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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 18, 1996
ROADMASTER INDUSTRIES, INC.
(Exact name of Registrant as Specified in its Charter)
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DELAWARE 0-16482 84-1065239
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
250 SPRING STREET, N.W
SUITE 3 SOUTH
ATLANTA, GEORGIA 30303
(404) 586-9000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 18, 1996, Roadmaster Industries, Inc. (the "Company") and its
Roadmaster Corporation subsidiary entered into a definitive agreement (the
"Agreement") with Brunswick Corporation ("Brunswick"), pursuant to which
Brunswick is to acquire all of the assets of the Company's bicycle and snow
products business (which also includes tricycles, wagons and junior ride-ons)
for approximately $212,000,000 in cash. The Agreement also provides for: the
assumption by Brunswick of trade payables affiliated with the bicycle and snow
products being conveyed at the time of the closing, the grant to
Brunswick of a long-term lease, of the Olney, Illinois facility (such lease
being estimated to have a present value of approximately $2.6 million), the
assumption by Brunswick of certain long-term indebtedness consisting of
Industrial Revenue Bonds, UDAG loans and capital leases (the assumption of
which Industrial Revenue Bonds and UDAG loans, will result in a reduction to
the purchase price), and the establishment by the Company of an escrow account
in the amount of $10,000,000 to secure the costs of the environmental
remediation of the property at the Olney, Illinois facility, for which the
Corporation has indemnified Brunswick. The purchase price is subject to
adjustment for changes in working capital as of the Closing Date. The
Agreement was approved by the Company's Board of Directors on July 18, 1996.
The transaction is subject to satisfaction of certain conditions set forth in
the Agreement, including, without limitation, the consent of the Company's
lenders under its Bank Credit Agreement and waivers of certain provisions of
the Indenture governing the Company's 11 3/4% Senior Subordinated Notes due
2002 (the "Notes") by the holders of the required majority of such Notes.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The Company stated it was not practicable to file at this time the
information required by Item 7 and that all information required by Item 7 will
be furnished within sixty (60) days of the required date for the filing of this
report.
EXHIBITS
10.1 Asset Purchase Agreement dated as of July 18, 1996 between Roadmaster
Industries, Inc. ("Seller") and Roadmaster Corporation ("Seller Sub") and
Brunswick Corporation ("Purchaser")
99.1 Press Release
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROADMASTER INDUSTRIES, INC.
Date: August 2, 1996 By: /s/ Charles E. Sanders
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Charles E. Sanders
Vice President and Secretary
(Principal Accounting Officer)
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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
dated as of July 18, 1996,
between
ROADMASTER INDUSTRIES, INC.,
Seller,
and
ROADMASTER CORPORATION,
Seller Sub,
and
BRUNSWICK CORPORATION,
Purchaser.
Purchase and Sale of Roadmaster's
Bicycle and Snow Products Business
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
Purchase and Sale of Acquired Assets
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<S> <C> <C>
SECTION 1.1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.2. Acquired Assets and Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.3. Assumption of Certain Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.4. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.5. Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 1.6. Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 1.7. Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
<CAPTION>
ARTICLE II
The Closing
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<S> <C> <C>
SECTION 2.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.2. Transactions To Be Effected at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.3. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
<CAPTION>
ARTICLE III
Representations and Warranties
------------------------------
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SECTION 3.1. Representations and Warranties of Seller and Seller Sub . . . . . . . . . . . . . . . . . . . 22
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Compliance with Applicable Laws; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) Litigation; Decrees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(g) Title to Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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<TABLE>
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(h) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(i) Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(j) Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(k) Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(l) Intellectual Property and Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(m) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(n) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(o) Investments; Exclusively Conducted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(p) Suppliers; Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(q) Sufficiency of Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(r) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(s) Employees; Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(t) Employee Benefits; Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(u) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(v) No Other Agreements To Sell the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(w) Material Misstatements or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(x) Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(y) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(z) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(aa) State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(bb) Voting and Waiver Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(cc) Board Approval; Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . 52
(dd) Stockholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 3.2. Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . 53
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(b) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IV
Covenants
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<S> <C> <C>
SECTION 4.1. Covenants of Seller and Seller Sub Relating to Conduct
of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.2. Consultation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.3. Frustration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.4. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.5. Legal Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 4.6. Third-Party Consents; Trade Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 4.7. Offer of Employment; Employee Benefit Plans; Welfare . . . . . . . . . . . . . . . . . . . . . 64
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 4.8. Expenses and Fees; Property Relocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 4.9. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 4.10. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 4.11. Agreement Not To Compete; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 4.12. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 4.13. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 4.14. Purchase Price Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 4.15. Supplies; Names Following Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 4.16. Enforcement of Confidentiality Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 4.17. Post-Closing Financial and Other Information . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 4.18. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 4.19. Transfer of RLI Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 4.20. Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 4.21. Environmental Remediation and Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 4.22. License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 4.23. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 4.24. Stockholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 4.25. Completion of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 4.26. Access to Leasehold Portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 4.27. Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 4.28. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
Conditions Precedent
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<S> <C> <C>
SECTION 5.1. Conditions to Each Party's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 5.2. Conditions to Obligation of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 5.3. Conditions to Obligation of Seller and Seller Sub . . . . . . . . . . . . . . . . . . . . . . 91
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
Termination, Amendment and Waiver
---------------------------------
<S> <C> <C>
SECTION 6.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
SECTION 6.2. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE VII -4-
Page
Indemnification ----
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<S> <C> <C>
SECTION 7.1. Indemnification by Seller and Seller Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 7.2. Environmental Indemnification by Seller and
Seller Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 7.3. Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 7.4. Losses Net of Insurance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 7.5. Termination of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 7.6. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
SECTION 7.7. Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VIII
Tax Matters
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<S> <C> <C>
SECTION 8.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 8.2. Taxable Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 8.3. FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 8.4. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 8.5. Preparation of W-2 Forms, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
</TABLE>
<TABLE>
<CAPTION>
ARTICLE IX
General Provisions
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<S> <C> <C>
SECTION 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
SECTION 9.2. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 9.3. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 9.4. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 9.8. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
SECTION 9.9. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
</TABLE>
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<TABLE>
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SECTION 9.10. Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 9.11. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 9.12. Purchase Agreement Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
</TABLE>
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<TABLE>
<S> <C>
Exhibit A Procedures and Terms for Purchase Price
Adjustment
Exhibit B Form of Escrow Agreement
Exhibit C Form of Lease
Exhibit D Form of Smith, Gambrell & Russell Legal
Opinion
Exhibit E Form of Purchaser's General Counsel
Legal Opinion
Schedule 1.3(a) Promotional Obligations
Schedule 3.1(c) Financial Statements
Schedule 3.1(d) Permits
Schedule 3.1(e) Litigation; Decrees
Schedule 3.1(g) Title to Acquired Assets
Schedule 3.1(h)-1 Owned Property
Schedule 3.1(h)-2 Leased Property
Schedule 3.1(j) Owned Personal Property
Schedule 3.1(l) Intellectual Property and Technology
Schedule 3.1(m) Insurance
Schedule 3.1(n) Contracts
Schedule 3.1(o) Investments
Schedule 3.1(p) Suppliers; Customers
Schedule 3.1(r)(iii) Changes
Schedule 3.1(s) Employees; Officers
Schedule 3.1(t) Benefit Plans
Schedule 3.1(u) Environmental
Schedule 3.1(v) Agreements To Sell Assets
Schedule 3.1(x) Product Liability
Schedule 3.1(y) Affiliate Transactions
Schedule 3.1(z) Tax Matters
Schedule 4.1(a) Ordinary Course Exceptions
Schedule 4.15(b) Names
Schedule 5.2(h) Material Required Consents
</TABLE>
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ASSET PURCHASE AGREEMENT dated as of July 18, 1996,
between ROADMASTER INDUSTRIES, INC., a Delaware corporation
("Seller"), and ROADMASTER CORPORATION, a Delaware
corporation and a wholly owned subsidiary of Seller
("Seller Sub"), and BRUNSWICK CORPORATION, a Delaware
corporation ("Purchaser").
WHEREAS Seller and Seller Sub are engaged in the sourcing,
purchasing, manufacturing, marketing, sale and distribution of (i) bicycles and
the accessories thereto and components thereof, including such bicycles as
pedacycles, action riders, metal wagons, metal tricycles, scooters, sidewalk
bikes and ride-ons and (ii) sleds and other snow-related products
(collectively, the "Business");
WHEREAS Seller and Seller Sub wish to sell to Purchaser, and
Purchaser wishes to purchase from Seller and Seller Sub, substantially all the
assets used, intended to be used, held for use or useful in the Business, upon
the terms and subject to the conditions of this Agreement; and
WHEREAS Seller and Seller Sub intend to use the proceeds from the
sale of the Business to retire certain indebtedness, to pay expenses incurred
in connection therewith
<PAGE> 9
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and in connection with the sale of the Business and to reinvest in Seller and
Seller Sub's remaining businesses.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
Purchase and Sale of Acquired Assets
------------------------------------
SECTION 1.1. Purchase and Sale. Upon the terms and subject
to the conditions of this Agreement, at the Closing (as defined in Section 2.1)
Seller and Seller Sub agree to sell, assign, transfer, convey and deliver
("Transfer") to Purchaser, and Purchaser agrees to purchase, all Seller's and
Seller Sub's right, title and interest in, to and under the Acquired Assets (as
defined in Section 1.2(a)).
SECTION 1.2. Acquired Assets and Excluded Assets. (a) The
term "Acquired Assets" means all the business, properties, assets, goodwill and
rights of Seller and Seller Sub of whatever kind and nature, real or personal,
tangible or intangible, other than the Excluded Assets (as defined in Section
1.2(b)), owned, leased or licensed by Seller
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or Seller Sub on the Closing Date (as defined in Section 2.1) and used,
intended to be used, held for use or useful in the Business, including:
(i) all real property, leaseholds and other interests in real
property of Seller or Seller Sub, including the items listed
in Schedule 3.1(h) (unless otherwise designated so in such
Schedule (the "Excluded Premises")), in each case together
with Seller's and Seller Sub's right, title and interest in
all buildings, improvements, fixtures and all other
appurtenances thereto (except as otherwise so designated in
such Schedule, the "Premises");
(ii) all raw materials, work-in-process, finished goods, supplies,
parts and other inventories ("Inventory") of Seller or Seller
Sub, including Inventory located on the Premises or the
Excluded Premises, in transit, on consignment or in the
possession of any vendor where title to such Inventory is held
by Seller or Seller Sub;
(iii) all personal property and interests therein of Seller or
Seller Sub, including machinery, furniture, office,
communications, computer and other equipment, vehicles, spare
and replacement parts and other tangible property, together
with any additions thereto or replacements therefor made in
the ordinary course of business ("Personal Property");
(iv) all accounts, notes and other receivables ("Receivables") of
Seller or Seller Sub arising out of the Business;
(v) all patents (including all reissues, divisions, continuations
and extensions thereof), patent applications, trademarks,
trademark registrations, servicemarks, common law marks, trade
names, copyrights, computer software programs and data,
licenses with respect to the
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foregoing and any other similar property, including the names
identified on Schedule 4.15(b) and all variations thereof
("Intellectual Property"); provided, that, subject to Section
4.22, Intellectual Property shall not include any rights with
respect to the "Flexible Flyer" trademark or trade name;
(vi) all trade secrets, inventions, know-how, formulae, processes,
procedures, research records, records of inventions, test
information, market surveys, marketing know-how, applications,
technical and other data, manufacturing documentations,
product designs, shop-rights, plans, drawings and other
technologies ("Technology");
(v) all permits, licenses, consents, certificates, orders,
franchises, approvals, registrations and authorizations by
Governmental Entities and other Persons (each such term as
defined in Section 3.1(b)) ("Permits");
(viii) all Seller's and Seller Sub's rights and privileges under all
contracts, leases, licenses, indentures, joint venture,
environmental indemnity and other agreements, commitments,
sales and purchase orders and all other legally binding
arrangements, whether oral or written, formal or informal
("Contracts"), to which Seller or Seller Sub is a party or by
which Seller or Seller Sub is bound that are listed in
Schedule 3.1(h)-l, 3.1(h)-2 or 3.1(n) (unless otherwise
designated so in any such Schedule) and all other Contracts
that relate to the Business that are not required to be listed
in any such Schedule (all such Contracts, except as otherwise
so designated in any such Schedule, collectively referred to
as "Assumed Contracts");
<PAGE> 12
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(ix) all partnership interests or any other equity interests in any
partnership, joint venture, trust or other business
association ("Investments") listed in Schedule 3.1(o) and all
other Investments that relate to the Business acquired by
Seller or Seller Sub after the date of this Agreement in the
ordinary course of business;
(x) all rights, claims, credits and causes of action to the extent
relating to any of the Assumed Liabilities (as defined in
Section 1.3(a)) or the Acquired Assets, including rights,
claims, credits and causes of action under insurance policies
relating thereto;
(xi) all prepaid expenses and all security deposits;
(xii) all books, ledgers, records, files and papers, whether in hard
copy or computer format, including books of account, general,
financial, accounting and personnel records, invoices, lists
of present and former customers and suppliers, sales and
promotional literature, manuals, sales data, purchase
correspondence and documentation and know-how developed or
used for accounting, marketing, warehousing or any other
purpose, other than the financial and tax records expressly
specified in Section 1.2(b)(iv); and
(xiii) all goodwill of Seller or Seller Sub relating to the Business
or the other Acquired Assets.
(b) The term "Excluded Assets" means:
(i) all cash on hand or in banks and cash
equivalents owned by Seller or Seller Sub
relating to the Business;
(ii) all rights of Seller or Seller Sub under this
Agreement and the agreements, instruments and
certificates delivered in connection with this
Agreement;
<PAGE> 13
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(iii) all rights, claims and causes of action to the extent
relating to any of the Excluded Liabilities (as
defined in Section 1.3(b)) or the Excluded Assets,
including rights, claims and causes of action under
insurance policies relating thereto;
(iv) all financial and tax records relating to the
Business that are part of Seller's general ledger,
and supporting documents therefor;
(v) all properties, assets and rights of Seller
or Seller Sub of whatever kind and nature,
real or personal, tangible or intangible,
designated as an Excluded Asset in any
Schedule, including the Olney Site (as
defined in Section 3.1(u)) and the other
Excluded Premises; and
(vi) all shares of capital stock of Seller Sub held by
Seller.
SECTION 1.3. Assumption of Certain Liabilities. (a) Upon
the terms and subject to the conditions of this Agreement, at the Closing
Purchaser agrees to assume, to pay, perform and discharge when due, and to
indemnify Seller and Seller Sub and hold Seller and Seller Sub harmless from
and after the Closing from (the obligations and liabilities identified in this
Section 1.3 shall be referred to as the "Assumed Liabilities"):
(i) all current liabilities, including current accrued
expenses, of Seller or Seller Sub included in Closing
Net Working Capital (as defined in Exhibit A hereto);
(ii) all Taxes (as defined in Section 8.1) relating to or
arising out of the Acquired Assets accruing under the
principles of Section 8.2 during the Post-Closing Tax
Period (as defined in Section 8.1);
<PAGE> 14
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(iii) all obligations and liabilities of Seller or Seller
Sub under its (A) product warranties (but only to the
extent that such obligations or liabilities are
limited to repair, replacement or refund of the
purchase price) for products of the Business sold or
manufactured by or on behalf of Seller or Seller Sub
on or prior to the Closing Date and (B) promotional
obligations, including advertising allowances,
guaranteed sales, freight allowances and volume
discounts (but only to the extent that such
promotional obligations are of the type listed on
Schedule 1.3(a)) and, in the case of obligations or
liabilities under either clause (A) or (B), only to
the extent of the applicable aggregate reserves (in
the case of clause (A)) or liabilities (in the case
of clause (B)) therefor included in Closing Net
Working Capital; and
(iv) all obligations and liabilities of Seller or Seller
Sub under the Assumed Contracts but only to the
extent such obligations or liabilities (A) relate to
the period from and after the Closing Date and arise
from actions taken after the Closing Date or (B) are
otherwise included in Section 1.3(a)(i) or (a)(v);
and
(v) all obligations and liabilities of Seller or Seller
Sub under the industrial revenue bonds issued by the
City of Delavan (Wisconsin) and identified on
Schedule 3.1(n) (the "IRBs") but only to the extent
such obligations or liabilities relate to the period
from and after the Closing Date and only to the
extent such IRBs can be assumed by Purchaser in
accordance with their terms.
<PAGE> 15
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(b) The term "Excluded Liabilities" means any obligation or
liability (other than as expressly assumed by Purchaser in Section 1.3(a)
above) of Seller or Seller Sub or relating to or arising out of the Acquired
Assets or the Business (or the assets of RLI identified in Section 4.19), of
any nature whatsoever whether express or implied, fixed or contingent, known or
unknown, and based on, arising out of, or resulting from, acts, omissions,
facts, circumstances, events or conditions occurring or existing on or prior to
the Closing Date, including:
(i) all obligations and liabilities (including
environmental liabilities) relating to or arising out
of any of the Excluded Assets;
(ii) all Taxes imposed upon Seller or Seller Sub or any
present or former affiliate of Seller or Seller Sub
for any taxable period (including Taxes relating to
or arising out of the transactions contemplated by
this Agreement), all Taxes relating to or arising out
of the Excluded Assets for any taxable period, all
Taxes relating to or arising out of any Tax sharing
agreement, Tax indemnity obligation or similar
agreement, arrangement or practice in effect with
respect to Seller, Seller Sub or any present or
former affiliate of Seller or Seller Sub and all
Taxes relating to or arising out of the Acquired
Assets accruing under the principles of Section 8.2
during the Pre-Closing Tax Period (as defined in
Section 8.1) ("Excluded Taxes");
(iii) all Transfer Taxes (as defined in Section 8.1);
<PAGE> 16
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(iv) all obligations and liabilities relating to or
arising out of any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom
stock, retirement, severance pay, disability
benefits, death benefits, hospitalization, insurance
or other similar plan or arrangement or understanding
(whether or not legally binding) providing benefits
to any present or former employee (or dependent or
beneficiary thereof) of Seller or Seller Sub,
including Employees (as defined in Section 3.1(s));
(v) all obligations and liabilities relating to or
arising out of any claims made by Employees or former
employees (or their dependents or beneficiaries) or
labor organizations, unions or associations
representing Employees or former employees for
severance or other separation benefits with respect
to the employment or the failure to offer employment
to, the failure to promote, or the termination of
employment of (including any claims under the Worker
Adjustment and Retaining Notification Act, as amended
("WARN Act"), the Age Discrimination in Employment
Act ("ADEA"), the Equal Employment Opportunity Act
("EEOA") or any other applicable law), any such
Employee or former employee or which are based on,
arising out of, or resulting from, acts, omissions,
facts, circumstances, events or conditions occurring
or existing on or prior to the Closing Date,
including any such claims based upon the transactions
contemplated hereby;
<PAGE> 17
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(vi) all obligations and liabilities (including any
environmental liabilities) relating to or arising out
of any Acquired Assets or the Business, with respect
to any claim, cause of action, proceeding or other
litigation pending or threatened on the Closing Date
or which is initiated at any time thereafter and
based on, arising out of, or resulting from, acts,
omissions, facts, circumstances, events or conditions
occurring or existing on or prior to the Closing
Date;
(vii) all obligations and liabilities based on, arising out
of, or resulting from, products sold or manufactured
by or on behalf of Seller or Seller Sub on or prior
to the Closing Date (including claims of negligence,
personal injury, product damage, product liability,
product warranties (except as specified in Section
1.3(a)(iii)), promotional obligations, strict
liability, product recall or any other claims
(including workers' compensation, employer's
liability or otherwise)), whether such obligations or
liabilities are based on, arising out of, or
resulting from, accidents, injuries or losses
occurring on or prior to or after the Closing Date;
and
(viii) all intercompany obligations and liabilities of
Seller, Seller Sub or the Business.
