<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended September 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-20757
TRAVIS BOATS & MOTORS, INC.
(Exact name of registrant as specified in its charter)
TEXAS
(State or other jurisdiction of
incorporation or organization)
74-2024798
(I.R.S. Employer Indentification Number)
5000 Plaza on the Lake, Suite 250, Austin, Texas 78746
(Address of principal executive offices)
Registrant's telephone number, including area code: (512) 347-8787
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceeding 12 months (or for such shorter
period that Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes _X_ No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitve proxy or
information statements incorporated by reference in Part III of this
Report on Form 10-K or any amendment to this Report on Form 10-K.
_____
The aggregate market value of the voting stock (which consists solely
of shares of Common Stock) held by non-affiliates of the Registrant as of
December 18, 1997, (based upon the last reported price of $23.25 per
share) was approximately $63,484,637 on such date.
The number of shares of the issuer's Common Stock, par value $.01 per
share, outstanding as of December 18, 1997 was 4,294,867 of which
2,730,522 shares were held by non-affiliates.
Documents Incorporated by reference: Portions of Registrant's Proxy
Statement relating to the 1998 Annual Meeting of Stockholders to be held
in March 1998, have been incorporated by reference herein (Part III).
<PAGE>
TRAVIS BOATS & MOTORS, INC. AND CONSOLIDATED SUBSIDIARIES
REPORT ON FORM 10-K
TABLE OF CONTENTS
RISK FACTORS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Stock and Related
Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements
Item 9. Changes in and Disagreements with Accountants and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
Item 15. Index to Consolidated Financial Statements
<PAGE>
Risk Factors
This Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could
differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, the
factors set forth below, those discussed in ''Management's Discussion and
Analysis of Financial Condition and Results of Operations'' and those
discussed elsewhere in this Report on Form 10-K.
Impact of Seasonality and Weather on Operations. The Company's
business, as well as the entire recreational boating industry, is highly
seasonal. Strong sales typically begin in January with the onset of the
public boat and recreation shows, and continue through July. Over the
previous four-year period, the average net sales for the quarterly
periods ended March 31 and June 30 represented in excess of 28% and 37%,
respectively, of the Company's average annual net sales. If, for any
reason, the Company's sales were to be substantially below those normally
expected during these periods, the Company's business, financial
condition and results of operations would be materially and adversely
affected. The Company generally realizes significantly lower sales in the
quarterly period ending December 31, resulting in operating losses during
that quarter.
The Company's business is also significantly affected by weather
patterns which may adversely impact the Company's operating results. For
example, drought conditions or merely reduced rainfall levels, as well as
excessive rain, may force area lakes to close or render boating dangerous
or inconvenient, thereby curtailing customer demand for the Company's
products. In addition, unseasonably cool weather and prolonged winter
conditions may lead to a shorter selling season in certain locations.
Although the Company's geographic expansion has reduced, and is expected
to continue to reduce, the overall impact on the Company of adverse
weather conditions in any one market area, such conditions will continue
to represent potential, material adverse risks to the Company and its
future financial performance. Due to the foregoing factors, among others,
the Company's operating results in some future quarters may be below the
expectations of stock market analysts and investors. In such event, there
could be an immediate and significant adverse effect on the trading price
of the Common Stock. See ''Management's Discussion and Analysis of
Financial Condition and Results of Operations.''
Impact of General Economic Conditions and Discretionary Consumer
Spending. The Company's operations are dependent upon a number of
factors relating to or affecting consumer spending. The Company's
operations may be adversely affected by unfavorable local, regional or
national economic developments or uncertainties regarding future economic
prospects that reduce consumer spending in the markets served by the
Company's stores. Consumer spending on non-essential goods such as
recreational boats can also be adversely affected due to declines in
consumer confidence levels, even if prevailing economic conditions are
positive. In an economic downturn, consumer discretionary spending levels
are also reduced, often resulting in disproportionately large declines in
the sale of high-dollar items such as recreational boats. For example,
during the Company's 1988-1990 fiscal years, the Texas economy was
severely depressed due to declines in the financial, oil and gas and real
estate markets. While the Company remained profitable during these
periods, its operating performance declined. There can be no assurance
that a similar economic downturn might not recur in Texas or any other
market or that the Company could remain profitable during any such
period. Similarly, rising interest rates could have a negative impact on
consumers' ability or willingness to obtain financing from third-party
lenders, which could also adversely affect the ability of the Company to
sell its products. Changes in federal and state tax laws including,
without limitation, the imposition or proposed adoption of luxury or
similar taxes on certain consumer products, could also influence
consumers' decisions to purchase products offered by the Company and
could have a negative effect on the Company's sales. Local influences
such as corporate downsizing, military base closings and the Mexican peso
devaluation have adversely affected and may continue to influence the
Company's operations in certain markets.
Dependence Upon Expansion. A significant portion of the Company's
growth has resulted from, and will continue to be increasingly dependent
upon, the addition of new stores and continued sales and profitability
from existing stores. Since October 1991, at which time the Company
operated five stores in Texas, the Company has opened or acquired 15 new
store locations in Texas, Arkansas, Louisiana, Alabama, Tennessee,
Mississippi, and Florida. During fiscal years 1997 and 1996, the stores
added since October 1991 have collectively accounted for approximately
70.6% and 57.6%, respectively, of the Company's aggregate net sales.
Comparable store sales increased 5.7% and 4.3% in fiscal years 1997 and
1996, respectively. Recent rates of comparable store sales and net income
growth are not necessarily indicative of the comparable store performance
that may be achieved by the Company in the foreseeable future. See
''Management's Discussion and Analysis of Financial Condition and Results
of Operations.''
The Company intends to continue to pursue a strategy of growth into
new markets through acquiring existing boat retailers, converting
compatible facilities to Travis Boating Centers and building new store
facilities. Accomplishing these goals for expansion will depend upon a
number of general factors, including the identification of new markets in
which the Company can obtain approval to sell its existing or
substantially similar product lines, the Company's financial
capabilities, the hiring, training and retention of qualified personnel
and the timely integration of new stores into existing operations. The
acquisition strategy will further depend upon the Company's ability to
locate suitable acquisition candidates at a reasonable cost and to
dispose, timely and effectively, of the acquired entity's remaining
inventory, as well as the ability of the Company to sell its Travis
Edition product line to the customer base of the previous owner. There
can be no assurance that the Company can identify suitable acquisition
candidates or complete acquisitions on terms and conditions favorable to
the Company.
The strategy of growth through conversion of compatible facilities to
Travis Boating Centers or the construction of new Travis Boating Centers
will further depend upon the Company's ability (i) to locate and
construct suitable facilities at a reasonable cost in those new markets
in which the Company believes it can obtain adequate market penetration
at standard operating margins without the acquisition of an existing
dealer, (ii) to obtain the reliable data necessary to determine the size
and product preferences of such potential markets and (iii) to introduce
successfully its Travis Edition line. There can be no assurance that the
Company will be able to open and operate new stores on a timely or
profitable basis. Moreover, the costs associated with opening such stores
may adversely affect the Company's profitability. See ''Management's
Discussion and Analysis of Financial Condition and Results of
Operations.''
Management of Growth. The Company has undergone a period of rapid
growth. Management has expended and expects to continue to expend
significant time and effort in acquiring and opening new stores. There
can be no assurance that the Company's systems, procedures and controls
will be adequate to support the Company's expanding operations. The
inability of the Company to manage its growth properly could have a
material adverse effect on the Company's business, financial condition
and results of operations.
The Company's management information system is designed to improve its
ability to monitor and manage its geographically dispersed stores. This
system is operational in 19 of the Company's 20 stores, with the most
recently acquired store planned to be operational during fiscal 1998.
There can be no assurance that the system will function as planned or
that the system can be integrated smoothly with new store openings and
acquisitions.
The Company's planned growth will also impose significant added
responsibilities on members of senior management, including the need to
identify, recruit and integrate new senior level managers, and the
ability to maintain or expand Travis Edition's and Travis Boating
Center's successful appeal to consumers. There is no assurance that any
additions to management can be readily and successfully achieved or that
the Company will be able to continue to grow its business.
Reliance on Manufacturers and Other Key Vendors. The Company's
success is dependent upon its relationship with, and favorable pricing
arrangements from, a limited number of major manufacturers. In the event
these arrangements were to change or terminate for any reason, including
changes in competitive, regulatory or marketing practices, the Company's
business, financial condition and results of operations could be
adversely affected.
As is typical in the industry, the Company deals with each of its
manufacturers pursuant to an annually renewable, non-exclusive, dealer
agreement that does not contain any contractual provisions concerning
product pricing or required purchasing levels. Pricing is generally
established on a model year basis, but is subject to change at the
manufacturer's sole discretion.
The Company purchased approximately 100% of its new outboard motors
for use on its Travis Edition lines of recreational boats in fiscal years
1997 and 1996, respectively, from Outboard Marine Corporation (''OMC''),
the manufacturer of Johnson outboard motors. Unlike the Company's other
dealer agreements, the Company's agreement with OMC is multi-year in
nature. The current agreement, which is in the first of five years, sets
forth an established discount level from the then prevailing dealer net
price over the entire term of the agreement. This dealer agreement may be
canceled by either party if the volume of product purchased or available
to be purchased is not maintained at pre-established levels. If the
Company's contract with OMC were canceled or modified, it could have a
material adverse effect on the Company's business, financial condition
and results of operations.
Approximately 34.3% and 22.7% of the Company's net inventory purchases
in fiscal years 1997 and 1996, respectively, were from a single boat
supplier. The Company also currently purchases a high percentage of the
annual production of a limited number of boat manufacturers. To ensure
adequate inventory levels to support the Company's expansion, it may be
necessary for such manufacturers to increase production levels or
allocate a greater percentage of their production to the Company. In the
event that the operations of the Company's manufacturers were interrupted
or discontinued, the Company could experience temporary inventory
shortfalls, or disruptions or delays with respect to any unfilled
purchase orders then outstanding. Although the Company believes that
adequate alternate sources would be available that could replace a
manufacturer as a product resource, there can be no assurance that such
alternate sources will be available at the time of any such interruption
or that alternative products will be available at comparable quality and
prices. The unanticipated failure of any manufacturer or supplier to meet
the Company's requirements with regard to volume or design
specifications, the Company's inability to locate acceptable alternative
manufacturers or suppliers, the Company's failure to have dealer
agreements renewed or to meet certain volume requirements with regard to
purchasing, or any substantial increase in the manufacturer's pricing to
the Company, could have a material adverse effect on the Company's
business, financial condition and results of operations.
Limitations to Market Entry. Under certain of its dealer agreements,
the Company must obtain permission from its manufacturers to sell
products in new markets. While the Company has received permission to
sell Johnson motors and various boat lines in its immediate expansion
markets, manufacturers have not granted such permission to the Company in
each of its broader target markets. While the Company believes it can
sell products of other manufacturers in new markets, there can be no
assurance that all of the Company's current manufacturers will grant
permission for the Company to sell in new markets, or if unable to obtain
such permission, that the Company can obtain suitable alternative sources
of supply.
Unlike other states the Company has targeted for expansion, the State
of Oklahoma has had restrictions on the location of competing marine
dealers that limit the ability of new entrants in the retail boat
industry to compete in Oklahoma. There can be no assurance that other
states will not pass similar or other restrictions limiting new
competition.
Income from Financing, Insurance and Extended Service Contracts. A
substantial portion of the Company's income results from the origination
and placement of customer financing and the sale of insurance products
and extended service contracts (collectively, ''F&I Products''), the most
significant component of which is the income resulting from the Company's
origination of customer financing. For example, during fiscal years 1997
and 1996, respectively, F&I Products accounted for approximately 4.4% and
4.2% of net sales and approximately 16.7% and 16.5% of gross profit. The
Company's lenders may choose to pursue this business directly, rather
than through intermediaries such as the Company. Moreover, lenders may
impose terms in their boat financing arrangements with the Company that
may be materially unfavorable to the Company or its customers. For these
and other reasons, the Company could experience a significant reduction
in income resulting from reduced demand for its customer financing
programs. In addition, if profit margins are reduced on sales of F&I
Products, or if these products are no longer available, it would have a
material adverse effect on the Company's business, financial condition
and results of operations. Furthermore, although optional extended
service contracts sold by the Company are from third party providers that
have further reinsured their warranty exposure and the Company has never
experienced any claims due to the default of a third party extended
service contract provider, the Company may experience significant breach
of warranty claims as a result of the failure of a third party extended
service contract provider or reinsurers that may, in the aggregate, be
material to the Company's business.
Availability of Financing. The Company currently has significant
floor plan and other inventory lines of credit from financial
institutions and other lenders, which the Company believes reflect
competitive terms and conditions. While the Company believes it will
continue to obtain comparable financing from these or other lenders,
there can be no assurance that such financing will be available to the
Company. The failure to obtain sufficient financing on favorable terms
and conditions could have a material adverse effect on the business,
financial condition and results of operations of the Company. See
''Management's Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources.''
Dependence on Key Personnel. The Company believes its success
depends, in large part, upon the continued services of key management
personnel, including Mark T. Walton, Chairman of the Board and President;
Ronnie L. Spradling, Executive Vice President-New Store Development; and
Michael B. Perrine, Chief Financial Officer, Secretary and Treasurer; and
other key employees. Although the Company has employment agreements
through TBC Management, Ltd. (an affiliated partnership of the Company)
with each of Messrs. Walton, Spradling and Perrine expiring in June 1999,
the loss of any of these individuals could materially and adversely
affect the Company, including its business expansion plans. The Company
maintains and is the beneficiary of key-man life insurance policies on
Messrs. Walton and Perrine in the amount of $1.0 million each, and on Mr.
Spradling in the amount of $500,000.
Product and Service Liability Risks. Products sold or serviced by
the Company may expose it to potential liability for personal injury or
property damage claims relating to the use of those products.
Additionally, as a result of the Company's activities in custom packaging
its Travis Edition lines, the Company may be included as a defendant in
product liability claims relating to defects in manufacture or design.
Historically, the resolution of product liability claims has not
materially affected the Company's business. The Company generally
requires manufacturers from which it purchases products to supply proof
of product liability insurance. Although the Company maintains third-
party product liability insurance that it believes to be adequate, there
can be no assurance that the Company will not experience legal claims in
excess of its insurance coverage, or claims that are ultimately not
covered by insurance. Furthermore, if any significant claims are made
against the Company, the Company's business, financial condition and
results of operations may be adversely affected by related negative
publicity.
.
Volatility of Stock Price. Prior to the Company's initial public
offering in June 1996, there was no public trading market for the
Company's Common Stock. There can be no assurance of an ongoing active
trading market or that the market price of the Common Stock will not
decline. It is anticipated that there will be limited float in the market
due to the relatively low number of shares owned by the public and
consequently, fluctuations in the market price for the Common Stock could
be significant. Recent market conditions for newly public companies, as
well as the Company's quarterly variations in operating results due to
seasonality and other factors, are likely to result in significant
fluctuations in the market price for the Common Stock. Future
announcements concerning the Company or its competitors, including
government regulations, litigation or changes in earnings estimates or
descriptive materials published by analysts, may also cause the market
price of the Common Stock to fluctuate substantially. These fluctuations,
as well as general economic, political and market conditions, such as
recessions, may adversely affect the market price of the Common Stock.
See ''Management's Discussion and Analysis of Financial Condition and
Results of Operations.''
Shares Eligible for Future Sale. Sales of substantial amounts of the
Company's Common Stock in the public market, or the perception that such
sales may occur, could have a material adverse effect on the market price
of the Common Stock. As of December 18, 1997, the Company, its officers
and directors and certain stockholders, beneficially own or control
voting rights, in the aggregate, on approximately 1,619,557 shares of
Common Stock. No prediction can be made as to the effect, if any, that
future sales of shares, or the availability of shares for future sale,
will have on the market price of the Common Stock prevailing from time to
time.
Anti-takeover Effect of Articles and Bylaw Provisions. The Company's
Articles of Incorporation provide that up to 1,000,000 shares of
preferred stock may be issued by the Company from time to time in one or
more series. The Board of Directors is authorized to determine the
rights, preferences, privileges and restrictions granted to and imposed
upon any unissued series of preferred stock and to fix the number of
shares of any series of preferred stock and the designation of any such
series, without any vote or action by the Company's stockholders. The
Board of Directors may authorize and issue preferred stock with voting or
conversion rights that could adversely affect the voting power or other
rights of the holders of Common Stock. In addition, the issuance of
preferred stock could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company's Articles of
Incorporation also allow the Board of Directors to fix the number of
directors in the Bylaws with no minimum or maximum number of directors
required. The Company's Bylaws currently provide that the Board of
Directors shall be divided into three classes of two or three directors
each, with each class elected for three-year terms expiring in successive
years. The effect of these provisions may be to delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in the
stockholder's best interest, including attempts that might result in a
premium over the market price for the shares held by the stockholders.
PART I
Other than statements of historical fact, all statements contained in
this Report on Form 10-K, including statements in ''Item 1. Business'',
and ''Management's Discussion and Analysis of Financial Condition and
Results of Operations'', are forward-looking statements as that term is
defined in Section 21E of the Exchange Act that involve a number of
uncertainties. The actual results of the future events described in the
forward-looking statements in this Report on Form 10-K could differ
materially from those stated in such forward-looking statements. Among
the factors that could cause actual results to differ materially are:
general economic conditions, competition and government regulations, as
well as the risks and uncertainties discussed in this Report on Form 10-
K, including without limitation, the matters discussed in ''Risk
Factors'' and the uncertainties set forth from time to time in the
Company's other public reports, filings and public statements. All
forward-looking statements in this Report on Form 10-K are expressly
qualified in their entirety by the cautionary statements in this
paragraph.
Item 1. Business
General
Travis Boats & Motors, Inc. (''Travis Boats'' or the ''Company'') is a
leading multi-state superstore retailer of recreational boats, motors,
trailers and related marine accessories in the southern United States.
The Company, which currently operates 20 stores under the name Travis
Boating Center in Texas, Arkansas, Louisiana, Alabama, Tennessee,
Mississippi and Florida differentiates itself from competitors by
providing customers a unique superstore shopping experience that
showcases a broad selection of high quality boats, motors, trailers and
related marine accessories at firm, clearly posted low prices. Each
superstore also offers complete customer service and support, including
in-house financing programs and full-service repair facilities staffed by
factory-trained mechanics.
History
Travis Boats was incorporated as a Texas corporation in 1979. As used
herein and unless otherwise required by the context, the terms ''Travis
Boats'' and the ''Company'' shall mean Travis Boats & Motors, Inc. and
its direct and indirect subsidiaries.
Since its founding as a single retail store in Austin, Texas, the
Company has grown both through acquisitions and the establishment of new
store locations. During the 1980's, the Company expanded into San
Antonio, Texas with the construction of a new store facility. The Company
subsequently made acquisitions of boat retailers operating within the
Texas markets of Midland, Dallas and Abilene. It was during this initial
period of expansion that the Company began developing the systems
necessary to manage a multi-store operation and leveraging the economies
of scale associated with volume purchasing. The Company's success in
these areas led to the proprietary Travis Edition packaging concept and
the Company's pricing philosophy. Since 1990, Travis Boats has opened or
acquired 15 additional store locations in the following states: Texas
(3), Arkansas (2), Louisiana (3), Alabama (2), Tennessee (2), Mississippi
(1) and Florida (2).
Included in the new store acquisitions are the following transactions:
Effective September 20, 1995, the Company acquired substantially all
of the assets of Red River Marine, Inc., which operated store locations
in the resort communities of Hot Springs and Heber Springs, Arkansas.
Effective December 1, 1995, the Company acquired substantially all of
the assets of Clay's Boats & Motors, Inc., which operated a single store
location in New Iberia, Louisiana.
Effective October 3, 1996, the Company acquired substantially all of
the assets of North Alabama Watersports, which operated a single store
location in Florence, Alabama.
Effective November 1, 1996, the Company acquired substantially all of
the assets of Tri-Lakes Marine, Inc., which operated store locations in
Winchester, Tennessee and Huntsville, Alabama
Effective February 19, 1997, the Company acquired substantially all of
the assets of Bent's Marine, Inc., which operated a single store location
in Metairie, Louisiana.
Effective August 1, 1997, the Company acquired selected assets from
McLeod Marine, Inc. of Pascagoula, Mississippi.
Effective September 30, 1997, the Company acquired all of the
outstanding stock of Adventure Marine and Outdoors, Inc. , which operated
a store location in Fort Walton Beach, Florida; Adventure Marine South,
Inc., which operated a store location in Key Largo, Florida, and
Adventure Boat Brokerage, Inc., which operated a store location in Fort
Walton Beach, Florida.
Subsequent to September 30, 1997, the Company has completed the
acquisition of assets of one corporation:
Effective November 20, 1997, the Company acquired substantially all of
the assets of Southeastern Marine Group, Inc., which operated a single
store location in Hendersonville, Tennessee.
The Company sells approximately 50 different models of brand-name
fishing, water-skiing and general recreational boats, along with motors,
trailers, accessories and related equipment. Personal watercraft, off-
shore fishing boats and cabin cruisers are also offered for sale at
selected store locations. During fiscal 1997, substantially all of the
boats sold range in size from 16 to 23 feet at prices ranging from $7,500
to $23,000 with gross profit margins between approximately 21% and 23%.
Approximately 4.5% of new boat sales are personal watercraft with retail
prices generally ranging from $5,000 to $10,000 and approximately 3.2% of
new boat sales are off-shore fishing boats and cruisers with lengths of
27 feet or greater and ranging in retail price from $50,000 to $300,000.
The Company custom designs and pre-packages combinations of popular
brand-name boats, such as Larson, Sprint, Pro-Line and Sea Ark boats with
Johnson outboard and other motors, trailers and numerous accessories,
under its proprietary Travis Edition product line. These signature Travis
Edition packages, which account for the vast majority of total new boat
sales, have been designed and developed in coordination with the
manufacturers and often include distinguishing features and accessories
that have historically been unavailable to, or listed as optional by,
many competitors. These factors enable the Company to provide the
customer with an exceptional product that is conveniently packaged for
immediate enjoyment and competitively priced.
The Company believes that it offers a selection of boat, motor and
trailer packages that fall within the price range of the majority of all
boats, motors and trailers sold in the United States. The Company's
product line generally consists of boat packages priced from $7,500-
$23,000 with approximate even distribution within this price range. As
the Company continues to operate in Florida and enters other coastal type
markets along the Gulf of Mexico or the Atlantic coast, management
believes that the distribution of off-shore fishing boats and cabin
cruisers will increase as a percentage of net sales. Management believes
that by combining flexible financing arrangements with an even
distribution of products through a broad price range, the Company is able
to offer boat packages to customers with different purchasing budgets and
varying income levels.
Effective September 30, 1995, the Company elected to change its fiscal
year end from December 31 to September 30. This change was made to
establish a fiscal year that more closely conforms to the business cycle
of the Company.
Business Strategy
Management of the Company believes it is the first to have developed a
multi-state, chain superstore merchandising strategy in the recreational
boating business. The Company's objective is to become the dominant
retailer of recreational boats, motors, trailers and marine accessories
in the southern United States, prior to its focus and possible expansion
into other regions. Management's merchandising strategy is based on
providing customers with a comprehensive selection of quality, brand name
boats and boating products in a comfortable superstore environment. The
Company intends to continue to build brand identity by placing the Travis
Edition name on complete boating packages. Travis Boats has developed and
implemented a business strategy designed to increase its market
penetration within both existing and new market areas through a variety
of advertising and promotional events. The Company intends to emphasize
the following key elements of its business strategy:
Travis Boating Center superstore. Travis Boating Center superstores
have a distinctive and stylish trade dress accented with deep blue
awnings, a nautical neon building decoration, expansive glass storefronts
and brightly lit interiors. The stores range in size from approximately
2,000 (temporary store locations) to over 33,000 square feet and
management estimates the average store size at approximately 21,000
square feet. The superstore locations present customers with a broad
array of boats and often over 9,000 parts and accessories in a clean,
well-stocked, air-conditioned shopping environment. All boats are
typically displayed fully rigged with motor, trailer and a complete
accessory package, giving a ''ready to take home'' impression.
Professionally-trained mechanics operate service bays, providing
customers with quality and reliable maintenance and repair service.
Travis Edition concept. The Company uses extensive market research,
combined with the design resources of its manufacturers, to develop
custom Travis Edition boating packages. The Company's significant
purchasing power and consequent ability to coordinate designs with
manufacturers have enabled the Company to obtain products directly from
the factory at the lowest prices, with favorable delivery schedules and
with distinguishing features and accessories that have historically been
unavailable to, or listed as optional by, many competitors. The Company
can also add certain additional features after receipt of the product to
enhance the Company's Travis Edition packages. Each Travis Edition is a
complete, full-feature package, including the boat, motor, trailer and
numerous additional accessories and design features often not found on
competitors' products, thus providing customers with superior value.
These features often include enhanced styling such as additional exterior
colors, complete instrumentation in dashboards, transoms warrantied for
life, canopy tops, trolling motors, upgraded interiors with stereos, wood
grain dashboards, in-dash depth finders, stainless steel motor propellers
and enhanced hull design not available on other models. In addition,
Travis Edition boats are identified by the Company's attractive private
label logo as well as the respective manufacturer's logo.
Unlike most recreational boat dealers, the Company establishes firm
prices on its Travis Edition packages and generally maintains such prices
for an entire season. Prices are advertised and clearly posted so that
the customer receives the same price at any Travis Boating Center. The
Company's selling philosophy eliminates customer anxiety associated with
bargaining or negotiation and results in a price at or below prices
generally available from competitors. The Company believes this pricing
strategy and low-pressure sales style provide the customer with the
comfort and confidence of having received a better boat with more
features at a lower price. In the Company's view, this approach has
promoted good customer relationships and enhanced the Company's
reputation in the industry as a leading provider of quality and value.
Boat Show Participation. The Company also participates in boat
shows, typically held in January through March, in each of its markets
and in certain markets of close proximity. These shows are normally held
at convention centers, with all area dealers purchasing space to display
their respective product offerings. Boat shows and other offsite
promotions generate a significant amount of interest in products and
often have an immediate impact on sales at a nominal incremental cost.
Although total boat show sales are difficult to assess, management
attributes a significant portion of the second fiscal quarter's net sales
to such shows.
F&I Products. In the Company's efforts to maintain customer service
and support for customers purchasing its Travis Edition boat packages it
also offers customers the ability to purchase extended service contracts
and insurance coverages, including credit life and accident/disability
coverages (collectively ''F&I Products''). The Company also offers to
assist the customer in obtaining financing for their boat purchase
through a diversified group of financial institutions with which the
Company maintains financing agreements. The Company earns commissions on
these F&I Products based upon the Company's mark-up over the cost of the
products. F&I Products account for a substantial portion of the Company's
income, the most significant component of which is the income resulting
from the Company's origination of customer financing.
Operations
Purchasing. The Company is the largest volume buyer in the United
States of Johnson outboard motors from Outboard Marine Corporation
(''OMC'') and is the largest domestic volume buyer of boats from
substantially all of the boat manufacturers it represents. As a result,
the Company has significant access to the manufacturers and substantial
input into the design process for the new boats that are introduced to
the market each year by such manufacturers. In addition, the Company has
designed and developed, in coordination with its manufacturers, signature
Travis Edition boating packages which account for the vast majority of
its total new boat sales. The Company's purchasing power allows it to
purchase boats that are pre-rigged for the Company's Travis Edition
lines. Approximately 34.3% and 22.7% of the Company's net purchases in
fiscal years 1997 and 1996, respectively, were from Genmar Industries
which manufactures the Larson, AquaSport and (formerly) the Cajun boat
lines.
The Company typically deals with each of its manufacturers pursuant to
an annually renewable, non-exclusive dealer agreement which does not
contain any contractual provisions concerning product pricing or
purchasing levels. Pricing is generally established on an annual basis,
but may be changed at the manufacturer's sole discretion. The Company's
agreement with OMC, unlike its other dealer agreements, is multi-year in
nature. The current agreement, which is in the first of five years, sets
forth an established discount level from the then prevailing OMC dealer
net price over the entire term of the agreement. This dealer agreement
may be canceled by either party if volume of product purchased or
available to be purchased is not maintained at pre-established levels.
OMC supplied products that represented approximately $17.7 million, or
42.1% and $20.3 million, or 38.7%, of the Company's net purchases during
fiscal years 1997 and 1996, respectively.
Pursuant to its arrangements with certain manufacturers, the Company's
right to display some product lines in certain markets may be restricted.
Floor plan and other inventory financing. The Company acquires a
substantial portion of its inventory through floor plan financing
agreements. Inventory is generally purchased under floor plan lines of
credit (secured by such inventory) maintained with third party finance
companies or under revolving lines of credit maintained with commercial
banks, depending upon the type of product purchased. The finance
companies maintain relationships with certain manufacturers that allow
the Company to obtain several months of interest-free financing,
generally from August of one year through at least May of the following
year. Management believes that these financing arrangements are standard
within the industry. As of September 30, 1997, the Company and its
subsidiaries owed an aggregate of approximately $20.4 million pursuant to
the floor plan and revolving lines of credit.
Competition. The Company operates in a highly competitive
environment. In addition to facing competition generally from businesses
seeking to attract discretionary spending dollars, the recreational boat
industry itself is highly fragmented, resulting in intense competition
for customers, access to quality products, access to boat show space in
new markets and suitable store locations. The Company relies heavily on
boat shows to generate sales. If the Company is impeded in its ability to
participate in boat shows in its existing or targeted markets, it could
have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company competes primarily with single location or single state
boat dealers and, to a lesser degree, with national specialty marine
stores, catalog retailers, sporting goods stores and mass merchants,
particularly with respect to parts and accessories. Dealer competition
continues to increase based on the quality of available products, the
price and value of the products and attention to customer service. There
is significant competition both within markets currently being served by
the Company and in new markets into which the Company plans to enter. The
Company competes in each of its markets with retailers of brands of boats
and motors not sold by the Company in that market. Management believes
that a trend in the industry is for independent dealers to attempt to
form buyer's groups, for manufacturers to include more features as
standard equipment on boats and consequently, for dealers to offer
packages comparable to those offered by the Company as its Travis Edition
lines. In addition, several of the Company's competitors, especially
those selling boating accessories, are large national or regional chains
that have substantially greater financial, marketing and other resources
than the Company. There can be no assurance that the Company will be able
to compete successfully in the retail marine industry in the future.
Impact of Environmental and Other Regulatory Issues. On October 31,
1994, the U.S. Environmental Protection Agency (''EPA'') announced
proposed emissions regulations for outboard marine motors. The proposed
regulations would require a 75% average reduction in hydrocarbon
emissions for outboard motors and set standards for carbon monoxide and
nitrogen oxide emissions as well. Under the proposed regulations,
manufacturers would begin phasing in low emission models in 1998 and have
nine years to achieve full compliance. The EPA estimated that its
proposed regulations, if enacted, will result in an increase in the
average price of an outboard marine motor of $700 after full
implementation of the regulations in the year 2006. Costs of comparable
new models, if materially more expensive than previous models, or the
manufacturer's inability to comply with EPA requirements, could have a
material adverse effect on the Company's business, financial condition
and results of operations.
The Company, in the ordinary course of its business, is required to
dispose of certain waste products that are regulated by state or federal
agencies. These products include waste motor oil, tires, batteries and
certain paints. It is the Company's policy to use appropriately licensed
waste disposal firms to handle this refuse. If there were improper
disposal of these products, it could result in potential liability for
the Company. Although the Company does not own or operate any underground
petroleum storage tanks, it currently maintains several above-ground
tanks, which are subject to registration, testing and governmental
regulation.
Additionally, certain states have required or are considering
requiring a license in order to operate a recreational boat or personal
watercraft. While such licensing requirements are not expected to be
unduly restrictive, regulations may discourage potential first-time
buyers, thereby limiting future sales, which could have a material
adverse effect on the Company's business, financial condition and results
of operations.
Trademarks and service marks. The Company does not hold any
registered trade or service marks at this time but has trademark
applications pending with the U.S. Patent and Trademark Office for the
names ''Travis Boating Center'' and ''Travis Edition,'' for its corporate
logo and for the overall appearance and trade dress of its Travis Boating
Centers. There can be no assurance that any of these applications will be
granted. However, based on a number of years of use, the Company believes
it has common law rights to these marks at least in its current market
areas.
Employees. As of September 30, 1997, the Company's staff consisted
of 369 employees, 356 of whom are full time. The full-time employees
include 20 in store level management and 20 in corporate administration
and management. The Company is not a party to any collective bargaining
agreements and is not aware of any efforts to unionize its employees. The
Company considers its relations with its employees to be good.
Fiscal year 1997 acquisitions. The Company acquired substantially
all of the assets of North Alabama Watersports, Inc. in October 1996,
Tri-Lakes Marine, Inc. in November 1996, Bent's Marine, Inc. in February
1997, , as well as Adventure Marine and Outdoors, Inc., Adventure Marine
South, Inc. and Adventure Boat Brokerage, Inc. in September 1997. The
Company also acquired certain selected assets from McLeod Marine, Inc. in
August 1997. The results of the aformentioned fiscal 1997 acquisitions
from their respective acquisition dates through September 30, 1997 are
included in the discussion below.
Effective October 3, 1996, the Company acquired certain assets of North
Alabama Watersports, Inc. (''NAWS''). This acquisition included boat,
motor and trailer inventory, as well as parts and accessories inventory
of the location. The purchase price was $892,255, of which $79,707 was
financed by the issuance of notes payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of NAWS have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($892,255) has been allocated to the
tangible net assets acquired ($687,255) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($205,000) was allocated to a noncompete agreement and goodwill.
Effective November 1, 1996, the Company acquired Tri-Lakes Marine, Inc.
(''Tri-Lakes'') with retail store locations in Tennessee and Alabama. The
acquisition included furniture, fixtures and equipment, boat, motor and
trailer inventory, as well as parts and accessories. The purchase price
was $1,242,924, of which $642,924 was paid in cash and $600,000 was
financed by the issuance of a note payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Tri-Lakes have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,242,924) and liabilities assumed
($1,937,279) have been allocated to the tangible net assets acquired
($2,536,092) based on their respective fair values at the date of
acquisition. The resulting excess purchase price ($644,111) was allocated
to noncompete agreements and to goodwill.
Effective February 19, 1997, the Company acquired Bent's Marine, Inc.
(''Bent's'') with a single retail store locations in Metairie, Louisiana
. The acquisition included furniture, fixtures and equipment, boat, motor
and trailer inventory, as well as parts and accessories. The purchase
price was $1,518,550, of which $1,063,671 was paid in cash and $454,879
was financed by the issuance of a note payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Bent's have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,518,550) has been allocated to the
tangible net assets acquired ($839,627) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($678,923) was allocated to noncompete agreements and to goodwill.
Effective August 1, 1997, the Company acquired certain selected assets
from McLeod Marine, Inc. (''McLeod''). McLeod operates a single retail
store locations in Pascagoula, Mississippi. The certain selected assets
acquired included miscellaneous equipment, selected boat, motor and
trailer inventory, as well as certain parts and accessories. The purchase
price of $958,080 was paid in cash.
The certain selected acquired assets have been accounted for using the
purchase method of accounting and, accordingly, the operating results of
Travis Boating Center Mississippi which purchased the assets and has been
in operation since August, 1997 have been included in the consolidated
financial statements from the date of acquisition. The purchase price
($958,080) has been allocated to the tangible net assets acquired
($730,080) based on their respective fair values at the date of
acquisition. The resulting excess purchase price ($228,000) was allocated
to noncompete agreements and to goodwill.
On December 12, 1997, effective as of September 30, 1997, the Company
consummated the acquisition of Adventure Marine, a retail boating
organization with store locations in Fort Walton Beach, Florida and Key
Largo, Florida, through the acquisition of 100% of the common stock of
three companies, Adventure Marine & Outdoors, Inc., Adventure Boat
Brokerage, Inc. and Adventure Marine South, Inc. (collectively the three
companies are referred to as "Adventure Marine"). The total
consideration for Adventure Marine consisted of $729,643 in cash,
$115,000 in notes payable to the sellers, the assumption of $5,535,861in
liabilities and $1,477,392 paid via the issuance of 88,361 newly issued
common shares of common stock of the Company. An additional $700,000 in
cash was paid to a principal of Adventure Marine in exchange for an
agreement not to compete.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Adventure Marine
have been included in the consolidated financial statements from the date
of acquisition. The purchase price ($3,022,035), related acquisition
costs ($145,000) and liabilities assumed ($5,058,826) have been allocated
to the tangible net assets acquired ($5,535,861) based on their
respective fair values at the date of acquisition. The resulting excess
purchase price ($2,690,000) was allocated to noncompete agreements and
to goodwill.
Prior to the acquisition, the shareholders of Adventure Marine consisted
of three persons, John Reinhold, Paul ("Joey") Roberts, and Frederic
Pace, none of whom had any relationship to the Company, its affiliates,
any officers or directors of the Company or any associate of any officers
or directors of the Company.
The purchase of the Adventure Marine was funded through internally
generated working capital and borrowings under the Company's floor plan
and revolving lines of credit.
Effective November 20, 1997, the Company acquired certain assets of
Southeastern Marine Group, Inc. ("Southeastern"). This acquisition
included boat, motor and trailer inventory, as well as parts and
accessories inventory of the sellers. The purchase price was $1,730,134
of which $124,000 was financed by the issuance of notes payable to the
sellers.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Southeastern have
been included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,730,134) has been allocated to the
tangible net assets acquired ($1,450,134) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($280,000) was allocated to noncompete agreements and goodwill.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Item 2. Properties
The Company leases its corporate offices which are located at 5000
Plaza on the Lake, Suite 250, Austin, Texas. The Company also owns and
operates Travis Boating Center locations in Abilene, Austin, Beaumont,
Dallas, Midland and San Antonio, Texas; Baton Rouge, Louisiana; Hot
Springs, Arkansas; and Pascagoula, Mississippi. The remaining facilities
are leased under leases with original lease terms generally ranging from
five to ten years with additional multi-year renewal options. The
Company typically pays a fixed rent and in substantially all of the
leased locations the Company is responsible for the payment of taxes,
insurance, repairs and maintenance.
The chart below reflects the status and approximate size of the
various Travis Boating Center locations operated as of December 17,
1997.
Square Owned or Year of
Location Footage* Acreage* Leased Market Entry
- --------------------------- -------- -------- --------- ------------
Austin, Texas(1) 20,000 3.5 Owned 1979
San Antonio,Texas(1)(3) 15,500 1.9 Owned 1982
Midland, Texas(1) 18,750 3.8 Owned 1982
Dallas, Texas(1) 20,000 4.2 Owned 1983
Abilene, Texas(2) 24,250 3.7 Owned 1989
Houston, Texas(2) 15,100 2.2 Leased 1991
Baton Rouge, Louisiana(2) 33,200 7.5 Owned 1992
Beaumont, Texas(2) 25,500 6.5 Owned 1994
Arlington, Texas(2) 31,000 6.0 Leased 1995
Heber Springs, Arkansas(2) 26,000 9.0 Leased 1995
Hot Springs, Arkansas(2) 20,510 3.0 Owned 1995
New Iberia, Louisiana(4) 24,000 3.3 Leased 1995
Florence, Alabama(4) 22,500 6.0 Leased 1996
Huntsville, Alabama(3) 2,000 3.0 Leased 1996
Winchester, Tennessee(4) 25,000 3.5 Leased 1996
Metairie, Louisiana(3)(5) 10,000 1.3 Leased 1997
Pascagoula, Mississippi(2) 28,000 4.1 Owned 1997
Key Largo, Florida(3) 3,000 1.4 Leased 1997
Ft. Walton Beach Fl.-Sales(4) 7,000 2.9 Leased 1997
Ft. Walton Beach Fl.-Service(4) 7,500 2.0 Leased 1997
Hendersonville, Tennessee(4)(5) 31,320 3.6 Leased 1997
* Square footage and acreage are approximate.
(1) Newly constructed store.
(2) Facility acquired and converted to superstore.
(3) Temporary facility. To be relocated.
(4) Acquired facility.
(5) Acquired subsequent to September 30, 1997.
Item 3. Legal Proceedings
The Company is not a party to any material legal proceedings. The
Company is, however, involved in various legal proceedings arising out of
its operations in the ordinary course of business. The Company believes
that the outcome of all such proceedings, even if determined adversely,
would not have a material adverse effect on its business, financial
condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended September 30, 1997.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
The Company's common stock trades on the Nasdaq Stock Market under the
symbol: TRVS. At December 15, 1997, the Company had 32 shareholders of
record; however the Company believes its shares are beneficially owned by
more than 400 shareholders. On December 17, 1997, the last reported sales
price of the common stock on the NASDAQ National Market System was $22.75
per share.
The following table sets forth for the period indicated, on a per
share basis, the range of high and low sales prices for the Company's
common stock as quoted by the NASDAQ. These price quotations reflect
inter-dealer prices, without adjustment for retail mark-ups, mark-downs
or commissions and may not necessarily represent actual transactions:
<TABLE>
<CAPTION>
Sales Price
Quarter Ended High Low Ending
- ------------------------ ------- ------ -------
<S> <C> <C> <C>
December 31, 1996 $14.125 $10.75 $13.125
March 31, 1997 $13.25 $11.125 $11.625
June 30, 1997 $14.00 $10.75 $13.125
September 30, 1997 $21.25 $13.25 $20.375
</TABLE>
The Company has never declared or paid cash dividends on its Common
Stock and presently has no plans to do so. Any change in the Company's
dividend policy will be at the sole discretion of the Board of Directors
and will depend on the Company's profitability, financial condition,
capital needs, future loan covenants, general economic conditions, future
prospects and other factors deemed relevant by the Board of Directors.
The Company currently intends to retain earnings for use in the operation
and expansion of the Company's business and does not anticipate paying
cash dividends in the foreseeable future. Certain covenants contained in
the Company's loan agreements effectively restrict the payment of any
dividends without the lender's prior consent.
Item 6. Selected Consolidated Financial Data
The following selected consolidated financial information should be
read in conjunction with and is qualified in its entirety by reference to
the consolidated financial statements of the Company and the notes
thereto included elsewhere in this Report on Form 10-K:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Tweleve Months Fiscal Year Fiscal Year
December 31, Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1993 (1) 1994 (1) 1995 (1) 1995 (2) 1996(1)(3) 1997(1)(4)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net sales $ 25,757 $ 37,225 $ 41,442 $ 44,617 $ 64,555 $ 91,309
Gross profit 5,946 8,734 10,306 10,815 16,483 23,955
Selling, general and
administrative expenses 4,496 6,333 6,353 7,526 10,857 15,562
Operating income 1,270 2,135 3,736 3,004 5,061 7,480
Interest expense 449 629 670 845 1,289 1,354
Net income 596 1,023 2,050 1,486 2,383 3,982
Net income per share $ 0.23 $ 0.39 $ 0.76 $ 0.55 $ 0.78 $ 0.94
Weighted avg. shares
outstanding 2,564 2,600 2,672 2,663 3,043 4,251
Store Data:
Stores open at period end 7 8 11 11 12 20
Average sales per store(5) $ 3,679 $ 4,653 $ 4,886 $ 5,283 $ 5,617 $ 5,775
Percentage increase in
comparable store sales(6) 25.6% 28.4% 5.0% 12.2% 4.3% 5.7%
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30, September 30, September 30,
1993 (1) 1994 (1) 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 139 $ 259 $ 996 $ 1,533 $ 0
Working capital 11 1,866 2,808 15,263 0
Total assets 14,088 17,434 23,357 31,350 0
Short-term debt, including current
maturities of long-term debt 10,608 10,977 11,443 4,661 0
Long-term debt less current
maturities 1,013 2,588 4,876 4,334 0
Stockholders' equity 1,485 2,562 4,812 18,598 0
</TABLE>
(1) The Company's fiscal years ended on December 31 in 1993 and 1994,
and on September 30 in 1995, pursuant to a change adopted in 1995,
resulting in a nine-month 1995 fiscal year. The Consolidated Statement
of Operations Data for the fiscal years ended December 31, 1993 and
1994 and September 30, 1995, 1996 and 1997 has been derived from the
consolidated financial statements of the Company. All other financial
and store data has been derived from the Company's unaudited
consolidated financial statements.
(2) Reflects inclusion of nine-month audited financial statements for
the fiscal year ended September 30, 1995 and the three-month unaudited
financial statements for the quarter ended December 31, 1994, in order
to provide a basis for comparing 12 months of operations in 1995 to
fiscal 1996 operations.
(3) The operations of Red River Marine, Inc. acquired in September 1995
and Clay's Boats & Motors, Inc. acquired in December 1995 are included
for the fiscal 1996 period. See ''Management's Discussion and Analysis
of Financial Condition and Results of Operations'' and Note 4 of Notes
to Consolidated Financial Statements.
(4) The operations of North Alabama Watersports, Inc. acquired in
October 1996, Tri-Lakes Marine, Inc. acquired in November 1996, Bent's
Marine, Inc. acquired in February 1997, Adventure Marine and Outdoors,
Inc., Adventure Marine South, Inc. and Adventure Boat Brokerage, Inc.
acquired in September 1997 are included for the fiscal 1997 period.
Also includes the operations of Travis Boating Center Mississippi,
which acquired certain assets from McLeod Marine, Inc. on August 1,
1997. See ''Management's Discussion and Analysis of Financial
Condition and Results of Operations'' and Note 4 of Notes to
Consolidated Financial Statements.
(5) Includes only those stores open for the entire preceeding 12-month
period.
(6) New stores or upgraded facilities are included in the comparable
store base at the beginning of the store's thirteenth complete month
of operations.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto
included elsewhere in this Report on Form 10-K. The discussion in this
section of this Report on Form 10-K contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could
differ materially from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in this section, those discussed in ''Risk Factors'' and those
discussed elsewhere in this Report on Form 10-K.
Overview
The following discussion compares fiscal years 1996 and 1997, which
reflects the inclusion of the audited consolidated financial statements
for the fiscal years ended September 30, 1996 and 1997, respectively.
The Company acquired substantially all of the assets of North Alabama
Watersports, Inc. in October 1996, Tri-Lakes Marine, Inc. in November
1996, Bent's Marine, Inc. in February 1997, , as well as Adventure
Marine and Outdoors, Inc., Adventure Marine South, Inc. and Adventure
Boat Brokerage, Inc. in September 1997. The Company also acquired
certain selected assets from McLeod Marine, Inc. in August 1997. The
results of the aformentioned fiscal 1997 acquisitions from their
respective acquisition dates through September 30, 1997 are included in
the discussion below.
The Company acquired substantially all of the assets of Red River
Marine, Inc. in September 1995 and also acquired substantially all of the
assets of Clay's Boats & Motors, Inc. in December 1995. The results of
Red River Marine and Clay's Boats & Motors from their respective
acquisition dates through September 30, 1996 are included in the
discussion below.
Effective September 30, 1995, the Company elected to change its fiscal
year end from December 31 to September 30. This change was made to
establish a fiscal year that more closely conforms to the business cycle
of the Company. The following discussion compares fiscal year 1996 to the
12 month period ended September 30, 1995, which reflects the inclusion of
the nine-month audited consolidated financial statements for the fiscal
year ended September 30, 1995 and the three-month unaudited consolidated
financial statements for the quarter ended December 31, 1994 in order to
provide a basis for comparing 12 months of operations.
The following table sets forth for the periods indicated certain
financial data as a percentage of net sales:
<TABLE>
<CAPTION>
Twelve Months Fiscal Year Fiscal Year
Fiscal Years Ended Ended Ended Ended
December 31, September 30, September 30, September 30, September 30,
1994 1995 1995 1996 1996
========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of goods sold 76.5 75.1 75.8 74.5 73.8
--------- --------- --------- --------- ---------
Gross profit 23.5 24.9 24.2 25.5 26.2
Selling, general and
administrative expenses 17.0 15.3 16.9 16.8 17.0
Operating income 5.7 9.0 6.7 7.8 8.2
Interest expense 1.7 1.6 1.9 2.0 1.5
Other income 0.2 0.3 0.0 0.0 0.0
--------- --------- --------- --------- ---------
Income before income taxes 4.2 7.7 5.2 5.9 6.7
Income tax expense 1.5 2.8 1.9 2.2 2.3
--------- --------- --------- --------- ---------
Net income 2.7% 4.9% 3.3% 3.7% 4.4%
</TABLE>
Results of Operations
Highlights
Fiscal year 1997 was a record year for the Company, which included the
following achievements compared to fiscal 1996:
- -Net sales increased 41.4% to $91.3 million.
- -Gross profit margins increased as a percentage of net sales by 70 basis
points from 25.5% to 26.2%.
- -Operating income increased as a percentage of net sales by 40 basis
points from 7.8% to 8.2%.
- -Net income increased by 67.1% from $2.4 million to $4.0 million.
- -Primary earnings per share increased by 20.5% from $.78 to $.94, while
the weighted average common shares outstanding increased by 39.7%.
Fiscal Year Ended September 30, 1997 Compared to the Fiscal Year Ended
September 30, 1996
Net sales. Net sales increased by 41.3% to $91.3million in fiscal
1997 from $64.6million in fiscal 1996. Of this increase in net sales,
$22.0 million, or 82.4% is related to the stores acquired or newly
opened in fiscal 1997, $2.1 million is attributable to a 5.7% growth in
comparable store sales (6 stores in base) and $1.2 million or 4.5% is
related to the five existing store locations which relocated or upgraded
facilities to meet the Company's superstore standards during fiscal years
1996 or 1997, and thus not yet includeable in the comparable store base.
General growth in overall sales volume was in part the result of growth
in new Travis Edition boating packages introduced in fiscal 1997. This
included the new addition of the Pro-Line and Polar brand boats as well
as new boat models introduced by the Company's existing boat
manufacturers. These additional new Travis Edition boat lines have
allowed the Company to further broaden its boat line-up in an effort to
continue to address the needs and desires of the recreational boating
population. During fiscal 1997, the Company experienced increased
parts/accessories and service labor sales as an increased percentage of
the Company's store base was renovated to superstore standards which
provide larger and more accessible areas to merchandise its product
selection and conduct repair work on boats. This resulted in enhanced
sales of parts/accessories and service labor both in actual dollars and
as a percentage of net sales. Parts/accessory sales increased from $5.7
million, or 8.8% of net sales, to $8.6 million, or 9.4% of net sales, in
fiscal years 1996 and 1997, respectively. Service labor sales increased
from $2.3 million, or 3.6% of net sales, to $3.3 million, or 3.6% of net
sales, in fiscal years 1996 and 1997, respectively. Net sales also
benefitted from the Company's introduction of an used boat superstore on
the premises of its Beaumont, Texas store location. The used boat sales
from this facility in fiscal 1997 were approximately $600,000. The
Company plans to continue to explore the used boat market and potential
sites for used boat superstores.
The Company discontinued its emphasis on the sales program featuring
weekend sales shows in the parking lots of local Sam's Clubs or certain
other large retailers as certain retailers did not allow for the Company
to display its entire product line which in turn did not allow for
maximum sales reach and productivity. This ''parking lot'' program which
was initiated with several shows in late 1995, expanded during fiscal
1996 to include a full-time travelling sales team and participation in
approximately 35 parking lot shows (primarily during the second and third
fiscal quarters) which generated net sales of approximately $2.5 million
during fiscal 1996.
Net sales from comparable stores, which had 6 stores included in the
base for calculation, increased 5.7% in fiscal 1997. The Company
relocated or renovated 5 stores and opened or acquired an additional 8
stores during fiscal years 1997 and 1996 rendering such locations to be
excluded from the comparable store base. The Company's planned
acquisition strategy and subsequent renovation of stores to superstore
standards is expected to continue to negatively impact the number of
stores includable in comparable store base calculations in relationship
to the total number of store locations operated. See ''Risk Factors-
Dependence on Expansion.'' As such, comparable store performance is
expected to remain unstable until higher percentages of the Company's
stores are includable in comparable store calculations.
Included within net sales is revenue that the Company earns related to
F&I Products. The Company, through relationships with various national
and local lenders, is able to place financing for its customers' boating
purchases. These lenders allow the Company to ''sell'' the loan at a rate
higher than a minimum rate established by each such lender and the
Company earns fees based on the percentage increase in the loan rate over
the lender's minimum rate. The Company sells these loans without recourse
except that in certain instances the Company must return the fees earned
if the customer repays the loan or defaults in the first 120-180 days.
The Company also sells, as a broker, certain types of insurance
(property/casualty, credit life, disability) and extended service
contracts. The Company may also sell these products at amounts over a
minimum established cost and earn income based upon the profit over the
minimum established cost. Net sales attributable to F&I Products
increased by 48.2% to approximately $4.0 million in fiscal 1997 from $2.7
million in fiscal 1996. This improvement was primarily due to higher net
spreads achieved in the placement of customer financing, as well as
overall increases in the percentage of customers buying these products
(which is referred to as ''sell-through''). This increase was enhanced by
the Company's continued emphasis on training of F&I employees and
achievement of established goals.
Gross profit. Gross profit increased by 45.3% to approximately $24.0
million in fiscal 1997 from $16.5 million in fiscal 1996. Gross profit as
a percent of sales increased to 26.2% in fiscal 1997 from 25.5% in fiscal
1996. The Company generally seeks to maintain a gross profit margin of
21% to 23% on its boating packages and is able to further leverage the
margin through sales of parts/accessories, service labor and F&I
Products, all of which generally produce gross profit margins in excess
of 25%. During fiscal 1997, the Company's gross profit margin was
positively impacted by the increased revenues derived from the
parts/accessory, service labor and used boat sales as discussed above in
Net Sales.
Net sales attributable to F&I Products, which have a significant
impact on the gross profit margin, contributed $4.0 million, or 16.6%, of
total gross profit in fiscal 1997, as compared to $2.7 million, or 16.4%,
of total gross profit for fiscal 1996. Net sales attributable to F&I
Products are reported on a net basis and therefore all of such sales
contribute directly to the Company's gross profit. The costs associated
with the sale of F&I Products are included in selling, general and
administrative expenses.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 43.1% to $15.6 million in fiscal
1997 from $10.9 million for fiscal 1996. Selling, general and
administrative expenses as a percent of net sales increased by 20 basis
points to 17.0% in fiscal 1997 from 16.8% for fiscal 1996. In terms of
both actual dollars and as a percentage of net sales, the increase in
selling, general and administrative expenses was primarily attributable
to increased expenses associated with the operation of a larger store
network, through growth in the corporate-office staffing infrastructure
and increased advertising costs associated with introducing Travis Boats
and its Travis Edition products into new geographically diverse regions.
