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Exhibit 2
AGREEMENT AND PLAN OF REORGANIZATION
by and among
HUFFY CORPORATION,
HUFFY BRANDS COMPANY,
WASHINGTON INVENTORY SERVICE,
WIS HOLDINGS CORP.
and
WIS ACQUISITION CORP.
September 20, 2000
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TABLE OF CONTENTS
Article I Definitions 1
Section 1.1 Affiliate 1
Section 1.2 Applicable Laws 1
Section 1.3 Code 1
Section 1.4 Confidential Information 2
Section 1.5 Disclosure Schedules 2
Section 1.6 Environmental Laws 2
Section 1.7 ERISA 2
Section 1.8 Governmental Authority 2
Section 1.9 Indebtedness 3
Section 1.10 IRS 3
Section 1.11 knowledge 3
Section 1.12 Material Adverse Effect 3
Section 1.13 Merger Consideration 3
Section 1.14 ordinary course of business 3
Section 1.15 Permitted Cash Flow Indebtedness 3
Section 1.16 person 3
Section 1.17 Tax Returns 3
Section 1.18 Taxes 3
Section 1.19 WIS Capital Stock 3
Section 1.20 WIS Cash Flow 3
Section 1.21 Working Capital 4
Section 1.22 Other Definitions 4
Article II Terms of Sale and Payment 6
Section 2.1 The Merger 6
Section 2.2 Closing and Effective Time 6
Section 2.3 Deliveries at Closing 6
Section 2.4 Effect of the Merger 7
Section 2.5 Consideration to be Paid;
Effect on WIS Capital Stock 7
Section 2.6 Post-Closing Adjustments 7
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Section 2.7 Interest Adjustment 9
Article III Sellers' Representations and Warranties 9
Section 3.1 Organization and Good Standing: Qualification 9
Section 3.2 Capitalization 10
Section 3.3 Corporate Records 10
Section 3.4 Authorization and Validity 10
Section 3.5 No Violation 10
Section 3.6 Governmental Authorities; Third Party Consents 11
Section 3.7 Financial Statements 11
Section 3.8 Liabilities and Obligations 12
Section 3.9 Employee Matters 12
Section 3.10 Employee Benefit Plans 13
Section 3.11 Absence of Certain Changes 16
Section 3.12 Title; Leased Assets 18
Section 3.13 Commitments 18
Section 3.14 Insurance 20
Section 3.15 Intellectual Property 20
Section 3.16 Taxes 21
Section 3.17 Compliance with Laws 23
Section 3.18 Finder's Fee 23
Section 3.19 Litigation 23
Section 3.20 Condition of Fixed Assets 24
Section 3.21 Distributions and Repurchases 24
Section 3.22 Banking and Agency Relations 24
Section 3.23 Environmental Matters 24
Section 3.24 Affiliate Transactions 24
Section 3.25 Customers 25
Section 3.26 Absence of Certain Business Practices 25
Section 3.27 Disclosure 25
Article IV Purchaser's Representations and Warranties 25
Section 4.1 Organization and Good Standing 25
Section 4.2 Corporate Power and Authorization 25
Section 4.3 No Violation 26
Section 4.4 Government Authorities; Third Party Consents 26
Section 4.5 Availability of Funds 26
Section 4.6 Investigation by Purchaser 26
Section 4.7 Acquisition of Shares for Investment; Ability
to Evaluate and Bear Risk 27
Article V Sellers' Covenants 27
Section 5.1 Consummation of Agreement 27
Section 5.2 Business Operations 27
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Section 5.3 Access 28
Section 5.4 Notification of Certain Matters 28
Section 5.5 Hart Scott Rodino Notice 28
Section 5.6 Approvals of Third Parties 28
Section 5.7 Employee Matters 29
Section 5.8 Contracts 30
Section 5.9 Capital Assets 30
Section 5.10 Mortgages, Liens and Guaranties 30
Section 5.11 WIS Acquisition Proposals 30
Section 5.12 Intercompany Accounts 31
Section 5.13 Updated Financial Statements 31
Section 5.14 Schedules 31
Article VI Purchaser's Covenants 31
Section 6.1 Consummation of Agreement 31
Section 6.2 Hart Scott Rodino 31
Section 6.3 Approvals of Third Parties 32
Article VII Conditions Precedent to Purchaser's Obligations 32
Section 7.1 Representations and Warranties 32
Section 7.2 Covenants 32
Section 7.3 Legal Opinion 32
Section 7.4 Proceedings 32
Section 7.5 No Material Adverse Change 32
Section 7.6 Completion of Due Diligence 32
Section 7.7 Hart Scott Rodino 32
Section 7.8 Third Party Consents 32
Section 7.9 Closing Deliveries 33
Section 7.10 Resignations 33
Section 7.11 FIRPTA Certificate 33
Section 7.12 Release from Seller Credit Arrangements 33
Section 7.13 Assignment of Certain Liabilities 33
Section 7.14 Other Actions 33
Section 7.15 Transfer of Certain Related Assets 33
Article VIII Conditions Precedent to Sellers' Obligations 33
Section 8.1 Representations and Warranties 33
Section 8.2 Covenants 34
Section 8.3 Legal Opinion 34
Section 8.4 Proceedings 34
Section 8.5 Hart Scott Rodino 34
Section 8.6 Closing Deliveries 34
Section 8.7 Other Actions 34
Article IX Closing Deliveries 34
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Section 9.1 Deliveries of Sellers 34
Section 9.2 Deliveries of Purchaser 35
Article X Post Closing Matters 36
Section 10.1 Further Instruments of Transfer 36
Section 10.2 Transfer of Retirement Plan Assets and
Assumption of Benefit Plan Obligations 36
Section 10.3 Section 338(h)(10) Election 39
Section 10.4 Tax Returns and Audits 39
Section 10.5 Refunds and Carrybacks 43
Section 10.6 Insurance 43
Section 10.7 Workmen's Compensation and Automotive Claims 44
Section 10.8 Litigation Support 44
Section 10.9 Transition 45
Section 10.10 Covenants Not to Compete 45
Section 10.11 Office Lease 48
Section 10.12 Master Leases 48
Article XI Indemnification 48
Section 11.1 Survival 48
Section 11.2 Sellers' Indemnification Obligations 48
Section 11.3 Purchaser's Indemnification Obligations 49
Section 11.4 Limitations on Indemnification 50
Section 11.5 Procedure for Indemnification 50
Article XII Publicity 53
Article XIII Termination 53
Section 13.1 Termination 53
Section 13.2 Effect of Termination 54
Article XIV Nondisclosure of Confidential Information 55
Section 14.1 Nondisclosure 55
Section 14.2 Control of Confidential Information 55
Section 14.3 Confidentiality Obligations of Sellers
Following the Closing 55
Section 14.4 Limitations 55
Section 14.5 Legal Obligations 55
Section 14.6 Remedies 56
Article XV Miscellaneous 56
Section 15.1 Entire Agreement, Modification and Waiver 56
Section 15.2 Consents 56
Section 15.3 Assignment 56
Section 15.4 Parties in Interest; No Third Party Beneficiaries 56
Section 15.5 Severability 57
Section 15.6 Governing Law 57
Section 15.7 Interpretation 57
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Section 15.8 Gender and Number 58
Section 15.9 Notice 58
Section 15.10 No Waiver; Remedies 58
Section 15.11 Counterparts 59
Section 15.12 Costs, Expenses and Legal Fees 59
Section 15.13 Specific Performance 59
Section 15.14 Waiver of Jury Trial 59
EXHIBITS
2.2 Form of Agreement of Merger
7.3 Form of Opinion of Sellers' Counsel
7.13 Form of Assignment Agreement
8.3 Form of Opinion of Purchaser's Counsel
SCHEDULES
Section
Description
1.20 Cash Flow Adjustments
3.1 Qualification
3.2 Capitalization
3.5 No Violation
3.6 Governmental Authorities; Third Party Consents
3.7 Financial Statements
3.8 Liabilities and Obligations
3.9.1 Cash Compensation
3.9.2 Compensation Plans
3.9.4 Employment Agreements
3.9.5 Employee Policies and Procedures
3.9.6 Labor Compliance
3.10.1 Identification
3.10.8 PBGC
3.10.9 Retirees
3.10.11 Contributions and Funding
3.10.12 No Commitments
3.10.13 No Acceleration
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3.11 Absence of Certain Changes
3.12.1 Real Property
3.12.2 Personal Property
3.12.3 Leases
3.12.4 Related Assets
3.13.1 Commitments; Defaults
3.13.2 No Cancellation or Termination of Commitment.
3.14 Insurance
3.15.2 Owned Intellectual Property
3.15.3 Transfers or Encumbrances
3.15.4 Infringements
3.16.1 Filing of Tax Returns
3.16.2 Payment of Taxes
3.17 Compliance with Laws
3.19 Litigation
3.22 Banking and Agency Relations
3.24 Affiliate Transactions
3.25 Customers
5.7 Employee Matters
5.8 Contracts
5.9 Capital Assets
5.12. Intercompany Accounts
7.13 Seller Retained Litigation
7.15 Related Assets
10.2.1 Assumptions
10.2.6 Deferred Compensation Arrangements
10.12 Assets under Master Agreements
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made this 20th day of September,
2000 by and among HUFFY CORPORATION, an Ohio corporation ("Huffy"), HUFFY BRANDS
COMPANY, an Ohio corporation ("Brands"), WASHINGTON INVENTORY SERVICE, a
California corporation ("WIS" or the "Company"), WIS HOLDINGS CORP., a Delaware
corporation ("Purchaser"), and WIS ACQUISITION CORP., a California corporation
and a wholly-owned subsidiary of Purchaser ("Merger Sub"). Huffy and Brands are
sometimes collectively referred to as "Sellers".
BACKGROUND:
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Huffy is the parent and sole shareholder of Brands. Brands is the parent and
sole shareholder of WIS. WIS is engaged in the business of providing contracted
inventory services to retailers and other businesses with extensive inventory
holdings and providing Related Services to businesses (the "Business"). Sellers
wish to sell, and Purchaser wishes to purchase, WIS on the terms and conditions
set forth in this Agreement.
THEREFORE, and in consideration of the mutual promises and covenants set forth
herein, Sellers, WIS, Purchaser and Merger Sub hereby agree as follows:
ARTICLE I
DEFINITIONS
In addition to all other terms defined elsewhere in this Agreement, the
following terms shall have the meanings set forth below:
Section 1.1 "Affiliate" with respect to any person shall mean a person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such person. As used in this
definition of "Affiliate", the term "control" and any derivatives thereof mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract, or otherwise. Notwithstanding the foregoing,
the definition of "Affiliate" shall not include (a) Sellers' or Purchaser's
banks or other institutional lenders and (b) for purposes of Section 10.10, with
respect to Purchaser, Sterling Investment Partners, L.P., its general partner or
any of its limited partners, any stockholder of Purchaser (and any general or
limited partner of such stockholder) and any entity controlled by Sterling
Investment Partners, L.P. or any such stockholder.
Section 1.2 "Applicable Laws" shall mean, with respect to any person, any
statute, law, regulation, ordinance, rule, judgment, rule of common law, order,
decree, award, governmental approval, concession, grant, franchise, license,
agreement, directive, guideline, policy, requirement or other governmental
restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any Governmental
Authority, whether in effect as of the date hereof or at any time thereafter
prior to the Closing Date and in each case as amended through the Closing Date
(but not thereafter), applicable to such person or its subsidiaries or their
respective assets.
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Section 1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.4 "Confidential Information" shall mean all trade secrets and other
confidential and/or proprietary information of the particular person, including
but not limited to information derived from reports, investigations, research,
work in progress, codes, marketing and sales programs, financial projections,
cost summaries, pricing formulae, contract analyses, financial information,
projections, confidential filings with any state or federal agency, any
information contained in Sellers' Data Room, software source code and/or object
code, computer hardware configurations, and all other confidential concepts,
methods of doing business, ideas, materials or information prepared or performed
for, by or on behalf of such person by its employees, officers, directors,
agents, representatives or consultants.
Section 1.5 "Disclosure Schedules" shall mean the schedules of exceptions and
other disclosures attached hereto as of the date hereof, as such may be amended
or supplemented from time to time pursuant to the provisions hereof.
Section 1.6 "Environmental Laws" shall mean any federal, state or local law,
statute, rule, regulation, order or other requirement of law, whether in effect
as of the date hereof or at any time thereafter prior to the Closing Date and in
each case as amended through the Closing Date (but not thereafter) relating to
(a) the manufacture, transport, use, treatment, storage, disposal, release or
threatened release of Hazardous Substances, or (b) the protection of human
health or the environment (including, without limitation, natural resources, air
and surface or subsurface land or waters), including without limitation (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Sections 9601 et seq.), as amended (including without limitation as
amended pursuant to the Superfund Amendments and Reauthorization Act of 1986),
and regulations promulgated thereunder, (ii) the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Sections 6901 et seq., as amended), and
regulations promulgated thereunder, (iii) statutes, rules or regulations,
whether federal, state or local, applicable to WIS' assets or operations that
relate to asbestos or polychlorinated biphenyls, and (iv) the provisions
contained in any similar state statutes or regulations relating to environmental
matters applicable to WIS' assets or operations. "Hazardous Substance" means any
material or substance that is: (i) listed, classified or regulated pursuant to
or under any applicable Environmental Law, or (ii) any petroleum product or
by-product, asbestos, urea formaldehyde insulation or polychlorinated biphenyls.
Section 1.7 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
Section 1.8 "Governmental Authority" shall mean any foreign or domestic court,
administrative agency or commission or other governmental authority or
instrumentality, including without limitation the Pension Benefit Guaranty
Corporation.
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Section 1.9 "Indebtedness" shall mean, with respect to WIS (whether or not the
recourse of the lender is to the whole of the assets of WIS or only to a portion
thereof): (a) every liability of WIS which consists of or relates to a
liability: (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
other similar instruments (whether or not negotiable), (iii) for reimbursement
of amounts drawn under letters of credit, bankers' acceptances or similar
facilities issued for the account of WIS, (iv) issued or assumed as the deferred
purchase price of property or services (excluding contingent payment obligations
and accounts payable), and (v) relating to a capitalized lease obligation and
all debt attributable to sale/leaseback transactions of WIS; and/or (b) every
liability of others of the kind described in the preceding clause (a) which WIS
has guaranteed or which is otherwise its legal liability; provided, however,
that for purposes of Section 2.6 hereof the term "Indebtedness" shall not
include Permitted Cash Flow Indebtedness.
Section 1.10 "IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
Section 1.11 "knowledge", "have no knowledge of", "do not know of" or "to the
knowledge of" and similar phrases shall mean (i) in the case of a natural
person, the particular fact was known, or not known, as the context requires, to
such person after commercially reasonable investigation and inquiry by such
person, and (ii) in the case of an entity, the particular fact was known, or not
known, as the context requires, to any executive officer of such entity (which
in the case of the knowledge of Sellers shall include the executive officers of
WIS) after commercially reasonable investigation and inquiry.
Section 1.12 "Material Adverse Effect" shall mean any change, effect, event,
occurrence or state of facts that has had or is reasonably likely to have any
change or effect that is materially adverse to the applicable party's business,
operations, condition (financial or otherwise) or results of operations, taken
as a whole, in consideration of all relevant facts and circumstances.
Section 1.13 "Merger Consideration" shall mean $84,750,000, as adjusted pursuant
to Sections 2.6 and 2.7.
Section 1.14 "ordinary course of business" shall mean the usual and customary
way in which the applicable party has conducted its business in the past.
Section 1.15 "Permitted Cash Flow Indebtedness" shall mean all Indebtedness
incurred under Sellers' credit facility with Congress Financial Corporation
(Central) from September 3, 2000 through but not including the Closing Date in
order to finance the ordinary course operations of WIS in accordance with this
Agreement.
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Section 1.16 "person" shall mean any natural person, corporation, partnership,
joint venture, limited liability company, association, group, organization or
other entity.
Section 1.17 "Tax Returns" shall include all federal, state, local or foreign
income, excise, corporate, franchise, property, sales, use, payroll,
withholding, provider, environmental, duties, value added and other tax returns
(including information returns).
Section 1.18 "Taxes" shall mean taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including without
limitation all income taxes, franchise taxes, withholding taxes, unemployment
insurance taxes, social security taxes, sales and use taxes, excise taxes, real
and personal property taxes, stamp taxes, transfer taxes, workers' compensation
taxes, payroll taxes, capital taxes, net worth taxes, estimated taxes and other
similar taxes or governmental charges imposed on or payable to the United States
or any state, county, local or foreign government, subdivision or agency
thereof, together with all interest and penalties and other additions payable
with respect thereto, and including any liability for Taxes as a
successor-in-interest or transferee of another entity.
Section 1.19 "WIS Capital Stock" shall mean all of the shares of capital stock
of WIS which are authorized, issued and outstanding as of the Closing Date.
Section 1.20 "WIS Cash Flow" shall mean the difference between (i) all cash
receipts of WIS and (ii) cash disbursements of WIS in the ordinary course of
business, in each case from September 3, 2000 through but not including the
Closing Date and excluding in each case any borrowings or repayments of
Indebtedness. For purposes hereof, (i) all amounts paid into the WIS lockbox
account with Congress Financial Corporation (Central) shall be deemed a cash
receipt by WIS, (ii) cash disbursements shall not include any payments made in
respect of any workmen's compensation or automotive liability claims and any
other matters being assigned to Sellers pursuant to the Assignment Agreement,
and (iii) cash disbursements shall include WIS' allocable share of disbursements
made by Huffy on behalf of WIS for the services set forth on Schedule 1.20 of
the Disclosure Schedules, which also sets forth the method of allocation.
Section 1.21 "Working Capital" shall mean WIS' net accounts receivable (after
allowance for doubtful accounts and customer concerns and excluding any amounts
owed by any Seller or any of their Affiliates) plus prepaid expenses less
accounts payable and less accrued expenses, in each case arising in the ordinary
course of business. In computing accrued expenses, any accruals (including any
incurred but not reported claims resulting in a liability) at September 2, 2000
for workmen's compensation and automotive liability claims will be included as
accrued expenses in calculating Working Capital. The components used to
calculate Working Capital shall be determined in accordance with U.S. generally
accepted accounting principles.
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Section 1.22 Other Definitions. The following additional terms have the meaning
ascribed thereto in the Section indicated below next to such term:
<TABLE>
<CAPTION>
Term
Section
<S> <C>
Accountant Statement 2.6.4
Actuary 10.2.1
Advisors 14.1
Affiliated Group 3.16.1
Agreement of Merger 2.2
Allocation 10.3
Antitrust Division 5.5
Assignment Agreement 7.13
Benefit Plans 3.10.1
Brands Preamble
Business Preamble
Cash Compensation 3.9.1
CGCL 2.1
Closing 2.2
Closing Date 2.2
Closing Date Statement 2.6.3
Combined Income Tax Returns 10.4.9(c)
Combined Income Taxes 10.4.9(c)
Commitments 3.13.1
Company Preamble
Compensation Plans 3.9.2
Constituent Corporations 2.1
Copyrights 3.15.1
Damages 11.2.1
Deferred Compensation Obligations 10.2.6
Disclosing Party 14.1
Dispute Actuary 10.2.1
Effective Time 2.2
Employee Policies and Procedures 3.9.5
Employment Agreements 3.9.4
Estimate Statement 2.6.1
FASB 87 3.10.8
Financial Statements 3.7
Financing Letters 4.5
</TABLE>
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Forms 10.3
FTC 5.5
HSF Specified Customers 10.10.1
Huffy Preamble
Huffy Acquisition Proposal 5.11
Huffy Credit Facilities 7.12
Huffy Deferred Compensation Plan 10.2.6
Huffy Meeting 5.6.2
Huffy SERP 10.2.6
Indebtedness Certificate 2.6.1
Insurance Policies 3.14
Intellectual Property 3.15.1
LIBOR 2.7
Merger 2.1
Merger Sub Preamble
Participant Schedule 10.2.1
Patents 3.15.1
PBGC 3.10.8
PBO 10.2.1
Personal Property 3.12.2
Plan 10.2.1
Plan Participants 10.2.3
Post-September Combined Income Taxes 10.4.9(a)
Post-September Period 10.4.9(c)
Post-September Pro Forma Return 10.4.9(a)
Post-September Stand Alone Taxes 10.4.9(c)
Proxy Statement 5.6.2
Purchaser Preamble
Purchaser Benefit Period 2.6.1
Purchaser Expenses 13.2
Purchaser Indemnified Parties 11.2
Purchaser Restricted Activities 10.10.1(b)
Purchaser Restrictive Covenants 10.10.4
Purchaser Statement 2.6.3
Receiving Party 14.1
Related Assets 7.15
Related Services 10.10.1(a)
Restricted Period 10.10.1
Reviewing Accountants 2.6.4
SEC 5.6.2
Section 338(h)(10) Election 10.3
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Sellers Preamble
Seller Indemnified Party 11.3
Seller Refunds 10.5.1
Seller Retained Claims 10.7
Seller Retained Litigation 7.13
Seller Restricted Activities 10.10.1(a)
Seller Restrictive Covenants 10.10.4
Statement of Objection 2.6.3
Surviving Corporation 2.1
Tax Dispute Accountants 10.4.9(d)
Tax Dispute Resolution Mechanism 10.4.9(d)
Termination Fee 13.2
Territory 10.10.1
Trade Secrets 3.15.1
Trademarks 3.15.1
Transfer Amount 10.2.3
WIS Preamble
WIS Acquisition Proposal 5.11
WIS Balance Sheet 3.7
WIS Balance Sheet Date 3.7
WIS Permits 3.17
WIS Plan 10.2.2
ARTICLE II
TERMS OF SALE AND PAYMENT
Section 2.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the California
General Corporation Law (the "CGCL "), Merger Sub shall be merged with and into
WIS (the "Merger"), the separate corporate existence of Merger Sub shall cease
and WIS shall continue as the surviving corporation and as a wholly owned
subsidiary of Purchaser. WIS, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation." WIS and Merger
Sub are sometimes collectively referred to as the "Constituent Corporations."
