EXHIBIT 10.13
EXCHANGE AND DISTRIBUTION AGREEMENT
BY AND AMONG
GENMAR HOLDINGS, INC.,
MINSTAR, INC.,
GENMAR INDUSTRIES, INC.
AND
HATTERAS YACHTS, INC.
______________________, 1999
EXCHANGE AND DISTRIBUTION AGREEMENT
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II
ACKNOWLEDGMENT OF MATERIAL FACTS . . . . . . . . . . . . . . . . . . . 5
2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3 Schedule of Genmar Shareholders. . . . . . . . . . . . . . . . .5
ARTICLE III
PRELIMINARY ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Cooperation Prior to the Distribution. . . . . . . . . . . . . .5
3.2 Transfers Not Effected Prior to Distribution: Transfers Deemed
Effective as of the Distribution Date. . . . . . . . . . . . . .6
3.3 No Representations or Warranties; Consents . . . . . . . . . . .6
3.4 Conveyancing and Assumption Instruments. . . . . . . . . . . . .7
ARTICLE IV
CAPITAL CONTRIBUTION OF INDUSTRIES . . . . . . . . . . . . . . . . . . 7
4.1 Capital Contribution . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE V
THE EXCHANGE AND DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . 8
5.1 Hatteras Actions . . . . . . . . . . . . . . . . . . . . . . . .8
5.2 Genmar Actions . . . . . . . . . . . . . . . . . . . . . . . . .8
5.3 Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . .8
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ARTICLE VI
MISCELLANEOUS LIABILITIES AND INDEMNIFICATION. . . . . . . . . . . . . 9
6.1 Hatteras Yachts Division Liabilities; Indemnification. . . . . .9
6.2 Genmar, Minstar and Industries Liabilities; Indemnification. . .9
ARTICLE VII
ADDITIONAL ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Mutual Assurances. . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE VIII
CONDITIONS TO EFFECTIVENESS OF DISTRIBUTION. . . . . . . . . . . . . .10
8.1 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 Taxation and Securities Laws Compliance. . . . . . . . . . . . 10
8.3 Contribution Agreement . . . . . . . . . . . . . . . . . . . . 10
8.4 Management Services Agreement. . . . . . . . . . . . . . . . . 10
8.5 Shareholders' Agreement. . . . . . . . . . . . . . . . . . . . 11
8.6 Hatteras Loan. . . . . . . . . . . . . . . . . . . . . . . . . 11
8.7 Genmar Guarantee . . . . . . . . . . . . . . . . . . . . . . . 11
8.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.9 Other Instruments. . . . . . . . . . . . . . . . . . . . . . . 11
8.10 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 11
8.11 Material Changes . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX
ACCESS TO INFORMATION AND SERVICES . . . . . . . . . . . . . . . . . .12
9.1 Provision of Corporate Records . . . . . . . . . . . . . . . . 12
9.2 Access to Information. . . . . . . . . . . . . . . . . . . . . 12
9.3 Provision of Services. . . . . . . . . . . . . . . . . . . . . 12
9.4 Production of Witnesses. . . . . . . . . . . . . . . . . . . . 13
9.5 Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . 13
9.6 Retention of Records . . . . . . . . . . . . . . . . . . . . . 13
9.7 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X
TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
10.1 Tax Indemnification by Genmar. . . . . . . . . . . . . . . . . 14
10.2 Tax Indemnity and Covenant by Hatteras . . . . . . . . . . . . 14
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10.3 Allocation of Income Taxes . . . . . . . . . . . . . . . . . . 15
10.4 Filing Responsibility. . . . . . . . . . . . . . . . . . . . . 15
10.5 Refunds and Carrybacks . . . . . . . . . . . . . . . . . . . . 16
10.6 Cooperation and Exchange of Information. . . . . . . . . . . . 17
ARTICLE XI
ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . .19
11.1 Consents; Transfer of Assets and Assumption of Liabilities. . 19
11.2 Collection of Accounts . . . . . . . . . . . . . . . . . . . . 19
11.3 Hatteras Payment of Intercompany Debt. . . . . . . . . . . . . 19
11.4 Physical Inventory . . . . . . . . . . . . . . . . . . . . . . 19
11.5 Genmar Inventory and Supply Buying Group . . . . . . . . . . . 19
ARTICLE XII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.4 Complete Agreement; Construction . . . . . . . . . . . . . . . 21
12.5 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.7 Amendments; Waivers. . . . . . . . . . . . . . . . . . . . . . 21
12.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 22
12.10 Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . 22
EXHIBITS
Exhibit A - Contribution Agreement (Section 4.1)
Exhibit B - Management Services Agreement (Section 8.4)
Exhibit C - Shareholders' Agreement (Section 8.5)
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EXCHANGE AND DISTRIBUTION AGREEMENT
THIS EXCHANGE AND DISTRIBUTION AGREEMENT (the "Agreement") is made and
entered into as of the ___ day of ______________, 1999 to be effective as of the
____ day of __________, 1999 (the "Effective Date") by and among GENMAR
HOLDINGS, INC., a Delaware corporation ("Genmar"), MINSTAR, INC., a Delaware
corporation ("Minstar"), GENMAR INDUSTRIES, INC., a Delaware corporation
("Industries") and HATTERAS YACHTS, INC., a Delaware corporation ("Hatteras").
RECITALS
A. Genmar is planning an initial public offering (the "IPO") of its
common stock pursuant to a registration statement that is anticipated to become
effective in 1999.
B. Genmar's Board of Directors has determined that the product lines
offered by the Hatteras Yachts division operated by Genmar through its Affiliate
Industries (the "Hatteras Yachts Division") are inconsistent with (i) the Genmar
business and strategic plan and (ii) the other marine industry product lines
offered by Genmar and its Affiliates.
C. Genmar is the holder of all of the issued and outstanding shares
of capital stock of Minstar, which owns all of the issued and outstanding shares
of capital stock of Industries.
D. Genmar has caused Industries to organize Hatteras and, pursuant to
this Agreement, will cause Industries to contribute certain assets and transfer
certain liabilities to Hatteras, which are presently associated with the
operation of the Hatteras Yachts Division business, in exchange for all of the
issued and outstanding common stock of Hatteras, par value $0.0001 (the
"Hatteras Stock").
E. It is the intention of Genmar to cause Industries to distribute to
Minstar the Hatteras Stock immediately following its contribution and transfer
of the assets and Liabilities of the Hatteras Yacht Division referred to in
Recital D above.
F. It is the intention of Genmar to cause Minstar to distribute the
Hatteras Stock to Genmar immediately following receipt and distribution of the
contribution referred to in Recital E above.