(c) Purchaser shall acquire the Acquired Assets (and the
assets of RLI (as defined) identified in Section 4.19) free and clear of all
Liens, other than Permitted Liens (each such term as defined in Section
3.1(g)), obligations and liabilities, except as expressly provided in Section
1.3(a). Each of Seller and Seller Sub jointly and severally agrees to pay,
perform and discharge, and indemnify Purchaser against and hold Purchaser
harmless from,
<PAGE> 18
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all obligations and liabilities of Seller and Seller Sub based on, arising out
of, or resulting from, the Acquired Assets (or such assets of RLI) except those
which Purchaser has expressly agreed to assume pursuant to Section 1.3(a).
SECTION 1.4. Purchase Price. The purchase price for the
Acquired Assets shall equal the sum of (i) $212,000,000 minus (ii) the
outstanding principal amount of the IRBs on the Closing Date being assumed by
Purchaser pursuant to Section 1.3(a)(v) (the "Purchase Price"), subject to
adjustment as set forth in Section 1.5 and payable as set forth in Section
2.2(b), together with the assumption of the other Assumed Liabilities as
provided in Section 1.3(a).
SECTION 1.5. Purchase Price Adjustment. (a) The Purchase
Price shall be increased by the amount that Closing Net Working Capital exceeds
$68,240,000 (the "Base Amount"), and the Purchase Price shall be decreased by
the amount that Closing Net Working Capital is less than the Base Amount (the
Purchase Price as so increased or decreased being herein referred to as the
"Adjusted Purchase Price"). If the Closing Date Amount (as defined in Section
2.2(b)) is less than the Adjusted Purchase Price, Purchaser shall, and if the
Closing Date Amount is more than the Adjusted Purchase Price, Seller shall,
within 10 business days after the Closing Statement (as defined in Exhibit A
hereto) becomes final and binding on the parties, make payment by wire transfer
in immediately available funds of the amount of such difference (subject to
adjustment for any payment made pursuant to the provisos below), together with
simple interest thereon at the prime or base rate of The
<PAGE> 19
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Chase Manhattan Bank, announced from time to time, calculated on the basis of
the actual number of days elapsed divided by 365, from the Closing Date to the
date of actual payment (the "Applicable Rate"); provided, that, if Seller would
be required by this Section 1.5(a) to make a payment to Purchaser based upon
the amounts shown on the Closing Statement prepared and delivered by Seller to
Purchaser, then Seller shall make such payment to Purchaser within 10 business
days after delivering the Closing Statement; provided, further, that, if
Purchaser would be required by this Section 1.5(a) to make a payment to Seller
based upon the amounts set forth in the Closing Statement that are not disputed
by Purchaser in the Notice of Disagreement (as defined in Exhibit A hereto),
then Purchaser shall make such payment to Seller within 10 business days after
delivering the Notice of Disagreement.
(b) Closing Net Working Capital shall be determined according
to the procedures and terms set forth in Exhibit A hereto.
SECTION 1.6. Prorations. The items listed below, to the
extent not reflected in Closing Net Working Capital or covered by Section 8.2
("Proration Items"), shall be apportioned between Seller and Seller Sub and
Purchaser, with Seller and Seller Sub being fully responsible for all expenses,
and entitled to all income, attributable to periods on or prior to the Closing
Date, and Purchaser being responsible for all expenses, and entitled to all
income, attributable to periods after the Closing Date:
<PAGE> 20
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(i) prepaid rent, tenant utility payments and all other
percentage or additional rent, common area maintenance and sundry
charges (including any HVAC charges) and commissions paid by tenants;
(ii) utility company charges, including electricity, gas,
fuel, water and sewer charges;
(iii) prepaid insurance premiums; and
(iv) other items typically apportioned in sale of assets
transactions of the type contemplated by this Agreement.
No less than 10 days prior to the Closing Date, the parties shall
provide each other with a list of all Proration Items reasonably
ascertainable at such time and all information necessary to determine
the apportionment of such Proration Items between Seller and Seller
Sub and Purchaser ("Proration Information"). To the extent
practicable, any payments between the parties necessary with respect
to such Proration Items shall be made as of the Closing Date. As soon
as practicable after the Closing Date, the parties shall provide each
other with a list of any other Proration Items and all related
Proration Information. Payment for any Proration Items not made as of
the Closing Date shall be made no later than 5 days after the parties
shall agree upon the amount of such Proration Items, together with
interest thereon from the Closing Date to the date of actual payment
at the Applicable Rate.
SECTION 1.7. Receivables. Any payment received by Seller or
Seller Sub (i) at any time following the Closing Date, (ii) from a customer or
other debtor of the Business who also has been a customer or other debtor (an
"Overlapping Customer") of
<PAGE> 21
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Seller's or Seller Sub's other businesses ("Other Seller Businesses") and
(iii) which is not designated as a payment of a particular invoice or invoices
or as a security deposit or other prepayment, shall be applied pro rata to the
Receivables and to any accounts, notes or other receivables of any Other Seller
Business ("Other Seller Receivables") based on the aggregate amount of
Receivables and the aggregate amount of Other Seller Receivables, respectively,
then outstanding and due from such Overlapping Customer. Any payment received
by Seller or Seller Sub on account of any Receivables (whether from an
Overlapping Customer or otherwise) shall be held in trust by Seller or Seller
Sub, as the case may be, for Purchaser. Seller or Seller Sub, as the case may
be, shall account for and forward such payments to Purchaser no later than the
first business day of the month immediately following the month in which such
payments were received by Seller or Seller Sub. Seller, Seller Sub and
Purchaser shall cooperate in good faith and exercise reasonable business
judgement and discretion with respect to seeking the collection of amounts due
from Overlapping Customers.
ARTICLE II
The Closing
-----------
SECTION 2.1. Closing Date. The closing of the sale and
transfer of the Acquired Assets (hereinafter referred to as the "Closing")
shall take place at the offices of Cravath, Swaine & Moore, 825 8th Avenue, New
York, New York, at 10:00 a.m. on the
<PAGE> 22
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second business day following the satisfaction of the conditions set forth in
Article V, or at such other time, date and place as shall be fixed by agreement
among the parties hereto (such date of the Closing being hereinafter referred
to as the "Closing Date").
SECTION 2.2. Transactions To Be Effected at the Closing. At
the Closing:
(a) Seller and Seller Sub shall deliver to Purchaser (i) such
appropriately executed deeds, bills of sale, assignments and other
instruments of transfer relating to the Acquired Assets in form and
substance reasonably satisfactory to Purchaser and its counsel; and
(ii) such other documents as Purchaser or its counsel may reasonably
request to demonstrate satisfaction of the conditions and compliance
with the agreements set forth in this Agreement; and
(b) Purchaser shall deliver to Seller and Seller Sub (i) by
wire transfer to an account designated in writing by Seller, by
notice to Purchaser, on or prior to the Closing Date, immediately
available funds in an amount equal to the Purchase Price, less (1) an
estimate prepared by Seller in good faith and delivered to Purchaser
at least two business days prior to the Closing Date of any decrease
to the Purchase Price pursuant to the adjustment set forth in Section
1.5 (the Purchase Price, less any such estimate, being herein referred
to as the "Closing Date Amount"), and (2) $10,000,000 which shall be
deposited by like means into the escrow account identified in the
escrow agreement attached as Exhibit B hereto (the "Escrow Agreement")
to be executed and delivered at the Closing by and among Seller, Seller
<PAGE> 23
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Sub, Purchaser and The Chase Manhattan Bank, as escrow agent (the
"Escrow Agent"); (ii) such appropriately executed assumption
agreements and other instruments of assumption providing for the
assumption of the Assumed Liabilities in form and substance reasonably
satisfactory to Seller and its counsel; and (iii) such other documents
as Seller or its counsel may reasonably request to demonstrate
satisfaction of the conditions and compliance with the agreements set
forth in this Agreement.
SECTION 2.3. Risk of Loss. Until the Closing, any loss of or
damage to the Acquired Assets from fire, casualty or any other occurrence shall
be the sole responsibility of Seller or Seller Sub, as applicable.
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.1. Representations and Warranties of Seller and
Seller Sub. Each of Seller and Seller Sub hereby jointly and severally
represents and warrants to Purchaser as follows:
(a) Organization, Standing and Power. It is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite power and authority and all material
governmental licenses, authorizations, permits, consents and approvals required
to own the Acquired Assets owned by it and to carry on the
<PAGE> 24
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Business. Seller has heretofore delivered to Purchaser true and complete
copies of the respective certificates of incorporation and By-laws or other
constitutional documents of Seller and Seller Sub, in each case as amended
through the date of this Agreement. It is duly qualified to do business as a
foreign corporation in each jurisdiction where the character of the Acquired
Assets or the nature of the Business make such qualification necessary to carry
on the Business, except where the failure to so qualify does not have, or is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect (as defined in Section 5.2(g)). Neither Seller nor Seller Sub
has any subsidiaries that are or have been engaged in the Business, other than
in the case of Seller, Seller Sub, a wholly owned subsidiary of Seller;
International Sports and Fitness, Inc., a Delaware corporation and a wholly
owned subsidiary of Seller ("ISF"); and Roadmaster Leisure, Inc., a Canadian
corporation and a wholly owned subsidiary of ISF ("RLI").
(b) Authority. It has all corporate power and authority to execute
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on its part and do not require the approval of the
stockholders of Seller. This Agreement has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation enforceable against
it in accordance with its terms. The execution and delivery of this Agreement
by it do not, and the consummation by it of the transactions contemplated
hereby and the compliance with the
<PAGE> 25
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terms hereof will not, (i) violate any law, judgment, order, decree, statute,
ordinance, rule or regulation applicable to it, any of its affiliates or any of
its property, (ii) conflict with any provision of its certificate of
incorporation or By-laws, (iii) conflict with, or result in the breach of, or
give rise to any right of termination, cancellation or acceleration of any
right or obligation or to a loss of any benefit under, or constitute a default
under or violation of (whether with notice or lapse of time or both), or result
in the creation of any Lien upon any of Purchaser's assets pursuant to, or
require that Purchaser assume any obligations or liabilities (other than
Assumed Liabilities) under, any Contract to which it is a party or by which it
or any of its property is bound (including the indenture dated as of July 15,
1993, with respect to Seller's 8% Convertible Subordinated Debentures Due 2003
(the "Debenture Indenture")) or (iv) require any consent, approval, order or
authorization of, or the registration, declaration or filing with, any court,
administrative agency or commission or other governmental or regulatory
authority, body or instrumentality, domestic or foreign (a "Governmental
Entity") or any individual, corporation, partnership, joint venture, trust,
business association or other entity (a "Person", which term shall include a
Governmental Entity), except (A) for the filing of a premerger notification
report by Seller under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), (B) for compliance with and filings under Section 13(a) and,
in connection with obtaining the waivers referred to in clause (D) below,
Section 13(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), (C)
as set forth on Schedule 3.1(n), (D) for the waiver, by holders (the
<PAGE> 26
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"Noteholders") of not less than a majority in aggregate principal amount of
Seller's then outstanding 11 3/4% Senior Subordinated Notes Due 2002 (the
"Notes") of compliance by Seller and Seller Sub in consummating the
transactions contemplated by this Agreement with Section 5.1 of the Indenture
dated as of December 15, 1993 (the " Indenture"; such waiver being referred to
herein as the "Noteholder Waiver") and (E) for the consent (the "Credit
Agreement Consent") to the consummation of the transactions contemplated by
this Agreement by the Majority Lenders under Seller's Credit Agreement
identified on Schedule 3.1(g) (the "Credit Agreement"). For purposes of this
Agreement, the phrases "transactions contemplated hereby" and "transactions
contemplated by this Agreement" shall be deemed to include the execution and
delivery of, and consummation of the transactions contemplated by, each of the
Lease (as defined in Section 4.20), the Escrow Agreement, the License (as
defined in Section 4.22) and the Stockholder Agreement (as defined in Section
4.24).
(c) Financial Statements. Schedule 3.1(c) sets forth the (i)
unaudited balance sheet and income statement of the Business as of and for the
year-to-date period ended March 31, 1996 (the "First Quarter Financial
Statements"), (ii) the unaudited balance sheet and income statement of the
Business as of and for the year ended December 31, 1995 (the "Year-End
Financial Statements", and, together with the First Quarter Financial
Statements, the "Financial Statements") and (iii) the accounting assumptions
and conventions employed in the preparation of the Financial Statements. Each
of the First Quarter Financial Statements and the Year-End Financial Statements
(i) has been prepared from the books and records of
<PAGE> 27
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Seller and Seller Sub relating to the Business in accordance with generally
accepted accounting principles consistently applied (except, in each case, as
to certain of the assumptions and accounting conventions employed in the
preparation of the Financial Statements and set forth in Schedule 3.1(c) which
may not be in accord with generally accepted accounting principles) throughout
the periods covered thereby, (ii) fairly present the financial condition and
results of operations of the Business as of and for the dates and periods
indicated, (iii) do not contain any material items of special or nonrecurring
income or any other income not earned in the ordinary course of business except
as otherwise expressly stated therein and (iv) expressly state therein all
material assumptions upon which such Financial Statements are based.
(d) Compliance with Applicable Laws; Permits. (i) Each of
Seller and Seller Sub has complied in all material respects with all material
laws, regulations, rules and orders of all Governmental Entities applicable to
it which relate to the Acquired Assets. Neither Seller nor Seller Sub has
received any written notice of any asserted violation in any material respect
of any such laws, regulations, rules or orders which relate to the Acquired
Assets. Neither Seller nor Seller Sub has received any written notice that any
investigation or review by any Governmental Entity with respect to any of the
Acquired Assets or the Business is pending or that any such investigation or
review is contemplated. Neither this paragraph (d)(i) nor paragraph (d)(ii)
relates to Environmental Laws (as defined in Section 3.1(u)), as to which
Section 3.1(u) is applicable.
<PAGE> 28
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(ii) Seller or Seller Sub possesses or has applied for all
material Permits to own or hold under lease and operate the Acquired Assets and
to conduct the Business. Neither Seller nor Seller Sub has received notice of
any proceedings relating to the revocation or modification of any Permit which,
individually or in the aggregate, would have, or would be reasonably likely to
have, a Material Adverse Effect. The Permits are identified in Schedule
3.1(d). Each of Seller and Seller Sub is operating in all material respects in
compliance with the provisions, terms and conditions of the Permits.
(e) Litigation; Decrees. Except as set forth in Schedule
3.1(e), there is no suit, claim, action, investigation, inquiry or proceeding
pending against or affecting Seller or Seller Sub relating to the Acquired
Assets. To the best knowledge of Seller and Seller Sub, there is no suit,
claim, action, investigation, inquiry or proceeding threatened against Seller
or Seller Sub relating to the Acquired Assets which if adversely determined
would have a material adverse effect on the Business, including its financial
condition. Neither Seller nor Seller Sub is in default under any judgment,
order, injunction, rule or decree of any Governmental Entity or arbitrator
relating to the Acquired Assets.
(f) Undisclosed Liabilities. There are no material
liabilities or obligations of any nature or kind (absolute, accrued, contingent
or otherwise) except (i) as set forth or reflected in the Financial Statements
(or described in the notes thereto), (ii) as disclosed in the Schedules hereto,
(iii) for liabilities incurred in the ordinary course of business since the
date of the Year-End Financial Statements and (iv) for Excluded Liabilities.
<PAGE> 29
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(g) Title to Acquired Assets. Either Seller or Seller Sub
has good, valid and marketable title to all the Acquired Assets free and clear
of all mortgages, claims, charges, liens, security interests, easements, rights
of way, pledges, rights of first refusal, restrictions, imperfections of title
or other encumbrances of any nature whatsoever ("Liens"), except for (i) Liens
set forth on Schedule 3.1(g), (ii) mechanics', carriers', workmen's,
repairmen's and other like Liens arising or incurred in the ordinary course of
business, (iii) Liens for taxes, assessments and other governmental charges
that are not yet due and payable or that may thereafter be paid without
penalty, (iv) imperfections of title and other encumbrances that, individually
or in the aggregate, are insignificant in character and amount and do not,
except in immaterial respects, detract from, or interfere with the use, value
or operation of, the Acquired Assets and (v) Liens arising under the Credit
Agreement (the Liens described in clauses (i) (but only with respect to the
IRBs), (ii), (iii) and (iv) being herein referred to as "Permitted Liens").
This paragraph (g) does not relate to real property, interests in real property
or leasehold interests (except that the defined term "Permitted Liens" shall be
applicable to paragraph (h) of this Section 3.1 to the extent provided
therein). The Acquired Assets are in good operating condition and repair,
ordinary wear and tear excepted, are usable in the ordinary course of business
and conform in all material respects to all applicable statutes, ordinances and
regulations relating to their use and operation.
(h) Real Property. Schedule 3.1(h)-l sets forth a complete
list of all real property and interests in real property owned in fee by Seller
or Seller Sub and related to the
<PAGE> 30
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operations of the Business (individually, an "Owned Property"). Schedule
3.1(h)-2 sets forth a complete list (by address and with a brief description of
the use made thereof) of all real property and interests in real property
leased by Seller or Seller Sub and related to the operations of the Business,
whether capitalized or operating (individually, a "Leased Property"), together
with a brief description of the leases, subleases and other occupancy and
similar agreements (each a "Lease") covering or affecting all or any portion of
such Leased Properties. Either Seller or Seller Sub has good and marketable
fee title, insurable at standard rates and without material qualification, to
all Owned Property free and clear of all Liens other than (A) Permitted Liens,
(B) recorded easements, covenants, rights-of-way and other similar
restrictions, (C) zoning, building and other similar restrictions of record and
(D) Liens arising under the Credit Agreement, none of which such items set
forth in clauses (A) through (C) above, individually or in the aggregate, could
reasonably be expected to impair or diminish, except in immaterial respects,
the continued use and operation and the value of the Owned Property in the
business of Seller or Seller Sub, as presently conducted. Either Seller or
Seller Sub is the lessee of all the Leased Property and is in possession of the
premises purported to be leased under the related Lease, and each Lease is
valid and in full force and effect without any material default thereunder by
Seller or Seller Sub, as applicable, or, to Seller's and Seller Sub's
knowledge, by the lessor.
