SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
MERIDIAN SPORTS INCORPORATED
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii) or 14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Filing fee: $5,060.00. Fee determined pursuant to Rule 0-11(c)(2)
based upon bona fide estimate of aggregate proceeds to the Company of
$25,300,000 upon the sale of substantially all of its assets.
(4) Proposed maximum aggregate value of transaction:
$25,300,000
(5) Total fee paid:
$5,060.00
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
_______________________________________________
(2) Form, Schedule or Registration Statement No.:
_______________________________________________
(3) Filing Party:
_______________________________________________
(4) Date Filed:
_______________________________________________
MERIDIAN SPORTS INCORPORATED
625 MADISON AVENUE
NEW YORK, NEW YORK 10022
(212) 527-4413
INFORMATION STATEMENT
INTRODUCTION
This Information Statement is being furnished to holders of shares of
common stock, par value $.01 per share (the "Common Stock"), of Meridian Sports
Incorporated, a Delaware corporation (the "Company"), in connection with the
irrevocable written consent of Meridian Sports Holdings Incorporated, the
holder of approximately 65% of the Company's outstanding Common Stock, to the
sale (the "Proposed Sale") to Brunswick Corporation, a Delaware corporation
(the "Purchaser"), and one of the Purchaser's subsidiaries, of the business
(the "Boston Whaler Business") of Boston Whaler, Inc., a Massachusetts
corporation and a wholly owned subsidiary of the Company ("Boston Whaler"),
relating primarily to the manufacture, marketing and sale of Boston Whaler
sport fishing and recreational boats, and the sale of all of the capital stock
of E.W. Driessen B.V., a corporation organized under the laws of the
Netherlands and a wholly owned subsidiary of Boston Whaler ("Driessen"),
pursuant to an Asset Purchase Agreement, dated as of March 29, 1996 (the "Asset
Purchase Agreement"), by and among the Company, Boston Whaler, the Purchaser
and a subsidiary of the Purchaser for $25,300,000 in cash (subject to
adjustment), and the assumption by the Purchaser of certain liabilities
relating to the Boston Whaler Business. This Information Statement is
furnished for information purposes only. THE COMPANY IS NOT ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The Asset Purchase Agreement provides for the sale by Boston Whaler to
the Purchaser of the Boston Whaler Business for an aggregate consideration
equal to (i) $25,300,000 in cash, subject to adjustment based on the Closing
Net Tangible Equity (as defined in "The Asset Purchase Agreement--Purchase
Price") of the Boston Whaler Business (the "Purchase Price"), and (ii) the
assumption of certain liabilities related to the Boston Whaler Business (the
"Assumed Liabilities"), as more fully described in this Information Statement.
See "The Asset Purchase Agreement--Purchase Price." A copy of the Asset
Purchase Agreement is attached hereto as Annex A.
This Information Statement is first being mailed to stockholders on or
about May 9, 1996.
THE PROPOSED SALE IS CONDITIONED UPON, AMONG OTHER THINGS, THE SECURING
OF ALL NECESSARY GOVERNMENTAL APPROVALS AND CONSENTS. THERE CAN BE NO
ASSURANCE THAT THE CONDITIONS TO THE PROPOSED SALE WILL BE SATISFIED OR WAIVED
AND THAT THE PROPOSED SALE WILL BE CONSUMMATED. SEE "THE ASSET PURCHASE
AGREEMENT--CONDITIONS" AND "THE PROPOSED SALE--REGULATORY MATTERS."
Since the Proposed Sale involves a sale of assets, the stockholders of
the Company will retain their equity interest in the Company following its
consummation, which will continue to operate its other businesses and will have
received the proceeds from the Proposed Sale. See "The Asset Purchase
Agreement--Business to Be Sold" and "The Proposed Sale--Use of Proceeds;
Conduct of Business Following the Proposed Sale."
THE INFORMATION CONTAINED HEREIN UNDER "SUMMARY--THE COMPANIES--
BRUNSWICK CORPORATION" AND "CERTAIN INFORMATION CONCERNING THE PURCHASER" HAS
BEEN SUPPLIED BY THE PURCHASER. NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
INFORMATION STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER
PERSON.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material also can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates. The Common Stock is traded on the Nasdaq National
Market. Reports and other information concerning the Company may be inspected
at the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
ii
TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . i
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . ii
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Companies. . . . . . . . . . . . . . . . . . . . . . 1
The Stockholder Consent. . . . . . . . . . . . . . . . . 1
The Proposed Sale. . . . . . . . . . . . . . . . . . . . 2
THE STOCKHOLDER CONSENT. . . . . . . . . . . . . . . . . . . . . 7
THE PROPOSED SALE. . . . . . . . . . . . . . . . . . . . . . . . 7
Background of the Proposed Sale. . . . . . . . . . . . . 7
Opinion of CS First Boston . . . . . . . . . . . . . . . 9
Approval of the Board of Directors; Reasons for the
Proposed Sale . . . . . . . . . . . . . . . . . . . . 13
Use of Proceeds; Conduct of Business Following the
Proposed Sale . . . . . . . . . . . . . . . . . . . . 14
Certain Tax Consequences . . . . . . . . . . . . . . . . 15
Regulatory Matters . . . . . . . . . . . . . . . . . . . 15
Interests of Certain Persons in the Proposed Sale. . . . 16
Accounting Treatment . . . . . . . . . . . . . . . . . . 16
No Appraisal Rights. . . . . . . . . . . . . . . . . . . 16
THE ASSET PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . 17
Business to Be Sold. . . . . . . . . . . . . . . . . . . 17
Purchase Price . . . . . . . . . . . . . . . . . . . . . 20
Representations and Warranties . . . . . . . . . . . . . 22
Certain Covenants. . . . . . . . . . . . . . . . . . . . 22
Exclusivity. . . . . . . . . . . . . . . . . . . . . . . 23
Employment and Employee Benefit Plans. . . . . . . . . . 23
Non-Competition. . . . . . . . . . . . . . . . . . . . . 25
Conditions . . . . . . . . . . . . . . . . . . . . . . . 25
Termination. . . . . . . . . . . . . . . . . . . . . . . 26
Indemnification. . . . . . . . . . . . . . . . . . . . . 26
CERTAIN INFORMATION CONCERNING THE PURCHASER . . . . . . . . . . 27
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . 28
SELECTED HISTORICAL FINANCIAL INFORMATION. . . . . . . . . . . . 32
RECENT DEVELOPMENTS. . . . . . . . . . . . . . . . . . . . . . . 35
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . 36
MARKET PRICE DATA. . . . . . . . . . . . . . . . . . . . . . . . 37
INCORPORATION OF THE ANNUAL REPORT BY REFERENCE . . . . . . . . 37
Annexes
A. Asset Purchase Agreement . . . . . . . . . . . . . . A-1
B. Opinion of CS First Boston Corporation . . . . . . . B-1
iii
SUMMARY
The following is a summary of certain information contained elsewhere
in this Information Statement. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in this
Information Statement and the Annexes hereto. Unless the context otherwise
requires, references in this Information Statement to the "Company" shall be
deemed to refer to the Company together with its subsidiaries and references in
this Information Statement to the "Purchaser" shall be deemed to refer to the
Purchaser together with its subsidiaries. Unless otherwise defined herein,
capitalized terms used in this summary have the respective meanings ascribed to
them elsewhere in this Information Statement. Stockholders are urged to read
this Information Statement and the Annexes hereto in their entirety.
THE COMPANIES
Meridian Sports
Incorporated . . . . . . Meridian Sports Incorporated is a holding
company which conducts its operations through
its wholly owned subsidiaries. The Company is
a designer, manufacturer and marketer of
specialized boats and water sports equipment
targeted principally at boating, fishing,
waterskiing and scuba enthusiasts and sold
under such well-known brand names as Boston
Whaler, MasterCraft, and O'Brien. The
principal executive offices of the Company are
located at 625 Madison Avenue, New York, New
York 10022, and its telephone number is (212)
527-4413.
Brunswick Corporation. . Brunswick Corporation is a multinational
company with leadership positions in marine
power, pleasure boating and recreation. The
principal executive offices of Brunswick
Corporation are located at 1 North Field Court,
Lake Forest, Illinois 60045-4811, and its
telephone number is (847) 735-4700.
THE STOCKHOLDER CONSENT
Consent Required . . . . Pursuant to Section 271 of the Delaware General
Corporation Law (the "DGCL"), the written
consent of the holders of a majority of the
shares of Common Stock outstanding and entitled
to vote is required to approve the Proposed
Sale. Meridian Sports Holdings Incorporated
("Meridian Holdings"), the holder of
approximately 65% of the outstanding Common
Stock, has irrevocably consented in writing to
the Proposed Sale, which consent satisfies the
Section 271 require-
1
ment. The granting by Meridian Holdings of
such consent was required as a condition to the
Purchaser's willingness to enter into the Asset
Purchase Agreement. See "The Stockholder
Consent."
THE PROPOSED SALE
Business to Be Sold. . . Pursuant to the Asset Purchase Agreement, the
Company has agreed to sell the Boston Whaler
Business, including all of the capital stock of
Driessen, to the Purchaser. The Boston Whaler
Business relates primarily to the manufacture,
marketing and sale of Boston Whaler sport
fishing and recreational boats, including the
business of Driessen. See "The Asset Purchase
Agreement--Business to Be Sold."
Purchase Price . . . . . The Asset Purchase Agreement provides for the
sale by Boston Whaler to the Purchaser of the
Boston Whaler Business for an aggregate
consideration equal to (i) the Purchase Price
of $25,300,000 in cash (subject to adjustment)
and (ii) the assumption by the Purchaser of the
Assumed Liabilities, all as more fully
described in this Information Statement. The
Purchaser shall place $1,250,000 of the
Purchase Price in escrow for twenty-four months
following the date of Closing (the "Closing
Date") as security for the Company's
indemnification obligations under the Asset
Purchase Agreement.
On the Closing Date, the amount of the Purchase
Price will be adjusted to the extent that the
Most Recent Net Tangible Equity (which will be
determined based on the sum of (i) the amount
of the tangible assets included in the
Purchased Assets reduced by the amount of the
Assumed Liabilities reflected on a balance
sheet of the Boston Whaler Business as of the
end of the calendar month immediately preceding
the Closing Date, plus (ii) the net worth of
Driessen determined in accordance with
generally accepted accounting principles
("GAAP") as of such balance sheet date) is
greater or less than $16,222,000.
Within forty-five days following the Closing
Date, Boston Whaler will deliver to the
Purchaser a schedule (the "Closing Schedule")
setting forth the Closing Net Tangible Equity
(which will be determined based on the
2
sum of (i) the amount of the tangible assets
included in the Purchased Assets reduced by the
amount of the Assumed Liabilities reflected on
the Closing Schedule, plus (ii) the net worth
of Driessen determined in accordance with GAAP
as of the Closing Date). The Purchase Price,
as previously adjusted on the Closing Date,
will be adjusted to the extent that the Closing
Net Tangible Equity is greater or less than the
Most Recent Net Tangible Equity. If the Most
Recent Net Tangible Equity had been determined
by reference to Boston Whaler's balance sheet
as of March 31, 1996, the Purchase Price at the
Closing would have been approximately $26.5
million. The actual Purchase Price at the
Closing and the final Purchase Price will
depend on changes to Boston Whaler's Net
Tangible Equity following December 31, 1995
through the relevant determination date
(principally related to Boston Whaler's interim
operating results) and may be higher or lower
than such amount.
See "The Asset Purchase Agreement--Purchase
Price."
Closing of the Proposed
Sale . . . . . . . . . . The consummation of the Proposed Sale (the
"Closing") will occur on May 31, 1996 or, if
later, at least five business days following
the satisfaction or waiver of conditions
contained in the Asset Purchase Agreement.
See "The Asset Purchase Agreement."
Approval by the Board
of Directors . . . . . . The Board of Directors believes that the
Proposed Sale is expedient and for the best
interests of the Company, and has approved the
Asset Purchase Agreement. The Board of
Directors' approval of the Proposed Sale is
based upon a number of factors described in
this Information Statement. See "The Proposed
Sale--Approval by the Board of Directors;
Reasons for the Proposed Sale" and "The
Proposed Sale--Interests of Certain Persons in
the Proposed Sale."
Opinion of CS First Boston CS First Boston Corporation ("CS First Boston")
was engaged to render an opinion as to the
fairness from a financial point of view of the
consideration to be received by the Company
pursuant to the Asset Purchase Agreement. On
March 25, 1996, the date the Board of Directors
approved the Asset Purchase Agree-
3
ment, CS First Boston delivered to the Board of
Directors its oral opinion to the effect that,
as of the date of its opinion and subject to
the assumptions made, matters considered and
limits of the review undertaken, as set forth
in such opinion, the consideration to be
received by the Company pursuant to the Asset
Purchase Agreement is fair from a financial
point of view to the Company.
In connection with the mailing of this
Information Statement, CS First Boston
delivered an updated opinion to the Board of
Directors dated the date of this Information
Statement, which opinion confirmed its earlier
opinion and which is substantially similar to
its oral opinion delivered on March 25, 1996.
A copy of the updated opinion of CS First
Boston is attached to this Information
Statement as Annex B. The attached opinion
sets forth the assumptions made, matters
considered, the scope and limitations of the
review undertaken and procedures followed by CS
First Boston, and should be read in its
entirety. See "The Proposed Sale--Opinion of
CS First Boston."