G. It is the intention of Genmar to offer an exchange of stock to its
shareholders whereby one (1) share of Hatteras Stock will be exchanged for one
(1) share of Genmar common stock held by such Genmar shareholders on the Record
Date; PROVIDED, that the number of shares of Genmar common stock that each
holder of Genmar common stock will
exchange for Hatteras Stock shall be equal to ten percent (10%) of the number
of shares of Genmar common stock held by each holder of Genmar common stock
on the Record Date (the "Exchange").
H. In connection with the transactions described above, Hatteras will
borrow $25 million from a third party lendor for use as working capital and to
repay $20 million of intercompany debt owed to Genmar.
I. In connection with the borrowing transaction described in Recital
H above, it is Genmar's intention to guarantee approximately $5 million of
Hatteras' debt to the third party lendor.
J. The transactions described in the Recitals above will occur prior
to the IPO.
K. The transactions described herein are intended to constitute a
plan which will qualify, without limitation, under Sections 351, 355 and/or 368
(a) (1) (D) of the Code.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements made herein, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
intending to be legally bound agree as follows:
ARTICLE I
DEFINITIONS
1.1 GENERAL. As used in this Agreement and the Exhibits hereto, the
following terms shall have the following meanings:
ACTION: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: a legal entity or association which, directly or indirectly,
is controlled by, is in control of, or under common control with the legal
entity or association with reference to which the term "affiliate" is used.
ANCILLARY AGREEMENTS: all of the agreements, instruments,
understandings, assignments or other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation the
Conveyancing and Assumption Instruments, the Contribution Agreement, the
Management Services Agreement and the Shareholders' Agreement.
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ASSUMED LIABILITIES: all of the Liabilities associated with the Hatteras
Yachts Division business.
CODE: the Internal Revenue Code of 1986, as amended, or, as the context
may require, the Internal Revenue Code applicable to the pre-Distribution year
in question.
CONTRIBUTION AGREEMENT: shall have the meaning set forth in Section 4.1
of this Agreement.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: collectively, the various
agreements, instruments and other documents to be entered into to effect the
transfer, effective on, prior or subsequent to the Distribution Date, in the
manner contemplated by this Agreement and the Ancillary Agreements.
DETERMINATION: means a "determination" as defined by Section 1313(a) of
the Code.
DISTRIBUTION: the distribution effected in accordance with the Exchange
to all holders of Genmar common stock on the Record Date of the Hatteras Stock
owned by Genmar.
DISTRIBUTION DATE: the date of effecting the Distribution.
EFFECTIVE DATE: shall have the meaning set forth in the preamble to this
Agreement.
EXCHANGE: shall have the meaning set forth in the Recitals to this
Agreement.
GENMAR: shall have the meaning set forth in the preamble to this
Agreement.
HATTERAS: shall have the meaning set forth in the preamble to this
Agreement.
HATTERAS LOAN: shall have the meaning set forth in Section 8.6 of this
Agreement.
HATTERAS STOCK: shall have the meaning set forth in the Recitals to this
Agreement.
HATTERAS YACHTS DIVISION: shall have the meaning set forth in the
Recitals to this Agreement.
INCOME TAXES: means all Taxes based upon or measured by income.
INDUSTRIES: shall have the meaning set forth in the preamble to this
Agreement.
INFORMATION: shall have the meaning set forth in Section 9.2 of this
Agreement.
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IPO: shall have the meaning set forth in the Recitals to this Agreement.
IRS: means the Internal Revenue Service.
JMC: shall have the meaning set forth in Section 8.4 of this Agreement.
LIABILITIES: any and all debts, liabilities and obligations, absolute or
contingent, mature or unmature, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any governmental entity or
any award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking. In the case of Hatteras, Liabilities shall include
all intercompany debt designated by Genmar to be associated with or arising in
connection with the Hatteras Yachts Division; PROVIDED, FURTHER, that such
determination by Genmar shall be final and binding.
MANAGEMENT SERVICES AGREEMENT: shall have the meaning set forth in
Section 8.4 of this Agreement.
MINSTAR: shall have meaning set forth in the preamble to this Agreement.
RECORD DATE: the date determined by the board of directors of Genmar as
the "Record Date" to establish the Genmar shareholders who will receive the
Exchange offer and may participate in the Distribution.
RETURNS: means returns, reports and forms required to be filed with
respect to Taxes.
SECURITY ACT: means the Securities Act of 1933, as amended.
SERVICES: shall have meaning set forth in Section 9.4 of this Agreement.
SHAREHOLDERS' AGREEMENT: shall have the meaning set forth in Section 8.5
of this Agreement.
TAX LAWS: means the Code, and any other federal, state, county, local,
or foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
TAXES: means all taxes (whether federal, state, local or foreign) based
upon or measured by income and any other tax whatsoever, including, without
limitation, gross receipts, profits, sales, use, occupation, value added, ad
valorem, transfer, franchise, capital
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stock, net worth, withholding, payroll, employment, excise, or property
taxes, together with any interest or penalties imposed with respect thereto.
TAXING AUTHORITY: means any governmental authority, domestic or foreign,
having jurisdiction over the assessment, determination, collection, or other
imposition of Tax.
ARTICLE II
ACKNOWLEDGMENT OF MATERIAL FACTS
2.1 ORGANIZATION. The parties acknowledge that each is duly
organized, validly existing and in good standing under the laws of the State of
Delaware, as applicable, with requisite corporate power to own their properties
and assets and to carry on their respective businesses as presently conducted or
contemplated. Genmar will, on the Distribution Date, be the owner of all of the
Hatteras Stock, and all other issued and outstanding interests in capital stock
of Hatteras.
2.2 AUTHORITY. The parties acknowledge that each have the full power
and authority to enter into this Agreement, to carry out the transactions
contemplated hereby, and all proceedings and other actions required to be taken
to authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements have been properly taken and this Agreement and the
Ancillary Agreements constitute valid and binding obligations of each of the
parties hereto, enforceable against each of them in accordance with their
respective terms.
2.3 SCHEDULE OF GENMAR SHAREHOLDERS. SCHEDULE 1 to this Agreement
sets forth the Genmar Shareholders and the number of shares of Hatteras Stock to
be received on the Distribution Date.
ARTICLE III
PRELIMINARY ACTION
3.1 COOPERATION PRIOR TO THE DISTRIBUTION.
(a) COMPILATION OF HATTERAS YACHTS DIVISION DILIGENCE MATERIALS
AND SCHEDULES. Hatteras, Genmar and Industries shall cooperate in compiling,
preparing and scheduling such due diligence information and records as shall be
deemed necessary or appropriate to enable the parties to properly and completely
prepare this Agreement, the Ancillary Agreements and all Conveyancing and
Assumption Instruments which may be necessary or desirable to effect the
transactions contemplated by this Agreement.