Rental expense also increased as a percent of net sales as the Company
expanded and relocated its Corporate headquarters which had previously
been located in the Austin, Texas superstore facility. Opening and other
start-up costs associated with the relocation of the Arlington, Texas
facility to a new superstore location, and the opening of satellite sales
facility locations in Dallas, Texas and Hot Springs, Arkansas also
contributed to the increase in selling, general and administrative
expenses.
Costs associated with being a public company such as annual reports,
investor relations, investor presentations and certain legal and
accounting issues further impacted selling, general and administrative
expenses.
Interest expense. Interest expense, in actual dollars, increased by
5.0% to $1.4 million in fiscal 1997 from $1.3 million in fiscal 1996.
However, interest expense as a percent of net sales, decreased to 1.5% in
fiscal 1997 from 2.0% in fiscal 1996. Effective with the funding of the
Company's Initial Public Offering in late June of 1996 and an additional
140,500 shares in the over-allotment option, the Company reduced certain
revolving indebtedness and certain long term indebtedness. The Company
has since continued to utilize available working capital and has
negotiated reduced borrowing rates under its floor plan and revolving
lines of credit which have combined to provide for the containment of
interest expense and its percentage decrease as a percent of net sales.
The Company intends to reborrow under its revolving credit lines as
necessary to fund future acquisitions and to support working capital
needs. See ''Liquidity and Capital Resources.''
Net income. Net income increased by 67.1% to approximately $4.0
million in fiscal 1997 from $2.4 million in fiscal 1996. Net income as a
percent of sales increased to 4.4% from 3.7% during the same periods. Net
income attributable to F&I Products increased by 48.2% to approximately
$1.2 million in fiscal 1997 from $810,000 in fiscal 1996. The calculation
of net income attributable to F&I Products is based on an allocation of
gross profit after adjusting for costs which management believes are
directly allocable to F&I Products.
Fiscal Year Ended September 30, 1996 Compared to the Twelve Months Ended
September 30, 1995
Net sales. Net sales increased by 45% to $64.6 million in fiscal
1996 from $44.6 million in the twelve months ended September 30, 1995. Of
this increase, $780,000 was attributable to 4.3% growth in comparable
store sales (4 stores in base) and $16.6 million, or 83.0% is related to
the four stores acquired or newly opened in 1995 and $2.5 million, or
12.5% is related to the four store existing store locations which
relocated or upgraded facilities to meet the Company's superstore
standards during fiscal 1996. General growth in overall sales volume was
in part the result of growth in new boating packages introduced in fiscal
1996 and in the expanded offering of boating packages introduced in 1995
along with increased sales of parts/accessories, service labor and F&I
Products. Net sales also benefitted from the Company's participation in
additional season-opening boat shows and a new sales program featuring
weekend sales shows in the parking lots of local Sam's Clubs or certain
other large retailers. The ''parking lot'' program which was initiated
with several shows in late 1995, expanded during fiscal 1996 to include a
full-time travelling sales team and participation in approximately 35
parking lot shows (primarily during the second and third fiscal quarters)
which generated net sales of approximately $2.5 million.
Net sales from comparable stores, which had 4 stores included in the
base for calculation, increased 4.3% in fiscal 1996. The Company
relocated or renovated 4 stores and acquired or opened an additional 4
stores during fiscal years 1995 and 1996 rendering such locations to be
excluded from the comparable store base. The Company's planned
acquisition strategy and subsequent renovation of stores to superstore
standards is expected to continue to negatively impact the number of
stores includable in comparable store base calculations in relationship
to the total number of store locations operated. See ''Risk Factors-
Dependence on Expansion.'' As such, comparable store performance is
expected to remain unstable until higher percentages of the Company's
stores are includable in comparable store calculations.
Included within net sales is revenue that the Company earns related to
F&I Products. The Company, through relationships with various national
and local lenders, is able to place financing for its customers' boating
purchases. These lenders allow the Company to ''sell'' the loan at a rate
higher than a minimum rate established by each such lender and the
Company earns fees based on the percentage increase in the loan rate over
the lender's minimum rate. The Company sells these loans without recourse
except that in certain instances the Company must return the fees earned
if the customer repays the loan or defaults in the first 120-180 days.
The Company also sells, as a broker, certain types of insurance
(property/casualty, credit life, disability) and extended service
contracts. The Company may also sell these products at amounts over a
minimum established cost and earn income based upon the profit over the
minimum established cost. Net sales attributable to F&I Products
increased by 75.3% to $2.7 million in fiscal 1996 from $1.6 million in
the twelve months ended September 30, 1995. This improvement was
primarily due to higher net spreads achieved in the placement of customer
financing, as well as overall increases in the percentage of customers
buying these products (which is referred to as ''sell-through''). This
increase was enhanced by the Company's continued emphasis on training of
F&I employees and achievement of established goals.
Gross profit. Gross profit increased by 52.8% to $16.5 million in
fiscal 1996 from $10.8 million in the twelve months ended September 30,
1995. Gross profit as a percent of sales increased to 25.5% in fiscal
1996 from 24.2% in the twelve months ended September 30, 1995. The
Company generally seeks to maintain a gross profit margin of 21% to 23%
on its boating packages and is able to further leverage the margin
through sales of parts/accessories, service labor and F&I Products, all
of which generally produce gross profit margins in excess of 25%.
Net sales attributable to F&I Products, which have a significant
impact on the gross profit margin, contributed $2.7 million, or 16.4%, of
total gross profit in fiscal 1996, as compared to $1.6 million, or 14.8%,
of total gross profit for the twelve months ended September 30, 1995. Net
sales attributable to F&I Products are reported on a net basis and
therefore all of such sales contribute directly to the Company's gross
profit. The costs associated with the sale of F&I Products are included
in selling, general and administrative expenses.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 45.3% to $10.9 million in fiscal
1996 from $7.5 million for the twelve months ended September 30, 1995.
Selling, general and administrative expenses as a percent of net sales
decreased to 16.8% in fiscal 1996 from 16.9% for the twelve months ended
September 30, 1995. The decrease in selling, general and administrative
expenses as a percent of net sales was the result of the economies of
operating a larger store base and regional market presence, particularly
in the leveraging of advertising, insurance, rents and
depreciation/amortization expenses. In terms of dollars, the increase in
selling, general and administrative expenses was primarily attributable
to increased expenses associated with the operation of a larger store
network, the Company's participation in additional season-opening boat
shows and the expenses related to completing the implementation of the
Company's management information system in all of its stores operating as
of September 30, 1996. Additionally, the Company's management information
system has been implemented in the three store locations acquired since
September 30, 1996.
Interest expense. Interest expense, in actual dollars, increased by
45.7% to $1.3 million in fiscal 1996 from $845,000 in the twelve months
ended September 30, 1995. However, interest expense as a percent of net
sales remained flat at 1.9% and 2.0% in the 1995 and 1996 periods,
respectively. The Company incurred additional debt levels in the
acquisition of Red River Marine and Clay's Boats & Motors as well as
higher balances on the Company's floor plan lines of credit necessary to
support inventory requirements for the additional stores and actual
increase in net sales. Effective with the funding of the Company's
Initial Public Offering in late June of 1996 and an additional 140,500
shares in the over-allotment options, the Company reduced certain
revolving indebtedness and certain long term indebtedness. This reduction
of debt in the Company's third and fourth fiscal quarters provided for
the containment of interest expense and its percentage decrease as a
percent of net sales. The Company intends to reborrow under its revolving
credit lines as necessary to fund future acquisitions and to support
working capital needs. See ''Liquidity and Capital Resources.''
Net income. Net income increased by 60.3% to $2.4 million in fiscal
1996 from $1.5 million in the twelve months ended September 30, 1995. Net
income as a percent of sales increased to 3.7% from 3.4% during the same
periods. Net income attributable to F&I Products increased by 73.8% to
$810,000 in fiscal 1996 from $466,000 in the twelve months ended
September 30, 1995. The calculation of net income attributable to F&I
Products is based on an allocation of gross profit after adjusting for
costs which management believes are directly allocable to F&I Products.
Quarterly Data and Seasonality
The following table sets forth certain unaudited quarterly financial
data for each of the Company's last eight quarters and such data
expressed as a percentage of the Company's net sales for the respective
quarters. The information has been derived from unaudited financial
statements that, in the opinion of management, reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such quarterly information. The operating results for any
quarter are not necessarily indicative of the results to be expected for
any future period.
<TABLE>
<CAPTION>
Quarter Ended
Fiscal Year 1996 Fiscal Year 1997
Dec. 31 March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30
--------- --------- --------- --------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 3,564 $ 18,453 $ 26,445 $ 16,093 $ 5,451 $ 24,273 $ 37,348 $ 24,237
Gross profit 948 4,623 6,613 4,299 1,341 6,404 9,531 6,679
Selling, general and
Administrative
expenses 1,551 2,751 3,767 2,788 2,140 3,638 5,426 4,358
Operating income (loss) (729) 1,736 2,705 1,349 (983) 2,529 3,873 2,061
Interest expense 276 393 424 196 214 415 412 313
Net income (loss) (642) 885 1,416 724 (744) 1,320 2,172 1,234
Net Income per Share (.24) .32 .52 .18 (.18) .32 .53 .29
Wtd. Average Shares
Outstanding 2,684 2,684 2,741 4,097 4,137 4,137 4,137 4,291
</TABLE>
<TABLE>
<CAPTION>
As a Percentage of Net Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 26.6 25.1 25.0 26.7 24.6% 26.4% 25.5% 27.6%
Selling, general and
administrative
expenses 43.5 14.9 14.2 17.3 39.3% 15.0% 14.5% 18.0%
Operating income (loss) (20.5) 9.4 10.2 8.4 (18.0) 10.4 10.4 8.5
Interest expense 7.7 2.1 1.6 1.2 3.9 1.7 1.1 1.3
Net income (loss) (17.9) 4.8 5.4 4.5 (13.7) 5.4 5.8 5.1
</TABLE>
The Company's business, as well as the sales demand for various types
of boats, tends to be highly seasonal. Strong sales typically begin in
January with the onset of the public boat and recreation shows, and
continue through July. Over the previous four-year period, the average
annual net sales for the quarterly periods ended March 31 and June 30
represented in excess of 28% and 37%, respectively, of the Company's
annual net sales. With regard to net income, the Company historically
generates profits in three of its fiscal quarters and experiences
operating losses in the quarter ended December 31 due to a broad seasonal
slowdown in sales. During the quarter ended September 30, inventory
typically reaches its lowest levels and accumulated cash reserves reach
the highest levels. During the quarter ended December 31, the Company
generally builds inventory levels in preparation for the upcoming selling
season which begins with boat and recreation shows occurring during
January through March in certain market areas in which the Company
conducts business. Travis Boats' operating results would be materially
and adversely affected if net sales were to fall significantly below
historical levels during the months of January through June.
The Company's business is also significantly affected by weather
patterns. Weather conditions that are unseasonable or unusual may
adversely affect the Company's results of operations. For example,
drought conditions or merely reduced rainfall levels, as well as
excessive rain, may affect the Company's sale of boating packages and
related products and accessories. While management believes that the
Company's quarterly net sales will continue to be impacted by
seasonality, quarterly results may become less susceptible to certain
regional weather conditions as expansion occurs throughout the southern
United States.
Quarterly results may fluctuate as a result of the expenses associated
with new store openings or acquisitions. The Company, prior to fiscal
1997, had attempted to concentrate expansion during the seasonal slowdown
generally occurring in the quarter ending December 31. During fiscal
1997, the Company modified its acquisition strategy to acquire store
locations through-out the fiscal year. This was done to allow the
Company the opportunity to derive in-season sales from the acquisitions
as well as to provide a longer period in which to integrate the acquired
store's operations. Accordingly, the results for any quarterly period
may not be indicative of the expected results for any other quarterly
period.
Year 2000 Issues
The Year 2000 issue is the result of computer programs being written
using two digits rather than four (for example, "97" for 1997) to define
the applicable year. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. In some cases, the new date will cause
computers to stop operating, while in other cases, incorrect output may
result. Since the Company is currently in the process of replacing and
upgrading its computer hardware and software systems, the Company
believes that there is little business risk attributable to the Year 2000
issue.
Liquidity and Capital Resources
The Company's short-term cash needs are primarily for working capital
to support operations including inventory requirements, off-season
liquidity and store expansion. These short-term cash needs have
historically been financed with cash from operations and borrowings under
the Company's floor plan and revolving credit lines (collectively the
"credit facilities"). At September 30, 1997, the Company had working
capital of $14.8 million, including $3.9 million in accounts receivable
(primarily contracts in transit from sales) and $34.5 million in
inventories, offset by approximately $5.2 million of accounts payable and
accrued liabilities, $14.4 million outstanding under floor plan lines of
credit, approximately $6.0 million under revolving lines of credit and
$4.3 million in other current liabilities and short-term indebtedness
including current maturities of long-term debt. Contracts in transit are
amounts receivable from a customer or a customer's financial institution
related to that customer's purchase of a boat. As of September 30, 1997,
the aggregate maximum borrowing limits under floor plan and revolving
lines of credit were approximately $25.0 million and $55.0 million,
respectively.
In fiscal 1996, operating activities utilized cash flows of $2.1
million due primarily to an increase of $6.2 million in inventories,
offset partially by unearned revenue of $1.2 million relating to a volume
purchase from a manufacturer. Of the increase in inventories,
approximately $4.4 million is related to stocking of the newly acquired
store locations since the acquisitions during fiscal 1996 occured in the
off-season and the acquired store locations had little remaining
inventory. Subsequently, the Company maintains a representative level of
stocking of its Travis Edition boating packages and generally over 9,000
stock keeping units in parts/accessories.
In fiscal 1997, operating activities utilized cash flows of $808,000
due primarily to an increase of $5.2 million and $2.0 million in
inventories and accounts receivable, respectively. These amounts were
offset partially by an increase in accrued liabilities of $913,000 and an
additional $1.4 million payable to the sellers of Adventure Marine (which
is payable in 88,361 shares of newly issued shares of the Company's
common stock) related to the purchase which is effective as of September
30, 1997. Of the increase in inventories, approximately $14.6 million is
related to inventory acquired in seven store acquisitions during fiscal
1997 and the initial stocking of Travis Editions product in the newly
acquired locations.
Financing activities in fiscal 1997 provided $10.8 million of cash
flows primarily from the net proceeds of borrowings under the Company's
credit facilities. Effective October 31, 1997, the Company renewed and
increased its $15.0 million revolving line of credit agented by
NationsBank of Texas, N.A. to a new credit limit of $55.0 million. The
line provides for borrowing pursuant to a borrowing formula based upon
the certain of the Company's inventory and accounts receivable.
Collateral consists of a security interest in specific inventories (and
proceeds thereof), accounts receivable and contracts in transit. The line
has a maturity on October 31, 1999 and pricing is at the Company's
election of the prime rate minus .375% or on a LIBOR based price
structure. There is a fee on the unused portion assessed quarterly. A
comprehensive loan agreement governs the line of credit. The agreement
contains financial covenants regulating debt service coverages, tangible
net worth, operating leverage and restrictions on dividends or
distributions. As of December 18, 1997, $18.3 million was drawn on the
revolving line and the Company could borrow an additional $3.1 million
based upon the revolving line's borrowing formula. Management believes
the Company to be in compliance with the terms and conditions of this
loan agreement.
The Company also maintains floor plan lines of credit with various
finance companies totalling approximately $25 million in credit limits,
which generally have no stated maturity and utilize subsidies from
manufacturers to provide for certain interest free periods each calendar
year (usually August through at least May). Certain floor plan lines of
credit with finance companies are governed by loan agreements containing
financial covenants concerning, among others, minimum tangible net worth
and leverage ratios. As of December 18, 1997, approximately $19.5 million
was drawn under the floor plan lines and management believes the Company
was in compliance with the terms and conditions of these loan agreements.
Merchandise inventories were $20.6 million and $34.5 million as of
September 30, 1996 and September 30, 1997, respectively. Accounts
receivable increased by approximately $2.6 million to $3.9 million at the
end of fiscal 1997 from a year earlier. The receivables amount represents
primarily contracts in transit generated from sales. Costs in excess of
net assets acquired increased to by approximately $4.3 million to $5.4
million in fiscal 1997 due to the acquisitions during fiscal 1997
discussed previously in the section Overview.
The Company had net capital expenditures of approximately $1.4 million
in fiscal 1996 and approximately $5.7 million in fiscal 1997. Capital
expenditures during fiscal 1996 included the acquisition of Clay's Boats
& Motors, the renovation of several facilities to the Company's
superstore standards and expenses related to the roll-out of the
Company's management information systems in certain store locations. In
fiscal 1997 the Company's capital expenditures included the acquisitions
of the store locations discussed previously in the section Overview. The
Company also acquired land and buildings for store locations in Beaumont,
Texas and Pascagoula, Mississippi and continued to renovate certain store
locations to superstore standards. The fiscal 1997 capital expenditures
were primarily financed under the Company's credit facilities and
additionally with certain individuals and corporations.
The Company's revolving credit facility, floor plan lines of credit
and internally generated working capital should be sufficient to meet the
Company's cash requirements in the near future.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board (FASB) issues
Statement No. 121, ''Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of '', which requires impairment
losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are held for disposition. The Company adopted
Statement No. 121 effective October 1, 1995. No material impact to the
Company's results of operations or financial position resulted from such
adoption.
The Company has elected to follow Accounting Principles Board No. 25,
Accounting for Stock Issued to Employees (APB 25), and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No.
123, Accounting for Stock-Based Compensation (Statement 123), requires
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to June 30, 1995 under the fair value method
prescribed by Statement 123. The Company has evaluated the effects of
Statement 123 and determined that it does not have a material effect on
the Company's statement of operations or earnings per share.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share (Statement 128), which is required
to be adopted for financial statements issued for periods ending after
December 15, 1997. At that time the Company will be required to change
the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements, the presentation of
primary earnings per share is replaced with a presentation of basic
earnings per share, the calculation of which excludes the dilutive effect
of common stock equivalents.
Inflation
The Company believes that inflation generally has not had a material
impact on its operations or liquidity to date.
Item 8. Financial Statements
For the financial statements and supplementary data required by this
Item 8, see the Index to Consolidated Financial Statements and Schedules.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers
There is incorporated herein by reference that portion of the
Company's proxy statement for the 1998 Annual Meeting of Stockholders
which appears therein under the captions ''Item 1: Election of
Directors'' and ''Information Concerning Directors.''
Item 11. Executive Compensation
There is incorporated in this Item 11 by reference that portion of the
Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders which appears under the caption ''Executive Compensation.''
Item 12. Security Ownership of Certain Beneficial Owners and Management
There is incorporated in this Item 12 by reference that portion of the
Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders which appears under the caption ''Securities Holdings of
Principal Stockholders, Directors, Nominees and Officers.''
Item 13. Certain Relationships and Related Transactions
There is incorporated in this Item 13 by reference that portion of the
Company's definitive proxy statement for the 1998 Annual Meeting of
Stockholders which appears under the captions ''Certain Relationships and
Related Transactions'' and ''Compensation Committee Interlocks and
Insider Participation.''
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the Company are
included following the Index to Consolidated Financial Statements and
Schedules on page F-1 of this Report.
Report of Ernst & Young LLP, Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Shareholder's Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
(a) 2. Financial Statement Schedules
All other schedules have been omitted because they are not applicable,
not required under the instructions, or the information requested is set
forth in the consolidated financial statements or related notes thereto.
(a) 3. Exhibits
The following Exhibits are incorporated by reference to the filing or
are included following the Index to Exhibits.
INDEX TO EXHIBITS
(a) Exhibits: Except as otherwise noted, all Exhibits have been
previously filed with Registrant's S-1 dated June 1996.
3.1 Restated Articles of Incorporation of the Registrant,
as amended.
3.2 Restated Bylaws of the Registrant, as amended.
10.2(a) Agreement dated as of August 11, 1995, between the
Company and Outboard Marine
Corporation.
10.2(b) Dealer Agreement dated as of October 13, 1995,
between the Company and Outboard Marine Corporation.
10.3 Dealer Agreement dated as of August 17, 1995, between
the Company and Larson Boats, a Division of Larson/Glastron Boats,
Inc., a subsidiary of Genmar Industries, Inc.
10.4 Dealer Agreement dated as of August 17, 1995, between
the Company and Mastercrafters Corporation.
10.5(a) Inventory Security Agreement and Power of Attorney
dated as of November 30, 1993, Between Bombardier Capital Inc. and
the Company.
10.5(b) Inventory Security Agreement and Power of Attorney dated as of
November 30, 1993, Between Bombardier Capital Inc. and Falcon Marine
Abilene, Inc.
10.6(a) Agreement for Wholesale Financing dated as of August 17, 1995,
by and among Deutsche Financial Services Corporation, the Company
and its subsidiaries; and Amendment to Agreement for Wholesale
Financing dated as of September 22, 1995.
10.6(b) Agreement for Wholesale Financing dated as of August 17, 1995,
between Deutsche Financial Services Corporation and Travis Boats &
Motors Baton Rouge, Inc.
10.7(a) Inventory Loan Agreement dated as of September 20, 1995, between
TBC Arkansas, Inc. And Hibernia National Bank.
10.7(b) Commercial Security Agreement dated September 1, 1995, between
TBC Arkansas, Inc. and Hibernia National Bank.
10.8(a) Inventory Loan Agreement dated as of December 17, 1992, between
Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank;
and First Amendment to Inventory Loan Agreement dated as of
February 7, 1994.
10.8(b) Promissory Note dated May 30, 1995, in the original principal
amount of $100,000, payable By Travis Boats & Motors Baton Rouge,
Inc. to Hibernia National Bank.
10.8(c) Promissory Note dated May 30, 1995, in the original principal
amount of $800,000, payable By Travis Boats & Motors Baton Rouge,
Inc. to Hibernia National Bank.
10.8(d) Promissory Note dated July 14, 1995, in the original principal
amount of $480,000, payable By Travis Boats & Motors Baton Rouge,
Inc. to Hibernia National Bank.
10.8(e) Business Loan Agreement dated July 14, 1995, between Travis
Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.
10.8(f) Commercial Security Agreement dated July 14, 1995, between
Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.
10.8(g) Collateral Mortgage dated July 14, 1995, from Travis Boats &
Motors Baton Rouge, Inc. to Hibernia National Bank.
10.8(h) Assignment of Leases and Rents dated July 14, 1995, between
Travis Boats & Motors Baton Rouge, Inc. and Hibernia National Bank.
10.8(i) Pledge of Collateral Mortgage Note dated July 14, 1995, from
Travis Boats & Motors Baton Rouge, Inc. to Hibernia National Bank.
10.9(a) Promissory Note dated September 1, 1995, in the original
principal amount of $3,000,000, Payable by TBC Arkansas, Inc. to
Hibernia National Bank.
10.9(b) Commercial Guaranty dated September 1, 1995 by the Company in
favor of Hibernia National Bank guarantying a $3,000,000 Promissory
Note.
10.9(c) Promissory Note dated September 1, 1995, in the original principal
amount of $250,000, Payable by TBC Arkansas to Hibernia National Bank.
10.10(a) Amended and Restated Loan Agreement dated as of September 15,
1995, by and among NationsBank of Texas, N.A., the Company and its
subsidiaries.
10.10(b)Security Agreement dated July 31, 1995, by and among Nations Bank
of Texas, N.A., the Company and its subsidiaries.
10.11 General Promissory Note dated August 31, 1995, in the original
principal amount of $300,000, payable by the Company to Amerisure
Property & Casualty, Ltd.
10.12 General Promissory Note dated August 31, 1995, in the original
principal amount of $100,000, payable by the Company to Capitol
Commerce Reporter, Inc.
10.13 General Promissory Note dated August 31, 1995, in the original
principal amount of $75,000, payable by the Company to Capitol
Commerce Reporter, Inc.
10.14 General Promissory Note dated August 31, 1995, in the original
principal amount of $150,000, payable by the Company to Joe Simpson
and Pat Simpson.
10.15 Asset Purchase Agreement dated as of September 20, 1995, by and
among Red River Marine, Inc., Red River Marine, Inc. #2, and TBC
Arkansas, Inc.
10.16 Promissory Note dated September 20, 1995, in the original principal
amount of $800,000, Payable by TBC Arkansas, Inc. to Benny Hargrove.
10.17(a)Promissory Note dated as of September 20, 1995, in the original
principal amount of $462,145.53, payable by TBC Arkansas, Inc. to Red
River Marine, Inc. #2.
10.17(b) Mortgage With Power of Sale (Realty) dated September 20, 1995,
from TBC Arkansas, Inc. to Red River Marine, Inc. #2.
10.18 Promissory Note dated September 20, 1995, in the original principal
amount of $230,177.16, payable by TBC Arkansas, Inc. to Red River
Marine, Inc. and Red River Marine, Inc. #2.
10.19 Promissory Note dated September 20, 1995, in the original principal
amount of $108,750, Payable by TBC Arkansas, Inc. to Red River Marine,
Inc. and Red River Marine, Inc. #2.
10.20 Travis Boats and Motors, Inc. 1995 Incentive Plan.
10.21 Form of Amended and Restated Employment Agreement dated May 7, 1996,
between the Company and Mark T. Walton, Ronnie L. Spradling and
Michael B. Perrine.
10.22 Form of Option Agreement dated May 17, 1995, between the Company and
Michael B. Perrine, Ronnie L. Spradling and Mark T. Walton.
10.23 Form of Indemnification Agreement for Directors and Officers of the
Company.
10.24 Management Agreement dated December 14, 1995, by and among TBC
Management, Ltd., The Company and its subsidiaries.
10.25 [Intentionally left blank]
10.26(a) First Lien Promissory Note dated September 15, 1995, in the
original principal amount of $679,000, payable by Travis Snowden
Marine, Inc. to NationsBank of Texas, N.A.
10.26(c) First Lien Deed of Trust, Assignment, Security Agreement and
Financing Statement dated September 15, 1995, from Travis Snowden
Marine, Inc. to Michael F. Hord, Trustee.
10.27(a) Second Modification and Extension Agreement dated April 26, 1994,
between the Company and NationsBank of Texas, N.A.
10.27(b) ''504'' Note dated April 28, 1994, in the original principal
amount of $454,000, payable by the Company to Cen-Tex Certified
Development Corporation.
10.27(c) Deed of Trust, Assignment, Security Agreement and Financing
Statement dated March 5, 1993, from the Company to Michael F. Hord,
Trustee.
10.27(d) Deed of Trust dated April 28, 1994, from the Company to Wm. H.
Harrison, Jr., Trustee.
10.28 Trust Agreement dated December 31, 1994, by and among Ideal Insurance
Company, Ltd. and the Company.
16 Letter re change in certifying accountant.
Portions of this exhibit have been omitted and are subject to an
application for confidential treatment filed separately with the
Commission.
The above Exhibits have been previously filed with Registrant's S-1 dated
June 1996.
(b) Financial Statement Schedules: None.
The following exhibits are filed herewith
10.29(a) Revolving Credit Agreement dated as of December 12, 1996, in the
original principal amount of $15,000,000 by and among the Company,
its Subsidiaries and NationsBank of Texas, N.A. as agent.
10.29(b) Commercial Security Agreement dated as of December 12, 1996 by
and among the Company, its Subsidiaries and NationsBank of Texas,
N.A. as agent.
10.29(c) Promissory Note dated as of December 12, 1996 in ane original
principal amount of $9,000,000 among the Company, its subsidiaries and
NationsBank of Texas, N.A., as agent.
10.29(d) Promissory Note dated as of December 12, 1996 in the original
principal amount of $6,000,000 among the Company, its subsidiaries and
NationsBank of Texas, N.A. as agent.
10.30 Asset Purchase Agreement dated as of November 1, 1996 between Travis
Boating Center Tennessee, Inc. and Tri-Lakes Marine, Inc.
10.31 Asset Purchase Agreement dated as of November 1, 1996 between Travis
Boating Center Alabama, Inc. and Tri-Lakes Marine, Inc.
The above Exhibits have been previously filed with
Registrant's Report on Form 10-K for the fiscal
year ended September 30, 1996.
The following exhibits are filed herewith on the
Registrant's Report on Form 10-K for the fiscal
year ended September 30, 1997.
10.32(#) Asset Purchase Agreement dated as of February 19, 1997 between
Travis Boating Center Louisiana, Inc. and Bent's Marine, Inc.
10.33 Asset Purchase Agreement dated as of August 1, 1997 between Travis
Boating Center Mississippi, Inc. and McLeod Marine, Inc
10.34 Stock Purchase Agreement dated as of September 30, 1997 among
Travis Boating Center Florida, Inc. and Frederic D. Pace and John W.
Reinhold providing for the purchase of 100% of the common stock of
Adventure Boat Brokerage, Inc.
10.35 Stock Purchase Agreement dated as of September 30, 1997 among Travis
Boating Center Florida, Inc. and John W. Reinhold providing for the
purchase of 100% of the common stock of Adventure Marine & Outdoors,
Inc.
10.36 Stock Purchase Agreement dated as of September 30, 1997 among Travis
Boating Center Florida, Inc. and Frederic D. Pace and John W. Reinhold
providing for the purchase of 100% of the common stock of Adventure
Marine South, Inc.
10.37 First Amendment to Revolving Credit Agreement dated as of October 31,
1997, in the original principal amount of $55,000,000 by and among the
Company, its Subsidiaries and NationsBank of Texas, N.A. as agent.
10.38 Asset Purchase Agreement dated as of November 20, 1997 between Travis
Boating Center Tennessee, Inc. and Southeastern Marine Group, Inc.
10.39(+) Travis Boats & Motors, Inc. 1995 Incentive Plan filed pursuant to
Form S-8 filed on December 11,1997.
21.1 List of Subsidiaries of Registrant.
23.1(+) Consent of Ernst & Young LLP, Independent Auditors of Registrant,
dated December 23, 1997.
27.1 Financial Data Schedule.
(#) Incorporated by reference from the Company Report on Form 10-Q for
the quarter ended March 31, 1997.
(+) Incorporated by reference from the Company's filing on Form S-8 on
December 11, 1997.
No annual report or proxy material has been sent to security holders
as of the date of this Form 10-K; however, the Company anticipates
sending the annual report and proxy materials on or before any applicable
deadlines. When such a report and proxy materials are furnished, the
Registrant will furnish copies of such materials to the Commission.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRAVIS BOATS & MOTORS, INC.
_____/S/___ MARK T. WALTON
By:
Chairman of the Board and President
Date: December 23, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Name Capacity Date Signed
/S/ MARK T. WALTON
Mark T. Walton Chairman of the Board, President and December 23, 1997
Director (Principal Executive Officer )
/S/ MICHAEL B. PERRINE
Michael B. Perrine Chief Financial Officer, Secretary December 23, 1997
and Treasurer (Principal Financial
and Accounting Officer )
/S/ RONNIE L. SPRADLING
Ronnie L. Spradling Executive Vice President-New Store December 23, 1997
Development and Director
/S/ E. D. BOHLS
E. D. Bohls Director December 23, 1997
/S/ STEVEN W. GURASICH, JR.
Steven W. Gurasich, Jr. Director December 23, 1997
/S/ ZACH MCCLENDON, JR
Zach McClendon, Jr. Director December 23, 1997
/S/ ROBERT C. SIDDONS
Robert C. Siddons Director December 23, 1997
/S/ JOSEPH E. SIMPSON
Joseph E. Simpson Director December 23, 1997
<PAGE>
Report of Independent Auditors
The Board of Directors
Travis Boats & Motors, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Travis
Boats & Motors, Inc. and Subsidiaries as of September 30, 1997 and 1996
and the related consolidated statements of income, stockholders' equity
and cash flows for the years then ended and the nine-month period ended
September 30, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Travis Boats & Motors, Inc. and Subsidiaries as of September 30, 1997 and
1996 and the consolidated results of their operations and their cash
flows for the years then ended and the nine-month period ended
September 30, 1995 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
November 25, 1997
Austin, Texas
<PAGE>
<TABLE>
<CAPTION>
Travis Boats & Motors, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30
1996 1997
---------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,816,317 $ 1,532,942
Accounts receivable 3,915,399 1,330,642
Prepaid expenses 371,356 102,094
Inventories 34,449,559 20,554,166
Deferred tax asset 172,591 160,815
---------- ----------
Total current assets 44,725,222 23,680,659
Property and equipment:
Land 1,990,718 1,815,718
Buildings and improvements 6,366,447 4,908,861
Furniture, fixture and equipment 3,161,501 1,847,086
---------- ---------
11,518,666 8,571,665
Less accumulated depreciation (2,749,914) (2,024,953)
---------- ---------
8,768,752 6,546,712
Deferred tax asset 119,855 39,187
Goodwill, net of accumulated amortization
of $78,569 in 1997 and $32,037 in 1996 4,067,466 806,035
Noncompete agreement, net of accumulated
amortization of $129,710 in 1997 and $42,857
in 1996 1,308,362 257,143
Other assets 131,825 20,672
----------- -----------
Total assets $59,121,482 $31,350,408
=========== ===========
Liabilities
Current liabilities:
Bank overdraft $ 272,004 $ -
Accounts payable 2,238,410 239,852
Accrued liabilities 2,929,310 1,388,810
Amounts due for purchase of business 1,429,643 -
Federal income taxes payable 1,081,254 953,523
Unearned revenue 521,694 1,174,159
Current portion of notes payable and other
short-term obligations 21,446,952 4,661,104
---------- ---------
Total current liabilities 29,919,267 8,417,448
Notes payable, less current portion 5,144,684 4,334,494
Stockholders' equity:
Serial preferred stock, $.01 par value,
1,000,000 shares authorized, no shares
issued or outstanding - -
Common stock, $.01 par value, 50,000,000
shares authorized, 4,224,867 and
4,136,506 issued and outstanding at
September 30, 1997 and 1996, respectively 42,249 41,365
Paid-in capital 13,004,007 11,527,498
Retained earnings 11,011,275 7,029,603
---------- ---------
Total stockholders' equity 24,057,531 18,598,466
========== ==========
Total liabilities and stockholders' equity $59,121,482 $31,350,408
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Travis Boats & Motors, Inc. and Subsidiaries
Consolidated Statements of Income
Nine Months
Ended
Year Ended September 30 September 30
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $91,309,256 $64,555,273 $41,442,349
Cost of sales 67,354,110 48,072,499 31,136,555
----------- ----------- -----------
Gross profit 23,955,146 16,482,774 10,305,794
Selling, general and
administrative expenses 15,561,569 10,857,413 6,352,844
Depreciation and amortization 913,445 563,991 216,965
----------- ----------- -----------
16,475,014 11,421,404 6,569,809
Operating income 7,480,132 5,061,370 3,735,985
Interest expense (1,353,750) (1,289,064) (670,020)
Other (expenses) income (12,080) 60,781 133,849
----------- ----------- -----------
Income before income taxes 6,114,302 3,833,087 3,199,814
Income taxes 2,132,630 1,450,000 1,149,621
----------- ----------- -----------
Net income $ 3,981,672 $ 2,383,087 $ 2,050,193
=========== =========== ===========
Net income per common share:
Primary $ .94 $ .78 $ .76
Fully-diluted $ .93 $ .78 $ .76
Weighted average common
shares outstanding:
Primary 4,251,396 3,043,329 2,672,919
Fully-diluted 4,296,633 3,043,329 2,672,919
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Travis Boats & Motors, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Notes
Common Stock Paid-in Retained Receivable-
Shares Amount Capital Earnings Stockholders Total
----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,1994 2,635,865 $ 26,358 $ 66,670 $ 2,596,323 $ (127,124) $ 2,562,227
Issuance of common stock 47,641 477 71,841 - - 72,318
Net income - - - 2,050,193 - 2,050,193
Net proceeds on notes
receivable - stockholders - - - - 127,124 127,124
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1995 2,683,506 26,835 138,511 4,646,516 - 4,811,862
Issuance of common stock 1,453,000 14,530 13,062,470 - - 13,077,000
Common stock issuance costs - - (1,673,483) - - (1,673,483)
Net income - - - 2,383,087 - 2,383,087
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1996 4,136,506 41,365 11,527,498 7,029,603 - 18,598,466
Issuance of common stock
in purchase of business 88,361 884 1,476,509 - - 1,477,393
Net income - - - 3,981,672 - 3,981,672
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1997 4,224,867 $ 42,249 $13,004,007 $11,011,275 $ - $24,057,531
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
Travis Boats & Motors, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months
Ended
Year Ended September 30 September 30
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income $ 3,981,672 $ 2,383,087 $ 2,050,193
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 780,060 489,097 216,965
Amortization 133,385 74,894 -
Changes in operating assets and
liabilities:
Increase in accounts receivable (1,995,179) (283,925) (823,109)
(Increase) decrease in prepaid assets (243,989) (53,535) 24,631
(Increase) decrease in inventories (5,166,177) (6,152,835) 349,830
(Increase) decrease in other assets (17,910) (3,522) 23,017
Increase in deferred tax asset (92,444) (63,327) (136,675)
Increase (decrease) in accounts payable 1,453,388 (222,067) 265,863
Increase in accrued liabilities 883,753 200,455 404,190
Increase in federal income taxes payable 127,731 377,366 349,622
(Decrease) increase in unearned revenue (652,465) 1,174,159 -
------------ ------------ ------------
Net cash provided by (used in) operating
activities (808,175) (2,080,153) 2,724,527
Investing activities
Purchase of businesses (3,477,223) (262,687) (916,345)
Purchase of property and equipment (2,255,495) (1,134,967) (1,885,345)
Net cash used in investing activities (5,732,718) (1,397,654) (2,801,690)
Financing activities
Net increase (decrease) in notes payable
and other short-term obligations 10,824,268 (7,388,826) 715,027
Net proceeds from issuance of common stock - 11,403,517 72,268
Redemption of preferred stock - - (100,000)
Net proceeds on notes receivable -
stockholders - - 127,174
------------ ------------ ------------
Net cash provided by financing activities 10,824,268 4,014,691 814,469
Increase in cash and cash equivalents 4,283,375 536,884 737,306
Cash and cash equivalents, beginning of
period 1,532,942 996,058 258,752
------------ ------------ ------------
Cash and cash equivalents, end of period $ 5,816,317 $ 1,532,942 $ 996,058
============ ============ ============
</TABLE>
See accompanying notes.
<PAGE>
1. Summary of Significant Accounting Policies
Description of Business and Consolidation
Travis Boats & Motors, Inc. (the "Company") based in Austin, Texas, is a
retailer of boats, motors, trailers and related watersport accessories.
The Company operates locations in the southern region of the United
States. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. In 1995,
the Company changed its fiscal year end from December 31 to September 30
to coincide with the seasonal cycle of its business.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
The Company records revenue on sales of boats, motors, trailers, and
related watersport parts and accessories upon delivery to the customer
and transfer of title at the closing of the transaction.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
investments with maturities of ninety days or less when purchased to be
cash equivalents.
Inventories
Inventories consist of boats, motors, trailers and related watersport
parts and accessories. Inventories are carried at the lower of cost or
market. Cost for boats, motors and trailers is determined using the
specific identification method. Cost for parts and accessories is
determined using the first-in, first-out method.
1. Summary of Significant Accounting Policies (continued)
Property and Equipment
Property and equipment are stated at cost. Provisions for depreciation
are determined using double-declining balance and straight-line methods.
The Company uses estimated useful lives of 5 - 20 years for buildings and
improvements and 5 - 10 years for furniture, fixtures and equipment. The
Company capitalized interest of approximately $80,000 during the nine
months ended September 30, 1995 in connection with the construction of a
store location. No interest was capitalized in the years ended September
30, 1997 and 1996.
Income Taxes
In accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, deferred income taxes are provided for
temporary differences between the basis of assets and liabilities for
financial reporting purposes and for income tax return purposes.
Intangible Assets
Amounts assigned to intangible assets are amortized over the respective
estimated useful lives using the straight-line method as follows:
Noncompete agreements 7 years
Goodwill 15 to 25 years
Goodwill and other intangible assets are recorded at the lower of
unamortized cost or fair value. Management reviews the valuation and
amortization of intangible assets on a periodic basis, taking into
consideration any events or circumstances which might result in
diminished fair value. If this review indicates goodwill will not be
recoverable, as determined by the undiscounted cash flows of the entity
acquired over the remaining amortization period, the carrying value of
the goodwill is reduced by the estimated shortfall of cash flows.
1. Summary of Significant Accounting Policies (continued)
Accounts Receivable
Accounts receivable potentially expose the Company to concentrations of
credit risk, as defined by the Statement of Financial Accounting
Standards No. 105, Disclosure of Information about Financial Instruments
with Off-Balance Sheet Risk and Financial Instruments with Concentrations
of Credit Risk. Accounts receivable consist primarily of amounts due from
financial institutions upon sales contract funding and amounts due from
vendors under rebate programs. There was no allowance for doubtful
accounts recorded at September 30, 1997 and 1996.
Pre-opening Costs
Pre-opening costs related to new store locations are expensed as
incurred.
Significant Suppliers
The Company purchased substantially all of its new outboard motors in
1997, 1996 and 1995 from a single outboard motor manufacturer.
Approximately 34%, 23% and 20% of the Company's net purchases in fiscal
1997, 1996 and 1995 were from a single boat supplier, respectively.
Advertising Costs
Advertising costs are expensed as incurred and were approximately
$829,000, $508,000 and $353,000 during the years ended September 30, 1997
and 1996, and the nine months ended September 30, 1995, respectively.
Notes Payable and Other Short-Term Obligations
Interest expense on notes payable and other short-term obligations is
recorded as incurred. No interest expense is recorded during portions of
the year on certain floor plan payables which include noninterest bearing
payment terms.
1. Summary of Significant Accounting Policies (continued)
Net Income per Common Share
For the year ended September 30, 1997, both primary and fully diluted net
income per common share are computed by dividing net income by the
weighted average number of common shares and common stock equivalents (if
dilutive) outstanding during each period. Common stock equivalents
include stock options. The number of common stock equivalents is computed
using the treasury stock method.
For the year ended September 30, 1996 and the nine months ended September
30, 1995, net income per common share is based on the weighted average
number of common shares outstanding during the period. The effect of
common stock equivalents is not significant.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share (Statement 128), which is required
to be adopted for financial statements issued for periods ending after
December 15, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements, the presentation of
primary earnings per share is replaced with a presentation of basic
earnings per share, the calculation of which excludes the dilutive effect
of common stock equivalents. The adoption of Statement 128 is expected to
result in a basic net income per share of $0.96 for the year ended
September 30, 1997. Compared to primary net income per share as currently
presented, the adoption of Statement 128 results in an increase of $0.02
per share for 1997. The adoption of Statement 128 is expected to result
in a fully diluted net income per share of $0.94 for the year ended
September 30, 1997. Compared to fully diluted net income per share as
currently presented, the adoption of Statement 128 results in an increase
of $0.01 per share for 1997. There is no impact to primary or fully
diluted earnings per share for the year ended September 30, 1996 and the
nine months ended September 30, 1995.
Unearned Revenue
Amounts received from vendors in connection with agreed upon rebates or
discounts are deferred until the related product is sold and such rebate
or discount is earned.
2. Notes Payable and Other Short-Term Obligations
<TABLE>
<CAPTION>
Notes payable and other short-term obligations consist of the following:
September 30
1997 1996
------------- -------------
<S> <C> <C>
Floor plans payable $ 14,422,068 $ 3,474,398
Revolving lines of credit 6,000,000 500,000
Notes payable 6,169,568 5,021,200
------------- -------------
Total notes payable and other
short-term obligations 26,591,636 8,995,598
Less current portion (21,446,952) (4,661,104)
------------- -------------
Total notes payable and other
short-term obligations, less
current portion $ 5,144,684 $ 4,334,494
============= =============
</TABLE>
Floor plans payable consist of the following:
September 30
1997 1996
----------- ----------
Floor plans payable to commercial
finance companies under revolving
line of credit agreements with
interest ranging from 0% to prime
plus 4.75% with no stated
maturity date. $14,422,068 $3,474,398
----------- ----------
Total floor plans payable $14,422,068 $3,474,398
2. Notes Payable and Other Short-Term Obligations (continued)
The floor plans payable are secured by specific boat, motor and trailer
inventory, as well as general security filings on all inventory and
certain equipment. The floor plans payable to commercial finance
companies include noninterest bearing payment terms for part of the
calendar year (typically the months of August through May). As of
September 30, 1997 and 1996, the amount of noninterest bearing floor
plans payable to finance companies was $8,579,509 and $3,274,781,
respectively.
Floor plans payable of certain of the Company's subsidiaries are
guaranteed by the Company. The Company is significantly limited as to
annual dividends for preferred and common stock.
Borrowings under revolving lines of credit consist of the following:
September 30
1997 1996
----------- ----------
Note payable to bank under a
revolving line of credit
agreement with interest at prime
minus .375%, due October 1997. $6,000,000 $500,000
----------- ----------
Borrowings under revolving lines of
credit $6,000,000 $500,000
=========== ==========
The weighted average interest rate on floor plan payables and revolving
lines of credit outstanding as of September 30, 1997 and 1996 is 5.3% and
3.7%, respectively.
2. Notes Payable and Other Short-Term Obligations (continued)
Notes payable consist of the following:
September 30
1997 1996
----------- ----------
Mortgage notes payable to various
banks, organizations and
individuals under deeds of trust
with interest ranging from 5.0%
to prime plus 1% due in
installments ranging from $1,225
monthly including interest to
$30,114 semiannually plus
interest, maturing beginning in
April 1998. $4,139,738 $3,779,458
Notes payable to various banks, a
corporation and an individual for
vehicles, equipment and leasehold
improvements with interest
ranging from 6.99% to 9.75%, due
in monthly installments ranging
from $333 to $3,062, maturing
beginning in April 1998. 259,909 449,472
Acquisition related notes payable
to individuals and corporations
with interest ranging from 7.5%
to 8.75%, due in monthly
principal and interest
installments ranging from $291 to
$47,500, maturing beginning in
March 1998. 1,769,921 792,270
----------- ----------
Total notes payable $6,169,568 $5,021,200
Certain notes payable are secured by assets of the Company including
inventory, accounts receivable, equipment, leasehold improvements,
vehicles, land and buildings. Notes payable of certain of its
subsidiaries are guaranteed by the Company.
Interest paid approximates interest expense plus interest capitalized, if
any, during 1997, 1996 and 1995.
2. Notes Payable and Other Short-Term Obligations (continued)
Aggregate annual maturities required on notes payable at September 30,
1997 are as follows:
Year ending
September 30
------------
1998 $1,024,884
1999 768,906
2000 790,674
2001 625,242
2002 1,353,483
Thereafter 1,606,379
----------
$6,169,568
Effective October 31, 1997, the Company amended its existing revolving
line of credit agreement. The amendment increased the available borrowing
commitment from $15.0 million to $55.0 million and extended the maturity
date through October 31, 1999.
3. Leases
The Company leases various facilities under operating leases. Rent
expense was $545,917 in 1997, $263,710 in 1996 and $188,581 in 1995.
Generally, the leases provide for renewals for various periods at
stipulated rates. Future minimum rentals due under noncancelable leases
are as follows for each of the years ending September 30:
1998 $989,380
1999 843,704
2000 741,853
2001 650,828
2002 459,921
Thereafter 513,000
4. Acquisitions
Adventure Marine
Effective September 30, 1997, the Company acquired all of the outstanding
common stock of Adventure Boat Brokerage, Inc., Adventure Marine South,
Inc., and Adventure Marine and Outdoors, Inc. (collectively referred to
as Adventure Marine) with three store locations in Florida. The Adventure
Marine entities had common shareholders. The purchase price was
$3,022,035, of which $1,429,643 is to be paid in cash, $115,000 was
financed by the issuance of notes payable to the sellers, and $1,477,392
was paid via the issuance of 88,361 shares of common stock of the
Company.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Adventure Marine
have been included in the consolidated financial statements from the date
of acquisition. The purchase price ($3,022,035), related acquisition
costs ($145,000), and liabilities assumed ($5,058,826) have been
allocated to the tangible net assets acquired ($5,535,861) based on their
respective fair values at the date of acquisition. The resulting excess
purchase price ($2,690,000) was allocated to noncompete agreements and
goodwill.
McLeod Marine, Inc.
Effective August 1, 1997, the Company acquired certain assets of McLeod
Marine, Inc. (McLeod) in Pascagoula, Mississippi. The assets acquired
included boat, motor and trailer inventory, parts and accessories
inventory. The purchase price was $958,080, all of which was paid in
cash.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of McLeod have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($958,080) has been allocated to the
tangible net assets acquired ($730,080) based upon their respective fair
values at the date of acquisition. The resulting excess purchase price
($228,000) was allocated to noncompete agreements and goodwill.
4. Acquisitions (continued)
Bent's Marine, Inc.
Effective February 19, 1997, the Company acquired certain assets of
Bent's Marine, Inc. (Bent's) in Metairie, Louisiana. This acquisition
included boat, motor and trailer inventory, parts and accessories
inventory, and furniture, fixtures and equipment. The purchase price was
$1,518,550, of which $1,063,671 was paid in cash and $454,879 was
financed by the issuance of a note payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Bent's have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,518,550) has been allocated to the
tangible net assets acquired ($839,627) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($678,923) was allocated to a noncompete agreement and goodwill.
Tri-Lakes Marine, Inc.
Effective November 1, 1996, the Company acquired certain assets of Tri-
Lakes Marine, Inc. (Tri-Lakes) with retail store locations in Tennessee
and Alabama. This acquisition included boat, motor and trailer inventory,
parts and accessories inventory, and furniture, fixtures and equipment.
The purchase price was $1,242,924, of which $642,924 was paid in cash and
$600,000 was financed by the issuance of notes payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Tri-Lakes have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,242,924) and liabilities assumed
($1,937,279) have been allocated to the tangible net assets acquired
($2,536,092) based on their respective fair values at the date of
acquisition. The resulting excess purchase price ($644,111) was allocated
to noncompete agreements and goodwill.
4. Acquisitions (continued)
North Alabama Watersports, Inc.
Effective October 3, 1996, the Company acquired certain assets of North
Alabama Watersports, Inc. (NAWS) in Florence, Alabama. This acquisition
included boat, motor and trailer inventory, parts and accessories
inventory, and furniture, fixtures and equipment. The purchase price was
$892,255, of which $812,548 was paid in cash and $79,707 was financed by
the issuance of a note payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of NAWS have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($892,255) has been allocated to the
tangible net assets acquired ($687,255) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($205,000) was allocated to noncompete agreements and goodwill.
Clay's Boats and Motors, Inc.
Effective December 1, 1995, the Company acquired certain assets of Clay's
Boats and Motors, Inc. (Clay's) in New Iberia, Louisiana. The assets
acquired included furniture, fixtures and equipment, parts and
accessories inventory, all leasehold improvements and certain other
assets. The purchase price was $328,741, of which $262,687 was paid in
cash and $66,054 was financed by the issuance of a note payable to the
seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Clay's have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($328,741) has been allocated to the
tangible net assets acquired ($240,669) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($88,072) was allocated to noncompete agreements and goodwill.
4. Acquisitions (continued)
Red River Marine, Inc.
Effective September 20, 1995, the Company acquired Red River Marine, Inc.
(Red River) with retail store locations in Hot Springs and Heber Springs,
Arkansas. This acquisition included land and building (Hot Springs
location) and boat, motor and trailer inventory, as well as parts and
accessories inventory of each location. The purchase price was
$2,517,417, of which $917,417 was paid in cash and $1,600,000 was
financed by the issuance of notes payable to the seller.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Red River have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($2,517,417) and liabilities assumed
($437,150) have been allocated to the tangible net assets acquired
($1,904,567) based on their respective fair values at the date of
acquisition. The resulting excess purchase price ($1,050,000) was
allocated to a noncompete agreement and goodwill.
5. Income Taxes
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets are as follows:
September 30
1997 1996
----------- ----------
Deferred tax assets:
Book over tax depreciation $119,855 $ 39,187
Accrued salaries and wages 172,591 160,815
----------- ----------
Total deferred tax assets 292,446 200,002
Valuation allowance for
deferred tax assets - -
----------- ----------
Net deferred tax assets $292,446 $200,002
=========== ==========
5. Income Taxes (continued)
<TABLE>
<CAPTION>
Significant components of the provisions for income taxes are as follows:
Nine Months
ended
Year Ended Septmeber 30 September 30
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current expense:
Federal $ 1,992,732 $ 1,342,327 $ 1,243,371
State 232,343 171,000 42,925
------------ ------------ ------------
Total current expense 2,225,075 1,513,327 1,286,296
Deferred expense (benefit):
Federal (82,764) (56,171) (130,900)
State (9,681) (7,156) (5,775)
------------ ------------ ------------
Total deferred expense(benefit) (92,445) (63,327) (136,675)
------------ ------------ ------------
Total provision for income
taxes $ 2,132,630 $ 1,450,000 $ 1,149,621
============ ============ ============
</TABLE>
The differences between the effective tax rate and the U.S. federal
statutory rate of 34% are reconciled as follows:
<TABLE>
<CAPTION>
Nine Months
ended
Year Ended Septmeber 30 September 30
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income tax expense at the
federal statutory rate $ 2,078,863 $ 1,303,250 $ 1,087,937
State income taxes 222,662 163,844 37,150
Other (168,895) (17,094) 24,534
------------ ------------ ------------
$ 2,132,630 $ 1,450,000 $ 1,149,621
</TABLE>
5. Income Taxes (continued)
Income taxes paid were approximately $1,900,000, $1,088,000 and $855,000
in the years ended September 30, 1997 and 1996, and the nine months ended
September 30, 1995, respectively.
6. Stockholders' Equity
In November 1995, the Board of Directors of the Company approved a 15 to
1 stock dividend for stockholders of record as of November 8, 1995.
In May 1996, the Board of Directors of the Company approved a 1 for 3
stock dividend for stockholders of record as of May 3, 1996.
All share amounts presented in these financial statements have been
restated to retroactively reflect the above stock dividends.
Effective December 14, 1995, the Company changed the stated par value of
each share of common stock from $.10 to $.01. The financial statements
have been restated to retroactively reflect the above changes in par
value.
In March 1995, the Company granted options to purchase shares of the
Company's common stock to certain officers of the Company which vest over
five years.
Effective December 14, 1995, the Company adopted an Incentive Stock
Option Plan which provides for the granting of options to directors,
officers, and key employees to purchase shares of the Company's common
stock. The Company has reserved 200,000 shares of common stock for
issuance under such plan.
The Company has elected to follow Accounting Principles Board No. 25,
Accounting for Stock Issued to Employees (APB 25), and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, Accounting for Stock-Based Compensation
(Statement 123), requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals
market price of the underlying stock on the date of grant, no
compensation expense is recognized.
