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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 21, 1997
(Date of earliest event reported)
HUFFY CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 1-5325 31-0326270
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
225 BYERS ROAD
MIAMISBURG, OHIO
(Address of principal executive offices)
45342-3657
(Zip Code)
(937) 866-6251
(Registrant's telephone number, including area code)
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Item 2: DISPOSITION OF ASSETS
On March 7, 1997, authorized representatives of Huffy Corporation, an Ohio
corporation ("Huffy"), and two of its wholly-owned subsidiaries, Gerry Baby
Products Company, a Delaware corporation ("GBPC"), and Gerry Wood Products
Company, a Wisconsin corporation ("GWPC"), executed an Asset Purchase Agreement
("Agreement") in an arm's length transaction with Evenflo Company, Inc., a
Delaware corporation ("Evenflo"), unrelated to Huffy, GBPC or GWPC. Huffy, GBPC
and GWPC, agreed to sell and Evenflo agreed to purchase substantially all of the
assets of GBPC and GWPC, including without limitation, inventory, equipment,
records, contracts and leases, real property, intangible property, permits and
licenses, goodwill, accounts receivable, cash, prepaid expenses, software and
bank accounts. Pursuant to the Agreement, Evenflo also agreed to assume certain
of GBPC's and GWPC's liabilities. On April 21, 1997, the closing date of the
asset purchase, GBPC and GWPC conveyed and transferred to Evenflo substantially
all of their assets pursuant to a duly executed assumption agreement. Upon the
transfer of assets, Evenflo paid Huffy consideration of $73,000,000 in cash. The
amount of consideration paid for the assets was determined through negotiation
and was approved by the boards of directors of each of the companies. GBPC and
GWPC were both engaged in the business of designing, manufacturing and marketing
juvenile products.
Item 7: FINANCIAL STATEMENTS AND EXHIBITS
Item 7(b): Financial Information
The following restated consolidated statement of earnings for the fiscal year
ended December 31, 1996 gives effect to the sale by Huffy Corporation
substantially all of the assets and certain liabilities of GBPC and GWPC as if
the transaction were consummated on January 1, 1996. The consolidated statement
of earnings for the three months ended March 31, 1997 and the consolidated
balance sheet as of March 31, 1997, which would be duplicates of the statements
in the 10-Q for the quarter ended March 31, 1997 have not been included.
Page 2 of 5
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HUFFY CORPORATION
RESTATED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 as
Restated
-----------
<S> <C>
Net sales $ 579,670
Cost of sales 484,782
-------
Gross profit 94,888
Selling, general and administrative expenses 80,058
-------
Operating income 14,830
Other expense (income)
Interest expense 5,873
Interest income (82)
Other (481)
-------
Earnings before income taxes 9,520
Income tax expense 2,596
-------
Earnings from continuing operations 6,924
Discontinued operations:
Loss from discontinued operations, net of
income tax benefit of $202 (467)
-------
Net earnings $ 6,457
============
Earnings per common share:
Weighted average number of common shares 13,452,008
============
Earnings from continuing operations $ 0.51
Discontinued operations (0.03)
------------
Net earnings per common share $ 0.48
============
</TABLE>
Page 3 of 5
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ITEM 7(c) EXHIBITS
a. Exhibits - The Exhibits, as shown in the "Index of Exhibits"
attached hereto, are filed as a part of this Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUFFY CORPORATION, registrant
May 5, 1997 /s/ TIMOTHY G. HOWARD
- ---------------------------------- -------------------------------------
Date Timothy G. Howard
Vice President - Corporate Controller
(Principal Accounting Officer)
Page 4 of 5
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INDEX OF EXHIBITS
Exhibit
No. Item
- ------- -------------------------------------------------------------------
(1) Not Applicable
(2) Asset Purchase Agreement, dated March 7, 1997, by and among
Gerry Baby Products Company, Gerry Wood Products Company,
Huffy Corporation, and Evenflo Company, Inc. (the "Agreement").
Pursuant to Section 229.601(b)(2) of Regulation S-K of the
Securities Act of 1933, the Registrant has omitted the exhibits and
schedules to the Agreement. A description of the exhibits and
schedules is included at the end of the Agreement. The Registrant
hereby agrees to furnish supplementary a copy of any omitted
exhibit or schedule to the Commission upon request.
(4) Not applicable
(12) Not applicable
(18) Not applicable
(20) Not applicable
(23) Not applicable
(24) Not applicable
(27) Financial Data Schedule
(99) Not applicable
Page 5 of 5
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ASSET PURCHASE AGREEMENT DATED AS OF MARCH 7, 1997
BY AND AMONG
GERRY BABY PRODUCTS COMPANY
GERRY WOOD PRODUCTS COMPANY,
AS SELLERS,
HUFFY CORPORATION
AND
EVENFLO COMPANY, INC.
AS PURCHASER
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ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE #
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<S> <C>
TERMS OF SALE AND PAYMENT...................................................................1
Sale of Assets.....................................................................1
Excluded Assets....................................................................3
Liabilities........................................................................3
Employer Liabilities...............................................................4
Sellers' Liabilities...............................................................4
Purchaser's Liabilities............................................................4
Assumed Contracts, Purchase Orders, Leases, etc....................................4
Purchase Price.....................................................................4
Minimum Net Asset Adjustment.......................................................4
Allocation of Purchase Price.......................................................5
REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF SELLERS AND HUFFY.....................7
Organization.......................................................................7
Authority and Enforceability.......................................................8
Financial Statements...............................................................8
Pending Claims.....................................................................8
Legal Compliance...................................................................9
Title to Assets....................................................................9
Condition of Assets................................................................9
Leases.............................................................................9
Inventory..........................................................................9
Other Property.....................................................................9
Customers and Suppliers...........................................................10
No Breach or Violation............................................................10
Interest in Customers, Suppliers and Competitors..................................10
Corporate Documents...............................................................10
Zoning............................................................................11
OSHA..............................................................................11
Intellectual Property.............................................................11
Environmental Matters.............................................................11
Leases and Contracts..............................................................13
Employees.........................................................................14
Labor Matters.....................................................................14
WARN Act .........................................................................15
Employee Benefit Plans............................................................15
Brokers' Fee......................................................................16
Receivables.......................................................................16
Insurance.........................................................................16
Governmental Licenses, Permits and Related Approvals..............................16
</TABLE>
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<TABLE>
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Absence of Certain Changes or Events..............................................16
Recalls .........................................................................17
Product Liability Claims..........................................................17
Tax Matters.......................................................................17
Real Property.....................................................................17
Entire Business...................................................................19
Full Disclosure...................................................................19
PURCHASER'S REPRESENTATIONS AND WARRANTIES.................................................19
Organization......................................................................19
Authority.........................................................................19
Enforceability....................................................................19
Brokers' Fee......................................................................20
COVENANTS AND AGREEMENTS...................................................................20
Bulk Sales Compliance.............................................................20
Preservation of Business and Assets...............................................20
Conduct of Business...............................................................20
Access to Books and Records.......................................................21
Confidentiality...................................................................23
Hart-Scott-Rodino Filing..........................................................23
Expenses .........................................................................23
Shareholder Communication.........................................................23
Additional Agreements.............................................................24
Customer Service..................................................................24
Closing Conditions................................................................24
Notification......................................................................24
No Shopping.......................................................................25
Affiliated Transactions...........................................................25
Assignment of Confidentiality Agreements..........................................25
Insurance Matters.................................................................25
Employee Matters..................................................................25
Grant of License..................................................................26
THE CLOSING................................................................................26
SELLERS' CONDITIONS TO CLOSE...............................................................26
Representations and Warranties True at Closing; Compliance with Agreement.........26
Regulatory Approvals..............................................................27
No Action/Proceeding..............................................................27
Compliance with Article IX........................................................27
Other Prohibiting Transaction.....................................................27
PURCHASER'S CONDITIONS TO CLOSE............................................................27
Representations and Warranties True at Closing; Compliance with Agreement.........27
No Loss, Damage or Destruction....................................................27
</TABLE>
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<TABLE>
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No Material Adverse Change........................................................28
Regulatory Approvals..............................................................28
No Action/Proceeding..............................................................28
Compliance with Article VIII......................................................28
Other Prohibiting Transaction.....................................................28
Environmental Diligence...........................................................28
Lien Search.......................................................................28
Sublease Agreement................................................................28
Union Agreements..................................................................29
OBLIGATIONS OF SELLERS AT CLOSING..........................................................29
Documents Relating to Title.......................................................29
Possession........................................................................30
Opinion of Sellers' Counsel.......................................................30
Corporate Good Standing and Corporate Resolution..................................30
Closing Certificate...............................................................30
Third Party Consents..............................................................30
Additionally Requested Documents; Post Closing Assistance.........................30
OBLIGATIONS OF PURCHASER AT CLOSING........................................................30
Purchase Price....................................................................31
Corporate Good Standing and Certified Board Resolutions...........................31
Assumption of Liabilities.........................................................31
Closing Certificate...............................................................31
INDEMNIFICATION AND SURVIVAL OF PROVISIONS.................................................31
Survival .........................................................................31
Sellers' Indemnification Obligation...............................................31
Purchaser's Indemnification Obligation............................................33
Procedure for Indemnification; General............................................35
NON-COMPETITION COVENANT...................................................................38
TERMINATION................................................................................38
General .........................................................................38
No Liabilities in Event of Termination............................................39
MISCELLANEOUS..............................................................................39
Headings .........................................................................39
Entire Agreement, Modification and Waiver.........................................39
Counterparts......................................................................39
Rights of Parties.................................................................39
Assignment........................................................................39
Remedies .........................................................................39
Effect of Certain Actions.........................................................40
Supplements to Schedules and Exhibits.............................................40
</TABLE>
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<TABLE>
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Notices .........................................................................40
Knowledge of Sellers..............................................................42
Severability......................................................................42
Meanings of Certain Terms.........................................................42
Transfer Taxes and Recording Expenses.............................................42
Governing Law.....................................................................42
</TABLE>
iv
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated March 7, 1997, is made and
entered into by and among GERRY BABY PRODUCTS COMPANY, a Delaware corporation,
GERRY WOOD PRODUCTS COMPANY, a Wisconsin corporation, (hereafter collectively
referred to herein as "Sellers"), HUFFY CORPORATION, an Ohio corporation and
sole shareholder of Sellers ("Huffy") and EVENFLO COMPANY, INC., a Delaware
corporation, (hereinafter referred to as "Purchaser").
W I T N E S S E T H:
WHEREAS, Sellers are collectively engaged in the business of
designing, manufacturing and marketing juvenile products;
WHEREAS, Sellers desire to sell to Purchaser, and Purchaser desires to
purchase from Sellers, substantially all of Sellers' assets as such exist on
the date hereof, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, and in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
ARTICLE I
TERMS OF SALE AND PAYMENT
SECTION 1.1(a) SALE OF ASSETS. Sellers, on the basis of the
representations and warranties of Sellers and Huffy contained herein and upon
the terms and conditions hereinafter set forth, shall sell, assign, convey,
transfer and deliver to Purchaser, and Purchaser shall purchase and pay for, on
the Closing Date (as defined in Article V hereof), free and clear of all liens
and encumbrances, all of the assets, rights, properties, claims, contracts and
business of Sellers at the Closing Date of every kind, nature, character and
description, tangible and intangible, real, personal or mixed, wherever located
(the "Assets"), including but not limited to, the following:
(i) INVENTORY. Sellers' entire inventory consisting of finished
products, operating supplies, raw materials, purchased parts,
work-in-progress, and unshipped finished goods of Sellers,
including products or supplies on hand or in transit
("Inventory");
(ii) EQUIPMENT. All vehicles, equipment, tooling, machinery,
furniture, supplies, tools, dies, jigs, molds, patterns,
drawings and all other tangible personal property (including
all spare parts therefor) used in or intended for use in the
operation of the Sellers' business and owned by Sellers
(collectively, the "Equipment"), and all warranties and
guarantees, if any, express or implied, existing for the
benefit of Sellers with respect to the Equipment, including
but not limited to, the
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Equipment set forth on Schedule 1.1(a)(ii) of the disclosure
schedules attached hereto and made a part hereof (the
"Disclosure Schedules");
(iii) RECORDS. All pertinent records, financial and non-financial,
relating to the present and past operating history of Sellers'
business;
(iv) CONTRACTS. All outstanding customer orders, lists, contracts
for goods, supplies, materials, equipment, tooling, machinery,
prepayments or other items used in the operation of Sellers'
business other than employee-related contracts, including but
not limited to, the contracts which are listed on Schedule
1.1(a)(iv);
(v) REAL PROPERTY AND LEASES. The fee simple interest in the real
property, including all buildings, structures, fixtures and
improvements located therein (the "Owned Real Property")
described on Schedule 1.1(a)(v) and a sublease interest in the
real property, including all buildings, structures, fixtures
and improvements located therein, described on Schedule
1.1(a)(v) pursuant to the terms of the Sublease Agreement,
substantially in the form attached hereto as Exhibit A;
(vi) INTANGIBLE ASSETS. All intangible assets of Sellers relating
to their past, current and presently contemplated future
products for their business, including, without limitation
"Snugli" and "Gerry" trademarks, all of Sellers' right, title
and interest in and to the patents, patent registrations,
patent applications, trademarks, trademark registrations,
trademark applications, trade names, copyrights, copyright
registrations, copyright applications, franchises, permits,
licenses, processes, formulas, inventions, trade secrets and
royalties (including any rights to sue for breach or past
infringement) relating to such business, including but not
limited to, the intangible assets set forth on Schedule
1.1(a)(vi);
(vii) GOVERNMENTAL PERMITS AND LICENSES. All permits, licenses,
consents and any other forms of government approval, to the
extent assignable, as have been or are required for the
operation of Sellers' business as it is and during the year
prior to the date hereof has been operated, including but not
limited to, the governmental permits and licenses set forth on
Schedule 1.1(a)(vii);
(viii) GOODWILL. All goodwill and, to the extent assignable by
Sellers, all warranties (express or implied) and rights and
claims related to the operation of their business including,
but not limited to, the right to the names "Gerry Baby
Products Company" and "Gerry Wood Products Company";
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(ix) ACCOUNTS RECEIVABLE. All accounts receivable of Sellers in
existence on the Closing Date, including all notes, bonds and
other evidences of such receivables, including but not limited
to, the receivables set forth on Schedule 1.1(a)(ix); and
(x) CASH/PREPAID EXPENSES. All cash on hand, cash equivalents,
deposits in transit and prepaid expenses as of the Closing
Date;
(xi) MIS AND MATERIALS. All management information systems and
software, and customer, subscriber and vendor lists, catalogs,
research material, technical information, technology,
specifications, designs, drawings, processes and quality
control data; and
(xii) BANK ACCOUNTS. All bank accounts of Sellers listed on Schedule
1.1(a)(xii), including the bank accounts receiving payments of
all receivables.