(i) Inventories. All Inventory (which, for purposes of
clauses (A) and (B) only, shall be deemed to include the Inventory of RLI
identified in Section 4.19) included in
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the Acquired Assets are (A) free of any material defect or deficiency, (B) in
good, usable and currently marketable condition in the ordinary course of
business consistent with past practice (subject, in the case of raw materials
and work-in-process, to the completion of the production process) and (C)
properly stated on the Financial Statements at the lesser of cost or fair
market value, with adequate obsolescence reserves, all as determined in
accordance with generally accepted accounting principles.
(j) Personal Property. Schedule 3.1(j) sets forth a brief
description of each item of owned Personal Property having a cost in excess of
$10,000, indicating, in each case, the purchase price thereof, the year of
purchase and the accumulated book depreciation. Each such item of Personal
Property is in good working order, is free from any material defects and has
been well maintained, and no repairs, replacements or regularly scheduled
maintenance relating to such items have been deferred.
(k) Receivables. All Receivables included in the Acquired
Assets (i) represent actual indebtedness incurred by the applicable account
debtors, (ii) are good and collectible in the ordinary course of business of
Seller or Seller Sub, less any reserves for doubtful accounts reflected on (A)
the Financial Statements or (B) in the case of currently existing Receivables
arising since the date of the Year-End Financial Statements, on Seller's or
Seller Sub's current books and records, (iii) have arisen in the ordinary
course of business and (iv) will not be subject on the Closing Date to any
prior Lien of any nature whatsoever.
<PAGE> 32
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(l) Intellectual Property and Technology. Schedule 3.1(l)
sets forth a true and complete list of all Intellectual Property and Technology
of the Business and, to the extent and as of the dates indicated on such
Schedule, such Intellectual Property has been duly registered in, applications
have been filed in, or patents or certificates of registration have been issued
by, the United States Copyright Office or the United States Patent and
Trademark Office, the appropriate offices in the various states of the United
States and the appropriate offices of such other jurisdictions (foreign or
domestic). Except as set forth on Schedule 3.1(l), all such registrations,
applications, patents and certificates are currently in effect. Except as set
forth on Schedule 3.1(l), either Seller or Seller Sub is the sole and exclusive
owner of all right, title and interest in and to the Intellectual Property and
has received no written notice from any other Person pertaining to or
challenging the right of Seller or Seller Sub, as applicable, to use any of the
Intellectual Property or any rights thereunder. The current use of the
Intellectual Property in the operations of the Business does not, to the
knowledge of Seller and Seller Sub, conflict with, infringe upon or violate any
intellectual property rights, including any patent, copyright, trademark or
trade name, of any other Person. Except as set forth on Schedule 3.1(l),
neither Seller nor Seller Sub has granted any licenses or other rights, and
neither Seller nor Seller Sub has any obligation to grant licenses or other
rights to any of the Intellectual Property or Technology, to any other Person.
Seller and Seller Sub have taken all reasonable and prudent steps to protect
the Intellectual Property and Technology from infringement by any other Person.
Neither Seller
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nor Seller Sub has made any claim of a violation or infringement by others of
its rights to or in connection with the Intellectual Property or Technology.
There have not been and are not pending, or to Seller's and Seller Sub's
knowledge, threatened, any suits, claims, actions or proceedings involving
Seller or Seller Sub concerning the infringement or misappropriation of any
intellectual property rights of any other Person or otherwise concerning
Seller's or Seller Sub's ownership interest in any of the Intellectual
Property. There are no interferences or other contested proceedings, either
pending or, to the knowledge of Seller and Seller Sub, threatened, in the
United States Copyright Office, the United States Patent and Trademark Office
or any Federal, state or local court or before any other Governmental Entity,
relating to any pending application with respect to any of the Intellectual
Property. The consummation of the transactions contemplated by this Agreement
will not alter, impair or modify Seller's or Seller Sub's rights or obligations
with respect to the Intellectual Property or the Technology.
(m) Insurance. All the material properties and businesses
constituting any part of the Acquired Assets are insured for Seller's or Seller
Sub's benefit, as applicable, and will be so insured through the Closing, in
amounts and against risks consistent with past practice. Schedule 3.1(m)
contains a list of all insurance policies (specifying (i) the insurer, (ii) the
amount of the coverage, (iii) the type of insurance, (iv) the policy number and
(v) any currently pending claims thereunder or any claims asserted thereunder
or under similar policies since the date that is two years prior to the date of
this Agreement) currently
<PAGE> 34
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maintained by or on behalf of Seller or Seller Sub on the Acquired Assets. All
such policies are (and pending the Closing will continue to be) in full force
and effect, and neither Seller nor Seller Sub is in default in any material
respect with respect to any provision contained in any such insurance policy,
nor has Seller or Seller Sub, to the best of their knowledge, failed to give
any notice or present any claim thereunder with respect to the Acquired Assets
in due and timely fashion. Except as set forth on Schedule 3.1(m), neither
Seller nor Seller Sub self-insures or has self- insured any risks with respect
to the Acquired Assets.
In the two years preceding the date of this Agreement neither
Seller nor Seller Sub has been denied any insurance or indemnity bond coverage
which it has requested with respect to the Acquired Assets or received written
notice from or on behalf of any insurance carrier presently providing insurance
relating to the Acquired Assets that (i) insurance rates have been or may or
will be substantially increased, (ii) there has been or will be no renewal of
such policies or (iii) material alterations to any of the properties or
business operations of Seller or Seller Sub are or will be necessary or
required by such carrier.
(n) Contracts. (i) Except for Contracts listed on Schedule
3.1(h)-l, 3.1(h)-2 or 3.1(n), and except for Contracts relating exclusively to
the Excluded Assets, neither Seller nor Seller Sub is a party to or bound by
any Contract affecting the Acquired Assets or the Assumed Liabilities which is
a:
(1) Contract for the employment of any Person or any
consulting agreement with any Person;
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(2) Contract with any labor organization, union or
association;
(3) Contract with any stockholder, director, officer,
subsidiary or other affiliate (including RLI) of Seller or Seller Sub;
(4) indenture, note, loan or credit agreement, letter of
credit or other Contract relating to the borrowing of money by Seller
or Seller Sub or to the direct or indirect guarantee or assumption by
Seller or Seller Sub of the obligation of any other Person, including
any arrangement which has the economic effect although not the legal
form of a guarantee;
(5) power of attorney (other than powers of attorney given in
the ordinary course of business with respect to routine tax and
securities matters) or other agency agreement;
(6) Contract not made in the ordinary course of business;
(7) covenant not to compete or confidentiality agreement;
(8) lease, sublease, occupancy or similar agreement under
which (A) Seller or Seller Sub is a lessee of, or holds or uses, any
real property owned by any other Person or (B) Seller or Seller Sub is
a lessor of, or makes available for use by any other Person, any real
property owned or held as lessee by Seller or Seller Sub;
(9) lease, sublease, occupancy or similar agreement under
which (A) Seller or Seller Sub is lessee of, or holds or uses, any
machinery, equipment, vehicle or other tangible personal property
owned by any other Person having a fair market value in
<PAGE> 36
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excess of $10,000 or (B) Seller or Seller Sub is a lessor of, or makes
available for use by any other Person, any Personal Property owned
(including ownership for tax purposes) by Seller or Seller Sub having
a fair market value in excess of $10,000;
(10) Contract (including vendor supply contracts and customer
"blanket" purchase orders) involving payment by Seller or Seller Sub
of more than $50,000 or extending for a term more than 30 days from
the date of this Agreement (unless terminable without payment or
penalty upon no more than 30 days' notice);
(11) Contract (including vendor supply contracts and "blanket"
sales orders) involving the obligation of Seller or Seller Sub to
deliver products or services for payment of more than $50,000 or
extending for a term more than 30 days from the date of this Agreement
(unless terminable without payment or penalty upon no more than 30
days' notice);
(12) Contract for the sale of any of the Acquired Assets
(other than Inventory sales in the ordinary course of business) or the
grant of any rights to purchase any of the Acquired Assets (including
any right of first negotiation or first refusal) or requiring the
consent of any party to the transfer thereof;
(13) mortgage, pledge, security agreement, deed of trust,
financing statement or other document granting a Lien (including Liens
upon properties acquired under conditional sales, capital leases or
other title retention or security devices);
(14) Contract with, or license or Permit by or from, any
Governmental Entity;
<PAGE> 37
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(15) foreign currency exchange or similar Contract;
(16) Contract for any joint venture, partnership or similar
arrangement;
(17) Contract providing for the services of any dealer,
distributor, sales representative, franchisee or similar
representative involving the payment or receipt of in excess of $5,000
by Seller or Seller Sub;
(18) Contract providing for the provision of advertising
services and involving the payment or receipt of in excess of $15,000
by Seller or Seller Sub;
(19) Contract relating to the ownership, use or licensing of
any Intellectual Property or Technology;
(20) Contract (other than purchase orders) with one or more of
the 10 largest customers of products and services of the Business; or
(21) Contract other than as set forth above to which Seller
or Seller Sub is a party or by which it or any of its assets or
businesses is bound or subject to that is material to the Business or
the use or operation of the Acquired Assets.
Subject to the last sentence of this paragraph (n) and except as disclosed
in Schedule 3.1(h)-l, 3.1(h)-2 or 3.1(n), each Contract listed in such
Schedules is a valid and binding obligation of each of Seller and Seller Sub, to
the extent named as parties thereto or bound thereby, and, to the best of
Seller's and Seller Sub's knowledge, each of the other parties thereto,
enforceable in accordance with its terms and in full force and effect. Except
as disclosed in such Schedules, none of Seller, Seller Sub or, to the best of
Seller's and Seller Sub's
<PAGE> 38
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knowledge, any other party to any such Contract is (with or without the lapse
of time or the giving of notice, or both) in breach or default in any material
respect under any Contract listed in such Schedules. Neither Seller nor Seller
Sub has, except as disclosed in such Schedules, received any notice of the
intention of any party to terminate any such Contract. Complete and correct
copies of all Contracts referred to in such Schedules, together with all
modifications and amendments thereto, have been delivered or made available to
Purchaser.
(ii) Schedule 3.1(n) lists each Contract (other than the
Indenture and the Credit Agreement) with respect to which the consent of the
other party or parties thereto must be obtained by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the invalidity of the transfer of such Contract, the
termination thereof, a breach, violation or default thereunder or any other
change or modification to the terms thereof (each, a "Required Consent").
(o) Investments; Exclusively Conducted.
(i) Schedule 3.1(o) is a list of all Investments (other than
Investments that are Excluded Assets) owned by Seller or Seller Sub on the date
of this Agreement relating to the Business.
(ii) The Business is conducted exclusively and solely by
Seller and Seller Sub and not by any of Seller's other affiliates (other
than with respect to certain assets of RLI which, pursuant to Section 4.19,
shall be transferred to Purchaser or a subsidiary thereof),
<PAGE> 39
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and no assets or properties (other than such assets of RLI) relating to the
Acquired Assets or the Business are owned or leased by any such affiliates.
(p) Suppliers; Customers. Schedule 3.1(p) contains a true
and complete list of the names and addresses of the 15 largest suppliers
(indicating dollar volume and percentage of product purchases for each) of
products and services to the Business and the 25 largest customers (indicating
dollar volume and percentage of sales for each) of products and services of the
Business, in each case for the 12 months ended December 31, 1995, and the six
months ended June 30, 1996, indicating the existing contractual arrangements
for continued supply from or to each such Person. Except as set forth in
Schedule 3.1(p), neither Seller nor Seller Sub has received any notice of, and
knows of no reasonable basis for, any development which threatens to affect
adversely its arrangements with such customers and suppliers.
(q) Sufficiency of Acquired Assets. The Acquired Assets
comprise all the assets used, held for use, intended to be used or useful in
connection with the Business that are necessary for the conduct of the Business
in the same manner as currently conducted (except for the Excluded Assets
specified in Sections 1.2(b)(i), (iv) and (v) and certain assets of RLI which,
pursuant to Section 4.19, shall be transferred to Purchaser or a subsidiary
thereof).
(r) Absence of Certain Changes or Events. Except as set
forth in the Schedules hereto, since the date of the Year-End Financial
Statements:
<PAGE> 40
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(i) there has been no change which, individually or in
the aggregate, has had, or is reasonably likely to have, a Material
Adverse Effect;
(ii) there has not been any material damage or destruction
to, or any sale or other disposition of, any of the Acquired Assets,
except for sale of Inventory in the ordinary course of business;
(iii) there has not been any increase in, or commitment to
increase, the compensation paid or payable to employees of the
Business;
(iv) there has not been any amendment or termination, or
proposed or threatened amendment or termination, of any Contract or
Permit;
(v) Seller and Seller Sub have operated the Business in
the ordinary course of business so as to preserve the Business intact,
to keep available to the Business the services of its officers and
employees and to preserve the relationship and goodwill of the
Business with its suppliers, customers, distributors, creditors,
lenders and others having business or financial dealings with it; and
(vi) none of Seller, Seller Sub or their respective
affiliates has directly or indirectly taken or agreed to take any
action that it would not be permitted to take pursuant to Section 4.1.
(s) Employees; Officers. Schedule 3.1(s) lists the name and
address of each active and inactive employee, each officer and each consultant
of the Business (each, an "Employee") as of June 30, 1996, together with each
such person's current annual salary and bonus, a description of bonus or
benefit plans applicable to each such person and, in the case of any such
person that was paid by the Business in excess of $25,000 for the period from
<PAGE> 41
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July 1, 1995, through June 30, 1996, such person's current job title or
relationship to the Business.
(t) Employee Benefits; Labor Matters. (i) Schedule 3.1(t)
contains a list of each "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "Welfare Plan") and each other material plan,
arrangement or policy relating to stock options, stock purchases, compensation,
deferred compensation, severance or termination, fringe benefits or other
employee benefits, in each case currently maintained or contributed to by
Seller, Seller Sub or their respective affiliates (whether or not legally
binding) on behalf of active employees of the Business who are employed in the
United States and each employee benefit plan maintained or contributed to by
Seller, Seller Sub or their respective affiliates outside the United States on
behalf of active foreign employees of the Business who are employed outside the
United States (all the foregoing being herein called "Benefit Plan's"). Seller
has furnished to Purchaser copies of (1) each Benefit Plan, (2) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan, (3) the most recent summary plan description (or similar
document) for each Benefit Plan and (4) all insurance policies and other
funding or financing agreements and material service agreements relating to the
Benefit Plans.
<PAGE> 42
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(ii) There are no investigations by any Governmental
Entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Benefit Plans), suits or proceedings
against or involving any Benefit Plan or asserting any rights or claims to
benefits under any Benefit Plan that could give rise to any material liability
to Purchaser.
(iii) All contributions to Benefit Plans that are Pension
Plans (hereinafter "Business Pension Plans") that were required to be made in
accordance with Section 302 of ERISA or Section 412 of the Internal Revenue
Code of 1986, as amended (the "Code"), have been timely made, no Business
Pension Plan has applied for or received a waiver of the minimum funding
standards imposed by Section 412 of the Code, and no Business Pension Plan has
an "accumulated funding deficiency" within the meaning of Section 412(a) of the
Code as of its most recent plan year. Except as set forth in Schedule 3.1(t),
none of the Business Pension Plans are "multiemployer plans" within the meaning
of 3(31) of ERISA.
(iv) As of the most recent valuation date for each
Business Pension Plan covering Transferred Employees (as defined in Section
4.7(a)) that is a "defined benefit plan" (as defined in Section 3(35) of ERISA
(hereinafter a "Defined Benefit Plan")), there was not any amount of "unfunded
benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) under such
Defined Benefit Plan and neither Seller nor Seller Sub is aware of any facts or
circumstances that would materially change the funded status of any such
Defined Benefit Plan. Seller has furnished to Purchaser the most recent
actuarial report or valuation with respect to each Defined Benefit Plan. The
information supplied to the plan actuary by Seller or any subsidiary of Seller
for
<PAGE> 43
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use in preparing those reports or valuations was true, complete and accurate in
all material respects and neither Seller nor Seller Sub has any reason to
believe that the conclusions expressed in those reports or valuations are
incorrect.
(v) All the Benefit Plans, as adopted or as they may have
been amended, comply in all material respects with currently applicable
provisions of the Code and ERISA and other applicable laws and have been
administered in accordance with its terms. Seller has furnished to Purchaser a
copy of the most recent determination letter received with respect to each
Business Pension Plan for which such a letter has been issued.
(vi) With respect to any Business Pension Plan subject to
Title IV of ERISA, no event has occurred, or is reasonably expected to occur as
a result of the transactions contemplated by this Agreement, which will result
in any material liability to any such plan or to the Pension Benefit Guaranty
Corporation, other than for the payment of contributions or premiums, all of
which have been paid when due. Seller has furnished to Purchaser the most
recent actuarial report or valuation with respect to each Business Pension Plan
that is a "defined benefit plan" (as defined in Section 3(35) of ERISA).
(vii) Each of Seller and Seller Sub complies in all material
respects with the applicable requirements of Section 4980B(f) of the Code with
respect to each Benefit Plan that is a "group health plan" (as such term is
defined in Section 5000(b)(1) of the Code).
<PAGE> 44
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(viii) No Benefit Plan disclosed in Schedule 3.1(t) which is
a Welfare Plan provides for post-retirement medical or dental benefits to
Employees or their dependents who are participants or beneficiaries thereunder.
(ix) No Employee will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement.
(x) Except as set forth in Schedule 3.1(t), neither
Seller nor Seller Sub is a party to or is otherwise bound by any contract,
agreement or collective bargaining agreement with any labor organization, union
or association or other commitment respecting employment or compensation of any
of the Employees, and no Employees are represented by any labor organization,
union or association. There is no existing or, to Seller's or Seller Sub's
knowledge, threatened labor disturbance by Employees.
(u) Environmental Matters. (i) Except as disclosed in
Schedule 3.1(u) and except for activities and operations by Persons unrelated
to Seller or Seller Sub, the existence of which Seller and Seller Sub, to the
best of their knowledge, are unaware, all properties or facilities (including
the Olney Site (as defined in subparagraph (xiii) below)) leased, owned, used
or operated by Seller, Seller Sub or any predecessor in interest in the
Business ("Business Sites") have been, and continue to be, leased, owned, used
or operated in compliance in all respects with all applicable Federal, state,
local and foreign laws, statutes, regulations, rules, binding guidelines,
ordinances, decrees or orders relating to Hazardous
<PAGE> 45
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Substances (as defined below), environmental contamination or pollution, the
protection of natural resources or employee health or safety, as enacted,
amended or reauthorized or promulgated, including common law ("Environmental
Laws"). "Hazardous Substances" shall have the meaning assigned to it in
Sec. 101(14) of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"), and shall include petroleum, its
by-products or fractions, asbestos and asbestos containing materials,
polychlorinated biphenyls and radioactive materials.
