<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 17, 1996
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GANDER MOUNTAIN, INC.
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(Exact name of registrant as specified in its charter)
Wisconsin
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(State or other jurisdiction or incorporation)
0-14579 39-1742710
- --------------------------------- ------------------------------
(Commission File Number) (I.R.S. Employer I.D. No.)
Highway W, P.O. Box 128
Wilmot, Wisconsin 53192
- --------------------------------- ------------------------------
(Address of Principal Executive ( Zip Code )
Offices)
414-862-2331
----------------------------------------------------
(Registrant's telephone number; including area code)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
a. On May 17, 1996, the Company sold selected catalog assets
including the customer list, certain other intangible assets and
selected inventory with an aggregate net book value of
approximately $26.5 million to Cabela's Incorporated for $35.0
million in cash. As a result of the sale, the Company is exiting
the catalog business and winding-down its catalog operations
during the fourth quarter of fiscal 1996. No additional catalogs
are planned to be mailed and no new catalog inventory is being
purchased. Catalog sales orders are being filled through no
later than mid-June 1996 from the remaining catalog inventory.
The catalog business exit strategy will include liquidation of the
remaining catalog inventory not sold above (primarily through the
retail stores), selling the fixed assets of the catalog business
and selling the Company's combined headquarters, distribution and
retail store facility in Wilmot, WI with the intent of leasing
back the portion needed for the retail business. The sale price
was determined by arms length negotiation.
Item 7. Financial Statements and Exhibits
b. Pro forma financial information is attached for the transaction
described in Item 2 above.
c. Exhibits
2. Asset Purchase Agreement between Cabela's, Inc. and Gander
Mountain, Inc., dated as of April 10, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
GANDER MOUNTAIN, INC.
Date: June 3, 1996 BY______________________
Kenneth C. Bloom
Chief Financial Officer
<PAGE> 3
GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited pro forma consolidated financial statements include
the effects of the sale of selected catalog assets to Cabela's Incorporated on
May 17, 1996 and the catalog business wind-down and exit strategy, as described
below, as if such events had occurred, for balance sheet purposes, on March 30,
1996 and, for statement of operations purposes, on July 3, 1994. These
unaudited pro forma consolidated financial statements are provided for
informational purposes only and should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.
On May 17, 1996, the Company sold selected catalog assets including the
customer list, certain other intangible assets and selected inventory with an
aggregate net book value of $26.5 million to Cabela's Incorporated for $35.0
million in cash. As a result of the sale, the Company is exiting the
catalog business and winding-down it's catalog operations during the fourth
quarter of fiscal 1996. No additional catalogs will be mailed and no new
catalog inventory is being purchased. Catalog sales orders are being filled
through no later than mid-June 1996 from the remaining catalog inventory. The
catalog business exit strategy includes liquidation of the remaining catalog
inventory not sold above (primarily through the retail stores), selling the
fixed assets of the catalog business and selling the Company's combined
headquarters, distribution and retail store facility in Wilmot, WI with the
intent of leasing back the portion needed for the retail business.
The unaudited pro forma adjustments are based upon available information and
certain assumptions and estimates that management believes are reasonable in
the circumstances and are subject to audit adjustments. The unaudited pro
forma consolidated financial information purports neither to represent what the
Company's financial position or results of operations would actually have been
if the events had occurred on the dates specified nor to be indicative of the
Company's future results.
<PAGE> 4
GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended July 1, 1995
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments for
Sale of Catalog
Assets and Exit
from Catalog Pro Forma
Historical Business (1) As Adjusted
---------- --------------- -----------
<S> <C> <C> <C>
Net sales 297,784 (202,270) 95,514
Cost of goods sold 201,843 (136,992) 64,851
-------- -------- -------
Gross profit 95,941 (65,278) 30,663
Selling, general & administrative (2) 95,453 (62,421) 33,032
Special charge (3) 11,510 (11,200) 310
-------- -------- -------
Loss from operations (11,022) 8,343 (2,679)
Net interest expense (4) 4,635 (2,577) 2,058
Other - net (5) 1,326 (602) 724
-------- -------- -------
Loss before income taxes (16,983) 11,522 (5,461)
Income tax provision (6) (6,199) 4,206 (1,993)
-------- -------- -------
Net loss (10,784) 7,316 (3,468)
Preferred redeemable stock dividends 1,112 - 1,112
-------- -------- -------
Net loss to common shareholders ($11,896) $7,316 ($4,580)
======== ======== =======
Net loss per share:
Primary ($3.69) ($1.42)
======== =======
Fully Diluted ($3.69) ($1.42)
======== =======
Weighted Average common and
common equivalent shares:
Primary 3,224 3,224
======== =======
Fully Diluted 3,224 3,224
======== =======
</TABLE>
<PAGE> 5
GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Thirty-Nine Weeks Ended March 30, 1996
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments for
Sale of Catalog
Assets and Exit
from Catalog Pro Forma
Historical Business (1) As Adjusted
---------- -------------- -----------
<S> <C> <C> <C>
Net sales 264,486 (151,105) 113,381
Cost of goods sold 186,014 (104,791) 81,223
-------- -------- -------
Gross profit 78,472 (46,314) 32,158
Selling, general & administrative (2) 81,159 (49,221) 31,938
Special charge (3) 5,300 (1,627) 3,673
-------- -------- -------
Loss from operations (7,987) 4,534 (3,453)
Net interest expense (4) 5,006 (2,092) 2,914
Other - net (5) 406 (205) 201
-------- -------- -------
Loss before income taxes (13,399) 6,831 (6,568)
Income tax provision 408 - 408
-------- -------- -------
Net loss (13,807) 6,831 (6,976)
Preferred redeemable stock dividends 832 - 832
-------- -------- -------
Net loss to common shareholders ($14,639) $6,831 ($7,808)
======== ======== =======
Net loss per share:
Primary ($4.51) ($2.40)
======== =======
Fully Diluted ($4.51) ($2.40)
======== =======
Weighted Average common and
common equivalent shares:
Primary 3,247 3,247
======== =======
Fully Diluted 3,247 3,247
======== =======
</TABLE>
<PAGE> 6
GANDER MOUNTAIN, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments (1)
----------------------------------------
Sale of Catalog Exit from Catalog Pro Forma
Historical Assets Business As Adjusted
---------- --------------- ----------------- -----------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash $5,278 - - $5,278
Accounts receivable 5,076 - - 5,076
Inventory 69,828 (26,315)(7) - 43,513
Prepaid catalog expenses 3,723 - (1,923)(9) 1,800
Assets held for sale 100 - 8,644 (10) 8,744
Other current assets 36 - - 36
-------- -------- -------- -------
84,041 (26,315) 6,721 64,447
Property and equipment - net 33,697 - (18,195)(11) 15,502
Intangible assets - net 610 (149)(7) (438)(12) 23
-------- -------- -------- -------
$118,348 ($26,464) ($11,912) $79,972
======== ======== ======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $25,021 - - $25,021
Notes payable to bank 47,459 (14,071)(8) - 33,388
Current portion of long-term oblig 19,500 (19,500)(8) - 0
Other current liabilities 10,478 - 4,127 (13) 14,605
-------- -------- -------- -------
102,458 (33,571) 4,127 73,014
Long-term obligations 0 - 2,119 (13) 2,119
Redeemable preferred stock 20,000 - - 20,000
Shareholders' deficit (4,110) 7,107 (14) (18,158)(14) (15,161)
-------- -------- -------- -------
$118,348 ($26,464) ($11,912) $79,972
======== ======== ======== =======
</TABLE>
<PAGE> 7
GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Reflects the sale of catalog inventory and intangible assets to
Cabela's which occurred on May 17, 1996 and subsequent exit from
the catalog business in the fourth quarter of fiscal 1996.
(2) Selling, general and administrative expenses for the catalog
business include historical allocations of centralized
distribution center, information technology, accounting,
administrative, human resource and loss prevention expenses of
$11.7 million and $9.2 million, respectively, for the year ended
July 1, 1995 and the thirty-nine weeks ended March 30, 1996. The
allocations represent the estimated incremental expenses incurred
on behalf of the catalog operations.
(3) The fiscal 1995 special charge attributed to the catalog business
includes $5.0 million for the abandonment of certain internally
developed catalog business software, $4.5 million for the
write-down of catalog aged inventory, $1.0 million severance for
catalog personnel, $0.5 million EZ pay receivable bad debt reserve
and $0.2 million in costs related to termination of two catalog
joint ventures. The fiscal 1996 special charge attributed to the
catalog business of $1.6 million is based on the proportion of
catalog inventory to total inventory included in the liquidation
plan.
(4) The pro forma adjustments to interest expense were calculated
assuming the net proceeds from the catalog assets sale of $33.6
million were used to retire all long term loans outstanding and a
portion of the revolving line of credit indebtedness at July 3,
1994. The average interest rates for such indebtedness was 7.1
percent and 8.2 percent, respectively, for the year ended July 1,
1995 and the thirty-nine weeks ended March 30, 1996.