SECTION 1.1(b) EXCLUDED ASSETS. Sellers are not selling and Purchaser
is not purchasing or assuming obligations with respect to the following
(collectively the "Excluded Assets"):
(a) any equity interest in Sellers or any of their subsidiaries or any
of Sellers' joint venture or partnership interests;
(b) the assets listed on Schedule 1.1(b);
(c) leasehold interest under that certain Lease Agreement between
Selco Service Corporation and Gerry Baby Products Company dated October
29, 1992 (the "Lease"); and
(d) all intercompany receivables.
SECTION 1.1(c) LIABILITIES. Purchaser shall assume on the Closing Date
on behalf of Sellers the following specific liabilities:
(i) All accounts payable of Sellers in existence on the Closing
Date, in each case only to the extent such liabilities and
obligations (1) have been incurred in the ordinary course of
either Seller's business, (2) have been incurred in a manner and
amount consistent with past practice, and (3) are unpaid and due
and owing as of the opening of business on the Closing Date.
(ii) All other trade liabilities relating to the operation of
Sellers' business as may be agreed upon between the parties
hereto and which are described on Schedule 1.1(c) hereto.
SECTION 1.1(d) EMPLOYER LIABILITIES. Purchaser shall assume on the
Closing Date on behalf of Sellers the liabilities with respect to Sellers'
employees who become employees of
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Purchaser described on Schedule 1.1(d) hereto. Sellers shall remain liable up
to the Closing Date for all other employee wages, salaries and benefits not
listed on Schedule 1.1(d).
SECTION 1.2(a) SELLERS' LIABILITIES. Except as set forth specifically
in this Agreement and in the last sentence of this Section 1.2(a), Purchaser is
not by reason of its purchase of the Assets assuming any liabilities or
obligations of Sellers whatsoever and shall not become liable in any manner for
any liabilities or obligations of Sellers. Without limiting the generality of
the foregoing, and without regard to whether any law, governmental authority,
or other third party may impose any liability of Sellers, in whole or in part,
on Purchaser, Purchaser does not assume, and Sellers shall continue to be
liable for, all liabilities and obligations, fixed or contingent, known or
unknown, not otherwise assumed by Purchaser under this Agreement. No payment in
respect of any liability or obligation of Sellers not expressly assumed in
writing by Purchaser under this Agreement shall be made by Sellers or Purchaser
out of the Assets to be acquired hereunder. Notwithstanding the foregoing, all
executory contracts with third parties set forth in Schedule 1.2(c) shall be
assigned by Sellers and assumed by Purchaser, but only with respect to the
executory portions thereof such that Purchaser shall be obligated to render any
performance required by such contracts after the Closing Date, but any
obligations or liabilities accruing under such contracts prior to the Closing
Date shall remain solely the responsibility of Sellers.
SECTION 1.2 (b) PURCHASER'S LIABILITIES. Other than the indemnity
obligations of Huffy and Sellers contained in Article X, Sellers are not by
reason of their sale of the Assets assuming any liabilities of Purchaser
whatsoever and shall not become liable in any manner for any liabilities of
Purchaser. Without limiting the generality of the foregoing, Sellers do not
assume, and Purchaser shall be liable for, all liabilities assumed by Purchaser
pursuant to the terms of this Agreement.
SECTION 1.2 (c) ASSUMED CONTRACTS, PURCHASE ORDERS, LEASES, ETC. On
the Closing Date, Purchaser shall assume and agree to pay or perform, as the
case may be, all obligations accruing after the Closing Date with respect to
those contracts, purchase orders, leases of personal property and other
obligations which are set forth on Schedule 1.2(c) hereto only to the extent
that such contracts, purchase orders, leases and other obligations are properly
assigned to Purchaser and Purchaser receives the benefits under such contracts,
purchase orders, leases and obligations (collectively with the other
liabilities assumed by Purchaser pursuant to Sections 1.1(c) and 1.1(d), the
"Assumed Liabilities"). Purchaser is not assuming, nor shall it be deemed to
have assumed any liability or obligation of Sellers or Huffy of any kind or
nature, except for the Assumed Liabilities.
SECTION 1.3 PURCHASE PRICE. Purchaser shall pay a purchase price of
Seventy-Three Million Dollars ($73,000,000) for the net assets, as defined in
and shown on Schedule 1.4 hereto (the "Net Assets"), subject to adjustment as
provided herein (as adjusted, the "Purchase Price"). The Purchase Price shall
be payable to Sellers in immediately available funds to an account designated
in writing by Sellers to Purchaser at least two (2) business days prior to the
Closing Date.
SECTION 1.4 MINIMUM NET ASSET ADJUSTMENT. (a) Within ninety (90) days
following the Closing Date, Purchaser shall prepare and deliver to Sellers a
consolidated balance sheet and Schedule of Net Assets Purchased of the business
as of the close of business on the day before the Closing Date (the "Closing
Date Schedule of Net Assets Purchased") which shall be prepared in accordance
with generally accepted accounting principles and the instructions set forth on
Schedule
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1.4 (the "Instructions") applied on a basis consistent with those used in the
preparation of the Schedule of Net Assets Purchased as set forth on Schedule
1.4.
(b) Within thirty (30) days after Sellers' receipt of the
Closing Date Schedule of Net Assets Purchased, Sellers shall deliver to
Purchaser a written report ("Sellers' Report") setting forth, in reasonable
detail and with reasonable specificity as to each disputed item, any disputed
amounts comprising the Net Assets as reflected on the Closing Date Schedule of
Net Assets Purchased and Sellers' proposed alternative thereto.
(c) Purchaser and Sellers shall permit the other and the
other's accounting representatives, during normal business hours, at the
other's expense, to have full and complete access to, and to examine, all work
papers of or relating to the business for the periods prior to the Closing
which are in its possession, and which work papers and schedules were necessary
to prepare and/or review the Closing Date Schedule of Net Assets Purchased.
(d) If Sellers disagree with the Net Assets shown on the
Closing Date Schedule of Net Assets Purchased and have timely delivered
Sellers' Report, and such disagreement cannot be resolved by Purchaser and
Sellers within sixty (60) days of Purchaser's receipt of Sellers' Report,
either party, by written notice to the other, may elect to have any such
disagreement tendered to and resolved by a firm of independent certified public
accountants of recognized national standing ("Accountant") to make such
determination which determination, shall be final and binding on the parties
hereto for the purpose of this Agreement, and Purchaser and Sellers shall each
pay one-half the entire cost of such Accountant. If Purchaser and Sellers are
unable to agree on the Accountant within the sixty (60) day period, then the
Accountant shall be Price Waterhouse, Atlanta office, (an accounting firm which
both Purchaser and Seller represent to be independent). The Accountant shall be
instructed to use every reasonable effort to perform its function within thirty
(30) days of submission of the matter to it and, in any case, as soon as
practicable after such submission to it. The Accountant shall be limited to
deciding each such disagreement in an amount which shall be equal to or in
between the amount proposed by Sellers and Purchaser, and no more and no less.
(e) Once the parties agree upon or otherwise arrive at the
amount of the business' Net Assets as shown on the Closing Date Schedule of Net
Assets Purchased ("Closing Net Assets"), the line item referred to as "Net
Assets Per Book" as computed on Schedule 1.4 shall be compared to $52 million.
To the extent the amount set forth as "Net Assets Per Book" is less than $52
million, such amount shall be repaid to Purchaser by Sellers within ten (10)
days of such determination as a reduction of the Purchase Price.
SECTION 1.5 ALLOCATION OF PURCHASE PRICE. (a) Purchaser and Sellers
agree that Purchaser and Sellers shall allocate the sum of the Purchase Price
and the Assumed Liabilities, including for purposes of this Section 1.5 any
adjustments to the Purchase Price or Assumed Liabilities, among the Assets and
the covenant not to compete (set forth in Section 11.1 of this Agreement) as of
the Closing Date on Internal Revenue Service ("IRS") Form 8594, in accordance
with Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder. Except as otherwise
provided in Section 1.5(d) below, the allocation described in the preceding
sentence (the "Purchase Price Allocation") shall be based upon an appraisal
(the "Appraisal") of the fair market value of the Assets and such covenant not
to
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compete as of the Closing Date. Purchaser shall select and engage, at its own
expense, the appraiser or appraisal firm (the "Appraiser") to perform the
Appraisal.
(b) Purchaser shall use its reasonable best efforts to
provide Sellers with a copy of the Appraisal at least five (5) business days
prior to the Closing Date; provided, however, that Purchaser's provision of the
Appraisal to the Sellers shall not be a condition to the Closing and
Purchaser's failure to so provide the Appraisal to the Sellers as provided
herein shall not delay or otherwise affect the Closing.
(c) Upon receipt of the Appraisal, Sellers shall have thirty
(30) days to review the Appraisal and submit, in writing, any comments,
changes, revisions or other amendments on or to the Appraisal to the Purchaser
for its consideration; provided, however, that Purchaser (and/or the Appraiser)
shall in its sole discretion determine whether to accept such comments or to
make any proposed changes, revisions or amendments to the Appraisal. If
Purchaser determines in its sole discretion not to make any of the changes,
revisions or amendments to the Appraisal proposed by the Sellers, Purchaser
must notify Sellers of such determination in writing within thirty (30) days
from the date it received such written comments, changes, revisions or
amendments from the Sellers. Upon receipt of such notice from Purchaser, the
Sellers must notify Purchaser in writing whether they shall accept or reject
the Appraisal.
(d) If the Sellers accept the Appraisal, the Appraisal shall
be binding on Purchaser and the Sellers to the extent described herein. If,
however, the Sellers reject the Appraisal (in accordance with the procedures
outlined in Section 1.5(c) above), Sellers must select and engage, at their own
expense, a different appraiser or appraisal firm ("Sellers' Appraiser") to
perform an appraisal of the fair market value of the Assets and the covenant
not to compete as of the Closing Date (the "Sellers' Appraisal") and the
parties shall submit the Appraisal and the Sellers' Appraisal to an
independent, nationally recognized appraisal firm (the "Arbitrator") for
binding arbitration. The Arbitrator shall determine which of the competing
appraisals submitted to it by the parties more accurately reflects the fair
market value of the Assets and the covenant not to compete as of the Closing
Date (such selected appraisal shall be referred to hereinafter as the "Final
Appraisal"). The Arbitrator's decision shall be final and binding on the
parties and the Purchase Price Allocation shall be based upon the Final
Appraisal.
(e) Purchaser and Sellers shall timely file with the
appropriate Tax authorities copies of the IRS Form 8594 and shall use the
Purchase Price Allocation set forth in the Appraisal or the Final Appraisal, as
the case may be, to prepare such IRS Form 8594, and in the preparation of all
Tax Returns (including any attachments thereto) and for all other Tax purposes.
In the event any party hereto receives notice of an audit in respect of the
Purchase Price Allocation specified herein, such party shall notify the other
party in writing as to the date and subject of such audit as promptly as
reasonably practicable.
(f) If any Tax Return filed by Purchaser or Sellers relating
to the transactions contemplated hereby is challenged by the Tax authority with
which such Tax Return was filed on the basis of the Purchase Price Allocation,
as finally adjusted, the filing party shall assert in good faith the validity
and correctness of the Purchase Price Allocation and such party shall not agree
to any adjustment to the Purchase Price Allocation without obtaining the prior
written consent of the other
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party (which consent shall not be unreasonably withheld). If any such Tax
Return is challenged as herein described, the party filing such Tax Return
shall keep the other party informed of its decisions and the current status and
progress of all administrative and judicial proceedings, if any, that are
undertaken at the election of such party with respect thereto.
(g) Any adjustment to the Purchase Price or the Assumed
Liabilities pursuant to this Agreement shall result in an appropriate
adjustment to the Purchase Price Allocation and the allocation set forth in the
IRS Form 8594.
(h) If either party (including permitted successors and
assigns thereof) to this Agreement defaults under this Section 1.5, it shall
pay as damages to the other party, so long as such other party is not in
default under this Section 1.5, an amount which, after reduction for all Taxes
which would be incurred (calculated at the highest marginal rate applicable in
the relevant jurisdiction) as a result of receiving said amount, is equal to
the result (but not less than zero) of subtracting the amount in (ii) below
from the amount in (i) below:
(i) the total amount of income, franchise, transfer,
sales or gains taxes (calculated at the highest marginal rate
applicable in the relevant jurisdictions and including
interest and penalties) payable to all jurisdictions imposing
such taxes upon the nondefaulting party with respect to the
transactions contemplated hereby; and
(ii) the total amount of such taxes which would have
been incurred (calculated at the highest marginal rate
applicable in the relevant jurisdictions and including
interest and penalties) and payable to all jurisdictions
imposing such taxes upon the nondefaulting party with respect
to the transactions contemplated hereby, if such taxing
jurisdictions had accepted the Purchase Price Allocation.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF SELLERS AND HUFFY
Sellers and Huffy, jointly and severally, hereby make the following
representations, warranties and agreements to Purchaser, its successors and
assigns:
SECTION 2.1 ORGANIZATION. Each Seller and Huffy is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its respective incorporation, duly authorized to carry on the business
presently conducted by it. Each Seller is qualified to do business in the
jurisdictions listed on Schedule 2.1 and is not required to be qualified to do
business in any other jurisdiction where the failure to be so qualified would
have a material adverse effect on the condition (financial or otherwise),
results of operations, assets, properties, business or prospects of Sellers
considered together or have a material adverse effect on either Seller's
ability to perform its obligations hereunder or under any other agreement
between the parties contemplated hereby (each of such effects is herein called
a "Material Adverse Effect").
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SECTION 2.2 AUTHORITY AND ENFORCEABILITY. Sellers and Huffy have the
full right, power, legal capacity and authority to sell and transfer the
Assets, free and clear of any statutory, contractual or other limitation, and
to enter into and perform their obligations under this Agreement. The
execution, delivery and performance by Sellers and Huffy of this Agreement and
any other agreements contemplated hereby and the consummation by them of the
transactions contemplated hereby and thereby have been duly authorized by Huffy
as the sole stockholder of Sellers and by the Board of Directors of each
Seller. No other corporate or stockholder action is necessary for the
authorization, execution, delivery and performance by Sellers or Huffy of this
Agreement and any other agreements between the parties contemplated hereby and
the consummation by Sellers and Huffy of the transactions contemplated hereby
or thereby. This Agreement has been duly executed and delivered by each Seller
and Huffy and constitutes a valid and legally binding obligation of each Seller
and Huffy, enforceable against each of them in accordance with the terms
hereof.