Use of Proceeds; Conduct
of Business Following the
Proposed Sale. . . . . . All of the proceeds from the Proposed Sale will
be used to repay outstanding indebtedness of
the Company, including indebtedness owed to an
affiliate of Meridian Holdings under a
subordinated credit facility.
Following consummation of the Proposed Sale,
the Company intends to continue to operate its
remaining businesses while looking for ways to
redeploy its assets, which may include a
disposition of the Company's O'Brien water
sports equipment and/or Soniform scuba
equipment businesses.
See "The Proposed Sale--Use of Proceeds;
Conduct of Business Following the Proposed
Sale."
Certain Tax Consequences The Proposed Sale will be a taxable transaction
to the Company for United States Federal income
tax purposes. It is anticipated, however, that
for United States Federal income tax purposes,
any taxable income of the Company that is
attributable to the Proposed Sale will
4
be substantially offset by net operating loss
carryforwards or other tax attributes of the
Company.
Conditions to the Proposed
Sale . . . . . . . . . . The obligations of the Company and the
Purchaser to consummate the Proposed Sale are
subject to the satisfaction or waiver of
certain conditions customary to a transaction
of this nature, including, among others, the
occurrence of certain events described in "The
Proposed Sale--Regulatory Matters;" obtaining
all governmental approvals; the absence of
orders of any court or governmental entity that
enjoin, restrain or prohibit the Asset Purchase
Agreement or the consummation of the
transactions contemplated by the Asset Purchase
Agreement; the absence of any action of any
government entity pending or threatened that
seeks to enjoin, restrain, prohibit or obtain
damages with respect to the Asset Purchase
Agreement or the consummation of the
transactions contemplated by the Asset Purchase
Agreement; and since December 31, 1995, none of
the Company, the Purchased Assets, Driessen or
the Boston Whaler Business having experienced a
material adverse change.
See "The Asset Purchase Agreement--Conditions."
Regulatory Matters . . . The Company and the Purchaser each filed
notification and report forms under the Hart-
Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and the
applicable waiting period under the HSR Act is
expected to expire on May 12, 1996, unless
earlier terminated or extended.
See "The Proposed Sale--Regulatory Matters."
Termination. . . . . . . The Asset Purchase Agreement may be terminated
in certain circumstances, including the
following: (i) by mutual consent of the
Company and the Purchaser; (ii) automatically,
without further action of the parties if the
Closing does not occur on or before July 31,
1996; (iii) by either the Company or the
Purchaser, if any court or other governmental
body shall have issued a final order or taken
any other action permanently restraining,
enjoining or otherwise prohibiting the
transactions contemplated by the Asset Purchase
Agreement; or (iv) by either the Company or the
Purchaser,
5
APITAL PRINTING SYSTEMS]
if there shall have been a material breach of
any covenant, representation or warranty set
forth in the Asset Purchase Agreement which has
not been remedied within 10 business days after
notice of the breach from the non-breaching
party.
See "The Asset Purchase Agreement--
Termination."
Interests of Certain Persons
in the Proposed Sale. . . . For information relating to the interests of
certain persons in the Proposed Sale, see "The
Proposed Sale--Interests of Certain Persons in
the Proposed Sale."
Accounting Treatment . . . In accordance with GAAP, the results of the
Boston Whaler Business will be included in the
results of the Company through the Closing
Date. Any gain or loss on the disposition will
be recognized as of the Closing Date. See "The
Proposed Sale--Accounting Treatment."
No Appraisal Rights. . . Under the DGCL, holders of shares of Common
Stock will not be entitled to appraisal rights
in connection with the Proposed Sale.
6
THE STOCKHOLDER CONSENT
Section 271 of the DGCL permits a Delaware corporation to sell all or
substantially all of its assets if the sale is approved by stockholders holding
a majority of the shares entitled to vote thereon. Although it is not certain
that the Proposed Sale necessarily constitutes a sale of all or substantially
all of the Company's assets, the Board of Directors has concluded that such
approval by the stockholders of the Proposed Sale should be obtained.
Meridian Holdings, an indirect wholly owned subsidiary of MacAndrews &
Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned
through Mafco Holdings Inc. ("Holdings" and together with MacAndrews Holdings,
"MacAndrews & Forbes") by Ronald O. Perelman, Chairman of the Board of
Directors of the Company, owns approximately 65% of the outstanding Common
Stock. In order to satisfy a condition to the Purchaser's willingness to enter
into the Asset Purchase Agreement, Meridian Holdings irrevocably consented in
writing to the adoption of the Asset Purchase Agreement and the Proposed Sale
pursuant to Section 228 of the DGCL. This written consent also satisfies the
Section 271 stockholder approval requirement. Accordingly, no vote of any
other stockholder is necessary and stockholder votes are not being solicited.
Subject to the terms and conditions of the Asset Purchase Agreement, it
is contemplated that the Proposed Sale will be consummated not earlier than 20
days after the mailing of this Information Statement and following satisfaction
or waiver of the conditions contained in the Asset Purchase Agreement. See
"The Asset Purchase Agreement--Conditions." This Information Statement is
first being mailed to stockholders on May 9, 1996.
THE PROPOSED SALE
BACKGROUND OF THE PROPOSED SALE
The Company was incorporated in Delaware in 1994 in connection with an
initial public offering of its Common Stock to hold the water sports businesses
owned by Meridian Holdings (the "Water Sports Businesses") and to hold the
capital stock of Boston Whaler. Meridian Holdings is an indirect wholly owned
subsidiary of MacAndrews & Forbes.
On October 19, 1994, the Company completed an initial public offering
(the "IPO") in which it issued and sold 2,800,000 shares of its Common Stock
for $11.00 per share. The IPO reduced MacAndrews & Forbes' ownership interest
in the Company to approximately 65%.
During the second half of 1995, the Board of Directors and the
Company's management began an evaluation of the Company's strategic
alternatives in light of market and other conditions. This process was
accelerated when it became apparent that the magnitude of the problems relating
to the Company's WetJet personal watercraft business would require the
7
funding of significant restructuring costs and would cause a deterioration of
the Company's financial ratios below those required by the Company's senior
indebtedness. It was determined in light of such developments that there
should be a significant reduction of the Company's outstanding senior
indebtedness and that these concurrent liquidity demands should be funded
through, among other things, a disposition of certain of the Company's
businesses.
In order to obtain additional liquidity, in January 1996, the Company
entered into a Subordinated Credit Facility with an affiliate of Meridian
Holdings (the "Subordinated Facility"). Initially, the Subordinated Facility
provided for borrowings on a revolving basis of up to $12.5 million. The
borrowings under the Subordinated Facility bear interest at the prime rate and
mature in 1997.
On January 31, 1996, the Company sold (the "Skeeter Sale") all of the
outstanding capital stock of Skeeter Products, Inc. ("Skeeter") to Yamaha Motor
Corporation, U.S.A. ("Yamaha") and received cash proceeds of approximately
$37.5 million (subject to adjustment), of which $2.7 million was placed in
escrow, pending a final determination of the net assets sold to Yamaha. The
final determination is expected to result in an adjustment in favor of Yamaha
in an amount at least equal to the escrow amount. On May 3, 1996, Yamaha
notified the Company of its calculation of the net assets sold pursuant to the
Skeeter Sale and its request, according to such calculation, that the Company
make a payment to Yamaha in the amount of approximately $1.38 million plus the
return of the escrow fund as an adjustment to the purchase price. The Company
and its auditors are in the process of reviewing Yamaha's calculations.
The Company used approximately $31.6 million of the proceeds from the
Skeeter Sale to repay borrowings under its senior credit agreement (the "Credit
Agreement") and approximately $3.2 million of such proceeds to repay borrowings
under the Subordinated Facility. In connection with the Skeeter Sale, the
availability for borrowings under the Credit Agreement was reduced to
approximately $24.3 million and the availability for borrowings under the
Subordinated Facility was reduced to approximately $6.1 million.
In connection with its consideration of the Skeeter Sale, the Company
held preliminary discussions with the Purchaser and Yamaha concerning the
possibility of the Purchaser or Yamaha acquiring Skeeter and with the Purchaser
concerning the possibility of the Purchaser acquiring both Skeeter and Boston
Whaler. The Company determined to sell Skeeter to Yamaha. Following
consummation of the Skeeter Sale, the Company and the Purchaser renewed their
discussions on the basis of a sale of Boston Whaler's assets to the Purchaser.
These discussions continued throughout the month of March 1996.
On March 25, 1996, the Board of Directors met to consider the Proposed
Sale. At this meeting, CS First Boston made a presentation regarding the
fairness of the financial terms of the Proposed Sale and responded to questions
from the Board of Directors. The Company's senior management and legal counsel
made a presentation regarding the status of the negotiations of the Asset
Purchase Agreement and the remaining open issues. After further deliberation,
at that meeting, the Board of Directors, making reference to the material
referred to below under
8
"Approval of the Board of Directors; Reasons for the Proposed Sale", determined
that the Proposed Sale is expedient and for the best interests of the Company
and voted to approve the Asset Purchase Agreement and the Proposed Sale,
subject to a satisfactory resolution of certain open issues.
Discussions between the parties continued until the evening of March
29, 1996, at which time the Asset Purchase Agreement was executed and delivered
by the parties. In addition, on such date, as required by the Purchaser in
connection with the execution of the Asset Purchase Agreement, Meridian
Holdings executed and delivered its written consent to the Proposed Sale and
agreed with the Purchaser not to revoke such consent.
OPINION OF CS FIRST BOSTON
At the meeting of the Board of Directors held on March 25, 1996, CS
First Boston delivered its oral opinion (subsequently confirmed in writing) to
the effect that based upon the assumptions made, matters considered and limits
of the review undertaken, as set forth in such opinion, the consideration to be
received by the Company in the Proposed Sale is fair to the Company from a
financial point of view. The Company retained CS First Boston to render a
fairness opinion in connection with the Proposed Sale based upon CS First
Boston's qualifications, expertise and reputation, as well as CS First Boston's
prior investment banking relationship and familiarity with the Company.
The full text of CS First Boston's written opinion dated the date of
this Information Statement is attached hereto as Annex B to this Information
Statement and is incorporated herein by reference. Stockholders of the Company
are urged to, and should, read the opinion carefully and in its entirety for
the assumptions made, matters considered and limits of the review undertaken by
CS First Boston. CS First Boston's opinion is directed to the Board of
Directors and only to the fairness of the consideration to be received by the
Company in the Proposed Sale and does not address any other aspect of the
Proposed Sale, including the Company's use of the sale proceeds, nor does it
constitute a recommendation to any holder of Common Stock. Although the
Company believes that the summary describes the material portions thereof, such
summary of the opinion of CS First Boston set forth herein is qualified in its
entirety by reference to the full text of such opinion.
In arriving at its opinion, CS First Boston reviewed the Asset Purchase
Agreement and certain publicly available business and financial information
relating to the Company and the Boston Whaler Business. CS First Boston also
reviewed certain other information, including financial forecasts, furnished to
CS First Boston by the Company and discussed the business and prospects of the
Boston Whaler Business with the Company's and Boston Whaler's managements. In
addition, CS First Boston also considered certain financial data of the Boston
Whaler Business, and compared that data with stock market data for publicly
held companies in businesses similar to those of Boston Whaler and considered
the financial terms of certain other business combinations and other
transactions which have recently been effected. CS First Boston
9
also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which it deemed
relevant.
In connection with its review, CS First Boston did not assume any
responsibility for independent verification of any of the foregoing information
and relied on its being complete and accurate in all material aspects. With
respect to the financial forecasts, CS First Boston assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company's and Boston Whaler's managements as to the future
financial performance of the Boston Whaler Business. In addition, CS First
Boston did not make an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Boston Whaler Business, nor was it
furnished with any such evaluations or appraisals. CS First Boston's opinion
was necessarily based upon financial, economic, market or other conditions as
they existed and could be evaluated on the date of the opinion. In connection
with its engagement, CS First Boston was not requested to, and did not, solicit
third party indications of interest in acquiring the Boston Whaler Business.
In addition, although CS First Boston evaluated the fairness of the
consideration to be received by the Company from a financial point of view, CS
First Boston was not asked to and did not recommend the form or amount of
consideration payable in the Proposed Sale.
In arriving at its opinion and making its presentation to the Board of
Directors, CS First Boston performed a variety of financial analyses, including
those summarized below. The summary set forth below includes certain of the
financial analyses discussed by CS First Boston with the Board of Directors,
but does not purport to be a complete description of the analyses performed by
CS First Boston in arriving at its opinion. Arriving at a fairness opinion is
a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion
is not necessarily susceptible to partial analysis or summary description. CS
First Boston believes that its analyses must be considered as a whole and that
selecting portions of its analyses or portions of the factors considered by it,
without considering all analyses and factors, could create an incomplete view
of the evaluation process underlying its opinion. In performing its analyses,
CS First Boston made numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of the Company or Boston Whaler. Any
estimates incorporated in the analyses performed by CS First Boston are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the value of businesses and securities neither
purport to be appraisals nor necessarily reflect the prices at which businesses
or securities may actually be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty. No public company utilized
as a comparison is identical to Boston Whaler, and none of the similar
transactions utilized as a comparison is identical to the Proposed Sale.
Accordingly, an analysis of publicly traded comparable companies and comparable
acquisition transactions is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies or the companies involved in
comparable acquisition transactions and
10
other factors that could affect the public trading value of the comparable
companies or company or transaction to which they are being compared.