(5) The pro forma adjustments to other expense include amortization
associated with intangible assets sold or written-off as part of
the disposition of the catalog business of $0.3 million and $0.2
million, respectively, for the year ended July 1, 1995 and the
thirty-nine weeks ended March 30, 1996.
(6) The pro forma income tax benefit adjustment for the year ended
July 1, 1995 is based on the Company's historical effective tax
rate.
(7) Book value of inventory and customer list intangible asset
included in catalog assets sold.
<PAGE> 8
GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(8) Cash proceeds have been reduced by $1.4 million representing
estimated transaction costs for financial advisors, associate
transaction incentives, bank fees and legal expenses. The net
proceeds from the catalog assets sale of $33.6 million were used
to retire all long term loans outstanding and with the
remainder applied against the revolving line of credit
indebtedness.
(9) Represents write-off of prepaid catalog expenses of $1.4 million
for which there will be no future catalog sales benefit as a
result of exiting the catalog business and the write-down to
estimated net realizable value of prepaid paper stock of $0.3
million and the reclassification of the balance of $0.3 million to
assets held for sale.
(10) Represents reclassification of various catalog fixed assets to
assets held for sale at estimated net realizable value less
selling costs as well as the paper stock noted in Note (9).
(11) Represents the net book value of assets which will be held for
sale including the fixed assets of the catalog business and the
Company's combined headquarters, distribution and retail store
facility.
(12) Represents the write-off of deferred organization and financing
costs with no future benefits as a result of the disposition of
the catalog operation.
(13) Represents future costs associated with the disposition of the
catalog business. The remaining value of operating lease
obligations relating to computer equipment used only in the
catalog business amounts to $3.1 million, of which $2.1 million
extends beyond one year. Severance and stay-put bonuses for
catalog associates amount to $1.5 million and reserves of $1.7
million for future estimated costs, claims and contingencies.
<PAGE> 9
GANDER MOUNTAIN, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(14) The net estimated pro forma increase to shareholders' deficit of
$11.1 million is calculated as follows (in millions):
<TABLE>
<S> <C>
Gross proceeds $ 35.0
Less:
Book value of assets sold 26.5
Direct transaction costs 1.4
Assets held for sale write-downs to net realizable value 9.9
Value of remaining catalog lease obligations 3.1
Severance and stay-put bonuses 1.5
Write-off prepaid catalog expenses 1.4
Reserve for future estimated costs, claims and contingencies 1.7
Write-off deferred organization and financing costs 0.4
Other 0.2
Tax benefit - offset entirely by valuation allowance -
------
Net adjustment to shareholders' deficit $ 11.1
======
</TABLE>
<PAGE> 10
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 10th day of
April, 1996, by and between CABELA'S INCORPORATED, a Nebraska corporation
("Purchaser"), on the one hand, and, on the other hand, GANDER MOUNTAIN, INC.,
a Wisconsin corporation ("GMI"), and GMO, Inc., a Wisconsin corporation and a
wholly owned subsidiary of GMI ("GMO") (GMI and GMO are collectively herein
referred to as "Gander Mountain").
WHEREAS, Gander Mountain, through GMI and GMO, is engaged
(among other businesses) in the business of selling hunting, fishing and
camping equipment and other outdoor sporting and recreational goods and
services through mail order catalogs (the "Catalog Division"); and
WHEREAS, Gander Mountain desires to sell certain of the assets
of the Catalog Division set forth herein to Purchaser and Purchaser desires to
purchase such assets, all on terms provided herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises in this Agreement, the parties hereto agree as follows:
1. SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
a. SALE OF ASSETS. Subject to the terms and
conditions hereof, on the "Closing Date" and at the "Closing" (both as
defined below), Gander Mountain shall sell to Purchaser and Purchaser
shall purchase from Gander Mountain the following assets (the
"Transaction"), as of the Closing (the assets to be sold hereunder
being collectively referred to herein as the "Purchased Assets"):
(1) INVENTORY. Certain inventory of the
Catalog Division, chosen by Purchaser as provided in Section 3
out of the total inventory of the Catalog Division, having a
Book Value (as defined herein) of $26 million (the "Firm
Inventory"), plus such other inventory of the Catalog Division
as the parties shall mutually agree upon as provided in
Section 3 (the "Optional Inventory" and, together with the
Firm Inventory, the "Purchased Inventory").
(2) CUSTOMER LISTS. All customer lists,
whenever created, of the Catalog Division, including buyers'
inquiries, prospects, commercial account lists (i.e. customer
exchange and list rental arrangements, data from vendors and
all other sources) and business, international and government
accounts and any and all information and files concerning all
past, present and prospective customers of the Catalog
Division, including archives, related data bases, service
bureaus or other similar data management systems, source
materials and all hard copy and electronic materials which
embody the customer list, together with the history and
back-up materials in respect of the list, as well as customer
item and order history
<PAGE> 11
and all other data concerning the customers of the Catalog
Division and any agreements with brokers, service bureaus or
agents permitting such parties to sell customer list rental
and exchange agreements or any similar arrangements (all of
the foregoing is referred to as the "Customer Lists"). The
Customer Lists shall specifically include all information
regarding customers or potential customers of the retail
stores of Gander Mountain to the extent used for any purpose
by the Catalog Division.
(3) MISCELLANEOUS ASSETS. The items
described on Schedule 1(a)(3) attached hereto ("Miscellaneous
Assets").
(4) LICENSE. The rights to be granted
to Purchaser by Gander Mountain under the License Agreement
(as hereinafter defined).
b. AT&T AGREEMENT. Subject to the terms and
conditions hereof, on the Closing Date and at the Closing, Purchaser
shall assume and agree to discharge in accordance with its terms, all
liabilities and obligations of GMI, GMO or any subsidiary thereof
under the instrument entitled "Contract Tariff No. Gander" (#2363)
dated 5/19/95 (the "AT&T Agreement") with AT&T Communications ("AT&T")
other than liabilities and obligations for (i) AT&T ACCUNET T1.5
Service Access Connections and (ii) AT&T Terrestrial 1.544 Mbps Local
Channel Services, including installation charges and liabilities
relating to early termination of such Terrestrial Local Channel
Services. Such liabilities and obligations shall be assumed
regardless of any failure of AT&T to consent thereto, in the event
such consent is required. The liabilities and obligations under the
AT&T Agreement to be assumed by Purchaser hereunder are referred to
herein as the "AT&T Liabilities." From and after execution hereof,
Gander Mountain shall provide Purchaser its full cooperation and
assistance in negotiating with AT&T to obtain consent to the
assignment of the AT&T Agreement and certain amendments thereto
including elimination of commitment penalties and reduction in tariff
amounts. The parties shall use best efforts to obtain such consent
and amendment as soon as reasonably practicable but no later than May
19, 1996. Without limiting the generality of the foregoing, Gander
Mountain shall submit to AT&T such applications and requests to
accomplish such consent and amendment as may be reasonably requested
by Purchaser. In no event shall Gander Mountain be required to
provide consideration to AT&T or any other person in connection with
its agreements set forth above.
c. NO OTHER LIABILITIES ASSUMED. Other than the
AT&T Liabilities, in no event shall Purchaser assume or incur any
liability or obligation hereunder in respect of the Catalog Division
or any other liability of Gander Mountain or any of its subsidiaries
or affiliates.
2. PURCHASE PRICE
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<PAGE> 12
a. GENERAL. The purchase price (the "Purchase
Price") for the Purchased Assets and the Noncompetition Agreement
(as hereinafter defined) shall be as follows:
(1) For the Firm Inventory, the sum of
$20 million.
(2) For the Optional Inventory (if any),
the Book Value thereof, unless otherwise agreed between the
parties.
(3) For the Customer Lists and the
Miscellaneous Assets, the sum of $7.5 million.
