2(b) of this
Agreement.
"APPLICABLE LAW" OR "APPLICABLE LAWS" - means any and all laws,
ordinances, constitutions, regulations, statutes, treaties, rules, codes,
licenses, certificates, franchises, permits, requirements and Injunctions
adopted, enacted, implemented, promulgated, issued, entered or deemed
applicable by or under the authority of any Governmental Body having
jurisdiction over a specified Person or any of such Person's properties or
assets. Unless used in either Section 5.24 or Section 8.7 hereof, the
foregoing definition shall not include Environmental Laws.
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"ASSET ACQUISITION STATEMENT" - has the meaning set forth in Section
2.3 of this Agreement.
"ASSETS" - has the meaning set forth in Section 1.2(a) of this
Agreement.
"ASSUMED LIABILITIES" - has the meaning set forth in Section 1.3(a) of
this Agreement.
"AUDIT" - has the meaning set forth in Section 8.7 of this Agreement.
"AUDITOR" - has the meaning set forth in Section 2.4 of this Agreement.
"Benefit Plans" - means any and all bonus, stock option, restricted
stock, stock purchase, stock appreciation, phantom stock, profit
participation, profit-sharing, deferred compensation, severance, pension,
retirement, disability, medical, dental, health, life or dental insurance,
death benefit, incentive, welfare and/or other benefit, compensation and/or
retirement plan, policy, arrangement and/or Contract maintained, sponsored or
participated in by Seller.
"BRUNSWICK NOTE" - has the meaning set forth in Section 7.26 of this
Agreement.
"BUSINESS" - has the meaning set forth in the recitals to the
Agreement.
"CASH CONSIDERATION" - has the meaning set forth in Section 2.1 of
this Agreement.
"CLOSING" - has the meaning set forth in Article III of this Agreement.
"CLOSING CERTIFICATE" - has the meaning set forth in Section 2.4 of
this Agreement.
"CLOSING DATE" - has the meaning set forth in Article III of this
Agreement.
"CODE" - means the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"COMPETING BUSINESS" - has the meaning set forth in Section 5.26 of
this Agreement.
"COMPUTER SYSTEM" has the meaning set forth in Section 5.28 of this
Agreement.
"CONFIDENTIAL INFORMATION" - means any information or compilation of
information not generally known to the public or the industry or which the
Seller has not disclosed to third parties without a written obligation of
confidentiality, which is proprietary to the Seller, relating to the Seller's
procedures, techniques, methods, concepts, ideas, affairs, products,
processes and services, including, but not limited to, information relating
to marketing, merchandising, selling, research, development, manufacturing,
purchasing, accounting, engineering, financing, costs, customers, plans,
pricing, billing, needs of customers and products and services used by
customers, all lists of customers and their addresses, prospects, sales
calls, products, services, prices and the like as well as any specifications,
formulas, plans, drawings, accounts or sales records, sales brochures, code
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books, manuals, trade secrets, knowledge, know-how, pricing strategies,
operating costs, sales margins, methods or operations, invoices or statements
and the like.
"COPYRIGHTS" - has the meaning set forth in Section 5.15(a) of this
Agreement.
"COST OF GOODS SOLD" - has the meaning set forth in Section 2.2(a) of
this Agreement.
"DEBT INSTRUMENTS" - has the meaning set forth in Section 5.25 of this
Agreement.
"DEFAULTING PARTY" - has the meaning set forth in Section 13.2(a) of this
Agreement.
"EARN-OUT CONSIDERATION" - has the meaning set forth in Section 2.2(a) of
this Agreement.
"ENCUMBRANCE" - means and includes:
(i) with respect to any personal property, any intangible property or
any property other than real property, any security or other
property interest or right, claim, lien, pledge, option, charge,
security interest, contingent or conditional sale, or other title
claim or retention agreement or lease or use agreement in the
nature thereof whether voluntarily incurred or arising by
operation of law, and including any agreement to grant or submit
to any of the foregoing in the future; and
(ii) with respect to any real property (including Leased Real Estate),
any mortgage, lien, easement, interest, right-of-way, condemnation
or eminent domain Proceeding, encroachment, any building, use or
other form of restriction, Encumbrance or other claim (including
adverse or prescriptive) or right of third parties (including
Governmental Bodies), any lease or sublease (other than Seller's
lease on Leased Real Estate), boundary dispute, and agreements
with respect to any real property including: purchase, sale, right
of first refusal, option, construction, building or property
service, maintenance, property management, conditional or
contingent sale, use or occupancy, franchise or concession,
whether voluntarily incurred or arising by operation of law, and
including any agreement to grant or submit to any of the foregoing
in the future.
