MASTERCRAFT GROUP
ACQUISITION AGREEMENT,
DATED AS OF APRIL 24, 1997,
AMONG
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ PRODUCTS CO.,
▇▇▇▇ FABRICS CORPORATION
AND
MC GROUP ACQUISITION COMPANY, LLC
TABLE OF CONTENTS
(Not a part of this Agreement)
I. PURCHASE AND SALE OF ACQUIRED ASSETS.......................................... 1
1.1. Purchase and Sale................................................... 1
1.2. Acquired Assets and Excluded Assets................................. 1
1.3. Assumption of Liabilities........................................... 4
1.4. Purchase Price...................................................... 7
1.5. Purchase Price Adjustment........................................... 8
1.6. Transactions to be Effected at the Closing...........................10
II. REPRESENTATIONS AND WARRANTIES.................................................11
2.1. Representations and Warranties of Seller.............................11
2.1.1. Authorization and Effect of Agreement.......................11
2.1.2. No Restrictions.............................................11
2.1.3. Financial Statements........................................12
2.1.4. Conduct of the Business Since the Balance Sheet Date........13
2.1.5. Compliance with Laws........................................13
2.1.6. Tangible Personal Property; Title to
Assets................................................ 13
2.1.7. Real Property.............................................. 14
2.1.8. Insurance.................................................. 15
2.1.9. Intellectual Property...................................... 15
2.1.10. Litigation; Decrees........................................ 15
2.1.11. Contract Rights............................................ 16
2.1.12. Employee Plans, Etc........................................ 18
2.1.13. Taxes...................................................... 19
2.1.14. Environmental Matters...................................... 19
2.1.15. Certain Additional Representations......................... 21
2.2. Representations and Warranties of Purchaser......................... 21
2.2.1. Authorization and Effect of Agreement...................... 21
2.2.2. No Restrictions............................................ 22
2.2.3. Financial Capacity......................................... 22
2.3. Certain Limitations on Representations and
Warranties.......................................................... 22
III. COVENANTS..................................................................... 23
3.1. Investigation by Purchaser.............................................. 23
3.2. Press Releases.......................................................... 24
3.3. Regulatory Filings...................................................... 24
3.4. Injunctions............................................................. 25
3.5. Operation of the Business............................................... 25
3.6. Supplemental Schedules.................................................. 27
3.7. Satisfaction of Conditions.............................................. 27
3.8. Bulk Transfer Laws...................................................... 27
3.9. Real Property Licenses.................................................. 27
3.10. Discharge of Mortgages.................................................. 27
3.11. Designer Contracts...................................................... 28
3.12. UCC-3s/Release of Ack-Ti and ▇▇▇▇▇▇▇▇................................... 28
IV. THE CLOSING....................................................................28
4.1. Conditions Precedent to Obligations of Purchaser,
Parent and Seller....................................................... 28
4.2. Additional Conditions Precedent to Obligations of
Purchaser and Parent.................................................... 29
4.2.1. No Material Misrepresentation or Breach......................... 29
4.2.2. Bills of Sale; Special Warranty Deeds........................... 29
4.2.3. Assignment Agreements........................................... 29
4.2.4. Clearance Certificates.......................................... 30
4.2.5. FIRPTA.......................................................... 30
4.2.6. Opinion of Counsel.............................................. 30
4.2.7. Certain Leases.................................................. 30
4.2.8. Payment of Certain Indebtedness................................. 30
4.3. Additional Conditions Precedent to Obligations of
Seller.............................................................. ....30
4.3.1. No Material Misrepresentation or Breach......................... 30
4.3.2. Assumption Agreement............................................ 31
4.3.3. Opinion of Counsel.............................................. 31
4.3.4. Estimated Purchase Price........................................ 31
4.4. The Closing............................................................. 31
4.5. Termination............................................................. 31
V. SURVIVAL AND INDEMNIFICATION.................................................. 32
5.1. Survival of Representations, Warranties and
Covenants............................................................... 32
5.2. Limitations on Liability................................................ 33
5.3. Indemnification......................................................... 34
5.4. Defense of Claims....................................................... 36
VI. OTHER POST-CLOSING COVENANTS.................................................. 38
6.1. Personnel Matters....................................................... 38
6.1.1. Employees and Employee Benefit Plans............................ 38
6.1.2. Assumption of Obligations....................................... 38
6.1.3. Retirement Plans................................................ 39
6.1.4. Employment and Plan Amendments or
Terminations.................................................... 39
6.1.5. Transitional Matters............................................ 40
6.1.6. Employee Information............................................ 40
6.1.7. W-2 Matters................................................... ..40
6.2. General Post-Closing Matters............................................ 40
6.2.1. Post-Closing Notifications...................................... 40
6.2.2. Names, Trademarks, Etc.......................................... 41
6.2.3. Access.......................................................... 41
6.2.4. Certain Tax Matters............................................. 42
6.2.5. Insurance....................................................... 44
6.2.6. Receivables..................................................... 46
6.2.8. Certain Contracts............................................... 47
6.2.9. Non-Solicitation................................................ 48
6.2.10. Software Licenses............................................... 48
VII. MISCELLANEOUS PROVISIONS...................................................... 49
7.1. Notices................................................................. 49
7.2. Expenses................................................................ 49
7.3. Successors and Assigns...................................................50
7.4. Waiver.................................................................. 50
7.5. Entire Agreement........................................................ 50
7.6. Amendments, Supplements, Etc............................................ 51
7.7. Rights of the Parties................................................... 51
7.8. Further Assurances...................................................... 51
7.9. Applicable Law; Jurisdiction............................................ 51
7.10. Titles and Headings..................................................... 52
7.11. Certain Interpretive Matters and Definitions............................ 52
TABLE OF DEFINED TERMS
(Not a part of this Agreement)
Section
Accountants.......................................................1.5(c)
Accounting Policies ..............................................1.5(a)
Ack-Ti..........................................................Recitals
▇▇▇▇▇▇▇▇........................................................Recitals
Acquired Assets...................................................1.2(a)
Actual Net Worth Amount...........................................1.5(a)
Affiliate........................................................7.11(a)
Agreement...................................................Introduction
Assumed Liabilities...............................................1.3(a)
Assumed Contracts..............................................1.2(a)(v)
Balance Sheet...................................................2.1.3(a)
Balance Sheet Date..............................................2.1.3(a)
Business........................................................Recitals
Closing...........................................................4.4(a)
Closing Date......................................................4.4(a)
Closing Price.....................................................1.4(a)
Closing Date Balance Sheet........................................1.5(a)
Closing Date Employees........................................1.3(a)(ii)
Code...........................................................2.1.12(b)
Commitment Letter.................................................4.5(d)
Confidentiality Agreement............................................7.5
Consent Costs......................................................4.2.7
Consent-Required Leased Real Property..............................4.2.7
Contracts......................................................1.2(a)(v)
Direct Claim......................................................5.4(c)
Employee.......................................................2.1.12(a)
Employee Plan..................................................2.1.12(a)
Environment....................................................2.1.14(d)
Environmental Law..............................................2.1.14(d)
Environmental Condition........................................2.1.14(d)
ERISA..........................................................2.1.12(a)
Estimated Purchase Price..........................................1.4(b)
Estimated Net Worth Amount........................................1.4(b)
Excluded Liabilities..............................................1.3(b)
Excluded Assets...................................................1.2(b)
Excluded Contracts...........................................1.3(b)(vii)
Financial Statements............................................2.1.3(a)
Former Employee................................................2.1.12(a)
GAAP............................................................2.1.3(a)
Governmental Entity................................................2.1.2
HSR Act............................................................2.1.2
Income Tax .....................................................6.2.4(g)
Indemnifiable Losses..............................................5.2(a)
Indemnifying Party................................................5.2(a)
Indemnitee........................................................5.2(a)
Indemnity Payment.................................................5.2(a)
Intellectual Property .............................................2.1.9
IRS............................................................2.1.12(b)
Knowledge of Seller..............................................7.11(a)
Last Offer........................................................1.5(c)
Law.................................................................2.1.2
Leased Real Property................................................2.1.7
Legal Proceedings..................................................2.1.10
Liens...............................................................2.1.6
Master Contracts.................................................6.2.7(a)
Mastercraft Group................................................Recitals
Material Adverse Effect..............................................7.11
Negative Cash Amount............................................1.3(b)(i)
Net Worth Amount...................................................1.4(a)
Non-Prevailing Party...............................................1.5(c)
Orders.............................................................2.1.10
Owned Real Property.................................................2.1.7
Parent.......................................................Introduction
Permit..............................................................2.1.2
Permitted Liens..................................................2.1.6(a)
Person...............................................................7.11
Prevailing Party...................................................1.5(c)
Products.........................................................Recitals
Purchase Price.....................................................1.4(a)
Purchaser Companies................................................5.2(e)
Purchaser....................................................Introduction
Purchaser's Insurance............................................6.2.5(b)
Real Property...................................................1.2(a)(i)
Records..........................................................6.2.3(a)
Receivables Facility ........................................... 2.1.3(c)
Restricted Period...............................................6.2.9(a)
Retirement Plans....................................................6.1.3
Sales Representatives............................................6.2.9(a)
Seller Trade Name.................................................. 6.2.2
Seller.......................................................Introduction
Seller's Accountant................................................1.5(b)
Seller's Insurance...............................................6.2.5(a)
Shares.............................................................1.2(a)
subsidiary...........................................................7.11
Supply Agreement......................................................4.1
Tax/Taxes .......................................................6.2.4(g)
Tax Returns......................................................6.2.4(g)
Third Party Claim..................................................5.2(a)
Transfer.........................................................Recitals
Transfer Taxes ..................................................6.2.4(g)
UCC-3's ..............................................................3.7
West Spindale Property..........................................2.1.14(e)
LIST OF SCHEDULES
(Not a part of this Agreement)
Schedule 1.2(b)(viii) Other Excluded Assets
Schedule 1.3(b)(vii) Excluded Contracts
Schedule 1.5(a) Accounting Principles
Schedule 2.1.2 Seller Consents and Approvals/Conflicts
Schedule 2.1.3 Financial Statements
Schedule 2.1.4(a) Conduct of Business
Schedule 2.1.5 Compliance with Laws
Schedule 2.1.6(a) Tangible Property; Title to Assets
Schedule 2.1.6(b) Shares
Schedule 2.1.7 Real Property
Schedule 2.1.9 Intellectual Property
Schedule 2.1.10(a) Litigation
Schedule 2.1.11 Contract Rights
Schedule 2.1.12 Current Employee Benefits
Schedule 2.1.13 Tax Matters
Schedule 2.1.14 Environmental Matters
Schedule 2.2.2 Purchaser/Parent Consents and
Approvals/Conflicts
Schedule 3.5(f) Compensation Contracts
Schedule 7.11 Definition of Knowledge
LIST OF EXHIBITS
(Not a part of this Agreement)
Exhibit 4.1 Supply Agreement
Exhibit 4.2.5 FIRPTA Affidavit
Exhibit 4.2.6 Opinion of Seller's Counsel
Exhibit 4.3.3 Opinion of Purchaser's Counsel
This Mastercraft Group Acquisition Agreement (this "Agreement")
is made and entered into as of April 24, 1997, among ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Products
Co., a Delaware corporation ("Seller"), ▇▇▇▇ Fabrics Corporation, a Delaware
corporation ("Parent"), and MC Group Acquisition Company, LLC, a Delaware
limited liability company ("Purchaser").
RECITALS:
A. Seller is engaged in the business (the "Business") of
designing, manufacturing and marketing fabrics for furniture
upholstery, home textiles, recreational vehicles and neckwear
interlining and of manufacturing and selling yarn (such fabrics
and yarn, the "Products");
B. Seller operates the Business through its Mastercraft Division,
its Yarn Division and its Ack-Ti Division, including Seller's wholly owned
subsidiaries, Ack-Ti-Lining, Inc., a New York corporation ("Ack-Ti"), and
▇▇▇▇▇▇▇▇ Associates, Inc., a New York corporation ("▇▇▇▇▇▇▇▇") (the Mastercraft
Division, the Yarn Division and the Ack-Ti Division (including Ack-Ti and
▇▇▇▇▇▇▇▇) being collectively referred to as the "Mastercraft Group");
C. Seller desires to sell, assign and deliver
("Transfer") to Purchaser, and Purchaser desires to purchase and
accept from Seller, the Acquired Assets on the terms and subject
to the conditions of this Agreement;
D. Seller desires to delegate to Purchaser, and
Purchaser is willing to assume, the Assumed Liabilities on the
terms and subject to the conditions of this Agreement; and
E. Seller and Parent desire that the foregoing
transactions be completed on such terms and subject to such
conditions.
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF ACQUIRED ASSETS
1.1. Purchase and Sale. On the terms and subject to the
conditions of this Agreement, at the Closing, Seller will
Transfer to Purchaser, and Purchaser will purchase and accept
from Seller, the Acquired Assets.
1.2. Acquired Assets and Excluded Assets. (a) For
purposes of this Agreement, the term "Acquired Assets" means the
following properties, assets and rights of whatever kind and
nature, real or personal, tangible or intangible, other than the
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Excluded Assets, owned by Seller as of the Closing and used or held for use
primarily in the Business:
(i) the real property, leaseholds and other interests
in real property of Seller that are listed in Schedule 2.1.7,
together with the right, title and interest of Seller in all
buildings, improvements, fixtures and other appurtenances thereto
(the "Real Property");
(ii) the inventory of Seller that as of the Closing is
located on the Real Property and all other inventory of Seller on
the Closing Date that is used or held for use primarily in the
Business;
(iii) the machinery and equipment of Seller and other
fixed assets of the Business located at the Real Property
as of the Closing;
(iv) the prepaid expenses of Seller as of the Closing
to the extent relating to the Acquired Assets;
(v) the right, title and interest of Seller as of the
Closing in, to and under all contracts, leases, licenses and all
other legally binding commitments ("Contracts") (other than
Excluded Contracts) ("Assumed Contracts") that are listed on
Schedules 2.1.7 or 2.1.11, or which would be so listed but for
any dollar, time or other exclusion or exception in Section 2.1.7
or Section 2.1.11, as the case may be, and any Contract primarily
relating to the Business entered into in accordance with this
Agreement, including without limitation Section 3.5;
(vi) the right, title and interest of Seller as of the
Closing in, to and under the intellectual property listed or
required to be listed on Schedule 2.1.9;
(vii) the trade secrets, know how and goodwill owned
by Seller as of the Closing relating primarily to the
Business;
(viii) the books of account, general, financial,
accounting and personnel records, files, invoices, customers' and
suppliers' lists and other written information owned by Seller as
of the Closing and relating primarily to the Business;
(ix) the permits, licenses, franchises and other
federal, state, local and foreign governmental approvals and
authorizations of Seller as of the Closing relating primarily to
the Business;
(x) the assets reflected as such in the Closing Date
Balance Sheet, including without limitation amounts due
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from Seller or any of its Affiliates as of the Closing Date
arising out of or relating to the supply of yarn or the provision
of commission weaving services to the Seller or any of its
Affiliates by the Mastercraft Group prior to the Closing Date;
and
(xi) the entire right, title and interest of Seller in
all of the issued and outstanding capital stock of Ack-Ti and
▇▇▇▇▇▇▇▇ (the "Shares").
