<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) September 16, 1997
-------------------------------
Global Motorsport Group, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 000-19540 94-1716138
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
16100 JACQUELINE COURT, MORGAN HILL, CA 95037
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 778-0500
----------------------------
CUSTOM CHROME, INC.
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 16, 1997, CSI Acquisition Sub, Inc., a Delaware corporation
and a wholly-owned subsidiary of Global Motorsport Group, Inc. (the "Company"),
a Delaware corporation, completed the purchase (the "Purchase") of substantially
all of the assets and the assumption of certain liabilities of Chrome
Specialties, Inc., a Texas corporation ("CSI"). The Purchase was made pursuant
to the terms and conditions of an Asset Acquisition Agreement dated August 8,
1997 ("Agreement"). Under the terms of the Agreement, the Company paid
approximately $36 million ("Purchase Price") for CSI's assets, subject to post-
closing adjustments under certain circumstances. The Purchase Price was
determined through an arms-length negotiation between the parties. The Company
funded the Purchase through a bank financing with Bank of America National Trust
and Savings Association.
CSI is a distributor of aftermarket parts and accessories for Harley-
Davidson motorcycles. CSI's principal operations are located in Fort Forth,
Texas. Following the Purchase, the Company will operate CSI's Texas operations
as a separate subsidiary of the Company under the name "Chrome Specialties,
Inc." The Company has offered employment to all CSI employees and has assumed
CSI's lease for its facilities in Fort Worth, Texas.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma consolidated financial
information and exhibits are filed at the end of this report and are part of
this report.
(a) Financial statements of business acquired.
(b) Pro forma consolidated financial information.
(c) Exhibits.
2.1 Asset Acquisition Agreement, dated as of
August 8, 1997, among Global Motorsport
Group, Inc., CSI Acquisition Sub., Inc.
and the Shareholders of Chrome Specialties,
Inc., as amended.
24.1 Consent of Ernst & Young LLP
<PAGE>
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.
Date: September 23, 1997 GLOBAL MOTORSPORT GROUP, INC.
/s/ James J. Kelly, Jr.
-------------------------------------------
James J. Kelly, Jr.
Executive Vice President, Finance and
Chief Financial Officer
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
The Stockholders
Chrome Specialties, Inc.
We have audited the accompanying balance sheet of Chrome Specialties, Inc. (an S
corporation) as of September 30, 1996, and the related statements of income and
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chrome Specialties, Inc. at
September 30, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Dallas, Texas
December 13, 1996
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Balance Sheet
September 30, 1996
ASSETS
Current assets:
Cash $ 1,635,336
Accounts receivable, net of allowance for
doubtful accounts of $50,000 2,063,288
Inventory 9,450,955
Prepaid expenses 220,683
-----------
Total current assets 13,370,262
Property and equipment, at cost:
Furniture and fixtures $337,644
Warehouse machinery & equipment 412,673
Computer software 335,928
Computer equipment 259,946
Automobiles 82,001
Leasehold improvements 131,992
Designs & patents 11,162 1,571,346
--------
Less accumulated depreciation and amortization (706,332)
-----------
Net property and equipment 865,014
Other assets 24,296
-----------
Total assets $14,259,572
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,300,000
Accounts payable 882,053
Accrued liabilities 316,300
-----------
Total current liabilities 2,498,353
Long-term debt 8,960,000
Commitments and contingencies
Stockholders' equity:
Common stock, no par value,
999 shares authorized and issued 1,500
Retained earnings 2,800,219
-----------
2,801,719
Less cost of 333 shares of common stock
held in treasury (500)
-----------
Total stockholders' equity 2,801,219
-----------
Total liabilities and stockholders' equity $14,259,572
===========
See accompanying notes.
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Statement of Income and Retained Earnings
Year ended September 30, 1996
Sales $ 35,811,390
Cost of sales (21,121,165)
------------
Gross profit 14,690,225
Selling, general and administrative expenses:
Officers' salaries $3,943,750
Other salaries and payroll taxes 2,821,523
Contract labor 50,759
Freight-out 2,486,622
Telephone and utilities 452,741
Rent and related property taxes 539,014
Advertising, promotion and postage 483,529
Office and warehouse supplies 110,628
Packaging and shipping 492,616
Catalogs and printing 569,645
Travel 109,082
Depreciation and amortization 271,958
Insurance 219,552
Repairs and maintenance 28,488
Professional services 324,347
Other 579,933 13,484,187
---------- -----------
Operating income 1,206,038
Other income (expense):
Interest income 30,135
Interest expense, including approximately
$398,000 to stockholders (896,179)
Other income 19,814 (846,230)
---------- -----------
Net income 359,808
Retained earnings at beginning of year 2,440,411
-----------
Retained earnings at end of year $ 2,800,219
============
See accompanying notes.
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Statement of Cash Flows
Year ended September 30, 1996
OPERATING ACTIVITIES
Net income $ 359,808
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization $ 271,958
Gain on sale of property and equipment (4,021)
Changes in operating assets and liabilities:
Increase in accounts receivable (342,093)
Increase in inventory (1,042,989)
Increase in prepaids (83,614)
Decrease in accounts payable (346,011)
Increase in accrued liabilities 24,447 (1,522,323)
---------- -----------
Net cash used in operating activities (1,162,515)
INVESTING ACTIVITIES
Additions to property and equipment (440,330)
Proceeds from sale of property and equipment 120,826
----------
Net cash used in investing activities (319,504)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 12,150,000
Payments on long-term debt (8,145,000)
Payments on notes payable to stockholders (1,150,000)
----------
Net cash provided by financing activities 2,855,000
-----------
Net increase in cash 1,372,981
Cash at beginning of year 262,355
-----------
Cash at end of year $ 1,635,336
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 896,000
===========
See accompanying notes.
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Notes to Financial Statements
September 30, 1996
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Chrome Specialties, Inc. (the Company) distributes parts and related products
primarily for Harley Davidson motorcycles throughout the United States, Canada,
Europe, Australia and the Far East. The Company was formed in 1984 and is
located in Fort Worth, Texas.
The Company has elected, for Federal income tax purposes, to be taxed under
subchapter S of the Internal Revenue Code. Under that subchapter the Company is
not taxed on net earnings. Instead, the stockholders report their respective
shares of the Company's net taxable income or loss on their individual Federal
income tax returns.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
INVENTORY
Inventory is stated at the lower of cost or market. Cost is determined using the
average cost method. Inventory consists principally of finished goods
merchandise.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and betterments are
capitalized. Maintenance and repairs are charged to operations as incurred.
Provisions for depreciation and amortization of property and equipment are
computed using the declining balance method over estimated useful lives of 3 to
7 years, with the exception of leasehold improvements and designs and patents
which are amortized using the straight line method over useful lives of 39.5
years and 15 years, respectively.
REVENUE RECOGNITION AND CREDIT RISK
Sales revenue is generally recognized at the time of shipment. Credit is
extended to customers based upon evaluation of the customer's financial
condition and, generally, collateral is not required. The Company maintains an
allowance for doubtful accounts based upon expected collectibility. Losses from
bad debts have historically been within Management's expectations.
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Notes to Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ADVERTISING
The Company expenses the costs of advertising as incurred, except for certain
capitalized catalog costs, which are amortized over the expected period of
future benefits. The total capitalized catalog costs at September 30, 1996, were
approximately $122,000, and advertising expense for the year was approximately
$1,053,000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
2. LONG-TERM DEBT
Long-term debt at September 30, 1996 consists of:
Borrowings from a bank under a $6,500,000 five year
term note bearing interest, as the Company may elect,
at the bank's base rate or at LIBOR plus 1.75%. At
September 30, 1996, the bank's base rate was 8.25% and
LIBOR was 7.125%. Payments of principal of $325,000
plus accrued interest are due quarterly and the loan
matures July 1, 2001. $ 6,500,000
Various notes payable to stockholders bearing interest
at rates ranging from 8% to 10%, with interest payable
quarterly, due in varying amounts through December 29,
2000, secured by substantially all the remaining
assets of the Company. 3,760,000
-----------
10,260,000
Less current portion of long-term debt 1,300,000
-----------
$ 8,960,000
===========
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Notes to Financial Statements (continued)
2. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows for the years ending September 30:
1998 $1,910,000
1999 2,950,000
2000 2,300,000
2001 1,800,000
----------
$8,960,000
==========
Under the loan agreement providing for the $6,500,000 term loan, the Company has
additional borrowing facilities as follows:
A revolving line of credit of $5,000,000, up to $750,000 of which may be
utilized for letters of credit, with interest at LIBOR plus 1.50% or the
bank's base rate (as the Company may elect), subject to collateral
availability. Interest is payable monthly with the outstanding principal
balance payable on the maturity date of July 1, 1998. There were no
borrowings under this line of credit at September 30, 1996. However, a
letter of credit for $184,000 was outstanding at September 30, 1996.
A $1,000,000 line of credit (limited to 75% of Extended Receivables, as
defined), which bears interest at LIBOR plus 1.50% or the bank's base rate
(as the Company may elect). Interest is payable monthly with the
outstanding principal balance payable on the maturity date of July 1, 1997.
There were no borrowings under this line of credit at September 30, 1996.
Amounts available under the loan agreement are limited in the aggregate to 80%
of Qualified Accounts Receivable, as defined, plus 55% to 65% of Eligible
Inventory, as defined. Borrowings under the loan agreement are collateralized by
all inventory, equipment, accounts receivable and substantially all other assets
of the Company. The loan agreement contains various restrictive covenants
including, but not limited to, net worth requirements, liquidity ratios and
limitations on capital expenditures and additional indebtedness.
Based on the floating nature of the interest rates provided in the long-term
debt facilities and the interest rates provided in the shareholder loan
agreements, management of the Company believes the fair value of these financial
instruments approximates their carrying value.
<PAGE>
Chrome Specialties, Inc.
(An S Corporation)
Notes to Financial Statements (continued)
3. COMMITMENTS AND CONTINGENCIES
The Company leases certain office and warehouse facilities and office equipment
under operating leases. Total rent expense of approximately $401,000 for these
leases was recognized for the year ended September 30, 1996.
Future minimum lease payments are as follows for the years ending September 30:
1997 $321,052
1998 333,349
1999 237,249
--------
$891,650
========
The Company is from time-to-time involved in litigation in the ordinary course
of business. Management believes the outcome of all pending matters at September
30, 1996, will not have a material adverse effect on the Company's financial
position or results of operation.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
Pro Forma Consolidated Financial Information
--------------------------------------------
The following presents unaudited pro forma consolidated statements of operations
for Global Motorsport Group, Inc. and Subsidiaries (Global Motorsport) for the
year ended January 31, 1997 and the six months ended July 31, 1997, and includes
the unaudited statements of operations of Chrome Specialties, Inc. for the 12
month period ended January 31, 1997 and the six month period ended July 31,
1997, and gives effect to the Chrome Specialties, Inc. Acquisition as if it had
occurred as of February 1, 1996.
The following unaudited pro forma consolidated balance sheet gives effect to the
transaction described above, as if all of such events occurred on July 31, 1997.
The following unaudited pro forma consolidated financial data does not purport
to represent what Global Motorsport's results of operations or financial
condition would have been had such transactions in fact occurred at the
beginning of the period or to project Global Motorsport's results of operations
or financial position in or for any future period. The unaudited pro forma
consolidated financial data should be read in conjunction with the Global
Motorsport consolidated financial statements and accompanying notes thereto
contained in their Annual Report filed on Form 10-K.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
Pro Forma Consolidated Statement of Operations
For the year ended January 31, 1997
(In thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Global Motor-
Sport, Inc. Chrome Pro Forma Pro Forma
Actual Specialties, Inc.(1) Adjustments As Adjusted
-------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales, net $108,557 $35,557 $(1,736)(2) $142,378
Cost of Sales 64,834 21,243 -- 86,077
-------- ------- ------- --------
Gross profit 43,723 14,314 (1,736) 56,301
-------- ------- ------- --------
Operating expenses: (1,736)(2)
Selling, general & administrative 27,039 13,249 (2,476)(3) 36,076
Product Development 1,723 -- -- 1,723
-------- ------- ------- --------
28,762 13,249 (4,212) 37,799
-------- ------- ------- --------
Operating Income 14,961 1,065 2,476 18,502
Interest expense 1,915 831 1,866(4) 4,612
-------- ------- ------- --------
Income before income taxes 13,046 234 610 13,890
Income Taxes 5,174 -- 338(5) 5,512
-------- ------- ------- --------
Net income $ 7,872 $ 234 $ 272 $ 8,378
======== ======= ======= ========
Net income per share $ 1.48 $ 1.57
======== ========
Weighted average shares outstanding 5,327 5,327
======== ========
</TABLE>
- -------------------------
See accompanying footnotes to Unaudited Pro Forma Consolidated Statement of
Operations.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
For the year ended January 31, 1997
Note 1 Reflects the historical data for the period from February 1, 1996 to
January 31, 1997 for Chrome Specialties, Inc., which is not included
in Global Motorsport Group, Inc.'s operations. Prior to the
acquisition, Chrome Specialties, Inc. filed income tax returns under
subchapter S of the U.S. Federal Income Tax Code. Therefore, all
taxable income of Chrome Specialties, Inc. passed through to its
shareholders.
Note 2 Reflects reclassification of amounts recorded as sales by Chrome
Specialties, Inc. which Global Motorsport historically presents as
recovered expenses.