"ENVIRONMENTAL AUDITOR" - has the meaning set forth in Section 8.7 of
this Agreement.
"ENVIRONMENTAL CLAIMS" - has the meaning set forth in Section 5.24(j)(i)
of this Agreement.
"ENVIRONMENTAL CONDITIONS" - has the meaning set forth in Section
5.24(j)(ii) of this Agreement.
"ENVIRONMENTAL LAWS" - has the meaning set forth in Section 5.24(j)(iii)
of this Agreement.
"EXCLUDED LIABILITIES" - has the meaning set forth in Section 1.3(b) of
this Agreement.
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"FINAL BALANCE SHEET" - has the meaning set forth in Section 2.4 of this
Agreement.
"FINAL BALANCE SHEET DATE" - has the meaning set forth in Section 2.4 of
this Agreement.
"FINANCIAL STATEMENTS" - has the meaning set forth in Section 5.7 of this
Agreement.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" - shall mean generally
accepted accounting principles used and applied in the United States of America
and which are recognized as generally accepted by the American Institute of
Certified Public Accountants.
"GENMAR HOLDINGS" - has the meaning set forth in the recitals to the
Agreement.
"GENMAR INDUSTRIES" - has the meaning set forth in the recitals to the
Agreement.
"GOVERNMENTAL BODY" - any:
(a) nation, state, county, city, town, village, district or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board,
commission, department, instrumentality, office or other
entity, and any court or other tribunal);
(d) multi-national organization or body; and/or
(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police,
regulatory or Taxing authority or power of any nature.
"HAZARDOUS MATERIALS" - has the meaning set forth in Section 5.24(j)(iv)
of this Agreement.
"IP LICENSE AGREEMENT" - has the meaning set forth in Section 7.35 of
this Agreement.
"INDEMNIFIED PARTY" - has the meaning set forth in Section 10.4 of this
Agreement.
"INDEMNIFYING PARTY" - has the meaning set forth in Section 10.4 of this
Agreement.
"INDEPENDENT ACCOUNTANTS" - has the meaning set forth in Section 2.2(c)
of this Agreement.
"INJUNCTION" - means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees or
other orders adopted, enacted,
66
implemented, promulgated, issued, entered or deemed applicable by or under
the authority of any Governmental Body.
"INTELLECTUAL PROPERTY" - means any and all (i) inventions (whether
Patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all Patents, Patent applications and Patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof, (ii) Trademarks, service
marks, trade dress, logos, trade names, assumed names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith; (iii) copyrightable works,
all Copyrights and all applications, registrations and renewals in connection
therewith; (iv) mask works and all applications, registrations and renewals in
connection therewith; (v) trade secrets and confidential business information
(including ideas, research and development, know-how, technology, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (vi)
computer software (including data and related software program documentation in
computer-readable and hard-copy forms); (vii) other intellectual property and
proprietary rights of any kind, nature or description; and (viii) copies of
tangible and embodiments thereof (in whatever form or medium).
"KNOWLEDGE" - An individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(i) such individual is actually aware of such fact or other matter; or
(ii) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter with reasonable
investigation.
An entity or other Person will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a stockholder, director, officer, partner, member or trustee
of such entity (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
"LEASED REAL ESTATE" - has the meaning set forth in Section 5.21 of this
Agreement.
"LIABILITY" or "LIABILITIES" - means any and all debts, liabilities
and/or obligations of any type, nature or description (whether known or unknown,
asserted or unasserted, secured or unsecured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due).
"LIABILITY EXCEPTION" - has the meaning set forth in Section 10.1 of this
Agreement.
"LOSS" or "LOSSES" - has the meaning set forth in Section 10.1(a) of this
Agreement.