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(b) BENEFIT PLANS AND INSURANCE. All parties shall cooperate
in preparing, approving and implementing any agreements or other actions which
are appropriate to separate benefit plans or insurance of Genmar and Industries
from benefit plans of Hatteras and the Hatteras Yachts Division, if necessary.
In the event any such benefit plans or insurance coverage applicable to Hatteras
continues under a contractual obligation of Genmar or any Genmar Affiliate,
Hatteras shall be obligated to remit to Genmar any monies due which relate to
Hatteras' coverage under such plans or policies, prior to or upon its due date.
(c) SECURITIES LAW COMPLIANCE AND BLUE SKY. The parties shall
take all such action as may be necessary or appropriate under the Securities Act
and the securities (or blue sky laws) of states or other political subdivisions
of the United States in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements.
(d) HATTERAS STOCK. The parties acknowledge and agree that the
Hatteras Stock (i) will not be registered under the Securities Act or under any
state law counterpart and (ii) may not be transferred except in accordance with
applicable federal and state securities laws.
3.2 TRANSFERS NOT EFFECTED PRIOR TO DISTRIBUTION: TRANSFERS DEEMED
EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that any transfers or
other actions contemplated by this Article III and Article IV hereof shall not
have been consummated prior to the Distribution Date, the parties shall
cooperate to effect such transfers or other actions as promptly following the
Distribution Date as shall be practicable, it nonetheless being agreed and
understood by the parties that neither party shall be liable in any manner to
any other party for any failure of any of the transfers or assumptions
contemplated by this Article III or Article IV hereof to be consummated prior to
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; PROVIDED, HOWEVER, that the
parties shall cooperate to seek to obtain any necessary consents or approvals
for the transfer of all assets and assumption of all Liabilities contemplated to
be transferred or assumed pursuant to this Article III and Article IV or any
Ancillary Agreement.
3.3 NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each of the parties
hereto understands and agrees that no party hereto is, in this Agreement or in
any Ancillary Agreement or in any other agreement or document contemplated by
this Agreement, representing or warranting in any way (i) as to the value or
freedom from encumbrance of, or any other matter concerning any assets of such
party or (ii) as to the legal sufficiency to convey title to any asset pursuant
to this Agreement or any Ancillary Agreement, including, without limitation, any
Conveyancing and Assumption Instruments, it being agreed and understood that all
such assets are being transferred "as is, where is" and that the party to which
such assets are to be transferred hereunder shall bear the economic and legal
risk that
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any conveyances of such assets shall prove to be insufficient or that such
party's title to any such assets shall be other than good and marketable and
free from encumbrances. Similarly, each party hereto understands and agrees
that no party hereto is, in this Agreement or in any other agreement or
document contemplated by this Agreement, representing or warranting in any
way that the obtaining of any consents or approvals, the execution and
delivery of any agreements or the making of any filings or applications
contemplated by this Agreement will satisfy the provisions of any or all
applicable agreements or the requirements of any or all applicable laws or
judgments, it being agreed and understood that the party to which any assets
are transferred shall bear the economic and legal risk that any necessary
consents or approvals are not obtained or that any requirements of laws or
judgments are not complied with. Notwithstanding the foregoing, the parties
shall use reasonable efforts to obtain all consents and approvals, to enter
into all agreements and to make all filings and applications which may be
required for the consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable regulatory filings
or consents under federal or state laws and all necessary consents,
approvals, agreements, filings and applications.
3.4 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection with the
transfer of assets (other than capital stock) and the transfer and assumption of
Liabilities between Industries and Hatteras as contemplated by this Agreement
and the Ancillary Agreements, the parties shall execute or cause to be executed
by the appropriate entities the Conveyancing and Assumption Instruments in such
form as the parties shall agree. The transfer of the Hatteras Stock shall be
effected by means of delivery of stock certificates and executed stock powers
and notation on the stock record books of the applicable corporation or other
legal entities involved.
ARTICLE IV
CAPITAL CONTRIBUTION OF INDUSTRIES
4.1 CAPITAL CONTRIBUTION. Prior to the Distribution Date, Industries
will contribute cash and other assets (including unamortized goodwill) of the
Hatteras Yachts Division to Hatteras in an amount based upon the book value of
the assets contributed. Such contribution will be accomplished through the
following steps (with such modifications as the parties may deem necessary or
desirable to qualify the Distribution for non-recognition treatment under Code
Sections 368(a) (1) (D), 355(a) (1) and 351: (i) Industries will transfer the
assets and Liabilities of the Hatteras Yachts Division to Hatteras, in exchange
for the Hatteras Stock, pursuant to a capital contribution agreement
substantially in the form of EXHIBIT A hereto (the "Contribution Agreement"),
(ii) Industries will distribute to Minstar the Hatteras Stock, and (iii) Minstar
will distribute to Genmar the Hatteras Stock. Such steps are intended to be
accomplished without any recognition of gain or loss pursuant to various
Sections of the Code, including Sections 351, 355, 357, 361, 368 and 1032, and
the
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Distribution is intended to qualify under Section 355 of the Code. All of
such steps and the Distribution shall be reported on all Genmar and Hatteras tax
returns and other statements in accordance with such intentions, unless
otherwise indicated by Genmar. Genmar and Hatteras acknowledge and agree that
all of the Hatteras Stock held by Genmar will be distributed to the holders of
outstanding shares of Genmar common stock in accordance with the Exchange.
ARTICLE V
THE EXCHANGE AND DISTRIBUTION
5.1 HATTERAS ACTIONS. Hatteras shall take all steps required by
Genmar to effect the transactions contemplated by this Agreement or the
Ancillary Agreements. Prior to the Distribution, and after completion of the
transactions contemplated in Article IV hereof, Hatteras shall cause to be
issued to Genmar a certificate or certificates representing 2,358,470 shares of
Hatteras common stock.
5.2 GENMAR ACTIONS. In order to properly effect the Distribution,
Genmar shall provide to Hatteras prior to the Distribution the SCHEDULE 1 list
of Genmar shareholders and the number of shares of Hatteras Stock to which each
such shareholder is entitled pursuant to the Exchange, as well as the mailing
and other address and contact information necessary for Hatteras to comply with
all notice and other requirements with respect to such shareholders.