CS First Boston is an internationally recognized investment banking
advisory firm. As part of its investment banking business, CS First Boston is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. In the ordinary course of
business, CS First Boston and its affiliates may actively trade the debt and
equity securities of the Company and the Purchaser for their own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities. In the past, CS First Boston has performed
certain investment banking services for the Company, MacAndrews & Forbes and
certain of its affiliates, and has received customary fees for such services,
including the delivery of a fairness opinion to the Board of Directors in
connection with the Skeeter Sale for which CS First Boston received a fee.
The following is a summary of the analyses performed by CS First Boston
in connection with its fairness opinion.
Discounted Cash Flow Analysis. CS First Boston calculated the
estimated unlevered after-tax cash flows that the Boston Whaler Business could
be expected to generate using management's projections of future financial
performance for 1996 and projections developed by CS First Boston, after
discussions with management, for the period from January 1, 1997 through
December 31, 2005. Using these projections, CS First Boston then calculated
estimated terminal values at the end of the ten-year projection period by
applying multiples ranging from 4.5x to 5.5x (based on the way businesses such
as Boston Whaler are defined in the public and private markets) to projected
2005 operating cash flow (defined as operating income plus depreciation and
amortization ("EBITDA")). The unlevered cash flows for the projected period
and the range of terminal values were then discounted using annual discount
rates ranging from 12.0% to 12.5% (chosen to reflect the weighted average cost
of capital of businesses such as Boston Whaler) to imply a hypothetical
enterprise value for Boston Whaler. Three cases were calculated: a base case,
an upside case and a downside case. The upside case assumed higher unit volume
growth and operating margins. The downside case assumed lower unit volume
growth and operating margins. The discounted cash flow analysis indicated a
hypothetical enterprise value for Boston Whaler of between $20.9 million to
$24.1 million for the base case, a hypothetical enterprise value for Boston
Whaler of between $22.5 million to $26.1 million for the upside case, and a
hypothetical enterprise value for Boston Whaler of between $18.3 million to
$21.0 million for the downside case.
Comparable Companies Analysis. CS First Boston reviewed certain
publicly available historical information for the period from January 1, 1995
to December 31, 1995 and projected 1996 financial results (reflecting a
composite of research analysts' estimates) of certain boat and related business
manufacturers considered by CS First Boston to be reasonably comparable to
Boston Whaler, including the Company, the Purchaser and Outboard Marine
Corporation. This
11
analysis indicated that (i) an appropriate enterprise value multiple range for
Boston Whaler based on the comparable companies for fiscal year 1996 estimated
EBITDA ranged from 4.0x to 5.0x and for fiscal year 1996 estimated earnings
before interest and taxes ("EBIT") ranged from 6.5x to 7.5x, and (ii) an
appropriate equity value multiple range for Boston Whaler based on the
comparable companies for fiscal year 1996 estimated earnings ranged from 10.0x
to 12.0x. CS First Boston then applied these comparable companies' multiple
ranges to Boston Whaler's projected 1996 financial performance to imply a
hypothetical enterprise value for Boston Whaler. The comparable companies
analysis indicated a hypothetical enterprise value for Boston Whaler of between
$18.0 million to $22.0 million.
Comparable Acquisitions Analysis. CS First Boston reviewed the
acquisition multiples of companies considered by CS First Boston to be
reasonably comparable to Boston Whaler that were the target companies in
certain recent transactions involving partial or complete acquisitions. The
comparable transactions involved transactions for target companies in the
boating and related industries. CS First Boston calculated certain multiples
(including sales, EBITDA, and operating income) of the prices paid in such
acquisitions and applied such multiples to Boston Whaler's 1995 financial
results to imply a hypothetical enterprise value for Boston Whaler. The
comparable acquisitions analysis indicated a hypothetical enterprise value for
Boston Whaler of between $20.0 million to $27.0 million.
Pro Forma Analysis. CS First Boston conducted a pro forma analysis of
the Company's loss per share ("LPS") for the year ended December 31, 1995 and
its LPS for the year ending December 31, 1996 based upon management's current
forecast of 1996 operating results, which give effect to the Skeeter Sale but
not the Proposed Sale. The pro forma analysis gave effect to (i) the Skeeter
Sale and the Proposed Sale (but excluded the one-time gain on such sales), (ii)
the reduction in interest expense as a result of repayment of indebtedness with
the proceeds of the Skeeter Sale and the Proposed Sale and (iii) an assumed
reduction in corporate expense in 1996 projected to be $1,000,000. The pro
forma analysis indicated that the Skeeter Sale and the Proposed Sale would have
increased the LPS by 3.0% in 1995 and that the Proposed Sale would decrease the
LPS by 83.3% in 1996.
Forward Looking Information. The Company does not make, as a matter of
course, public forecasts or projections as to future performance or earnings.
However, in connection with its ongoing budgetary and financing activities,
management of the Company, periodically prepares certain projections of results
of operations. Certain of such projections were provided to CS First Boston
for its due diligence review in connection with the Proposed Sale. THE
PROJECTIONS PROVIDED TO CS FIRST BOSTON WERE BASED UPON MANY ESTIMATES AND ARE
INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF MANAGEMENT OF THE
COMPANY, INCLUDING, WITHOUT LIMITATION, THE EFFECT OF GENERAL ECONOMIC AND
MARKET CONDITIONS, BUSINESS CONDITIONS, CHANGES IN PUBLIC TASTE, COMPETITION,
CHANGES IN BUSINESS STRATEGY AND AVAILABILITY, TERMS AND DEPLOYMENT OF CAPITAL.
ACCORDINGLY, ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE
PROJECTED. THE INCLUSION OF SUCH PROJECTIONS IN CS FIRST BOSTON'S ANALYSIS
12
SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON
THAT SUCH PROJECTIONS WILL PROVE TO BE CORRECT.
Pursuant to the terms of CS First Boston's engagement, the Company
agreed to pay CS First Boston a fee for rendering a fairness opinion in
connection with the Proposed Sale. CS First Boston's aggregate fee for
rendering fairness opinions in the Skeeter Sale and the Proposed Sale will be
approximately $250,000. The Company has also agreed to reimburse CS First
Boston for its reasonable out-of-pocket expenses, and to indemnify CS First
Boston against certain liabilities, including liabilities under the federal
securities laws or relating to or arising out of CS First Boston's engagement.
APPROVAL OF THE BOARD OF DIRECTORS; REASONS FOR THE PROPOSED SALE
The Board of Directors believes that the Proposed Sale is expedient and
for the best interests of the Company. Accordingly, the Board of Directors has
approved the Asset Purchase Agreement. In reaching its determination, the
Board of Directors consulted with the Company's management as well as its
financial and legal advisors, and considered the following factors:
1. Current industry, economic and financial market conditions
relating to the Company and the Boston Whaler Business, as well as the
financial condition, assets, liabilities, businesses and operations of the
Company and the Boston Whaler Business, both on a historical and prospective
basis.
2. The belief of the Board of Directors that the industry in
which the Boston Whaler Business and certain of the Company's other businesses
operate is cyclical, seasonal, highly competitive and price sensitive, as well
as the belief that to return to consistent profitability the Company will need
to reduce indebtedness and redeploy its assets to decrease its dependence on
the marine business.
3. The results of the Company's efforts to identify other
alternatives with respect to the Boston Whaler Business, including the Board of
Directors' judgment that a disposition of the Boston Whaler Business on terms
more favorable to the Company and its stockholders would not likely be
consummated.
4. CS First Boston's presentation to the Board of Directors on
March 25, 1996, including its oral opinion (subsequently confirmed in writing)
that, as of such date and subject to the considerations set forth in such
opinion, the consideration to be received by the Company pursuant to the Asset
Purchase Agreement is fair from a financial point of view to the Company. See
"--Opinion of CS First Boston."
5. The proposed terms and structure of the Proposed Sale,
including the terms of the Asset Purchase Agreement, the Purchaser's desire to
acquire the assets of the Boston Whaler Business and its unwillingness to
acquire Boston Whaler as a whole, the fact that, subject to certain exceptions,
the Company's obligations to indemnify the Purchaser for breaches of the
13
representations and warranties contained in the Asset Purchase Agreement are
limited to $10,000,000, the fact that the Company will retain certain
liabilities, and the risks to the consummation of the Proposed Sale. See "The
Asset Purchase Agreement--Indemnification."
6. The fact that the Purchaser required Meridian Holdings to
provide its irrevocable consent in writing to the adoption of the Asset
Purchase Agreement and the Proposed Sale as a condition to its willingness to
enter into the Asset Purchase Agreement.
7. The utilization of the net cash proceeds received from the
Proposed Sale to repay indebtedness, including indebtedness owed to an
affiliate of Meridian Holdings under the Subordinated Facility. See "Use of
Proceeds; Conduct of Business Following the Proposed Sale."
In view of the wide variety of factors considered in connection
with its evaluation of the Proposed Sale, the Board of Directors did not find
it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination.
USE OF PROCEEDS; CONDUCT OF BUSINESS FOLLOWING THE PROPOSED SALE
Use of Proceeds
All of the net cash proceeds of the Proposed Sale received by the
Company at the Closing will be used to repay outstanding indebtedness of the
Company. Assuming that the cash payment at the Closing is $25.3 million, and
that, of that amount, $1.25 million is placed into escrow and the Company pays
$1.0 million in transaction costs, the Company would have approximately $23
million in net proceeds available for repayment of indebtedness. Such net
proceeds would first be used to repay borrowings under the Credit Agreement (of
which there were $22.0 million outstanding as of May 3, 1996), with the
remainder used to repay borrowings under the Subordinated Facility (of which
there were $4.9 million outstanding as of May 3, 1996).
Following such repayment, unless the terms of the Credit Agreement are
renegotiated or the Credit Agreement is replaced, the Company will no longer
have access to any funds under the Credit Agreement or similar senior credit
facility. The Company will accordingly be dependent for its seasonal working
capital and other needs on the Subordinated Facility and loans from affiliates.
Conduct of Business Following the Proposed Sale
Following the Proposed Sale, the Company will continue to operate its
remaining businesses while looking for ways to redeploy its assets, which may
include a disposition of the Company's O'Brien water sports equipment and/or
Soniform scuba equipment businesses. In addition, the Company may explore
acquisition opportunities in other areas.
14
CERTAIN TAX CONSEQUENCES
The Proposed Sale will be a taxable transaction to the Company for
United States Federal income tax purposes. It is anticipated, however, that
for United States Federal income tax purposes, any taxable income of the
Company that is attributable to the Proposed Sale will be substantially offset
by net operating loss carryforwards or other tax attributes of the Company.
REGULATORY MATTERS
Under the HSR Act, and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Proposed Sale may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division"), and specified waiting period requirements have been satisfied. The
Company and the Purchaser have filed notification and report forms under the
HSR Act with the FTC and the Antitrust Division and the required waiting period
under the HSR Act is expected to expire at 11:59 p.m., New York City time, on
May 12, 1996, unless such waiting period is earlier terminated by the FTC and
the Antitrust Division or extended by a request from the FTC or the Antitrust
Division for additional information or documentary material prior to the
expiration of the waiting period. Pursuant to the HSR Act, the Company and the
Purchaser intend to request early termination of the waiting period applicable
to the Proposed Sale. There can be no assurance, however, that the 30-day HSR
Act waiting period will be terminated early. If either the FTC or the
Antitrust Division were to request additional information or documentary
material from the Company and the Purchaser with respect to the Proposed Sale,
the waiting period with respect to the Proposed Sale would expire at 11:59
p.m., New York City time, on the twentieth calendar day after the date of
substantial compliance by the Company and the Purchaser with such request.
Thereafter, the waiting period could be extended only by court order or by
agreement of the parties. If the Proposed Sale is delayed pursuant to a
request by the FTC or the Antitrust Division for additional information or
documentary material pursuant to the HSR Act, the Proposed Sale will be
deferred until 20 days after the request is substantially complied with, unless
the waiting period is sooner terminated by the FTC and the Antitrust Division.
Only one extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. It is a condition of the Proposed Sale that the waiting
period applicable under the HSR Act to the Proposed Sale expire or be
terminated.
The FTC and the Antitrust Division frequently scrutinize the legality
under the antitrust laws of transactions such as the Proposed Sale. At any
time before or after the Proposed Sale, the FTC or the Antitrust Division could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the Proposed Sale or seeking
the divestiture of the Boston Whaler Business purchased by the Purchaser or the
divestiture of substantial assets of the Purchaser. Private parties and state
attorneys general may also bring legal action under federal or state antitrust
laws under certain circumstances. Based upon an examination of information
available to the Company and the Purchaser relating to the
15
businesses in which the Company and the Purchaser are engaged, the Company
believes that the Proposed Sale will not violate the antitrust laws.
There can be no assurance that a challenge to the consummation of the
Proposed Sale on antitrust grounds will not be made or that, if such a
challenge were made, the Company or the Purchaser would prevail. The
obligations of the Company and the Purchaser to consummate the Proposed Sale
are subject to the condition that there be no order that enjoins, restrains or
prohibits the Asset Purchase Agreement or the consummation of transactions
contemplated by the Asset Purchase Agreement. See "The Asset Purchase
Agreement--Certain Covenants" and "--Conditions."