SECTION 2.3 FINANCIAL STATEMENTS. The unaudited consolidated balance
sheets of Sellers as of December 31, 1995 and December 31, 1996, unaudited
consolidated statements of income for the years ended December 31, 1995 and
December 31, 1996, the unaudited balance sheet of Sellers as of February 1,
1997 and the unaudited statement of income for the one-month period ended
February 1, 1997, copies of which have been previously delivered or are
attached hereto as Schedule 2.3 (the "Financial Statements"), are true and
correct and have been prepared in accordance with generally accepted accounting
principles consistently applied (except as set forth in the Instructions), the
balance sheets contained in the Financial Statements fairly present, in all
material respects, the financial position of the business as of their
respective dates and set forth in full and reflect all liabilities of such
business as of such dates and the income statements fairly present, in all
material respects, the results of the operations of such business for the
periods indicated and covered thereby. The inventory valuations are based upon
pricing the inventories at the lower of cost or market in accordance with the
established practice of Sellers for a number of years, with all obsolete or
unusable or not readily saleable inventories having been either eliminated,
properly written down or reserved against; Sellers do not know or have any
reason to know of any liability or any basis for the assertion against any
Seller of any liability required to be reflected or reserved against in the
balance sheets according to generally accepted accounting principles,
consistently applied, and not so reflected or reserved. Since February 1, 1997,
no liabilities or obligations have been incurred by either Seller except for
liabilities and obligations (absolute, accrued, contingent or otherwise)
incurred in the ordinary course of business and consistent with past practice.
SECTION 2.4 PENDING CLAIMS. Except as set forth in Schedule 2.4:
(i) there is no litigation, proceeding or governmental
investigation pending or, to Sellers' knowledge,
threatened against either Seller or relating to the
Assets or the business of Sellers and there are no
unasserted claims possible of assertion involving
Sellers' business or the Assets of which Sellers
have notice or knowledge;
(ii) there are no audits by a governmental authority,
claims for unpaid taxes of any kind, or other
similar actions, proceedings or disputes pending or,
to Sellers' knowledge, threatened against or
affecting Sellers' business;
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(iii) there are no unpaid judgments of any kind against
either Seller or Huffy relating to its business or
the Assets;
(iv) neither Sellers nor Huffy is charged with or, to its
knowledge threatened, with a charge or violation
nor, to its knowledge, is it under investigation
with respect to any alleged violation of any
provision of any federal, state or local law or
administrative ruling or regulation relating to any
aspect of its business or the Assets.
SECTION 2.5 LEGAL COMPLIANCE. Except as set forth in Schedule 2.5,
Sellers have conducted since January 1, 1994 and are presently conducting their
business in material compliance with all applicable U.S. and foreign laws,
statutes, ordinances, rules and regulations. Neither Sellers nor Huffy is in
violation of any term of any judgment, writ, decree, injunction or order
entered by any court or governmental authority (domestic or foreign) and
outstanding against either Seller or Huffy with respect to any of the Assets or
the business of Sellers.
SECTION 2.6 TITLE TO ASSETS. Except as set forth in Schedule 2.6: (i)
Sellers are the sole and exclusive owners of, and have good and marketable
title to, all of the Assets, wherever located, free and clear of all liens,
mortgages, pledges, claims, encumbrances or other charges or any other
restriction of any kind or nature (collectively, "Liens"); and (ii) no other
person, firm or corporation has or will have on the Closing Date any interest
whatsoever in any of the Assets.
SECTION 2.7 CONDITION OF ASSETS. Except as set forth on Schedule 2.7,
the Assets, including all machinery and equipment, are in good state of repair,
in sound operating condition, ordinary wear and tear excepted, and have been
given regular maintenance in the ordinary course of business.
SECTION 2.8 LEASES. Except as may be set forth in Schedule 2.8, no
Seller is a lessee of any personal property under any lease agreement covering
property not owned by each Seller, and in connection with all leases set forth
in such Schedules, no Shareholder nor any officer, director or key employee of
any Seller, nor any spouse, child or relative of any of these persons owns or
has any interest, directly or indirectly, in any of the personal property
leased to any Seller. All leases listed in Schedule 2.8 are valid and in full
force, and there does not exist any default or event that with notice or lapse
of time, or both, would constitute a default or event of acceleration under any
of these leases.
SECTION 2.9 INVENTORY. The Inventory being transferred on the Closing
Date consists of items of a quality and quantity useable or salable in the
ordinary course of business of Sellers except as reserved for in the Financial
Statements. The Inventory is not subject to any material write-down or
write-off for which appropriate reserves have not been included in the
Financial Statements. Sellers shall conduct a physical count of the Inventory
as of the Closing Date, at Sellers' expense. Purchaser shall be entitled to
have its representatives observe such physical count.
SECTION 2.10 OTHER PROPERTY. Schedule 2.10 to this Agreement is a
complete and accurate schedule describing all trucks, automobiles, machinery,
equipment, furniture, supplies, tools,
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dies, jigs, molds, patterns, drawings, and all other tangible personal property
owned by, in the possession of, or used by Sellers in connection with their
business, except items with net book value of less than Five Thousand Dollars
($5,000.00). Except as set forth on Schedule 2.10, all property described on
Schedule 2.10 is situated at one of the two locations set forth on Schedule
1.1(a)(v). Except as stated in Schedules 2.8 or 2.10, no personal property used
by Sellers in connection with their business is held under any lease, security
agreement, conditional sales contract, or other title retention or security
arrangement, or is located other than in possession of Sellers.
SECTION 2.11 CUSTOMERS AND SUPPLIERS. Schedule 2.11 to this Agreement
is a correct and current list, in all material respects, of all material
customers and suppliers of the Sellers' business as of a recent date. Neither
Sellers nor Huffy have received any communication from any material customer or
supplier of any intention to terminate or materially reduce purchases from, or
supplies to, either Seller or the business.
SECTION 2.12 NO BREACH OR VIOLATION. Except as set forth on Schedule
2.12, the execution, delivery and performance of this Agreement and any other
agreements contemplated hereby between the parties hereto by Sellers or Huffy
and the consummation of the transactions contemplated by this Agreement or any
other agreements contemplated hereby will not (i) result in or constitute a
breach or an event that, with notice or lapse of time or both, would be a
default, breach or other violation of the articles of incorporation or by-laws
of Huffy or any Seller; (ii) violate (with or without the giving of notice or
the lapse of time or both), or require any consent, approval, filing or notice
under, any provision of any law, rule or regulation, court or administrative
order, writ, judgment or decree applicable to Sellers or any of the Assets,
except for such violations the occurrence of which, and such consents,
approvals, filings or notices the failure of which to obtain or make, would
not, either individually or in the aggregate, have a Material Adverse Effect,
and (iii) with or without the giving of notice or the lapse of time or both (x)
violate or conflict with, or result in the breach, suspension or termination of
any provision of, or constitute a default under, or result in the acceleration
of the performance of the obligations of Sellers under, or (y) result in the
creation of any Liens upon all or any portion of the properties, assets
(including the Assets) or business of Sellers pursuant to, the charter or
by-laws of Sellers, or any indenture, mortgage, deed of trust, lease,
agreement, contract or instrument to which either Seller is a party or by which
either Seller or any of its properties, assets (including the Assets) or
business is bound.
SECTION 2.13 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except
as set forth on Schedule 2.13, neither Sellers nor any officer, director or key
employee of any Seller, nor any spouse, child or any Affiliate of any of them,
has any direct or indirect ownership interest in any competitor, supplier or
customer of their business or in any person from whom or to whom any Seller
leases any real or personal property, or in any other person with whom any
Seller is doing business, except for interests of less than two percent held in
publicly traded companies.
SECTION 2.14 CORPORATE DOCUMENTS. Sellers and Huffy have furnished to
Purchaser for its examination true and correct copies of the following:
(i) the articles of incorporation and by-laws of
Sellers;
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(ii) the minute books of Gerry Baby Products Company and
Gerry Wood Products Company for the period
commencing January 1, 1992, containing all records
required to be set forth of all proceedings,
consents, actions and meetings of shareholders and
the board of directors (including committee
meetings) of Sellers; and
(iii) all permits, orders and consents issued with respect
to Sellers' business, and all applications for such
permits, order and consents.
SECTION 2.15 [RESERVED]
SECTION 2.16 ZONING. Sellers' business as conducted on the Closing
Date and all current uses of the Owned Real Property and Leased Real Property
do not conflict with applicable federal, state or local laws, ordinances,
regulations, orders or zoning laws so as to interfere with or prevent, in any
material adverse manner, its continued use for the purposes for which it is
being used.
SECTION 2.17 OSHA. Other than as described on Schedule 2.17, each
Seller and its operations and properties as such relate to their business are
presently in compliance with all applicable Occupational Safety and Health
Administration ("OSHA") rules, regulations and laws and Sellers have not
received any notice of any potential occupational safety and health problem in
connection with the operations or properties of Sellers where such problem
would have a Material Adverse Effect.
SECTION 2.18 INTELLECTUAL PROPERTY. All U.S. and foreign intellectual
property owned by or licensed to Sellers, including without limitation, all
license agreements relating to patents and/or inventions, and all patents and
patent applications, all copyrights, trademarks (whether registered or
unregistered) and trade names owned by or licensed to Sellers which are of any
value or importance to their business or which they are authorized to use in
the production or marketing of any products now produced or proposed to be
produced by Sellers (collectively, the "Intellectual Property") are listed in
Schedule 2.18, and to the extent indicated therein have been duly registered
in, filed in or issued by the United States and foreign Patent Offices or other
appropriate governmental office. Except as set forth in Schedule 2.18, except
for any residual rights retained by the owners of any third party-owned
Intellectual Property licensed to Sellers (all of which are described on
Schedule 2.18), Sellers are the sole persons entitled to use the Intellectual
Property, free and clear of any claims or demands of any other person. Except
as noted above, Sellers do not use any of the Intellectual Property by consent
of any other rightful owner thereof and there are no attachments, liens or
encumbrances thereon. Except as set forth on Schedule 2.18, (i) Sellers do not
pay any licensing fee, royalty or other payment to any other person or entity
with respect to any of the Intellectual Property or the use thereof, and (ii)
Sellers' right to use and transfer any and all of the Intellectual Property is
perpetual and unrestricted. Except as set forth on Schedule 2.18, there are no
claims or demands of any other person, firm or corporation pertaining to any of
the Intellectual Property and no actions or proceedings which have been
instituted or are pending or, to the best of Sellers' knowledge, threatened,
which challenge the validity of, or the rights of Sellers with respect thereto,
and, to the best of Sellers' knowledge, no Intellectual Property infringes or
is being infringed by others or is subject to any outstanding order, decree,
judgment or stipulation.
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SECTION 2.19 ENVIRONMENTAL MATTERS. (a) Except as disclosed on
Schedule 2.19:
(i) the property and assets of Sellers' business and any of
Sellers' operations conducted thereon or elsewhere do
not violate, and during the period of any applicable
statute of limitations have not violated, in a material
manner any applicable Environmental Law (as hereinafter
defined), and Sellers reasonably believe that
compliance with any Environmental Law that is or is
expected to become applicable to the property or the
Assets, or to any of Sellers' operations conducted
thereon or elsewhere on or prior to the Closing, will
be timely attained and maintained, without material
expense, and Sellers are not subject to any existing,
pending or, to Sellers' knowledge, threatened
investigation, inquiry or proceeding by any person or
to any order, decree, judgment, agreement or similar
obligation under any Environmental Law;
(ii) all notices, permits, licenses or similar
authorizations, if any, currently required to be
obtained or filed under any Environmental Law in
connection with the use of the real properties and
assets including, without limitation, underground
storage tanks, and the operations of Sellers' business
including, without limitation, past or present
treatment, storage, disposal or release of any or all
petroleum products, and any or all Hazardous Substances
(as such term is hereinafter defined) into the
environment (hereinafter the "Environmental Permits"),
have been obtained or filed and to Sellers' knowledge,
the Environmental Permits will be timely renewed and
complied with, without material expense, and that any
additional Environmental Permits that may be required
will be timely obtained and complied with, without
material expense;
(iii) all Hazardous Substances generated at or in connection
with the real properties and operations of Sellers'
business have been transported and otherwise handled,
treated, and disposed of in compliance with all
applicable Environmental Laws;
(iv) no Hazardous Substances have been disposed of or
otherwise released, handled or stored by Sellers on or
to (aa) the real properties on which the operations of
Sellers' business are conducted or (bb) elsewhere in
violation of applicable Environmental Laws.
(b) "Environmental Laws" shall mean any and all applicable laws,
rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees,
or other legally enforceable requirement (including, without limitation, common
law) of any foreign government, the United States, or any state, local,
municipal or other governmental authority, regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment or
of human health, or employee health and safety.
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(c) "Hazardous Substances" shall mean any petroleum products,
asbestos, radioactive material, or hazardous, acutely hazardous, or toxic
substance or waste defined and regulated as such under Environmental Laws,
including without limitation the Federal Comprehensive Environmental Response,
Compensation and Liability Act and the Federal Resource Conservation and
Recovery Act.
(d) Except as disclosed on Schedule 2.19, no notice of any violation
of any Environmental Laws has been received by any Seller concerning the real
properties of or used by Sellers and to Sellers' knowledge there are no
existing or pending requirements of any governmental authority relating to
environmental matters requiring any remedial action or other work, repairs,
construction or capital expenditures with respect to real properties. No Seller
has been named as a "potentially responsible party" in connection with any
litigation, investigation or similar matter, and no Seller knows of any matter
in which any Seller may be so named.
(e) Except as set forth in Schedule 2.19, there is not located in, on
or under the real properties owned or used by Sellers' business (1) electrical
transformers or other equipment containing PCBs, (2) underground storage tanks,
whether or not regulated under the Resources Conservation Recovery Act, (3) to
Sellers' knowledge, urea-formaldehyde foam insulation, or (4) asbestos in
friable form.
SECTION 2.20 LEASES AND CONTRACTS.
(a) Schedule 2.20 hereto sets forth a complete and accurate list of
all contracts, agreements, purchase orders, leases, subleases, options and
commitments, oral or written, and all assignments, amendments, schedules,
exhibits and appendices thereof, involving net book value amounts in the
aggregate in excess of Five Thousand Dollars ($5,000.00) or which are otherwise
material to the business, affecting or relating to any asset, the business, or
any interest therein, to which any Seller is a party or by which any Seller or
the Assets is bound or affected, including without limitation, service
contracts, management agreements, equipment leases, leases of space and ground
leases pertaining to any real estate (collectively the "Leases and Contracts"
and individually a "Lease and Contract"). Except for Assumed Liabilities set
forth on Schedule 1.2(c), all Leases and Contracts and all other obligations
relating to the Assets and the business of Sellers shall be retained and paid
or performed by Seller.