6. Stockholders' Equity (continued)
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to September 30, 1995 under the fair value method
prescribed by Statement 123. The Company has evaluated the effects of
Statement 123 and determined that it does not have a material effect on
the Company's statement of income or earnings per share.
Total option activity for the years ended September 30, 1997 and 1996 and
the nine months ended September 30, 1995 was as follows:
<TABLE>
<CAPTION>
Weighted
Range of Average
Number of Exercise Exercise
Shares Prices Price
----------------- ----------------- ----------------
<C> <C> <C>
Outstanding at December 31, 1994 - - -
Granted 133,867 $ 5.25 $ 5.25
Exercised - - -
Forfeited - - -
-----------------
Outstanding at September 30,1995 133,867 $ 5.25 $ 5.25
Granted 110,999 $ 9.00 $ 9.00
Exercised - - -
Forfeited (13,333) $ 9.00 $ 9.00
-----------------
Outstanding at September 30, 1996 231,533 $ 5.25 -$ 9.00 $ 6.83
Granted 33,500 $10.00-$13.125 $ 11.56
Exercised - - -
Forfeited (5,000) $ 9.00 $ 9.00
-----------------
Outstanding at September 30, 1997 260,033 $ 5.25 -$13.25 $ 7.40
=================
Exercisable at September 30, 1997 72,079
Options available for grant at
September 30, 1997 73,834
=================
Common stock reserved for
issuance at September 30, 1997 333,867
=================
</TABLE>
6. Stockholders' Equity (continued)
The weighted-average remaining contractual life of options at September
30, 1997 is 8.2 years. Options outstanding at September 30, 1997, are
comprised of the following:
Range of
Exercise
Options Prices
---------- ---------------
133,867 $5.25
92,666 $9.00
33,500 $10.00-$13.125
==========
260,033
7. Related Party Transactions
The Company sells extended service contracts to its customers. For the
period from January 1, 1994 through June 27, 1996, the obligations of the
Company under these contracts were transferred to Ideal Insurance
Company, Ltd. ("Ideal") pursuant to an agreement between the Company and
Ideal dated as of January 1, 1994. Ideal reinsured these risks with
Amerisure Property & Casualty, Ltd. ("Amerisure"), a company wholly owned
by certain principal shareholders of the Company. These contracts are
administered by First Extended Service Corporation ("FESC"), which
contracts are insured by FESC's affiliate, FFG Insurance Co. ("FFG"). In
conjunction with these agreements, the Company paid Amerisure an agreed
amount for each extended service contract which is insured and, in the
event of claims under any extended service contracts, Amerisure
reimburses the repair facility for the amount of covered claims.
Amerisure is then financially responsible for any repairs required
pursuant to the extended service contract. The Company received a
commission for each extended service contract that it sold. For the years
ended September 30, 1997 and 1996 and the nine months ended September 30,
1995, extended service contract commissions received from Amerisure
totaled approximately $-0-, $411,000 and $448,000, respectively. The
Company transferred the obligations under the extended service contracts
sold subsequent to June 27, 1996 to entities other than Ideal and
Amerisure.
8. Commitments and Contingencies
The Company is currently involved in several matters regarding pending or
threatened litigation in the normal course of business. Management does
not expect the ultimate resolution of these matters to have a material
adverse effect on the Company's consolidated financial statements.
9. Benefit Plan
In January 1995, the Company adopted a 401(k) retirement plan which is
available to all full-time employees. The Company may, in its discretion,
make matching contributions which the Company, in its discretion,
determines from year to year. The Company's expenses related to the plan
were not significant in the years ended September 30, 1997 and 1996 and
the nine-month period ended September 30, 1995.
10. Subsequent Event
In November 1997, the Company acquired substantially all of the assets of
Southeastern Marine Group, Inc. located in Hendersonville, Tennessee. The
purchase price was $1,730,133, of which $1,606,133 was paid in cash and
$124,000 was financed by the issuance of notes payable to the seller.
<PAGE>
EXHIBIT 10.33
ASSET PURCHASE AGREEMENT
BY AND AMONG
TRAVIS BOATING CENTER MISSISSIPPI, INC.,
McLEOD MARINE, INC.,
AND
GAIL AND J.W. McLEOD
DATED AS OF
MAY 30, 1997
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Sale of Assets.
1.1 Purchase and Sale of Assets
Section 2. Consideration
2.1 Purchase Price
2.2 Allocation of Consideration
2.3 Bulk Sales Act
Section 3. Assumed Liabilities and Excluded Assets.
3.1 Assignment and Assumption
Section 4. Representations and Warranties of Seller.
4.1 Organization and Qualification
4.2 Authority and Validity
4.3 No Breach or Violation
4.4 Assets
4.5 Contracts and Commitments
4.6 Compliance with Law
4.7 Legal Proceedings
4.8 Finders and Brokers
4.9 Access and Notice
4.10 Disclosure
Section 5. Representations and Warranties of Buyer.
5.1 Organization and Qualification
5.2 Authority and Validity
5.3 No Breach or Violation
Section 6. Closing; Termination.
6.1 Closing; Effective Date
6.2 Events of Termination
6.3 Liabilities in Event of Termination
6.4 Procedure Upon Termination
Section 7. Conditions to Closing.
7.1 Conditions to the Obligations of Buyer and Seller
7.2 Conditions to Obligations of Buyer
7.3 Conditions to Obligations of Seller
7.4 Waiver of Conditions
Section 8. Survival of Representations and Warranties; Indemnification.
8.1 Survival of Representations and Warranties
8.2 Indemnification by Seller
8.3 Indemnification by Buyer
8.4 Third Party Claims
Section 9. Covenants.
9.1 No Shopping
9.2 Notification of Certain Matters
9.3 Satisfaction of Conditions
9.4 Confidentiality
9.5 Transfer Taxes
9.6 Confidentiality
9.7 Consignment and Repair
9.8 Access to Records
Section 10. Definitions.
10.1 Affiliate
10.2 Boat Show Rights
10.3 Encumbrance
10.4 Governmental Authority
10.5 Intangibles
10.6 Legal Requirement
10.7 Net Cost
10.8 Permitted Encumbrances
10.9 Person
10.11 Purchased Assets
10.12 Purchased Boats, Motors, and Trailers
10.13 Other Definitions.
Section 11. Miscellaneous.
11.1 Parties Obligated and Benefited
11.2 Notices
11.3 Attorneys' Fees
11.4 Right to Specific Performance
11.5 Waiver
11.6 Captions
11.7 Choice of Law
11.8 Terms
11.9 Rights Cumulative
11.10 Further Actions
11.11 Time
11.12 Counterparts
11.13 Entire Agreement
11.14 Severability
11.15 Construction
11.16 Expenses
Exhibits and Schedules
Exhibit A Certificate (Seller)
Exhibit B Bill of Sale
Exhibit C Assignment and Assumption Agreement
Exhibit D Non-Competition Agreement (Individuals)
Exhibit E Non-Competition Agreement (Seller)
Exhibit F Certificate (Buyer)
Exhibit G Opinion of Seller's Counsel
Exhibit H Opinion of Buyer's Counsel
Schedule 1.1 Purchased Boats, Motors, & Trailers
Schedule 1.2 ProLine Parts and Accessories
Schedule 1.3 Boat Show Rights
Schedule 3.1 Seller's Contracts
Schedule 4.1 Capitalization
Schedule 4.4 Encumbrances
Schedule 4.7 Legal Proceedings
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of May 30,
1997, by and among Travis Boating Center Mississippi, Inc., a Texas
corporation ("Buyer"), McLeod Marine, Inc., a Mississippi corporation
("Seller"), and J.W. McLeod and Gail McLeod, individuals living in
Mississippi (together, "Owner").
Recitals
WHEREAS, Seller is engaged in the business of retail sale and
service of boats, motors, and trailers sold under the brand names
"ProLine," "Donzi," "Sprint," and "Polar" and related parts and
accessories at Seller's store in Pascagoula, Mississippi, and at Boat
Shows attended by Seller (the "Business"); and
WHEREAS, Buyer desires to purchase, and Seller desires to sell,
certain of Seller's assets used or held for use in the Business as
conducted by Seller, and Buyer desires to obtain dealership rights for
the product lines listed above (the "Purchased Lines").
NOW, THEREFORE, in consideration of the above recitals and of the
mutual agreements, representations, warranties, provisions, and
covenants herein contained, and other good and valuable consideration,
the parties hereto agree as follows:
Section 1. Sale of Assets.
1.1 Purchase and Sale of Assets. Subject to the terms
and conditions set forth in this Agreement, at the Closing,
Seller will sell to Buyer, and Buyer will purchase from Seller,
all of Seller's rights, title and interest in, to and under the
following Purchased Assets: (2. the new boats, motors, and
trailers in the Purchased Lines listed on Schedule 1.1 (the
"Purchased Boats, Motors, and Trailers"), (3. the ProLine Parts
and Accessories listed on Schedule 1.2, not to exceed $10,000 in
aggregate purchase price, (4. the Intangibles, and (5. the Boat
Show Rights listed on Schedule 1.3.
Section 2 Consideration.
2.1 Purchase Price. Buyer will pay the purchase price for
the Purchased Assets in the amounts set forth in this Section 2 (the
"Purchase Price") in immediately available funds at Closing.
2.1.1 Purchased Boats, Motors, and
Trailers: The aggregate Net Cost, of the Purchased Boats, Motors,
and Trailers listed on Schedule 1.1, as defined in Section 10.7
and determined jointly by Buyer and Seller.
2.1.2 ProLine Parts and Accessories: The
amount determined jointly by Buyer and Seller in accordance with
Section 10.10.
2.1.3 Intangibles and Boat Show Rights: $228,000.
2.2 Allocation of Consideration. The consideration payable
by Buyer under this Agreement will be allocated among the Assets as
set forth in Section 2.1. Buyer and Seller agree to be bound by such
allocation, will not take any position inconsistent with such
allocation, and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal,
state, and local tax returns, on the basis of such allocation.
2.3 Bulk Sales Act. Buyer and Seller waive compliance with
the provisions of the Mississippi Bulk Sales Act, subject to Section
8.2.1(v).
Section 3. Assumed Liabilities and Excluded Assets.
3.1 Assignment and Assumption. Seller will assign to Buyer,
and Buyer will assume and perform, the "Assumed Liabilities", which
are defined as: (a) obligations accruing and relating to periods
after the Effective Date under the contracts, oral and written, listed
on Schedule 3.1 hereof, and the Boat Show Rights, to the extent
assignable by Seller to Buyer (the "Seller's Contracts"), and (b)
warranty repair service on boats, motors and trailers in the Purchased
Lines that were sold by Seller prior to or on the Effective Date,
except Mariner outboard motors on such boats, provided that (i) Buyer
is recognized as an authorized warranty repair facility by the
manufacturer or extended service contract provider, as the case may
be, (ii) the requested warranty repair is covered under the applicable
manufacturer's warranty program or extended service contract, and
(iii) Seller and Owner use their best efforts to assist Buyer in
collecting reimbursement from such manufacturers or extended service
contract providers for repairs. Buyer will not assume or have any
responsibility for any liabilities or obligations of Seller other than
the Assumed Liabilities.
Section 4. Representations and Warranties of Seller.
To induce Buyer to enter into this Agreement, Seller and
Owner represent and warrant to Buyer, as of the Effective Date, as
follows:
4.1 Organization and Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Mississippi and has all requisite corporate power and
authority to own, lease and use the Purchased Assets as they are
currently owned, leased and used and to conduct the Business as it is
currently conducted. Seller is duly qualified or licensed to do
business and is in good standing under the laws of each jurisdiction
in which the character of the properties owned, leased or operated by
it or the nature of the activities conducted by it makes such
qualification necessary, except any such jurisdiction where the
failure to be so qualified or licensed and in good standing would not
have a material adverse effect on Seller or on the validity, binding
effect or enforceability of this Agreement. Set forth on Schedule 4.1
is the name and identity of each Person who owns of record or
beneficially any common stock, capital stock, or other securities of
Seller, has any right to vote with the owners of Seller, or has the
right to acquire any such securities or rights. Schedule 4.1 also sets
forth the amounts of all such securities or rights and the percentage
that each Person's securities or rights bears to the whole.
4.2 Authority and Validity. Seller has all requisite power
and authority to execute and deliver, to perform its obligations
under, and to consummate the transactions contemplated by, this
Agreement. The execution and delivery by Seller of, the performance
by Seller of its obligations under, and the consummation by Seller of
the transactions contemplated by this Agreement have been duly
authorized by all requisite action of Seller. This Agreement has been
duly executed and delivered by Seller and is the valid and binding
obligation of Seller, enforceable against Seller in accordance with
its terms, except insofar as enforceability may be affected by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect affecting creditors' rights
generally or by principles governing the availability of equitable
remedies.
4.3 No Breach or Violation. The execution, delivery and
performance of this Agreement by Seller will not: (a) violate any
provision of the charter or bylaws of Seller; (b) violate any Legal
Requirement; (c) require any consent, approval or authorization of, or
any filing with or notice to, any Person; or (d) (i) violate, conflict
with or constitute a breach of or default under, (ii) permit or result
in the termination, suspension or modification of, (iii) result in the
acceleration of (or give any Person the right to accelerate) the
performance of Seller under, or (iv) result in the creation or
imposition of any Encumbrance under, any Seller contract or agreement
or any other instrument evidencing any of the Purchased Assets or any
instrument or other agreement to which Seller is a party or by which
Seller or any of its assets is bound or affected, except, for purposes
of this clause (d), such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications, and accelerations as would
not, individually or in the aggregate, have a material adverse effect
on the Business or Seller.
4.4 Assets. Seller has exclusive, good and marketable title
to the Purchased Assets claimed by Seller. The Purchased Assets are
free and clear of all Encumbrances of any kind or nature, except (a)
Permitted Encumbrances and (b) Encumbrances disclosed on Schedule 4.4,
which will be removed or otherwise released of record effective at or
prior to the Closing, or for which executed releases in form
appropriate for filing by Buyer will be delivered to Buyer at Closing.
Except as set forth on Schedules 3.1 and 4.4, none of the Purchased
Assets is leased by Seller from any other Person. All the Purchased
Boats, Motors, and Trailers, and the ProLine Parts and Accessories,
are in good and operable condition and repair, ordinary wear and tear
excepted, and have been maintained in accordance with all applicable
safety codes.
4.5 Contracts and Commitments. Seller has disclosed to
Buyer all contracts and other contractual rights, oral and written,
relating to the Purchased Assets. Except as may be disclosed on
Schedule 3.1, each of the written agreements, contracts, commitments,
leases, plans and other instruments, documents and undertakings listed
on Schedule 3.1, including the Boat Show Rights, is valid and
enforceable in accordance with its terms; Seller is, and to the
knowledge of Seller and Owner, all other parties thereto are, in
compliance in all material respects with the provisions thereof;
Seller is not, and to the knowledge of Seller and Owner, no other
party thereto, is in default in the performance, observance or
fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default
thereunder; furthermore, except as may be disclosed on Schedule 3.1,
no such material agreement, contract, commitment, lease, plan or other
instrument, document or undertaking, in the reasonable opinion of
Seller and Owner, contains any contractual requirement with which
there is a reasonable likelihood the Seller, the Buyer, or any other
party thereto will be unable to comply.
4.6 Compliance with Law. The ownership, leasing and use of
the Assets as they are currently owned, leased and used and the
conduct of the Business as it is currently conducted do not violate
any Legal Requirement, which violations, individually or in the
aggregate, would have a material adverse effect on the Business.
Seller has not received notice claiming a violation by Seller or the
Business of any Legal Requirement applicable to Seller or the Business
as it is currently conducted and to Seller's best knowledge, there is
no basis for any claim that such a violation exists.
4.7 Legal Proceedings. Except as set forth on Schedule 4.7,
there is no judgment or order outstanding, or any action, suit,
complaint, proceeding or investigation by or before any Governmental
Authority or any arbitrator pending, or to Seller's best knowledge,
threatened, involving or affecting all or any part of the Business,
the Purchased Assets or Seller.
4.8 Finders and Brokers. Any liability for any financial
advisory, brokerage, finder's or similar fee or commission in
connection with the transactions contemplated by this Agreement will
be the liability of the party incurring the liability.
4.9 Access and Notice. Seller and Owner will permit Buyer
and its authorized representatives access to, and make available for
inspection, all of the Purchased Assets and Business of Seller related
to these assets, including employees, customers and suppliers, and
permit Buyer and its authorized representatives to inspect and make
copies of all documents, records and information with respect to the
Business related to the purchased assets or the Assets as Buyer or its
representatives may request. Seller and Owner will promptly notify
Buyer in writing of (a) any notice or communication relating to a
default or event that, with notice or lapse of time or both, could
become a default, under any contract, commitment or obligation to
which Seller is a party, or relating to the Business or the Purchased
Assets, and (b) any adverse change in the Seller's or the Business'
financial condition or the condition of the Purchased Assets.
Notwithstanding any of the above, "Business" means any business
associates with the assets to be purchased.
20. Disclosure. No representation or warranty by Seller in
this Agreement or in any Schedule or Exhibit to this Agreement, or any
statement, list or certificate furnished or to be furnished by Seller
pursuant to this Agreement, contains or will contain any untrue
statement of material fact, or omits or will omit to state a material
fact required to be stated therein or necessary to make the statements
contained therein not misleading in light of the circumstances in
which made.
Section 5. Representations and Warranties of Buyer.
To induce Seller to enter into this Agreement, Buyer
represents and warrants to Seller, as of the Effective Date, as
follows:
5.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Texas and has all requisite corporate power and
authority to carry on its business as currently conducted and to own,
lease, use and operate its assets.
5.2 Authority and Validity. Buyer has all requisite
corporate power and authority to execute and deliver, to perform its
obligations under, and to consummate the transactions contemplated by
this Agreement. The execution and delivery by Buyer of, the
performance by Buyer of its obligations under, and the consummation by
Buyer of the transactions contemplated by this Agreement have been
duly authorized by all requisite corporate action of Buyer and this
Agreement constitutes the valid and binding obligation of Buyer,
enforceable in accordance with its terms, except insofar as
enforceability may be limited or affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
5.3 No Breach or Violation. The execution, delivery
and performance of this Agreement by Buyer will not: (a) violate
any provision of the charter or bylaws of Buyer; (b) violate any
Legal Requirement; (c) require any consent, approval or
authorization of, or any filing with or notice to, any Person; or
(d) (2. violate, conflict with or constitute a breach of or
default under (without regard to requirements of notice, passage
of time or elections of any Person), (3. permit or result in the
termination, suspension or modification of, (4. result in the
acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (5. result in the creation or
imposition of any Encumbrance under, any instrument or other
agreement to which Buyer is a party or by which Buyer or any of
its assets is bound or affected, except for purposes of this
clause (d) such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications, and accelerations as
would not, individually or in the aggregate, have a material
adverse effect on Buyer or on the validity, binding effect or
enforceability of this Agreement.
Section 6 Closing; Termination.
6.1 Closing; Effective Date. The closing ("Closing") of the
transactions will be in Pascagoula, Mississippi, on or before June 30,
1997, on a date designated by Buyer upon three business days' notice
to Seller ("Closing Date"). The transactions will be effective as of
a date to be agreed upon prior to Closing by Buyer and Seller
("Effective Date").
6.2 Events of Termination. This Agreement may be terminated
and the transactions contemplated by this Agreement may be abandoned
at any time prior to the Closing:
6.2.1 by the mutual written consent of
Buyer and Seller; or
6.2.2 by either party if the Closing
shall not have taken place on or before June 30, 1997; provided,
however, that if the failure to consummate the transactions is
the result of (i) a breach or default by a party in the
performance of any of its obligations under this Agreement or
(ii) the failure of any representation or warranty of such party
to be accurate, then the termination of this Agreement will not
limit the right of the other party to pursue an action for
damages resulting from such breach or failure; and
6.3 Liabilities in Event of Termination. The termination of
this Agreement will in no way limit any obligation or liability of any
party based on or arising from a breach or default by such party with
respect to any of its representations, warranties, covenants or
agreements contained in this Agreement.
6.4 Procedure Upon Termination. In the event of the
termination of this Agreement by Buyer or Seller pursuant to Section
6.2.2, notice of such termination will promptly be given by the
terminating party to the other.
Section 7. Conditions to Closing.
7.1 Conditions to the Obligations of Buyer and Seller. The
obligations of each party to consummate the transactions contemplated
by this Agreement to take place at the Closing are subject to the
satisfaction or waiver, to the extent permitted by applicable Legal
Requirements, at or prior to the Closing Date, of each of the
following conditions:
7.1.1 No action, suit or proceeding is
pending or threatened by or before any Governmental Authority and
no Legal Requirement has been enacted, promulgated or issued or
deemed applicable to any of the transactions contemplated by this
Agreement by any Governmental Authority, which would (a) prohibit
Buyer's ownership or operation of all or a material portion of
the Purchased Assets, (b) compel Buyer to dispose of or hold
separate all or a material portion of the Purchased Assets as a
result of any of the transactions contemplated by this Agreement,
or (c) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
7.1.2 Buyer and Seller have completed
Schedules 1.1 and 1.2.
7.2 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement to
take place at the Closing are subject to the satisfaction or waiver,
to the extent permitted by applicable Legal Requirements, at or prior
to the Closing Date, of each of the following conditions:
7.2.1 Seller has performed and complied
in all material respects with each obligation, agreement,
covenant and condition required by this Agreement to be performed
or complied with by Seller at or prior to the Closing and has
delivered to Buyer a certificate, dated the Closing Date, signed
by Seller's President, to such effect, in substantially the form
attached as Exhibit A.
7.2.2 Seller has executed (or caused to
be executed) and delivered to Buyer each of the following items:
7.2.2.1 a Bill of Sale in substantially the form
attached as Exhibit B;
7.2.2.2 an Assignment and Assumption
Agreement in substantially the form attached as Exhibit C; and
7.2.2.3 applications for title, assignments
of Manufacturer's Statements of Origin, and such other transfer
instruments as Buyer may reasonably deem necessary or advisable
to transfer the Purchased Assets to Buyer and to perfect
Buyer's rights in the Purchased Assets.
7.2.3 By the Closing Date, Buyer will
have completed a due diligence review of the Business, operations
and financial statements of Seller related to the assets purchased,
the results of which are satisfactory to Buyer in its sole discretion.
7.2.4 Owner has signed and delivered to
Buyer a Non-Competition Agreement in substantially the form
attached as Exhibit D.
7.2.5 Seller has signed and delivered to
Buyer a Non-Competition Agreement in substantially the form
attached as Exhibit E.
7.2.6 Seller has delivered releases, in
form reasonably satisfactory to Buyer, of all Encumbrances
affecting any of the Purchased Assets (other than Permitted
Encumbrances) and a certificate of no taxes due with respect to
Seller and the Assets issued by appropriate Mississippi state
taxing authorities as of a date no earlier than 10 days prior to
the Closing.
7.2.7 Seller has provided Buyer with the
original invoices evidencing the net cost of the Purchased Boats,
Motors, and Trailers, and the ProLine Parts and Accessories, and
an inventory sheet detailing these items.
7.2.8 Buyer has received the opinion of
Brown, Watt & Buchanan in substantially the form attached as
Exhibit G.
7.2.9 The Purchased Lines dealer
agreements listed on Schedule 3.1 have been terminated and Buyer
has entered into dealer agreements for the Purchased Lines with
the manufacturers of the Purchased Lines.
7.2.10 Seller has completed Schedules 1.3,
3.1, 4.1, 4.4 and 4.7.
7.3 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement
to take place at the Closing are subject to the satisfaction or waiver
by Seller, to the extent permitted by applicable law, at or prior to
the Closing Date, of each of the following conditions:
7.3.1 Buyer has paid the Purchase Price
required to be paid at the Closing.
7.3.2 Buyer has performed and complied in
all material respects with each obligation, agreement, covenant
and condition required by this Agreement to be performed or
complied with by Buyer at or prior to the Closing and has
delivered to Seller a certificate, dated the Closing Date, signed
by Buyer's President, to such effect, in substantially the form
attached as Exhibit F.
7.3.3 Buyer has executed and delivered to
Seller an Assignment and Assumption Agreement in substantially
the form attached as Exhibit C.
7.3.4 Buyer has received the opinion of
Winstead Sechrest & Minick P.C. in substantially the form
attached as Exhibit H.
7.4 Waiver of Conditions. Any party may waive in writing
any or all of the conditions to its obligations under this Agreement.
Section 8. Survival of Representations and Warranties;
Indemnification.
8.1 Survival of Representations and Warranties. The
representations and warranties of Seller in this Agreement and in the
documents and instruments to be delivered by Seller pursuant to this
Agreement will survive the Closing without limitation until the third
anniversary of the Effective Date. The representations and warranties
of Buyer in this Agreement and in the documents and instruments to be
delivered by Buyer pursuant to this Agreement will survive the Closing
without limitation until the third anniversary of the Effective Date.
The periods of survival of the representations and warranties
prescribed by this Section 8.1 are referred to as the "Survival
Period". The liabilities of the parties under their respective
representations and warranties will expire as of the expiration of the
applicable Survival Period; provided, however, that such expiration
will not include, extend or apply to any representation or warranty,
the breach of which has been asserted by Buyer in written notice to
Seller before such expiration or about which Seller has given Buyer
written notice before such expiration indicating the facts or
conditions existing that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such
potential breach in reasonable detail). The covenants and agreements
of the parties in this Agreement and in the other documents and
instruments to be delivered by Seller or Buyer pursuant to this
Agreement will survive the Closing and will continue in full force and
effect without limitation.
8.2 Indemnification by Seller. Seller and Owner will
indemnify, defend and hold harmless Buyer and its shareholders and its
and their respective Affiliates, and the shareholders, directors,
officers, employees, agents, successors and assigns of any of such
Persons, from and against:
8.2.1 all losses, damages, liabilities,
deficiencies or obligations of or to Buyer resulting from or
arising out of (i) any breach of any then surviving
representation or warranty made by Seller in this Agreement, (ii)
any breach of any then surviving covenant, agreement or
obligation of Seller contained in this Agreement, (iii) any third
party claim with respect to any occurrence prior to or on the
Effective Date, without regard to whether such third party claim
with respect to such occurrence is asserted before or after the
Effective Date, including any matter described on Schedule 4.8,
(iv) any liability or obligation of Seller not included in the
Assumed Liabilities, including contingent liability for products
sold prior to the Effective Date, (v) any claim that the
transactions contemplated by this Agreement violate any bulk
transfer or fraudulent conveyance laws of any jurisdiction, and
(vi) any liability or obligation of Seller arising after the
Effective Date; and
8.2.2 all claims, actions, suits,
proceedings, demands, judgments, assessments, fines, interest,
penalties, costs and expenses (including settlement costs and
reasonable legal, accounting, experts' and other fees, costs and
expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause
8.2.1(i) and under one or more of clauses 8.2.1(ii) through 8.2.1(vi)
of this Section 8.2, Buyer's rights to pursue its claim under clauses
8.2.1(ii) through 8.2.1(vi), as applicable, will exist notwithstanding
the expiration of the Survival Period applicable to such claim under
clause 8.2.1(i).
8.3 Indemnification by Buyer. Buyer will indemnify, defend
and hold harmless Seller and Seller's officers, employees, agents,
successors and assigns, from and against:
8.3.1 all losses, damages, liabilities,
deficiencies or obligations of or to Seller or any such other
indemnified Person resulting from or arising out of (i) any
breach of any representation or warranty made by Buyer in this
Agreement, (ii) the breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or (iii) the
failure by Buyer to perform any of its obligations in respect of
the Assumed Liabilities; and
8.3.2 all claims, actions, suits,
proceedings, demands, judgments, assessments, fines, interest,
penalties, costs and expenses (including, without limitation,
settlement costs and reasonable legal, accounting, experts' and
other fees, costs and expenses) incident or relating to or
resulting from any of the foregoing.
In the event that an indemnified item arises under both clause
8.3.1(i) and under one or more of clauses 8.3.1(ii) or 8.3.1(iii) of
this Section 8.3, Seller's rights to pursue its claim under clauses
8.3.1(ii) or 8.3.1(iii), as applicable, will exist notwithstanding the
expiration of the Survival Period applicable to such claim under
clause 8.3.1(i).
8.4 Third Party Claims. Promptly (and in any event within
30 days) after the receipt by any party of notice of any claim,
action, suit or proceeding by any Person who is not a party to this
Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified
Party") will give reasonable written notice to the party from whom
indemnification is claimed (the "Indemnifying Party"). The
Indemnified Party will be entitled, at the sole expense and liability
of the Indemnifying Party, to exercise full control of the defense,
compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time (and in any event within 15 days)
after the giving of such notice by the Indemnified Party, (a) admits
in writing to the Indemnified Party the Indemnifying Party's liability
to the Indemnified Party for such Action under the terms of this
Section 8, (b) notifies the Indemnified Party in writing of the
Indemnifying Party's intention to assume such defense, and (c) retains
legal counsel reasonably satisfactory to the Indemnified Party to
conduct the defense of such Action. The other party will cooperate
with the party assuming the defense, compromise or settlement of any
such Action in accordance with this Agreement in any reasonable manner
that such party reasonably may request. If the Indemnifying Party so
assumes the defense of any such Action, the Indemnified Party will
have the right to employ separate counsel and to participate in (but
not control) the defense, compromise or settlement of the Action, but
the fees and expenses of such counsel will be at the expense of the
Indemnified Party unless (i) the Indemnifying Party has agreed to pay
such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the
Indemnified Party will have been advised by its counsel that there may
be one or more defenses available to it which are different from or
additional to those available to the Indemnifying Party, and in any
such case that portion of the fees and expenses of such separate
counsel that are reasonably related to matters covered by the
indemnity provided in this Section 8 will be paid by the Indemnifying
Party. No Indemnified Party will settle or compromise any such Action
for which it is entitled to indemnification under this Agreement
without prior written consent of the Indemnifying Party, unless the
Indemnifying Party has failed, after reasonable notice, to undertake
control of such Action in the manner provided in this Section 8.4. No
Indemnifying Party will settle or compromise any such Action (A) in
which any relief other than the payment of money damages is sought
against any Indemnified Party or (B) in the case of any Action
relating to the Indemnified Party's liability for any tax, if the
effect of such settlement would be an increase in the liability of the
Indemnified Party for the payment of any tax for any period beginning
after the Effective Date, unless the Indemnified Party consents in
writing to such compromise or settlement.
Section 9. Covenants.
9.1 No Shopping. Neither the Seller nor any agent or
representative of it will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or
the termination of this Agreement, directly or indirectly (a) solicit
or initiate the submission of proposals or offers from any Person for,
(b) participate in any discussions pertaining to, or (c) furnish any
information to any Person other than Buyer relating to, any direct or
indirect acquisition or purchase of all or any portion of the
Purchased Assets.
9.2 Notification of Certain Matters. Seller will promptly
notify Buyer of any fact, event, circumstance or action (a) which, if
known on the date of this Agreement, would have been required to be
disclosed to Buyer pursuant to this Agreement or (b) the existence or
occurrence of which would cause any of Seller's representations or
warranties under this Agreement not to be correct and complete.
9.3 Satisfaction of Conditions. Each party will use its
best efforts to satisfy, or to cause to be satisfied, the conditions
to the obligations of the other party to consummate the transactions
contemplated by this Agreement.
9.4 Transfer Taxes. In the event that any Governmental
Authority of the State of Mississippi or of any municipality, parish,
county or other subdivision thereof shall at any time impose or
otherwise require or demand payment by or from either Seller or Buyer
of any state or local sales, use, transfer, excise, documentary or
license taxes or fees or any other charge (including filing fees) with
respect to Seller's sale or transfer to Buyer of the Purchased Assets,
Seller will be responsible for the payment.
9.5 Confidentiality. No party will issue any press release
or make any other public announcement regarding this Agreement or the
transactions contemplated hereby without the consent of the other
parties. Each party will, and will cause its employees, consultants,
advisors and agents to, hold in confidence the terms of this Agreement
and any non-public information concerning another party obtained
pursuant to this Agreement. Notwithstanding the preceding, a party
may disclose such information to the extent required by any Legal
Requirement (including disclosure requirements under federal and state
securities laws), but the party proposing to disclose such information
will first notify and consult with the other parties concerning the
proposed disclosure, to the extent reasonably feasible. Each party
also may disclose such information to employees, consultants,
advisors, agents and actual or potential lenders whose knowledge is
necessary to facilitate the consummation of the transactions
contemplated by this Agreement. Each party's obligation to hold
information in confidence will be satisfied if it exercises the same
care with respect to such information as it would exercise to preserve
the confidentiality of its own similar information.
9.6 Consignment and Repair. In the event Seller or Owner is
required to retake possession of any boats, motors or trailers in the
Purchased Lines sold by Seller prior to the Effective Date, Buyer will
accept the products on consignment from Seller or Owner. Any repairs
will be pre-approved by Seller and will be paid for by Seller or
Owner.
9.7 Access to Records. Seller will allow Buyer reasonable
access to its records for a period of two years after the Effective
Date, for any reasonable business purpose related to the purchase of
the Purchased Assets.
Section 10. Definitions.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have
the meanings set forth below:
10.1 Affiliate. With respect to any Person, any other Person
controlling, controlled by or under common control with such Person,
with "control" for such purpose meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities or voting interests, by contract, or otherwise.
10.2 Boat Show Rights. All agreements and assets related to
any ProLine Boat Show or other manufacturer-specific boat shows and
marketing events related to one or more of the Purchased Lines, listed
on Schedule 1.3 and such agreements or contracts in the name of the
manufacturer.
10.3 Encumbrance. Any mortgage, lien, security interest,
security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, assessment or other such
charge, restrictive agreement, restriction, encumbrance, adverse
interest, restriction on transfer, or exception to or defect in title
or other ownership interest (including reservations, rights of way,
possibilities of reverter, encroachments, easements, rights of entry,
restrictive covenants, leases and licenses).
10.4 Governmental Authority. (i) The United States of
America, (ii) any state, commonwealth, territory or possession of the
United States of America and any political subdivision thereof
(including counties, municipalities and the like), (iii) any foreign
(as to the United States of America) sovereign entity and any
political subdivision thereof, or (iv) any agency, authority or
instrumentality of any of the foregoing, including any court,
tribunal, department, bureau, commission or board.
10.5 Intangibles. All rights granted to Buyer pursuant to
the Non-Competition Agreements.
10.6 Legal Requirement. Any statute, ordinance, code, law,
rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Governmental Authority, including
judicial decisions applying common law or interpreting any other Legal
Requirement.
10.7 Net Cost. The actual net cost to Seller of an item,
after all earned rebates and credits, plus freight charges (if any)
that have been paid by Seller to the manufacturer.
10.8 Permitted Encumbrances. The following Encumbrances:
(a) liens for taxes, assessments and governmental charges not yet due
and payable; (b) zoning laws and ordinances and similar Legal
Requirements; (c) rights reserved to any Governmental Authority to
regulate the affected property; and (d) as to real property interests,
any easements, rights-of-way, servitudes, permits, restrictions and
minor imperfections or irregularities in title which are reflected in
public records and which do not individually or in the aggregate
interfere with the right or ability to own, lease, use or operate
(whichever may be the case) the real property for the Business or to
convey good, marketable and indefeasible title to the real property;
provided that (i) Permitted Encumbrances will not include any item
which could materially adversely affect the conduct of the Business
and (ii) the classification of any item as a Permitted Encumbrance
will not affect any liability Seller may have for such item, including
pursuant to any indemnity obligation under this Agreement.
10.9 Person. Any natural person, corporation, partnership,
trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
10.10 ProLine Parts and Accessories. Seller's new parts and
accessories that are designed for and fit current production model
ProLine boats, and that are listed in current 1997 manufacturer price
books or computer disks, as inventoried on the Effective Date and
listed on Schedule 1.2, for which Buyer will pay Seller the lesser of
the manufacturer's 1997 published wholesale price or invoice amount,
after any applicable rebates or credits that have been earned.
10.11 Purchased Assets. The Purchased Boats, Motors, and
Trailers; the ProLine Parts and Accessories; Miscellaneous Assets; the
Intangibles; the Boat Show Rights; and Seller's Contracts, more
particularly described in Section 1.1 and on Schedules 1.1, 1.2, 1.3
and 3.1.
10.12 Purchased Boats, Motors, and Trailers. All of Seller's
new boats, motors, and trailers in the Purchased Lines as inventoried
on the Effective Date, described individually on Schedule 1.1.
10.13. Other Definitions. The following terms are defined in
the Sections indicated:
Term Section
Action 8.4
Assumed Liabilities 3.1
Business Recitals
Closing 6.1
Closing Date 6.1
Effective Date 6.1
Indemnifying Party; Indemnified Party 8.4
Purchase Price 2.1
Purchased Lines Recitals
Seller's Contracts 3.1
Survival Period 8.1
Section 11. Miscellaneous.
11.1 Parties Obligated and Benefited. Subject to the
limitations set forth below, this Agreement will be binding on the
parties and their respective assigns and successors in interest and
will inure solely to the benefit of the parties and their respective
assigns and successors in interest, and no other Person will be
entitled to any of the benefits conferred by this Agreement. Without
the prior written consent of the other parties, no party will assign
any of its rights under this Agreement or delegate any of its duties
under this Agreement, provided that Buyer may, without the consent of
any other party, (i) assign or delegate its rights or obligations
under this Agreement to a commonly controlled entity of Buyer, and
such assignee will be substituted for Buyer under this Agreement as
though it were the original party to this Agreement and Buyer will be
released from all obligations under this Agreement, and (ii) make a
collateral assignment of its rights hereunder to Buyer's or its
assignee's secured lenders.
11.2 Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement
will be in writing and will be deemed to have been duly given only if
delivered in person or sent by first class, prepaid, registered or
certified mail (return receipt requested), or delivered by commercial
courier (e.g., United Parcel Service or Federal Express) or, if
receipt is confirmed, by telecopier:
To Buyer at:
Travis Boating Center Mississippi, Inc.
13045 Research Blvd.
Austin, Texas 78750
Attention: Mike Perrine, Chief Financial Officer
Telecopy: 512/250-1207
With a copy (which will not constitute notice)
transmitted by telecopier to:
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
Attention: Walter Earl Bissex, Esq.
Telecopy: 512/370-2850
To Seller and Owner at:
Gail and J.W. McLeod
c/o Brown, Watt & Buchanan
3112 Canty Street
Pascagoula, Mississippi 39569
Attention: W. Lee Watt, Esq.
Telecopy: 601/762-0299
Any party may change the address to which notices are required to be
sent by giving notice of such change in the manner provided in this
Section 11.2. All notices will be deemed to have been received on the
date of delivery or on the third business day after mailing in
accordance with this Section, except that any notice of a change of
address will be effective only upon actual receipt.
11.3 Attorneys' Fees. In the event of any action or suit
based upon or arising out of any alleged breach by any party of any
representation, warranty, covenant or agreement contained in this
Agreement, the prevailing party will be entitled to recover reasonable
attorneys' fees and other costs of such action or suit from the other
party.
11.4 Right to Specific Performance. Seller acknowledges that
the unique nature of the Assets to be purchased by Buyer pursuant to
this Agreement renders money damages an inadequate remedy for the
breach by Seller of its obligations under this Agreement, and Seller
agrees that in the event of such breach, Buyer will upon proper action
instituted by it, be entitled to a decree of specific performance of
this Agreement.
11.5 Waiver. Neither this Agreement nor any of its
provisions may be waived except in writing. The failure of any party
to enforce any right arising under this Agreement on one or more
occasions will not operate as a waiver of that or any other right on
that or any other occasion.
11.6 Captions. The section captions of this Agreement are
for convenience only and do not constitute a part of this Agreement.
11.7 Choice of Law. This agreement and the rights of the
parties under it will be governed by and construed in all respects in
accordance with the laws of the State of Texas, without regard to the
conflicts of laws rules of Texas. Any litigation resulting from any
dispute among the parties must be filed in Travis County, Texas.
11.8 Terms. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural
forms, for all purposes of this Agreement. The word "include" and
derivatives of that word are used in this Agreement in an illustrative
sense rather than a limiting sense.
11.9 Rights Cumulative. All rights and remedies of each of
the parties under this Agreement will be cumulative, and the exercise
of one or more rights or remedies will not preclude the exercise of
any other right or remedy available under this Agreement or applicable
law.
11.10 Further Actions. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for
no additional consideration and at no additional cost to the
requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably
necessary to give full effect to this Agreement and to allow each
party fully to enjoy and exercise the rights accorded to and acquired
by it under this Agreement.
11.11 Time. Time is of the essence under this Agreement. If
the last day permitted for the giving of any notice or the performance
of any act required or permitted under this Agreement falls on a day
which is not a business day, the time for the giving of such notice or
the performance of such act will be extended to the next succeeding
business day.
11.12 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original.
11.13 Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are
incorporated into and constitute a part of this Agreement) contains
the entire agreement of the parties and supersedes all prior oral or
written agreements and understandings with respect to the subject
matter of this Agreement. This Agreement may not be amended or
modified except by a writing signed by the parties.
11.14 Severability. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining rights of the Person intended to be
benefited by such provision or any other provisions of this Agreement.
11.15 Construction. This Agreement has been negotiated by
Buyer and Seller and their respective legal counsel, and legal or
equitable principles that might require the construction of this
Agreement or any provision of this Agreement against the party
drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
11.16 Expenses. Except as otherwise expressly provided in
this Agreement, each party will pay all of its own expenses, including
attorneys' and accountants' fees, in connection with the negotiation
of this Agreement, the performance of its obligations and the
consummation of the transactions contemplated by this Agreement.
****** END OF PAGE ******
The parties have executed this Agreement as of the day and year
first above written.
BUYER:
TRAVIS BOATING CENTER MISSISSIPPI, INC.
By: _____/S/____________________
Ron Spradling, Executive Vice President
SELLER:
McLEOD MARINE, INC.
By: _____/S/____________________
J.W. McLeod, President
OWNER:
__________/S/_________________
J.W. McLeod
__________/S/_________________
Gail McLeod
WITNESS:
__________/S/_________________
Trudy R. Bream
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (the "Agreement"), dated as of
August 1, 1997, is among TRAVIS BOATS & MOTORS, INC., a Texas
corporation ("Travis"), TRAVIS BOATING CENTER MISSISSIPPI, INC., a
Texas corporation and wholly-owned subsidiary of Travis
("Buyer"), both having an office for the purpose of notice at 13045
Research Blvd., Austin, Texas 78750, and Gail and J.W. McLeod,
individuals residing at 2406 Pintail Lane,
Moss Point, Mississippi (together, "Owners").
WHEREAS, Buyer has agreed to acquire the Business of McLeod
Marine, Inc., a Mississippi corporation ("Seller"), pursuant to
that certain asset purchase agreement dated May 30, 1997 (the
"Purchase Agreement") among Buyer, Seller and Owners (the capitalized
terms used herein have the meanings assigned to them in the Purchase
Agreement unless otherwise defined herein); and
WHEREAS, Owners own 100% of the outstanding shares of capital
stock of Seller; and
WHEREAS, Owners have established a valuable, far-reaching
personal reputation in the boat, boat accessory and water sports sales
business; and
WHEREAS, the parties hereto agree that the reasonable market area
of a business such as the Business is approximately a 150-mile radius;
and
WHEREAS, it is a condition precedent to the closing of the
purchase under the Purchase Agreement that Owners shall have entered
into this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and of the
mutual covenants, terms and conditions hereinafter expressed, Travis,
Buyer and Owners agree as follows:
Section 1.
1.1 Non-Competition. Neither Owner will, for any reason:
1.1.1 Object to or oppose efforts by Travis or
any Affiliate of Travis to obtain a dealer agreement or
agreements allowing the retail sale of ProLine, Donzi, Sprint or
Polar brand boats and related accessories (the "Dealer
Agreements"), or obtain such Dealer Agreements himself or
herself, anywhere within 150 miles of the location of Seller's
store in Pascagoula, Mississippi; or
1.1.2 Compete with Buyer, Travis, or any other
Affiliate of Travis in the retail sale of new ProLine, Donzi,
Sprint or Polar brand boats anywhere within 150 miles of the
location of Seller's store in Pascagoula, Mississippi.
1.2 Owners agree that Travis and Buyer will not be able to
recognize the value of the Purchased Assets unless Buyer is able to
engage in the successful operation of the Business, that the non-
competition provisions set forth in Section 1.1 are ancillary to the
Purchase Agreement, that the Purchase Agreement is an otherwise
enforceable agreement, and that the non-competition provisions in this
Agreement are therefore ancillary to an otherwise enforceable
agreement. Owners further agree that the non-competition provisions
set forth above are supported by independent valuable consideration
and contain reasonable limitations as to the time, geographical area,
and scope of activity for which they are to be restrained; and that
the limitations of the non-competition provisions do not impose a
greater restraint than is necessary to protect the goodwill or other
business interests of Travis and Buyer. It is agreed by the parties
that the restrictions contained in Section 1.1 impose, on the date of
the execution of this Agreement, a reasonable restraint on Seller in
light of the activities and businesses of Travis and Buyer and their
future plans.
1.3 For the purposes of this Agreement, Owners will be deemed to
have obtained Dealer Agreements if they have an interest in any such
Dealer Agreements directly or indirectly, whether for their own
account or for that of any other person, firm or corporation, and
whether as a stockholder (except solely as a stockholder in a publicly
held corporation with more than 500 holders of common stock and as to
which he owns, in the aggregate, less than 5% of any class of stock),
director, officer, employee, consultant, partner, joint venturer,
principal, agent, proprietor, consultant, manager, independent
contractor, sales representative, landlord, lessor, lender, guarantor,
or in any other capacity.
Section 2.
2.1 Term. The term of this Agreement will commence on the date
hereof and will terminate on the fifth anniversary of such date.
2.2 Remedies. Owner acknowledges that a breach of any of the
provisions of Section 1 will cause irreparable harm to Travis and
Buyer, for which there may be no adequate remedy at law and for which
the ascertainment of damages would be difficult. Therefore, Travis
and Buyer will be entitled to specific performance of Section 1
hereof, in addition to, and without having to prove the inadequacy of,
other remedies at law, as well as injunctive relief (without being
required to post bond or other security), and, if such legal action
becomes necessary, Travis and Buyer will be entitled to recover
reasonable attorney's fees and costs of court incurred in connection
with such action. Nothing contained herein will be construed as
prohibiting Travis and Buyer from pursuing any other remedies
available to it for such breach, including the recovery of money
damages.
2.3 Notices. Notices and demands provided for under this
Agreement will be in writing and will be deemed to be fully given and
received if sent by registered mail, postage prepaid, to the
respective party at the address listed at the beginning of this
Agreement.
2.4 Assignment. Buyer or Travis may assign its rights or
obligations hereunder to any Affiliate of Buyer or Travis or any
successor to the business of Buyer or Travis by merger, consolidation,
sale of assets, or otherwise.
2.5 Reformation; Severability. Whenever possible, each
provision of this Agreement will be interpreted so as to be legal,
valid and enforceable under applicable law, but in the event any
provision of this Agreement is held to be prohibited, unenforceable or
invalid under applicable law, the parties agree that such provision
will automatically be deemed modified for purposes of performance of
this Agreement to the extent necessary to render it lawful, valid and
enforceable, or if such modification is not possible without
materially altering the intent of the parties, that such provision
will automatically be deemed severed from this Agreement to the extent
of such prohibition, unenforceability, or invalidity. The validity of
the remaining provisions of this Agreement will not be altered by any
such modification or severance.
2.6 Amendment of Agreement. Except as set forth in Section 2.5,
this Agreement may not be amended, modified, or supplemented except
by a writing signed by all parties.
2.7 Governing Law; Venue. THIS AGREEMENT WILL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES OF TEXAS. Each of the
undersigned irrevocably agrees that any legal action or proceeding
brought against said Person with respect to this Agreement will be
brought in the appropriate court in Travis County, Texas and hereby
waives any right to be sued in any other place.
2.8 Construction. This Agreement constitutes the entire
Agreement between the parties and will be binding upon and inure to
the benefit of the parties hereto and their permitted successors and
assigns. No terms or understandings not herein contained will apply
unless in writing and signed by all parties subsequent to execution of
this Agreement. This Agreement is intended to benefit only the
parties hereto and no third party will have any right to enforce this
Agreement or receive any benefits hereof.
IN WITNESS WHEREOF, Travis, Buyer and Owner have executed this
Agreement, in the manner appropriate to each, as of the day and year
first above written.
TRAVIS BOATS & MOTORS, INC.
By:__/s/______________________ Michael B. Perrine
CFO, Secretary, Treasurer
TRAVIS BOATING CENTER MISSISSIPPI, INC.
By:__/s/______________________ Michael B. Perrine
CFO, Secretary, Treasurer
___/s/___________________________
J.W. McLeod
___/s/___________________________
Gail McLeod
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (the "Agreement"), dated as of
August 1, 1997, is among TRAVIS BOATS & MOTORS, INC., a Texas
corporation ("Travis"), TRAVIS BOATING CENTER MISSISSIPPI, INC., a
Texas corporation and wholly owned subsidiary of Travis ("Buyer"),
both having an office for the purpose of notice at 13045 Research
Blvd., Austin, Texas 78750, and McLEOD MARINE, INC., a Mississippi
corporation ("Seller") with an office for the purpose of notice at
1824 Denny Ave., Pascagoula, Mississippi.
WHEREAS, Buyer has agreed to acquire the Business of Seller
pursuant to that certain asset purchase agreement dated May 30, 1997
(the "Purchase Agreement") among Buyer, Seller and
Gail and J.W. McLeod (the capitalized terms used herein
have the meanings assigned to them in the Purchase Agreement unless
otherwise defined herein); and
WHEREAS, the parties hereto agree that the reasonable market area
of a business such as the Business is approximately a 150-mile radius;
and
WHEREAS, it is a condition precedent to the closing of the
purchase under the Purchase Agreement that Seller shall have entered
into this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and of the
mutual covenants, terms and conditions hereinafter expressed, Travis,
Buyer and Seller agree as follows:
Section 1.
1.1 Non-Competition. Seller will not, for any reason:
1.1.1 Object to or oppose efforts by Travis or
any Affiliate of Travis to obtain a dealer agreement or
agreements allowing the retail sale of ProLine, Donzi, Sprint or
Polar brand boats and related accessories (the "Dealer
Agreements"), or obtain such Dealer Agreements itself anywhere
within 150 miles of the location of Seller's store in Pascagoula,
Mississippi; or
1.1.2 Compete with Buyer, Travis, or any other
Affiliate of Travis in the retail sale of new ProLine, Donzi,
Sprint or Polar brand boats anywhere within 150 miles of the
location of Seller's store in Pascagoula, Mississippi.
1.2 Seller agrees that Travis and Buyer will not be able to
recognize the value of the Purchased Assets unless Buyer is able to
engage in the successful operation of the Business, that the non-
competition provisions set forth in Section 1.1 are ancillary to the
Purchase Agreement, that the Purchase Agreement is an otherwise
enforceable agreement, and that the non-competition provisions in this
Agreement are therefore ancillary to an otherwise enforceable
agreement. Seller further agrees that the non-competition provisions
set forth above are supported by independent valuable consideration
and contain reasonable limitations as to the time, geographical area,
and scope of activity for which he is to be restrained; and that the
limitations of the non-competition provisions do not impose a greater
restraint than is necessary to protect the goodwill or other business
interests of Travis and Buyer. It is agreed by the parties that the
restrictions contained in Section 1.1 impose, on the date of the
execution of this Agreement, a reasonable restraint on Seller in light
of the activities and businesses of Travis and Buyer and their future
plans.
1.3 For the purposes of this Agreement, Seller will be deemed to
have obtained Dealer Agreements if it has an interest in any such
Dealer Agreements, directly or indirectly, whether for its own account
or for that of any other person, firm or corporation, and whether as a
stockholder (except solely as a stockholder in a publicly held
corporation with more than 500 holders of common stock and as to which
he owns, in the aggregate, less than 5% of any class of stock),
director, officer, employee, consultant, partner, joint venturer,
principal, agent, proprietor, consultant, manager, independent
contractor, sales representative, landlord, lessor, lender, guarantor,
or in any other capacity.
Section 2.
2.1 Term. The term of this Agreement will commence on the date
hereof and will terminate on the fifth anniversary of such date.
2.2 Remedies. Seller acknowledges that a breach of any of the
provisions of Section 1 will cause irreparable harm to Travis and
Buyer, for which there may be no adequate remedy at law and for which
the ascertainment of damages would be difficult. Therefore, Travis and
Buyer will be entitled to specific performance of Section 1 hereof, in
addition to, and without having to prove the inadequacy of, other
remedies at law, as well as injunctive relief (without being required
to post bond or other security), and, if such legal action becomes
necessary, Travis and Buyer will be entitled to recover reasonable
attorney's fees and costs of court incurred in connection with such
action. Nothing contained herein will be construed as prohibiting
Travis and Buyer from pursuing any other remedies available to it for
such breach, including the recovery of money damages.
2.3 Notices Notices and demands provided for under this
Agreement will be in writing and will be deemed to be fully given and
received if sent by registered mail, postage prepaid, to the
respective party at the address listed at the beginning of this
Agreement.
2.4 Assignment. Buyer or Travis may assign its rights or
obligations hereunder to any Affiliate of Buyer or Travis or any
successor to the business of Buyer or Travis, by merger,
consolidation, sale of assets, or otherwise.
2.5 Reformation; Severability. Whenever possible, each
provision of this Agreement will be interpreted so as to be legal,
valid and enforceable under applicable law, but in the event any
provision of this Agreement is held to be prohibited, unenforceable or
invalid under applicable law, the parties agree that such provision
will automatically be deemed modified for purposes of performance of
this Agreement to the extent necessary to render it lawful, valid and
enforceable, or if such modification is not possible without
materially altering the intent of the parties, that such provision
will automatically be deemed severed from this Agreement to the extent
of such prohibition, unenforceability, or invalidity. The validity of
the remaining provisions of this Agreement will not be altered by any
such modification or severance.
2.6 Amendment of Agreement. Except as set forth in Section 2.5,
this Agreement may not be amended, modified, or supplemented except by
a writing signed by all parties.
2.7 Governing Law; Venue. THIS AGREEMENT WILL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES OF TEXAS. Each of the undersigned
irrevocably agrees that any legal action or proceeding brought against
said Person with respect to this Agreement will be brought in the
appropriate court in Travis County, Texas and hereby waives any right
to be sued in any other place.