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"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" - means, in
connection with any Person, any event, change or effect that is materially
adverse, individually or in the aggregate, to the condition (financial or
otherwise), properties, assets, Liabilities, revenues, income, business,
operations, results of operations or prospects of such Person.
"MONTHLY NET REVENUE STATEMENT" - has the meaning set forth in Section
2.2(b) of this Agreement.
"NET ASSETS" - shall mean the assets less the liabilities set forth on
the Final Balance Sheet.
"NET ASSET ADJUSTMENT" - has the meaning set forth in Section 2.1 of this
Agreement.
"NET REVENUE" - has the meaning set forth in Section 2.2(a) of this
Agreement.
"NON-DEFAULTING PARTY" - has the meaning set forth in Section 13.2(a) of
this Agreement.
"ORDER"- means any judgment, award, decision, consent decree, Injunction,
ruling, writ or order of any federal, state or local Governmental Body, or
authority that is binding on any Person or its property under Applicable Law.
"ORDINARY COURSE OF BUSINESS" - means an action taken by a Person only if
(i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(ii) such action is not required to be authorized by the governing body
of such Person (or by any Person or group of Persons constituting
a governing body of a Person exercising similar authority).
"PARENT" means Seller's ultimate corporate parent and Affiliate, PT
Sumberdaya Pacific Corporation, an Indonesian corporation.
"PATENT" - has the meaning set forth in Section 5.15(a) of this
Agreement.
"PCBS" - has the meaning set forth in Section 5.24(h) of this Agreement.
"PERMITTED ENCUMBRANCES" - has the meaning set forth in Section 5.21(d)
of this Agreement.
"PERSON" - means any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or
other entity or Governmental Body.
"PHYSICAL INVENTORY" - has the meaning set forth in Section 7.25 of this
Agreement.
68
"PROCEEDING" - means any suit, litigation, arbitration, hearing, audit,
investigation, Injunction or other action (whether civil, criminal,
administrative or investigative) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" - has the meaning set forth in Section 2.1 of this
Agreement.
"PURCHASER" - has the meaning set forth in the introductory paragraph
hereof.
"RELATED PERSON" - means, with respect to a particular individual,
(i) each other member of such individual's Family (as hereafter
defined); and
(ii) any Affiliate of one or more members of such individual's Family.
With respect to a specified Person other than an individual:
(i) any Affiliate of such specified Person: and
(ii) each Person that serves as a director, governor, officer, manager,
general partner, executor or trustee of such specified Person (or
in a similar capacity). For purposes of this definition, the
"FAMILY" of an individual includes (a) such individual, (b) the
individual's spouse, (c) any lineal ancestor or lineal descendant
of the individual, or (d) a trust for the benefit of any of the
foregoing.
"RENEGOTIATED BRUNSWICK NOTE" - has the meaning set forth in Section 7.26
of this Agreement.
"RESPONSE PERIOD" - has the meaning set forth in Section 2.4 of this
Agreement.
"SCHEDULES" - means the Schedules to this Agreement.
"SELLER" - has the meaning set forth in the introductory paragraph of
this Agreement.
"SELLER'S PRODUCTS" - has the meaning set forth in Section 2.2(a) of this
Agreement.
"STOCKHOLDER" or "STOCKHOLDERS" - each have the meaning(s) set forth in
the introductory paragraph hereof.
"SOFTWARE" has the meaning set forth in Section 5.28 of this Agreement.
"SUPER-FUND" - is used in Section 5.24(b) of this Agreement.
"TAX" or "TAXES" - has the meaning set forth in Section 5.9 of this
Agreement.
69
"TAX RETURN" - means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including without limitation
any schedule or attachment thereto, any amendment thereof, and any estimated
report or statement.
"THREATENED" - a claim, Proceeding, dispute, action, or other matter will
be deemed to be "Threatened" if any demand or statement has been made, or any
notice has been given, that would lead a reasonably prudent Person to conclude
that such a claim, Proceeding, dispute, action, or other matter will be
asserted, commenced, taken or otherwise pursued in the future.
"TRADEMARKS" - has the meaning set forth in Section 5.15(a) of this
Agreement.
"YEAR-END STATEMENT" - has the meaning set forth in Section 2.2(b) of
this Agreement.