Note 3 Reflects adjustment to (i) non-recurring salaries and bonuses paid to
previous owners (ii) amortization for the excess of purchase price
over the net tangible assets acquired (goodwill) over 25 years and
other intangible assets over 5 to 7 years using straight line method
as follows:
(in thousands)
Salary and bonus adjustments $(3,810)
Amortization 1,334
-------
$(2,476)
=======
Note 4 Reflects adjustment for interest expenses incurred for net borrowings
associated with the acquisition.
Note 5 Reflects an adjustment to income tax expense on a pro forma basis at
the effective tax rate for Global Motorsport Group, Inc., for the year
ended January 31, 1997.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 1997
(In thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Global Motor-
Sport, Inc. Chrome Pro Forma Pro Forma
Actual Specialties, Inc.(1) Adjustments As Adjusted
------- ------------------ ------------ -----------
<S> <C> <C> <C> <C>
Sales, net $64,004 $20,746 $ (738)(2) $84,012
Cost of Sales 39,836 12,410 -- 52,246
------- ------- ------- -------
Gross profit 24,168 8,336 (738) 31,766
------- ------- ------- -------
Operating expenses: (738)(2)
Selling, general & administrative 14,509 5,626 280 (3) 19,677
Product Development 711 - - 711
------- ------- ------- -------
15,220 5,626 (458) 20,388
------- ------- ------- -------
Operating Income 8,948 2,710 (280) 11,378
Interest expense 872 400 885 (4) 2,157
------- ------- ------- -------
Income before income taxes 8,076 2,310 (1,165) 9,221
Income Taxes 3,209 -- 458 (5) 3,667
------- ------- ------- -------
Net income $ 4,867 $ 2,310 $(1,623) $ 5,554
======= ======= ======= =======
Net income per share $0.93 $ 1.06
======= =======
Weighted average shares outstanding 5,224 5,224
======= =======
</TABLE>
- -----------------------------
See accompanying footnotes to Unaudited Pro Forma Consolidated Statement of
Operations.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
For six months ended July 31, 1997
NOTE 1 Reflects the historical data for the period from February 1, 1997 to July
31, 1997 for Chrome Specialties, inc., which is not included in Global
Motorsport Group, Inc.'s operations. Prior to the acquisition, Chrome
Specialties, Inc. filed income tax returns under subchapter S of the
U.S. Federal Income Tax Code. Therefore, all taxable income of Chrome
Specialties, Inc. passed through to its shareholders.
NOTE 2 Reflects reclassification of amounts recorded as sales by Chrome
Specialties, Inc. which Global Motorsport historically presents as
recovered expenses.
NOTE 3 Reflects adjustment to (i) non-recurring salaries and bonuses paid to
previous owners (ii) amortization for the excess of purchase price over
the net tangible assets acquired (goodwill) over 25 years and other
intangible assets over 5 to 7 years using straight line method as
follows:
(in thousands)
Salary and bonus adjustments $(387)
Amortization 667
------
$ 280
======
NOTE 4 Reflects adjustment for interest expense incurred for net borrowings
associated with the acquisition.
NOTE 5 Reflects an adjustment to income tax expense on a pro forma basis at the
effective tax rate for Global Motorsport Group, Inc., for the six months
ended July 31, 1997.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
Pro Forma Consolidated Balance Sheet
July 31, 1997
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Global Motor-
Sport, Inc. Chrome Pro Forma Pro Forma
Actual Specialties, Inc.(1) Adjustments As Adjusted
------------- ------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,168 $ (387) $ 387 (2) $ 3,168
Accounts receivable, net 10,539 3,198 (100)(3) 13,637
Merchandise inventories 46,330 10,219 (250)(3) 56,299
Deferred income taxes 1,334 1,334
Prepaid income taxes 2,378 2,378
Deposits and prepaid expenses 2,254 247 2,501
------- ------- ------- --------
66,003 13,277 37 79,317
Property and equipment, net 17,435 765 18,200
Other assets 8,103 47 28,076 (4) 36,226
------- ------- ------- --------
$91,541 $14,089 $28,113 $133,743
======= ======= ======= ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $(2,025) (5)
and capital lease obligations $ 3,297 $ 1,304 (1,304) (2) $ 1,272
Bank borrowings 3,899 3,899
Accounts payable 3,120 603 3,723
Accrued expenses and other liabilities 3,035 479 2,620 (6) 6,134
------- ------- ------- --------
13,351 2,386 (709) 15,028
40,525 (5)
Long-term debt and capital lease obligations 16,011 8,306 (8,306) (2) 56,536
Deferred income taxes 817 817
Shareholders' equity:
Common stock 5 1 (1) (2) 5
Additional paid in capital 28,412 28,412
Retained Earnings 32,945 3,396 (3,396) (2) 32,945
------- ------- ------- --------
61,362 3,397 (3,397) 61,362
Commitment and contingencies ------- ------- ------- --------
$91,541 $14,089 $28,113 $133,743
======= ======= ======= ========
</TABLE>
- -----------------------------
See accompanying footnotes to Unaudited Pro Forma Consolidated Balance Sheet.
<PAGE>
GLOBAL MOTORSPORT GROUP, INC.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
July 31, 1997
NOTE 1 Reflects the unaudited historical cost balance sheet of Chrome
Specialties, Inc. at July 31, 1997.
NOTE 2 Reflects a reduction for assets and liabilities not included in the
acquisition.
NOTE 3 Reflects an adjustment based on an evaluation of the fair values of
assets acquired.
NOTE 4 Reflects adjustments to reflect the acquisition under the purchase method
of accounting, as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase price $38,256
Other direct acquisition costs 2,500
-------
40,756
Less fair value of net assets
acquired 13,780
-------
26,976
Accruals 1,100
-------
Cost in excess of fair value $28,076
=======
Allocation of excess cost:
Goodwill $26,576
Non-compete agreements 500
Deferred debt issue costs 1,000
-------
$28,076
=======
</TABLE>
NOTE 5 Reflects the net effect of borrowings incurred to finance the acquisition
and classification of current portions.
NOTE 6 Reflects the accrual of acquisition costs incurred and not yet paid.
<PAGE>
EXHIBIT 2.1
ASSET ACQUISITION AGREEMENT
AMONG
CUSTOM CHROME, INC.,
CSI ACQUISITION CORPORATION,
CHROME SPECIALTIES, INC.
AND
THE SHAREHOLDERS OF CHROME SPECIALTIES, INC.
DATED AS OF AUGUST 8, 1997
<PAGE>
*INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
A FORM OF BILL OF SALE AND ASSIGNMENT
B FORM OF ASSUMPTION AGREEMENT
C FORM OF CONSULTING AGREEMENT
D FORM OF ESCROW AGREEMENT
E FORM OF LEGAL OPINION OF KELLY, HART & HALLMAN
*Exhibits have been ommited in accordance with Item 601(b)(2) under Regulation
S-K. The Registrant will furnish supplementally a copy of any of the above
ommited exhibits upon request of the Securities and Exchange Commission.
<PAGE>
*INDEX OF SCHEDULES
COMPANY SCHEDULE DESCRIPTION
- ---------------- -----------
1.1 Purchased Assets
1.2 Assumed Liabilities
1.4 Assigned Leases and Contracts
2.1 Jurisdictions
2.3 Affiliated Companies
2.4 No Conflicts
2.5 Company Financial Statements
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Matters
2.9 Restriction in Business
2.10(a) Real Property Owned and Leased
2.10(b) Other Tangible Property
2.10(c) Leased Personal Properties
2.10(d) Other Property Matters
2.11 Company Intellectual Property
2.12 Agreements, Contracts and Commitments
2.13 Governmental Authorizations
2.14 Litigation
2.15 Inventory
2.16 Accounts Receivable
2.18 Environmental Matters
2.19 Company Transaction Costs
2.20 Employee Compensation
2.21 Employee Benefit Plans
2.22 Insurance
2.25 Warranties and Indemnity Claims
2.27 Interested Party Transactions
5.12 Allocation of Adjusted Purchase Price
5.13 Family Business
*Schedules have been ommited in accordance with Item 601(b)(2) under Regulation
S-K. The Registrant will furnish supplementally a copy of any of the above
ommited schedules upon request of the Securities and Exchange Commission.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I THE PURCHASE AND SALE.......................................... 1
1.1 Transfer of Assets............................................. 1
1.2 Assumption of Certain Liabilities.............................. 1
1.3 Purchase Price................................................. 2
1.4 The Closing.................................................... 2
1.5 Deliveries by the Company and the Shareholders................. 2
1.6 Deliveries by the Buyer........................................ 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS................................... 4
2.1 Organization of the Company.................................... 4
2.2 Company Capital Structure...................................... 5
2.3 Subsidiaries................................................... 5
2.4 No Conflicts................................................... 5
2.5 Company Financial Statements................................... 6
2.6 No Undisclosed Liabilities..................................... 6
2.7 No Changes..................................................... 6
2.8 Tax and Other Returns and Reports.............................. 8
2.9 Restrictions on Business Activities............................ 9
2.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment......................................... 10
2.11 Intellectual Property.......................................... 10
2.12 Agreements, Contracts and Commitments.......................... 11
2.13 Governmental Authorization..................................... 12
2.14 Litigation..................................................... 12
2.15 Inventory...................................................... 13
2.16 Accounts Receivable............................................ 13
2.17 No Defaults.................................................... 13
2.18 Environmental Matters.......................................... 13
2.19 Brokers' and Finders' Fees; Third Party Expenses............... 14
2.20 Compensation; Employment Agreements............................ 14
2.21 Employee Benefit Plans; Employment Matters..................... 15
2.22 Insurance...................................................... 16
2.23 Compliance with Laws........................................... 16
2.24 Complete Copies of Materials................................... 16
2.25 Warranties; Indemnities; Product Liability..................... 16
2.26 Customer and Vender Lists...................................... 17
<PAGE>
TABLE OF CONTENTS
(continued)
2.27 Interested Party Transactions................................... 17
2.28 Individual Representations and Warranties....................... 17
2.29 Representations Complete........................................ 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE BUYER........................................ 18
3.1 Organization, Standing and Power................................ 18
3.2 Authority....................................................... 18
ARTICLE IV CONDUCT PRIOR TO THE CLOSING.................................... 19
4.1 Conduct of Business of the Company.............................. 19
4.2 No Solicitation................................................. 21
4.3 S Status........................................................ 21
ARTICLE V ADDITIONAL AGREEMENTS........................................... 21
5.1 Access to Information........................................... 21
5.2 Transitional Cooperation........................................ 22
5.3 Confidentiality................................................. 22
5.4 Expenses........................................................ 22
5.5 Public Disclosure............................................... 22
5.6 Consents........................................................ 23
5.7 Insurance....................................................... 23
5.8 Reasonable Best Efforts......................................... 23
5.9 Notification of Certain Matters................................. 23
5.10 Additional Documents and Further Assurances..................... 23
5.11 Adjustment to Estimated Purchase Price.......................... 24
5.12 Tax Matters..................................................... 25
5.13 Noncompetition.................................................. 25
5.14 HSR Act Filings................................................. 27
5.15 Financial Statements............................................ 27
5.16 Employment by the Buyer of Company Employees.................... 27
5.17 Discharge of Debts.............................................. 27
5.18 Use of Name..................................................... 28
5.19 Bulk Sales Laws................................................. 28
<PAGE>
TABLE OF CONTENTS
(continued)
ARTICLE VI CONDITIONS TO THE ACQUISITION.................................. 28
6.1 Conditions to Obligations of Each Party to Effect the
Acquisition..................................................... 28
6.2 Additional Conditions to Obligations of Company and the
Shareholders.................................................... 28
6.3 Additional Conditions to the Obligations of the Parent
and the Buyer................................................... 29
ARTICLE VII REMEDIES FOR BREACHES OF THE AGREEMENT........................ 31
7.1 Survival of Representations and Warranties; Liability Threshold. 31
7.2 Indemnification................................................. 32
7.3 Matters Involving Third Parties................................. 32
7.4 Procedure for Asserting Claims.................................. 33
7.5 Resolution of Conflicts: Arbitration............................ 33
7.6 Escrow.......................................................... 33
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................ 34
8.1 Termination..................................................... 34
8.2 Effect of Termination........................................... 35
8.3 Amendment....................................................... 35
8.4 Extension; Waiver............................................... 35
ARTICLE IX GENERAL PROVISIONS............................................. 35
9.1 Notices......................................................... 35
9.2 Interpretation.................................................. 37
9.3 Counterparts.................................................... 37
9.4 Entire Agreement; Assignment.................................... 37
9.5 Severability.................................................... 37
9.6 Other Remedies.................................................. 37
9.7 Governing Law................................................... 37
9.8 Rules of Construction........................................... 37
9.9 Certain Definitions............................................. 38
<PAGE>
ASSET ACQUISITION AGREEMENT
This ASSET ACQUISITION AGREEMENT (the "AGREEMENT") is made and entered into
as of August 8, 1997 among Custom Chrome, Inc., a Delaware corporation (the
"PARENT"), CSI Acquisition Corporation, a Delaware corporation (the "BUYER"),
the Chrome Specialties, Inc., a Texas corporation (the "COMPANY"), and the
holders of all outstanding capital stock of the Company (the "SHAREHOLDERS").