2.8 Construction. This Agreement constitutes the entire
Agreement between the parties and will be binding upon and inure to
the benefit of the parties hereto and their permitted successors and
assigns. No terms or understandings not herein contained will apply
unless in writing and signed by all parties subsequent to execution of
this Agreement. This Agreement is intended to benefit only the parties
hereto and no third party will have any right to enforce this
Agreement or receive any benefits hereof.
IN WITNESS WHEREOF, Travis, Buyer and Seller have executed this
Agreement, in the manner appropriate to each, as of the day and year
first above written.
TRAVIS BOATS & MOTORS, INC.
By:__/s/______________________ Michael B. Perrine
CFO, Secretary, Treasurer
TRAVIS BOATING CENTER MISSISSIPPI, INC.
By:__/s/______________________ Michael B. Perrine
CFO, Secretary, Treasurer
McLEOD MARINE, INC.
By:___/s/_________________________
J.W. McLeod, President
<PAGE> EXHIBIT 10.34
STOCK PURCHASE AGREEMENT
AMONG
TRAVIS BOATING CENTER FLORIDA, INC.
("BUYER")
AND
FREDERIC D. PACE
AND
JOHN W. REINHOLD
("SELLERS")
SEPTEMBER 30, 1997
PROVIDING FOR THE PURCHASE OF
100% OF THE COMMON STOCK OF
ADVENTURE BOAT BROKERAGE, INC.,
A FLORIDA CORPORATION
<PAGE>
TABLE OF CONTENTS
1. Definitions
2. Purchase and Sale of Company Shares
2.1. Basic Transaction
2.2. Purchase Price
2.3. The Closing
2.4. Deliveries at the Closing
2.5. Post Closing Adjustments.
3. Representations and Warranties Concerning the Transaction
3.1. Representations and Warranties of the Sellers
3.2. Representations and Warranties of the Buyer
4. Representations and Warranties Concerning the Company.
4.1. Organization, Qualification, and Corporate Power
4.2. Capitalization
4.3. Noncontravention
4.4. Brokers' Fees
4.5. Title to Assets
4.6. Subsidiaries
4.7. Financial Statements
4.8. Events Subsequent to Most Recent Fiscal Year End
4.9. Undisclosed Liabilities
4.10. Legal Compliance
4.11. Tax Matters
4.12. Real Property
4.13. Intellectual Property
4.14. Tangible Assets
4.15. Condition of Assets.
4.16. Contracts
4.17. Notes and Accounts Receivable
4.18. Powers of Attorney
4.19. Insurance
4.20. Litigation
4.21. Product Warranty
4.22. Product Liability.
4.23. Employees.
4.24. Employee Benefits.
4.25. Guaranties
4.26. Environment, Health, and Safety
4.27. Disclosure
5. Pre-Closing Covenants.
5.1. General.
5.2. Notices and Consents.
5.3. Operation of Business.
5.4. Preservation of Business.
5.5. Full Access.
5.6. Notice of Developments.
5.7. Exclusivity.
6. Post-Closing Covenants
6.1. General
6.2. Litigation Support
6.3. Transition
6.4. Confidentiality
6.5. Buyer Notes
6.6. Registration of Travis Parent Stock
6.7. Pre-Closing Sales
6.8. Use of Name
6.9. Accounts Receivable.
6.10. Non-Compete.
7. Conditions to Obligation to Close
7.1. Conditions to Obligation of the Buyer
7.2. Conditions to Obligation of the Sellers
8. Remedies
8.1. Indemnification Provisions for Benefit of the Buyer
8.2. Indemnification Provisions for Benefit of the Sellers
8.3. Matters Involving Third Parties
8.4. Determination of Adverse Consequences
8.5. Set-off Under Buyer Note
8.6. Other Indemnification Provisions
9. Tax Matters
9.1. Tax Periods Ending on or Before the Closing Date
9.2. Tax Periods Beginning Before and Ending After the Closing Date
9.3. Cooperation on Tax Matters
9.4. Tax Sharing Agreements
9.5. Certain Taxes
10. Termination
10.1. Termination of Agreement
10.2. Effect of Termination
11. Miscellaneous
11.1. Nature of Certain Obligations
11.2. Press Releases and Public Announcements
11.3. No Third-Party Beneficiaries
11.4. Entire Agreement
11.5. Succession and Assignment
11.6. Counterparts
11.7. Headings
11.8. Notices
11.9. Governing Law and Venue
11.10. Amendments and Waivers
11.11. Severability
11.12. Expenses
11.13. Construction
11.14. Incorporation of Exhibits and Schedules
11.15. Specific Performance
11.16. Attorney's Fees
11.17. Further Cooperation.
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into on
September 30, 1997, by and among TRAVIS BOATING CENTER FLORIDA, INC. a
Texas corporation (the "Buyer"), and FREDERIC D. PACE and JOHN W.
REINHOLD (collectively the "Sellers").
Recitals:
The Sellers in the aggregate own all of the outstanding capital
stock of Adventure Boat Brokerage, Inc. a Florida corporation (the
"Company").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of
the outstanding capital stock of the Company in return for (i) cash, (ii)
shares of voting common stock of Travis Boats & Motors, Inc., a Texas
corporation, the sole shareholder of the Buyer ("Travis Parent"), and
(iii) the Buyer Notes (as defined below).
Now, therefore, in consideration of the premises and the mutual
promises, of the representations, warranties, and covenants contained
herein, the parties agree as follows.
A. Definitions.
"Accounts Receivable, means all of the accounts receivable of the
Company, as listed on Exhibit "A".
"Adventure North" means Adventure Marine & Outdoors, Inc., a Florida
corporation.
"Adventure South" means Adventure Marine South, Inc., a Florida
corporation.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Sec. 1504 or any similar group defined under a similar provision of
state, local or foreign law.
"Applicable Rate" means 7 1/2%.
"Assets" means all properties, privileges, rights, interests and
claims, personal, tangible and intangible, of every type and description
(including, without limitation, New Boats, Motors, and Trailers, Used
Boats, Motors, and Trailers, Parts, Accessories, Miscellaneous Assets,
Intellectual Property, Deposits, Accounts Receivable and Boat Show
Rights) that are used, or held for use, by the Company or the Sellers in
the Business and in which the Company or the Sellers has any right, title
or interest (or in which the Company or the Sellers hereafter acquires
any right, title or interest on or before the Closing Date), but
specifically excludes all Excluded Assets.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Boat Shows" means all boat shows at which the Company has had a
booth or made a presentation in any of the last five (5) years.
"Boat Show Rights" means all of the Company's agreements for space
at Boat Shows, including common stock and other ownership rights in
corporations, partnerships, and other types of entities holding Boat
Shows.
"Business" means the retail and wholesale sales and service of
boats, motors, trailers, marine accessories and water sporting goods at
the store located in Ft. Walton Beach, Florida, and at Boat Shows
attended by the representatives of the Company.
"Buyer" has the meaning set forth in the preface above.
"Buyer Notes" has the meaning set forth in paragraph 2.2 below.
"Closing" has the meaning set forth in paragraph 2.3 below.
"Closing Date" has the meaning set forth in paragraph 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Share" or "Share" means any share of the Common Stock, par
value $1.00 per share, of the Company.
"Confidential Information" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth in Code
Sec. 1563.
"Current Accounts Receivable" means those Accounts Receivable of the
Company that are (i) aged less than 60 days as of the Closing Date, and
(ii) are not Accounts Receivable due from Affiliates of the Sellers or
the Company. The Current Accounts Receivable are identified on the list
of Accounts Receivable on Exhibit "A".
"Deposits" means all customer prepaids, tax deposits, utility
deposits and deposits relating to customer special orders as of the
Closing Date.
"Disclosure Schedule", has the meaning set forth in part 4 below.
"Employee Benefit Plan", means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Environmental, Health, and Safety Laws, means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" means those assets of the Company that will be
assigned to the Sellers or an Affiliate of the Sellers immediately prior
to Closing. The Excluded Assets are listed on Exhibit "B" to this
Agreement. All inventory on loan or consignment shall be Excluded
Assets, regardless of whether such items are specifically listed in
Exhibit "B".
"Excluded Liabilities" means those liabilities and obligations of
the Company to be assumed by the Sellers, or an Affiliate of the Sellers,
prior to the Closing. The Excluded Liabilities are listed on Exhibit
"C".
"Extremely Hazardous Substance" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in paragraph 4.5
below.
"Indemnified Party" has the meaning set forth in paragraph 7.4
below.
"Indemnifying Party" has the meaning set forth in paragraph 7.4
below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in- part, revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith,
including without limitations all rights in and to "Adventure Marine" and
"Adventure Boat Brokerage" and any derivations thereof, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information related to the
Business and the Company (including rights of publicity, customer lists,
supplier lists, ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, pricing and cost
information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof (in what ever form or medium).
"Inventory" means the inventory of the Company based on a physical
inspection of the Company as of the Closing Date. Used inventory shall
be subject to a mutually agreeable value among the parties, but in no
case shall any used inventory value exceed the current "wholesale" value
as set forth in the most recent "Yellow" used boat guide or such other
used boat reference as may be mutually agreeable.
"Invoice" means a document reflecting a manufacturer's cost of
Assets and related options or accessories on such Assets.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability of the Company (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including without limitation any liability
for Taxes, payroll expenses, operating expenses, insurance audit expense,
accounts payable to the Sellers, to third parties and to Affiliates of
the Sellers, lease payment and interest payments.
"Miscellaneous Assets" means all furniture, fixtures, vehicles,
leasehold improvements, equipment and other assets of the Company,
including all Rebates for products previously sold for which no Rebate
has been paid to the Company.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
paragraph 4.7 below.
"Most Recent Fiscal Month End" has the meaning set forth in
paragraph 4.7 below.
"Most Recent Fiscal Year End" has the meaning set forth in
paragraph 4.7 below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"New Boats, Motors, and Trailers" means all new boats, motors, and
trailers owned by the Company. The value of New Boats, Motors and
Trailers shall be determined based on Invoice, net of Rebates.
"Net Asset Value" means (a) the sum of the value, at Closing, of (i)
Miscellaneous Assets, (ii) Boat Show Rights, (iii) Parts, (iv) New Boats,
Motors, and Trailers, (v) Used Boats, Motors, and Trailers, (vi)
Intellectual Property, (vii) 100% of the face amount of the Current
Accounts Receivable, (viii) Deposits, and (ix) the Company's cash minus
(b) the sum of (i) all trade accounts payable, (ii) accrued but unpaid
operating expenses (including Taxes) and floor plan notes existing as of
the date of Closing, (iii) physical damage to any of the Assets or
Inventory, (iv) parts missing from the Assets or Inventory based upon a
physical inspection of the Assets and Inventory, (v) 50% of the face
amount of the Current Accounts Receivable, and (vi) any other Liabilities
assumed by the Buyer. The value assigned to each asset shall be net of
depreciation. The calculation of the Net Asset Value, which includes a
detailed calculation of the value of each category the of the Assets, as
of the Closing date, is attached hereto as Exhibit "D",
"Ordinary Course of Business" means the ordinary course of business
consistent with the Company's past custom and practice (including with
respect to quantity and frequency).
"Other Buyer Notes" means those promissory notes issued to the
Sellers in connection with the sale of Adventure North and Adventure
South.
"Parts" means all parts of the Company inventoried on the Closing
Date. The parts and accessories so identified in the physical inventory
and found in the most recent price disks/books from their respective
manufacturers shall be purchased by Travis at the lower of the most
recent wholesale price evidenced by such price disks/books or the
original invoice amount.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Pre-Closing Sales" has the meaning set forth in paragraph 3.1(e)
below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec.
406 and Code Sec. 4975.
"Purchase Price" has the meaning set forth in paragraph 2.2 below.
"Rebate" means all sums paid or payable from a vendor to the
Company.
"Registration Statement" shall have the meaning set forth in
section 5.6.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Seller" has the meaning set forth in the preface above.
"Set-Off" means the Buyer's right to recoup all or part of Adverse
Consequences that it may suffer; such right shall be exercisable by
notifying the Seller that it is reducing the principal amount outstanding
under the Buyer Notes and/or the Other Buyer Notes.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common
stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Reserve" has the meaning set forth in paragraph 4.11(g) below.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in paragraph 7.3
below.
"Travis Parent" means Travis Boats & Motors, Inc., a Texas
corporation.
"Travis Parent Stock" means the voting common stock, par value $0.01
per share, of Travis Parent.
"Used Boats, Motors, and Trailers" means all used boats, motors,
and trailers owned by the Company. The Used Boats, Motors and Trailers
shall be subject to a mutually agreeable value among the parties, but in
no case shall any used inventory value exceed the current "wholesale"
value as set forth in the most recent "Yellow" used boat guide or such
other used boat reference as may be mutually agreeable.
B. Purchase and Sale of Company Shares.
1. Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from each of
the Sellers, and each of the Sellers agrees to sell to the Buyer, all of
his Shares for the consideration specified in paragraph 2.2.
Notwithstanding the foregoing, however, immediately prior to the Closing
(i) the Company will assign to the Sellers, or an Affiliate of the
Sellers, the Excluded Assets (listed on Exhibit "B"), to which the Buyer
shall have no right, title or interest following this transaction, and
(ii) the Company shall assign to the Sellers, or an Affiliate of the
Sellers, and the Sellers or its Affiliate shall assume, the Excluded
Liabilities (listed on Exhibit "C"), under which neither the Buyer nor
the Company will be obligated or have any Liability whatsoever.
2. Purchase Price. The Buyer agrees to deliver the following
to the Sellers at the Closing:
a. $1,053,360 in cash, by wire transfer or cashier's check;
and
b. Two promissory notes (the "Buyer Notes") in the form of
Exhibit "E, attached hereto, one of which shall be in the
principal amount of $47,500 and shall be payable to John
W. Reinhold and one of which shall be in the principal
amount of $47,500 and shall be payable to Frederic D.
Pace.
The consideration set forth above is hereinafter referred to as the
"Purchase Price". The Purchase Price shall be allocated to the Sellers
in proportion to their respective holdings of Company Shares as set forth
in paragraph 4.2 of the Disclosure Schedule. The Purchase Price shall be
subject to adjustment as set forth in paragraph 2.5 hereof.
3. The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing" ) shall take place at the
offices of Adventure North in Ft. Walton Beach, Florida, at mutually
agreeable time, on the first business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or
such other date as the Buyer and the Sellers may mutually determine (the
"Closing Date"); provided, however, that the Closing shall be effective
as of September 30, 1997.
4. Deliveries at the Closing. At the Closing, (i) the
Sellers will deliver to the Buyer the various certificates, instruments,
and documents referred to in paragraph 6.1 below, (ii) the Buyer will
deliver to the Sellers the various certificates, instruments, and
documents referred to in paragraph 6.2 below, (iii) each of the Sellers
will deliver to the Buyer stock certificates representing all of his or
its Shares, properly endorsed or accompanied by duly executed assignment
documents for transfer to Buyer free and clear of all Security Interests,
claims, proxies, voting trusts, voting agreements, or other restrictions,
and (iv) the Buyer will deliver the Purchase Price to each of the
Sellers.
5. Post Closing Adjustments. The Purchase Price shall be
adjusted following the Closing based on the matters set forth below.
Such adjustments shall be payable by Sellers to the Buyer or by Buyer to
Sellers, as applicable, within 30 days following the submission of
documentation describing in reasonable detail the factual basis of the
adjustment:
a) The Purchase Price shall be adjusted by the amount by
which the Net Asset Value determined as of the Closing Date is less
than or greater than $48,360; and
b) The Purchase Price shall be adjusted by the dollar
amount of any Adverse Consequences.
c) The purchase price shall be adjusted to reflect
amounts collected for the Accounts Receivable pursuant to the
provisions of Section 6.9 hereof.
C. Representations and Warranties Concerning the Transaction.
1. Representations and Warranties of the Sellers. Each of
the Sellers represents and warrants to the Buyer that the statements
contained in this paragraph 3.1 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this paragraph 3.1 with respect to
himself), except as set forth in schedule 1 attached hereto.
a) Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions. The Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
b) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency,
or court to which the Seller is subject, or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which he is bound
or to which any of his assets are subject.
c) Brokers' Fees. Except as described in paragraph 4.4 of
the Disclosure Schedule, the Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
d) Company Shares. The Seller holds of record and owns
beneficially the number of Shares set forth next to his or its name
in paragraph 4.2 of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a
party to any option, warrant, purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than
this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company. The Sellers
collectively own all of the outstanding shares of capital stock of
the Company.
e) The Sellers represent and warrant that (i) all Excluded
Assets have been transferred or assigned from the Company to the
Sellers or Affiliates of the Sellers, (iii) that the Excluded
Liabilities have been assumed by the Sellers, or an Affiliate of the
Sellers, without recourse to the Buyer, the Company or Travis
Parent, (ii) that the pre-Closing Sales of the Company (the "Pre-
Closing Sales") have been completed in accordance with the detailed
description of the Pre-Closing Sales set forth on Exhibit "F"
hereto, and (iii) that the consideration paid in each of the Pre-
Closing Sales set forth in Exhibit "E, is equal to the fair market
value of the asset sold.
(f) The Sellers currently do not own any interest in,
operate, or serve as an officer, director, guarantor or shareholder
of, any business, or have any plans to engage in any of such
actions, that will compete directly or indirectly against the
Company or the Buyer, within a 250 mile radius of Ft. Walton Beach,
Florida, or within a 250 mile radius of Key Largo, Florida.
2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in
this paragraph 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this paragraph 3.2, except as set forth
in schedule 2 attached hereto.
a) Organization of the Buyer. The Buyer is a corporation
validly existing, and in good standing under the laws of the State
of Texas.
b) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms
and conditions. Other than as contemplated by the registration of
the Travis Parent Stock, the Buyer need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restrict ion of any government, governmental
agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject.
d) Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
e) Travis Parent Stock. The Travis Parent Stock to be
issued to the Sellers will be issued free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act or state securities laws), Taxes, Security Interest,
Options, warrants, purchase rights, contracts, commitments,
equities, claims and demands.
f) Independent Investigation. Buyer acknowledges that
in the determination to purchase the Shares from the Sellers, Buyer
has made its own independent investigation as to the Company and as
to the Sellers. Further, Buyer confirms that except for those
covenants, representations and warranties specifically enumerated
herein and any schedules delivered pursuant to this Agreement, no
representation or warranties related to the affairs or condition of
the Company or the Sellers (of any kind of nature, legal, financial,
or otherwise), have been made by Buyer to Sellers, or anyone acting
on behalf of Sellers.
D. Representations and Warranties Concerning the Company. The
Sellers represent and warrant to the Buyer that the statements contained
in this part are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this part), except as set forth in the disclosure
schedule delivered by the Sellers to the Buyer on the date hereof and
initialed by the Parties (the "Disclosure Schedule" ). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity and describes the
relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item
itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
part 4.
1. Organization, Qualification, and Corporate Power. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Florida. The Company is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. The Company has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is
engaged and in which it presently proposes to engage and to own and use
the properties owned and used by it. Paragraph 4.1 of the Disclosure
Schedule lists the directors and officers of the Company. The Sellers
have delivered to the Buyer correct and complete copies of the charter
and bylaws of the Company (as amended to date). The Company is not in
default under or in violation of any provision of its charter or bylaws.
2. Capitalization. The entire authorized capital stock of
Company consists of 100 Shares, of which 100 Shares are issued and
outstanding and 0 Company Shares are held in treasury. All of the issued
and outstanding Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective
Sellers as set forth in paragraph 4.2 of the Disclosure Schedule. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There
are no out standing or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Company.
There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Company.
3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company is subject or any provision of the charter or bylaws of the
Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). The Company does not need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
for the parties to consummate the transactions contemplated by this
Agreement.
4. Brokers' Fees. Except as set forth on paragraph 4.4 of
the Disclosure Schedule, the Company has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
5. Title to Assets. The Company has exclusive, good and
marketable title to the Assets, or a valid leasehold interest in the
properties used by them. The Assets are free and clear of all Security
Interests, except as listed on paragraph 4.5 of the Disclosure Schedule.
Except as set forth in paragraph 4.5 of the Disclosure Schedule, none of
the Assets are leased by the Company from any third parties.
6. Subsidiaries. The Company has no subsidiaries.
7. Financial Statements. Attached hereto as Exhibit "G" are
the following financial statements (collectively the "Financial
Statements" ): (i) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal
years ended June 30, 1995, 1996 and 1997 (hereinafter referred to as the
"Most Recent Fiscal Year End, ) for the Company. The Financial
Statements (including the notes thereto, if any) have been prepared in
accordance with the cash basis of accounting, applied on a consistent
basis throughout the periods covered thereby, present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and complete, and
are consistent with the books and records of the Company (which books and
records are correct and complete).
8. Events Subsequent to Most Recent Fiscal Year End. Except
as described in Exhibit "F", and in paragraph 4.8 of the Disclosure
Schedule, since the Most Recent Fiscal Year End, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
a) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
b) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $50,000 or outside
the Ordinary Course of Business;
c) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) to which the Company is a party or by which the Company is
bound, other than any agreement listed as an Excluded Liability;
d) the Company has not imposed any Security Interest upon any
of its assets, tangible or intangible;
e) the Company has not made any single capital expenditure
(or series of related capital expenditures) either involving more
than $150,000 or outside the Ordinary Course of Business;
f) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $150,000 or outside the
Ordinary Course of Business;
g) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
h) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course
of Business;
i) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the Ordinary Course of
Business;
j) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
k) there has been no change made or authorized in the charter
or bylaws of the Company;
l) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange,
or exercise) any of its capital stock;
m) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
n) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
o) the Company has no outstanding loans to any of its
directors, officers, and employees outside the Ordinary Course of
Business and the Company is currently not a party to a transaction
with any of its directors, officers or employees outside the
Ordinary Course of Business;
p) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
q) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
r) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
s) the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
t) the Company has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of
Business;
u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company; and
v) the Company has not committed to any of the foregoing.
9. Undisclosed Liabilities. Except as described on
paragraph 4.9 of the Disclosure Schedule, neither the Sellers nor the
Company has any knowledge of any Liability of the Company that is not
fully and accurately reflected on the Most Recent Financial Statements
(and neither the Sellers nor the Company has any knowledge of any Basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability).
10. Legal Compliance. The Company and its predecessors and
Affiliates has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply.
11. Tax Matters.
a) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company currently is not the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
b) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or
other third party.
c) No Seller or director or officer (or employee responsible
for Tax matters) of the Company expects any authority to assess any
additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
the Company either (i) claimed or raised by any authority in writing
or (ii) as to which any of the Sellers and the directors and
officers (and employees responsible for Tax matters) of the Company
has Knowledge based upon personal contact with any agent of such
authority. Such disclosure also indicates those Tax Returns that
have been audited and indicates those Tax Returns that currently are
the subject of audit. The Sellers have delivered to the Buyer
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by the Company since December 31, 1992.
d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
e) The Company has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. The Company has not made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Sec. 280G. The
Company has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec.
6662. The Company is not a party to any Tax allocation or sharing
agreement. The Company (A) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (B) has no
Liability for the Taxes of any Person (other than the Company) under
Treas. Reg. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
f) Paragraph 4.11 of the Disclosure Schedule sets forth the
following information with respect to the Company) as of the most
recent practicable date (i) the basis of the Company in its assets;
and (ii) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company.
g) The unpaid Taxes of the Company (i) did not, as of the
Closing Date, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (ii) do
not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of
the Company in filing their Tax Returns (collectively the "Tax
Reserve,).
12. Real Property.
a) The Company does not own any real property, except
leasehold improvements, or any interest in any entities that own
real property.
b) As of the Closing Date, the Company is not a party to
any lease for real property.
c) At the Closing, Adventure North will enter into a
triple net lease (i) with Paul J. Roberts, Reinhold and Pace, DBA
Adventure Marine Real Estate Partnership and Adventure Marine Real
Estate, Inc. for the properties associated with the Business located
in Ft. Walton Beach, Florida, as specifically described in the lease
for such properties, a signed copy of which is included in Paragraph
4.12 of the Disclosure Schedule, and (ii) with Paul J. Roberts for
the property known as the "Kettle Property" specifically described
in the lease for such properties, a signed copy of which is included
in Paragraph 4.12 of the Disclosure Schedule.
13. Intellectual Property.
a) The Company does not own, except through common law
rights, or have the right to use pursuant to license, sublicense,
agreement, or permission, any Intellectual Property.
b) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the
Sellers and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company has
ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Company must license or
refrain from using any Intellectual Property rights of any third
party). To the Knowledge of any of the Sellers and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with the Intellectual Property rights of the Company, if
any.
c) Paragraph 4.13 of the Disclosure Schedule identifies
each trade name or unregistered or registered trademark used by any
of the Company in connection with any of its businesses.
14. Tangible Assets. The Company owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for
the conduct of their businesses as presently conducted and as presently
proposed to be conducted.
15. Condition of Assets. All of the Assets of the Company,
including without limitation the New Boats, Motors, and Trailers, Used
Boats, Motors and Trailers, Accessories, Parts and Miscellaneous Assets,
are merchantable and fit for the purpose for which it was procured or
manufactured and are in good repair. The value of the Assets as detailed
on Exhibit "D, hereto has been jointly established by the parties as the
fair market thereof and neither party disagrees with such values.
16. Contracts. Paragraph 4.16 of the Disclosure Schedule
lists all of the contracts and other agreements to which any of the
Company is a party pursuant to which the Company is obligated, on an
annual basis, for payments or commitments in excess of $25,000, including
without limitation all Boat Show Rights. A correct and complete copy of
each written agreement listed in paragraph 4.16 of the Disclosure
Schedule (as amended to date) and a written summary setting forth the
terms and conditions of each oral agreement referred to in paragraph 4.16
of the Disclosure Schedule is attached as an exhibit to the Disclosure
Schedules. With respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (ii)
the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the trans actions contemplated hereby; (iii) no party is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement. This paragraph specifically
excludes any and all retail contracts.
17. Notes and Accounts Receivable. To the Seller's and the
Company's Knowledge, all notes and accounts receivable of the Company are
reflected properly on the books and records, were incurred in the
ordinary course of business, are not subject to setoffs or counterclaims,
and are current and collectible, and will be collected in accordance with
their terms at their recorded amounts. All Current Accounts Receivable
are aged less than 60 days as of the Closing Date and are not due from
the Sellers or affiliates of the Sellers or the Company.
18. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
19. Insurance. Paragraph 4.19 of the Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past two years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the Company is not in
breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (B) the
Company has paid all premiums through the Closing Date. The Company has
been covered during the past 10 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged
during such period. The Company has no self-insurance arrangements.
20. Litigation. Paragraph 4.20 of the Disclosure Schedule
sets forth each instance in which the Company (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for litigation
matters) of the Company, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the actions,
suits, proceedings, hearings, and investigations set forth in paragraph
4.20 of the Disclosure Schedule could result in any adverse change in the
business, financial condition, operations, results of operations, or
future prospects of any of the Company. None of the Sellers and the
directors and officers (and employees with responsibility for litigation
matters) of the Company has any reason to believe that any such action,
suit, proceeding, hearing, or investigation may be brought or threatened
against of the Company.
21. Product Warranty. Each product manufactured, sold,
leased, or delivered by any of the Company has been in conformity with
all applicable contractual commitments and all express and implied
warranties, and the Company has no Liability (and to its knowledge there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith. No product manufactured, sold, leased,
or delivered by the Company is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of
sale or lease. Paragraph 4.21 of the Disclosure Schedule includes copies
of the standard terms and conditions of sale or lease for the Company
(containing applicable guaranty, warranty, and indemnity provisions).
22. Product Liability. The Company has no Liability (and
there is no Basis for the present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use
of any product manufactured, sold, leased, or delivered by any of the
Company.
23. Employees. To the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for employment
matters) of the Company, and except as contemplated by this Agreement, no
executive, key employee, or group of employees has any plans to terminate
employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor
practice. None of the Sellers and the directors and officers (and
employees with responsibility for employment matters) of the Company has
any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees
of any of the Company. Paragraph 4.23 of the Disclosure Schedule
includes a complete and correct list of the names and positions of all of
the employees of the Company, including a detailed description of the
compensation paid to each such employee, including all benefits.
24. Employee Benefits.
a) Paragraph 4.24 of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Company and the Controlled
Group of Corporations which includes the Company (here,
collectively, the "Company ERISA Group") maintains or to which any
member of the Company ERISA Group has ever contributed. With
respect to such Employee Benefit Plan(s):
(1) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws, including, without
limitation, the nondiscrimination requirements of Section 125
of the Code. None of the Employee Benefit Plans is an
Employee Pension Benefit Plan nor has the Company ERISA Group
maintained or contributed to an Employee Pension Benefit Plan
subsequent to 1991.
(2) All required reports and descriptions have been filed
or distributed appropriately with respect to each such Employee
Benefit Plan. Without limitation, the requirements of Part 6 of
Subtitle B of Title I of ERISA, of Code Sec. 4980B, and of the
applicable provisions of the Health Insurance Portability and
Accountability Act of 1996 have been met with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(3) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements (if any), contracts (including without
limitation insurance contracts), and other material agreements
which implement each such Employee Benefit Plan.
(4) The Company and the Sellers have no Liability for
breach of fiduciary duty or any other failure to act or comply
in connection with the administration, or investment of the
assets, of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits)
is pending or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for
employee benefits matters) of the Company ERISA Group
threatened. None of the Sellers and the directors and officers
(and employees with responsibility for employee benefits
matters) of the Company ERISA Group has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
b) None of the Company ERISA Group maintains or ever has
maintained or contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with
Code Sec. 4980B).
25. Guaranties. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any
other Person.
26. Environment, Health, and Safety.
a) To the Seller's and the Company's Knowledge, the Company,
and its predecessors and Affiliates have complied with all
Environmental, Health, and Safety Laws. No action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them
alleging any failure so to comply. Without limiting the generality
of the preceding sentence, to the Seller's and the Company's
Knowledge, each of the Company and its respective predecessors and
Affiliates has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
b) To the Seller's and the Company's Knowledge, the Company
has no Liability (and none of the Company and its predecessors and
Affiliates has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company giving rise
to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
27. Disclosure. The representations and warranties contained
in this part 4 do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this part 4 not misleading.
E. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing.
1. General. Each of the parties will use reasonable efforts
to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set
forth in part 7 below).
2. Notices and Consents. The Sellers will cause the Company
to give any notices to third parties, and will cause the Company to use
commercially reasonable efforts to obtain any third-party consents
required in connection with the transactions contemplated hereby.
3. Operation of Business. The Sellers will not cause or
permit the Company to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Sellers will not cause or
permit the Company to declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, or otherwise engage in any
practice, take any action, or enter into any transaction of the sort
described in paragraph 4.8 above, except as contemplated by the Pre-
Closing Sales described in Exhibit "F".
4. Preservation of Business. Other than reductions in the
inventory pursuant to the Buyer's request, the Sellers will cause the
Company to keep its business and properties substantially intact,
including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
5. Full Access. Each of the Sellers will permit, and the
Sellers will cause the Company to permit, representatives of the Buyer to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company, to all
premises, personnel, books, records (including Tax records), contracts,
and documents of or pertaining to the Company.
6. Notice of Developments. The Sellers will give prompt
written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in part 4 above.
Each Party will give prompt written notice to the others of any material
adverse development causing a breach of any of his or its own
representations and warranties in part 3 above. No disclosure by any
Party pursuant to this paragraph 5.6, however, shall be deemed to amend
or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
7. Exclusivity. Except as contemplated by the Pre-Closing
Sales, none of the Sellers will (and the Sellers will not cause or permit
the Company to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of
the assets of the Company (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner
any effort or attempt by any Person to do or seek any of the foregoing.
None of the Sellers will vote their Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange.
The Sellers will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the
foregoing.
F. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
1. General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of
this Agreement, each of the parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other party reasonably may request, all at the sole
cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under part 8 below). The Sellers
acknowledge and agree that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the
Company. The Buyers agree to take reasonable steps to safekeep such
records.
2. Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Company, each
of the other Parties will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification therefor under
paragraph 8 below).
3. Transition. None of the Sellers will take any action that
is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Company
from maintaining the same business relationships with the Company after
the Closing as it maintained with the Company prior to the Closing. Each
of the Sellers will refer all customer inquiries relating to the
businesses of the Company to the Buyer from and after the Closing.
4. Confidentiality. Each of the Sellers will treat and hold
as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement,
and deliver promptly to the Buyer or destroy, at the request and option
of the Buyer, all tangible expressions (and all copies) of the
Confidential Information which are in his or its possession. In the event
that any of the Sellers is requested or required (by oral question or
request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process)
to disclose any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek
an appropriate protective order or waive compliance with the provisions
of this paragraph 6.4. If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Sellers is, on the advice of
counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the
disclosing Seller shall use his or its best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall
designate.
5. Buyer Notes. Each of the Buyer Notes will bear a legend
substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT
TO CERTAIN RIGHTS OF SET-OFF AS SET FORTH IN A STOCK PURCHASE
AGREEMENT DATED AS OF SEPTEMBER 30, 1997 (THE "PURCHASE
AGREEMENT") AMONG THE ISSUER OF THIS NOTE AND THE ORIGINAL
HOLDER HEREOF. THIS NOTE WAS ORIGINALLY ISSUED ON SEPTEMBER 30,
1997, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF THIS NOTE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT. THE
ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE PROVISIONS TO
THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
Each holder desiring to transfer a Buyer Note first must furnish the
Buyer with (i) a written opinion of counsel satisfactory to the Buyer in
form and substance satisfactory to the Buyer to the effect that the
holder may transfer the Buyer Note as desired without registration under
the Securities Act, and (ii) a written undertaking executed by the
proposed transferee satisfactory to the Buyer in form and substance
satisfactory to Buyer agreeing to be bound by the Set-Off provisions and
the restrictions on transfer contained herein.
6. Pre-Closing Sales. The Sellers agree to fully indemnify
and promptly reimburse the Buyer for any Liability incurred or expenses
incurred by the Buyer arising out of or in connection with the Pre-
Closing Sales. The Sellers agree to cooperate fully with Buyer in
connection with the defense of any such Liability and agree to provide
Buyer access to all books and records related to the Pre-Closing Sales.
This provision shall be in addition to the Buyers remedies set forth in
part 8 and 9 hereof.
7. Use of Name. The Sellers shall, and the Seller shall
cause its Affiliates, to cease using the name "Adventure Marine" or any
derivation thereof within six months of the Closing Date.
8. Accounts Receivable. (a) The Buyer shall, in the manner
provided in Paragraph 6.8(b), promptly reimburse the Sellers for any sums
collected for Accounts Receivable in excess of 50% of the aggregate face
amount of the Current Accounts Receivable. In the event the Buyer is
unable to collect 50% of the face amount of the Current Accounts
Receivable within 120 days of the Closing Date, the Buyer may, among
other remedies, exercise its right to Set-Off under the Buyer Notes and
the Other Buyer Notes and/or seek indemnification pursuant to the terms
of this Agreement.
(b) On the tenth day of each month following the Closing
Date, the Buyer shall deliver to Reinhold an accounting which details the
amount of Accounts Receivable collected by the Buyer in the previous
month. If the Buyer has collected in excess of 50% of the Current
Accounts Receivable, the Buyer shall, at that time, reimburse Sellers for
all amounts not previously paid to Sellers which Buyer has collected with
respect to the Accounts Receivable in excess of 50% of the Current
Accounts Receivable. The Buyer agrees to use diligent efforts to collect
the Accounts Receivable. If, at any time after six months following the
Closing Date, the Buyer has collected an amount in excess of 50% of all
Current Accounts Receivable and the Buyer is unable to collect any of the
Accounts Receivable, the Buyer shall, at the Seller's request, assign
such uncollected Accounts Receivable to the Sellers.
9. Non-Compete.
a) To induce Buyer to consummate the transactions
contemplated by this Agreement, (i) John Reinhold agrees to execute
the Noncompetition Agreement attached as Exhibit "I" and (ii)
Frederic D. Pace ("Pace") agrees that for a period of five (5) years
after the date of this Agreement, he shall not, directly or
indirectly, individually or as an employee, partner, officer,
director, guarantor or shareholder or in any other capacity
whatsoever:
(A) solicit the business of customers of the Company or
the Business: or
(B) (i) acquire any interest (by gift, purchase,
bequest, or otherwise), open, or operate any
retail or wholesale business related to the
marine industry (including, without limitation,
brokerage activities, whether conducted in
person or via computer) or enter into any
franchise or other management agreement with any
retail or wholesale business related to the
marine industry or
(ii) engage in any activities that enrich either of
the Sellers at the expense of the Buyer or
(iii) serve as an officer, director, employee,
agent or consultant to any retail or wholesale
business related to the marine industry,
within a 250 mile radius of Ft. Walton Beach, Florida
or within a 250 mile radius of Key Largo, Florida.
b) If any court of competent jurisdiction should
determine that any term or terms of this covenant are too broad with
respect to time, geographic area, lines of commerce or otherwise,
such court shall modify and revise any such term or terms so that
they comply with applicable law.
c) The provision set forth in this paragraph
6.09 shall terminate, upon the earlier of (i) five years after the
date of this Agreement, or (ii) the termination of the employment
by the Buyer of Pace, unless such termination is "For Cause,. The
term "For Cause" shall mean (i) Pace's gross neglect or willful
misconduct in the discharge of his duties and responsibilities to
the Buyer, as determined by the Board of Directors of the Buyer,
(ii) Pace's repeated failure to obey reasonable directions from the
Buyer, (iii) any act of Pace's against the Buyer intended to enrich
Pace at the expense of the Buyer, (iv) any willful act or omission
by Pace having the effect of materially injuring the business or
business relationships of the Buyer, or (v) Pace's commission of a
felony or any crime involving moral turpitude, fraud or
misrepresentation.
G. Conditions to Obligation to Close.
1. Conditions to Obligation of the Buyer. The obligation
of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
a) the representations and warranties set forth in
paragraph 3.1 and part 4 above shall be true and correct in all
material respects at and as of the Closing Date;
b) the Sellers shall have performed and complied with all
of their covenants hereunder in all material respects through the
Closing;
c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or
charge would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of the
Buyer to own the Shares and to control the Company, or (iv)
affect adversely the right of the Company to own its assets and
to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
d) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified
above in paragraph 7.1(a)-(c) is satisfied in all respects;
e) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in Exhibit
"H" attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
f) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the
Company;
g) the Buyer shall have received satisfactory evidence in
its sole discretion that Paul J. Roberts consented to the terms
of this Agreement, has released the Company from any and all
claims, and that the Sellers provided full disclosure regarding
the terms of this Agreement and any other related agreements to
Paul J. Roberts; and
h) the Buyer's acquisitions of the stock of Adventure
North and Adventure South shall have been consummated, or the
Buyer is satisfied, in its sole discretion, that such
transactions will be consummated immediately following
consummation of the transactions contemplated hereby;
i) John W. Reinhold shall have executed the
Noncompetition Agreement attached hereto as Exhibit "I"
j) the Buyers shall have received satisfactory
evidence that the Excluded Assets have been transferred from the
Company to the Sellers or an Affiliate of the Sellers and that
the Excluded Liabilities have been assumed by the Sellers, or an
Affiliate of the Sellers, without recourse to the Buyer, the
Company or Travis Parent; and
k) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this paragraph 7.1 if it
executes a writing so stating at or prior to the Closing.
2. Conditions to Obligation of the Sellers. The
obligation of the Sellers to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
a) the representations and warranties set forth in
paragraph 3.2 above shall be true and correct in all material
respects at and as of the Closing Date;
b) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or
charge would (i) prevent consummation of any of the transactions
contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
d) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified
above in paragraph 7.2(a)-(c) is satisfied in all respects;
e) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit
"J" attached hereto, addressed to the Sellers, and dated as of
the Closing Date; and
f) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this paragraph 7.2 if
they execute a writing so stating at or prior to the Closing.
H. Remedies
1. Indemnification Provisions for Benefit of the Buyer.
a) In the event any of the Sellers breaches (or in the
event any third party alleges facts that, if true, would mean any
of the Sellers has breached) any of the representations,
warranties and covenants contained herein (other than those of
the Sellers described in paragraph 8.1(b) and (c)), then each of
the Sellers agrees jointly and severally to indemnify the Buyer
from and against the entirety of any Adverse Consequences the
Buyer may suffer, for a period of one year following the Closing
Date, through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after
the end of such one year period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the
alleged breach); provided, however, that (a) the Sellers shall
have no obligations to indemnify the Buyer for any Adverse
Consequences pursuant to this Section 8.1(a) for an amount in
excess of (i) the Buyer Notes and (ii) the Other Buyer Notes,
issued in connection with the sale of Adventure North and
Adventure South and (b) the Buyer's exclusive remedy for any
claims brought pursuant to this Section 8.1(a) shall be the right
to Set-Off described in Section 8.5 hereof.
b) Each of Sellers shall be obligated to fully and
completely indemnify the Buyer, for an unlimited period of time
following the Closing (subject to applicable statutes of
limitation), from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of
or relating to any Liability suffered as a result of (i) fraud by
the Sellers or the Company (including without limitation any
Adverse Consequences suffered by Buyer as a result of a breach of
the Seller's representations in paragraph 3.1 (Representations
and Warranties) hereof), (ii) a misrepresentation which the
Sellers or the Company knew or reasonably should have known or
been aware (including without limitation any Adverse Consequences
suffered by Buyer as a result of employee misstatements to
customers or others), (iii) claims by employees against the
Company (including without limitation any Adverse Consequences
suffered by Buyer as a result of the representations made by the
Sellers and the Company in paragraph 4.24 (Employee Benefits)
hereof), (iv) Taxes (including without limitation any Adverse
Consequences suffered by Buyer as a result of the representations
made by the Sellers and the Company in paragraph 4.11 (Tax
Matters) hereof, and (v) claims by any of the current or former
shareholders of the Company, Adventure North or Adventure South
against the Company, Adventure North, Adventure South or the
Buyer and its affiliates.
c) Each of the Sellers shall be obligated to fully and
completely indemnify the Buyer for an unlimited period of time
following Closing (subject to applicable statutes of limitation)
from and against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of, relating to, in
the nature of, or caused by any Liability of any of the Company
(i) for any Taxes of the Company with respect to any Tax year or
portion thereof ending on or before the Closing Date (or for any
Tax year beginning before and ending after the Closing Date to
the extent allocable (determined in a manner consistent with
paragraph 9.2 below) to the portion of such period beginning
before and ending on the Closing Date), to the extent such Taxes
are not reflected in the Tax Reserve or have not been paid to the
Buyer pursuant to paragraph 9.1 below, and (ii) for the unpaid
Taxes of any Person (other than any of the Company) under Treas.
Reg. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise suffer.
2. Indemnification Provisions for Benefit of the Sellers.
The representations, warranties and covenants of the Buyer shall survive
the Closing and continue in full force and effect for a period of one
year. In the event the Buyer breaches (or in the event any third party
alleges facts that, if true, would mean the Buyer has breached) any of
its representations, warranties, and covenants contained herein, provided
that any of the Sellers makes a written claim for indemnification against
the Buyer within such one year period, then the Buyer agrees to indemnify
each of the Sellers from and against any Adverse Consequences the Seller
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Seller may suffer after the end
of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach). Furthermore, the Buyer agrees to fully and completely indemnify
the Sellers for any Adverse Consequences suffered by the Sellers as a
result of any action or omission by the Company following the Closing
Date; provided, however, that (i) in the case of Adverse Consequences
involving a series of actions or omissions by the Company, the Buyer
shall not indemnify Sellers for any liability created by the Company
prior to the Closing Date, and (ii) this provision shall not apply to
Frederic Pace for any Adverse Consequences suffered by Pace arising out
of or in connection with Pace's employment with the Company or the Buyer
subsequent to the Closing Date.
3. Matters Involving Third Parties.
a) If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under this
part 8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that
no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
b) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party so
long as (i) the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom
or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with paragraph
8.3(b) above, (i) the Indemnified Party may retain separate co-
counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (ii) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be
unreasonably withheld), and (iii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably
withheld).
d) In the event any of the conditions in paragraph 8.3(b)
above is or becomes unsatisfied, however, (i) the Indemnified
Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith),
(ii) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys'
fees and expenses), and (iii) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest
extent provided in this part 8.
4. Determination of Adverse Consequences. The parties
shall take into account the time cost of money (using the Applicable Rate
as the discount rate) in determining Adverse Consequences for purposes of
this part 8. All indemnification payments under this part 8 shall be
deemed adjustments to the Purchase Price.
5. Set-off Under Buyer Notes. The Buyer shall have the
option of recouping all or any part of any Adverse Consequences it may
suffer (in lieu of seeking any indemnification to which it is entitled
under this part 8); such right shall be exercisable by Buyer by notifying
the Sellers that the Buyer is reducing the principal amount outstanding
under the Buyer Notes. This shall affect the timing and amount of
payments required under the Buyer Notes in the same manner as if the
Buyer had made a permitted prepayment (without premium or penalty)
thereunder. The Buyer shall offset against each Buyer Note based on each
Seller's percentage ownership of the Company, based upon the information
contained in paragraph 4.2 of the Disclosure Schedule. If the Buyer
discovers an Adverse Consequence prior to the maturity of the Buyer Note
(the "Maturity Date,), but is unable, in good faith, to determine with
specificity the amount of the Adverse Consequence and, therefore, does
not exercise its right of Set-Off prior to the Maturity Date, the
Maturity Date shall be deemed to be extended until the Buyer can
determine the amount of the Adverse Consequence and exercise its right of
Set-Off. The extension of the Maturity Date hereunder shall not be
considered an event of default under the Buyer Note and no late payment
shall be payable as a result of the extension of the Maturity Date.
Following any set-off by Buyer against the Buyer Note which in the
aggregate is equal to the full amount thereof, Buyer shall be permitted
to set-off unsatisfied Adverse Consequences arising under this Agreement
against the Other Buyer Notes, issued in connection with the sale of
Adventure North and Adventure South.
6. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of,
any statutory, equitable, or common law remedy any party may have for
breach of representation, warranty, or covenant. Each of the Sellers
hereby agrees that he or it will not make any claim for indemnification
against the Company by reason of the fact that he or it was a director,
officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect
to any action, suit, proceeding, complaint, claim, or demand brought by
the Buyer against such Seller (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable
law, or otherwise).
I. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Sellers for certain Tax
matters following the Closing Date:
1. Tax Periods Ending on or Before the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit
the Sellers to review and comment on each such Tax Return described in
the preceding sentence prior to filing. Sellers shall reimburse Buyer
for Taxes of the Company with respect to such periods within fifteen (15)
days after payment by Buyer of such Taxes to the extent such Taxes are
not reflected in the Tax Reserve. Buyer shall be permitted to Set-Off
against the Buyer Note to pay any such Taxes.
2. Tax Periods Beginning Before and Ending After the
Closing Date. Buyer shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company for Tax periods which
begin before the Closing Date and end after the Closing Date. Sellers
shall pay to Buyer within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such Taxable period ending on
the Closing Date to the extent such Taxes are not reflected in the Tax
Reserve. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on the Closing
Date shall (i) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for
the entire Taxable period multiplied by a fraction the numerator of which
is the number of days in the Taxable period ending on the Closing Date
and the denominator of which is the number of days in the entire Taxable
period, and (ii) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any credits relating
to a Taxable period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Company.
3. Cooperation on Tax Matters.
(i) Buyer, the Company and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to
this Part 9 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on
a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company and
Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer
or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered
into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Company or Sellers, as the case may be, shall allow
the other party to take possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to
use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as
may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to
the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon
request, to provide the other party with all information that
either party may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations promulgated
thereunder.
4. Tax Sharing Agreements. All tax sharing agreements or
similar agreements, if any, with respect to or involving the Company
shall be terminated as of the Closing Date and, after the Closing Date,
the Company shall not be bound thereby or have any liability thereunder.
5. Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall
be paid by Sellers when due, and Sellers will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, Buyer will, and will
cause its affiliates to, join in the execution of any such Tax Returns
and other documentation.
J. Termination.
1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
a) the Buyer and both Sellers may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
b) the Buyer may terminate this Agreement by giving
written notice to the Sellers on or before the 10th day following
the date of this Agreement if the Buyer is not satisfied with the
results of its continuing business, legal, and accounting due
diligence regarding the Company;
c) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing
(i) in the event any of the Sellers has breached any material
representation, warranty, or covenant contained in this Agreement
in any material respect, the Buyer has notified the Sellers of
the breach, and the breach has continued without cure for a
period of 5 days after the notice of breach, or (ii) if the
Closing shall not have occurred on or before September 30, 1997,
by reason of the failure of any condition precedent under
paragraph 7.1 hereof (unless the failure results primarily from
the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and
d) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (i)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, any of the Sellers has notified the Buyer of the breach,
and the breach has continued without cure for a period of 5 days
after the notice of breach or (ii) if the Closing shall not have
occurred on or before September 30, 1997, by reason of the
failure of any condition precedent under paragraph 7.2 hereof
(unless the failure results primarily from any of the Sellers
themselves breaching any representation, warranty, or covenant
contained in this Agreement).
2. Effect of Termination. If any party terminates this
Agreement pursuant to paragraph 10.1 above, all rights and obligations of
the parties hereunder shall terminate without any Liability of any party
to any other party (except for any Liability of any party then in
breach).
K. Miscellaneous.
1. Nature of Certain Obligations.
(i) The covenants of each of the Sellers in paragraph
2.1 above concerning the sale of his or its Company Shares to the
Buyer and the representations and warranties of each of the
Sellers in paragraph 3.1(a) through (d) above concerning the
transaction are several obligations. This means that the
particular Seller making the representation, warranty, or
covenant will be solely responsible to the extent provided in
part 8 above for any Adverse Consequences the Buyer may suffer as
a result of any breach thereof.
(ii) The remainder of the representations, warranties,
and covenants in this Agreement, including paragraph 3.1(c), are
joint and several obligations. This means that each Seller will
be responsible to the extent provided in part 8 above for the
entirety of any Adverse Consequences the Buyer may suffer as a
result of any breach thereof.
2. Press Releases and Public Announcements. No party
shall issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval
of the Buyer and the Sellers; provided, however, that any party may make
any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its reasonable
efforts to advise the other Parties prior to making the disclosure).
3. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and
their respective successors and permitted assigns.
4. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent
they related in any way to the subject matter hereof. Typewritten or
handwritten provisions inserted in this Agreement shall control all
printed provisions in conflict therewith, provided the typewritten or
handwritten provision is initialed and dated by each of the parties to
this Agreement.
5. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party may assign
either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the Buyer and
the Sellers; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
6. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
7. Headings. The paragraph headings contained in this
Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
8. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed
to the intended recipient as set forth below:
If to the Sellers: Copy to:
c/o John Reinhold H. Bart Fleet
Chesser, Wingard, Barr, Whitney,
Flowers & Fleet, P.A.
1201 Eglin Parkway
Shalimar, Florida 32579
Telecopy: (850) 651-6084
If to the Buyer: Copy to:
Travis Boating Center Florida, Inc. J. Rowland Cook
Attn: Michael B. Perrine Jenkens & Gilchrist,
A Professional Corporation
5000 Plaza on the Lake, #250 600 Congress Avenue, Suite 2200
Austin, Texas 78746 Austin, Texas 78701
Telecopy: (512) 329-0480 Telecopy: (512) 404-3520
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
9. Governing Law and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Florida. Venue for any proceeding brought hereunder shall lie in
Escambia County, Florida.
10. Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Sellers. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
11. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
12. Expenses. Each of the Parties will bear his own costs
and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Sellers
agree that the Company has not borne or will not bear any of the Sellers'
costs and expenses (including any of their legal fees, expenses or fees
to be paid to brokers) in connection with this Agreement or any of the
transactions contemplated hereby.
13. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall
be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including,
shall mean including without limitation. The parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that
there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first
representation, warranty, or covenant.
14. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
15. Specific Performance. Each of the parties acknowledges
and agrees that the other parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having jurisdiction over the
parties and the matter (subject to the provisions set forth in paragraph
11.9), in addition to any other remedy to which they may be entitled, at
law or in equity.
16. Attorney's Fees. In connection with any breach,
default, collection, or litigation, including appellate proceedings,
arising out of this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees and costs.
17. Further Cooperation. The parties to this Agreement
shall execute and deliver, or cause to be executed and delivered, on the
Closing Date or at such other times as may reasonably be agreed upon,
such additional instruments as the other party may reasonably request for
the purpose of carrying out the transactions contemplated hereby.
Additionally, each of the parties hereto agree to allow the other parties
reasonable access to the books and records of the Company and the Sellers
related to the transactions contemplated hereby.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
TRAVIS BOATING CENTER FLORIDA, INC.
By: ____/S/________________________
Name: MICHAEL B. PERRINE
Title: CFO, SECRETARY, TREASURER
SELLERS
_____/S/_______________________________
Frederic D. Pace
____/S/________________________________
John W. Reinhold
<PAGE> EXHIBIT 10.35
STOCK PURCHASE AGREEMENT
AMONG
TRAVIS BOATING CENTER FLORIDA, INC.
("BUYER",)
AND
JOHN W. REINHOLD
("SELLER",)
SEPTEMBER 30, 1997
PROVIDING FOR THE PURCHASE OF
100% OF THE COMMON STOCK OF
ADVENTURE MARINE AND OUTDOORS, INC.,
A FLORIDA CORPORATION
<PAGE>
TABLE OF CONTENTS
1. Definitions
2. Purchase and Sale of Company Shares
2.1. Basic Transaction
2.2. Purchase Price
2.3. The Closing
2.4. Deliveries at the Closing
2.5. Post Closing Adjustments.
3. Representations and Warranties Concerning the Transaction
3.1. Representations and Warranties of the Seller
3.2. Representations and Warranties of the Buyer
4. Representations and Warranties Concerning the Company.
4.1. Organization, Qualification, and Corporate Power
4.2. Capitalization
4.3. Noncontravention
4.4. Brokers' Fees
4.5. Title to Assets
4.6. Subsidiaries
4.7. Financial Statements
4.8. Events Subsequent to Most Recent Fiscal Year End
4.9. Undisclosed Liabilities
4.10. Legal Compliance
4.11. Tax Matters
4.12. Real Property
4.13. Intellectual Property
4.14. Tangible Assets
4.15. Condition of Assets.
4.16. Contracts
4.17. Notes and Accounts Receivable
4.18. Powers of Attorney
4.19. Insurance
4.20. Litigation
4.21. Product Warranty
4.22. Product Liability.
4.23. Employees.
4.24. Employee Benefits.
4.25. Guaranties
4.26. Environment, Health, and Safety
4.27. Disclosure
5. Pre-Closing Covenants.
5.1. General.
5.2. Notices and Consents.
5.3. Operation of Business.
5.4. Preservation of Business.
5.5. Full Access.
5.6. Notice of Developments.
5.7. Exclusivity.
6. Post-Closing Covenants
6.1. General
6.2. Litigation Support
6.3. Transition
6.4. Confidentiality
6.5. Buyer Note
6.6. Registration of Travis Parent Stock
6.7. Pre-Closing Sales
6.8. Use of Name
6.9. Accounts Receivable.
6.10. Non-Compete.
7. Conditions to Obligation to Close
7.1. Conditions to Obligation of the Buyer
7.2. Conditions to Obligation of the Seller
8. Remedies
8.1. Indemnification Provisions for Benefit of the Buyer
8.2. Indemnification Provisions for Benefit of the Seller
8.3. Matters Involving Third Parties
8.4. Determination of Adverse Consequences
8.5. Set-off Under Buyer Note
8.6. Other Indemnification Provisions
9. Tax Matters
9.1. Tax Periods Ending on or Before the Closing Date
9.2. Tax Periods Beginning Before and Ending After the Closing Date
9.3. Cooperation on Tax Matters
9.4. Tax Sharing Agreements
9.5. Certain Taxes
10. Termination
10.1. Termination of Agreement
10.2. Effect of Termination
11. Miscellaneous
11.1.