Section 2.2 Closing and Effective Time. Unless this Agreement is earlier
terminated pursuant to Section 13.1, the closing of the Merger (the "Closing")
shall take place at 9:00 a.m. on such date as mutually agreed by the parties
hereto (the "Closing Date"), at the offices of Fulbright & Jaworski L.L.P., 666
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Fifth Avenue, New York, New York 10103. On the Closing Date, the parties hereto
shall cause the Merger to be consummated by filing an Agreement of Merger, in
substantially the form of Exhibit 2.2 hereto (the "Agreement of Merger"), with
the Secretary of State of the State of California in accordance with the
relevant provisions of the CGCL. The time the Merger becomes effective in
accordance with the provisions of the CGCL is referred to herein as the
"Effective Time".
Section 2.3 Deliveries at Closing. At the Closing, (i) the Sellers will deliver
to the Purchaser the various certificates, instruments and documents referred to
in Section 9.1 below, (ii) the Purchaser will deliver to the Sellers the various
certificates, instruments and documents referred to in Section 9.2 below, (iii)
Brands will deliver to the Purchaser stock certificates representing all of the
WIS Capital Stock, endorsed in blank or accompanied by duly executed stock
powers, and (iv) the Purchaser will deliver to the Sellers the Merger
Consideration in accordance with Section 2.5 below.
Section 2.4 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the CGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the
Constituent Corporations shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Constituent Corporations shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4.1 Articles of Incorporation; Bylaws. At the Effective Time, the Articles of
Incorporation of Merger Sub shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation, except that the name of the Surviving Corporation
shall be "Washington Inventory Service". The bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended.
2.4.2 Directors and Officers. The directors of Merger Sub immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and bylaws
of the Surviving Corporation. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
each to hold office in accordance with the bylaws of the Surviving Corporation.
Section 2.5 Consideration to Be Paid; Effect on WIS Capital Stock. Subject to
the terms and conditions of this Agreement, as of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of WIS Capital
Stock or the holders of capital stock of Merger Sub, the following shall occur:
2.5.1 each share of WIS Capital Stock will be canceled and extinguished and
automatically be converted into the right to receive 1/310,409 of the Merger
Consideration; and
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2.5.2 each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation. Each certificate evidencing shares of common stock of Merger Sub
shall after the Effective Time evidence ownership of shares of the Surviving
Corporation.
As of and after the Effective Time, no holder of any certificate that
immediately before the Effective Time represented shares of WIS Capital Stock
shall have any rights as a holder of WIS Capital Stock other than to receive the
consideration specified in this Section 2.5 in accordance with the terms of this
Agreement.
Section 2.6 Post-Closing Adjustments.
2.6.1 At least five (5) business days prior to the Closing Date, Sellers shall
prepare and deliver to Purchaser (a) a good faith estimate (the "Estimate
Statement"), prepared in accordance with U.S. generally accepted accounting
principles, applied in a manner consistent with the preparation of the Financial
Statements referred to in Section 3.7 hereof (except as otherwise expressly
provided in the definition of (i) Working Capital in calculating Working Capital
and (ii) WIS Cash Flow in calculating WIS Cash Flow) and accompanied by a
certificate of the chief financial officer of Sellers to that effect, of the (i)
aggregate amount of the Working Capital of WIS at September 2, 2000 and (ii) WIS
Cash Flow for the period (the "Purchaser Benefit Period") from September 3, 2000
through but not including the Closing Date, and (b) a written certificate of the
chief financial officer of Sellers that WIS will not have any Indebtedness
immediately prior to the closing of the transactions contemplated hereby on the
Closing Date or, if WIS will have Indebtedness, stating the amount of such
Indebtedness (the "Indebtedness Certificate").
2.6.2. The Merger Consideration to be paid at the Closing shall be reduced by
the amount of the positive WIS Cash Flow or increased by the amount of the
negative WIS Cash Flow, as the case may be, shown on the Estimate Statement. In
addition, if the Estimate Statement shows that Working Capital at September 2,
2000 is less than $3,750,000, or the Indebtedness Certificate shows that WIS
will have Indebtedness as of the Closing Date, the Merger Consideration paid at
the Closing will be adjusted as follows:
(a) The Merger Consideration shall be reduced by one dollar for each dollar that
the Working Capital is less than $3,750,000; and
(b) The Merger Consideration shall be reduced by one dollar for each dollar of
Indebtedness shown on
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the Indebtedness Statement.
2.6.3 As promptly as practicable thereafter, but in no event more than sixty
(60) days following the Closing Date, Purchaser shall prepare or cause to be
prepared and shall deliver to Sellers a reasonably detailed statement setting
forth (i) the Working Capital of WIS at September 2, 2000, (ii) the WIS Cash
Flow for the Purchaser Benefit Period and (iii) the Indebtedness of WIS as of
the close of business on the Closing Date (determined on a pro forma basis as
though the parties had not consummated the transactions contemplated by this
Agreement) (the "Purchaser Statement"). The Purchaser will prepare the Purchaser
Statement consistent with the basis of the preparation of the Estimate Statement
and the Indebtedness Certificate. Unless within thirty (30) days after its
receipt of the Purchaser Statement Sellers shall deliver to Purchaser a
reasonably detailed statement describing their objections to the Purchaser
Statement (a "Statement of Objection"), the amount of the Working Capital of WIS
at September 2, 2000, the WIS Cash Flow for the Purchaser Benefit Period and the
Indebtedness of WIS as of the Closing Date shall be final and binding on the
parties hereto and the Purchaser Statement shall be the final statement
hereunder (the "Closing Date Statement").
2.6.4 If Sellers shall deliver to Purchaser a timely Statement of Objection,
Purchaser and Sellers and their respective independent accountants shall
negotiate in good faith and use reasonable best efforts to resolve any disputes.
If a resolution is reached, such resolution shall be final and binding on the
parties and Purchaser and Sellers shall set forth the Working Capital of WIS at
September 2, 2000, the WIS Cash Flow for the Purchaser Benefit Period and the
Indebtedness of WIS as of the Closing Date on a mutually acceptable statement
and such statement shall be the Closing Date Statement. If a final resolution is
not reached within thirty (30) days after Sellers have submitted their Statement
of Objection, any remaining disputes shall be resolved by a third firm of
independent accountants (the "Reviewing Accountants") selected jointly by the
parties. The Reviewing Accountants shall be instructed to resolve any matters in
dispute as promptly as practicable, but in no event more than thirty (30) days,
and set forth their resolution in a statement setting forth the Working Capital
of WIS at September 2, 2000, the WIS Cash Flow for the Purchaser Benefit Period
and the Indebtedness of WIS as of the Closing Date (the "Accountant Statement").
In such event, the determination of the Reviewing Accountants shall be final and
binding on the parties hereto and the Accountant Statement shall be the Closing
Date Statement.
2.6.5 Sellers and Purchaser each shall pay one-half of the fees and expenses of
the Reviewing Accountants. Sellers and Purchaser shall cooperate with each other
and the Reviewing Accountants in connection with the matters contemplated by
this Section 2.6, including Purchaser's preparation of and Sellers' review of
the Closing Date Statement, including by furnishing such information and access
to books, records (including accountants' work papers), personnel and properties
as may be reasonably requested.
2.6.6 If the Working Capital of WIS at September 2, 2000 as shown on the Closing
Date Statement is less than $3,750,000, or if the WIS Cash Flow for the
Purchaser Benefit Period or the Indebtedness of WIS as of the Closing Date, in
each case as shown on the Closing Date Statement, differs from the WIS
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Cash Flow or Indebtedness shown on the Estimate Statement and Indebtedness
Certificate, respectively, then the Merger Consideration shall be recomputed as
set forth in Section 2.6.2, but using the Working Capital, WIS Cash Flow and
Indebtedness as shown on the Closing Date Statement rather than as shown on the
Estimate Statement or the Indebtedness Certificate, as the case may be. If the
Merger Consideration as computed pursuant to this Section 2.6.6 is greater than
the amount paid to Sellers at the Closing, then Purchaser shall immediately pay
the difference to Sellers by wire transfer of immediately available funds,
together with interest as computed in accordance with Section 2.7. If the Merger
Consideration as computed pursuant to this Section 2.6.6 is less than the amount
paid to Sellers at the Closing, the Sellers shall immediately refund the
difference to the Purchaser, together with (i) an amount equal to the interest,
if any, paid on such difference at the Closing pursuant to Section 2.7 and (ii)
an amount equal to interest on the difference from the Closing Date to the date
of payment computed in accordance with clause (ii) of Section 2.7, by wire
transfer of immediately available funds.
Section 2.7 Interest Adjustment. In the event the Closing occurs after October
5, 2000, Purchaser shall pay interest on the Merger Consideration at an annual
rate (based on the number of days elapsed to, but not including, the Closing
Date over a year of 365 days) computed as follows:
(i) For the period from October 6, 2000 through and including October 20, 2000,
LIBOR plus 300 basis points; and
(ii) For the period from October 21, 2000 through but excluding the Closing
Date, LIBOR plus 500 basis points.
For purposes hereof, "LIBOR" shall mean the London Interbank Offered Rate for
one month borrowings on the first day of the period, as reported in The Wall
Street Journal. Notwithstanding the foregoing, if Huffy determines that the
approval of its shareholders of this Agreement and the transactions contemplated
hereby is required under Ohio law, the Purchaser shall not be required to pay
interest on the Merger Consideration for the period beginning on the date of
such determination and ending on the date the approval of Huffy's shareholders
is obtained.
ARTICLE III
SELLERS' REPRESENTATIONS AND WARRANTIES
The Sellers, jointly and severally, represent and warrant to Purchaser that,
except as may be set forth in the Disclosure Schedules, the following are true
and correct as of the date hereof:
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Section 3.1 Organization and Good Standing; Qualification. WIS is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, with all requisite corporate power and authority to carry
on the business in which it is engaged, and to own the properties it owns. WIS
is duly qualified and licensed to do business in the other jurisdictions set
forth in Section 3.1 of the Disclosure Schedules. WIS does not have any assets,
employees or offices in any jurisdiction other than the jurisdictions set forth
in Section 3.1 of the Disclosure Schedules. Except as set forth in Section 3.1
of the Disclosure Schedules, WIS does not own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any person.
Section 3.2 Capitalization. The WIS Capital Stock consists of 310,409 shares of
common stock, par value $1.00 per share. The total authorized capital stock of
WIS consists of 968,650 shares of common stock, par value $1.00 per share, of
which only the WIS Capital Stock is issued and outstanding. Except as set forth
in Section 3.2 of the Disclosure Schedules, Brands owns, of record and
beneficially, the WIS Capital Stock free and clear of all security interests,
liens, adverse claims, encumbrances, equities, proxies and shareholders'
agreements. Each outstanding share of WIS Capital Stock has been legally and
validly issued and is fully paid and nonassessable. No shares of WIS Capital
Stock have been issued or disposed of in violation of the preemptive rights,
rights of first refusal or similar rights of any of WIS' stockholders. There
exist no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, any of the authorized or
outstanding securities of WIS, and no option, warrant, call, conversion right or
commitment of any kind exists which obligates WIS to issue any of its authorized
but unissued capital stock or obligates Brands to sell any of the WIS Capital
Stock. Except as set forth in Section 3.2 of the Disclosure Schedules, WIS has
no bonds, debentures, notes or other obligations the holders of which have the
right to vote (or are convertible into or exercisable for securities having the
right to vote) on any matter.
Section 3.3 Corporate Records. The copies of the Articles of Incorporation and
Bylaws, and all amendments thereto, of WIS that have been delivered or made
available to Purchaser are true, correct and complete copies thereof, as
currently in effect. The minute books of WIS, copies of which have been
delivered or made available to Purchaser, contain accurate minutes of all
meetings of, and accurate consents to all actions taken without meetings by, the
Board of Directors (and any committees thereof) and the stockholders of WIS
since its formation.
Section 3.4 Authorization and Validity. Each of the Sellers and WIS has the
corporate power and authority to execute and deliver this Agreement and the
other agreements contemplated hereby, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Sellers and WIS of this Agreement
and the other agreements contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
required corporate action. This Agreement has been duly executed and delivered
by each Seller and by WIS and constitutes the legal, valid and binding
obligation of each Seller and WIS, enforceable against each Seller and WIS in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
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Section 3.5 No Violation. Except as set forth in Section 3.5 of the Disclosure
Schedules, neither the execution, delivery or performance of this Agreement or
the other agreements contemplated hereby nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with, or result in
a violation or breach of the terms, conditions or provisions of, or constitute a
default under, the Articles of Incorporation or Bylaws of WIS or either Seller,
(ii) conflict with, or result in a violation or breach of the terms, conditions
or provisions of or in the loss of benefits under, or constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under, any
agreement, indenture, right of first refusal, non-competition agreement or other
instrument under which WIS or either Seller is bound or to which any of the
assets of WIS (including the Related Assets) or the WIS Capital Stock are
subject, or result in the creation or imposition of any security interest, lien,
charge or encumbrance upon any of the assets of WIS (including the Related
Assets) or the WIS Capital Stock, (iii) violate or conflict with, or result in
the loss of any benefit under, any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
or (iv) result in any suspension, revocation, impairment, forfeiture or
non-renewal of any WIS Permit which is material to the Business.
Section 3.6 Governmental Authorities; Third Party Consents. The Sellers and WIS
are not required to submit any notice, report or other filing with any
Governmental Authority in connection with the execution or delivery by Sellers
and WIS of this Agreement or the consummation of the transactions contemplated
hereby, except for a Hart Scott Rodino notification, notification under the
antitrust laws of Brazil and the filing of the Agreement of Merger, and no
consent, approval or authorization of any Governmental Authority or other person
is required to be obtained in connection with the execution, delivery and
performance of this Agreement or the transactions contemplated hereby except as
set forth in Section 3.6 of the Disclosure Schedules.
Section 3.7 Financial Statements. The Sellers have delivered to the Purchaser
complete and correct copies of the audited balance sheet and related statements
of income and cash flows of WIS as of and for the year ended December 31, 1999,
and the unaudited balance sheets and related statements of income and cash flows
of WIS as of and for the year ended December 31, 1998 and the six-month periods
ended July 3, 1999 and July 1, 2000 (collectively, the "Financial Statements").
The "WIS Balance Sheet" shall mean the balance sheet of WIS at July 1, 2000, and
the "WIS Balance Sheet Date" shall mean July 1, 2000. The Financial Statements
have been derived from the books and records of WIS. The Financial Statements
were prepared in accordance with U.S. generally accepted accounting principles,
applied on a consistent basis with prior periods, are complete and correct in
all material respects and fairly present the financial condition and results of
operations of WIS as of the dates and for the periods indicated, except as set
forth in Section 3.7 of the Disclosure Schedules. Except as set forth in Section
3.7 of the Disclosure Schedules, the Business has been conducted solely through
WIS during the period covered by the Financial Statements and during such period
WIS conducted no business other than the Business. All material liabilities and
obligations of WIS, whether absolute, accrued, contingent or otherwise, whether
direct or indirect, and whether due or to become due, which existed at the date
of such Financial Statements have been disclosed in the balance sheets included
in the Financial Statements or in notes to the Financial Statements to the
extent such liabilities were required, under U.S. generally accepted accounting
principles, to be so disclosed. Except as set forth in Section 3.7 of the
Disclosure Schedules, the balance sheets included in the Financial Statements do
not include any material assets or liabilities not intended to constitute a part
of the Business after giving effect to the transactions contemplated
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hereby. Except as set forth in Section 3.7 of the Disclosure Schedules, the
statements of income and cash flows included in the Financial Statements do not
reflect the operations of any entity or business not intended to constitute a
part of the Business after giving effect to all such transactions and reflect
all costs that historically have been incurred by the Business. Except as set
forth in Section 3.7 of the Disclosure Schedules, the statements of operations
included in the Financial Statements do not contain any material items of
special or non-recurring income or other income not earned, or omit any material
item of expense incurred, in each case in the ordinary course of business except
as expressly specified therein.
All notes and accounts receivable of WIS are reflected properly on its books and
records, are valid receivables subject to no setoffs or counterclaims, are
current in all material respects and are collectible in accordance with their
terms at their recorded amounts (by use of WIS' normal collection methods),
subject only to the reserve for bad debts and customer concerns set forth on the
face of the WIS Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of WIS. WIS has performed all obligations with respect
thereto which it was obligated to perform on or prior to the date hereof.
WIS has records that accurately and validly reflect its transactions and
accounting controls sufficient to insure that such transactions are (i) in all
material respects executed in accordance with its management's general or
specific authorization and (ii) recorded in conformity with U.S. generally
accepted accounting principles.
The Disclosure Schedules set forth all amounts (i) owed by WIS to Sellers or any
of their Affiliates and (ii) owed by either Seller or any of their Affiliates to
WIS.
On the Closing Date, WIS will have no Indebtedness.
Section 3.8 Liabilities and Obligations. The Financial Statements reflect all
liabilities of WIS, accrued, contingent or otherwise, prepared using U.S.
generally accepted accounting principles, except for liabilities and obligations
incurred in the ordinary course of business since the WIS Balance Sheet Date.
Except as set forth in the WIS Balance Sheet or in Section 3.8 of the Disclosure
Schedules, WIS is not obligated in any way to provide funds in connection with
any guarantee of, or to assume, any debt, obligation or dividend of any other
person, corporation, association, partnership, limited liability company, joint
venture, trust or other entity. Sellers do not know of any valid basis for the
assertion of any other claims against WIS or any other liabilities of any nature
or for any amount, except as may arise in connection with an accrual basis
accounting treatment of maintenance contracts and liabilities incurred in the
ordinary course of business, except as set forth in Section 3.8 of the
Disclosure Schedules.
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Section 3.9 Employee Matters.
3.9.1 Cash Compensation. Section 3.9.1 of the Disclosure Schedules contains a
complete and accurate list of the names, titles and annual cash compensation as
of August 16, 2000, including without limitation wages, salaries, bonuses
(discretionary and formula) and other cash compensation (the "Cash
Compensation") of the ten most highly compensated employees of WIS during the
last 12 months. In addition, Section 3.9.1 of the Disclosure Schedules contains
a complete and accurate description of (i) all increases in Cash Compensation of
such ten employees of WIS during the current fiscal year and the immediately
preceding fiscal year and (ii) any promised increases in Cash Compensation of
such employees of WIS that have not yet been effected.
3.9.2 Compensation Plans. Section 3.9.2 of the Disclosure Schedules contains a
complete and accurate list of all compensation plans, arrangements or practices
(the "Compensation Plans") sponsored by WIS or to which WIS contributes on
behalf of its current or former employees or other personnel. The Compensation
Plans include, without limitation, all plans, arrangements or practices that
provide for severance, retention, change in control, termination, supplemental
retirement or fringe benefits or pay, deferred compensation, incentive, bonus or
performance awards, and stock ownership or stock options. Sellers have delivered
to Purchaser a copy of each written Compensation Plan and a written description
of each unwritten Compensation Plan.
3.9.3 Right to Amend or Terminate Plans. Each of the Compensation Plans, Benefit
Plans and Employee Policies and Procedures can be unilaterally terminated or
amended at will by WIS after the Closing Date without participant consent and
with no penalty or required payment, other than with respect to vested pension
benefits accrued as of, or claims for welfare benefits incurred prior to, the
date of such amendment or termination.
3.9.4 Employment Agreements. Except as set forth in Section 3.9.4 of the
Disclosure Schedules, WIS is not a party to any employment agreement
("Employment Agreements") with any of its employees or other service providers.
Employment Agreements include without limitation any employee leasing agreement,
employee services agreement, management, consulting, confidentiality, severance,
noncompetition or similar agreement that (i) would, as a result of the
consummation of the transactions contemplated hereby, obligate the Company to
increase the rate at which it pays money or provides benefits to any person over
the rate being paid or benefits being provided immediately prior to the Closing,
(ii) provides for an automatic increase in pay or benefits or (iii) obligates
the Company to pay money or provide benefits to any person in any amount after
the termination of such person's employment for any reason.
3.9.5 Employee Policies and Procedures. Section 3.9.5 of the Disclosure
Schedules contains a complete and accurate list of all employee manuals and
handbooks and all material policies, procedures and work-
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related rules (the "Employee Policies and Procedures") that apply to employees
of WIS. Sellers have delivered to Purchaser a copy of all written Employee
Policies and Procedures and a written description of all material unwritten
Employee Policies and Procedures.
3.9.6 Labor Compliance. WIS has been and is in material compliance with all
Applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and occupational health and safety.
WIS is not liable for any arrears of wages or penalties for failure to comply
with any of the foregoing. Neither the Sellers nor WIS has instituted any
"freeze" of, or delayed or deferred the grant of, any cost-of-living or other
salary adjustments for any of its employees. WIS has not engaged in any unfair
labor practice or discriminated on the basis of race, color, religion, sex,
national origin, age, disability or handicap in its employment conditions or
practices. Except as set forth in Section 3.9.6 of the Disclosure Schedules,
there are no (i) unfair labor practice charges or complaints or racial, color,
religious, sex, national origin, age, disability or handicap discrimination
charges or complaints pending or, to the knowledge of Sellers, threatened
against WIS before any Governmental Authority (nor does any valid basis therefor
exist) or (ii) existing or, to Sellers' knowledge, threatened labor strikes,
disputes, grievances, controversies or other labor troubles affecting WIS (nor
does any valid basis therefor exist).