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE
The Company has entered into a retention agreement with F. Douglas
Fonte, President of Boston Whaler, providing that, in case of a change in
control of Boston Whaler, Mr. Fonte will receive a retention payment of
$120,000 if he remains employed with Boston Whaler or its successor on a date
six months immediately following the change in control (or is terminated
without cause prior to such date). In addition, several other executives of
Boston Whaler have retention agreements which are similar in nature but provide
for smaller payments. Any payments under the retention agreements will be in
addition to any payments that Mr. Fonte or such other executives may receive
upon termination of employment under employment agreements with the Company. In
connection with the Proposed Sale, which will constitute a change in control
for purposes of the retention agreements, the Purchaser has agreed to assume
the Company's obligations under the employment agreements; however, the Company
will remain obligated to pay one half of any amounts paid pursuant to such
retention agreements.
The Company intends to use a portion of the net proceeds from the
Proposed Sale to repay outstanding indebtedness under the Subordinated
Facility. For a description of the Subordinated Facility and the intended
application of proceeds from the Proposed Sale, see "--Background of the
Proposed Sale" and "--Use of Proceeds; Conduct of Business Following the
Proposed Sale."
ACCOUNTING TREATMENT
In accordance with GAAP, the results of the Boston Whaler Business will
be included in the results of the Company through the Closing Date. Any gain
or loss on the disposition will be recognized as of the date the Proposed Sale
is closed.
NO APPRAISAL RIGHTS
Pursuant to the DGCL, holders of shares of Common Stock will not be
entitled to rights of appraisal in connection with the Proposed Sale.
16
THE ASSET PURCHASE AGREEMENT
Although the Company believes that the following summary describes the
material terms and conditions of the Asset Purchase Agreement, such summary is
qualified in its entirety by reference to the full text of the Asset Purchase
Agreement, a copy of which is attached as Annex A to this Information Statement
and is incorporated herein by reference. Unless the context otherwise
requires, references in this section to the "Company" shall be deemed to refer
to the Company together with its subsidiaries and references in this section to
the "Purchaser" will be deemed to refer to the Purchaser together with its
subsidiaries. Terms which are not otherwise defined in this summary have the
meaning set forth in the Asset Purchase Agreement.
BUSINESS TO BE SOLD
The Asset Purchase Agreement provides for the sale by the Company to
the Purchaser of the Boston Whaler Business, including all of the outstanding
capital stock of Driessen.
Assets to Be Transferred
The assets to be sold or transferred by the Company to the Purchaser
pursuant to the Asset Purchase Agreement (the "Purchased Assets") include all
of the assets of the Company relating to the Boston Whaler Business including,
without limitation, the capital stock of Driessen and the following assets,
other than the Retained Assets (as defined below): (i) all of the real
property related to the Boston Whaler Business, together with all rights,
privileges, appurtenances and easements pertaining thereto, and all of the
buildings, plants, facilities, fixtures, structures and improvements on such
real property, as set forth in the Asset Purchase Agreement (the "Real
Property"); (ii) all of the machinery, equipment, furniture, telephones, tools,
dies, molds, plugs, castings, spare and replacement parts, tooling, supplies,
maintenance equipment, computer equipment, materials and other personal
property located or usually located at the Real Property or otherwise used in
connection with or necessary to the Boston Whaler Business; (iii) all trucks,
trailers, automobiles and other vehicles used in connection with the Boston
Whaler Business; (iv) all inventories wherever located, including all raw
materials, work in process, finished goods and supplies inventories; (v) all
records, files, notebooks, confidential and nonconfidential information, price
lists, marketing information, sales records, customer lists and files, legal
and accounting records, personnel and labor relations records, employee
benefits and compensation plans and records, environmental control, monitoring
and test records, plats and surveys of the Real Property, plans and designs of
buildings, structures, fixtures and equipment, tax records, historical and
financial records and files, and all other proprietary information related to,
or used in connection with, the Boston Whaler Business; (vi) the name "Boston
Whaler" and any derivation thereof, and all tradenames, trade dress, corporate
names and logos, trademarks, service marks, patents and copyrights (and any
registrations with any Governmental Authority of, and applications for
registration pending with respect to, any of the foregoing),
17
trade secrets, mask works, technology, inventions, processes, designs, know-
how, computer software and data, formulas, goodwill, any licenses related to
any of the foregoing, to the extent assignable, and all other intangible
intellectual property assets related to the Boston Whaler Business, including
rights to sue and recover for past infringement or misappropriation thereof and
to receive all income, royalties, damages and payments for past and future
infringements thereof (the "Intellectual Property"); (vii) all accounts, notes
and other receivables arising from the operation of the Boston Whaler Business;
(viii) to the extent assignable, all licenses, permits, variances, interim
permits, permit applications, approvals or other authorizations under any law
applicable to the Boston Whaler Business or otherwise required in connection
with the Boston Whaler Business or the ownership or operation of the Purchased
Assets or the assets of Driessen; (ix) all phone numbers and facsimile numbers
used in the Boston Whaler Business; (x) the books and records of Driessen
including the corporate minute book and shareholder register; (xi) certain
contracts of the Boston Whaler Business (the "Assigned Contracts"); and (xii)
to the extent not included in the foregoing, any assets which were included in
the balance sheet of Boston Whaler dated December 31, 1995 (the "Balance
Sheet") and all other assets of Boston Whaler (except for the Retained Assets),
including any warranties or other rights, claims, demands or causes of action
relating to the Purchased Assets.
Assumed Liabilities
Pursuant to the Asset Purchase Agreement, the Purchaser will assume and
agree to pay, perform, fulfill and discharge the obligations of Boston Whaler:
(i) under the Assigned Contracts and Permits; (ii) all liabilities and
obligations for warranty claims for goods manufactured or sold by Boston Whaler
on or before the Closing Date; (iii) certain specified liabilities and
obligations with respect to employees of Boston Whaler; (iv) (a) all
liabilities and obligations of Boston Whaler that are reflected on the Balance
Sheet to the extent such liabilities and obligations have not been paid or
discharged prior to the Closing Date, and (b) such categories of liabilities
and obligations incurred in the ordinary course of business consistent with
past practice since December 31, 1995 including, without limitation, all
accounts payable, accrued expenses, trade obligations and notes payable (other
than intercompany notes) but only to the extent set forth on the Closing
Schedule; (v) any environmental liability at the Real Property or with respect
to Driessen other than a Pre-Closing Environmental Condition (as defined below)
and any liability under environmental law caused by the shipment of hazardous
substances after the Closing Date from the Real Property, the site of
Driessen's operations in Amsterdam (the "Amsterdam Property") or by Driessen;
(vi) all liabilities and obligations from or in connection with any product of
the Boston Whaler Business manufactured by the Purchaser after the Closing Date
and the operation, use or possession of the Purchased Assets after the Closing
Date; and (vii) liabilities and obligations for product liability claims
resulting from injury or damage after the Closing Date.
18
Retained Assets
The assets being retained by Boston Whaler (the "Retained Assets")
include: (i) certain specified contracts; (ii) all books and records to the
extent related to the other Retained Assets or the Retained Liabilities (as
defined below) and not to the Purchased Assets or the Assumed Liabilities;
(iii) all claims of Boston Whaler for refunds, credits, carrybacks or
carryforwards in connection with taxes for tax periods ending on or prior to
the Closing Date and proceeds therefrom, subject to certain exceptions; (iv)
certain specified bank accounts; (v) all cash and cash equivalents; (vi) all
insurance policies, binders and related prepaid expenses, other than insurance
policies where Driessen is the first named insured; (vii) all rights, claims,
demands and causes of action which Boston Whaler or any of its affiliates may
have against any person to the extent related to any of the Retained
Liabilities or Retained Assets, including all proceeds remitted to Boston
Whaler or any of its affiliates from claims, rights, demands and causes of
actions with respect thereto or to any Assumed Liability to the extent the
Purchaser has previously received all indemnity payments from Boston Whaler
with respect to such Assumed Liability; (viii) all tooling, molds and dies and
all other assets relating exclusively to Boston Whaler's Whaler Technologies
division; and (ix) any goodwill shown on the Balance Sheet.
Liabilities Not Assumed
The liabilities of Boston Whaler which are not being assumed by the
Purchaser (the "Retained Liabilities") are all debts, claims, obligations or
other liabilities of Boston Whaler or any of its affiliates, absolute or
contingent, known or unknown (other than the Assumed Liabilities), including,
without limitation, include the following: (i) all liabilities with respect to
any taxes, including state, local or Federal taxes for, or property
attributable to, any periods ending on or prior to the Closing Date (including,
with respect to any taxable period that includes but does not end on the
Closing Date, taxes with respect to the portion of such period that includes
and ends on the Closing Date calculated as if such taxable period ended at the
consummation of the Closing on the Closing Date), including any taxes payable
by Boston Whaler as a result of the consummation of the transactions
contemplated by the Asset Purchase Agreement, except that portion of transfer
and similar taxes expressly assumed by the Purchaser; (ii) all liabilities
arising under any environmental law (a) relating to off-site disposal of
hazardous substances, including, without limitation, any disposal from the Real
Property, the Amsterdam Property or by Driessen, or (b) caused by, or any
condition at the Real Property or the Amsterdam Property or any other facility
now or formerly owned or operated by Driessen, consisting of the presence of
release on or prior to the Closing Date of hazardous substances on, under or
emanating from the Real Property or the Amsterdam Property or any other
facility now or formerly owned or operated by Driessen, that (A) are set forth
in specified environmental reports or (B) are discovered by Purchaser and
disclosed to Boston Whaler within 5 years after the Closing Date ("Pre-Closing
Environmental Conditions"); (iii) all liabilities relating to environmental
laws with respect to locations other than the Real Property, including without
limitation, any other facility owned or operated by Boston Whaler, Boston
Whaler's former Rockland, Massachusetts facility and any site at
19
which was disposed any hazardous substance generated by Boston Whaler; (iv) all
accounts payable not constituting Assumed Liabilities and all liabilities for
borrowed funds; (v) all liabilities under retained contracts or any Retained
Assets; (vi) all liabilities to the employees of Boston Whaler, including all
employee compensation and benefit obligations and any claims with respect to
severance or termination of employment, except to the extent the Purchaser
expressly assumes responsibility for such matters; (vii) all product liability
claims against Boston Whaler for injury or damage occurring on or before the
Closing Date; (viii) all liabilities relating to the operations of or goods
produced or sold by, Boston Whaler's Whaler Technologies division; and (ix) all
liabilities relating to any litigation pending as of the Closing Date or
threatened in writing as of the Closing Date against Boston Whaler except for
litigation to the extent arising out of warranty claims.
PURCHASE PRICE
Payment at Closing
The Asset Purchase Agreement provides for the sale by the Company to
the Purchaser of the Boston Whaler Business for an aggregate consideration
equal to: (i) the Purchase Price of $25,300,000 in cash (subject to
adjustment); and (ii) the assumption of the Assumed Liabilities.
Escrow
The Purchaser shall place $1,250,000 (the "Escrow Fund") of the
Purchase Price in escrow to secure the Company's indemnification obligations
under the Asset Purchase Agreement. Unless the related escrow agreement is
terminated earlier, the full amount of the Escrow Fund, less any amounts
distributed to the Purchaser, shall be distributed to the Company twenty-four
months after the Closing Date; provided, that, if there are unresolved claims
by the Purchaser for indemnification at such date, such amounts will be
distributed following the resolution of all such claims. All accrued income
earned on the Escrow Fund will be delivered to the Company quarterly. The
Company's indemnification obligations under the Asset Purchase Agreement are
not limited to the amount of the Escrow Fund. See "--Indemnification."
Closing
If the conditions to the Proposed Sale are then satisfied or waived,
the Closing will take place on May 31, 1996 or, if later, at least five
business days following the satisfaction or waiver of the conditions to Closing
set forth in the Asset Purchase Agreement. See "--Conditions."
20
Adjustment of the Consideration
The Asset Purchase Agreement provides that the Purchase Price to be
received at the Closing will be adjusted to reflect the Most Recent Net
Tangible Equity (as defined below) of the Boston Whaler Business. The amount
of the Most Recent Net Tangible Equity, and the corresponding adjustment to the
Purchase Price, will be determined before the Closing Date. If the Net
Tangible Equity had been determined by reference to the Company's balance sheet
as of March 31, 1996, the Purchase Price at the Closing would have been
approximately $26.5 million. The actual Purchase Price at the Closing will
depend upon changes to Boston Whaler's net equity following December 31, 1995
through the relevant determination date (principally related to Boston Whaler's
interim operating results) and may be higher or lower than such amount.
At the time of the Closing, the Purchase Price will be adjusted as
follows. If the sum of (i) the amount of the tangible assets included in the
Purchased Assets reduced by the amount of the Assumed Liabilities reflected on
a balance sheet of the Boston Whaler Business as of the end of the calendar
month immediately preceding the Closing Date, plus (ii) the net worth of
Driessen determined in accordance with GAAP as of such balance sheet date (the
"Most Recent Net Tangible Equity") exceeds $16,222,000 (the "Base Net Tangible
Equity"), the Purchase Price will be increased by the amount of such excess.
If the Most Recent Net Tangible Equity is less than the Base Net Tangible
Equity, the Purchase Price will be reduced by the amount of such shortfall.
The Base Net Tangible Equity was derived based on Boston Whaler's net tangible
equity as of December 31, 1995.
The Asset Purchase Agreement provides that following the Closing the
Purchase Price will be adjusted to reflect the Closing Net Tangible Equity (as
defined below) of the Boston Whaler Business. The amount of the Closing Net
Tangible Equity, and the corresponding adjustment to the Purchase Price, will
not be determined until after the Closing has occurred.