5.3 STOCK LEGEND. Each certificate representing shares of Hatteras
Stock issued to the Genmar shareholders, and any successor, shall have the
following legend imprinted on the reverse of such certificate:
The shares represented by this certificate were issued without
registration under the Securities Act of 1933, as amended (the
"Act"), and without registration under state securities laws, in
reliance upon exemptions contained in the Act and such laws. No
transfer of these shares or any interest therein may be made
except pursuant to an effective registration statement under said
laws unless Hatteras Yachts, Inc. has received an opinion of
counsel satisfactory to it that such transfer or disposition does
not require registration under said laws and, for any sales under
Rule 144 of the Act, such evidence as it shall request for
compliance with that rule.
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ARTICLE VI
MISCELLANEOUS LIABILITIES AND INDEMNIFICATION
6.1 HATTERAS YACHTS DIVISION LIABILITIES; INDEMNIFICATION. Subject to
the provisions of Article X below, Hatteras shall be liable for any and all
claims and Liabilities described in the Contribution Agreement, including (i)
any and all claims and Liabilities incurred by Hatteras subsequent to the date
of its formation; (ii) any and all claims and Liabilities, including all
contractual and Tax Liabilities (including without limitation those described in
Section 10.1(c) hereof), arising out of or in connection with the ownership or
operation of the Hatteras Yachts Division prior or subsequent to the date the
Hatteras Yachts Division assets are contributed to Hatteras (but excluding those
claims and Liabilities described as Excluded Liabilities in the Contribution
Agreement), and (iii) any product warranty given by the Hatteras Yachts Division
prior or subsequent to the Distribution. Hatteras hereby agrees to indemnify
and hold harmless Genmar, Minstar, Industries and their Affiliates from and
against such claims and Liabilities, including any contractual breaches. In the
event Genmar, Minstar, Industries and their Affiliates suffer or incur any
Liability or expense to be borne by Hatteras hereunder, Hatteras agrees to
reimburse, indemnify and hold harmless Genmar, Minstar, Industries and their
Affiliates for any expense or Liability associated therewith.
6.2 GENMAR, MINSTAR AND INDUSTRIES LIABILITIES; INDEMNIFICATION.
Subject to the provisions of Article X below, Genmar, Minstar, Industries and
their Affiliates shall be NOT liable for any claims and Liabilities described in
the Contribution Agreement, including (i) any and all claims and Liabilities
incurred by Hatteras subsequent to the date of its formation, (ii) any and all
claims and Liabilities, including all contractual and Tax liabilities arising
out of or in connection with the ownership or operation of the Hatteras Yachts
Division prior or subsequent to the date the Hatteras Yachts Division assets are
contributed to Hatteras (with the exception of the Excluded Liabilities
described in the Contribution Agreement) and (iii) any breach of any contract
entered into or warranty given in connection with the Hatteras Yachts Division
by Genmar, Minstar, Industries or their Affiliates in connection with the
Distribution. In the event Hatteras suffers or incurs any Liability or expense
to be borne by Genmar, Minstar, Industries or their Affiliates as set forth in
this Agreement or the Ancillary Agreements, Genmar agrees to reimburse,
indemnify and hold harmless Hatteras for such expense or Liability.
ARTICLE VII
ADDITIONAL ASSURANCES
7.1 MUTUAL ASSURANCES. The parties agree to cooperate with respect to
the implementation of this Agreement and the Ancillary Agreements and to execute
such further
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documents and instruments as may be necessary to (i) confirm the transfer of
the Hatteras Yachts Division assets and the Liabilities and (ii) to effect
transactions contemplated hereby. Such cooperation may include joint meetings
with corporate partners, suppliers, customers and others to the extent
necessary to assure the orderly transition of the business and operations of
the Hatteras Yachts Division as contemplated hereby; PROVIDED, HOWEVER, that
nothing herein shall be deemed to obligate any of the parties to take any
action or reach any understandings which may violate any applicable laws. The
parties agree that they will not take any action inconsistent with this
Agreement or the Ancillary Agreements in connection with the contribution and
the Distribution and, if any of the parties shall take any such inconsistent
action, or fail to use such best efforts, it will indemnify the other parties
for any expense or Liability incurred as a consequence thereof. The parties
acknowledge and agree that no tax or securities opinions have been or are
anticipated to be obtained in connection with the transactions contemplated
hereunder. Except as otherwise specifically provided in Section 12.6 of this
Agreement, the parties shall bear their own expenses associated with the
contribution of the Hatteras Yachts Division and the Distribution.
ARTICLE VIII
CONDITIONS TO EFFECTIVENESS OF DISTRIBUTION
The Distribution shall be subject to the implementation of the portions
of this Agreement which are contemplated to become effective prior to the
Distribution and to the satisfaction or waiver of the following conditions:
8.1 BOARD APPROVAL. This Agreement and the Ancillary Agreements
(including exhibits and schedules) shall have been approved by the Board of
Directors of all parties and shall have been executed and delivered by
appropriate officers of all parties.
8.2 TAXATION AND SECURITIES LAWS COMPLIANCE. The transactions
contemplated hereby shall be in compliance with applicable federal and state
taxation and securities laws and, if determined necessary by Genmar, Genmar
shall have received a satisfactory determination with regard to exemptions from
taxation and compliance with securities laws in connection with the
contribution, the Distribution and related matters.
8.3 CONTRIBUTION AGREEMENT. Industries and Hatteras shall have
entered into the Contribution Agreement and shall have performed all of their
respective obligations thereunder required to be performed on or before the
Distribution Date.
8.4 MANAGEMENT SERVICES AGREEMENT. Each of Hatteras, Genmar and
Xxxxxx Management Corporation, a Delaware corporation ("JMC") shall on or before
the Distribution Date enter into a management services agreement substantially
in the form of EXHIBIT B hereto (the "Management Services Agreement") pursuant
to which Genmar and
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JMC shall provide advisory, management, administrative, legal, environmental,
financial, accounting and other such services to and on behalf of Hatteras
for a period of one (1) year following the Distribution Date.
8.5 SHAREHOLDERS' AGREEMENT. Each of the following shareholders of
Genmar (i) Xxxxx X. Xxxxxx, (ii) Xxxxxx Management Corporation, (iii) Miramar
Equity Holdings Partnership, (iv) Xxxxxx Industries, Inc., (v) Xxxx X. Xxxxxx,
as Trustee of Revocable Trust No. 2 of Xxxx X. Xxxxxx created U/A dated 5/28/93,
(vi) PEP Partnership, (vii) RDV Capital Management X.X. XX, (viii) Orekeon
Holdings AB, (ix) the State of Wisconsin Investment Board, (x) all other
shareholders of Genmar and their Affiliates who will receive Distribution of
Hatteras Stock hereunder, and (xi) Hatteras shall enter into a shareholders'
agreement effective on and after the Distribution Date substantially in the form
of Exhibit C hereto (the "Shareholders' Agreement") pursuant to which such
shareholders and Hatteras shall agree to, among other things, certain transfer
restrictions, purchase obligations and capital stock registration rights.