(b) Other than as described on Schedule 2.20, none of the Leases and
Contracts has been modified, amended, assigned or transferred and each of the
Leases and Contracts which are included in Assumed Liabilities is in full force
and effect and is valid, binding and enforceable in accordance with its
respective terms on each party thereto.
(c) Other than as described on Schedule 2.20, no event or condition
has happened or presently exists which constitutes a default or breach or,
after notice or lapse of time or both, would constitute a default or breach by
any party under any of the Leases and Contracts which are part of the Assumed
Liabilities, and Sellers shall do no act nor omit to do any act which would
cause such a default or breach. There are no counterclaims or offsets under any
of the Leases and Contracts which are part of the Assumed Liabilities.
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(d) There does not exist, and between the date hereof and the Closing
Date Sellers will not grant or suffer, any security interest, lien,
encumbrance, mortgage or claim of others created or suffered to exist on any
interest created under any of the Leases or Contracts which are part of the
Assumed Liabilities.
(e) None of the Leases or Contracts shall be amended in any material
respect between the date hereof and the Closing Date without the prior written
consent of Purchaser.
(f) Except as identified on Schedule 2.20 hereto, none of the Leases
and Contracts is: (1) a capitalized lease within the meaning of generally
accepted accounting principles; or (2) a lease with a remaining term of one (1)
year or more from Closing and which cannot be canceled within thirty (30) days
at the option of Seller without penalty.
(g) Other than as described on Schedule 2.20, the assignment to
Purchaser of the Leases and Contracts constituting the Assumed Liabilities will
not cause a default under, alter or terminate any of the Leases and Contracts,
and such assignment will confer all Sellers' rights thereunder to Purchaser
except for those consents described on Schedule 2.20 not received by the
Closing Date which were waived by Purchaser in writing. Other than as set forth
on Schedule 2.20 hereto, the assignment to Purchaser of the Leases and
Contracts constituting the Assumed Liabilities does not require any consents.
(h) Any leases of space or real property to third parties are set
forth or described (if they are oral) on Schedule 2.20. Each of such third
party leases is in full force and effect and in each case free and clear of all
Liens and free from defaults and events which with the passage of time or
notice or both would constitute a default (by landlord or tenant thereunder).
Neither Seller has transferred, assigned, hypothecated, pledged or encumbered
any of its rights under any of such leases. Except as set forth on Schedule
2.20, (i) none of the third party leases grant any options or other rights to
the tenant thereunder to purchase any real property interest of Sellers, and
(ii) no person has any option, right of possession or interest of any kind in
or to any real property interest of Sellers. Sellers have no outstanding
obligations under any of such leases including without limitation any
obligations to make any repairs or improvements or renovations (whether such
repairs or improvements or renovations are to be made prior to or after the
Closing Date). There are no outstanding negotiations with any such lessees
regarding any matter relating to the leased space.
SECTION 2.21 EMPLOYEES. Except as provided on Schedule 2.21 Sellers
have no employment agreements with their employees and all such employees are
employed on an "at will" basis. Sellers intend to terminate all of their
employees at closing. Except for the liabilities assumed by Purchaser hereunder
pursuant to Section 1.1(d) above and the covenant contained in Section 4.17
herein, Sellers and Huffy shall be jointly and severally responsible for, and
shall jointly and severally indemnify and hold harmless Purchaser from and
against any and all claims of Sellers' employees, and Sellers and Huffy shall
retain sole responsibility for and fully and timely pay all salaries, wages and
benefits (including long-term disability and payroll taxes) that have accrued
to their employees through the Closing Date (whether or not such amounts are
payable prior to the Closing Date).
SECTION 2.22 LABOR MATTERS. Other than as described on Schedule 2.22
hereto, Sellers are not parties to any labor contract, collective bargaining
agreement, contract, letter of
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understanding (or to Sellers' knowledge any other agreement, formal or
informal) with any labor union or organization which obligates Sellers to
compensate their employees at prevailing rates or union scale, nor are any of
their employees represented by any labor union or organization. Other than as
set forth on Schedule 2.22, there is no pending, or to Sellers' knowledge,
threatened labor dispute, work stoppage, unfair labor practice complaint,
strike, administrative, arbitration or court proceeding or order between
Sellers and any present or former employees of Sellers or affecting the Sellers
or the business. There have been no labor union organizing activities at
Sellers' facilities within the last three (3) years except as described on
Schedule 2.22. Sellers have provided to the Purchasers true, correct and
complete copies of the executed collective bargaining agreements, including
true, correct and complete copies of any and all written modifications and
interpretations thereof and descriptions of any and all oral modifications and
interpretations thereof. No representations have been made to Huffy, Sellers or
their employees or agents to employees of Sellers with respect to the
Purchaser's intentions to employ, or not to employ, Sellers' employees.
SECTION 2.23 WARN ACT. As of the date hereof Sellers have not taken
any action so as to require any compliance under the Worker Adjustment and
Retraining Notification Act ("WARN"). Sellers shall comply with their
obligations under the Act and, if applicable, make the appropriate
notifications thereunder sixty (60) or more days prior to the Closing Date.
Huffy and Sellers shall be solely liable and responsible for any debt,
obligation, contribution or other liability arising from any failure by Sellers
to comply fully with their WARN obligations.
SECTION 2.24 EMPLOYEE BENEFIT PLANS. (a) Schedule 2.24 hereto contains
a correct and complete list of each "employee benefit plan" (within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (including multiemployer plans within the meaning of Section
3(37) of ERISA)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining, bonus, incentive,
deferred compensation and all other employee benefit plans, agreements,
programs, policies or other arrangements relating to the employees of Sellers,
whether or not subject to ERISA (including any funding mechanism therefor now
in effect or required in the future as a result of the transactions
contemplated in this Agreement or otherwise), whether formal or informal, oral
or written, under which any employee or former employee of the Sellers has any
present or future right to benefits or under which the Sellers have any present
or future liability. All such plans, agreements, programs, policies and
arrangements are referred to collectively as "Sellers' Plans".
(b) The Sellers have delivered, or made available, to Purchaser a
current, accurate and complete copy (or, to the extent no such copy exists, an
accurate description) of each Sellers' Plan and, to the extent applicable and
in existence, with respect to each Sellers' Plan, (i) any related trust
agreement, annuity contract or other funding instrument; (ii) the most recent
determination letter; (iii) any summary plan description and other written
communications (or a description of any oral communications) by a Seller to its
employees concerning the extent of the benefits provided under a Sellers' Plan;
and (iv) for the three most recent years (A) the Form 5500 and attached
schedules; (B) audited financial statements; and (C) attorney's response to an
auditor's request for information.
(c) Each Sellers' Plan has been administered and is substantially in
compliance with the terms of such Plan and all applicable laws and no event or
condition exists is likely to arise
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by virtue of the transaction contemplated by this Agreement, with respect to
any Sellers' employee or any Sellers' Plans which could reasonably be likely to
result in any liability to Purchaser.
(d) Except for the liabilities assumed by Purchaser hereunder pursuant
to Section 1.1(d) above, Purchaser shall not be liable and not be responsible
for any debt, obligation, contribution, responsibility, withdrawal liability or
other liability of Sellers or Huffy or both under any Employee Benefit Plans.
SECTION 2.25 BROKERS' FEE. Other than Paine Webber Incorporated, whose
fee will be paid in full by Sellers, Sellers have not employed and are not
liable for the payment of any fee to any finder, broker, consultant or similar
person in connection with the transactions contemplated by this Agreement.
SECTION 2.26 RECEIVABLES. The accounts receivable and other
receivables being sold pursuant to this Agreement (collectively, "Receivables")
of Sellers arose from bona fide transactions in the ordinary course of
business. Other than ordinary course adjustments not material in the aggregate,
no counterclaims or offsetting claims with respect to presently outstanding
Receivables are pending or, to the knowledge of Sellers, threatened.
SECTION 2.27 INSURANCE. Schedule 2.27 hereto sets forth a complete and
accurate list of Sellers' insurance maintained on their respective properties
and assets (including the Assets) and with respect to their respective
employees and representatives and business and which, in the reasonable
judgment of Sellers, covers risks customarily insured by businesses similar to
the business of Sellers.
SECTION 2.28 GOVERNMENTAL LICENSES, PERMITS AND RELATED APPROVALS.
Except as set forth on Schedule 2.28 hereto, Sellers have all licenses,
permits, consent, approvals, authorizations, qualifications and orders of
governmental authorities required for the conduct of its business as presently
conducted.
SECTION 2.29 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since February 1,
1997 and except as otherwise disclosed herein or set forth in Schedule 2.29
hereto, there has not been (i) any material adverse change in the condition
(financial or otherwise), results of operations, Assets, properties, business
or prospects of Sellers taken as a whole, (ii) any material damage, destruction
or loss relating to the business or assets of Sellers, whether or not insured,
(iii) any liability created or incurred which Purchaser will assume hereunder
pursuant to this Agreement other than liabilities created or incurred in the
ordinary course of business and in amounts not unusual in respect of the
business of Sellers as customarily conducted, (iv) any material Lien created on
any Asset, (v) any material capital expenditures or commitment to make any such
expenditures with respect to the Assets or as to which Purchaser will become
obligated after the Closing pursuant to Section 1.2 of this Agreement, (vi) any
condemnation proceedings commenced with respect to any Asset or notice received
by Seller as to the proposed commencement of any such proceedings, (vii) any
rights of substantial value knowingly waived with respect to the Assets or the
business of Sellers or (viii) any sale or transfer of any Assets other than
dispositions in the ordinary course of business. Since February 1, 1997, other
than acts relating to the transactions contemplated by this Agreement, the
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business of Sellers has been conducted in all significant respects only in the
ordinary course, consistent with past practice.
SECTION 2.30 RECALLS. Schedule 2.30 hereto sets forth a complete and
accurate summary of each consumer corrective action, recall or safety advisory
on products designed or manufactured by Sellers since January 1, 1992,
describing in each case the nature of the problem giving rise to such action,
the number of products affected, and the aggregate costs incurred for each such
action. Except as set forth on Schedule 2.30, to Sellers' knowledge, Sellers'
products comply with all mandatory juvenile products standards and there is no
notice regarding such products required to be given to any governmental or
regulatory agencies regulating such products.
SECTION 2.31 PRODUCT LIABILITY CLAIMS. Schedule 2.31 hereto sets forth
a complete and accurate summary of each Product Liability Claim (as defined
below) in excess of $25,000 (including all legal fees) paid by Sellers or its
insurance carriers during the past five years, and each outstanding Product
Liability Claim in excess of $25,000 (including all legal fees). For purposes
of this Section 2.31, the term "Product Liability Claim" shall mean any claim
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product sold or leased by Sellers.
SECTION 2.32 TAX MATTERS. (a) All Tax Returns required to be filed by
Huffy or Sellers (or any of their predecessors) on or before the Closing Date
have been or shall be timely filed and all Taxes which are due or which may be
claimed to be due have been or shall be paid when due. There are no Liens upon
any of the Assets in respect of Taxes except for Liens for current Taxes that
are not yet due and payable. All Taxes required to be withheld by any Seller
have been withheld and paid over to the appropriate Tax authority. Huffy and
each Seller (or any predecessor of any of them) is not a party to and has not
received any written notice with respect to any proposed or pending action by
any governmental authority for assessment or collection of Taxes, nor is party
to any dispute or, to their knowledge, threatened dispute in which an adverse
determination of such action or dispute reasonably could be expected to result
in a foreclosure of the Assets and no such claim for assessment or collection
of Taxes has been made upon Huffy or any Seller.
(b) For purposes of this Agreement, (i) the term "Tax" or "Taxes"
shall mean all income, gross receipts, gains, sales, use, employment,
franchise, profits, excise, property, value added and other taxes, fees, stamp
taxes and duties, assessments or charges of any kind, together with any
interest and penalties, additions to tax or additional amounts imposed by any
Tax authority with respect thereto, (ii) the term "Tax Returns" shall mean any
and all returns, reports and information statements with respect to Taxes
required to be filed with the Internal Revenue Service or other Tax authority,
whether domestic or foreign, including, without limitation any and all
consolidated, combined and unitary tax returns and (iii) the term "Tax
authority" shall mean any authority having jurisdiction over Taxes.
SECTION 2.33 REAL PROPERTY. (a) Schedule 2.33 hereto sets forth a
legal description of all Owned Real Property. Except for the Owned Real
Property listed on said Schedule 2.33, Sellers do not own any real property or
interest therein that is used in, held for use in or otherwise pertains to the
business. Sellers have good and sufficient, valid, marketable and indefeasible
title to the Owned Real Property, free and clear of any Liens. No Owned Real
Property is in violation of any
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restrictive covenant, condition, restriction or limitation nor is any Owned
Real Property in violation of any statute, code, ordinance, order, regulation,
or requirement applicable to such Owned Real Property which would have a
material adverse effect on the use of the Owned Real Property as currently
utilized.
(b) Schedule 2.33 hereto is a correct and current list, by address,
owner and usage, a true and complete list of all real property agreements
(including any amendments thereto) pursuant to which Sellers lease, sublease or
otherwise occupy any real property (the "Real Property Leases") which list is
true and complete (including all amendments and supplements thereto) and copies
of which have been furnished to Purchaser. Pursuant to the Real Property
Leases, Sellers have validly existing and enforceable leasehold, subleasehold
or occupancy interests in the property leased thereunder, in each case free and
clear of all Liens and free from defaults and events which with the passage of
time or notice or both would constitute a default. The Real Property Lease is
in full force and effect and is a valid and binding obligation of each of the
parties in accordance with its terms. Except as set forth in Schedule 2.33, the
consummation of the transaction contemplated by this Agreement will not require
any consent or approval of any landlord or sublandlord under any such Real
Property Lease, result in any increase in rent or penalty to the party which is
a tenant or subtenant thereunder or result in the early termination of any Real
Property Lease. Sellers have not transferred, assigned, hypothecated, pledged
or encumbered any of their rights or interest under any Real Property Lease.
Sellers have not received any notice from any landlord or sublandlord or any
other party of the termination of any Real Property Lease.
(c) There are (i) no outstanding contracts for any improvements to the
Owned Real Property which have not been fully paid and (ii) no expenses of any
kind (including brokerage and leasing commissions) pertaining to the Owned Real
Property which have not been fully paid. Sellers have furnished Purchaser with
copies of all recorded deeds, legal descriptions, surveys and owner's title
policies for the Owned Real Property. Sellers have furnished Purchaser with all
reports, and environmental and engineering or other studies prepared for
Sellers since January 1, 1992 which primarily deal with the ownership,
operation, maintenance or management of the Owned Real Property.