3.9.7 Unions. WIS has never been a party to any agreement with any union, labor
organization or collective bargaining unit. No employees of WIS are represented
by any union, labor organization or collective bargaining unit and no activities
the purpose of which is to achieve such representation of all or some of such
employees are, to Sellers' knowledge, threatened or ongoing.
3.9.8 Aliens. To Sellers' knowledge, all U.S.-based employees of WIS are
citizens of, or are authorized in accordance with federal immigration laws to be
employed in, the United States.
Section 3.10 Employee Benefit Plans.
3.10.1 Identification. Section 3.10.1 of the Disclosure Schedules contains a
complete and accurate list of all employee benefit plans (within the meaning of
Section 3(3) of ERISA, whether or not subject to ERISA) sponsored, maintained or
participated in by WIS or to which WIS contributes (or has an obligation to
contribute) on behalf of its current or former employees (or their beneficiaries
or dependents) and all employee benefit plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof (the "Benefit Plans"). Sellers have delivered to Purchaser copies of
all plan documents, determination letters, pending determination letter
applications, trust instruments, insurance contracts, administrative services
contracts, annual reports and all schedules thereto, actuarial valuations,
summary plan descriptions, summaries of material modifications, administrative
forms and other documents that constitute a part of or are incident to the
administration of the Benefit Plans.
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3.10.2 Administration. Each Benefit Plan and Compensation Plan has been
administered and maintained in compliance in all material respects with its
terms and all Applicable Laws. WIS and Sellers have made all necessary filings,
reports and disclosures with respect to all applicable Compensation Plans and
Benefit Plans, except where failure to make such filings, reports and
disclosures would not, individually or in the aggregate, result in a Material
Adverse Effect on WIS.
3.10.3 Examinations. WIS has not received any notice that any Benefit Plan is
currently the subject of an audit, investigation, enforcement action or other
similar proceeding conducted by any state or federal agency and, to Sellers'
knowledge, no such audit, investigation, action or proceeding is threatened.
3.10.4 Prohibited Transactions. No prohibited transactions (within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA) have occurred with
respect to any Benefit Plan and WIS has not engaged in any prohibited
transaction.
3.10.5 Claims and Litigation. No pending or, to Sellers' knowledge, threatened,
claims, suits or other proceedings exist with respect to any Benefit Plan,
Compensation Plan or Employment Agreement other than routine benefit claims
under Compensation Plans or Benefit Plans filed by participants or
beneficiaries.
3.10.6 Excise Taxes. WIS has no liability, direct or indirect, to pay excise
taxes with respect to any Benefit Plan under applicable provisions of the Code
or ERISA.
3.10.7 Multiemployer Plans. WIS is not and has never been obligated to
contribute to a multiemployer plan within the meaning of Section 3(37) of ERISA
and during the last six years has not incurred any withdrawal liability.
3.10.8 PBGC. Except as described in Section 3.10.8 of the Disclosure Schedules,
none of the Benefit Plans is subject to the requirements of Section 302 or Title
IV of ERISA, or Section 412 of the Code. No direct or indirect liability
(contingent or otherwise) under Title IV or Section 302 of ERISA or Section 412
of the Code has been, is or will be incurred by WIS which has not been satisfied
in full prior to the Closing. No event has occurred and no condition exists that
could reasonably be expected to result in WIS incurring any liability, direct or
indirect, contingent or otherwise, under Title IV or Section 302 of ERISA or
Section 412 of the Code. All premiums due to the Pension Benefit Guaranty
Corporation (the "PBGC") by WIS, the Sellers or any entity that would be deemed
to be a single employer with WIS or the Sellers under Section 414 of the Code
have been paid on a timely basis. No security under Section 401(a)(29) of the
Code has been or could be expected to be required with respect to any Benefit
Plan.
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Except as described in Section 3.10.8 of the Disclosure Schedules, with
respect to each Benefit Plan that is subject to Title IV of ERISA, the present
value of all "benefit liabilities" (whether or not vested) (within the meaning
of Section 4001(a)(16) of ERISA) based on the actuarial assumptions used for
funding purposes (1) set forth in the most recent actuarial report, (2) as
required by the PBGC for the Benefit Plan's termination and (3) as set forth in
Financial Accounting Standards Board SFAS No. 87 ("FASB 87") using the
methodology under FASB 87 to calculate the projected benefit obligation, did not
exceed as of the most recent Benefit Plan actuarial valuation date the then
current fair market value, and does not exceed the current fair market value, of
the assets of such Benefit Plan and no amendments or other modifications to such
Benefit Plan or its actuarial assumptions were adopted since the date of such
Benefit Plan's most recent actuarial report. No "reportable event" within the
meaning of Section 4043(b) of ERISA has occurred or will occur or is continuing
with respect to any Benefit Plan, and the consummation of the transactions
contemplated by this Agreement will not constitute or directly or indirectly
result in a reportable event.
3.10.9 Retirees. Except as set forth in Section 3.10.9 of the Disclosure
Schedules, WIS has no obligation or commitment to provide medical, dental, life
or other welfare insurance benefits to or on behalf of any of its employees who
may retire or terminate or any of its former employees who have retired or
terminated except as may be required pursuant to the continuation of coverage
provisions of Section 4980B of the Code and Sections 601 through 608 of ERISA.
Except as set forth in Section 3.10.9 of the Disclosure Schedules, no event,
circumstance or condition exists that would prevent or hinder WIS from
unilaterally amending or terminating the benefits set forth in Section 3.10.9 of
the Disclosure Schedules without penalty or liability (except for claims
incurred prior to such amendment or termination).
3.10.10 Qualified Status. Each Benefit Plan intended to qualify under Section
401(a) of the Code is and, since its inception, has been so qualified (and would
be so qualified as of the Closing Date if, under Section 414(r) of the Code, the
Company were treated as a "separate line of business") and a determination
letter has been issued by the IRS to the effect that each such Benefit Plan is
so qualified and that each trust forming a part of any such Benefit Plan is
exempt from Tax pursuant to Section 501(a) of the Code and, to Sellers'
knowledge, no circumstances exist which would adversely affect such
qualification or exemption. No Benefit Plan is funded by a trust described in
Section 501(c)(9) of the Code.
3.10.11 Contributions and Funding. Except as set forth in Section 3.10.11 of the
Disclosure Schedules, all payments required by any Compensation Plan or Benefit
Plan or by any agreement or by law (including, without limitation, all
contributions, insurance premiums and inter-company charges) with respect to all
periods through the Closing Date shall have been made prior to the Closing (on a
pro-rata basis where such payments are otherwise discretionary at year end). WIS
has no unfunded liabilities pursuant to any Benefit Plan that is not intended to
be qualified under Section 401(a) of the Code, except as otherwise reflected in
the Financial Statements.
3.10.12 No Commitments. Except as set forth in Section 3.10.12 of the Disclosure
Schedules, there is no plan or commitment, whether legally binding or not, to
establish any new Compensation Plan or Benefit
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Plan, to enter into any Employment Agreement or to modify or to terminate any
Compensation Plan or Benefit Plan or Employment Agreement (except to the extent
required by law or as required by this Agreement), nor has any intention to do
any of the foregoing been communicated to any employee of WIS.
3.10.13 No Acceleration. Except as described in Section 3.10.13 of the
Disclosure Schedules or as otherwise expressly contemplated hereby, the
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or in conjunction with another event, such as a
termination of employment or other services) (i) result in any additional
payment by WIS (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting (other than vesting of accrued benefits
under any Benefit Plan intended to qualify under Section 401(a) of the Code, but
solely to the extent such vesting is required in connection with a termination
or partial termination of any such plan within the meaning of Section 411(d)(3)
of the Code), distribution, increase in benefits or an obligation to fund
benefits with respect to any employee of WIS, or (ii) result in the triggering
or imposition of any restrictions or limitations on the right of WIS or the
Purchaser to amend or terminate any Benefit Plan or Compensation Plan. To the
Sellers' knowledge, no officer of WIS has any plans to terminate his or her
employment with WIS, and no key employee of WIS (as identified in Section 3.9.1
of the Disclosure Schedules) has advised Sellers or WIS that he or she has any
plans to terminate their employment with WIS.
Section 3.11 Absence of Certain Changes. Except as set forth in Section 3.11 of
the Disclosure Schedules, since the WIS Balance Sheet Date, WIS has operated the
Business only in the ordinary course of business and has not:
3.11.1 suffered a Material Adverse Effect, whether or not caused by any
deliberate act or omission of WIS or a Seller;
3.11.2 contracted for the purchase of any capital asset(s) having a cost in
excess of $50,000 individually or $150,000 in the aggregate, or made any single
capital expenditure in excess of $50,000 or aggregate capital expenditures in
excess of $150,000;
3.11.3 incurred any Indebtedness (other than short-term borrowings in the
ordinary course of business), or issued or sold any debt securities;
3.11.4 incurred any liability or obligation, or discharged any material
liabilities or obligations, except in each case in the ordinary course of
business;
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3.11.5 paid any amount on any Indebtedness prior to the due date except in the
ordinary course of business, forgiven or canceled any claims or any debt in
excess of $50,000 individually or $150,000 in the aggregate, or released or
waived any rights or claims except in the ordinary course of business;
3.11.6 mortgaged, pledged or subjected to any security interest, lien, lease or
other charge or encumbrance any of its properties or assets (other than
statutory liens arising in the ordinary course of business that do not
materially detract from the value or interfere with the use of such properties
or assets);
3.11.7 suffered any damage or destruction to or loss of any assets (whether or
not covered by insurance) that has, individually or in the aggregate, a book
value in excess of $50,000;
3.11.8 acquired or disposed of any assets having an aggregate value in excess of
$50,000, except in the ordinary course of business;
3.11.9 written up or written down the carrying value of any of its assets, other
than accounts receivable in the ordinary course of business;
3.11.10 changed the costing system or depreciation methods of accounting for its
assets in any material respect;
3.11.11 made any material change in its accounting methods, principles or
practices;
3.11.12 lost or terminated, or suffered any material adverse change in its
relationship with, any (a) customer listed on Section 3.25 of the Disclosure
Schedules or that accounted for more than three percent (3%) of WIS' revenues in
the year ended December 31, 1999 or the six months ended July 1, 2000, or is
reasonably expected by Sellers to account for more than three percent (3%) of
WIS' revenues for the year ended December 31, 2000, or (b) supplier that,
individually or in the aggregate, had resulted or may result in a Material
Adverse Effect;
3.11.13 increased the compensation or benefits of any of the employees
referenced in Section 3.9.1 above;
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3.11.14 increased the compensation or benefits of any employee (except for
increases in the ordinary course of business consistent with past practice),
increased benefits under any Compensation Plan or Benefit Plan or hired any new
employee who is expected to receive annualized base salary of at least $100,000;
3.11.15 adopted, amended, modified or terminated any bonus, profit-sharing,
incentive, severance or other plan, contract or commitment for the benefit of
any of its directors, officers and employees (or taken any action with respect
to any other Benefit Plan);
3.11.16 other than in the ordinary course of business consistent with past
practice, increased the benefits payable under or established any Benefit Plan
or in any other fashion increased the compensation payable or to become payable
to any officers or employees of WIS, or entered into any contract or other
binding commitment to effect any of the foregoing;
3.11.17 formed or acquired or disposed of any interest in any corporation,
partnership, joint venture or other entity other than in the ordinary course of
business;
3.11.18 redeemed, purchased or otherwise acquired, or sold, granted or otherwise
disposed of, directly or indirectly, any of its capital stock or securities or
any rights to acquire such capital stock or securities, or agreed to change the
terms and conditions of any such capital stock, securities or rights;
3.11.19 entered into any agreement outside the ordinary course of business or
providing for total payments by WIS in excess of $50,000 in any 12 month period
with any person or group, or modified or amended in any material respect the
terms of any such existing agreement, except in the ordinary course of business;
3.11.20 delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
3.11.21 paid (by way of dividend or otherwise), loaned or advanced any amount
to, or sold, transferred or leased any property or asset (real, personal or
mixed, tangible or intangible) to, any Seller or any Affiliate of any Seller, or
entered into any contract, agreement or commitment with any Seller or any
Affiliate of any Seller (other than in each case advancement or reimbursement of
travel expenses in the ordinary course of business); or
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3.11.22 entered into any other commitment or transaction or experienced any
other event that would materially interfere with its performance under this
Agreement or any other agreements or document executed or to be executed
pursuant to this Agreement, or otherwise that, individually or in the aggregate,
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
Section 3.12 Title; Leased Assets.
3.12.1 Real Property. WIS does not possess any leased or owned interest in real
property except as described in Section 3.12.1 of the Disclosure Schedules. The
leased real property described in the Disclosure Schedules constitutes the only
real property used in or necessary for the conduct of WIS' business.
3.12.2 Personal Property. Except as set forth in Section 3.12.2 of the
Disclosure Schedules, WIS has good, valid and marketable title to all the
personal property owned by WIS, all of which is reflected in the Financial
Statements (collectively, the "Personal Property"). The Personal Property, any
personal property leased by WIS, and the Related Assets constitute the only
personal property used in or necessary for the conduct of the Business. On the
Closing Date, WIS' interest in the Personal Property shall be free and clear of
all security interests, liens, claims and encumbrances, other than statutory
liens arising in the ordinary course of business that do not materially detract
from the value or interfere with the use of such properties or assets.
3.12.3 Leases. Section 3.12.3 of the Disclosure Schedules sets forth a list and
brief description of (i) all leases of real property and (ii) leases of personal
property involving rental payments within any 12 month period in excess of
$50,000, in either case to which WIS is a party, either as lessor or lessee. All
leases of real and personal property to which WIS is a party, whether or not
listed on the Disclosure Schedules, are valid and enforceable in accordance with
their respective terms except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies. WIS has a valid leasehold interest in all
leased real and personal property. WIS enjoys peaceful and undisturbed
possession under its leases. The Sellers have delivered or made available to the
Purchaser complete and correct copies of all leases, including all amendments
thereto.
3.12.4 Related Assets. Except as set forth in Section 3.12.4 of the Disclosure
Schedules, Sellers have good, valid and marketable title to the Related Assets.
On the Closing Date, Sellers' interest in the Related Assets shall be free and
clear of all security interests, liens, claims and encumbrances, other than
statutory liens arising in the ordinary course of business that do not
materially detract from the value or interfere with the use of such properties
or assets.
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Section 3.13 Commitments.
3.13.1 Commitments; Defaults. Any of the following to which WIS is a party or is
bound by, or which any of the shares of WIS Capital Stock are subject to, or
which the assets or the business of WIS are bound by, whether or not in writing,
are listed in Section 3.13.1 of the Disclosure Schedules (collectively
"Commitments"):
(a) any partnership, joint venture and similar agreements involving a sharing of
profits or expenses;
(b) any guaranty or suretyship, indemnification or contribution agreement or
performance bond;
(c) any debt instrument, loan agreement, guarantee, security or pledge agreement
or other obligation relating to Indebtedness or money lent or to be lent to
another;
(d) any contract to purchase real property;
(e) any agreement with sales or commission agents, public relations or
advertising agencies, (other than in connection with this Agreement and the
transactions contemplated hereby) involving total payments within any 12-month
period in excess of $50,000 and which is not terminable on 30 days' notice or
without penalty;
(f) any agreement relating to any matter or transaction in which an interest is
held by a person or entity that is an Affiliate of WIS;
(g) any written agreement (or group of related agreements) for the acquisition
of services, supplies, equipment, inventory, fixtures or other property
involving more than $50,000;
(h) any contracts to provide inventory or other services to third parties for a
fixed price over a fixed term and which is not terminable on 30 days' notice or
without penalty;
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(i) any contracts containing noncompetition covenants;
(j) any agreement providing for the purchase from a supplier of all or
substantially all of the requirements of WIS of a particular product or service;
(k) contracts, agreements or commitments requiring WIS to indemnify or hold
harmless any person other than (i) contracts to provide inventory services
entered into in the ordinary course of business and (ii) leases of office
equipment which do not involve payments of more than $50,000 per annum; or
(l) any other agreement or commitment not made in the ordinary course of
business or that is or could reasonably be anticipated to be material to the
business, operations, condition (financial or otherwise) or results of
operations of WIS.
True, correct and complete copies of all written Commitments, and true, correct
and complete written descriptions of all oral Commitments, have heretofore been
delivered or made available to Purchaser. There are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute material
defaults by WIS or, to either Seller's knowledge, any other party to a
Commitment, and no material penalties have been incurred nor are amendments
pending with respect to the Commitments. The Commitments are in full force and
effect and are valid and enforceable obligations of WIS and, to Sellers'
knowledge (but without inquiry of the other party), the other parties thereto,
in accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to Sellers' knowledge, may be made by any
party thereto (other than WIS), nor has WIS waived any rights thereunder. Each
Commitment will continue to be legal, binding, enforceable and in full force and
effect on identical terms immediately following the Closing.
3.13.2 No Cancellation or Termination of Commitment. Except as set forth in
Section 3.13.2 of the Disclosure Schedules, neither WIS nor either Seller has
received notice of any plan or intention of any other party to any Commitment to
exercise any right to cancel or terminate any Commitment, and neither WIS nor
either Seller currently contemplates, or has received notice that any other
person currently contemplates, any amendment or change to any Commitment.
Section 3.14 Insurance. Huffy and/or WIS carries property, liability, workers'
compensation and such other types of insurance pursuant to the insurance
policies listed and briefly described in Section 3.14 of the Disclosure
Schedules (collectively, the "Insurance Policies" and each individually, an
"Insurance Policy"). The Insurance Policies cover such risks and contain such
policy limits, types of coverage and deductibles as are, in the Sellers'
judgment, adequate to insure fully (subject to the deductibles and
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retention amounts described in Section 3.14 of the Disclosure Schedules) against
risks to which the Company and its employees, business, properties and other
assets may be exposed in the operation of the Business as currently conducted.
The Insurance Policies are all of the insurance policies relating to the
Business. All of the Insurance Policies are valid and enforceable policies and
all premiums due with respect to all periods to and including the Closing Date
have either been paid or adequate provisions for payment thereof has been made
in the Financial Statements. All WIS-related retroactive premium adjustments
under any workmen's compensation policy of WIS or the Sellers have been recorded
in the Financial Statements in accordance with U.S. generally accepted
accounting principles and are reflected in the Financial Statements. WIS has
complied in all material respects with the terms and provisions of such
policies. True, complete and correct copies of all Insurance Policies have been
provided or made available to Purchaser. Neither WIS nor either Seller has
received any notice or other communication from any issuer of any Insurance
Policy canceling such policy, materially increasing any deductibles or retained
amounts thereunder, or materially increasing the annual or other premiums
payable thereunder and no such cancellation or increase of deductibles,
retainages or premiums is threatened. There are no outstanding claims,
settlements or premiums owed against any Insurance Policy, or if there are, WIS
has given all notices or has presented all potential or actual claims under any
Insurance Policy in due and timely fashion. Section 3.14 of the Disclosure
Schedules sets forth a list of all claims under any Insurance Policy in excess
of $50,000 per occurrence filed by or on behalf of WIS since July 1, 1997. The
Insurance Policies are sufficient for compliance in all material respects with
all requirements of Applicable Law and the terms of leases to which WIS is a
party.
Section 3.15 Intellectual Property.
3.15.1 Definitions. For the purpose of this Agreement, "Intellectual Property"
shall be defined as (i) all know-how, show-how, confidential or proprietary
information, trade secrets, designs, processes, computer software or database
contents proprietary to WIS, research in progress, inventions or invention
disclosures (whether patentable or unpatentable) and drawings, schematics,
blueprints, flow sheets, designs and models ("Trade Secrets"); (ii) all
copyrights, copyright registrations, copyrights mask works and copyright
applications which are material to the Business (the "Copyrights"); (iii) all
patents, patent applications, patents pending, patent disclosures on inventions
and all patents issued upon said patent applications or based upon such
disclosures (the "Patents"); and (iv) all registered and unregistered trade
names, trademarks, service marks, product designations, corporate names, trade
dress, logos, slogans, designs and general intangibles of like nature, together
with all registrations and recordings and all applications for registration
therefor and all translations, adaptations, derivatives and combinations thereof
used in the Business, specifically excluding, however, the name "Huffy" and any
variations or derivations thereof (the "Trademarks").
3.15.2 Owned Intellectual Property. Section 3.15.2 of the Disclosure Schedules
contains a complete and accurate list of all Copyrights, Patents and Trademarks,
each as defined herein, used in the Business. Except as set forth in Section
3.15.2 of the Disclosure Schedules, Huffy, Brands and/or WIS together own all
right, title and interest in and to all Intellectual Property as may be used in
or necessary for the conduct of the Business, free and clear of all security
interests, liens, claims and encumbrances, other than statutory liens arising in
the ordinary course of business that do not materially detract from the value or
interfere with the use of such Intellectual Property. Any such Intellectual
Property owned by Huffy or Brands is included in the Related Assets.
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3.15.3 Transfers or Encumbrances. Except as set forth in Section 3.15.3 of the
Disclosure Schedules, each of WIS, Huffy and Brands have not, as of and since
the date upon which it acquired rights in or to any Intellectual Property, (i)
transferred, conveyed, sold, assigned, pledged, mortgaged or granted a security
interest in any such Intellectual Property to any third person, (ii) entered
into any license, franchise or other agreement with respect to any such
Intellectual Property with any third person, or (iii) otherwise encumbered any
such Intellectual Property.
3.15.4 Infringements. Except as set forth in Section 3.15.4 of the Disclosure
Schedules, to Sellers' knowledge, the business of WIS as currently conducted
does not in any material respect conflict with, misappropriate or infringe on,
any Intellectual Property right of any third person. There are no claims, suits,
actions or proceedings pending or, to the knowledge of Sellers, threatened
against WIS (i) alleging that use or license by WIS of any Intellectual Property
conflicts or infringes in any way with any third person's Intellectual Property
rights, (ii) challenging WIS' right to use any Intellectual Property owned or
used by it, or (iii) challenging the validity of any of WIS' Intellectual
Property. To Sellers' knowledge, there are no conflicts, misappropriations,
infringements or other violations by any third party of any of the Intellectual
Property owned by, used by or licensed by or to WIS.