8.6 HATTERAS LOAN. On or prior to the Distribution Date, Hatteras
shall have obtained and have the right to draw upon a third party lender loan
(the "Hatteras Loan") in an amount not less than $25 million to be used for
repayment of intercompany debt of the Hatteras Yachts Division and for working
capital purposes.
8.7 GENMAR GUARANTEE. On or prior to the Distribution Date, Genmar
shall have guaranteed the due performance of Hatteras under the Hatteras Loan,
in an amount not to exceed $5 million, pursuant to a guarantee in form and
substance mutually acceptable to Genmar and its counsel, Hatteras and the
lending institution issuing the Hatteras Loan.
8.8 CONSENTS. The parties shall have received such consents, and
shall have received executed copies of such agreements or amendments of
agreements, as deemed necessary in connection with the completion of the
transactions contemplated by this Agreement and the Ancillary Agreements.
8.9 OTHER INSTRUMENTS. All actions and other Conveyancing and
Assumption Instruments deemed necessary or advisable in connection with the
transactions contemplated hereby shall have been taken or executed, as the case
may be, in form and substance satisfactory to the parties.
8.10 LEGAL PROCEEDINGS. No legal proceedings affecting or arising out
of the transactions contemplated hereby or which could otherwise affect in a
materially adverse manner shall have been commenced or threatened against any of
the parties or the directors or officers of any of the parties.
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8.11 MATERIAL CHANGES. No material adverse change shall have occurred
with respect to any of the parties, the securities markets or general economic
or financial conditions which shall, in the reasonable judgment of Genmar, make
the transactions contemplated by this Agreement inadvisable.
ARTICLE IX
ACCESS TO INFORMATION AND SERVICES
9.1 PROVISION OF CORPORATE RECORDS. Upon Hatteras' request, Genmar
and Industries shall arrange as soon as practicable following the Distribution
Date for the delivery to Hatteras of active agreements and corporate records in
the possession of Genmar, Minstar, Industries or any of their Affiliates
relating to the assets, Liabilities, business and operations of the Hatteras
Yachts Division, except to the extent such items (i) are already in the
possession of Hatteras, (ii) are "Excluded Liabilities" or "Excluded Assets"
under the Contribution Agreement or (iii) are to be maintained by Genmar or JMC
pursuant to the Management Services Agreement. Such records shall be the
property of Hatteras, but shall be available to Genmar, Minstar, Industries or
any of their Affiliates for review and duplication until Hatteras shall dispose
of such records as permitted by Section 9.7 hereof.
9.2 ACCESS TO INFORMATION. From and after the Distribution Date,
Hatteras shall afford to Genmar and its authorized accountants, counsel and
other designated representatives reasonable access (including using reasonable
efforts to give access to persons or firms possessing information) and
duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information
(collectively, "Information") within Hatteras' possession relating to the
assets, Liabilities, business and operations of Hatteras or the Hatteras Yachts
Division, insofar as such access is reasonably required by Genmar. Genmar shall
afford to Hatteras and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing Information) and duplicating rights during
normal business hours to Information within Genmar's and its Affiliates'
possession relating to the assets, Liabilities, business and operations of the
Hatteras Yachts Division as constituted prior to the Distribution, insofar as
such access is reasonably required by Hatteras. Information may be requested
under this Article IX for, without limitation, audit, accounting, claims,
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing the transactions contemplated by
this Agreement and the Ancillary Agreements.
9.3 PROVISION OF SERVICES. Each party to this Agreement, upon written
request, shall make available to any other party, during normal business hours
and in a manner that will not unreasonably interfere with such party's business,
its financial, tax, accounting, legal, personnel, employee benefits and similar
staff services (collectively "Services")
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whenever and to the extent that they may be reasonably required in connection
with the preparation of tax returns, audits, claims, litigation or
administration of employee benefit plans, and otherwise to assist in
effecting an orderly transition following the Distribution.
9.4 PRODUCTION OF WITNESSES. At all times from and after the
Distribution Date, each of the parties shall use reasonable efforts to make
available to the other, upon written request, its officers, directors, employees
and agents as witnesses to the extent that such persons may reasonably be
required in connection with legal, administrative or other proceedings in which
the requesting party may from time to time be involved.
9.5 REIMBURSEMENT. A party providing Information, Services or
witnesses to any other party under this Article IX shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payment for
providing such Information, Services or witnesses corresponding to a reasonable
pro rata share of the salary and benefits of the officers, directors, employees
and agents involved, and the supplies, disbursements and other out-of- pocket
expenses as may be reasonably incurred in providing such Information or Services
or producing such witnesses; PROVIDED, HOWEVER, that there shall be no charge
for such salary and benefits for a party's participation in an existing and
known lawsuit (as determined on the Effective Date).
9.6 RETENTION OF RECORDS. Following the Distribution Date, each of
the parties shall retain all Information relating to any other party, except as
otherwise required by law or set forth in an Ancillary Agreement or except to
the extent that such Information is in the public domain or in the possession of
the other party, for the period specified for such types of Information as set
forth in Industries' record retention policy (or that of its parent).
9.7 CONFIDENTIALITY. Subject to any contrary requirement of law and
the right of each party to enforce its rights hereunder in any legal action or
other claim or proceeding, each party shall keep strictly confidential, and
shall cause its employees and agents to keep strictly confidential, any
Information of or concerning the other party which it or any of its agents or
employees may acquire pursuant to, or in the course of performing its
obligations under, any provisions of this Agreement or any Ancillary Agreement;
PROVIDED, HOWEVER, that such obligation to maintain confidentiality shall not
apply to Information which (i) at the time of disclosure was in the public
domain, not as a result of improper acts by the receiving party, (ii) was
already independently in the possession of the receiving party at the time of
disclosure, (iii) is received by the receiving party from a third party who did
not receive such Information from the disclosing party under an obligation of
confidentiality, or (iv) is required by law or regulation (including Tax Laws)
to be disclosed, but only in the context and to the extent required by such law
or regulation.