11.2. Press Releases and Public Announcements
11.3. No Third-Party Beneficiaries
11.4. Entire Agreement
11.5. Succession and Assignment
11.6. Counterparts
11.7. Headings
11.8. Notices
11.9. Governing Law and Venue
11.10. Amendments and Waivers
11.11. Severability
11.12. Expenses
11.13. Construction
11.14. Incorporation of Exhibits and Schedules
11.15. Specific Performance
11.16. Attorney's Fees
11.17. Further Cooperation.
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement",) is entered into on
September 30, 1997, by and among TRAVIS BOATING CENTER FLORIDA, INC. a
Texas corporation (the "Buyer",), and JOHN W. REINHOLD (the "Seller",).
Recitals:
The Seller owns all of the outstanding capital stock of Adventure
Marine & Outdoors, Inc., a Florida corporation (the "Company",).
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of
the outstanding capital stock of the Company in return for (i) cash, (ii)
shares of voting common stock of Travis Boats & Motors, Inc., a Texas
corporation, the sole shareholder of the Buyer ("Travis Parent",), and
(iii) the Buyer Note (as defined below).
Now, therefore, in consideration of the premises and the mutual
promises, of the representations, warranties, and covenants contained
herein, the parties agree as follows.
A. Definitions.
"Accounts Receivable", means all of the accounts receivable of the
Company, as listed on Exhibit "A",.
"Adventure Brokerage", means Adventure Boat Brokerage, Inc., a
Florida corporation.
"Adventure Brokerage Stock Purchase Agreement", means the Stock
Purchase Agreement, dated as of September 30, 1997, between the Buyer,
the Seller and Frederic Pace, providing for the sale of 100% of the
common stock of Adventure Brokerage to the Buyer.
"Adventure South", means Adventure Marine South, Inc., a Florida
corporation.
"Adverse Consequences", means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and attorneys' fees and expenses.
"Affiliate", has the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act.
"Affiliated Group", means any affiliated group within the meaning of
Code Sec. 1504 or any similar group defined under a similar provision of
state, local or foreign law.
"Applicable Rate", means 7 1/2%.
"Assets", means all properties, privileges, rights, interests and
claims, personal, tangible and intangible, of every type and description
(including, without limitation, New Boats, Motors, and Trailers, Used
Boats, Motors, and Trailers, Parts, Accessories, Miscellaneous Assets,
Intellectual Property, Deposits, Accounts Receivable and Boat Show
Rights) that are used, or held for use, by the Company or the Seller in
the Business and in which the Company or the Seller has any right, title
or interest (or in which the Company or the Seller hereafter acquires any
right, title or interest on or before the Closing Date), but specifically
excludes all Excluded Assets.
"Basis", means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Boat Shows", means all boat shows at which the Company has had a
booth or made a presentation in any of the last five (5) years.
"Boat Show Rights", means all of the Company's agreements for space
at Boat Shows, including common stock and other ownership rights in
corporations, partnerships, and other types of entities holding Boat
Shows.
"Business", means the retail and wholesale sales and service of
boats, motors, trailers, marine accessories and water sporting goods at
the store located in Key Largo, Florida, and at Boat Shows attended by
the representatives of the Company.
"Buyer", has the meaning set forth in the preface above.
"Buyer Note", has the meaning set forth in paragraph 2.2 below.
"Closing", has the meaning set forth in paragraph 2.3 below.
"Closing Date", has the meaning set forth in paragraph 2.3 below.
"Code", means the Internal Revenue Code of 1986, as amended.
"Company Share", or "Share", means any share of the Common Stock, par
value $1.00 per share, of the Company.
"Confidential Information", means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"Controlled Group of Corporations", has the meaning set forth in Code
Sec. 1563.
"Current Accounts Receivable", means those Accounts Receivable of the
Company that are (i) aged less than 60 days as of the Closing Date, and
(ii) are not Accounts Receivable due from Affiliates of the Seller or the
Company. The Current Accounts Receivable are identified on the list of
Accounts Receivable on Exhibit "A",.
"Deposits", means all customer prepaids, tax deposits, utility
deposits and deposits relating to customer special orders as of the
Closing Date.
"Disclosure Schedule", has the meaning set forth in part 4 below.
"Employee Benefit Plan", means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan", has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan", has the meaning set forth in ERISA
Sec. 3(1).
"Environmental, Health, and Safety Laws", means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA", means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets", means those assets of the Company that will be
assigned to the Seller or an Affiliate of the Seller immediately prior to
Closing. The Excluded Assets are listed on Exhibit "B", to this
Agreement. All inventory on loan or consignment shall be Excluded
Assets, regardless of whether such items are specifically listed in
Exhibit "B".,
"Excluded Liabilities", means those liabilities and obligations of
the Company to be assumed by the Seller, or an Affiliate of the Seller,
prior to the Closing. The Excluded Liabilities are listed on Exhibit
"C".,
"Extremely Hazardous Substance", has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary", has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement", has the meaning set forth in paragraph 4.5
below.
"Indemnified Party", has the meaning set forth in paragraph 7.4
below.
"Intellectual Property", means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in- part, revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith,
including without limitations all rights in and to "Adventure Marine", and
"Adventure Boat Brokerage", and any derivations thereof, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information related to the
Business and the Company (including rights of publicity, customer lists,
supplier lists, ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, pricing and cost
information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof (in what ever form or medium).
"Inventory", means the inventory of the Company based on a physical
inspection of the Company as of the Closing Date. Used inventory shall
be subject to a mutually agreeable value among the parties, but in no
case shall any used inventory value exceed the current "wholesale value"
as set forth in the most recent "Yellow", used boat guide or such other
used boat reference as may be mutually agreeable.
"Invoice", means a document reflecting a manufacturer's cost of
Assets and related options or accessories on such Assets.
"Knowledge", means actual knowledge after reasonable investigation.
"Liability", means any liability of the Company (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including without limitation any liability
for Taxes, payroll expenses, operating expenses, insurance audit expense,
accounts payable to third parties, the Seller, Frederic Pace and to
affiliates of the Seller and Frederic Pace, lease payment and interest
payments.
"Miscellaneous Assets", means all furniture, fixtures, vehicles,
leasehold improvements, equipment and other assets of the Company,
including all Rebates for products previously sold for which no Rebate
has been paid to the Company.
"Most Recent Balance Sheet", means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements", has the meaning set forth in
paragraph 4.7 below.
"Most Recent Fiscal Month End", has the meaning set forth in
paragraph 4.7 below.
"Multiemployer Plan", has the meaning set forth in ERISA Sec. 3(37).
"New Boats, Motors, and Trailers", means all new boats, motors, and
trailers owned by the Company. The value of New Boats, Motors and
Trailers shall be determined based on Invoice, net of Rebates.
"Net Asset Value", means (a) the sum of the value, at Closing, of (i)
Miscellaneous Assets, (ii) Boat Show Rights, (iii) Parts, (iv) New Boats,
Motors, and Trailers, (v) Used Boats, Motors, and Trailers, (vi)
Intellectual Property, (vii) 100% of the face amount of the Current
Accounts Receivable, (viii) Deposits, and (ix) the Company's cash minus
(b) the sum of (i) all trade accounts payable, (ii) accrued but unpaid
operating expenses (including Taxes) and floor plan notes existing as of
the date of Closing, (iii) physical damage to any of the Assets or
Inventory, (iv) parts missing from the Assets or Inventory based upon a
physical inspection of the Assets and Inventory, (v) 50% of the face
amount of the Current Accounts Receivable and (vi) any other Liabilities
assumed by the Buyer. The value assigned to each asset shall be net of
depreciation. The calculation of the Net Asset Value, which includes a
detailed calculation of the value of each category the of the Assets, as
of the Closing date, is attached hereto as Exhibit "D".,
"Ordinary Course of Business", means the ordinary course of business
consistent with the Company's past custom and practice (including with
respect to quantity and frequency).
"Other Buyer Notes", means those promissory notes issued to the
Seller and Frederic Pace in connection with the sale of Adventure South
and Adventure Brokerage.
"Parts", means all parts of the Company inventoried on the Closing
Date. The parts and accessories so identified in the physical inventory
and found in the most recent price disks/books from their respective
manufacturers shall be purchased by Travis at the lower of the most
recent wholesale price evidenced by such price disks/books or the
original invoice amount.
"PBGC", means the Pension Benefit Guaranty Corporation.
"Person", means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Pre-Closing Sales", has the meaning set forth in paragraph 3.1(e)
below.
"Prohibited Transaction", has the meaning set forth in ERISA Sec.
406 and Code Sec. 4975.
"Purchase Price", has the meaning set forth in paragraph 2.2 below.
"Rebate", means all sums paid or payable from a vendor to the
Company.
"Registration Statement", shall have the meaning set forth in
section 5.6.
"Reportable Event", has the meaning set forth in ERISA Sec. 4043.
"Securities Act", means the Securities Act of 1933, as amended.
"Securities Exchange Act", means the Securities Exchange Act of
1934, as amended.
"Security Interest", means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Seller", has the meaning set forth in the preface above.
"Set-Off", means the Buyer's right to recoup all or part of Adverse
Consequences that it may suffer; such right shall be exercisable by
notifying the Seller that it is reducing the principal amount outstanding
under the Buyer Note and/or the Other Buyer Notes.
"Subsidiary", means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common
stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Tax", means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Reserve", has the meaning set forth in paragraph 4.11(g) below.
"Tax Return", means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim", has the meaning set forth in paragraph 7.3
below.
"Travis Parent", means Travis Boats & Motors, Inc., a Texas
corporation.
"Travis Parent Stock", means the voting common stock, par value $0.01
per share, of Travis Parent.
"Used Boats, Motors, and Trailers", means all used boats, motors,
and trailers owned by the Company. The Used Boats, Motors and Trailers
shall be subject to a mutually agreeable value among the parties, but in
no case shall any used inventory value exceed the current "wholesale
value" as set forth in the most recent "Yellow" used boat guide or such
other used boat reference as may be mutually agreeable.
B. Purchase and Sale of Company Shares.
1. Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the
Seller, and the Seller agrees to sell to the Buyer, all of his Shares for
the consideration specified in paragraph 2.2. Notwithstanding the
foregoing, however, immediately prior to the Closing (i) the Company will
assign to the Seller, or an Affiliate of the Seller, the Excluded Assets
(listed on Exhibit "B"), to which the Buyer shall have no right, title or
interest following this transaction, and (ii) the Company shall assign to
the Seller, or an Affiliate of the Seller, and the Seller or its
Affiliate shall assume, the Excluded Liabilities (listed on Exhibit "C"),
under which neither the Buyer nor the Company will be obligated or have
any Liability whatsoever.
2. Purchase Price. The Buyer agrees to deliver the following
to the Seller at the Closing:
a. $181,000 in cash, by wire transfer or cashier's check;
b. A promissory note (the "Buyer Note") in the form of
Exhibit "E" attached hereto, in the principal amount of
$19,000 and payable to the Seller; and
c. A number of newly issued shares of Travis Parent Stock
equal to (i) the Net Asset Value (as set forth on Exhibit
"D") plus $380,000 (ii) divided by $16.72. Fractional
shares shall be rounded up if the fraction is .50 or
greater.
The consideration set forth above is hereinafter referred to as the
"Purchase Price". The Purchase Price shall be subject to adjustment as
set forth in paragraph 2.5 hereof.
3. The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing" ) shall take place at the
offices of the Company in Ft. Walton Beach, Florida, at mutually
agreeable time, on the first business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or
such other date as the Buyer and the Seller may mutually determine (the
"Closing Date"); provided, however, that the Closing shall be effective
as of September 30, 1997.
4. Deliveries at the Closing. At the Closing, (i) the
Seller will deliver to the Buyer the various certificates, instruments,
and documents referred to in paragraph 6.1 below, (ii) the Buyer will
deliver to the Seller the various certificates, instruments, and
documents referred to in paragraph 6.2 below, (iii) the Seller will
deliver to the Buyer stock certificates representing all of his or its
Shares, properly endorsed or accompanied by duly executed assignment
documents for transfer to Buyer free and clear of all Security Interests,
claims, proxies, voting trusts, voting agreements, or other restrictions,
and (iv) the Buyer will deliver the Purchase Price to the Seller.
5. Post Closing Adjustments. The Purchase Price shall be
adjusted following the Closing based on the matters set forth below.
Such adjustments shall be payable by Seller to the Buyer or by Buyer to
Seller, as applicable, within 30 days following the submission of
documentation describing in reasonable detail the factual basis of the
adjustment:
a) The Purchase Price shall be adjusted by the amount by
which the Net Asset Value determined as of the Closing Date is less
than or greater than $988,674; and
b) The Purchase Price shall be adjusted by the dollar
amount of any Adverse Consequences.
c) The purchase price shall be adjusted to reflect
amounts collected for the Accounts Receivable pursuant to the
provisions of Section 6.9 hereof.
C. Representations and Warranties Concerning the Transaction.
1. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in
this paragraph 3.1 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this paragraph 3.1 with respect to
himself), except as set forth in schedule 1 attached hereto.
a) Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions. The Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
b) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency,
or court to which the Seller is subject, or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which he is bound
or to which any of his assets are subject.
c) Brokers' Fees. Except as described in paragraph 4.4 of
the Disclosure Schedule, the Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
d) Company Shares. The Seller holds of record and owns
beneficially 100% of the Shares of the Company, free and clear of
any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a
party to any option, warrant, purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than
this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company. The Seller owns all of
the outstanding shares of capital stock of the Company.
e) The Seller represents and warrants that (i) all Excluded
Assets have been transferred or assigned from the Company to the
Seller or Affiliates of the Seller, (iii) that the Excluded
Liabilities have been assumed by the Seller, or an Affiliate of the
Seller, without recourse to the Buyer, the Company or Travis Parent,
(ii) that the pre-Closing Sales of the Company (the "Pre-Closing
Sales") have been completed in accordance with the detailed
description of the Pre-Closing Sales set forth on Exhibit "F"
hereto, and (iii) that the consideration paid in each of the Pre-
Closing Sales set forth in Exhibit "E" is equal to the fair market
value of the asset sold.
(f) The Seller currently does not own any interest in,
operate, or serve as an officer, director, guarantor or shareholder
of, any business, or have any plans to engage in any of such
actions, that will compete directly or indirectly against the
Company or the Buyer, within a 250 mile radius of Ft. Walton Beach,
Florida, or within a 250 mile radius of Key Largo, Florida.
2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements contained in
this paragraph 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this paragraph 3.2, except as set forth
in schedule 2 attached hereto.
a) Organization of the Buyer. The Buyer is a corporation
validly existing, and in good standing under the laws of the State
of Texas.
b) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms
and conditions. Other than as contemplated by the registration of
the Travis Parent Stock, the Buyer need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restrict ion of any government, governmental
agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject.
d) Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
e) Travis Parent Stock. The Travis Parent Stock to be
issued to the Seller will be issued free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act or state securities laws), Taxes, Security Interest,
Options, warrants, purchase rights, contracts, commitments,
equities, claims and demands.
f) Independent Investigation. Buyer acknowledges that
in the determination to purchase the Shares from the Seller, Buyer
has made its own independent investigation as to the Company and as
to the Seller. Further, Buyer confirms that except for those
covenants, representations and warranties specifically enumerated
herein and any schedules delivered pursuant to this Agreement, no
representation or warranties related to the affairs or condition of
the Company or the Seller (of any kind of nature, legal, financial,
or otherwise), have been made by Buyer to Seller, or anyone acting
on behalf of Seller.
D. Representations and Warranties Concerning the Company. The
Seller represents and warrants to the Buyer that the statements contained
in this part are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this part), except as set forth in the disclosure
schedule delivered by the Seller to the Buyer on the date hereof and
initialed by the Parties (the "Disclosure Schedule" ). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity and describes the
relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item
itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
part 4.
1. Organization, Qualification, and Corporate Power. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Florida. The Company is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. The Company has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is
engaged and in which it presently proposes to engage and to own and use
the properties owned and used by it. Paragraph 4.1 of the Disclosure
Schedule lists the directors and officers of the Company. The Seller have
delivered to the Buyer correct and complete copies of the charter and
bylaws of the Company (as amended to date). The Company is not in default
under or in violation of any provision of its charter or bylaws.
2. Capitalization. The entire authorized capital stock of
Company consists of 1,000 Shares, of which 1,000 Shares are issued and
outstanding and 0 Company Shares are held in treasury. All of the issued
and outstanding Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective
Seller as set forth in paragraph 4.2 of the Disclosure Schedule. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell,
or otherwise cause to become outstanding any of its capital stock. There
are no out standing or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the Company.
There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Company.
3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company is subject or any provision of the charter or bylaws of the
Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). The Company does not need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
for the parties to consummate the transactions contemplated by this
Agreement.
4. Brokers' Fees. Except as set forth on paragraph 4.4 of
the Disclosure Schedule, the Company has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
5. Title to Assets. The Company has exclusive, good and
marketable title to the Assets, or a valid leasehold interest in the
properties used by them. The Assets are free and clear of all Security
Interests, except as listed on paragraph 4.5 of the Disclosure Schedule.
Except as set forth in paragraph 4.5 of the Disclosure Schedule, none of
the Assets are leased by the Company from any third parties.
6. Subsidiaries. The Company has no subsidiaries.
7. Financial Statements. Attached hereto as Exhibit "G" are
the following financial statements (collectively the "Financial
Statements" ): (i) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal
years ended June 30, 1995, 1996 and 1997 (hereinafter referred to as the
"Most Recent Fiscal Year End, ) for the Company. The Financial
Statements (including the notes thereto, if any) have been prepared in
accordance with the cash basis of accounting, applied on a consistent
basis throughout the periods covered thereby, present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and complete, and
are consistent with the books and records of the Company (which books and
records are correct and complete).
8. Events Subsequent to Most Recent Fiscal Year End. Except
as described in Exhibit "F" and in paragraph 4.8 of the Disclosure
Schedule, since the Most Recent Fiscal Year End, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
a) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
b) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $50,000 or outside
the Ordinary Course of Business;
c) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) to which the Company is a party or by which the Company is
bound, other than any agreement listed as an Excluded Liability;
d) the Company has not imposed any Security Interest upon any
of its assets, tangible or intangible;
e) the Company has not made any single capital expenditure
(or series of related capital expenditures) either involving more
than $150,000 or outside the Ordinary Course of Business;
f) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $150,000 or outside the
Ordinary Course of Business;
g) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
h) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course
of Business;
i) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the Ordinary Course of
Business;
j) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
k) there has been no change made or authorized in the charter
or bylaws of the Company;
l) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange,
or exercise) any of its capital stock;
m) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
n) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
o) the Company has no outstanding loans to any of its
directors, officers, and employees outside the Ordinary Course of
Business and the Company is currently not a party to a transaction
with any of its directors, officers or employees outside the
Ordinary Course of Business;
p) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
q) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
r) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
s) the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
t) the Company has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of
Business;
u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company; and
v) the Company has not committed to any of the foregoing.
9. Undisclosed Liabilities. Except as described on
paragraph 4.9 of the Disclosure Schedule, neither the Seller nor the
Company has any knowledge of any Liability of the Company that is not
fully and accurately reflected on the Most Recent Financial Statements
(and neither the Seller nor the Company has any knowledge of any Basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability).
10. Legal Compliance. The Company and its predecessors and
Affiliates has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply.
11. Tax Matters.
a) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company currently is not the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
b) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or
other third party.
c) No Seller or director or officer (or employee responsible
for Tax matters) of the Company expects any authority to assess any
additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
the Company either (i) claimed or raised by any authority in writing
or (ii) as to which the Seller and the directors and officers (and
employees responsible for Tax matters) of the Company has Knowledge
based upon personal contact with any agent of such authority. Such
disclosure also indicates those Tax Returns that have been audited
and indicates those Tax Returns that currently are the subject of
audit. The Seller has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the
Company since December 31, 1992.
d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
e) The Company has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. The Company has not made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Sec. 280G. The
Company has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec.
6662. The Company is not a party to any Tax allocation or sharing
agreement. The Company (A) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (B) has no
Liability for the Taxes of any Person (other than the Company) under
Treas. Reg. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
f) Paragraph 4.11 of the Disclosure Schedule sets forth the
following information with respect to the Company) as of the most
recent practicable date (i) the basis of the Company in its assets;
and (ii) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company.
g) The unpaid Taxes of the Company (i) did not, as of the
Closing Date, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (ii) do
not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of
the Company in filing their Tax Returns (collectively the "Tax
Reserve").
12. Real Property.
a) The Company does not own any real property, except
leasehold improvements, or any interest in any entities that own
real property.
b) As of the Closing Date, the Company is not a party to
any lease for real property.
c) At the Closing, the Company will enter into a triple
net lease (i) with Paul J. Roberts, the Seller and Frederic Pace,
DBA Adventure Marine Real Estate Partnership and Adventure Marine
Real Estate, Inc. for the properties associated with the Business
located in Ft. Walton Beach, Florida, as specifically described in
the lease for such properties, a signed copy of which is included in
Paragraph 4.12 of the Disclosure Schedule, and (ii) with
[____________] for the property known as the "Kettles Property"
specifically described in the lease for such properties, a signed
copy of which is included in Paragraph 4.12 of the Disclosure
Schedule.
13. Intellectual Property.
a) The Company does not own, except through common law
rights, or have the right to use pursuant to license, sublicense,
agreement, or permission, any Intellectual Property.
b) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the
Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company has
ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Company must license or
refrain from using any Intellectual Property rights of any third
party). To the Knowledge of any of the Seller and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with the Intellectual Property rights of the Company, if
any.
c) Paragraph 4.13 of the Disclosure Schedule identifies
each trade name or unregistered or registered trademark used by any
of the Company in connection with any of its businesses.
14. Tangible Assets. The Company owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for
the conduct of their businesses as presently conducted and as presently
proposed to be conducted.
15. Condition of Assets. All of the Assets of the Company,
including without limitation the New Boats, Motors, and Trailers, Used
Boats, Motors and Trailers, Accessories, Parts and Miscellaneous Assets,
are merchantable and fit for the purpose for which it was procured or
manufactured and are in good repair. The value of the Assets as detailed
on Exhibit "D", hereto has been jointly established by the parties as the
fair market thereof and neither party disagrees with such values.
16. Contracts. Paragraph 4.16 of the Disclosure Schedule
lists all of the contracts and other agreements to which any of the
Company is a party pursuant to which the Company is obligated, on an
annual basis, for payments or commitments in excess of $25,000, including
without limitation all Boat Show Rights. A correct and complete copy of
each written agreement listed in paragraph 4.16 of the Disclosure
Schedule (as amended to date) and a written summary setting forth the
terms and conditions of each oral agreement referred to in paragraph 4.16
of the Disclosure Schedule is attached as an exhibit to the Disclosure
Schedules. With respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (ii)
the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the trans actions contemplated hereby; (iii) no party is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement. This paragraph specifically
excludes any and all retail contracts.
17. Notes and Accounts Receivable. To the Seller's and the
Company's Knowledge, all notes and accounts receivable of the Company are
reflected properly on the books and records, were incurred in the
ordinary course of business, are not subject to setoffs or counterclaims,
and are current and collectible, and will be collected in accordance with
their terms at their recorded amounts. All Current Accounts Receivable
are aged less than 60 days as of the Closing Date and are not due from
the Seller or affiliates of the Seller or the Company.
18. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
19. Insurance. Paragraph 4.19 of the Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past two years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the Company is not in
breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (B) the
Company has paid all premiums through the Closing Date. The Company has
been covered during the past 10 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged
during such period. The Company has no self-insurance arrangements.
20. Litigation. Paragraph 4.20 of the Disclosure Schedule
sets forth each instance in which the Company (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to the Knowledge of any of the Seller and the
directors and officers (and employees with responsibility for litigation
matters) of the Company, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the actions,
suits, proceedings, hearings, and investigations set forth in paragraph
4.20 of the Disclosure Schedule could result in any adverse change in the
business, financial condition, operations, results of operations, or
future prospects of any of the Company. None of the Seller and the
directors and officers (and employees with responsibility for litigation
matters) of the Company has any reason to believe that any such action,
suit, proceeding, hearing, or investigation may be brought or threatened
against of the Company.
21. Product Warranty. Each product manufactured, sold,
leased, or delivered by any of the Company has been in conformity with
all applicable contractual commitments and all express and implied
warranties, and the Company has no Liability (and to its knowledge there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith. No product manufactured, sold, leased,
or delivered by the Company is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of
sale or lease. Paragraph 4.21 of the Disclosure Schedule includes copies
of the standard terms and conditions of sale or lease for the Company
(containing applicable guaranty, warranty, and indemnity provisions).
22. Product Liability. The Company has no Liability (and
there is no Basis for the present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use
of any product manufactured, sold, leased, or delivered by any of the
Company.
23. Employees. To the Knowledge of any of the Seller and the
directors and officers (and employees with responsibility for employment
matters) of the Company, and except as contemplated by this Agreement, no
executive, key employee, or group of employees has any plans to terminate
employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor
practice. None of the Seller and the directors and officers (and
employees with responsibility for employment matters) of the Company has
any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees
of any of the Company. Paragraph 4.23 of the Disclosure Schedule
includes a complete and correct list of the names and positions of all of
the employees of the Company, including a detailed description of the
compensation paid to each such employee, including all benefits.
24. Employee Benefits.
a) Paragraph 4.24 of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Company and the Controlled
Group of Corporations which includes the Company (here,
collectively, the "Company ERISA Group") maintains or to which any
member of the Company ERISA Group has ever contributed. With
respect to such Employee Benefit Plan(s):
(1) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws, including, without
limitation, the nondiscrimination requirements of Section 125
of the Code. None of the Employee Benefit Plans is an
Employee Pension Benefit Plan nor has the Company ERISA Group
maintained or contributed to an Employee Pension Benefit Plan
subsequent to 1991.
(2) All required reports and descriptions have been filed
or distributed appropriately with respect to each such Employee
Benefit Plan. Without limitation, the requirements of Part 6 of
Subtitle B of Title I of ERISA, of Code Sec. 4980B, and of the
applicable provisions of the Health Insurance Portability and
Accountability Act of 1996 have been met with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(3) The Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements (if any), contracts (including without
limitation insurance contracts), and other material agreements
which implement each such Employee Benefit Plan.
(4) The Company and the Sellers have no Liability for
breach of fiduciary duty or any other failure to act or comply
in connection with the administration, or investment of the
assets, of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits)
is pending or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for
employee benefits matters) of the Company ERISA Group
threatened. None of the Sellers and the directors and officers
(and employees with responsibility for employee benefits
matters) of the Company ERISA Group has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
b) None of the Company ERISA Group maintains or ever has
maintained or contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with
Code Sec. 4980B).
25. Guaranties. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any
other Person.
26. Environment, Health, and Safety.
a) To the Seller's and the Company's Knowledge, the Company,
and its predecessors and Affiliates have complied with all
Environmental, Health, and Safety Laws. No action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them
alleging any failure so to comply. Without limiting the generality
of the preceding sentence, to the Seller's and the Company's
Knowledge, each of the Company and its respective predecessors and
Affiliates has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
b) To the Seller's and the Company's Knowledge, the Company
has no Liability (and none of the Company and its predecessors and
Affiliates has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company giving rise
to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
27. Disclosure. The representations and warranties contained
in this part 4 do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this part 4 not misleading.
E. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing.
1. General. Each of the parties will use reasonable efforts
to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set
forth in part 7 below).
2. Notices and Consents. The Sellers will cause the Company
to give any notices to third parties, and will cause the Company to use
commercially reasonable efforts to obtain any third-party consents
required in connection with the transactions contemplated hereby.
3. Operation of Business. The Sellers will not cause or
permit the Company to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Sellers will not cause or
permit the Company to declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, or otherwise engage in any
practice, take any action, or enter into any transaction of the sort
described in paragraph 4.8 above, except as contemplated by the Pre-
Closing Sales described in Exhibit "F".
4. Preservation of Business. Other than reductions in the
inventory pursuant to the Buyer's request, the Sellers will cause the
Company to keep its business and properties substantially intact,
including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
5. Full Access. The Seller will permit, and the Seller will
cause the Company to permit, representatives of the Buyer to have full
access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of the Company, to all premises,
personnel, books, records (including Tax records), contracts, and
documents of or pertaining to the Company.
6. Notice of Developments. The Seller will give prompt
written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in part 4 above.
Each Party will give prompt written notice to the others of any material
adverse development causing a breach of any of his or its own
representations and warranties in part 3 above. No disclosure by any
Party pursuant to this paragraph 5.6, however, shall be deemed to amend
or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
7. Exclusivity. Except as contemplated by the Pre-Closing
Sales, the Seller will not (and the Seller will not cause or permit the
Company to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of
the assets of the Company (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner
any effort or attempt by any Person to do or seek any of the foregoing.
The Seller will not vote his Shares in favor of any such acquisition
structured as a merger, consolidation, or share exchange. The Seller
will notify the Buyer immediately if any Person makes any proposal,
offer, inquiry, or contact with respect to any of the foregoing.
F. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
1. General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of
this Agreement, each of the parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other party reasonably may request, all at the sole
cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under part 8 below). The Seller
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the
Company. The Buyers agree to take reasonable steps to safekeep such
records.
2. Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Company, each
of the other Parties will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification therefor under
paragraph 8 below).
3. Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Company
from maintaining the same business relationships with the Company after
the Closing as it maintained with the Company prior to the Closing. The
Seller will refer all customer inquiries relating to the businesses of
the Company to the Buyer from and after the Closing.
4. Confidentiality. The Seller will treat and hold as such
all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of
the Buyer, all tangible expressions (and all copies) of the Confidential
Information which are in his or its possession. In the event the Seller
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Seller will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or
waive compliance with the provisions of this paragraph 6.4. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his or
its best efforts to obtain, at the reasonable request of the Buyer, an
order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as
the Buyer shall designate.
5. Buyer Note. The Buyer Note will bear a legend
substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT
TO CERTAIN RIGHTS OF SET-OFF AS SET FORTH IN A STOCK PURCHASE
AGREEMENT DATED AS OF SEPTEMBER 30, 1997 (THE "PURCHASE
AGREEMENT") AMONG THE ISSUER OF THIS NOTE AND THE ORIGINAL
HOLDER HEREOF. THIS NOTE WAS ORIGINALLY ISSUED ON SEPTEMBER 30,
1997, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF THIS NOTE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT. THE
ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE PROVISIONS TO
THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
Each holder desiring to transfer a Buyer Note first must furnish the
Buyer with (i) a written opinion of counsel satisfactory to the Buyer in
form and substance satisfactory to the Buyer to the effect that the
holder may transfer the Buyer Note as desired without registration under
the Securities Act, and (ii) a written undertaking executed by the
proposed transferee satisfactory to the Buyer in form and substance
satisfactory to Buyer agreeing to be bound by the Set-Off provisions and
the restrictions on transfer contained herein.
6. Registration of Travis Parent Stock. Travis Parent shall
file a registration statement at its expense, on Form S-3 (the
"Registration Statement,) within fifteen (15) business days after the
Closing Date and shall use its reasonable efforts to have the
Registration Statement declared effective by the Securities and Exchange
Commission ("SEC"). The Seller agrees to cooperate and provide all
required information for inclusion in the Registration Statement. The
Buyer agrees that if the SEC does not, on or before March 31, 1998,
declare the Registration Statement effective, and the failure to do so is
a result of a circumstance or condition associated with the Buyer, which
causes the SEC under current or then existing rules and regulations to
postpone or prohibit the effectiveness of the Registration Statement,
then the Buyer shall, upon receipt of the Travis Parent Stock from
Seller, pay to the Seller an amount of cash equal to cash value of the
Travis Parent Stock as of the Closing Date. Without limiting the
generality of the foregoing, the Buyer shall be under no obligation to
pay cash to the Seller if the SEC does not declare the Registration
Statement effective due to issues arising out of or in connection with
the acquisition of the Company, the Company or Adventure Brokerage.
7. Pre-Closing Sales. The Seller agrees to fully indemnify
and promptly reimburse the Buyer for any Liability incurred or expenses
incurred by the Buyer arising out of or in connection with the Pre-
Closing Sales. The Seller agrees to cooperate fully with Buyer in
connection with the defense of any such Liability and agree to provide
Buyer access to all books and records related to the Pre-Closing Sales.
This provision shall be in addition to the Buyers remedies set forth in
part 8 and 9 hereof.
8. Use of Name. The Seller shall, and the Seller shall cause
its Affiliates, to cease using the name "Adventure Marine" or any
derivation thereof within six months of the Closing Date.
9. Accounts Receivable. (a) The Buyer shall, in the manner
provided in paragraph 6.9(b), promptly reimburse the Seller for any sums
collected for Accounts Receivable in excess of 50% of the aggregate face
amount of the Current Accounts Receivable. In the event the Buyer is
unable to collect 50% of the face amount of the Current Accounts
Receivable within 120 days of the Closing Date, the Buyer may, among
other remedies, exercise its right to Set-Off under the Buyer Note and
the Other Buyer Notes and/or seek indemnification pursuant to the terms
of this Agreement.
(b) On the tenth day of each month following the Closing
Date, the Buyer shall deliver to The Seller an accounting which details
the amount of Accounts Receivable collected by the Buyer in the previous
month. If the Buyer has collected in excess of 50% of the Current
Accounts Receivable, the Buyer shall, at that time, reimburse Seller for
all amounts not previously paid to Seller which Buyer has collected with
respect to the Accounts Receivable in excess of 50% of the Current
Accounts Receivable. The Buyer agrees to use diligent efforts to collect
the Accounts Receivable. If, at any time after six months following the
Closing Date, the Buyer has collected an amount in excess of 50% of all
Current Accounts Receivable and the Buyer is unable to collect any of the
Accounts Receivable, the Buyer shall, at the Seller's request, assign
such uncollected Accounts Receivable to the Seller.
10. Non-Compete.
a) To induce Buyer to consummate the transactions
contemplated by this Agreement, the Seller agrees to execute the
Noncompetition Agreement attached as Exhibit "I" to the Adventure
Brokerage Stock Purchase Agreement.
G. Conditions to Obligation to Close.
1. Conditions to Obligation of the Buyer. The obligation of
the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
a) the representations and warranties set forth in paragraph
3.1 and part 4 above shall be true and correct in all material
respects at and as of the Closing Date;
b) the Seller shall have performed and complied with all of
his covenants hereunder in all material respects through the
Closing;
c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation, (iii) affect adversely the right of the Buyer to own
the Shares and to control the Company, or (iv) affect adversely the
right of the Company to own its assets and to operate its businesses
(and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
d) the Seller shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in
paragraph 7.1(a)-(c) is satisfied in all respects;
e) the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in Exhibit "H"
attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
f) the Buyer shall have received the resignations, effective
as of the Closing, of each director and officer of the Company;
g) the Buyer shall have received satisfactory evidence in its
sole discretion that Paul J. Roberts and Frederic Pace consented to
the terms of this Agreement, has released the Company from any and
all claims, and that the Seller provided full disclosure regarding
the terms of this Agreement and any other related agreements to
Paul J. Roberts and Frederic Pace; and
h) the Buyer's acquisitions of the stock of The Company
and Adventure Brokerage shall have been consummated, or the Buyer is
satisfied, in its sole discretion, that such transactions will be
consummated immediately following consummation of the transactions
contemplated hereby;
i) the Seller shall have executed the Noncompetition
Agreement attached as Exhibit "I" to the Adventure Brokerage Stock
Purchase Agreement.
j) the Buyers shall have received satisfactory evidence
that the Excluded Assets have been transferred from the Company to
the Seller or an Affiliate of the Seller and that the Excluded
Liabilities have been assumed by the Seller, or an Affiliate of the
Seller, without recourse to the Buyer, the Company or Travis Parent;
and
k) all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this paragraph 7.1 if it
executes a writing so stating at or prior to the Closing.
2. Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
a) the representations and warranties set forth in paragraph
3.2 above shall be true and correct in all material respects at and
as of the Closing Date;
b) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (i) prevent consummation of any of the transactions
contemplated by this Agreement or (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
d) the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified
above in paragraph 7.2(a)-(c) is satisfied in all respects;
e) the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit "I"
attached hereto, addressed to the Seller, and dated as of the
Closing Date; and
f) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this paragraph 7.2 if he
executes a writing so stating at or prior to the Closing.
H. Remedies
1. Indemnification Provisions for Benefit of the Buyer.
a) In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the Seller has
breached) any of the representations, warranties and covenants
contained herein (other than those of the Seller described in
paragraph 8.1(b) and (c)), then the Seller agrees to indemnify the
Buyer from and against the entirety of any Adverse Consequences the
Buyer may suffer, for a period of one year following the Closing
Date, through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after the
end of such one year period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the
alleged breach); provided, however, that (a) the Sellers shall have
no obligations to indemnify the Buyer for any Adverse Consequences
pursuant to this Section 8.1(a) for an amount in excess of (i) the
Buyer Note and (ii) the Other Buyer Notes, issued in connection with
the sale of The Company and Adventure Brokerage and (b) the Buyer's
exclusive remedy for any claims brought pursuant to this Section
8.1(a) shall be the right to Set-Off described in Section 8.5
hereof.
b) The Seller shall be obligated to fully and completely
indemnify the Buyer, for an unlimited period of time following the
Closing (subject to applicable statutes of limitation), from and
against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of or relating to any Liability
suffered as a result of (i) fraud by the Seller or the Company
(including without limitation any Adverse Consequences suffered by
Buyer as a result of a breach of the Seller's representations in
paragraph 3.1 (Representations and Warranties) hereof), (ii) a
misrepresentation which the Seller or the Company knew or reasonably
should have known or been aware (including without limitation any
Adverse Consequences suffered by Buyer as a result of employee
misstatements to customers or others), (iii) claims by employees
against the Company (including without limitation any Adverse
Consequences suffered by Buyer as a result of the representations
made by the Seller and the Company in paragraph 4.24 (Employee
Benefits) hereof), (iv) Taxes (including without limitation any
Adverse Consequences suffered by Buyer as a result of the
representations made by the Seller and the Company in paragraph 4.11
(Tax Matters) hereof, and (v) claims by any of the current or former
shareholders of the Company, The Company or Adventure Brokerage
against the Company, The Company, Adventure Brokerage or the Buyer
and its affiliates.
c) The Seller shall be obligated to fully and completely
indemnify the Buyer for an unlimited period of time following
Closing (subject to applicable statutes of limitation) from and
against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of, relating to, in the nature
of, or caused by any Liability of any of the Company (i) for any
Taxes of the Company with respect to any Tax year or portion thereof
ending on or before the Closing Date (or for any Tax year beginning
before and ending after the Closing Date to the extent allocable
(determined in a manner consistent with paragraph 9.2 below) to the
portion of such period beginning before and ending on the Closing
Date), to the extent such Taxes are not reflected in the Tax Reserve
or have not been paid to the Buyer pursuant to paragraph 9.1 below,
and (ii) for the unpaid Taxes of any Person (other than any of the
Company) under Treas. Reg. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise suffer.
2. Indemnification Provisions for Benefit of the Seller. The
representations, warranties and covenants of the Buyer shall survive the
Closing and continue in full force and effect for a period of one year.
In the event the Buyer breaches (or in the event any third party alleges
facts that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained herein, provided
that the Seller makes a written claim for indemnification against the
Buyer within such one year period, then the Buyer agrees to indemnify the
Seller from and against any Adverse Consequences the Seller may suffer
through and after the date of the claim for indemnification (including
any Adverse Consequences the Seller may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged breach).
Furthermore, the Buyer agrees to fully and completely indemnify the
Seller for any Adverse Consequences suffered by the Seller as a result of
any action or omission by the Company following the Closing Date;
provided, however, that (i) in the case of Adverse Consequences involving
a series of actions or omissions by the Company, the Buyer shall not
indemnify Seller for any liability created by the Company prior to the
Closing Date, and (ii) this provision shall not apply to Frederic Pace
for any Adverse Consequences suffered by Frederic Pace arising out of or
in connection with Frederic Pace's employment with the Company or the
Buyer subsequent to the Closing Date.
3. Matters Involving Third Parties.
a) If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
any other Party (the "Indemnifying Party") under this part 8, then
the Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing; provided, however, that no delay on the part of
the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is
prejudiced.
b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as
(i) the Indemnifying Party notifies the Indemnified Party in writing
within 15 days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (ii) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third
Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (iv) settlement of, or an
adverse judgment with respect to, the Third Party Claim is not, in
the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to
the continuing business interests of the Indemnified Party, and (v)
the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with paragraph 8.3(b)
above, (i) the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the
Third Party Claim, (ii) the Indemnified Party will not consent to
the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be unreasonably withheld), and (iii) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (not to
be unreasonably withheld).
d) In the event any of the conditions in paragraph 8.3(b)
above is or becomes unsatisfied, however, (i) the Indemnified Party
may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in
any manner it reasonably may deem appropriate (and the Indemnified
Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying
Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys' fees and expenses), and (iii)
the Indemnifying Parties will remain responsible for any Adverse
Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this part 8.
4. Determination of Adverse Consequences. The parties shall
take into account the time cost of money (using the Applicable Rate as
the discount rate) in determining Adverse Consequences for purposes of
this part 8. All indemnification payments under this part 8 shall be
deemed adjustments to the Purchase Price.
5. Set-off Under Buyer Notes. The Buyer shall have the
option of recouping all or any part of any Adverse Consequences it may
suffer (in lieu of seeking any indemnification to which it is entitled
under this part 8); such right shall be exercisable by Buyer by notifying
the Seller that the Buyer is reducing the principal amount outstanding
under the Buyer Note. This shall affect the timing and amount of payments
required under the Buyer Note in the same manner as if the Buyer had made
a permitted prepayment (without premium or penalty) thereunder. The
Buyer shall offset against each Buyer Note based on each Seller's
percentage ownership of the Company, based upon the information contained
in paragraph 4.2 of the Disclosure Schedule. If the Buyer discovers an
Adverse Consequence prior to the maturity of the Buyer Note (the
"Maturity Date,), but is unable, in good faith, to determine with
specificity the amount of the Adverse Consequence and, therefore, does
not exercise its right of Set-Off prior to the Maturity Date, the
Maturity Date shall be deemed to be extended until the Buyer can
determine the amount of the Adverse Consequence and exercise its right of
Set-Off. The extension of the Maturity Date hereunder shall not be
considered an event of default under the Buyer Note and no late payment
shall be payable as a result of the extension of the Maturity Date.
Following any set-off by Buyer against the Buyer Note which in the
aggregate is equal to the full amount thereof, Buyer shall be permitted
to set-off unsatisfied Adverse Consequences arising under this Agreement
against the Other Buyer Notes, issued in connection with the sale of The
Company and Adventure Brokerage.
6. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of,
any statutory, equitable, or common law remedy any party may have for
breach of representation, warranty, or covenant. The Seller hereby agrees
that he will not make any claim for indemnification against the Company
by reason of the fact that he or it was a director, officer, employee, or
agent of any such entity or was serving at the request of any such entity
as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and
whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller
(whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
I. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for certain Tax
matters following the Closing Date:
1. Tax Periods Ending on or Before the Closing Date. Buyer
shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit
the Seller to review and comment on each such Tax Return described in the
preceding sentence prior to filing. Seller shall reimburse Buyer for
Taxes of the Company with respect to such periods within fifteen (15)
days after payment by Buyer of such Taxes to the extent such Taxes are
not reflected in the Tax Reserve. Buyer shall be permitted to Set-Off
against the Buyer Note to pay any such Taxes.
2. Tax Periods Beginning Before and Ending After the Closing
Date. Buyer shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of the Company for Tax periods which begin
before the Closing Date and end after the Closing Date. Seller shall pay
to Buyer within fifteen (15) days after the date on which Taxes are paid
with respect to such periods an amount equal to the portion of such Taxes
which relates to the portion of such Taxable period ending on the Closing
Date to the extent such Taxes are not reflected in the Tax Reserve. For
purposes of this Section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Taxable period that includes (but
does not end on) the Closing Date, the portion of such Tax which relates
to the portion of such Taxable period ending on the Closing Date shall
(i) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the
number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire Taxable period,
and (ii) in the case of any Tax based upon or related to income or
receipts be deemed equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any credits relating
to a Taxable period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Company.
3. Cooperation on Tax Matters.
(i) Buyer, the Company and Seller shall cooperate fully,
as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Part 9
and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder. The Company and Seller agree (A) to
retain all books and records with respect to Tax matters pertinent
to the Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations
(and, to the extent notified by Buyer or Seller, any extensions
thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records
and, if the other party so requests, the Company or Seller, as the
case may be, shall allow the other party to take possession of such
books and records.
(ii) Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer and Seller further agree, upon request, to
provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
4. Tax Sharing Agreements. All tax sharing agreements or
similar agreements, if any, with respect to or involving the Company
shall be terminated as of the Closing Date and, after the Closing Date,
the Company shall not be bound thereby or have any liability thereunder.
5. Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall
be paid by Seller when due, and Seller will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, Buyer will, and will
cause its affiliates to, join in the execution of any such Tax Returns
and other documentation.
J. Termination.
1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
a) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
b) the Buyer may terminate this Agreement by giving
written notice to the Seller on or before the 10th day following the
date of this Agreement if the Buyer is not satisfied with the
results of its continuing business, legal, and accounting due
diligence regarding the Company;
c) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (i) in the
event the Seller has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of 5 days after the notice of
breach, or (ii) if the Closing shall not have occurred on or before
September 30, 1997, by reason of the failure of any condition
precedent under paragraph 7.1 hereof (unless the failure results
primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and
d) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (i) in the
event the Buyer has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the
Seller has notified the Buyer of the breach, and the breach has
continued without cure for a period of 5 days after the notice of
breach or (ii) if the Closing shall not have occurred on or before
September 30, 1997, by reason of the failure of any condition
precedent under paragraph 7.2 hereof (unless the failure results
primarily from the Seller himself breaching any representation,
warranty, or covenant contained in this Agreement).
2. Effect of Termination. If any party terminates this
Agreement pursuant to paragraph 10.1 above, all rights and obligations of
the parties hereunder shall terminate without any Liability of any party
to any other party (except for any Liability of any party then in
breach).
K. Miscellaneous.
1. Intentionally Deleted.
2. Press Releases and Public Announcements. No party shall
issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of
the Buyer and the Sellers; provided, however, that any party may make any
public disclosure it believes in good faith is required by applicable law
or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its reasonable
efforts to advise the other Parties prior to making the disclosure).
3. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and
their respective successors and permitted assigns.
4. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties
and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, to the extent they related in
any way to the subject matter hereof. Typewritten or handwritten
provisions inserted in this Agreement shall control all printed
provisions in conflict therewith, provided the typewritten or handwritten
provision is initialed and dated by each of the parties to this
Agreement.
5. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party may assign
either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the Buyer and
the Seller; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
6. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
7. Headings. The paragraph headings contained in this
Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
8. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed
to the intended recipient as set forth below:
If to the Seller: Copy to:
c/o John Reinhold H. Bart Fleet
Chesser, Wingard, Barr, Whitney,
Flowers & Fleet, P.A.
1201 Eglin Parkway
Shalimar, Florida 32579
Telecopy: (850) 651-6084
If to the Buyer: Copy to:
Travis Boating Center Florida, Inc. J. Rowland Cook
Attn: Michael B. Perrine Jenkens & Gilchrist, A Professional
Corporation
5000 Plaza on the Lake, #250 600 Congress Avenue, Suite 2200
Austin, Texas 78746 Austin, Texas 78701
Telecopy: (512) 329-0480 Telecopy: (512) 404-3520
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
9. Governing Law and Venue. This Agreement shall be governed
by and construed in accordance with the laws of the State of Florida.
Venue for any proceeding brought hereunder shall lie in Escambia County,
Florida.
10. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
11. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
12. Expenses. Each of the Parties will bear his own costs and
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Seller
agrees that the Company has not borne or will not bear any of the
Seller's costs and expenses (including any of their legal fees, expenses
or fees to be paid to brokers) in connection with this Agreement or any
of the transactions contemplated hereby.
13. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall
be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including,
shall mean including without limitation. The parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that
there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first
representation, warranty, or covenant.
14. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
15. Specific Performance. Each of the parties acknowledges
and agrees that the other parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having jurisdiction over the
parties and the matter (subject to the provisions set forth in paragraph
11.9), in addition to any other remedy to which they may be entitled, at
law or in equity.
16. Attorney's Fees. In connection with any breach, default,
collection, or litigation, including appellate proceedings, arising out
of this Agreement, the prevailing party shall be entitled to recover
reasonable attorney's fees and costs.
17. Further Cooperation. The parties to this Agreement shall
execute and deliver, or cause to be executed and delivered, on the
Closing Date or at such other times as may reasonably be agreed upon,
such additional instruments as the other party may reasonably request for
the purpose of carrying out the transactions contemplated hereby.
Additionally, each of the parties hereto agree to allow the other parties
reasonable access to the books and records of the Company and the Seller
related to the transactions contemplated hereby.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
TRAVIS BOATING CENTER FLORIDA, INC.
By: _________/s/________________________
Name: MICHAEL B. PERRINE
Title: CFO, SECRETARY, TREASURER
SELLER
____________/S/_________________________
John W. Reinhold
<PAGE> EXHIBIT 10.36
STOCK PURCHASE AGREEMENT
AMONG
TRAVIS BOATING CENTER FLORIDA, INC.
("BUYER")
AND
FREDERIC D. PACE
AND
JOHN W. REINHOLD
("SELLERS")
SEPTEMBER 30, 1997
PROVIDING FOR THE PURCHASE OF
100% OF THE COMMON STOCK OF
ADVENTURE MARINE SOUTH, INC.,
A FLORIDA CORPORATION
<PAGE>
TABLE OF CONTENTS
1. Definitions
2. Purchase and Sale of Company Shares
2.1. Basic Transaction
2.2. Purchase Price
2.3. The Closing
2.4. Deliveries at the Closing
2.5. Post Closing Adjustments.
3. Representations and Warranties Concerning the Transaction
3.1. Representations and Warranties of the Sellers
3.2. Representations and Warranties of the Buyer
4. Representations and Warranties Concerning the Company.
4.1. Organization, Qualification, and Corporate Power
4.2. Capitalization
4.3. Noncontravention
4.4. Brokers' Fees
4.5. Title to Assets
4.6. Subsidiaries
4.7. Financial Statements
4.8. Events Subsequent to Most Recent Fiscal Year End
4.9. Undisclosed Liabilities
4.10. Legal Compliance
4.11. Tax Matters
4.12. Real Property
4.13. Intellectual Property
4.14. Tangible Assets
4.15. Condition of Assets.
4.16. Contracts
4.17. Notes and Accounts Receivable
4.18. Powers of Attorney
4.19. Insurance
4.20. Litigation
4.21. Product Warranty
4.22. Product Liability.
4.23. Employees.
4.24. Employee Benefits.
4.25. Guaranties
4.26. Environment, Health, and Safety
4.27. Disclosure
5. Pre-Closing Covenants.
5.1. General.
5.2. Notices and Consents.
5.3. Operation of Business.
5.4. Preservation of Business.
5.5. Full Access.
5.6. Notice of Developments.
5.7. Exclusivity.
6. Post-Closing Covenants
6.1. General
6.2. Litigation Support
6.3. Transition
6.4. Confidentiality
6.5. Buyer Notes
6.6. Registration of Travis Parent Stock
6.7. Pre-Closing Sales
6.8. Use of Name
6.9. Accounts Receivable.
6.10. Non-Compete.
7. Conditions to Obligation to Close
7.1. Conditions to Obligation of the Buyer
7.2. Conditions to Obligation of the Sellers
8. Remedies
8.1. Indemnification Provisions for Benefit of the Buyer
8.2. Indemnification Provisions for Benefit of the Sellers
8.3. Matters Involving Third Parties
8.4. Determination of Adverse Consequences
8.5. Set-off Under Buyer Note
8.6. Other Indemnification Provisions
9. Tax Matters
9.1. Tax Periods Ending on or Before the Closing Date
9.2. Tax Periods Beginning Before and Ending After the Closing Date
9.3. Cooperation on Tax Matters
9.4. Tax Sharing Agreements
9.5. Certain Taxes
10. Termination
10.1. Termination of Agreement
10.2. Effect of Termination
11. Miscellaneous
11.1. Nature of Certain Obligations
11.2. Press Releases and Public Announcements
11.3. No Third-Party Beneficiaries
11.4. Entire Agreement
11.5. Succession and Assignment
11.6. Counterparts
11.7. Headings
11.8. Notices
11.9. Governing Law and Venue
11.10. Amendments and Waivers
11.11. Severability
11.12. Expenses
11.13. Construction
11.14. Incorporation of Exhibits and Schedules
11.15. Specific Performance
11.16. Attorney's Fees
11.17. Further Cooperation.
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into on
September 30, 1997, by and among TRAVIS BOATING CENTER FLORIDA, INC. a
Texas corporation (the "Buyer"), and FREDERIC D. PACE and JOHN W.
REINHOLD (collectively the "Sellers").
Recitals:
The Sellers in the aggregate own all of the outstanding capital
stock of Adventure Marine South, Inc., a Florida corporation (the
"Company").
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of
the outstanding capital stock of the Company in return for (i) cash, (ii)
shares of voting common stock of Travis Boats & Motors, Inc., a Texas
corporation, the sole shareholder of the Buyer ("Travis Parent"), and
(iii) the Buyer Notes (as defined below).