In the event that the sum of (i) the amount of the tangible assets
included in the Purchased Assets reduced by the amount of the Assumed
Liabilities reflected on the Closing Schedule, plus (ii) the net worth of
Driessen determined in accordance with GAAP as of the Closing Date (the
"Closing Net Tangible Equity") is less than the Most Recent Net Tangible
Equity, then the amount of the Purchase Price, as previously adjusted, will be
decreased by the amount by which the Closing Net Tangible Equity is less than
the Most Recent Net Tangible Equity. In the event that the Closing Net
Tangible Equity is more than the Most Recent Net Tangible Equity, then the
amount of the Purchase Price, as previously adjusted, will be increased by the
amount by which the Closing Net Tangible Equity is more than the Most Recent
Net Tangible Equity.
The Asset Purchase Agreement provides for certain procedures relating
to the preparation of the Closing Schedule. The Asset Purchase Agreement
provides a mechanism whereby any disputes regarding the Closing Schedule are to
be resolved within 51 days after
21
the receipt of the Closing Schedule. Any dispute not then resolved will be
submitted for resolution to the offices of Price Waterhouse LLP.
REPRESENTATIONS AND WARRANTIES
The Asset Purchase Agreement contains various customary representations
and warranties of the Company and the Purchaser. These include representations
and warranties by the Company as to (i) corporate organization and authority,
(ii) required consents and approvals, (iii) accuracy of financial statements,
(iv) the absence of certain changes or events, (v) title to the Purchased
Assets and the Driessen Shares, (vi) Boston Whaler's computer system, (vii) the
Real Property, (viii) the personal property included in the Purchased Assets,
(ix) inventories, (x) the absence of third party rights or options, (xi) the
intellectual property, (xii) material contracts, (xiii) permits, (xiv)
insurance, (xv) employee benefit plans and employment agreements, (xvi)
employees, (xvii) taxes, (xviii) the absence of defaults or violations of law,
(xix) litigation and product liabilities, (xx) the absence of undisclosed
liabilities, (xxi) environmental matters, (xxii) related parties, (xxiii)
intercompany services and transactions, (xxiv) customers and suppliers, (xxv)
receivables, (xxvi) product warranties and liabilities, (xxvii) due diligence
materials, (xxviii) brokers, (xxix) the accuracy of certain statements, (xxx)
Driessen's capitalization and (xxxi) Driessen's bank accounts. The Purchaser's
representations and warranties include those as to (i) corporate organization
and authority, (ii) required consents and approvals, (iii) brokers and (iv) due
diligence materials.
CERTAIN COVENANTS
General
Pursuant to the Asset Purchase Agreement, the Company, Boston Whaler
and the Purchaser have made various customary covenants for transactions of
this type. The Company has agreed, among other things, that from the date of
the Asset Purchase Agreement through the Closing Date, the Company will conduct
the Boston Whaler Business only in the ordinary and usual course consistent
with past practice and shall preserve its present business organization and
personnel. In addition, the Company has agreed, among other things, to (i) use
all commercially reasonable efforts to not permit any action or omission which
would cause any of its representations or warranties or Boston Whaler's
representations or warranties contained in the Asset Purchase Agreement to
become inaccurate, or any of their covenants to be breached, (ii) not
terminate, modify or amend any Material Contract or any Assigned Contract,
other than in the ordinary course of business, (iii) not make or permit
Driessen to make any tax election or settle or compromise any Tax Liability or
waive or extend the statute of limitations in respect of any taxes, (iv) unless
Boston Whaler or Driessen first obtain the Purchaser's written consent (which
will not be unreasonably withheld), not enter into or become otherwise bound
with respect to, or permit Boston Whaler or Driessen to enter into or otherwise
become bound with respect to, any license or
22
royalty agreement for any of the Intellectual Property or any intellectual
property owned by Driessen and (v) not enter into any new lease affecting the
Amsterdam Property.
Expenses
The Asset Purchase Agreement provides that each party will bear its own
expenses incurred in connection with the transactions contemplated by the Asset
Purchase Agreement, except as specified below. The Purchaser has agreed to pay
all sales, use, stamp, transfer, service, recording, real estate and like taxes
or fees, if any, imposed in connection with the transfer of the Purchased
Assets, provided, that the Company has agreed to promptly reimburse the
Purchaser for one-half of all such taxes and fees upon request therefor. The
Company and the Purchaser have each agreed to pay (i) one-half of the fees
required in connection with the filings under the HSR Act, (ii) the Commission
filing fee for this Information Statement, (iii) the fees for the title
insurance covering the Real Property and (iv) the surveyor's fees for the
survey of the Real Property.
Reasonable Efforts
Pursuant to the Asset Purchase Agreement, each of the parties has
agreed, among other things, to use its commercially reasonable efforts to
facilitate the consummation of the Proposed Sale. Each party has agreed to
make all filings, applications, statements and reports to all governmental
authorities which are required to be made prior to the Closing Date by such
party pursuant to applicable law in connection with the Asset Purchase
Agreement and the Proposed Sale.
EXCLUSIVITY
The Asset Purchase Agreement provides that neither Boston Whaler,
Driessen nor the Company nor any of their respective directors, officers,
employees, representatives, agents or affiliates will take any action which
would have the effect of preventing or impairing the performance by the Company
or Boston Whaler of their obligations under the Asset Purchase Agreement.
Pursuant to the Asset Purchase Agreement, neither the Company, Driessen nor
Boston Whaler are permitted to solicit proposals from, provide any information
to, or participate in any discussions or negotiations with any person other
than the Purchaser concerning a merger, sale of assets, acquisition, business
combination, change of control, or similar transaction involving Boston Whaler
or Driessen, any sale of stock of Boston Whaler or Driessen or any debt
financing involving Boston Whaler or Driessen or their respective assets.
EMPLOYMENT AND EMPLOYEE BENEFIT PLANS
The Asset Purchase Agreement provides that the Purchaser will offer
employment to employees of the Boston Whaler Business who are actively employed
on the Closing Date and those employees who are on leave for maternity or who
are on leave for another
23
nonserious disability and who are expected to return to active employment
within 120 days of the Closing Date (such employees who accept the Purchaser's
offer of employment are referred to herein as the "Continuing Employees").
Purchaser's offer of employment shall be on pay levels, terms and conditions
substantially comparable to the terms and conditions of the Company's
employment of the Continuing Employees immediately prior to the Closing Date.
Continuing Employees will have a fully vested and nonforfeitable
interest in their respective account balances under the Boston Whaler, Inc.
Retirement Savings and Investment Plan (the "BWI Plan"), and those Continuing
Employees who receive an eligible rollover distribution (within the meaning of
Section 402(f)(2) of the Code, and subject to provisions of the Code and upon
presentation of the current Internal Revenue Service favorable determination
letter with respect to the BWI Plan or, if material modifications are made to
the BWI Plan, evidence reasonably satisfactory to the Purchaser that the BWI
Plan then meets the applicable requirements of the Code) will be permitted to
make a rollover contribution to a defined contribution plan established or
maintained by the Purchaser for the benefit of such Continuing Employees which
is intended to be qualified under Section 401(a) of the Code. Pursuant to the
terms of the Asset Purchase Agreement, to the extent applicable, Continuing
Employees (and their eligible dependents) will be given credit under employee
benefit plans, programs, policies and arrangements, including vacation pay
plans, that are established or maintained by the Purchaser for the benefit of
Continuing Employees (the "Purchaser's Plans") for their service with the
Company (i) for purposes of eligibility to participate and vesting (but not
benefit accrual except for vacation pay) to the extent such service was taken
into account under a corresponding employee benefit plan of the Company, and
(ii) for purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any pre-existing condition limitations and
will be given credit for amounts paid under a corresponding employee benefit
plan of the Company during the same period for purposes of applying
deductibles, copayments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the plans, programs,
policies and arrangements maintained by the Purchaser. Notwithstanding the
foregoing, under the Asset Purchase Agreement, service and other amounts will
not be credited to Continuing Employees (or their eligible dependents) to the
extent the crediting of such service or other amounts would produce benefits
which are substantially more favorable to Continuing Employees than are
provided to current employees of the Purchaser who are covered by similar
plans, determined in the sole discretion of the Purchaser.
Effective as of the Closing Date, the Purchaser will be obligated to
pay all liabilities under the Purchaser's Plans or otherwise in respect of any
Continuing Employee terminated for any reason on or after the Closing Date,
including, without limitation, any severance benefits payable in accordance
with the Purchaser's Plans, any liability triggered under unemployment
compensation or other government mandated benefits relating to the termination
of any Continuing Employee after the Closing Date, including WARN. The
Purchaser will have no liability for, and the Company will retain all
responsibility for, any claim by any Continuing Employee against the Company
asserting constructive termination based on
24
the Purchaser's offer of employment as of the Closing Date. The Purchaser will
assume all liabilities under certain retention agreements, each dated January
18, 1996, between Boston Whaler and each of Joe Wilk, Peter Van Lancker,
Douglas Fonte and David Evins, except that the Company will pay the Purchaser
one half of any amounts paid by Purchaser pursuant to any such retention
agreements.
NON-COMPETITION
Under the terms of the Asset Purchase Agreement, each of the Company
and Boston Whaler has agreed that, for a period beginning on the Closing Date
and ending three years thereafter, neither the Company, Boston Whaler, nor, in
the case of clauses (i) or (ii) below, any of their respective subsidiaries
(for so long as they remain subsidiaries) will, directly or indirectly, without
the prior express written consent of the Purchaser, (i) own, manage, operate,
join, control, consult with or participate in or be connected with any
business, individual, partnership, firm, corporation or other entity which is
engaged in the Boston Whaler Business, wholly or partly, in Canada, Mexico, the
United States, Europe or Asia, (ii) disturb or attempt to disturb any business
relationship between any third party and the Purchaser or its affiliates in
connection with the Boston Whaler Business, or (iii) solicit or encourage any
officer or employee employed by the Boston Whaler Business to leave the employ
or retention of the Boston Whaler Business. However, the Asset Purchase
Agreement does not limit, prohibit or restrict the operation of the respective
businesses of the present subsidiaries of the Company in substantially the same
manner as such businesses were operated on March 29, 1996, provided that
neither the Company, Boston Whaler nor any of their subsidiaries will engage in
the manufacture or marketing of sport fishing or recreational boats for
saltwater applications (except for the operation of the Company's subsidiary
MasterCraft Boat Company, as currently conducted), nor does the Asset Purchase
Agreement limit, prohibit or restrict the bona fide arms length sale of
products or provision of services, each in the ordinary course of business, to
any person engaged in the Boston Whaler Business.
CONDITIONS
The obligations of the parties to consummate the Proposed Sale are
subject to the following conditions: (i) the representations and warranties of
each party shall have been accurate, true and correct in all material respects;
(ii) each party shall have complied with all of their respective covenants,
obligations and agreements in the Asset Purchase Agreement to be performed on
or prior to the Closing Date; (iii) no court or government order shall have
been entered in any action or proceeding instituted by any party which enjoins,
restrains, or prohibits the Asset Purchase Agreement or the consummation of the
transactions contemplated by the Asset Purchase Agreement, no governmental
action shall be pending or threatened that seeks to enjoin, restrain or
prohibit or obtain damages with respect to the Asset Purchase Agreement and no
governmental investigation shall be pending or threatened that might result in
any of the foregoing; (iv) all waiting and review periods under the HSR Act
shall have expired, without adverse action being taken by any governmental
authority to
25
prevent consummation of the Proposed Sale; and (v) the Company shall have
obtained all requisite stockholder approval in accordance with the DGCL and the
applicable requirements of the Commission.
The Purchaser's obligations to consummate the Proposed Sale is subject
to the following conditions: (i) all consents and approvals of any
governmental authority and under certain specified contracts of Boston Whaler
required for the consummation of the Proposed Sale, ownership of the Purchased
Assets and the Driessen Shares by the Purchaser and operation of the Boston
Whaler Business shall have been obtained by Boston Whaler; (ii) there shall
have been no material adverse change to Boston Whaler, the Purchased Assets,
Driessen, or the Boston Whaler Business since December 31, 1995; (iii) delivery
of such agreements, documents, instruments and certificates as shall be
reasonably requested by the Purchaser to consummate the transactions
contemplated by the Asset Purchase Agreement; (iv) all indebtedness of Driessen
to the Company shall have been fully released or forgiven; and (v) the Company
shall have delivered updated schedules to the Asset Purchase Agreement.
TERMINATION
The Asset Purchase Agreement may be terminated on or prior to the
Closing Date: (i) by the written consent of the Company and the Purchaser;
(ii) automatically, if the Closing has not occurred on or before July 31, 1996;
(iii) by either the Company or the Purchaser by written notice to the other, if
any court or other governmental body shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Proposed Sale and such order or other action shall
have become final and nonappealable; or (iv) by either the Company or the
Purchaser by written notice to the other, if there has been a material breach
of any covenant, representation or warranty set forth in the Asset Purchase
Agreement which has not been remedied within 10 business days after notice in
writing from the non-breaching party.
