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EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
between
XXXXXXX CORPORATION
and
SAF-T-HAMMER CORPORATION
Dated as of May 11, 2001
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of May 11, 2001, (this
"AGREEMENT"), between Xxxxxxx Corporation, a company organized under the laws of
the State of Delaware (the "SELLER"), and Saf-T-Hammer Corporation, a company
organized under the laws of the State of Nevada (the "BUYER").
RECITALS
A. WHEREAS, the Seller owns all of the issued and outstanding shares of Xxxxx
& Wesson Corp., a company organized under the laws of the State of Delaware (the
"COMPANY"); and
B. WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, 800 shares of common stock, par value $0.01 per share,
representing all of the issued and outstanding shares of the Company (the
"SHARES"), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained herein,
and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS & INTERPRETATION
Section 1.1 Definitions. For all purposes of this Agreement,
the following terms have the following meanings:
"Act" has the meaning given in Section 4.5.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person. For purposes of this definition, the term "control"
(including the correlative terms "controlling," "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
(whether or not exercised) to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
interests of such Person, by contract or otherwise.
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"Balance Purchase Price" has the meaning given in Section
2.1.
"Boston Agreement" means the agreement, dated 11 December
2000, signed by the Company, the city of Boston and the Boston Public Health
Commission.
"Business Day" means any day other than a Saturday, Sunday or
one on which banks are authorized or required by law to close in New York, New
York.
"Business Records" has the meaning given in Section 5.5.
"Buyer Damages" has the meaning given in Section 6.2.
"Buyer Indemnities" has the meaning given in Section 6.2.
"Buyer Material Adverse Effect" means an event, change or
circumstance that would materially and adversely affect the ability of the Buyer
to consummate the transactions contemplated in this Agreement or to perform its
obligations under this Agreement.
"Buyer's Note" has the meaning given in Section 2.1.
"Change of Control" means, with respect to the Buyer or the
Company:
(i) whenever the Control Shareholders do not control the
Buyer or the Company;
(ii) whenever the Control Shareholders sell or dispose
of any of their shares in the Buyer, where such sale or disposal
results in the Control Shareholders holding, in the aggregate, less
than thirteen percent (13%) of the voting securities of the Buyer;
(iii) the sale of all or substantially all of the assets
of the Buyer or the Company, or any of the capital stock of the
Company; provided, that the Buyer shall be permitted to sell all or
substantially all of the assets owned by the Buyer prior to the Closing
and any assets it acquires after the
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Closing Date unless any such sale constitutes a sale of all or
substantially all of the assets of the Buyer; and
(iv) whenever the shares of the Buyer are no longer
publicly traded.
For purposes of this definition, "control" shall mean the possession, directly
or indirectly, of the power (whether or not exercised) to direct or cause the
direction of the management and policies of the Buyer or Company, whether
through the ownership of voting securities or interests of the Buyer or Company,
by contract or otherwise.
"Closing" means the consummation of the sale of the Company by
the Seller to the Buyer, in accordance with this Agreement.
"Closing Date" means the date of the Closing.
"Company Agreements" has the meaning given in Section 3.13.
"Company Disclosure Schedule" has the meaning given in Section
3.1.
"Company Group" means the Company and all of its Subsidiaries,
both present and past.
"Company Liabilities" means any and all debts, obligations,
contracts and liabilities of any kind, character or description (whether known
or unknown, accrued, absolute, contingent, indirect or derivative, or otherwise)
of any member of the Company Group, of any predecessor of any member of the
Company Group, of any prior owner of all or part of their respective businesses
or assets, or of any direct or indirect parent of the Company (including, but
not limited to, the Seller and Xxxxxxx) and any Affiliate of the Company where
the debts, obligations, contracts or liabilities of such parent or Affiliate
relate to any member of the Company Group, any predecessor of any member of the
Company Group or any prior owner of all or part of the businesses or assets of
any member of the Company Group or any predecessor of any member of the Company
Group, and the agreement, action, omission or event which gave rise to such
debt, obligation, contract or liability occurred prior to the Closing (provided,
that the parties hereby agree that the Letters of Credit & Bond are liabilities
which existed prior to Closing). Any such debts, obligations, contracts and
liabilities include but are not limited to:
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(v) all liabilities, whether contingent or otherwise,
set forth in the balance sheets of any member of the Company Group;
(vi) all Environmental Liabilities;
(vii) all liabilities and obligations arising out of any
action (including, but not limited to, any class actions), suit,
investigation or proceeding before any arbitrator or Governmental
Entity listed on Exhibit A hereto or otherwise;
(viii) all liabilities and obligations arising out of
any action (including, but not limited to, any class actions), suit,
investigation or proceeding before any arbitrator or Governmental
Entity which may at any time (whether past, present or future) be made,
commenced, asserted, or pursued, that in any way are based upon or
arise from Company Products of any description anywhere in the world,
including, but not limited to, all liabilities and obligations relating
to or arising in any way from:
(A) the design, manufacture, marketing,
development, advertising, research, distribution or sale of
such products at any time; and
(B) any statement or other actions or
omissions (including, but not limited to, a failure to give
adequate warning) of any member of the Company Group (or any
predecessor of any member of the Company Group or any prior
owner of all or part of its businesses or assets) at any time;
(ix) all liabilities and obligations relating to any products
manufactured or sold by the Company or any of its Subsidiaries (past or
present) at any time, including, but not limited to, all warranty
obligations and product liabilities and any liability or
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obligation relating to the effects of, or exposure to, any products
manufactured, sold or distributed by the Company or any of its
Subsidiaries (past or present) at any time; and
(x) all liabilities or obligations relating to employee
benefits or compensation arrangements with respect to any employee or
former employee of the Company or any of its Subsidiaries (past or
present) at any time.
"Company Material Adverse Effect" means a material adverse
change in, or effect on, the business, results of operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
In determining whether a Company Material Adverse Effect has occurred, the
effects of changes that exist on the Closing Date and have been reflected in
this Agreement or disclosed in the Company Disclosure Schedule, or that are
generally applicable to the industry in which the Company and its Subsidiaries
operate or to the United States economy generally, shall be excluded.
"Company Products" means:
(i) at any time prior to Closing, any products that
the Company has manufactured, sold, distributed, represented, repaired,
serviced, licensed or otherwise provided and any services that the Company has
provided; and
(ii) at any time after Closing, any products that the
Company will manufacture, sell, distribute, represent, repair, service, license
or otherwise provide and any services that the Company will provide.
"Control Shareholders" means Xxxxxxxx Xxxxx, Xxxxxx Xxxxxx,
Xxxxxxxx Xxxxx and Xxxxxx Xxxxx.
"Covenant Certification" has the meaning given in Section
5.17.
"Environmental Laws" means any federal, state, local or
foreign law (including, but not limited to, common law), treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or any agreement with any Governmental Entity relating
to the environment, the effect of the environment on human health and safety or
to pollutants, contaminants, wastes or chemicals or any toxic, radioactive,
ignitable, corrosive, reactive or otherwise hazardous substances, wastes or
materials.
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"Environmental Liabilities" means any and all liabilities at
any time arising in connection with or in any way relating to the Company, any
member of the Company Group or any activities or operations occurring or
conducted at the real property used or held for use in the conduct of the
Company (together with all buildings, fixtures and improvements thereon and,
also including, but not limited to, offsite disposal), whether accrued,
contingent, absolute, determined, determinable or otherwise, which arise under
or relate to any Environmental Law, whether now or hereinafter in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules, regulations and orders issued thereunder, as any of the same
may be amended.
"Expiration Date" means February 1, 2002 with respect to the
Chase-NY/Insurance of Wasau letter of credit for $500,000 and September 30, 2001
for all other Letters of Credit & Bond.
"GMBH" means Xxxxx & Wesson Firearms Training Centre GMBH, a
German company and one of the Subsidiaries of the Company.
"Governmental Entity" means any governmental or regulatory
body, authority or court, domestic or foreign.
"Indebtedness" includes, but is not limited to:
(xi) all indebtedness for borrowed money;
(xii) that portion of obligations with respect to
capital leases that is properly classified as a liability on a balance
sheet in conformity with generally accepted accounting principles; and
(xiii) any direct or indirect guaranty by the Company,
or the Subsidiaries of the Company, of any obligation of any other
Person, whether for borrowed money or otherwise.
"Initial Purchase Price" has the meaning given in Section 2.1.