(b) For purposes of this Agreement, the term "Excluded
Assets" means:
(i) cash and cash-equivalent assets;
(ii) the insurance policies or other insuring agreements
of Seller, whether or not pertaining to the Acquired Assets or
the Business, and all rights of every nature and description
under or arising out of such policies or agreements, except as
expressly provided in Section 6.2.5;
(iii) the rights of Seller under this Agreement and the
agreements, instruments and certificates delivered in connection
with this Agreement;
(iv) the Records referred to in Section 6.2.3(a)(i),
(ii) or (iii);
(v) the rights and other assets (including Tax and
other refunds and claims thereto) to the extent related
to any of the Excluded Liabilities;
(vi) the rights, title and interest in the trade names
"▇▇▇▇▇▇▇ & ▇▇▇▇▇▇" and "C&A" and the "CA" logo, or any variations
or derivations of such names or logo;
(vii) the accounts of a type that would be reflected (on
a net basis or otherwise) on a combined balance sheet of the
Mastercraft Group prepared on a basis consistent with the Balance
Sheet as "Investments and Advances from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Products
Co." and any other accounts due from Seller or any of its
subsidiaries without reduction or increase, as the case may be,
of such accounts for (A) amounts due from Seller or any of its
Affiliates as of the Closing Date arising out of or relating to
the supply of yarn or the provision of commission weaving
services to the Seller or any of its Affiliates by the
Mastercraft Group prior to the Closing Date and (B) amounts due
to Seller or any of its Affiliates as of the Closing Date arising
out of or relating to the provision of finishing services to the
Ack-Ti Division and transportation services to the Mastercraft
Group prior to the Closing Date; and
3
(viii) the assets identified on Schedule 1.2(b)(viii).
(c) As used in this Agreement, the phrases "used" or "held for
use in," "relate to," "related primarily to" or "relating primarily to" the
Business, or the conduct thereof, and similar phrases are intended to exclude
assets of Seller owned or held (i) in any business other than the Business, (ii)
for use in the businesses or activities of Seller generally, or (iii) for use by
both the Mastercraft Group and any other business of Seller so long as such
assets or rights do not exclusively or predominantly relate to the Business.
Nothing in this Section 1.2 will constitute a representation or warranty with
respect to the extent of Seller's right, title and interest in or to any of the
Acquired Assets.
1.3. Assumption of Liabilities. (a) On the terms and subject to
the conditions of this Agreement, effective as of the Closing, Purchaser assumes
and agrees to pay, perform and discharge when due, and to indemnify Seller and
its Affiliates against and hold them harmless from, the obligations and
liabilities of Seller of whatever kind and nature, primary or secondary, direct
or indirect, absolute or contingent, known or unknown, whenever arising, whether
or not accrued, that are described below (collectively, the "Assumed
Liabilities"):
(i) the obligations and liabilities, or reserves
therefor, to the extent reflected in the Closing Date Balance
Sheet, including without limitation amounts due to Seller or any
of its subsidiaries as of the Closing Date arising out of or
relating to the provision of finishing services to the Ack-Ti
Division and transportation services to the Mastercraft Group
prior to the Closing Date;
(ii) all amounts due from Seller or any of its
Affiliates (A) to Employees who are employed by Seller as of the
Closing Date (or on temporary leave or disability) ("Closing Date
Employees") under any of the Employee Plans or arrangements
listed on Schedule 2.1.12 (excluding those Employee Plans marked
with an asterisk thereon), the parties hereby acknowledging,
however, that (1) except and only to the extent provided in
Sections 6.1.1-6.1.7, nothing in this Section 1.3(a)(ii) will
require Purchaser to continue any Employee Plan or arrangement
listed on Schedule 2.1.12 that is not an Assumed Contract after
the Closing and (2) accordingly, Purchaser's obligations under
this Section 1.3(a)(ii)(A) will apply only to events or periods
occurring or, in the case of a continuing event (such as, for
example, a hospitalization) commencing, prior to or on the
Closing Date, (B) for severance or termination pay or benefits to
any sales representative referred to on Schedule 2.1.12 or to any
Closing Date Employee pursuant to the severance letters referred
to in Exhibit A to Schedule 2.1.12, the
4
severance policy referred to in Exhibit B of Schedule 2.1.12, any
Assumed Contract or applicable Law arising out of (1) the
termination (actual, constructive or, under certain of such
severance letters, for "Good Reason" or without "cause") of any
such sales representative or Closing Date Employee on or after
the Closing or (2) the consummation of the transactions
contemplated hereby, (C) for post-retirement health benefits to
Closing Date Employees, and (D) for claims under worker's
compensation Laws made by Closing Date Employees on or after the
Closing Date;
(iii) the obligations and liabilities relating to,
resulting from or arising out of any matter listed or described
on any of Schedules 2.1.7, 2.1.9 and 2.1.10(a) or not so listed
or described by reason of any dollar, time or other exclusion or
exception in any representation or warranty in the corresponding
Section in Article II;
(iv) the obligations and liabilities of Seller under
the executory portion of Assumed Contracts;
(v) the obligations and liabilities of Seller, if any,
(A) for personal injury in respect of any and all Products
manufactured by Purchaser or any of its Affiliates after the
Closing and (B) for Product return, warranty or similar
liabilities or obligations in respect of any and all Products
manufactured or sold by Seller, Purchaser or any of their
respective Affiliates prior to, on or after the Closing Date
(including without limitation obligations and liabilities for
refunds, adjustments, allowances, damages, repairs, exchanges and
returns;
(vi) the obligations and liabilities arising out of
Purchaser's conduct of the Business after the Closing
Date;
(vii) the obligations and liabilities assumed by
Purchaser or Parent under Sections 6.1.1, 6.1.2 and
6.2.4; and
(viii) the obligations and liabilities for any legal,
accounting, travel, printing or other expenses incurred on behalf
of Purchaser or any of its Affiliates in connection with the
transactions contemplated by this Agreement or the financing
thereof.
The provisions of Sections 1.3(a)(i)-(viii) are independent, with the result
that any limitation in any such provision thereof will not apply to any other
provision thereof. All Persons having any right in respect of any Assumed
Liabilities are intended third-party beneficiaries of Purchaser's obligations
under this Section
5
1.3(a). Notwithstanding any other provision hereof or of applicable Law to the
contrary, the parties' respective obligations under any covenant in this
Agreement, including without limitation Purchaser's obligations under this
Section 1.3(a), will not be subject to offset or reduction or otherwise affected
by reason of any actual or alleged breach of any representation, warranty or
covenant contained in this Agreement or any document contemplated by or
delivered in connection herewith or any right or alleged right to
indemnification hereunder or thereunder or any other matter whatsoever.
(b) Notwithstanding anything to the contrary contained herein,
but subject to Section 1.3(c), Purchaser will not assume or otherwise become
liable for, and as between Purchaser and Seller, Seller will retain and remain
responsible for and pay in accordance with their respective terms, the
obligations and liabilities of Seller of whatever kind and nature, primary or
secondary, direct or indirect, absolute or contingent, known or unknown,
whenever arising, whether or not accrued, that are described below
(collectively, the "Excluded Liabilities"):
(i) the obligations or liabilities of Seller to the
extent attributable to any of the Excluded Assets, including
without limitation the total amounts of checks issued by Seller,
Ack-Ti, ▇▇▇▇▇▇▇▇ or any Affiliate thereof that have not been
presented for payment to Seller's bank disbursement account prior
to the Closing Date (the amount thereof, the "Negative Cash
Amount");
(ii) the obligations or liabilities of Seller (A) under
any Employee Plans marked with an asterisk on Schedule 2.1.12
except to the extent assumed by Purchaser pursuant to Section
1.3(a)(ii)(B) or (C), (B) referred to in the second paragraph of
Note 2(c) to the Financial Statements to provide post-retirement
health benefits to individuals formerly employed in the Business
and not so employed as of immediately prior to the Closing
(unless on temporary leave or disability), and (C) referred to in
Note 2(d) to the Financial Statements under worker's compensation
Laws in respect of claims made prior to the Closing Date;
(iii) the obligations or liabilities of Seller that are
not Assumed Liabilities, including without limitation arising out
of any Environmental Condition to the extent existing prior to
the Closing Date;
(iv) the obligations or liabilities of Seller of a type
that would be reflected (on a net basis or otherwise) on a
combined balance sheet of the Mastercraft Group prepared on a
basis consistent with the Balance Sheet as "Investments and
Advances from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Products Co.", and any other
accounts due to Seller or any of its subsidiaries without
reduction or increase, as
6
the case may be, of such accounts for (A) amounts due to Seller
or any of its Affiliates as of the Closing Date arising out of or
relating to the provision of finishing services to the Ack-Ti
Division and transportation services to the Mastercraft Group
prior to the Closing Date or (B) amounts due from Seller or any
of its Affiliates as of the Closing Date arising out of or
relating to the supply of yarn or the provision of commission
weaving services to Seller or any of its Affiliates by the
Mastercraft Group prior to the Closing Date;
(v) the obligations or liabilities retained by
Seller under Section 6.1.3 or 6.2.4;
(vi) the obligations or liabilities for any legal,
accounting, investment banking, brokerage or similar fees or
expenses incurred by Seller or any of its Affiliates in
connection with the transactions contemplated by this Agreement;
and
(vii) the obligations or liabilities of Seller or Ack- Ti
under the Contracts listed on Schedule 1.3(b)(vii) (the "Excluded
Contracts").
(c) Notwithstanding any other provision hereof, effective as
of the seventh anniversary of the Closing Date, all Excluded Liabilities
involving claims for personal injury or damage to property relating to,
resulting from or arising out of the conduct of the Business at any time, other
than (i) any of such Excluded Liabilities as to which Purchaser has theretofore
made a claim for indemnification in accordance with this Agreement and (ii) any
of such Excluded Liabilities relating to any Environmental Condition existing on
or prior to the Closing Date, will, without further action, become Assumed
Liabilities.
1.4. Purchase Price. (a) In addition to assuming the Assumed
Liabilities, at the Closing, Purchaser will pay to Seller U.S. $310.0 million
(the "Closing Price"), subject to adjustment as provided in Sections 1.4(b) and
1.5 in respect of changes in the Net Worth Amount (as adjusted, the "Purchase
Price"). "Net Worth Amount" means the amount shown as "Investments and Advances
from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Products Co." as it would appear on a balance sheet of the
Mastercraft Group prepared in accordance with the second sentence of Section
1.5(a).
(b) Not less than two business days prior to the Closing Date,
Seller will deliver to Purchaser a combined balance sheet which will set forth
Seller's estimate of the Net Worth Amount as of the Closing Date (the "Estimated
Net Worth Amount"), determined in accordance with the second sentence of Section
1.5(a) as if it were the Actual Net Worth Amount, but based upon Seller's review
of monthly financial information then available to Seller and its inquiries of
personnel responsible for the
7
preparation of financial information relating to the Business in the ordinary
course thereof. The Closing Price will be reduced or increased
dollar-for-dollar, as the case may be (as so adjusted, the "Estimated Purchase
Price"), by the amount by which the Estimated Net Worth Amount calculated on the
basis set forth in the second sentence of Section 1.5(a) is less or more, as the
case may be, than $143,714,000.
(c) On the Closing Date, Purchaser will pay by wire transfer
of immediately available funds to such account as Seller has theretofore
designated an amount equal to the Estimated Purchase Price.
1.5. Purchase Price Adjustment. (a) In order to determine the
Purchase Price, the Estimated Purchase Price will be reduced or increased
dollar-for-dollar, as the case may be, to the extent that the Actual Net Worth
Amount is less or greater, as the case may be, than the Estimated Net Worth
Amount determined in accordance with Section 1.4(b). For purposes of this
Agreement, the "Actual Net Worth Amount" means the Net Worth Amount (without
giving effect to any extraordinary transactions taken upon or after the Closing)
on a combined balance sheet for the Mastercraft Group prepared in accordance
with this Section 1.5 as of the close of business on the Closing Date (the
"Closing Date Balance Sheet") on a basis consistent with, and using the same
accounting principles, policies, practices and procedures used in preparing, the
Balance Sheet (the "Accounting Policies"), except that (i) the principles set
forth in Schedule 1.5(a) will be applied in preparing the Closing Date Balance
Sheet, (ii) the Closing Date Balance Sheet will in all events exclude any
Excluded Liabilities (including without limitation the Executive Incentive
Compensation Plan referred to on Schedule 2.1.12) and Excluded Assets and any
accruals or reserves related thereto, (iii) the Closing Date Balance Sheet will
reflect liabilities for amounts accrued as of the close of business on the
Closing Date for the obligations and liabilities of Seller to Closing Date
Employees for group health, long term disability, medical, dental, vision and
hospitalization benefits referred to in Note 2(c) to the Financial Statements in
accordance with the Accounting Policies, and (iv) the Negative Cash Amount, if
any, and any accounts payable to which the Negative Cash Amount relates will be
excluded from the Closing Date Balance Sheet.
(b) Within 60 calendar days after the Closing Date, Seller and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. ("Seller's Accountants") will prepare, or cause to be
prepared, and deliver to Purchaser the Closing Date Balance Sheet setting forth
the Actual Net Worth Amount. The Closing Date Balance Sheet will be accompanied
by a report of Seller's Accountants substantially to the effect, that in the
opinion of such firm, the Closing Date Balance Sheet has been prepared in all
material respects in accordance with the requirements of the second sentence of
Section 1.5(a). Seller and its authorized representatives will be entitled to
review, during normal business hours, the books, records and workpapers
8
of the Mastercraft Group to prepare the Closing Date Balance Sheet. Without
limiting the generality or effect of any other provision hereof, (i) Purchaser
will (A) provide Seller and its representatives access, during normal business
hours, to the facilities, personnel and accounting and other records of the
Mastercraft Group to the extent reasonably determined by Seller to be necessary
to permit Seller to prepare or have prepared the Closing Date Balance Sheet as
herein provided; provided, however, that Seller will conduct any such review in
a manner that does not unreasonably interfere with the conduct of the Business
by the Mastercraft Group after the Closing, or result in substantial
out-of-pocket costs to Purchaser, and (B) take such actions as may be reasonably
requested by Seller to close, or to assist Seller in closing, as of the close of
business on the Closing Date, the books and accounting records of the
Mastercraft Group and otherwise reasonably to cooperate with Seller and its
representatives in the preparation of the Closing Date Balance Sheet, and (ii)
Purchaser's independent accountants will be entitled to participate as an
observer in any physical inventory count or similar procedure conducted by
Seller in connection with the preparation of the Closing Date Balance Sheet.
Purchaser and Seller will each pay one-half of the Seller's Accountants' fees
and expenses incurred in performing the audit of the Closing Date Balance Sheet.
Concurrently with the delivery of the Closing Date Balance Sheet, Seller will
use its reasonable efforts to cause Seller's Accountants to provide Purchaser
access to any of such firm's workpapers, trial balances and similar materials
prepared in connection with such firm's audit or review of the Closing Date
Balance Sheet.
(c) If, within 60 calendar days after the date of Seller's
delivery of its computation of the Actual Net Worth Amount, Purchaser determines
in good faith that such computation is inaccurate, Purchaser will give written
notice to Seller within such 60 calendar day period (i) setting forth
Purchaser's computation of Actual Net Worth Amount as of the close of business
on the Closing Date and (ii) specifying in reasonable detail Purchaser's basis
for its disagreement with Seller's computation. The failure by Purchaser so to
express its disagreement or provide such specification within such 60 calendar
day period will constitute Purchaser's acceptance of Seller's computation of the
Actual Net Worth Amount. If Purchaser and Seller are unable to resolve any
disagreement between them within ten calendar days after the giving of notice of
such disagreement, the items in dispute will be referred for determination to
the dispute resolution group of Deloitte & Touche (the "Accountants") as
promptly as practicable. Purchaser and Seller will use reasonable efforts to
cause the Accountants to render their decision as soon as practicable, including
without limitation by promptly complying with all reasonable requests by the
Accountants for information, books, records and similar items. The Accountants
will make a determination as to each of the items in dispute, which
determination will be (A) in writing, (B) furnished to each of the parties
hereto as promptly
9
as practicable after the items in dispute have been referred to the Accountants,
(C) made in accordance with this Agreement, and (D) conclusive and binding upon
each of the parties hereto. In connection with their determination of the
disputed items, the Accountants will be entitled, but not obligated, to rely on
the workpapers, trial balances and similar materials prepared by Seller's
Accountants in connection with such firm's examination of the financial
statements of Seller and its subsidiaries, the Accountants will not consider or
make any adjustment in respect of any matter which is not in dispute, other than
an adjustment resulting from any other adjustment in respect of a matter which
is in dispute, and the fees and expenses of the Accountants will be shared
equally by Purchaser and Seller (except as provided below). If the determination
of the Accountants represents an outcome more favorable to either Purchaser or
Seller than the midpoint of such parties' last written settlement offers related
to all items in dispute, in the aggregate, submitted to the Accountants upon the
referral of the matter to the Accountants (each, a "Last Offer"), then the party
obtaining such favorable result will be deemed the "Prevailing Party" and the
other party will be deemed the "Non-Prevailing Party". For purposes hereof, all
of the fees and expenses of the Accountants, and the reasonable out-of-pocket
expenses of the Prevailing Party, will be borne by the Non-Prevailing Party. No
party will disclose to the Accountants, and the Accountants will not consider
for any purpose, any settlement discussions or settlement offer (other than the
Last Offer) made by any party.