(4) For the License Agreement and the
Noncompetition Agreement, the sum of $7.5 million.
b. PAYMENT OF PURCHASE PRICE. The Purchase
Price shall be paid in full to GMI and GMO, jointly, as their
interests appear, in immediately available funds on the Closing Date,
by wire transfer to such bank account as shall be specified by GMI not
less than two business days prior to Closing; provided, however, that
such payment shall be reduced by any amount previously drawn against
the Letter of Credit (as defined below).
c. ALLOCATION OF PURCHASE PRICE. The Purchase
Price shall be allocated to the Purchased Assets for purposes of
Section 1060 of the Internal Revenue Code of 1986 as specified in
Section 2(a). In that regard, the parties agree to (i) treat and
report the transactions contemplated hereunder in all respects
consistent with the allocation provided for in this subsection (c) for
purposes of federal, state or local tax, and (ii) not take any action
inconsistent with such allocation.
d. BOOK VALUE. For purposes of determining
the Purchase Price, the "Book Value" of an item of inventory shall be
its cost as reflected in the "Item Master File" on the books of Gander
Mountain at the Closing Date, which file shall continue to be
maintained consistently with past practice as reflected in financial
statements of Gander Mountain previously provided to Purchaser,
provided, in no event shall the Book Value of any item of inventory on
the Inventory List exceed the amount shown for such item on the
Inventory List (as hereinafter defined).
e. LETTER OF CREDIT. Upon the execution and
delivery of this Agreement, Purchaser shall provide to Gander Mountain
an irrevocable standby letter of credit issued by a banking
institution reasonably acceptable to Gander Mountain. Such letter of
credit (the "Letter of Credit") shall be in the amount of $7.0 million
(until increased to $10.0 million as provided in the last sentence of
this section 2(e)) and shall provide for the immediate disbursement of
the entire principal amount to GMI at 12:00 noon prevailing time (or,
if earlier, at the issuing bank's wire transfer deadline) on the third
business day following presentation to the issuer and Purchaser of a
certificate, duly
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<PAGE> 13
executed by the Chairman, President or Chief Financial Officer of GMI,
stating that Gander Mountain has tendered to Purchaser delivery of all
items required under Section 7(b) against payment or delivery of the
items required under Sections 7(c) and 7(e), and all other conditions
precedent to the Purchaser's obligations to close as provided in
Section 7(d) hereof have been fulfilled. Gander Mountain acknowledges
that if Gander Mountain were to obtain the proceeds of the Letter of
Credit even though the conditions precedent as provided in Section
7(d) had not been fulfilled, Purchaser would be irreparably damaged
and would not have an adequate remedy at law. Accordingly, Gander
Mountain agrees that Purchaser shall be entitled to permanent
injunction prohibiting disbursement of the Letter of Credit in the
event that the conditions precedent as provided in Section 7(d) have
not been fulfilled and, pending a final, nonappealable decision after
a full hearing, Gander Mountain agrees that in such event Purchaser
shall be entitled to a temporary restraining order and/or preliminary
injunction without the requirement of posting a bond provided the
Purchaser obtains such an order prior to payment of the Letter of
Credit by the issuer. The parties agree that any proceeding by
Purchaser seeking an injunction may only be brought in a court of
competent jurisdiction in Lincoln, Nebraska, and Gander Mountain
hereby waives any and all objections for lack of jurisdiction,
improper venue and inconvenience of forum of any such court. Nothing
contained in this Section 2(e) is intended or shall be construed to
affect the burden of proof necessary for Purchaser to obtain a
temporary restraining order or a temporary or permanent injunction
prohibiting disbursement of the Letter of Credit. On April 17, 1996,
Purchaser shall provide to Gander Mountain a substitute letter of
credit in the amount of $10.0 million which shall be exchanged for the
initial letter of credit.
3. INVENTORY CHOICE AND SEGREGATION
Purchaser shall, at all times prior to Closing, have
access during normal business hours, and on reasonable notice to
Gander Mountain management, to Gander Mountain's inventory and
historical sales records and warehousing or inventory storage
facilities, for the purpose of determining its choice of inventory
items which will constitute Firm Inventory and which, if any,
Purchaser wishes to offer to purchase as Optional Inventory.
Immediately following execution hereof, Gander Mountain shall provide
Purchaser inventory reports with regard to the inventory of the
Catalog Division in such form and with such frequency as are
customarily produced by Gander Mountain. Purchaser may immediately
begin to provide Gander Mountain listings of the descriptions,
quantities and Book Values of items of inventory out of the total
inventory of the Catalog Division chosen by Purchaser as to selection
and quantity in its sole and absolute discretion without any right of
rejection in favor of Gander Mountain to constitute Firm Inventory in
sufficient detail that the same may be called out of Gander Mountain's
inventory storage. Gander Mountain will provide reasonable support,
including personnel, to assist in this process. Purchaser shall
provide all such listings to Gander Mountain no later than 21 days
after the date hereof. Within 10 days after the date Purchaser
provides each such listing, Gander Mountain shall provide Purchaser
copies of invoices showing the cost of all items of Firm Inventory.
During the 21 day period following the date hereof, Purchaser shall
also have the right to provide Gander Mountain listings of inventory
items
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<PAGE> 14
to constitute Optional Inventory. Within 5 days after receiving each
such listing, Gander Mountain shall advise Purchaser whether it wishes
to accept Purchaser's offer to purchase the specified Optional
Inventory. Failure of Gander Mountain to give notice of acceptance
during such period shall constitute a rejection of Purchaser's offer.
Gander Mountain shall cause the Firm Inventory as so specified (and
the Optional Inventory after acceptance of Purchaser's Offer for
same), to be segregated immediately following identification by
Purchaser, under the observation of representatives of Purchaser and
held at Gander Mountain's Wilmot, Wisconsin facility until the Closing
and thereafter until removed by Purchaser but not later than one year
after Closing. Gander Mountain shall also promptly upon designation
by Purchaser mark the Firm Inventory (and, after acceptance of
Purchaser's Offer for Optional Inventory, shall mark the Optional
Inventory) as not available for sale on its inventory records and
shall restrict access to the same by all Gander Mountain employees.
Gander Mountain shall continue to maintain through Closing the
insurance in effect at the date hereof covering the Purchased
Inventory. Beginning at Closing, Purchaser shall insure all Purchased
Inventory. Beginning on the Closing Date, Purchaser shall be entitled
to rent-free storage of the Purchased Inventory along with office
space, conference rooms, and telephone service (at Purchaser's expense
as to telephone service to the extent of long distance usage)
reasonably necessary to the liquidation by Purchaser of the Purchased
Inventory until the first anniversary of the Closing Date, and to
employ reasonable security measures with respect to the Purchased
Inventory at Purchaser's cost with respect thereto. All Purchased
Inventory stored at such facility shall be stored at the sole risk of
Purchaser after Closing who shall be solely responsible for any damage
thereof or shrinkage thereof, other than damage or shrinkage caused by
the gross negligence or willful misconduct of employees or agents of
Gander Mountain, to the extent not covered by Purchaser's insurance.
4. REPRESENTATIONS AND WARRANTIES OF GANDER MOUNTAIN
GMI and GMO hereby jointly and severally represent and warrant
to Purchaser that the following statements in this Section 4 are true and
correct on the date hereof (each of which representations and warranties is
qualified to the extent so referenced in the Schedule applicable thereto):
a. ORGANIZATION. GMI and GMO are each
corporations duly organized and validly existing under the laws of the
State of Wisconsin. Each of GMI and GMO has all requisite corporate
power and authority to own or lease and to operate and use the
Purchased Assets and to carry on the Catalog Division as now
conducted. True and complete copies of the articles of incorporation
and all amendments thereto and of the by-laws, as amended to date, of
each of GMI and GMO have been delivered to Purchaser. GMI is the
owner of all the issued and outstanding capital stock of GMO.
b. TITLE TO ASSETS. GMI or GMO have good and
marketable title to the Purchased Assets free and clear of all liens,
security interests, assignments of trademarks and service marks,
restrictions on transfer, options to acquire and other encumbrances
(collectively, "Liens"), except the Liens set forth on Schedule 4(b)
hereto
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<PAGE> 15
which, other than the Lien of Direct Digital, shall be released as of
Closing. Gander Mountain has complete and unrestricted power and
right to sell, assign and convey the Purchased Assets as contemplated
hereby, subject to the consent from the banks who are parties to the
Revolving Credit Agreement and Term Loan Agreement, as amended,
between among others, such banks, GMI and GMO (the "Credit
Agreement"). At Closing, Purchaser shall receive good and marketable
title to all the Purchased Assets free and clear of all Liens, other
than the Lien of Direct Digital and except for Liens created by or
through Purchaser.
c. AUTHORITY OF GANDER MOUNTAIN.
(1) GMI and GMO each have the corporate
power, authority and legal right to execute, deliver and
perform this Agreement and all agreements, instruments and
certificates referred to herein including, without limitation,
the License Agreement and Noncompetition Agreement (the
"Related Documents") to be executed by either GMI and/or GMO.
The execution, delivery and performance by each of GMI and GMO
of this Agreement and the Related Documents have each been
properly authorized by all necessary corporate action of GMI
and GMO. This Agreement has been duly executed and delivered
by GMI and GMO, and this Agreement constitutes, and upon
execution and delivery of the Related Documents by GMI and
GMO, such Related Documents will constitute the valid and
binding agreements of GMI and GMO enforceable against GMI and
GMO in accordance with their respective terms, subject to
bankruptcy, insolvency, moratorium and other laws affecting
creditors generally and to the discretion of a court to grant
equitable remedies.