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"Insurance Side Letter" means the side letter agreement, dated
May 10, 2001, from the Seller to the Buyer which lists the insurance policies of
the Xxxxxxx' Group from which the Company Group will be removed as an insured
from the Closing Date.
"Laws" has the meaning given in Section 3.5.
"LCB Account" has the meaning given in Section 2.10.
"LCB Interest Rate" means the rate of interest earned by the
Seller on the LCB Account.
"Letters of Credit & Bond Amount" has the meaning given in
Section 2.10(b).
"Letters of Credit & Bond" has the meaning given in Section
2.10.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest or encumbrance in respect of
such property or asset.
"Municipal Lawsuits" has the meaning given in Section 3.17.
"Non-Combined Tax Return" has the meaning given in Section
5.16(c)(ii).
"Note" means the promissory note held by the Seller, issued
and payable by the Company, in the amount of $73,830,000, due April 30, 2004, at
an interest rate of 9% per annum.
"Note Amendment" means the first amendment to the Note, dated
the date of this Agreement, between the Seller and the Company.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (i) which is maintained for past or present
employees of the Company Group, or (ii) to which the Company Group made, or was
required to make, contributions within the preceding five years, as any of the
same may be amended.
"Permits" has the meaning given in Section 3.18.
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"Permitted Indebtedness" means Indebtedness incurred in the
ordinary course of business (which ordinary course may include the leasing of
equipment for the business conducted in the ordinary course by members of the
Company Group) of the Company in connection with the purchase, acquisition or
lease of equipment, the purchase or acquisition of inventory for the manufacture
of products or delivery of services, for use in the business of the Company or
any Subsidiary of the Company.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof (or any equivalent in any jurisdiction).
"Purchase Price" means $15,000,000.
"Real Property" has the meaning given in Section 3.9.
"Restricted Payment" means:
(xiv) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of
the Company, or any Subsidiary of the Company, now or
hereafter outstanding other than the following:
(A) common stock dividends payable on common
stock;
(B) dividends payable from a wholly-owned
Subsidiary of the Company to the Company; and
(C) dividends payable by the Company to the
Buyer in an amount not in excess of $600,000 in the
twelve (12) month period following the Closing and not
in excess of $1,800,000 per annum thereafter, subject to
applicable law.
(xv) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value,
direct or
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indirect by any member of the Company Group, of any shares
of any class of stock of the Company, or any Subsidiary of
the Company, now or hereafter outstanding; and
(xvi) any payment made by any member of the
Company Group to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire
shares of any class of stock of the Company, or any Subsidiary
of the Company, now or hereafter outstanding.
"Retention Amount" has the meaning given in Section 2.10.
"Seller Damages" has the meaning given in Section 6.3.
"Seller Group" means the Seller and its Affiliates.
"Seller Indemnities" has the meaning given in Section 6.3.
"Seller Obligations" has the meaning given in Section 2.10.
"Settlement Agreement" means the agreement, entitled
`Settlement Document', dated March 17, 2000, among the Company, the Department
of Housing and Urban Development, the Department of Treasury and various states
and municipalities.
"Shares" has the meaning given in Recital B.
"Subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership or
membership interests of which is sufficient to elect at least a majority of its
board of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned or controlled
directly or indirectly by such person.
"Tax" or "Taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including income, gross
receipts, ad valorem, value added, excise, real or property, asset, sales, use,
license, payroll, transaction, capital, net worth, withholding, estimated,
social security, utility, workers' compensation, severance, production,
unemployment compensation, occupation, premium, windfall profits, transfer and
gains taxes or other
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governmental taxes imposed or payable to the United States, or any state,
county, local or foreign government or subdivision or agency thereof, together
with any interest, penalties or additions with respect thereto and any interest
in respect of such additions or penalties.
"Tax Claim" has the meaning given in Section 5.16.
"Tax Package" has the meaning given in Section 5.16.
"Tax Returns" means all returns, reports, statements,
declarations, estimates and forms or other documents (including any related or
supporting information), required to be filed with respect to any Taxes.
"Tax Sharing Agreement" has the meaning given in Section 5.16.
"Third Party Claims" has the meaning given in Section 6.4.
"Xxxxxxx" means Xxxxxxx PLC, a public company organized under
the laws of England and Wales.
"Xxxxxxx' Group" means Xxxxxxx and all of its Subsidiaries.
"Transfer Taxes" has the meaning given in Section 5.16.
"Transitional Agreement" means the agreement, dated the date
of this agreement, among the Seller, the Buyer and Xxxxxxx, relating to the
insurance coverage of the parties, particularly in relation to the Company
Liabilities.
"Welfare Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (i) which is maintained for past or present
employees of the Company Group, or (ii) to which the Company Group made, or was
required to make, contributions within the preceding five years, as any of the
same may be amended.
Section 1.2 Interpretation. (a) Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."
(b) The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
and
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article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(c) The meaning assigned to each term defined herein shall be
equally applicable to both the singular and the plural forms of such term, and
words denoting any gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a corresponding
meaning.
(d) A reference to any party to this Agreement or any other
agreement or document shall include such party's successors and permitted
assigns.
(e) A reference to any legislation or to any provision of any
legislation shall include any amendment to, any modification or re-enactment
thereof, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(f) 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 provisions
of this Agreement.
(g) The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
ARTICLE II
SALE OF STOCK
Section 2.1 Purchase and Sale. (a) Upon the terms and subject
to the conditions of this Agreement, the Seller hereby sells, conveys, assigns,
transfers and delivers to the Buyer, and the Buyer hereby purchases, acquires
and accepts from the Seller the Shares, in consideration for which:
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(i) the Buyer hereby pays to the Seller $5,000,000 of the
Purchase Price (the "INITIAL PURCHASE PRICE") by wire transfer of
immediately available funds to an account or accounts designated in
writing by the Seller; and
(ii) the Buyer hereby agrees to pay the Seller $10,000,000 of
the Purchase Price (the "BALANCE PURCHASE PRICE") on May 11, 2002 by
wire transfer of immediately available funds to an account or accounts
designated in writing by the Seller, pursuant to a promissory note
issued by the Buyer in the form of the note in Exhibit E (the "BUYER'S
NOTE") and delivered at the Closing.
(b) Except for the representations and warranties expressly
stated by the Seller in Article III of this Agreement, all the Shares to be
sold, conveyed, assigned, transferred and delivered pursuant to this Agreement
shall be conveyed, assigned and transferred on an "as is" and "where is" basis
with all faults, without any representations or warranties, expressed or
implied, in fact or by law with respect to the Shares, the Company or the
Subsidiaries of the Company, and without any recourse against the Seller.
Section 2.2 Deliveries by the Seller at Closing. The Seller
hereby delivers the following to the Buyer:
(a) A certificate or certificates representing the Shares,
accompanied by stock powers duly endorsed in blank or accompanied by duly
executed instruments of transfer;
(b) The resignations of all members of the boards of directors
of the Company and its Subsidiaries and all officers of the Company and its
Subsidiaries, who are employees of the Seller; and
(c) Evidence that the transaction in Section 2.8(b) has been
effected.
(d) A certificate of its Secretary, dated as of the date of
this Agreement, certifying (i) that correct and complete copies of each
resolution of its
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board of directors approving this Agreement and the other instruments and
transactions to be executed in connection herewith and authorizing the execution
hereof and thereof and the consummation of the transactions contemplated hereby
and thereby and attached thereto and (ii) the incumbency and signatures of the
officers of the Seller authorized to execute and deliver this Agreement and the
other documents and instruments required by this Agreement.
(e) For each of the Company and its Subsidiaries, a
certificate of the Secretary of State of such entity's state of incorporation,
dated as of a recent date, as to the legal existence and good standing of such
entity, except for GMBH as to which applicable German corporate documents, if
any, will be provided.
(f) The Company Disclosure Schedule, containing such items as
required by this Agreement.
Section 2.3 Deliveries by the Buyer at Closing. At the Closing, the
Buyer hereby delivers to the Seller:
(a) the Initial Purchase Price, in immediately available
funds, in the manner set forth in Section 2.1 of this Agreement.
(b) the Buyer's Note, duly executed by the Buyer on the
Closing Date.
Section 2.4 Note Amendment. Immediately following the Closing, the
Buyer shall cause the Company to, and the Seller shall, execute the Note
Amendment and the Buyer shall deliver the same to the Seller.