RECITAL
The Parent and the Buyer desires the Buyer to acquire, and the Company
desires to sell to the Buyer, the Purchased Assets (as defined below) upon the
terms and conditions set forth in this Agreement (the "ACQUISITION").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1 Transfer of Assets. At the Closing (as defined in Section 1.3 hereof)
------------------
and subject to and upon the terms and conditions of this Agreement, the Company
shall sell, convey, assign, transfer and deliver to the Buyer, and the Buyer
shall purchase and acquire from the Company, good and valid title to the assets
of the Company set forth on Schedule 1.1 hereto (the "PURCHASED ASSETS"), free
and clear of any mortgage, pledge, security interest, conditional sale
agreement, encumbrance, lien or charge of any kind or claims of any third party
(a "LIEN"), except for any inchoate Lien that arises by operation of law for
taxes that are not yet due and payable. The Buyer shall not purchase and
acquire, and the Company shall retain, all assets of the Company either not
included in the Purchased Assets or not listed on Schedule 1.1 (the "EXCLUDED
ASSETS").
1.2 Assumption of Certain Liabilities. At the Closing and subject to and
---------------------------------
upon the terms and conditions of this Agreement, the Buyer shall assume and
agree thereafter to pay, perform and discharge only the obligations and
liabilities of the Company, as such exist on the Closing Date (as defined in
Section 1.4 below), as set forth on Schedule 1.2 (the "ASSUMED LIABILITIES").
Other than the Assumed Liabilities, the Buyer shall not assume or have any
responsibility for any liability, obligation or
<PAGE>
commitment of any nature of the Company, whether now or hereafter existing, and
the Company shall retain and be responsible for all such liabilities,
obligations or commitments. Specifically, but without limiting the foregoing,
the Buyer shall not assume the liabilities or obligations associated with the
following:
(a) the outstanding indebtedness of the Company payable to the
Shareholders;
(b) the outstanding indebtedness of the Company payable to Bank One,
Texas N.A.; and
(c) the Company Transaction Costs (as defined in Section 2.19).
1.3 Purchase Price. In consideration for the sale and transfer of the
--------------
Purchased Assets, the Buyer shall pay to the Company a cash payment of
$36,000,000 (the "ESTIMATED CASH PAYMENT") and shall assume the Assumed
Liabilities. The total of the Estimated Cash Payment and the Assumed
Liabilities is hereinafter referred to as the "ESTIMATED PURCHASE PRICE," which
Estimated Purchase Price shall be subject to adjustment pursuant to Section 5.11
below. The Estimated Purchase Price as so adjusted shall be referred to as the
"ADJUSTED PURCHASE PRICE."
1.4 The Closing. Unless this Agreement is earlier terminated pursuant to
-----------
Section 8.1, the closing of the Acquisition (the "CLOSING") will take place as
promptly as practicable, but no later than two (2) business days, following
satisfaction or waiver of the conditions set forth in Article VI hereof, at the
offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California, unless another place or time is agreed to in writing by the Buyer
and the Company. The date upon which the Closing actually occurs is herein
referred to as the "CLOSING DATE."
1.5 Deliveries by the Company and the Shareholders. At the Closing, the
----------------------------------------------
Company and the Shareholders shall deliver, or cause to be delivered the
following:
(a) a copy of the Company's Articles of Incorporation, as amended
through the Closing Date, including the amendment necessary to change the
corporate name pursuant to Section 6.3(h), certified by the Secretary of State
for the State of Texas;
(b) a certificate of the Secretary of State for the State of Texas to
the effect that the Company is legally existing and in good standing under the
laws of such state;
(c) a certificate of the appropriate governmental authorities of the
State of Texas to the effect that the Company has filed all franchise tax
returns required to be filed and has no outstanding franchise tax liability (so-
called "tax good standing" certificates);
<PAGE>
(d) a bill of sale and assignment transferring and assigning to the
Buyer all of the Company's right, title and interest in and to the Purchased
Assets, substantially in the form attached hereto as EXHIBIT A (together with
original consents of the other parties to any contracts or leases whenever not
assignable without consent);
(e) any patent and trademark assignments in recordable form and
sufficient to record the assignment of the patents and trademarks transferred to
the Buyer hereunder;
(f) the compliance certificate executed by the Company's President
required by Section 6.3(b);
(g) a certificate of the Secretary of the Company attesting to the
incumbency and signatures of the appropriate officers of the Company and
certifying as to the minutes of the corporate proceedings of the Company with
respect to the transactions contemplated hereby is a true, correct and complete
copy and that such minutes have not been rescinded, superseded or otherwise
modified since the date thereof;
(h) the Customer Lists and Vendor Lists (as defined in Section 2.26).
(i) an executed Consulting Agreement (as defined in 6.2(c)) between
each Shareholder and the Buyer required by Section 6.3(c);
(j) an executed Escrow Agreement (as defined in Section 6.2(d));
(k) the opinion of counsel for the Company required by Section 6.3(e);
and
(l) such Uniform Commercial Code termination statements, releases,
reconveyance and other documents and instruments which may be reasonably
necessary to effect the transactions contemplated hereby or which may reasonably
be requested by the Buyer.
1.6 Deliveries by the Buyer. At the Closing, the Buyer shall deliver, or
-----------------------
cause to be delivered:
(a) a wire transfer in immediately available funds to such accounts as
the Company shall indicate to the Buyer in an aggregate amount equal to the
Estimated Cash Payment less: (i) the amount of cash to be deposited to the
Escrow (as defined in Section 7.6(a)); and (ii) the amount payable by the
Company to Bank One Texas N.A. to satisfy the entire outstanding principal
balance together with any accrued interest, fees and charges as of the Closing
Date, which aggregate amount will be paid by Buyer on the Company's behalf on
the Closing Date by wire transfer to Bank One Texas N.A. of immediately
available funds;
<PAGE>
(b) an assumption agreement covering all of the Assumed Liabilities,
substantially in the form attached hereto as EXHIBIT B;
(c) the compliance certificate executed by the appropriate officer of
each of the Parent and the Buyer required by Section 6.2(b);
(d) an executed Consulting Agreement between each Shareholder and the
Company; and
(e) the executed Escrow Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
The Company and each Shareholder, jointly and severally, represents and
warrants to the Parent and the Buyer, subject to such exceptions as are
specifically disclosed in the disclosure schedule supplied by the Company and
the Shareholders to the Parent and the Buyer (the "DISCLOSURE SCHEDULES") and
dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Texas. The Company has the corporate power to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), financial condition or results
of operations of the Company (hereinafter referred to as a "MATERIAL ADVERSE
EFFECT"). The Company has delivered a true and correct copy of its Articles of
Incorporation and Bylaws, each as amended to date, to the Buyer. The Company
has previously made available to the Buyer true, correct and complete copies of
its corporate minute books which include copies of all minutes of the Company's
Board of Directors' and Shareholders' meetings. The minute books of the Company
made available to counsel for the Buyer are the only minute books of the Company
and contain a summary that is accurate in all material respects of all meetings
of directors (or committees thereof) and stockholders or actions by written
consent since the time of incorporation of the Company. On Schedule 2.1, the
Company has listed each jurisdiction where (i) it owns or leases any real
property, (ii) maintains or operates any personal property, and (iii) any
employee of the Company regularly performs his or her duties as an employee of
the Company.
<PAGE>
2.2 Company Capital Structure.
-------------------------
(a) The authorized capital stock of the Company consists of 666 shares
of Common Stock, 666 shares of which are issued and outstanding (the "COMMON
STOCK"). All of the Common Stock is owned of record and beneficially by the
Shareholders free and clear of all Liens. All of the issued and outstanding
shares of Common Stock were offered, issued, sold and delivered by the Company
in compliance with all applicable state and federal securities laws. All of the
issued and outstanding shares of the Common Stock are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound.
(b) Other than as set forth on Schedule 2.2(a), there are no
outstanding shares of Common Stock, preferred stock or any other equity
securities of the Company, and there are no options, warrants, calls, conversion
rights, commitments or agreements of any character to which the Company or the
Shareholders are a party or by which the Company or the Shareholders may be
bound that do or may obligate the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of the Common Stock, preferred
stock or other equity securities or that do or may obligate the Company to
grant, extend or enter into any such option, warrant, call, conversion right,
commitment or agreement. There are no outstanding arrangements, agreements,
commitments or understandings of any kind affecting or relating to the voting,
issuance, purchase, redemption, repurchase or transfer of any capital stock of
the Company or any other securities of the Company.
2.3 Subsidiaries. Except as set forth on Schedule 2.3, the Company does
------------
not have and has never had any subsidiaries or affiliated companies and does not
otherwise own and has never otherwise owned any shares of capital stock or any
interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity.
2.4 No Conflicts. Except as set forth on Schedule 2.4, the execution and
------------
delivery of this Agreement by the Company does not, and, as of the Closing, the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit (any such event, a
"CONFLICT") under (i) any provision of the Articles of Incorporation or Bylaws
of the Company or (ii) any mortgage, indenture, lease, contract or other
agreement or commitment (any such instrument being referred to as a "CONTRACT"),
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets or the Shareholders. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("GOVERNMENTAL ENTITY") or any third party (so as not to trigger any Conflict),
is required by or with respect to the Company or the Shareholders in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) compliance with the
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act
<PAGE>
of 1976, as amended (the "HSR ACT") and (ii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 includes (a) a true,
----------------------------
complete and correct copy of the Company's Audited Balance Sheet as of September
30, 1996 (the end of its most recent completed fiscal year), and Audited
Statements of Income and Retained Earnings for the fiscal year ended September
30, 1996 (collectively, the "YEAR-END FINANCIALS") and (b) a true, complete and
correct copy of the Company's Unaudited Balance Sheet (the "INTERIM BALANCE
SHEET") as of June 30, 1997 (the "INTERIM BALANCE SHEET DATE") and the Unaudited
Statements of Income, and Retained Earning for the nine month period then ended
(collectively, the "INTERIM FINANCIALS"; and together with the Year-End
Financials, the "COMPANY FINANCIAL STATEMENTS"). The Company Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied and fairly present
the financial position of the Company as of the dates thereof and the results of
its operations for the periods then ended, subject, in the case of the Interim
Financials, to the omission of complete footnote information.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6, the
--------------------------
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, in excess of $5,000
individually or $15,000 in the aggregate, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with GAAP), which individually or in the
aggregate, (i) has not been reflected in the Interim Balance Sheet, or (ii) has
not arisen in the ordinary course of the Company's business since the Interim
Balance Sheet Date.
2.7 No Changes. Except as specifically set forth in Schedule 2.7, since
----------
Interim Balance Sheet Date, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date;
(b) capital expenditure or commitment by the Company, exceeding
$10,000 individually or $20,000 in aggregate;
(c) destruction of, damage to or loss of any material assets, business
or customer of the Company (whether or not covered by insurance);
(d) labor trouble, claim of wrongful discharge, claim of other
unlawful labor practice or any strike, work stoppage or union organization
activities;
(e) change in accounting methods or practices (including any change in
reserve, depreciation or amortization policies or rates) by the Company;
<PAGE>
(f) revaluation (upward or downward) by the Company of any of its
assets;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(h) increase in the salary, commissions or other compensation payable
or to become payable by the Company to any of its officers, directors,
employees, advisors or consultants or the declaration, payment or commitment or
obligation of any kind for the payment, by the Company, of a bonus or other
additional salary, commissions or compensation to any such person;
(i) acquisition, sale or transfer of any asset of the Company, except
in the ordinary course of business as conducted on that date;
(j) amendment or termination of any material Contract, agreement or
license to which the Company is a party or by which it is bound;
(k) loan by the Company to any person or entity;
(l) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company;
(m) the commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(n) notice of any claim of ownership by a third party of Company
Intellectual Property (as defined in Section 2.11 below) or of infringement by
the Company of any third party's intellectual property rights;
(o) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(p) change in pricing or royalties paid or charged by the Company
since February 1, 1997, other than in the ordinary course of business;
(q) any event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect;
(r) any distribution of cash or other assets of the Company to any
third parties (except in the ordinary course of business); or
(s) negotiation or agreement by the Company or the Shareholders, or
any other officer or employees of the Company to do any of the things described
in the preceding clauses (a) through (r)
<PAGE>
(other than negotiations with the Parent, the Buyer and their representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement, "TAX"
-------------------
or, collectively, "TAXES," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
Taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
----------------------
(i) The Company as of the Closing will have prepared and filed all
required federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns are true and
correct in all material respects and have been completed in accordance with
applicable law in all material respects.
(ii) The Company as of the Closing: (A) will have paid or
accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld.
(ii) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company does not have any liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved against
on the Company Financial Statements, whether asserted or unasserted, contingent
or otherwise, and the Company has no knowledge of any basis for the assertion of
any such liability attributable to the Company, its assets or operations.
(vi) The Company has provided to the Parent and the Buyer or its
legal counsel copies of all federal and state income and all state sales and use
Tax Returns filed for calendar years ended December 31, 1993, 1994, 1995 and
1996 for the Company.
(vi) There are (and as of immediately following the Closing there
will be) no Liens on the assets of the Company relating to or attributable to
Taxes.
<PAGE>
(vi) The Company has no knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) (Tax-Exempt Use Property) of the
Internal Revenue Code of 1986, as amended (the "CODE").