(d) Schedule 2.33 sets forth a true and complete list of all current
agreements, including any amendments thereto (as amended, the "Development
Agreements"), pursuant to which (i) any third party has been given the right
(exclusive or otherwise) to develop any real property for Sellers or (ii)
Sellers have agreed to develop, construct or occupy in the future (whether by
lease or other occupancy agreement) any real property. Except as set forth on
Schedule 2.33, each of the Development Agreements is in full force and effect
and in each case free from defaults and events which with the passage of time
or notice or both would constitute a default thereunder.
(e) Sellers have all permits and certificates of occupancy necessary
to own or operate its Owned Real Property and Leased Real Property as such is
currently being operated and used, and no such permits will be required, as a
result of the consummation of the transaction contemplated by this Agreement,
to be issued, modified or supplemented after the Closing in order to permit
Sellers following the consummation of the transaction contemplated by this
Agreement to continue to own or operate its Owned Real Property and Leased Real
Property as such is currently being operated and used, other than any such
permits which are ministerial in nature.
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(f) There is no pending or, to Seller's knowledge, threatened
condemnation, expropriation, eminent domain or other governmental taking of all
or any part of any of the Owned Real Property or Leased Real Property and
Sellers have not received any oral or written notice of any of the same.
(g) None of the Owned Real Property or Leased Real Property is subject
to any contract or other restriction of any nature whatsoever (recorded or
unrecorded) preventing or limiting Sellers' right to convey or use it as
currently operated, as the case may be.
(h) All components of buildings, structures and other improvements
included within the Owned Real Property and the Leased Real Property,
including, but not limited to, the roofs and structural elements thereof and
the heating, ventilation, air conditioning, plumbing, electrical, mechanical,
sewer, waste water, storm water, paving and parking, and systems and facilities
included therein, are in good working order and repair and free of structural
defects.
(i) All Owned Real Property and Leased Real Property and the
improvements thereon are supplied with the utilities necessary for the
operation of such facilities as currently operated.
(j) Sellers have not received written notice of any special assessment
relating to any Owned or Leased Real Property or any portion thereof, and
Sellers have no knowledge of any pending or threatened special assessments.
SECTION 2.34 ENTIRE BUSINESS. On the Closing Date, Sellers will
transfer to Purchaser all of the Assets used by Sellers in and necessary for
the conduct by Purchaser of Sellers' business, except for the Assets excluded
from purchase hereunder pursuant to Section 1.1(b).
SECTION 2.35 FULL DISCLOSURE. No representation or warranty made in
this Agreement or any exhibit or schedule hereto and no statement or
certificate or memorandum furnished or to be furnished to Purchaser pursuant
hereto or in connection with the transactions covered hereby contains or will
contain any untrue statement of a material fact, or omit any material fact, the
omission of which would be misleading.
ARTICLE III
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to Sellers and Huffy, their
respective successors and assigns, that:
SECTION 3.1 ORGANIZATION. It is a corporation duly organized, existing
and in good standing under the laws of Delaware.
SECTION 3.2 AUTHORITY. It has taken all necessary corporate action on
its part as may be required under the laws of Delaware and under its
Certificate of Incorporation and By-laws to authorize the execution, delivery
and carrying out of this Agreement on its behalf.
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SECTION 3.3 ENFORCEABILITY. This Agreement constitutes a valid and
legally binding obligation of Purchaser enforceable in accordance with the
terms hereof.
SECTION 3.4 BROKERS' FEE. Purchaser has not employed and is not liable
for the payment of any fee to any finder, broker, government official,
consultant or similar person in connection with the transactions contemplated
by this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
SECTION 4.1 BULK SALES COMPLIANCE. The parties agree to waive
compliance with any applicable bulk sales statutes with respect to the sale of
the assets hereunder; provided, however, that notwithstanding anything to the
contrary contained in this Agreement, Sellers will indemnify and hold Purchaser
harmless from and against any and all liabilities, including liabilities for
any Taxes, imposed upon, or asserted against Purchaser as a result of Sellers'
noncompliance with any such bulk sales or bulk transfer laws.
SECTION 4.2 PRESERVATION OF BUSINESS AND ASSETS. From the date hereof
until the Closing, Huffy and Sellers jointly and severally agree to use their
best efforts and shall do or cause to be done all such acts and things as may
be necessary to preserve, protect and maintain intact the Assets, and the
business and operation of the Sellers' business as a going concern consistent
with prior practice and in the ordinary course of business, to preserve,
protect and maintain for Purchaser the goodwill of the business' customers,
suppliers, employees, tenants and others having business relations with
Sellers. Sellers shall continue to collect accounts receivable consistent with
their past practices. Sellers shall provide Purchaser promptly with interim
financial statements of Seller and any other management reports, as and when
they are available. In the event there is any damage to or loss of any of the
Assets (whether by fire, theft, vandalism or other cause or casualty) between
the date hereof and the Closing Date, the Purchase Price shall be reduced by
the amount necessary to repair the damage, which reduction shall be offset by
any amounts paid by Sellers' insurance company assigned to Purchaser.
SECTION 4.3 CONDUCT OF BUSINESS. Without limiting the generality of
Section 4.2, each of Sellers, jointly and severally, agree that, except as
required or contemplated by this Agreement or otherwise consented to in writing
by Purchaser, during the period commencing on the date hereof and ending on the
Closing Date, it will:
(a) (i) maintain its books, accounts and records
relating to Sellers' business in the usual, regular
and ordinary manner, on a basis consistent with past
practice, (ii) comply with all laws and contractual
obligations applicable to Sellers and the conduct of
the business and (iii) perform all of its material
obligations relating to the business;
(b) not (i) make any capital expenditures, (ii) dispose
of any of the fixed Assets owned by it, (iii) modify
or change in any material respect or enter into or
terminate any material contract
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relating to the business of Sellers; except in each
case for such actions taken in the ordinary course
of business and consistent with past practice;
provided that the aggregate of such capital
expenditures shall not exceed $1 million per month,
(iv) acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial
portion of the stock or assets of, or by any other
manner, any business or any corporation,
partnership, joint venture, association or other
business organization or division thereof, or (v)
upgrade its computer system without Purchaser's
written consent;
(c) not make any change in its accounting policies from
those applied in the preparation of the December 31,
1996 audited financial statements;
(d) not (i) permit or allow any of the Assets owned by
it to become subject to any Liens or other security
interest, (ii) waive any claims or rights relating
to the business of Sellers, (iii) grant any increase
in the compensation of any of Sellers' employees
(including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or
commitment), except for reasonable increases in the
ordinary course of business and consistent with past
practice, or as a result of contractual arrangements
or sales compensation plans existing on the date
hereof or (iv) enter into any agreements giving rise
to obligations on the part of Sellers with respect
to the business in excess of $25,000 individually or
$1,000,000 in the aggregate or otherwise not
terminable by the parties upon 30 days' notice,
except commitments to purchase raw materials and
other trade obligations in the ordinary course of
business and consistent with past practice;
(e) maintain such insurance as is currently in effect;
(f) give Purchaser a copy of any notice received during
the period from the date hereof to the Closing Date
from any governmental or regulatory authority or any
other person alleging any violation of any rule,
regulation, law, order or ruling;
(g) not enter into any arrangement or transaction
between, or with Huffy or any affiliate, officer,
director or employee of Huffy or either Seller;
(h) not amend its charter or bylaws;
(i) not declare, set aside or pay any dividends on, or
make any other distributions in respect of its
capital stock; and
(j) not enter into any contract or agreement that
violates any of the foregoing.
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SECTION 4.4 ACCESS TO BOOKS AND RECORDS. (a) From the date hereof
until the Closing, Sellers shall give to Purchaser and to Purchaser's counsel,
accountants, and other representatives, full access during normal business
hours to all of Sellers' offices, properties, books, contracts, commitments,
records and affairs relating to the Assets and to their business so that
Purchaser may inspect and audit them (including, without limitation, a Phase I,
Phase II, or such other environmental assessment as may be reasonably
requested) and shall furnish to Purchaser a copy of all documents and
information concerning the properties and affairs of the Assets as Purchaser
may reasonably request. If any such books, records and materials are in the
custody of third parties, Sellers shall direct such third parties to promptly
provide them to Purchaser. Copies of documents furnished to Purchaser by
Sellers will be returned to Sellers upon request if the transaction is not
consummated.
(b) Following the Closing Date, Purchaser shall permit Huffy's and
Sellers' representatives (including, without limitation, their counsel and
auditors), during normal business hours, to have reasonable access to, and
examine and make copies of all books and records of the Sellers' prior business
which are transferred to Purchaser hereunder and which relate to transactions
or events occurring prior to the Closing Date. For a period of seven (7) years
after the Closing, Purchaser agrees that, prior to the destruction or
disposition of any such books or records, Purchaser shall provide not less than
forty-five (45) days nor more than ninety (90) days prior written notice to
Sellers of such proposed destruction or disposal. If Sellers desire to obtain
any of such documents, they may do so by notifying Purchaser in writing at any
time prior to the date scheduled for such destruction or disposal. In such
event, Purchaser shall not destroy such documents and the parties shall then
promptly arrange for the delivery of such documents to Sellers, their
successors or assigns. All out-of-pocket costs associated with the delivery of
the requested documents shall be paid by Sellers.
(c) Following the Closing Date, Sellers and Huffy shall permit
Purchaser and its representatives (including, without limitation, its counsel
and auditors), during normal business hours, to have reasonable access to, and
examine and make copies of all books and records of Sellers and their
affiliates relating to Sellers' business or the Assets, including tax records,
which are retained by Sellers and Huffy and which relate to transactions or
events contemplated by this Agreement occurring prior to the Closing Date. For
a period of seven (7) years after the Closing, Sellers and Huffy agree that,
prior to the destruction or disposition of any such books or records, Sellers
and Huffy shall provide not less than forty-five (45) days nor more than ninety
(90) days prior written notice to Purchaser of such proposed destruction or
disposal. If Purchaser desires to obtain any such documents, it may do so by
notifying Sellers and Huffy in writing at any time prior to the date scheduled
for such destruction or disposal. In such event, Sellers and Huffy shall not
destroy such documents and the parties shall then promptly arrange for the
delivery of such documents to Purchaser, its successors or assigns. All
out-of-pocket costs associated with the delivery of the requested documents
shall be paid by Purchaser.
(d) Following the Closing Date, Purchaser shall make available to
Sellers and Huffy, to the extent reasonably practicable, such personnel and
other technical assistance from Purchaser as Huffy and Sellers shall reasonably
require to properly fulfill their indemnification obligations owed to Purchaser
under Article X and the obligations set forth under Section 10.4(g) herein. All
such personnel and other technical assistance furnished by Purchaser hereunder
shall be
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at Huffy and Sellers' sole cost and expense, including all salary,
benefits, cost and other expenses of the personnel and technical assistance
provided.
(e) Following the Closing Date, Sellers and Huffy shall make available
to Purchaser, to the extent reasonably practicable, such personnel and other
technical assistance from Sellers and Huffy as Purchaser shall reasonably
require to properly fulfill its indemnification obligations owed to Sellers and
Huffy under Article X and the obligations set forth under Section 10.4(g)
herein. All such personnel and other technical assistance furnished by Sellers
and Huffy hereunder shall be at Purchaser's sole cost and expense, including
all salary, benefits, cost and other expenses of the personnel and technical
assistance provided.
SECTION 4.5 CONFIDENTIALITY. Huffy, each Seller and the Purchaser
covenant and agree that they will not, and they will cause their principals,
affiliates, officers and other personnel and authorized representatives not to,
use information concerning another party's business, properties and personnel
received in the course of negotiating this Agreement and investigation in
connection with this transaction and will hold such information (and will cause
the aforesaid persons to hold such information) in confidence until such
information otherwise becomes publicly available or as may be required by
applicable law. In the event of the termination of this Agreement, each party
will deliver to the other any copies of nonpublic documents furnished it by the
other.
SECTION 4.6 HART-SCOTT-RODINO FILING. The parties hereto shall timely
and promptly make all filings which may be required by them in connection with
the consummation of the transactions contemplated hereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"Antitrust Improvements Act"). The parties shall furnish to each other all
necessary information and assistance as may be reasonably requested in
connection with the preparation of any necessary filings or submissions to any
governmental agency, including, without limitation, any filings necessary under
the provisions of the Antitrust Improvements Act. The parties shall provide
each other with the opportunity to make copies of all correspondence, filings
or communications (or memoranda setting forth the substance thereof) between
them or their representatives, on the one hand, and the Federal Trade
Commission ("FTC"), the Antitrust Division of the United States Department of
Justice (the "Antitrust Division") or members of their respective staffs, on
the other hand, with respect to this Agreement or the transactions contemplated
hereby. Purchaser shall pay the Antitrust Improvements Act filing fee.
SECTION 4.7 EXPENSES. Except as otherwise set forth herein, without
regard to whether the sale contemplated herein is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses. The
foregoing shall not affect the legal right of any party to recover expenses
pursuant to any breach of this Agreement.
SECTION 4.8 SHAREHOLDER COMMUNICATION. From and after the date hereof,
except as required by law, any government agency or the New York Stock
Exchange, or similar entity, neither Huffy, Sellers nor Purchaser will, with
respect to the transactions contemplated hereby, issue any press release or
make any public statements or mail any communications or letters to their
respective stockholders generally (except, in the case of Huffy, its annual and
quarterly reports and annual meeting materials to stockholders, and in the case
of Purchaser, its annual and quarterly
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reports and annual meeting materials to stockholders) without the prior
approval of the other party and its counsel.
SECTION 4.9 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including but not limited to, using its reasonable best efforts
to obtain all necessary waivers, consents, authorizations and approvals of or
exemptions by any governmental authority, self-regulatory authority or third
party, and effecting all necessary registrations and filings; provided,
however, that in no event shall Purchaser be required to provide any
undertakings or comply with any condition imposed by the FTC or the Antitrust
Division that, in its good faith judgment, would diminish Purchaser's rights
under this Agreement or adversely affect its, or any of its affiliate's
business, results of operations or prospects. In case at any time after the
Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the parties,
as the case may be, shall promptly take all such necessary action. Where the
consent of any third party is required under the terms of any of the leases or
contracts to be assumed by Purchaser hereunder, the Seller which is a party to
such lease or contract will take all reasonable and necessary steps to obtain
such consent on terms and conditions not materially less favorable than as in
effect on the date hereof or to otherwise provide Purchaser with the benefits
of such leases or contracts. The costs incurred in connection with the
obtaining of such consents shall be the responsibility of Sellers. Sellers and
Purchaser shall cooperate fully with each other to the extent reasonably
required to obtain such consents. Notwithstanding anything to the contrary set
forth in this Agreement, to the extent that any consent or approval is not
obtained with respect to any lease, contract or any other agreement as
contemplated above, this Agreement shall not constitute an assignment or an
attempted assignment thereof. In each such case, Sellers agree to cooperate
with Purchaser in any reasonable arrangement designed to (i) provide for
Purchaser the benefits under any such lease, contract or agreement, including
enforcement at the cost and for the account of Purchaser or any and all rights
of Purchaser against the other party or otherwise and (ii) insure performance
by Purchaser of Sellers' obligations thereunder to the extent Purchaser
receives such benefits. Notwithstanding any other provision of this Agreement
(including Section 1.2(a)), to the extent that such arrangement cannot be made,
Purchaser shall not have any obligation with respect to any such lease,
contract or agreement.