Section 2.5 Repayment. Immediately following the execution of the Note
Amendment by the Company and the Seller, the Buyer will cause the Company to
repay $20 million of the total amount owing under the Note, as amended by the
Note Amendment, to the Seller, by wire transfer of immediately available funds
to an account or accounts designated by the Seller.
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Section 2.6 Books and Records of the Company. The Seller agrees that,
upon the Closing, the books and records of the Company and its Subsidiaries
shall be delivered to the Buyer or the Company, including, but not limited to,
correspondence, memoranda, books of account, personnel, payroll records and the
like; provided, however, that neither the Buyer nor any of its Affiliates shall
have the right to receive or obtain any information relating to Taxes or Tax
Returns of the Seller, any of the Seller's Affiliates, or any of Seller's
Affiliates' respective predecessors, other than information relating solely to
the Company and its Subsidiaries.
Section 2.7 Transition Services. All data processing, accounting, tax,
insurance, banking, personnel, legal, communications and other products and
services provided to the Company and its Subsidiaries by the Seller or any
Affiliate of the Seller (other than the Company Group), including any agreements
or understandings (written or oral) with respect thereto, hereby terminate
without any further action or liability on the part of the parties thereto.
Section 2.8 Inter-company Accounts.
(a) As of the date of this Agreement, all inter-company
accounts (including, but not limited to, inter-company loans, but excluding the
Note) between the Company or its Subsidiaries, on the one hand, and the Seller
or its Affiliates (excluding the Company and its Subsidiaries) on the other
hand, shall be settled through a cash payment of the full amount of the
respective obligation by the obligor to the creditor party.
(b) The parties acknowledge that, immediately prior to the
Closing, the principal amount of the Note shall be reduced to $50,000,000 by way
of, in the discretion of the Seller, a capital contribution in kind of, an
offset of, a cash payment of an amount equal to (but only to the extent of cash
contributed to the Company by the Seller for such purpose), or such other manner
selected by the Seller to reduce the principal amount of the Note by, the
portion of the principal amount of the Note in excess of $50,000,000.
Section 2.9 Insurance. Simultaneously with the execution of this
Agreement, the Seller, the Buyer and another party have executed the
Transitional Agreement which shall govern the parties' respective post-Closing
rights and
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obligations in relation to accessing liability insurance coverage existing prior
to and as of the date of Closing.
Section 2.10 Treatment of Seller Obligations. (a) Except as
provided in clause (b) below, following the Closing, the Buyer shall cause the
Company to use its commercially reasonable efforts to release and cancel the
obligations of the Seller set out in Exhibit B (the "SELLER OBLIGATIONS") within
90 days of the Closing; provided, however, that to the extent that any of the
Seller Obligations cannot be so released and cancelled, the Buyer shall use its
commercially reasonable efforts to cause itself to be substituted for the Seller
and any of its Affiliates in respect of such Seller Obligations (or if not
possible, added as the primary obligor under the Seller Obligations). In any
event, the Buyer shall indemnify, defend and hold harmless the Seller and its
Affiliates, as applicable, for all liabilities or expenses that might arise or
be incurred by any of the Seller and its Affiliates under the Seller
Obligations.
(b) In the case of:
(i) the current $5,000,000 bond (Bond number
137703854) placed with the Department of Industrial Accidents,
Massachusetts for worker's compensation (the "BOND"), the Buyer hereby
acknowledges that the Company has initiated the process to replace the
Bond using the cash of the Company;
(ii) the letters of credit set out in Exhibit F and
the Bond (together, the "LETTERS OF CREDIT & BOND"), which total
$7,235,000.00, the Buyer hereby agrees that the Seller shall retain
$7,235,000.00 (the "RETENTION AMOUNT"), which Retention Amount includes
a "Collateralization Factor" required by Chase Bank, in its account
when it calculates its inter-company account obligations to the Company
in accordance with Section 2.8(a) until the Letters of Credit & Bond
are replaced or expire; provided, as each of such Letters of Credit &
Bond is replaced or expires the Seller shall within five (5) days
thereafter release from the Retention Amount and pay to the Company the
amount of such released Letter of Credit or Bond along with a pro rata
portion of the Collateralization Factor; provided, however, that the
Seller shall not be obligated to release any portion of the
Collateralization Factor until it has been released under the
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Seller's arrangement with Chase Bank unless all of the Letters of
Credit & Bond have either been replaced or have expired.
Notwithstanding the foregoing, if the Letters of Credit & Bond have not
been replaced or have not expired by the Expiration Date, then the
Seller will be entitled to keep the Retention Amount or any portion
thereof which has not been so replaced or so expired. The Seller shall
maintain the Retention Amount in an interest bearing account (the "LCB
ACCOUNT") with Chase Bank or a comparable institution. Within five (5)
days after receipt of interest on the LCB Account, from time to time,
the Seller shall pay to the Company interest on the outstanding balance
of the Retention Amount, which interest shall be an amount equal to
one-half of one percent (0.5%) less than the LCB Interest Rate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as
follows:
Section 3.1 Organization. (a) Each of the Company and its
Subsidiaries:
(i) is a corporation validly existing and, except
for GMBH, is in good standing under the laws of the jurisdiction of its
organization; and
(ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets and to
carry on its business substantially as it is now being conducted.
(b) Section 3.1 of the disclosure schedule being delivered by
the Seller to the Buyer concurrently herewith (the "COMPANY DISCLOSURE
SCHEDULE") sets forth a complete list, as of the date of this Agreement, of all
of the Subsidiaries of the Company and their respective jurisdictions of
organization and, except for GMBH, their respective capitalization. Except as
set forth in Section 3.1 of the Company Disclosure Schedule, the Company does
not own any equity interest
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in any corporation or other entity. The Seller has previously delivered to the
Buyer true and correct copies of the certificate of incorporation and by-laws or
comparable organizational documents of the Company and its Subsidiaries as in
effect on the date of this Agreement. The minute books and stock record books of
the Company Group are complete and correct in all material respects. The minute
books of the Company Group contain a record of all shareholder and director
action which is accurate and complete in all material respects.
(c) The Company wholly owns Xxxxx & Wesson Distributing, Inc.,
Xxxxx & Wesson, Inc. and Xxxxx & Wesson Firearms Training Centre GMBH and the
Company made an initial capital contribution of $50,000 to Walther USA, LLC.
Section 3.2 Authority. The Seller has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly authorized by the
board of directors of the Seller.
Section 3.3 Validity of Agreement. This Agreement has been duly and
validly executed and delivered by the Seller and (assuming this Agreement has
been duly authorized, executed and delivered by the Buyer) constitutes a valid
and binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, except that:
(a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally; and
(b) enforcement of this Agreement, including by, among other
things, the remedy of specific performance or injunctive or other forms of
equitable relief, may be subject to equitable defenses and would be subject to
the discretion of the court before which any such proceeding may be brought.
Section 3.4 Ownership of Shares. The Shares represent all of the
outstanding capital stock of the Company. All Shares are validly issued, fully
paid
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and non-assessable. The Seller is the record and beneficial owner of the Shares
which are held free and clear of all Liens. No other stock or other securities
of any kind whatsoever are issued or outstanding, including, without limitation:
(a) bonds, debentures, or any other debt security; options,
rights, or warrants to purchase or subscribe for, or any commitment or
obligation of any kind to issue, any stock or securities of the Company; and
(b) securities convertible into stock of the Company.
There are no declared or accrued and unpaid dividends.
Section 3.5 Consents and Approvals; No Violations. Except as set forth
in Section 3.5 of the Company Disclosure Schedule, neither the execution and
delivery of this Agreement by the Seller, nor the consummation by the Seller or
the Company of the transactions contemplated hereby will:
(a) conflict with or result in any breach of any provision of
the certificate of incorporation or by-laws or comparable organizational
documents of the Seller or the Company or any Subsidiary of the Company;
(b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or require any
consent under, any indenture, license, contract, agreement or other instrument
or obligation to which the Seller, the Company or any Subsidiary of the Company
is a party or by which any of them or any of their respective properties or
assets are bound;
(c) violate any order, writ, injunction, decree or award
rendered by any Governmental Entity or any statute, rule or regulation
(collectively, "LAWS") applicable to the Seller, the Company or any Subsidiary
of the Company or any of their respective properties or assets; or
(d) require any filing with, or the obtaining of any permit,
authorization, consent or approval of, any Governmental Entity,
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except in the case of clauses (b), (c) and (d) of this Section 3.5 for any such
violations, breaches, defaults, rights of termination, cancellation or
acceleration or requirements that, individually or in the aggregate,
(i) would not have a Company Material Adverse Effect
or would not adversely affect the ability of the Seller to
consummate the transactions contemplated by this Agreement; or
(ii) become applicable as a result of the business or
activities in which the Buyer is or proposes to be engaged (in
each case, other than activities of the Company and its
Subsidiaries) or as a result of any acts or omissions by, or
the status of or any facts pertaining to, the Buyer.