Now, therefore, in consideration of the premises and the mutual
promises, of the representations, warranties, and covenants contained
herein, the parties agree as follows.
A. Definitions.
"Accounts Receivable" means all of the accounts receivable of the
Company, as listed on Exhibit "A".
"Adventure Brokerage" means Adventure Boat Brokerage, Inc., a
Florida corporation.
"Adventure Brokerage Stock Purchase Agreement" means the Stock
Purchase Agreement, dated as of September 30, 1997, between the Buyer and
the Sellers, providing for the sale of 100% of the common stock of
Adventure Brokerage to the Buyer.
"Adventure North" means Adventure Marine & Outdoors, Inc., a Florida
corporation.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court
costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Sec. 1504 or any similar group defined under a similar provision of
state, local or foreign law.
"Applicable Rate" means 7 1/2%.
"Assets" means all properties, privileges, rights, interests and
claims, personal, tangible and intangible, of every type and description
(including, without limitation, New Boats, Motors, and Trailers, Used
Boats, Motors, and Trailers, Parts, Accessories, Miscellaneous Assets,
Intellectual Property, Deposits, Accounts Receivable and Boat Show
Rights) that are used, or held for use, by the Company or the Sellers in
the Business and in which the Company or the Sellers has any right, title
or interest (or in which the Company or the Sellers hereafter acquires
any right, title or interest on or before the Closing Date), but
specifically excludes all Excluded Assets.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Boat Shows" means all boat shows at which the Company has had a
booth or made a presentation in any of the last five (5) years.
"Boat Show Rights" means all of the Company's agreements for space
at Boat Shows, including common stock and other ownership rights in
corporations, partnerships, and other types of entities holding Boat
Shows.
"Business" means the retail and wholesale sales and service of
boats, motors, trailers, marine accessories and water sporting goods at
the store located in Key Largo, Florida, and at Boat Shows attended by
the representatives of the Company.
"Buyer" has the meaning set forth in the preface above.
"Buyer Notes" has the meaning set forth in paragraph 2.2 below.
"Closing" has the meaning set forth in paragraph 2.3 below.
"Closing Date" has the meaning set forth in paragraph 2.3 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Share" or "Share" means any share of the Common Stock, par
value $1.00 per share, of the Company.
"Confidential Information" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not
already generally available to the public.
"Controlled Group of Corporations" has the meaning set forth in Code
Sec. 1563.
"Current Accounts Receivable" means those Accounts Receivable of the
Company that are (i) aged less than 60 days as of the Closing Date, and
(ii) are not Accounts Receivable due from Affiliates of the Sellers or
the Company. The Current Accounts Receivable are identified on the list
of Accounts Receivable on Exhibit "A".
"Deposits" means all customer prepaids, tax deposits, utility
deposits and deposits relating to customer special orders as of the
Closing Date.
"Disclosure Schedule" has the meaning set forth in part 4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement plan
or arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee
Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof) concerning
pollution or protection of the environment, public health and safety, or
employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants,
or chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" means those assets of the Company that will be
assigned to the Sellers or an Affiliate of the Sellers immediately prior
to Closing. The Excluded Assets are listed on Exhibit "B" to this
Agreement. All inventory on loan or consignment shall be Excluded
Assets, regardless of whether such items are specifically listed in
Exhibit "B".
"Excluded Liabilities" means those liabilities and obligations of
the Company to be assumed by the Sellers, or an Affiliate of the Sellers,
prior to the Closing. The Excluded Liabilities are listed on Exhibit
"C".
"Extremely Hazardous Substance" has the meaning set forth in Sec.
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Sec. 3(21).
"Financial Statement" has the meaning set forth in paragraph 4.5
below.
"Indemnified Party" has the meaning set forth in paragraph 7.4
below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in- part, revisions, extensions, and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith,
including without limitations all rights in and to "Adventure Marine" and
"Adventure Boat Brokerage" and any derivations thereof, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information related to the
Business and the Company (including rights of publicity, customer lists,
supplier lists, ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, pricing and cost
information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof (in what ever form or medium).
"Inventory" means the inventory of the Company based on a physical
inspection of the Company as of the Closing Date. Used inventory shall
be subject to a mutually agreeable value among the parties, but in no
case shall any used inventory value exceed the current "wholesale value"
as set forth in the most recent "Yellow" used boat guide or such other
used boat reference as may be mutually agreeable.
"Invoice" means a document reflecting a manufacturer's cost of
Assets and related options or accessories on such Assets.
"Knowledge" means actual knowledge after reasonable investigation.
"Liability" means any liability of the Company (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including without limitation any liability
for Taxes, payroll expenses, operating expenses, insurance audit expense,
accounts payable to the Sellers, third parties and to Affiliates of the
Sellers, lease payment and interest payments.
"Miscellaneous Assets" means all furniture, fixtures, vehicles,
leasehold improvements, equipment and other assets of the Company,
including all Rebates for products previously sold for which no Rebate
has been paid to the Company.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
paragraph 4.7 below.
"Most Recent Fiscal Month End" has the meaning set forth in
paragraph 4.7 below.
"Most Recent Fiscal Year End" has the meaning set forth in
paragraph 4.7 below.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"New Boats, Motors, and Trailers" means all new boats, motors, and
trailers owned by the Company. The value of New Boats, Motors and
Trailers shall be determined based on Invoice, net of Rebates.
"Net Asset Value" means (a) the sum of the value, at Closing, of (i)
Miscellaneous Assets, (ii) Boat Show Rights, (iii) Parts, (iv) New Boats,
Motors, and Trailers, (v) Used Boats, Motors, and Trailers, (vi)
Intellectual Property, (vii) 100% of the face amount of the Current
Accounts Receivable, (viii) Deposits, and (ix) the Company's cash minus
(b) the sum of (i) all trade accounts payable, (ii) accrued but unpaid
operating expenses (including Taxes) and floor plan notes existing as of
the date of Closing, (iii) physical damage to any of the Assets or
Inventory, (iv) parts missing from the Assets or Inventory based upon a
physical inspection of the Assets and Inventory, (v) 50% of the face
amount of the Current Accounts Receivable, and (vi) any other Liabilities
assumed by the Buyer. The value assigned to each asset shall be net of
depreciation. The calculation of the Net Asset Value, which includes a
detailed calculation of the value of each category the of the Assets, as
of the Closing date, is attached hereto as Exhibit "D".
"Ordinary Course of Business" means the ordinary course of business
consistent with the Company's past custom and practice (including with
respect to quantity and frequency).
"Other Buyer Notes" means those promissory notes issued to the
Sellers in connection with the sale of Adventure North and Adventure
Brokerage.
"Parts" means all parts of the Company inventoried on the Closing
Date. The parts and accessories so identified in the physical inventory
and found in the most recent price disks/books from their respective
manufacturers shall be purchased by Travis at the lower of the most
recent wholesale price evidenced by such price disks/books or the
original invoice amount.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Pre-Closing Sales" has the meaning set forth in paragraph 3.1(e)
below.
"Prohibited Transaction" has the meaning set forth in ERISA Sec.
406 and Code Sec. 4975.
"Purchase Price" has the meaning set forth in paragraph 2.2 below.
"Rebate" means all sums paid or payable from a vendor to the
Company.
"Registration Statement" shall have the meaning set forth in
section 5.6.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Seller" has the meaning set forth in the preface above.
"Set-Off" means the Buyer's right to recoup all or part of Adverse
Consequences that it may suffer; such right shall be exercisable by
notifying the Seller that it is reducing the principal amount outstanding
under the Buyer Notes and/or the Other Buyer Notes.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common
stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Reserve" has the meaning set forth in paragraph 4.11(g) below.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in paragraph 7.3
below.
"Travis Parent" means Travis Boats & Motors, Inc., a Texas
corporation.
"Travis Parent Stock" means the voting common stock, par value $0.01
per share, of Travis Parent.
"Used Boats, Motors, and Trailers" means all used boats, motors,
and trailers owned by the Company. The Used Boats, Motors and Trailers
shall be subject to a mutually agreeable value among the parties, but in
no case shall any used inventory value exceed the current "wholesale
value" as set forth in the most recent "Yellow" used boat guide or such
other used boat reference as may be mutually agreeable.
B. Purchase and Sale of Company Shares.
1. Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from each of
the Sellers, and each of the Sellers agrees to sell to the Buyer, all of
his Shares for the consideration specified in paragraph 2.2.
Notwithstanding the foregoing, however, immediately prior to the Closing
(i) the Company will assign to the Sellers, or an Affiliate of the
Sellers, the Excluded Assets (listed on Exhibit "B"), to which the Buyer
shall have no right, title or interest following this transaction, and
(ii) the Company shall assign to the Sellers, or an Affiliate of the
Sellers, and the Sellers or its Affiliate shall assume, the Excluded
Liabilities (listed on Exhibit "C"), under which neither the Buyer nor
the Company will be obligated or have any Liability whatsoever.
2. Purchase Price. The Buyer agrees to deliver the following
to the Sellers at the Closing:
a. Intentionally Deleted.
b. Two promissory notes (the "Buyer Notes") in the form of
Exhibit "E" attached hereto, one of which shall be in the
principal amount of $667 and shall be payable to John W.
Reinhold and one of which shall be in the principal amount
of $333 and shall be payable to Frederic D. Pace; and
c. A number of newly issued shares of Travis Parent Stock
equal to (i) the Net Asset Value (as set forth on Exhibit
"D") plus $19,000 (ii) divided by $16.72. Fractional
shares shall be rounded up if the fraction is .50 or
greater.
The consideration set forth above is hereinafter referred to as the
"Purchase Price". The Purchase Price shall be allocated to the Sellers
in proportion to their respective holdings of Company Shares as set forth
in paragraph 4.2 of the Disclosure Schedule. The Purchase Price shall be
subject to adjustment as set forth in paragraph 2.5 hereof.
3. The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing" ) shall take place at the
offices of Adventure North in Ft. Walton Beach, Florida, at mutually
agreeable time, on the first business day following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate
the transactions contemplated hereby (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or
such other date as the Buyer and the Sellers may mutually determine (the
"Closing Date"); provided, however, that the Closing shall be effective
as of September 30, 1997.
4. Deliveries at the Closing. At the Closing, (i) the
Sellers will deliver to the Buyer the various certificates, instruments,
and documents referred to in paragraph 6.1 below, (ii) the Buyer will
deliver to the Sellers the various certificates, instruments, and
documents referred to in paragraph 6.2 below, (iii) each of the Sellers
will deliver to the Buyer stock certificates representing all of his or
its Shares, properly endorsed or accompanied by duly executed assignment
documents for transfer to Buyer free and clear of all Security Interests,
claims, proxies, voting trusts, voting agreements, or other restrictions,
and (iv) the Buyer will deliver the Purchase Price to each of the
Sellers.
5. Post Closing Adjustments. The Purchase Price shall be
adjusted following the Closing based on the matters set forth below.
Such adjustments shall be payable by Sellers to the Buyer or by Buyer to
Sellers, as applicable, within 30 days following the submission of
documentation describing in reasonable detail the factual basis of the
adjustment:
a) The Purchase Price shall be adjusted by the amount by
which the Net Asset Value determined as of the Closing Date is less
than or greater than $88,718; and
b) The Purchase Price shall be adjusted by the dollar
amount of any Adverse Consequences.
c) The purchase price shall be adjusted to reflect
amounts collected for the Accounts Receivable pursuant to the
provisions of Section 6.9 hereof.
C. Representations and Warranties Concerning the Transaction.
1. Representations and Warranties of the Sellers. Each of
the Sellers represents and warrants to the Buyer that the statements
contained in this paragraph 3.1 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this paragraph 3.1 with respect to
himself), except as set forth in schedule 1 attached hereto.
a) Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform
his obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions. The Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
b) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency,
or court to which the Seller is subject, or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which he is bound
or to which any of his assets are subject.
c) Brokers' Fees. Except as described in paragraph 4.4 of
the Disclosure Schedule, the Seller has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
d) Company Shares. The Seller holds of record and owns
beneficially the number of Shares set forth next to his or its name
in paragraph 4.2 of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security
Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. The Seller is not a
party to any option, warrant, purchase right, or other contract or
commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than
this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company. The Sellers
collectively own all of the outstanding shares of capital stock of
the Company.
e) The Sellers represent and warrant that (i) all Excluded
Assets have been transferred or assigned from the Company to the
Sellers or Affiliates of the Sellers, (iii) that the Excluded
Liabilities have been assumed by the Sellers, or an Affiliate of the
Sellers, without recourse to the Buyer, the Company or Travis
Parent, (ii) that the pre-Closing Sales of the Company (the "Pre-
Closing Sales") have been completed in accordance with the detailed
description of the Pre-Closing Sales set forth on Exhibit "F"
hereto, and (iii) that the consideration paid in each of the Pre-
Closing Sales set forth in Exhibit "E" is equal to the fair market
value of the asset sold.
(f) The Sellers currently do not own any interest in,
operate, or serve as an officer, director, guarantor or shareholder
of, any business, or have any plans to engage in any of such
actions, that will compete directly or indirectly against the
Company or the Buyer, within a 250 mile radius of Ft. Walton Beach,
Florida, or within a 250 mile radius of Key Largo, Florida.
2. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Sellers that the statements contained in
this paragraph 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this paragraph 3.2, except as set forth
in schedule 2 attached hereto.
a) Organization of the Buyer. The Buyer is a corporation
validly existing, and in good standing under the laws of the State
of Texas.
b) Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms
and conditions. Other than as contemplated by the registration of
the Travis Parent Stock, the Buyer need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restrict ion of any government, governmental
agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject.
d) Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
e) Travis Parent Stock. The Travis Parent Stock to be
issued to the Sellers will be issued free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act or state securities laws), Taxes, Security Interest,
Options, warrants, purchase rights, contracts, commitments,
equities, claims and demands.
f) Independent Investigation. Buyer acknowledges that
in the determination to purchase the Shares from the Sellers, Buyer
has made its own independent investigation as to the Company and as
to the Sellers. Further, Buyer confirms that except for those
covenants, representations and warranties specifically enumerated
herein and any schedules delivered pursuant to this Agreement, no
representation or warranties related to the affairs or condition of
the Company or the Sellers (of any kind of nature, legal, financial,
or otherwise), have been made by Buyer to Sellers, or anyone acting
on behalf of Sellers.
D. Representations and Warranties Concerning the Company. The
Sellers represent and warrant to the Buyer that the statements contained
in this part are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this part), except as set forth in the disclosure
schedule delivered by the Sellers to the Buyer on the date hereof and
initialed by the Parties (the "Disclosure Schedule" ). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity and describes the
relevant facts in detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or
other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or
warranty has to do with the existence of the document or other item
itself). The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
part 4.
1. Organization, Qualification, and Corporate Power. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Florida. The Company is duly
authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required. The Company has
full corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the businesses in which it is
engaged and in which it presently proposes to engage and to own and use
the properties owned and used by it. Paragraph 4.1 of the Disclosure
Schedule lists the directors and officers of the Company. The Sellers
have delivered to the Buyer correct and complete copies of the charter
and bylaws of the Company (as amended to date). The Company is not in
default under or in violation of any provision of its charter or bylaws.
2. Capitalization. The entire authorized capital stock of
Company consists of ______ Shares, of which ______ Shares are issued and
outstanding and ______ Company Shares are held in treasury. All of the
issued and outstanding Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth in paragraph 4.2 of the Disclosure
Schedule. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights,
or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no out standing or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to
the Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the
Company.
3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company is subject or any provision of the charter or bylaws of the
Company or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). The Company does not need to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
for the parties to consummate the transactions contemplated by this
Agreement.
4. Brokers' Fees. Except as set forth on paragraph 4.4 of
the Disclosure Schedule, the Company has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
5. Title to Assets. The Company has exclusive, good and
marketable title to the Assets, or a valid leasehold interest in the
properties used by them. The Assets are free and clear of all Security
Interests, except as listed on paragraph 4.5 of the Disclosure Schedule.
Except as set forth in paragraph 4.5 of the Disclosure Schedule, none of
the Assets are leased by the Company from any third parties.
6. Subsidiaries. The Company has no subsidiaries.
7. Financial Statements. Attached hereto as Exhibit "G" are
the following financial statements (collectively the "Financial
Statements, ): (i) unaudited balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal
years ended June 30, 1995, 1996 and 1997 (hereinafter referred to as the
"Most Recent Fiscal Year End, ) for the Company. The Financial
Statements (including the notes thereto, if any) have been prepared in
accordance with the cash basis of accounting, applied on a consistent
basis throughout the periods covered thereby, present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and complete, and
are consistent with the books and records of the Company (which books and
records are correct and complete).
8. Events Subsequent to Most Recent Fiscal Year End. Except
as described in Exhibit "F" and in paragraph 4.8 of the Disclosure
Schedule, since the Most Recent Fiscal Year End, there has not been any
material adverse change in the business, financial condition, operations,
results of operations, or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
a) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
b) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than $50,000 or outside
the Ordinary Course of Business;
c) no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) to which the Company is a party or by which the Company is
bound, other than any agreement listed as an Excluded Liability;
d) the Company has not imposed any Security Interest upon any
of its assets, tangible or intangible;
e) the Company has not made any single capital expenditure
(or series of related capital expenditures) either involving more
than $150,000 or outside the Ordinary Course of Business;
f) the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any
other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $150,000 or outside the
Ordinary Course of Business;
g) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
h) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course
of Business;
i) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims)
either involving more than $20,000 or outside the Ordinary Course of
Business;
j) the Company has not granted any license or sublicense of
any rights under or with respect to any Intellectual Property;
k) there has been no change made or authorized in the charter
or bylaws of the Company;
l) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange,
or exercise) any of its capital stock;
m) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
n) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
o) the Company has no outstanding loans to any of its
directors, officers, and employees outside the Ordinary Course of
Business and the Company is currently not a party to a transaction
with any of its directors, officers or employees outside the
Ordinary Course of Business;
p) the Company has not entered into any employment contract
or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
q) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
r) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
s) the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
t) the Company has not made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of
Business;
u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company; and
v) the Company has not committed to any of the foregoing.
9. Undisclosed Liabilities. Except as described on
paragraph 4.9 of the Disclosure Schedule, neither the Sellers nor the
Company has any knowledge of any Liability of the Company that is not
fully and accurately reflected on the Most Recent Financial Statements
(and neither the Sellers nor the Company has any knowledge of any Basis
for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability).
10. Legal Compliance. The Company and its predecessors and
Affiliates has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply.
11. Tax Matters.
a) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company currently is not the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that it is
or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
b) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or
other third party.
c) No Seller or director or officer (or employee responsible
for Tax matters) of the Company expects any authority to assess any
additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
the Company either (i) claimed or raised by any authority in writing
or (ii) as to which any of the Sellers and the directors and
officers (and employees responsible for Tax matters) of the Company
has Knowledge based upon personal contact with any agent of such
authority. Such disclosure also indicates those Tax Returns that
have been audited and indicates those Tax Returns that currently are
the subject of audit. The Sellers have delivered to the Buyer
correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by the Company since December 31, 1992.
d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
e) The Company has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. The Company has not made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Sec. 280G. The
Company has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec.
6662. The Company is not a party to any Tax allocation or sharing
agreement. The Company (A) has not been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (B) has no
Liability for the Taxes of any Person (other than the Company) under
Treas. Reg. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
f) Paragraph 4.11 of the Disclosure Schedule sets forth the
following information with respect to the Company) as of the most
recent practicable date (i) the basis of the Company in its assets;
and (ii) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company.
g) The unpaid Taxes of the Company (i) did not, as of the
Closing Date, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (ii) do
not exceed that reserve as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of
the Company in filing their Tax Returns (collectively the "Tax
Reserve,).
12. Real Property.
a) The Company does not own any real property, except
leasehold improvements, or any interest in any entities that own
real property.
b) As of the Closing Date, the Company is not a party to
any lease for real property.
c) At the Closing, Adventure North will enter into a
triple net lease (i) with Paul J. Roberts, Reinhold and Pace, DBA
Adventure Marine Real Estate Partnership and Adventure Marine Real
Estate, Inc. for the properties associated with the Business located
in Ft. Walton Beach, Florida, as specifically described in the lease
for such properties, a signed copy of which is included in Paragraph
4.12 of the Disclosure Schedule, and (ii) with [____________] for
the property known as the "Kettles Property" specifically described
in the lease for such properties, a signed copy of which is included
in Paragraph 4.12 of the Disclosure Schedule.
13. Intellectual Property.
a) The Company does not own, except through common law
rights, or have the right to use pursuant to license, sublicense,
agreement, or permission, any Intellectual Property.
b) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the
Sellers and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company has
ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that the Company must license or
refrain from using any Intellectual Property rights of any third
party). To the Knowledge of any of the Sellers and the directors and
officers (and employees with responsibility for Intellectual
Property matters) of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with the Intellectual Property rights of the Company, if
any.
c) Paragraph 4.13 of the Disclosure Schedule identifies
each trade name or unregistered or registered trademark used by any
of the Company in connection with any of its businesses.
14. Tangible Assets. The Company owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for
the conduct of their businesses as presently conducted and as presently
proposed to be conducted.
15. Condition of Assets. All of the Assets of the Company,
including without limitation the New Boats, Motors, and Trailers, Used
Boats, Motors and Trailers, Accessories, Parts and Miscellaneous Assets,
are merchantable and fit for the purpose for which it was procured or
manufactured and are in good repair. The value of the Assets as detailed
on Exhibit "D" hereto has been jointly established by the parties as the
fair market thereof and neither party disagrees with such values.
16. Contracts. Paragraph 4.16 of the Disclosure Schedule
lists all of the contracts and other agreements to which any of the
Company is a party pursuant to which the Company is obligated, on an
annual basis, for payments or commitments in excess of $25,000, including
without limitation all Boat Show Rights. A correct and complete copy of
each written agreement listed in paragraph 4.16 of the Disclosure
Schedule (as amended to date) and a written summary setting forth the
terms and conditions of each oral agreement referred to in paragraph 4.16
of the Disclosure Schedule is attached as an exhibit to the Disclosure
Schedules. With respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (ii)
the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of
the trans actions contemplated hereby; (iii) no party is in breach or
default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement. This paragraph specifically
excludes any and all retail contracts.
17. Notes and Accounts Receivable. To the Seller's and the
Company's Knowledge, all notes and accounts receivable of the Company are
reflected properly on the books and records, were incurred in the
ordinary course of business, are not subject to setoffs or counterclaims,
and are current and collectible, and will be collected in accordance with
their terms at their recorded amounts. All Current Accounts Receivable
are aged less than 60 days as of the Closing Date and are not due from
the Sellers or affiliates of the Sellers or the Company.
18. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
19. Insurance. Paragraph 4.19 of the Disclosure Schedule sets
forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the
Company has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past two years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the Company is not in
breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or
the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (B) the
Company has paid all premiums through the Closing Date. The Company has
been covered during the past 10 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged
during such period. The Company has no self-insurance arrangements.
20. Litigation. Paragraph 4.20 of the Disclosure Schedule
sets forth each instance in which the Company (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for litigation
matters) of the Company, is threatened to be made a party to any action,
suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator. None of the actions,
suits, proceedings, hearings, and investigations set forth in paragraph
4.20 of the Disclosure Schedule could result in any adverse change in the
business, financial condition, operations, results of operations, or
future prospects of any of the Company. None of the Sellers and the
directors and officers (and employees with responsibility for litigation
matters) of the Company has any reason to believe that any such action,
suit, proceeding, hearing, or investigation may be brought or threatened
against of the Company.
21. Product Warranty. Each product manufactured, sold,
leased, or delivered by any of the Company has been in conformity with
all applicable contractual commitments and all express and implied
warranties, and the Company has no Liability (and to its knowledge there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) for replacement or repair thereof or other
damages in connection therewith. No product manufactured, sold, leased,
or delivered by the Company is subject to any guaranty, warranty, or
other indemnity beyond the applicable standard terms and conditions of
sale or lease. Paragraph 4.21 of the Disclosure Schedule includes copies
of the standard terms and conditions of sale or lease for the Company
(containing applicable guaranty, warranty, and indemnity provisions).
22. Product Liability. The Company has no Liability (and
there is no Basis for the present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any
of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use
of any product manufactured, sold, leased, or delivered by any of the
Company.
23. Employees. To the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for employment
matters) of the Company, and except as contemplated by this Agreement, no
executive, key employee, or group of employees has any plans to terminate
employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Company has not committed any unfair labor
practice. None of the Sellers and the directors and officers (and
employees with responsibility for employment matters) of the Company has
any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees
of any of the Company. Paragraph 4.23 of the Disclosure Schedule
includes a complete and correct list of the names and positions of all of
the employees of the Company, including a detailed description of the
compensation paid to each such employee, including all benefits.
24. Employee Benefits.
a) Paragraph 4.24 of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Company and the Controlled
Group of Corporations which includes the Company (here,
collectively, the "Company ERISA Group") maintains or to which any
member of the Company ERISA Group has ever contributed. With
respect to such Employee Benefit Plan(s):
(1) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws, including, without
limitation, the nondiscrimination requirements of Section 125
of the Code. None of the Employee Benefit Plans is an
Employee Pension Benefit Plan nor has the Company ERISA Group
maintained or contributed to an Employee Pension Benefit Plan
subsequent to 1991.
(2) All required reports and descriptions have been filed
or distributed appropriately with respect to each such Employee
Benefit Plan. Without limitation, the requirements of Part 6 of
Subtitle B of Title I of ERISA, of Code Sec. 4980B, and of the
applicable provisions of the Health Insurance Portability and
Accountability Act of 1996 have been met with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(3) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements (if any), contracts (including without
limitation insurance contracts), and other material agreements
which implement each such Employee Benefit Plan.
(4) The Company and the Sellers have no Liability for
breach of fiduciary duty or any other failure to act or comply
in connection with the administration, or investment of the
assets, of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits)
is pending or, to the Knowledge of any of the Sellers and the
directors and officers (and employees with responsibility for
employee benefits matters) of the Company ERISA Group
threatened. None of the Sellers and the directors and officers
(and employees with responsibility for employee benefits
matters) of the Company ERISA Group has any Knowledge of any
Basis for any such action, suit, proceeding, hearing, or
investigation.
b) None of the Company ERISA Group maintains or ever has
maintained or contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan
providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with
Code Sec. 4980B).
25. Guaranties. The Company is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any
other Person.
26. Environment, Health, and Safety.
a) To the Seller's and the Company's Knowledge, the Company,
and its predecessors and Affiliates have complied with all
Environmental, Health, and Safety Laws. No action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them
alleging any failure so to comply. Without limiting the generality
of the preceding sentence, to the Seller's and the Company's
Knowledge, each of the Company and its respective predecessors and
Affiliates has obtained and been in compliance with all of the terms
and conditions of all permits, licenses, and other authorizations
which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws.
b) To the Seller's and the Company's Knowledge, the Company
has no Liability (and none of the Company and its predecessors and
Affiliates has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any
property or facility in any manner that could form the Basis for any
present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company giving rise
to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to
any employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
27. Disclosure. The representations and warranties contained
in this part 4 do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
and information contained in this part 4 not misleading.
E. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing.
1. General. Each of the parties will use reasonable efforts
to take all action and to do all things necessary in order to consummate
and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set
forth in part 7 below).
2. Notices and Consents. The Sellers will cause the Company
to give any notices to third parties, and will cause the Company to use
commercially reasonable efforts to obtain any third-party consents
required in connection with the transactions contemplated hereby.
3. Operation of Business. The Sellers will not cause or
permit the Company to engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Sellers will not cause or
permit the Company to declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or redeem, purchase, or
otherwise acquire any of its capital stock, or otherwise engage in any
practice, take any action, or enter into any transaction of the sort
described in paragraph 4.8 above, except as contemplated by the Pre-
Closing Sales described in Exhibit "F".
4. Preservation of Business. Other than reductions in the
inventory pursuant to the Buyer's request, the Sellers will cause the
Company to keep its business and properties substantially intact,
including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
5. Full Access. Each of the Sellers will permit, and the
Sellers will cause the Company to permit, representatives of the Buyer to
have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company, to all
premises, personnel, books, records (including Tax records), contracts,
and documents of or pertaining to the Company.
6. Notice of Developments. The Sellers will give prompt
written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in part 4 above.
Each Party will give prompt written notice to the others of any material
adverse development causing a breach of any of his or its own
representations and warranties in part 3 above. No disclosure by any
Party pursuant to this paragraph 5.6, however, shall be deemed to amend
or supplement the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
7. Exclusivity. Except as contemplated by the Pre-Closing
Sales, none of the Sellers will (and the Sellers will not cause or permit
the Company to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of
the assets of the Company (including any acquisition structured as a
merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner
any effort or attempt by any Person to do or seek any of the foregoing.
None of the Sellers will vote their Shares in favor of any such
acquisition structured as a merger, consolidation, or share exchange.
The Sellers will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the
foregoing.
F. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing.
1. General. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of
this Agreement, each of the parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other party reasonably may request, all at the sole
cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under part 8 below). The Sellers
acknowledge and agree that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax
records), agreements, and financial data of any sort relating to the
Company. The Buyers agree to take reasonable steps to safekeep such
records.
2. Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Company, each
of the other Parties will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting
or defending Party is entitled to indemnification therefor under
paragraph 8 below).
3. Transition. None of the Sellers will take any action that
is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of the Company
from maintaining the same business relationships with the Company after
the Closing as it maintained with the Company prior to the Closing. Each
of the Sellers will refer all customer inquiries relating to the
businesses of the Company to the Buyer from and after the Closing.
4. Confidentiality. Each of the Sellers will treat and hold
as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement,
and deliver promptly to the Buyer or destroy, at the request and option
of the Buyer, all tangible expressions (and all copies) of the
Confidential Information which are in his or its possession. In the event
that any of the Sellers is requested or required (by oral question or
request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process)
to disclose any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek
an appropriate protective order or waive compliance with the provisions
of this paragraph 6.4. If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Sellers is, on the advice of
counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the
disclosing Seller shall use his or its best efforts to obtain, at the
reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Buyer shall
designate.
5. Buyer Notes. Each of the Buyer Notes will bear a legend
substantially in the following form:
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS NOTE IS SUBJECT
TO CERTAIN RIGHTS OF SET-OFF AS SET FORTH IN A STOCK PURCHASE
AGREEMENT DATED AS OF SEPTEMBER 30, 1997 (THE "PURCHASE
AGREEMENT") AMONG THE ISSUER OF THIS NOTE AND THE ORIGINAL
HOLDER HEREOF. THIS NOTE WAS ORIGINALLY ISSUED ON SEPTEMBER 30,
1997, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF THIS NOTE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT. THE
ISSUER OF THIS NOTE WILL FURNISH A COPY OF THESE PROVISIONS TO
THE HOLDER HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
Each holder desiring to transfer a Buyer Note first must furnish the
Buyer with (i) a written opinion of counsel satisfactory to the Buyer in
form and substance satisfactory to the Buyer to the effect that the
holder may transfer the Buyer Note as desired without registration under
the Securities Act, and (ii) a written undertaking executed by the
proposed transferee satisfactory to the Buyer in form and substance
satisfactory to Buyer agreeing to be bound by the Set-Off provisions and
the restrictions on transfer contained herein.
6. Registration of Travis Parent Stock. Travis Parent shall
file a registration statement at its expense, on Form S-3 (the
"Registration Statement,) within fifteen (15) business days after the
Closing Date and shall use its reasonable efforts to have the
Registration Statement declared effective by the Securities and Exchange
Commission ("SEC"). The Sellers agree to cooperate and provide all
required information for inclusion in the Registration Statement. The
Buyer agrees that if the SEC does not, on or before March 31, 1998,
declare the Registration Statement effective, and the failure to do so is
a result of a circumstance or condition associated with the Buyer, which
causes the SEC under current or then existing rules and regulations to
postpone or prohibit the effectiveness of the Registration Statement,
then the Buyer shall, upon receipt of the Travis Parent Stock from
Sellers, pay to the Sellers an amount of cash equal to cash value of the
Travis Parent Stock as of the Closing Date. Without limiting the
generality of the foregoing, the Buyer shall be under no obligation to
pay cash to the Sellers if the SEC does not declare the Registration
Statement effective due to issues arising out of or in connection with
the acquisition of the Company, Adventure North or Adventure Brokerage.
7. Pre-Closing Sales. The Sellers agree to fully indemnify
and promptly reimburse the Buyer for any Liability incurred or expenses
incurred by the Buyer arising out of or in connection with the Pre-
Closing Sales. The Sellers agree to cooperate fully with Buyer in
connection with the defense of any such Liability and agree to provide
Buyer access to all books and records related to the Pre-Closing Sales.
This provision shall be in addition to the Buyers remedies set forth in
part 8 and 9 hereof.
8. Use of Name. The Sellers shall, and the Seller shall
cause its Affiliates, to cease using the name "Adventure Marine" or any
derivation thereof within six months of the Closing Date.
9. Accounts Receivable. (a) The Buyer shall, in the manner
provided in paragraph 6.9(b), promptly reimburse the Sellers for any sums
collected for Accounts Receivable in excess of 50% of the aggregate face
amount of the Current Accounts Receivable. In the event the Buyer is
unable to collect 50% of the face amount of the Current Accounts
Receivable within 120 days of the Closing Date, the Buyer may, among
other remedies, exercise its right to Set-Off under the Buyer Notes and
the Other Buyer Notes and/or seek indemnification pursuant to the terms
of this Agreement.
(b) On the tenth day of each month following the Closing
Date, the Buyer shall deliver to Reinhold an accounting which details the
amount of Accounts Receivable collected by the Buyer in the previous
month. If the Buyer has collected in excess of 50% of the Current
Accounts Receivable, the Buyer shall, at that time, reimburse Sellers for
all amounts not previously paid to Sellers which Buyer has collected with
respect to the Accounts Receivable in excess of 50% of the Current
Accounts Receivable. The Buyer agrees to use diligent efforts to collect
the Accounts Receivable. If, at any time after six months following the
Closing Date, the Buyer has collected an amount in excess of 50% of all
Current Accounts Receivable and the Buyer is unable to collect any of the
Accounts Receivable, the Buyer shall, at the Seller's request, assign
such uncollected Accounts Receivable to the Sellers.
10. Non-Compete.
a) To induce Buyer to consummate the transactions
contemplated by this Agreement, (i) John Reinhold agrees to execute
the Noncompetition Agreement attached as Exhibit "I" to the
Adventure Brokerage Stock Purchase Agreement, and (ii) Frederic D.
Pace ("Pace") agrees that for a period of five (5) years after the
date of this Agreement, he shall not, directly or indirectly,
individually or as an employee, partner, officer, director,
guarantor or shareholder or in any other capacity whatsoever:
(A) solicit the business of customers of the Company or
the Business: or
(B) (i) acquire any interest (by gift, purchase,
bequest, or otherwise), open, or operate any
retail or wholesale business related to the
marine industry (including, without limitation,
brokerage activities, whether conducted in
person or via computer) or enter into any
franchise or other management agreement with any
retail or wholesale business related to the
marine industry, or
(ii) engage in any activities that enrich either of
the Sellers at the expense of the Buyer, or
(iii) serve as an officer, director, employee,
agent or consultant to any retail or wholesale
business related to the marine industry,
within a 250 mile radius of Ft. Walton Beach, Florida
or within a 250 mile radius of Key Largo, Florida.
b) If any court of competent jurisdiction should
determine that any term or terms of this covenant are too broad with
respect to time, geographic area, lines of commerce or otherwise,
such court shall modify and revise any such term or terms so that
they comply with applicable law.
c) The provision set forth in this paragraph
6.10 shall terminate, upon the earlier of (i) five years after the
date of this Agreement, or (ii) the termination of the employment
by the Buyer of Pace, unless such termination is "For Cause". The
term "For Cause" shall mean (i) Pace's gross neglect or willful
misconduct in the discharge of his duties and responsibilities to
the Buyer, as determined by the Board of Directors of the Buyer,
(ii) Pace's repeated failure to obey reasonable directions from the
Buyer, (iii) any act of Pace's against the Buyer intended to enrich
Pace at the expense of the Buyer, (iv) any willful act or omission
by Pace having the effect of materially injuring the business or
business relationships of the Buyer, or (v) Pace's commission of a
felony or any crime involving moral turpitude, fraud or
misrepresentation.
G. Conditions to Obligation to Close.
1. Conditions to Obligation of the Buyer. The obligation
of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
a) the representations and warranties set forth in
paragraph 3.1 and part 4 above shall be true and correct in all
material respects at and as of the Closing Date;
b) the Sellers shall have performed and complied with all
of their covenants hereunder in all material respects through the
Closing;
c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or
charge would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of the
Buyer to own the Shares and to control the Company, or (iv)
affect adversely the right of the Company to own its assets and
to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
d) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified
above in paragraph 7.1(a)-(c) is satisfied in all respects;
e) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in Exhibit
"H" attached hereto, addressed to the Buyer, and dated as of the
Closing Date;
f) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the
Company;
g) the Buyer shall have received satisfactory evidence in
its sole discretion that Paul J. Roberts consented to the terms
of this Agreement, has released the Company from any and all
claims, and that the Sellers provided full disclosure regarding
the terms of this Agreement and any other related agreements to
Paul J. Roberts; and
h) the Buyer's acquisitions of the stock of Adventure
North and Adventure Brokerage shall have been consummated, or the
Buyer is satisfied, in its sole discretion, that such
transactions will be consummated immediately following
consummation of the transactions contemplated hereby;
i) John W. Reinhold shall have executed the
Noncompetition Agreement attached as Exhibit "I" to the Adventure
Brokerage Stock Purchase Agreement.
j) the Buyers shall have received satisfactory
evidence that the Excluded Assets have been transferred from the
Company to the Sellers or an Affiliate of the Sellers and that
the Excluded Liabilities have been assumed by the Sellers, or an
Affiliate of the Sellers, without recourse to the Buyer, the
Company or Travis Parent; and
k) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this paragraph 7.1 if it
executes a writing so stating at or prior to the Closing.
2. Conditions to Obligation of the Sellers. The
obligation of the Sellers to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
a) the representations and warranties set forth in
paragraph 3.2 above shall be true and correct in all material
respects at and as of the Closing Date;
b) the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the
Closing;
c) no action, suit, or proceeding shall be pending or
threatened before any court or agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or
charge would (i) prevent consummation of any of the transactions
contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
d) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified
above in paragraph 7.2(a)-(c) is satisfied in all respects;
e) the Sellers shall have received from counsel to the
Buyer an opinion in form and substance as set forth in Exhibit
"I, attached hereto, addressed to the Sellers, and dated as of
the Closing Date; and
f) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this paragraph 7.2 if
they execute a writing so stating at or prior to the Closing.
H. Remedies
1. Indemnification Provisions for Benefit of the Buyer.
a) In the event any of the Sellers breaches (or in the
event any third party alleges facts that, if true, would mean any
of the Sellers has breached) any of the representations,
warranties and covenants contained herein (other than those of
the Sellers described in paragraph 8.1(b) and (c)), then each of
the Sellers agrees jointly and severally to indemnify the Buyer
from and against the entirety of any Adverse Consequences the
Buyer may suffer, for a period of one year following the Closing
Date, through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after
the end of such one year period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the
alleged breach); provided, however, that (a) the Sellers shall
have no obligations to indemnify the Buyer for any Adverse
Consequences pursuant to this Section 8.1(a) for an amount in
excess of (i) the Buyer Notes and (ii) the Other Buyer Notes,
issued in connection with the sale of Adventure North and
Adventure Brokerage and (b) the Buyer's exclusive remedy for any
claims brought pursuant to this Section 8.1(a) shall be the right
to Set-Off described in Section 8.5 hereof.
b) Each of Sellers shall be obligated to fully and
completely indemnify the Buyer, for an unlimited period of time
following the Closing (subject to applicable statutes of
limitation), from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of
or relating to any Liability suffered as a result of (i) fraud by
the Sellers or the Company (including without limitation any
Adverse Consequences suffered by Buyer as a result of a breach of
the Seller's representations in paragraph 3.1 (Representations
and Warranties) hereof), (ii) a misrepresentation which the
Sellers or the Company knew or reasonably should have known or
been aware (including without limitation any Adverse Consequences
suffered by Buyer as a result of employee misstatements to
customers or others), (iii) claims by employees against the
Company (including without limitation any Adverse Consequences
suffered by Buyer as a result of the representations made by the
Sellers and the Company in paragraph 4.24 (Employee Benefits)
hereof), (iv) Taxes (including without limitation any Adverse
Consequences suffered by Buyer as a result of the representations
made by the Sellers and the Company in paragraph 4.11 (Tax
Matters) hereof, and (v) claims by any of the current or former
shareholders of the Company, Adventure North or Adventure
Brokerage against the Company, Adventure North, Adventure
Brokerage or the Buyer and its affiliates.
c) Each of the Sellers shall be obligated to fully and
completely indemnify the Buyer for an unlimited period of time
following Closing (subject to applicable statutes of limitation)
from and against the entirety of any Adverse Consequences the
Buyer may suffer resulting from, arising out of, relating to, in
the nature of, or caused by any Liability of any of the Company
(i) for any Taxes of the Company with respect to any Tax year or
portion thereof ending on or before the Closing Date (or for any
Tax year beginning before and ending after the Closing Date to
the extent allocable (determined in a manner consistent with
paragraph 9.2 below) to the portion of such period beginning
before and ending on the Closing Date), to the extent such Taxes
are not reflected in the Tax Reserve or have not been paid to the
Buyer pursuant to paragraph 9.1 below, and (ii) for the unpaid
Taxes of any Person (other than any of the Company) under Treas.
Reg. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise suffer.
2. Indemnification Provisions for Benefit of the Sellers.
The representations, warranties and covenants of the Buyer shall survive
the Closing and continue in full force and effect for a period of one
year. In the event the Buyer breaches (or in the event any third party
alleges facts that, if true, would mean the Buyer has breached) any of
its representations, warranties, and covenants contained herein, provided
that any of the Sellers makes a written claim for indemnification against
the Buyer within such one year period, then the Buyer agrees to indemnify
each of the Sellers from and against any Adverse Consequences the Seller
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Seller may suffer after the end
of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach). Furthermore, the Buyer agrees to fully and completely indemnify
the Sellers for any Adverse Consequences suffered by the Sellers as a
result of any action or omission by the Company following the Closing
Date; provided, however, that (i) in the case of Adverse Consequences
involving a series of actions or omissions by the Company, the Buyer
shall not indemnify Sellers for any liability created by the Company
prior to the Closing Date, and (ii) this provision shall not apply to
Frederic Pace for any Adverse Consequences suffered by Pace arising out
of or in connection with Pace's employment with the Company or the Buyer
subsequent to the Closing Date.
3. Matters Involving Third Parties.
a) If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification
against any other Party (the "Indemnifying Party") under this
part 8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that
no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
b) Any Indemnifying Party will have the right to defend
the Indemnified Party against the Third Party Claim with counsel
of its choice reasonably satisfactory to the Indemnified Party so
long as (i) the Indemnifying Party notifies the Indemnified Party
in writing within 15 days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of
the Indemnified Party, likely to establish a precedential custom
or practice materially adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with paragraph
8.3(b) above, (i) the Indemnified Party may retain separate co-
counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (ii) the Indemnified Party will
not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (not to be
unreasonably withheld), and (iii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be unreasonably
withheld).
d) In the event any of the conditions in paragraph 8.3(b)
above is or becomes unsatisfied, however, (i) the Indemnified
Party may defend against, and consent to the entry of any
judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith),
(ii) the Indemnifying Parties will reimburse the Indemnified
Party promptly and periodically for the costs of defending
against the Third Party Claim (including reasonable attorneys'
fees and expenses), and (iii) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest
extent provided in this part 8.
4. Determination of Adverse Consequences. The parties
shall take into account the time cost of money (using the Applicable Rate
as the discount rate) in determining Adverse Consequences for purposes of
this part 8. All indemnification payments under this part 8 shall be
deemed adjustments to the Purchase Price.
5. Set-off Under Buyer Notes. The Buyer shall have the
option of recouping all or any part of any Adverse Consequences it may
suffer (in lieu of seeking any indemnification to which it is entitled
under this part 8); such right shall be exercisable by Buyer by notifying
the Sellers that the Buyer is reducing the principal amount outstanding
under the Buyer Notes. This shall affect the timing and amount of
payments required under the Buyer Notes in the same manner as if the
Buyer had made a permitted prepayment (without premium or penalty)
thereunder. The Buyer shall offset against each Buyer Note based on each
Seller's percentage ownership of the Company, based upon the information
contained in paragraph 4.2 of the Disclosure Schedule. If the Buyer
discovers an Adverse Consequence prior to the maturity of the Buyer Note
(the "Maturity Date,), but is unable, in good faith, to determine with
specificity the amount of the Adverse Consequence and, therefore, does
not exercise its right of Set-Off prior to the Maturity Date, the
Maturity Date shall be deemed to be extended until the Buyer can
determine the amount of the Adverse Consequence and exercise its right of
Set-Off. The extension of the Maturity Date hereunder shall not be
considered an event of default under the Buyer Note and no late payment
shall be payable as a result of the extension of the Maturity Date.
Following any set-off by Buyer against the Buyer Note which in the
aggregate is equal to the full amount thereof, Buyer shall be permitted
to set-off unsatisfied Adverse Consequences arising under this Agreement
against the Other Buyer Notes, issued in connection with the sale of
Adventure North and Adventure Brokerage.
6. Other Indemnification Provisions. The foregoing
indemnification provisions are in addition to, and not in derogation of,
any statutory, equitable, or common law remedy any party may have for
breach of representation, warranty, or covenant. Each of the Sellers
hereby agrees that he or it will not make any claim for indemnification
against the Company by reason of the fact that he or it was a director,
officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect
to any action, suit, proceeding, complaint, claim, or demand brought by
the Buyer against such Seller (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable
law, or otherwise).
I. Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Sellers for certain Tax
matters following the Closing Date:
1. Tax Periods Ending on or Before the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit
the Sellers to review and comment on each such Tax Return described in
the preceding sentence prior to filing. Sellers shall reimburse Buyer
for Taxes of the Company with respect to such periods within fifteen (15)
days after payment by Buyer of such Taxes to the extent such Taxes are
not reflected in the Tax Reserve. Buyer shall be permitted to Set-Off
against the Buyer Note to pay any such Taxes.
2. Tax Periods Beginning Before and Ending After the
Closing Date. Buyer shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company for Tax periods which
begin before the Closing Date and end after the Closing Date. Sellers
shall pay to Buyer within fifteen (15) days after the date on which Taxes
are paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such Taxable period ending on
the Closing Date to the extent such Taxes are not reflected in the Tax
Reserve. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such Taxable period ending on the Closing
Date shall (i) in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for
the entire Taxable period multiplied by a fraction the numerator of which
is the number of days in the Taxable period ending on the Closing Date
and the denominator of which is the number of days in the entire Taxable
period, and (ii) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the
relevant Taxable period ended on the Closing Date. Any credits relating
to a Taxable period that begins before and ends after the Closing Date
shall be taken into account as though the relevant Taxable period ended
on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior
practice of the Company.
3. Cooperation on Tax Matters.
(i) Buyer, the Company and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to
this Part 9 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on
a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company and
Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer
or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered
into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Company or Sellers, as the case may be, shall allow
the other party to take possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to
use their best efforts to obtain any certificate or other
document from any governmental authority or any other Person as
may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to
the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon
request, to provide the other party with all information that
either party may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations promulgated
thereunder.
4. Tax Sharing Agreements. All tax sharing agreements or
similar agreements, if any, with respect to or involving the Company
shall be terminated as of the Closing Date and, after the Closing Date,
the Company shall not be bound thereby or have any liability thereunder.
5. Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall
be paid by Sellers when due, and Sellers will, at their own expense, file
all necessary Tax Returns and other documentation with respect to all
such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, Buyer will, and will
cause its affiliates to, join in the execution of any such Tax Returns
and other documentation.
J. Termination.
1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
a) the Buyer and both Sellers may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
b) the Buyer may terminate this Agreement by giving
written notice to the Sellers on or before the 10th day following
the date of this Agreement if the Buyer is not satisfied with the
results of its continuing business, legal, and accounting due
diligence regarding the Company;
c) the Buyer may terminate this Agreement by giving
written notice to the Sellers at any time prior to the Closing
(i) in the event any of the Sellers has breached any material
representation, warranty, or covenant contained in this Agreement
in any material respect, the Buyer has notified the Sellers of
the breach, and the breach has continued without cure for a
period of 5 days after the notice of breach, or (ii) if the
Closing shall not have occurred on or before September 30, 1997,
by reason of the failure of any condition precedent under
paragraph 7.1 hereof (unless the failure results primarily from
the Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and
d) the Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (i)
in the event the Buyer has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, any of the Sellers has notified the Buyer of the breach,
and the breach has continued without cure for a period of 5 days
after the notice of breach or (ii) if the Closing shall not have
occurred on or before September 30, 1997, by reason of the
failure of any condition precedent under paragraph 7.2 hereof
(unless the failure results primarily from any of the Sellers
themselves breaching any representation, warranty, or covenant
contained in this Agreement).
2. Effect of Termination. If any party terminates this
Agreement pursuant to paragraph 10.1 above, all rights and obligations of
the parties hereunder shall terminate without any Liability of any party
to any other party (except for any Liability of any party then in
breach).
K. Miscellaneous.
1. Nature of Certain Obligations.
(i) The covenants of each of the Sellers in paragraph
2.1 above concerning the sale of his or its Company Shares to the
Buyer and the representations and warranties of each of the
Sellers in paragraph 3.1(a) through (d) above concerning the
transaction are several obligations. This means that the
particular Seller making the representation, warranty, or
covenant will be solely responsible to the extent provided in
part 8 above for any Adverse Consequences the Buyer may suffer as
a result of any breach thereof.
(ii) The remainder of the representations, warranties,
and covenants in this Agreement, including paragraph 3.1(c), are
joint and several obligations. This means that each Seller will
be responsible to the extent provided in part 8 above for the
entirety of any Adverse Consequences the Buyer may suffer as a
result of any breach thereof.
2. Press Releases and Public Announcements. No party
shall issue any press release or make any public announcement relating to
the subject matter of this Agreement without the prior written approval
of the Buyer and the Sellers; provided, however, that any party may make
any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its reasonable
efforts to advise the other Parties prior to making the disclosure).
3. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and
their respective successors and permitted assigns.
4. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent
they related in any way to the subject matter hereof. Typewritten or
handwritten provisions inserted in this Agreement shall control all
printed provisions in conflict therewith, provided the typewritten or
handwritten provision is initialed and dated by each of the parties to
this Agreement.
5. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party may assign
either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the Buyer and
the Sellers; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
6. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
7. Headings. The paragraph headings contained in this
Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
8. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed
to the intended recipient as set forth below:
If to the Sellers: Copy to:
c/o John Reinhold H. Bart Fleet
Chesser, Wingard, Barr, Whitney,
Flowers & Fleet, P.A.
1201 Eglin Parkway
Shalimar, Florida 32579
Telecopy: (850) 651-6084
If to the Buyer: Copy to:
Travis Boating Center Florida, Inc. J. Rowland Cook
Attn: Michael B. Perrine Jenkens & Gilchrist, A Professional
Corporation
5000 Plaza on the Lake, #250 600 Congress Avenue, Suite 2200
Austin, Texas 78746 Austin, Texas 78701
Telecopy: (512) 329-0480 Telecopy: (512) 404-3520
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice in the
manner herein set forth.
9. Governing Law and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Florida. Venue for any proceeding brought hereunder shall lie in
Escambia County, Florida.
10. Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Sellers. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
11. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms
and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
12. Expenses. Each of the Parties will bear his own costs
and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Sellers
agree that the Company has not borne or will not bear any of the Sellers'
costs and expenses (including any of their legal fees, expenses or fees
to be paid to brokers) in connection with this Agreement or any of the
transactions contemplated hereby.
13. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall
be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including"
shall mean including without limitation. The parties intend that each
representation, warranty, and covenant contained herein shall have
independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that
there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first
representation, warranty, or covenant.
14. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
15. Specific Performance. Each of the parties acknowledges
and agrees that the other parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other parties shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court
of the United States or any state thereof having jurisdiction over the
parties and the matter (subject to the provisions set forth in paragraph
11.9), in addition to any other remedy to which they may be entitled, at
law or in equity.
16. Attorney's Fees. In connection with any breach,
default, collection, or litigation, including appellate proceedings,
arising out of this Agreement, the prevailing party shall be entitled to
recover reasonable attorney's fees and costs.
17. Further Cooperation. The parties to this Agreement
shall execute and deliver, or cause to be executed and delivered, on the
Closing Date or at such other times as may reasonably be agreed upon,
such additional instruments as the other party may reasonably request for
the purpose of carrying out the transactions contemplated hereby.
Additionally, each of the parties hereto agree to allow the other parties
reasonable access to the books and records of the Company and the Sellers
related to the transactions contemplated hereby.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
TRAVIS BOATING CENTER FLORIDA, INC.
By: ________/S/______________________
Name: MICHAEL B. PERRINE
Title: CFO, SECRETARY, TREASURER
SELLERS
___________/S/________________________
Frederic D. Pace
__________/S/_________________________
John W. Reinhold
<PAGE>
EXHIBIT 10.37
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment")
is entered into effective as of the 31st day of October, 1997, by and among
TRAVIS BOATS & MOTORS, INC., a Texas corporation, TRAVIS SNOWDEN MARINE,
INC., a Texas corporation, TRAVIS BOATING CENTER ARLINGTON, INC., a Texas
corporation, FALCON MARINE, INC., a Texas corporation, FALCON MARINE
ABILENE, INC., a Texas corporation, TRAVIS BOATING CENTER BEAUMONT, INC., a
Texas corporation, TRAVIS BOATS & MOTORS BATON ROUGE, INC., a Louisiana
corporation, TBC ARKANSAS, INC., an Arkansas corporation, TBC MANAGEMENT,
LTD., a Texas limited partnership, TBC MANAGEMENT, INC., a Delaware
corporation, TRAVIS BOATING CENTER LOUISIANA, INC., a Louisiana corporation,
TRAVIS BOATING CENTER TENNESSEE, INC., a Texas corporation, TRAVIS BOATING
CENTER ALABAMA, INC., a Texas corporation, RED RIVER MARINE ARKANSAS, INC.,
an Arkansas corporation, TRAVIS BOATING CENTER LITTLE ROCK, INC., an
Arkansas corporation, TRAVIS BOATING CENTER GEORGIA, INC., a Texas
corporation, TRAVIS BOATING CENTER FLORIDA, INC., a Texas corporation, and
TRAVIS BOATING CENTER MISSISSIPPI, INC., a Texas corporation and any other
entity which may become a party to this Agreement as a borrower, each of
which is designated as a "Borrower" on Schedule I hereto (as modified from
time to time) (hereinafter individually referred to as a "Borrower" and
collectively referred to as "Borrowers"), and NationsBank of Texas, N.A., a
national banking association, for itself and as agent (in such capacity,
hereinafter referred to as "Agent"), and the lending institutions designated
as "Lenders" on Schedule I hereto (as modified from time to time)
(hereinafter collectively referred to as "Lenders").