(ii) Except as disclosed in Schedule 3.1(u), Seller or
Seller Sub holds and is in substantial compliance with all environmental
permits, licenses, consents, certificates, orders, franchises, approvals,
registrations and authorizations ("Environmental Permits") required for the
conduct of the Business under all Environmental Laws, all such Environmental
Permits are currently in effect, and all such Environmental Permits are freely
transferable under the transactions contemplated by this Agreement.
(iii) Each of Seller and Seller Sub has made timely
applications for renewals for all Environmental Permits that are scheduled to
expire by December 31, 1996, except for such Environmental Permits for which,
by their terms or by operation of law, application for renewal need not be made
more than 90 days before their expiration. A complete list of Seller's and
Seller Sub's Environmental Permits and applications for renewal is set forth in
Schedule 3.1(u).
<PAGE> 46
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(iv) Except as disclosed in Schedule 3.1(u), no notice,
citation, summons, order or consent decree has been issued, no complaint has
been filed, no penalty has been assessed, and, to the best of Seller's and
Seller Sub's knowledge, no investigation or review is pending or has been
threatened by any Governmental Entity or other Person with respect to (a) any
alleged violation of any Environmental Law by Seller or Seller Sub in the
conduct of the Business, (b) any alleged failure by Seller or Seller Sub in the
conduct of the Business to have or to comply with any required Environmental
Permit or (c) any alleged violation of any Environmental Law concerning the
generation, use, possession, treatment, storage, recycling, transportation or
disposal of any Hazardous Substance by Seller or Seller Sub in the conduct of
the Business.
(v) Except as disclosed in Schedule 3.1(u), neither
Seller nor Seller Sub has received any request for information, notice of
claim, demand or notification that it is or may be potentially responsible
under any Environmental Law with respect to any investigation or cleanup of any
threatened or actual Release (as defined below) of any Hazardous Substance.
"Release" shall have the meaning assigned to it in Section 101(22) of CERCLA.
(vi) With respect to the Business or the Business Sites,
Schedule 3.1(u) identifies (a) all environmental audits, assessments or
occupational health studies known to Seller or Seller Sub undertaken by, or at
the direction of, any Governmental Entity, Seller or Seller Sub or any
predecessor in interest; (b) the results of the most recent analyses of water
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(including groundwater analyses), soil, air or asbestos samples where
noncompliance or contamination is indicated; (c) the most recent inspection of
each operating facility of the Business by any Governmental Entity provided to
Seller or Seller Sub by such Governmental Entity; (d) written communications
with all Governmental Entities relating to issues of noncompliance or
contamination; and (e) any claim or complaint concerning environmental matters.
(vii) Except as disclosed in Schedule 3.1(u), each of Seller
and Seller Sub has reported, or has reason to believe that a responsible party
has reported, promptly to appropriate Governmental Entities each unauthorized
Release of any Hazardous Substance at or on, or in any manner affecting, any
current or former Business Site where such report was required by law. Each
such reported unauthorized Release of any Hazardous Substance is also disclosed
in Schedule 3.1(u).
(viii) Except as disclosed in Schedule 3.1(u), neither
Seller, Seller Sub nor, to the best of Seller's or Seller Sub's knowledge, any
predecessor in interest, has stored, disposed, treated, or arranged for the
storage, disposal or treatment of, any Hazardous Substance at a site or
location, or has leased, owned, used or operated a site or location, which,
pursuant to CERCLA or other similar state law: (a) has been placed on the
National Priorities List or its state equivalent; (b) has been placed on the
Comprehensive Environmental Response, Compensation, and Liability Information
System list or any state equivalent; (c) is subject to a claim, administrative
order or other demand, either to take
<PAGE> 48
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"removal", "remedial" or "corrective" action, as those terms are defined under
any Environmental Law, or to reimburse any Person who has taken "removal",
"remedial" or "corrective" action in connection with such site; or (d) has been
the subject of notification of activities relating to Hazardous Substances.
(ix) There are no environmental liens on any Business
Sites, and, to the best of Seller's and Seller Sub's knowledge, no governmental
actions have been taken or are in process or pending which would subject any
Business Sites to such liens.
(x) Schedule 3.1(u) sets forth the age, contents or
former contents of any storage tanks that are, to the best knowledge of Seller
and Seller Sub, located on or at any Business Sites. Except as set forth in
Schedule 3.1(u) and except for any tanks abandoned by Persons unrelated to
Seller or Seller Sub, the existence of which Seller and Seller Sub, to the best
of their knowledge, are unaware, neither Seller nor Seller Sub has leased,
owned, used or operated, or presently leases, owns, uses or operates, any
underground storage tanks as defined under any Environmental Law. Except as
set forth in Schedule 3.1(u), all Seller's or Seller Sub's tanks and pipes
appurtenant thereto are, to the best knowledge of Seller and Seller Sub,
currently and have been in the past in good condition and do not leak.
(xi) To the best knowledge of Seller and Seller Sub, there
has been no treatment, storage, disposal, handling or Release of any Hazardous
Substance on any property currently or formerly leased, owned, used or operated
by Seller or Seller Sub that
<PAGE> 49
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could reasonably be expected to lead to any liability that would have a
Material Adverse Effect.
(xii) Except as set forth in Schedule 3.1(u), to the best
knowledge of Seller and Seller Sub, there are no polychlorinated biphenyls,
asbestos or urea formaldehyde insulation on or at any Business Sites.
(xiii) Seller and Seller Sub have made available to Purchaser
true and complete copies of all assessments, audits, studies, correspondence,
data and other information (including soil and groundwater data and other
information) pertaining to the investigation or remediation of the facility and
related property of the Business located in Olney, Illinois, including the
portions thereof constituting Excluded Premises (the "Olney Site").
(v) No Other Agreements To Sell the Assets. Except as set
forth in Schedule 3.1(v), neither Seller nor Seller Sub nor any of their
respective officers, directors, stockholders, subsidiaries or other affiliates
has any commitment or legal obligation, absolute or contingent, to any Person
other than Purchaser to sell, assign, transfer or effect a sale of any of the
Acquired Assets, other than Inventory in the ordinary course, to sell or effect
a sale of the capital stock of Seller or Seller Sub, to effect any merger,
consolidation, liquidation, dissolution or other reorganization of Seller or
Seller Sub or to enter into any agreement or cause the entering into of an
agreement with respect to any of the foregoing.
<PAGE> 50
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(w) Material Misstatements or Omissions. To the best of
Seller's and Seller Sub's knowledge, no statements, representations or
warranties by Seller or Seller Sub contained herein (including the Schedules
hereto), or in any document, exhibit, statement, certificate, Schedule or other
agreement heretofore or hereafter furnished to Purchaser pursuant hereto, or in
connection with the transactions contemplated hereunder or thereunder, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact required to be stated herein or therein or necessary
in order to make the statements herein or therein not misleading. Seller and
Seller Sub have endeavored to disclose all events, conditions and facts
materially affecting the Acquired Assets and the Business.
(x) Product Liability. Except as disclosed in Schedule
3.1(x), there are no actions, suits, inquiries, proceedings or investigations
by or before any Governmental Entity or, to the knowledge of Seller or Seller
Sub, threatened, against or involving Seller or Seller Sub relating to any
product alleged to have been manufactured or sold by Seller or Seller Sub in
the Business and alleged to have been defective or improperly designed or
manufactured.
(y) Transactions with Affiliates. Except as set forth in
Schedule 3.1(y), there are no Contracts or other arrangements (formal or
informal, written or oral), directly or indirectly, between Seller or Seller
Sub, on the one hand, and any other Persons controlling, under common control
with or controlled by Seller or Seller Sub, on the other hand, relating to the
Acquired Assets.
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(z) Tax Matters. Except as otherwise provided in Schedule
3.1(z), (i) each of Seller and Seller Sub, and each consolidated, combined or
affiliated group of which Seller or Seller Sub is or has been a member, has
timely filed or caused to be filed, within the time and in the manner
prescribed by applicable law and regulations, with the relevant Taxing
Authorities (as defined below), all material returns required to be filed by or
on behalf of it ("Returns"), and each such Return was true, complete and
accurate in all material respects at the time of filing; (ii) all Taxes of
Seller or Seller Sub, or for which Seller or Seller Sub could otherwise be held
liable, or which relate to the Acquired Assets or the Business, or for which a
Lien could otherwise be imposed after the Closing Date upon any Acquired Asset
(except for Permitted Liens described in clause (ii) of the definition thereof)
(all such Taxes, "Covered Taxes") have been duly and timely paid; (iii) no
Returns with respect to Covered Taxes are under audit or examination by any
Taxing Authority, and no written or unwritten notice of such an audit or
examination has been received by Seller or Seller Sub or any of their
respective affiliates; (iv) each material deficiency resulting from any audit
or examination relating to Covered Taxes by any Taxing Authority has been paid;
and (v) no material issues were raised in writing by the relevant Taxing
Authority during any audit or examination relating to Covered Taxes, and no
issues which could reasonably be expected to have a material adverse effect
during a Post-Closing Tax Period on the Business, including its financial
condition, were raised in writing by the relevant Taxing Authority during any
audit or examination for Covered Taxes. The term "Taxing Authority" shall mean
any
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governmental or regulatory authority, body or instrumentality, domestic or
foreign, exercising any Taxing authority or Tax regulatory authority.
(aa) State Takeover Statutes. No state takeover statute or
substantially similar statute or regulation applies or purports to apply to
this Agreement or any of the transactions contemplated hereby.
(bb) Voting and Waiver Requirements. No approval by or vote
of the holders of any class or series of Seller's or Seller Sub's stock is
required or otherwise necessary for this Agreement or any of the transactions
contemplated hereby, and no waiver, consent or other agreement of the
Noteholders, the trustees under the Indenture or the lenders or agents under
the Credit Agreement is required or otherwise necessary for this Agreement or
any of the transactions contemplated hereby, other than the Noteholder Waiver
and the Credit Agreement Consent.
(cc) Board Approval; Opinion of Financial Advisor. The Board
of Directors of Seller has (i) by not less than the affirmative vote of a
majority of its members approved this Agreement and the transactions
contemplated hereby, (ii) received the verbal opinion of SBC Capital Markets,
Inc. ("SBC Capital") to the effect that, as of the date of this Agreement, the
consideration to be received by Seller upon consummation of the transactions
contemplated hereby is fair to Seller from a financial point of view (and
Seller agrees to provide to Purchaser on or prior to the Closing, a written
opinion from SBC Capital to the effect thereof) and (iii) determined in good
faith that the Acquired Assets (as defined under
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this Agreement), together with the Acquired Assets (as defined in the Asset
Purchase Agreement dated as of February 26, 1996, among Seller,
Nelson/Weather-Rite, Inc., Actava World Trade Corporation and Purchaser), do
not represent, for purposes of Section 801 of the Debenture Indenture, all or
substantially all of the assets of Seller or Seller's assets substantially as
an entirety . A true and complete copy of the opinion referred to in clause
(ii) above has been delivered to Purchaser.
(dd) Stockholder Agreement. Each of the Stockholders (as
defined in Section 4.24) has agreed for the benefit of Seller and Seller Sub to
enter into the Stockholder Agreement on the terms set forth in Section 4.24.
SECTION 3.2. Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Seller and Seller Sub as follows:
(a) Organization, Standing and Power. It is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted.
(b) Authority. It has the corporate power and authority to
execute this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser and do not and will not require the
approval of the stockholders of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes a legal, valid and binding
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obligation of Purchaser enforceable in accordance with its terms. The
execution and delivery of this Agreement by Purchaser does not, and the
consummation by Purchaser of the transactions contemplated hereby will not, (i)
violate any law, judgment, order, decree, statute, ordinance, rule or
regulation applicable to it, any of its affiliates or any of its property, (ii)
conflict with any provision of the certificate of incorporation or By-laws of
Purchaser or (iii) require the consent, approval, order or authorization of, or
the registration, declaration or filing with, any Governmental Entity or other
Person, except for the filing of a premerger notification report by Purchaser
under the HSR Act.
ARTICLE IV
Covenants
SECTION 4.1. Covenants of Seller and Seller Sub Relating to
Conduct of Business. During the period from the date of this Agreement and
continuing until the Closing, each of Seller and Seller Sub jointly and
severally agrees (except as expressly provided in this Agreement or to the
extent that Purchaser shall otherwise consent in writing) that:
(a) Ordinary Course. Seller and Seller Sub shall carry on
the Business and operate the Acquired Assets in the ordinary course in
substantially the same manner as presently conducted, maintain the records of
the Business in substantially the same manner as presently maintained and use
all reasonable efforts to preserve intact the present organization
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of the Business, keep available the services of the present officers and
employees of the Business and preserve the goodwill and relationships of the
Business with its customers, suppliers, distributors, creditors and lenders and
with others having business or financial dealings with the Business. Without
in any way limiting the foregoing, Seller and Seller Sub shall not, and shall
not agree to, and will not permit their respective affiliates to, or to agree
to, without the prior written consent of Purchaser:
(i) purchase or otherwise acquire assets that would
constitute Acquired Assets from any Person in excess of an
aggregate of $250,000 for all such purchases and other acquisitions,
other than Inventory in the ordinary course of business;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber, any assets that
would constitute Acquired Assets other than the sale of Inventory
(which, for purposes of this clause (ii) only, shall be deemed to
include Inventory sold to RLI) in the ordinary course of business and
consistent with past practice;
(iii) amend or modify in any material respect or terminate or
fail to renew any Contract set forth in Schedule 3.1(h)-1,
3.1(h)-2 or 3.1(n) or enter into any other Contract which, if in
existence on the date hereof, would be required to be set forth in any
such Schedule;
(iv) commit to make capital expenditures in excess of an
aggregate of $250,000 for all such capital expenditures
relating to the Business or the Acquired Assets, other than capital
expenditures set forth on Schedule 4.1(a);
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(v) (A) except as required by law, enter into, adopt or
amend in any material respect or terminate any Benefit Plan or any
other agreement, arrangement, plan or policy affecting employees; or (B)
increase the compensation of any Transferred Employee or pay any benefit or
amount not required by a plan or arrangement as in effect on the date of
this Agreement; or
(vi) agree, whether in writing or otherwise, to do any of the
foregoing.
(b) Affirmative Covenants. Each of Seller and Seller Sub
shall, and shall cause their respective affiliates to:
(i) (A) maintain the Acquired Assets in the ordinary
course of business in good operating order and condition, reasonable wear
and tear excepted; (B) upon any damage, destruction or loss to any of the
Acquired Assets, apply any and all insurance proceeds received with
respect thereto to the prompt repair, replacement and restoration thereof
to the condition of the Acquired Assets before such event or, if required,
to such other (better) condition as may be required by applicable law; and
(C) maintain its level and quality of Inventory and supplies, raw
materials and spare parts in the ordinary course in a manner consistent
with its practices in place as of the date of the Year-End Financial
Statements;
(ii) use its best efforts to obtain, prior to the Closing
Date, all Required Consents;
(iii) use its best efforts to obtain, as promptly as
practicable following execution of this Agreement, the Noteholder Waiver
(in connection with so obtaining the Noteholder Waiver,Seller
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shall (A) provide Purchaser and its counsel with drafts of the waiver
solicitation statements and all related materials (including all amendments
and supplements thereto) reasonably in advance of the distribution thereof
to Noteholders, (B) shall give good faith consideration to any comments of
Purchaser or its counsel on such drafts and (C) promptly provide Purchaser
with a reasonable number of copies of the final versions of such waiver
solicitation statements and related materials (including all amendments and
supplements thereto));
(iv) use its best efforts to obtain, as promptly as
practicable following execution of this Agreement, the Credit Agreement
Consent; and
(v) use its best efforts to obtain, as promptly as
practicable following execution of this Agreement, a letter or other
document from the Illinois Environmental Protection Agency or any other
Governmental Entity that is actively exercising control over remediation at
or around the Olney Site (collectively, the "IEPA"), approving the nature
and scope of the environmental investigation, remediation and monitoring
that will be required by the IEPA at the Olney Site (the "IEPA Approval")
either (1) as proposed in the letter from Environmental Science &
Engineering, Inc. ("ES&E") to David Schaper, Esq. dated June 10, 1996 (the
"ES&E Remediation Proposal"); (2) in a form substantially similar in scope
and substance to the ES&E Remediation Proposal, except that the method of
treatment for contaminated soil shall consist of excavation, thermal
desorption and replacement rather than source isolation by installation of
sheet piling;
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or (3) in a form reasonably acceptable in scope and substance to
Purchaser, who, after consultation with Seller or Seller Sub,
shall timely transmit its evaluation of any proposed investigation,
remediation and monitoring to Seller or Seller Sub (collectively, the
"Olney Remediation"), provided, that this covenant will not be deemed
to have been satisfied if, notwithstanding the best efforts of Seller
and Seller Sub, (A) IEPA rejects or otherwise affirmatively refuses to
approve the Olney Remediation; (B) the IEPA Approval of the Olney
Remediation (or any other form of investigation and remediation of the
Olney Site) requires removal and off-site disposal of in excess of
10,000 cubic yards of soils and/or any other materials contaminated
with Hazardous Substances; or (C) Seller or Seller Sub learns that the
terms on which the IEPA Approval would likely be obtained would require
removal and off-site disposal of in excess of 10,000 cubic yards of
soils and/or any other materials contaminated with Hazardous
Substances.
SECTION 4.2. Consultation. In connection with the continuing
operation of the Business between the date of this Agreement and the Closing,
Seller and Seller Sub shall use reasonable efforts to consult in good faith on
a regular and frequent basis with the representatives for Purchaser to report
material operational developments and the general status of ongoing operations
pursuant to procedures reasonably requested by Purchaser or such
representatives. Seller and Seller Sub each acknowledge that any such
consultation shall not constitute a waiver by Purchaser of any rights it may
have under this Agreement, and
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that Purchaser shall have no liability or responsibility for any actions of
Seller, Seller Sub or any of their respective officers or directors with
respect to matters which are the subject of such consultations unless Purchaser
expressly consents to such action in writing.
SECTION 4.3. Frustration. Neither Seller nor Seller Sub
shall take any action that would or could reasonably be expected to result in
any of the representations and warranties of Seller and Seller Sub set forth in
this Agreement becoming untrue (including the accuracy of the Schedules) or in
any of the conditions of the Closing set forth in Article V not being
satisfied.