SECTION 4.10 CUSTOMER SERVICE. Commencing on the Closing Date,
Purchaser shall administer on behalf of Sellers all warranty claims associated
with products sold by Sellers prior to the Closing Date (including finished
goods in inventory on the Closing Date), in accordance with the terms of the
express warranties accompanying such products or made by Sellers or otherwise
consistent with Sellers' past practice in connection with sales of such
products. Sellers shall have full responsibility for, and shall reimburse the
Purchaser for, all reasonable out-of-pocket costs and expenses (including
material and labor costs) attributable to or incurred in connection with the
administration of such warranty claims.
SECTION 4.11 CLOSING CONDITIONS. Except as otherwise set forth herein,
each of the parties hereto will use its reasonable efforts to cause the
conditions set forth in Articles VI and VII to occur; provided, however, this
provision shall not require any party to waive any condition.
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SECTION 4.12 NOTIFICATION. Sellers shall promptly notify Purchaser of,
and furnish Purchaser any information Purchaser may reasonably request, and
keep Purchaser advised of, the occurrence of any event or condition or the
existence of any fact that would cause any of the conditions to Purchaser's
obligations to consummate the transactions contemplated by this Agreement not
to be fulfilled, including, but not limited to the occurrence of (i) any
litigation or administrative proceeding pending or, to the knowledge of
Sellers, threatened against Sellers or Huffy which could, if adversely
determined, have a Material Adverse Effect; (ii) any material damage or
destruction of any of the Assets; and (iii) any material adverse change in the
condition (financial or other), results of operations, assets, business or
prospects of Sellers taken as a whole.
SECTION 4.13 NO SHOPPING. Huffy and Sellers shall not and shall not
permit any of their agents, representatives (including, without limitation,
investment bankers, attorneys and accountants), officers, employees, or any
other affiliates to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any inquiries, indications of interest, proposals of offers
from any corporation, partnership, person, entity or group, other than
Purchaser (collectively, "Third Parties"), concerning the sale of any of the
assets of Sellers or any of their subsidiaries (other than Inventory in the
ordinary course of business), or any equity security of, or any other interest
in, Sellers or any subsidiary of Sellers, or any merger, recapitalization or
other business combination transaction involving Sellers or any of their
subsidiaries (an "Acquisition Proposal"), (ii) participate in any discussions
or negotiations regarding, or enter into any agreements of understandings
relating to, any of the foregoing with, or provide any information concerning
Sellers, its subsidiaries or any of the foregoing to, any Third Parties
including any Third Parties that Huffy or Sellers had conducted negotiations
with prior to the date of this Agreement, or (iii) otherwise cooperate in any
way with, or assist or participate in, facilitate or encourage, any effort or
attempt by any Third Party to do or seek any of the foregoing. Prior to the
Closing, at Purchaser's request, Huffy shall use its best efforts to cause the
destruction or return of all non-public, confidential or proprietary
information concerning the operations of Sellers provided to potential
purchasers of the Company or the assets thereof. Huffy or Sellers will
immediately notify Purchaser after the receipt by either of them or any of
their agents of any inquiry, indication of interest, proposal or offer with
respect to an Acquisition Proposal by any Third Party and will immediately
deliver to Purchaser any written documentation relating thereto.
SECTION 4.14 AFFILIATED TRANSACTIONS. Except as set forth in Schedule
4.14 hereto, Huffy and Sellers shall terminate any transactions or agreements
between Sellers, on the one hand, and any officers, directors, employees or
affiliates of either Seller, on the other hand.
SECTION 4.15 ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS. At the Closing,
Sellers shall assign to Purchaser its rights with respect to the
confidentiality of information related to the business of Sellers executed by
each of the prospective purchasers who received such information.
SECTION 4.16 INSURANCE MATTERS. Sellers shall add Purchaser as an
additional insured on Seller's insurance policies which are currently in effect
("Seller's Insurance Policies"). To the extent that any of Seller's Insurance
Policies, cover any loss, liability, damage or claim relating to the Business
arising out of occurrences prior to the Closing Date, Sellers shall cooperate
with Purchaser in submitting such claims (or pursuing claims previously made).
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SECTION 4.17 EMPLOYEE MATTERS. Purchaser shall offer employment,
commencing on the Closing Date, at such salary, compensation levels and terms
and conditions as Purchaser may determine, to all salaried and hourly employees
employed by Sellers. For purposes of this Section 4.17, any person on
short-term disability, vacation or leave of absence with a definite date of
return (a "Return Date") shall be considered offered employment as set forth in
this Section; but any person on long-term disability, layoff or on a leave of
absence with no prior agreement or understanding to return to employment with
Sellers at the end of such disability, layoff or leave shall not be considered
offered employment; provided however that Sellers and Huffy shall retain sole
responsibility for and fully and timely pay all benefits and other amounts
payable with respect to any person on long-term disability, layoff or on a
leave of absence prior to their Return Date. Seller shall be responsible for
providing the continuation of health, dental and prescription drugs as required
by COBRA to any individual on COBRA on the Closing Date or eligible for COBRA
coverage on the Closing Date.
SECTION 4.18 GRANT OF LICENSE. Huffy hereby grants to Purchaser a
limited license to use the names "Huffy" or "a Huffy Company", on all of
Sellers' packaging, catalogs, labeling and other written materials containing
such names which are sold to Purchaser on the Closing Date. Purchaser shall
have the right to use all such materials containing such names until all such
materials are fully depleted or until the twelve month anniversary of the
Closing Date, whichever date occurs first. Purchaser shall not have the right
or license to reorder any new materials containing such names or otherwise use
the trademark, "Huffy."
Huffy shall have the right to inspect Purchaser's packaging materials
utilizing its name to determine and ensure that its name is being used in the
same manner, and in accordance with the same standards that Sellers are using
it prior to the Closing Date. Purchaser shall indemnify Huffy, in accordance
with Sections 1.2(b) and 10.3 hereof, for any liability, cost or other expense
arising out of Purchaser's use of its name hereunder.
ARTICLE V
THE CLOSING
SECTION 5.1 If all of the conditions to Closing set forth in Articles
VI and VII hereof are satisfied, the Closing shall take place on the third
business day after the satisfaction of all such conditions or at such time and
place as the parties may mutually agree (the "Closing Date").
ARTICLE VI
SELLERS' CONDITIONS TO CLOSE
The obligations of Sellers under Article VIII of this Agreement shall,
at the option of Sellers (which may be waived specifically in writing by
Sellers in whole or in part) be subject to the satisfaction on or prior to
Closing, of the following conditions:
SECTION 6.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE
WITH AGREEMENT. The representations and warranties of Purchaser contained in
this Agreement (including the Schedules and Attachments hereto) or in any
certificate or document delivered to Sellers pursuant hereto), shall be deemed
to have been made again at the Closing Date and shall then be true in all
respects; and Purchaser shall have performed and complied with all covenants,
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agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
SECTION 6.2 REGULATORY APPROVALS. Any applicable waiting period
required by Hart-Scott-Rodino Antitrust Improvements Act shall have expired and
no other review, approval or any other action of the Federal Trade Commission
or the Antitrust Division of the United States Department of Justice shall be
required in order to consummate the transactions contemplated hereby.
SECTION 6.3 NO ACTION/PROCEEDING. No action or proceeding before a
court or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body shall have taken any other action or made any
request of Huffy or Sellers or Purchaser as a result of which Huffy and Sellers
reasonably and in good faith deem that to proceed with the transactions
hereunder may constitute a violation of law.
SECTION 6.4 COMPLIANCE WITH ARTICLE IX. The Purchaser shall have made
to the Sellers the deliveries required by Article IX.
SECTION 6.5 OTHER PROHIBITING TRANSACTION. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued,
which would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Purchaser effectively to
acquire and hold Assets, or, in either case, to exercise rights of ownership
pursuant thereto. There shall have been no United States federal or state
statute, rule or regulations enacted or promulgated after the date of this
Agreement that would reasonably, directly or indirectly, result in any of the
consequences referred to in this Section.
ARTICLE VII
PURCHASER'S CONDITIONS TO CLOSE
The obligations of Purchaser under Article IX of this Agreement are,
at the option of Purchaser (which may be waived specifically in writing by
Purchaser in whole or in part) subject to the satisfaction on or prior to
Closing of the following conditions:
SECTION 7.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING; COMPLIANCE
WITH AGREEMENT. The representations and warranties of Sellers and/or Huffy
contained in this Agreement (including the Schedules and Attachments hereto) or
in any certificate or document delivered to Purchaser pursuant hereto, shall be
deemed to have been made again at the Closing Date and shall then be true in
all respects; and Sellers shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or
complied with by them prior to or at the Closing Date.
SECTION 7.2 NO LOSS, DAMAGE OR DESTRUCTION. In the event there is any
damage to or loss of any of the Assets (whether by fire, theft, vandalism or
other cause or casualty), the terms of Section 4.2 shall have been complied
with to the satisfaction of Purchaser.
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SECTION 7.3 NO MATERIAL ADVERSE CHANGE. Since February 1, 1997 there
shall not have been any material adverse change in the condition (financial or
otherwise), results of operations, assets, properties, business or prospects of
the business of Sellers.
SECTION 7.4 REGULATORY APPROVALS. Any applicable waiting period
required by the Hart-Scott-Rodino Antitrust Improvements Act shall have
expired, and no other review, approval or other action of the Federal Trade
Commission or the Antitrust Division of the United States Department of Justice
shall be required in order to consummate the transactions contemplated hereby,
and any other permit, license, authorization, consent, approval or order
required by any other governmental authority shall have been obtained.
SECTION 7.5 NO ACTION/PROCEEDING. No action or proceeding before a
court or any other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the transaction herein contemplated, and no
governmental agency or body shall have taken any other action or made any
request of Huffy or Sellers or Purchaser as a result of which Purchaser
reasonably and in good faith deems that to proceed with the transactions
hereunder may constitute a violation of law.
SECTION 7.6 COMPLIANCE WITH ARTICLE VIII. The Sellers shall have made
to the Purchaser the deliveries required by Article VIII.
SECTION 7.7 OTHER PROHIBITING TRANSACTION. No order shall have been
entered in any action or proceeding before any court or governmental agency,
and no preliminary or permanent injunction by any court shall have been issued,
which would have the effect of (a) making the transactions contemplated by this
Agreement illegal, (b) otherwise preventing consummation of such transactions,
or (c) imposing material limitations on the ability of Purchaser effectively to
acquire and hold Assets, or, in either case, to exercise rights of ownership
pursuant thereto. There shall have been no United States federal or state
statute, rule or regulations enacted or promulgated after the date of this
Agreement that would reasonably, directly or indirectly, result in any of the
consequences referred to in this Section.
SECTION 7.8 ENVIRONMENTAL DILIGENCE. Purchaser shall have received an
environmental assessment report in form and substance reasonably satisfactory
to Purchaser with respect to the environmental hazards, conditions, liabilities
or potential liabilities to which Sellers, and the properties currently or
formerly owned, leased or operated by Sellers or their subsidiaries may be
subject, provided that in the event the environmental assessment report is not
in form and substance reasonably satisfactory to Purchaser, Purchaser will
agree to waive this condition, if, in its discretion, it is satisfied with
Sellers' agreement to remediate the conditions raised in such report.
SECTION 7.9 LIEN SEARCH. Purchaser shall have received satisfactory
results of Lien searches with respect to the Assets.
SECTION 7.10 SUBLEASE AGREEMENT. The Sublease Agreement in the form
attached hereto as Exhibit A, or in a form otherwise satisfactory to Purchaser,
shall have been executed by Sellers and the Selco Service Corporation, or other
Lessor with respect to the Thornton, Colorado facility.
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SECTION 7.11 UNION AGREEMENTS. The amendment to that certain agreement
captioned "Agreement between Gerry Baby Products Company and U.N.I.T.E. Union
of Needletrades, Industrial and Textile Employees, AFL-CIO-CLC, Chicago and
Central States Joint Board, Rocky Mountain District Joint Board, Local #1156C,
AFL-CIO-CLC dated January 31, 1996" (the "Collective Bargaining Agreement")
providing for the wage reductions set forth in Schedule 7.11 shall have been
executed by the parties thereto and shall be a valid and binding obligation of
the parties thereto. The Union Assumption Agreement in the form attached hereto
as Exhibit B, or in a form otherwise satisfactory to Purchaser, shall have been
executed by the labor organizations that are parties to the Collective
Bargaining Agreement, and such Union Assumption Agreement shall be a valid and
binding obligation on the union and its membership.
ARTICLE VIII
OBLIGATIONS OF SELLERS AT CLOSING
At Closing, Sellers shall deliver or cause to be delivered to
Purchaser the following in a form and substance reasonably satisfactory to
Purchaser:
SECTION 8.1 DOCUMENTS RELATING TO TITLE. Sellers shall execute,
acknowledge, deliver and cause to be executed, acknowledged and delivered to
Purchaser:
(a) Deeds, bills of sales and assignments, in form and
substance satisfactory to Purchaser and sufficient to
convey to Purchaser good, valid and marketable fee
simple title to all Assets free and clear of all liens,
mortgages, pledges, encumbrances, security interests,
covenants, easements, rights of way, equities, options,
rights of first refusal restrictions, special tax or
governmental assessments, defects in title,
encroachments and other burdens, except for exceptions
permitted by Purchaser.
(b) An assignment to Purchaser of all of Sellers' rights
and interests in, to and under each Lease of personal
property and Contract constituting an Assumed
Liability.
(c) General Warranty Deeds (or equivalent) in recordable
form and substance satisfactory to Purchaser and
sufficient to convey to Purchaser all of Seller's
interest in the Owned Real Property free and clear of
all liens, mortgages, pledges, encumbrances, security
interests, covenants, easements, rights of way,
equities, options, rights of first refusal,
restrictions, special tax or governmental assessments,
defects in title, encroachments and other burdens,
except for exceptions permitted by Purchaser.
(d) An Affidavit of Non-Foreign Status as required by the
Foreign Investment and Real Property Tax Act
Section 1445(b)(2), as amended.