(d) To the extent that the Actual Net Worth Amount determined
as provided in this Section 1.5 is more or less than the Estimated Net Worth
Amount, Purchaser or Seller, as applicable, will, within ten calendar days after
the final determination of the Actual Net Worth Amount pursuant to this Section
1.5, make payment by wire transfer of immediately available funds of the amount
of such difference, together with interest thereon from the Closing Date to the
date of payment (at a rate equal to Chase Manhattan Bank's prime rate, as
publicly announced and in effect from time to time during such period, plus
2.0%, calculated on the basis of the actual number of days elapsed over 360), to
such account as has been designated by Purchaser or Seller, as applicable.
1.6. Transactions to be Effected at the Closing. At the
Closing:
(a) Seller will deliver or cause to be delivered to
Purchaser the documents described in Section 4.2; and
(b) Purchaser will deliver to Seller payment of the Estimated
Purchase Price as provided in Section 1.4(b) and the documents described in
Section 4.3.
10
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller. Subject
to Section 2.3, Seller represents and warrants to Purchaser as of
the date of this Agreement as follows:
2.1.1. Authorization and Effect of Agreement. (a) Seller has
the requisite corporate power to execute and deliver this Agreement and to
perform the transactions contemplated hereby to be performed by it. All
necessary corporate action required to be taken under the Delaware General
Corporation Law and the New York Business Corporation Law for the due
authorization of the execution and delivery by Seller of this Agreement and the
performance by Seller of the transactions contemplated hereby to be performed by
Seller has been duly taken by Seller. This Agreement has been duly executed and
delivered by Seller and, assuming the due execution and delivery of this
Agreement by Parent and Purchaser, constitutes a valid and binding obligation of
Seller.
(b) Each of Ack-Ti and ▇▇▇▇▇▇▇▇ is a duly organized, validly
existing corporation, in good standing under New York Law and is duly qualified
or licensed to do business and is in good standing as a foreign corporation in
each jurisdiction in which the character of its respective properties owned or
held under lease or the nature of its business makes such qualification
necessary, except for such of the foregoing in which the failure to be so
qualified or in good standing would not have a Material Adverse Effect.
2.1.2. No Restrictions. The execution and delivery of this
Agreement by Seller does not, and the performance by Seller of the transactions
contemplated hereby to be performed by it will not, in any material respect,
conflict with, or result in any material violation of, or constitute a material
default (with or without notice or lapse of time or both) under, or give rise to
a right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit or the incurrence of a material liability under, any
provision of the Certificate of Incorporation or By-laws of Seller, Ack-Ti or
▇▇▇▇▇▇▇▇ or any Contract listed or described or required to be listed or
described on Schedule 2.1.7 or Schedule 2.1.11, or any permit or approval
pertaining to the Mastercraft Group ("Permit") issued under any domestic,
foreign or other statute, law, ordinance, rule, regulation, judgment, order,
injunction, decree or ruling or common law obligation ("Law") of any domestic,
foreign or other court, government, governmental agency, authority, entity or
instrumentality ("Governmental Entity"), other than any such conflicts,
violations or defaults as are listed or described on Schedule 2.1.2 or which
would not reasonably be expected to have a Material Adverse Effect. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to Seller under any applicable Law in connection
11
with the execution and delivery of this Agreement by Seller or the performance
by Seller of the transactions contemplated hereby to be performed by it, except
(i) for the filing of a premerger notification report by an Affiliate of Seller
under the ▇▇▇▇- ▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) for such of the foregoing as are listed or described on
Schedule 2.1.2, and (iii) for such consents, approvals, orders, authorizations
of, or registrations, declarations or filings with, any Governmental Entity,
which if not obtained or made, would not reasonably be expected to have a
Material Adverse Effect.
2.1.3. Financial Statements. (a) Attached as Schedule 2.1.3
are the audited combined balance sheet of the Mastercraft Group as of January
27, 1996, the related audited combined statements of operations and cash flows
for the 12 months ended January 27, 1996, the audited combined balance sheet of
the Mastercraft Group as of December 28, 1996 (the "Balance Sheet") and the
related audited combined statements of operations and cash flows for the fiscal
year then ended (collectively, with the related notes, the "Financial
Statements"). The Financial Statements present fairly, in all material respects,
the combined financial position of the Mastercraft Group as of the dates thereof
and the results of its operations and cash flows for the periods specified in
conformity with United States generally accepted accounting principles,
consistently applied ("GAAP"), except as set forth in the notes to the Financial
Statements. For purposes of this Agreement, "Balance Sheet Date" means December
28, 1996.
(b) The inventory that will be shown on the Closing Date
Balance Sheet will consist of items usable or salable in the ordinary course of
business of the Business and will be shown thereon at the lower of historical
cost or net realizable value based on sales in the ordinary course of business,
in either case, valued in accordance with GAAP.
(c) The accounts receivable that are shown on the Balance
Sheet and that will be shown on the Closing Date Balance Sheet arose or will
arise out of transactions in the ordinary course of business of the Business
(without giving effect to the Receivables Facility) and constitute identifiable
indebtedness of the applicable account debtor, and the related reserves will be
adequate under GAAP. Any collections of accounts receivable to which Purchaser
is entitled pursuant to Section 6.2.6 will be remitted without reduction for any
discount or loss on sale attributable to the accounts receivables financing
facility operated by a finance subsidiary of Seller for Seller and its
Affiliates described in the Notes to the Financial Statements and embodied in
certain agreements referred to in Schedule 1.3(b)(vii) (the "Receivables
Facility").
(d) Except for liabilities of a type specifically
referred to in the notes to the Balance Sheet, as of the Closing
12
Date there will be no Assumed Liabilities that are not reflected in the Closing
Date Balance Sheet, but are required to be so reflected in accordance with GAAP
(subject to Schedule 1.5(a)).
2.1.4. Conduct of the Business Since the Balance Sheet Date.
(a) Except as listed or described on Schedule 2.1.4(a), and except as a result
of matters permitted or required by this Agreement, since the Balance Sheet
Date, Seller has conducted the Business in the ordinary course consistent with
past practice, Seller has not taken any action which would have constituted a
violation of Section 3.5 if Section 3.5 had applied since the Balance Sheet Date
and there has not been any Material Adverse Effect except as a result of general
economic conditions and competitive circumstances in the businesses in which the
Business is conducted.
(b) Seller has not sold any capital equipment or machinery
having an original cost basis of more than $1,000 since the Balance Sheet Date.
2.1.5. Compliance with Laws. To the Knowledge of Seller,
except as listed or described on Schedule 2.1.5, Seller is not in violation of
any applicable Law in the conduct of the Business and has all Permits required
thereunder, other than such violations or failures to have such Permits which
would not reasonably be expected to have a Material Adverse Effect.
2.1.6. Tangible Personal Property; Title to Assets. (a) Except
(i) with respect to the Owned Real Property and the Leased Real Property which
are the subject of Section 2.1.7, (ii) as listed or referred to on Schedule
2.1.6(a), and (iii) for assets sold in the ordinary course of business to any
Person who is not an Affiliate of Seller in transactions believed by Seller to
be for fair value since the Balance Sheet Date, Seller, Ack-Ti and ▇▇▇▇▇▇▇▇ own
all tangible assets reflected on the Balance Sheet as owned by Seller, or Ack-Ti
or ▇▇▇▇▇▇▇▇ for the Mastercraft Group, or thereafter purchased or acquired by
Seller, Ack-Ti or ▇▇▇▇▇▇▇▇ for the Mastercraft Group, free and clear of all
mortgages, liens, security interests or other encumbrances ("Liens") except for
(A) Liens that are listed or described on Schedule 2.1.7, (B) mechanics',
carriers', workers', warehouseman's, materialman's, repairmen's or other Liens
arising or incurred in the ordinary course of business of the Business, (C)
Liens for Taxes, assessments and other similar governmental charges which are
not due and payable or which may thereafter be paid without penalty or which are
listed or described in Schedule 2.1.6(a) and, if required by GAAP, as will be
reflected in the Closing Date Balance Sheet, (D) other imperfections of title or
encumbrances, if any, which do not materially affect the marketability of the
property subject thereto and do not materially impair the use of the property
subject thereto in the Business as presently conducted, and (E) other Liens
arising as a matter of Law. (The items referred to in clauses (A) through (E) of
the immediately preceding sentence are hereafter referred to
13
as "Permitted Liens"). Other than Excluded Assets, the tangible assets owned by
Seller on the Closing Date and Transferred to Purchaser will constitute all
tangible assets owned by Seller and primarily used in the conduct of the
Business. All such tangible assets and all of the tangible assets listed on
Seller's most recent asset register prepared by Seller in the ordinary course of
business and furnished to Purchaser prior to the date hereof (except for such of
those as have been sold in the ordinary course of business or otherwise in
accordance with the covenants of Seller herein contained) are located at the
Real Property or are owned by Seller and held by a bailee.
(b) Except as set forth on Schedule 2.1.6(b), Seller owns the
number of Shares listed on Schedule 2.1.6(b) free and clear of any Liens and
such Shares represent all of the issued and outstanding shares of capital stock
of Ack-Ti and ▇▇▇▇▇▇▇▇. The Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable and the Shares have not been issued in
violation of, and are not subject to, any preemptive rights, and there are no
outstanding convertible or exchangeable securities, calls, options or similar
Contracts relating to the Shares or that may require Ack-Ti or ▇▇▇▇▇▇▇▇ to issue
to any Person any shares of any of its capital stock. Except as listed or
described on Schedule 2.1.6(b), there are no voting trust or other Contracts
restricting the voting, dividend rights or disposition of the Shares.
2.1.7. Real Property. The Real Property listed on Schedule
2.1.7 constitutes all real property primarily used in the Business and owned in
fee by Seller or any of its Affiliates (the "Owned Real Property") or leased by
Seller (the "Leased Real Property"). Seller has title to the Owned Real Property
and title to the leasehold interests in the Leased Real Property (subject to the
terms of the applicable leases, licenses, subleases and related instruments
governing the Seller's interests therein, as listed on Schedule 2.1.7), to the
Knowledge of Seller, free and clear of all Liens other than (a) Liens listed or
described on Schedule 2.1.7, (b) Liens referred to in the title policies listed
on Schedule 2.1.7, (c) other Permitted Liens, (d) Liens that arise under zoning,
land use and other similar laws, and (e) easements, covenants, rights-of-way and
other encumbrances or restrictions, whether recorded or referred to in an
applicable lease or unrecorded, which, in the case of any of the preceding
clauses (a) through (e), do not materially impair the continued use of the
property subject thereto in the Business as presently conducted. The leases,
licenses and subleases related to the Leased Real Property are valid and
subsisting leases, licenses or subleases which are in full force and effect and
neither Seller nor, to the Knowledge of Seller, any other party thereto, is in
material default thereunder. The Real Property, and Seller's use of it in the
Business, comply with all applicable Laws, except where the failure to so
comply, individually or together with all other such failures to so comply,
would not have a Material Adverse Effect; and no
14
condemnation proceedings are pending, or to the Knowledge of the Seller,
threatened, with respect to any of the Real Property, nor has any such property
been condemned. Seller has, and the Purchaser immediately after the Closing will
have, access to public roads or valid easements over private streets or private
property for such ingress to and egress from each of the Real Property as is
necessary for the conduct of the Business as conducted as of the date hereof.
2.1.8. Insurance. Seller has made available to
Purchaser schedules of all material policies of fire, liability
and other forms of insurance covering occurrences as of, or
claims made on, the date hereof and maintained by Seller or any
of its Affiliates to the extent applicable to the Business.
2.1.9. Intellectual Property. Schedule 2.1.9 lists or
describes all material patents, trademarks, trade names, service marks,
registered copyrights and registrations and applications therefor used primarily
in the conduct of the Business as of the date hereof (the "Intellectual
Property"). Except as set forth on Schedule 2.1.9, neither Seller nor any of its
Affiliates has received any written notice (that has not been subsequently
satisfied or withdrawn) of any conflict with the asserted rights of others in
connection with the use by Seller of any of the Intellectual Property in the
conduct of the Business and, to the Knowledge of Seller, the use of the
Intellectual Property as currently used by Seller does not conflict with or
infringe upon any intellectual property rights of others.
2.1.10. Litigation; Decrees. (a) Except (i) as listed or
described on Schedules 2.1.5 or 2.1.10(a), (ii) for claims under workers'
compensation Laws, (iii) for routine claims for employee benefits, and (iv) for
claims for money damages alone of less than $50,000 in respect of any single
claim or series of related claims arising out of a single event or condition
(which claims do not exceed $100,000 in the aggregate), to the Knowledge of
Seller, there are no lawsuits, claims or administrative or other proceedings
("Legal Proceedings") pending or threatened in writing against Seller or any of
its Affiliates with respect to the Business or the Real Property, except for
Legal Proceedings which, if determined adversely, would not reasonably be
expected to have a Material Adverse Effect. To the Knowledge of Seller, neither
Seller nor any of its Affiliates is in default under the terms of any judgment,
order or decree of any Governmental Entity (collectively, "Orders") with respect
to the Business or the Real Property, except for such defaults which would not
reasonably be expected to have a Material Adverse Effect.
(b) Neither Seller nor any of its Affiliates has any obligation
or liability in respect of breach of warranty on any Product manufactured by
Seller or any of its Affiliates prior to the Closing that results from a
systemic manufacturing process or construction defect (excluding for this
purpose obligations and
15
liabilities for refunds, adjustments, allowances, damages (including as a result
of product liability claims), repairs, exchanges and returns in the ordinary
course of business and for personal injury).