SECTION 4.4. Access to Information. Each of Seller and
Seller Sub shall afford to Purchaser and its officers, directors, principals,
attorneys, accountants, employees and other representatives reasonable access
during normal business hours during the period prior to the Closing to all the
properties, books, work papers of its accountants, Contracts, commitments, tax
returns and records of the Business, and, during such period, shall furnish
promptly to Purchaser or any such other Person any information or data
concerning the Business as Purchaser or any such other Person may reasonably
request. Such access afforded by Seller and Seller Sub shall be sufficient so
that, among other things, Purchaser can obtain results from, monitoring wells
on the Olney Site, and otherwise obtain, from Seller or Seller Sub, sampling
data from existing or newly-installed monitoring wells, placed after
consultation with Purchaser, and other pertinent data and review materials and
site conditions with respect to the Olney Site, including for purposes of
conducting a Phase II environmental baseline assessment in form and
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scope reasonably acceptable to Purchaser (the "Baseline Assessment"), taking
into account the activities and obligations of Seller and Seller Sub with
respect to the Olney Remediation, but in no event delaying completion of the
Baseline Assessment. The Baseline Assessment shall be conducted at the expense
of Purchaser. Purchaser acknowledges that any information being provided to it
or its representatives by Seller or Seller Sub pursuant to this Agreement is
subject to the terms of a confidentiality agreement between Purchaser and
Seller dated May 3, 1995 (the "Confidentiality Agreement"), which terms are
incorporated herein by reference and which terms shall remain in effect until
the Closing Date (except to the extent such information relates to Other Seller
Businesses, in which case such terms shall remain in effect following the
Closing Date). In addition to the foregoing, each of Seller and Seller Sub
shall keep Purchaser reasonably informed with respect to Seller's and Seller
Sub's activities in connection with, and the progress of, the Project (as
defined in Section 4.25). Each of Seller and Seller Sub shall provide
Purchaser with copies of all summaries, reports, recommendations,
correspondence and other documents ("Documents") with respect to the Project.
Purchaser shall be permitted to review drafts of Seller's, Seller Sub's and
ES&E's Documents to be submitted to IEPA reasonably in advance of the date such
Documents are to be so submitted and shall receive timely and complete
summaries from Seller and Seller Sub of all meetings and telephone conferences
between Seller and Seller Sub and IEPA, and ES&E and IEPA, together with all
records and minutes of such meetings and copies of all correspondence between
Seller and Seller Sub and IEPA, and ES&E and IEPA; provided that copies of all
such summaries, records and
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minutes (i) prepared by Seller and Seller Sub, shall be provided to IEPA
concurrently with the provision of such summaries, records and minutes to
Purchaser and (ii) prepared by IEPA, shall be provided to Seller and Seller Sub
concurrently with the provision of such summaries, records and minutes to
Purchaser. Purchaser shall also be permitted to, and Seller and Seller Sub
shall cooperate in any of Purchaser's efforts to, discuss with ES&E any
meetings or conferences with IEPA or any other matters related to the Project.
Notwithstanding the foregoing, the form and substance of the Documents to be
submitted to IEPA are solely within Seller's and Seller Sub's discretion.
Purchaser may engage and utilize its own environmental consultant, at
Purchaser's expense, who shall be entitled to exercise the foregoing rights of
Purchaser.
SECTION 4.5. Legal Conditions to Closing. Each of Purchaser,
Seller and Seller Sub will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it or any of its
subsidiaries with respect to the Closing (including the prompt filing of the
premerger notification report under the HSR Act and the furnishing of all
information required under the HSR Act) and will promptly cooperate with and
furnish information to each other and to other parties in connection with any
such legal requirements. The filing fees under the HSR Act shall be borne by
Purchaser. In addition, without limiting the foregoing, each of Seller
(including its Board of Directors) and Seller Sub shall use its reasonable best
efforts to (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to this
Agreement or any of the transactions contemplated hereby, and (ii) if any such
state takeover statute or similar statute or
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regulation becomes so applicable, take all action necessary to ensure that the
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement, and otherwise to
minimize the effect of such statute or regulation on this Agreement and the
transactions contemplated hereby.
SECTION 4.6. Third-Party Consents; Trade Letters of Credit.
(a) Anything in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign any Acquired Asset or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the consent of a third party thereof, would
constitute a breach or other contravention thereof, would be ineffective with
respect to any party thereto or would in any way adversely affect the rights of
Seller or Seller Sub or, upon transfer, Purchaser thereunder.
(b) In Section 4.1(b)(ii) each of Seller and Seller Sub has
agreed that between the date hereof and the Closing Date it will use its best
efforts to obtain the Required Consents. If (i)(A) any Required Consent
identified as a "Material Required Consent" on Schedule 5.2(h) is not obtained
prior to the Closing Date and (B) notwithstanding the provisions of Section
5.2(h), Purchaser elects to consummate the Closing or (ii) any other Required
Consent is not obtained, Purchaser may, at its option, endeavor to obtain any
such Material Required Consents or other Required Consents and Seller and
Seller Sub shall be jointly and severally liable to Purchaser for all costs
incurred by Purchaser in respect of any such Material Required Consents or
other Required Consents it attempts to obtain. Seller, Seller Sub and
Purchaser will cooperate in an
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arrangement reasonably satisfactory to Purchaser, Seller and Seller Sub under
which Purchaser shall obtain the claims, rights and benefits and assume the
corresponding obligations under any Contracts with respect to which the
Required Consents have not been obtained in accordance with this Agreement,
including subcontracting, sublicensing or subleasing to Purchaser and
enforcement of any and all rights of Seller and Seller Sub against the other
party thereto arising out of a breach or cancellation thereof by the other
party. Seller or Seller Sub, as applicable, will promptly pay to Purchaser
when received all money received under any Contract or any other Acquired
Asset, or any claim, right or benefit arising thereunder, that has been
assigned to Purchaser or which Seller or Seller Sub has made an arrangement to
the satisfaction of Purchaser to provide pursuant to this Section 4.6.
(c) With respect to the Credit Agreement Consent, the
Purchaser (i) acknowledges that, prior to the Majority Lenders providing such
Consent, (A) the reimbursement obligations for the undrawn balances of any
trade letters of credit of the Business outstanding pursuant to the Credit
Agreement and to be included in Net Working Capital (as defined in Exhibit A)
must be assumed or otherwise guaranteed by Purchaser or (B) such other
arrangements must be made that are satisfactory to the Majority Lenders given
their liability under such letters of credit; and (ii) agrees to so assume or
otherwise guarantee, or effect such other arrangements with respect to, the
reimbursement obligations for the undrawn balances of any trade letters of
credit of the Business, whether outstanding pursuant to the Credit Agreement
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or otherwise; provided, that Seller and Seller Sub agree to cooperate with and
facilitate any such assumption, guarantee or other arrangements.
SECTION 4.7. Offer of Employment; Employee Benefit Plans;
Welfare Benefit Plans. (a) Continuation of Employment. Purchaser shall offer
employment to such Employees actively at work on the Closing Date ("Active
Employees") as Purchaser, in its sole discretion, shall elect. Purchaser may
also offer employment to any Employee who is not actively at work on the
Closing Date due to leave of absence, disability leave, military leave or
layoff with recall rights ("Inactive Employees"). The period of such
employment shall, in the case of Active Employees offered employment by
Purchaser, begin on the Closing Date, and, in the case of Inactive Employees
offered employment by Purchaser, on the date that they first become eligible
for reemployment. For purposes of this Agreement, Active Employees who
immediately following the Closing continue their employment with the Business
and Inactive Employees (but only to the extent that they become reemployed by
Purchaser following the Closing) shall be referred to herein collectively as
"Transferred Employees". Nothing herein shall be construed as requiring
Purchaser to continue any Transferred Employee in employment following the
Closing.
(b) Accrued Vacation. Purchaser shall credit each
Transferred Employee with the unused vacation days, holidays and any personal
and sickness days accrued by such Transferred Employee as of the Closing Date
under the applicable policy of Seller or Seller Sub.
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(c) Benefit Plans.
(i) Participation in Benefit Plans. Transferred Employees
shall be given credit for all service with Seller and its subsidiaries
credited as of the Closing Date under the applicable plans of Seller
or its subsidiaries with respect to all employee benefit plans and
arrangements of Purchaser or any of its subsidiaries in which such
Transferred Employees become participants solely for purposes of
eligibility and vesting (other than for purposes of any early
retirement subsidy under Purchaser's pension plans), and not for
purposes of benefit accrual, to the same extent as if such service had
been rendered to Purchaser or any of its subsidiaries.
(ii) Vesting in Benefit Plans. Effective as of the Closing,
Transferred Employees shall be fully vested by Seller and Seller Sub
in their account balances or accrued benefits, as applicable, under
each applicable Benefit Plan, subject, in the case of Transferred
Employees who are covered by a collective bargaining agreement, to the
consent of the applicable bargaining representative.
(iii) Welfare Benefits. Seller and Seller Sub shall be
responsible in accordance with their applicable welfare plans in effect
prior to the Closing for all (1) medical and dental claims for expenses
incurred on or prior to the Closing Date by Transferred Employees and
other Employees, former employees and their dependents (including all
claims arising from continuous hospitalization periods commencing prior
to the Closing Date) and (2) life insurance claims for deaths occurring
on or prior to the Closing Date, in each case including claims
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which are filed after the Closing Date. For purposes hereof, a medical
or dental claim shall be deemed incurred when the services that are the
subject of the claim are performed, regardless of when the claim is
filed. Reimbursement of employees and their dependents for medical and
dental expenses associated with such claims (including claims submitted
on behalf of disabled employees and their dependents) shall be
determined in accordance with the terms of Seller's and Seller Sub's
medical and dental programs as in effect immediately prior to the
Closing Date. Purchaser shall be responsible for all medical and dental
claims for expenses incurred after the Closing Date with respect to
Transferred Employees. Purchaser shall cause to be waived any
pre-existing condition limitation under its welfare plans that might
otherwise apply to a Transferred Employee. Purchaser agrees to
recognize (or cause to be recognized) the dollar amount of all expenses
incurred by Transferred Employees during the 1996 calendar year for
purposes of satisfying the 1996 calendar year deductibles and
co-payments limitations under the relevant benefit plans of Purchaser
and its subsidiaries. Each of Seller and Seller Sub agrees that it
shall be responsible for workers compensation claims of (x) Transferred
Employees to the extent the injury first arose, or the exposure to the
element giving rise to an occupational disease, first occurred, on or
prior to the Closing Date and (y) Employees who are not Transferred
Employees. Each of Seller and Seller Sub agrees that it shall be
responsible for providing appropriate severance and termination benefits
under Seller's and Seller Sub's applicable plans and arrangements
consistent with past
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practice, including providing COBRA coverage under its medical and
dental plans for all its Employees (and their eligible dependents) who
are not Transferred Employees.
(d) WARN Act. Seller and Seller Sub agree to provide any
required notice under the WARN Act and any other applicable law and to
otherwise comply with any such statute with respect to any "plant closing" or
"mass layoff" (as defined in the WARN Act) or similar event affecting Employees
and occurring on or prior to the Closing Date. Seller and Seller Sub shall
indemnify and hold harmless Purchaser and its subsidiaries with respect to any
liability under the WARN Act or other applicable law arising from the actions
of Seller, Seller Sub or their respective affiliates on or prior to the Closing
Date. Notwithstanding any other provision of this Agreement, Purchaser shall
indemnify and hold harmless Seller and Seller Sub with respect to any liability
under the WARN Act and any other applicable law governing "plant closings" or
"mass layoffs" arising from Purchaser's failure to offer employment on the
Closing Date to any Employee and for its failure to comply with the WARN Act
and any other applicable law governing "plant closings" or "mass layoffs" with
respect to events occurring after the Closing Date.
SECTION 4.8. Expenses and Fees; Property Relocation. (a)
Whether or not the Closing takes place, except as provided in Sections 4.4 and
4.5 and in paragraphs (b) and (c) below, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense.
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(b) Seller shall immediately pay, or cause to be paid, in
same day funds to Purchaser the sum of (i) all of Purchaser's out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, up to an aggregate amount of $2,500,000 (the "Expenses")
and (ii) $12,500,000 (the "Fee"), upon demand if (A) Purchaser terminates this
Agreement in accordance with Section 6.1(a)(v) or (vii) or (B) Purchaser or
Seller terminates this Agreement in accordance with Section 6.1(a)(vi);
provided, that in the case of a termination pursuant to Section 6.1(a)(vi) or
(vii), the Fee and any Expenses in excess of $1,000,000 shall only become
payable if (A) in the event no takeover proposals have been made prior to such
termination, within six months from the date of such termination, a definitive
agreement is executed providing for a Takeover Transaction (as defined below),
(B) in the event one or more takeover proposals have been made prior to such
termination, within one year from the date of such termination, a definitive
agreement is executed providing for a Takeover Transaction or (C) regardless of
whether any takeover proposals have or have not been made prior to such
termination, within two years from the date of such termination, a definitive
agreement is executed providing for the sale or exchange of all or a
significant amount of the Acquired Assets or a sale of all or substantially all
of the capital stock of the entity owning the Acquired Assets. For purposes of
this Agreement, "Takeover Transaction" shall mean any transaction that the
inquiry, proposal or offer of which would have qualified as a takeover
proposal. The amount of Expenses so payable shall be the amount set forth in
an estimate delivered by Purchaser upon any such termination subject to upward
or downward adjustment
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as provided in the next sentence. In the event that Purchaser's actual
Expenses exceed such estimate, the amount of such excess shall be payable by
Seller to Purchaser upon demand, and in the event that Purchaser's actual
Expenses are less than such estimate, the amount of such overpayment shall be
promptly refunded by Purchaser to Seller. Purchaser shall furnish Seller with
such documents as Seller may reasonably request to substantiate the amount of
any Expenses for which a claim for payment is made.
(c) Seller, Seller Sub and Purchaser shall cooperate in good
faith to, as promptly as practicable following the Closing, physically separate
and relocate any Personal Property and Inventory from Seller's facility in West
Point, Mississippi (the "Westpoint Site") to the Olney Site and any similar
assets of the Other Seller Businesses from the Olney Site to the Westpoint Site
or certain other Seller facilities. All costs associated with such separation
and relocation shall be borne by Seller and Seller Sub. Purchaser agrees to
provide Seller or Seller Sub with the opportunity to, as promptly as
practicable following the Closing, effect any relocation required under this
Section 4.8(c) prior to incurring any relocation costs which are reimbursable
by Seller or Seller Sub hereunder; provided, that prior to effecting any such
relocation, Seller or Seller Sub, as applicable, shall consult reasonably in
advance with Purchaser and give reasonable consideration to Purchaser's
comments and requests with respect thereto. In the event Purchaser shall incur
costs or expenses in connection with such separation and relocation, Seller
shall reimburse Purchaser for such costs and expenses promptly upon
presentation by Purchaser of invoices or other appropriate documentation for
such costs and expenses.
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SECTION 4.9. Brokers or Finders. Each of Purchaser and
Seller represents, as to itself and its affiliates, that no agent, broker,
investment banker or other firm or Person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except, as to
Seller and its affiliates, SBC Capital, whose fees and expenses (whether for
the transactions contemplated by this Agreement or any other transactions) will
be paid by Seller, and each of Purchaser and Seller respectively agrees to
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions,
expenses or other payments asserted by any Person on the basis of any act or
statement alleged to have been taken or made by such party or its affiliates.
SECTION 4.10. Insurance. Each of Seller and Seller Sub shall
keep the current product liability insurance (both general and umbrella
coverages) policies of the Business in effect through the Closing. No later
than the Closing Date Seller and Seller Sub shall obtain a fully prepaid "tail
coverage" insurance policy (the "Policy") for a term of five years beginning on
the Closing Date for products of the Business sold or manufactured by or on
behalf of Seller or Seller Sub on or prior to the Closing Date. The Policy
shall be (i) for an amount not less than $1,000,000 per occurrence, with excess
coverage for an amount not less than $14,000,000 per occurrence, aggregate
coverage of $15,000,000 for the term of the Policy and a $200,000 self-insured
retention, (ii) on other terms substantially similar to the terms of the
current product liability insurance of the Business and (iii) with an insurance
company reasonably acceptable to
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Purchaser (the "Insurer"). Purchaser shall be included as an "additional
insured" on the Policy for the term of the Policy. On the Closing Date Seller
shall furnish Purchaser a binder containing a marked specimen of the Policy and
a letter and certificate of insurance from the Insurer with respect to the
Policy, such letter and certificate to be in form and substance reasonably
satisfactory to Purchaser.
SECTION 4.11. Agreement Not To Compete; Confidentiality. For
a period ending five years after the Closing Date, neither Seller nor Seller
Sub nor any of their respective controlling or controlled affiliates (other
than Metromedia International Group, Inc. ("Metromedia") and any directors of
Seller who are not and who at any time within the preceding 12 months have not
been employed by Seller or Seller Sub) shall, without the prior written consent
of Purchaser, engage in a business which competes with the Business, directly
or indirectly, as an owner, consultant, manager, associate, partner, agent,
employee or otherwise, or by means of any corporate or other device within
North America or any other location in the world (this geographic area is
hereafter referred to as the "Territory"); nor shall Seller, Seller Sub or
their respective controlling or controlled affiliates (other than Metromedia
and any directors of Seller who are not and who at any time within the
preceding 12 months have not been employed by Seller or Seller Sub), for such
period and in the Territory (A) solicit orders, directly or indirectly, from
any customer of Seller or Seller Sub, for any product substantially similar to
those currently or at any time since the date that is five years prior to the
date of this Agreement sold, manufactured or distributed by the Business or (B)
engage in any
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product design relating to any such product, in each case as an owner,
consultant, manager, associate, partner, agent, employee or otherwise, or by
means of any corporate or other device; nor shall Seller, Seller Sub or their
respective controlling or controlled affiliates (other than Metromedia and any
directors of Seller who are not and who at any time within the preceding 12
months have not been employed by Seller or Seller Sub), for a period of three
years after the Closing Date solicit for employment any employee of Seller or
Seller Sub who continued employment with Purchaser after the Closing Date.
Each of Seller and Seller Sub covenants and agrees that
neither it nor any of their respective controlling or controlled affiliates
(including Metromedia and any directors of Seller who are not and who at any
time within the preceding 12 months have not been employed by Seller or Seller
Sub) shall use for its own behalf or divulge to any other Person any
confidential information or trade secrets of or relating to the Business;
provided that Seller or Seller Sub may use for its own behalf (but may not
divulge to any other Person) such confidential information or trade secrets in
its fitness business. As used herein, confidential information shall consist
of all information, knowledge or data relating to the Business (including all
information relating to inventions, production methods, customer and
prospective customer lists, prices and trade practices) which is not in the
public domain or otherwise published or publicly available.
This Section 4.11 shall not be construed to prohibit the
ownership by Seller, Seller Sub or any of their respective controlling or
controlled affiliates of not more than 5% of the
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capital stock of any corporation having a class of securities registered
pursuant to the Securities Act of 1933 or the common stock of Purchaser.