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(e) Such other documents as Purchaser may reasonably
request to facilitate the transfer of the Owned Real
Property and Purchaser's obtaining title insurance
insuring Purchaser's title in and to the Owned Real
Property.
SECTION 8.2 POSSESSION. Sellers shall deliver to Purchaser full
possession and control of the Assets.
SECTION 8.3 OPINION OF SELLERS' COUNSEL. Sellers shall deliver to
Purchaser the favorable opinion of counsel for Sellers, dated as of the Closing
Date, in a form reasonably satisfactory to Purchaser.
SECTION 8.4 CORPORATE GOOD STANDING AND CORPORATE RESOLUTION. Sellers
shall deliver to Purchaser Certificates of Good Standing from the secretaries
of states of organization for Sellers, together with a certified copy of the
resolutions of the Board of Directors of Huffy Corporation and Sellers, and of
the sole stockholder of Sellers, authorizing the execution, delivery and
consummation of this Agreement and the execution, delivery and consummation of
all other agreements and documents executed in connection herewith by them,
including all deeds, bills of sale and other instruments required hereunder and
certified by officers of the respective entities to be validly adopted and in
full force and effect and unamended as of Closing.
SECTION 8.5 CLOSING CERTIFICATE. Huffy and Sellers shall deliver to
Purchaser certificates of executive officers of Huffy and Sellers, dated as of
Closing, certifying that (a) each covenant and obligation of Sellers has been
complied with by Sellers in all material respects, and (b) each representation
and warranty of Sellers is true and correct on the Closing as if made on and as
of the Closing.
SECTION 8.6 THIRD PARTY CONSENTS. Sellers shall deliver to Purchaser
any consents, approvals and authorizations of third parties which are necessary
in the reasonable opinion of Purchaser for the execution, delivery and
consummation of this Agreement and the operation of the business after the
Closing Date as currently conducted by Sellers, including without limitation,
those necessary for the assignment of the Leases and Contracts included in the
Assumed Liabilities.
SECTION 8.7 ADDITIONALLY REQUESTED DOCUMENTS; POST CLOSING ASSISTANCE.
At the reasonable request of Purchaser at the Closing Date and at any time or
from time to time thereafter, Huffy and Sellers shall cooperate with Purchaser
to put Purchaser in actual possession and operating control of the Assets,
execute and deliver such further instruments of sale, conveyance, transfer and
assignment, as Purchaser may reasonably request in order to effectively sell,
convey, transfer and assign the Assets to Purchaser, to execute and deliver
such further instruments and to take such other actions as Purchaser may
reasonably request to release Purchaser from all obligation and liability with
regard to any obligation or liability retained by Sellers.
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ARTICLE IX
OBLIGATIONS OF PURCHASER AT CLOSING
At Closing, Purchaser shall deliver or cause to be delivered to
Sellers the following in a form and substance reasonably satisfactory to
Sellers:
SECTION 9.1 PURCHASE PRICE. Purchaser shall deliver to Sellers cash or
other immediately available funds in the aggregate amount of the Purchase Price
specified herein.
SECTION 9.2 CORPORATE GOOD STANDING AND CERTIFIED BOARD RESOLUTIONS.
Purchaser shall deliver to Sellers a certificate of Good Standing from the
secretary of the state of organization for the Purchaser and a certified copy
of the resolutions of the Board of Directors of the Purchaser approving this
Agreement and consummation of the transactions intended hereby.
SECTION 9.3 ASSUMPTION OF LIABILITIES. Purchaser shall assume and
covenant to fully perform and comply with all of the Assumed Liabilities
pursuant to the form of Assumption Agreement attached hereto as Exhibit C.
SECTION 9.4 CLOSING CERTIFICATE. Purchaser shall deliver to Sellers a
certificate of officers of the Purchaser, dated as of Closing, certifying that
(a) each covenant and condition precedent of Purchaser has been complied with
by Purchaser in all material respects and (b) each representation and warranty
of Purchaser is true and correct on the Closing as if made on and as of the
Closing.
ARTICLE X
INDEMNIFICATION AND SURVIVAL OF PROVISIONS
SECTION 10.1 SURVIVAL. The covenants and agreements contained in this
Agreement and any agreements, certificates or other instruments delivered
pursuant to this Agreement, shall survive the Closing and remain in full force
and effect. The representations and warranties set forth in Articles II and III
shall survive the Closing and remain in full force and effect until the second
anniversary of the Closing Date; provided, that the representations and
warranties set forth in Sections 2.19 and 2.24 shall survive for three years
and the representations and warranties contained in Sections 2.1, 2.2, 2.6,
3.1, 3.2 and 3.3 or which otherwise relate to title of the Assets shall survive
indefinitely and the representations and warranties contained in Section 2.32
shall survive for the statute of limitations period and any extensions thereof.
SECTION 10.2 SELLERS' INDEMNIFICATION OBLIGATION. Huffy and Sellers
shall, jointly and severally, indemnify and hold Purchaser and its Affiliates,
and their successors and assigns, harmless from and against, and in respect of:
(a) all obligations and liabilities of Sellers or any of
its Affiliates, whether accrued, absolute, fixed,
contingent or otherwise, not assumed by Purchaser
pursuant to the Assumption Agreement or under any other
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agreement executed and delivered by the parties in
furtherance of the transactions described herein;
(b) any claim, cost, loss, liability, settlement, judgment,
charge, fee, expense (including any reasonable
attorneys', accountants' or other experts' fee or
expense) or damage (collectively, "Damages") incurred
or sustained by Purchaser or its Affiliates as a result
of any inaccuracy or breach of any representation or
warranty by Sellers or Huffy contained herein or under
any other agreement executed and delivered by the
parties in furtherance of the transactions described
herein; provided, however, that (i) Sellers and Huffy
shall be required to indemnify Purchaser or its
Affiliates pursuant to this clause (b) for any such
breaches or inaccuracies only to the extent that the
aggregate Damages resulting from such breaches or
inaccuracies to Purchaser or its Affiliates exceed
$1,500,000, (ii) Purchaser and its Affiliates shall not
make any claim against Sellers or Huffy which
individually (or in the aggregate with respect to
related claims, including but not limited to,
corrective actions, recalls and other related actions)
does not exceed $20,000 (such claims that do not meet
the threshold shall still be applied against the
$1,500,000 aggregate basket and such aggregate minimum
claim threshold shall not act as a deductible) and
(iii) any claim for indemnification under this clause
(b) must be made in writing in reasonable detail to
Sellers or Huffy not later than the expiration of the
applicable survival period specified in Section 10.1;
(c) any Damages incurred or sustained by Purchaser or its
Affiliates as a result of a breach by Sellers or Huffy
of any covenant or other agreement contained herein or
under any other agreement executed and delivered by the
parties in furtherance of the transactions described
herein;
(d) any liabilities for Taxes arising at any time out of
the operation of the business of Sellers and its
Affiliates prior to the close of business on the
Closing Date or incurred in connection with the
transactions contemplated by this Agreement (including
any transfer of recording taxes);
(e) any Damages incurred or sustained by Purchaser or its
Affiliates as a result of the operation of the business
of Sellers, Huffy and its Affiliates prior to the close
of business on the Closing Date, including but not
limited to, any liabilities and obligations relating to
(i) products shipped prior to the close of business on
the Closing Date, (ii) all employee wages, salaries,
bonuses, benefits or other compensation or employee
claims relating to Sellers' employees for the period
ending at the close of business on the Closing Date,
(iii) all workers' compensation claims relating to
injuries occurring prior to the close
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of business on the Closing Date, or (iv) any
litigation, proceeding or governmental investigation or
action relating to actions taken by Sellers or Huffy
prior to the close of business on the Closing Date,
except to the extent assumed by Purchaser pursuant to
the Assumption Agreement and except for Damages
relating to design or manufacturing defects for
products shipped after the close of business on the
Closing Date to the extent the representations and
warranties in Sections 2.30 and 2.31 are not violated
or to the extent Sellers have not otherwise agreed to
indemnify Purchaser for Damages pursuant to Section
10.2(h);
(f) any Damages (including, without limitation, injuries to
persons, property or natural resources, injunctive
relief, the fees and disbursements of legal counsel,
environmental consultants or engineers, and any
investigation and laboratory fees and response costs),
whether or not the subject of a claim by any government
entity or any other third party, which Purchaser or its
affiliates, successors, assigns, partners, contractors
or lenders may incur by reason of any violation of or
liability under any Environmental Law or the presence
of any Hazardous Substances, to the extent arising from
any event or condition that (i) on or prior to the
Closing Date exists on, or results from the migration
or transport from, the Owned Real Property or the
leased real property, whether or not caused or
contributed to by Sellers, and (ii) exists at any time
at any location to the extent caused or contributed to
by Sellers or any of its Affiliates;
(g) any Damages incurred or sustained by Purchaser or its
Affiliates as a result of any recall (voluntary or
involuntary), safety advisory or other corrective
action taken with respect to any products shipped prior
to the close of business on the Closing Date;
(h) any Damages incurred or sustained by Purchaser or its
Affiliates with respect to any Double Guard booster
seats, model number 675, shipped within 16 months of
the Closing Date; provided, that Purchaser shall not
recall, issue any safety advisory or take any other
corrective action with respect to such products without
the written consent of Sellers or Huffy; provided
further, that Purchaser may take the same corrective
action taken by Sellers or Huffy with respect to such
products without such consent; and
(i) all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by
Purchaser or its Affiliates in connection with any
action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified
against in this Section 10.2.
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SECTION 10.3 PURCHASER'S INDEMNIFICATION OBLIGATION. Purchaser shall
indemnify and hold Huffy, Sellers, and their Affiliates, and their respective
successors and assigns, harmless from and against, and in respect of:
(a) all obligations and liabilities of Purchaser or any of
its affiliates, whether accrued, absolute, fixed,
contingent or otherwise, assumed by Purchaser pursuant
to the Assumption Agreement or assumed under any other
agreement executed and delivered by the parties in
furtherance of the transactions described herein;
(b) any Damages incurred or sustained by Sellers or their
Affiliates as a result of any inaccuracy or breach of
any representation or warranty by Purchaser contained
herein or under any other agreement executed and
delivered by the parties in furtherance of the
transactions described herein; provided, however, that
(i) Purchaser shall be required to indemnify Sellers or
their Affiliates pursuant to this clause (a) for any
such breaches or inaccuracies only to the extent that
the aggregate Damages resulting from such breaches or
inaccuracies to Sellers or their Affiliates exceed
$1,500,000, (ii) Sellers and their Affiliates shall not
make any claim against Purchaser which individually (or
in the aggregate with respect to related claims) does
not exceed $20,000 (such claims that do not meet the
threshold shall still be applied against the $1,500,000
aggregate basket and such aggregate minimum claim
threshold shall not act as a deductible) and (iii) any
claim for indemnification under this clause (a) must be
made in writing in reasonable detail to Purchaser not
later than the expiration of the applicable survival
period specified in Section 10.1;
(c) any Damages incurred or sustained by Sellers or their
Affiliates as a result of a breach by Purchaser of any
covenant or other agreement contained herein or under
any other agreement executed and delivered by the
parties in furtherance of the transactions described
herein;
(d) any liabilities for Taxes arising at any time out of
the operation of the business of Purchaser after the
close of business on the Closing Date or incurred in
connection with the transactions contemplated by this
Agreement, other than Taxes assumed by Sellers pursuant
to the terms of this Agreement;
(e) any Damages incurred or sustained by Sellers or its
Affiliates as a result of the operation of the business
of Purchaser, and its affiliates after the close of
business on the Closing Date, including but not limited
to, any liabilities and obligations relating to (i)
products shipped after the close of business on the
Closing Date (except as set forth in Section 10.2(h)),
(ii) all employee wages, salaries, bonuses, benefits or
other compensation or employee claims relating to
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Purchaser's employees for the period commencing on the
close of business on the Closing Date, (iii) all
workers' compensation claims relating to injuries
occurring after the close of business on the Closing
Date, (iv) any litigation, proceeding or governmental
investigation or action relating to actions taken by
Purchaser after the close of business on the Closing
Date; except in each case to the extent such Damages
relate to Sellers' and Huffy's indemnification
obligations under this Agreement.
(f) all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Sellers
or their Affiliates in connection with any action,
suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in
this Section 10.3.
SECTION 10.4 PROCEDURE FOR INDEMNIFICATION; GENERAL. The procedure to
be followed in connection with any claim for indemnification by Purchaser under
Section 10.3 or by Sellers or Huffy under Section 10.2 or any claims by one
party against the other, is set forth below:
(a) Notice. Whenever any indemnified party shall have
received notice that a claim has been asserted or
threatened against such indemnified party, which, if
valid, would subject the indemnifying party to an
indemnity obligation under this Agreement, the
indemnified party shall promptly notify the
indemnifying party of such claim, together with
supporting facts and data to support the claim for
indemnification, provided, however, that the failure of
the indemnified party to give timely notice hereunder
shall relieve the indemnifying party of its
indemnification obligations under this Agreement to the
extent, but only to the extent that, such failure
materially prejudices the indemnifying party's ability
to defend such claim.