3.15.5 Maintenance. Each Copyright, Patent and Trademark listed in the
Disclosure Schedules is valid, subsisting and in proper form, and has been duly
maintained, including the submission of all necessary filings in accordance with
the legal and administrative requirements of the jurisdictions referenced in
Section 3.15.2 of the Disclosure Schedules, and no Copyright, Patent or
Trademark has lapsed, nor has there been any cancellation or abandonment
thereof. WIS has taken all of the proper precautions to maintain the secrecy of
its Intellectual Property that it considers to be Trade Secrets, and to protect
its Trade Secrets from disclosure to the full extent required under Applicable
Law, and there have been no failures in complying with such requirements.
Section 3.16 Taxes.
3.16.1 Filing of Tax Returns. All Tax Returns required to be filed by or on
behalf of WIS or any affiliated, consolidated, unitary or similar group of which
WIS is or was a member ("Affiliated Group") have been properly prepared and duly
and timely filed (in accordance with any extensions duly granted by the
appropriate governmental agency, if applicable) with the appropriate
governmental agencies of the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns or reports
are complete and accurate in all material respects and properly reflect the
taxes of WIS for the periods covered thereby. True and correct copies of all
federal and state Tax Returns for the past five taxable years have heretofore
been delivered to Purchaser and copies of all other Tax Returns have heretofore
been made available to Purchaser. Except as set forth in Section 3.16.1 of the
Disclosure Schedules, neither WIS nor any other person (including Sellers) on
behalf of WIS has requested any extension of time within which to file any Tax
Return, which Tax Return has since not been filed.
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3.16.2 Payment of Taxes. Except for such items as WIS may be disputing in good
faith by proceedings in compliance with Applicable Law, each of which is
described in Section 3.16.2 of the Disclosure Schedules, WIS has paid all Taxes
(whether or not shown on any such Tax Returns) payable by or on behalf of WIS
either directly, as part of the consolidated Tax Return of another taxpayer, or
otherwise.
3.16.3 No Pending Deficiencies, Delinquencies, Assessments or Audits. WIS has
not received any notice that any Tax deficiency or delinquency has been asserted
against WIS. There is no Taxing authority audit of WIS pending or, to Sellers'
knowledge, threatened, and the results of any completed audits are properly
reflected in the Financial Statements. True and correct copies of any audit
report issued within the last three years relating to any Taxes due from or with
respect to WIS, its income, properties or operations, have heretofore been
delivered to Purchaser. No issue has been raised by a federal, state, local or
foreign Tax authority in any prior examination which, by application of the same
or similar principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period. No claim has been made by a Tax
authority in a jurisdiction where WIS does not file Tax Returns such that WIS is
or may be subject to taxation by the jurisdiction. WIS has not violated in any
material respect any federal, state, local or foreign Tax law.
3.16.4 No Extension of Limitation Period. WIS has not granted an extension to
any Taxing authority of the limitation period during which any Tax liability may
be assessed or collected.
3.16.5 Withholding Requirements Satisfied. All monies required to be withheld by
WIS and paid to governmental agencies for all income, social security,
unemployment insurance, sales, excise, use, and other Taxes have been collected
or withheld and paid to the respective governmental agencies.
3.16.6 Section 168 Property. None of the assets of WIS is (1) property required
to be treated as being owned by another person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, or (2)
"tax-exempt use property" or "tax-exempt bond financed property" within the
meaning of Section 168 of the Code. WIS is not a party to any "long-term
contract" within the meaning of Section 460 of the Code.
3.16.7 Boycotts. WIS has not at any time participated in or cooperated with any
international boycott as defined in Section 999 of the Code.
3.16.8 No Tax Sharing Agreements. WIS is not a party to any Tax sharing or
similar agreement or arrangement pursuant to which it will have any obligation
to make any payments after the Closing.
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3.16.9 Section 341 Assets. Neither WIS nor any other person (including Sellers)
on behalf of WIS has filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by WIS.
3.16.10 Section 481 Adjustments. Neither WIS nor any other person (including
Sellers) on behalf of WIS has agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law by reason of a change in accounting method initiated by WIS or
Sellers or has any knowledge that the IRS has proposed any such adjustment or
change in accounting method, or has any application pending with any Tax
authority requesting permission for any changes in accounting methods that
relate to the business or operations of WIS.
3.16.11 No Closing Agreements or Private Letter Rulings. Neither WIS nor any
other person (including Sellers) on behalf of WIS has executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law with
respect to WIS, and WIS is not subject to any private letter ruling of the IRS
or comparable rulings of other tax authorities.
3.16.12 US Real Property Holding Company. WIS has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3.16.13 Golden Parachutes; Compensation Limitation. There is no contract, plan
or arrangement covering any person that, individually or collectively, could
give rise to the payment by WIS of any amount that would be characterized as an
"excess parachute payment" (within the meaning of Section 280G(b)(1) of the
Code), would not be deductible by Purchaser or WIS by reason of Section 280G of
the Code, or would constitute compensation in excess of the limitation set forth
in Section 162(m) of the Code.
3.16.14 Pass-through Entities. WIS is not a party to any joint venture,
partnership or other arrangement that is treated as a partnership or as a
disregarded or transparent entity for any Tax purpose.
3.16.15 Affiliated Group. Since December 31, 1988, WIS has not been a member of
any Affiliated Group for any Tax purpose other than a group the parent of which
was Huffy.
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Section 3.17 Compliance with Laws. WIS has complied in all material respects
with all Applicable Laws and has filed with the proper authorities all necessary
statements and reports. There are no existing violations by WIS of any federal,
state or local law or regulation that could, individually or in the aggregate,
result in a Material Adverse Effect. Except as set forth in Section 3.17 of the
Disclosure Schedules, WIS possesses or is obtaining all necessary licenses,
franchises, permits and governmental authorizations for the conduct of the
Business as now conducted (the "WIS Permits"), all of which (including those
currently in the process of being obtained) are listed (with expiration dates,
if applicable) in Section 3.17 of the Disclosure Schedules. The transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded by any such
WIS Permits, except for any such default, breach or violation that would not,
individually or in the aggregate, have a Material Adverse Effect. Since January
1, 1998, neither Sellers nor WIS has received any notice from any Governmental
Authority having jurisdiction over WIS' Business, properties or activities, or
any insurance or inspection body, that WIS' operations or any of its properties,
facilities, equipment or business practices fail to comply in any material
respect with any Applicable Law or requirement of any public or quasi-public
authority or body. Section 3.17 of the Disclosure Schedules contains a true and
complete list of all Federal, state, local and foreign governmental or judicial
consents, orders, decrees and other compliance agreements relating to WIS, the
Business or its assets (including the Related Assets) under which WIS is
operating or bound.
Section 3.18 Finder's Fee. WIS has not incurred any obligation for any finder's,
broker's or agent's fee in connection with the transactions contemplated hereby.
Section 3.19 Litigation. Section 3.19 of the Disclosure Schedules contains a
description of all federal, state or local, or foreign, legal actions,
investigations known to Sellers or administrative proceedings which are pending
against or, to Sellers' knowledge, affecting WIS or the Business or are known by
Sellers to be threatened against WIS. None of the actions, proceedings or
investigations described in Section 3.19 of the Disclosure Schedules would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on WIS or materially adversely affect the ability of WIS to
conduct the Business after the Closing as currently conducted. With respect to
each litigation or claim described in the Disclosure Schedules, copies of all
pleadings, filings, correspondence with opposing parties and their counsel,
judgments and other material documents have been made available to Purchaser.
Section 3.20 Condition of Fixed Assets. All of the structures and equipment
reflected in the Financial Statements and used by WIS in the Business are free
from material defects (latent and patent) and are in good operating condition
and repair, subject to normal wear and tear.
Section 3.21 Distributions and Repurchases. Except as relates to the elimination
of intercompany payables and receivables in accordance with Section 5.12, no
distribution, payment or dividend of any kind has been declared or paid by WIS
on any of the WIS Capital Stock since the WIS Balance Sheet Date. No repurchase
of any WIS Capital Stock has been approved, effected or is pending, or is
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contemplated by WIS.
Section 3.22 Banking and Agency Relations. Set forth in Section 3.22 of the
Disclosure Schedules is a complete and accurate list of all borrowing and
investing arrangements or other banking relationships that WIS has with any bank
or other financial institution, indicating with respect to each relationship the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof. Except as set forth in Section 3.22 of the Disclosure
Schedules, none of the Sellers or their Affiliates or any other person has
outstanding any powers of attorney in respect of WIS.
Section 3.23 Environmental Matters. Neither WIS nor any of its assets are
currently in violation of, or subject to any existing, pending or, to Sellers'
knowledge, threatened, investigation or inquiry by any Governmental Authority or
to any remedial obligations under, any Environmental Laws
Section 3.24 Affiliate Transactions. Except as set forth in Section 3.24 of the
Disclosure Schedules, WIS is not a party to any agreement with (a) any of its
directors or officers or (b) any Seller or any of its subsidiaries or
Affiliates. Section 3.24 of the Disclosure Schedules sets forth a list of all
services provided by the Sellers or any of their respective subsidiaries or
Affiliates to WIS. No Seller nor, to the knowledge of the Sellers, any of their
respective officers, directors or Affiliates, nor any relative or spouse (or
relative of such spouse) of any such officer, director or Affiliate, nor any
entity controlled by one of more of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than 2% stock
holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any person
which is, or is engaged in business as, a competitor, lessor, lessee, supplier,
sales agent, customer or client of WIS;
(ii) owns, directly or indirectly, in whole or in part, any tangible or
intangible property that WIS uses in the conduct of the Business; or
(iii) has any cause of action or other claim whatsoever against, or owes any
amount to, WIS, except for claims in the ordinary course of business such as for
accrued vacation pay, accrued benefits under employee benefit plans, and similar
matters and agreements existing on the date hereof.
Section 3.25 Customers. Section 3.25 of the Disclosure Schedules lists for each
of calendar 1998 and 1999 and the six months ended July 1, 2000 the 15 largest
customers of WIS based on the aggregate
<PAGE> 38
value of goods and services provided by WIS to such customers during each such
period. No Seller nor WIS has knowledge or any reason to believe that (i) any
customer listed on Schedule 3.25 or any other significant customer of the
Business has ceased or during the current fiscal year of WIS intends to cease to
use the services of WIS or (ii) any one or more of the customers listed on
Schedule 3.25 has reduced or intends to reduce its use of the services provided
by WIS, which reduction has reduced or could reasonably be expected to result in
a reduction of the Company's earnings before interest and taxes (excluding the
effect of extraordinary gains and losses) from that reflected in the Company's
projections for the 2000 or 2001 fiscal year contained in the Company's
strategic plan previously made available by Sellers to Purchaser by more than
$450,000 per annum in aggregate, including in each case following consummation
of the transactions contemplated hereby.
Section 3.26 Absence of Certain Business Practices. None of the Sellers, WIS,
any of their respective officers, employees or agents, or any other person
acting on their behalf, has, directly or indirectly, within the past five years
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the Business (or assist WIS with any actual or proposed transaction
relating to the Business) in violation of Applicable Law.
Section 3.27 Disclosure. No representation or warranty by Sellers contained in
this Agreement contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact required to make the statements
contained herein not misleading. There is no fact (other than matters of a
general economic or political nature which do not affect the Business uniquely)
known to Sellers that has not been disclosed by Sellers to the Purchaser that
might reasonably be expected to have or result in a Material Adverse Effect on
WIS or adversely affect the ability of WIS to conduct the Business after the
Closing as currently conducted.
ARTICLE IV
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to Sellers the following are true and correct
as of the date hereof:
Section 4.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly authorized to carry on the business presently conducted by
it. Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and is duly authorized to
carry on the business presently conducted by it. Each of Purchaser and Merger
Sub was formed solely for the purpose of effecting the transactions contemplated
hereby and, since the date of its respective incorporation, neither
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Purchaser nor Merger Sub has engaged in any activities or incurred any
liabilities or obligations other than in connection with its formation and in
connection with or as contemplated by this Agreement (including the financing of
the transactions contemplated hereby).
Section 4.2 Corporate Power and Authorization. Each of Purchaser and Merger Sub
has the corporate power and authority to execute and deliver this Agreement and
the other agreements contemplated hereby, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by Purchaser and Merger Sub of
this Agreement and the other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all required corporate action. This Agreement has been duly
executed and delivered by Purchaser and Merger Sub and constitutes the legal,
valid and binding obligation of each of Purchaser and Merger Sub, enforceable
against Purchaser and Merger Sub in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
Section 4.3 No Violation. Neither the execution, delivery or performance of this
Agreement or the other agreements contemplated hereby nor the consummation of
the transactions contemplated hereby or thereby will (i) conflict with, or
result in a violation or breach of the terms, conditions or provisions of, or
constitute a default under, the Certificate of Incorporation or Bylaws of
Purchaser or Merger Sub, (ii) conflict with, or result in a violation or breach
of the terms, conditions or provisions of or in the loss of benefits under, or
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under, any agreement, indenture, right of first refusal, non-competition
agreement or other instrument under which Purchaser or Merger Sub is bound or to
which any of the assets of Purchaser or Merger Sub are subject, or result in the
creation or imposition of any security interest, lien, charge or encumbrance
upon any of the assets of Purchaser or Merger Sub or (iii) violate or conflict
with, or result in the loss of any benefit under, any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
Section 4.4 Governmental Authorities; Third Party Consents. Except for a Hart
Scott Rodino filing as contemplated in Section 5.5 below, notification under the
antitrust laws of Brazil and the filing of the Agreement of Merger, neither
Purchaser nor Merger Sub is required to submit any notice, report or other
filing with any Governmental Authority in connection with the execution or
delivery by it of this Agreement or the consummation of the transactions
contemplated hereby, and no consent, approval or authorization of any
Governmental Authority or any other person is required to be obtained by
Purchaser or Merger Sub in connection with its execution, delivery and
performance of this Agreement or the transactions contemplated hereby, except
that Merger Sub will be required to obtain a tax clearance certificate from the
State of California in connection with the consummation of the Merger.
Section 4.5 Availability of Funds. Purchaser has delivered to Sellers true and
correct copies of signed letters received by Purchaser with respect to the
financing (the "Financing Letters") required for the
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consummation of the transactions contemplated hereby. Assuming satisfaction of
all applicable conditions set forth in the Financing Letters and full funding
thereunder, such financing will provide sufficient funds to effect the Merger;
provided, however, Purchaser acknowledges and agrees that failure to satisfy any
or all of the applicable conditions set forth in the Financing Letters or
failure to obtain full funding under the Financing Letters shall not release
Purchaser from its obligation to consummate the transactions contemplated hereby
pursuant to the terms and conditions set forth in this Agreement, except to the
extent caused by any breach by Sellers of any of their representations,
warranties, covenants or agreements contained herein or the occurrence of any
event which has had or could reasonably be expected to have a Material Adverse
Effect on WIS.
Section 4.6 Investigation by Purchaser. Purchaser has conducted its own
independent investigation, review and analysis of the business, operations,
assets, liabilities, results of operations, financial condition, software,
technology and prospects of WIS which investigation, review and analysis was
done by Purchaser and, to the extent Purchaser deemed appropriate, by
Purchaser's representatives and advisors. Purchaser acknowledges that it and its
representatives and advisors have been provided adequate access to the
personnel, properties, premises and records of WIS for such purpose. In entering
into this Agreement, Purchaser acknowledges that, except for the representations
and warranties contained in this Agreement, it has relied solely upon the
aforementioned investigation, review and analysis and not on any factual
representations of Sellers or Sellers' representatives and advisors, and that,
except for the representations and warranties contained in this Agreement, the
WIS Capital Stock and Related Assets are being transferred, assigned and
conveyed without any representation or warranty of any nature whatsoever,
express or implied, oral or written, and, in particular, without any implied
warranty of merchantability or fitness for a particular purpose. Notwithstanding
anything herein to the contrary, no investigation by or on behalf of Purchaser
into the business, operations, assets, liabilities, results of operations,
financial condition, software, technology and prospects of WIS shall diminish or
in any way affect any of the representations or warranties made by the Sellers
in this Agreement or shall relieve any Seller of any of its obligations under
this Agreement.
Section 4.7 Acquisition of Shares for Investment; Ability to Evaluate and Bear
Risk. Purchaser is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act of 1933, as amended, and is acquiring the
WIS Capital Stock for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the WIS Capital Stock in violation of applicable federal
and state securities laws.
ARTICLE V
SELLERS' COVENANTS
Between the date hereof and the Closing Date:
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Section 5.1 Consummation of Agreement. Sellers shall use their reasonable best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions; provided, however, that this
covenant shall not require Sellers or WIS to make any expenditures or incur any
liabilities that are not expressly set forth in this Agreement or otherwise
contemplated herein.
Section 5.2 Business Operations. WIS shall, and Sellers shall cause WIS to,
operate its business in the ordinary course and shall use their best efforts to
preserve the business of WIS intact. Seller shall, in accordance with its past
practice, pay, or provide to WIS all funds necessary to pay, WIS' expenses
incurred in the conduct of the Business on a timely basis. Neither Seller nor
WIS shall, and Sellers shall not permit WIS to, (a) take any action described in
Section 3.11 or (b) take any action or omit to take any action (i) which act or
omission would result in the inaccuracy of any of its representations and
warranties set forth herein if such representations or warranties were to be
made immediately after the occurrence of such act or omission, or (ii) that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect on WIS. Sellers shall cause WIS to use commercially
reasonable efforts to preserve intact its relationships with customers,
suppliers, employees and others having significant business relations with it,
unless doing so would impair its goodwill or could reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect on WIS.
Sellers shall cause WIS to collect its receivables and pay its trade payables in
the ordinary course of business consistent with past practice, and to perform in
all material respects all of its obligations under all contracts and other
agreements and instruments relating to or affecting the Business, and comply in
all material respects with all Applicable Laws applicable to it or the Business.
The Insurance Policies shall be maintained in force without interruption up to
and including the Closing Date. Notwithstanding anything herein to the contrary,
WIS shall be permitted to incur and repay, and Seller shall be permitted to
repay on behalf of WIS, Permitted Cash Flow Indebtedness at any time prior to
the Closing Date, it being understood and agreed that Sellers shall repay, or
cause to be repaid, at or prior to the Closing all Permitted Cash Flow
Indebtedness incurred by WIS which is outstanding at the Closing Date.
Section 5.3 Access. Purchaser may, upon reasonable notice and at reasonable
times, (i) interview WIS' senior management and (ii) inspect WIS' San Diego,
California offices and its books and records. Sellers shall, and shall cause WIS
to, furnish to Purchaser or its authorized representatives such financial and
operating data and other information with respect to the Business and properties
of or otherwise relating to WIS as Purchaser may reasonably request. The
foregoing access rights are granted for the purpose of permitting Purchaser to
conduct a customary due diligence investigation on, and otherwise become
familiar with, the business and assets and liabilities of WIS, and Purchaser
shall exercise those rights in consultation with Sellers in such a manner as
will minimize, to the extent possible, any disruption in WIS' ongoing business.
Section 5.4 Notification of Certain Matters. Sellers and WIS shall promptly
inform Purchaser in writing of (i) any notice of or other communication relating
to a default or event that, with notice or lapse of time or both, would become a
default, under any Commitment that becomes known to Sellers subsequent to the
date of this Agreement and prior to the Closing Date, (ii) any development that
becomes known to Sellers causing a breach of any of its representations,
warranties, covenants or
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agreements contained herein or (iii) the occurrence of any other event which
could reasonably be expected to result in a Material Adverse Effect on WIS. No
disclosure by Sellers or WIS pursuant to this Section 5.4 of any matter that was
in existence and should have been disclosed on the date of this Agreement,
however, shall be deemed to amend or supplement the Disclosure Schedules or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant.
Disclosure by Sellers or WIS pursuant to this Section 5.4 of any matter that
occurred subsequent to the date of this Agreement, however, shall be deemed to
amend or supplement the Disclosure Schedules, subject to Purchaser's right to
terminate this Agreement pursuant to Section 13.1.2(ii).
Section 5.5 Hart Scott Rodino Notice. The Sellers shall provide any additional
information requested by the United States Federal Trade Commission ("FTC") or
the Antitrust Division of the United States Justice Department ("Antitrust
Division") in connection with the Pre-Merger Notification Report filed by Huffy
with the FTC and the Antitrust Division under the Hart Scott Rodino Act on
August 24, 2000.
Section 5.6 Approvals of Third Parties.
5.6.1 The Sellers and WIS shall, and Sellers shall cause WIS to, give any
required notices to third parties and give any required notices to and make any
required filings with Governmental Authorities. Sellers shall use commercially
reasonable efforts to secure, as soon as practicable after the date hereof, all
required authorizations, consents and approvals of Governmental Authorities and
third parties to the consummation of the transactions contemplated hereby.
5.6.2 Without limiting the generality of the foregoing, if Huffy determines that
the approval of its shareholders of this Agreement and the transactions
contemplated hereby is required under Ohio law, Huffy shall, as soon as
practicable following the date of such determination, prepare and file with the
Securities and Exchange Commission (the "SEC") a proxy statement relating to the
approval of this Agreement and the transactions contemplated hereby (the "Proxy
Statement"). Huffy shall use its reasonable best efforts to obtain the approval
of the SEC to circulate the Proxy Statement as soon after such filing as is
reasonably practicable. The Purchaser shall furnish all information concerning
it as may reasonably be required to be disclosed in the Proxy Statement. Huffy
shall, promptly after receipt thereof, provide the Purchaser with copies of any
written comments and advise the Purchaser of any oral comments with respect to
the Proxy Statement received from the SEC. Huffy shall provide the Purchaser
with a reasonable opportunity to review and comment on the Proxy Statement and
any amendment or supplement thereto prior to filing it with the SEC, and shall
provide the Purchaser with a copy of all such filings made with the SEC. If at
any time prior to the Closing any information relating to Huffy, WIS or the
Purchaser, or any of their respective Affiliates, officers or directors, should
be discovered that should be set forth in an amendment or supplement to the
Proxy Statement, so that such document would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed by Huffy with the SEC and, to the
extent required by law, disseminated to the shareholders of Huffy.