(2) Neither the execution and delivery
of this Agreement by Gander Mountain nor Gander Mountain's
execution and delivery of the Related Documents or the
consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will:
(a) conflict with, result in a
breach of the terms, conditions or provisions of, or
constitute a default, an event of default or an event
creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in
the creation or imposition of any lien upon any of
the Purchased Assets under: the articles of
incorporation or by-laws of GMI or GMO; other than
the Credit Agreement and, if necessary, the AT&T
Agreement, any material note, instrument or agreement
to which GMI or GMO is a party or by which GMI or GMO
or any of the Purchased Assets is bound; any
judgment, order, award or decree of any federal,
state or local court or tribunal to which GMI or GMO
is a party or by which GMI or GMO or any of the
Purchased Assets is bound; or any federal, state or
local laws by which GMI or GMO or any of the
Purchased Assets is bound; or
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<PAGE> 16
(b) violate any statute,
regulation, rule, injunction, judgment, order or
decree or other restriction of any governmental body
or court to which Gander Mountain is subject or
require the approval, consent, authorization or act
of, or the making by GMI or GMO of any declaration,
filing or registration with, any third person or
governmental body, except as provided under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to the extent
required.
d. SALES TAXES.
(1) Assuming that the Purchased
Inventory is being purchased hereunder for resale by
Purchaser, there are no transfer, sales or use taxes required
to be made in connection with the transactions contemplated by
this Agreement; provided, however, that if necessary, Gander
Mountain shall timely file all transfer, sales and use tax
returns, if any, required by all applicable state laws
reflecting all transactions contemplated by this Agreement
through the Closing Date and shall timely pay the applicable
taxes shown due on such tax returns, except to the extent that
such taxes arise solely as a result of Purchaser's acquisition
of Purchased Inventory for any purpose other than for resale.
(2) Nothing contained in subparagraph
(1) above shall constitute an admission that any transfer,
sales or use taxes are required to be paid, or transfer, sales
or use tax returns required to be filed, in connection with
the transactions contemplated by this Agreement.
e. CONFIDENTIALITY OF CUSTOMER LISTS. The
confidentiality of the Customer Lists has been maintained by Gander
Mountain and will continue to be maintained by Gander Mountain through
the Closing Date. If necessary, at Closing, under the supervision of
and in cooperation with Purchaser, the Customer Lists shall be erased
from all systems of Gander Mountain (with all hard copies, tapes,
discs, etc. either delivered to Purchaser or destroyed) and, to the
extent any knowledge with respect to the Customer Lists is retained by
Gander Mountain, its officers, directors, employees, representatives,
brokers, service bureaus and agents, such information shall be deemed
confidential and a trade secret of Purchaser, and shall not be
disclosed to any third party or used in any manner for the benefit of
Gander Mountain or any other person, without the prior written consent
of Purchaser. Gander Mountain may, however, retain and use analyses
of its Customer Lists performed prior to the date of this Agreement,
reflecting solely the geographic breakdown by zip code of its
customers but not reflecting any names, addresses or telephone
numbers. Notwithstanding the foregoing, Gander Mountain shall neither
be required to erase nor to keep confidential any information
described in the last sentence of Section 1(a)(2).
f. CUSTOMER LIST RENTAL AND EXCHANGE AGREEMENTS.
Schedule 4(f) sets forth a list of all persons who, during the period
January 1, 1995 - March 31, 1996,
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<PAGE> 17
had the right to utilize to any extent and on any basis a customer
list of the Catalog Division (all of such utilization having been
through Chilicutt, except as set forth on Schedule 4(f)).
g. CUSTOMER LIST QUALITY. As of April 1, 1996,
the Customer Lists included not less than the following:
<TABLE>
<S> <C>
1,290,000 - 0-12 month buyers
995,000 - 13-24 month buyers
785,000 - 25-36 month buyers
1,790,000 - 37-72 month buyers
695,000 - 0-12 month inquiries
875,000 - 13-24 month inquiries
2,065,000 - 25-48 month inquiries
</TABLE>
h. INTELLECTUAL PROPERTY.
(1) Schedule 4(h) contains a list of:
(a) all United States and state
trademarks, service marks and trade names for which
registrations have been issued or applied for, and
all other United States and state trademarks, service
marks and trade names, owned by GMI or GMO or in
which GMI or GMO holds any right, license or interest
used in the Catalog Division, except that in case of
trademarks, service marks and trade names which are
not registered or for which registrations are not
applied for, the foregoing warranty is given only to
the best knowledge of Gander Mountain; and
(b) all agreements, commitments,
contracts, understandings, licenses, assignments and
indemnities relating or pertaining to any asset,
property or right of the character described in the
preceding clause to which GMI or GMO is a party,
other than those referred to on Schedule 4(b).
(2) With respect to the "Gander
Mountain" trade name, all of the registrations for such trade
name, trademark and service mark are valid and in force and
all without challenge of any kind, and GMI owns the entire
right, title and interest in and to such trade name, trademark
and service mark as well as the registration therefor without
qualification, limitation, burden or encumbrance of any kind,
other than as listed on Schedule 4(b).
(3) Gander Mountain has received during
the past 24 months no notice of any claim against Gander
Mountain involving any conflict or claim of conflict with
respect to the Gander Mountain trade name, trademark or
service mark. To the best knowledge of Gander Mountain, no
infringement of any
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<PAGE> 18
trademark, service mark, trade name, or copyright or
registration thereof has occurred or results in any way from
the use of such mark in the operations or business of the
Catalog Division. To Gander Mountain's best knowledge there
is no infringing use of such mark by any other person.
i. LITIGATION MATTERS. As of the date hereof,
there are no actions, suits, investigations or proceedings pending
against or, to the best of Gander Mountain's knowledge, threatened
against or affecting, Gander Mountain or any of the Purchased Assets
before any court, arbitrator or government authority which,
individually or in aggregate, could reasonably be expected to affect
the validity of this Agreement or its enforceability against Gander
Mountain, consummation by Gander Mountain of the transactions
contemplated hereby or compliance with the terms hereof by Gander
Mountain. As of the date hereof, there are no outstanding judgments,
decrees or orders of any court or governmental authority against
Gander Mountain which relate to or arise out of the conduct of the
Catalog Division or the ownership, condition or operation of the
Purchased Assets which, individually or in aggregate, could reasonably
be expected to affect the validity, enforceability or performance of
this Agreement by Gander Mountain. As of the date hereof, no
challenge to the Transaction based upon GMI's failure to obtain
shareholder approval therefor is pending and, to the actual knowledge
of Ralph Freitag and David Lubar, no such challenge has been
threatened.
j. INVENTORY. The listing of inventory of the
Catalog Division dated April 2, 1996 and run at 16:52 C.S.T. provided
to Purchaser by Gander Mountain (the "Inventory List") accurately
reflects the items and prices of the inventory of the Catalog Division
on hand as of such date in all material respects and, since that date,
there have been no sales or other dispositions of inventory by the
Catalog Division outside the ordinary course of business. As of April
9, 1996, the Catalog Division continues to hold inventory on the
Inventory List of at least $35 million in cost (using the costs shown
on the Inventory List).
k. DISCLOSURE. To the actual knowledge of Ralph
Freitag and David Lubar, no representation or warranty made by Gander
Mountain in this Agreement contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Gander Mountain
that the following statements in this Section 5 are true and correct on the
date hereof (each of which representations and warranties is qualified to the
extent so referenced in the Schedule applicable thereto):
a. ORGANIZATION OF PURCHASER. Purchaser is a
corporation duly organized and validly existing under the laws of the
State of Nebraska with all requisite corporate power and authority to
own, operate and lease its properties and conduct its business.
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<PAGE> 19
b. AUTHORITY OF PURCHASER. Purchaser has the
corporate power and authority and legal right to execute, deliver and
perform this Agreement and all Related Documents to be executed by
Purchaser. The execution, delivery and performance of this Agreement,
and any Related Documents to be executed by Purchaser, have been
properly and duly authorized by all required action of Purchaser.
This Agreement has been duly executed and delivered by Purchaser and
constitutes, and upon execution and delivery of the Related Documents
by Purchaser, such Related Documents will constitute, the valid and
binding agreements of Purchaser enforceable against Purchaser in
accordance with their respective terms, subject to bankruptcy,
insolvency, moratorium and other laws affecting creditors generally
and to the discretion of a court to grant equitable remedies.
c. NO CONFLICTS; APPROVALS. Neither the
execution and delivery of this Agreement by Purchaser nor Purchaser's
execution and delivery of the other agreements and instruments to be
delivered by Purchaser pursuant hereto or the consummation of any of
the transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or thereof
will:
(1) conflict with, result in a breach of
the terms, conditions or provisions of, or constitute a
default, an event of default or an event creating rights of
acceleration, termination or cancellation or a loss of rights
under the articles of incorporation or related instruments of
Purchaser; any material note, instrument or agreement to which
Purchaser is a party or by which Purchaser is bound; any
judgment, order, award or decree of any federal, state or
local court or tribunal to which Purchaser is a party or by
which Purchaser is bound; or any federal, state or local laws
to which Purchaser is bound; or
(2) require the approval, consent,
authorization or act of, or the making by Purchaser of any
declaration, filing or registration with, any third person or
governmental body, except as provided under the HSR Act.
d. SOURCE OF FUNDS. Purchaser's source of funds
for the payment of the cash portion of the Purchase Price is from
internal funds and through its existing revolving credit facility
provided by a group of banking institutions and such sources are
sufficient to enable Purchaser to pay the amounts to be paid by it
pursuant to Section 7(c)(1) at the Closing.
e. BUSINESS OF PURCHASER. Purchaser's principal
business is direct marketing through the catalog known as "Cabela's."
f. STOCK OF GMI. Purchaser is not the
"beneficial owner" (within the meaning of Wis. Stat. Section
180.1140(3)) of more than 5% of the Common Stock of GMI and has not
been such a beneficial owner since April 9, 1993.