Section 3.6 Brokers; Finders and Fees. Except for Xxxx
Xxxxxxxx & Company, Inc., the fees of which will be paid by the Seller, neither
the Seller nor the Company and its Subsidiaries has employed any investment
banker, broker or finder or incurred any liability for any investment banking
fees, brokerage fees, commissions or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
Section 3.7 Tax Matters. Except as set forth in the Company
Disclosure Schedule:
(a) The Company and each Subsidiary of the Company
has timely filed (or there have been filed on its behalf) with appropriate
taxing authorities all material Tax Returns required to be filed by it on or
prior to the date hereof (taking into account all extensions timely filed), and
such Tax Returns are correct in all material respects.
(b) There are no liens for Taxes upon any property
or assets of the Company or any Subsidiary of the Company except for liens for
Taxes not yet due.
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(c) No federal, state, local or foreign audits,
examinations, investigations or other administrative proceedings or court
proceedings (collectively, for purposes of this subsection (c) only,
"investigations") are presently pending with regard to any Taxes or Tax Returns
filed by or on behalf of the Company or any Subsidiary of the Company. Neither
the Company nor the Seller has received any written notice of any investigation.
(d) There are no outstanding requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any Taxes or deficiencies against the Company or any
Subsidiary of the Company.
(e) Neither the Company nor any Subsidiary of the
Company is a party to any material tax sharing, tax indemnity or other agreement
or arrangement with any Person.
(f) All Taxes for which the Company or any
Subsidiary of the Company is liable that are due and payable or required to be
withheld by the Company or any Subsidiary of the Company on or before the date
of this Agreement have been paid or withheld in full.
Section 3.8 Cash Held in Company Account. The cash of the
Company in its cash bank accounts as of 12:01am on May 11, 2001 (excluding
amounts which as of the date hereof have been provisionally credited to the
Company and which credits are hereafter ultimately not sustained as a result of
an error by the bank or an act or omission by a Person other than the Seller)
will be no less than $29,485,00.00 after taking into account the payment of
$20,000,000 to be made on account of the Note, which payment will be made by the
Company, at the direction of the Buyer, after Closing in accordance with Section
2.5.
Section 3.9 Title to Real Property and Other Assets.
(a) Except as otherwise disclosed on the Company
Disclosure Schedule, the Company has:
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(i) good and marketable title to the real property
which is disclosed on the Company Disclosure Schedule; and
(ii) good leasehold title to the real property leased
by it which is disclosed on the Company Disclosure Schedule
(collectively, the property in (i) and (ii) are hereafter
referred to as the "REAL PROPERTY"),
in each case free and clear of all Liens, except (A) inchoate Liens for taxes
not yet due and payable; (B) Liens on the Real Property in connection with
indebtedness reflected on the financial statements of the Company; (C) all
existing covenants, conditions and restrictions affecting the Real Property; (D)
zoning laws and all other laws, ordinances, rules and regulations of any kind,
whether now or hereafter affecting, limiting or defining the type or character
of, or the right to construct buildings or improvements in or about the Real
Property, or the use to which the Real Property may be put or which in any way
affects the ownership or use of the Real Property; (E) easements and
rights-of-way, if any, of record and to such state of facts as an inspection and
accurate survey would disclose; (F) the standard printed exceptions contained in
the usual form of Owner's Title Policy; and (G) other encumbrances of a
non-financial nature which would not materially impair the current use of the
Real Property.
(b) Except for the Real Property and as otherwise disclosed on
the Company Disclosure Schedule, the Company has:
(i) good and marketable title to the assets purported to
be owned by it; and
(ii) good leasehold title to the assets purported to be
leased by it,
in each case free and clear of all Liens, except inchoate Liens for taxes not
yet due and payable and Liens on assets in connection with indebtedness
reflected on the financial statements of the Company.
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Section 3.10 Pension Plans. Except as set forth on the Company
Disclosure Schedule, none of the Company or its Subsidiaries maintains, nor have
any of them previously maintained, any Pension Plan.
Section 3.11 Welfare Plans and Other Benefit Plans.
(a) Except as set forth on the Company Disclosure Schedule,
none of the Company or its Subsidiaries maintains any Welfare Plans.
(b) The Company Disclosure Schedule sets forth, and the Seller
has delivered or made available to the Buyer copies or summaries of, all
material pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plans, all other material written employee programs, and arrangements,
and all other material employee benefit plans or fringe benefit plans, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
the Company Group for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries (collectively,
"BENEFIT PLANS").
(c) Except as disclosed on the Company Disclosure Schedule,
all Benefit Plans are in compliance in all material respects with applicable
Laws and neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement will:
(i) result in any payment (including, but not limited to,
severance, unemployment compensation, golden parachute, or otherwise)
becoming due to any director or any employee under any Benefit Plan,
(ii) increase any benefits otherwise payable under any
Benefit Plan, or
(iii) result in any acceleration of the time of payment or
vesting of any such benefit.
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Section 3.12 Personnel Matters.
(a) The Company Disclosure Schedule sets forth a correct and
complete list of:
(i) all directors and executive officers of the
Company and the Subsidiaries of the Company;
(ii) all other employees of, or consultants to, the
Company and the Subsidiaries of the Company who earn more than
$75,000; and
(iii) the current job title or relationship to the
Company and the Subsidiaries of the Company of each such
Person described in clauses (i) and (ii) above;
(iv) the amount of compensation (including bonuses
and commissions) paid to each such Person during the year
ending December 31, 2000 and which each of them is expected to
receive in the year ending December 31, 2001; and
(v) any employee benefits or perquisites available to
any such Person that are not generally available to employees
of the Company and the Subsidiaries of the Company.
(b) Except as otherwise disclosed on the Company Disclosure
Schedule, none of the Company or any Subsidiary of the Company is party to any
written employment, consulting, non-compete or similar agreement with any
Person.
(c) Except as otherwise disclosed on the Company Disclosure
Schedule:
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(i) no employees of the Company or any Subsidiary of
the Company are represented by any labor union or similar
organization;
(ii) none of the Company or any Subsidiary of the
Company is a party to any collective bargaining or similar
agreement covering any of its employees; and
(iii) no labor union or similar organization or group
of employees has made a demand for recognition, filed a
petition seeking a representation proceeding, or given any of
the Company or any Subsidiary of the Company notice of any
intention to hold an election of a collective bargaining
representative at any time during the past three years.
Section 3.13 Other Material Agreements. All written agreements and
contracts to which any of the Company or any Subsidiary of the Company is a
party or by which any of the Company or any Subsidiary of the Company or any of
their assets are bound are listed on the Company Disclosure Schedule other than:
(a) agreements involving the payment by or to the Company or
any Subsidiary of the Company, or creating any liability of the Company or any
Subsidiary of the Company (whether direct or indirect, fixed or contingent), of
less than $50,000 over the term thereof; and
(b) agreements which are able to be cancelled by the Company
or any Subsidiary of the Company on 30 days' notice or less without any material
liability to the Company or any Subsidiary of the Company. The agreements and
contracts to which any of the Company or any Subsidiary of the Company is a
party listed on the Company Disclosure Schedule are referred to herein as the
"COMPANY AGREEMENTS".
Section 3.14 Status of Company Agreements.
(a) Except as set forth on the Company Disclosure Schedule,
each Company Agreement is in full force and effect and is enforceable against
the
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Company in accordance with its terms, except as such enforceability may be
limited by:
(i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally; and
(ii) applicable equitable principles, whether
considered in a proceeding at law or in equity.
(b) Except for agreements relating to sales and distribution
of Company Products, the Company is in compliance with each Company Agreement to
which it is a party, except, in each case, for such non-compliance as does not
(x) constitute a breach or default (or an event which, with the giving of notice
or the passage of time, or both, would constitute a default) thereunder, (y)
give to others any rights of termination, acceleration, suspension, revocation,
cancellation or amendment thereof, or (z) cause, either individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.15 Bank Accounts. The Company Disclosure Schedule sets forth
a correct and complete list of the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which the Company and the Subsidiaries of the Company maintain accounts of any
nature, the type and number of all such accounts and the names of all Persons
authorized to draw thereon or make withdrawals therefrom.