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Huffy represents and warrants that the Proxy Statement will comply as to form in
all material respects with the Securities Exchange Act of 1934, as amended, the
rules and regulations thereunder and the applicable provisions of Ohio law and,
at the respective times filed with the SEC, distributed to the shareholders of
Huffy and the date of the Huffy Meeting, will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, that
Huffy makes no representation or warranty as to any information included in the
Proxy Statement which is provided by Purchaser. Purchaser represents and
warrants that none of the information supplied by Purchaser for inclusion in the
Proxy Statement will, at the respective times filed with the SEC, distributed to
the stockholders of Huffy and the date of the Huffy Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Huffy shall, as soon as reasonably practicable, consistent with the process of
clearing the Proxy Statement with the SEC, as provided in this Section 5.6.2,
establish a record date for, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Huffy Meeting") for the purpose of obtaining
the approval of Huffy's shareholders and shall take all lawful action to solicit
adoption of this Agreement and the transactions contemplated hereby by the
required vote of the Huffy shareholders. Huffy shall, through its Board of
Directors, recommend to its shareholders adoption of this Agreement and shall
not withdraw, amend or modify in a manner adverse to the Purchaser its
recommendation except in connection with the termination of this Agreement in
accordance with Section 13.1.3(ii). Huffy shall ensure that the Huffy Meeting is
called, noticed, convened, held and conducted, and that all proxies solicited in
connection with the Huffy Meeting are solicited, in compliance with all
Applicable Law.
Section 5.7 Employee Matters. WIS shall not, and Sellers shall ensure that WIS
shall not, except either (i) in the ordinary course of business and consistent
with past practice, (ii) with the prior written approval of Purchaser, (iii) as
required by law, or (iv) immediately prior to the Closing Date as described in
Section 5.7 of the Disclosure Schedules:
5.7.1 increase the Cash Compensation of any employee of WIS;
5.7.2 adopt, amend or terminate any Compensation Plan or Benefit Plan;
5.7.3 adopt, amend or terminate any Employment Agreement;
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5.7.4 adopt, amend or terminate any Employee Policies and Procedures;
5.7.5 fail to pay any premium or contribution due or with respect to any
Employee Benefit Plan;
5.7.6 fail to file any return or report with respect to any Employee Benefit
Plan; or
5.7.7 enter into, modify, amend or terminate any agreement with any union, labor
organization or collective bargaining unit.
Section 5.8 Contracts. Except (i) in the ordinary course of business, (ii) as
set forth in Section 5.8 of the Disclosure Schedules, or (iii) with Purchaser's
prior written consent, WIS shall not, and Sellers shall not permit WIS to,
assume or enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale or to waive any material right or cancel any
material contract, debt or claim.
Section 5.9 Capital Assets. Except (i) as set forth in Section 5.9 of the
Disclosure Schedules, or (ii) with the prior written consent of Purchaser, WIS
shall not, and Sellers shall not permit WIS to, acquire any capital asset having
a fair market value of $50,000 or more, or dispose of any capital asset having a
fair market value of $50,000 or more except capital assets which are obsolete,
constitute excess equipment or are to be contributed as capital to a joint
venture of which WIS will retain an ownership interest.
Section 5.10 Mortgages, Liens and Guaranties. Except (i) in the ordinary course
of business, (ii) with Purchaser's prior written consent, or (iii) as may be
required under the terms of the credit facility with Congress Financial
Corporation (Central), WIS shall not, and Sellers shall not permit WIS to, enter
into or assume any mortgage, pledge, conditional sale or other title retention
agreement, permit any security interest, lien, encumbrance or claim of any kind
to attach to any of its assets (other than statutory liens arising in the
ordinary course of business that do not materially detract from the value or
interfere with the use of such assets), whether now owned or hereafter acquired,
or guarantee or otherwise become contingently liable for any obligation of
another, except obligations arising by reason of endorsement for collection and
other similar transactions in the ordinary course of business, or make any
capital contribution or investment in any person. Sellers shall cause all
security interests, liens, encumbrances or claims of any kind (other than
statutory liens for Taxes not yet due and payable arising in the ordinary course
of business that do not materially detract from the value or interfere with the
use of such assets) on any real or personal property owned or leased by WIS
(including the Related Assets) to be terminated or otherwise discharged at or
prior to the Closing.
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Section 5.11 WIS Acquisition Proposals. From and after the date of this
Agreement (i) neither Sellers, WIS, nor any of their employees, officers and
directors shall, and the Sellers shall cause WIS and its employees, agents and
representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, WIS (any such proposal or offer being hereinafter
referred to as a "WIS Acquisition Proposal") or engage in any negotiations
concerning, or provide any Confidential Information or data to, or have any
discussions with, any person relating to a WIS Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement a WIS
Acquisition Proposal; and (ii) Sellers will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to the solicitation of WIS Acquisition
Proposals and each will take the necessary steps to inform the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
herein; provided, however, that nothing herein shall prohibit Huffy from seeking
or entertaining offers to acquire Huffy (or its consolidated businesses,
including WIS) in the entirety (a "Huffy Acquisition Proposal") or any
individual Huffy business other than WIS. In the event any Seller or any of its
Affiliates or representatives receives any offer or proposal to enter into any
such negotiations or other communication with a party other than Purchaser, such
Seller will provide prompt notice of the same to Purchaser.
Section 5.12. Intercompany Accounts. All intercompany accounts between WIS, on
the one hand, and any Seller or any of their Affiliates, on the other hand,
shall be canceled as of the close of business on the business day immediately
preceding the Closing Date. The accounts shall be settled as follows: (a) to the
extent that WIS is so indebted, such debt shall be canceled and the amount of
the debt so canceled shall be deemed a capital contribution to WIS and (b) to
the extent that any Seller or any of their Affiliates is indebted to WIS, such
debt shall be canceled and the amount of the debt so canceled shall be deemed a
dividend from WIS. Section 5.12 of the Disclosure Schedules lists all
intercompany accounts in effect, and the amounts thereof, on the date of this
Agreement. Sellers shall deliver to Purchaser at least five business days prior
to Closing a schedule of all intercompany accounts, and the amounts thereof,
expected to be canceled pursuant to this Section 5.12.
Section 5.13 Updated Financial Statements. As soon as available and in any event
within 30 days after the end of each month prior to the Closing Date, commencing
with July 2000, Sellers shall deliver to Purchaser a balance sheet and related
statements of operations and cash flows of WIS. All such financial statements
shall be covered by and conform to the representations and warranties set forth
in Section 3.7 hereof and shall be included in the term "Financial Statements"
for purposes of this Agreement.
Section 5.14 Schedules. From time to time prior to the Closing, the Sellers
shall promptly supplement or amend the Disclosure Schedules with respect to any
matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedules. No supplement or amendment of the Disclosure Schedules
made pursuant to this Section with respect to matters which existed, and should
have been disclosed, at the date of this Agreement shall be deemed to cure any
breach of, affect or otherwise diminish any representation or warranty made in
this Agreement unless Purchaser specifically agrees thereto in writing.
Disclosure by Sellers pursuant to this Section 5.14 of any matter that occurred
subsequent to the date of this
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Agreement, however, shall be deemed to amend or supplement the Disclosure
Schedules, subject to Purchaser's right to terminate this Agreement pursuant to
Section 13.1.2(ii).
ARTICLE VI
PURCHASER'S COVENANTS
Purchaser agrees that between the date hereof and the Closing:
Section 6.1 Consummation of Agreement. Purchaser shall use its reasonable best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions; provided, however, that this
covenant shall not require Purchaser or Merger Sub to make any expenditures or
incur any liabilities that are not expressly set forth in this Agreement or
otherwise contemplated herein.
Section 6.2 Hart Scott Rodino. The Purchaser shall provide any additional
information requested by the FTC or Antitrust Division in connection with the
Pre-Merger Notification Report filed by Sterling Investment Partners, L.P. with
the FTC and the Antitrust Division under the Hart Scott Rodino Act on August 24,
2000.
Section 6.3 Approvals of Third Parties. Purchaser shall give any required
notices to third parties and give any required notices to and make any required
filings with Governmental Authorities. Purchaser shall use commercially
reasonable efforts to secure, as soon as practicable after the date hereof, all
required authorizations, consents and approvals of Governmental Authorities and
third parties to the consummation of the transactions contemplated hereby.
ARTICLE VII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Except as may be waived in writing by Purchaser, the obligations of Purchaser
hereunder are subject to the fulfillment at or prior to the Closing Date of each
of the following conditions:
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Section 7.1 Representations and Warranties. The representations and warranties
of Sellers contained herein (i) that are qualified as to materiality shall be
true in all respects on and as of the Closing Date and (ii) that are not
qualified as to materiality shall be true in all material respects on and as of
the Closing Date, in each case with the same force and effect as though such
representations and warranties were made on and as of the Closing Date.
Section 7.2 Covenants. Sellers shall have performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed and complied with by Sellers prior to the Closing Date.
Section 7.3 Legal Opinion. Counsel to Sellers shall have delivered to Purchaser
its opinion, dated as of the Closing Date, in substantially the form set forth
in Exhibit 7.3.
Section 7.4 Proceedings. No action, proceeding or order by any court or
Governmental Authority shall have been threatened orally or in writing,
asserted, instituted or entered (a) to restrain or prohibit the carrying out of
the transactions contemplated hereby or (b) that would (i) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (ii) affect adversely the right of Purchaser to own the WIS
Capital Stock and to control WIS or (iii) affect adversely the right of WIS to
own its assets and to operate the Business.
Section 7.5 No Material Adverse Change. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities or business
of WIS shall have occurred since the WIS Balance Sheet Date or could reasonably
be expected to occur.
Section 7.6 Completion of Due Diligence. Purchaser shall have had the
opportunity to conduct, and shall have completed, a customary due diligence
review of WIS pursuant to Section 5.3, and shall have determined that there
exist no facts or circumstances as of the Closing Date which would have or
result in a Material Adverse Effect on WIS.
Section 7.7 Hart Scott Rodino. The waiting period under the Hart Scott Rodino
Act shall have expired or been terminated and the FTC and/or Antitrust Division
shall not have taken action to prevent this transaction.
Section 7.8 Third Party Consents. Sellers shall have obtained all necessary
material third party approvals
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and consents to the transactions contemplated hereby.
Section 7.9 Closing Deliveries. Purchaser shall have received all documents and
agreements, duly executed and delivered in form reasonably satisfactory to
Purchaser, referred to in Section 9.1.
Section 7.10 Resignations. The directors and officers of WIS specified in a
notice delivered by the Purchaser to the Sellers at least five days prior to the
Closing shall have submitted their resignations from the Board of Directors and
as officers of WIS, effective as of the Closing Date.
Section 7.11 FIRPTA Certificate. Sellers shall have delivered on the Closing
Date to the Purchaser a certificate, as contemplated under and meeting the
requirements of section 1.1445-2(b)(2)(i) of the Treasury regulations to the
effect that each Seller is not a foreign person within the meaning of the Code
and applicable Treasury regulations.
Section 7.12 Release from Seller Credit Arrangements. WIS shall have been
released from all liabilities and obligations, accrued, contingent or otherwise,
under all Indebtedness of either Seller and their Affiliates (the "Huffy Credit
Facilities"), and all security interests, liens, encumbrances or claims of any
kind on the WIS Capital Stock or any real or personal property owned or leased
by WIS (including the Related Assets) arising under or in respect of the Huffy
Credit Facilities shall have been terminated or otherwise discharged at or prior
to the Closing, all pursuant to documentation reasonably acceptable to Purchaser
and its lenders.
Section 7.13 Assignment of Certain Liabilities. Sellers shall have executed an
Assignment and Assumption Agreement, substantially in the form of Exhibit 7.13
(the "Assignment Agreement"), pursuant to which WIS will assign to, and Sellers
will assume, all liabilities and obligations in respect of (i) the Seller
Retained Claims, including all litigation related thereto or arising therefrom,
(ii) the litigation set forth on Schedule 7.13 (the "Seller Retained
Litigation"), and (iii) all liabilities and obligations of WIS under that
certain Settlement Agreement with Carol Gebhardt, it being agreed that WIS will
continue to administer this arrangement on behalf of Sellers in accordance with
past practice.
Section 7.14 Other Actions. All actions to be taken by the Sellers in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Purchaser.
Section 7.15 Transfer of Certain Related Assets. Sellers shall have transferred
to WIS those certain
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assets described on Schedule 7.15 which are not owned by WIS but which are
related to the Business (the "Related Assets").
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
Except as may be waived in writing by Sellers, the obligations of Sellers
hereunder are subject to fulfillment at or prior to the Closing Date of each of
the following conditions:
Section 8.1 Representations and Warranties. The representations and warranties
of Purchaser contained herein (i) that are qualified as to materiality shall be
true in all respects on and as of the Closing Date and (ii) that are not
qualified as to materiality shall be true in all material respects on and as of
the Closing Date, in each case with the same force and effect as though such
representations and warranties were made on and as of the Closing Date.
Section 8.2 Covenants. Purchaser shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed and complied with by it prior to the Closing Date.
Section 8.3 Legal Opinion. Counsel to Purchaser shall have delivered to Sellers
its opinion, dated as of the Closing Date, in substantially the form set forth
in Exhibit 8.3
Section 8.4 Proceedings. No action, proceeding or order by any court or
Governmental Authority shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby or that would cause any of the transactions
contemplated by this Agreement to be rescinded following consummation.
Section 8.5 Hart Scott Rodino. The waiting period under the Hart Scott Rodino
Act shall have expired or been terminated and the FTC and/or Antitrust Division
shall not have taken action to prevent this transaction.
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Section 8.6 Closing Deliveries. Sellers shall have received all documents and
agreements, duly executed and delivered in form reasonably satisfactory to
Sellers, referred to in Section 9.2.
Section 8.7 Other Actions. All actions to be taken by Purchaser in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Sellers.
ARTICLE IX
CLOSING DELIVERIES
Section 9.1 Deliveries of Sellers. At or prior to the Closing Date, Sellers
shall deliver to Purchaser the following, all of which shall be in a form
satisfactory to Purchaser and its counsel:
9.1.1 Bring Down Certificate. A certificate of the President or any Vice
President of each Seller, dated the Closing Date, (a) as to the truth and
correctness (i) in all respects of the representations and warranties of Sellers
contained herein that are qualified as to materiality and (ii) in all material
respects of the representations and warranties of Sellers contained herein that
are not so qualified, in each case on and as of the Closing Date, and (b) to the
effect that no material adverse change in the condition (financial or
otherwise), operations, assets, liabilities or business of WIS has occurred
since the WIS Balance Sheet Date or, to Sellers' knowledge, could reasonably be
expected to occur;
9.1.2 Compliance Certificate. A certificate of the President or any Vice
President of each Seller, dated the Closing Date, (i) as to the performance of
and compliance in all material respects by Sellers with all covenants contained
herein on and as of the Closing Date, and (ii) certifying that all conditions
precedent to the obligations of Purchaser hereunder have been satisfied;
9.1.3 WIS Capital Stock. Certificates representing the WIS Capital Stock, duly
endorsed for transfer to Purchaser, and accompanied by all requisite stock
transfer stamps;
9.1.4 Related Assets. Such bills of sale, assignment and assumption agreements
or other instruments reasonably necessary to transfer the Related Assets to WIS;
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9.1.5 Corporate Records. WIS' minute books, stock transfer records, corporate
seal and other materials related to WIS' corporate administration;
9.1.6 Evidence of Incorporation. A copy of the Articles of Incorporation of WIS
as amended to date, certified by the Secretary of State of California, and a
Certificate of Good Standing of WIS from the Secretary of State of California
and each jurisdiction in which WIS is qualified evidencing the good standing of
WIS in such jurisdiction, each as of a recent date;
9.1.7 Certified Bylaws. A copy of WIS' Bylaws, duly certified by WIS' corporate
secretary;
9.1.8 Board Resolutions. A copy of the text of the resolutions adopted by the
boards of directors of Sellers authorizing the execution, delivery and
performance of this Agreement, duly certified by Sellers' respective corporate
secretaries to Purchaser to the effect that such copies are true, correct and
complete copies of such resolutions and that such resolutions were duly adopted
and have not been amended or rescinded;
9.1.9 Incumbency Certificates. Incumbency certificates executed on behalf of
each Seller by its corporate secretary certifying the signature and office of
each officer executing this Agreement;
9.1.10 Opinion of Counsel. An opinion of Dinsmore & Shohl LLP, counsel to
Sellers, dated as of the Closing Date, pursuant to Section 7.3;
9.1.11 Consents. Copies of all necessary material authorizations, consents,
approvals, permits and licenses required to be obtained by Sellers in connection
with the consummation of the transactions contemplated hereby;
9.1.12 Officer Resignations. The resignations of the directors and officers of
WIS as requested by Purchaser;
9.1.13 Assignment of Liabilities. The Assignment Agreement as contemplated by
Section 7.13; and
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9.1.14 Further Assurances. Such other instrument or instruments of transfer
prepared by Sellers or WIS as shall be necessary or appropriate, as Purchaser or
its counsel shall reasonably request, to carry out and effect the purpose and
intent of this Agreement.
Section 9.2 Deliveries of Purchaser. At or prior to the Closing Date, Purchaser
shall deliver to Sellers the following, all of which shall be in a form
satisfactory to Sellers and their counsel:
9.2.1 Bring Down Certificate. A certificate of an officer of Purchaser dated the
Closing Date as to the truth and correctness (i) in all respects of the
representations and warranties of Purchaser contained herein that are qualified
as to materiality and (ii) in all material respects of the representations and
warranties of Purchaser contained herein that are not so qualified, in each case
on and as of the Closing Date;
9.2.2 Compliance Certificate. A certificate of an officer of Purchaser dated the
Closing Date, (i) as to the performance and compliance in all material respects
by Purchaser with all covenants contained herein on and as of the Closing Date
and (ii) certifying that all conditions precedent to the obligations of Sellers
have been satisfied;
9.2.3 Board Resolutions. A copy of the text of the resolutions adopted by the
board of directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated by this Agreement, duly certified by its corporate secretary to
Sellers to the effect that such copies are true, correct and complete copies of
such resolutions and that such resolutions were duly adopted and have not been
amended or rescinded;
9.2.4 Incumbency Certificate. Incumbency certificates executed on behalf of
Purchaser by its corporate secretary certifying the signature and office of each
officer executing this Agreement;
9.2.5 Opinion of Counsel. An opinion of Fulbright & Jaworski L.L.P., counsel to
Purchaser, dated as of the Closing Date, pursuant to Section 8.3; and
9.2.6 Merger Consideration. Evidence satisfactory to Sellers of the wire
transmission of the full Merger Consideration.
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ARTICLE X
POST CLOSING MATTERS
Section 10.1 Further Instruments of Transfer. Following the Closing, at the
request of Purchaser and at Purchaser's sole cost and expense (unless Purchaser
is entitled to indemnification therefor under Article XI), Sellers shall deliver
any further instruments of transfer and take all reasonable action as may be
necessary or appropriate to carry out the purpose and intent of this Agreement.
Section 10.2 Transfer of Retirement Plan Assets and Assumption of Benefit Plan
Obligations
10.2.1. Calculation of Projected Benefit Obligations. Sellers shall cause the
actuary (the "Actuary") to the Huffy Corporation Retirement Plan (the "Plan") to
prepare and deliver to Purchaser, as promptly as reasonably possible, but no
later than 20 days after the date on which WIS provides the census data
requested by the Actuary, a written report setting forth its calculations with
respect to the projected benefit obligation (the "PBO") for all employees and
former employees (and their beneficiaries and survivors) of WIS under the Plan
as of the Closing Date, which calculation shall be made by the Actuary using a
discount rate of 7 3/4% per annum, compounded annually and the assumptions and
methods set forth in Section 10.2.1 of the Disclosure Schedules, and further
calculated in accordance with the methods and procedures set forth in FASB 87.
Such written report shall contain a schedule which sets forth the name and
social security number of each employee or former employee (and each beneficiary
and survivor thereof) of WIS who has an accrued benefit under the Plan as of the
Closing Date (the "Participant Schedule"). Such calculation shall be subject to
review by Purchaser and its advisors. If the Purchaser disputes the amount of
the Actuary's PBO calculation, such dispute shall be resolved as follows: (i)
the parties will in good faith attempt to negotiate a prompt settlement of the
dispute; (ii) if the parties are unable to negotiate a resolution of the dispute
within 10 business days, the dispute will be submitted to an independent actuary
reasonably satisfactory to the Actuary and Purchaser (the "Dispute Actuary");
(iii) the parties will present their arguments and submit the proposed amount of
PBO within 10 business days after submission of the dispute to the Dispute
Actuary; (iv) the Dispute Actuary, whose decision shall be final, conclusive and
binding on the parties, shall resolve the dispute, in a fair and equitable
manner and in accordance with applicable law and the provisions of this
Agreement, by selecting the proposed PBO amount submitted by one party or the
other party within 10 business days after the parties have presented their
arguments to the Dispute Actuary; (v) notwithstanding any other provision of
this Agreement, any payment to be made as a result of the resolution of a
dispute shall be made, and any other action to be taken as a result of the
resolution of a dispute shall be taken, on or before the later of (1) the date
on which such payment or action would otherwise be required or (2) the third
business day following the date on which the dispute is resolved (in the case of
a dispute resolved by the Dispute Actuary, such date being the date on which the
parties receive written notice from the Dispute Actuary of their resolution; and
(vi) the fees and expenses of the Dispute Actuary in resolving a dispute will be
borne equally by Purchaser and Sellers.