2.1.11. Contract Rights. Except as listed or described on
Schedule 2.1.7 or Schedule 2.1.11, and except for Excluded Contracts, as of the
date hereof, neither Seller nor any of its Affiliates is a party to or bound by
any Contract relating primarily to the Business that is of a type described
below:
(a) Any employment, severance or consulting Contract with an
Employee or Former Employee that is not terminable at will by Seller (other than
any Contract for the employment of any such Employee or Former Employee implied
in Law but as to which no specific claim has, to the Knowledge of Seller, been
asserted) and which will require the payment of amounts to such employee after
the date hereof in excess of $100,000 in any year;
(b) Any collective bargaining Contract with any labor
union;
(c) Any Contract or series of related Contracts for capital
expenditures or the acquisition or construction of fixed assets which requires
aggregate future payments in excess of $250,000;
(d) Any Contract or series of related Contracts requiring
aggregate future payments or expenditures in excess of $100,000 and relating to
cleanup, abatement or other actions in connection with environmental
liabilities;
(e) Any license or other Contract or series of related
Contracts with respect to Intellectual Property (other than licenses for terms
of less than one year granted or received in the ordinary course of business of
the Business), which pursuant to the terms thereof requires future payments in
excess of $50,000 in any year;
(f) Any indenture, mortgage, loan or credit Contract under
which Seller, Ack-Ti or ▇▇▇▇▇▇▇▇ has borrowed any money or issued any note,
bond, indenture or other evidence of indebtedness for borrowed money, or
guaranteed indebtedness for money borrowed by others, which is not reflected in
the Balance Sheet (without reference to any associated notes);
(g) Any Contract with any manufacturer's representative or
other sales agent having a remaining term in excess of one year and which is not
terminable without penalty on 90 calendar days' or less notice;
(h) Any Contract which requires payments in any year in excess
of $100,000 under which Seller, Ack-Ti or ▇▇▇▇▇▇▇▇ is (i) a lessee of, or holds
or uses, any machinery, equipment,
16
vehicle or other tangible personal property owned by a third Person or (ii) a
lessor of or one who otherwise makes available for third party use any tangible
personal property owned by Seller, Ack-Ti or ▇▇▇▇▇▇▇▇;
(i) Any Contract or series of related Contracts which involves
aggregate future payments by or to the Seller in excess of $100,000, other than
a purchase or sales order or other Contract entered into in the ordinary course
of the conduct of the Business or not required to be listed on Schedule 2.1.7 or
Schedule 2.1.11 by reason of any dollar amount, time or other exclusion or
exception in any other paragraph of this Section 2.1.11;
(j) Any Contract granting to any Person a first- refusal,
first-offer or other similar right to purchase or acquire any of the Acquired
Assets; any Contract with respect to a joint venture or partnership arrangement;
any Contract granting a power of attorney other than in connection with the
asserted rights of landlords in the event of a default under any real property
lease; any Contract with respect to indemnities, guarantees, letters of credit,
surety or other bonds or pursuant to which any assets or properties of the
Business is, or is to be, subjected to a Lien; any Contract limiting or
restricting the ability of the Purchaser or any of its Affiliates to enter into
or engage in any market or line of business in or related to the Business after
the Closing Date; or any Contract relating to any borrowing or any full or
partial guarantee or other similar liability in respect of any similar liability
for indebtedness of any Person other than Seller;
(k) Any Contract for the provision of design services
to the Business which is, or would reasonably be expected to be,
material to the Business; or
(l) Any other Contract a breach of or default under which
would have a Material Adverse Effect if recovery for such breach or default were
based on general compensatory damages.
Except as set forth on Schedule 2.1.11 or 2.1.7, each Assumed Contract is a
valid and binding obligation of Seller, Ack-Ti or ▇▇▇▇▇▇▇▇, as the case may be,
and, to the Knowledge of Seller, the other parties thereto. Except as set forth
on Schedule 2.1.11 or 2.1.7, to the Knowledge of Seller, Seller or one of its
Affiliates, as the case may be, has performed in all material respects the
obligations required to be performed by it through the date hereof under each of
the Assumed Contracts and neither Seller nor any of its Affiliates, as
applicable, is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any respect thereunder and neither Seller nor any
of its Affiliates has received any notice of default or termination of any
Contract required to be listed on Schedule 2.1.7 or Schedule 2.1.11 from any
party thereto, except in any
17
such case for any breach, default or termination which would not have a Material
Adverse Effect.
2.1.12. Employee Plans, Etc. (a) For purposes of this
Agreement, (i) the term "Employee Plan" means each employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and each other material plan, program, agreement or
arrangement, whether or not subject to ERISA, that (A) provides benefits for
Employees or Former Employees and (B) is maintained by Seller or any of its
Affiliates or to which Seller or any of its Affiliates contributes or is
obligated to contribute, or under which Seller or any of its Affiliates is
liable in respect of Employees or Former Employees, provided, however, that the
term "Employee Plan" does not include any of the foregoing that relates
exclusively to an Excluded Contract, (ii) the term "Employee" means each Person
listed or described as such on Schedule 2.1.12 and each Person who is presently
employed by Seller, Ack-Ti or ▇▇▇▇▇▇▇▇ primarily in the conduct of the Business,
and (iii) the term "Former Employee" means any Person formerly so employed by
Seller, Ack-Ti or ▇▇▇▇▇▇▇▇. (The terms "Employee" and "Former Employee" will
include, where an Employee Plan provides benefits for beneficiaries or
dependents, the beneficiaries and dependents of an Employee or Former Employee.)
Schedule 2.1.12 lists or describes all Employee Plans currently in effect other
than Employee Plans (x) listed or described on Schedule 2.1.11 or (y) mandated
or implied by Law and usual and customary for a business such as the Business.
None of the Employee Plans is a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) With respect to each Employee Plan listed or described on
Schedule 2.1.12, Seller has delivered or made available to Purchaser, to the
extent applicable, a copy of (i) the plan document for each Employee Plan as
currently in effect (or a description of any Employee Plan for which there is no
plan document), including any agreements entered into in connection with such
Employee Plan, (ii) the most recent annual report (Form 5500 Series) filed with
the Internal Revenue Service, (iii) the most recent actuarial report, and (iv)
the most recent summary plan description, together with each summary of material
modifications that has been distributed to Employees. Except as set forth on
Schedule 2.1.12, each Employee Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the trust (if any) forming a part thereof, has received a favorable
determination from the Internal Revenue Service (the "IRS") as to the
qualification under the Code of each such Employee Plan. Seller has delivered to
Purchaser a copy of the most recent determination letter with respect to each
such Employee Plan, and to the Knowledge of Seller nothing has occurred since
the date of such determination letter that would adversely affect such
qualification which cannot be corrected within the remedial amendment period
provided under Section 401(b) of the Code.
18
(c) Neither Seller nor any of its Affiliates has engaged in a
transaction with respect to any Employee Plan which would reasonably be expected
to subject any Employee Plan or Purchaser to a material civil penalty under
ERISA or a material tax under the Code. Each of the Employee Plans has been
operated and administered in all material respects in accordance with applicable
Laws, including without limitation, to the extent applicable, ERISA. Neither
Seller nor any of its Affiliates has incurred any liability under Title IV of
ERISA that would reasonably be expected to result in material liability to
Purchaser. Each Employee Plan that is a group health plan within the meaning of
Section 5000(b)(1) of the Code is in compliance in all material respects with
the provisions of Section 4980B(f) of the Code. There is not any pending or, to
the Knowledge of Seller, threatened in writing, material claim by or on behalf
of any Employee Plan, by any Employee or Former Employee covered under any
Employee Plan or otherwise involving any Employee Plan (other than routine
claims for benefits).
(d) As of the date hereof, none of Seller, Ack-Ti or ▇▇▇▇▇▇▇▇
is a party to any Contract with any union representing Employees and, to the
Knowledge of Seller, no union organizational effort relating to Employees is
pending.
2.1.13. Taxes. Seller, Ack-Ti and ▇▇▇▇▇▇▇▇ have filed or
caused to be filed with the appropriate United States, state, local and foreign
Governmental Entities all Tax Returns required to be filed by them on or prior
to the Closing Date (taking into account all extensions of due dates) and
Seller, Ack-Ti and ▇▇▇▇▇▇▇▇ have paid or adequately reserved or provided for all
Taxes shown thereon as owing, except where the failure to file such Tax Returns
or pay any such Taxes would not reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 2.1.13, to the Knowledge of
Seller, no Governmental Entity has proposed any adjustment to any such Tax
Return which adjustment relates to the Business or the Mastercraft Group, unless
such adjustment has been adequately provided for or satisfied or would not
reasonably be expected to have a Material Adverse Effect. Seller has withheld
and paid all Taxes required to be withheld in connection with any amounts paid
or owing to any Employee or Former Employee, creditor, independent contractor or
other third party, including without limitation payroll and back-up withholding
taxes.
2.1.14. Environmental Matters. (a) Except as listed or
described on Schedule 2.1.14 or in the environmental assessments referred to
therein, (i) neither Seller nor any of its Affiliates has any liability under
any Environmental Law (including without limitation any obligation to remediate
any Environmental Condition) applicable to the Owned Real Property or the Leased
Real Property, (ii) neither Seller nor any of its Affiliates is in violation of
or has any liability with respect to any Environmental Law with respect to the
Business, and (iii) there exists no Environmental Condition with respect to the
Owned
19
Real Property or the Leased Real Property or the Business, which liability,
violation or Environmental Condition specified in (i), (ii) or (iii) would
reasonably be expected to have a Material Adverse Effect.
(b) Furthermore, to the Knowledge of Seller, except as listed
or described on Schedule 2.1.14 or in the environmental assessments referred to
therein, (i) neither Seller nor any predecessor of Seller, has generated,
manufactured, refined, transported, treated, stored, handled, disposed,
released, spilled, transferred, produced or processed any oil or hazardous
material or any solid waste at the Real Property, except in compliance with all
applicable Environmental Laws, (ii) neither Seller nor any predecessor of Seller
has any Knowledge of the release or threat of release of any oil or hazardous
material at or in the vicinity of the Real Property, (iii) neither Seller nor
any predecessor of Seller has received notice under the citizen suit provision
of any Environmental Law in connection with any of the Real Property or any
facilities or operations thereon, (iv) neither Seller nor any predecessor of
Seller has received any request for information, notice, demand letter or notice
of a legal proceeding, or is subject to a pending or ongoing investigation, with
respect to any Environmental Condition relating to any of the Real Property or
any facilities or operations thereon, (v) Seller is not in violation of any
health standards or applicable Laws relating to asbestos, oil or hazardous
material, (vi) no asbestos or polychlorinated biphenyls are used or stored at
any of the Real Property, (vii) no oil or hazardous material has migrated from
other properties upon, about or beneath the Real Property, and (viii) the Real
Property is not listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on any similar state list of sites, as a property requiring investigation or
remediation and Seller has not received written notice that the Real Property is
proposed to be so listed.
(c) Without limiting the generality or effect of the
foregoing, to the Knowledge of Seller, Schedule 2.1.14 or the environmental
assessments referred to therein list all underground storage tanks, and the
capacity and contents of such tanks, located on any of the Real Property.
(d) For purposes of this Agreement, (i) the term "Environment"
means soil, surface waters, groundwaters, land, surface or subsurface strata,
ambient air or any other environmental medium, (ii) the term "Environmental
Condition" means a condition with respect to the Environment which is reasonably
likely to result in an Indemnifiable Loss with respect to the Business, and
(iii) the term "Environmental Law" means any Law for the protection of the
Environment. Seller has made available to Purchaser all documents and records in
possession or control of Seller or any of its Affiliates concerning
Environmental Conditions at any of the Real Property or any
20
facilities or operations thereon, whether generated by Seller or others,
including without limitation environmental audits, environmental risk
assessments or site assessments of any of the Real Property and/or any adjacent
property or any property in the vicinity of any of the Real Property owned or
operated by Seller or others, documentation regarding off-site disposal of
hazardous materials, spill control plans and environmental agency reports and
correspondence.
(e) To the Knowledge of Seller, the Real Property located at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "West Spindale Property") does not
and has not contained any underground or aboveground storage tanks, underground
injection ▇▇▇▇▇, equipment containing polychlorinated biphenyls or drums or
containers buried in the ground and there are no existing or closed sanitary
landfills, solid waste disposal sites or hazardous waste treatment, storage or
disposal facilities on or affecting, or reasonably likely to affect, the West
Spindale Property.
2.1.15. Certain Additional Representations. (a) Neither
Seller, Ack-Ti, ▇▇▇▇▇▇▇▇ nor any director, officer, agent, employee or other
Person acting on behalf of Seller, Ack- Ti or ▇▇▇▇▇▇▇▇, has used any corporate
or other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to governmental
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Laws. Neither Seller, Ack-Ti, ▇▇▇▇▇▇▇▇ nor any current
director, officer, agent, employee or other Person acting on behalf of Seller,
Ack- Ti or ▇▇▇▇▇▇▇▇, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
(b) The Acquired Assets, Purchaser's right to collections of
receivables pursuant to Section 6.2.6 and the Excluded Assets constitute, and
will as of the Closing constitute, all assets (real or personal) and rights of
Seller or any of its Affiliates used primarily in the Business or necessary for
the conduct of the Business as conducted on the date hereof.
2.2. Representations and Warranties of Purchaser.
Subject to Section 2.3, each of Purchaser and Parent jointly and
severally represents and warrants to Seller as follows:
2.2.1. Authorization and Effect of Agreement. Each of Parent
and Purchaser has the requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated hereby to be performed by
it. All necessary corporate action required to be taken for the due
authorization of the execution and delivery by Parent and Purchaser of this
Agreement and the performance by Parent and Purchaser of the transactions
contemplated hereby to be performed by them has been duly taken by Parent and
Purchaser. This Agreement has been duly executed and delivered by each of Parent
and Purchaser and,
21
assuming the due execution and delivery of this Agreement by Seller, constitutes
a valid and binding obligation of each of Parent and Purchaser.
2.2.2. No Restrictions. The execution and delivery of this
Agreement by each of Parent and Purchaser does not, and the performance by
Parent and Purchaser of the transactions contemplated hereby to be performed by
each of them will not conflict with, or result in any material violation of, or
constitute a material default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit or incurrence of a material
liability under, any provision of the charter or bylaws or comparable governing
documents of Parent and Purchaser, or any indenture, mortgage, deed of trust or
other agreement or Permit applicable to Parent or Purchaser. No material
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Parent or Purchaser under an applicable Law in connection with
the execution and delivery of this Agreement by Parent or Purchaser or the
performance by Parent or Purchaser of the transactions contemplated hereby to be
performed by either of them, except for the filing of a premerger notification
report by Parent under the HSR Act and as listed or described on Schedule 2.2.2.
2.2.3. Financial Capacity. Parent has or has
committed to it, and will cause Purchaser to have, cash on hand
sufficient to satisfy all of its obligations under this
Agreement.
2.3. Certain Limitations on Representations and Warranties. (a)
Each of the parties is a sophisticated legal entity that was advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement. Accordingly, each of the parties hereby
acknowledges that (i) no party has relied or will rely upon any document or
written or oral information previously furnished or made available to or
discovered by it or its representatives, other than this Agreement (including
the Schedules hereto) or such of the foregoing as are delivered at the Closing,
(ii) there are no representations or warranties by or on behalf of any party
hereto or any of its respective Affiliates or representatives other than those
expressly set forth in this Agreement, and (iii) the parties' respective rights,
obligations and remedies with respect to this Agreement and the events giving
rise thereto will be solely and exclusively as set forth in this Agreement and
the Confidentiality Agreement. EACH OF PARENT AND PURCHASER ACKNOWLEDGES THAT,
SHOULD THE CLOSING OCCUR, PURCHASER WILL ACQUIRE THE ACQUIRED ASSETS WITHOUT ANY
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, IN AN "AS IS" CONDITION AND ON A "WHERE IS" BASIS, EXCEPT AS OTHERWISE
EXPRESSLY REPRESENTED AND WARRANTED HEREIN.
22
(b) The representations and warranties made in this Agreement
by Seller will be deemed for all purposes to be qualified by the disclosures
made in any Schedule not specifically referred to only if the item disclosed in
the Schedule not referred to specifically cross references the representation
and warranty to be qualified by such item or the relevance of any item in any
Schedule to such representation and warranty is apparent on its face.
III. COVENANTS
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon
reasonable notice from Parent (on behalf of itself and Purchaser) to Seller
given in accordance with this Agreement, Seller will afford to the officers,
attorneys, accountants or other authorized representatives of Purchaser and
Parent reasonable access during normal business hours to the facilities, assets
and the books and records of the Mastercraft Group so as to afford Purchaser and
Parent a reasonable opportunity to make, at their sole cost and expense, such
review, examination and investigation of the Business as Purchaser and Parent
may reasonably desire to make, including without limitation asset appraisals
relating to inventory, receivables, fixed assets and other assets and a
so-called "Phase I" (I.E., documentary review and walk-through site inspection)
preliminary environmental evaluations; provided, however, that no borings or
other so-called "Phase II" environmental examinations will be performed without
Seller's prior written consent, which consent may be given or withheld in
Seller's sole discretion. Purchaser and Parent will be permitted to make
extracts from or to make copies of such books and records as may be reasonably
necessary. Neither Parent nor Purchaser will contact any employee of Seller
without the prior written approval of an authorized representative of Seller.