Section 3.16 Powers of Attorney. Except as set forth in the Company
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Company.
Section 3.17 Government Orders.
(a) Set forth in the Company Disclosure Schedule is a list
provided by the Company of the currently pending lawsuits served upon the
Company which relate to product liability claims brought by Governmental
Entities,
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the NAACP and certain other actions for which class certification has been
sought (the "MUNICIPAL LAWSUITS").
(b) Except as set forth in the Company Disclosure Schedule, to
the best knowledge of the Seller, there are no material settlement agreements,
consent decrees or judgments relating to the Municipal Lawsuits to which the
Company is a party.
(c) Except as set forth in the Company Disclosure Schedule, to
the best knowledge of the Seller, there are no material environmental orders,
writs, judgments, injunctions or decrees issued by any Governmental Entity which
name any of the Company Group, are directed to or apply to any of the Company
Group or any of their respective assets.
Permits. Except as set forth in the Company Disclosure Schedule, the Seller has
not been notified in writing by any Governmental Entity that the Company is
currently in violation of any permit, license, franchise, certificate,
authorization, consent or approval of a Governmental Entity necessary to conduct
its business (the "PERMITS") or that the Company fails to hold any required
Permit.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Seller as
follows:
Section 4.1 Organization. The Buyer is a corporation validly existing
and in good standing under the laws of the jurisdiction of its organization.
Section 4.2 Authority. The Buyer has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action on the part of the Buyer.
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Section 4.3 Validity of Agreement. This Agreement has been duly and
validly executed and delivered by the Buyer and (assuming this Agreement has
been duly authorized, executed and delivered by the Seller) constitutes a valid
and binding agreement of the Buyer, enforceable against the Buyer in accordance
with its terms, except that:
(a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally; and
(b) enforcement of this Agreement, including by, among other
things, the remedy of specific performance or injunctive or other forms of
equitable relief, may be subject to equitable defenses and would be subject to
the discretion of the court before which any such proceeding may be brought.
Section 4.4 Consents and Approvals; No Violations. Neither the
execution and delivery of this Agreement by the Buyer nor the consummation by
the Buyer of the transactions contemplated hereby will:
(a) conflict with or result in any breach of any provision of
the certificate of incorporation or by-laws of the Buyer,
(b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or require any
consent under, any indenture, license, contract, agreement or other instrument
or obligation to which the Buyer or any of its Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound,
(c) violate any order, writ, injunction, decree or Laws
applicable to the Buyer, any of its Subsidiaries or any of their respective
properties or assets; or
(d) require any filing with, or the obtaining of any permit,
authorization, consent or approval of, any Governmental Entity,
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except in the case of clauses (b), (c) and (d) of this Section 4.4 for any such
violations, breaches, defaults, rights of termination, cancellation or
acceleration or requirements that, individually or in the aggregate, would not
have a Buyer Material Adverse Effect.
Section 4.5 Acquisition of Shares for Investment; Ability to Evaluate &
Bear Risk. (a) The Buyer is acquiring the Shares for investment and not with a
view toward, or for sale in connection with, any distribution thereof, nor with
any present intention of distributing or selling such Shares. The Buyer agrees
that the Shares may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act of 1933, as amended, (the "ACT") and any applicable state securities Laws,
except pursuant to an exemption from such registration under the Act and such
Laws.
(b) The Buyer
(i) is able to bear the economic risk of holding the Shares
for an indefinite period;
(ii) can afford to suffer the complete loss of its investment
in the Shares; and
(iii) has knowledge and experience in financial and business
matters such that it is capable of evaluating the risks of the
investment in the Shares.
(c) The Buyer is not acquiring the Shares with a view to
liquidating the Company or otherwise putting the Company into an insolvent
position.
Section 4.6 Litigation. There is no claim, action, suit, proceeding or,
to the knowledge of the Buyer, governmental investigation pending or, to the
knowledge of the Buyer, threatened against the Buyer or any of its Affiliates by
or before any court or Governmental Entity that, individually or in the
aggregate, would have, or would reasonably be expected to have, a Buyer Material
Adverse Effect.
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Section 4.7 Brokers; Finders and Fees. Except for Xxxxx Xxxxxxxxx and
Xxxxx Xxxxxxx, whose fees will be paid by the Buyer, neither the Buyer nor any
of its Affiliates has employed any investment banker, broker or finder or
incurred any liability for any investment banking, financial advisory or
brokerage fees, commissions or finders' fees in connection with this Agreement
or the transactions contemplated hereby.
Section 4.8 Review of Information. The Buyer has fully reviewed all
information concerning the Company and its Subsidiaries, including, but not
limited to:
(a) insurance policies and related documents and information
of the Seller, the Company, and their respective Subsidiaries, and formed its
own view of such insurance policies, including, but not limited to, whether or
not such insurance policies provide adequate coverage to the Company Group; and
(b) all documents relating to Company Liabilities, including,
but not limited to, the Settlement Agreement and the Boston Agreement.
(c) the Company Liabilities (including, without limitation,
the Municipal Lawsuits and other possible litigation against the Company) and
has taken into account the risks associated with the Company Liabilities.
ARTICLE V
COVENANTS AND ACKNOWLEDGMENTS OF THE PARTIES
Section 5.1 Reasonable Best Efforts. Each of the Seller and the Buyer
shall cooperate and use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
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Section 5.2 Public Announcements. The Seller and the Buyer will consult
with each other with respect to the issuance of a report, statement or press
release with respect to the execution of this Agreement and the transactions
contemplated hereby and neither party will issue any such report, statement or
press release without the prior written approval of the other party; provided,
however, that the foregoing shall not prohibit either party from making any
report, statement or press release required by any applicable law if either
party has given the other party a good faith opportunity to review the wording
of any such report, statement or press release prior to such disclosure.
Section 5.3 Indemnification of Officers and Directors. The Buyer shall
not, and shall cause the Company and its Subsidiaries not to, make any changes
to the certificate of incorporation or by-laws or comparable organizational
documents of the Buyer, the Company, or any Subsidiary of either, that could
adversely affect the rights of persons who are currently, or were, officers and
directors of the Company or any of its Subsidiaries to claim indemnification
from such entity under the terms of such certificate of incorporation or by-laws
as in effect on the date of this Agreement, for acts taken prior to the Closing.
To the extent not paid by the Company or any of its Subsidiaries, the Buyer
shall make any payments required under such indemnification provisions relating
to facts or circumstances occurring prior to the Closing.
Section 5.4 Maintenance of Books and Records. All records, including
Tax records relating to the Company, in the possession of or solely under the
control of each party prior to the Closing Date (collectively, "BUSINESS
RECORDS"), shall be preserved until at least seven years after the Closing Date.
Section 5.5 Access to Information.
(a) Upon any reasonable request from the Seller, the Buyer
shall, and shall cause the Company and its Subsidiaries to:
(i) provide to the Seller and its representatives reasonable
access to the Business Records and any business records relating to the
Company that are created after the Closing Date during normal business
hours; and
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(ii) permit the Seller and its representatives to make copies
of such Business Records and any business records relating to the
Company that are created after the Closing Date, in each case at no
cost to the Seller or its representatives (other than for reasonable
out-of-pocket expenses). Such Business Records and any business records
relating to the Company that are created after the Closing Date may be
sought under this Section 5.5 for any reasonable purpose up until the
seventh anniversary of the Closing Date, including, without limitation,
in connection with the audit, accounting, Tax, federal securities
disclosure or other similar needs of the Seller; provided, that the
Seller shall not be limited to seeking such Business Records and any
business records relating to the Company that are created after the
Closing Date, in relation to litigation and insurance matters, to the
period up until the seventh anniversary of the Closing Date and may
seek such access or copies of such documents until the Seller notifies
the Buyer that it no longer requires such access or copies.
(b) Until the seventh anniversary of the Closing Date, upon
any reasonable request from the Buyer or its representatives, the Seller shall:
(i) provide to the Buyer and its representatives reasonable
access to Tax records, including Tax Returns, which relate solely to
the Company or its Subsidiaries during normal business hours; provided,
that neither the Buyer nor its representatives shall have the right to
be provided with any Tax records, including Tax Returns, of the Seller,
any of the Seller's Affiliates or any of the Seller's Affiliates'
respective predecessors, other than Tax records or Tax Returns relating
solely to the Company and/or its Subsidiaries; and
(ii) permit the Buyer or its representatives to make copies of
such Tax records, in each case at no cost to the Buyer and its
representatives (other than for reasonable out-of-pocket expenses). The
Tax records relating solely to the Company and its Subsidiaries may be
sought under this Section 5.5 for the Tax needs of the Buyer.