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<PAGE> 20
6. COVENANTS PENDING CLOSING
a. HSR ACT; GOVERNMENTAL APPROVALS.
(1) As promptly as practicable after the
date hereof, GMI and Purchaser or its ultimate parent
entities, as appropriate, shall file with the Federal Trade
Commission and the Antitrust Division of the Department of
Justice the notifications and other information required to be
filed under the HSR Act, or any rules and regulations
promulgated thereunder, with respect to the transactions
contemplated hereby. Each party warrants that in all material
respects all such filings by it or its affiliates will be, as
of the date filed and based on information available as of the
date of filing, true and accurate and substantially in
accordance with the requirements of the HSR Act and any such
rules and regulations. Each of Purchaser and Gander Mountain
agrees to make available to the other such information as each
of them may reasonably request relative to its business,
assets and property as may be required of each of them to file
any additional information requested by such agencies under
the HSR Act and any such rules and regulations.
(2) During the period prior to the
Closing Date, Purchaser and Gander Mountain shall act
diligently and reasonably, and shall cooperate with each
other, to secure any consents and approvals of any
governmental body required to be obtained by them in order to
permit the consummation of the transactions contemplated by
this Agreement, or to otherwise satisfy the conditions set
forth in Section 7 hereof.
b. CLOSING CONDITIONS. Purchaser and Gander
Mountain agree to use their best efforts to cause to be fulfilled the
conditions to their respective obligations hereunder set forth in
Section 7 hereof, provided, however, that nothing herein shall require
the Board of Directors of GMI or GMO to take any action if such Board
determines in good faith, after advice of counsel, that taking such
action would reasonably risk violating its fiduciary duties.
c. INVESTIGATION BY PURCHASER. Between the date
hereof and the Closing Date, Gander Mountain shall furnish to
Purchaser or its authorized representatives such additional
information concerning the Purchased Assets as shall be reasonably
requested, including all such information as shall be necessary to
enable them to verify the accuracy of the representations and
warranties contained in this Agreement, to verify that the covenants
of Gander Mountain contained in this Agreement have been complied with
and to determine whether the conditions set forth in Section 7(d) have
been satisfied. Purchaser agrees that such investigation shall be
conducted in such a manner as not to interfere unreasonably with the
operations of Gander Mountain or the Catalog Division. Anything
herein to the contrary notwithstanding, in no event shall Purchaser or
any representative be entitled to access to or to receive any
information (i) about the Customer Lists or any information therein,
or (ii) which is subject to a confidentiality obligation on the part
of Gander Mountain. Notwithstanding clause (i) in the prior sentence,
to enable
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<PAGE> 21
Purchaser to prepare for an expedited transition of the Customer Lists
to Purchaser, from the date hereof to the Closing Date, Purchaser
shall be entitled to merge the Customer Lists with Purchaser's own
customer list and to purge all duplicative names if (i) such
merger/purge operations are conducted solely through DMT or another
organization acceptable to GMI, (ii) Purchaser is given no information
about the names, addresses or telephone numbers on the Customer Lists
and (iii) all resulting merged/purged customer lists are destroyed in
the event the Closing does not occur. In addition, Purchaser shall be
permitted to perform additional studies concerning the Customer Lists
consistent with and subject to the limitations of the above terms.
d. NO SHOPPING. GMI shall not, nor shall it
permit any subsidiary to nor shall it authorize or permit any officer,
director, investment banker, attorney, accountant or other agent or
representative retained by or acting under its authority to contact,
initiate, solicit, enter into or conduct any negotiations or
discussions or furnish any information to any person with respect to
the sale, direct or indirect, of the Purchased Assets (except, in each
case, for the transactions to be effected hereunder); provided,
however, GMI shall be entitled to furnish information about GMI or any
subsidiary (including any information about the Purchased Assets) to
any person who GMI reasonably believes is capable of effecting a
Superior Transaction (as defined in Section 8(a)(2) below), and shall
be entitled to enter into and conduct discussions and negotiations
with any such person with a view to entering into an agreement for a
Superior Transaction and Purchaser shall have no claim against GMI nor
any such person as a consequence thereof, including any contact with
GMI by such person. As promptly as practicable after such contact,
GMI shall advise Purchaser that GMI has been contacted by a person
seeking to acquire the Purchased Assets directly or indirectly and if
GMI furnishes information to such person, GMI shall as promptly as
practicable also advise Purchaser that it has done so. Gander
Mountain will promptly communicate to Purchaser the identity of the
party making any proposal which it receives in respect of any actual
or potential Superior Transaction. In no event will Gander Mountain
enter into any agreement with respect to a Superior Transaction unless
and until this Agreement has been terminated pursuant to Section
8(a)(2) below.
e. NOTICE OF DEVELOPMENTS. Gander Mountain and
Purchaser will give prompt written notice to each other of any
material adverse development causing a breach of any of its own
representations and warranties set forth in Sections 4 and 5 above.
No disclosure by either party pursuant to this Section 6(e), however,
shall be deemed to amend or supplement the schedules provided by
either party or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
f. BANKRUPTCY MATTERS. In the event that a
voluntary or involuntary petition in bankruptcy is filed by or against
Gander Mountain so that this Agreement or any Related Agreement
becomes subject to the executory contract or unexpired lease
provisions and requirements of 11 U.S.C. Sec. 365: (a) Gander Mountain
shall immediately seek, on an expedited basis, authorization from the
bankruptcy court to assume this Agreement and each Related Agreement
and to provide adequate assurances
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<PAGE> 22
in accordance with the terms and provisions of 11 U.S.C. Sec.
365(b)(1); (b) Gander Mountain shall make no demand for any action or
forbearance from Purchaser or from the issuer of the Letter of Credit
that relates in any way to this Agreement or any Related Agreement
unless or until a final, nonappealable order is entered by a court of
competent jurisdiction on the question of whether this Agreement and
each Related Agreement should be assumed; (c) Gander Mountain hereby
consents to relief from the automatic bankruptcy stay under 11 U.S.C.
Sec. 362 so that Purchaser can take all action or forbear from any
action as needed or appropriate to preserve its rights and protect its
interests that relate in any way to the subject matter of this
Agreement and each Related Agreement until a final, nonappealable
order is entered by a court of competent jurisdiction on the question
of whether this Agreement and each Related Agreement should be
assumed; and (d) in the event that such court authorization for
assumption of this Agreement and each Related Agreement is not
obtained within a reasonable time after the bankruptcy filing, but in
no event later than June 30, 1996, Gander Mountain hereby consents to
relief from the automatic stay of 11 U.S.C. Sec. 362 so that Purchaser
may take all necessary and appropriate action to terminate this
Agreement, obtain possession of any funds held in escrow according to
the terms of this Agreement, and take such other action or forbear
from any action that is needed or appropriate to preserve its rights
and protect its interests in light of such termination.
g. TAX CLEARANCE CERTIFICATES. Gander Mountain
shall use its best efforts to obtain all available certificates from
the Wisconsin Department of Revenue indicating that Purchaser shall
not, by reason of the transactions contemplated hereby, become liable
for any sales or use tax imposed by the State of Wisconsin.
h. VENDORS. Immediately following execution
hereof, Gander Mountain shall provide Purchaser the names and
addresses of its vendors and Purchaser shall have the right and
authority to contact any such vendors for the purposes of discussing
returns of Purchased Inventory, past business practices and any
quality issues regarding Purchased Inventory.
i. PRESS RELEASE. Gander Mountain shall prepare
any press releases announcing the execution of this Agreement and the
Transaction, which shall be subject to prior approval of Purchaser
with respect to the portions thereof describing Purchaser.