(x) As of the Closing, there will not be any contract, agreement,
plan or arrangement, including but not limited to the provisions of this
Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G (Golden Parachute Payments) or
162 (Trade or Business Expenses) of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) (Certain Sales of Stock of Consenting Corporations) of the Code
or agreed to have Section 341(f)(2) (Recognition of Gain) of the Code apply to
any disposition of a subsection (f) asset (as defined in Section 341(f)(4)
(Subsection (f) Asset Defined) of the Code) owned by the Company.
(xi) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xi) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) (United States Real Property Holding Corporation) of the Code.
(xi) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records in all
material respects.
(xv) The Company has been an S corporation within the meaning of
Section 1361 (Tax Treatment of S Corporations and their Shareholders) of the
Code since January 1, 1987.
2.9 Restrictions on Business Activities. Except as set forth in Schedule
-----------------------------------
2.9, there is no agreement (noncompete or otherwise), commitment, judgment,
injunction, order or decree to which the Company is a party or otherwise binding
upon the Company which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company.
<PAGE>
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition of
--------------------------------------------------------------------
Equipment.
---------
(a) Schedule 2.10(a) sets forth (i) a list of all real property owned
by the Company and (ii) a list of all real property currently leased, occupied
or operated by the Company, including, with respect to leased real property, the
name of the lessor, the date of the lease and each amendment thereto and, with
respect to any current lease, the aggregate annual rental and/or other fees
payable under any such lease. All such current leases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not with respect to the Company and any other party to such leases,
under any of such leases any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default). The
owned and leased property described in Schedule 2.10(a) is referred to as
"COMPANY REAL PROPERTY." Neither the Company nor the Shareholders have received
any notice of any condemnation proceeding with respect to any portion of the
Company Real Property or any access thereto, and no such proceeding is
contemplated by any government authority.
(b) Schedule 2.10(b) sets forth all tangible assets owned by the
Company which are not located on Company Real Property.
(c) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except as reflected in the Company
Financial Statements or in Schedule 2.10(c) and except for liens for taxes not
yet due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
(d) Except as described in Schedule 2.10(d), the real and personal
property owned or leased by the Company is, taken as a whole, (i) adequate for
the conduct of the business of the Company as currently conducted and (ii) in
good operating condition, regularly and properly maintained, subject to normal
wear and tear.
2.11 Intellectual Property. Except as set forth in Schedule 2.11, the
---------------------
Company owns, or is licensed or otherwise has sufficient rights to use rights to
all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, and tangible or intangible proprietary information or
material that in any material respect are used or currently proposed to be used
in the business of the Company as now being conducted or as currently proposed
to be conducted (the "COMPANY INTELLECTUAL PROPERTY"). The Company Intellectual
Property includes but is not limited to the items set forth on Schedule 2.11.
Except as set forth in Schedule 2.11, no claims challenging the Company's rights
to use Company Intellectual Property have been asserted or are threatened by any
person nor does the Company or any Shareholder have knowledge of any valid
grounds for any such bona fide claims.
<PAGE>
2.12 Agreements, Contracts and Commitments. Except as set forth on
-------------------------------------
Schedule 2.12, the Company does not have, is not a party to nor is it bound by:
(a) any agreements or arrangements that contain any severance pay or
post-employment liabilities or obligations;
(b) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
including, without limitation, any stock option plan, stock appreciation rights
plan or stock purchase plan;
(c) any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or consulting or sales
agreement, contract or commitment with a firm or other organization;
(d) any agreement or plan under which any of the benefits will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(e) any fidelity or surety bond or completion bond;
(f) any lease of personal property having a value individually in
excess of $5,000;
(g) any agreement of indemnification or guaranty;
(h) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or to
compete with any person;
(i) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $5,000;
(j) any agreement, contract or commitment relating to the acquisition
of any business enterprise (or the assets of any business enterprise) or the
disposition of assets of the Company outside the ordinary course of the
Company's business;
(k) any mortgages, indentures, loans, letters of credit or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (g) hereof;
(l) any purchase order or contract for the purchase or manufacture by
any third party of goods for resale (including, without limitation, raw
materials, components, sub-assemblies and assemblies and finished goods) other
than those contracts or purchase orders which both involve $5,000 or less and
were entered into in the ordinary course of business;
<PAGE>
(m) any construction contracts;
(n) any agreement between the Company and a vendor or dealer of the
Company;
(o) any distribution, joint marketing, development agreement or other
agreement which grants any third party continuing rights (exclusive or
nonexclusive) to distribute, market, develop or otherwise sell any products
currently being sold by the Company; or
(p) any other agreement, contract or commitment that involves $5,000
or more or is not cancelable without penalty within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time, giving
of notice, or both, all as noted in Schedule 2.12, the Company has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the terms or conditions of any Contract. Each
Contract is in full force and effect and, except as otherwise disclosed in
Schedule 2.12, is not subject to any default thereunder of which the Company or
the Shareholders have knowledge by any party obligated to the Company pursuant
thereto.
2.13 Governmental Authorization. Schedule 2.13 accurately lists each
--------------------------
material consent, license, permit, grant or other authorization issued to the
Company by a Governmental Entity (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
(herein collectively called "GOVERNMENT AUTHORIZATIONS"). The Government
Authorizations are in full force and effect and constitute all Government
Authorizations required to permit the Company to operate or conduct its business
substantially as it is currently and has been conducted or hold any interest in
its properties or assets.
2.14 Litigation. The litigation between the Company and Harley-Davidson
----------
Motor Company and H-D Michigan, Inc. (the "HARLEY-DAVIDSON LITIGATION")
previously disclosed to the Buyer and Parent has been fully settled pursuant to
the terms of a Settlement Agreement dated July 1, 1997 (the "HARLEY-DAVIDSON
SETTLEMENT AGREEMENT"). Except as set forth in Schedule 2.14, there is no
action, suit, claim or proceeding of any nature pending or threatened against
the Company, its properties or any of its officers or directors (with respect to
the operations of the Company), nor is there any basis therefor. Except as set
forth in Schedule 2.14, there is no investigation pending or threatened against
the Company, its properties or any of its officers or directors (nor is there
any basis therefor) by or before any Governmental Entity. Schedule 2.14 sets
forth, with respect to any pending or threatened action, suit, proceeding or
investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. No Governmental Entity
has at any time challenged or questioned the legal right of the Company to
manufacture, offer or sell any of its products in the present manner or style
thereof.
<PAGE>
2.15 Inventory. The inventories of the Company shown on the Interim
---------
Balance Sheet and set forth on Schedule 2.15 (the "INVENTORIES") are valued at
cost or market, whichever is lower, with adequate allowances for excess and
obsolete materials and materials below standard quality, in accordance with GAAP
consistently applied. The quality and quantity of the Inventories are such that
the Inventories are readily usable and saleable in the normal course of business
of the Company, except such amounts as are reserved on the Interim Balance Sheet
in accordance with GAAP consistently applied and in accordance with the past
practice of the Company. Except as set forth on Schedule 2.15, all items
included in such Inventories are located on the Company's premises and are owned
by the Company, except for sales made subsequent to the Balance Sheet Date in
the ordinary course of business, for all of which either the purchaser has made
full payment or the purchaser is obligated to make payment and such obligation
is an asset of the Company in accordance with GAAP consistently applied.
Schedule 2.15 also lists all Inventories materially in excess of reasonable
estimated requirements for the Company based on current operations for the next
twelve months.
2.16 Accounts Receivable.
-------------------
(a) Schedule 2.16 sets forth a list of all accounts receivable of the
Company reflected on the Interim Balance Sheet ("ACCOUNTS RECEIVABLE") along
with a statement of number of days elapsed since invoice, with respect to each
Accounts Receivable.
(b) Except as disclosed in Schedule 2.16, all Accounts Receivable of
the Company arose in the ordinary course of business, are carried at values
determined in accordance with GAAP and are collectible except to the extent of
reserves therefor set forth in the Interim Balance Sheet; and no person has any
Lien on any of such Accounts Receivable and no request or agreement for material
deduction or discount has been made with respect to any of such Accounts
Receivable.
2.17 No Defaults. The Company is not, nor has it or any Shareholder
-----------
received notice that it is or would be with the passage of time, (a) in
violation of any provision or its Articles of Incorporation or Bylaws or (b) in
default or violation of any term, condition or provision of (i) any judgment,
decree, order, injunction or stipulation applicable to the Company or (ii) any
agreement, note, mortgage, indenture, contract, lease, sublease or instrument,
permit, concession, franchise or license to which the Company is a party or by
which the Company or its properties or assets may be bound.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. Except as set forth on Schedule 2.18, no
------------------
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state or local
law to be radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "HAZARDOUS MATERIAL"), but excluding office
and janitorial supplies
<PAGE>
and packaged brake fluid, oil, waxes, polishes and other similar items in the
Inventory, are present, as a result of the deliberate actions of the Company, or
as a result of any actions of any third party or otherwise, in, on, under or
adjacent to any Company Real Property, or any other real property previously
occupied by the Company that is not included in Company Real Property, including
the land and the improvements, ground water and surface water thereof.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "ENVIRONMENTAL PERMITS")
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ, injunction or claim is pending
threatened concerning any Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of the Company. Neither the Company nor the
Shareholders are aware of any fact or circumstance that could involve the
Company in any material environmental litigation or impose upon the Company any
material environmental liability.
(e) Capital Expenditures. Except as set forth on Schedule 2.18, the
--------------------
Company is not aware of any capital expenditures that are required in order for
it to comply with Environmental Laws.
2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has
------------------------------------------------
paid, or shall pay, all liabilities for brokerage or finders' fees, agents'
commissions or any similar charges, and all other expenses incurred by the
Company and the Shareholders, including but not limited to, legal, accounting
and financial advisory fees, in connection with the negotiation and effectuation
of the terms and conditions of this Agreement and the transactions contemplated
hereby. Any liabilities, fees or expenses of the type described in this Section
2.19 are referred to as "COMPANY TRANSACTION COSTS."
2.20 Compensation; Employment Agreements. Schedule 2.20 sets forth an
-----------------------------------
accurate list, as of the date hereof, of all officers, directors, employees and
consultants of the Company listing all employment agreements with such officers,
directors, employees and consultants and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each such person as of the date hereof. The Company has
provided to the Parent and the Buyer true, complete and correct copies of all
employment contracts, commitments and arrangements with persons listed on
Schedule 2.20. The Company does not have any plan, agreement or commitment,
<PAGE>
whether legally binding or not, to compensate any director, officer, employee or
consultant in any manner whatsoever except as set forth in Schedule 2.20.
2.21 Employee Benefit Plans; Employment Matters.
------------------------------------------
(a) All employee compensation, incentive, fringe or benefit plans,
programs, policies, commitments or other arrangements (whether or not set forth
in a written document) covering any active, former or retired employee or
consultant of the Company or any trade or business (whether or not incorporated)
which is a member of a controlled group or which is under common control with
the Company within the meaning of Section 414 (Definitions and Special Rules
(Deferred Payment)) of the Code, or with respect to which the Company has or may
in the future have liability, are listed on Schedule 2.21 (the "PLANS"). To the
extent applicable, the Plans comply with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Code, and
any Plan intended to be qualified under Section 401(a) (Qualified Pension,
Profit Sharing, and Stock Plans -- Requirements for Qualification) of the Code
and each trust intended to qualify under Section 501(a) (Exemption from Tax on
Corporations, Certain Trusts, Etc.) of the Code (i) has either obtained a
favorable determination letter as to its qualified status from the Internal
Revenue Service ("IRS") or still has a remaining period of time under applicable
Treasury Regulations or Internal Revenue Service pronouncements in which to
apply for such determination letter and to make any amendments necessary to
obtain a favorable determination, and (ii) incorporates or has been amended to
incorporate all provisions required to comply with the Tax Reform Act of 1986
and subsequent legislation. The Company has furnished or made available to the
Buyer copies of the most recent Internal Revenue Service letters and Forms 5500
(Annual Return/Report of Employee Benefit Plan) with respect to any such Plan.
No Plan is covered by Title IV of ERISA or Section 412 (Minimum Funding
Standards) of the Code. Neither the Company nor any officer or director of the
Company has incurred any liability or penalty under Section 4975 through 4980B
(Excise Taxes -- Qualified Pension, Etc. Plans) of the Code or Title 1 of ERISA.
None of the Plans promises or provides retiree medical or other retiree welfare
benefits to any person except as required by applicable law, including, but not
limited to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended. Each Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, which are applicable to such Plans. No suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Plan activities) has been brought, or is threatened, against or with respect
to any such Plan. All contributions, reserves or premium payments required to
be made or accrued as of the date hereof to the Plans have been made or accrued.
Schedule 2.21 includes a listing of the accrued vacation liability of the
Company as of the December 31, 1996.
(b) The Company (i) is in compliance in all material respects with all
applicable federal and state laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees; (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) (other than
routine payments to be made in the normal course of
<PAGE>
business and consistent with past practice) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
for Employees.
(c) The Company is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. No employee of the Company is represented by any labor union
or covered by any collective bargaining agreement and no campaign to establish
such representation is in progress. There is no pending or threatened labor
dispute involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years and the Company
considers its relationship with its employees to be good.
(d) Except as set forth on Schedule 2.21, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby or thereby will (i) result in any payment (including severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any director, officer, employee or consultant of the Company under any
employment agreement, Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any employment agreement or Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.22 Insurance. Schedule 2.22 lists all insurance policies and fidelity
---------
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, including without limitation
product liability insurance. There is no claim by the Company pending under any
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and the Company is otherwise in material compliance
with the terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). The Shareholder have no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
2.23 Compliance with Laws. The Company has materially complied with, is
--------------------
not in material violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, law or regulation, domestic or
foreign.