W I T N E S S E T H:
WHEREAS, Lenders previously extended to Borrowers a $15,000,000.00
revolving credit facility (the "Credit Facility") pursuant to that certain
Revolving Credit Agreement, dated as of December 12, 1996, by and among
Borrowers, Agent and Lenders, as supplemented, modified and amended by that
certain Supplemental Credit and Security Agreement (the "Supplemental Credit
and Security Agreement"), dated effective as of October 31, 1997, by and
among Borrowers, Agent and Lenders (as supplemented, modified and amended,
the "Credit Agreement"); and
WHEREAS, Borrowers have requested that Lenders modify and amend the
Credit Agreement with respect to various terms, including, without
limitation, an increase in the Available Commitment from $15,000,000 to
$55,000,000.00, the addition of a LIBOR interest option and the extension of
the Termination Date from October 31, 1997, to October 31, 1999; and
WHEREAS, subject to the terms and conditions contained herein, Lender
has agreed to such request.
1. NOW, THEREFORE, for and in consideration of the terms and
conditions contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, Lenders, Borrowers and Agent hereby
agree as follows:
1. Definitions. Capitalized terms used but not defined herein have
the meaning given such term in the Credit Agreement.
2. Amendments.
(a) The preamble of the Credit Agreement is modified to (i)
delete the word "and" and insert a comma after the first phrase of "a
Texas corporation" in the twelfth line thereof, and (ii) is modified to
insert the words "and Travis Boating Center Mississippi, Inc., a Texas
corporation" before the words "and any other" in the twelfth line
thereof.
(b) The Preliminary Statement of the Credit Agreement is modified
(i) to delete the word "Fifteen" and to insert in place thereof the
word "Fifty-Five" in the fifth line thereof, and (ii) to delete
"$15,000,000" and to insert in place thereof "$55,000,000" in the fifth
line thereof.
(c) Section 1.1 of the Credit Agreement is hereby amended and
modified to add thereto, in alphabetical order, the following
definitions:
"Adjusted LIBOR Rate" shall mean on the applicable Effective
Date, with respect to a LIBOR Rate Advance, a rate per annum equal
to the sum of (a) the quotient of (i) the LIBOR Rate on the
applicable Effective Date, divided by (ii) the remainder of 1.00
minus the LIBOR Reserve Requirement, if any, on the applicable
Effective Date, plus (b) the FDIC Percentage in effect on the
applicable Effective Date, together with any additional
impositions, assessments, fees or surcharges that may be imposed
on Agent or any Lender (expressed as a percentage), to the extent
such impositions, assessments, fees or surcharges are not
reflected in the FDIC Percentage or the LIBOR Reserve Requirement
and are generally imposed on banks with capitalization and
supervisory risk factors comparable to Agent, plus (c) 2.375%.
"Agency Fee" shall mean the non-refundable fee equal to an
amount to be mutually agreed to by the parties.
"Dollar" or "Dollars" means dollars of the United States of
America.
"Effective Date" means the date Borrowers have elected in a
Request for Advance or pursuant to Section 3.5 hereof, as
applicable, for a LIBOR Rate Advance to begin to accrue interest
at the Adjusted LIBOR Rate.
"FDIC Percentage" shall mean, on any day, the net assessment
rate (expressed as a percentage rounded to the next highest 1/100
of 1%) which is in effect on such day (under the regulations of
the Federal Deposit Insurance Corporation or any successor) for
determining the assessments paid by Agent to the Federal Deposit
Insurance Corporation (or any successor) for insuring Eurocurrency
deposits made in Dollars at Agent's principal offices (which for
NationsBank shall be its offices in Dallas, Texas). Each
determination of said percentage made by Agent shall, in the
absence of manifest error, be binding and conclusive.
"Interest Adjustment Date" shall mean the last day of an
Interest Period.
"Interest Period" shall mean, with respect to a LIBOR Rate
Advance, a period selected by Borrowers of 30, 60 or 90 days,
commencing on the Effective Date of any LIBOR Rate Advance;
provided that no Interest Period may be selected with respect to
a LIBOR Rate Advance which ends on a date later than the
Termination Date.
"LIBOR Rate" shall mean, with respect to a LIBOR Rate
Advance for the Interest Period applicable thereto, the rate of
interest per annum (rounded upward to the next higher of 1/100 of
1.0%) appearing on the Telerate Screen as the London interbank
offered rate for deposits in Dollars for a term comparable to the
relevant Interest Period as of approximately 11:00 A.M. (London
time) on the day which is two (2) Business Days prior to the first
day of such Interest Period; provided, that if at least two such
offered rates appear on the Telerate Screen in respect to such
Interest Period, the arithmetic mean of all such rates upward to
determined by Agent) will be the rate used; provided, further,
that if Telerate ceases to provide LIBOR quotations, such rate
shall be the average rate of interest (per annum rounded upward to
the next higher of 1/100 of 1.0%) of the offered rates at which
Dollars appear on the Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the Effective
Date for a term comparable to such Interest Period; provided,
further, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable LIBOR Rate shall be the arithmetic mean of
all such rates; provided, further, that if neither of the
foregoing rates are available, the average (rounded upward to the
next higher of 1/100 of 1.0%) of the per annum rates determined by
Agent at which deposits in Dollars are offered for the relevant
Interest Period by Agent (or its successor) to banks with combined
capital and surplus in excess of $500,000,000 in the London
interbank market as of 11:00 A.M. (London time) on the applicable
Effective Date.
"LIBOR Rate Advance" shall mean a Working Capital Advance
which bears interest computed with reference to the Adjusted LIBOR
Rate.
"LIBOR Reserve Requirement" shall mean, on any day, that
percentage (expressed as a decimal fraction) which is in effect on
such date, as provided by the Federal Reserve System for
determining the maximum reserve requirements generally applicable
to financial institutions regulated by the Federal Reserve Board
comparable in size and type to Agent (including, without
limitation, basic supplemental, marginal and emergency reserves)
under Regulation D with respect to "Eurocurrency Liabilities" as
currently defined in Regulation D, or under any similar or
successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding (or, if reserves for Eurocurrency liabilities
are not separately stated in such regulations, the other
applicable category of liabilities which includes deposits by
reference to which the interest rate on a LIBOR Rate Advance is
determined or any category of extensions of credit which includes
loans by a non-United States office of Agent to United States
residents). Each determination by Agent of the LIBOR Reserve
Requirement, shall, in the absence of manifest error, be binding
and conclusive.
"Minimum Notice Requirement" shall have the meaning set forth
in Section 3.5(a).
"Regulatory Change" shall mean the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule
or regulation, or any change in the interpretation or
administration thereof by any Governmental Authority charged with
the administration thereof.
"Telerate Screen" means the display designated as Screen
3750 on the Telerate System or such other screen on the Telerate
System as shall display the London interbank offered rates for
deposits in U.S. dollars quoted by selected banks.
"Variable Rate Advance" means a Working Capital Advance which
will bear interest computed with reference to the Variable Rate.
(d) The definition of "Available Commitment" set forth in
Section 1.1 of the Credit Agreement is modified to (i) delete the
word "Fifteen" and to insert in place thereof the word "Fifty-
Five" in the second line thereof, and (ii) delete "$15,000,000" in
the third line thereof and to insert in place thereof
"$55,000,000".
(e) The definition of "Borrowing Base" set forth in Section 1.1
of the Credit Agreement is deleted in its entirety and replaced with
the following provision:
"Borrowing Base" means an amount, as shown in the most recent
monthly Borrowing Base Certificate, equal to the sum of:
(a) eighty percent (80%) (except for the months of
October, November, December, January, February and March,
when the rate shall be ninety percent (90%)) of Eligible
Inventory;
(b) fifty percent (50%) of Borrowers' Eligible
Accessories, as shown in the most recent current monthly
Borrowing Base Certificate; and
(c) the sum of (i) fifty percent (50%) of the amount
owing to Borrowers for Eligible Contract Discounts which have
been outstanding less than one hundred and twenty (120) days
at the date of invoice for Contract Debtors which settle on
a quarterly basis, and (ii) twenty-five percent (25%) of the
amount owing to Borrowers for Eligible Contract Discounts for
Contract Debtors which settle on an annual basis; provided,
however, that this item (d) may not exceed One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000.00).
(f) The definition of "Borrowing Base Certificate" set forth in
Section 1.1 of the Credit Agreement is deleted in its entirety and
replaced with the following provision:
"Borrowing Base Certificate" means a certificate prepared as
of each calendar month end, in the form attached hereto as Exhibit
B, completed in all appropriate respects, executed by an
Authorized Officer of TBM and delivered to Agent within 30 days of
such calendar month end; provided, however, that the calculation
of the excess of noncurrent year model boats, trailers and motors
shall only be prepared each March 31 and September 30 of each
Fiscal Year.
(g) The definition of "Business Day" set forth in Section 1.1 of
the Credit Agreement is deleted in its entirety and replaced with the
following provision:
"Business Day" means (a) for all purposes other than as
covered by clause (b) of this definition, any day of the week,
other than Saturday, Sunday or other day Agent or any Lender is
required or authorized by law or executive order to close, and (b)
with respect to all requests, notices and determinations in
connection with LIBOR Rate Advances, a day which is a Business Day
described in clause (a) of this definition and which is a day for
trading by and between banks for Dollar deposits in the London
interbank market.
(h) The definition of "Consolidated Funded Debt" set forth in
Section 1.1 of the Credit Agreement is modified to delete the words
"and having a final maturity of not less than one year" in the second
and third lines thereof.
(i) Subsection (a) of the definition of "Eligible Inventory" set
forth in Section 1.1 of the Credit Agreement is deleted in its entirety
and replaced with the following provision:
(a) the boats, trailers and motors are new; provided,
however, that Eligible Inventory shall not include any amount
for noncurrent year model boats, trailers and motors in
excess of the lesser of (i) Ten Million and No/100 Dollars
($10,000,000.00) or (ii) thirty percent (30%) of all new
boats, trailers and motors, such excess amount to be
determined on a semi-annual basis only as of each March 31
and September 30 of each Fiscal Year.
(j) The definition of "Request for Advance" set forth in Section
1.1 of the Credit Agreement is deleted in its entirety and replaced
with the following provision:
"Request for Advance" means a written request of an
Authorized Officer of TBM for a Working Capital Advance,
substantially in the form attached hereto as Exhibit B-1, which
shall (a) specify (i) the date of such an Advance, which shall be
a Business Day, (ii) what portion of such Advance is to be a LIBOR
Rate Advance or Variable Rate Advance, (iii) the aggregate amount
of such Advance, (iv) for a LIBOR Rate Advance, the Interest
Period and the Effective Date selected, and (v) the transfer
instructions with respect to such Advance and (b) contain a
certification of an Authorized Officer of TBM, as of the date of
such Advance, (i) that the intended use of the proceeds of such
Advance does not violate the provisions of this Agreement
(including, without limitation, Section 2.1 and Section 5.13) or
any other Loan Document, and (ii) as to the matters set forth in
Section 4.2(b) and (c).
(k) The definition of "Termination Date" set forth in Section 1.1
of the Credit Agreement is modified to (i) delete the words "October
31, 1997" and to insert in place thereof the words "October 31, 1999"
in the first line thereof.
(l) The definition of "Working Capital Advance" set forth in
Section 1.1 of the Credit Agreement is deleted in its entirety and
replaced with the following provision:
"Working Capital Advance" means a Variable Rate Advance or a
LIBOR Rate Advance of the Credit Facility made pursuant to Section
2.2(a).
(m) Section 2.1 of the Credit Agreement is modified to insert
after the word "Borrowers," in the sixth line thereof the words "and
Borrowers,".
(n) Section 2.1(a)(ii) of the Credit Agreement is modified to
insert after the words "provided in Section 2.2(a)" the words "or (b),
as applicable" in the second line thereof.
(o) Section 2.2(a) of the Credit Agreement is deleted in its
entirety and replaced with the following:
(a) Working Capital Advances.
(i) Variable Advances. In the case of any Variable
Advance, Borrowers, through an Authorized Officer of TBM,
shall give Agent at least one Business Day prior to the date
of such Advance an irrevocable Request for Advance specifying
their intention to borrow such Variable Advance hereunder.
Notice shall be given to Agent prior to 2:00 p.m., San
Antonio, Texas time, in order for such Business Day to count
toward the minimum number of Business Days required. Such
Request for Advance shall be accompanied by the documents
required to be delivered pursuant to Article IV. Any
Variable Advance shall be in an amount not less than One
Hundred Thousand and No/100 Dollars ($100,000.00) or greater
whole multiples of Fifty Thousand and No/100 Dollars
($50,000.00).
(ii) LIBOR Rate Advances. In the case of any LIBOR Rate
Advance, Borrowers, through an Authorized Officer of TBM,
shall give Agent an irrevocable Request for Advance which
satisfies the Minimum Notice Requirement, specifying their
intention to borrow or reborrow such Advance hereunder as a
LIBOR Rate Advance. Notice shall be given to Agent prior to
10:00 A.M., San Antonio, Texas time, in order for such
Business Day to count toward the Minimum Notice Requirement.
LIBOR Rate Advances shall in all cases be subject to
availability and to Section 3.5 hereof. Such Request for
Advance shall be accompanied by the documents required to be
delivered pursuant to Article IV. The aggregate amount of
LIBOR Rate Advances to be made on any funding date shall not
be less than One Million and No/100 Dollars ($1,000,000.00)
or greater whole multiples of Five Hundred Thousand and
No/100 Dollars ($500,000.00).
(p) Section 2.2(c) of the Credit Agreement is modified to delete
the word "this" in the second line thereof.
(q) Section 2.3 of the Credit Agreement is modified to add the
following provision as a new subsection (d) to Section 2.3:
(d) Agency Fee. Borrowers shall pay to Agent, for the
benefit of Agent, the Agency Fee as mutually agreed to by the
parties.
(r) Section 3.3 of the Credit Agreement is modified to insert the
words "or the Adjusted LIBOR Rate, as specified in a Request for
Advance or pursuant to Section 3.5, as applicable," in the second line
thereof after the words "Variable Rate".
(s) Section 3.4 of the Credit Agreement is deleted in its
entirety and replaced with the following provision:
Section 3.4. Mandatory Interest Payments. Interest on the
Notes, computed as provided in Section 3.11, shall be due and
payable as follows: (i) with respect to interest accrued on each
Variable Rate Advance, in arrears on the first day of each April,
July, October and January commencing on April 1, 1997, (ii) with
respect to interest accrued on each LIBOR Rate Advance, in arrears
on the last day of the applicable Interest Period, and (iii) with
respect to all Advances, on the Termination Date, so long as any
principal of any Note remains unpaid.
(t) Article III of the Credit Agreement is modified to insert the
following provisions as Sections 3.5 and 3.12, respectively, and to
renumber the current sections 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11,
3.12, 3.13 and 3.14 as section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.13,
3.14, 3.15 and 3.16:
Section 3.5. Election of the Applicable Rate.
(a) Upon at least three (3) Business Days prior written
notice to Agent ("Minimum Notice Requirement"), borrowers
may, through an Authorized Officer of TBM, on any Interest
Adjustment Date (other than the Termination Date), convert
amounts of not less than One Hundred Thousand and No/100
Dollars ($100,000.00) in the aggregate on the same day (or
any whole multiple of Fifty Thousand and No/100 Dollars
($50,000.00) in excess thereof) of any LIBOR Rate Advance
into a Variable Rate Advance with interest accruing thereon,
with reference to the Variable Rate, as provided in Section
3.3 above.
(b) Upon satisfaction by Borrowers of the Minimum
Notice Requirement, and subject to the conditions provided in
this Agreement or the Notes, Borrowers may, through an
Authorized Officer of TBM, on any date prior to the
Termination Date (provided that such date is sufficient to
permit the selection of the Interest Period), convert amounts
of not less than One Million and No/100 Dollars
($1,000,000.00) in the aggregate on the same date (or any
whole multiple of Five Hundred Thousand and No/100 Dollars
($500,000.00) in excess thereof) of (i) any Variable Rate
Advance(s) or (ii) of any LIBOR Rate Advance whose Interest
Period will expire on or prior to the next Effective Date to
be elected by Borrowers, into a LIBOR Rate Advance with
interest accruing thereon with reference to the Adjusted
LIBOR Rate as provided in Section 3.3 above, for the Interest
Period and as of the Effective Date selected in such notice.
(i) Each notice of LIBOR Rate election by
Borrowers must be given an Authorized Officer of TBM,
must satisfy the Minimum Notice Requirement and shall
include the following: (i) Borrowers' election of the
Adjusted LIBOR Rate; (ii) Borrowers' choice of an
Interest Period during which the Adjusted LIBOR Rate
will apply; (iii) Borrowers' election of the Effective
Date; and (iv) the amount of outstanding loan principal
to which the Adjusted LIBOR Rate shall apply. Borrowers
shall give notice of such election to Agent on behalf of
Lenders.
(ii) Borrowers' election to select the Adjusted
LIBOR Rate as the Applicable Rate is subject to the
following conditions: (1) the Interest Period shall be
limited to a period commencing on the Effective Date and
ending on a date 30, 60 or 90 days later elected by
Borrowers in their notice to Agent; (2) Borrowers'
written notice of an election shall be received by Agent
in time to satisfy the Minimum Notice Requirement;
(3) the last day of the Interest Period will not be
subsequent in time to the Termination Date; (4) in the
case of a continuation of a LIBOR Rate Advance, the
Interest Period applicable after such continuation shall
commence on the last day of the preceding Interest
Period; (5) no LIBOR Rate election shall be made if
Agent determines by reason of circumstances affecting
the interbank Eurodollar market that either adequate or
reasonable means do not exist for ascertaining the
Adjusted LIBOR Rate for any Interest Period, or it
becomes impracticable for Agent to obtain funds by
purchasing Dollars in the interbank Eurodollar market,
or if Agent or any Lender determines that the Adjusted
LIBOR Rate will not adequately or fairly reflect the
costs to any Lender of maintaining the applicable LIBOR
Rate Advances at such rate, or if as a result of any
Regulatory Change, it shall become unlawful or
impossible for Lenders to maintain any such LIBOR Rate
election; (6) there shall never be more than five (5)
LIBOR Rate Advances, in the aggregate, in effect at any
one time hereunder; and (7) no LIBOR Rate election shall
be made after the occurrence and during the continuance
of a Default or Event of Default.
(iii) If, on or after the Effective Date, any
Regulatory Change shall make it unlawful or impossible
for any Lender (or its Eurodollar lending office) to
make, maintain or fund LIBOR Rate Advances and such
Lender shall so notify Agent, Agent shall forthwith give
notice thereof to the other Lenders and Borrowers,
whereupon until such Lender notifies Borrowers and Agent
that the circumstances giving rise to such suspension no
longer exist, the obligation of such Lender to make
LIBOR Rate Advances shall be suspended. If such Lender
shall determine that it may not lawfully continue to
maintain and fund any of its outstanding LIBOR Rate
Advances to maturity and shall so specify in such
notice, Borrowers shall immediately prepay in full the
then outstanding principal amount of such Lender's
portion of the LIBOR Rate Advances, together with
accrued interest thereon. Concurrently with prepaying
such portion of the LIBOR Rate Advances, such Lender
shall make a Variable Rate Advance to Borrowers in an
equal principal amount (on which interest and principal
shall be payable contemporaneously with the related
LIBOR Rate Advances of the other Lenders).
(iv) Borrowers shall, jointly and severally,
indemnify Agent and Lenders against any loss or expense
which Agent or Lenders may, as a consequence of
Borrowers' failure to make a payment on the date such
payment is due hereunder or the payment, prepayment or
conversion of any LIBOR Rate Advances hereunder on a day
other than an Interest Adjustment Date, sustain or incur
in liquidating or employing deposits from third parties
acquired to effect, fund or maintain any such LIBOR Rate
Advances or any part thereof, including, without
limitation, any Consequential Losses.
(v) Borrowers shall, jointly and severally, also
indemnify Lenders against and reimburse Lenders for
increased costs to Lenders, as a result of any
Regulatory Change, in the maintaining of any LIBOR Rate
Advances. Agent shall give Borrowers a written notice
of such costs within one hundred eighty (180) days of
its or any Lender's implementation and/or compliance
with any such Regulatory Change and such costs shall be
reimbursed to such Lender prior to the earlier of
(i) the Termination Date or (ii) ten (10) days following
written notice thereof from Agent to Borrowers. All
payments made pursuant to this paragraph shall be made
free and clear, without reduction for, or account of,
any present or future taxes or other levies of any
nature, excluding net income and franchise taxes.
(c) To the extent Borrowers have not made an effective
election under and in accordance with subparagraphs (a) or
(b) above (including, without limitation, at the expiration
of an Interest Period), the Applicable Rate shall be the rate
specified pursuant to the provisions contained herein for
Variable Rate Advances. If Borrowers have failed to make
such election at the end of an Interest Period, the Lenders
shall be deemed to have made a Variable Rate Advance in the
amount, and in replacement, of the LIBOR Rate Advance then
maturing.
Section 3.12. Capital Adequacy. If any present or future
law, governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) or the interpretation
thereof by a court or governmental authority with appropriate
jurisdiction affects the amount of capital required to be
maintained by Agent or any Lender or any corporation controlling
such Agent or any Lender reasonably determines that the amount of
capital so required to be maintained is increased by or based upon
the existence of the Credit Facility or the Letters of Credit,
then Agent may notify Borrowers, in writing, of such fact, and
Borrowers shall pay to Agent (for the benefit of such Lender) from
time to time on demand, as an additional fee payable hereunder,
such amount as such Lender shall determine in good faith and
certify in a notice to Borrowers in reasonable detail to be an
amount that will adequately compensate such Lender in light of
these circumstances for its increased costs of maintaining such
capital effective after the date of Agent's notice to Borrower.
The payment required hereby shall be paid within thirty (30) days
after the above certified notice has been delivered to Borrowers.
Lender shall allocate such cost increases among their customers
in good faith and on an equitable basis.
(u) Section 3.6(a) (formerly Section 3.5(a)) of the Credit
Agreement is deleted in its entirety and replaced with the following
provision:
(a) At any time, Borrowers may by notice to Agent, with
at least three Business Days prior notice in the case of
LIBOR Rate Advances, and at least one Business Day prior
notice in the case of Variable Rate Advances to the date on
which prepayment under this Section 3.6 is to be made,
voluntarily prepay outstanding Advances from time to time and
at any time, in whole or in part; provided, that (i) each
such partial payment must be in a minimum amount of at least
One Hundred Thousand and No/100 Dollars ($100,000.00) or any
whole multiple of Fifty Thousand and No/100 Dollars
($50,000.00) in excess thereof, and (ii) Borrowers shall pay
any related Consequential Losses within ten (10) days after
Agents demand therefor. Each such optional prepayment shall
be applied ratably in accordance with Section 3.9 to pay the
amounts owed to each Lender under the Credit Facility.
(v) Section 3.6(b) (formerly Section 3.5(b)) of the Credit
Agreement is modified to insert the words "together with any
Consequential Loss arising as a result thereof" after the words "of
such excess" in the sixth line thereof and before the period.
(w) Section 3.6(c) (formerly Section 3.5(c)) of the Credit
Agreement is modified to insert the words "together with any
Consequential Loss arising as a result thereof" after the words "of
such excess" in the eleventh line thereof.
(x) Section 3.6 (formerly Section 3.5) of the Credit Agreement is
modified to add the following provision as a new subsection (d) to
Section 3.6:
(d) If Borrowers shall prepay any LIBOR Rate Advance
prior to the expiration of its applicable Interest Period,
Borrowers shall indemnify Lenders against any consequential
loss (the "Consequential Loss") incurred by Lenders as a
result of any such prepayment, such Consequential Loss to be
an amount equal to any losses, costs or expenses incurred or
anticipated to be incurred by any Lender by virtue of such
prepayment, which such loss, cost or expense shall include
that which any Lender may sustain or incur in liquidating or
employing deposits from any Lender or third parties acquired
to effect, fund or maintain any such LIBOR Rate Advance, and
shall be due and payable to Lenders at the time of such
prepayment. Such loss or expense shall consist of (i) any
expense or penalty incurred by any Lender in redepositing
such principal amount, plus (ii) any "breakage" fees that any
Lender is required to pay by reason of the early breakage of
any customary LIBOR contract entered into by any Lender in
connection with providing funds for such LIBOR Rate Advance.
Any Consequential Loss required to be paid by Borrowers
pursuant to this Section 3.6 or any other provisions of this
Agreement or of the other Loan Documents in connection with
the prepayment of any LIBOR Rate Advances shall be due and
payable whether such prepayment is being made voluntarily or
involuntarily, including, without limitation, as a result of
an acceleration of sums due under LIBOR Rate Advances or any
part thereof due to an Event of Default.
(y) Section 3.9 (formerly Section 3.8) of the Credit Agreement is
modified to (i) amend the section reference in the sixth line thereof
from Section 3.5 to Section 3.6, and (ii) to add the following proviso
at the end of Section 3.9 and before the period:
; provided, however, that unless otherwise designated by Borrowers
or required by law, prepayments and involuntary payments received
by the holder hereof and applied to principal hereunder shall be
applied first to the Variable Rate Advances (or that portion of
LIBOR Rate Advances not subject to a prepayment penalty) and then
to reduce LIBOR Rate Advances
(z) Section 3.13 (formerly Section 3.11) of the Credit Agreement
is modified to amend the section references in the fourteenth and
fifteenth lines thereof from Section 3.11 to Section 3.13.
(aa) Section 3.16 (formerly Section 3.14) of the Credit Agreement
is modified to amend the section references in the thirteenth and
twenty-first lines thereof from Section 1.04 to Section 3.16 and from
Section 3.14 to Section 3.16, respectively.
(bb) Section 6.1(d) of the Credit Agreement is modified to amend
the subsection reference in the fourth line thereof from Section 3.5(b)
to Section 3.6(b).
(cc) Section 7.1 of the Credit Agreement is modified to delete the
word "less" and to insert in place thereof the word "more" in the third
line thereof.
(dd) Section 7.2 of the Credit Agreement is modified to delete
"$12,000,000.00" in the third line thereof and to insert in place
thereof "$14,000,000.00".
(ee) Section 7.10 of the Credit Agreement is modified to
(i) insert the words "One Million" before the words "Five Hundred
Thousand" in the sixth line thereof, and (ii) delete "$500,000.00" and
to insert in place thereof "$1,500,000.00" in the sixth line thereof.
(ff) Exhibits A (Form of Note), B (Borrowing Base Certificate), B-
1 (Form of Request for Advance) and F (Form of Compliance Certificate),
and Schedule I (Parties to Credit Agreement, Notice Addresses and
Lender Schedule), Schedule 5.1 (Jurisdictions Qualified to do Business
In) and Schedule 5.19 (Locations), are each deleted in their entirety
and replaced with the attached Exhibits A (Form of Note), B (Borrowing
Base Certificate), B-1 (Form of Request for Advance) and F (Form of
Compliance Certificate) and Schedule I (Parties to Credit Agreement,
Notice Addresses and Lender Schedule), Schedule 5.1 (Jurisdictions
Qualified to do Business In) and Schedule 5.19 (Locations).
(gg) Each of the Loan Documents shall be amended wherever as is
necessary, and even though not specifically addressed or identified
herein, so as to conform to the amendments to the provisions of the
Agreement which are set forth in this Amendment.
3. Conditions Precedent. This Amendment shall be effective upon the
fulfillment of all of the following conditions:
(a) Borrowers, Agent and Lenders shall have executed and
delivered this Amendment;
(b) Borrowers shall have executed and delivered to each Lender
its promissory note, in the amount of such Lender's Loan Commitment
Amount, in the form attached hereto as Exhibit A, in substitution and
replacement of the outstanding Notes;
(c) Agent shall have received an opinion of counsel for
Borrowers, opining as to the due organization, existence and good
standing of Borrowers, that each of the Loan Documents, as modified by
this Amendment, have been duly authorized by Borrowers and constitute
the legal, valid and binding obligations of Borrowers, enforceable
against each of them in accordance with their terms, compliance by
Borrowers with applicable Laws as Lenders may require, and such other
matters as Agent may reasonably request, in form and substance
satisfactory to Agent;
(d) Agent shall have received an opinion of Mississippi Counsel
opining as to the enforceability and perfection of Lenders' security
interest in the Collateral and such other matters as Agent may
reasonably request, in form and substance satisfactory to Agent under
Mississippi law;
(e) Borrowers shall have delivered to Lenders such certificates,
authorizations or other items (in form and substance satisfactory to
Lenders) as Lenders shall require to evidence or confirm the due
formation, existence and good standing of each of the Borrowers, on the
date hereof, and the partnership and corporation authorization for the
execution, delivery and enforceability of the Loan Documents, as
modified by this Amendment, by and against Borrowers;
(f) Borrowers, Agent and Lenders shall have executed and
delivered a Supplemental Credit and Security Agreement, the promissory
notes in relation thereto, and such other documents, opinions or
certificates as may be necessary or as may be required, in the opinion
of counsel to Lenders, to add Travis Boating Center Mississippi, Inc.,
a Texas corporation, as a party to the Loan Documents pursuant to and
in accordance with Section 7.15 of the Agreement to effect the
transactions contemplated thereby; and
(g) No Default or Event of Default shall have occurred and be
continuing under the Credit Agreement or under any other Loan Document,
and no default shall have occurred and be continuing under any other
documentation evidencing other Debt owed by Borrowers.
4. Ratification; Lien Priority; Effectiveness of Liens. Except as
otherwise modified by this Amendment, all terms and provisions of the Credit
Agreement, the Notes, the Security Agreement and the other Loan Documents
remain unchanged and hereby are ratified and confirmed and shall be and
shall remain in full force and effect, enforceable in accordance with their
terms. Nothing herein contained shall affect or impair the validity or
priority of the liens and security interests arising under the Security
Agreement or the liens and security interests arising under any other Loan
Documents. Borrowers hereby acknowledge and agree that the liens and
security interests of the Security Agreement and any and all other Loan
Documents are valid and subsisting liens and security interests, and remain
superior to all liens and security interests other than those exceptions
heretofore approved by Lenders in writing.
5. Payment of Expenses. Borrowers agree to provide to Lenders, upon
demand, the reasonable attorneys' fees and expenses of Lenders' counsel, and
other reasonable expenses incurred by Lenders in connection with this
Amendment.
6. Representations and Warranties; Further Assurances. Borrowers
represent and warrant that the representations and warranties contained in
the Credit Agreement and in the other Loan Documents, as modified by this
Amendment, are and remain true and correct in all respects on and as of the
date hereof, except to the extent that any representation or warranty is
necessarily made as of a particular date. Borrowers shall execute or
deliver such other documents as may be necessary or as may be required, in
the opinion of counsel to Lenders, to effect the transactions contemplated
hereby.
7. Binding Amendment. The provisions of this Amendment shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
8. Enforceability. In the event the enforceability or validity of
any portion of this Amendment or any of the other Loan Documents is
challenged or questioned, such provision shall be construed in accordance
with, and shall be governed by, whichever applicable federal or Texas law
would uphold or would enforce such challenged or questioned provision.
9. Counterparts. This Amendment may be executed in any number of
original counterparts, each of which when so executed and delivered shall be
an original, and all of which, collectively, shall constitute one and the
same agreement, it being understood and agreed that the signature pages may
be detached from one or more counterparts and combined with the signature
pages from any other counterpart in order that one or more fully executed
originals may be assembled.
10. APPLICABLE LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT
THAT THE LAWS OF ANOTHER JURISDICTION GOVERN THE CREATION, PERFECTION OR
ENFORCEMENT OF INTERESTS, OR THEIR REMEDIES RELATED TO ANY PART OF
BORROWERS' ASSETS OR TO THE EXTENT THAT UNITED STATES FEDERAL LAW APPLIES.
11. Prior Understandings; No Defenses; Release; No Oral Agreements.
This Amendment supersedes all other prior understandings and agreements,
whether written or not, between the parties hereto relating specifically to
the transactions provided for herein. Each Borrower confirms that there are
no existing defenses, claims, counterclaims or rights of offset against
Lender in connection with the negotiation, preparation, execution,
performance or any other matters related to this Amendment or any of the
other Loan Documents executed as of the date hereof and any of the
transactions contemplated thereby, and each Borrower hereby expressly
releases and discharges Lenders, and their officers and representatives,
from any and all such claims, known or unknown. Each Borrower further
confirms that none of the Lenders has made any agreements with, or
commitments or representations to, any Borrower (either in writing or
orally) other than as expressly stated herein.
THIS WRITTEN AMENDMENT, TOGETHER WITH THE OTHER WRITTEN LOAN DOCUMENTS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
To the fullest extent applicable, Borrowers and Lenders acknowledge and
agree that this Amendment and each of the Loan Documents shall be subject to
Section 26.02 of the Texas Business and Commerce Code.
IN WITNESS WHEREOF, this Amendment is executed on this 31st day of
October, 1997.
BORROWERS:
TRAVIS BOATS & MOTORS, INC., a Texas corporation,
TRAVIS SNOWDEN MARINE, INC., A Texas corporation,
TRAVIS BOATING CENTER ARLINGTON, INC., a Texas
corporation, FALCON MARINE, INC., a Texas
corporation, FALCON MARINE ABILENE, INC., a Texas
corporation, TRAVIS BOATING CENTER BEAUMONT, INC.,
a Texas corporation, TRAVIS BOATING CENTER
TENNESSEE, INC., a Texas corporation, TRAVIS
BOATING CENTER ALABAMA, INC., a Texas corporation,
TRAVIS BOATING CENTER GEORGIA, INC., a Texas
corporation, TRAVIS BOATING CENTER FLORIDA, INC.,
a Texas corporation and TRAVIS BOATING CENTER
MISSISSIPPI, INC., a Texas corporation
By: _____/S/___________________
Name: Mark T. Walton
Title: President
TRAVIS BOATS & MOTORS BATON ROUGE, INC., a
Louisiana corporation and TRAVIS BOATING CENTER
LOUISIANA, INC., a Louisiana corporation
By: ____/S/____________________
Name: Mark T. Walton
Title: President
TBC ARKANSAS, INC., an Arkansas corporation, RED
RIVER MARINE ARKANSAS, INC., a Arkansas
corporation and TRAVIS BOATING CENTER LITTLE ROCK,
INC., a Arkansas corporation
By: ____/S/____________________
Name: Mark T. Walton
Title: President
TBC MANAGEMENT, INC., a Delaware corporation
By: ___/S/_____________________
Name: Mark T. Walton
Title: President
TBC MANAGEMENT, LTD., a Texas limited partnership
By: TRAVIS BOATS & MOTORS, INC., a Texas
corporation, as General Partner
By: ______/S/__________________
Name: Mark T. Walton
Title: President
AGENT:
NATIONSBANK OF TEXAS, N.A.,
a national banking association,
as Agent for Lenders
By: __/S/______________________
Name: R. Mark Bearfield
Title: Vice President
LENDERS:
NATIONSBANK OF TEXAS, N.A.,
a national banking association
By: ____/S/____________________
Name: R. Mark Bearfield
Title: Vice President
HIBERNIA NATIONAL BANK,
a national banking association
By: ____/S/___________________
Name: Wade Carwile
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.38
ASSET PURCHASE AGREEMENT
BY AND AMONG
TRAVIS BOATING CENTER TENNESSEE, INC.,
SOUTHEASTERN MARINE GROUP, INC.
AND
LENA SCARBOROUGH
AND
MIKE ZORETIC
DATED AS OF
NOVEMBER 20, 1997
<PAGE>
TABLE OF CONTENTS
Section 1. Sale of Assets.
1.1 Purchase and Sale of Assets
Section 2. Consideration
2.1 Purchase Price
2.2 Post-Closing Liquidation
2.3 Allocation of Consideration
2.4 Bulk Sales Act
Section 3. Assumed Liabilities and Excluded Assets.
3.1 Assignment and Assumption
3.2 Excluded Assets
Section 4. Representations and Warranties of Seller.
4.1 Organization and Qualification
4.2 Authority and Validity
4.3 No Breach or Violation
4.4 Assets
4.5 Contracts and Commitments
4.6 Compliance with Law
4.7 Financial Statements
4.8 Legal Proceedings
4.9 Tax Returns; Other Reports
4.10 Employment Matters
4.11 Environmental Matters
4.12 Finders and Brokers
4.13 Access and Notice
4.14 Disclosure
Section 5. Representations and Warranties of Buyer.
5.1 Organization and Qualification
5.2 Authority and Validity
5.3 No Breach or Violation
5.4 Disclosure
Section 6. Closing.
6.1 Closing; Effective Date
Section 7. Conditions to Closing.
7.1 Conditions to the Obligations of Buyer and Seller
7.2 Conditions to Obligations of Buyer
7.3 Conditions to Obligations of Seller
7.4 Waiver of Conditions
Section 8. Survival of Representations and Warranties;
Indemnification.
8.1 Survival of Representations and Warranties
8.2 Indemnification by Seller
8.3 Indemnification by Buyer
8.4 Third Party Claims
8.5 Offset
Section 9. Covenants.
9.1 No Shopping
9.2 Notification of Certain Matters
9.3 Satisfaction of Conditions
9.4 Transfer Taxes
9.5 Use of Seller's Name
9.6 Confidentiality
9.7 Consignment and Repair
9.8 Access to Records
Section 10. Definitions.
10.1 Accessories
10.2 Affiliate
10.3 Assets
10.4 Boat Show Rights
10.5 Boat Shows
10.6 Business
10.7 Deposits
10.8 Encumbrance
10.9 Governmental Authority
10.10 Intangibles
10.11 Legal Requirement
10.12 Miscellaneous Assets
10.13 Net Cost
10.14 New Boats, Motors, and Trailers
10.15 Parts
10.16 Permitted Encumbrances
10.17 Person
10.18 Used Boats, Motors, and Trailers
10.19 Other Definitions.
Section 11. Miscellaneous.
11.1 Parties Obligated and Benefited
11.2 Notices
11.3 Attorneys' Fees
11.4 Right to Specific Performance
11.5 Waiver
11.6 Captions
11.7 Choice of Law
11.8 Terms
11.9 Rights Cumulative
11.10 Further Actions
11.11 Time
11.12 Counterparts
11.13 Entire Agreement
11.14 Severability
11.15 Construction
11.16 Expenses
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of November
20, 1997, by and among Travis Boating Center Tennessee, Inc., a Texas
corporation ("Buyer"), Southeastern Marine Group, Inc., a Tennessee
corporation ("Seller"), and Lena Scarborough and Mike Zoretic,
individuals living in Hendersonville, Tennessee ("Owner").
Recitals
WHEREAS, Seller is engaged in the business of retail marine products
sales and service; and
WHEREAS, Buyer desires to purchase, and Seller desires to sell,
certain of Seller's assets used or held for use in the Business as
conducted by Seller;
NOW, THEREFORE, in consideration of the above recitals and of the
mutual agreements, representations, warranties, provisions, and covenants
herein contained, and other good and valuable consideration, the parties
hereto agree as follows:
Section 1. Sale of Assets.
1.1 Purchase and Sale of Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing, Seller will sell
to Buyer, and Buyer will purchase from Seller, all of Seller's rights,
title and interest in, to and under the following Assets: (i) the New
Boats, Motors, and Trailers listed on Schedule 1.1, (ii) the Parts and
Accessories, (iii) the Miscellaneous Assets listed on Schedule 1.3, (iv)
the Intangibles, (v) the Deposits, and (vi) the Boat Show Rights.
Section 2. Consideration.
2.1 Purchase Price. Buyer will pay the purchase price of
$1,670,133.52 for the Assets and the advance for the Used Boats, Motors,
and Trailers in the amounts and in the manner set forth in this Section 2
(the "Purchase Price"):
2.1.1 New Boats, Motors, and Trailers.
2.1.2 Parts and Accessories and Miscellaneous Assets.
2.1.3 Intangibles, Deposits, Boat Show Rights and other
Assets.
2.1.4 Advance for Used Boats, Motors, and Trailers pursuant
to Section 2.2.1: $60,000.
2.1.5 The aggregate amount payable for the Assets and the
advance for the Used Boats, Motors, and Trailers is payable as
follows: (i) the sum of One Million Five Hundred Forty-Six Thousand
One Hundred Thirty-Three and 52/100 Dollars ($1,546,133.52)is payable in
immediately available funds at Closing, (ii)notes due January 2, 1998 for
$30,000 each to the Owners, and (iii) the remainder is payable
pursuant to a promissory note (the "Promissory Note") substantially
in the form attached as Exhibit A.
2.2 Post-Closing Liquidation.
2.2.1 Buyer shall serve as broker for the Used Boats,
Motors, and Trailers. At Closing, Buyer shall advance Seller
$60,000 toward the future sales of the Used Boats, Motors, and
Trailers. Seller will establish an acceptable selling price for
each such item, which price must be agreeable to Buyer. Upon
Buyer's sale of such items, Buyer will retain in each instance the
greater of (i) ten percent (10%) of the actual sales price and (ii)
the excess of the actual sales price over the acceptable selling
price established by Seller. The proceeds of each sale, after
deducting the amount required pursuant to the preceding sentence,
shall be credited against the $60,000 advance, without interest.
Once the full $60,000 has been repaid to Buyer, Buyer shall pay to
Seller within ten (10) days of receipt the proceeds of each
subsequent sale of Used Boats, Motors, and Trailers, net of the
payment to Seller pursuant to the fourth sentence of this Section
2.2.1. Buyer will use reasonable efforts to sell the Used Boats,
Motors, and Trailers.
2.2.2 Seller will bear the risk for all boats, motors,
trailers, and other assets not purchased by Buyer and left on
Buyer's premises, provided that Buyer will be responsible for
insuring the Used Boats, Motors, and Trailers. Buyer shall pay
Seller, within ten (10) days of receipt, the proceeds from any claim
pursuant to such insurance, however, Buyer shall not be liable to
Seller for any loss not covered by insurance.
2.3 Allocation of Consideration. The consideration payable by
Buyer under this Agreement will be allocated among the Assets as set
forth in Section 2.1. Buyer and Seller agree to be bound by such
allocation, will not take any position inconsistent with such allocation,
and will file all returns and reports with respect to the transactions
contemplated by this Agreement, including all federal, state, and local
tax returns, on the basis of such allocation.
2.4 Bulk Sales Act. Buyer and Seller waive compliance with the
provisions of the Tennessee Bulk Sales Act, subject to Section 8.2.1(v).
Section 3. Assumed Liabilities and Excluded Assets.
3.1 Assignment and Assumption. Seller will assign to Buyer,
and Buyer will assume and perform, the "Assumed Liabilities", which are
defined as: (a) obligations accruing and relating to periods after the
Effective Date under the contracts, oral and written, listed on
Schedule 3.1 hereof, including the Boat Show Rights (the "Seller's
Contracts"), and (b) warranty repair service on boats, motors, and
trailers sold by Seller prior to or on the Effective Date, provided
(i) that Buyer receives preapproval from the manufacturer or extended
service contract provider, as the case may be, to do the repair or (ii)
that (A) Buyer is recognized as an authorized warranty repair facility by
the manufacturer or extended service contract provider, as the case may
be, (B) the requested warranty repair is covered under the applicable
manufacturer's warranty program or extended service contract, and
(C) Seller and Owner use their reasonable best efforts to assist Buyer in
collecting reimbursement from such manufacturers or extended service
contract providers for repairs. Buyer will not assume or have any
responsibility for any liabilities or obligations of Seller other than
the Assumed Liabilities. In no event will Buyer assume or have any
responsibility for any liabilities or obligations associated with the
Excluded Assets.
3.2 Excluded Assets. The excluded assets (the "Excluded
Assets"), which will be retained by Seller, will consist of the
following: cash, accounts receivable, insurance policies, books and
records, Used Boats, Motors, and Trailers, and other assets not described
in Section 1.1.
Section 4. Representations and Warranties of Seller.
To induce Buyer to enter into this Agreement, Seller and Owner
represent and warrant to Buyer, as of the Effective Date, as follows:
4.1 Organization and Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Tennessee and has all requisite corporate power and
authority to own, lease and use the Assets as they are currently owned,
leased and used and to conduct the Business as it is currently conducted.
Seller is duly qualified or licensed to do business and is in good
standing under the laws of each jurisdiction in which the character of
the properties owned, leased or operated by it or the nature of the
activities conducted by it makes such qualification necessary, except any
such jurisdiction where the failure to be so qualified or licensed and in
good standing would not have a material adverse effect on Seller or on
the validity, binding effect or enforceability of this Agreement. Set
forth on Schedule 4.1 is the name and identity of each Person who owns of
record or beneficially any common stock, capital stock, or other
securities of Seller, has any right to vote with the owners of Seller, or
has the right to acquire any such securities or rights. Schedule 4.1
also sets forth the amounts of all such securities or rights and the
percentage that each Person's securities or rights bears to the whole.
4.2 Authority and Validity. Seller has all requisite power and
authority to execute and deliver, to perform its obligations under, and
to consummate the transactions contemplated by, this Agreement. The
execution and delivery by Seller of, the performance by Seller of its
obligations under, and the consummation by Seller of the transactions
contemplated by this Agreement have been duly authorized by all requisite
action of Seller. This Agreement has been duly executed and delivered by
Seller and is the valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except insofar as
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
4.3 No Breach or Violation. The execution, delivery and
performance of this Agreement by Seller will not: (a) violate any
provision of the charter or bylaws of Seller; (b) violate any Legal
Requirement; (c) require any consent, approval or authorization of, or
any filing with or notice to, any Person; or (d) except as set forth in
Schedule 4.3, (i) violate, conflict with or constitute a breach of or
default under, (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person
the right to accelerate) the performance of Seller under, or (iv) result
in the creation or imposition of any Encumbrance under, any Seller
contract or agreement or any other instrument evidencing any of the
Assets or any instrument or other agreement to which Seller is a party or
by which Seller or any of its assets is bound or affected, except, for
purposes of this clause (d), such violations, conflicts, breaches,
defaults, terminations, suspensions, modifications, and accelerations as
would not, individually or in the aggregate, have a material adverse
effect on the Business or Seller.
4.4 Assets.
4.4.1 Seller has exclusive, good and marketable title to
the Assets claimed by Seller. The Assets are free and clear of all
Encumbrances of any kind or nature, except (a) Permitted
Encumbrances and (b) Encumbrances disclosed on Schedule 4.4.1, which
will be removed or otherwise released of record effective at or
prior to the Closing, or for which executed releases in form
appropriate for filing by Buyer will be delivered to Buyer at
Closing. Except as set forth on Schedules 3.1 and 4.4.1, none of
the Assets is leased by Seller from any other Person. All the New
Boats, Motors, and Trailers, Parts and Accessories, Miscellaneous
Assets are in good and operable condition and repair, ordinary wear
and tear excepted, and have been maintained in accordance with all
applicable safety codes.
4.4.2 Seller has adopted, used, is using, and is the owner
of the Intangibles, including trade names, brand names, trademarks,
service marks, or any other word, name, symbol, or device, or
combination thereof which is used by Seller to identify and
distinguish Seller's goods and services from those manufactured,
sold, or offered by others, as set forth on Schedule 4.4.2, whether
existing at common law or which are applied for or which are
registered in the office of the Secretary of State of the State of
Tennessee or in the United States Patent and Trademark Office.
Except as set forth on Schedule 4.4.2, Seller has full title and
ownership of the Intangibles. Neither Owner nor Seller has any
knowledge of any infringement of Seller's rights with respect to the
Intangibles. To the knowledge of Seller or Owner, the Intangibles
do not conflict with or infringe the rights of others. To the
knowledge of Seller or Owner, no third party has any ownership
right, title, interest, claim in or lien on any of the Intangibles.
4.5 Contracts and Commitments. Seller has disclosed to Buyer
all contracts and other contractual rights, oral and written, relating to
the Business. Except as may be disclosed on Schedule 3.1, each of the
written agreements, contracts, commitments, leases, plans and other
instruments, documents and undertakings listed on Schedule 3.1, including
the Boat Show Rights, is valid and enforceable in accordance with its
terms; Seller is, and to the knowledge of Seller and Owner, all other
parties thereto are, in compliance in all material respects with the
provisions thereof; Seller is not, and to the knowledge of Seller and
Owner, no other party thereto, is in default in the performance,
observance or fulfillment of any material obligation, covenant or
condition contained therein; and, to the knowledge of Seller or Owner, no
event has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder; furthermore, except
as may be disclosed on Schedule 3.1, no such material agreement,
contract, commitment, lease, plan or other instrument, document or
undertaking, in the reasonable opinion of Seller and Owner, contains any
contractual requirement with which there is a reasonable likelihood the
Seller, the Buyer, or any other party thereto will be unable to comply.
4.6 Compliance with Law. The ownership, leasing and use of
the Assets as they are currently owned, leased and used and the conduct
of the Business as it is currently conducted do not violate any Legal
Requirement, which violations, individually or in the aggregate, would
have a material adverse effect on the Business. Seller has not received
notice claiming a violation by Seller or the Business of any Legal
Requirement applicable to Seller or the Business as it is currently
conducted and to Seller's best knowledge, there is no basis for any claim
that such a violation exists.
4.7 Financial Statements. Schedule 4.7 presents correct and
complete copies of Seller's unaudited balance sheet for the fiscal year
ended December 31, 1996, together with its unaudited statement of income
and cash flows for the fiscal year then ended, and its unaudited balance
sheet as of June 30, 1997, together with its unaudited statement of
income for the six months then ended (collectively, the "Financial
Statements"). The Financial Statements fairly present Seller's financial
condition and results of operations as of the dates and for the periods
indicated. Since the opening date of the most recent operating statement
included in the Financial Statements, the Business has been operated only
in the ordinary course, and there has been no material adverse change in,
and no events have occurred which are likely, individually or in the
aggregate, to result in any material adverse change in, the Business,
operations, Assets, prospects or condition (financial or otherwise) of
the Business.
4.8 Legal Proceedings. Except as set forth on Schedule 4.8,
there is no judgment or order outstanding, or any action, suit,
complaint, proceeding or, to the knowledge of Seller or Owner,
investigation by or before any Governmental Authority or any arbitrator
pending, or to Seller's best knowledge, threatened, involving or
affecting all or any part of the Business, the Assets or Seller.
4.9 Tax Returns; Other Reports. Seller has delivered to Buyer
true and correct copies of its U.S. and Tennessee tax returns for the
fiscal year ended December 31, 1996. Seller has duly and timely filed in
proper form with the appropriate Governmental Authority all income,
franchise, sales, use, property, excise, payroll and other tax returns,
and, to the knowledge of Seller or Owner, all other reports (whether or
not relating to taxes) required to be filed with respect to the Business.
All taxes, fees and assessment of whatever nature due and payable by
Seller with respect to the Business and the Assets have been paid, except
such amounts as are being contested diligently and in good faith and are
not in the aggregate material.
4.10 Employment Matters. Schedule 4.10 includes a complete and
correct list of names and positions of all employees of Seller engaged in
the Business, and their current hourly wages or monthly salaries and
other compensation. Seller has complied in all respects with all Legal
Requirements relating to the employment of labor, including the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
continuation coverage requirements with respect to group health plans,
and those relating to wages, hours, collective bargaining, unemployment
compensation, worker's compensation, equal employment opportunity, age
and disability discrimination, immigration control and the payment and
withholding of taxes. No reportable event, within the meaning of Title
IV of ERISA, has occurred and is continuing with respect to any "employee
benefit plan" or "multiemployer plan" (as those terms are defined in
ERISA) maintained by Seller or any Affiliate of Seller. No prohibited
transaction, within the meaning of Title I of ERISA, has occurred with
respect to any such employee benefit plan or multiemployer plan, and no
material accumulated funding deficiency (as defined in Title I of ERISA)
or withdrawal liability (as defined in Title IV of ERISA) exists with
respect to any such employee benefit plan or multiemployer plan.
4.11 Environmental Matters. (i) Real property used by Seller
has, during Seller's use thereof, been maintained, and all activities of
Seller, its employees, agents, contractors, lessees and invites thereon
have been conducted, in compliance in all material respects with all
applicable environmental laws; (ii) Seller has not received written
notification from any governmental authority with respect to any actual
or alleged violations of, or remedial obligations arising under, any
applicable environmental laws with respect to such property which have
not been responded to and cured; (iii) Seller has not received written
notification from any Person or entity that it is (A) potentially
responsible or liable under any applicable environmental laws for removal
or remedial action or costs associated with the generation, treatment,
storage, transportation or disposal of hazardous materials at such
property, or (B) potentially liable for any costs or liability as a
result of Seller's operation of the Business or Seller's generation,
transfer, storage, use, release, transportation or disposal of hazardous
materials in connection with the Business; (iv) Seller has not removed
any underground storage tanks located on such property, (v) such property
has not been used by Seller for the generation, disposal storage,
treatment, processing or handling of hazardous materials in a manner that
violates, or creates any remedial obligation under, any applicable
environmental law, and such property is free of any on-site condition of
environmental concern and is not in violation of any applicable
environmental law; (vi) such property has not been listed on the National
Priorities List maintained by the U.S. Environmental Protection Agency
pursuant to CERCLA or on any other "Superfund" or "Superlien" list
maintained by any governmental authority pursuant to any applicable law;
and (vii) Seller has made available to Buyer true and correct copies of
all environmental reports or inspections delivered to Seller or prepared
at the request of Seller relating to such property.
4.12 Finders and Brokers. Any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection
with the transactions contemplated by this Agreement will be the
liability of the party incurring the liability.
4.13 Access and Notice. Seller and Owner will permit Buyer and
its authorized representatives reasonable access to, and make available
for inspection, all of the assets and Business of Seller, including
employees, customers and suppliers, and permit Buyer and its authorized
representatives to inspect and make copies of all documents, records and
information with respect to the Business or the Assets as Buyer or its
representatives may request. Seller and Owner will promptly notify Buyer
in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default,
under any contract, commitment or obligation to which Seller is a party,
or relating to the Business or the Assets, and (b) any adverse change in
the Seller's or the Business' financial condition or the condition of the
Assets.