7. CLOSING AND CLOSING DELIVERIES; CONDITIONS
a. CLOSING. The Closing shall take place at
9:00 a.m. local time no later than the third business day following
the day on which the condition in Section 7(d)(3) is satisfied, at the
offices of Koley, Jessen, Daubman & Rupiper, P.C., Omaha, Nebraska or
at such other place as may be mutually agreed upon by the parties;
provided, however, that if all the conditions precedent to the Closing
shall not have been satisfied or waived by such date, and (i) the
party which has failed to fulfill any condition not waived is
diligently seeking to fulfill such condition, and (ii) it is
reasonably expected that
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<PAGE> 23
such condition can be fulfilled by June 30, 1996, then the Closing
Date shall be extended to the third business day following the day on
which such condition precedent has been fulfilled (or waived). The
date on which the Closing shall actually occur is herein referred to
as the "Closing Date." All actions to be taken and deliveries to be
made at Closing shall be deemed to be conditions concurrent with the
Closing. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as
any other party reasonably may request, all at the sole cost and
expense of the requesting party (unless the requesting party is
entitled to indemnification therefore under Section 10 below).
b. GANDER MOUNTAIN DELIVERIES. At Closing,
Gander Mountain shall deliver to Purchaser the instruments and
documents specified below duly executed by an authorized officer of
Gander Mountain, if applicable:
(1) a Bill of Sale to the Purchased
Assets in the form attached as Exhibit 7(b)(1) hereto, and
concurrent possession of the Purchased Assets;
(2) a certificate of the Secretary or an
Assistant Secretary of GMI to the effect that the resolutions
of GMI's directors authorizing the sale of the Purchased
Assets to Purchaser pursuant to this Agreement have not been
modified, revoked or repealed;
(3) the Letter of Credit;
(4) a license agreement in the form of
Exhibit 7(b)(4) attached hereto (the "License Agreement");
(5) a noncompetition agreement in the
form of Exhibit 7(b)(5) attached hereto (the "Noncompetition
Agreement");
(6) an opinion of Foley & Lardner,
counsel to Gander Mountain, to the effect set forth on Exhibit
7(b)(6) attached hereto dated the Closing Date;
(7) properly-executed releases of all
Liens on the Purchased Assets including, but not limited to
the Liens described on Schedule 4(b) hereto, except that
notwithstanding the foregoing, no release shall be required of
the Lien of Direct Digital on the Miscellaneous Assets;
(8) assignments of the interests in the
trademarks covered by the License Agreement properly executed
by any bank, lender or other third party having a security
interest or any other interest in such trademarks;
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<PAGE> 24
(9) certificates of existence for GMI
and GMO from the State of Wisconsin dated not more than ten
(10) days prior to Closing;
(10) Consents and Covenants not to Sue in
the form of Exhibit 7(b)(10) attached hereto properly executed
by shareholders of GMI holding in the aggregate not less than
41% of the total votes that are entitled to be cast by holders
of Common Stock and Preferred Stock of GMI when they vote
together as a single class; and
(11) the certificates of Gander Mountain
contemplated under Sections 7(d)(1) and 7(d)(2) below.
c. PURCHASER DELIVERIES. At Closing, Purchaser
shall deliver to Gander Mountain the instruments and documents
specified below duly executed by an authorized officer of Purchaser,
if applicable:
(1) the Purchase Price payable to GMI
and GMO jointly as their interests appear, by wire transfer in
immediately available funds (reduced by any amount drawn
against the Letter of Credit);
(2) resale or equivalent certificates
executed by Purchaser with respect to the inventory and any
other personal property for which such certificates are
required by law to avoid collection of sales tax on the sale
of Purchased Assets hereunder;
(3) a certificate of the Secretary or an
Assistant Secretary of Purchaser to the effect that the
resolutions of Purchaser's directors authorizing the purchase
of the Purchased Assets from Gander Mountain pursuant to this
Agreement have not been modified, revoked or repealed;
(4) the License Agreement;
(5) a noncompetition agreement in the
form of Exhibit 7(c)(5) attached hereto (the "Purchaser
Noncompetition Agreement");
(6) an opinion of Koley, Jessen, Daubman
& Rupiper, P.C., counsel to Purchaser, to the effect set forth
on Exhibit 7(c)(6) attached hereto dated the Closing Date;
(7) a Certificate of Good Standing for
Purchaser from the State of Nebraska dated not more than ten
(10) days prior to Closing;
(8) an Assumption of the AT&T
Liabilities in the form of Exhibit 7(c)(8); and
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<PAGE> 25
(9) the certificates of Purchaser
contemplated under Sections 7(e)(1) and 7(e)(2) below.
d. CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATIONS. All obligations of Purchaser under this Agreement are
subject to the fulfillment, on or prior to the Closing Date, of each
of the following conditions (unless the fulfillment thereof is
prevented by an act or omission of Purchaser):
(1) The representations and warranties
of Gander Mountain contained in Section 4 of this Agreement
shall be deemed to have been made again at and as of the
Closing Date with respect to the state of facts then existing
(except that any representation and warranty which is
expressly given as of the date hereof or as of any specified
date shall be only deemed made as of the date hereof or as of
such specified date and not as of the Closing Date), and shall
then be true in all respects on and as of the Closing Date,
except for any untruths which, individually and in the
aggregate, are not material and adverse to the Purchased
Assets; and there shall have been delivered to Purchaser a
certificate to such effect, dated the Closing Date, signed on
behalf of GMI and GMO by their respective Chairman, Chief
Executive Officer or Chief Financial Officer.
(2) There shall have been no material
breach by Gander Mountain in the performance of any of its
covenants and agreements herein (including, without
limitation, the completion of the actions and delivery by
Gander Mountain of all of the items specified in Section 7(b)
of this Agreement), and there shall have been delivered to
Purchaser a certificate to such effect, dated the Closing
Date, signed on behalf of GMI and GMO by their respective
Chairman, Chief Executive Officer or Chief Financial Officer.
(3) All applicable waiting periods,
including any extensions thereof, under the HSR Act shall have
expired or otherwise been terminated.
(4) There shall not be in effect any
order issued by a court of competent jurisdiction enjoining
the consummation of the Transaction or any part thereof.
e. CONDITIONS PRECEDENT TO GANDER MOUNTAIN'S
OBLIGATIONS. All obligations of Gander Mountain under this Agreement
are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions:
(1) The representations and warranties
of Purchaser contained in Section 5 of this Agreement shall be
deemed to have been made again at and as of the Closing Date
with respect to the state of facts then existing and shall
then be true in all material respects on and as of the Closing
Date; and there shall have been delivered to Gander Mountain a
certificate to such effect, dated the Closing Date, signed on
behalf of Purchaser by its President or any Vice President.
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<PAGE> 26
(2) There shall have been no material
breach by Purchaser in the performance of any of its covenants
and agreements herein (including, without limitation,
completion of the actions and delivery by Purchaser of all of
the items specified in Section 7(c) of this Agreement), and
there shall have been delivered to Gander Mountain a
certificate to such effect, dated the Closing Date, signed on
behalf of Purchaser by its President or any Vice President.
(3) All applicable waiting periods,
including any exclusions thereof, under the HSR Act shall have
expired or otherwise been terminated.
(4) There shall not be in effect any
order issued by a court of competent jurisdiction enjoining
the consummation of the Transaction or any part thereof.
f. WAIVER. Either party may, but shall have no
obligation to, waive in its absolute discretion any delivery to it
hereunder or any condition precedent to its obligations hereunder.
8. TERMINATION
a. GENERAL.
(1) Either party may terminate this
Agreement by giving written notice to the other party in the
event that the conditions precedent to the performance of the
obligations of the party giving such notice shall not have
been fulfilled by June 30, 1996, unless the absence of such
fulfillment is due to a breach of this Agreement by the party
seeking to terminate this Agreement.
(2) Gander Mountain may terminate this
Agreement to enter into an agreement with a third party
providing for the sale of any of the assets of GMI or any
subsidiary, or any merger, business combination or similar
transaction involving GMI, or a transaction in which a person
makes a significant equity investment in GMI or any
subsidiary, on terms which a majority of the Board of
Directors of GMI in good faith believe are materially more
favorable to GMI than the sale of the Purchased Assets
hereunder (any such sale a "Superior Transaction"); provided,
however, contemporaneously with the closing of such Superior
Transaction, Gander Mountain shall pay to Purchaser the sum of
$1,500,000 (the "Termination Fee") by wire transfer of
immediately available funds.
b. EFFECT OF TERMINATION. If this Agreement is
terminated under Section 8(a), then all obligations of Gander Mountain
and Purchaser hereunder shall terminate; provided, however, that such
termination shall not (i) relieve Gander Mountain or Purchaser from
liability for any breach of this Agreement, which liability shall
include, in addition to all damages otherwise recoverable under
applicable law, all legal and other
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<PAGE> 27
costs and expenses incurred by the non-breaching party in connection
with this Agreement and the transactions contemplated hereby,
including such costs and expenses as arise out of any legal proceeding
incident to such breach, provided, however, Purchaser's liability for
breach of this Agreement shall not exceed $10,000,000 or (ii)
relieve Gander Mountain from its obligations to make payment to
Purchaser of the Termination Fee upon the closing of a Superior
Transaction.
9. RISK OF LOSS
The risk of loss or damage to any of the tangible property,
transfer of which is contemplated hereby, shall remain with Gander Mountain
until Closing, except to the extent any such loss or damage is proximately
caused by an act of Purchaser, in which event such loss shall be at the expense
of Purchaser.