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Section 5.6 Insurance. The Buyer hereby acknowledges and agrees that:
(i) the insurance policies of the Seller and the Company
provide coverage for other named insureds and not just for the Seller
and the Company;
(ii) the other named insureds on such policies may make claims
which, either singly or in the aggregate, could reduce or exhaust all
coverage provided, if any, by such insurance policies;
(iii) from the Closing Date, the Company Group will be removed
as an insured from all insurance policies of the Xxxxxxx' Group,
including, but not limited to the policies listed in the Insurance Side
Letter, which has been previously delivered to the Buyer, and the
Company Group will be solely responsible, without any recourse to the
Xxxxxxx' Group, for any and all insurance coverage for the Company
Group, including coverage gaps arising out of the settlement,
adjustment or compromise of any claims or litigation; and
(iv) the Seller will not be responsible for the purchase of
any extension of current insurance policies, including, but not limited
to, "discovery period" extension.
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Section 5.7 As Is Basis. The Buyer acknowledges that it is acquiring
the Shares and the Company on an "as is," "where is" basis with all faults,
without, except for the representations and warranties set forth in Article III
above, any representations or warranties, expressed or implied, in fact or by
law, with respect to the Shares, the Company or the Subsidiaries of the Company,
and without any recourse against the Seller. The Buyer waives any claim of
liability against the Seller based on any statement, representation, warranty,
covenant, undertaking or agreement which may have been made by the Seller in
connection with the Shares, the Company, the Subsidiaries of the Company or the
transactions contemplated by this Agreement, except as expressly stated in this
Agreement.
Section 5.8 Operation of the Company. Until the later of repayment in
full of all amounts due under the Note or May 11, 2006, the Buyer agrees that:
(a) it shall, and shall cause the Company and the Subsidiaries
of the Company to, operate the Company and the Subsidiaries of the Company only
in the ordinary course of business;
(b) the Buyer shall not cause the Company or any Subsidiary of
the Company to, nor permit the Company or any Subsidiary of the Company to, loan
or otherwise transfer any cash out of the Company or any Subsidiary of the
Company to the Buyer or to any Affiliate of the Buyer; provided, that dividends
payable by the Company to the Buyer in an amount not in excess of $600,000 in
the first twelve (12) month period following the Closing and not in excess of
$1,800,000 per annum thereafter, may be paid subject to applicable law, and this
Section 5.8(b) shall not prohibit any other transactions which are expressly
permitted under other provisions of this Agreement; and
(c) the Buyer shall not cause the Company or any Subsidiary of
the Company to, nor permit the Company or any Subsidiary of the Company to, pay
any employee, officer or director of the Company or any Subsidiary of the
Company a salary, bonus or other compensation that is not a reasonable salary,
bonus or other compensation.
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Section 5.9 Restricted Payments. Until the later of repayment in full
of all amounts due under the Note or May 11, 2006, the Buyer agrees that the
Buyer shall not cause the Company or any Subsidiary of the Company to, nor
permit the Company or any Subsidiary of the Company to, directly or indirectly,
declare, order, pay any sum for, or make, any Restricted Payment.
Indebtedness. The Buyer agrees that, until payment of the Balance Purchase
Price:
(a) the Buyer shall not cause the Company or any Subsidiary of
the Company to, nor permit the Company or any Subsidiary of the Company to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to any Indebtedness, except
for the Note and any Indebtedness incurred in the ordinary course of business of
the Company and the Subsidiaries of the Company and Permitted Indebtedness;
(b) the Buyer shall not cause the Company or any Subsidiary of
the Company to, nor permit the Company or any Subsidiary of the Company to, make
any payment or prepayment of principal of, pay any premium, if any, or interest
on, or pay any redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, any subordinated Indebtedness other than Indebtedness permitted by Section
5.10(a).
Section 5.10 Fundamental Changes; Disposition of Assets; Acquisitions.
The Buyer agrees that the Buyer shall not cause the Company or any Subsidiary of
the Company, nor permit the Company or any Subsidiary of the Company to:
(a) enter into any transaction of merger or consolidation,
convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise
dispose of, or xxxxx x Xxxx over, in one transaction or a series of
transactions, all or any part of its business, assets or property of any kind
whatsoever, whether real, personal or mixed and whether tangible, intangible or
contingent, whether now owned or hereafter acquired until payment of the Balance
Purchase Price;
(b) liquidate, wind-up or dissolve itself, or suffer any
liquidation or dissolution of, in one transaction or a series of transactions,
all or any part of its business, assets or property of any kind whatsoever,
whether real, personal
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or mixed and whether tangible, intangible or contingent, whether now owned or
hereafter acquired, until the later of repayment in full of all amounts due
under the Note or May 11, 2006; and
(c) acquire by purchase, or otherwise, the property or fixed
assets of, the business of, or stock or other evidence of beneficial ownership
of, any Person or any division or line of business or other business unit of any
Person until payment of the Balance Purchase Price.
Section 5.11 Transactions with Shareholders and Affiliates. Until the
later of repayment in full of all amounts due under the Note or May 11, 2006,
the Buyer agrees that the Buyer shall not cause the Company or any Subsidiary of
the Company to, nor permit the Company or any Subsidiary of the Company to,
directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of 5% or more of any class of capital stock of the
Company or any of its Subsidiaries or with any Affiliate of the Buyer, or of any
such holder, unless such transaction is on terms which are generally no less
favorable to the Company (or any Subsidiary) as would be applicable in an "arms
- length" transaction.
Section 5.12 Change of Control. If there is a Change of Control of the
Buyer or the Company then, pursuant to the terms of the Note, as amended by the
Note Amendment, the term of the Note shall immediately be accelerated and become
due and payable in full and the Buyer shall cause the Company to immediately
repay the Note in full to the Seller.
Section 5.13 Guaranty. The Buyer hereby agrees to execute a guaranty of
the obligations of the Company under the Note, in the form of the Guaranty set
out in Exhibit C attached to this Agreement.
Section 5.14 Settlement Agreement & Boston Agreement. The Buyer
acknowledges that the Company is a party to the Settlement Agreement and to the
Boston Agreement.
Section 5.15 Taxes.
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(a) Within 60 days following the Closing Date, the Buyer shall
cause the Company to prepare and provide to the Seller a package of Tax
information materials, including, but not limited to, schedules, work papers and
a LIFO calculation (the "TAX PACKAGE") required by the Seller to enable the
Seller to prepare and file its consolidated federal income Tax Return (and any
state or local consolidated, combined, unitary or similar income tax return).
The Tax Package shall be prepared in good faith and, to the extent permitted by
applicable law, in a manner consistent with past practice of the Company.
(b) None of the Buyer or any Affiliate of the Buyer shall (or
shall cause or permit the Company or any Subsidiary of the Company to) take any
action on or after the Closing Date which could increase the amount of income
for Tax purposes of the Company or any Subsidiary of the Company, or reduce the
amount of loss for Tax purposes or any Tax attribute of or attributable to the
Company or any Subsidiary of the Company, in each case, for any taxable period
ending on or before the Closing Date.
(c) (i) Unless otherwise required by applicable Law, none of
the Buyer or any Affiliate of the Buyer shall (or shall cause or permit the
Company or any Subsidiary of the Company to) amend, refile or otherwise modify
any Tax Return of or that includes the Company or any Subsidiary of the Company
filed on or prior to the date of this Agreement or any other Tax Return for
which the Seller is the common parent of a consolidated, combined, unitary or
similar group that includes the Company or any of its Subsidiaries, without the
prior written consent of the Seller, which consent may be withheld in the sole
discretion of the Seller.