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10.2.2 Establishment of WIS Plan. Effective as of the Closing Date, Purchaser
shall establish, or shall cause WIS to establish, a WIS Retirement Plan and
trust (the "WIS Plan") for the benefit of employees and former employees (and
their beneficiaries and survivors) of WIS. As promptly as reasonably possible
after the Closing Date, Purchaser shall provide, or shall cause WIS to provide,
to Seller a copy of the WIS Plan and relevant supporting documents. As soon as
reasonably possible following the Closing Date, but in no event subsequent to
the expiration of the applicable remedial amendment period, Purchaser shall
submit, or shall cause WIS to submit, the WIS Plan to the Internal Revenue
Service for a favorable determination letter with regard to its status as a
qualified plan under Section 401(a) of the Code. To the extent requested by the
Internal Revenue Service, Purchaser shall adopt, or shall cause WIS to adopt,
such amendments to the WIS Plan as are necessary to obtain such favorable
determination letter.
10.2.3 Transfer of Assets. Sellers shall cause to be transferred from the Plan
and related trust to the WIS Plan with respect to the employees and former
employees (and their beneficiaries and survivors) of WIS under the Plan (the
"Plan Participants") determined as of the Closing Date, Plan assets in an amount
(the "Transfer Amount") equal to the greater of (i) the PBO determined as set
forth in Section 10.2.1, and (ii) the amount required to be transferred in
accordance with Section 414(l) of the Code and, to the extent required by PBGC,
Title IV of ERISA, as of the Closing Date. The Actuary to the Plan shall make
the determinations hereunder in good faith and shall prepare the actuarial
certification of compliance with Sections 401(a)(12) and 414(l) of the Code. As
of the date of this Agreement, the Transfer Amount has been estimated by the
Actuary, based on January 1, 2000 census data, to be approximately $6,650,000.
10.2.4 Time of Transfer. Sellers shall cause the trustee(s) of the Plan to
transfer cash, cash equivalents, and/or other assets acceptable to the
Purchaser, in an amount equal to the Transfer Amount from the Plan and related
trust to the WIS Plan and related trust not later than 20 business days after
Purchaser's delivery to Sellers of a favorable IRS determination letter on the
qualified status of the WIS Plan under Section 401(a) of the Code or, if
approved by the trustee(s) of the Plan (in accordance with the trustee's general
past practices), at such earlier time as requested by the Purchaser, provided
that such request contains documentation, copies of which will be provided to
Huffy, which the trustee(s) of the Plan determine to be satisfactory to
establish that the form of the WIS Plan is qualified under Section 401(a) of the
Code. Sellers shall cooperate with, and shall provide such information in its
possession or control to, WIS and Purchaser as is reasonably necessary establish
that the WIS Plan is so qualified. Pending the completion of the transfer,
Purchaser and Sellers shall make arrangement for any required benefit payments
to Plan participants who are employees or former employees (and their
beneficiaries and survivors) of WIS from the Plan. Purchaser and Sellers shall
provide each other with access to information reasonably necessary in order to
carry out the provisions hereof.
10.2.5 Adjustment of Transfer Amount. The Transfer Amount to be transferred
pursuant hereto shall be equitably adjusted (i) to include interest on the
Transfer Amount at an annual rate (based on the number of days elapsed to, but
not including, the date of asset transfer over a year of 365 days) equal to the
greater of (1) 5.5% or (2) the annualized rate of earnings achieved by the Plan
for the period from and including the Closing Date through and excluding the
date of asset transfer) and (ii) to take into account benefit payments under the
Plan attributable to employees, former employees (and their beneficiaries
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and survivors) of WIS after the Closing Date but prior to the date of Plan asset
transfer, and a pro rata share of (1) reasonable trustee administrative expenses
of the Plan for the period from and including the Closing Date through and
excluding the date of asset transfer (2) except in the event where interest is
calculated pursuant to Section 10.2.5(i)(1) above, reasonable investment
management fees of the Plan for the period from and including the Closing Date
through and excluding the date of asset transfer and (3) PBGC premiums paid by
WIS after the Closing Date but prior to the date of Plan asset transfer. From
and after the Closing Date, Sellers shall take the reporting position with PBGC
that the Plan Participants are not participants in the Plan and, to the extent
Sellers are unsuccessful in asserting such position, after reasonable best
efforts to do so, the Transfer Amount shall be reduced by the amount of basic
PBGC premiums attributable to Plan Participants for the 2001 Plan year.
10.2.6 Deferred Compensation Arrangements. Section 10.2.6 of the Disclosure
Schedules contains a complete and accurate list of the name and account balance
or accrued benefit, as of September 18, 2000, of each current or former WIS
employee (or beneficiary thereof (excluding Carol Gebhart and any other former
president of WIS, each of whom remains an obligation of Huffy)) who is a
participant in or entitled to benefits under: (i) the Huffy Corporation Master
Deferred Compensation Plan which includes or is successor to all obligations
arising under the Huffy Corporation Deferred Compensation Plan, the Huffy
Corporation Deferred Compensation Plan II and the Huffy Corporation Special
Deferred Compensation Plan (the "Huffy Deferred Compensation Plan"), (ii) the
Huffy Corporation Supplemental/Excess Benefit Plan, as amended (the "Huffy
SERP"), or (iii) any other deferred compensation, supplemental executive
retirement or non-qualified retirement plan, program, agreement or arrangement
maintained, contributed to or entered into by WIS or Sellers (collectively with
items (i) and (ii) above, the "Deferred Compensation Obligations"). As soon as
promptly possible following the Closing Date but in no event more than thirty
days after the Closing Date, Sellers shall cause cash, cash equivalents and/or
other assets as currently invested at the direction of the respective employees
to be transferred to WIS in an amount equal to the aggregate account balances as
of the date of asset transfer (including account additions, investment
gains/losses, expenses and disbursements allocated to the Huffy Deferred
Compensation Plan's accounts in the ordinary course subsequent to the Closing
Date), of all current and former WIS employees (or beneficiaries thereof) who
are participants in, or entitled to benefits under, the Huffy Deferred
Compensation Plan and, upon receipt of such amount, WIS shall (without further
action by the parties hereto) assume and be obligated to fully discharge Huffy's
obligations under the Huffy Deferred Compensation Plan with respect such
transferred amounts. From and after the Closing Date, Huffy shall retain or, to
the extent it does not have such obligation, assume responsibility for any and
all liabilities and obligations under the Huffy SERP relating to current WIS
employees (or their beneficiaries) and shall cause all such individuals to be
fully vested in their benefits thereunder as of the Closing Date. Except as
specifically provided in this Section 10.2.6, from and after the Closing Date,
none of WIS, the Purchaser or their Affiliates shall have any responsibility for
the administration and payment of any and all claims of whatever nature arising
prior to the Closing Date under or in connection with any of the Deferred
Compensation Obligations for which Sellers shall retain and/or assume, as
applicable, responsibility.
10.2.7 Employee Stock Purchase Plan. Not more than ten (10) business days after
the Closing Date, Sellers shall refund to each participant in the Amended and
Restated Huffy Corporation 1998 Employee Stock Purchase Plan (the "ESPP") who is
employed by WIS as of the Closing, the total amount of his or her accrued but
unapplied payroll deductions under the ESPP as of the Closing Date, together
with interest (as determined in accordance with Section 6(e) of the ESPP).
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Section 10.3 Section 338(h)(10) Election. Sellers and Purchaser hereby agree
that an election under Section 338(h)(10) of the Code and similar provisions of
state, local or foreign law (hereinafter referred to collectively as the
"Section 338(h)(10) Election") shall be made. Purchaser shall prepare all
documents, returns, statements and other forms, including Internal Revenue
Service Form 8023 (and any required attachments), that may be required to make
the Section 338(h)(10) Election (collectively, the "Forms") and shall submit the
Forms to the Sellers no later than 60 days prior to the date the Forms are
required to be filed. Sellers shall provide the necessary information to
Purchaser in connection with the preparation of the Forms and Purchaser's Tax
Returns. Sellers and Purchaser agree that an allocation of the modified
aggregate deemed sales price (as such term is defined in Treasury regulations
under Section 338 of the Code) among WIS' assets (the "Allocation") will be as
follows: after allocating the aggregate deemed sales price to Class I, Class II,
Class III and Class V assets, all of the remainder will be allocated to
goodwill, a Class VII asset; regarding Class III and Class V assets, accounts
receivable will be valued at face value and real property will be valued at
their adjusted tax basis as set forth in WIS' Tax Returns for the period ending
on the Closing Date, and all other Class III and Class V assets will be valued
at $10,571,891. Sellers shall deliver to Purchaser the Forms, which shall have
been duly executed by Sellers no later than 30 days prior to the date the Forms
are required to be filed. Purchaser shall then promptly cause the Forms to be
duly executed and shall file the Forms in accordance with applicable Tax laws.
The parties shall take or cause to be taken any other actions that are necessary
for making or perfecting the Section 338(h)(10) Elections. Purchaser shall
provide Sellers with a copy of the Forms as filed. With respect to each Section
338(h)(10) Election, the parties shall treat the Section 338(h)(10) Election as
valid and shall not take any action inconsistent with such treatment and shall
report the transaction in a manner consistent with the Allocation, except to the
extent otherwise provided under applicable Tax law or U.S. generally accepted
accounting principles. Sellers shall be responsible for and shall pay all Taxes
arising as a result of the Section 338(h)(10) Election.
Section 10.4 Tax Returns and Audits.
10.4.1 Periods Ending on or Before Closing Date. Sellers shall cause to be
prepared and timely filed all Tax Returns of any kind required to be filed by or
on behalf of WIS that relate to taxable periods ending on or before the Closing
Date, and shall, subject to Section 10.4.9(b), pay all Taxes due with respect to
such Tax Returns. Such returns will be prepared in a manner consistent with past
practice, it being understood that the Tax Returns of WIS for the period ending
on the Closing Date shall reflect, where appropriate, the Allocation and the
Section 338(h)(10) Elections to be made pursuant to Section 10.3. Sellers shall
provide Purchaser with a draft of (x) the portion of the schedules, workpapers
and attachments, if any, for all Combined Income Tax Returns relating to WIS and
Tax information (including, without limitation, work papers and schedules) and
(y) all other Tax Returns required to be filed prior to the Closing Date, for
review of such Tax Returns in a timely manner no later than 60 days prior to the
due date (taking into account valid extensions) for filing such Tax Returns.
Purchaser shall have the right at its expense to review all workpapers and
procedures used to prepare each such draft Tax Return. Unless the Purchaser
timely objects as specified in this Section 10.4.1, each such draft Tax Return
shall be final and binding on the parties without further adjustment. If the
Purchaser objects to any item on any such draft Tax Return, it shall, within 30
days after delivery of such draft Tax Return, notify the Sellers in writing that
it so objects, specifying any such item and stating the factual or legal basis
for any such objection. If a notice of objection shall be duly delivered, any
disputed item shall be resolved pursuant to the Tax Dispute Resolution
Mechanism. Upon resolution of all disputed items, such
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Tax Returns shall be adjusted to reflect the resolution and shall be final and
binding on the parties without further adjustment.
10.4.2 Periods Beginning On or Before and Ending After Closing Date. Purchaser
shall cause to be prepared and timely filed all Tax Returns of WIS that relate
to periods beginning on or before the Closing Date and ending after the Closing
Date. Sellers shall pay to Purchaser the amount, if any, determined pursuant to
Section 11.2.3 and Section 10.4.3 with respect to such Tax Returns within 10
days following the filing of such returns by Purchaser.
10.4.3 Current Tax Year. The parties agree that WIS' current Tax year shall end
on the Closing Date. WIS' books will be closed and Tax Returns prepared based on
such Closing Date; provided, that in the case of any Tax other than a Tax based
upon or measured by income that is imposed on a periodic basis and is payable
for a period that begins on or before the Closing Date and ends after the
Closing Date, the portion of such Taxes which for purposes of this Agreement
(including Section 11.2.3) shall be treated as relating to the period ending on
the Closing Date shall be the amount of such Tax for the entire period
multiplied by a fraction, the numerator of which is the number of days in the
period ending on the Closing Date and the denominator of which is the number of
days in the entire period.
10.4.4 Audits Controlled by Sellers. Sellers shall at their expense have the
right to control with respect to WIS any Tax audit and any administrative or
court proceeding concerning Taxes (including penalties and interest) or Tax
Returns for which Sellers could be held solely liable under Article XI hereof,
and Sellers shall have the right to concede, compromise or contest any
assessment or assertion of liability with respect to any such Taxes and any
adjustments with respect to such returns; provided, however, that Purchaser
shall have the right to consult with Sellers regarding any audit or proceeding
that may affect WIS for any period or portion thereof after September 30, 2000,
and provided further, that Sellers shall not have the right to settle,
compromise and/or concede any audit or proceeding that may affect WIS for any
period or portion thereof after September 30, 2000 without the Purchaser's prior
written consent, which consent shall not be unreasonably withheld.
10.4.5 Audits Controlled by Purchaser. Purchaser shall at its expense have the
right to control with respect to WIS any Tax audit and any administrative or
court proceeding concerning Taxes or Tax Returns not covered by Section 10.4.4
for which Purchaser bears sole responsibility and to concede, compromise or
contest any assessment or assertion of liability with respect to any such Taxes.
10.4.6 Jointly Controlled. With respect to any other Tax audit and any
administrative or court proceeding regarding WIS, each of the Sellers and
Purchaser shall have the right to participate in such audit or administrative or
court proceeding at their own expense and neither Sellers nor Purchaser shall
have the right to concede, compromise or settle any such audit or proceeding
without the prior written consent of the other parties.
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10.4.7 Subsequent Position.In the event that Sellers or any of their Affiliates
shall after the Closing take any position in any Tax Return, or reach any
settlement or agreement on audit, which is in any manner inconsistent with any
position taken by Sellers or any of their Affiliates in any filing, settlement
or agreement made by Sellers prior to the Closing and such inconsistent position
(i) requires the payment by Purchaser of more Tax (including any interest and
penalties) than would have been required to be paid had such position not been
taken or such settlement or agreement not been reached, (ii) affects the
determination of useful life, basis or method of depreciation, amortization or
accounting of any of the assets or properties of WIS or (iii) accelerates the
time at which any Tax must be paid by Purchaser or WIS, then Sellers, in each
such case, shall provide timely and reasonable notice to Purchaser of such
position and shall indemnify Purchaser and hold it harmless from any Damages for
Taxes or Tax cost arising from, in connection with or otherwise with respect to
such position.
10.4.8 General Cooperation. Sellers, on the one hand, and Purchaser, on the
other hand, shall provide reasonable cooperation to each other in connection
with (i) the preparation of and filing of any Tax Return, Tax election, Tax
consent or certification, or any claim for refund, (ii) any determination of
liability for Taxes, and (iii) any audit, examination or other proceeding in
respect of Taxes of WIS. Such cooperation shall include (i) making available, on
a reasonable basis, employees of WIS, (ii) promptly forwarding all
correspondence and other documents received from taxing authorities with respect
to a matter to the party assigned in Section 10.4.4 or 10.4.5 hereof to control
such matter, (iii) executing powers of attorney and other authorizing documents
with respect to a matter so as to permit the party assigned in Section 10.4.4 or
10.4.5 to control such matter, and (iv) providing access to records and other
information in the possession or under the control of the party. The parties
will preserve all information, records or documents relating to the liability
for Taxes of WIS until the expiration of any applicable statute of limitations
or extensions thereof.
10.4.9 Post-September 30, 2000 Period.
(a) With respect to any Combined Income Taxes relating to WIS for taxable
periods or portions thereof beginning on or after October 1, 2000 and ending
prior to or on the Closing Date (the "Post-September Combined Income Taxes"),
such Post-September Combined Income Taxes shall be computed as if WIS had not
been included in any Combined Income Tax Return which includes any Seller as a
member, and as if, instead, WIS (and only WIS) had filed a separate Tax Return
with respect to such Post-September Combined Income Taxes. Such Post-September
Combined Income Taxes shall be computed assuming that the books of WIS were
closed at the close of business on September 30, 2000 and the close of business
on the Closing Date (except that deductions (such as depreciation) allowable on
a periodic basis and real and personal property Taxes shall be allocated on a
daily basis); provided, that the liability for Taxes arising in connection with
any Section 338 Election shall not be considered to be related to WIS and shall
be excluded from Post-September Combined Income Taxes. For purposes of such
computation, Huffy shall (or shall cause its Affiliates to) deliver to Purchaser
a draft of a pro forma Tax Return relating to the Post-September Combined Income
Taxes (the "Post-September Pro Forma Return") no later than 60 days prior to the
due date (including any valid extension) on which the Combined Income Tax Return
relating to the Post-September Pro Forma Return is required to be filed
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with the applicable taxing authority. Unless otherwise provided in this
Agreement, the Post-September Pro Forma Return shall be consistent with the
Combined Income Tax Return relating thereto as filed with the applicable taxing
authorities, and shall not be affected by any amendments to such Combined Income
Tax Return, audit adjustments or claims for refunds. Purchaser shall have the
right at its own expense to review all workpapers and procedures used to prepare
the Post-September Pro Forma Return. Unless the Purchaser timely delivers notice
of objection as specified in this Section 10.4.9(a), the Post-September Pro
Forma Return shall be final and binding on the parties without further
adjustment. If the Purchaser objects to any item on the Post-September Pro Forma
Return, it shall, within 30 days after delivery of such Post-September Pro Forma
Return, notify Huffy in writing that it so objects, specifying any such item and
stating the factual or legal basis for any such objection. If a notice of
objection shall be duly delivered, disputed items shall be resolved pursuant to
the Tax Dispute Resolution Mechanism. Upon resolution of all disputed items,
such Post-September Pro Forma Return shall be adjusted to reflect such
resolution and shall be final and binding on the parties without further
adjustment.
(b) Within thirty (30) business days after the Post-September Pro Forma Return
becomes final, (i) Purchaser shall cause WIS to pay to Huffy the Post-September
Combined Income Taxes, if any, shown on the Post-September Pro Forma Return or
(ii) Huffy shall pay to Purchaser an amount equal to the Tax benefit that could
be realized by use of the loss, if any, shown on the Post-September Pro Forma
Return, regardless of when realized. For avoidance of uncertainty,
notwithstanding anything to the contrary contained herein, the Purchaser shall
not be responsible for any Combined Income Taxes relating or attributable to WIS
for any period or portion thereof ending on or prior to the Closing Date, other
than the payment, if any, pursuant to this Section 10.4.9(b).
(c) For the purposes of this Agreement, (i) "Combined Income Taxes" shall mean
(x) any Taxes with respect to WIS for any taxable period or portion thereof
ending on or prior to the Closing Date for which WIS has been included or is
required to be included (at any time during the periods ending on or before the
Closing Date) as a member of an affiliated group of which any of the Sellers (or
their Affiliates) is or was the common parent for the purpose of paying (or
filing a Tax Return with respect to) such Taxes and (y) any Taxes imposed on,
asserted against or incurred by any member of WIS under Section 1.1502-6 of the
Treasury Regulations or similar provisions under state or local law as a result
of WIS being a member (at any time on or before the Closing Date) of any
affiliated group of which any of the Sellers (or their Affiliates) is or was the
common parent for the purpose of filing a Tax Return or paying Taxes, (ii)
"Combined Income Tax Returns" shall mean any Tax Returns relating to any
Combined Income Taxes, (iii) "Post-September Stand Alone Taxes" shall mean Taxes
other than (x) Combined Income Taxes or (y) any Taxes incurred in connection
with the transactions contemplated by this Agreement (including any transfer,
recording and similar Taxes, or any Taxes arising as a result of the Section
338(h)(10) Election), arising with respect to the Post-September Period, and
(iv) "Post-September Period" shall mean any taxable period or portion thereof
beginning October 1, 2000 and ending on the Closing Date, determined on the
basis of an interim closing of the books as of the close of business on
September 30, 2000 and as of the close of business on the Closing Date, except
that deductions (such as depreciation) allowable on a periodic basis and real
and personal property Taxes shall be allocated on a daily basis over the taxable
year.
(d) Wherever in this Agreement it shall be provided that a dispute shall be
resolved pursuant to the "Tax Dispute Resolution Mechanism", such dispute shall
be resolved as follows: (i) the parties will in good
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faith attempt to negotiate a prompt settlement of the dispute; (ii) if the
parties are unable to negotiate a resolution of the dispute within 10 business
days, the dispute will be submitted to a firm of independent accountants of
nationally recognized standing reasonably satisfactory to Purchaser and Huffy
(or, if the Purchaser and Huffy do not agree on such a firm, then a firm chosen
by the Arbitration and Mediation Committee of the New York Society of Certified
Public Accountants) (the "Tax Dispute Accountants"); (iii) the parties will
present their arguments and submit the proposed amount of each item in dispute
to the Tax Dispute Accountants within 10 business days after submission of the
dispute to the Tax Dispute Accountants; (iv) the Tax Dispute Accountants, whose
decision shall be final, conclusive and binding on the parties, shall resolve
the dispute, in a fair and equitable manner and in accordance with applicable
Tax law and the provisions of this Agreement, by selecting, for each item in
dispute, the proposed amount for such item submitted by one party or the other
party within 10 business days after the parties have presented their arguments
to the Tax Dispute Accountants; (v) notwithstanding any other provision of this
Agreement, any payment to be made as a result of the resolution of a dispute
shall be made, and any other action to be taken as a result of the resolution of
a dispute shall be taken, on or before the later of (1) the date on which such
payment or action would otherwise be required or (2) the third business day
following the date on which the dispute is resolved (in the case of a dispute
resolved by the Tax Dispute Accountants, such date being the date on which the
parties receive written notice from the Tax Dispute Accountants of their
resolution); provided, that if a dispute with respect to an item in a Tax Return
shall not be resolved on or before the date that is three business days prior to
the latest date on which such Tax Return may be filed under applicable Tax law,
then the party having the responsibility for filing such Tax Return pursuant to
Section 10.4 shall file such Tax Return reflecting all disputed items that have
been resolved in the manner so resolved, and reflecting all unresolved disputed
items in the manner proposed by such party, and shall, if necessary, upon the
resolution of all such unresolved disputed items, file an amended Tax Return
reflecting the resolution thereof in the manner so resolved; and (vi) the fees
and expenses of the Tax Dispute Accountants in resolving a dispute will be borne
equally by Purchaser and Sellers.