10. INDEMNIFICATION
a. SURVIVAL. Except as otherwise set forth in
this Section 10(a), the representations and warranties made in this
Agreement or in any Related Agreement shall survive the Closing until
the second anniversary thereof and shall thereupon expire together
with any right to indemnification for breach thereof (except to the
extent a written notice asserting a claim for breach of any such
representation or warranty, describing the nature of the breach in
reasonable detail, shall have been given prior to such date to the
party which made such representation or warranty, in which case such
representation and warranty shall survive, to the extent of such claim
only, until such claim is resolved, whether or not the amount of the
damages or expense resulting from such breach has been finally
determined at the time the notice is given, if, but only if, in the
case of a claim made by Purchaser by reason of a third party claim,
the written notice is accompanied by a copy of the written notice of
the third party claimant. The representations and warranties
contained in Sections 4(a), 4(b) and 4(c) shall survive the Closing
until the expiration of the applicable statute of limitations. The
covenants and agreements contained herein to be performed or complied
with at or after the Closing (other than the covenant and agreement to
indemnify against breaches of representations and warranties, which
shall expire as set forth in the first sentence of this Section 10(a))
shall survive the Closing until the expiration of the applicable
statute of limitations.
b. INDEMNIFICATION.
(1) If the Closing shall occur, Gander
Mountain shall indemnify Purchaser and hold it harmless from
and against all "Losses" (as hereinafter defined) which are
incurred or suffered by Purchaser (A) by reason of the breach
of any of the representations or warranties made by Gander
Mountain herein or in any Related Agreement, (B) by reason of
the failure by Gander Mountain to perform or comply with any
of the covenants or agreements contained herein or in any
Related Agreement to be performed or complied with by Gander
Mountain prior to, at or after the Closing, or (C) by reason
of any liability or obligation of
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GMI or GMO which is asserted against Purchaser, other than the AT&T
Liabilities; provided, however, that (x) Purchaser shall not be
entitled to any recovery unless a claim for indemnification is made in
accordance with paragraph (3)(A) of Section 10(b) and within the time
period of survival set forth in Section 10(a); and (y) Purchaser shall
not be entitled to recover any amount for indemnification claims under
clause (A) of this paragraph (1), unless and until the amount of all
claims exceeds, in the aggregate, an amount equal to $200,000, in
which event Purchaser shall be entitled to recover the amount by which
the aggregate of such claims exceeds $200,000. As used herein, the
term "Losses" means any liability, loss, damage, deficiency, cost or
expense (including reasonable attorneys' fees and disbursements),
whether as a result of third-party claims or actual or direct Losses
sustained by Purchaser, but shall not include damages for lost
profits, unless the same have been sustained by a third party and are
payable by Purchaser on account of claims against Purchaser by such
third party. In no event shall Gander Mountain be obligated to
indemnify Purchaser under this subparagraph (1) for any amount which,
when added to all other amounts previously paid to Purchaser in regard
to its indemnification obligations hereunder, exceeds the Purchase
Price.
(2) If the Closing shall occur,
Purchaser shall indemnify GMI and GMO and hold each of them harmless
from and against all Losses which are incurred or suffered by any of
them (A) by reason of the breach by Purchaser of any of the
representations or warranties made by Purchaser herein or in any
Related Document, (B) by reason of the failure by Purchaser to perform
or comply with any of the covenants or agreements contained herein or
in any Related Document to be performed or complied with by it prior
to, at or after the Closing or (C) by reason of the AT&T Liabilities;
provided, however, that: (x) Gander Mountain shall not be entitled to
any recovery unless a claim for indemnification is made in accordance
with paragraph (3)(A) of this Section 10(b) and within the time period
set forth in Section 10(a); and (y) Gander Mountain shall not be
entitled to recover any amount for indemnification claims under clause
(A) of this paragraph (2) unless and until the amount of such claims
exceeds, in the aggregate, an amount equal to $200,000, in which event
Gander Mountain shall be entitled to recover the amount by which the
aggregate of such claims exceeds $200,000. In no event shall
Purchaser be obligated to indemnify Gander Mountain under this
subparagraph (2) for any amount which, when added to all other amounts
previously paid to Gander Mountain in regard to its indemnification
obligations hereunder, exceeds the Purchase Price.
(3) (a) In the event that any party
shall incur or suffer any Losses in respect of which indemnification
may be sought by such party pursuant to the provisions of this Section
10(b), the party seeking to be indemnified hereunder (the
"Indemnitee") shall assert a claim for indemnification by written
notice (a "Notice") to the party from whom indemnification is sought
(the "Indemnitor") stating the nature and basis of such claim, and, if
such claim is with
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<PAGE> 29
respect to a third party claim, accompanied by the documentation set
forth in Section 10(a). In the case of Losses arising by reason of
any third party claim, the Notice shall be given within 30 days of the
filing or other written assertion of any such claim against the
Indemnitee, but the failure of the Indemnitee to give the Notice
within such time period shall not relieve the Indemnitor of any
liability that the Indemnitor may have to the Indemnitee except to the
extent that the Indemnitor is prejudiced thereby.
(b) The Indemnitee shall provide to
the Indemnitor upon request all information and documentation
reasonably necessary to support and verify any Losses which the
Indemnitee believes give rise to a claim for indemnification hereunder
and shall give the Indemnitor reasonable access to all books, records
and personnel in the possession or under the control of the Indemnitee
which would have bearing on such claim.
(c) In the case of third party claims
for which indemnification is sought, the Indemnitor shall have the
option, and with respect to such claims that are in respect of the
AT&T Liabilities ("AT&T Claims"), shall have the obligation, at its
sole cost and expense, (x) to conduct any proceedings or negotiations
in connection therewith, (y) to take all other steps to settle or
defend any such claim (provided that the Indemnitor shall not settle
any such claim without the consent of the Indemnitee (which consent
shall not be unreasonably withheld) and (z) to employ counsel to
contest any such claim or liability in the name of the Indemnitee or
otherwise. In any event, the Indemnitee shall be entitled to
participate at its own expense and by its own counsel in any
proceedings relating to any third party claim. The Indemnitor shall,
within 45 days of receipt of the Notice, notify the Indemnitee of (or,
in the case of AT&T Claims, confirm to the Indemnitee) its intention
to assume the defense of such claim. Until the Indemnitee has received
notice of the Indemnitor's election (or such confirmation) whether to
defend any claim, the Indemnitee shall take reasonable steps to defend
(but may not settle) such claim. If, in the case of any claim that is
not an AT&T Claim, the Indemnitor shall fail to notify the Indemnitee
within 45 days after receipt of the Notice whether or not the
Indemnitor elects to defend such claim, the Indemnitee shall defend
against such claim, and the Indemnitor shall reimburse the Indemnitee
or pay directly for the costs and expenses thereof (including, without
limitation, counsels' fees) on a periodic basis promptly upon receipt
of Indemnitee's request therefor and written verification of such
costs and expenses (provided that the Indemnitee shall not settle such
claim without the consent of the Indemnitor, which consent shall not
be unreasonably withheld). The expenses of all proceedings, contests
or lawsuits in respect of such claims (other than those incurred by
the Indemnitee which are referred to in the second sentence of this
subparagraph (c)) shall be borne by the Indemnitor but only if the
Indemnitor is responsible pursuant hereto to indemnify the Indemnitee
in respect of the third party claim and, if applicable, only to the
extent required by clause (y) of Section 10(b)(1) or 10(b)(2),
whichever is applicable. Regardless of which party shall assume the
defense of the
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<PAGE> 30
claim, the parties agree to cooperate fully with one another in
connection therewith. In the case of a claim for indemnification made
under Section 10(b)(1)(A) or 10(b)(2)(A), (1) if (and to the extent)
the Indemnitor is responsible pursuant hereto for indemnifying the
Indemnitee in respect of the third party claim, then within ten days
after the occurrence of a final non-appealable determination with
respect to such third party claim, the indemnitor shall pay the
Indemnitee, in immediately available funds, the amount of any Losses
(or such portion thereof as the Indemnitor shall be responsible for
pursuant to the provisions hereof, including, without limitation,
clause (y) of Section 10(b)(1) or 10(b)(2), whichever is applicable),
and (2) in the event that any Losses incurred by the Indemnitee do not
involve payment by the Indemnitee of a third party claim, then, if (and
to the extent) the Indemnitor is responsible pursuant hereto for
indemnifying the Indemnitee against such Losses, the Indemnitor shall
within ten days after agreement on the amount of Losses or the
occurrence of a final non-appealable determination of such amount pay
to the Indemnitee, in immediately available funds, the amount of such
Losses (or such portion thereof as the Indemnitor shall be responsible
for pursuant to the provisions hereof, including, without limitation,
clause (y) of Section 10(b)(1) or 10(b)(2), whichever is applicable.
(4) The indemnification provided in this
Section 10(b) shall be the sole and exclusive remedy for monetary
damages for any inaccuracy or breach of any representation, warranty,
covenant, agreement or any other obligation made by GMI or GMO or
Purchaser in this Agreement (including the Schedules hereto) or in any
Related Document; provided, however, nothing contained herein shall
restrict the right of the parties to obtain equitable relief. All
amounts payable by one party in indemnification of the other shall be
considered an adjustment to the Purchase Price.