2.24 Complete Copies of Materials. All documents delivered or made
----------------------------
available by the Company at the request of the Buyer or its counsel are true and
complete copies of each document (or summaries of same).
2.25 Warranties; Indemnities; Product Liability. Schedule 2.25 indicates
------------------------------------------
each warranty, indemnity and product liability claim (whether satisfied or to be
satisfied by a payment in cash or by repairing or replacing the defective
product) made against the Company during the two-year period prior to the date
hereof with a value in excess of (a) $5,000 with respect to any single item of
Inventory for which a previous claim was made or (b) $10,000 for any individual
claim. Except as set forth on Schedule 2.25, there are no currently pending
product liability claims against the Company.
<PAGE>
Schedule 2.25 sets forth all product liability claims filed against the Company
since inception and a description of the disposition of all such claims.
2.26 Customer and Vender Lists. The Company has provided to the Buyer true
-------------------------
and complete lists (the "CUSTOMER LISTS") of all customers of the Company that
have purchased product from the Company during (i) the prior fiscal year and
(ii) the period from October 1, 1996 through the date hereof, which lists shall
be in descending order based on sales and shall exclude the identity of such
customers. The Company has also provided to the Buyer true and complete lists
(the "VENDOR LISTS") of all vendors of the Company from which the Company has
purchased products during (i) the prior fiscal year and (ii) the period from
October 1, 1996 through the date hereof, which lists shall be in descending
order based on purchases by the Company and shall exclude the identity of such
vendors. On the Closing Date, the Company shall provide to the Buyer the
Customer Lists and the Vendor Lists complete with the name, a contact name, the
address, the telephone number and the facsimile number of each such customer and
vendor, as the case may be.
2.27 Interested Party Transactions. Except as set forth on Schedule 2.27,
-----------------------------
no officer, director or shareholder of the Company (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has an interest), has, directly or
indirectly, (i) an interest in any entity that furnished or sold, or furnishes
or sells, services or products that the Company furnishes or sells, or proposes
to furnish or sell, or (ii) an interest in any entity that purchases from or
sells or furnishes to, the Company, any goods or services or (iii) a beneficial
interest in any Contract; provided, that ownership of no more than one percent
(1%) of the outstanding voting stock of a publicly traded corporation shall not
be deemed an "interest in any entity" for purposes of this Section 2.27.
2.28 Individual Representations and Warranties. Each Shareholder severally
-----------------------------------------
and not jointly further represents and warrants to the Parent and the Buyer as
follows:
(a) Such Shareholder has all power and authority to enter into this
Agreement and each of the other agreements that are attached as Exhibits hereto
(the "RELATED AGREEMENTS") to which he is a party, to perform such Shareholder's
respective obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
(b) Each of this Agreement and the Related Agreements has been duly
executed and delivered by such Shareholder who are parties thereto and
constitutes a legal, valid and binding obligation of such Shareholder
enforceable against such Shareholder in accordance with its terms, except as
such enforceability may be limited by principles of public policy and subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable principles.
(c) The execution and delivery of this Agreement and the Related
Agreements by such Shareholder does not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default under any mortgage, indenture, lease, contract
<PAGE>
or other agreement or instrument, permit concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to such Shareholder or such Shareholder's properties or assets.
2.29 Representations Complete. None of the representations or warranties
------------------------
made by the Company or the Shareholders (as modified by the Disclosure
Schedules), nor any statement made in any Schedule or certificate furnished by
the Company or the Shareholder pursuant to this Agreement, contains or will
contain at the Closing, any untrue statement of a material fact, or omits or
will omit at the Closing to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE BUYER
The Parent and the Buyer represent and warrant to the Company and the
Shareholders as follows:
3.1 Organization, Standing and Power. Each of the Parent and the Buyer is
--------------------------------
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Parent and the Buyer has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the ability of the Parent and the Buyer to consummate the
transactions contemplated hereby.
3.2 Authority. Each of the Parent and the Buyer has all requisite
---------
corporate power and authority to enter into 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 the Buyer. This
Agreement has been duly executed and delivered by each of the Parent and the
Buyer and constitutes the valid and binding obligations of each of the Parent
and the Buyer, enforceable in accordance with its terms, except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
<PAGE>
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 Conduct of Business of the Company. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Company shall (except to the extent that the Buyer
shall otherwise consent in writing), carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted,
pay its debts and Taxes when due, pay or perform other obligations when due,
and, to the extent consistent with such business, use all reasonable efforts
consistent with past practice and policies to preserve intact the Company's
present business organizations, keep available the services of its present
officers and key employees and preserve their relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired the Company's
goodwill and ongoing businesses at the Closing. The Company shall promptly
notify the Parent and the Buyer of any event or occurrence or emergency not in
the ordinary course of business of the Company, and any material event involving
the Company. Except as expressly contemplated by this Agreement, the Company
shall not, without the prior written consent of the Buyer:
(a) Enter into any commitment or transaction not in the ordinary
course of business or any commitment or transaction of the type described in
Section 2.7 hereof;
(b) Enter into or amend any agreements pursuant to which any other
party is granted broker marketing, distribution or similar rights of any type or
scope with respect to any of the Company's products;
(c) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any Contract;
(d) Commence or settle any litigation or modify or amend the Harley-
Davidson Settlement Agreement;
(e) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of the Company, or repurchase, redeem or otherwise
acquire, directly or indirectly, any shares of its capital stock (or options,
warrants or other rights exercisable therefor);
(f) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities;
<PAGE>
(g) Cause or permit any amendments to its Articles of Incorporation or
Bylaws;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company;
(i) Sell, lease, license or otherwise dispose of any of its properties
or assets, except in the ordinary course of business;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others, except in the ordinary course of business;
(k) Grant any severance or termination pay to any director, officer or
employee except payments made pursuant to written agreements outstanding and
described in Schedule 2.12;
(l) Adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage rates
of its employees;
(m) Revalue any of its assets, including without limitation writing up
or down the value of inventory (or any reserves with respect thereto) or writing
off notes or accounts receivable other than in the ordinary course of business;
(n) Pay, discharge or satisfy, in an amount in excess of $5,000 (in
any one case) $20,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of (i)
ordinary course liabilities incurred since December 31, 1996 or (ii) liabilities
reflected or reserved against in the Company Financial Statements (or the notes
thereto);
(o) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(p) Enter into any strategic alliance or joint marketing arrangement
or agreement; or
(q) Distribute cash or other assets of the Company to any third
parties (except in the ordinary course of business) or to the Shareholder; or
<PAGE>
(r) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (q) above, or any other action that would
prevent the Company and the Shareholders from performing their covenants
hereunder.
4.2 No Solicitation. Until the Closing or, if this Agreement is
---------------
terminated prior to the Closing pursuant to Section 8.1(d), 90 days following
the date of termination of this Agreement, or, if this Agreement is terminated
prior to the Closing pursuant to Section 8.1(e), the date of termination of this
Agreement, as the case may be, neither the Company nor the Shareholders will
(nor will they permit any of the Company's officers, directors, agents,
representatives or Affiliates to) directly or indirectly, take any of the
following actions with any party other than the Parent, the Buyer and its
designees:
(a) solicit, encourage, initiate or participate in any negotiations or
discussions with respect to, any offer or proposal to acquire all or any portion
of the Company's business and properties or capital stock whether by merger,
purchase of assets, tender offer or otherwise,
(b) disclose any information (other than its attorneys or financial
advisors) concerning the Company's business and properties or afford to any
person or entity access to its properties, books or records, or
(c) assist or cooperate with any person to make any proposal to
purchase all or any part of the capital stock of the Company or assets, other
than selling products of the Company in the ordinary course of business.
In the event the Company or the Shareholders shall receive any offer or
proposal, directly or indirectly, of the type referred to in clause (a) or (c)
above, or any request for disclosure or access pursuant to clause (b) above, the
Company shall immediately inform the Buyer in writing as to any such offer or
proposal.
4.3 S Status. The Company shall maintain its tax status as a subchapter S
--------
corporation up to the Closing and the Company and the Shareholders shall not
revoke or otherwise terminate the election of the Company to be treated as a
subchapter S corporation.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. The Company shall afford the Parent, the Buyer
---------------------
and their accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Closing to (a) all
of the Company's properties, books, contracts, commitments and records, and (b)
all other information concerning the business, properties and personnel of the
Company as the Buyer may reasonably request. The Company agrees to provide to
the Parent, the Buyer and their accountants, counsel and other representatives
copies of internal financial statements promptly upon
<PAGE>
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.1 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Acquisition.
5.2 Transitional Cooperation. During the period from the date of this
------------------------
Agreement and continuing until the earlier of the termination of this Agreement
or the Closing, the Shareholders each agree that they will provide such
assistance as may be reasonably requested by the Buyer or the Parent with
respect to transitioning business relationships from the Company to the Buyer.
Such assistance shall include but not be limited to: (i) preparing joint press
statements regarding the transactions contemplated by this Agreement; (ii)
meeting with representatives of the press (trade and other) to discuss the
transactions contemplated by this Agreement; (iii) meeting with current or
prospective customers of, and suppliers to, the Company, the Buyer and/or the
Parent; and (iv) meeting with Company employees to facilitate the hiring of such
persons by Buyer following the Closing. The Parent agrees that it shall
promptly reimburse the Company (or the Shareholders as applicable) for those
out-of-pocket expenses that were reasonably incurred by the Shareholders or the
Company, as the case may be, in complying with the Buyer's or the Parent's
requests for assistance pursuant to this Section 5.2.
5.3 Confidentiality. Each of the parties hereto hereby agrees to keep
---------------
such information or knowledge obtained in any investigation pursuant to Section
5.1, or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential, as provided
in the Confidentiality Agreement dated December 19, 1996 by and among the
parties hereto.
5.4 Expenses. Whether or not the Acquisition is consummated, all fees and
--------
expenses incurred in connection with the Acquisition including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby ("THIRD PARTY EXPENSES"), (i) in the case
of Third Party Expenses incurred by the Buyer, shall be the obligation of the
Buyer and (ii) in the case of Third Party Expenses incurred by the Company or
the Shareholders, shall be the obligation of the Company. Without limiting the
generality of the foregoing, Buyer agrees that it will pay the filing fees due
in connection with the HSR Act filings, but the Buyer shall bear the Third Party
Expenses incurred by it, and the Company shall bear the Third Party Expenses
incurred by it or the Shareholders, in connection with the preparing their
respective HSR Act filings and in responding to any requests for further
information or objections raised by the U.S. Department of Justice or Federal
Trade Commission.
5.5 Public Disclosure. Unless otherwise required by law, prior to the
-----------------
Closing, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless shown to and
approved in writing by the Parent, the Buyer and the Company prior to release;
provided, however, that such approval shall not be required with respect to
disclosure made by the Parent to comply with applicable securities laws. The
Parent agrees to provide to the Company and the Shareholders drafts of any
disclosure required under applicable securities laws prior to such disclosure
being made.
<PAGE>
5.6 Consents. The Shareholders shall use their best efforts, and shall
--------
cause the Company to use its best efforts, to obtain the consents, waivers and
approvals under any of the Contracts or Government Authorizations as may be
required in connection with the Acquisition (all of such consents and approvals
are set forth in Schedule 2.4) so as to preserve all rights of, and benefits to,
the Company thereunder.
5.7 Insurance. The Company shall assign, and shall obtain all necessary
---------
approvals and consents to assign, all of its insurance policies to the Buyer,
and the Buyer shall name the Shareholders as additional insured parties under
such policies, effective as of the Closing Date.
5.8 Reasonable Best Efforts. Subject to the terms and conditions provided
-----------------------
in this Agreement, each of the parties hereto shall use its reasonable best
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
5.9 Notification of Certain Matters. The Company shall give prompt notice
-------------------------------
to the Parent and the Buyer, and Parent and the Buyer shall give prompt notice
to the Company, of (i) the occurrence or nonoccurrence of any event, the
occurrence or nonoccurrence of which is likely to cause any representation or
warranty of the Company and the Shareholders, on the one hand, and the Parent
and the Buyer, on the other hand, contained in this Agreement to be untrue or
inaccurate at or in the period prior to the Closing and (ii) any failure of the
Company and the Shareholders or the Parent and the Buyer, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.9 shall not limit or otherwise affect any remedies
available to the party receiving such notice.
5.10 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby. From and after the Closing, each party agrees
to cooperate with, and shall provide to the other parties, all necessary
information in order for such requesting party to comply with information
disclosure requirements under applicable federal and state securities laws and
regulations and federal and state franchise, income, sales and other tax laws
and regulations. Without limiting the generality of the foregoing, the Company
shall, promptly following payment, provide evidence to the Buyer of payment of
all sales and franchise taxes arising in connection with the transactions
contemplated by this Agreement. In addition, each party agrees to cooperate
with the other parties with respect to any currently pending or future
litigation, claims, investigations or the like related to the business of the
Company.