INDEMNIFICATION
The Asset Purchase Agreement provides that the Company and Boston
Whaler will jointly and severally indemnify the Purchaser and its affiliates
against any losses relating to or arising out of: (i) any breach of any
representation or warranty made by the Company or Boston Whaler in the Asset
Purchase Agreement or any other document delivered to Purchaser at the Closing;
provided that neither the Company nor Boston Whaler (a) will be liable to the
Purchaser with respect to certain breaches of such representations and
warranties until such losses equal or exceed $150,000 in the aggregate, at
which point the Purchaser will be entitled to recover all losses in excess of
such amount and (b) will have any obligation pursuant to the foregoing
indemnity for losses in excess of $10 million in the aggregate; provided
further that such limitations shall not apply with respect to certain
representations and warranties relating to taxes, environmental matters and
title to the Purchased Assets; (ii) any breach of any covenant made by the
Company or Boston Whaler in the Asset Purchase
26
Agreement or any document delivered to the Purchaser at the Closing pursuant to
the Asset Purchase Agreement; (iii) the bulk sales laws of any jurisdiction
applicable to the Proposed Sale and any laws of any jurisdiction imposing
liability on the Purchaser for Boston Whaler's taxes, including the failure to
comply with such laws; (iv) the Retained Liabilities; (v) any damage to any
Purchased Assets relating to the removal of any Retained Assets from the Real
Property; and (vi) any taxes paid for or incurred by Driessen for any tax
period prior to the Closing.
The Asset Purchase Agreement provides that the Purchaser shall
indemnify Boston Whaler and the Company and each of their respective affiliates
against any losses relating to or arising out of: (i) any breach of any
representation or warranty or covenant made by the Purchaser in the Asset
Purchase Agreement or any other document delivered to Boston Whaler at the
Closing; or (ii) any Assumed Liability.
The representations and warranties made in the Asset Purchase Agreement
will survive the Closing until twenty-eight months after the Closing Date,
except that the representations and warranties relating to (i) taxes shall
survive until the expiration of the statute of limitations applicable to the
taxes in question, taking into account any extensions of such statute of
limitations, (ii) title to the Purchased Assets shall survive forever and (iii)
environmental matters shall survive until the fifth anniversary of the Closing
Date.
CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser is a multinational company with leadership positions in
marine power, pleasure boating and recreation. The Purchaser's consolidated
net sales were $3,041 million for the year ended December 31, 1995, with net
earnings of $127.2 million. The principal executive offices of the Purchaser
are located at 1 North Field Court, Lake Forest, Illinois 60045-4811, and its
telephone number is (847) 735-4700.
27
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth pro forma financial information of the
Company for the year ended December 31, 1995. The unaudited pro forma
consolidated statement of operations data for the year ended December 31, 1995
gives pro forma effect, alternatively, to (i) the Skeeter Sale and (ii) the
Skeeter Sale and the Proposed Sale, in each case, as if such transactions had
been consummated on January 1, 1995. The unaudited pro forma consolidated
balance sheet gives pro forma effect to the Skeeter Sale and the Proposed Sale
as if such transactions had been consummated on December 31, 1995. The
unaudited pro forma financial information has been prepared on the basis that
the Company would have received cash consideration of $33,261,000 (as of
December 31, 1995) from the Skeeter Sale and $25,300,000 from the Proposed Sale
and, with respect to the Proposed Sale, does not give effect to any Purchase
Price increase resulting from the Company's results of operations for the
period from December 31, 1995, to the Closing Date or any other Purchase Price
adjustment. See "The Asset Purchase Agreement--Purchase Price" and "The
Proposed Sale--Background of the Proposed Sale."
The unaudited pro forma adjustments are described in the notes hereto
and are based upon available information and certain assumptions that the
Company believes are reasonable. The pro forma financial information does not
necessarily reflect the financial position or the results of operations of the
Company that actually would have resulted had the transactions described above
been consummated as of the date or for the period indicated, or to project the
Company's financial position or results of operations at any future date or for
any future period. The pro forma financial information should be read in
conjunction with the notes hereto and the Company's Consolidated Financial
Statements for the year ended December 31, 1995 and the Notes thereto
incorporated by reference in this Information Statement.
28
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
SKEETER
SKEETER PRO FORMA PROPOSED SALE AND
SALE SKEETER SALE PROPOSED
HISTORICAL ADJUSTMENTS SALE ADJUSTMENTS SALE
---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . $ 208,188 ($51,733)(a) $ 156,455 ($49,694)(c) $ 106,761
Cost of sales(e). . . . . 191,241 (40,278)(a) 150,963 (38,132)(c) 112,831
--------- ------------ ---------- ----------- -----------
Gross profit. . . . . . . 16,947 (11,455)(a) 5,492 (11,562)(c) (6,070)
Selling, general and
administrative expenses(f) 54,209 (7,211)(a) 46,998 (9,792)(c) 37,206
Amortization of
intangibles(g) . . . . . 2,464 (304)(b) 2,151 (72)(c) 2,079
(9)(a)
Interest and related
amortization expense . . 3,449 (2,438)(d) 1,011 (10)(c) 0
(1,001)(d)
--------- ------------ ---------- ----------- -----------
Loss before income taxes. (43,175) (1,493) (44,668) (687) (45,355)
Benefit for income taxes. (5,620) 0 (5,620) 0 (5,620)
--------- ------------ ---------- ----------- -----------
Net loss (h) . . . . . . ($37,555) ($1,493) ($39,048) ($687) ($39,735)
========= ============ ========== =========== ============
Pro forma loss per
common share . . . . . . ($4.69) ($4.88) ($4.97)
Weighted average number of
common shares outstanding 8,000 8,000 8,000
===== ===== =====
</TABLE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(a) Reflects the results of Skeeter for the year ended December 31, 1995.
(b) Reflects the elimination of amortization of goodwill which is to be written
off in connection with the Skeeter Sale.
(c) Reflects the results of Boston Whaler for the year ended December 31, 1995.
(d) Reflects the elimination of interest and related amortization expense on
debt repaid with proceeds from the Skeeter Sale (average debt of $26,300 at
an average rate of 8.75%) and the Proposed Sale (average debt of $10,000 at
an average rate of 8.75%).
(e) Includes restructuring charges of $22,581 related to WetJet.
(f) Includes restructuring charges of $10,617 related to WetJet.
(g) Includes restructuring charges of $1,893 related to WetJet.
(h) Does not reflect: (1) the estimated aggregate gain of approximately
$12,000, net of the realization of the tax benefit of $5,906 recorded in
1995 to reflect the utilization of net operating loss carryforwards,
arising from the Skeeter Sale and the Proposed Sale; and (2) an
extraordinary charge of approximately $1,400 for the writeoff of expected
deferred financing costs due to a permanent commitment reduction under the
Credit Agreement in connection with the Skeeter Sale and the Proposed Sale.
29
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Skeeter
Skeeter Pro Forma Proposed Sale and
Sale Skeeter Sale Proposed
Historical Adjustments Sale Adjustments Sale
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . $ 1,937 $ 33,261 (a) $ 1,937 $ 25,300 (h) $ 14,316 (m)
(30,800) (b) (11,600) (i)
(2,461) (c) (1,000) (j)
(321) (k)
Accounts receivable, net of
allowances . . . . . . . . . . 20,943 (4,771) (d) 16,172 (6,037) (k) 10,135
Inventories . . . . . . . . . . 27,533 (6,750) (d) 20,783 (5,328) (k) 15,455
Prepaid expenses and other. . . 7,836 (399) (d) 1,626 (683) (k) 943
(5,811) (e)
---------- -------- --------- --------- ---------
Total current assets . . . . . 58,249 (17,731) 40,518 331 40,849
Property, plant and equipment, net 29,797 (3,006) (d) 26,791 (11,839) (k) 14,952
Intangible and other assets, net. 15,781 (10,129) (d) 5,360 (2,983) (k) 2,102
(292) (g) (275) (g)
---------- -------- --------- --------- ---------
$103,827 ($31,158) $ 72,669 ($14,766) $ 57,903
========== ======== ========= ========= =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Skeeter
Skeeter Pro Forma Proposed Sale and
Sale Skeeter Sale Proposed
Historical Adjustments Sale Adjustments Sale
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Current portion of long-term
debt . . . . . . . . . . . . . $ 42,400 ($30,800)(b) $ 11,600 ($11,600)(i) $ 0
Accounts payable . . . . . . . 18,479 (6,444)(d) 12,035 (5,514)(k) 6,521
Accrued expenses and other
current liabilities . . . . . 25,594 (1,021)(d) 24,573 (1,900)(k) 22,673
---------- --------- --------- --------- ----------
Total current liabilities. . . 86,473 (38,265) 48,208 (19,014) 29,194
Other liabilities . . . . . . . 3,096 (75)(d) 3,021 3,021
Stockholders' equity:
Preferred stock . . . . . . .
Common stock . . . . . . . . . 80 80 80
Additional paid-in capital 131,951 131,951 131,951
Accumulated deficit. . . . . . (117,859) 7,474 (f) (110,677) 4,523 (l) (106,429)
(292)(g) (275)(g)
Cumulative translation
adjustment . . . . . . . . . 86 86 86
---------- --------- --------- --------- ----------
Total stockholders' equity . 14,258 7,182 21,440 4,248 25,688
---------- --------- --------- --------- ----------
$ 103,827 ($31,158) $ 72,669 ($14,766) $ 57,903
========== ========= ========= ========= ==========
Book value per share . . . . . . $1.78 $2.68 $3.21
Number of common shares
outstanding . . . . . . . . 8,000 8,000 8,000
===== ===== =====
</TABLE>
30
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Represents the proceeds, net of a pro forma purchase price adjustment of
$4,239 at December 31, 1995, from the Skeeter Sale. On May 3, 1996, Yamaha
notified the Company of its calculation of the net assets sold pursuant to
the Skeeter Sale. According to such calculation, Yamaha estimates the
final purchase price to be $33,420. The Company and its auditors are in
the process of reviewing Yamaha's calculations.
(b) Represents the use of cash proceeds, net of fees and expenses, from the
Skeeter Sale to repay indebtedness of the Company.
(c) Represents the payment of estimated fees and expenses, including state
income taxes, related to the Skeeter Sale.
(d) Reflects the elimination of assets and liabilities as of December 31, 1995
in connection with the Skeeter Sale.
(e) Reflects the realization of deferred tax assets in connection with the
Skeeter Sale.
(f) Represents the estimated gain, net of the realization of deferred tax
assets, realized on the Skeeter Sale.
(g) Represents an extraordinary charge for the writeoff of deferred financing
costs at December 31, 1995 due to a permanent commitment reduction under
the Credit Agreement in connection with the Skeeter Sale and the Proposed
Sale.
(h) Represents the proceeds at December 31, 1995 from the Proposed Sale.
Includes $1.25 million to be deposited in the Escrow Fund.
(i) Represents the use of cash proceeds, net of fees and expenses, from the
Proposed Sale to repay indebtedness of the Company at December 31, 1995.
(See footnote (m)).
(j) Represents the payment of estimated fees and expenses related to the
Proposed Sale.
(k) Reflects the elimination of assets and liabilities as of December 31, 1995
in connection with the Proposed Sale.
(l) Represents the estimated gain, net of income taxes, realized on the
Proposed Sale.
(m) Represents remaining cash which would be used prospectively to fund
seasonal working capital and other needs and the payment of WetJet
restructuring liabilities. Because of the application of cash since
December 31, 1995 to fund several working capital requirements and to fund
WetJet restructuring liabilities, it is not expected that any cash will
remain after giving effect to the Proposed Sale. At March 31, 1996, all of
the cash proceeds from the Proposed Sale would have been needed to repay
indebtedness. See "The Proposed Sale--Use of Proceeds; Conduct of
Business Following the Proposed Sale" and "Recent Developments."
31
SELECTED HISTORICAL FINANCIAL INFORMATION
The Company was formed in 1994 in connection with the IPO to
hold the Water Sports Businesses and Boston Whaler. The selected financial
information presented herein relates to the Water Sports Businesses and, since
July 30, 1993, Boston Whaler. Boston Whaler was acquired by an indirect wholly
owned subsidiary of MacAndrews & Forbes on July 30, 1993 in a transaction using
the purchase method of accounting. The Consolidated Financial Statements
reflect (i) MacAndrews & Forbes' historical basis of accounting for Boston
Whaler since July 30, 1993 and (ii) MacAndrews & Forbes' historical basis of
accounting for the Water Sports Businesses. The table below reflects financial
data for each of the years in the five-year period ended December 31, 1995. The
results of Skeeter are included for all periods shown in the table and the
results of Boston Whaler are included for all periods since July 30, 1993, the
date of acquisition.
The following selected financial data for the years presented in
the table below have been derived from the Company's audited Consolidated
Financial Statements. The selected historical financial data should be read in
conjunction with the Company's audited Consolidated Financial Statements and the
Notes thereto incorporated by reference in this Information Statement.