(b) Defense of a Claim. The indemnifying party or its
designee will have the right, but not the obligation,
to assume the defense of any claim which is the subject
of indemnification under this Agreement so long as the
indemnifying party acknowledges in writing its
obligation to indemnify the indemnified party
hereunder; provided, however, if there is a reasonable
probability that a claim may adversely affect the
business of the indemnified party despite the indemnity
of the indemnifying party, the indemnified party shall
have the right at its option to defend, at its own cost
and expense, and to compromise or settle such claim,
which compromise or settlement shall be made only with
the written consent of the indemnifying party, such
consent not to be unreasonably withheld, provided that
the indemnified party shall promptly notify the
indemnifying party of any compromise or settlement
proposal with respect to the claim and shall not
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unreasonably refuse to accept any such proposal if the same
is acceptable to the indemnifying party. If the indemnifying
party fails to assume the defense of such claim with thirty
(30) days after receipt of notice of a claim for
indemnification, the indemnified party against which such
claim has been asserted will (upon delivering notice to such
effect to the indemnifying party) have the right to
undertake, at the indemnifying party's cost and expense, the
defense, compromise or settlement of such claim on behalf of
and for the account and risk of the indemnifying party,
subject to the right of the indemnifying party to assume the
defense of such claim at any time prior to settlement,
compromise or final determination thereof if, in the good
faith judgment of the indemnifying party's counsel, such
claim is not being adequately defended and so long as the
indemnifying party acknowledges in writing its obligation to
indemnify the indemnified party hereunder and provided,
however, that the indemnified party shall not enter into any
such compromise or settlement without the written consent of
the indemnifying party which consent shall not be
unreasonably withheld. In the event the indemnifying party
assumes defense of the claim, the indemnifying party will
keep the indemnified party reasonably informed of the
progress of any such defense, compromise or settlement. The
indemnifying party shall have the sole right to defend,
settle or otherwise dispose of such claim, on such terms as
the indemnifying party, in its sole discretion, shall deem
appropriate; provided, however, that the indemnifying party
shall obtain the written consent of the indemnified party,
which shall not be unreasonably withheld, prior to ceasing
to defend, settling or otherwise disposing of any such claim
if as a result of such settlement the indemnified party
would become subject to injunctive or other equitable relief
or the business of the indemnified party would be adversely
affected in any manner; and provided, further, that if the
indemnified party has elected to be represented by separate
counsel pursuant to the proviso to the following sentence,
such settlement or compromise shall be effected only with
the consent of the indemnified party, which consent shall
not be unreasonably withheld. After notice from the
indemnifying party to the indemnified party of its election
to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified
party under this Section 10.4(b) for any legal or other
expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that
the indemnified party shall have the right to employ counsel
to represent it if, in the written opinion of counsel to the
indemnified party (such opinion also addressed to the
indemnifying party), it is advisable for the indemnified
party to be represented by separate counsel due to actual or
potential conflicts of interest, and in that event the fees
and expenses of such separate counsel shall be paid by the
indemnifying party; provided, that in no event shall the
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indemnifying party be responsible for the fees of more
than one counsel. The parties each agree to render to
the other parties such assistance as may reasonably be
requested in order to insure the proper and adequate
defense of any such claim or proceeding. The
indemnifying party shall not be liable for any
settlement of any action effected without its consent,
but if settled with the consent of the indemnifying
party or if there be a final judgment beyond review or
appeal, for the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold
harmless an indemnified party from and against any loss
or liability by reason of such settlement or judgment.
Any party who does not undertake the defense of a claim
may otherwise, at its own expense, retain such
additional attorneys and other advisors as it shall
deem necessary, which attorneys and advisors will be
permitted by the party undertaking such defense, and
its attorneys, to observe the defense of such claim.
(c) No Additional Obligations. Nothing herein shall be
deemed to expand the obligation of the indemnifying
party to defend, or be responsible for indemnifying the
indemnified party, with respect to any claim beyond the
specific indemnification obligations set forth in this
Agreement.
(d) Survival. The indemnities provided in this Article X
shall survive the Closing.
(e) Treatment of Indemnity Payments. The parties agree that
any indemnification payments made pursuant to this
Agreement shall be treated for tax purposes as an
adjustment to the Purchase Price, unless otherwise
required by applicable law. To the extent that any
indemnity claim is required by any taxing authority or
by applicable law to be treated as taxable income to
the party making the claim and is not under applicable
law permitted to be treated as an adjustment to the
Purchase Price, the amount of any indemnity payment
shall be determined on a net after-tax basis (after
taking into consideration any related deductions and
assuming a tax rate equal to the maximum marginal
federal corporate income tax rate for the taxable year
in which the indemnity is determined to be taxable).
(f) Third Party Suppliers. The parties hereto agree that if
the liability is deemed to be that of a third party
supplier used by Purchaser, Purchaser shall cooperate
with Sellers to assist in causing such supplier to
assume its defense and/or liability obligations.
(g) Recall Cooperation. The parties agree to communicate,
cooperate and share all relevant information as soon as
possible with respect to any potential recall, consumer
corrective action or other consumer
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notification action. In the event that either party
receives notification from any regulatory agency
requesting or suggesting a recall, consumer corrective
action or other consumer notification action, the
receiving party will promptly inform the other of all
relevant information relating to the notice and the
party's response plan; or, conversely, if either party
believes it must notify any regulatory agency regarding
a recall, consumer corrective action or notification
action, it shall notify the other party in advance of
such notice to discuss the substance of such notice and
the effect on the parties. The parties will cooperate
in good faith with each other regarding all
communication and negotiation with any applicable
governmental authority or other third party, and shall
notify and allow both parties to meet jointly with the
regulatory agencies. In the event that the parties
disagree as to whether a consumer notification action
is necessary, the parties agree to communicate with
each other, to act in good faith with respect to each
other and such issue and to give due regard to the
business interests of the other.
ARTICLE XI
NON-COMPETITION COVENANT
SECTION 11.1 Huffy and Sellers hereby agree and acknowledge
that Purchaser would not enter into this Agreement and purchase the Assets
without the covenant and agreement of Huffy and Sellers to the non-competition
covenant contained in this Article XI. Huffy and Sellers agree, jointly and
severally, that for a period of ten (10) years from and after the Closing Date
they will not, directly or indirectly, engage as a principal, agent, partner,
stockholder (other than as passive investor owning less than five percent
(5%)), member, consultant, lender or in any other capacity, in a business,
directly or indirectly, that would be competitive with the products of the
business of Sellers sold to Purchaser hereunder as described on Schedule 11.1
hereto. The parties agree that if Huffy or any Seller violates this covenant
that irreparable harm will be caused to Purchaser thereby for which there is no
adequate remedy at law and that Purchaser shall be entitled, in addition to any
other remedies and damages available, to seek an injunction to restrain the
violation of this covenant. Huffy's activities under the license agreement with
TRI Industries, Inc. dated February 14, 1990, (as amended July 23, 1991, July
1, 1992, July 5, 1993 and June 23, 1994) and the manufacture and sale of the
products described therein and the manufacture and sale of products under the
Midway Sales, Inc. license agreements dated June 1, 1995, (as amended April 1,
1995, January 1, 1996 and October 1, 1996), and dated April 1, 1995 are
excepted, in each case to the extent such activities or products do not compete
with the products set forth on Schedule 11.1. From the date hereof, until the
third anniversary of the Closing Date, neither Huffy nor Sellers or any other
affiliate will solicit (or assist or encourage the solicitation of) any of the
current employees of Purchaser or Sellers or its affiliates, without the prior
written consent of Purchaser; provided, that the foregoing restriction shall
not prohibit general solicitations of employment not specifically targeted at
Purchaser's employees and shall not apply to terminated Employees of Purchaser.
38
<PAGE> 44
ARTICLE XII
TERMINATION
SECTION 12.1 GENERAL. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, (a) by mutual written
consent of Purchaser and Sellers, (b) by either Purchaser or Sellers, if any
permanent injunction or action by any governmental authority preventing the
consummation of the Closing shall have become final and nonappealable, (c) by
any party by notice to the other party in the event that the Closing Date shall
not have occurred on or before May 15, 1997; provided, if the only condition to
Closing not satisfied is the Antitrust Improvements Act compliance set forth in
Section 4.6 hereto, then that date shall be June 15, 1997; provided further,
that if the Closing Date shall not have occurred on or before such dates due to
the act or omission of one of the parties in violation of any provision of this
Agreement, that party may not terminate the Agreement pursuant to this clause
(c) of Section 12.1.
SECTION 12.2 NO LIABILITIES IN EVENT OF TERMINATION. In the event of
any termination of the Agreement as provided in Section 12.1 above, this
Agreement shall forthwith become wholly void and of no further force and effect
and there shall be no liability on the part of Purchaser, Sellers or Huffy,
except that the obligations of Purchaser, Sellers and Huffy under Sections 4.5,
4.7 and Article X of this Agreement shall remain in full force and effect, and
except that termination shall not preclude any party from suing the other party
for breach of this Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 HEADINGS. The subject headings of the sections,
paragraphs and subparagraphs of this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of its provisions.
SECTION 13.2 ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This Agreement
constitutes the entire agreement between the parties pertaining to its subject
matter and supersedes all prior and contemporaneous agreements, representations
and understandings of the parties. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
SECTION 13.3 COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 13.4 RIGHTS OF PARTIES. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third persons any
right of subrogation or action over or against any party to this Agreement.
39
<PAGE> 45
SECTION 13.5 ASSIGNMENT. Purchaser shall not assign this Agreement
except to an affiliate or successor. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their respective heirs,
legal representatives and successors. Sellers shall be free to assign their
right to receive payments under Section 1.3 to any party.
SECTION 13.6 REMEDIES. Each party's obligation under this Agreement is
unique. If any party should default in its obligations under this Agreement,
the parties each acknowledge that it would be extremely impracticable to
measure the resulting damages; accordingly, the nondefaulting party, in
addition to any other available rights or remedies, may sue in equity for
specific performance, and the parties each expressly waive the defense that a
remedy in damages will be adequate.
SECTION 13.7 EFFECT OF CERTAIN ACTIONS. No action taken pursuant to or
related to this Agreement, including without limitation any investigation by or
on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, condition
or agreement contained herein.
SECTION 13.8 SUPPLEMENTS TO SCHEDULES AND EXHIBITS. Sellers, may at
any time between execution of this Agreement and the Closing Date provide
Purchaser in writing as a supplement to any Schedule hereto any information
considered necessary by Sellers to cause such Schedule to be complete and
accurate. The provision of such information shall not affect the right of
Purchaser to elect not to close the transactions contemplated by this Agreement
if the representations and warranties of Sellers contained in this Agreement at
the time of execution hereof and the Disclosure Schedules attached hereto at
the time of execution shall not be true and correct in all material respects at
the time of the Closing Date, but if, despite such right, Purchaser
nevertheless elects to close, Purchaser shall thereby be deemed to have waived
any such disclosed misrepresentation or breach of warranty, and shall
thereafter have no claim against Sellers for a breach of such representation or
warranty; provided, however, such supplement shall not otherwise affect any
other indemnification available under this Agreement.
SECTION 13.9 NOTICES. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party
(including without limitation service by overnight courier service) to whom
notice is to be given, or on the third day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered or certified,
postage prepaid, at the address set forth below, or on the date of service if
delivered by facsimile to the facsimile number set forth below which facsimile
is confirmed within three days by deposit of a copy of such notice in first
class mail, registered or certified, postage prepaid at the address set forth
below. Any party may change its address for purposes of this paragraph by
giving the other parties written notice of the new address in the manner set
forth above.
If to Sellers or Huffy Corporation
to Huffy: P. O. Box 1204
Dayton, OH 45401
Attn: Ms. Nancy A. Michaud
Vice President-General Counsel and Secretary
Fax: (937) 865-5414
40
<PAGE> 46
with a copy to: Clifford A. Roe, Jr., Esq.
Dinsmore & Shohl
1900 Chemed Center
255 East Fifth Street
Cincinnati, OH 45202
Fax: (513) 977-8141
If to Purchaser: Robert Adikes, Esq.
Evenflo Company, Inc.
601 S. Harbour Island Blvd., Suite 200
Tampa, Florida 33602-3141
Fax: (813) 204-5208
With copies to: Charles I. Cogut, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Fax: (212) 455-2502
41
<PAGE> 47
SECTION 13.10 KNOWLEDGE OF SELLERS. To the knowledge of Sellers, to
Sellers' knowledge or any counterparts thereof shall mean the actual knowledge
of the officers of Sellers and those natural persons listed on Schedule 13.10
hereto.
SECTION 13.11 SEVERABILITY. If any provision of this Agreement shall
be declared by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be affected and
shall remain in full force and effect.
SECTION 13.12 MEANINGS OF CERTAIN TERMS. As used in this Agreement the
term "business" shall mean the juvenile products business of Sellers and the
term "Affiliate" as to any person, means any other person, that, directly or
indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with such person.
SECTION 13.13 TRANSFER TAXES AND RECORDING EXPENSES. Sellers shall
assume and pay and shall indemnify Purchaser and its Affiliates against all
sales, motor vehicle or transfer taxes and recording expenses, if any, required
to be paid in connection with the transfer of the Assets (including any
interest charge or penalty with respect thereto). Purchaser shall assume and
pay and shall indemnify Sellers and Huffy against all sales taxes, if any,
required to be paid in connection with the transfer of the Assets (including
any interest charge or penalty with respect thereto).
SECTION 13.14 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by the laws of, the State of Ohio.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
it as of the date set forth above.
HUFFY CORPORATION GERRY BABY PRODUCTS COMPANY
BY /s/ Richard L. Molen BY /s/ Daryle A. Lovett
-------------------- -----------------------------
GERRY WOOD PRODUCTS COMPANY
BY /s/ Daryle A. Lovett
-----------------------------
EVENFLO COMPANY, INC.
BY /s/ George A. Harris
-----------------------------
42
<PAGE> 48
LIST OF SCHEDULES
(The company undertakes to furnish the contents of all omitted schedules to
the Commission upon request.)
<TABLE>
<CAPTION>
SCHEDULE NUMBER SCHEDULE
<S> <C>
1.1(a)(ii) Equipment
1.1(a)(iv) Leases and Contracts
1.1(a)(v) Real Property Presently Owned or Leased by Gerry
1.1(a)(vi) Intangible Assets
1.1(a)(vii) Permits, Licenses and Consents
1.1(a)(ix) Accounts Receivable
1.1(a)(xii) Bank Accounts
1.1(b) Excluded Assets
1.1(c) Trade Liabilities
1.1(d) Employer Liabilities
1.2(c) Assumed Contracts, Purchase Orders, Etc.
1.4 Schedule of Net Assets Purchased as of February 1, 1997
2.1 Organization
2.3 Financial Statements
2.4 Pending Claims
2.5 Legal Compliance
2.6 Title to Assets
2.7 Condition of Assets
2.8 Leases
2.10 Other Property (Tangible Personal Property)
2.11 Customers and Suppliers
2.12 No Breach or Violation
2.13 Interest in Customers, Suppliers & Competitors
2.17 OSHA
2.18 Intellectual Property
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
SCHEDULE NUMBER SCHEDULE
<S> <C>
2.19 Environmental Matters
2.20 Leases and Contracts
2.21 Employees
2.22 Labor Contracts
2.24 Employee Benefit Plan
2.27 Insurance
2.28 Governmental Licenses, Permits and Related Approvals
2.29 Absence of Certain Changes or Events
2.30 Recalls
2.31 Product Liability Claims Paid From 1992 Through 1996
2.33 Real Property
4.14 Affiliated Transactions
7.11 Union Agreement
11.1 Products Manuafactured by GBPC/GWPC
13.10 Knowledge of Sellers
</TABLE>
<PAGE> 50
EXHIBIT INDEX
Exhibit A Sublease Agreement
Exhibit B Form of Union Assumption Agreement
Exhibit C Form of Assumption Agreement
43
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 579,670
<TOTAL-REVENUES> 0
<CGS> 484,782
<TOTAL-COSTS> 564,840
<OTHER-EXPENSES> (481)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,873
<INCOME-PRETAX> 9,520
<INCOME-TAX> 2,596
<INCOME-CONTINUING> 6,924
<DISCONTINUED> (467)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,457
<EPS-PRIMARY> .48
<EPS-DILUTED> 0
</TABLE>