Prior to the Closing, Seller will furnish to Parent or Purchaser, or cause to be
furnished to Parent or Purchaser, such financial and operating data and other
information pertaining to the Business as Parent or Purchaser may reasonably
request; provided, however, that nothing in this Agreement will obligate Seller
to take actions that would unreasonably disrupt the normal course of business of
itself or any of its Affiliates, violate the terms of any applicable Law or any
Contract or agreement to which any of them is a party or to which any of them or
any of their assets are subject, or grant access to any of their proprietary or
confidential information.
(b) Subject to Section 3.2, whether or not the Closing occurs,
Parent and Purchaser will, and will cause each of their Affiliates to, treat in
confidence all documents, materials and other information (including without
limitation information relating to supply and sales agreements and relationships
with third Persons) disclosed by or on behalf of Seller or any of its
Affiliates, whether before, during or after the course of the negotiations
leading to the execution of this Agreement or thereafter, including without
limitation in its investigation of
23
the other parties and in the preparation of agreements, schedules and other
documents relating to the consummation of the transactions contemplated hereby.
Prior to the Closing, and in the event that this Agreement is terminated,
neither Purchaser, Parent nor any of their Affiliates will use in their
businesses or otherwise any confidential or proprietary information furnished by
Seller or any of its Affiliates not known to Purchaser or Parent on a
non-confidential basis prior to its disclosure to Purchaser or Parent by Seller
or any of its Affiliates. If this Agreement is terminated, Purchaser, Parent and
each of their Affiliates will return to Seller all originals and copies of all
non-public documents and materials of the type provided for in this Section 3.1
which have been furnished or made available in connection with this Agreement,
and Purchaser and Parent will destroy all notes, analyses, compilations, studies
or other documents which contain or otherwise reflect such information.
3.2. Press Releases. Prior to the Closing, no party will issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of Parent (in the case of Seller) or Seller (in the case of
Purchaser or Parent), which consent will not be unreasonably withheld; provided,
however, that nothing herein will prohibit any party from issuing or causing
publication of any such press release or public announcement to the extent that
such party determines such action to be required by Law or the rules of any
national stock exchange applicable to it or its Affiliates, in which event the
party making such determination will, if practicable in the circumstances, use
reasonable efforts to allow the other parties reasonable time to comment on such
release or announcement in advance of its issuance.
3.3. Regulatory Filings. (a) Within ten calendar days after the
date hereof, Parent will, and Seller will cause the ultimate parent entity of
Seller to, make such filings as may be required by the HSR Act with respect to
the consummation of the transactions contemplated by this Agreement. Thereafter,
Parent will, and Seller will cause the ultimate parent entity of Seller to, file
or cause to be filed as promptly as practicable with the United States Federal
Trade Commission and the United States Department of Justice any supplemental
information which may be requested pursuant to the HSR Act. If applicable to the
consummation of the transactions contemplated by this Agreement, Purchaser and
Parent will each make such filings and use their respective reasonable efforts
to obtain all permits required by Law. Seller will make such filings and use its
reasonable efforts to obtain the governmental approvals referred to in Section
2.1.2, and Purchaser and Parent will each make such filings and use their
respective reasonable efforts to obtain the governmental approvals referred to
in Section 2.2.2. All filings referred to in this Section 3.3(a) will comply in
all material
24
respects with the requirements of the respective Laws pursuant to
which they are made.
(b) Without limiting the generality or effect of Section
3.3(a), each of the parties will (i) use their respective reasonable efforts to
comply as expeditiously as possible with all lawful requests of Governmental
Entities for additional information and documents pursuant to the HSR Act, (ii)
not (A) extend any waiting period under the HSR Act or (B) enter into any
agreement with any Governmental Entity not to consummate the transactions
contemplated by this Agreement, except with the prior consent of Seller, in the
case of Parent and Purchaser, or Parent, in the case of Seller, and (iii)
cooperate with each other and use reasonable efforts to cause the lifting or
removal of any temporary restraining order, preliminary injunction or other
judicial or administrative order which may be entered into in connection with
the transactions contemplated by this Agreement, including without limitation
the execution, delivery and performance by the appropriate entity of such
divestiture agreements or other actions, as the case may be, as may be necessary
to secure the expiration or termination of the applicable waiting periods under
the HSR Act or the removal, dissolution, stay or dismissal of any temporary
restraining order, preliminary injunction or other judicial or administrative
order which prevents the consummation of the transactions contemplated hereby or
requires as a condition thereto that all or any part of the Business be held
separate and, prior to or after the Closing, pursue the underlying litigation or
administrative proceeding diligently and in good faith.
3.4. Injunctions. Without limiting the generality or effect of
any provision of Section 3.3 or Article IV, if any Governmental Entity having
jurisdiction over any party issues or otherwise promulgates any injunction,
decree or similar order prior to the Closing which prohibits the consummation of
the transactions contemplated hereby, the parties will use their respective
reasonable efforts to have such injunction dissolved or otherwise eliminated as
promptly as possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith.
3.5. Operation of the Business. Except (i) in connection with or
as a result of any matter listed or described on any Schedule and specifically
identified therein as affecting the operating covenants below or as to which the
relevance to the operating covenants below is apparent on its face, (ii) as
expressly contemplated by this Agreement, or (iii) as otherwise consented to by
Parent (on behalf of itself and Purchaser) in writing, prior to the Closing,
Seller will:
(a) Use reasonable efforts to keep the Business intact and not
take or permit to be taken or do or suffer to be done anything other than in the
ordinary course of business of the Business as presently conducted, and use
reasonable good faith
25
efforts to keep intact, to preserve and maintain the goodwill associated with
the Business and Seller's relationships with the customers, suppliers,
distributors, licensors and others with whom Seller has a material relationship;
provided, however, that nothing in this Agreement or otherwise will prohibit or
restrict Seller from paying or prepaying any indebtedness for borrowed money or
any intercompany obligation reflected on the Balance Sheet;
(b) Continue existing practices relating to maintenance of the
Acquired Assets so that they remain in substantially the same (or better)
condition as on the date of this Agreement, normal wear and tear excepted;
(c) Not purchase, sell, lease or dispose of, or enter into any
lease, agreement or other Contract for the purchase, sale, lease or disposition
of, or subject to a Lien (other than a Permitted Lien), any asset that would be,
but for such transaction, an Acquired Asset other than in the ordinary course of
business of the Business or pursuant to the Receivables Facility and, with
respect to the sale or disposition of a capital asset, only in respect of assets
having an individual cost basis of less than $1,000;
(d) Not make any material amendment to any Employee Plan or
materially increase the general rates of compensation of Employees, except (i)
as required by Law or (ii) in the ordinary course of business of the Business;
(e) Not incur any indebtedness or guarantee any debt or other
liability of any other Person that would constitute an Assumed Liability;
(f) Not increase the compensation payable or to become payable
by the Seller to any Employee whose annual base compensation exceeds $100,000
except for normal periodic increase of regular salary (not bonuses or other
compensation) in the ordinary course of business of the Business that are made
in accordance with established compensation policies of the Seller or as
required under a Contract listed on Schedule 3.5(f);
(g) Not enter into any employment Contract which would be an
Assumed Contract which is not terminable at will without Purchaser incurring any
liability;
(h) Not adopt or enter into any employee retirement or welfare
benefit plan, whether or not subject to ERISA, providing for benefits to
Employees; or
(i) Except for transactions which do not breach any covenant
of Seller hereunder, not voluntarily take any action that would result in a
material breach of the covenants, representations or warranties of the Seller
hereunder or that
26
would, individually or together with any other such action, have a Material
Adverse Effect.
3.6. Supplemental Schedules. Seller may (but will not be required
to), from time to time but not less than five days prior to the Closing, by
notice in accordance with this Agreement, supplement or amend any Schedule,
including without limitation one or more supplements or amendments to correct
any matter which would otherwise constitute a breach of any representation,
warranty or covenant herein contained; provided, however, that subject to the
following sentence, no such supplement or amendment will affect the rights or
obligations of any party to this Agreement, including without limitation under
Section 4.2.1., which such party would have had in the absence of such
supplement or amendment. Notwithstanding any other provision hereof, if the
Closing occurs, any such previously noticed supplement or amendment of any
Schedule will be effective to cure and correct for all purposes any breach of
any representation, warranty or covenant which would have existed by reason of
Seller not having made such supplement or amendment.
3.7. Satisfaction of Conditions. Without limiting the generality
or effect of any provision of Article IV, prior to the Closing, each of the
parties hereto will use its respective reasonable efforts with due diligence and
in good faith to satisfy promptly all conditions required hereby to be satisfied
by such party in order to expedite the consummation of the transactions
contemplated hereby.
3.8. Bulk Transfer Laws. Purchaser hereby waives
compliance by Seller with the provisions of any so-called "bulk
transfer" Law of any jurisdiction in connection with the sale of
the Acquired Assets to Purchaser.
3.9. Real Property Licenses. On the Closing Date each of
Purchaser and Seller will execute and deliver to the other (a) the licenses for
Seller's use of the Mastercraft Group showrooms in Tupelo, MS, Cerritos, CA,
Chicago, IL, Hickory, NC and High Point, NC referred to in item 2 under the
heading "Licenses" on Schedule 2.1.7 in the form attached, on the terms and
conditions, described on Exhibit A to Schedule 2.1.7, and (b) the license for
Seller's use of certain office and showroom space located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
in the form of Exhibit B to Schedule 2.1.7.
3.10. Discharge of Mortgages. On or before the Closing Date,
Seller will (a) pay or discharge (i) any and all mortgages of record with
respect to the Owned Real Property and (ii) the encumbrances on the Owned Real
Property located in ▇▇▇▇, North Carolina in favor of the ▇▇▇▇▇▇▇▇▇▇ County
Industrial Facilities and Pollution Control Authority (including under the
related Bond Purchase Agreement) and (b) provide Purchaser with evidence of such
payment or discharge suitable for recording in the appropriate registry of
deeds.
27
3.11. Designer Contracts. On the Closing Date, Seller will
execute and deliver to Purchaser (a) a separate assignment to Purchaser of the
Assumed Contracts with respect to the provision of Product design services with
a specific consent of Seller to the provision of design services to Purchaser
under such Assumed Contracts and (b) a separate assignment to Purchaser of the
Assumed Contracts with respect to sales representatives containing a specific
consent of Seller to the provision by such sales representatives of services to
Purchaser under such Assumed Contracts.
3.12. UCC-3s/Release of Ack-Ti and ▇▇▇▇▇▇▇▇. Prior to the Closing
Seller will use reasonable best efforts to obtain and deliver to Purchaser at
the Closing, and in any event will deliver to Purchaser within 30 days after the
Closing, (a) releases of all of Ack-Ti's and ▇▇▇▇▇▇▇▇'▇ obligations and
liabilities under the vendor financing agreements and credit agreements
described on Schedule 1.3(b)(vii), to the extent permitted thereby, with respect
to the Receivables Facility and other similar agreements relating to similar
facilities, and (b) appropriate termination or partial release statements on
Form UCC-3 ("UCC-3s") releasing all security interests with respect to Acquired
Assets granted in connection with the vendor financing agreements and credit
agreements described on Schedule 1.3(b)(vii). To the extent the agreements with
respect to the Receivables Facility do not permit the release of Ack-Ti from all
obligations and liabilities thereunder, subject to Purchaser's obligations under
Section 6.2.6, Seller will indemnify, defend and hold harmless Purchaser from
and against any and all Indemnifiable Losses arising out of the assertion
against Ack-Ti or Purchaser of any claim under such agreements.
IV. THE CLOSING
4.1. Conditions Precedent to Obligations of Purchaser, Parent and
Seller. The obligations of each of Purchaser, Parent and Seller under this
Agreement to consummate the transactions contemplated hereby will be subject to
the satisfaction, at or prior to the Closing, of the conditions that (a) subject
to the last sentence of this Section 4.1, each of the governmental and other
approvals, consents or waivers identified in Item 1 on Schedule 2.1.2 shall have
been obtained, (b) there shall not have been entered a preliminary or permanent
injunction, temporary restraining order or other judicial or administrative
order or decree in any jurisdiction, the effect of which prohibits the Closing,
(c) the waiting period under the HSR Act shall have expired or been terminated,
and (d) Seller and Purchaser shall have executed and delivered to each other the
letter agreement substantially in the form of Exhibit 4.1 (the "Supply
Agreement") (which each party covenants to do at the Closing, provided that the
other conditions to the Closing are duly satisfied or waived). Any of the
foregoing conditions may be waived (i) insofar as it is a condition to the
obligations of Purchaser
28
or Parent, by Parent (without the joinder of Purchaser) at its option and (ii)
insofar as it is a condition to the obligations of Seller, by Seller at its
option.
4.2. Additional Conditions Precedent to Obligations of Purchaser
and Parent. The obligations of Purchaser and Parent under this Agreement to
consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived at the option of Parent (without the
joinder of Purchaser):
4.2.1. No Material Misrepresentation or Breach. There
shall have been no material breach by Seller in the performance
of any of the covenants herein to be performed by it in whole or
in part prior to the Closing, and the representations and
warranties of Seller contained in this Agreement shall be true
and correct in all material respects on the date hereof and as of
the Closing Date as if made anew on the Closing Date, except for
representations or warranties made as of a specified date, which
shall be true and correct in all material respects as of the
specified date, and Seller shall have delivered to Purchaser a
certificate certifying each of the foregoing, dated the Closing
Date and signed by one of its executive officers to the foregoing
effect (it being understood that for purposes of the condition in
Section 4.2.1 the representations and warranties contained in
Sections 2.1.5, 2.1.9, 2.1.10, 2.1.13 and 2.1.14 will be read
without regard to the actual state of the Knowledge of Seller but
that such representations and warranties will be subject to the
additional condition that this Section 4.2.1 will be deemed to
have been satisfied unless any breach of such representation or
warranty as of the Closing Date would reasonably be expected to
have a Material Adverse Effect);
4.2.2. Bills of Sale; Special Warranty Deeds. Seller shall
have delivered to Purchaser bills of sale for the Transfer of the personal
property included in the Acquired Assets effective to vest in Purchaser all of
Seller's right, title and interest in such Acquired Assets and deeds for the
Transfer of the Owned Real Property included in the Acquired Assets effective to
vest in Purchaser all of Seller's right, title and interest in such Acquired
Assets in form and substance reasonably satisfactory to Purchaser and Seller;
4.2.3. Assignment Agreements. Seller shall have delivered to
Purchaser any assignment documents relating to the assignment by Seller to
Purchaser of the Real Property leases, the equipment leases included in the
Acquired Assets, the Intellectual Property included in the Acquired Assets and
any other Acquired Assets reasonably requested by Purchaser for recording or
other evidentiary purposes and, except as contemplated by Section 6.2.8,
effective to vest in Purchaser all of Seller's right, title and interest in such
Acquired Assets;
29
4.2.4. Clearance Certificates. Seller shall have
delivered to Purchaser any clearance certificates or similar
documents that may be required by any state Tax authority in
order to relieve Purchaser of any obligation to withhold any
portion of the Purchase Price;
4.2.5. FIRPTA. Seller shall have delivered to
Purchaser an affidavit, dated the Closing Date, pursuant to
Section 1445 of the Code in substantially the form of Exhibit
4.2.5;
4.2.6. Opinion of Counsel. Seller shall have
delivered to Purchaser an opinion of Seller's counsel
substantially to the effect set forth in Exhibit 4.2.6;
4.2.7. Certain Leases. Seller shall have (a) obtained all
required consents to the Transfer of the Leased Real Property designated with an
asterisk on Schedule 2.1.7 (the "Consent- Required Leased Real Property") or (b)
notified Parent and Purchaser in writing specifically referring to this Section
4.2.7 that Seller has elected to indemnify, defend and hold harmless Purchaser
for its actual, reasonable and documented out-of-pocket moving costs incurred
within 12 months of the Closing Date in relocating the operations conducted as
of the Closing at the Consent-Required Property for which the consent
contemplated by clause (a) was not obtained ("Consent Costs"), whereupon, if the
Closing occurs, such notice will constitute an undertaking to indemnify, defend
and hold harmless Purchaser for its Consent Costs in accordance with the
provisions of Section 5.4 applicable to Direct Claims; and
4.2.8. Payment of Certain Indebtedness. Seller shall have
repaid all amounts necessary to release the Acquired Assets from any pledge or
security interest arising under the credit agreement and vendor financing
agreements referred to on Schedule 1.3(b)(vii).