32
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993(A) 1992 1991
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
HISTORICAL STATEMENTS OF OPERATIONS DATA:
Net sales . . . . . . . . . . . . . . . . $208,188 $187,625 $122,447 $89,499 $70,452
Cost of sales (1)(b) . . . . . . . . . . 191,241 140,192 91,642 73,024 54,715
Selling, general and administrative
expenses (2)(b) . . . . . . . . . . . . 53,463 33,919 28,203 22,792 20,168
Provision for doubtful accounts . . . . . 746 531 454 693 412
Amortization of intangibles (3) . . . . . 2,464 615 524 436 66,169
Interest and related amortization expense 3,449 4,194 2,327 1,802 2,373
-------- -------- ------- -------- -------
(Loss) income before income taxes and
extraordinary charge . . . . . . . . . . (43,175) 8,174 (703) (9,248) (73,385)
(Benefit) provision for income taxes. . . (5,620) 1,470 352 (27) (1,061)
-------- -------- ------- -------- -------
(Loss) income before extraordinary
charge . . . . . . . . . . . . . . . . . (37,555) 6,704 (1,055) (9,221) (72,324)
Extraordinary charge. . . . . . . . . . . -- 1,191 -- -- --
-------- -------- ------- -------- -------
Net (loss) income . . . . . . . . . . . . ($37,555) $ 5,513 ($1,055) ($9,221) ($72,324)
======== ======== ======= ======== =======
Earnings per common share (e):
(Loss) income before extraordinary
charge . . . . . . . . . . . . . . . . ($4.69) $1.17 ($0.20) ($1.77) ($13.91)
Extraordinary charge . . . . . . . . . . -- (0.21) -- -- --
-------- -------- ------- -------- -------
Net (loss) income . . . . . . . . . . . ($4.69) $0.96 ($0.20) ($1.77) ($13.91)
======== ======== ======= ======== =======
</TABLE>
____________________
(1) In 1995, includes restructuring charges of $22,581 related to WetJet which
includes: (a) a writedown of inventory to estimated net realizable value;
(b) additional provisions for expected warranty costs on models sold; and
(c) the writedown of tooling and equipment to estimated net realizable
value. In 1992, the Company recorded an unusual charge of approximately
$2,832 comprised primarily of fixed asset writedowns to estimated fair
market values related to the closure of a manufacturing facility.
(2) In 1995, includes restructuring charges of $10,617 related to WetJet which
includes: (a) a provision for expected costs to ensure sell through of
products in retail dealer inventories; and (b) a writedown of accounts
receivable to estimated net realizable value.
(3) In 1995, includes a restructuring charge of $1,893 to write off all
remaining goodwill related to WetJet. In 1991, the Company recorded a
provision to write off $64,665 of goodwill which arose in the 1989
acquisition of the Water Sports Businesses by MacAndrews & Forbes.
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA (AT PERIOD END):
Total assets . . . . . . . . . . . . . . . . . . $103,827 $117,512 $99,352 $52,086 $52,774
Total debt (including current portion) . . . . . 42,400 35,429 48,613 26,891 26,914
Stockholders' equity . . . . . . . . . . . . . . 14,428 51,884 18,266 7,451 15,960
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993(A) 1992 1991
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation expense . . . . . . . . . . . . . . $4,379 $3,579 $2,054 $1,972 $1,506
Capital expenditures . . . . . . . . . . . . . . 5,317 7,384(d) 9,048(c) 1,968 2,422
</TABLE>
See notes on succeeding page
33
(a) Includes the results of Boston Whaler since July 30, 1993, the date of
acquisition.
(b) Depreciation expense is allocated within the historical statements of
operations data between cost of sales and selling, general and
administrative expenses. Includes fees to affiliates of $1,376, $1,768,
$2,034, $200 and $200 for the years ended December 31, 1991 through 1995,
respectively.
(c) Capital expenditures in 1993 include: approximately $4,600 related to the
acquisition of Cherokee Cove, approximately $900 for the initial tooling
and machinery purchases at WetJet and approximately $200 related to the
reorganization of O'Brien's manufacturing facility.
(d) Capital expenditures in 1994 include: approximately $900 related to the
completion of the relocation to Cherokee Cove and approximately $800
related to the completion of O'Brien's plant reorganization.
(e) Historical earnings per share is calculated based upon weighted average
shares outstanding for the year (8,000,000 shares for 1995, 5,768,000
shares for 1994 and 5,200,000 shares for 1993 and prior years).
34
RECENT DEVELOPMENTS
On May 9, 1996, the Company announced its financial results for the
three months ended March 31, 1996. The Company had sales of $33.6 million for
the three-month period ended March 31, 1996 compared to $59.2 million for the
comparable period in 1995. This decrease is primarily attributable to: (i) the
decision during the third quarter of 1995 to halt sales and production at
WetJet; (ii) the Skeeter Sale during January 1996; and (iii) the reduction in
MasterCraft's and Boston Whaler's production rates to balance retail
inventories. Net earnings for the quarter were $1.0 million, or $0.13 per
share, before an extraordinary charge of $0.7 million, or $0.09 per share,
compared to net earnings of $1.4 million, or $0.17 per share, during the
comparable period in 1995. The 1996 quarter's results reflect a $12.0 million
pre-tax gain primarily related to the Skeeter Sale partially offset by WetJet
losses of $3.0 million primarily comprised of a restructuring charge related to
increased estimates for warranty costs and an extraordinary charge of $0.7
million related to the permanent repayment of debt with the proceeds from the
Skeeter Sale. Operating unit contribution was negatively affected by the
Skeeter Sale and overall lower sales volumes.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1996 1995
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total net sales . . . . . . . . . . . . . . . . $ 33.6 $ 59.2
Income before extraordinary charge. . . . . . . 1.0 1.4
Extraordinary charge. . . . . . . . . . . . . . 0.7 --
Net income. . . . . . . . . . . . . . . . . . . 0.3 1.4
Net income per share. . . . . . . . . . . . . . $ 0.04 $ 0.17
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1995
(IN MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . $ 81.0 $ 103.8
Debt . . . . . . . . . . . . . . . . . . . . . . 24.2 42.4
Stockholders' equity . . . . . . . . . . . . . . $14.5 $ 14.3
</TABLE>
35
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 1, 1996, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by each
Director of the Company, by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, by the
Company's Chief Executive Officer and the Company's four most highly compensated
executive officers during 1995 (other than the Chief Executive Officer) and by
all Directors and executive officers (including two former executive officers)
as a group. The number of shares owned are those "beneficially owned," as
determined under the rules of the Commission, and such information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which a person has
sole or shared voting power or investment power and any shares of Common Stock
which the person has the right to acquire within 60 days through the exercise of
any option, warrant or right, through conversion of any security, or pursuant to
the automatic termination of power of attorney or revocation of trust,
discretionary account or similar arrangement.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Ownership(a) Class
<S> <C> <C>
Ronald O. Perelman(b) 5,200,000 64.7%
35 East 62nd Street
New York, NY 10021
George Napier 22,913(c) *
Mark L. Wilson 18,700(d) *
F. Douglas Fonte 5,250(e) *
James M. Weber(f) 1,000 *
Russell Kelley(g) 0 *
J. Eric Hanson 5,000 *
Jerry W. Levin 5,000 *
John P. Murray, Jr. 17,000 *
Martin D. Payson 12,000 *
Bruce Slovin 10,000 *
All Directors and executive
officers as a group
(15 persons)(h) 5,301,363 66.0%
</TABLE>
See footnotes on succeeding page
36
* Less than 1%
(a) Includes Common Stock and options exercisable within 60 days.
(b) All of such shares of Common Stock are indirectly owned by Mr. Perelman
through MacAndrews & Forbes. Of such shares owned by Mr. Perelman,
4,520,334 shares are pledged.
(c) Includes 14,813 shares of Common Stock subject to stock options granted
pursuant to the Company's 1994 Stock Option Plan.
(d) Includes 9,500 shares of Common Stock subject to stock options granted
pursuant to the Company's 1994 Stock Option Plan.
(e) Includes 4,250 shares of Common Stock subject to stock options granted
pursuant to the Company's 1994 Stock Option Plan.
(f) As of January 1996, Mr. Weber ceased to be an executive officer of the
Company.
(g) As of January 1996, in connection with the Skeeter Sale, Mr. Kelley ceased
to be an executive officer of the Company.
(h) Includes two former executive officers of the Company, Messrs. Weber and
Kelley.
MARKET PRICE DATA
The Common Stock is listed and traded on the Nasdaq National
Market under the symbol "MSPO." On March 29, 1996, the last trading day
preceding the public announcement of the execution and delivery of the Asset
Purchase Agreement, the high and low sale prices per share of Common Stock were
$5 1/4 and $4 3/4, respectively. On May 7, 1996, the most recent practicable
date prior to the printing of this Information Statement, the closing price per
share of Common Stock on the Nasdaq National Market was $4 .
INCORPORATION OF THE ANNUAL REPORT BY REFERENCE
The following captioned items of the Company's Annual Report for the
fiscal year ended December 31, 1995 mailed to stockholders with this Information
Statement are incorporated by reference in this Information Statement:
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Information Statement to the extent
that a statement contained herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Information Statement.
May 9, 1996
37
ANNEX A
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
among
BRUNSWICK CORPORATION,
a Delaware corporation
("PURCHASER"),
BOSTON WHALER, INC.,
a Massachusetts corporation
("SELLER"),
and
MERIDIAN SPORTS INCORPORATED,
a Delaware corporation
("PARENT")
Date: March 29, 1996
- - - -------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.....................................................A-7
1.1 Definitions............................................A-7
ARTICLE II
SALE AND PURCHASE OF ASSETS....................................A-14
2.1 Purchase of Assets....................................A-14
2.2 Assignment of Certain Contracts.......................A-15
2.3 Excluded Assets.......................................A-16
2.4 Assumed Liabilities...................................A-16
2.5 Closing...............................................A-17
2.6 Payment of Purchase Price.............................A-17
2.7 Consistent Treatment..................................A-19
2.8 Procedures for Purchased Assets not Transferable......A-19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER ...........A-20
3.1 Due Incorporation; Subsidiaries.......................A-20
3.2 Due Authorization.....................................A-20
3.3 Consents and Approvals................................A-20
3.4 Financial Statements..................................A-21
3.5 No Adverse Effects or Changes.........................A-21
3.6 Title to Properties...................................A-22
3.7 Computer System.......................................A-22
3.8 Real Property.........................................A-23
3.9 Personal Property.....................................A-24
3.10 Inventories...........................................A-24
3.11 No Third Party Options................................A-24
3.12 Intellectual Property.................................A-24
3.13 Contracts.............................................A-25
3.14 Permits...............................................A-27
3.15 Insurance.............................................A-27
3.16 Employee Benefit Plans and Employment Agreements......A-27
3.17 Employees.............................................A-28
3.18 Taxes.................................................A-29
3.19 No Defaults or Violations.............................A-30
3.20 Environmental Matters.................................A-30
3.21 Litigation; Product Liabilities.......................A-31
3.22 Related Parties.......................................A-31
3.23 Intercompany Services and Transactions................A-32
3.24 Customers and Suppliers...............................A-32
3.25 Receivables...........................................A-32
3.26 Product Warranties....................................A-32
3.27 Due Diligence Materials...............................A-32
3.28 Brokers...............................................A-33
A-2
<PAGE>
Page
3.29 Accuracy of Statements................................A-33
3.30 Capitalization........................................A-33
3.31 Banks.................................................A-33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER....................A-34
4.1 Due Incorporation.....................................A-34
4.2 Due Authorization.....................................A-34
4.3 Consents and Approvals................................A-34
4.4 Brokers...............................................A-34
4.5 Due Diligence Materials...............................A-34
ARTICLE V
COVENANTS......................................................A-35
5.1 Preservation of Business..............................A-35
5.2 Efforts...............................................A-35
5.3 Maintenance of Insurance..............................A-36
5.4 Supplemental Information..............................A-36
5.5 Noncompetition; Confidentiality.......................A-36
5.6 Exclusivity...........................................A-37
5.7 Use of Name...........................................A-37
5.8 Interim Financial Statements..........................A-37
5.9 Title Insurance; Survey; Firpta.......................A-37
5.10 Product Liability.....................................A-38
5.11 Employees and Employee Benefits.......................A-38
5.12 Access................................................A-40
5.13 Organizational Documents..............................A-40
5.14 Environmental Matters.................................A-41
5.15 Tax Matters...........................................A-41
5.16 Whaler Technologies Assets............................A-41
5.17 Licensing.............................................A-42
5.18 Driessen..............................................A-42
5.19 Production of Witnesses and Individuals...............A-42
6.1 Warranties True.......................................A-43
6.2 Compliance with Covenants.............................A-43
6.3 Consents; Approvals ..................................A-43
6.4 No Action.............................................A-43
6.5 No Material Adverse Change............................A-43
6.6 Closing Deliveries....................................A-43
6.7 Intercompany Release..................................A-45
6.8 Updated Schedules.....................................A-45
A-3
<PAGE>
Page
ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER........................................A-45
7.1 Warranties True.......................................A-45
7.2 Compliance with Agreements and Covenants..............A-45
7.3 Consents and Approvals................................A-45
7.4 No Action.............................................A-46
7.5 Closing Deliveries....................................A-46
ARTICLE VIII
TERMINATION....................................................A-46
8.1 Termination...........................................A-46
8.2 Effect of Termination.................................A-46
ARTICLE IX
INDEMNIFICATION................................................A-47
9.1 Survival..............................................A-47
9.2 Indemnification by Parent and Seller..................A-47
9.3 Indemnification by Purchaser..........................A-48
9.4 Claims................................................A-48
9.5 Third Party Claims; Assumption of Defense.............A-48
9.6 Tax Returns and Tax Indemnity.........................A-49
9.7 Refunds of Taxes and Carrybacks of Tax Attributes.....A-50
9.8 Adjustments...........................................A-50
9.9 Record Retention......................................A-51
ARTICLE X
MISCELLANEOUS..................................................A-51
10.1 Expenses..............................................A-51
10.2 Amendment.............................................A-51
10.3 Notices...............................................A-51
10.4 Effect of Investigation...............................A-52
10.5 Waivers...............................................A-52
10.6 Counterparts..........................................A-53
10.7 Interpretation........................................A-53
10.8 Applicable Law........................................A-53
10.9 Binding Agreement.....................................A-53
10.10 No Third Party Beneficiaries..........................A-53
10.11 Publicity.............................................A-53
10.12 Further Assurances....................................A-53
10.13 Severability..........................................A-54
10.14 Remedies Cumulative...................................A-54
10.15 Liability of Parent and Seller........................A-54
10.16 Forum.................................................A-54
10.17 Assignment............................................A-54
10.18 Entire Understanding..................................A-55
A-4
<PAGE>
EXHIBITS
A - Assignment and Assumption Agreement
B - Escrow Agreement
C - Intellectual Property Assignment
D - Safety Programs
E - Soil Evaluation and Remediation
F - Opinion of Seller's Counsel
G - Opinion of Purchaser's General Counsel
A-5
<PAGE>
SCHEDULES
1.2 - Permitted Exceptions
2.1(a) - Legal Description of the Real Property
2.1(b) - Equipment
2.1(c) - Vehicles
2.1(f) - Intellectual Property
2.1(h) - Permits
2.2(a) - Personal Property Leases
2.2(b) - Purchase Orders and Contracts
2.2(c) - Customer Contracts
2.2(d) - Floorplan Contracts
2.2(e) - Marketing Contracts
2.2(g) - Executive Contracts
2.3 - Excluded Assets
2.7 - Purchase Price Allocation
3.3 - Consents and Approvals
3.4 - Financial Statements
3.5 - No Adverse Effects
3.6 - Title to Properties
3.7 - Computer System
3.8 - Real Property
3.9 - Personal Property
3.10 - Inventories
3.12 - Intellectual Property
3.13 - Material Contracts
3.15 - Insurance
3.16 - Employee Benefit Plans and Employment Agreements
3.17 - Employees
3.19 - No Defaults of Violations
3.20 - Environmental Matters
3.21 - Litigation
3.22 - Related Parties
3.23 - Intercompany Services
3.24 - Customers and Suppliers
3.26 - Product Warranties
3.27 - Due Diligence Materials
4.3 - Consents and Approvals
6.3 - Transfers Consents
A-6
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 29th day of March, 1996, by and
among Brunswick Corporation, a Delaware corporation ("PURCHASER"), Boston
Whaler, Inc., a Massachusetts corporation ("SELLER"), and Meridian Sports
Incorporated, a Delaware corporation ("PARENT"). Certain capitalized terms
used herein are defined in Article I.