<PAGE>
5.11 Adjustment to Estimated Purchase Price.
--------------------------------------
(a) Within 60 days after the Closing Date, the Company shall deliver
to the Buyer a certificate (the "CLOSING CERTIFICATE") setting forth a schedule
of the Purchased Assets and the Assumed Liabilities, dated as of the Closing
Date, derived from the audited financial statements referred to in Section 5.15
hereof prepared in accordance with GAAP applied on a basis consistent with the
Company Financial Statements, signed by the President of the Company and by each
of the Shareholders. Without limiting the generality of the foregoing, the
Assumed Liabilities, as reflected on the Closing Certificate, shall include
accrual of the estimated expense of complying with the Company's obligation
under the Harley-Davidson Settlement Agreement to the extent that accrual of
such expense on a regularly prepared balance sheet would be required by GAAP.
The Closing Certificate shall also include a determination of purchased net
assets of the Company (the "CLOSING NET ASSETS"), which Closing Net Assets shall
be equal to the Purchased Assets minus the Assumed Liabilities. The Company's
calculation of the Closing Net Assets as reflected in the Closing Certificate
shall be referred to as the "SELLER'S CLOSING NET ASSETS CALCULATION." Buyer
shall have 60 days from the date of receipt of the Closing Certificate during
which it and its independent accountants may review the Closing Certificate.
Following completion of such review, the Buyer shall deliver a written notice
(the "PURCHASE PRICE ADJUSTMENT NOTICE") to the Company setting forth the
Buyer's determination of the Closing Net Assets (the "BUYER'S CLOSING NET ASSETS
CALCULATION"). If Buyer shall fail to deliver the Purchase Price Adjustment
Notice within such 60 day period, or if the Buyer's Closing Net Assets
Calculation shall equal the Seller's Closing Net Assets Calculation, then the
Seller's Closing Net Assets Calculation shall be deemed to constitute the
statement of "FINAL CLOSING NET ASSETS." Subject to Section 5.11(b) below, if
the Final Closing Net Assets are less than $11,523,880, the Estimated Purchase
Price shall be reduced by such difference, and if the Final Closing Net Assets
is more than $11,523,880, the Estimated Purchase Price shall be increased by
such difference.
(b) The Company shall, within 15 days from the receipt of the Purchase
Price Adjustment Notice, notify the Buyer whether or not the Company disputes
the Buyer's Closing Net Assets Calculation (the "SELLER NOTICE"). If the Buyer
has not received notice of such a dispute within such 15-day period, then the
Buyer's Closing Net Assets Calculation shall be deemed to constitute the
statement of Final Closing Assets, and shall be final and binding. If, on the
other hand, the Buyer has received notice of such a dispute within such 15-day
period, then the Buyer and the Company shall mutually agree in writing on an
independent accounting firm to review the Closing Certificate (and related
information) to determine the amount, if any, of the adjustment to the Estimated
Purchase Price pursuant to Section 5.11(a) above. In the event that the Buyer
and the Company cannot agree in writing on an independent accounting firm, KPMG
Peat Marwick LLP shall select such independent accounting firm. The
determination of such independent accounting firm shall be final and binding on
the parties hereto. The costs of the independent accounting firm shall be borne
by the party (either the Buyer or the Company) whose determination of the
Closing Net Assets was furthest from such determination of the independent
accounting firm, or equally by the Buyers and the Company in the event that the
determination by the independent accounting firm is equidistant between the
determinations of the parties. The independent accounting firm selected under
this Section 5.11(b) shall be chosen from among only the six largest
international firms in the independent accounting profession.
<PAGE>
(c) Any additional amount determined to be payable by the Buyer shall
be paid by the Buyer within 10 business days of the final determination
hereunder. Any amount determined pursuant to this Section 5.11 to be payable by
the Company may, at the Buyer's election, either be paid out of the Escrow or,
upon request of the Buyer, shall be paid by the Company within 10 business days
of such request.
(d) Notwithstanding anything to the contrary in Section 7.1, the
Liability Threshold shall not apply to Section 5.11, and any adjustment required
under Section 5.11 shall be from the first dollar.
5.12 Tax Matters.
-----------
(a) Tax Returns. The Company shall be responsible for timely filing
-----------
all federal and state income tax returns of the Company and for paying all
income taxes attributable to the income of the Company for all periods. The
Company shall also be responsible for and shall pay that portion of real,
personal or other property taxes attributable to periods prior to the Closing
Date.
(b) Allocation of Adjusted Purchase Price. The Adjusted Purchase
-------------------------------------
Price for the Purchased Assets shall be allocated in accordance with Schedule
5.12 (the "ALLOCATION") which shall be mutually agreed upon by the Buyer and the
Company. The parties agree that all Tax Returns and reports (including IRS Form
8594 (Asset Acquisition Statement)) and all financial statements shall be
prepared in a manner consistent with (and the parties shall not otherwise take a
position inconsistent with) the Allocation unless required by the IRS or a state
taxing authority.
(c) Responsibility for Taxes. Each of the Company and the
-------------------------
Shareholders, jointly and severally, hereby indemnifies and agrees to hold the
Parent and the Buyer harmless from, against and in respect of any U.S. federal
or State of Texas Tax liability (including interest and penalties), if any,
incurred by or imposed upon the Parent and the Buyer resulting from or as a
consequence of the Acquisition (including without limitation, any such Tax
liability arising pursuant to Section 1374 of the Code or state counterpart).
(d) Liability Threshold Inapplicable. Notwithstanding anything to the
--------------------------------
contrary in this Section 5.12, the Liability Threshold shall not apply to
Section 5.12, and any indemnification required under Section 5.12 shall be from
the first dollar.
5.13 Noncompetition.
--------------
(a) Each of the Shareholders agree that for a period of seven years
from the Closing Date, he will not:
(i) in any location throughout the world, either directly or
indirectly, engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative in any business
<PAGE>
that manufactures, develops, modifies, engineers, designs, customizes,
maintains, replaces, tools, services, sells, resells, distributes, wholesales,
supplies, delivers, imports or exports motorcycles, motorcycle parts and
accessories or motorcycle apparel (a "MOTORCYCLE BUSINESS"). For the purposes
of this Section 5.13(a), "motorcycle parts and accessories" includes, but is not
limited to, fenders, gas tanks, ignition parts, carburetors, cylinder heads,
exhaust systems, mufflers, oil pumps, cams, air and oil filters, spark plugs,
gaskets, batteries, starters, pistons, piston rings, chains, tire tubes, back
rests, rear-view mirrors, windshields, luggage racks, electrical parts,
transmissions or lighting products. The term "motorcycle apparel" as used
herein includes, but is not limited to, jackets, vests, chaps and helmets. The
term "motorcycle" as used herein includes motorcycles of any make, model or
brand name;
(ii) employ or solicit, or receive or accept the performance of
services by any employee of the Company employed on the date hereof; provided,
however, that this clause (ii) shall not apply to the Shareholders' spouses,
children or siblings;
(ii) employ or solicit, or receive or accept performance of
services by any employee of a customer or vendor of the Company or any other
business entity with which the Company had or has a business relationship,
except for: (a) any outside professional firms, such as investment banking,
financial advisory, accounting or legal firms; or (b) any other vendor not in
the Motorcycle Business which vendor has sales in excess of $100 million per
year; or
(iv) conduct any business whatsoever with a customer or vendor of
the Company or any other business entity with which the Company had or has a
business relationship, except for: (a) any outside professional firms, such as
investment banking, financial advisory, accounting or legal firms; or (b) any
other vendor not in the Motorcycle Business provided that the Shareholders'
dealing with such vendor(s) do not interfere with the vendor's ability to meet
the Buyer's needs.
(b) Notwithstanding Section 5.13(a), the Shareholders may hold an
ownership interest in two family owned franchise Harley-Davidson retail
dealerships located in Minneapolis, Minnesota (the "FAMILY BUSINESS"); provided
that for a period seven years from the Closing Date, (i) the Shareholders shall
not participate in the Family Business as a manager or employee and shall not
otherwise actively participate in the day-to-day activities of the Family
Business; (ii) the Family Business shall not be engaged in a Motorcycle Business
except for franchise Harley-Davidson retail dealerships located in the State of
Minnesota; and (iii) the activities of the Family Business do not expand to
compete with the Buyer's business, including but not limited to, the
establishment of a wholesale distribution channel of any kind or any motorcycle
aftermarket retail store or an expansion of the current retail mail order
operation of the Family Business (as described in Schedule 5.13); provided,
however, that nothing in this Section 5.13(b) shall prohibit either Shareholders
from serving on the Board of Directors of the Family Business or as a consultant
to the Family Business.
If the Family Business shall fail at any time to meet these conditions, the
Shareholders agree to divest all ownership in the Family Business within one
year from the date on which the Family Business fails to meet any of the
conditions.
<PAGE>
(c) If any provision contained in this Section 5.13 shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Section 5.13, but this Section 5.13 shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. It
is the intention of the Buyer and the Shareholders that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time which is not permitted by applicable law, or in any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would be valid and enforceable under applicable law, a court of competent
jurisdiction shall construe and interpret or reform this Section 5.13 to provide
for a covenant having the maximum enforceable geographic area, time period and
other provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable law. The Shareholders acknowledge that the
Buyer would be irreparably harmed by any breach of this Section 5.13 and that
there would be no adequate remedy at law or in damages to compensate the Buyer
for such breach. The Shareholders agree that the Buyer shall be entitled to
injunctive relief requiring specific performance by the Shareholders of this
Section 5.13, and the Shareholders consent to the entry thereof.
5.14 HSR Act Filings. Both the Buyer and the Company shall (i) take
---------------
promptly all actions necessary to prepare and file the applicable notices (the
"HSR NOTICES") required, if any, to be filed under the HSR Act, which filings
will comply in all material respects with the requirements of the HSR Act, (ii)
promptly comply at the earliest practicable date with any requests for
additional information from the Federal Trade Commission or United States
Department of Justice, and (iii) request early termination of the applicable
waiting period.
5.15 Financial Statements. The Company shall deliver to the Buyer audited
--------------------
financial statements for the period from October 1, 1996 through the Closing
Date as soon after the Closing Date as possible and in no event more than 60
days after the Closing Date.
5.16 Employment by the Buyer of Company Employees. The Company shall use
--------------------------------------------
its best efforts to assist the Buyer in hiring and retaining the services of
current Company employees whom the Buyer desires to employ. The Company
understands and agrees that (a) the Buyer is under no obligation to offer
employment with the Buyer to any employees of the Company, (b) it is within the
sole discretion of the Buyer to determine to whom offers of employment with the
Buyer will be extended and from whom such offers will be withheld, and (c) those
employees of the Company who are given offers of employment with the Buyer will
become, upon their acceptance of such offers, employees of the Buyer with full
credit for prior service with the Company for all purposes, including but not
limited to that of determining their eligibility for the Buyer's employment
benefits. Any Company employee accepting employment by the Buyer will be
required as a condition precedent to such employment to terminate any existing
employment agreement with the Company, execute the Buyer's standard form of
confidentiality and proprietary information agreement and take such other
actions generally required by the Buyer of its employees.
5.17 Discharge of Debts. The Company shall hereafter promptly and fully
------------------
satisfy and discharge all its debts, liabilities and obligations when due
(except, after the Closing Date, the Assumed Liabilities)
<PAGE>
except such debts, liabilities and obligations as the Company shall be
contesting in good faith, or shall obtain full releases from the same or make
sufficient provisions to pay the same or to be released therefrom, all to the
satisfaction of the Buyer.
5.18 Use of Name. The Company shall change its name immediately prior to
-----------
the Closing. From and after the date hereof, neither the Company nor the
Shareholders shall transact business under or in any other way use the words
"Chrome," "Specialties," "Custom," "Global" or "Motorsport" either alone or
together in any manner.
5.19 Bulk Sales Laws. The Company shall take all actions necessary to
---------------
comply with the provisions of the Uniform Commercial Code and the Civil Code of
Texas concerning bulk sales of bulk transfers or any similar law (the "BULK
SALES LAWS"), including, without limitation, the filing and publication of
notices of the transactions contemplated hereunder that may be required by the
Bulk Sales Laws. The Buyer shall fully cooperate with the Company with respect
to compliance with the Bulk Sales Laws.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
6.1 Conditions to Obligations of Each Party to Effect the Acquisition.
-----------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing of
the following condition:
(a) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Acquisition shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Acquisition, which makes the consummation of the Acquisition illegal.
(b) HSR Act Clearance. All approvals shall have been received and the
-----------------
expiration or early termination of all antitrust review periods under the HSR
Act, and other applicable antitrust laws ("HSR CLEARANCE"); provided that,
neither party may rely on the condition set forth in this Section 6.1(b) if the
failure to obtain HSR Clearance for the Acquisition is a result of such party's
failure to take all necessary actions set forth in Section 5.14 above.
6.2 Additional Conditions to Obligations of Company and the Shareholders.
--------------------------------------------------------------------
The obligation of the Company and the Shareholders to consummate and effect this
Agreement and the transactions
<PAGE>
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Buyer in this Agreement shall be true and correct on and
as of the Closing as though such representations and warranties were made on and
as of such time and the Buyer shall have performed and complied with all
covenants, obligations and conditions of this Agreement required to be performed
and complied with by it as of the Closing.
(b) Certificate of the Buyer. The Company shall have been provided
------------------------
with a certificate executed on behalf of the Parent and the Buyer by one of its
executive officers to the effect that, as of the Closing:
(i) all representations and warranties made by the Parent and the
Buyer in this Agreement are true and correct in all material respects; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by the Parent and the Buyer on or before such date have been so
performed.