(5) Upon making any payment to an
Indemnitee for any indemnification claim pursuant to this Section
10(b), the Indemnitor shall be subrogated, to the extent of such
payment, to any rights which the Indemnitee may have against any other
parties with respect to the subject matter underlying such
indemnification claim.
11. BULK SALES ACT
Gander Mountain shall furnish to Purchaser within seven business days
after the date hereof: (i) the list of creditors (including parties to all
litigation to which Gander Mountain or its subsidiaries and affiliates are
parties) required to be furnished to comply with the bulk transfer laws of
Wisconsin, Wis. Stat. Ann. Section 406.101 et seq. and any other applicable
bulk transfer law (collectively, the "Bulk Transfer Laws") in connection with
the sale and the transfer of the Purchased Assets (it being understood that the
amounts contained on such list as known to Gander Mountain may be determined as
of a time in advance of the delivery of such list to Purchaser but as close
thereto as reasonably practicable) and (ii) all information with respect to
Gander Mountain necessary for any notice to creditors that Purchaser desires to
send under the
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<PAGE> 31
Bulk Transfer Laws. In connection therewith, Gander Mountain will take such
other action as is reasonably requested by Purchaser to assist in complying
with the Bulk Transfer Laws (it being understood that all costs relating to the
mailing of the notice to creditors shall be the responsibility of Purchaser).
Gander Mountain represents and warrants that such list and information and the
schedule of property referred to below will be true and correct. Gander
Mountain shall be entitled, if it so desires, to include in any mailing to
creditors a letter from Gander Mountain, other than a letter to which Purchaser
reasonably objects. In addition to the foregoing, Gander Mountain and
Purchaser will jointly prepare the schedule of property required by the Bulk
Transfer Laws.
12. MISCELLANEOUS PROVISIONS
a. BROKERS. Each party represents to the other
that all negotiations relative to this Agreement have been carried on
by Gander Mountain and Purchaser, directly, and no broker or third
party (other than Smith Barney Inc., whose fees and expenses are the
responsibility of Gander Mountain, and Dain Bosworth Incorporated
whose fees and expenses are the responsibility of Purchaser) has been
employed with respect to the sale and transfer covered hereby and no
one, other than Smith Barney Inc. and Dain Bosworth Incorporated, is
entitled to any broker's fee or other similar compensation.
b. FURTHER EXECUTIONS AND DELIVERIES. From time
to time at and after Closing, without further consideration, each of
Gander Mountain and Purchaser agrees to execute and deliver to the
other all such other and further instruments and documents, and
affirmatively to cooperate with one another, as may be necessary to
effectuate fully the transactions contemplated in this Agreement and
the other documents and instruments referred to herein.
c. AMENDMENTS. This Agreement may be amended or
modified only by a written instrument executed by Purchaser and Gander
Mountain.
d. NOTICES. Any notice, demand, consent,
approval, request, statement, document or other communications
required or permitted to be given to or served upon either party
hereto pursuant to this Agreement shall be in writing and shall be
delivered personally (including by private carriers such as Federal
Express), sent by facsimile transmission or sent by registered or
certified mail, postage prepaid, addressed to such party as follows:
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<PAGE> 32
(1) If to GMI or GMO:
Gander Mountain, Inc.
P.O. Box 128
Highway W
Wilmot, Wisconsin 53192
Attention: Ralph Freitag
Fax No.: (414) 862-3588
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Jeffrey H. Lane
Fax No.: (414) 297-4900
(2) If to Purchaser:
Cabela's Incorporated
812 Thirteenth Avenue
Sidney, Nebraska 69162
Attention: David A. Roehr
Fax No.: (308) 254-6969
with a copy to:
Koley, Jessen, Daubman & Rupiper, P.C.
1125 South 103 Street, Suite 800
Omaha, Nebraska 68124
Attention: Paul C. Jessen
Fax No.: (402) 390-9005
All such communications mailed shall be deemed to have been given or
served three (3) business days after the date of such mailing. All
such communications delivered personally shall be deemed to have been
given on the date of delivery. All such communications given by
facsimile shall be deemed to have been given on the date the facsimile
transmission is sent if confirmation of receipt is obtained, including
confirmation given by the sending facsimile machine. Either Purchaser
or Gander Mountain may, upon notice to the other as aforesaid,
designate a different address or different addresses to which
communications intended for it are to be sent.
e. ENTIRE AGREEMENT. This Agreement, the
documents referred to herein and the letter of even date herewith from
Gander Mountain to Purchaser contain the entire agreement between the
parties hereto with respect to the transactions contemplated
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<PAGE> 33
hereby, and no prior agreements, representations or warranties are of
any force or effect; provided, however, that, except as expressly
provided for in this Agreement, nothing herein shall affect the
letter agreement, dated August 24, 1995, between Purchaser and GMI,
which agreement shall continue in effect in accordance with its terms.
f. EXHIBITS INCORPORATED. All Exhibits and
Schedules attached hereto and identified herein are incorporated
herein by this reference.
g. COUNTERPART EXECUTION. This Agreement may be
executed in a number of counterparts and all counterparts executed by
Purchaser and Gander Mountain shall constitute one and the same
agreement, and it shall not be necessary for Purchaser and Gander
Mountain to execute the same counterpart hereof.
h. BREACH; WAIVER. No waiver of any breach of
any warranty, representation, covenant or other term or provision of
this Agreement shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other warranty, representation,
covenant, term or provision. Any waiver of any condition or covenant
herein must be in writing signed by the waiving party.
i. ASSIGNMENT. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Gander Mountain shall have the
right to assign its rights under this Agreement to its bank group as
collateral security for obligations owed to them or, after the Closing
Date, to assign this Agreement to a purchaser of substantially all the
assets of Gander Mountain but no such assignment shall relieve Gander
Mountain of its liability with respect hereto. Purchaser shall have
the right to assign this Agreement to any entity a majority of whose
equity interest is owned by Purchaser, but no assignment shall relieve
Purchaser of its obligations hereunder. No assignment shall entitle
any assignee to any greater rights hereunder than the assignor was
entitled to.
j. PUBLICITY. Except as otherwise required by
law as advised by counsel, no public announcements (including to
employees in general) with regard to the transactions contemplated
hereby shall be made without the mutual agreement of both parties.
k. EXPENSES. Except as otherwise specifically
provided herein, each party shall bear all costs and expenses of its
attorneys, accountants and other advisors and all other costs and
expenses of such party incident to the transactions contemplated
hereby.
l. INTERPRETATION. Article titles and headings
to sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
m. PARTIAL INVALIDITY. Wherever possible, each
provision hereof shall be interpreted in such manner as to be
effective and valid under applicable law, but in case
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<PAGE> 34
any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only
to the extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions hereof,
unless such a construction would be unreasonable.
n. 800 NUMBERS. For such period after the
Closing Date as ends not more than three months after the date hereof,
Gander Mountain shall have the right to use (at Gander Mountain's
expense) the inbound 800 telephone numbers used by the Catalog
Division for the limited purposes and time specified in the
Noncompetition Agreement.
o. EMPLOYEES. Within seven days following the
date of this Agreement, Gander Mountain agrees to post a worksite
notice and distribute a memorandum, in form and content reasonably
satisfactory to Gander Mountain and Purchaser, the substance of which
shall be to advise employees of the Catalog Division who are not to be
hired or retained by Gander Mountain that, if such employees are
interested in employment with Purchaser, they should contact a
representative of Purchaser to be identified in such notice or
memorandum.
p. GMI SHAREHOLDER APPROVAL. Unless a third
party has obtained a judgment not subject to appeal to the effect that
approval of GMI's shareholders is required to effect the transactions
contemplated hereby, Purchaser shall not challenge any failure
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<PAGE> 35
of GMI to obtain such shareholder approval and shall cooperate with
GMI in resisting any challenge by any third party.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
GANDER MOUNTAIN, INC. CABELA'S INCORPORATED
By: /s/Ralph L. Freitag By: /s/David A. Roehr
----------------------------------- ---------------------------
Title: Chief Executive Officer Title: Vice President
------------------------ ------------------------
GMO, INC.
By: /s/Ralph L. Freitag
---------------------------------------
Title: Executive Vice President
---------------------------
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<PAGE> 36
The following schedules and exhibits to the foregoing Asset
Purchase Agreement are not being filed in accordance with Item 601(b)(2) of
Regulation S-K of the Securities and Exchange Commission. Gander Mountain,
Inc. hereby agrees to furnish supplementally a copy of any such schedule or
exhibit to the Commission upon its request.
Schedule 1(a)(3) - Listing of Miscellaneous Assets
Schedule 4(b) - List of Liens
Schedule 4(f) - Certain persons who had access to the Customer List
Bill of Sale
Trademark License Agreement
Noncompetition Agreement
Form of Opinion of Counsel to Gander Mountain, Inc.
Consent and Covenant Not to Sue
Purchaser Noncompetition Agreement
Form of Opinion of Counsel to Cabela's Incorporated
Assumption of AT&T Liabilities
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