4.14 Disclosure. No representation or warranty by Seller in
this Agreement or in any Schedule or Exhibit to this Agreement, or any
certificate furnished or to be furnished by Seller pursuant to this
Agreement, contains or will contain any untrue statement of material
fact, or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which made.
Section 5. Representations and Warranties of Buyer.
To induce Seller to enter into this Agreement, Buyer represents
and warrants to Seller and Owner, as of the Effective Date, as follows:
5.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Texas and has all requisite corporate power and authority to
carry on its business as currently conducted and to own, lease, use and
operate its assets.
5.2 Authority and Validity. Buyer has all requisite corporate
power and authority to execute and deliver, to perform its obligations
under, and to consummate the transactions contemplated by this Agreement.
The execution and delivery by Buyer of, the performance by Buyer of its
obligations under, and the consummation by Buyer of the transactions
contemplated by this Agreement have been duly authorized by all requisite
corporate action of Buyer and this Agreement constitutes the valid and
binding obligation of Buyer, enforceable in accordance with its terms,
except insofar as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting creditors' rights generally or by
principles governing the availability of equitable remedies.
5.3 No Breach or Violation. The execution, delivery and
performance of this Agreement by Buyer will not: (a) violate any
provision of the charter or bylaws of Buyer; (b) violate any Legal
Requirement; (c) require any consent, approval or authorization of, or
any filing with or notice to, any Person; or (d) (i) violate, conflict
with or constitute a breach of or default under (without regard to
requirements of notice, passage of time or elections of any Person), (ii)
permit or result in the termination, suspension or modification of, (iii)
result in the acceleration of (or give any Person the right to
accelerate) the performance of Buyer under, or (iv) result in the
creation or imposition of any Encumbrance under, any instrument or other
agreement to which Buyer is a party or by which Buyer or any of its
assets is bound or affected, except for purposes of this clause (d) such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications, and accelerations as would not, individually or in the
aggregate, have a material adverse effect on Buyer or on the validity,
binding effect or enforceability of this Agreement.
5.4 Disclosure. No representation or warranty by Buyer in this
Agreement or in any Schedule or Exhibit to this Agreement, or any
certificate furnished or to be furnished by Buyer pursuant to this
Agreement, contains or will contain any untrue statement of material
fact, or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which made.
Section 6. Closing.
6.1 Closing; Effective Date. The closing ("Closing") of the
transactions will be in Hendersonville, Tennessee, at 10:00 a.m. local
time on November 20, 1997 ("Closing Date"). The transactions will be
effective as of November 20, 1997 ("Effective Date").
6.2 Events of Termination. This Agreement may be terminated
and the transactions contemplated by this Agreement may be abandoned at
any time prior to the Closing:
6.2.1 by the mutual written consent of Buyer and Seller; or
6.2.2 by Buyer if Seller breaches in any material respects
any of the covenants set forth in Section 9; provided, however, that
the termination of this Agreement will not limit the right of Buyer
to pursue an action for damages resulting from such breach or
failure.
6.2.3 by either party if the Closing shall not have taken
place on or before December 5, 1997; provided, however, that if the
failure to consummate the transactions is the result of (i) a breach
or default by a party in the performance of any of its obligations
under this Agreement or (ii) the failure of any representation or
warranty of such party to be accurate in all material respects, then
the termination of this Agreement will not limit the right of the
other party to pursue an action for damages resulting from such
breach or failure.
Section 7. Conditions to Closing.
7.1 Conditions to the Obligations of Buyer and Seller. The
obligations of each party to consummate the transactions contemplated by
this Agreement to take place at the Closing are subject to the
satisfaction or waiver, to the extent permitted by applicable Legal
Requirements, at or prior to the Closing Date, of each of the following
conditions:
7.1.1 No action, suit or proceeding is pending or
threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or deemed
applicable to any of the transactions contemplated by this Agreement
by any Governmental Authority, which would (a) prohibit Buyer's
ownership or operation of all or a material portion of the Business
or the Assets, (b) compel Buyer to dispose of or hold separate all
or a material portion of the Business or the Assets as a result of
any of the transactions contemplated by this Agreement, or (c)
prevent or make illegal the consummation of any transactions
contemplated by this Agreement.
7.2 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement to
take place at the Closing are subject to the satisfaction or waiver, to
the extent permitted by applicable Legal Requirements, at or prior to the
Closing Date, of each of the following conditions:
7.2.1 Seller has performed and complied in all material
respects with each obligation, agreement, covenant and condition
required by this Agreement to be performed or complied with by
Seller at or prior to the Closing and has delivered to Buyer a
certificate, dated the Closing Date, signed by Seller's President,
to such effect, in substantially the form attached as Exhibit B.
7.2.2 Seller has executed (or caused to be executed) and
delivered to Buyer each of the following items:
7.2.2.1 a Bill of Sale in substantially the
form attached as Exhibit C;
7.2.2.2 an Assignment and Assumption Agreement
in substantially the form attached as Exhibit D; and
7.2.2.3 motor vehicle title certificates,
applications for title, assignments of Manufacturer's Statements
of Origin, and such other transfer instruments as Buyer may
reasonably deem necessary or advisable to transfer the Assets to
Buyer and to perfect Buyer's rights in the Assets.
7.2.3 By the Closing Date, Buyer will have completed a due
diligence review of the Business, operations and financial
statements of Seller, the results of which are satisfactory to Buyer
in its sole discretion.
7.2.4 Buyer has completed, with Seller's cooperation,
Schedules 1.1, 1.3, 2.2.1, 3.1, 4.1, 4.4.1, and 4.4.2.
7.2.5 Seller has completed Schedules 4.7, 4.8, and 4.10.
7.2.6 Owner has signed and delivered to Buyer a
Non-Competition Agreement in substantially the form attached as
Exhibit E.
7.2.7 Seller has signed and delivered to Buyer a
Non-Competition Agreement in substantially the form attached as
Exhibit F.
7.2.8 Seller shall have delivered to Buyer an amended lease
for the property currently utilized by Seller, executed by Marine
Properties, Inc., as landlord, conforming to the following
conditions: (i) initial lease term of five years, (ii) initial rent
equal to the current rates plus $500 per month, (iii) three
additional five-year extension periods at tenant's option, (iv) rent
increases in each of the extension periods of 10% each, (v) no
cancellation clause, (vi) a right of first refusal to purchase the
property on behalf of the tenant, and (vii) such other terms as
Buyer may reasonably require.
7.2.9 Seller has delivered releases, in form reasonably
satisfactory to Buyer, of all Encumbrances affecting any of the
Assets (other than Permitted Encumbrances).
7.2.10 Seller has provided Buyer with a copy of the
amendment to its charter, certified by the Secretary of State of
Tennessee, that it has changed its corporate name to one that is not
similar to or confusing with "Southeastern Marine".
7.2.11 Seller has provided Buyer with the original invoices
evidencing the cost of the New Boats, Motors, and Trailers, Parts
and Accessories, and an inventory sheet detailing these items.
7.2.12 Buyer has received the opinion of Bass, Berry & Sims
PLC in substantially the form attached as Exhibit H.
7.3 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement to
take place at the Closing are subject to the satisfaction or waiver by
Seller, to the extent permitted by applicable law, at or prior to the
Closing Date, of each of the following conditions:
7.3.1 Buyer has paid the Purchase Price required to be paid
at the Closing.
7.3.2 Buyer has performed and complied in all material
respects with each obligation, agreement, covenant and condition
required by this Agreement to be performed or complied with by Buyer
at or prior to the Closing and has delivered to Seller a
certificate, dated the Closing Date, signed by Buyer's President, to
such effect, in substantially the form attached as Exhibit G.
7.3.3 Buyer has executed and delivered to Seller each of
the following:
7.3.3.1 an Assignment and Assumption Agreement
in substantially the form attached as Exhibit D; and
7.3.3.2 the Promissory Note.
7.4 Waiver of Conditions. Any party may waive in writing any
or all of the conditions to its obligations under this Agreement.
Section 8. Survival of Representations and Warranties;
Indemnification.
8.1 Survival of Representations and Warranties. The
representations and warranties of Seller in this Agreement and in the
documents and instruments to be delivered by Seller pursuant to this
Agreement will survive the Closing without limitation until the first
anniversary of the Effective Date; provided, however, that the
representations and warranties set forth in Sections 4.9, 4.10, and 4.11
hereof will survive the Closing without limitation until the third
anniversary of the Effective Date. The representations and warranties of
Buyer in this Agreement and in the documents and instruments to be
delivered by Buyer pursuant to this Agreement will survive the Closing
without limitation until the first anniversary of the Effective Date.
The periods of survival of the representations and warranties prescribed
by this Section 8.1 are referred to as the "Survival Period." The
liabilities of the parties under their respective representations and
warranties will expire as of the expiration of the applicable Survival
Period; provided, however, that such expiration will not include, extend
or apply to any representation or warranty, the breach of which has been
asserted by Buyer in written notice to Seller before such expiration or
about which Seller has given Buyer written notice before such expiration
indicating the facts or conditions existing that, with the passage of
time or otherwise, can reasonably be expected to result in a breach (and
describing such potential breach in reasonable detail). The covenants
and agreements of the parties in this Agreement and in the other
documents and instruments to be delivered by Seller or Buyer pursuant to
this Agreement will survive the Closing and will continue in full force
and effect without limitation.
8.2 Indemnification by Seller. Seller and Owner will
indemnify, defend and hold harmless Buyer and its shareholders and its
and their respective Affiliates, and the shareholders, directors,
officers, employees, agents, successors and assigns of any of such
Persons, from and against:
8.2.1 all losses, damages, liabilities, deficiencies or
obligations of or to Buyer resulting from or arising out of (i) any
breach of any then surviving representation or warranty made by
Seller in this Agreement, (ii) any breach of any then surviving
covenant, agreement or obligation of Seller contained in this
Agreement, (iii) any third party claim with respect to any
occurrence relating to the Seller, the Owner, or the Business prior
to or on the Effective Date, without regard to whether such third
party claim with respect to such occurrence is asserted before or
after the Effective Date, including any matter described on Schedule
4.8, but excluding any such claim relating to the Assumed
Liabilities, (iv) any liability or obligation of Seller not included
in the Assumed Liabilities, including contingent liability for
products sold prior to the Effective Date, (v) any claim that the
transactions contemplated by this Agreement violate the Worker
Adjustment and Retraining Notification Act, as amended, or any
similar state or local law, or any bulk transfer or fraudulent
conveyance laws of any jurisdiction, and (vi) any liability or
obligation of Seller arising after the Effective Date; and
8.2.2 all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and
expenses (including settlement costs and reasonable legal,
accounting, experts' and other fees, costs and expenses) incident or
relating to or resulting from any of the foregoing.
In the event that an indemnified item arises under both clause 8.2.1(i)
and under one or more of clauses 8.2.1(ii) through 8.2.1(vi) of this
Section 8.2, Buyer's rights to pursue its claim under clauses 8.2.1(ii)
through 8.2.1(vi), as applicable, will exist notwithstanding the
expiration of the Survival Period applicable to such claim under clause
8.2.1(i).
8.3 Indemnification by Buyer. Buyer will indemnify, defend and
hold harmless Seller and Seller's officers, employees, agents, successors
and assigns, from and against:
8.3.1 all losses, damages, liabilities, deficiencies or
obligations of or to Seller or any such other indemnified Person
resulting from or arising out of (i) any breach of any
representation or warranty made by Buyer in this Agreement, (ii) the
breach of any covenant, agreement or obligation of Buyer contained
in this Agreemen, (iii) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; or (iv) the
operation of the Business after the Effective Date; and
8.3.2 all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and
expenses (including, without limitation, settlement costs and
reasonable legal, accounting, experts' and other fees, costs and
expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause 8.3.1(i)
and under one or more of clauses 8.3.1(ii) or 8.3.1(iii) of this Section
8.3, Seller's rights to pursue its claim under clauses 8.3.1(ii) or
8.3.1(iii), as applicable, will exist notwithstanding the expiration of
the Survival Period applicable to such claim under clause 8.3.1(i).
8.4 Third Party Claims. Promptly (and in any event within 30
days) after the receipt by any party of notice of any claim, action, suit
or proceeding by any Person who is not a party to this Agreement
(collectively, an "Action"), which Action is subject to indemnification
under this Agreement, such party (the "Indemnified Party") will give
reasonable written notice to the party from whom indemnification is
claimed (the "Indemnifying Party"). The Indemnified Party will be
entitled, at the sole expense and liability of the Indemnifying Party, to
exercise full control of the defense, compromise or settlement of any
such Action unless the Indemnifying Party, within a reasonable time (and
in any event within 15 days) after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action
under the terms of this Section 8, (b) notifies the Indemnified Party in
writing of the Indemnifying Party's intention to assume such defense, and
(c) retains legal counsel reasonably satisfactory to the Indemnified
Party to conduct the defense of such Action. The other party will
cooperate with the party assuming the defense, compromise or settlement
of any such Action in accordance with this Agreement in any reasonable
manner that such party reasonably may request. If the Indemnifying Party
so assumes the defense of any such Action, the Indemnified Party will
have the right to employ separate counsel and to participate in (but not
control) the defense, compromise or settlement of the Action, but the
fees and expenses of such counsel will be at the expense of the
Indemnified Party unless (i) the Indemnifying Party has agreed to pay
such fees and expenses, (ii) any relief other than the payment of money
damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of
the fees and expenses of such separate counsel that are reasonably
related to matters covered by the indemnity provided in this Section 8
will be paid by the Indemnifying Party. No Indemnified Party will settle
or compromise any such Action for which it is entitled to indemnification
under this Agreement without prior written consent of the Indemnifying
Party, which consent may not be unreasonably withheld. No Indemnifying
Party will settle or compromise any such Action (A) in which any relief
other than the payment of money damages is sought against any Indemnified
Party or (B) in the case of any Action relating to the Indemnified
Party's liability for any tax, if the effect of such settlement would be
an increase in the liability of the Indemnified Party for the payment of
any tax for any period beginning after the Effective Date, unless the
Indemnified Party consents in writing to such compromise or settlement,
which consent may not be unreasonably witheld.
8.5 Offset. Buyer will have a right of offset in the
Promissory Note with respect to any matter for which Buyer is indemnified
under Section 8.2.
8.6 Limitations. Notwithstanding any provision contained
herein to the contrary, an Indemnifying Party shall not have any
liabilities under this Section 8 prior to November 20, 1998, unless the
aggregate of all amounts to which such Indemnifying Party is liable
exceeds on a cumulative basis $1,000, in which event such Indemnifying
Party is liable for all such amount above and below $1,000. After
November 20, 1998, such cumulative amount must exceed $10,000 before a
claim may be made, in which event the Indemnifying Party is liable for
all such amount above and below $10,000. In addition, the total
liability of an Indemnifying Party for claims made under this Section 8
after November 20, 1998 shall be limited to the Purchase Price plus
amounts paid pursuant to Section 2.2.1.
Section 9. Covenants.
9.1 No Shopping. Neither the Seller, the Owner, nor any agent
or representative of it or them will, during the period commencing on the
date of this Agreement and ending with the earlier to occur of the
Closing or the termination of this Agreement, directly or indirectly (a)
solicit or initiate the submission of proposals or offers from any Person
for, (b) participate in any discussions pertaining to, or (c) furnish any
information to any Person other than Buyer relating to, any direct or
indirect acquisition or purchase of an interest in the Seller or all or
any portion of the Assets. In the event that any Person should approach
the Seller, the Owner, or any agent or representative of it or them with
an inquiry concerning or an offer to negotiate concerning any such
transaction, the Seller and the Owner shall immediately disclose to the
Buyer all material information concerning such inquiry or offer.
9.2 Notification of Certain Matters. Seller will promptly
notify Buyer of any fact, event, circumstance or action (a) which, if
known on the date of this Agreement, would have been required to be
disclosed to Buyer pursuant to this Agreement or (b) the existence or
occurrence of which would cause any of Seller's representations or
warranties under this Agreement not to be correct and complete.
9.3 Satisfaction of Conditions. Each party will use its
reasonable best efforts to satisfy, or to cause to be satisfied, the
conditions to the obligations of the other party to consummate the
transactions contemplated by this Agreement.
9.4 Transfer Taxes. In the event that any Governmental
Authority of the State of Tennessee or of any municipality, parish or
other subdivision thereof shall at any time impose or otherwise require
or demand payment by or from either Seller or Buyer of any state or local
sales, use, transfer, excise, documentary or license taxes or fees or any
other charge (including filing fees) with respect to Seller's sale or
transfer to Buyer of the Assets, Seller will be responsible for the
payment; provided that Buyer shall be responsible for all taxes and fees
arising from obtaining certificates of title for any vehicles in the name
of Buyer.
9.5 Use of Seller's Name. Seller may continue use of its Marks
after the Effective Date only as long as necessary to, and in connection
with, winding up Business transactions undertaken before the Effective
Date, but in no event longer than sixty (60) days, after which time
Seller will cease all such usage. Neither Seller nor Owner will at any
time adopt or use any word, mark or trade name which is similar to or
confusing with "Southeastern Marine". Seller will have the right to sue
and recover for any and all past infringements of the Intangibles.
Seller and Owner will notify Buyer of any infringement of the Intangibles
of which either becomes aware.
9.6 Confidentiality. No party will issue any press release or
make any other public announcement regarding this Agreement or the
transactions contemplated hereby without the consent of the other
parties. Each party will, and will cause its employees, consultants,
advisors and agents to, hold in confidence the terms of this Agreement
and any non-public information concerning another party obtained pursuant
to this Agreement. Notwithstanding the preceding, Buyer may disclose
such information to the extent required by any Legal Requirement
(including disclosure requirements under federal and state securities
laws). Each party also may disclose such information to employees,
consultants, advisors, agents and actual or potential lenders whose
knowledge is necessary to facilitate the consummation of the transactions
contemplated by this Agreement. Each party's obligation to hold
information in confidence will be satisfied if it exercises the same care
with respect to such information as it would exercise to preserve the
confidentiality of its own similar information.
9.7 Consignment and Repair. In the event Seller or Owner is
required to retake possession of any products sold prior to the Effective
Date, Buyer will accept the products on consignment from Seller or Owner.
Any repairs will be pre-approved by Seller and will be paid for by
Seller or Owner.
9.8 Access to Records. Seller will allow Buyer reasonable
access to its records for a period of two years after the Effective Date,
for any reasonable business purpose related to the Business.
9.9 Employees. Buyer shall offer employment to each of
Seller's employees, subject to compliance with Buyer's policies and
procedures, with initial salaries to be in the amounts set forth on
Schedule 4.10.
Section 10. Definitions.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the
meanings set forth below:
10.1 Accessories. All accessories inventoried on the Effective
Date.
10.2 Affiliate. With respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities or voting interests, by contract, or otherwise.
10.3 Assets. All properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description (including, without limitation, New Boats, Motors, and
Trailers; Used Boats, Motors, and Trailers; Parts; Accessories;
Miscellaneous Assets; Intangibles; Deposits; Boat Show Rights; and
Seller's Contracts, more particularly described in Section 1.1 and on
Schedules 1.1, 3.1 and 4.4.2), that are used, or held for use, by Seller
or Owner in the Business and in which Seller or Owner has any right,
title or interest (or in which Seller or Owner hereafter acquires any
right, title or interest on or before the Closing Date), but excluding
all Excluded Assets.
10.4 Boat Show Rights. All agreements for space at Boat Shows,
including common stock and other ownership rights in corporations,
partnerships, and other types of entities holding Boat Shows.
10.5 Boat Shows. All boat shows in Tennessee and all boat shows
at which Seller has had a booth or made a presentation in any of the last
five (5) years.
10.6 Business. The retail sales and service of boats, motors,
trailers, marine accessories and water sporting goods at the Seller's
store located in Hendersonville, Tennessee and at Boat Shows attended by
the Seller.
10.7 Deposits. All customer deposits relating to customer
special orders as of the Effective Date.
10.8 Encumbrance. Any mortgage, lien, security interest,
security agreement, conditional sale or other title retention agreement,
limitation, pledge, option, assessment or other such charge, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on
transfer, or exception to or defect in title or other ownership interest
(including reservations, rights of way, possibilities of reverter,
encroachments, easements, rights of entry, restrictive covenants, leases
and licenses).
10.9 Governmental Authority. (i) The United States of America,
(ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including
counties, municipalities and the like), (iii) any foreign (as to the
United States of America) sovereign entity and any political subdivision
thereof, or (iv) any agency, authority or instrumentality of any of the
foregoing, including any court, tribunal, department, bureau, commission
or board.
10.10 Intangibles. All intangible assets, including
trademarks, service marks, copyrights, trade names (collectively,
"Marks"), customer lists, claims, patents, rights of publicity and other
intangibles, owned, used or held for use in the Business, including the
names "Southeastern Marine", "Southeastern Marine Group, Inc." and all
derivative uses of such names, and the goodwill associated therewith, and
all rights granted to Buyer pursuant to the Non-Competition Agreements.
10.11 Legal Requirement. Any statute, ordinance, code,
law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Governmental Authority, including
judicial decisions applying common law or interpreting any other Legal
Requirement.
10.12 Miscellaneous Assets. All furniture, fixtures,
vehicles, equipment and other assets set forth on Schedule 1.3.
10.13 Net Cost. The actual net cost to Seller of an item,
after all earned rebates and credits, plus (i) freight charges that have
been paid by Seller to the manufacturer or (ii) scheduled freight charges
if Seller has picked up an item.
10.14 New Boats, Motors, and Trailers. All new boats,
motors, and trailers described on Schedule 1.1.
10.15 Parts. All parts inventoried on the Effective Date.
10.16 Permitted Encumbrances. The following Encumbrances:
(a) liens for taxes, assessments and governmental charges not yet due
and payable; (b) zoning laws and ordinances and similar Legal
Requirements; (c) rights reserved to any Governmental Authority to
regulate the affected property; and (d) as to real property interests,
any easements, rights-of-way, servitudes, permits, restrictions and minor
imperfections or irregularities in title which are reflected in public
records and which do not individually or in the aggregate interfere with
the right or ability to own, lease, use or operate (whichever may be the
case) the real property for the Business or to convey good, marketable
and indefeasible title to the real property; provided that (i) Permitted
Encumbrances will not include any item which could materially adversely
affect the conduct of the Business and (ii) the classification of any
item as a Permitted Encumbrance will not affect any liability Seller may
have for such item, including pursuant to any indemnity obligation under
this Agreement.
10.17 Person. Any natural person, corporation,
partnership, trust, unincorporated organization, association, limited
liability company, Governmental Authority or other entity.
10.18 Used Boats, Motors, and Trailers. All used boats,
motors, and trailers described on Schedule 2.2.1.
10.19 Other Definitions. The following terms are defined
in the Sections indicated:
Term Section
Action 8.4
Assumed Liabilities 3.1
Closing 6.1
Closing Date 6.1
Effective Date 6.1
ERISA 4.10
Excluded Assets 3.2
Financial Statements 4.7
Indemnifying Party; Indemnified Party 8.4
Marks 10.10
Promissory Note 2.1.7
Purchase Price 2.1
Seller's Contracts 3.1
Survival Period 8.1
Section 11. Miscellaneous.
11.1 Parties Obligated and Benefited. Subject to the
limitations set forth below, this Agreement will be binding on the
parties and their respective assigns and successors in interest and will
inure solely to the benefit of the parties and their respective assigns
and successors in interest, and no other Person will be entitled to any
of the benefits conferred by this Agreement. Without the prior written
consent of the other parties, no party will assign any of its rights
under this Agreement or delegate any of its duties under this Agreement,
provided that Buyer may, without the consent of any other party, (i)
assign or delegate its rights or obligations under this Agreement to a
commonly controlled entity of Buyer, and such assignee will be
substituted for Buyer under this Agreement as though it were the original
party to this Agreement and Buyer will be released from all obligations
under this Agreement, and (ii) make a collateral assignment of its rights
hereunder to Buyer's or its assignee's secured lenders.
11.2 Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will
be in writing and will be deemed to have been duly given only if
delivered in person or sent by first class, prepaid, registered or
certified mail (return receipt requested), or delivered by commercial
courier (e.g., United Parcel Service or Federal Express) or, if receipt
is confirmed, by telecopier:
To Buyer at:
Travis Boating Center Tennessee, Inc.
5000 Plaza on the Lake, Suite 250
Austin, Texas 78746
Attention: Mike Perrine, Chief Financial Officer
Telecopy: 512/329-0480
With a copy (which will not constitute notice)
transmitted by telecopier to:
Winstead Sechrest & Minick P.C.
100 Congress Avenue, Suite 800
Austin, Texas 78701
Attention: Walter Earl Bissex, Esq.
Telecopy: 512/370-2850
To Seller and Owner at:
5150 Hereford Court
Brentwood, Tennessee 37027
Attention: Mike Zoretic
With a copy (which will not constitute notice)
transmitted by telecopier to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attention: J. Page Davidson, Esq.
Telecopy: 615/742-2753
Any party may change the address to which notices are required to be sent
by giving notice of such change in the manner provided in this Section
11.2. All notices will be deemed to have been received on the date of
delivery or on the third business day after mailing in accordance with
this Section, except that any notice of a change of address will be
effective only upon actual receipt.
11.3 Attorneys' Fees. In the event of any action or suit based
upon or arising out of any alleged breach by any party of any
representation, warranty, covenant or agreement contained in this
Agreement, the prevailing party will be entitled to recover reasonable
attorneys' fees and other costs of such action or suit from the other
party.
11.4 Right to Specific Performance. Seller acknowledges that
the unique nature of the Assets renders money damages an inadequate
remedy for the breach by Seller of its obligations under this Agreement,
and Seller agrees that in the event of such breach, Buyer will upon
proper action instituted by it, be entitled to a decree of specific
performance of this Agreement.
11.5 Waiver. Neither this Agreement nor any of its provisions
may be waived except in writing. The failure of any party to enforce any
right arising under this Agreement on one or more occasions will not
operate as a waiver of that or any other right on that or any other
occasion.
11.6 Captions. The section captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
11.7 Choice of Law. This agreement and the rights of the
parties under it will be governed by and construed in all respects in
accordance with the laws of the State of Tennessee.
11.8 Terms. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. The word "include" and derivatives of
that word are used in this Agreement in an illustrative sense rather than
a limiting sense.
11.9 Rights Cumulative. All rights and remedies of each of the
parties under this Agreement will be cumulative, and the exercise of one
or more rights or remedies will not preclude the exercise of any other
right or remedy available under this Agreement or applicable law.
11.10 Further Actions. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost to the requesting
party, such further assignments, certificates, instruments, records, or
other documents, assurances or things as may be reasonably necessary to
give full effect to this Agreement and to allow each party fully to enjoy
and exercise the rights accorded to and acquired by it under this
Agreement.
11.11 Time. Time is of the essence under this Agreement.
If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls
on a day which is not a business day, the time for the giving of such
notice or the performance of such act will be extended to the next
succeeding business day.
11.12 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed an original.
11.13 Entire Agreement. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are
incorporated into and constitute a part of this Agreement) contains the
entire agreement of the parties and supersedes all prior oral or written
agreements and understandings with respect to the subject matter of this
Agreement. This Agreement may not be amended or modified except by a
writing signed by the parties.
11.14 Severability. Any term or provision of this
Agreement which is invalid or unenforceable will be ineffective to the
extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining rights of the Person intended to be
benefited by such provision or any other provisions of this Agreement.
11.15 Construction. This Agreement has been negotiated
by Buyer and Seller and their respective legal counsel, and legal or
equitable principles that might require the construction of this
Agreement or any provision of this Agreement against the party drafting
this Agreement will not apply in any construction or interpretation of
this Agreement.
11.16 Expenses. Except as otherwise expressly provided
in this Agreement, each party will pay all of its own expenses, including
attorneys' and accountants' fees, in connection with the negotiation of
this Agreement, the performance of its obligations and the consummation
of the transactions contemplated by this Agreement.
****************************** END OF PAGE *****************************
<PAGE>
The parties have executed this Agreement as of the day and year
first above written.
BUYER:
TRAVIS BOATING CENTER TENNESSEE, INC.
By: _____/S/____________________________
Michael B. Perrine, CFO, Secretary,
Secretary
SELLER:
SOUTHEASTERN MARINE GROUP, INC.
By: ________/S/_________________________
OWNER: LENA SCARBOROUGH
____________________________________
By: ________/S/_________________________
OWNER: MIKE ZORETIC
NON-COMPETITION AGREEMENT (INDIVIDUAL)
This Non-Competition Agreement (the "Agreement"), dated as of November
20, 1997, is among TRAVIS BOATS & MOTORS, INC., a Texas corporation
("Travis"), TRAVIS BOATING CENTER TENNESSEE, INC., a Texas corporation and
wholly owned subsidiary of Travis ("Buyer"), both having an office for the
purpose of notice at 13045 Research Blvd., Austin, Texas 78750, and
__MIKE ZORETIC____________________, an individual residing at
__5150 HEREFORD COURT, BRENTWOOD, TN 37027______________ ("Owner").
WHEREAS, Buyer has agreed to acquire certain of the assets of
Southeastern Marine, Inc., a Tennessee corporation ("Seller"), pursuant to
that certain asset purchase agreement dated as of the date hereof (the
"Purchase Agreement") among Buyer, Seller and the owners of Seller (the
capitalized terms used herein have the meanings assigned to them in the
Purchase Agreement unless otherwise defined herein); and
WHEREAS, Owner owns 50% of the outstanding shares of capital stock of
Seller; and
WHEREAS, Owner has established a valuable, far-reaching personal
reputation in the boat, boat accessory and water sports sales business; and
WHEREAS, pursuant to the Purchase Agreement, Buyer will acquire
Seller's tradenames "Southeastern Marine", "Southeastern Marine, Inc.",
and all derivative uses of such names and the goodwill associated
therewith; and
WHEREAS, Owner's personal reputation and identification with the
Business is a significant portion of the value of the Business; and
WHEREAS, the parties hereto agree that the reasonable market area of a
business such as the Business is approximately a 150-mile radius; and
WHEREAS, it is a condition precedent to the closing of the purchase
under the Purchase Agreement that Owner shall have entered into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants, terms and conditions hereinafter expressed, Travis, Buyer and
Owner agree as follows:
Section 1.
1.1 Non-Competition. Owner will not, for any reason:
1.1.1 Engage in a business or businesses, directly or
indirectly, that competes with Buyer in its conduct of the Business,
or otherwise receive compensation for any services rendered regarding
any aspect of the boat, boat accessory or water sport sales business
anywhere in Tennessee within 150 miles of the location of the
Business.
1.1.2 Participate, directly or indirectly, in any business that
competes with Buyer and the Business at any Boat Show.
1.1.3 Engage in a business or businesses, directly or
indirectly, that competes with Travis or any Affiliate of Travis in
their conduct of the boat, boat accessory or water sport sales
business, or otherwise receive compensation for any services rendered
regarding any aspect of the boat, motor, trailer, marine accessory or
water sport sales business anywhere in Tennessee within 150 miles of
the location of any store operated by Travis or any Affiliate of
Travis.
1.1.4 Engage or participate, directly or indirectly, in any
business which is substantially similar to that of Travis or any
Affiliate of Travis, including, without limitation, serving as a
consultant, administrator, officer, director, employee, manager,
landlord, lender, guarantor, or in any similar or related capacity or
otherwise receive compensation for services rendered regarding any
aspect of the boat, boat accessory or water sport sales business
anywhere in Tennessee within 150 miles of the location of any store
operated by Buyer, Travis or any Affiliate of Travis.
1.2 Owner agrees that Travis and Buyer will not be able to recognize
the value of Seller's assets and the Business unless Buyer is able to
engage in the successful operation of the Business, that the
non-competition provisions set forth in Section 1.1 are ancillary to the
Purchase Agreement, that the Purchase Agreement is an otherwise enforceable
agreement, and that the non-competition provisions in this Agreement are
therefore ancillary to an otherwise enforceable agreement. Owner further
agrees that the non-competition provisions set forth above are supported by
independent valuable consideration and contain reasonable limitations as to
the time, geographical area, and scope of activity for which he is to be
restrained; and that the limitations of the non-competition provisions do
not impose a greater restraint than is necessary to protect the goodwill or
other business interests of Travis and Buyer. It is agreed by the parties
that the restrictions contained in Section 1.1 impose, on the date of the
execution of this Agreement, a reasonable restraint on Seller in light of
the activities and businesses of Travis and Buyer and their future plans.
1.3 For the purposes of this Agreement, Owner will be deemed to be
engaging or participating in a business or businesses if he is engaged in
such business or businesses, directly or indirectly, whether for his own
account or for that of any other person, firm or corporation, and whether
as a stockholder (except solely as a stockholder in a publicly held
corporation with more than 500 beneficial holders of common stock and as to
which he owns, in the aggregate, less than 5% of any class of stock),
director, officer, employee, consultant, partner, joint venturer,
principal, agent, proprietor, consultant, manager, independent contractor,
sales representative, landlord, lessor, lender, guarantor, or in any other
capacity. Engagement or participation by Owner's spouse in any activity
prohibited by this Agreement shall be deemed to be indirect engagement or
participation by Owner.
Section 2.
2.1 Term. The term of this Agreement will commence on the date
hereof and will terminate on the earlier of (i) November 20, 2002, or
(ii) the effective date of Owner's termination of employment by Buyer
without cause.
2.2 Remedies. Owner acknowledges that a breach of any of the
provisions of Section 1 will cause irreparable harm to Travis and Buyer,
for which there may be no adequate remedy at law and for which the
ascertainment of damages would be difficult. Therefore, Travis and Buyer
will be entitled to specific performance of Section 1 hereof, in addition
to, and without having to prove the inadequacy of, other remedies at law,
as well as injunctive relief (without being required to post bond or other
security), and, if such legal action becomes necessary, Travis and Buyer
will be entitled to recover reasonable attorney's fees and costs of court
incurred in connection with such action. Nothing contained herein will be
construed as prohibiting Travis and Buyer from pursuing any other remedies
available to it for such breach, including the recovery of money damages.
2.3 Notices. Notices and demands provided for under this
Agreement will be in writing and will be deemed to be fully given and
received if sent by registered mail, postage prepaid, to the respective
party at the address listed at the beginning of this Agreement.
2.4 Assignment. Buyer or Travis may assign its rights or obligations
hereunder to any Affiliate of Buyer or Travis or any successor to the
business of Buyer or Travis, by merger, consolidation, sale of assets, or
otherwise.
2.5 Reformation; Severability. Whenever possible, each provision of
this Agreement will be interpreted so as to be legal, valid and enforceable
under applicable law, but in the event any provision of this Agreement is
held to be prohibited, unenforceable or invalid under applicable law, the
parties agree that such provision will automatically be deemed modified for
purposes of performance of this Agreement to the extent necessary to render
it lawful, valid and enforceable, or if such modification is not possible
without materially altering the intent of the parties, that such provision
will automatically be deemed severed from this Agreement to the extent of
such prohibition, unenforceability, or invalidity. The validity of the
remaining provisions of this Agreement will not be altered by any such
modification or severance.
2.6 Amendment of Agreement. Except as set forth in Section 2.5, this
Agreement may not be amended, modified, or supplemented except by a
writing signed by all parties.
2.7 Governing Law; Venue. THIS AGREEMENT WILL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES OF TEXAS. Each of the undersigned
irrevocably agrees that any legal action or proceeding brought against said
Person with respect to this Agreement will be brought in the appropriate
court in Travis County, Texas and hereby waives any right to be sued in any
other place.
2.8 Construction. This Agreement constitutes the entire Agreement
between the parties and will be binding upon and inure to the benefit of
the parties hereto and their permitted successors and assigns. No terms or
understandings not herein contained will apply unless in writing and signed
by all parties subsequent to execution of this Agreement. This Agreement
is intended to benefit only the parties hereto and no third party will have
any right to enforce this Agreement or receive any benefits hereof.
IN WITNESS WHEREOF, Travis, Buyer and Owner have executed this
Agreement, in the manner appropriate to each, as of the day and year first
above written.
TRAVIS BOATS & MOTORS, INC.
By: _/S/________________________________
Michael B. Perrine, CFO, Secretary,
Treasurer
TRAVIS BOATING CENTER TENNESSEE, INC.
By: ____/S/_____________________________
Michael B. Perrine, CFO, Secretary,
Treasurer
_______/S/_____________
MIKE ZORETIC
<PAGE>
NON-COMPETITION AGREEMENT (INDIVIDUAL)
This Non-Competition Agreement (the "Agreement"), dated as of November
20, 1997, is among TRAVIS BOATS & MOTORS, INC., a Texas corporation
("Travis"), TRAVIS BOATING CENTER TENNESSEE, INC., a Texas corporation and
wholly owned subsidiary of Travis ("Buyer"), both having an office for the
purpose of notice at 13045 Research Blvd., Austin, Texas 78750, and
__LENA SCARBOROUGH____________________, an individual residing at
__125 W. HARBOR DRIVE, HENDERSONVILLE, TN 37075______________ ("Owner").
WHEREAS, Buyer has agreed to acquire certain of the assets of
Southeastern Marine, Inc., a Tennessee corporation ("Seller"), pursuant to
that certain asset purchase agreement dated as of the date hereof (the
"Purchase Agreement") among Buyer, Seller and the owners of Seller (the
capitalized terms used herein have the meanings assigned to them in the
Purchase Agreement unless otherwise defined herein); and
WHEREAS, Owner owns 50% of the outstanding shares of capital stock of
Seller; and
WHEREAS, Owner has established a valuable, far-reaching personal
reputation in the boat, boat accessory and water sports sales business; and
WHEREAS, pursuant to the Purchase Agreement, Buyer will acquire
Seller's tradenames "Southeastern Marine", "Southeastern Marine, Inc.",
and all derivative uses of such names and the goodwill associated
therewith; and
WHEREAS, Owner's personal reputation and identification with the
Business is a significant portion of the value of the Business; and
WHEREAS, the parties hereto agree that the reasonable market area of a
business such as the Business is approximately a 150-mile radius; and
WHEREAS, it is a condition precedent to the closing of the purchase
under the Purchase Agreement that Owner shall have entered into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants, terms and conditions hereinafter expressed, Travis, Buyer and
Owner agree as follows:
Section 1.
1.1 Non-Competition. Owner will not, for any reason:
1.1.1 Engage in a business or businesses, directly or
indirectly, that competes with Buyer in its conduct of the Business,
or otherwise receive compensation for any services rendered regarding
any aspect of the boat, boat accessory or water sport sales business
anywhere in Tennessee within 150 miles of the location of the
Business.
1.1.2 Participate, directly or indirectly, in any business that
competes with Buyer and the Business at any Boat Show.
1.1.3 Engage in a business or businesses, directly or
indirectly, that competes with Travis or any Affiliate of Travis in
their conduct of the boat, boat accessory or water sport sales
business, or otherwise receive compensation for any services rendered
regarding any aspect of the boat, motor, trailer, marine accessory or
water sport sales business anywhere in Tennessee within 150 miles of
the location of any store operated by Travis or any Affiliate of
Travis.
1.1.4 Engage or participate, directly or indirectly, in any
business which is substantially similar to that of Travis or any
Affiliate of Travis, including, without limitation, serving as a
consultant, administrator, officer, director, employee, manager,
landlord, lender, guarantor, or in any similar or related capacity or
otherwise receive compensation for services rendered regarding any
aspect of the boat, boat accessory or water sport sales business
anywhere in Tennessee within 150 miles of the location of any store
operated by Buyer, Travis or any Affiliate of Travis.
1.2 Owner agrees that Travis and Buyer will not be able to recognize
the value of Seller's assets and the Business unless Buyer is able to
engage in the successful operation of the Business, that the
non-competition provisions set forth in Section 1.1 are ancillary to the
Purchase Agreement, that the Purchase Agreement is an otherwise enforceable
agreement, and that the non-competition provisions in this Agreement are
therefore ancillary to an otherwise enforceable agreement. Owner further
agrees that the non-competition provisions set forth above are supported by
independent valuable consideration and contain reasonable limitations as to
the time, geographical area, and scope of activity for which he is to be
restrained; and that the limitations of the non-competition provisions do
not impose a greater restraint than is necessary to protect the goodwill or
other business interests of Travis and Buyer. It is agreed by the parties
that the restrictions contained in Section 1.1 impose, on the date of the
execution of this Agreement, a reasonable restraint on Seller in light of
the activities and businesses of Travis and Buyer and their future plans.
1.3 For the purposes of this Agreement, Owner will be deemed to be
engaging or participating in a business or businesses if he is engaged in
such business or businesses, directly or indirectly, whether for his own
account or for that of any other person, firm or corporation, and whether
as a stockholder (except solely as a stockholder in a publicly held
corporation with more than 500 beneficial holders of common stock and as to
which he owns, in the aggregate, less than 5% of any class of stock),
director, officer, employee, consultant, partner, joint venturer,
principal, agent, proprietor, consultant, manager, independent contractor,
sales representative, landlord, lessor, lender, guarantor, or in any other
capacity. Engagement or participation by Owner's spouse in any activity
prohibited by this Agreement shall be deemed to be indirect engagement or
participation by Owner.
Section 2.
2.1 Term. The term of this Agreement will commence on the date
hereof and will terminate on the earlier of (i) November 20, 2002, or
(ii) the effective date of Owner's termination of employment by Buyer
without cause.
2.2 Remedies. Owner acknowledges that a breach of any of the
provisions of Section 1 will cause irreparable harm to Travis and Buyer,
for which there may be no adequate remedy at law and for which the
ascertainment of damages would be difficult. Therefore, Travis and Buyer
will be entitled to specific performance of Section 1 hereof, in addition
to, and without having to prove the inadequacy of, other remedies at law,
as well as injunctive relief (without being required to post bond or other
security), and, if such legal action becomes necessary, Travis and Buyer
will be entitled to recover reasonable attorney's fees and costs of court
incurred in connection with such action. Nothing contained herein will be
construed as prohibiting Travis and Buyer from pursuing any other remedies
available to it for such breach, including the recovery of money damages.
2.3 Notices. Notices and demands provided for under this
Agreement will be in writing and will be deemed to be fully given and
received if sent by registered mail, postage prepaid, to the respective
party at the address listed at the beginning of this Agreement.
2.4 Assignment. Buyer or Travis may assign its rights or obligations
hereunder to any Affiliate of Buyer or Travis or any successor to the
business of Buyer or Travis, by merger, consolidation, sale of assets, or
otherwise.
2.5 Reformation; Severability. Whenever possible, each provision of
this Agreement will be interpreted so as to be legal, valid and enforceable
under applicable law, but in the event any provision of this Agreement is
held to be prohibited, unenforceable or invalid under applicable law, the
parties agree that such provision will automatically be deemed modified for
purposes of performance of this Agreement to the extent necessary to render
it lawful, valid and enforceable, or if such modification is not possible
without materially altering the intent of the parties, that such provision
will automatically be deemed severed from this Agreement to the extent of
such prohibition, unenforceability, or invalidity. The validity of the
remaining provisions of this Agreement will not be altered by any such
modification or severance.
2.6 Amendment of Agreement. Except as set forth in Section 2.5, this
Agreement may not be amended, modified, or supplemented except by a
writing signed by all parties.
2.7 Governing Law; Venue. THIS AGREEMENT WILL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES OF TEXAS. Each of the undersigned
irrevocably agrees that any legal action or proceeding brought against said
Person with respect to this Agreement will be brought in the appropriate
court in Travis County, Texas and hereby waives any right to be sued in any
other place.
2.8 Construction. This Agreement constitutes the entire Agreement
between the parties and will be binding upon and inure to the benefit of
the parties hereto and their permitted successors and assigns. No terms or
understandings not herein contained will apply unless in writing and signed
by all parties subsequent to execution of this Agreement. This Agreement
is intended to benefit only the parties hereto and no third party will have
any right to enforce this Agreement or receive any benefits hereof.
IN WITNESS WHEREOF, Travis, Buyer and Owner have executed this
Agreement, in the manner appropriate to each, as of the day and year first
above written.
TRAVIS BOATS & MOTORS, INC.
By: _/S/________________________________
Michael B. Perrine, CFO, Secretary,
Treasurer
TRAVIS BOATING CENTER TENNESSEE, INC.
By: ____/S/_____________________________
Michael B. Perrine, CFO, Secretary,
Treasurer
______/S/_______________
LENA SCARBOROUGH
NON-COMPETITION AGREEMENT (SELLER)
This Non-Competition Agreement (the "Agreement"), dated as of November
20, 1997, is among TRAVIS BOATS & MOTORS, INC., a Texas corporation
("Travis"), TRAVIS BOATING CENTER TENNESSEE, INC., a Texas corporation and
wholly owned subsidiary of Travis ("Buyer"), both having an office for the
purpose of notice at 13045 Research Blvd., Austin, Texas 78750, and
SOUTHEASTERN MARINE GROUP, INC., a Tennessee corporation ("Seller") with an
office for the purpose of notice at 5150 Hereford Court, Brentwood,
Tennessee 37027, Attn: Mike Zoretic.
WHEREAS, Buyer has agreed to acquire certain of the assets of Seller
pursuant to that certain asset purchase agreement dated the date hereof
(the "Purchase Agreement") among Buyer, Seller and the owners of Seller
(the capitalized terms used herein have the meanings assigned to them in
the Purchase Agreement unless otherwise defined herein); and
WHEREAS, pursuant to the Purchase Agreement, Buyer will acquire
Seller's tradenames "Southeastern Marine", "Southeastern Marine Group, Inc.
", and all derivative uses of such names and the goodwill associated
therewith; and
WHEREAS, the parties hereto agree that the reasonable market area of a
business such as the Business is approximately a 150-mile radius; and
WHEREAS, it is a condition precedent to the closing of the purchase
under the Purchase Agreement that Seller shall have entered into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants, terms and conditions hereinafter expressed, Travis, Buyer and
Seller agree as follows:
Section 1.
1.1 Non-Competition. Seller will not, for any reason:
1.1.1 Engage in a business or businesses, directly or
indirectly, that competes with Buyer in its conduct of the Business, or
otherwise receive compensation for any services rendered regarding any
aspect of the boat, boat accessory or water sport sales business anywhere
in Tennessee within 150 miles of the location of the Business.
1.1.2 Participate, directly or indirectly, in any business that
competes with Buyer and the Business at any Boat Show.
1.1.3 Engage in a business or businesses, directly or
indirectly, that competes with Travis or any Affiliate of Travis in their
conduct of the boat, boat accessory or water sport sales business, or
otherwise receive compensation for any services rendered regarding any
aspect of the boat, motor, trailer, or marine accessory or water sport
sales business anywhere in Tennessee within 150 miles of the location of
any store operated by Travis or any Affiliate of Travis.
1.1.4 Engage or participate, directly or indirectly, in any
business which is substantially similar to that of Travis or any Affiliate
of Travis, including, without limitation, serving as a consultant,
administrator, officer, director, employee, manager, landlord, lender,
guarantor, or in any similar or related capacity or otherwise receive
compensation for services rendered regarding any aspect of the boat, boat
accessory or water sport sales business anywhere in Tennessee within 150
miles of the location of any store operated by Buyer, Travis or any
Affiliate of Travis.
1.2 Seller agrees that Travis and Buyer will not be able to recognize
the value of Seller's assets and the Business unless Buyer is able to
engage in the successful operation of the Business, that the
non-competition provisions set forth in Section 1.1 are ancillary to the
Purchase Agreement, that the Purchase Agreement is an otherwise enforceable
agreement, and that the non-competition provisions in this Agreement are
therefore ancillary to an otherwise enforceable agreement. Seller further
agrees that the non-competition provisions set forth above are supported by
independent valuable consideration and contain reasonable limitations as to
the time, geographical area, and scope of activity for which he is to be
restrained; and that the limitations of the non-competition provisions do
not impose a greater restraint than is necessary to protect the goodwill or
other business interests of Travis and Buyer. It is agreed by the parties
that the restrictions contained in Section 1.1 impose, on the date of the
execution of this Agreement, a reasonable restraint on Seller in light of
the activities and businesses of Travis and Buyer and their future plans.
1.3 For the purposes of this Agreement, Seller will be deemed to be
engaging or participating in a business or businesses if it is engaged in
such business or businesses, directly or indirectly, whether for its own
account or for that of any other person, firm or corporation, and whether
as a stockholder (except solely as a stockholder in a publicly held
corporation with more than 500 beneficial holders of common stock and as to
which he owns, in the aggregate, less than 5% of any class of stock),
director, officer, employee, consultant, partner, joint venturer,
principal, agent, proprietor, consultant, manager, independent contractor,
sales representative, landlord, lessor, lender, guarantor, or in any other
capacity.
Section 2.
2.1 Term. The term of this Agreement will commence on the date
hereof and will terminate on November 20, 2002.
2.2 Remedies. Seller acknowledges that a breach of any of the
provisions of Section 1 will cause irreparable harm to Travis and Buyer,
for which there may be no adequate remedy at law and for which the
ascertainment of damages would be difficult. Therefore, Travis and Buyer
will be entitled to specific performance of Section 1 hereof, in addition
to, and without having to prove the inadequacy of, other remedies at law,
as well as injunctive relief (without being required to post bond or other
security), and, if such legal action becomes necessary, Travis and Buyer
will be entitled to recover reasonable attorney's fees and costs of court
incurred in connection with such action. Nothing contained herein will be
construed as prohibiting Travis and Buyer from pursuing any other remedies
available to it for such breach, including the recovery of money damages.
2.3 Notices Notices and demands provided for under this Agreement will
be in writing and will be deemed to be fully given and received if sent by
registered mail, postage prepaid, to the respective party at the address
listed at the beginning of this Agreement.
2.4 Assignment. Buyer or Travis may assign its rights or obligations
hereunder to any Affiliate of Buyer or Travis or any successor to the
business of Buyer or Travis, by merger, consolidation, sale of assets, or
otherwise.
2.5 Reformation; Severability. Whenever possible, each provision of
this Agreement will be interpreted so as to be legal, valid and enforceable
under applicable law, but in the event any provision of this Agreement is
held to be prohibited, unenforceable or invalid under applicable law, the
parties agree that such provision will automatically be deemed modified for
purposes of performance of this Agreement to the extent necessary to render
it lawful, valid and enforceable, or if such modification is not possible
without materially altering the intent of the parties, that such provision
will automatically be deemed severed from this Agreement to the extent of
such prohibition, unenforceability, or invalidity. The validity of the
remaining provisions of this Agreement will not be altered by any such
modification or severance.
2.6 Amendment of Agreement. Except as set forth in Section 2.5,
this Agreement may not be amended, modified, or supplemented except by a
writing signed by all parties.
2.7 Governing Law; Venue. THIS AGREEMENT WILL BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES OF TEXAS. Each of the undersigned
irrevocably agrees that any legal action or proceeding brought against said
Person with respect to this Agreement will be brought in the appropriate
court in Travis County, Texas and hereby waives any right to be sued in any
other place.
2.8 Construction. This Agreement constitutes the entire Agreement
between the parties and will be binding upon and inure to the benefit of
the parties hereto and their permitted successors and assigns. No terms or
understandings not herein contained will apply unless in writing and signed
by all parties subsequent to execution of this Agreement. This Agreement is
intended to benefit only the parties hereto and no third party will have
any right to enforce this Agreement or receive any benefits hereof.
IN WITNESS WHEREOF, Travis, Buyer and Seller have executed this
Agreement, in the manner appropriate to each, as of the day and year first
above written.
TRAVIS BOATS & MOTORS, INC.
By: __/S/_______________________________
Michael B. Perrine, CFO, Secretary,
Treasurer
TRAVIS BOATING CENTER TENNESSEE, INC.
By: ___/S/____________________________
Michael B. Perrine, CFO, Secretary,
Treasurer
SOUTHEASTERN MARINE GROUP, INC.
By: _/S/___________________________
MIKE ZORETIC, PRESIDENT
<PAGE>
EXHIBIT 21.1
Subsidiaries of Registrant
REGISTRANT: Travis Boats & Motors, Inc.
Travis Snowden Marine, Inc.
Travis Boating Center Arlington, Inc.
Falcon Marine, Inc.
Falcon Marine Abilene, Inc.
Travis Boating Center Beaumont, Inc.
Travis Boats & Motors Baton Rouge, Inc.
TBC Arkansas, Inc.
TBC Management, Ltd.
TBC Management, Inc.
Travis Boating Center Louisiana, Inc.
Travis Boating Center Tennessee, Inc.
Travis Boating Center Alabama, Inc.
Red River Marine Arkansas, Inc.
Travis Boating Center Little Rock, Inc.
Travis Boating Center Georgia, Inc.
Travis Boating Center Florida, Inc.
Travis Boating Center Mississippi, Inc.
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-41981) pertaining to the Travis Boats & Motors, Inc. 1995
Incentive Plan, Stock Option Agreement for Michael B. Perrine, Stock Option
Agreement for Mark T. Walton, and Stock Option Agreement for Ron Spradling of
our report dated November 25, 1997, with respect to the consolidated financial
statements of Travis Boats & Motors included in the Annual Report (Form 10-K)
for the year ended September 30, 1997.
/s/ Ernst & Young LLP
Austin, Texas
December 23, 1997
<PAGE>
EXHIBIT 27.1
[ARTICLE] 5
[MULTIPLIER] 1,000
<PERIOD TYPE> 12-MOS 12-MOS
<FISCAL YEAR-END> SEP-30-97 SEP-30-96
[PERIOD-START] OCT-01-96 OCT-01-95
[PERIOD-END] SEP-30-97 SEP-30-96
[CASH] 5,816 1,533
[SECURITIES] 0 0
[RECEIVABLES] 3,915 1,331
<ALLOWOWANCES> 0 0
[INVENTORY] 34,450 20,554
[CURRENT-ASSETS] 44,725 23,681
[PP&E] 11,519 8,572
[DEPRECIATION] 2,750 2,025
[TOTAL-ASSETS] 59,121 31,350
[TOTAL-LIABILITIES] 35,064 12,752
[BONDS] 5,145 4,335
[PREFERRED-MANDATORY] 0 0
[COMMON] 42 41
[OTHER-SE] 24,015 18,557
[TOTAL-LIABILITY-AND-EQUITY] 59,121 31,350
[SALES] 91,309 64,555
[TOTAL-REVENUES] 91,309 64,555
[CGS] <67,354> <48,072>
[TOTAL-COSTS] <67,354> <48,072>
[OTHER-EXPENSES] <16,475> <11,421>
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] <1,354> <1,289>
[INCOME-PRETAX] 6,114 3,833
[INCOME-TAX] <2,133> <1,450>
[INCOME-CONTINUING] 3,982 2,383
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 3,982 2,383
[EPS-PRIMARY] .94 .78
[EPS-DILUTED] .93 .78