(c) Consulting Agreements. The Buyer shall have entered into a
---------------------
consulting agreement with each of the Shareholders, substantially in the form
attached hereto as EXHIBIT C (a "CONSULTING AGREEMENT")
(d) Escrow Agreement. The Buyer shall have entered into an escrow
----------------
agreement, substantially in the form attached hereto as EXHIBIT D (the "ESCROW
AGREEMENT")
6.3 Additional Conditions to the Obligations of the Parent and the Buyer.
--------------------------------------------------------------------
The obligations of the Parent and the Buyer to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived, in writing, exclusively by the Buyer:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Company and the Shareholders in this Agreement shall be
true and correct in all material respects on and as of the Closing, except for
changes in Accounts Receivable and Inventories incurred in the ordinary course
of business, as though such representations and warranties were made on and as
of such time and the Company and the Shareholders shall have performed and
complied with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by such party as of the Closing. The
parties agrees that nothing in this Section 6.3(a) shall limit the Parent's and
the Buyer's rights to an adjustment to the Estimated Purchase Price pursuant to
Section 5.11.
(b) Certificate of Company. The Buyer shall have been provided with a
----------------------
certificate executed by the President of the Company and each of the
Shareholders to the effect that, as of the Closing:
<PAGE>
(i) all representations and warranties made by the Company and the
Shareholders in this Agreement are true and correct in all material respects;
and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by the Company and the Shareholders on or before such date have
been so performed.
(c) Consulting Agreements. Each Shareholder shall have entered into a
---------------------
Consulting Agreement with the Buyer.
(d) Third Party Consents. Any and all consents, waivers, and
--------------------
approvals listed pursuant to Schedule 2.4 shall have been obtained.
(e) Legal Opinion. The Buyer shall have received a legal opinion from
-------------
Kelly, Hart & Hallman, legal counsel to the Company, substantially in the form
of EXHIBIT E hereto.
(f) No Injunctions or Restraints on Conduct of Business; Litigation.
---------------------------------------------------------------
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or regulatory
restraint or provision challenging the Buyer's proposed acquisition of the
Purchased Assets, or limiting or restricting the Buyer's conduct or operation of
the business of the Company (or its own business) following the Acquisition
shall be in effect, nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending. There shall be no action,
suit, claim or proceeding of any nature pending, or overtly threatened, against
the Parent, the Buyer or the Company, their respective properties or any of
their officers or directors, arising out of, or in any way connected with, the
Acquisition or the other transactions contemplated by the terms of this
Agreement.
(g) No Material Adverse Changes; Claims. There shall not have
-----------------------------------
occurred any material adverse change in the business, assets (including
intangible assets), results of operations, liabilities (contingent or accrued)
or financial condition of the Company or of the Parent. The parties acknowledge
that at the time of execution of this Agreement, there exists a labor strike by
employees of United Parcel Services ("UPS"), which strike is affecting the
businesses of both the Company and the Parent. Parent reserves the right to
claim that the labor strike against UPS has caused a material adverse change of
the type described in the first sentence of this paragraph should the strike
have such an effect. There shall not have occurred any claims (whether or not
asserted in litigation) which reasonably could be expected to materially and
adversely affect the consummation of the transactions contemplated hereby or the
Purchased Assets or other assets (including intangible assets), financial
condition or results of operations of the Company.
(h) Amendment of Articles of Incorporation. Article One of the
--------------------------------------
Articles of Incorporation of the Company shall have been amended to change the
name of the Company to comply with the provisions of Section 5.18 hereof.
<PAGE>
(i) Bulk Sales Laws. The Company shall have complied with the
---------------
provisions of the Bulk Sales Laws.
(j) Harley-Davidson Litigation. The Harley-Davidson Settlement
--------------------------
Agreement shall not have been modified or amended by the parties since
execution, shall remain in full force and effect and shall not have been
breached by the parties thereto.
(k) Financing Available. The Parent shall have available to it the
-------------------
$73,500,000 credit facility substantially in the form described in the
commitment letter from Bank of America dated July 21, 1997, and no event shall
have occurred which would prevent Parent from borrowing against such facility.
(l) Accountants Reports and Consents. The independent accounting
--------------------------------
firm(s) that audited the financial statements of Seller for the each of the two
years in the period ended September 30, 1996 (and any later period for which
audited financial statements of Seller exist) shall have delivered to Parent
complete copies of such audited financial statements together with (i) a
manually signed copy of the accountant's report thereon and (ii) a consent to
Parent filing such financial statements with the Securities and Exchange
Commission as a part of any filing therewith pursuant to the Securities Exchange
Act of 1934, as amended, and the resulting incorporation thereof by reference
into registration statements of Parent filed pursuant to the Securities Act of
1933; provided, that the Parent shall have delivered to such accountants a draft
of such filing in final form within 2 business days prior to the Closing.
ARTICLE VII
REMEDIES FOR BREACHES OF THE AGREEMENT
7.1 Survival of Representations and Warranties; Liability Threshold.
---------------------------------------------------------------
(a) All of the representations and warranties of the Company and the
Shareholders (except for those contained in Sections 2.8 (Tax and Other Returns
and Reports), 2.14 (Litigation) and 2.18 (Environmental Matters)) contained in
herein shall survive the Closing and continue in full force and effect for a
period of the greater of the applicable tort statute of limitations and three
(3) years following the Closing. The representations and warranties of the
Company and the Shareholders contained in Sections 2.8 and 2.18 shall continue
in full force and effect without limit as to time (subject to any applicable
statutes of limitations). The representation and warranty contained in Section
2.14 shall continue in full force and effect for a period of the greater of the
applicable tort statute of limitations and three (3) years following the
Closing. The covenants and agreements in this Agreement shall survive except to
the extent they are specifically limited by their terms.
(b) The Parent and the Buyer shall not be entitled to indemnification
for any loss contemplated by this Article VII until the aggregate of all
indemnified or indemnifiable losses, damages or expenses suffered by such party,
or its successors and assigns pursuant to this Agreement, exceeds
<PAGE>
$100,000 ("LIABILITY THRESHOLD"). If such losses, damages or expenses exceed
$100,000, the Company and the Shareholders (individually, an "INDEMNIFYING
PARTY" and collectively, the "INDEMNIFYING PARTIES") shall be obligated to pay
the entire amount of such losses, damages or expenses suffered by the other
party, less $100,000.
(c) Except in the case of fraud, the aggregate amount of the
Indemnifying Parties' liability under this Article VII shall not exceed
$2,000,000; provided, however, that with respect to liabilities incurred based
on a breach of the Company and the Shareholder's representations, warranties or
covenants contained in Sections 2.8 (Tax and Other Returns and Reports), 2.18
(Environmental Matters), Section 2.25 (Warranties; Indemnities; Product
Liability) and 5.13 (Noncompetition), the aggregate amount of the Indemnifying
Parties' liability shall not exceed the amount equal to the Estimated Cash
Payment less the Final Closing Net Assets.
7.2 Indemnification. In the event (a) any of the Company or the
---------------
Shareholders' breach any of its or his respective representations, warranties,
agreements or covenants contained herein or (b) the Company incurs liabilities
that are not Assumed Liabilities for which a claim is made against the Parent or
the Buyer, then, subject to the provisions of this Article VII, the Indemnifying
Parties agree, jointly and severally, to indemnify, defend and hold harmless the
Buyer and its officers, directors, employees, shareholders, assigns, successors
and affiliates (individually, an "INDEMNIFIED PARTY" and collectively, the
"INDEMNIFIED PARTIES") from and against the entirety of any and all actions,
suits, proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, reasonable amounts paid in settlement, liabilities,
obligations, taxes, liens, losses, expenses, and fees, including court costs and
reasonable attorneys' fees and expenses ("ADVERSE CONSEQUENCES") an Indemnified
Party may suffer arising out of, relating to, in the nature of, or caused by the
breach or liability of the Company that is not an Assumed Liability.
7.3 Matters Involving Third Parties.
-------------------------------
(a) If any third party shall notify an Indemnified Party with respect
to any matter (a "THIRD PARTY CLAIM") which may give rise to a claim for
indemnification against any Indemnifying Party under this Article VII, the
Indemnified Party shall promptly notify Seller's Agent (as defined herein)
thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying Seller's Agent shall relieve the Indemnifying
Parties from any obligation hereunder unless (and then solely to the extent) the
Indemnifying Parties thereby are prejudiced.
(b) The Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to, the Third Party
Claim in any manner such Indemnified Party reasonably may deem appropriate (and
such Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), and the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article VII.
Notwithstanding the foregoing sentence, counsel for any Indemnifying Party shall
be permitted to monitor the Indemnified Party's defense of a Third Party Claim
for the purpose of
<PAGE>
advising of the status and progress of the defense. Any such activity shall be
at the sole expense of the Indemnifying Parties.
7.4 Procedure for Asserting Claims. If an Indemnified Party wishes to
------------------------------
assert a claim for indemnification pursuant to this Article VII, the Indemnified
Party shall prepare and deliver to John Kuelbs (hereinafter "SELLERS' AGENT") a
certificate signed by an officer of the Parent (an "OFFICER'S INDEMNIFICATION
CLAIM") providing notice of such claim and specifying in reasonable detail the
date the Adverse Consequences relating to such claim were paid, incurred or
otherwise arose, and the nature of the misrepresentation or breach to which such
Adverse Consequences are related. The Indemnified Party shall act reasonably
and in good faith in preparing any such Officer's Indemnification Claim and in
specifying any alleged Adverse Consequences. If Sellers' Agent disputes the
claim, Sellers' Agent shall notify the Indemnified Party of such disagreement
within fifteen (15) days of the delivery by the Indemnified Party of the
Officer's Indemnification Claim. Thereupon, the Indemnified Party and the
Sellers' Agent will, during the thirty (30) day period following delivery of the
Officer's Indemnification Claim, negotiate in good faith to resolve their
differences with respect to the claim. If the parties fail to reach an
agreement prior to the expiration of such 30-day period, either party shall be
entitled to submit such claim to arbitration pursuant to Section 7.5 hereto.
7.5 Resolution of Conflicts: Arbitration.
------------------------------------
(a) If no agreement can be reached regarding a claim described in an
Officer's Indemnification Claim delivered pursuant to Section 7.4, either the
Indemnified Party or the Sellers' Agent may, by written notice to the other,
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained (provided that an indemnitee's
rights shall not be prejudiced by any delay in determining the amount of such
claim) or both parties agree to arbitration; and in either such event the matter
shall be settled by arbitration conducted by three arbitrators. Within fifteen
(15) days after such written notice is delivered, the Indemnified Party and
Seller's Agent shall each select one arbitrator, and thereafter the two
arbitrators so selected shall select a third arbitrator. The decision of the
majority of the arbitrators as to the validity and amount of any claim pursuant
to this Agreement shall be binding and conclusive upon the parties to this
Agreement.
(b) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in Delaware
under the commercial rules then in effect of the American Arbitration
Association. The costs of arbitration shall be borne by the party incurring
such costs.
7.6 Escrow. At the Closing, the Buyer shall deposit into a an escrow
------
account (the "ESCROW") the amount of $2,000,000, which fund shall be governed by
the provisions of this Agreement and the Escrow Agreement. The Escrow shall be
available to satisfy the indemnification obligations to the Indemnified Parties
pursuant to the terms of this Article VII, provided that such claims are made on
or before the third anniversary of the Closing Date or, if there are any pending
claims as of such date, the final resolution of all such pending claims.
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Acquisition abandoned at any time prior to the
Closing:
(a) by mutual written consent of the Company and the Buyer;
(b) by the Buyer or the Company if: (i) the Closing has not occurred
on or prior to the date 60 days from the date hereof (provided, however, that
such date shall be automatically extended where the failure to close is as a
result of obtaining HSR Clearance and the parties are continuing to pursue such
clearance); (ii) there shall be a final nonappealable order of a federal or
state court in effect preventing consummation of the Acquisition; or (iii) there
shall be any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Acquisition by any governmental entity that would
make consummation of the Acquisition illegal;
(c) by the Buyer if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Acquisition by any Governmental Entity, which would: (i) prohibit the
Buyer's or the Company's ownership or operation of all or a portion of the
Purchased Assets or (ii) compel the Buyer or the Company to dispose of or hold
separate all or a portion of the assets or business the Buyer as a result of the
Acquisition;
(d) by the Buyer if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company or the Shareholders and such breach has not been cured within five (5)
business days after delivery of written notice to the Company by the Buyer
(provided that no cure period shall be required for a breach which by its nature
cannot be cured);
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Parent and the Buyer and such breach has not been cured within five (5) business
days after delivery of written notice to the Parent and the Buyer by the Company
(provided that no cure period shall be required for a breach which by its nature
cannot be cured).
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Sections 8.1(a), 8.1(b) and 8.1(c), this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of the Parent, the Buyer, the Company, the Shareholders or their respective
officers, directors or stockholders, as applicable. In the event of termination
of this Agreement pursuant to Sections 8.1(d) or 8.1(e), then the Company and
the Shareholders in the former case and the
<PAGE>
Parent and the Buyer in the latter case shall remain liable for any breaches of
this Agreement prior to its termination. Notwithstanding anything to the
contrary, the provisions of Sections 4.2 (No Solicitation), 5.3
(Confidentiality), 5.4 (Expenses), this Section 8.2 and Article IX of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto at any
---------
time by execution of an instrument in writing signed on behalf of each of the
parties hereto.