4.3. Additional Conditions Precedent to Obligations of Seller.
The obligations of Seller under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to the
Closing, of all the following conditions, any one or more of which may be waived
at the option of Seller:
4.3.1. No Material Misrepresentation or Breach. There
shall have been no material breach by either Purchaser or Parent
in the performance of any of the covenants herein to be performed
by either of them in whole or in part prior to the Closing, and
the representations and warranties of Parent and Purchaser
contained in this Agreement shall be true and correct in all
material respects on the date hereof and as of the Closing Date
as if made anew on the Closing Date, except for representations
or warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date,
30
and each of Purchaser and Parent shall have delivered to Seller a certificate
certifying each of the foregoing, dated the Closing Date and signed by one of
its executive officers to the foregoing effect;
4.3.2. Assumption Agreement. If requested by Seller,
Purchaser shall have delivered to Seller an assumption agreement
evidencing Purchaser's assumption of the Assumed Liabilities on
the terms set forth herein and otherwise in form reasonably
satisfactory to Purchaser and Seller;
4.3.3. Opinion of Counsel. Purchaser shall have
delivered to Seller an opinion of Purchaser's counsel
substantially to the effect set forth in Exhibit 4.3.3; and
4.3.4. Estimated Purchase Price. Purchaser shall have
delivered to Seller in the manner specified in Section 1.4 an
amount equal to the Estimated Purchase Price.
4.4. The Closing. (a) Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of
the purchase of the Acquired Assets and assumption of the Assumed Liabilities
contemplated hereby (the "Closing") will take place on the 60th calendar day
after the date hereof or such other date as provided in Section 4.4(b) (the
"Closing Date"). The Closing will take place at 10:00 A.M., Eastern Time, at the
offices of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇.
(b) Subject to Section 4.5(b), if the Closing has not occurred
by the date specified in Section 4.4(a), then the Closing Date will be extended
to the earlier of (a) the business day after the conditions set forth in Section
4.1 have been satisfied and (b) such other date, on or prior to the 90th
calendar day after the date hereof, to which Parent (on behalf of itself and
Purchaser) and Seller mutually agree.
4.5. Termination. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of Parent (without
the joinder of Purchaser) and Seller;
(b) By either Parent (without the joinder of Purchaser) or
Seller if the Closing shall not have occurred on or before the 90th calendar day
after the date hereof;
(c) By either Parent (without the joinder of Purchaser) or
Seller if there shall have been entered a final, nonappealable order or
injunction of any Governmental Entity restraining or prohibiting the
consummation of the transactions contemplated hereby or any material part
thereof;
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(d) By Purchaser after June 30, 1997 if (i) on or prior to May
7, 1997 Fleet Financial Corp. shall have terminated its financing commitment
under its letter to Parent given in connection with this Agreement (a copy of
which has previously been delivered by Parent to Seller) (the "Commitment
Letter"), (ii) on or prior to May 7, 1997 Purchaser shall have so notified
Seller, (iii) Parent and Purchaser use their respective reasonable best efforts
to obtain alternative financing on terms that, in the aggregate, are not
materially less favorable to Parent than the terms set forth in the Commitment
Letter, and (iv) financing shall not be available to Parent on or prior to June
30, 1997 from Chase Manhattan Bank or another bank on terms that, in the
aggregate, are not materially less favorable to Parent than the terms set forth
in the Commitment Letter; or
(e) By Seller on or prior to June 30, 1997 if it shall have
received the notice referred to in (d)(ii) above.
In the event of the termination of this Agreement under this Section 4.5, each
party hereto will pay all of its own fees and expenses. There will be no further
liability hereunder on the part of any party hereto if this Agreement is so
terminated, except under Section 3.1(b) or by reason of a breach of any covenant
contained in this Agreement, including without limitation the covenants
contained in Sections 3.2, 3.3, 3.4 and 3.7.
V. SURVIVAL AND INDEMNIFICATION
5.1. Survival of Representations, Warranties and Covenants. (a)
Each of the representations and warranties contained in Article II will survive
the Closing and remain in full force and effect until March 31, 1999, except
that the representations and warranties set forth in Sections 2.1.1, 2.1.9,
2.1.10(b) and 2.2.1 will survive the Closing and remain in full force and effect
until March 31, 2000 and the representations and warranties set forth in Section
2.1.13 will survive for 30 calendar days after the expiration of applicable
statutes of limitation. Any claim for indemnification with respect to any of
such matters which is not asserted by a notice given as herein provided
specifically identifying the particular breach underlying such claim and the
facts and Indemnifiable Loss relating thereto within such specified periods of
survival may not be pursued and is hereby irrevocably waived.
(b) The covenants contained in Sections 3.1(b), 3.3(b), 3.4,
3.8, 3.12 and 4.2.7 in this Article V and in Articles I, VI and VII, will
survive the Closing and remain in effect indefinitely unless a specified period
is otherwise set forth in this Agreement (in which event such specified period
will control). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of the Closing, with the result that
any claim for an alleged breach
32
of any such covenant may not be pursued and is hereby irrevocably
waived.
5.2. Limitations on Liability. (a) For purposes of this
Agreement, (i) "Indemnity Payment" means any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement, (ii) "Indemnitee" means any
Person entitled to indemnification under this Agreement, (iii) "Indemnifying
Party" means any Person required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all claims, demands,
actions, suits or proceedings (by any Person, including without limitation any
Governmental Entity), settlements and compromises relating thereto and
reasonable attorneys' fees and expenses in connection therewith, losses,
liabilities, costs and expenses, reduced by the amount of insurance proceeds
recoverable by the Indemnitee or an Affiliate of the Indemnitee from any Person
that is not the Indemnitee or an Affiliate of the Indemnitee, and (v) "Third
Party Claim" means any claim, demand, action, suit or proceeding made or brought
by any Person who or which is not a party to this Agreement or an Affiliate of a
party to this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, if the Closing occurs, (i) no claim for indemnification may be
asserted under Section 5.3(a)(i) with respect to any matter discovered by or
known to Purchaser or Parent on or before the Closing Date and (ii) no claim for
indemnification may be asserted under Section 5.3(b)(i) with respect to any
matter discovered by or known to Seller on or before the Closing Date.
(c) Notwithstanding any other provision in this
Agreement or of any applicable Law:
(i) No Indemnitee will be entitled to make a claim
against an Indemnifying Party under Section 5.3(a)(i) or Section
5.3(b)(i) in respect of any individual event or occurrence giving
rise to an Indemnifiable Loss unless and until the aggregate
amount of Indemnifiable Losses incurred by the Indemnitee in
respect of any such individual event or occurrence giving rise to
such Indemnifiable Losses exceeds $5,000, in which event (subject
to the following provisions of this Section 5.2) such Indemnitee
may assert its right to indemnification hereunder to the full
extent of its Indemnifiable Losses in respect thereof; and
(ii) No Indemnitee will be entitled to make a claim
against an Indemnifying Party under Section 5.3(a)(i) or Section
5.3(b)(i) unless and until the aggregate amount of claims which
may be asserted for Indemnifiable Losses under Section 5.3(a)(i)
and Section 5.3(b)(i) (but subject to Section 5.2(c)(i) in all
events), exceeds $500,000, and then only to the extent of the
excess.
33
(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 5.3(a)(i) will not exceed
the Purchase Price.
(e) As between Seller and any of its Affiliates, on the one
hand, and Purchaser, Parent or any of its Affiliates (collectively, the
"Purchaser Companies"), on the other hand, the rights and obligations set forth
in this Article V will be the sole and exclusive rights, obligations and
remedies with respect to this Agreement, the events giving rise to this
Agreement and the transactions provided for herein or contemplated hereby.
Without limiting the generality or effect of the foregoing, as a material
inducement to the other parties hereto entering into this Agreement, and in
light of, among other factors, the acknowledgements contained in Section 2.3,
each of the parties to this Agreement hereby (i) waives any claim or cause of
action which it otherwise might assert, including without limitation under the
common law or federal or state securities, trade regulation, environmental or
other Laws, by reason of this Agreement, the events giving rise to this
Agreement and the transactions provided for herein or contemplated hereby (other
than in respect of the Confidentiality Agreement (as hereafter defined)) except
for claims or causes of action brought under and subject to the terms and
conditions of this Article V and (ii) agrees that, regardless of the foregoing
provisions, no party will have any liability or obligation in respect of any
claim or cause of action that is or may be brought (other than in respect of the
Confidentiality Agreement) except in respect of an Indemnifiable Loss, and then
only to the extent expressly provided in this Article V.
(f) Notwithstanding anything to the contrary contained in this
Agreement, including this Article V, Purchaser and Parent will not be entitled
to indemnity hereunder if and to the extent that the amount on the Closing Date
Balance Sheet (as finally adjusted pursuant to Section 1.5) of a liability or
contra-asset with respect to the matter for which indemnification is sought is
greater than the corresponding amount on the Balance Sheet.
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4,
Seller will indemnify, defend and hold harmless Purchaser and its directors,
officers, partners, members, managers, employees, agents and representatives
(including without limitation any successor to any of the foregoing) from and
against any and all Indemnifiable Losses relating to, resulting from or arising
out of:
(i) Any breach by Seller of any of the representations
or warranties of Seller contained in this Agreement;
(ii) Any breach by Seller of any covenant of Seller
contained in this Agreement which requires performance by
Seller after the Closing; and
34
(iii) the assertion against Purchaser or any of its
Affiliates of (A) any claim arising from an Excluded Liability or
(B) any other obligation or liability of Seller of whatever kind
and nature, primary or secondary, direct or indirect, absolute or
contingent, known or unknown, whether or not accrued, arising
with respect to periods before the Closing (other than to the
extent any of the foregoing is an Assumed Liability).
(b) Subject to Sections 5.1, 5.2 and 5.4, each of Purchaser
and Parent will jointly and severally indemnify, defend and hold harmless Seller
and its Affiliates and their respective directors, officers, partners, members,
managers, employees, agents and representatives (including without limitation
any predecessor or successor to any of the foregoing) from and against any and
all Indemnifiable Losses relating to, resulting from or arising out of:
(i) Any breach by Purchaser or Parent of any of the
representations or warranties of Purchaser or Parent
contained in this Agreement;
(ii) Any breach by Purchaser or Parent of any
covenant of Purchaser or Parent contained in this Agreement which
covenant requires performance by Purchaser or Parent after the
Closing; and
(iii) the assertion against Seller or any of its
Affiliates of (A) any claim arising from an Assumed Liability or
(B) any other obligation or liability of the Business of whatever
kind and nature, primary or secondary, direct or indirect,
absolute or contingent, known or unknown, whether or not accrued,
arising with respect to periods on or after the Closing (other
than to the extent any of the foregoing is an Excluded
Liability).
(c) Subject to Sections 5.1, 5.2 and 5.4, each of Purchaser
and Parent will jointly and severally indemnify, defend and hold harmless Seller
and each of its Affiliates and their respective directors, officers, partners,
members, managers, employees, agents and representatives (including without
limitation any predecessor or successor to any of the foregoing) from and
against any and all Indemnifiable Losses relating to, resulting from or arising
out of any breach by Purchaser or Parent of any covenant of Purchaser or Parent
contained in Sections 3.1(b), 3.2, 3.3, 3.7, 3.9, 7.2, 7.7(b) or 7.8.
(d) Subject to Sections 5.1, 5.2 and 5.4, Seller will
indemnify, defend and hold harmless Purchaser and Parent and each of their
respective Affiliates and their respective directors, officers, partners,
members, managers, employees, agents and representatives (including without
limitation any predecessor or successor to any of the foregoing) from and
against any and all
35
Indemnifiable Losses relating to, resulting from or arising out of any breach by
Seller of any covenant of Seller contained in Sections 3.1(a), 3.2, 3.3, 3.7,
3.9, 3.10, 3.11, 3.12, 7.2 or 7.8.
(e) The rights of the parties under the various clauses of
Sections 5.3(a), 5.3(b), 5.3(c) and 5.3(d) are cumulative and not exclusive.
5.4. Defense of Claims. (a) If any Indemnitee receives notice of
the assertion or commencement of any Third Party Claim against such Indemnitee
with respect to which an Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnitee will give such Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
20 calendar days after receipt of such notice of such Third Party Claim. Such
notice by the Indemnitee will describe the Third Party Claim in reasonable
detail, will include copies of all material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party
will have the right to participate in or, by giving written notice to the
Indemnitee, to assume, the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense.
(b) If, within ten calendar days after giving notice of a
Third Party Claim to an Indemnifying Party pursuant to Section 5.4(a), an
Indemnitee receives written notice from the Indemnifying Party that the
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in the last sentence of Section 5.4(a), the Indemnifying Party will
not be liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the Indemnifying
Party fails to take reasonable steps necessary to defend diligently such Third
Party Claim within ten calendar days after receiving written notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs or expenses paid or incurred in
connection therewith. Without the prior written consent of the Indemnitee, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
which would lead to liability or create any financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the Indemnitee
to
36
that effect. If the Indemnitee fails to consent to such firm offer within ten
calendar days after its receipt of such notice, the Indemnitee may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will not exceed
the amount of such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after the Indemnitee
becomes aware of such Direct Claim. Such notice by the Indemnitee will describe
the Direct Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have a period of 30 calendar days within
which to respond in writing to such Direct Claim. If the Indemnifying Party does
not so respond within such 30 calendar day period, the Indemnifying Party will
be deemed to have rejected such claim, in which event the Indemnitee will be
free to pursue such remedies as may be available to the Indemnitee on the terms
and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any
specified information in any notice as provided in Sections 5.4(a), 5.4(b) or
5.4(c) will not affect the rights or obligations of any party hereunder except
and only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise prejudiced as a result
of such failure.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an Indemnity Payment, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement, rebate or other payment by or against any
other Person, the amount of such reduction, less any costs, expenses, premiums
or taxes incurred in connection therewith, together with interest thereon from
the date of payment thereof at the rate of interest described in Section 1.5(d),
will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making
any Indemnity Payment the Indemnifying Party will, to the extent of such
Indemnity Payment, be subrogated to all rights of the Indemnitee against any
third Person that is not an Affiliate of the Indemnitee or an insurer of the
Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment
relates; provided, however, that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all
37
claims of the Indemnifying Party against any such third Person on account of
said Indemnity Payment will be subrogated and subordinated in right of payment
to the Indemnitee's rights against such third Person. Without limiting the
generality or effect of any other provision hereof, each such Indemnitee and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
subordination rights.
VI. OTHER POST-CLOSING COVENANTS
6.1. Personnel Matters.
6.1.1. Employees and Employee Benefit Plans. (a) Subject to
Section 6.1.4, effective as of the Closing, Purchaser will, or will cause one of
its Affiliates to, offer employment to each Closing Date Employee commencing as
of the Closing with compensation that is substantially equivalent to the
compensation of such Closing Date Employee immediately prior to the Closing.