(ii) Notwithstanding anything to the contrary contained in
Section 5.16(c)(i), upon prior written notice by the Buyer to the Seller, Buyer
shall be entitled (and shall be entitled to cause or permit the Company or any
Subsidiary of the Company) to amend, refile or otherwise modify (x) any state
income Tax Return of the Company that is not a consolidated, combined, unitary
or similar state income Tax Return (a "NON-COMBINED TAX RETURN"), (y) any
Non-Combined Tax Return of any Subsidiary of the Company or (z) any state
consolidated, combined, unitary or similar income Tax Return of a group that
includes only the Company and one or more of its Subsidiaries; provided,
however, that if any such Tax Return is amended, refiled or otherwise modified
pursuant to this section 5.16(c)(ii), then, notwithstanding anything to the
contrary contained in this Agreement or otherwise, neither Seller nor any of its
Affiliates shall be required to indemnify Buyer, its Affiliates, the Company or
any Subsidiary of the Company pursuant to this
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Agreement or otherwise with respect or attributable to (A) any Tax Return that
has been amended, refiled or otherwise modified, (B) any Taxes related or
attributable to such Tax Return or (C) any other Tax Return or any Taxes, in
each case, that are affected as a result of such amendment, refiling or other
modification.
(d) (i) Any Tax refund (including any interest in respect
thereof) received by the Seller or any Affiliate of the Seller that relates to
(x) any Non-Combined Tax Return of the Company, (y) any Non-Combined Tax Return
of any Subsidiary of the Company or (z) any state combined, unitary or similar
income Tax Return of a group that includes only the Company and one or more of
its Subsidiaries, in each case, shall be for the account of the Buyer, and the
Seller shall pay over to the Buyer any such refund within five (5) days after
receipt. The Seller shall pay the Buyer interest at the rate prescribed under
Section 6621(a)(1) of the Code, compounded daily, on any amount not paid when
due under this Section 5.16(d)(i).
(ii) Any Tax refund (including any interest in respect
thereof), and any amounts credited against Tax, that relates to (x) any Tax
Return of the Company or any Subsidiary of the Company that is not described in
Section 5.16(d)(i) or (y) any Tax Return of the Seller or any of its Affiliates
(other than any Tax Return described in Section 5.16(d)(i)), including any Tax
Return for which the Seller is the common parent of a consolidated, combined,
unitary or similar group that includes the Company or any of its Subsidiaries,
in each case, shall be for the account of the Seller, and the Buyer shall pay
over to the Seller any such refund or the amount of any such credit within five
(5) days after receipt or entitlement thereto, whichever is applicable. The
Buyer shall pay the Seller interest at the rate prescribed under Section
6621(a)(1) of the Code, compounded daily, on any amount not paid when due under
this Section 5.16(d)(ii). The Buyer shall reasonably cooperate, and cause the
Company and each Subsidiary of the Company to reasonably cooperate, in obtaining
any refund described in this Section 5.16(d)(ii) that the Seller reasonably
believes should be available, including without limitation, through filing
appropriate forms with the applicable taxing authorities; provided, however,
that in no event shall such cooperation require any of the Buyer, the Company or
any Subsidiary of the Company to expend any funds or undertake any financial
obligation without reimbursement by the Seller.
(e) With respect to the sale of the Shares under this
Agreement, the Seller and the Buyer hereby agree that an election under Section
338 of the Code (or similar provision of the law of any state or other taxing
authority) will not be made with respect to the Company or any Subsidiary of the
Company.
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(f) All excise, sales, use, transfer (including real property
transfer or gains), stamp, documentary, filing, recordation and other similar
taxes, together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties, resulting directly
from the transactions contemplated by this Agreement (the "TRANSFER TAXES"),
shall be borne by the Buyer. Any Tax Returns that must be filed in connection
with Transfer Taxes shall be prepared and filed when due by the party primarily
or customarily responsible under the applicable local law for filing such Tax
Returns, and such party will use its reasonable efforts to provide such Tax
Returns to the other party at least 10 days prior to the due date for such Tax
Returns. If the Seller is responsible for filing such Tax Returns relating to
Transfer Taxes pursuant to the preceding sentences, the Buyer shall pay to the
Seller the amount of such Transfer Taxes required to be paid no later than five
days prior to the due date for filing such returns.
(g) (i) The Buyer shall notify the chief tax officer of the
Seller in writing within 15 days of receipt by the Buyer, the Company or any
Subsidiary of the Company (or any of their respective Affiliates) of written
notice of any pending or threatened audits, notice of deficiency, proposed
adjustment, assessment, examination or other administrative or court proceeding,
suit, dispute or other claim (a "TAX CLAIM") which could affect the liability
for Taxes for which the Seller may be required to indemnify the Buyer pursuant
to this Agreement. If the Buyer fails to give such prompt notice to the Seller
it shall not be entitled to indemnification for any Taxes arising in connection
with such Tax Claim if and to the extent that such failure to give notice
adversely affects the Seller's right to participate in the Tax Claim.
(ii) The Seller shall have the sole right to represent the
Company and each Subsidiary of the Company in any Tax Claim for which the Buyer
or any Buyer Indemnitee is entitled to indemnification pursuant to this
Agreement and to employ counsel of its choice at its expense. None of the Buyer,
any of its Affiliates, or the Company or any Subsidiary of the Company may
settle or otherwise dispose of any Tax Claim for which the Seller may have a
liability under this Agreement, or which may result in an increase in Seller's
liability under this Agreement, without the prior written consent of the Seller.
(iii) Notwithstanding anything to the contrary in this
Agreement, this Section 5.16(g) shall govern and control all claims relating to
Taxes.
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(h) The parties hereby agree for Tax purposes that the fair
market value of the Note, after consummating the actions in Section 2.8(b), is
equal to $50,000,000. Each of the Buyer and the Seller (and each of their
respective Affiliates) shall prepare and file, and cause its respective
Affiliates to prepare and file, its Tax Returns on a basis consistent with such
fair market value (including, but not limited to, for purposes of Treasury
Regulation Section 1.1502-13(g)) and shall take no position, and cause its
Affiliates to take no position, inconsistent with such fair market value on any
applicable Tax Return, in any audit or proceeding before any taxing authority or
otherwise.
(i) (i) The Seller hereby agrees to pay the Buyer $464,500 on
January 15, 2002 by wire transfer of immediately available funds to an account
or accounts designated in writing by the Buyer.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, (x) Seller or any of its Affiliates shall not be required to pay
Buyer, the Company or any Subsidiary of the Company any amount for any
utilization by Seller of any loss for Tax purposes or any Tax attribute of or
attributable to the Company or any of its Subsidiaries, (y) any and all Tax
sharing agreements or arrangements, written or unwritten (the "TAX SHARING
AGREEMENT"), between the Seller and/or any of its Affiliates (other than the
Company and/or any of its Subsidiaries) and the Company and/or its Subsidiaries,
shall be terminated as of the Closing and no Person shall have any rights or
obligations under any such Tax Sharing Agreement after such termination and (z)
none of the Buyer, its Affiliates, the Company or any Subsidiary of the Company
shall be entitled to any indemnification from the Seller or any of its
Affiliates pursuant to this Agreement or otherwise that relates or is
attributable to the Company or any Subsidiary of the Company not having losses
for Tax purposes or any Tax attribute.
Section 5.16 Covenant Certification.
(a) Until the later of repayment in full of all amounts due
under the Note or May 11, 2006, the Buyer shall provide certification to the
Seller, on October 11 and May 11 each year, commencing November 11, 2001, in the
form of the certificate attached to this Agreement as Exhibit D, that it is in
full compliance with all of its covenants under this Agreement (the "COVENANT
CERTIFICATION"). If the date for certification does not fall on a Business Day,
then the certificate shall be provided on the next Business Day.
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(b) Failure by the Buyer to provide any Covenant Certification
within five (5) Business Days of the due date of such Certification shall cause
the term of the Note to immediately be accelerated and become due and payable in
full.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
Section 6.1 Survival Periods. Each of the representations and
warranties made by the parties in this Agreement shall terminate eighteen (18)
months after the Closing; provided however, that the representations and
warranties made in Section 3.7 shall continue in full force and effect until the
expiration of the applicable statute of limitations (taking into account all
extensions timely filed). The covenants of the parties contained in Article V
survive indefinitely except as otherwise provided in this Agreement.
Section 6.2 Seller's Agreement to Indemnify. Subject to the terms and
conditions set forth in this Agreement, from and after the Closing, the Seller
shall indemnify and hold harmless the Buyer and its directors, officers,
employees, Affiliates, controlling persons and representatives (collectively,
the "BUYER INDEMNITEES") from and against all liability, demands, payments,
claims, actions or causes of action, assessments, losses, damages, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) (collectively, the "BUYER DAMAGES") asserted against or incurred by
any Buyer Indemnitee as a result of or arising out of or in connection with:
(i) a breach of any representation or warranty of the
Seller contained in Article III of this Agreement that
survives the Closing subject to the terms of Section ?;
(ii) any liability for Taxes imposed on the Company
or any Subsidiary of the Company as members of the "affiliated
group" (within the meaning of Section 1504(a) of the Code) of
which Seller is the common parent that arises under
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Treasury Regulation Section 1.1502-6(a) or comparable
provisions of foreign, state or local law; and
The Buyer's rights to indemnification as provided for in this Section 6.2 shall
be the sole and exclusive remedies of the Buyer against the Seller for a breach
of the Seller's representations and warranties contained in this Agreement and
for any Tax liability and the Seller shall have no other liability to the Buyer.