8.4 Extension; Waiver. At any time prior to the Closing, the Buyer, on
-----------------
the one hand, and the Company and the Shareholders, on the other hand, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to the Parent or the Buyer, to:
Custom Chrome, Inc.
16100 Jacqueline Court
Morgan Hill, California 95037-5598
Attention: President
Telecopy No.: (408) 778-7001
Telephone No.: (408) 778-0500
<PAGE>
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Kenneth M. Siegel
Telecopy No.: (415) 493-6811
Telephone No.: (415) 493-9300
(b) if to the Company, to:
Chrome Specialties, Inc.
4200 Diplomacy Road
Fort Worth, Texas 76155
Telecopy No.: (817) 868-2077
Telephone No.: (817) 868-2000
with a copy to:
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Fort Worth, Texas 76102
Attention: Daniel L. Lowry
Telecopy No.: (817) 878-9287
Telephone No.: (817) 878-3583
(c) if to the Shareholders, to:
Seller's Agent
John Kuelbs
1285 Shady Oaks Drive
Southlake, Texas 76092
Telephone No.: (817) 481-2138
with a copy to:
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Fort Worth, Texas 76102
Attention: Daniel L. Lowry
Telecopy No.: (817) 878-9287
Telephone No.: (817) 878-3583
<PAGE>
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." 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.
9.3 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 to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that the Buyer may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
9.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware as applicable to parties
domiciled in Delaware and regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
9.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
<PAGE>
9.9 Certain Definitions. For the purposes of this Agreement, the terms
-------------------
set forth below shall have the following definitions:
(a) "ACCOUNTS RECEIVABLE" shall have the meaning set forth in Section
2.16(a) hereof.
(b) "ADJUSTED PURCHASE PRICE" shall have the meaning set forth in
Section 1.3 hereof.
(c) "ADVERSE CONSEQUENCES" shall have the meaning set forth in Section
7.2 hereof.
(d) "ALLOCATION" shall have the meaning set forth in Section 5.12(b)
hereof.
(e) "ASSUMED LIABILITIES" shall have the meaning set forth in Section
1.2 hereof.
(f) "BULK SALES LAWS" shall have the meaning set forth in Section 5.19
hereof.
(g) "BUYER'S CLOSING NET ASSETS CALCULATION" shall have the meaning
set forth in Section 5.11(a) hereof.
(h) "CLOSING" shall have the meaning set forth in Section 1.4 hereof.
(i) "CLOSING CERTIFICATE" shall have the meaning set forth in Section
5.11(a) hereof.
(j) "CLOSING DATE" shall have the meaning set forth in Section 1.4
hereof.
(k) "CLOSING NET ASSETS" shall have the meaning set forth in Section
5.11(a) hereof.
(l) "CODE" shall have the meaning set forth in Section 2.8(b)(ix)
hereof.
(m) "COMMON STOCK" shall have the meaning set forth in Section 2.2
hereof.
(n) "COMPANY INTELLECTUAL PROPERTY" shall have the meaning set forth
in Section 2.11 hereof.
(o) "COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 2.5 hereof.
(p) "COMPANY REAL PROPERTY" shall have the meaning set forth in
Section 2.10(a) hereof.
(q) "COMPANY TRANSACTION COSTS" shall have the meaning set forth in
Section 2.19 hereof.
<PAGE>
(r) "CONFLICT" shall have the meaning set forth in Section 2.4 hereof.
(s) "CONSULTING AGREEMENT" shall have the meaning set forth in Section
6.2(c) hereof.
(t) "CONTRACT" shall have the meaning set forth in Section 2.4 hereof.
(u) "CUSTOMER LISTS" shall have the meaning set forth in Section 2.26
hereof.
(v) "ENVIRONMENTAL PERMITS" shall have the meaning set forth in
Section 2.18(c) hereof.
(w) "ERISA" shall have the meaning set forth in Section 2.21(a)
hereof.
(x) "ESCROW" shall have the meaning set forth in Section 7.6 hereof.
(y) "ESCROW AGREEMENT" shall have the meaning set forth in Section
6.2(d) hereof.
(z) "ESTIMATED CASH PAYMENT" shall have the meaning set forth in
Section 1.3 hereof.
(aa) "ESTIMATED PURCHASE PRICE" shall have the meaning set forth in
Section 1.3 hereof.
(bb) "EXCLUDED ASSETS" shall have the meaning set forth in Section
1.1 hereof.
(cc) "FAMILY BUSINESS" shall have the meaning set forth in Section
5.13(b) hereof.
(dd) "FINAL CLOSING NET ASSETS" shall have the meaning set forth in
Section 5.11(a) hereof.
(ee) "GAAP" shall have the meaning set forth in Section 2.5 hereof.
(ff) "GOVERNMENT AUTHORIZATIONS" shall have the meaning set forth in
Section 2.13 hereof.
(gg) "GOVERNMENTAL ENTITY" shall have the meaning set forth in
Section 2.4 hereof.
(hh) "HARLEY-DAVIDSON LITIGATION" shall have the meaning set forth in
Section 2.14 hereof.
(ii) "HAZARDOUS MATERIAL" shall have the meaning set forth in Section
2.18(a) hereof.
<PAGE>
(jj) "HAZARDOUS MATERIALS ACTIVITIES" shall have the meaning set
forth in Section 2.18(b) hereof.
(kk) "HSR ACT" shall have the meaning set forth in Section 2.4
hereof.
(ll) "HSR NOTICES" shall have the meaning set forth in Section 5.14
hereof.
(mm) "INDEMNIFIED PARTY" shall have the meaning set forth in Section
7.2 hereof.
(nn) "INDEMNIFYING PARTY" shall have the meaning set forth in Section
7.1(b) hereof.
(oo) "INTERIM BALANCE SHEET" shall have the meaning set forth in
Section 2.5 hereof.
(pp) "INTERIM BALANCE SHEET DATE" shall have the meaning set forth in
Section 2.5 hereof.
(qq) "INTERIM FINANCIALS" shall have the meaning set forth in Section
2.5 hereof.
(rr) "INVENTORIES" shall have the meaning set forth in Section 2.15
hereof.
(ss) "IRS" shall have the meaning set forth in Section 2.21(a)
hereof.
(tt) "LIABILITY THRESHOLD" shall have the meaning set forth in
Section 7.1(b) hereof.
(uu) "LIEN" shall have the meaning set forth in Section 1.1 hereof.
(vv) "MATERIAL ADVERSE EFFECT" shall have the meaning set forth in
Section 2.1 hereof.
(ww) "MOTORCYCLE BUSINESS" shall have the meaning set forth in
Section 5.13(a) hereof.
(xx) "OFFICER'S INDEMNIFICATION CLAIM" shall have the meaning set
forth in Section 7.4 hereof.
(yy) "PLANS" shall have the meaning set forth in Section 2.21(a)
hereof.
(zz) "PURCHASE PRICE ADJUSTMENT NOTICE" shall have the meaning set
forth in Section 5.11(a) hereof.
(aaa) "PURCHASED ASSETS" shall have the meaning set forth in Section
1.1 hereof.
<PAGE>
(bbb) "RELATED AGREEMENTS" shall have the meaning set forth in Section
2.28(a) hereof.
(ccc) "RETURNS" shall have the meaning set forth in Section 2.8(b)(i)
hereof.
(ddd) "SELLER NOTICE" shall have the meaning set forth in Section
5.11(b) hereof.
(eee) "SELLERS' AGENT" shall have the meaning set forth in Section 7.4
hereof.
(fff) "SELLERS' CLOSING NET ASSETS CALCULATION" shall have the meaning
set forth in Section 5.11(a) hereof.
(ggg) "TAX" and "TAXES" shall have the meaning set forth in Section
2.8(a) hereof.
(hhh) "THIRD PARTY CLAIM" shall have the meaning set forth in Section
7.3(a) hereof.
(iii) "THIRD PARTY EXPENSES" shall have the meaning set forth in
Section 5.4 hereof.
(jjj) "VENDOR LISTS" shall have the meaning set forth in Section 2.26
hereof.
(kkk) "YEAR-END FINANCIALS" shall have the meaning set forth in
Section 2.5 hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
CUSTOM CHROME, INC.
By: /s/ Ignatius Panzica
------------------------------
Name: Ignatius Panzica
Title: Chairman, President and CEO
CSI ACQUISITION CORPORATION
By: /s/ Ignatius Panzica
-----------------------------
Name: Ignatius Panzica
Title: Chairman, President and CEO
CHROME SPECIALTIES, INC.
By: /s/ John Kuelbs
------------------------------
Name: John Kuelbs
-----------------------------
Title: President
-----------------------------
SHAREHOLDERS
/s/ John Kuelbs
- -----------------------------------
John Kuelbs
Address: 1285 Shady Oaks Drive
Southlake, Texas 76092
/s/ Greg Kuelbs
----------------------------------
Greg Kuelbs
Address: 500 Davis Boulevard
Southlake, Texas 76092
<PAGE>
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (the "Amendment") to the Asset Acquisition Agreement
dated as of August 8, 1997 (the "Acquisition Agreement") between Global
Motorsport Group, Inc. (formerly "Custom Chrome, Inc."), a Delaware corporation
("GMG"), CSI Acquisition Sub, Inc., a Delaware corporation and wholly-owned
subsidiary of GMG ("Sub"), Chrome Specialties, Inc., a Texas corporation
("CSI"), John Kuelbs and Greg Kuelbs is effective as of September 5, 1997 by and
between GMG, Sub, CSI, John Kuelbs and Greg Kuelbs.
RECITALS
A. The parties hereto entered into the Acquisition Agreement providing
for purchase of substantially all of the assets of CSI by Sub.
B. On July 31, 1997, Custom Chrome, Inc. changed its name to "Global
Motorsport Group, Inc."
C. The parties hereto desire to amend the Acquisition Agreement to
replace all references to "Custom Chrome, Inc." with "Global Motorsport Group,
Inc." as set forth in this Amendment.
NOW, THEREFORE, the parties hereby agree to amend the Acquisition Agreement
as follows:
1. The first paragraph of the Acquisition Agreement is amended and
restated to read as follows:
"This ASSET ACQUISITION AGREEMENT (the "AGREEMENT") is made and entered
into as of August 8, 1997 among Global Motorsport Group, Inc., a Delaware
corporation (the "PARENT"), CSI Acquisition Sub, Inc., a Delaware
corporation (the "BUYER"), the Chrome Specialties, Inc., a Texas
corporation (the "COMPANY"), and the holders of all outstanding capital
stock of the Company (the "SHAREHOLDERS")."
2. Section 9.1(a) of the Acquisition Agreement is amended and restated to
read as follows:
"(a) if to the Parent or the Buyer, to:
Global Motorsport Group, Inc.
16100 Jacqueline Court
Morgan Hill, California 95037-5598
Attention: President
Telecopy No.: (408) 778-7001
Telephone No.: (408) 778-0500
<PAGE>
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Kenneth M. Siegel
Telecopy No: (415) 493-6811
Telephone No.: (415) 493-9300
3. The reference to "Custom Chrome, Inc." in the signature block is
hereby amended to state "Global Motorsport Group, Inc." and the reference to
"CSI Acquisition Corporation" in the signature block is hereby amended to state
"CSI Acquisition Sub, Inc."
4. Schedule 1.2 to the Agreement is amended and restated to read as set
forth in Exhibit A. hereto.*
5. This Amendment shall be governed by Delaware law and may be executed
in counterparts each of which shall be deemed an original and all of which shall
constitute one instrument.
6. Except as expressly amended in this Amendment, all provisions of the
Acquisition Agreement shall remain in full force and effect.
*This exhibit has been omitted in accordance with Item 601(b)(2) under
Regulation S-K. The Registrant will furnish supplementally a copy of this
exhibit upon request of the Securities and Exchange Commission.
<PAGE>
IN WITNESS WHEREOF, the parties execute this Amendment as of the date
referred to above.
GLOBAL MOTORSPORT GROUP, INC.
(FORMERLY KNOWN AS CUSTOM CHROME, INC.)
By: /s/ Ignatius Panzica
-------------------------------------------
Ignatius Panzica
Chairman, President and CEO
CSI ACQUISITION SUB, INC.
By: /s/ Ignatius Panzica
-------------------------------------------
Ignatius Panzica
Chairman, President and CEO
CHROME SPECIALTIES, INC.
By: /s/ John Kuelbs
---------------------------------------------
John Kuelbs
President
SHAREHOLDERS
/s/ John Kuelbs
---------------------------------------------
John Kuelbs
Address: 1285 Shady Oaks Drive
Southlake, Texas 76092
/s/ Greg Kuelbs
---------------------------------------------
Greg Kuelbs
Address: 500 Davis Boulevard
Southlake, Texas 76092
<PAGE>
EXHIBIT 24.1
We consent to the incorporation by reference in the Registration
Statements (Forms S-8 Nos. 333-12891, 33-80095, 33-78912, 33-47223) pertaining
to the Custom Chrome, Inc. 1996 Employee Stock Purchase Plan, the 1995 Stock
Option Plan of Custom Chrome, Inc., the Custom Chrome, Inc. 1991 Stock Option
Plan, and the Custom Chrome, Inc. 1991 Stock Option Plan, respectively, of our
report dated December 13, 1996, with respect to the financial statements of
Chrome Specialties, Inc. included in the Current Report on Form 8-K of Global
Motorsport Group, Inc. as filed on September 24, 1997.
Ernst & Young LLP
Dallas, Texas
September 22, 1997