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ARTICLE X
TAX MATTERS
10.1 TAX INDEMNIFICATION BY GENMAR. Genmar shall indemnify and hold
Hatteras and any successor entity thereto or Affiliate thereof harmless from and
against the following Taxes arising from or attributable to the business or
operations of Genmar and its Affiliates:
(a) any and all Taxes arising in or attributable to any taxable
period ending (or deemed, pursuant to Section 10.3, to end) on or before the
Distribution Date except for state, local or foreign Taxes (not based on income)
of the Hatteras Yacht Division which are (i) payable or (ii) not yet due and
payable as of the Distribution Date, and are Liabilities of the Hatteras Yachts
Division;
(b) any several liability of such entities under Treasury
Regulations Section 1.1502-6 or under any comparable or similar provision under
state, local or foreign laws or regulations for periods ending on or prior to
the Distribution Date; and
(c) any and all corporate level Taxes arising out of or imposed
in connection with the Exchange or Distribution or any of the transactions
arising out of or incident to the Exchange or Distribution; PROVIDED, HOWEVER,
(i) that neither Genmar, nor any of its Affiliates, shall be liable for any such
corporate level Tax if such Tax arises out of, in connection with or incident to
a final determination (that may no longer be appealed) by a federal or state
taxing authority that (x) Section 355 of the Code (or any state counterpart)
does not apply to the transactions contemplated by this Agreement and such
determination arises directly or indirectly from the acts or omissions of
Hatteras or (y) the application of Section 355(e) of the Code results in a Tax
to Genmar and/or its Affiliates by reason of an equity change of control of
Hatteras after the Distribution Date, and (ii) that Genmar shall be indemnified
at the time of such determination by Hatteras for any Tax paid and/or loss of
Tax benefits by use of its credits or net operating losses resulting from any
Tax incurred pursuant to the determination described in sentence (i) immediately
above.
10.2 TAX INDEMNITY AND COVENANT BY HATTERAS. Hatteras shall indemnify
and hold Genmar, Minstar, Industries and their Affiliates and any successor
entities thereto and any Affiliates thereof harmless from and against, the
following Taxes arising from or attributable to the business or operations of
Hatteras:
(a) any and all Taxes arising in or attributable to any taxable
period beginning (or deemed pursuant to Section 10.3 to begin) after the
Distribution Date and Taxes and other similar transfer fees which are incurred
in connection with the transfer of assets or Liabilities of the Hatteras Yachts
Division;
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(b) any and all Taxes not incurred in the ordinary course of
business attributable to the acts or omissions of Hatteras or its Affiliates
occurring after the Distribution Date, including any Tax arising in connection
with an equity change of control of Hatteras after the Distribution Date under
the provisions of Section 355(e) of the Code and, FURTHER, Hatteras shall also
indemnify Genmar, Minstar, Industries and their Affiliates for any loss of Tax
benefits as described in Section 10.1 (c) herein above; and
(c) state, local or foreign Taxes (not based on income) arising
in or attributable to any taxable period ending (or deemed pursuant to Section
10.3 to end) on or before the Distribution Date to the extent such Taxes (i)
payable or (ii) not yet due and payable as of the Effective Date, and are
Liabilities of the Hatteras Yachts Division.
10.3 ALLOCATION OF INCOME TAXES.
(a) The parties agree that if they are permitted but not
required under applicable foreign, state or local Tax laws to treat the
Effective Date as the last day of a taxable period, they shall treat such day as
the last day of a taxable period. The parties agree that they will treat
Hatteras as if it ceased to be part of Genmar's affiliated group, within the
meaning of Section 1504 of the Code, as of the close of business on the
Effective Date.
(b) Genmar shall be entitled to use and utilize any and all net
operating losses incurred by Genmar and its Affiliates on and prior to the
Distribution Date. Hatteras acknowledges and agrees that it shall not receive
as an asset under the Contribution Agreement, and therefore shall not be
entitled to utilize, net operating losses of the Hatteras Yachts Division.
10.4 FILING RESPONSIBILITY.
(a) Genmar shall prepare and file or shall cause to have
prepared and filed the following Returns with respect to such entities:
(i) all income and franchise Tax Returns for any taxable
period ending on or before the Distribution Date; and
(ii) all other Returns required to be filed on or before
the Distribution Date.
(b) Hatteras shall, subject to the provisions of Section
10.4(c), prepare and file all other Returns with respect to Hatteras required to
be filed (taking into account extensions) after the Distribution Date (unless
such Returns will be filed by Genmar pursuant to the Management Services
Agreement).
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(c) With respect to any Return for taxable periods beginning
before the Distribution Date and ending after the Distribution Date, Hatteras
shall consult with Genmar concerning each such Return and shall report all items
with respect to the period ending on the Distribution Date in accordance with
the instructions of Genmar, unless otherwise agreed by Genmar and Hatteras.
Hatteras shall provide Genmar with a copy of each proposed Return at least 30
days prior to the filing of such Return, and Genmar may provide comments to
Hatteras, which comments shall be delivered to Hatteras within fifteen days of
receiving such copies from Hatteras.
10.5 REFUNDS AND CARRYBACKS.
(a) Genmar shall be entitled to any refunds or credits of Taxes
attributable to taxable periods ending on or before the Distribution Date.
(b) Hatteras shall be entitled to any refunds or credits of
Taxes with respect to Hatteras attributable to taxable periods beginning after
the Distribution Date.
(c) Hatteras shall promptly forward to Genmar or reimburse
Genmar for any refunds or credits due Genmar (pursuant to the terms of this
Article X) after receipt thereof, and Genmar shall promptly forward to Hatteras
(pursuant to the terms of this Article X) or reimburse Hatteras for any refunds
or credits due Hatteras after receipt thereof.
(d) Hatteras agrees that with respect to any Tax, Hatteras
shall not have the right to carry back any item or loss, deduction or credit
which arises in any taxable period ending after the Distribution Date
("SUBSEQUENT LOSS") into any taxable period ending on or before the Distribution
Date. Notwithstanding the foregoing sentence, if a Subsequent Loss with respect
to any Tax is carried back into any taxable period ending on or before the
Distribution Date, Genmar shall be entitled to any refund or credit of Taxes
realized by Hatteras as a result thereof.
(e) (i) If any adjustment is made to any Return relating
to Genmar or any of its Affiliates (including the Hatteras Yachts Division)
for any taxable period (or portion thereof) ending on or prior to the
Distribution Date (whether such adjustment is a result of or in settlement of
any audit, other administrative proceeding or judicial proceeding or the
filing of an amended return to reflect the consequences of any determination
made in connection with any such audit or proceeding or otherwise) the
benefit or detriment of such adjustment shall accrue to or be incurred by, as
applicable, Genmar.