Section 10.5 Refunds and Carrybacks.
10.5.1 Refunds. Any refunds or credits of Taxes received or credited to WIS
attributable to any period or portion thereof ending on or before October 1,
2000 shall be for the benefit of Sellers ("Seller Refunds"), and the Purchaser
shall cause WIS to pay over to Sellers such refunds; provided, however, that no
Seller Refunds shall arise as a result of a carryback of a Tax attribute from a
taxable period ending after the Closing Date to a taxable period ending on or
prior to the Closing Date. All payments required pursuant to this Section 10.5.1
shall be made within ten days after the receipt of such refund, and shall be net
of any cost to Purchaser attributable to receipt of such refund, including Taxes
payable with respect to such refund. All other refunds received by WIS shall be
for the benefit of Purchaser. In the event that any refund or credit of Taxes
for which a payment has been made pursuant to this Section 10.5.1 is
subsequently reduced or disallowed, Sellers shall indemnify, defend and hold
harmless WIS against and reimburse WIS for any Tax liability, including interest
and penalties, assessed against WIS by reason of the reduction or disallowance.
10.5.2 Carrybacks. Sellers shall pay to Purchaser the amount of any Tax benefit
(including interest thereon) realized by Sellers or any Affiliate thereof as a
result of a carryback of any Tax loss, deduction or credit of WIS for any period
ending after the Closing Date to any period ending on or prior to the
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Closing Date. Sellers shall pay such amount within ten days after such Tax
benefit is realized by Sellers or any Affiliate of it as a refund or otherwise,
provided, that Purchaser shall return to Sellers the amount, if any, by which
the amount of such Tax benefit is thereafter reduced pursuant to a final
determination.
Section 10.6 Insurance. Effective 12:01 a.m. on the Closing Date, WIS and the
Business shall cease to be insured by the Sellers' insurance policies. With
respect to events or circumstances covered by insurance coverage written on an
"occurrence basis", the Sellers will have no liability for occurrences or losses
that take place on or after 12:01 a.m. on the Closing Date; provided, however,
that with respect to insurance coverage written on an "occurrence basis" and for
which WIS was an insured under such policies, then (i) for the first year
following the Closing Date, WIS shall continue to have rights under such
policies to the extent the events giving rise to a claim under such policies
occurred prior to 12:01 a.m. on the Closing Date, and (ii) the Sellers agree to
cooperate WIS for the first year following the Closing Date in making claims
under the Sellers' insurance policies in connection with insurable events that
occurred prior to 12:01 a.m. on the Closing Date and shall promptly remit any
recoveries that the Sellers receive with respect thereto to WIS. Purchaser
acknowledges and agrees that the Sellers shall have no liability with respect to
any failure by any carrier under such insurance policies to make payment with
respect to any such claim. Furthermore, the Purchaser acknowledges and agrees
that the Sellers shall not have any liability to Purchaser or WIS with respect
to deductibles and the failure of any claim to be covered as a result of such
deductibles under any insurance coverage with respect to WIS or the Business.
With respect to events or circumstances covered by insurance coverage written on
a "claims made basis", the Sellers will have no liability for claims made on or
after 12:01 a.m. on the Closing Date. Notwithstanding anything to the contrary,
this Section 10.6 shall not be applicable to Insurance Policies relating to
workmen's compensation and automotive claims, which shall be governed by Section
10.7.
Section 10.7 Workmen's Compensation and Automotive Claims. Notwithstanding
anything in this Agreement to the contrary, Sellers shall retain, and shall
indemnify Purchaser and WIS against all liabilities and obligations (including
all costs of investigating, defending and settling, including attorneys' fees
and expenses) arising out of, and Purchaser shall have no liability or
obligation for, any workmen's compensation claim and automotive claim which is
based on events which occurred prior to the Closing Date, even if such claim is
first made after the Closing Date (all such claims being referred to as the
"Seller Retained Claims"). Sellers shall maintain insurance to cover all such
claims in amount and scope consistent with its past practice until the statute
of limitations for bringing any such claims shall have expired.
After the Closing, Purchaser shall cause WIS to administer and manage the
defense of the Seller Retained Claims as follows:
10.7.1 Purchaser and WIS shall administer and manage the defense of the Seller
Retained Claims diligently and in good faith in a manner consistent with
Sellers' and WIS' practices prior to the Closing Date.
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10.7.2 Purchaser and WIS shall keep Sellers and the insurance companies
providing coverage of the Seller Retained Claims reasonably informed of the
progress of the defense of all Seller Retained Claims, including any actual or
attempted compromise or settlement thereof. Sellers and their applicable
insurers shall have the right upon reasonable notice to consult directly with
counsel representing WIS in the Seller Retained Claims and to review their case
management files and records.
10.7.3 Such administration and management shall be at Purchaser's and/or WIS'
sole expense. However, Sellers shall have the right at any time to assume full
responsibility for such administration and management, in which case Sellers and
not Purchaser or WIS shall bear the cost thereof.
Notwithstanding the foregoing, Sellers shall retain the responsibility and
authority to manage all Seller Retained Litigation.
Section 10.8. Litigation Support. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving WIS, each of the other parties will cooperate with
the other parties and their counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor under
Article XI below).
Section 10.9. Transition. Following the Closing, Sellers shall cooperate with
WIS and Purchaser in connection with the transfer to WIS of the human resources,
legal, accounting, tax, treasury and similar functions provided to WIS by
Sellers prior to the Closing. Sellers will not take any action that is designed
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier or other business associate of WIS from maintaining the same business
relationships with WIS after the Closing as it maintained with WIS prior to the
Closing. Sellers will refer all customer inquiries relating to the Business to
WIS from and after the Closing.
Section 10.10. Covenants Not to Compete.
10.10.1 For a period of five years from and after the Closing Date (the
"Restricted Period"):
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(a) the Sellers shall not, and shall cause their respective Affiliates not to,
whether for compensation or without compensation, directly or indirectly, as an
owner, principal, partner, stockholder, independent contractor, consultant,
joint venturer, investor, licensor, lender or in any other capacity whatsoever,
alone, or in association with any other person, carry on, be engaged or take
part in, or render services (other than services which are generally offered to
third parties) or advice to, own, share in the earnings of, invest in the
stocks, bonds or other securities of, or otherwise become financially interested
in any person engaged in the business of providing contracted inventory services
to retailers and other businesses with extensive inventory holdings and Related
Services in the Territory (the "Seller Restricted Activities"). The record or
beneficial ownership by the Sellers and their respective Affiliates of up to one
percent (1%) of the shares of any corporation whose shares are publicly traded
on a national securities exchange or in the over-the-counter market shall not of
itself constitute a breach hereunder; and
(b) Purchaser shall not, and shall cause WIS and any other of its Affiliates not
to, whether for compensation or without compensation, directly or indirectly, as
an owner, principal, partner, stockholder, independent contractor, consultant,
joint venturer, investor, licensor, lender or in any other capacity whatsoever,
alone, or in association with any other person, carry on, be engaged or take
part in, or render services (other than services which are generally offered to
third parties) or advise to, own, share in the earnings of, invest in the
stocks, bonds or other securities of, or otherwise become financially interested
in any person engaged in the business of providing in the Territory (i) in-store
and in-home assembly, repair and warranty services, (ii) retail equipment repair
and maintenance services (excluding repair and maintenance of hand-held scanners
and related computers and peripherals), (iii) temporary deployment of trained
labor to support labor-intensive distribution centers, (iv) in-store display
assembly and maintenance services to HSF Specified Customers and (v) in-store
product set and reset services to HSF Specified Customers, in each case
competitive with the services currently provided by Sellers' Huffy Service
First, Inc. subsidiary (the "Purchaser Restricted Activities"). The record or
beneficial ownership by Purchaser, WIS and their respective Affiliates of up to
one percent (1%) of the shares of any corporation whose shares are publicly
traded on a national securities exchange or in the over-the-counter market shall
not of itself constitute a breach hereunder. The parties hereby agree that the
Related Services shall not constitute Purchaser Restricted Activities.
For purposes hereof, (a) the term "Related Services" means (i) retail store
audit, point of sale audit, chain audit verification and wholesaler inventory
audit services similar to those currently provided by WIS in its R.J. Reynolds
Tobacco Program, (ii) WIS' temporary outsourcing placement services ("TOPS")
business which consists of providing temporary employees to retailers to meet
their seasonal needs other than to HSF Specified Customers, and (iii) WIS' fixed
asset inventory services; (b) the term "Territory" means the United States of
America, its territories and possessions; and (c) and the term "HSF Specified
Customers" means those current customers of Huffy Service First, Inc. agreed to
by the parties in writing on the date hereof.
10.10.2 During the Restricted Period:
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(a) the Sellers shall not, and shall cause their respective Affiliates not to,
whether for its own account or for the account of any person, (i) solicit,
endeavor to entice away from WIS, or otherwise interfere with the relationship
of WIS with, any person that, (A) during the Restricted Period, is employed by
or otherwise engaged to perform services for WIS or (B) during the Restricted
Period, is, or, during the one (1)-year period preceding the Closing, was, a
customer or client of WIS or (ii) solicit, interfere with or entice from WIS any
employee of WIS, but nothing in this Section 10.10.2(a) shall preclude the
Sellers or any of their respective Affiliates from (A) general advertising for
employees which is not directed at WIS or (B) soliciting or otherwise doing
business with any organizations, customers or clients other than in connection
with the Business, so long as the Sellers or such subsidiaries would not
reasonably expect its activities to interfere with the relationship of WIS with
such person in the Business; and
(b) Purchaser shall not, and shall cause WIS and its other Affiliates, whether
for its own account or for the account of any person, not to (i) solicit,
endeavor to entice away from Sellers or Huffy Service First, Inc., or otherwise
interfere with the relationship of Sellers or Huffy Service First, Inc. with,
any person that, (A) during the Restricted Period, is employed by or otherwise
engaged to perform services for Sellers or Huffy Service First, Inc. or (B)
during the Restricted Period is, or, during the one (1)-year period preceding
the Closing, was, a customer or client of Huffy Service First, Inc. or (ii)
solicit, interfere with or entice from Sellers or Huffy Service First, Inc. any
employee of Sellers or Huffy Service First, Inc., but nothing in this Section
10.10.2(b) shall preclude Purchaser, WIS or any of their respective Affiliates
from (A) general advertising for employees which is not directed at Sellers or
Huffy Service First, Inc. or (B) soliciting or otherwise doing business with any
organizations, customers or clients other than in connection with the business
of Huffy Service First, Inc., so long as Purchaser, WIS or such Affiliates would
not reasonably expect its activities to interfere with the relationship of
Sellers or Huffy Service First, Inc. with such person.
The parties hereby acknowledge that WIS and Huffy Service First, Inc. have a
number of common clients and will continue to have common clients. Except as
specifically provided in Section 10.10.1(b)(iv) and (v), neither WIS nor Huffy
Service First, Inc. shall be prohibited by this Section 10.10.2 from continuing
to call upon and deal with such common clients in the ordinary course of
business consistent with their respective past practices.
10.10.3 The Seller Restrictive Covenants (as defined below) set forth herein
have been separately bargained for to protect the Business, including goodwill,
being acquired by Purchaser hereunder and to ensure that Purchaser shall have
the full benefit of the value thereof. The Sellers recognize and acknowledge
that the business and markets of WIS are national and international in scope,
and that the Purchaser is investing substantial sums in purchasing the Business
and in consideration for the Seller Restrictive Covenants contained in this
Agreement, that such covenants are necessary in order to protect and maintain
the legitimate business interests of WIS and are reasonable in all respects, and
that Purchaser would not consummate the transactions contemplated hereby but for
such agreements. The Sellers hereby waive, on behalf of themselves and their
Affiliates, any and all right to contest the validity of the Seller Restrictive
Covenants on the ground of the breadth of their geographic or product coverage
or the length of their term. The Sellers acknowledge and agree that a
substantial and legally
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sufficient portion of the Merger Consideration is attributable to the Seller
Restrictive Covenants and the Sellers, on behalf of themselves and their
Affiliates, hereby waive any right to assert inadequacy of consideration as a
defense to enforcement of the Seller Restrictive Covenants should such
enforcement ever become necessary.
10.10.4 If any Seller or any of its Affiliates breaches, or threatens to commit
a breach of, any of the provisions of this Section 10.10 (the "Seller
Restrictive Covenants"), Purchaser and WIS shall have, in addition to, and not
in lieu of, any other rights and remedies available to them under law or in
equity, the rights to have the Seller Restrictive Covenants specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of the Seller Restrictive Covenants would cause irreparable
injury to Purchaser and WIS and that money damages would not provide an adequate
remedy. The Sellers, on behalf of themselves and their subsidiaries, covenant
and agree not to oppose any demand for specific performance and injunctive and
other equitable relief in case of any such breach or attempted breach.
If Purchaser, WIS or any of their Affiliates breaches, or threatens to commit a
breach of, any of the provisions of this Section 10.10 (the "Purchaser
Restrictive Covenants"), Sellers shall have, in addition to, and not in lieu of,
any other rights and remedies available to them under law or in equity, the
rights to seek to have the Purchaser Restrictive Covenants specifically enforced
by any court of competent jurisdiction, it being agreed that any breach of the
Purchaser Restrictive Covenants would cause irreparable injury to Sellers and
that money damages would not provide an adequate remedy. Purchaser, on behalf of
WIS and their Affiliates, covenant and agree not to oppose any demand for
specific performance and injunctive and other equitable relief in case of any
such breach.
10.10.5 The existence of any claim or cause of action by any Seller or any of
its Affiliates against Purchaser or WIS shall not constitute a defense to the
enforcement by Purchaser and WIS of the Seller Restrictive Covenants, but such
claim or cause of action shall be litigated separately.
The existence of any claim or cause of action by Purchaser, WIS or any of their
Affiliates against any Seller shall not constitute a defense to the enforcement
by Sellers of the Purchaser Restrictive Covenants, but such claim or cause of
action shall be litigated separately.
10.10.6 In addition to the remedies the Purchaser and WIS may seek and obtain
pursuant to Section 10.10.4 hereof, the Restricted Period applicable to the
Sellers and their Affiliates shall be extended by any and all periods during
which any Seller or any of its Affiliates shall be found by a final
non-appealable judgment of a court possessing personal jurisdiction over it to
have been in violation of the Seller Restrictive Covenants.
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In addition to the remedies Sellers may seek and obtain pursuant to Section
10.10.4 hereof, the Restricted Period applicable to the Purchaser, WIS and their
Affiliates shall be extended by any and all periods during which Purchaser, WIS
or any of their Affiliates shall be found by a final non-appealable judgment of
a court possessing personal jurisdiction over it to have been in violation of
the Purchaser Restrictive Covenants.
10.10.7 The parties hereto intend that the provisions of this Section 10.10 be
binding on the successors and assigns of their respective businesses.
10.10.8 WIS shall, and Purchaser agrees to cause WIS to, adopt a corporate
policy following the Closing prohibiting employees of WIS from engaging in any
Purchaser Restricted Activities during the period they are employed by WIS. WIS
shall, and Purchaser agrees to cause WIS to, keep such policy effective during
the Restricted Period.
10.10.9 Whenever possible, each provision of this Section 10.10 shall be
interpreted in such manner as to be effective and valid under applicable law but
if any provision of this Section 10.10 shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Section 10.10. If any provision of this
Section 10.10 shall, for any reason, be judged by any court of competent
jurisdiction to be invalid or unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this Section 10.10 but shall be confined
in its operation to the provision of this Section 10.10 directly involved in the
controversy in which such judgment shall have been rendered. In the event that
the provisions of this Section 10.10 should ever be deemed to exceed the time or
geographic limitations permitted by applicable law, then such provision shall be
reformed to the maximum time or geographic limitations permitted by applicable
law.
Section 10.11. Office Lease. WIS shall not, and Purchaser shall not permit WIS
to, renew the Office Lease between Sky Park Associates and WIS dated July 31,
1994 upon the expiration of its initial term on December 31, 2004 unless Huffy
is released at such time from its obligations under that certain Guaranty of
Lease between Huffy and Sky Park Associates dated July 31, 1994.
Section 10.12. Master Agreements. The assets listed in Section 10.12 of the
Disclosure Schedules are currently leased or licensed by Huffy pursuant to the
master agreements of Huffy listed in Section 10.12 of the Disclosure Schedules
and made available to WIS. Huffy agrees that it will permit WIS to continue to
use these assets pursuant to the master agreements for a period of six (6)
months following the Closing Date except to the extent prohibited by such
agreement. Purchaser will cause WIS to reimburse Huffy for the cost of using
such assets, consistent with past practice, and to comply with its obligations
under the master leases. Huffy will, if reasonably requested by Purchaser or
WIS, assist WIS in obtaining transfer of such assets to new lease arrangements.
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ARTICLE XI
INDEMNIFICATION
Section 11.1 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 III and IV shall survive
the Closing and remain in full force and effect for a period of eighteen (18)
months following the Closing Date; provided, however, that the representations
and warranties contained in Sections 3.10 and 3.16 and the second paragraph of
Section 5.6.2 shall survive for the applicable statute of limitations period and
any extensions thereof, and provided further that the representations and
warranties set forth in the first three sentences of Section 3.2 shall survive
forever.
Section 11.2 Sellers' Indemnification Obligations. Sellers shall, jointly and
severally, indemnify and hold Purchaser, WIS and their respective successors and
assigns, and their respective officers, stockholders, attorneys and agents
(collectively, the "Purchaser Indemnified Parties") harmless from and against,
and in respect of:
11.2.1 any demand, action or cause of action, claim, cost, loss, liability,
settlement, judgment, charge, fee, expense, or damage (collectively, "Damages")
incurred or sustained by any Purchaser Indemnified Party as a result of any
inaccuracy or breach of, or any claim by a third party alleging facts that, if
true, would mean Sellers have breached, any representation or warranty by
Sellers contained herein or under any other agreement executed and delivered by
the parties in furtherance of the transactions described herein (without regard
to any materiality qualifier contained in such representation or warranty);
11.2.2 any Damages incurred or sustained by any Purchaser Indemnified Party as a
result of a breach by Sellers 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;
11.2.3 any Damages for Taxes arising (i) at any time out of the operation of the
business of WIS for any taxable period or portion thereof ending on or prior to
the close of business on the Closing Date or incurred in connection with the
transactions contemplated by this Agreement (including any transfer, recording
taxes and similar Taxes, or any Taxes arising as a result of the Section
338(h)(10) Election), other than Post-September Stand Alone Taxes, (ii) with
respect to any and all Taxes of any member of an Affiliated Group of which WIS
(or any predecessor thereof) is or was a member on or prior to the Closing Date,
including any Taxes for which WIS may be liable under Section 1.1502-6 of the
Treasury
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regulations promulgated under the Code (or any similar provision of state, local
or foreign law); and (iii) by reason of being a successor-in-interest or
transferee of another person on or prior to the Closing Date;
11.2.4 any Damages for Seller Retained Claims or Seller Retained Litigation;
11.2.5 any Damages incurred or sustained by any Purchaser Indemnified Party
arising in connection with: (i) the Huffy Corporation Employee Benefit Plan
Salaried Retirees or any other plan or program providing retiree health or
welfare benefits maintained by Sellers, (ii) any reduction in, or change of, the
eligibility requirements for, retiree health or welfare benefits under any
welfare plan maintained or sponsored by WIS which reduction or change is adopted
prior to the Closing (whether or not such reduction or change becomes effective
prior to, on or after the Closing) including, without limitation, any Damages
incurred or sustained in connection with any claim for retiree health or welfare
benefits brought by any current or former employee of WIS who attains age
fifty-five (55) prior to January 1, 2002 and who completes at least five (5)
years of service with WIS and/or the Sellers prior to January 1, 2002 (or any
spouse or dependent thereof or any party bringing a claim through or on behalf
of any such individual), or (iii) the failure of WIS or Sellers to satisfy the
requirements of Section 204(h) of ERISA with respect to any reduction in benefit
accruals adopted prior to the Closing under any plan which is, or was at the
time of such reduction, subject to Section 204(h) of ERISA; and
11.2.6 all reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) incurred by any Purchaser Indemnified Party in connection
with any action, investigation, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 11.2.