"YEAR 2000 COMPLIANT" has the meaning set forth in Section 5.28 of this
Agreement.
70
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LOGIC MARINE CORPORATION
By /s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Its Pres.
--------------------------
GENMAR LOGIC, LLC
By /s/ Xxxxx X. Xxxxxxxx, XX
--------------------------------
Its Ex. Vice President
--------------------------
SHAREHOLDERS:
ALLIED PLASTICS INTERNATIONAL, LTD.
By [ILLEGIBLE]
--------------------------------
Its Pres.
--------------------------
CHESHIRE HOLDINGS, LTD.
By [ILLEGIBLE]
--------------------------------
Its Pres.
--------------------------
PARENT:
PT SUMBERDAYA PACIFIC CORPORATION
By [ILLEGIBLE]
--------------------------------
Its Pres.
--------------------------
EXHIBIT A
XXXX OF SALE
Logic Marine Corporation, a Delaware corporation (hereinafter called
"Seller") for One Dollar ($1.00) and other valuable consideration to it in hand
paid, receipt of which is hereby acknowledged, by these presents does sell,
assign, transfer and convey unto Genmar Logic, LLC, a Delaware limited liability
company,(hereinafter called "Assignee"), its successors and assigns, the
following described property:
All property of every kind and description and wherever situated,
tangible and intangible, owned by Seller or to which Seller has any right,
title or interest on the date hereof, and including, without limitation, all
"Assets" as defined in a certain Agreement of Purchase and Sale of Assets,
dated April ___, 1999, among, INTER ALIA, Seller and Assignee (the
"Agreement"), which includes the following:
1. All cash, cash equivalents (including all certificates of deposit)
bank balances, monies in the possession of banks and other depositories, term or
time deposits, guaranteed investment certificates, treasury bills, other
securities and similar cash or cash-equivalent items owned by the Seller as of
the Closing Date;
2. All trade or other accounts, credit card and other receivables
owed to the Seller;
3. All inventories to which the Seller has title (including supplies
and samples) wherever located, including goods in transit;
4. All Copyrights, trade names, Trademarks, service marks, logos,
trade dress, Patents and applications therefor and registration thereof, and all
licenses held or granted in connection with any of the foregoing or other
Intellectual Property, together with the goodwill of the Seller connected with
the use thereof;
5. All real estate, machinery, equipment, vehicles, furniture,
furnishings, leasehold improvements, fixtures, signs, supplies, fixed assets and
other personal property;
6. All of such leases, franchise agreements, agreements, commitments,
contracts and warranties (including prepayments and deposits, and including any
of such agreements which may have expired), to which any Seller is a party are
listed on Exhibit B hereto, excluding defaults, breaches or other such charges
occurring and/or accruing prior to or on the Closing Date (the "Assumed
Contracts"); provided, however, in no event shall the Assignee assume or be
responsible for any termination or cancellation costs or expenses incurred in
connection with any Seller executory contracts;
7. All Confidential Information, including without limitation trade
secrets, technical, processing or marketing information, including product
formulae, developments, inventions, know-
A-1
how, processes, ideas and trade secrets and documentation thereof and all
claims and rights related thereto;
8. All files, customer records, employee records, logos, customer
lists, vendor lists, accounting books, records, ledgers and electronic data
processing materials. With respect to the foregoing and all other materials
related to the Seller's Business transferred hereunder, the Purchaser hereby
covenants and agrees that the Seller may, at its option (but subject to the
Assignee's right to prepare copies thereof), upon the Closing take possession
of certain permanent records of the Seller, which records shall include but
not be limited to articles and certificates of organization, by-laws, minute
books and resolutions, stockholder records, general ledgers, journal entries,
tax returns (state and federal), payroll and payroll tax reporting forms
(state and federal), W-2 employee earnings records, workers' compensation
reports, retirement, pension and other benefit plan documents and records,
and the like. Assignee and its employees shall provide reasonable assistance
to the Seller in the location of and information relating to such records for
five (5) years from the Closing Date;
Notwithstanding any other contrary provision in this Agreement, this provision
shall survive the Closing (and be enforceable) for the periods specified in this
paragraph (h);