Section 6.3 Buyer's Agreement to Indemnify. Subject to the
terms and conditions set forth herein, from and after the Closing, the Buyer
shall indemnify and hold harmless the Seller and its directors, officers,
employees, Affiliates, controlling Persons and representatives and their
successors and assigns (collectively, the "SELLER INDEMNITEES") from and against
all liability, demands, claims, actions or causes of action, assessments,
losses, damages, payments, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (collectively, "SELLER DAMAGES")
asserted against or incurred by any Seller Indemnitee as a result of or arising
out of or in connection with:
(i) a breach of any representation or warranty of the
Buyer contained in Article IV of this Agreement that survives
Closing, subject to the terms of Section 6.1;
(ii) a breach of any covenant or agreement on the
part of the Buyer under this Agreement; and
(iii) any Company Liabilities; provided, that (A) any
liabilities of the Company or a Subsidiary of the Company the
existence of which constitutes a breach of a representation
and warranty of the Seller which survive Closing, and (B) any
Taxes imposed on the Company or any Subsidiary of the Company
as members of the "affiliated group" (within the meaning of
Section 1504(a) of the Code) of which the Seller is the common
parent that arise under Treasury Regulation Section
1.1502-6(a) or comparable provisions of foreign, state or
local law, in each case, shall be excluded from the definition
of Company Liabilities only for purposes of this Section 6.3
(iii).
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The Seller's rights to indemnification as provided for in this Section 6.3 shall
be the sole and exclusive remedies of the Seller against the Buyer for a breach
of the Buyer's representations and warranties contained in this Agreement, a
breach of any covenant or agreement on the part of the Buyer under this
Agreement and for any Company Liabilities and the Buyer shall have no other
liability to the Seller.
Section 6.4 Third-Party Claims Against Seller. The obligations of the
Buyer to indemnify the Seller Indemnitees under Section 6.3 with respect to
Seller Damages, resulting from the assertion of liability by third parties
(each, as the case may be, a "THIRD PARTY CLAIM"), will be subject to the
following terms and conditions:
(a) The Seller will give the Buyer written notice of any such
Third Party Claim promptly after learning of such Third Party Claim, and the
Buyer may participate in the defense thereof; provided, that the Seller shall
have the sole and absolute discretion to control the conduct of negotiations or
litigation in relation to such Third Party Claim including, but not limited to,
the right to settle, compromise or discharge, any such Third Party Claim or
consent to the entry of any judgment with respect thereto; provided, further,
that any such settlement, compromise or discharge includes as an unconditional
term thereof, the delivery by the claimant or plaintiff to the Seller and the
Buyer of a written release of the Seller, the Buyer, the Company and each
Subsidiary of the Company, as applicable, from all liability in respect of such
Third Party Claim. Failure to give prompt notice of a Third Party Claim shall
not affect the Buyer's obligations under this Article VI; and
(b) The Seller and the Buyer shall cooperate together fully in
all aspects of any investigation, defense, pre-trial activities, trial,
compromise, settlement or discharge of any claim in respect of which indemnity
is sought pursuant to this Article VI, including, but not limited to, providing
the Seller with reasonable access to employees and officers of the Company or
the Buyer and using best efforts to cause such employees and officers to agree
to appear as witnesses.
Section 6.5 Subrogation.
(a) The Seller shall be subrogated to the rights of the Buyer
in respect of any insurance relating to Seller Damages, to the extent of any
indemnification payments made pursuant to this Agreement.
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(b) The Buyer shall be subrogated to the rights of the Seller
in respect of any insurance relating to Buyer Damages to the extent of any
indemnification payments made pursuant to this Agreement.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Entire Agreement and Waiver.
(a) This Agreement (including the Company Disclosure Schedule
and the Buyer Disclosure Schedule) constitutes the entire agreement of the
parties relating to the subject matter hereof and supersedes any other prior
agreements and understandings between the parties, both oral and written,
regarding such subject matter.
(b) The Buyer waives any claim of liability it may have
against the Seller based on any statement, representation, warranty, covenant,
undertaking or agreement which may have been made by the Seller in connection
with the Shares, the Company, the Subsidiaries of the Company and the Company
Group, or the transactions contemplated by this Agreement, except as expressly
stated in this Agreement.
Section 7.2 Severability. Any provision of this Agreement that is held
by a court of competent jurisdiction to violate applicable law shall be limited
or nullified only to the extent necessary to bring the Agreement within the
requirements of such law.
Section 7.3 Notices. Any notice required or permitted by this Agreement
must be in writing and must be sent by facsimile, by nationally recognized
commercial overnight courier, or mailed by United States registered or certified
mail, addressed to the other party at the address below or to such other address
for notice (or facsimile number, in the case of a notice by facsimile) as a
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party gives the other party written notice of in accordance with this Section
7.3. Any such notice will be effective as of the date of receipt:
(a) if to the Seller, to
Xxxxxxx Corporation
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxx, Esq.
except for notices given pursuant to Section 5.16(g)(i) which shall also go to:
Gates Corporation
000 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Ms Xxxxxxxx Xxxxxxxx
(b) if to the Buyer, to
SAF-T-HAMMER Corporation
00000 X. Xxxxxxxxxx Xxxx. Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Mr Xxx Xxxxx
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with a copy to:
Xxxxxxx & Xxxxxxx PLC
0 X. Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxxx, Esq.
Section 7.4 Governing Law. This Agreement shall be governed by,
enforced under and construed in accordance with the laws of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule thereof.
Section 7.5 Venue. Each of the parties:
(a) consents to submit to the exclusive jurisdiction of any
court of the United States located in the State of Delaware for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby;
(b) agrees not to commence any litigation relating thereto
except in such courts;
(c) agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set forth in Section
7.3 (or to such other address for notice that such party has given the other
party written notice of in accordance with Section 7.3) shall be effective
service of process for any litigation brought against it in any such court;
(d) waives any objection to the laying of venue of any
litigation arising out of this Agreement or the transactions contemplated hereby
in the courts of the United States located in the State of Delaware; and
(e) agrees not to plead or claim in any such court that any
litigation brought in any such court has been brought in an inconvenient forum.
Section 7.6 Counterparts. This Agreement may be signed in counterparts
which together shall constitute one original of this Agreement. This
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Agreement shall become effective when each party hereto has received
counterparts thereof signed by the other party hereto.
Section 7.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party. Subject to the preceding clause, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
Section 7.8 Fees and Expenses. Each of the parties hereto shall bear
its own costs and expenses (including legal and financial advisory fees and
expenses) incurred in connection with, or in anticipation of, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses.
Section 7.9 No Third-Party Beneficiaries. Except as expressly provided
in Section 5.3, this Agreement shall not benefit or create any right or cause of
action in or on behalf of any Person other than the parties hereto; provided,
however, that this Agreement will be binding upon, inure to the benefit of, and
be enforceable by, the parties and their respective successors and permitted
assigns.
Section 7.10 No Waivers; Modification. Any waiver of any right or
default hereunder shall be effective only in the instance given and will not
operate as or imply a waiver of any other or similar right or default on any
subsequent occasion. No waiver, modification or amendment of this Agreement or
of any provision hereof will be effective unless in writing and signed by the
party against whom such waiver, modification or amendment is sought to be
enforced.
Section 7.11 Specific Performance. The parties to this Agreement agree
that:
(a) if any provision of this Agreement was not performed in
accordance with its specific terms, or was otherwise breached, irreparable
damage would occur, no adequate remedy at law would exist and damages would be
difficult to determine; and
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(b) the parties shall be entitled to specific performance of
the terms of this Agreement and immediate injunctive relief in addition to any
other remedy at law or in equity, without the necessity of proving the
inadequacy of money damages as a remedy and without having to post any bond.
IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly signed as of the date first above written.
XXXXXXX CORPORATION
By:
--------------------------------------------
Name:
Title:
SAF-T-HAMMER CORPORATION
By:
--------------------------------------------
Name:
Title:
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