Section 11.3 Purchaser's Indemnification Obligation. Purchaser shall indemnify
and hold Sellers, their respective successors and assigns, and their respective
officers, shareholders, attorneys and agents (collectively the "Seller
Indemnified Parties") harmless from and against, and in respect of:
11.3.1 all obligations and liabilities of WIS or arising out of or related to
the operation of WIS' business which are asserted after the Closing Date, except
(i) for Seller Retained Claims, (ii) for Seller Retained Litigation, (iii) as
provided in Sections 10.2, 10.4 and 10.5, and (iv) to the extent the existence
of such obligation or liability constitutes a breach by Sellers of any of their
representations or warranties hereunder (without regard to any materiality
qualifier contained in such representation and warranty);
11.3.2 any Damages incurred or sustained by any Seller Indemnified Party as a
result of any inaccuracy or breach of, or any claim by a third party alleging
facts that, if true, would mean Purchaser has breached, 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
(without regard
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to any materiality qualifier contained in such representation or warranty);
11.3.3 any Damages incurred or sustained by Sellers 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;
11.3.4 any Damages for Taxes arising at any time out of the operation of WIS
after the close of business on the Closing Date and any Post-September Stand
Alone Taxes;
11.3.5 any Damages incurred or sustained by Sellers as a result of the operation
of WIS' business after the Closing Date by Purchaser;
11.3.6 any Damages incurred or sustained by Huffy as a result of its being
required to pay or perform under that certain Guaranty of Lease between Huffy
and Sky Park Associates dated July 31, 1994 by reason of WIS' failure to pay or
perform under that certain Office Lease between Sky Park Associates and WIS
dated July 31, 1994; and
11.3.7 all reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) incurred by Sellers in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 11.3.
Section 11.4 Limitations on Indemnification. The respective rights and
obligations of Purchaser and Sellers under Section 11.2.1 or Section 11.3.2, as
the case may be, are subject to the following limitations: (i) neither Purchaser
nor Sellers shall become obligated to pay any asserted claims for Damages unless
and until the aggregate, cumulative amount of Damages exceeds a $500,000
threshold, at which point the indemnifying party will be obligated to indemnify
the indemnified parties from and against all such Damages in excess of the
initial $300,000; and (ii) under no circumstances shall either Sellers or
Purchaser be obligated to make indemnification payments under Section 11.2.1 or
Section 11.3.2, respectively, in a total, cumulative amount of more than
$4,000,000; provided that the foregoing threshold, basket and limit shall not
apply to indemnification for Damages resulting from breaches of Section 3.16,
the second paragraph of Section 5.6.2 or the first three sentences of Section
3.2.
Section 11.5 Procedure for Indemnification. The procedure to be followed in
connection with any claim for indemnification by Purchaser under Section 11.3 or
by Sellers under Section 11.2 or any claims by one party against the other, is
set forth below:
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11.5.1 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; provided, however, that failure to so notify the
indemnifying party shall not relieve the indemnifying party of its
indemnification obligations hereunder, except to the extent the indemnifying
party is actually prejudiced thereby. Any such notice must be made to the
indemnifying party not later than the expiration of the applicable survival
period specified in Section 11.1 above.
11.5.2 Defense of a Third Party Claim. The indemnifying party 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 with counsel reasonably satisfactory to the indemnified party;
provided, however, if there is a reasonable probability that a claim may
adversely affect the business or property 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 (with respect to amounts to be
paid by the indemnifying party) shall be made only with the written consent of
the indemnifying party, such consent not to be unreasonably withheld, provided
the indemnifying party receives a complete release of all obligations and
liabilities in any manner related to such claim. The indemnified party shall
promptly notify the indemnifying party of any compromise or settlement proposal
with respect to the claim and shall not unreasonably refuse to accept that
portion of any such proposal requiring the payment by the indemnifying party if
the same is acceptable to the indemnifying party and the indemnifying party
receives a complete release of all obligations and liabilities in any manner
related to such claim. The indemnified party may retain separate co-counsel at
its sole cost and expense and participate in the defense of any claim which the
indemnifying party is defending on behalf of the indemnified party. Purchaser
and Sellers hereby agree that the law firms of Dinsmore & Shohl LLP, Fulbright &
Jaworski L.L.P., Howrey Simon Arnold & White LLP and Nelson Mullins Riley &
Scarborough, L.L.P. are satisfactory for purposes of this Section 11.5.
If the indemnifying party fails to assume the defense of such claim (by failing
to notify the indemnified party that it acknowledges its obligation to indemnify
the indemnified party or that it will undertake the defense) within ten business
days after receipt of notice of a claim for indemnification, or fails to conduct
the defense of each claim diligently, 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, and provided,
however, that the indemnified party shall not enter into any such compromise or
settlement with respect to amounts to be paid by the indemnifying party without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld, provided the indemnifying party receives a complete
release of all obligations and liabilities in any manner related to such claim.
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
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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 (including without limitation the payment or obligation to pay on the
part of the indemnified party any amount) or the indemnified party would not
receive on the effective date of the indemnifying party's ceasing to defend,
settling or otherwise disposing of such claim without any cost or expense to the
indemnified party a complete release of all obligations and liabilities arising
out of, or in respect of such claims in form and content reasonably satisfactory
to indemnified party. If the indemnified party has elected to be represented by
separate counsel, 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, except as otherwise
contemplated by this Agreement, the indemnifying party shall not be liable to
the indemnified party under this Section 11.5.2 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof as long as the indemnifying party continues to conduct the defense of
each claim diligently, provided, however, that the indemnified party shall have
the right to employ counsel to represent it if, in the indemnified party's
counsel's opinion, it is advisable for the indemnified party to be represented
by separate counsel, and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the indemnifying party. 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.
11.5.3 Non-Third Party Claims. Within 30 business days after a party obtains
knowledge that it has sustained any Damages not involving a third party claim or
action which such party reasonably believes may give rise to a claim for
indemnification from another party hereunder, such indemnitee shall deliver
notice of such claim to the indemnitor, together with a brief description of the
facts and data which support the claim for indemnification; provided, however,
that failure to so notify the indemnitor shall not relieve the indemnitor of its
indemnification obligations hereunder, except to the extent that the indemnitor
is actually prejudiced thereby. Any such notice must be made to the indemnifying
party not later than the expiration of the applicable survival period specified
in Section 11.1 above. If the indemnitor does not notify the indemnitee within
45 business days following its receipt of such notice that the indemnitor
disputes its liability to the indemnitee under this Article XI, such claim
specified by the indemnitee in such notice shall be conclusively deemed a
liability of the indemnitor under this Article XI and the indemnitor shall pay
the amount of such claim to the indemnitee on demand or, in the case of any
notice in which the amount of the claim (or any portion thereof) is estimated,
on such later date when the amount of such claim (or such portion thereof)
becomes finally determined. If the indemnitor has timely disputed its liability
with respect to such claim, as provided above, the indemnitor and the indemnitee
shall proceed in good faith to negotiate a resolution of such dispute and, if
not resolved through negotiations, such dispute shall be resolved by litigation
in an appropriate court of competent jurisdiction.
11.5.4 No Additional Obligations. The obligation of the indemnifying party to
defend, or be responsible for indemnifying the indemnified party, with respect
to any claim made pursuant to this Article XI, shall be limited to the specific
indemnification obligations set forth in this Agreement; provided that the
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foregoing shall not prevent any party from bringing an action for fraud or apply
to Sellers' or Purchaser's obligations under Sections 10.4 and 10.5 hereof.
11.5.5 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 Merger Consideration, 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 Merger Consideration, the amount of any
indemnity payment shall be determined on an 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).
ARTICLE XII
PUBLICITY
All notices to third parties and all other parties concerning the transactions
contemplated by this Agreement (other than notices by either party to its
lenders) shall be jointly planned and coordinated by and between the parties.
None of the parties shall cause or authorize any such notice or publicity
without the prior written approval of the other party, which consent shall not
be unreasonably withheld; provided, however, that in the case of an announcement
which either party may be required by law, by any Governmental Authority or by
such party's stock exchange to make, issue or release, such action without the
prior approval by the other parties shall not constitute a breach of this
Article. In the event a party is required by law, by any Governmental Authority
or by such party's stock exchange to make any disclosure as described herein, it
shall use its best efforts to provide prompt notice to the other party of such
disclosure and consult with the other party prior to making such disclosure.
Notwithstanding the foregoing, it is understood and agreed that it is the desire
of the parties to make a public announcement of the transactions contemplated
herein at the earliest possible time after the execution of this Agreement, and
the parties agree to exercise their respective rights under this Article XII in
good faith to coordinate such an early announcement of this transaction.
ARTICLE XIII
TERMINATION
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Section 13.1 Termination. This Agreement may be terminated:
13.1.1 By Mutual Agreement. At any time prior to the Closing Date by mutual
agreement of all parties;
13.1.2 By Purchaser. At any time prior to the Closing Date by Purchaser if (i)
any representation or warranty of Sellers contained in this Agreement or in any
certificate or other document executed and delivered by Sellers pursuant to this
Agreement is or becomes untrue or breached in any respect (in the case of any
representation or warranty containing any materiality qualifier) or in any
material respect (in the case of any representation or warranty not containing a
materiality qualifier) or if Sellers fail to comply in any material respect with
any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within 20 days after
receipt of written notice thereof or (ii) if, pursuant to the last sentence of
Sections 5.4 or 5.14, Sellers amend their Disclosure Schedules to reflect a
matter which occurred subsequent to the date of this Agreement and Purchaser
determines that absent such amendment, any representation or warranty of Sellers
contained in this Agreement or in any certificate or other document executed and
delivered by Sellers pursuant to this Agreement is or becomes untrue or breached
in any respect (in the case of any representation or warranty containing any
materiality qualifier) or in any material respect (in the case of any
representation or warranty not containing a materiality qualifier);
13.1.3 By Sellers. At any time prior to the Closing Date by Sellers if (i) any
representation or warranty of Purchaser contained in this Agreement or in any
certificate or other document executed and delivered by Purchaser pursuant to
this Agreement is or becomes untrue in any respect (in the case of any
representation or warranty containing any materiality qualifier) or in any
material respect (in the case of any representation or warranty not containing a
materiality qualifier) or if Purchaser fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within 20 days after
receipt of written notice thereof, or (ii) Huffy receives a Huffy Acquisition
Proposal and delivers written notice thereof to Purchaser and pays the
Termination Fee and Purchaser Expenses as set forth in Section 13.2 hereof; and
13.1.4 Closing Deadline. By Purchaser or Sellers if the Closing has not occurred
by October 31, 2000 or, if a meeting of Huffy's stockholders is required to
approve the transactions contemplated hereby, the later of (a) October 31, 2000
or (b) five (5) business days following the date of receipt of such stockholder
approval;
provided, however, that the party seeking termination pursuant to the foregoing
clauses 13.1.2, 13.1.3 or 13.1.4 is not in breach in any material respect of any
of its representations, warranties, covenants or agreements contained in this
Agreement.
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Section 13.2 Effect of Termination. In the event this Agreement is terminated
pursuant to Sections 13.1.2 or 13.1.3(i), any party not then in breach of this
Agreement shall be entitled to pursue, exercise and enforce any and all
remedies, rights, powers and privileges available at law or in equity. In the
event of a termination of this Agreement under Sections 13.1.1 or 13.1.4 above,
the parties hereto shall stand fully released and discharged of any and all
obligations under this Agreement. In the event of a termination of this
Agreement under Section 13.1.3(ii), Sellers shall, as a condition to and
simultaneous with such termination, pay to Purchaser $1,700,000 (the
"Termination Fee") and reimburse Purchaser for all Purchaser Expenses. For
purposes hereof, "Purchaser Expenses" means all reasonable out-of-pocket
expenses and fees (including, without limitation, fees and expenses payable to
all banks, investment banking firms, other financial institutions and other
persons and their respective agents and counsel for arranging, committing to
provide or providing any financing for the transactions contemplated hereby or
structuring the transactions contemplated hereby and all fees of counsel,
accountants, experts and consultants to Purchaser but specifically excluding any
advisory, fund management, investment banking, consulting or arrangement fee
payable to an Affiliate of Purchaser) actually incurred or accrued by Purchaser
or on its behalf in connection with the transactions contemplated hereby and the
financing therefor. Nothing in this Section 13.2 shall be deemed to release the
Sellers, on the one hand, or the Purchaser, on the other hand, from any
liability for any breach by any of the Sellers or the Purchaser, as the case may
be, of the terms and provisions of this Agreement or to impair the right of any
party to compel specific performance by any of the Sellers or the Purchaser, as
the case may be, of their respective obligations under this Agreement.
Notwithstanding any provision in this Agreement to the contrary, the obligations
of the parties under Articles XII and XIV and Section 15.12 shall survive
termination of this Agreement for any reason.
ARTICLE XIV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 14.1 Nondisclosure. The parties recognize and acknowledge that they had
in the past, currently have, and in the future may possibly have, access to
certain Confidential Information (in such capacity, the "Receiving Party") of
one or more other parties (in such capacity, the "Disclosing Party") that is
valuable, special and unique assets of the Disclosing Party or its businesses.
Each Receiving Party agrees that it will keep all Confidential Information it
receives from a Disclosing Party confidential and will not permit any of its
directors, officers, employees, agents and representatives, including without
limitation attorneys, accountants, consultants and financial advisors
(collectively, "Advisors") to, without in each case the prior written consent of
the Disclosing Party, disclose the Confidential Information in any manner
whatsoever, in whole or in part. Each Receiving Party further agrees that all
Confidential Information which it receives from any Disclosing Party will not be
used by the Receiving Party or its Advisors directly or indirectly for any
purpose other than evaluating the transactions contemplated by this Agreement
and agrees to transmit the Confidential Information only to those Advisors who
need to know the Confidential Information for the purpose of evaluating such
transactions, who are informed by the Receiving Party of the confidential nature
of the Confidential Information and who are provided with a copy of, and agree
to be bound by, the provisions of this Article XIV. The Receiving Party shall be
responsible for any breach of the provisions of this Article XIV by any of its
Advisors, and will indemnify and hold harmless the Disclosing Party for any
losses, damages, charges, fees or expenses, including reasonable attorney's fees
arising out of or resulting from
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such breach. This Section 14.1 shall terminate with respect to Purchaser's
obligations in respect of Confidential Information regarding WIS upon the
closing of the transactions contemplated hereby.
Section 14.2 Control of Confidential Information. Each Receiving Party shall
keep a record of each location of any written Confidential Information. Upon any
termination of this Agreement, all written Confidential Information and any
copies thereof will be returned by the Receiving Party to the Disclosing Party
or, at the option of the Disclosing Party, destroyed immediately at the
Disclosing Party's request.
Section 14.3 Confidentiality Obligations of Sellers Following the Closing. From
and after the Closing Date, the Sellers shall, and shall cause their respective
Advisors to, keep confidential any Confidential Information relating to WIS and
the Business, and the Sellers and their respective Advisors shall be deemed to
be a Receiving Party, and WIS and Purchaser shall be deemed a Disclosing Party,
for all purposes of this Article XIV in respect of Confidential Information
about WIS and the Business.
Section 14.4 Limitations. The provisions of this Article XIV shall be
inoperative as to such portions of the Confidential Information which (i) are or
become generally available to the public other than as a result of a disclosure
by the Receiving Party or any of its Advisors; (ii) become available to the
Receiving Party on a nonconfidential basis from a source (other than the
Disclosing Party or one of its Advisors) which has represented to the Receiving
Party that such source is entitled to disclose it; or (iii) were known to the
Receiving Party on a nonconfidential basis prior to its disclosure to the
Receiving Party by the Disclosing Party or one of its Advisors; or (iv) is
independently developed by the Receiving Party without misappropriating
Confidential Information of the Disclosing Party.
Section 14.5 Legal Obligations. In the event that a Receiving Party or anyone to
whom a Receiving Party transmits the Confidential Information is requested or
becomes legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoena, criminal or civil investigative demand or
similar process) to disclose any of the Confidential Information, or if a
Receiving Party determines in its good faith judgment that disclosure of
Confidential Information is required by federal securities laws or the rules of
the National Association of Securities Dealers, the Receiving Party will provide
the Disclosing Party with prompt written notice so that the Disclosing Party may
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Article XIV, and the Receiving Party will cooperate with
the Disclosing Party in any effort the Disclosing Party undertakes to obtain a
protective order or other remedy. In the event that such a protective order or
other remedy is not obtained, or that the Disclosing Party waives compliance
with the provisions of this Article XIV, the Receiving Party will furnish only
that portion of the Confidential Information which is legally required and will
exercise its reasonable best efforts to obtain reliable assurance that
confidential treatment will be accorded the Confidential Information.
Section 14.6 Remedies. Each Receiving Party agrees that a Disclosing Party shall
be entitled to
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equitable relief, including temporary restraining orders, injunctions and
specific performance, in the event of any breach of the provisions of this
Article XIV. Such remedies shall not be deemed to be the exclusive remedies for
a breach of this Article XIV by a Receiving Party or its Advisors but shall be
in addition to all other remedies available at law or equity.
ARTICLE XV
MISCELLANEOUS
Section 15.1 Entire Agreement, Modification and Waiver. This Agreement and the
other agreements delivered pursuant hereto 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 15.2 Consents. Where any consent or waiver of Sellers is required or
requested hereunder, Nancy A. Michaud, Huffy's Vice President, General Counsel
and Secretary, shall be the authorized person to provide any such consent or
waiver. Where any consent or waiver of Purchaser is required or requested
hereunder, William L. Selden or Charles Santoro, Purchaser's President and Vice
President, respectively, shall be the authorized person to provide any such
consent or waiver. The waiver of any of the terms and conditions of this
Agreement shall not be construed as a waiver of any other terms and conditions
hereof.
Section 15.3 Assignment. Neither this Agreement nor any right created hereby or
in any agreement entered into in connection with the transactions contemplated
hereby shall be assignable by any party hereto, except by Purchaser to a wholly
owned subsidiary of Purchaser; provided that any such assignment shall not
relieve Purchaser of its obligations hereunder; and provided further that this
provision shall not prohibit Purchaser or its wholly owned subsidiary from
granting a security interest in its rights hereunder to any financial
institution extending credit to Purchaser or its wholly owned subsidiary.
Section 15.4 Parties In Interest; No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or
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thereto any rights or remedies hereunder or thereunder.
Section 15.5 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
Section 15.6 Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed and enforced in accordance
with the substantive laws (but not the rules governing conflicts of laws) of the
State of Ohio.
Section 15.7 Interpretation. The captions in this Agreement, including but not
limited to specific section number references included in the Disclosure
Schedules, are for convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions hereof. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation. Any
reference in this Agreement to a "day" or number of "days" (without the explicit
qualification of "business") shall be interpreted as a reference to a calendar
day or number of calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not a business day,
then such action or notice shall be deferred until, or may be taken or given on,
the next business day. References to the term "business day" shall mean any day
which is not a Saturday, Sunday or day on which banks in New York, New York are
authorized or required by law to close. The disclosure of any matter in the
Disclosure Schedules hereto shall be deemed to be a disclosure for all purposes
of this Agreement to which such matter could reasonably be likely to be
pertinent, but shall expressly not be deemed to constitute an admission by any
Seller or the Purchaser, or to otherwise imply, that any such matter is material
for the purposes of this Agreement. However, no disclosure in a Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein unless the Disclosure Schedule identifies and describes
the exception with such detail as would allow a reasonable person to understand
what exception is being taken. Without limiting the generality of the foregoing,
the mere listing (or inclusion of a copy) of a document or other item shall not
be deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
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Section 15.8 Gender and Number. When the context requires, the gender of all
words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
Section 15.9 Notice. Whenever this Agreement requires or permits any notice,
request, or demand from one party to another, the notice, request, or demand
must be in writing to be effective and shall be deemed to be delivered and
received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom notice
is sent or (ii) if delivered by mail (whether actually received or not), at the
close of business on the third business day next following the day when placed
in the mail, postage prepaid, certified or registered, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
If to Sellers:
Huffy Corporation
225 Byers Road
Miamisburg, Ohio 45342
Fax No.: (937) 865-5414
Attn.: Nancy A. Michaud
with a copy to: Dinsmore & Shohl LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Fax No.: (513) 977-8141
Attn: Charles F. Hertlein, Jr.
If to Purchaser: WIS Holdings Corp.
c/o Sterling Investment Partners Management LLC
276 Post Road West
Westport, CT 06880
Fax No.: (203) 454-5780
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Attn: William L. Selden
with a copy to (which shall not constitute notice):
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Fax No.: (212) 318-3400
Attn: Paul Jacobs, Esq.
Section 15.10 No Waiver; Remedies. No party hereto shall by any act (except by
written instrument pursuant to Section 15.1 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default in or breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the part of any
party hereto, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered exclusive
of any other remedy available to any party, but the same shall be distinct,
separate and cumulative and may be exercised from time to time as often as
occasion may arise or as may be deemed expedient.
Section 15.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 15.12 Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated hereby are consummated, each party hereto shall bear its own costs
and expenses (including attorneys' fees) incurred in connection with the
transactions contemplated herein, except to the extent provided herein. The
Sellers agree that WIS has not borne and will not bear any of the Sellers' costs
and expenses (including any of their legal fees and expenses, investment banking
fees and expenses (including the fees and expenses of PaineWebber Incorporated)
and any bonuses to management of WIS for assisting in the transaction
contemplated hereby) in connection with this Agreement or any of the
transactions contemplated hereby.
Section 15.13 Specific Performance. Each of the parties acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which they may be
entitled, at law or
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in equity.
Section 15.14 Waiver of Jury Trial.
15.14.1 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
15.14.2 EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
SUCH WAIVER, (iii) IT MAKES SUCH WAIVER VOLUNTARILY, AND (iv) IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER
AND CERTIFICATIONS IN THIS SECTION 15.14.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first written above.
HUFFY CORPORATION
By: /s/ Robert W. Lafferty
Its: Vice President-Finance, Chief Financial Officer
and Treasurer
HUFFY BRANDS COMPANY
By: /s/ Robert W. Lafferty
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Its: Vice President and Treasurer
WASHINGTON INVENTORY SERVICE
By: /s/ Robert W. Lafferty
Its: Treasurer
WIS HOLDINGS CORP.
By: /s/ William L. Selden
Its: President
WIS ACQUISITION CORP.
By: /s/ William L. Selden
Its: President