In the event the Purchaser determines to destroy or otherwise dispose of any of
the Seller's records or materials subsequent to the applicable retention period,
the Purchaser will notify the Seller in writing and allow the Seller the
opportunity to take custody of such records and materials within a commercially
reasonable time after receipt of such notification;
9. All assignable rights under agreements concerning confidentiality,
non-competition or the assignment of ideas or inventions, including but not
limited to non-competition agreements;
10. All prepaid expenses, deposits with third parties useable by the
Purchaser and credit balances and advances to vendors;
11. All transferable permits, licenses and governmental agreements,
waivers and authorizations of the Seller which the Purchaser elects to assume by
notice at or before the Closing;
12. All information systems (hardware and software), programs, manuals
and documentation thereof;
13. All interests in other entities and joint ventures;
14. All advertising materials and arrangements;
15. All rights of the Seller under and proceeds from insurance
policies and all rights of action or Proceedings against third persons for
damage to the Seller's property, business interruption or otherwise (including
insurance protecting the Seller from liability) arising with respect to claims
arising prior to the Closing;
A-2
16. All other rights, property and assets of the Seller, tangible or
intangible, including the Seller's corporate and assumed names used or useful in
the conduct of its Business and any and all contingent assets;
17. directors' and officers' liability insurance policies covering
officers and directors of Seller;
18. any and all governmental refunds for income and other Taxes
previously paid to which Seller is entitled;
19. goodwill and other rights or interests that may accrue to or
constitute Seller's Business;
Seller hereby authorizes and grants its power of attorney to Assignee and
appoints Assignee and the officers thereof as Seller's attorney-in-fact to take
any appropriate action in connection with any of said rights, claims, causes of
action and property, in the name of Seller or in its own or any other name but
at its own expense, it being understood that this authorization and power of
attorney are coupled with an interest and irrevocable.
TO HAVE AND TO HOLD said rights, claims, causes of action, property,
assets, business and goodwill, as a going concern, unto the said Assignee, its
successors and assigns, to and for its use forever.
In furtherance of the foregoing, Seller agrees as follows:
1. Seller agrees that it will, at any time, and from time to time
after the date hereof, upon the request and at the expense of Seller, do,
execute, acknowledge and deliver or will cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be required for the better
assigning, transferring, granting, conveying, assuring and confirming to
Assignee the Assets assigned, transferred, conveyed and delivered or to be
assigned, transferred, conveyed and delivered to Assignee hereunder.
2. Seller hereby names, constitutes and appoints Assignee the true
and lawful attorney of Seller, with full power of substitution in the name of
Assignee or in the name of Seller but on behalf of and for the benefit of
Assignee, its successors and assigns, to demand and receive from time to time
any and all Assets hereby assigned, transferred, conveyed and delivered to
Assignee and to give receipts, releases and acquittances for and in respect of
the same or any part thereof.
A-3
AND, Seller does hereby warrant, covenant and agree that it:
(a) has good and marketable title to the properties and assets
hereby sold, assigned, transferred, conveyed and delivered, subject to
such liens and other Encumbrances as are disclosed in the Agreement or
any schedules or exhibits thereto and except as otherwise provided in the
Agreement; and
(b) will warrant and defend the sale of said properties and
assets against all and every person or persons whomsoever claiming or to
claim against any or all of the same, subject to the terms and provisions
of the Agreement.
Any terms or phrases capitalized herein and not otherwise defined shall
have the meaning(s) ascribed to them in the Agreement.
IN WITNESS WHEREOF, Seller has caused this instrument to be duly executed
this ________ day of April, 1999.
SELLER:
LOGIC MARINE CORPORATION
By
---------------------------------
Its
-----------------------------
ATTEST:
----------------------------------
Secretary
A-4
EXHIBIT B
LIABILITIES UNDERTAKING
UNDERTAKING dated April, 1999 by GENMAR LOGIC, LLC, a Delaware limited
liability company (hereinafter called "Purchaser") in favor of LOGIC MARINE
CORPORATION, a Delaware corporation (hereinafter called "Seller").