(b) Purchaser agrees that, under any employee benefit plan
made available or established after the Closing, Closing Date Employees will
receive credit for their years of service with Seller or any of its Affiliates
prior to the Closing in determining eligibility and vesting thereunder, and in
determining the amount of benefits under any applicable sick leave, vacation or
severance plan. Purchaser will, or will cause one of its Affiliates to, cover
Closing Date Employees as of the Closing under a group health plan and waive any
preexisting condition limitations applicable to Closing Date Employees under any
group health plan made available to Closing Date Employees to the extent that a
Closing Date Employee's condition would not have operated as a preexisting
condition limitation under any applicable group health plan of or sponsored by
Seller or any of its Affiliates prior to Closing, and Purchaser will, or will
cause one of its Affiliates to, take all action necessary to ensure that Closing
Date Employees are given full credit for all co-payments and deductibles
incurred under any group health plan for the plan year that includes the Closing
Date.
6.1.2. Assumption of Obligations. (a) Effective as of the
Closing, Purchaser will, or will cause one of its Affiliates to, assume and be
solely responsible for all liabilities and obligations of any of Seller and each
of its Affiliates arising at any time and relating to employment or termination
(actual or constructive) of employment by Purchaser or any of its Affiliates of
any Closing Date Employee after the Closing Date.
(b) Without limiting Purchaser's obligations in respect of
Assumed Liabilities, effective as of the Closing, Purchaser will, or will cause
one of its Affiliates to, assume
38
and be solely responsible for all liabilities and obligations of Seller with
respect to Closing Date Employees for (i) accrued wages, vacation or sick pay,
whether or not accrued for or reserved against on the Closing Date Balance Sheet
and including any claims for such benefits incurred but not reported, and (ii)
any liability or obligation to provide such Closing Date Employees and their
qualified beneficiaries with continuation coverage (within the meaning of
Section 4980B(f)(2) of the Code) under each Employee Plan that is a group health
plan, and any liability or obligation relating to such coverage, including
without limitation any liability or obligation to provide such Closing Date
Employees with the notice required under Section 4980B(f)(6) of the Code with
respect to qualifying events that occur as a result of the Transfer of the
Assets.
6.1.3. Retirement Plans. As of the Closing, Seller will cause
Closing Date Employees to be fully vested in their accrued benefits under the
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Profit Sharing Account Plan, the ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Savings
Account Plan and the ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Employees' Pension Account Plan (the
"Retirement Plans"). Neither Purchaser nor any of its Affiliates will assume any
liabilities or obligations with respect to the Retirement Plans, which will be
retained by Seller, or with respect to any claims made with respect to benefits
allegedly payable thereunder. As soon as practicable after the Closing, but
subject to the terms of the Retirement Plans and applicable Law, Seller will
permit distributions or transfers of Closing Date Employees' vested benefits
under the Retirement Plans. As soon as practicable after the Closing, Purchaser
will, or will cause one of its Affiliates to, take all action necessary to cause
one or more qualified retirement plans maintained by Purchaser or any one of its
Affiliates to accept an eligible rollover distribution (within the meaning of
Section 402(f)(2) of the Code) of the amounts distributed from the Retirement
Plans to each Closing Date Employee who shall become an employee of Purchaser's
affiliated group and a rollover contribution (within the meaning of Section
408(d)(3) of the Code) with respect to such amounts. To the extent distributions
are not permitted under Law, the Purchaser and Seller will take mutually agreed
upon action with respect to Closing Date Employees' plan benefits, whether that
be a spin-off, trustee-to-trustee transfer to a plan maintained by Purchaser or
any of its Affiliates, or retention in the Retirement Plans for eventual
distribution pursuant to the terms of such Retirement Plans.
6.1.4. Employment and Plan Amendments or Terminations. Subject
to Purchaser's obligations under Assumed Contracts, no provision of this Section
6.1 or Section 1.3(a)(ii) will limit Purchaser's or any of its Affiliates' right
and authority to discontinue, suspend or modify the employment of any Closing
Date Employee or benefits provided to any or all Closing Date Employees after
the Closing; provided, however, that in the event of any such discontinuance,
suspension or modification Purchaser will, or will cause one of its Affiliates
to, remain liable for
39
all Employee Plan and other employee benefit liabilities or obligations assumed
pursuant to this Agreement and will indemnify, defend and hold harmless Seller,
each of its Affiliates and their respective directors, officers, partners,
employees, agents and representatives (including without limitation any
predecessor or successor to any of the foregoing) from and against any and all
Indemnifiable Losses they may suffer or incur as a result thereof. Neither
Seller nor any of its Affiliates will be liable for any liability or obligation
that may arise from the amendment or termination by Purchaser or any of its
Affiliates of any employee benefit plan assumed, established or continued by
Purchaser or any of its Affiliates.
6.1.5. Transitional Matters. Each of Seller and Purchaser will
use its respective reasonable efforts to cooperate to (a) transfer to Purchaser
or any of its Affiliates any insurance and administrative services contracts
that Purchaser wishes to continue with respect to any employee benefit plan or
arrangement established by Purchaser or included in the Assumed Contracts and
(b) cause any insurance carrier administering employee benefit liabilities or
obligations assumed by Purchaser or any of its Affiliates to deal directly with
Purchaser or such Affiliate.
6.1.6. Employee Information. Each of Seller and Purchaser will
provide the other, in a timely manner, any information with respect to any
Closing Date Employee's, Employee's or Former Employee's employment with and
compensation from Seller, any of its Affiliates or Purchaser or any of its
Affiliates, as the case may be, or rights or benefits under any employee benefit
plan or arrangement which the other party hereto may reasonably request.
6.1.7. W-2 Matters. Pursuant to the alternate procedure
described by Revenue Procedure 96-60, Purchaser will assume Seller's entire
obligation to furnish Forms W-2 for the year ending December 31, 1997 to Closing
Date Employees. Seller will provide Purchaser the information not available to
Purchaser and relating to periods ending on the Closing Date necessary for
Purchaser to prepare and distribute Forms W-2 to Closing Date Employees for the
year ending December 31, 1997, which Forms W-2 will include all remuneration
earned by Closing Date Employees from Seller and Purchaser during the year
ending December 31, 1997, and Purchaser will prepare and distribute such Forms.
Seller will indemnify, defend and hold harmless Purchaser against any fines or
penalties to the extent resulting from Seller's provision of incorrect
information pursuant to this Section 6.1.7.
6.2. General Post-Closing Matters.
6.2.1. Post-Closing Notifications. Purchaser and
Seller will, and each will cause its respective Affiliates to,
comply with any post-Closing notification or other requirements,
40
to the extent then applicable to such party, of any antitrust, trade
competition, investment, control or other Law of any Governmental Entity having
jurisdiction over the Business or the transactions contemplated hereby.
6.2.2. Names, Trademarks, Etc. Purchaser will revise
trademarks and Product literature, change signage and stationery and otherwise
discontinue use of the names "▇▇▇▇▇▇▇ & ▇▇▇▇▇▇" and "C&A" and the "CA" logo or
any variations or derivations of such names or logo (collectively, the "Seller
Trade Name") as promptly as practicable after the Closing; provided, however,
that for a period of one month from the Closing Date, Purchaser may consume
stationery and similar supplies on hand as of the Closing which contain the
Seller Trade Name thereon, provided that such items are overstamped or otherwise
appropriately indicate that the Mastercraft Group is then owned by Purchaser.
Without limiting the generality or effect of the foregoing, Purchaser will, and
will cause each of its Affiliates to, discontinue (a) no later than the close of
business on the Closing Date, affixing in any manner whatsoever the Seller Trade
Name to any Product and (b) no later than the close of business on the 30th
calendar day after the Closing Date, selling, shipping and delivering any
Product having the Seller Trade Name affixed thereto in any manner whatsoever.
6.2.3. Access. (a) On the Closing Date, or as soon thereafter
as practicable, and in no event later than 90 calendar days after the Closing
Date, Seller will deliver or cause to be delivered to Purchaser all original
agreements, documents, books, records and files primarily relating to the
Business (collectively, "Records") in the possession of Seller or any Affiliate
of Seller to the extent not in the possession of Purchaser, subject to the
following exceptions:
(i) Purchaser recognizes that certain Records may
contain only incidental information relating to the Business or
may primarily relate to the Seller or any of its Affiliates, or
the businesses of the Seller or any of its Affiliates other than
the Business, and Seller and its Affiliates may retain such
Records and Seller may deliver appropriately excised, but
otherwise true and correct copies of such Records so long as the
effect of such excising is not to omit information from the
Records necessary for the conduct of the Business;
(ii) Seller and each of its Affiliates may retain any
Tax Returns so long as true and complete copies of the portions
thereof relating to the Business are delivered to Purchaser at or
before the Closing or made available to the Purchaser following
the Closing; and
(iii) Seller and each post-Closing Affiliate may
retain Records that contain information that is privileged or
similarly protected from disclosure and
41
Records relating to the Excluded Liabilities or Excluded
Assets.
After the Closing, Purchaser will retain all Records (except those Records
referred to in Section 6.2.3(a)(i), (ii) and (iii)) required to be retained
pursuant to obligations imposed by any applicable Law. Except as provided in the
immediately preceding sentence, Purchaser will retain all Records for a period
of seven years after the Closing Date. After the end of such seven-year period,
before disposing of any such Records, Purchaser will give notice to such effect
to Seller and give Seller at its cost and expense an opportunity to remove and
retain all or any part of such Records as Seller may elect.
(b) After the Closing, upon reasonable notice, each party
hereto will give, or cause to be given, to the representatives, employees,
counsel and accountants of the other parties hereto access, during normal
business hours, to Records relating to periods prior to or including the Closing
Date (except those Records referred to in Section 6.2.3(a)(i), (ii) or (iii)),
and will permit such Persons to examine and copy such Records to the extent
reasonably requested by the other party in connection with tax and financial
reporting matters, audits, legal proceedings, governmental investigations and
other business purposes; provided, however, that nothing herein will obligate
any party to take actions that would unreasonably disrupt the normal course of
its business, violate the terms of any Contract to which it is a party or to
which it or any of its assets is subject or grant access to any of its
proprietary, confidential or classified information or information that is
privileged or similarly protected from disclosure. Purchaser will provide or
make available to Seller and each of its Affiliates access to, and assistance
from, employees of Purchaser for the purposes of, and with the limitations
described in, the preceding sentence. The parties hereto will, and will cause
their respective Affiliates to, cooperate with each other in the conduct of any
tax audit, claim for refund of taxes or similar proceedings involving or
otherwise relating to the Business (or the income therefrom or assets thereof)
with respect to any Tax as may be necessary to carry out the intent of this
Section 6.2.3(b). Purchaser and Seller will each be responsible to the other for
ensuring that such information can be provided to the other in the event that
the party obligated to provide the information disposes of any portion of the
Business.
6.2.4. Certain Tax Matters. (a) Each of Purchaser and Seller
will bear and pay one-half of all sales, use, transfer, stamp, conveyance, value
added or other similar Taxes, duties, excise or governmental charges imposed by
any United States federal, state, local or foreign Governmental Entity, and all
recording or filing fees, notarial fees and other similar costs of Closing with
respect to the Transfer of the Acquired Assets or otherwise on account of this
Agreement or the
42
transactions contemplated hereby (collectively, the "Transfer
Taxes").
(b) Purchaser will prepare and file or cause to be prepared
and filed all Tax Returns with respect to the Acquired Assets and the Business
required to be filed with the appropriate United States, state, local and
foreign agencies for all taxable periods for which Tax Returns are due after the
Closing Date (other than for Taxes with respect to periods for which the
consolidated, unitary and combined Tax Returns of Seller will include the
operations of the Business). Purchaser will make all payments required with
respect to any such Tax Returns.
(c) Seller or an Affiliate of Seller will prepare and file or
cause to be prepared and filed all Tax Returns for the Seller that are required
to be filed with respect to the Acquired Assets and the Business, other than Tax
Returns that Purchaser is obligated to prepare and file pursuant to Section
6.2.4(b), with the appropriate United States, state, local and foreign agencies.
Seller will pay or cause to be paid all Taxes required to be paid with respect
to such Tax Returns. The amount of any Income Taxes attributable to a portion of
a taxable period that includes but does not end on the Closing Date shall be
determined pursuant to the interim closing of books method.
(d) From the date hereof through the Closing Date, Seller and
Parent will consult with one another with a view to determining a mutually
acceptable allocation of the Purchase Price among the Acquired Assets. If such a
mutually acceptable allocation is agreed upon, Purchaser and Parent will jointly
prepare Form 8594 pursuant to Section 1060 of the Code and Purchaser, Parent and
Seller will file all of their respective Tax Returns consistent with such
allocation and each of Purchaser and Seller will notify the other if the IRS
disputes the allocation. If such a mutually acceptable allocation is not agreed
upon, each of Seller and Purchaser will be free independently to determine an
appropriate allocation of the aggregate purchase price among the Acquired Assets
for purposes of preparing and filing its own Tax Returns.
(e) Purchaser will prepare and deliver, or will cause to be
prepared and delivered, within 60 calendar days of receipt of Seller's request
therefor, to Seller, such information as Seller may reasonably request in order
for the operations of the Business to be properly reported in Seller's Tax
Returns.
(f) Purchaser will pay or reimburse Seller any fees and
expenses that are required to be paid in accordance with that certain Consultant
Services Agreement made as of February 1, 1995 between ▇▇▇▇▇ & Associates, Inc.,
an Illinois corporation, and Seller and certain Affiliates of Seller, and
extended by letter agreement dated March 27, 1997, as the same may be further
extended from time to time, to the extent that such fees and expenses are
ratably allocable to any reduction in the assessed
43
value of Owned Real Property resulting in a reduction in real property taxes for
which Purchaser is responsible.
(g) For purposes of this Agreement, (i) "Tax" or "Taxes"
includes all federal, state, local, foreign and other taxes, assessments, or
governmental charges of any kind whatsoever including, without limitation,
income, franchise, capital stock, excise, property, sales, use, service, service
use, leasing, leasing use, gross receipts, value added, single business,
alternative or add-on minimum, occupation, real and personal property, stamp,
workers' compensation, severance, environmental, payroll, withholding,
employment, unemployment and social security taxes, or other taxes of the same
or similar nature, together with any interest, penalties or additions thereon
and estimated payments thereof, whether disputed or not, (ii) "Tax Return" or
"Tax Returns" includes all returns, reports, information returns, forms,
declarations, claims for refund, statements and other documents (including any
amendments thereto and including any schedule or attachment thereto) in
connection with Taxes that are required to be filed with a Governmental Entity
or other tax authority, or sent or provided to another party under applicable
Law, (iii) "Income Tax" or "Income Taxes" means all Taxes imposed on, measured
by, or that require reference to, net or taxable income (including any income,
franchise, estimated, alternative, minimum, add-on minimum or other tax imposed
on, measured by, or which requires reference to, net or taxable income),
together with interest and penalties thereon and estimated payments thereof, and
(iv) "Code" means the Internal Revenue Code of 1986, as amended (all citations
to the Code or to the Treasury Regulations promulgated thereunder will include
any amendments or successor provisions thereto).