(ii) If any adjustment is made to any Return relating to
Hatteras or any of its Affiliates for any taxable period (or portion thereof)
ending after the Distribution Date (whether as a result of or in settlement of
any audit, other administrative proceeding or judicial proceeding or the filing
of an amended Return to reflect the consequences of any
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determination made in connection with any such audit or proceeding or
otherwise) the benefit or detriment of such adjustment shall accrue to or be
incurred by, as applicable, Hatteras.
10.6 COOPERATION AND EXCHANGE OF INFORMATION.
(a) Genmar shall prepare and submit to Hatteras, after the
Distribution Date, blank income Tax return workpaper packages. Hatteras shall
prepare completely and accurately and submit to Genmar, within sixty (60) days
of the extended income Tax return date, all information as Genmar shall
reasonably request in such income Tax return workpaper packages.
(b) As soon as practicable, but in any event within sixty (60)
days after Genmar's request, from and after the Distribution Date, Hatteras
shall provide Genmar with such cooperation and shall deliver to Genmar such
information and data concerning the pre-Distribution operations of the Hatteras
Yachts Division and make available such knowledgeable employees of such entities
as Genmar may reasonably request, including providing the information and data
required by Genmar's tax and accounting questionnaires, in order to enable
Genmar to complete and file all Returns which it may be required to file with
respect to the operations and business of the Hatteras Yachts Division through
the Distribution Date or to respond to audits by any Taxing Authorities with
respect to such operations and to otherwise enable Genmar to satisfy its
internal accounting, tax and other legitimate requirements. Such cooperation and
information shall include without limitation provision of powers of attorney for
the purpose of signing Returns and defending audits for the periods ending on or
prior to the Distribution Date and Hatteras will promptly forward copies of
appropriate notices and forms or other communications received from or sent to
any Taxing Authority which relate to Genmar or its obligations hereunder and
provide copies of all relevant Returns, together with accompanying schedules and
related workpapers, documents relating to rulings or other determinations by any
Taxing Authority and records concerning the ownership and tax basis of property,
which Hatteras and its Affiliates, if any, may possess. Genmar shall furnish
Hatteras with its cooperation in a manner comparable to that described in this
Section 10.6(b).
(c) For a period of seven (7) years after the Distribution Date
or such longer period as may be required by law, or as otherwise agreed to in
writing by the parties, each of the parties shall retain and not destroy or
dispose of all Returns (including supporting materials), books and records
(including computer files) of, or with respect to its activities or Taxes, for
all taxable periods ending (or deemed, pursuant to Section 10.3, to end) on or
prior to the Distribution Date.
(d) The parties shall cooperate in the preparation of all
Returns relating in whole or in part to taxable periods ending on or before or
including the Distribution Date
17
that are required to be filed after such date. Such cooperation shall
include, but not be limited to, furnishing prior years' Returns or return
preparation packages illustrating previous reporting practices or containing
historical information relevant to the preparation of such Returns, and
furnishing such other information within such party's possession requested by
the party filing such Returns as is relevant to their preparation. In the
case of any state, local or foreign joint, consolidated, combined, unitary or
group relief system Returns, such cooperation could also relate to any other
taxable periods in which one party could reasonably require the assistance of
the other party in obtaining any necessary information.
(e) Genmar shall have the right (but not the obligation), at
its own expense, to control any audit or examination by any Taxing Authority
("Tax Audit"), initiate any claim for refund or contest, resolve and defend
against any assessment, notice of deficiency, or other adjustment or proposed
adjustment relating to any and all Taxes for any taxable period ending on or
before the Distribution Date with respect to the Hatteras Yachts Division.
Hatteras shall have the right, at its own expense, to control any other Tax
Audit, initiate any other claim for refund, and contest, resolve and defend
against any other assessment, notice of deficiency, or other adjustment or
proposed adjustment relating to Taxes with respect to Hatteras, PROVIDED THAT,
with respect to any state, local and foreign Taxes for any taxable period
beginning before the Distribution Date and ending after the Distribution Date,
Hatteras or Genmar, as the case may be, shall keep the other party duly informed
and shall consult with each other with respect to the resolution of any issue
that would adversely affect the other party, and not settle any such issue, or
file any amended Return relating to any such issue, without the consent of the
affected party, which consent shall not unreasonably be withheld, delayed or
conditioned. Where consent to a settlement is withheld pursuant to this Section
10.6(e), the party controlling the audit or examination may nevertheless settle,
continue or initiate any further proceedings at its own expense, provided that
any adjustments required shall be made and treated as set forth in Section
10.5(e).
(f) If Hatteras fails to provide any information requested by
Genmar in the time specified herein, or if no time is specified pursuant to this
Section 10.6, within a reasonable period, or otherwise fails to do any act
required of it under this Section 10.6, then Hatteras shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify Genmar and
Hatteras shall so indemnify Genmar and hold Genmar harmless from and against any
and all costs, claims, penalties and damages, including, without limitation, all
incremental Taxes and penalties related thereto, payable or charged as a result
of such failure.
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ARTICLE XI
ADDITIONAL AGREEMENTS
11.1 CONSENTS; TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES.
Industries agrees to obtain consents, permits and authorizations necessary to
transfer and agrees to transfer or cause to be transferred to Hatteras, as the
case may be, any asset used solely in the Hatteras Yachts Division business
which has not been transferred by the Distribution Date. Industries and
Hatteras mutually agree to cooperate in order to obtain consents, permits and
authorizations necessary to permit Hatteras to assume, and Hatteras agrees to
assume from Genmar, as the case may be, any Liability of the Hatteras Yachts
Division which has not been assumed by Hatteras by the Distribution Date.
11.2 COLLECTION OF ACCOUNTS. After the Distribution Date, Genmar
agrees to promptly transfer or deliver to Hatteras any cash or other property
received directly or indirectly after the Distribution Date by Genmar or
Industries in respect of any accounts receivable arising from the operation of
the Hatteras Yachts Division.
11.3 HATTERAS PAYMENT OF INTERCOMPANY DEBT. Immediately following the
Distribution and upon receipt of authorization to draw down funds on the
Hatteras Loan, Hatteras shall remit to Genmar $20 million by wire transfer of
immediately available funds to an account or accounts specified in writing by
Genmar to Hatteras at least one (1) day prior to the remittance, in full and
final payment of intercompany debt associated with the Hatteras Yachts Division.
Hatteras acknowledges and agrees that such debt is due and owing to Genmar
and/or its Affiliates.
11.4 PHYSICAL INVENTORY. Genmar shall have the right to conduct an
audit or review (by its personnel or its authorized representatives) of all
inventories and supplies of the Hatteras Yachts Division. Such physical
inventory shall be accurately and properly priced and costed in accordance with
generally accept accounting principles consistently applied.