RECITALS
A. Pursuant to that certain Agreement of Purchase and Sale dated as
of April ____, 1999, among, INTER ALIA, Purchaser and Seller (the "Agreement"),
Seller has concurrently herewith sold, assigned, transferred, conveyed and
delivered to Purchaser substantially all of the Business, assets, properties,
goodwill and all other rights and interests of Seller as a going concern (the
"Assets"); and
B. In partial consideration therefor, the Agreement requires
Purchaser to execute and deliver to Seller this Undertaking;
C. All terms capitalized but not otherwise defined herein shall have
the meaning ascribed by and in the Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Purchaser is hereby
acknowledged, Purchaser hereby agrees as follows:
AGREEMENT
1. Purchaser hereby undertakes, assumes and agrees, subject to the
limitations contained herein, to perform, pay or discharge any and all Assumed
Liabilities set forth in Section 1.3(a) of the Agreement.
2. The debts, liabilities and obligations assumed by Purchaser under
Paragraph l hereof shall not include:
(a) Any Excluded Liabilities set forth in Section 1.3(b) of the
Agreement and any other liabilities, debts and obligations assigned to
the Seller under the Agreement;
(b) federal, state or local income, franchise, excise, sales,
use, property, payroll or similar Taxes imposed on Seller except to the
extent that (i) such Taxes constitute debts or liabilities of Seller
which would be assumed by Purchaser under the provisions of paragraph 1
above; (ii) Purchaser receives the benefits of all deposits, escrow
accounts or other payments made or collected by Seller on account of or
with respect to such Tax liabilities; and (iii) Seller complies with each
of the following conditions:
B-1
(i) Seller shall afford Purchaser the right, at its
option, to assume the entire control of the preparation and filing
of all non-income based Tax returns with respect thereto, and
Seller shall keep Purchaser fully advised as to any and all
investigations, audits or other Proceedings, Orders or other
communications by any taxing agent or authority which may affect
the amount of the Tax liabilities being assumed hereunder; and
(ii) Seller shall afford Purchaser the right, at its
option, to assess the entire control of any such audit or other
Proceeding insofar as it may relate to the liabilities of Seller
assumed hereunder, including the defense, compromise or settlement
thereof, and in connection therewith Seller and the Stockholders
shall cooperate fully and make available to Purchaser all
information under their control relating thereto which Purchaser
may reasonably request and shall execute and deliver to Purchaser
such powers-of-attorney or other documents which Purchaser may
reasonably deem necessary or desirable to effectuate the
foregoing.
(c) liabilities or obligations of Seller resulting or arising
from claims for personal injury or property damage or out of any breach
or any non-performance by Seller of any contract, commitment or
obligation imposed by law or otherwise, except to the extent covered by
insurance proceeds payable to or on behalf of Purchaser; or
(d) debts, liabilities or obligations arising under any
contract which have not been assigned to Purchaser so that Purchaser will
enjoy the full benefits thereunder or which is listed in any Schedule to
the Agreement and specifically designated thereon as "Not Assumed"; or
(e) debts, liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
Closing or which arise after the Closing but which are based upon or
arise from any act, omission, transaction, circumstance, sale of goods or
services (excluding product warranty claims of $100,000 or less which the
parties have agreed will be the responsibility of Purchaser), state of
facts or other condition which occurred or existed on or before the date
of the Closing, including products liability claims whether or not then
known, due or payable, except to the extent reflected or reserved against
on the face of the Final Balance Sheet (excluding the notes thereto) or
incurred after the Final Balance Sheet date in connection with the
purchase of goods or services in the ordinary course of Seller's Business
and in conformity with the representation, warranties and covenants
contained in the Agreement.
3. Nothing contained herein shall require Purchaser to pay or
discharge any debts or obligations expressly assumed hereby in the event, and so
long as, Purchaser shall in good faith contest or cause to be contested the
amount or validity thereof.
B-2
4. Other than as specifically stated above or in the Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this
Undertaking, and it is expressly understood and agreed that all debts,
Liabilities and obligations not assumed hereunder by Purchaser shall remain the
sole obligation of Seller, its successors and assigns, and no Person other than
Seller shall have any rights under this Undertaking or the provisions contained
herein.
5. Any terms or phrases Capitalized herein and not otherwise defined
shall have the meaning(s) ascribed to them in the Agreement.