Each of Seller and Seller Sub acknowledges that the
restrictions contained in this Section 4.11 are reasonable and necessary to
protect the legitimate interests of Purchaser, do not cause Seller, Seller Sub
or any of their respective controlling or controlled affiliates (including
Metromedia and any directors of Seller who are not and who at any time within
the preceding 12 months have not been employed by Seller or Seller Sub) undue
hardship, and that any violations of any provision of this Section 4.11 will
result in irreparable injury to Purchaser and that, therefore, Purchaser shall
be entitled to preliminary and permanent injunctive relief in any court of
competent jurisdiction and to an equitable accounting of all earnings, profits
and other benefits arising from such violation, which rights shall be
cumulative and in addition to any other rights or remedies to which Purchaser
may be entitled.
SECTION 4.12. Bulk Transfer Laws. Purchaser hereby waives
compliance by Seller and Seller Sub with the provisions of any so-called "bulk
transfer law" of any jurisdiction in connection with the sale of the Acquired
Assets to Purchaser. Each of Seller and Seller Sub shall indemnify and hold
harmless Purchaser against any and all liabilities that may be asserted by
other Persons against Purchaser as a result of noncompliance with any such bulk
transfer law.
SECTION 4.13. Additional Agreements. Each of Seller and
Seller Sub will use its best efforts to facilitate and effect the
implementation of the transfer of the Acquired Assets to Purchaser and, for
such purpose but without limitation, each of Seller and Seller Sub promptly
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will at and after the Closing execute and deliver to Purchaser such
assignments, deeds, bills of sale, consents and other instruments as Purchaser
or its counsel may reasonably request as necessary or desirable for such
purpose.
SECTION 4.14. Purchase Price Allocation. Seller, Seller Sub
and Purchaser agree that they will report, to the extent required under Section
1060 of the Code, the temporary regulations thereunder and any other applicable
laws and regulations, the allocation of consideration among the Acquired Assets
consistent with an allocation statement (the "Allocation Statement")
established by an appraiser selected by Purchaser and reasonably acceptable to
Seller and provided by Purchaser to Seller and Seller Sub no later than March
31, 1997. Purchaser, Seller and Seller Sub shall refrain, and cause their
affiliates to refrain, from taking any position inconsistent with such
Allocation Statement before any relevant Taxing Authority, unless such Taxing
Authority will not accept a return filed on that basis or unless otherwise
required under applicable law after a final determination thereof.
SECTION 4.15. Supplies; Names Following Closing. (a)
Purchaser shall not use stationery, purchase order forms or other similar paper
goods or supplies ("Supplies") that describe, contain or otherwise indicate
thereon the name "Roadmaster Industries, Inc." or "Roadmaster Corporation."
(b) Immediately following the Closing, each of Seller and
Seller Sub shall, and shall cause each of its affiliates to, amend or terminate
any certificate of assumed name or d/b/a filings so as to eliminate its right
to use any name identified on Schedule 4.15(b), or any name
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which, in the judgment of Purchaser acting reasonably, is confusingly similar
to any such names, and neither Seller nor Seller Sub shall thereafter, and each
of Seller and Seller Sub shall cause its affiliates to not, use those names or
other names acquired by Purchaser hereunder or names confusingly similar
thereto; provided, that, notwithstanding anything to the contrary contained
herein, Seller may use boxes or other packaging materials which bear a name
identified on Schedule 4.15(b) for a period not to exceed 90 days following the
Closing Date; provided, further, that following execution of this Agreement,
Seller shall order and maintain only such amount of boxes or packaging
materials referred to above as Seller reasonably believes is necessary for its
use prior to the Closing Date. Seller Sub shall, and shall cause each of its
affiliates to, also amend its certificate of incorporation and By-laws or other
constitutional documents to change its name to a name not similar to any of the
names identified on Schedule 4.15(b).
(c) As promptly as practicable (and in no event more than 60
days) following the Closing, Seller shall duly call, give notice of, convene
and hold such meetings of its stockholders as are necessary to amend its
certificate of incorporation and By-laws to change its name to a name not
similar to any of the names identified on Schedule 4.15(b). Seller shall,
through its Board of Directors, recommend to its stockholders approval of such
amendment and shall take all lawful action to solicit such approval. Following
the Closing, Seller shall not use any of the names identified on Schedule
4.15(b) for any purpose whatsoever, including product names, marketing,
promotional materials and advertising; provided, that, notwithstanding the
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foregoing, Seller may use its legal name as of the date of this Agreement
consistent with past practice (but not for commercial or operating purposes)
until such time as the stockholders of Seller shall have approved the changing
of such name as provided above; provided, further, that Seller shall use its
best efforts to utilize any intended replacement for its legal name in
conjunction with the use of its legal name and to clarify in any public
filings, press releases or other public announcements made prior to or after
the Closing that Seller will cease, or has ceased, on the Closing Date,
sourcing, purchasing, manufacturing, marketing, selling and distributing
products under the "Roadmaster" trademark and trade name.
SECTION 4.16. Enforcement of Confidentiality Rights. Each of
Seller and Seller Sub shall take all necessary or appropriate action to
enforce its rights and benefits under any confidentiality covenant or other
agreement relating to the Acquired Assets or the Business.
SECTION 4.17. Post-Closing Financial and Other Information.
After the Closing, upon reasonable written notice, Purchaser, Seller and Seller
Sub shall furnish or cause to be furnished to each other and their respective
accountants, counsel and other representatives access, during normal business
hours, such information (including records pertinent to the Acquired Assets),
assistance and personnel (including Transferred Employees) who have
responsibilities for the financial reporting and other matters described below,
in each case relating to the Acquired Assets as is reasonably necessary for
financial reporting and accounting matters, the preparation and filing of any
returns, reports or forms, the defense of any tax claim or assessment or the
preparation by Seller, or the review by Purchaser, of the Closing Statement;
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provided, that such access by one party shall not unreasonably interfere with
the conduct of the business of the other party. Purchaser shall make available
reasonably suitable office space for one employee of Seller at the Olney Site
for a period not to exceed six months following the Closing Date for the sole
purpose of assisting Seller with the foregoing matters.
SECTION 4.18. No Solicitation. (a) Neither Seller nor
Seller Sub shall, nor shall any of them permit any of their respective
controlled affiliates or investment bankers, attorneys or other advisors or
representatives to, directly or indirectly, (i) solicit or initiate, or
encourage the submission of, any takeover proposal (as defined below) or (ii)
participate in any discussion or negotiation regarding, or furnish to any
Person any non-public information with respect to, or take any other action to
facilitate any inquiry or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any takeover proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any officer, director, employee or agent of Seller or
any of its subsidiaries or any investment banker, attorney or other advisor or
representative of Seller or any of its subsidiaries, whether or not such Person
is purporting to act on behalf of Seller or any of its subsidiaries or
otherwise, shall be deemed to be a breach of this Section 4.18(a) by Seller.
Each of Seller and Seller Sub agrees to take the necessary steps to promptly
inform such Persons of the obligations set forth in this Section 4.18. For
purposes of this Agreement, "takeover proposal" means any inquiry, proposal or
offer from any Person relating to (A) any direct or indirect combination or
purchase of (1) a significant amount of the assets of Seller or any of its
subsidiaries or (2) voting
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or other equity or debt securities of or other equity or debt interests in
Seller or any of its subsidiaries, upon the consummation of which such Person
would beneficially own more than 20% of any class of such securities or
interests or more than 20% of the aggregate of such equity or debt securities
and interests of and in Seller or such subsidiary, (B) any tender or exchange
offer by any Person who, assuming consummation of such offer, would
beneficially own more than 20% of any class of voting or other equity or debt
securities of or other equity or debt interests in Seller or any of its
subsidiaries or more than 20% of the aggregate of such equity or debt
securities and interests of and in Seller or such subsidiary, (C) any merger,
consolidation, business combination, sale or other disposition of all or
substantially all the assets, reorganization, recapitalization,
reclassification, liquidation, dissolution, joint venture or similar
transaction involving Seller or any of its subsidiaries other than the
transactions contemplated by this Agreement or (D) any other transaction the
consummation of which would reasonably be expected to prevent or materially
impede, interfere with or delay the transactions contemplated by this
Agreement or which would reasonably be expected to dilute materially the
benefits to Purchaser of the transactions contemplated hereby. Without in any
way limiting the foregoing, any inquiry, proposal or offer from any Person
relating to the sale, assignment, license or other disposition of, or any
significant encumbrance on, or any joint venture or similar transaction
involving, any product, or interest therein or right associated therewith
(including any trademark or other Intellectual Property right), included in the
Business shall be deemed to be a "takeover proposal". Notwithstanding the
foregoing, any inquiry, proposal or offer from
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any Person relating to either of the following shall not be considered a
takeover proposal: (A) any direct or indirect combination or purchase of all or
a portion of the voting or other equity securities of Seller beneficially owned
as of the date of this Agreement by Metromedia or (B) any direct or indirect
combination or purchase of all or a portion of the fitness division assets or
the toy assets of Seller (other than any such assets constituting Acquired
Assets); provided, that, in either such case, any such Person (1) does not
otherwise own, beneficially or otherwise, voting or other equity or debt
securities of or other equity or debt interests in Seller or any of its
subsidiaries, (2) does not otherwise make any proposal that constitutes, or may
reasonably be expected to lead to, any takeover proposal and (3) agrees, prior
to consummation of such combination or purchase, in writing, with and for the
benefit of Purchaser not to make any proposal that constitutes, or may be
reasonably expected to lead to, any takeover proposal, such agreement not to
terminate until the earlier of (x) two years from the date of such consummation
and (y) the Closing.
(b) Neither the Board of Directors of Seller nor any
committee thereof shall (i) withdraw or modify, or resolve or propose to
withdraw or modify, the approval or recommendation by such Board of Directors
or any such committee of this Agreement or any of the transactions contemplated
hereby, (ii) approve or recommend, or resolve or propose to approve or
recommend, any takeover proposal or (iii) cause or permit Seller or any of its
subsidiaries to enter into any agreement with respect to any takeover proposal.
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(c) Seller and Seller Sub shall immediately advise Purchaser
orally and in writing of any request for information which may relate to a
takeover proposal or of any takeover proposal, or any inquiry or proposal with
respect to or which could lead to any takeover proposal, the material terms and
conditions of such request, takeover proposal or inquiry, and the identity of
the Person making any such request, takeover proposal or inquiry. Seller will
keep Purchaser fully and timely informed of the status and details (including
amendments or proposed amendments) of any such request, takeover proposal or
inquiry.
(d) Nothing contained in this Section 4.18 shall prohibit
Seller from taking and disclosing to its securityholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to its stockholders, in each case in response to an unsolicited
takeover proposal, if, in the good faith opinion of the Board of Directors of
Seller, after consultation with outside legal counsel, failure to so disclose
would constitute a violation of its duties under applicable law; provided, that
Seller does not withdraw or modify, or resolve or propose to withdraw or
modify, its approval or recommendation of this Agreement or any of the
transactions contemplated hereby.
(e) Each of Seller and Seller Sub agrees to (i) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Person conducted heretofore with respect to any takeover
proposal and (ii) promptly request that each Person that has heretofore
executed a confidentiality or similar agreement in connection with its
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consideration of any takeover proposal return all confidential information
heretofore furnished to such Person by or on behalf of Seller, Seller Sub or
any of their respective affiliates.
SECTION 4.19. Transfer of RLI Assets. On the Closing Date,
Seller shall cause RLI to transfer to Purchaser or such subsidiary of Purchaser
as Purchaser shall designate, (i) all its Inventory at a cost equal to the book
value of such Inventory, (ii) all its sales orders or similar Contracts at no
cost and (iii) all its assets of the type described in Sections 1.2(a)(x),
(xii) and (xiii) at no cost, in each case, used, intended to be used, held for
use or useful in the Business and, in the case of clauses (ii) and (iii),
relating to the Inventory referred to in clause (i).
SECTION 4.20. Lease. Each of Seller Sub and Purchaser agree
to execute and deliver, on the Closing Date, the lease agreement in the form
attached as Exhibit C hereto (the "Lease") pursuant to which Purchaser shall
lease the Olney Site other than the portions thereof designated as Areas A, B
and C, on which investigative or remediation activity is being conducted by
Seller as described in its Annual Report on Form 10-K for the year ended
December 31, 1995. As promptly as practicable following execution of this
Agreement, Seller and Seller Sub shall effect a legal subdivision of the Olney
Site so that, for purposes of the Lease, such portions of the Olney Site
referred to in the preceding sentence can be segregated from the remainder of
the Olney Site.
SECTION 4.21. Environmental Remediation and Escrow Agreement.
Each of Seller, Seller Sub and Purchaser agree to execute and deliver, on the
Closing Date, the
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Environmental Remediation and Escrow Agreement (the "Escrow Agreement") and to
use its best efforts to cause the Escrow Agent to do the same.
SECTION 4.22. License. Each of Seller, Seller Sub and
Purchaser agree to execute and deliver, on the Closing Date, a license
agreement (the "License"), in form and substance reasonably acceptable to
Purchaser and Seller, providing for the grant on the Closing Date by Seller or
Seller Sub, as the case may be, to Purchaser or any of its subsidiaries or
sub-licensees of a world-wide exclusive, royalty-free and perpetual license to
market, sell and distribute sleds and other snow-related products under the
"Flexible Flyer" trademark and containing such other terms and provisions as
are customary for an agreement of such type. Purchaser and Seller also agree
that the License shall permit Purchaser or any of its subsidiaries to sell
other products under the "Flexible Flyer" trademark and that Purchaser shall
pay Seller a royalty customary for such usage.
SECTION 4.23. Guarantee. Seller hereby absolutely and
unconditionally guarantees, as a primary obligor and not merely as a surety, to
the fullest extent permitted by law, all obligations (financial and otherwise)
of Seller Sub under the Lease. Seller also waives presentment to, demand of
compliance from and protest to Seller Sub of any of Seller Sub's obligations
under the Lease.
SECTION 4.24. Stockholder Agreement. (a) On or prior to the
Closing, Purchaser and Seller shall enter into a stockholder agreement (the
"Stockholder Agreement") with Metromedia, Mr. Henry Fong and Equitex, Inc., and
their respective affiliates (collectively,
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the "Stockholders"), as stockholders of Seller, whereby each such Stockholder
shall agree, among other things, in connection with the stockholder meeting
contemplated by Section 4.15(c): (i) to vote their shares of common stock, par
value $.01 per share, of Seller ("Seller Common Stock") in favor of the
amendment to Seller's certificate of incorporation and By-laws contemplated by
Section 4.15(c), (ii) to grant Purchaser an irrevocable proxy to so vote such
shares of Seller Common Stock in favor of such amendment and (iii) not to sell,
transfer or otherwise dispose of, or grant any other proxy with respect to,
such shares of Seller Common Stock unless the purchaser or transferee of such
shares agrees, in writing, to be bound under the terms of the Stockholder
Agreement as if named as a Stockholder thereunder. The Stockholder Agreement
shall contain such other terms and provisions as are customary for an agreement
of such type.
SECTION 4.25 Completion of the Project. Each of Seller and
Seller Sub shall use its best efforts to undertake and fully complete the
Project in a timely, cost efficient manner. Each of Seller's and Seller Sub's
obligations with respect to the Project shall be ongoing, including, if
necessary, further remediation following the completion of the Active
Remediation Program (as defined below), and shall include periodic groundwater
and other monitoring following the completion of the Active Remediation Program
until receipt by Seller or Seller Sub of a so- called "clean site letter", no
further action letter or the substantial equivalent thereof from IEPA or the
relevant Governmental Entity. Each of Seller's and Seller Sub's activities in
connection with the Project shall be in accordance with all Environmental Laws
(including all
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rules, regulations, standards or substantive or procedural guidance provisions
adopted, promulgated or issued from time to time by the IEPA or any other
Governmental Entity). For purposes of this Agreement, "Project" shall mean
Seller's and Seller Sub's undertaking and completion of a full investigation
and remediation (including periodic groundwater and other monitoring following
active remediation) of contamination of environmental media, including soils
and groundwater, at any time (including following completion of the Active
Remediation Program) arising from, related to, or discovered in connection
with, Releases of Hazardous Substances occurring at, or conditions existing at,
on, around or emanating from, the Olney Site on or prior to the Closing Date,
including the Olney Remediation. For purposes of this Agreement, "Active
Remediation Program" shall mean active remediation, including any trenching,
excavation, soil removal, soil treatment (by thermal desorption or otherwise),
leachate extraction and treatment and any groundwater extraction, treatment
recharge, reinfiltration or other flushing system, such as the removal and
system described in the ES&E Remediation Proposal. Each of Seller and Seller
Sub shall indemnify Purchaser for matters related to the Project or the Escrow
Agreement in accordance with the terms of Article VII hereof. Such
indemnification shall survive the expiration or termination of the Escrow
Agreement.
SECTION 4.26 Access to Leasehold Portion. Purchaser shall
provide Seller and Seller Sub, during normal business hours and upon prior
request, reasonable access to the portion of the Olney Site leased to Purchaser
by Seller Sub (the "Leasehold Portion") for purposes of undertaking and
completing the Project. Seller and Seller Sub shall not interfere
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with the business of Purchaser on the Leasehold Portion while Seller and Seller
Sub undertake and complete the Project. Purchaser shall cooperate reasonably
with Seller and Seller Sub to allow them to conduct any portion of the Project
on the Leasehold Portion. If disturbance of the Leasehold Portion is necessary
to undertake or complete the Project, Seller and Seller Sub, at their own
expense, shall promptly restore the Leasehold Portion to the condition that
existed immediately prior to such disturbance.
SECTION 4.27 Settlement. With respect to the lawsuit listed
as item 1 to Schedule 3.1(e) or any related lawsuit or other action, Seller and
Seller Sub shall not, without the prior written consent of Purchaser, such
consent not to be unreasonably withheld or delayed, enter into any settlement,
compromise or discharge thereof which (i) commits Purchaser to take, or forbear
to take, any action or compromises the ability of Purchaser to take any action
in the future, (ii) requires Purchaser to make any payments with respect
thereto or (iii) would be reasonably likely to adversely affect the business or
reputation of Purchaser or the Business. Seller and Seller Sub shall (a)
notify Purchaser of, and allow Purchaser and its counsel to participate in, any
negotiations, discussions or proceedings relating to such lawsuit and (b)
distribute to Purchaser copies of all pleadings and answers with respect
thereto relating to such lawsuit.
SECTION 4.28 Use Of Proceeds. Seller and Seller Sub shall not
dividend or otherwise distribute to stockholders of Seller any proceeds from
the payment of the Purchase Price.
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ARTICLE V
Conditions Precedent
SECTION 5.1. Conditions to Each Party's Obligation. The
obligation of Purchaser to purchase the Acquired Assets, and the obligation of
Seller and Seller Sub to sell, assign, transfer, convey and deliver the
Acquired Assets to Purchaser, shall be subject to the satisfaction prior to the
Closing of the following conditions:
(a) Governmental Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained or filed or shall have occurred.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by
this Agreement shall be in effect.