6.2.5. Insurance. (a) With respect to any loss, liability or
damage suffered after the Closing Date relating to, resulting from or arising
out of the conduct of the Business on or prior to the Closing Date and included
in the Assumed Liabilities for which Seller or any of its Affiliates would be
entitled to assert, or cause any other Person to assert, a claim for recovery
under any policy of insurance maintained by or for the benefit of Seller, in
respect of the Business ("Seller's Insurance"), at the request of Purchaser,
Seller will assert one or more claims under Seller's Insurance covering such
loss, liability or damage if Purchaser is not itself entitled to assert such
claim, but Seller or any of its Affiliates is so entitled, provided that all of
Seller's and any of its Affiliates' out-of-pocket costs and expenses incurred in
connection with the foregoing, including without limitation any liability,
obligation or expense referred to in the last sentence of this Section 6.2.5(a),
are, at the option of the entity incurring such costs and expenses, paid in
advance or promptly reimbursed by Purchaser; provided, however, that, effective
as of the Closing Date, Seller may in its sole discretion terminate or otherwise
discontinue any policy of Seller's Insurance but no such termination or
discontinuance will affect Seller's liability
44
under Section 5.3. To the extent required under the terms of Seller's Insurance
to give effect to the foregoing, Seller will be deemed, solely for the purpose
of asserting claims for Seller's Insurance pursuant to the immediately preceding
sentence, to have assumed or retained liability for such loss, liability or
damage to the extent of the policy limits of the applicable policy of Seller's
Insurance; provided, however, that (i) Purchaser's and Parent's obligations
under Section 5.3(b) will not be affected by the provisions of this Section
6.2.5(a) and (ii) with respect to any claim made by Seller or any of its
Affiliates under any Seller's Insurance pursuant to this Section 6.2.5(a), each
of Purchaser and Parent will jointly and severally indemnify, defend and hold
harmless Seller and each of its Affiliates and their respective directors,
officers, partners, employees, agents and representatives (including without
limitation any predecessor or successor of any of the foregoing) from and
against any Indemnifiable Loss relating to, resulting from or arising out of any
deductible, policy limit, obligation, indemnity, reinsurance due to the
liquidation or insolvency of the reinsurer, self-insurance retention, or
retroactive or retrospective premium resulting from claims made under this
Section 6.2.5(a) or other like arrangement by which any such entity, including
without limitation any captive insurance company, retains any liability or
obligation under any such policy of Seller's Insurance or otherwise.
(b) With respect to any loss, liability or damage suffered
after the Closing Date relating to, resulting from or arising out of the conduct
of the Business on or prior to the Closing Date and not included in the Assumed
Liabilities for which Purchaser or any of its Affiliates would be entitled to
assert, or cause any other Person to assert, a claim for recovery under any
policy of insurance maintained by or for the benefit of Purchaser or any of its
Affiliates, in respect of the Business ("Purchaser's Insurance"), at the request
of Seller, Purchaser will assert one or more claims under Purchaser's Insurance
covering such loss, liability or damage if Seller is not itself entitled to
assert such claim, but Purchaser or any of its Affiliates is so entitled,
provided that all of Purchaser's and any of its Affiliates' out-of-pocket costs
and expenses incurred in connection with the foregoing, including without
limitation any liability, obligation or expense referred to in the last sentence
of this Section 6.2.5(b), are, at the option of the entity incurring such costs
and expenses, paid in advance or promptly reimbursed by Seller; provided,
however, nothing herein shall obligate Purchaser to maintain any policy of
Purchaser's Insurance. To the extent required under the terms of Purchaser's
Insurance to give effect to the foregoing, Purchaser will be deemed, solely for
the purpose of asserting claims for Purchaser's Insurance pursuant to the
immediately preceding sentence, to have assumed or retained liability for such
loss, liability or damage to the extent of the policy limits of the applicable
policy of Purchaser's Insurance; provided, however, that (i) Seller's
obligations under Section 5.3(a) will not be
45
affected by the provisions of this Section 6.2.5(b) and (ii) with respect to any
claim made by Purchaser or any of its Affiliates under any Purchaser's Insurance
pursuant to this Section 6.2.5(b), Seller will indemnify, defend and hold
harmless Purchaser and each of its Affiliates and their respective directors,
officers, members, managers, partners, employees, agents and representatives
(including without limitation any predecessor or successor of any of the
foregoing) from and against any Indemnifiable Loss relating to, resulting from
or arising out of any deductible, policy limit, obligation, indemnity,
reinsurance due to the liquidation or insolvency of the reinsurer,
self-insurance retention, or retroactive or retrospective premium resulting from
claims made under this Section 6.2.5(b) or other like arrangement by which any
such entity, including without limitation any captive insurance company, retains
any liability or obligation under any such policy of Purchaser's Insurance or
otherwise.
6.2.6. Receivables. As of the Closing, Seller will terminate
the participation of the Mastercraft Group in the Receivables Facility.
Following the Closing, Purchaser and Parent will, and will cause Ack-Ti to, (a)
direct the customers of the Business to remit and deposit collections in respect
of receivables reflected on the Closing Date Balance Sheet to the appropriate
Receivables Facility lock-box account or accounts, (b) in the event that Ack-Ti,
Purchaser or any of Purchaser's Affiliates receives monies in respect of the
accounts receivable on the Closing Date Balance Sheet directly from any
customer, remit such monies together with identifying information to the
appropriate Receivables Facility lock-box account or accounts, and (c) perform
the servicing, collection and other obligations under the Receivables Facility
with respect to such receivables (other than any obligation to sell receivables
or pay any commission or loss on sale). Seller or its Affiliates will promptly
upon receipt thereof remit to Purchaser the full amount of any monies collected
after the Closing Date by Seller or any of its Affiliates with respect to
receivables reflected in the Closing Date Balance Sheet (without reduction for
any discount or loss on sale attributable to the Receivables Facility).
6.2.7. Master Contracts Etc. From and after the Closing,
Parent and Purchaser will use reasonable efforts (and Seller will cooperate
therewith) to obtain and have issued replacements for any Assumed Contract under
which Seller remains liable, or guarantees or secures Purchaser's payment or
performance thereunder notwithstanding the assignment thereof to Purchaser on
the Closing Date (collectively, "Master Contracts"), and to obtain any
amendments, novations, releases, waivers, consents or approvals necessary to
release Seller and each Seller Affiliate party to such Master Contract from all
liability or obligation thereunder relating to the Business, in each case as
promptly as practicable. In no event shall "reasonable efforts" be deemed to
require payments to obtain the same (other than payments of costs and expenses
incidental thereto). In the event
46
and for the period that Purchaser fails to obtain any such replacement,
amendment, novation, release, waiver, consent or approval, without limiting the
generality of Section 5.3(b), Parent and Purchaser will jointly and severally
indemnify, defend and hold harmless each of Seller and each of its Affiliates
and their respective Affiliates, directors, officers, partners, employees,
agents and representatives (including without limitation the predecessors or
successors of any of the foregoing) from and against any Indemnifiable Loss
relating to, resulting from or arising out of Purchaser's failure to perform or
pay the obligations or liabilities under the Master Contracts assumed pursuant
to this Agreement.
6.2.8. Certain Contracts. (a) Notwithstanding anything to the
contrary in this Agreement, to the extent that (i) any Assumed Contract is not
capable of being assigned to Purchaser in connection with the Closing without
the consent or waiver of a third Person (including without limitation a
Governmental Entity) which has not been obtained on or before the Closing Date,
or (ii) any of the transactions contemplated by this Agreement constituted or
would constitute a breach of any Assumed Contract, or a violation of any Law or
Order or other governmental edict, Seller will be deemed not to have
Transferred, and will not be obligated to Transfer, to Purchaser any direct or
indirect right, title or interest in or to any such Contract without first
having obtained all necessary consents and waivers. Seller will use reasonable
efforts to obtain such consents and waivers as may be necessary to cure such
potential breach or violation; provided, however, but without affecting Seller's
obligations under Section 5.3, Seller will not be obligated to pay any
consideration therefor to the party from whom the consent or waiver is
requested. Purchaser and Parent agree that neither Seller nor any of its
Affiliates will have any liability whatsoever arising out of or relating to the
failure to obtain any consents or waivers that may have been or may be required
in connection with the transactions contemplated by this Agreement or because of
a breach of, default under or termination of any Assumed Contract as a result
thereof, except in connection with a breach of the representation in the last
sentence of Section 2.1.11.
(b) To the extent that the consents and waivers referred to in
the immediately preceding paragraph are not obtained, or until the breaches or
violations referred to in the immediately preceding paragraph are resolved,
Seller will use reasonable efforts, with reasonable costs of Seller and its
Affiliates related thereto to be promptly reimbursed by Purchaser, to (i)
provide to Purchaser, at its request, the benefits of any such Contract, (ii)
cooperate in any reasonable and lawful arrangement designed to provide such
benefits to Purchaser, without incurring any financial obligation to Seller or
any of its Affiliates, and (iii) enforce, at the request and for the account of
Purchaser, any rights of Seller arising from any such Contract against the other
party or parties to such
47
Contract (including the right to elect to terminate in accordance with the terms
thereof upon the advice of Purchaser). Notwithstanding any provision to the
contrary contained herein, Purchaser will perform or pay for the benefit of the
other party or parties thereto the obligations of Seller under or in connection
with any such Contract and will indemnify and hold Seller and its Affiliates
harmless from any Indemnifiable Losses relating to, resulting from or arising
out of any failure by Purchaser so to perform or pay. Purchaser will comply with
all reasonable requests of Seller for cooperation in connection with the
performance of Seller's obligations under this Section 6.2.8.
6.2.9. Non-Solicitation. (a) During the period from
the Closing Date until the second anniversary thereof (the
"Restricted Period"), neither Seller nor any of its subsidiaries
will (i) solicit for hire any Closing Date Employee other than
pursuant to or resulting from a general advertisement not
specifically targeted at Closing Date Employees or (ii) engage,
hire or enter into any Contract to obtain the services of any
sales representative or Product designer or design consultant
engaged by or for the Business as of the Closing, provided,
however, that (A) the restriction in clause (ii) of this Section
6.2.9(a) will not apply during the initial year of the Restricted
Period to any sales representative with which Seller has a
business relationship as of the Closing in respect of any of
Seller's products other than the Products ("Sales
Representatives") if such relationship is not expanded beyond
such products and (B) in no event will any provisions hereof
apply to any Person who is or may be an Affiliate of Seller
(other than a subsidiary of Seller), including without limitation
The Blackstone Group, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. and their
respective Affiliates.
(b) During the period from the Closing Date until the first
anniversary thereof, neither Purchaser nor any of its Affiliates will, engage,
hire or enter into any Contract to obtain the services of any Sales
Representative in respect of any products of Purchaser or any of its Affiliates
other than the Products. Purchaser expressly acknowledges that the Sales
Representatives currently under Contract to sell Seller's or any of its
Affiliate's products other than Products may continue to sell such products for
the one-year period following the Closing Date.
6.2.10. Software Licenses. For a period of 30 days following
the Closing, Seller will, upon Purchaser's request and to the extent permitted
by the terms of the applicable license or by Law, make available for Purchaser's
use the software licensed by Seller pursuant to software licenses that are
Excluded Contracts.
48
VII. MISCELLANEOUS PROVISIONS
7.1. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by telegram or electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) or one business day after having been
dispatched by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to Parent or Purchaser, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (508) 649-3541
with a copy to:
Goulston & Storrs
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) If to Seller, to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Products Co.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Executive Vice President - Law
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.2. Expenses. Except as otherwise expressly provided herein, (a)
Seller will pay or cause to be paid all expenses incurred by Seller incident to
this Agreement and in preparing to consummate and consummating the transactions
provided for herein and (b) each of Parent and Purchaser will pay any expenses
incurred by it incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein.
49
7.3. Successors and Assigns. (a) Subject to Sections 7.3(b) and
(c), this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but will not be
assignable or delegatable by any party without the prior written consent of the
other parties hereto.
(b) Nothing in this Agreement is intended to limit Purchaser's
ability to sell or to Transfer the Acquired Assets and the Assumed Liabilities
following the Closing Date; provided, however, that any such sale or Transfer
will not result in a termination of any of Parent's or Purchaser's covenants,
duties, responsibilities, obligations or liabilities hereunder, including
without limitation under Sections 3.1(b) and Articles V and VI, and provided
further that the Person acquiring the Acquired Assets and Assumed Liabilities
pursuant to such sale or Transfer will assume all of such covenants, duties,
responsibilities, obligations and liabilities in a written instrument
satisfactory to Seller.
(c) Notwithstanding anything contained in this Agreement to
the contrary, upon notice to Purchaser, Seller may assign or delegate any or all
of its rights under this Agreement to any Affiliate of Seller, or to any Person,
that acquires all or substantially all of the assets or voting stock of Seller.
7.4. Waiver. Either Parent (on behalf of itself and Purchaser) or
Seller by written notice to the other may (a) extend the time for performance of
any of the obligations or other actions of the other under this Agreement, (b)
waive any inaccuracies in the representations or warranties of the other
contained in this Agreement, (c) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the other under this Agreement. Except
as provided in the immediately preceding sentence, no action taken pursuant to
this Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement. Any waiver
of any term or condition will not be construed as a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement. No failure or delay of any party in asserting any of its rights
hereunder will constitute a waiver of any such rights.
7.5. Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes any other agreement, whether written or oral,
that may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative thereof) prior to the
date hereof relating to the matters contemplated hereby, other than the existing
letter agreement (the "Confidentiality Agreement"), between Seller or one of its
Affiliates and Parent or one of its Affiliates, which will survive the
execution, delivery or termination of this Agreement and to which Purchaser
agrees to be
50
bound as if it was an original party thereto. This Agreement (together with the
Schedules and Exhibits hereto) and the Confidentiality Agreement constitute the
entire agreement by and among the parties hereto and there are no agreements or
commitments by or among such parties or their Affiliates except as expressly set
forth herein and therein.
7.6. Amendments, Supplements, Etc. This Agreement may be amended
or supplemented at any time by additional written agreements as may mutually be
determined by Parent (without the joinder of Purchaser) and Seller to be
necessary, desirable or expedient to further the purposes of this Agreement, or
to clarify the intention of the parties hereto.
7.7. Rights of the Parties. (a) Except as provided in Article V
or in Sections 1.3(a), 6.2.4(f) and 7.3, nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any Person
other than the parties hereto and their respective Affiliates any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby.
(b) Parent will cause Purchaser to perform in accordance with
the terms hereof all covenants to be performed by Purchaser pursuant to this
Agreement. Without limiting the generality of the foregoing, Parent will cause
Purchaser to have cash on hand and other capital resources sufficient to
discharge, on a timely basis, all of Purchaser's obligations hereunder. The
obligations of Purchaser and Parent hereunder are not subject to financing.
7.8. Further Assurances. From time to time, as and when requested
by either Parent (on behalf of itself and Purchaser) or Seller, the other will
execute and deliver, or cause to be executed and delivered, all such documents
and instruments as may be reasonably necessary to consummate the transactions
contemplated by this Agreement.
7.9. Applicable Law; Jurisdiction. (a) This Agreement
and the legal relations among the parties hereto will be governed
by and construed in accordance with the substantive Laws of the
State of New York, without giving effect to the principles of
conflict of laws thereof.
(b) Each party irrevocably submits to the exclusive
jurisdiction of either the United States District Court for the Southern
District of New York or the Supreme Court of the State of New York, New York
County, for purposes of any action, suit or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of Parent and Purchaser
hereby irrevocably designates, appoints and empowers Parent, and Seller hereby
irrevocably designates, appoints and empowers any officer of Seller, located in
its New York offices, in each case as its true and lawful agent and
attorney-in-fact in its name, place and
51
stead to receive and accept on its behalf service of process in any action, suit
or proceeding in New York with respect to any matters as to which it has
submitted to jurisdiction as set forth in the immediately preceding sentence.
7.10. Titles and Headings. Titles and headings to
Sections herein are inserted for convenience of reference only,
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
7.11. Certain Interpretive Matters and Definitions. (a)
Unless the context otherwise requires, (i) all references to
Sections or Schedules are to Sections or Schedules of or to this
Agreement, (ii) each term defined in this Agreement has the
meaning assigned to it, (iii) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in
accordance with GAAP, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the
plural and VICE VERSA, (vi) the terms "subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2
of Regulation 12B under the Securities Exchange Act of 1934, as
amended, (vii) all references to "$" or dollar amounts will be to
lawful currency of the United States of America, (viii)
"Knowledge of Seller" means solely to the actual knowledge of the
persons listed on Schedule 7.11 (Purchaser and Parent hereby
expressly acknowledging that such persons are under no obligation
to conduct any particular inquiry for purposes of this
Agreement), (ix) "Person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity
and (x) "Material Adverse Effect" means a material adverse effect
on the Business or the combined financial condition or results of
operations of the Mastercraft Group, taken as a whole.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ PRODUCTS CO.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and CEO
MC GROUP ACQUISITION COMPANY, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇ FABRICS CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
53