GENMAR LOGIC, LLC
By
---------------------------------
Its
------------------------------
B-3
EXHIBIT C
NON-COMPETITION AND CONTINUITY
OF BUSINESS DEALINGS UNDERTAKING
THIS UNDERTAKING dated ______________, 1999 by _____________________ in
favor of ____________________, a Delaware limited liability Company (hereinafter
called the "Company").
RECITALS
A. The Company has entered into an Agreement of Purchase and Sale of
Assets, dated _______________, 1999 (the "Agreement"), with ________________, a
limited liability company, having its principal office at ____________________,
_____________________, (hereinafter called "Seller") and the Stockholders of
Seller, pursuant to which the Company is to purchase from Seller, and Seller is
to sell to the Company, all of the business, assets, properties, goodwill and
rights of Seller (the "Seller's Assets"); and
B. The undersigned is one of the parties referred to in the Agreement
as being required to execute and deliver this Undertaking.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration, the receipt of which is hereby acknowledged by the
undersigned, and in order to induce the Company to purchase the Seller's Assets
pursuant to the terms of the Agreement, the undersigned hereby undertakes and
agrees as follows:
1. The undersigned will not, for a period of (i) forty-eight (48)
months from the date of the closing of the transactions contemplated by the
Agreement (hereinafter called the "Closing"), or (ii) two (2) years after the
last payment of the earn-out consideration under Section 2.2 of the Agreement,
whichever is later (the "Limited Period"), directly or indirectly, anywhere in
the world (except the continent of Asia [and other locations as agreed by the
parties in the final version]) or within the geographical area or territory
where the Business of Seller is presently being conducted or may from time to
time be conducted by the Company during the Limited Period, own, manage, operate
or control, or participate in the ownership, management, operation or control
of, or be connected with or have any interest in, as a stockholder, member,
director, officer, employee, agent, consultant, lender, partner or otherwise,
(a) any business which designs, manufactures, produces, sells or distributes
product the same or similar to the Business, including without limitation boats
and marine products, or any other products which have been manufactured,
produced, sold or distributed by Seller or which are competitive therewith or
(b) any other business which is competitive with the Business conducted by
Seller or any of its Affiliates during the Limited Period; PROVIDED, HOWEVER,
that nothing contained herein shall prohibit the undersigned from owning less
than 5% of any class of securities listed on a national securities exchange or
traded publicly in the over-the-counter market. If any of the provisions of this
paragraph is held to be unenforceable
C-1
because of the scope, duration or area of its applicability, the court making
such determination shall have the power to modify such scope, duration or
area or all of them, and such provision shall then be applicable in such
modified form.
2. The undersigned will use his or its best efforts to preserve
the business organization of Seller, to keep available to the Company the
services of Seller's present officers, employees and agents and to preserve
for the Company Seller's present business relations with its suppliers,
distributors, customers and others, and the undersigned shall not, either
before or after the Closing, commit any act, or in any way assist others to
commit any act, which will injure the Company or the business heretofore
conducted by Seller, and, without limiting the generality of the foregoing,
the undersigned will not divulge any Confidential Information or make
available to any others any documents, files or other papers concerning the
business or financial affairs of Seller.
3. Since the Company will be irreparably damaged if the provisions
hereof are not specifically enforced, the Company shall be entitled to an
injunction restraining any violation of this Undertaking by the undersigned
(without any bond or other security being required), or any other appropriate
decree of specific performance. Such remedies shall not be exclusive and
shall be in addition to any other remedy which the Company may have.
4. This Undertaking and any rights or interests arising from or in
connection with this Undertaking or the Agreement shall (i) not be assignable by
Seller, Parent or the Stockholders and any such purported assignment shall be
null and void and of no force or effect, (ii) be assignable by Company in its
sole discretion, including any assignment to Genmar Holdings, Inc.'s lenders
under the senior and subordinated credit facilities of Genmar Holdings, Inc.
5 Any terms or phrases capitalized herein and not otherwise defined
shall have the meaning(s) ascribed to them in the Agreement.
This Undertaking shall inure to the benefit of the Company and its
successors and assigns, shall be binding upon the undersigned and his or its
successors and assigns and may not be modified or terminated orally.
-----------------------------------
[Type or Print Name]
-----------------------------------
[Signature]
C-2