(c) Other Approvals. Each of the Noteholder Waiver and the
Credit Agreement Consent shall have been obtained.
(d) Lease; Escrow Agreement; License. Each of Seller, Seller
Sub and Purchaser shall have duly executed and delivered the Lease, the Escrow
Agreement and the License to the extent named as a party thereto; the Escrow
Agent shall have duly executed and delivered the Escrow Agreement; each of the
Lease, the Escrow Agreement and the License shall be in full
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force and effect; and each party thereto shall have complied with all
obligations required of it thereunder as of the Closing Date.
SECTION 5.2. Conditions to Obligation of Purchaser. The
obligation of Purchaser to purchase the Acquired Assets is subject to the
satisfaction at and as of the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller and Seller Sub set forth in this Agreement qualified as to
materiality shall be true and correct and those not so qualified shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct on and as of such earlier date), and
Purchaser shall have received a certificate to such effect signed by the chief
executive officer and the chief financial officer of Seller.
(b) Performance of Obligations of Seller and Seller Sub.
Each of Seller and Seller Sub shall have performed or complied in all material
respects with all obligations, conditions and covenants required to be
performed or complied with by it under this Agreement at or prior to the
Closing, and Purchaser shall have received a certificate signed by the chief
executive officer and the chief financial officer of Seller to such effect.
(c) Opinion of Seller's Counsel. Purchaser shall have
received an opinion dated the Closing Date of Smith, Gambrell & Russell,
counsel to Seller (which counsel Purchaser
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understands is licensed to practice law only in the State of Georgia), in the
form attached hereto as Exhibit D.
(d) Bills of Sale; Warranty Deeds; Assignments of Leases.
Each of Seller and Seller Sub, as applicable, shall have delivered to Purchaser
bills of sale conveying the personal property included in the Acquired Assets
(as well as bills of sale conveying the assets of RLI identified in Section
4.19), warranty deeds for the real property included in the Acquired Assets and
assignments of Leases, in each case in form and substance reasonably
satisfactory to Purchaser and its counsel.
(e) Lien Searches. Each of Seller and Seller Sub shall have
furnished to Purchaser (i) such UCC and other Lien searches and (ii) such duly
executed UCC-3 Termination or Partial Release Statements and other releases, in
each case as Purchaser or its counsel shall reasonably request for the Acquired
Assets.
(f) Other Documents. Each of Seller and Seller Sub shall
have furnished to Purchaser such other documents relating to Seller's or Seller
Sub's corporate existence and authority (including copies of resolutions of the
respective board of directors or other governing body of Seller and Seller
Sub), absence of Liens and such other matters as Purchaser or its counsel may
reasonably request, including such Owner's Affidavits and Non Imputation
Affidavits as may be required by Purchaser's title company to enable it to
issue to Purchaser, with respect to each Owned Property and Lease of Leased
Property, an ALTA 1992 Form of
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Owner's/Leasehold title insurance insuring Purchaser's title with the so-called
printed standard exceptions deleted and Non Imputation Endorsement provided.
(g) No Material Change. No change (nor any condition, event
or development involving a prospective change) on or after date of the Year-End
Financial Statements shall have occurred which, individually or in the
aggregate, would have, or would be reasonably likely to have, a Material
Adverse Effect. The term "Material Adverse Effect" shall mean a materially
adverse change in, or materially adverse effect on, the operations, affairs,
business, financial condition, results of operations, assets or liabilities of
the Business.
(h) Material Required Consents. All Material Required
Consents shall have been obtained in written instruments reasonably
satisfactory to Purchaser and its counsel.
(i) Insurance Policy. Seller and Seller Sub shall have
complied with all its obligations set forth in Section 4.10 with respect to the
Policy.
(j) No Litigation. There shall be no suit, action or other
proceeding pending before any Governmental Entity in which it is sought to
restrain, prohibit, invalidate or set aside in whole or in part the
consummation of the transactions contemplated by this Agreement or to obtain
substantial damages in connection therewith.
(k) Acceptance by Purchaser's Counsel. The form and
substance of all legal matters contemplated hereby and all documents delivered
hereunder shall be reasonably acceptable to counsel to Purchaser.
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(l) Stockholder Agreement. Each of Seller, Seller Sub,
Purchaser and the Stockholders shall have duly executed and delivered the
Stockholder Agreement; the Stockholder Agreement shall be in full force and
effect; and each party thereto shall have complied with all obligations
required of it thereunder as of the Closing Date.
SECTION 5.3. Conditions to Obligation of Seller and Seller
Sub. The obligation of Seller and Seller Sub to sell, assign, transfer, convey
and deliver the Acquired Assets is subject to the satisfaction at and as of the
Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement qualified as to materiality
shall be true and correct and those not so qualified shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date except to the extent such representations and warranties expressly relate
to an earlier date (in which case such representations and warranties shall be
true and correct on and as of such earlier date), and Seller shall have
received a certificate to such effect signed by an officer of Purchaser.
(b) Performance of Obligations of Purchaser. Purchaser shall
have performed or complied in all material respects with all obligations,
conditions and covenants required to be performed or complied with by it under
this Agreement at or prior to the Closing and Seller shall have received a
certificate signed by an officer of Purchaser to such effect.
(c) Opinion of Purchaser's Counsel. Seller shall have
received an opinion dated the Closing Date of the General Counsel of Purchaser,
in the form attached hereto as Exhibit E.
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(d) Acceptance by Seller's Counsel. The form and substance
of all legal matters contemplated herein and of all papers delivered hereunder
shall be reasonably acceptable to counsel to Seller.
ARTICLE VI
Termination, Amendment and Waiver
SECTION 6.1. Termination. (a) Notwithstanding anything to
the contrary in this Agreement, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of Seller, Seller Sub and
Purchaser;
(ii) by Seller or Seller Sub if any of the conditions set
forth in Section 5.1 or 5.3 (other than Section 5.1(c), as to which
clause (vi) of this Section 6.1 shall apply) shall have become
incapable of fulfillment, and shall not have been waived by Seller;
(iii) by Purchaser if any of the conditions set forth in
Section 5.1 or 5.2 (other than Section 5.1(c), as to which clause
(vi) of this Section 6.1 shall apply, and other than Section
5.2(b) to the extent otherwise set forth in clause (vii)) shall have
become incapable of fulfillment, and shall not have been waived by
Purchaser;
(iv) by Seller or Purchaser, if the Closing does not occur on
or prior to November 30, 1996, provided, that, if the Closing shall
not have occurred because the waiting period under the HSR Act
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shall not have expired or been terminated or because Material Required
Consents shall not have been obtained, either party may extend such
date to up to December 31, 1996;
(v) by Purchaser if, pursuant to Section 4.18(d), the Board of
Directors of Seller or any committee thereof approves or recommends a
takeover proposal or resolves or proposes to do so;
(vi) by Purchaser or Seller if either the Noteholder Waiver or
the Credit Agreement Consent shall not have been obtained by October
15, 1996 or;
(vii) by Purchaser if (1) by September 15, 1996, the IEPA
Approval shall not have been obtained on the terms required by Section
4.1(b)(v) and Seller and Seller Sub shall have failed to use their
best efforts to so obtain the IEPA Approval on such terms, (2) any
of the events described in the proviso to Section 4.1(b) (v) shall
have occurred, notwithstanding the best efforts of Seller and Seller
Sub, or (3) the Baseline Assessment shall not have been completed by
August 15, 1996, because Seller and Seller Sub shall not have complied
with their obligations set forth in Section 4.4; provided, however,
that the party seeking termination pursuant to clause (ii), (iii) or
(iv) is not in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(b) In the event of termination by Seller or Seller Sub, on
the one hand, or Purchaser, on the other hand, pursuant to this Section 6.1,
written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be
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terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(i) Purchaser shall return all documents and other material
received from Seller or Seller Sub relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to Seller; and
(ii) all confidential information received by Purchaser with
respect to the businesses of Seller or Seller Sub shall be treated in
accordance with the Confidentiality Agreement which shall remain in
full force and effect notwithstanding the termination of this
Agreement.
(c) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Section 6.1, this
Agreement shall become null and void and of no further force and effect, except
for the provisions of (i) Section 4.4 relating to the obligation of Purchaser
to keep confidential certain information and data obtained by it from Seller or
Seller Sub, (ii) Section 4.8 relating to certain expenses and fees, (iii)
Section 4.9 relating to finder's fees and broker's fees, (iv) this Section 6.1
and (v) Section 9.8 relating to publicity. Nothing in this Section 6.1 shall
be deemed in any way to (1) limit or affect the remedies and rights (including
the right to compel specific performance) a party shall have if another party
breaches any of the terms or provisions of this Agreement, including the no
solicitation provisions set forth in Section 4.18, or (2) release any party
from any liability for any such breach. This Section 6.1 and Section 4.8,
therefore, shall not be deemed to set forth liquidated
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or other damages in the event of such a breach and the provisions hereof and
thereof shall be in addition to any remedies for such breach.
SECTION 6.2. Amendments and Waivers. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto. By an instrument in writing signed by Purchaser, on the one
hand, or Seller and Seller Sub, on the other hand, a party may waive compliance
by the other party with any term or provision of this Agreement that such other
party was or is obligated to comply with or perform.
ARTICLE VII
Indemnification
SECTION 7.1. Indemnification by Seller and Seller Sub.
Seller and Seller Sub hereby jointly and severally agree to indemnify Purchaser
and its affiliates and their respective officers, directors, employees, agents
and representatives against, and agree to hold them harmless from, any loss,
liability, claim, damage, demand, action or cause of action, assessment,
judgment, award, fine, penalty, sanction, charge, amount paid in settlement,
cost or expense (including reasonable legal fees and expenses), as incurred
(payable promptly upon written request, with interest from the date which is 30
days from the date of such request to the date of actual payment, at the
Applicable Rate) ("Losses"), based on, arising out of, or resulting from: (i)
any breach on the part of Seller or Seller Sub of any representation or
warranty contained in this Agreement or any document, exhibit, statement,
certificate or
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Schedule delivered in connection herewith; (ii) any breach of any covenant or
agreement of Seller or Seller Sub contained in this Agreement or any document,
exhibit, statement, certificate or Schedule delivered in connection herewith;
(iii) any Excluded Liability; (iv) the failure to comply with statutory
provisions relating to bulk sales and transfers, if applicable; (v) any claims
made by any Employee, former employee or labor organization representing
Employees or former employees (A) for severance or other separation benefits,
(B) based on, arising out of, or resulting from, breach of contract or (C)
based on, arising out of, or resulting from, the employment or the failure to
offer employment to, the failure to promote, or the termination of employment
of (including any claims under the WARN Act, ADEA, EEOA or any other applicable
law), any such Employee or former employee or based on, arising out of, or
resulting from, acts, omissions, facts, circumstances, events or conditions
occurring or existing on or prior to the Closing Date, including any severance
claims based upon the consummation of the transactions contemplated hereby; or
(vi) any fees, commissions, expenses or other payments incurred or owed by
Seller or Seller Sub to any agents, brokers, investment bankers or comparable
other firms or Persons retained or employed by it in connection with the
transactions contemplated by this Agreement; provided, however, that Seller and
Seller Sub shall not have any liability under clause (i) of this Section 7.1
unless the aggregate of all Losses relating thereto for which Seller would, but
for this proviso, be liable exceeds on a cumulative basis an amount equal to
$1,325,000 (it being understood that in such event, Seller's and Seller Sub's
liability under such clause (i) shall include liability for such $1,325,000 of
Losses); provided, further,
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however, that in connection with (A) any breach of the representations and
warranties set forth in Section 3.1(f), 3.1(g), 3.1(o)(ii), 3.1(q), 3.1(v),
3.1(aa), 3.1(bb) or 3.1(cc); (B) any Losses which, in addition to arising under
clause (i), are also covered by any one or more of clauses (ii), (iii), (iv),
(v) and (vi) above; or (C) any Losses arising from the fraud or willful
misconduct of Seller, Seller Sub or any of their respective affiliates, the
liability of Seller under this Section 7.1 shall be without regard or subject
to the dollar threshold specified in the foregoing proviso. In determining
whether any representation or warranty has been breached for purposes of clause
(i) above, any reference to or qualification by materiality in any such
representation or warranty shall be deemed to be deleted. Except for clause
(i) of this Section 7.1 with respect to breaches of Section 3.1(u)
(Environmental Matters), this Section 7.1 shall not apply to Seller's
indemnification for environmental matters, which is the subject of Section 7.2;
provided, however, that Seller shall not be entitled to make a claim for any
breach of Section 3.1(u) for any matter that is included in the scope of the
Project.
SECTION 7.2. Environmental Indemnification by Seller and
Seller Sub. (a) Seller and Seller Sub hereby jointly and severally agree to
indemnify Purchaser and its affiliates and their respective officers,
directors, employees, agents and representatives against, and agree to hold
them harmless, from any Losses based on, arising out of, or resulting from:
(i) any breach of any covenant or agreement of Seller or Seller Sub contained
in this Agreement or any document, exhibit, statement, certificate or Schedule
delivered in connection herewith and relating to environmental matters; (ii)
any breach of any representation, warranty, covenant or
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agreement of Seller or Seller Sub contained in the Escrow Agreement or any
document, exhibit, statement, certificate or schedule delivered in connection
therewith; or (iii) (1) any Environmental Laws, Environmental Permits or
Hazardous Substances, including violations of Environmental Laws, and (2) acts,
omissions, facts, circumstances, events or conditions occurring or existing in
or on the Business or the Acquired Assets, in each such case on or prior to the
Closing Date, including any such Losses based on, arising out of, or resulting
from, the Olney Site, the Project, any investigation, clean-up, remedial,
removal or corrective action, any governmental oversight, any personal injury
or property damage or any off-site disposal of Hazardous Substances. The
foregoing environmental indemnity shall be freely assignable by Purchaser;
provided that Purchaser's assignee agrees to perform all the obligations of
Purchaser under this Agreement and the Escrow Agreement.
(b) With respect to notices provided to Seller or Seller Sub
under this Article VII of claims covered pursuant to paragraph (a) above (each,
an "Indemnified Environmental Matter"), and subject to any other applicable
procedures hereunder, such notice shall summarize in reasonable detail the
nature of the indemnified matter, including the contractual provision, laws or
regulations involved or under which liability arises; provided, however, that
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent Seller or Seller Sub shall have been actually
prejudiced as a result of such failure.
(c) In the event that Purchaser notifies Seller or Seller Sub
of any Indemnified Environmental Matter that may be subject to an
indemnification obligation under this
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Section 7.2, Seller or Seller Sub shall, within 14 days from the date of
receipt of such notice, advise Purchaser in writing whether it intends to
acknowledge and assume the related indemnification obligation. Seller's or
Seller Sub's refusal to acknowledge and assume any such obligation shall not
alter or affect in any manner Purchaser's rights and remedies under this
Agreement. During such 14-day period, Purchaser shall take no action nor incur
any expense with respect to the related Indemnified Environmental Matter,
except to the extent that such action or expense is (i) legally required or
(ii) reasonably necessary, in Purchaser's judgment, under the circumstances to
minimize potential harm from the act, omission, fact, circumstance, event or
condition giving rise to such Indemnified Environmental Matter. In no event
shall Purchaser's refusal to act or incur expense during such 14-day period be
a basis for Seller or Seller Sub to deny, in whole or in part, an Indemnified
Environmental Matter. In the event Seller or Seller Sub fails to timely
acknowledge and assume any indemnification obligation pursuant to, and as
required by, this Section 7.2, Seller and Seller Sub shall have no rights under
Section 7.2(d) and Purchaser may take any and all reasonable action and incur
any reasonable expense with respect to the related Indemnified Environmental
Matter.
(d) Subject to the provisions of this Agreement and the
Escrow Agreement, as of the date on which Seller or Seller Sub acknowledges
and assumes, pursuant to Section 7.2(c), an indemnification obligation for an
Indemnified Environmental Matter, Seller and Seller Sub shall have the right
and obligation to actively and in good faith control, manage and direct all
negotiations, proceedings and other activities regarding the satisfaction or
discharge of the
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related Indemnified Environmental Matter, provided, that Seller or Seller Sub,
as appropriate, shall consult reasonably in advance with Purchaser and give
reasonable consideration to Purchaser's requests and other input with respect
to: (i) the scope and type of any investigatory, remedial or other action to be
taken or implemented in connection with any Indemnified Environmental Claim
(each, an "Environmental Action"); (ii) the selection of consultants,
contractors and other third parties with respect to any Environmental Action;
and (iii) the form and substance of any plan or report to be transmitted to any
Governmental Entity with respect to any Environmental Action (it being
understood that if, following such consultation and consideration, there is any
disagreement between the parties as to the matters set forth in the foregoing
clauses (i) and (ii), Seller or Seller Sub shall, notwithstanding Purchaser's
requests, be permitted to take such action as Seller or Seller Sub, in its
reasonable discretion, deems appropriate), and provided, further, that, subject
to the provisions of this Agreement and the Escrow Agreement, Seller and Seller
Sub shall provide to Purchaser timely and complete summaries of any
negotiations or proceedings with any Governmental Entity with respect to any
Environmental Action, together with all records and minutes of such
negotiations or proceedings and copies of all correspondence between Seller and
Seller Sub and such Governmental Entity with respect to such Environmental
Action; provided that copies of all such summaries, records and minutes (i)
prepared by Seller and Seller Sub, shall be provided to such Governmental
Entity concurrently with the provision of such summaries, records and minutes
to Purchaser and (ii) prepared by such Governmental Entity, shall be provided
to Seller and Seller Sub
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concurrently with the provision of such summaries, records and minutes to
Purchaser. Purchaser shall also be permitted to, and Seller and Seller Sub
shall cooperate in any of Purchaser's efforts to, discuss with Seller's
environmental consultant any meeting or conferences with such Governmental
Entity relating to such Environmental Action. Purchaser shall provide Seller
and Seller Sub, during normal business hours and upon prior request, reasonable
access, at Seller's and Seller Sub's sole risk, to any real or personal
property in connection with any Indemnified Environmental Matter. Seller and
Seller Sub shall retain, and upon Purchaser's request, provide to Purchaser and
its representatives, any records and information reasonably related to any
Indemnified Environmental Matter and provide to Purchaser upon request
explanations of any such records or information.
SECTION 7.3. Indemnification by Purchaser. Purchaser hereby
agrees to indemnify Seller, Seller Sub, their respective affiliates and their
respective officers, directors, employees, agents and representatives against,
and agrees to hold them harmless from, any Loss, as incurred (payable promptly
upon written request, with interest from the date which is 30 days from the
date of such request to the date of actual payment, at the Applicable Rate),
based on, arising out of, or resulting from: (i) any breach of any
representation or warranty of Purchaser contained in this Agreement or any
document, exhibit, statement, certificate or Schedule delivered in connection
herewith; (ii) any breach of any covenant or agreement of Purchaser contained
in this Agreement or any document, exhibit, statement, certificate or Schedule
delivered in connection herewith; or (iii) the Assumed Liabilities.