11.5 GENMAR INVENTORY AND SUPPLY BUYING GROUP. Subject to the
provisions of this Section 11.5, for a period of ten (10) years following the
Effective Date, Hatteras covenants that it will continue to be and shall
continuously, at the election of Genmar and in its discretion, participate as
(and shall be identified as a member of) a member of the "buying group"
consortium with Genmar and its Affiliates for the purpose of purchasing product
inventory and supplies, including (without limitation) wire, core mat, balsa
wood, gelcoat, PCV and other forms, woven roving, coring, catalyst, plywood,
hose, MRO items, graphics, abrasives, fiberglass, plastics, resin, acrylic
fibers and such other inventory and supplies as may be used in the manufacture
of marine industry products from time-to-time. As a member of the Genmar buying
group, Hatteras shall share in all economic benefits of the
19
buying group that are realized thereby, including all rebates, on a pro-rata
basis (determined by relative economic participation of the buying group
members).
Hatteras further covenants that Genmar and its Affiliates shall lead and
direct the buying group's purchasing activities. Notwithstanding the foregoing,
Hatteras shall not be obligated to participate as a member of the Genmar buying
group if, with respect to any particular product, or line of products, Hatteras
can demonstrate to the satisfaction of Genmar and its affiliates, that it can
purchase on its own (and not in concert with others) the same or substantially
equivalent inventory and supply items, individually or in the aggregate, (i) at
a purchase price amount that is five percent (5%) or more lower in price than
the buying group price achieved by Genmar and/or (ii) obtain other benefits that
have substantial economic value, such as, but not limited to, superior quality
or functionality.
In the event that Hatteras determines that its purchase price for items
of inventory and supplies may be so reduced and/or substantial economic benefits
may be realized, and it as a result determines that it is not obligated and does
not desire to participate as a member of Genmar's buying group as to that
particular item of inventory or supplies it shall (i) document to Genmar's
satisfaction the reduced purchase price opportunity to Genmar prior to Hatteras'
commitment to any such purchases, (ii) afford Genmar and its affiliates five (5)
business days to renegotiate the purchase prices and/or the economic benefits of
the Genmar buying group and (iii) in the event: (y) Genmar is unsuccessful in
reducing the Genmar buying group price to within five percent (5%) of the
Hatteras reduced price and the substantial economic benefits are equal in all
material respects, Hatteras shall make best efforts to include Genmar and its
Affiliates in its buying group in the event Genmar and its Affiliates elect to
so participate, or (x) Genmar is successful in reducing the Genmar buying group
price within five percent (5%) of the Hatteras reduced price and the substantial
economic benefits are equal in all material respects, then Hatteras shall, at
Genmar's election, continue to (or again) participate as to such
inventory/supply item(s) in the Genmar buying group.
The foregoing covenants shall terminate upon the closing of the
following: (i) the sale of a controlling equity ownership interest in Hatteras
pursuant to which after such transaction the shareholders of Hatteras no longer
own 51% or more of Hatteras' voting shares, or (ii) the sale of all or
substantially all of Hatteras' assets.
ARTICLE XII
MISCELLANEOUS
12.1 GOVERNING LAW. This Agreement shall be governed by the internal
laws of the State of Delaware, without regard to the principles of comity or the
conflicts of laws provisions of any jurisdiction.
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12.2 CONSTRUCTION. Each provision of this Agreement shall be
interpreted in a manner to be effective and valid to the fullest extent
permissible under applicable law. The Recitals to this Agreement are
incorporated to this Agreement by reference. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other
provisions of this Agreement which shall remain in full force and effect.
12.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
12.4 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement and the
Ancillary Agreements and other agreements and documents referred to herein,
shall constitute the entire agreement between the parties with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
12.5 TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in
the sole discretion of Genmar. In the event of such termination by Genmar,
no party shall have any liability of any kind to any other party. In the
event that the IPO, and as a result the Distribution, has not occurred by
November 30, 1999, regardless of the reason therefor, then this Agreement
shall automatically be terminated and no party shall have any rights against,
or obligations to, any other party hereto; PROVIDED, FURTHER, that no
shareholder of Genmar shall have any rights or interest in this Agreement
prior to, and in any event only upon the completion of, the Distribution.
12.6 EXPENSES. Genmar and Hatteras shall each be responsible for
their own costs and expenses incurred in connection with the transactions
described herein; PROVIDED, HOWEVER, that Hatteras acknowledges and agrees
that Genmar will expend funds or accrue payables on Hatteras' behalf in order
to effect the transactions contemplated by this Agreement and the Ancillary
Agreements and, if such funds are spent or such payables are accrued,
Hatteras shall reimburse to Genmar a maximum amount of [$________] for such
expenditures or payables to the extent such costs and expenses are (i)
required to be recorded as liabilities on the books and records of Hatteras
pursuant to a provision of this Agreement or the Contribution Agreement, (ii)
constitute a Tax or other similar transfer fee on or relating to the transfer
of any contributed asset under the Contribution Agreement or (iii)
preauthorized by Hatteras.
12.7 AMENDMENTS; WAIVERS. This Agreement may be amended or modified
only in writing executed on behalf of the parties hereto. No waiver shall
operate to waive any further or future act and no failure to object of
forbearance shall operate as a waiver.
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12.8 NOTICES. Notices hereunder shall be effective if given in writing
and delivered or mailed, postage prepaid, by registered or certified mail to:
If to Genmar or Industries: Genmar Holdings, Inc.
Genmar Industries, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
If to Hatteras: Hatteras Yachts, Inc.
000 X. Xxxxxxxxxx Xxxx
Xxx Xxxx, Xxxxx Xxxxxxxx 00000
Attention: President
or at such other address as may be designated by a party in writing upon at
least fifteen (15) days prior notice which is given in accordance with this
Section 12.8.
12.9 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided that this Agreement and the rights and
obligations contained herein or in any exhibit or schedule hereto shall not
be assignable by Hatteras, in whole or in part, without the prior written
consent of Genmar and any attempt to effect any such assignment without such
consent shall be void.
12.10 THIRD PARTY BENEFICIARIES. Except as specifically set forth in
this Agreement there are not, and shall not be determined to be, any intended
or incidental third party beneficiaries to this Agreement. No Genmar
shareholder shall have any rights or interest in this Agreement or any
Ancillary Agreement prior to, and in any event only on completion of, the
Distribution.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GENMAR HOLDINGS, INC.
By: ____________________________
Its ________________________
GENMAR INDUSTRIES, INC.
By: ____________________________
Its ________________________
MINSTAR, INC.
By: ____________________________
Its ________________________
HATTERAS YACHTS, INC.
By: ____________________________
Its ________________________
23