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SECTION 7.4. Losses Net of Insurance, Etc. The amount of any
Loss for which indemnification is provided under this Article VII shall be net
of any amounts actually recovered by the indemnified party under insurance
policies with respect to such Loss and shall be (i) increased to take account
of any net tax cost incurred by the indemnified party arising from the receipt
of indemnity payments hereunder (grossed up for such increase) and (ii) reduced
to take account of any net tax benefit realized by the indemnified party
arising from the incurrence or payment of any such loss, liability, claim,
damage or expense. An indemnified party shall be deemed to have realized a net
tax cost or a net tax benefit to the extent that, and at such time as, the
amount of taxes payable by such indemnified party is increased above or reduced
below, as the case may be, the amount of taxes that such indemnified party
would have been required to pay but for receipt or accrual of the indemnity
payment or the incurrence or payment of such loss.
SECTION 7.5. Termination of Indemnification. The obligations
to indemnify and hold harmless any party (x) pursuant to Sections 7.1(i) and
7.3(i) shall terminate when the applicable representation or warranty
terminates pursuant to Section 9.3; provided, however, that such obligations to
indemnify and hold harmless shall not terminate with respect to any item as to
which the Person to be indemnified shall have, before the expiration of the
applicable period, previously made a claim by delivering a notice pursuant to
Section 7.6 or 7.7 hereof to the party to be providing the indemnification; and
(y) pursuant to Section 7.2 and the other clauses of Sections 7.1 and 7.3,
shall not terminate; provided, further, however, that, if any item for which
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indemnification is available under Section 7.1(i) is also covered by Section
7.2 or any one or more of clauses (ii), (iii), (iv), (v) and (vi) of Section
7.1, then the fact that the indemnification obligations for such item under
Section 7.1(i) shall have terminated shall not limit or affect the
indemnification under any one or more of such other clauses.
SECTION 7.6. Procedure. (a) In order for a Person (the
"indemnified party") to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving a claim made by any
Person against the indemnified party (except for Indemnified Environmental
Matters, as to which the procedures specified in Section 7.2 shall be
applicable) (a "Third Party Claim"), such indemnified party must notify the
indemnifying party in writing of the Third Party Claim within 10 business days
after receipt by such indemnified party of written notice of the Third Party
Claim; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure. Thereafter, the indemnified party shall deliver to the indemnifying
party, within five business days' time after the indemnified party's receipt
thereof, copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim.
(b) If a Third Party Claim is made against an indemnified
party, the indemnifying party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party. Should the indemnifying party so elect to assume the
defense of a Third
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Party Claim, the indemnifying party will not be liable to the indemnified party
for any legal expenses subsequently incurred by the indemnified party in
connection with the defense thereof. If the indemnifying party assumes such
defense, the indemnified party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood that the
indemnifying party shall control such defense. The indemnifying party shall be
liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has not assumed the defense
thereof (other than during any period in which the indemnified party shall have
failed to give notice of the Third Party Claim as provided above). If the
indemnifying party chooses to defend or prosecute a Third Party Claim, all the
parties hereto shall cooperate in the defense or prosecution thereof. Such
cooperation shall include the retention and (upon the indemnifying party's
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the indemnifying party
chooses to defend or prosecute any Third Party Claim, the indemnified party
will agree to any settlement, compromise or discharge of such Third Party Claim
which the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle,
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compromise or discharge, such Third Party Claim without the indemnifying
party's prior written consent, which shall not be unreasonably withheld.
Notwithstanding the foregoing, the indemnifying party shall
not be entitled to assume the defense of any Third Party Claim (and shall be
liable for the reasonable fees and expenses of counsel incurred by the
indemnified party in defending such Third Party Claim) if the Third Party Claim
seeks an order, injunction or other equitable relief for other than money
damages against the indemnified party.
SECTION 7.7. Other Claims. In the event any indemnified
party should have a claim against any indemnifying party under Section 7.1, 7.2
or 7.3 that does not involve a Third Party Claim being asserted against or
sought to be collected from such indemnified party, the indemnified party shall
deliver notice of such claim with reasonable promptness to the indemnifying
party. The failure by any indemnified party so to notify the indemnifying
party shall not affect the indemnification provided hereunder, except to the
extent that the indemnifying party shall have been actually prejudiced as a
result of such failure. If the indemnifying party does not notify the
indemnified party within 10 business days following its receipt of such notice
that the indemnifying party disputes its liability to the indemnified party
under Section 7.1, 7.2 or 7.3, then such claim specified by the indemnified
party in such notice shall be conclusively deemed a liability of the
indemnifying party under Section 7.1, 7.2 or 7.3 and the indemnifying party
shall pay the amount of such liability to the indemnified party on demand or,
in the case of any notice in which the amount of the claim (or any portion
thereof)
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is estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined. If the indemnifying party has timely
disputed its liability with respect to such claim, as provided above, the
indemnifying party and the indemnified party 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.
ARTICLE VIII
Tax Matters
SECTION 8.1. Definitions. The term "Tax" or "Taxes" shall
mean all Federal, state, local, foreign and other governmental taxes,
assessments, duties, fees, levies or similar charges of any kind, including all
sales, payroll, employment and other withholding taxes, and including all
obligations under any tax sharing agreement, tax indemnity obligation or
similar written or unwritten agreement, arrangement or practice, and including
all interest, penalties and additions imposed with respect to such amounts.
The term "Transfer Taxes" shall mean all transfer,
documentary, sales, use, registration, value-added and other similar Taxes
(including all applicable real estate transfer Taxes and real property transfer
gains Taxes) and related amounts (including any penalties, interest and
additions to Tax) incurred in connection with this Agreement and the
transactions contemplated hereby.
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The term "Post-Closing Tax Period" shall mean all taxable
periods beginning after the Closing Date and the portion beginning on the day
after the Closing Date of any taxable period that includes (but does not begin
on) such day.
The term "Pre-Closing Tax Period" shall mean all taxable
periods ending on or before the Closing Date and the portion ending on the
Closing Date of any taxable period that includes (but does not end on) such
day.
SECTION 8.2. Taxable Periods. In the case of any taxable
period that includes but does not end on the Closing Date (a "Straddle Period"):
(i) real, personal and intangible property Taxes relating or
with respect to or arising out of the Acquired Assets ("Property
Taxes") for the Pre-Closing Tax Period shall be equal to the amount of
such Property Taxes for such entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days during the
Straddle Period that are in the Pre-Closing Tax Period and the
denominator of which is the number of days in the Straddle Period; and
(ii) all Taxes (other than Property Taxes) relating or with
respect to or arising out of the Acquired Assets for the Pre-Closing
Tax Period shall be computed based on an actual closing of the books
as if such taxable period ended as of the close of business on the
Closing Date.
SECTION 8.3. FIRPTA. Seller shall deliver to the Purchaser
at the Closing a duly executed certificate in the form specified in Treas. Reg.
Section 1.1445-2(b)(2)(iii).
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SECTION 8.4. Transfer Taxes. All liability for Transfer
Taxes shall be the responsibility of Seller and Seller Sub. Seller, Seller Sub
and Purchaser shall cooperate in timely making and filing all filings, tax
returns, resale certifications, reports and forms as may be required to comply
with the provisions of any Transfer Tax laws.
SECTION 8.5. Preparation of W-2 Forms, Etc. Each of Seller,
Seller Sub and Purchaser agrees that it will not apply the alternative
procedure contained in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753.
Accordingly, Seller and Seller Sub acknowledge that they will be responsible
for the furnishing of a Form W-2 to each employee of the Business who has been
employed by them, such Form W-2 to disclose all wages and other compensation
paid for the period ending on the Closing Date, and taxes withheld thereon.
Purchaser acknowledges that it will be responsible for the furnishing of a Form
W-2 to each Transferred Employee, such Form W-2 to disclose all wages and other
compensation paid for the period beginning on the day following the Closing
Date and ending on December 31, 1996, and taxes withheld thereon.
ARTICLE IX
General Provisions
SECTION 9.1. Notices. All notices and other communications
hereunder shall be in writing (including telecopy or similar writing) and shall
be sent, delivered or mailed, addressed or telecopied:
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(a) if to Purchaser, to
Brunswick Corporation
1 North Field Court
Lake Forest, Illinois 60045-4811
Attention of General Counsel
Facsimile: (847) 735-4050; and
(b) if to Seller or Seller Sub, to
Roadmaster Industries, Inc.
250 Spring Street, N.W.
Atlanta, Georgia 30303
Attention of Jeff L. Hinton
Facsimile: (404) 586-3319;
with copies to
David E. Schaper, Esq.
Roadmaster Corporation
Vice President and General Counsel
10275 West Higgins Road
Suite 540
Rosemont, Illinois 60018
Facsimile: (708) 635-0487; and
David J. Harris, Esq.
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, Georgia 30309
Facsimile: (404) 815-3509.
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by nationally recognized courier service or (iii) by telecopy,
receipt confirmed. Each such notice,
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request or communication shall be effective (A) if delivered by hand or by
nationally recognized courier service, when delivered at the address specified
in this Section 9.1 (or in accordance with the latest unrevoked direction from
such party) and (B) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified in this Section 9.1 (or in accordance with the
latest unrevoked direction from such party), and the confirmation is received
from the party receiving such notice.
SECTION 9.2. Interpretation. When a reference is made in
this Agreement to a Section, Schedule or Exhibit, such reference shall be to a
Section of, or a Schedule or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "included", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". All accounting terms not defined in this
Agreement shall have the meanings determined by generally accepted accounting
principles. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. The definitions contained
in this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders
of such term, and references to a Person are also to its permitted successors
and assigns. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is
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referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. Statements in this Agreement made to the
"knowledge" of a party shall mean the knowledge that the executive officers of
such party have, or should have after having made a good faith effort to
ascertain the fact in question pursuant to an inquiry directed to the officers,
directors, supervisors and advisors of such party as would be reasonably likely
to have information relating to the fact in question.
SECTION 9.3. Survival of Representations. The
representations and warranties in this Agreement (other than (A) the
representations and warranties contained in Sections 3.1(f), 3.1(g),
3.1(o)(ii), 3.1(q), 3.1(u), 3.1(v), 3.1(aa), 3.1(bb) and 3.1(cc) and (B) the
representations and warranties relating to tax matters and employee benefits
matters, including the representations and warranties set forth in Section
3.1(t)) and in any other document, exhibit, statement, certificate or Schedule
delivered in connection herewith (on the date hereof or at the Closing) shall
survive the Closing and shall terminate at the close of business on the second
anniversary of the Closing Date. The representations and warranties relating
to tax matters and employee benefits matters (including the representations and
warranties set forth in Section 3.1(t)) shall terminate 60 days after the
expiration of the applicable statute of limitations, to be tolled for any
period during which Seller or Seller Sub shall have consented to the tolling
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of the applicable statute of limitations. The representations and warranties
contained in Sections 3.1(f), 3.1(g), 3.1(o)(ii), 3.1(q), 3.1(v), 3.1(aa),
3.1(bb) and 3.1(cc) shall survive the Closing indefinitely. The
representations and warranties contained in Section 3.1(u) shall survive the
Closing and shall terminate at the close of business on the fifth anniversary
of the Closing. All statements made by or on behalf of or any party herein or
in the Schedules hereto, or in any other document, exhibit, statement or
certificate delivered hereunder, shall be representations and warranties of the
party on whose behalf it was made which was relied upon by the party to whom it
was made regardless of any investigation made by or on behalf of the party to
whom it was made, and shall not be affected in any respect by such
investigation or by any knowledge or claimed knowledge of the party to whom it
was made.
SECTION 9.4. Severability. If any provision of this
Agreement (or any portion hereof), or the application thereof to any Person,
place or circumstance, shall be held invalid, unenforceable or void by a court
of competent jurisdiction, then such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons, places or
circumstances.
SECTION 9.5. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered (including by telecopy) to the
other parties, it being understood that all parties need not sign the same
counterpart.
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SECTION 9.6. Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Confidentiality Agreement (i) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof,
including the letter agreement relating to the sale contemplated hereby dated
January 19, 1996, between Seller and Purchaser, and (ii) except as provided in
Article VII, are not intended to confer upon any Person other than the parties
hereto and their successors and permitted assigns any rights or remedies
hereunder.
SECTION 9.7. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts made and to be performed entirely in the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law.
SECTION 9.8. Publicity. From the date of this Agreement
through the Closing, neither Seller nor Seller Sub, on the one hand, nor
Purchaser, on the other hand, shall issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld, except that any party may make any
disclosure required to be made by it under applicable law (including Federal
securities laws) if it determines in good faith that it is appropriate to do so
and gives prior notice to the other party hereto, which notice shall include
the contents of such press release or other public announcement.
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SECTION 9.9. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties, except as
provided in Section 7.2 and except that Purchaser may assign any part of or all
its rights and obligations to one or more corporations or other entities all or
substantially all the capital stock or equity interests in which are owned by
Purchaser or any affiliate of Purchaser, in which event all the rights and
powers of Purchaser hereunder shall extend to and be enforceable by each such
corporation or other entity; provided, however, that any such assignment shall
not release Purchaser from its obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 9.10. Cumulative Remedies. All rights and remedies
of any party to this Agreement, the Lease or the Escrow Agreement are
cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies. Without limiting the foregoing, in no event shall
Purchaser's rights and remedies for any of the matters identified in Section
7.2(a)(i), (ii) or (iii) be limited to the funds held by the Escrow Agent under
the Escrow Agreement.
SECTION 9.11. Right of Setoff. If any amounts shall be due
from Seller or Seller Sub to Purchaser following the Closing Date, including
under Section 1.5, 1.6, 1.7, 7.1 or 7.2, Purchaser is hereby authorized,
subject to the proviso set forth below, any time and from
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time to time to set off any amounts due from Purchaser to Seller Sub under the
Lease against such amounts due from Seller or Seller Sub; provided, that, at
least 10 days prior to exercising its right of setoff pursuant to this Section
9.11, Purchaser shall deliver written notice to Seller or Seller Sub specifying
the basis and facts, in reasonable detail, on which such right is being
exercised and the amount of any such setoff.
SECTION 9.12. Purchase Agreement Controls. The provisions of
the Escrow Agreement and the Lease are subject to, and in no way intended to
limit or modify, the provisions of this Agreement. To the extent that any
provisions of the Escrow Agreement or the Lease are inconsistent, or in
conflict, with the provisions of this Agreement, then the provisions of this
Agreement shall take precedence.
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IN WITNESS WHEREOF, Seller and Seller Sub and Purchaser have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
ROADMASTER INDUSTRIES, INC.,
by
-----------------------------
Name:
Title:
ROADMASTER CORPORATION,
by
-----------------------------
Name:
Title:
BRUNSWICK CORPORATION,
by
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
Richard Foote, ext.119
Jeffrey Volk, ext. 102
Company Contact: Jeff Hinton
ROADMASTER INDUSTRIES, INC.
250 Spring Street, N.W.
Atlanta, GA 30303
1-618-393-2217
ROADMASTER INDUSTRIES ANNOUNCES AGREEMENT FOR SALE
OF BICYCLE DIVISION
- MAJOR RESTRUCTURING PHASE NOW COMPLETE -
ATLANTA, GEORGIA, July 19, 1996 -- Roadmaster Industries, Inc. (NYSE
Symbol: RDM) and Brunswick Corporation (NYSE: BC) today jointly announced an
agreement to sell Roadmaster's Bicycle Division to Brunswick Corporation. Also
included in the sale is the Flexible Flyer line of sleds and wagons. The total
assets will be purchased for $212 million in cash.
Under the terms of the agreement, Roadmaster will sell the Roadmaster
trademark to Brunswick and adopt a new corporate name at its next shareholders'
meeting. The remaining Roadmaster Sporting Goods Group will retain the
Flexible Flyer trademark for use in all other toy categories. It is
anticipated that this sale will be consummated in the third quarter of 1996
subject to routine regulatory approvals and waiver of certain provisions of the
Senior Subordinated Notes Indenture.
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Roadmaster indicated that net proceeds will be used to reduce
outstanding indebtedness and make additional funds available for reinvestment
in the Company's remaining toy and fitness-related businesses or for general
corporate purposes. Specifically, the sale will allow Roadmaster to make a
repurchase offer at par to holders of its 11.75% Senior Subordinated Notes due
2002 (the "Senior Notes") which, if consummated, would result in the reduction
of approximately $10.6 million in annual interest expense. The stronger
balance sheet, combined with an even greater focus on Roadmaster's remaining
core businesses, will provide a platform that should enable the Company to
greatly improve prospects for a near-term return to profitability.
As previously announced, the Company implemented a separate business
unit structure at the beginning of 1996 to improve product line results in its
core fitness, toy and bicycle categories.
Henry Fong, Roadmaster's Chief Executive Officer, noted "The sale of
Roadmaster's Bicycle Division will focus management on two significant
opportunities to build shareholder value. First, Roadmaster's remaining toy
business is expected to post its third consecutive year of double-digit growth
during 1996 under the direction of newly appointed President Tim Voss. We
expect this growth trend to continue, driven by strong underlying
demographics."
Mr. Voss was previously Senior Vice President of Marketing for
Roadmaster's Toy and Bicycle Divisions. The Company noted that its toy
division has substantially improved gross
<PAGE> 4
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margins and bottom-line profitability in 1996, due to the introduction of
several exciting new products and the easing of raw material prices for
cardboard, plastics and steel.
Secondly, under the new structure the DP/Vitamaster Fitness Division
will be under the direction of newly appointed President, Dennis Sabau. Mr.
Sabau was formerly Vice President of Operations for the division. Mr. Fong
continued, "With the complete restructuring of our DP/Vitamaster division,
Roadmaster should begin to show better gross margins and lower warranty costs
for the remainder of 1996. Also, Roadmaster is expanding its presence in
fitness products marketed directly to consumers. The Company is presently in
negotiations to expand celebrity endorsements with the addition of another
high-profits figure to complement the successful Body By Jake product
offerings. These measures are expected to restore the Fitness Division to
positive case flow contribution."
The Fitness Division also established a separate sales force under the
direction of Mike Whitley, Vice Present of Sales, Fitness, dedicated solely to
the fitness product lines in order to better capitalize on market opportunities
in this category.
The Company also noted that its Hutch Sports USA unit had signed an
exclusive arrangement to market its team sports products with Reebok
(NYSE:RBK). The Reebok agreement will allow Hutch to expand the Company's
presence in higher price point channels of distribution for sporting goods
products.
<PAGE> 5
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Roadmaster is a leading supplier of bicycles and fitness equipment and
major supplier of team sports equipment and toys primarily to mass merchants.
The brand names under which the Company's products are sold include Flexible
Flyer, DP, Vitamaster, Hutch, Reach and Forster.