W I T N E S E T H:
WHEREAS, Purchaser wishes to purchase from Seller, and Seller desires to
sell to Purchaser, all of the Purchased Assets and the Driessen Shares (each
as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following
meanings for the purposes of this Agreement:
"AFFILIATE" shall mean, with respect to any specified Person, (a) any
other Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified
Person, (b) any other Person which is a director, officer or partner or is,
directly or indirectly, the beneficial owner of 10 percent or more of any
class or series of equity securities of the specified Person or a Person
described in clause (a) of this paragraph, or (c) another Person of which the
specified Person is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities.
"AGREEMENT" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended from time to time.
"AMSTERDAM PROPERTY" shall mean the real property subject to the
leases described in Section 3.8(d), which includes the real property used by
Driessen located at Oude Haagseweg 45-49, 1066 B.V. Amsterdam and "de Nieuwe
Meer" registered in the municipality of Sloten.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means that certain assignment
and assumption agreement and bill of sale, to be dated the Closing Date,
substantially in the form of Exhibit A.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.4.
"AUTHORIZED CAPITAL" shall have the meaning set forth in Section 3.30.
A-7
<PAGE>
"BALANCE SHEET" shall mean the consolidated balance sheet of Seller
dated December 31, 1995, a copy of which is set forth on Schedule 3.4,
together with the notes thereto, but shall not include the separate schedule
attached thereto that specifically breaks out and segregates reserves for
floor plan contracts, marketing programs, accounts receivable, warranty claims
and all other reserved and accrued expenses of Seller.
"BUSINESS" means the business conducted by Seller as of the date of
this Agreement and during the one year period prior to the date hereof,
including, without limitation, the manufacture and marketing of sport fishing
and recreational boats and the business conducted by Driessen, but
specifically excluding the operations of the Whaler Technologies division of
Seller.
"BUSINESS DAY" shall mean any day other than (a) any Saturday or
Sunday or (b) any other day on which banks located in New York City generally
are closed for business.
"BWI PLAN" shall mean the Boston Whaler, Inc. Retirement Savings and
Investment Plan.
"CLOSING" shall mean the consummation of the transactions contemplated
herein.
"CLOSING DATE" shall mean the date on which the Closing occurs or is
to occur.
"CLOSING SCHEDULE" shall have the meaning set forth in Section 2.6.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPUTER SYSTEM" shall have the meaning set forth in Section 3.7.
"CONTRACT" shall mean any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond,
right, warrant, instrument, plan, permit or license, whether written or oral,
which is intended or purports to be binding and enforceable.
"CONTINUING EMPLOYEES" shall have the meaning set forth in Section
5.10.
"DRIESSEN" shall mean E.W. Driessen B.V., a corporation organized
under the laws of the Netherlands.
"DRIESSEN ASSETS" shall mean all assets of Driessen, wherever located
and in whatever form, real, personal, tangible or intangible, including those
assets listed on the Balance Sheet of Driessen dated December 31, 1995.
"DRIESSEN CONSIDERATION" shall mean $2,000,000.
"DRIESSEN SHARES" shall mean all of the issued and outstanding shares
of the Authorized Capital of Driessen.
"EFFECTIVE DATE" shall have the meaning set forth in Section 5.4.
A-8
<PAGE>
"ENVIRONMENTAL LAW" shall mean any applicable Laws pertaining to (a)
the protection of the indoor or outdoor environment (including ambient air,
surface water, ground water, land surface or subsurface strata), or pertaining
to the protection of natural resources, the environment and public or employee
health and safety; (b) treatment, storage, disposal, generation,
transportation or Release of Hazardous Substances; (c) air, waste and noise
pollution; (d) the protection of wildlife, marine sanctuaries and wetlands;
(e) underground or other storage tanks or vessels, abandoned or discarded
barrels, containers and other closed receptacles; and including (f) the
Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. [Section] 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. [Section] 1801 et seq.), the Resource
Conservation and Recovery Act ("RCRA") (42 U.S.C. [Section] 6901 et seq.), the
Clean Water Act (33 U.S.C. [Section] 1251 et seq.), the Clean Air Act (33
U.S.C. [Section] 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
[Section] 7401 et seq.), the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. [Section] 136 et seq.), and the Occupational Safety and Health
Act (29 U.S.C. [Section] 651 et seq.) ("OSHA"), and the regulations
promulgated pursuant to any of the foregoing, and any such applicable foreign,
state or local statutes, and the regulations promulgated pursuant thereto, as
such laws have been and may be amended or supplemented through the Closing
Date.
"ENVIRONMENTAL PERMIT" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"ENVIRONMENTAL REPORTS" shall mean the following: (a) the Phase I
Environmental Report, dated December, 1995, prepared by ERM, (b) the Phase I
Environmental Report, dated July 15, 1993, prepared by ESI, (c) the Soil
Sampling Report, dated August, 1993, prepared by ESI, (d) the draft Phase I
Environmental Report, dated January 31, 1996, prepared by ENSR Consulting and
Engineering, (e) that certain report dated June 1992 entitled "environmental
investigation regarding soil pollution at the Oude Haagscheweg 45-49,
Amsterdam, prepared by Heidemij Adveisbureau, (f) the reports and
correspondence set forth on Schedule 3.20, and (g) the Phase Two Report.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" shall mean The Chase Manhattan Bank, N.A.
"ESCROW AGREEMENT" shall mean the Escrow Agreement in the form of
Exhibit B.
"ESCROW AMOUNT" means that portion of the Purchase Price equal to
$1,250,000, placed in escrow with the Escrow Agent pursuant to the Escrow
Agreement to satisfy claims under Section 9.2.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.3.
"FINANCIAL STATEMENTS" shall mean, collectively, (a) the consolidated
Balance Sheet and the audited consolidated statement of income of Seller for
the 12 month period ended December 31, 1995, and (b) the audited consolidated
financial statements of Meridian Sports Incorporated for the 12 month period
ended December 31, 1994 and the unaudited consolidated financial statements
for the 9 month period ended September 30, 1995.
"FLOORPLAN CONTRACTS" shall have the meaning set forth in Section 2.2.
"GAAP" shall mean U.S. generally accepted accounting principles at the
time in effect.
A-9
<PAGE>
"GOVERNMENTAL AUTHORITY" shall mean the government of the United
States or any foreign country, any state or political subdivision thereof, or
any entity, body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental functions or any court,
department, commission, board, agency, instrumentality or administrative body
of any of the foregoing.
"HAZARDOUS SUBSTANCE" means any substance, material or waste which is
regulated by any Governmental Authority in the jurisdictions in which Seller
or Driessen conducts business, or the United States or the Netherlands,
including, without limitation, petroleum products, asbestos, and any material
or substance which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted hazardous
waste," "contaminant," "toxic waste" or "toxic substance" under any provision
of any Environmental Law.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INTELLECTUAL PROPERTY" shall have the meaning set forth at
Section 2.1.
"INTELLECTUAL PROPERTY ASSIGNMENT" shall mean the assignment of the
Intellectual Property, to be dated the Closing Date, substantially in the form
of Exhibit C.
"INVENTORIES" shall have the meaning set forth in Section 2.1.
"LAW" shall mean any law, statute, regulation, ordinance, rule,
order, decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, or entered into, agreed or imposed by any
Governmental Authority.
"LENDER GROUP" shall mean all of the financial institutions granted
Liens against the Purchased Assets and the Driessen Shares pursuant to that
certain Credit Facilities and Reimbursement Agreement dated as of October 11,
1994, as amended, by and among Credit Suisse, NationsBank of North Carolina,
National Association, Fleet Bank and Meridian Sports Incorporated.
"LIEN" shall mean any mortgage, lien, charge, restriction, pledge,
security interest, option, claim, easement, encroachment or encumbrance.
"LOSS" or "LOSSES" shall mean all liabilities, losses (excluding
consequential damages), costs, claims, damages, penalties and expenses
(including reasonable attorneys' fees and expenses and reasonable
investigation and litigation costs incurred in relation to the indemnified
matter or in enforcing such indemnity).
"MARKETING CONTRACTS" shall have the meaning set forth in Section 2.2.
"MATERIAL ADVERSE CHANGE" shall mean a change in the business,
operations, assets, liabilities, results of operations, cash flows or
condition (financial or otherwise) of Seller, Driessen or the Business, which
could reasonably be expected to be materially adverse, other than the adverse
reaction of any customer or supplier of Seller or Driessen to the fact that
Purchaser and Normal Duns are acquiring the Purchased Assets and the Driessen
Shares.
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"MATERIAL CONTRACTS" shall mean all of the Contracts to which Seller
or Driessen is a party or to which either of their assets are subject which
are listed, described or required to be listed or described in Section 2.2 or
3.13 of this Agreement or any schedule thereto except, with respect to
Contracts specified in Section 2.2(a), 2.2(b) or 2.2.(c), those calling for
aggregate payments of less than $50,000.
"NET TANGIBLE EQUITY" shall mean the sum of (i) the tangible assets
included in the Purchased Assets reduced by the amount of the Assumed
Liabilities, as at the date of determination, determined in accordance with
GAAP (consistently applied, after the elimination of intercompany accounts)
and Section 2.6, plus (ii) the net worth of Driessen determined in accordance
with GAAP (consistently applied, after the elimination of intercompany
accounts).
"NORMAL DUNS" shall mean Purchaser's wholly owned indirect
subsidiary, Normal Duns, B.V.
"PERMITS" shall have the meaning set forth in Section 2.1.
"PERMITTED EXCEPTIONS" shall mean (a) easements, covenants,
rights-of-way, claims and other encumbrances of record specifically disclosed
on the Prior Title Report, (b) zoning, building and other similar governmental
restrictions applicable to the Real Property, (c) any conditions shown on the
Prior Survey, (d) taxes and general and special assessments not yet due and
payable and not in default on the date of determination and payable without
penalty and interest, (e) Liens set forth on Schedule 1.1, (f) Liens set forth
on Schedule 1.2, provided that such Liens shall be released on or prior to the
Closing Date and shall not constitute Permitted Exceptions following the
Closing Date, and (g) in the case of tangible personal property, those
irregularities in title that do not, individually or in the aggregate,
materially detract in any way from the value of, or impair in any way the use
by Purchaser of, such tangible personal property.
"PERSON" shall mean any individual, corporation, proprietorship,
firm, partnership, limited partnership, limited liability company, trust,
association, Governmental Authority or other entity.
"PHASE TWO REPORT" shall mean the Phase II Environmental Site
Assessment of the Amsterdam Property to be prepared by Seller's designated
environmental consultants.
"POST-CLOSING ENVIRONMENTAL CONDITIONS" shall mean (i) any
environmental liability at the Real Property or with respect to Driessen other
than a Pre-Closing Environmental Condition and (ii) any liability under any
Environmental Law caused by the shipment of Hazardous Substances following the
Closing Date from the Real Property, the Amsterdam Property or by Driessen.
"PRE-CLOSING ENVIRONMENTAL CONDITIONS" shall mean any liability under
any Environmental Law (i) relating to off-site disposal of Hazardous
Substances, including, without limitation, any disposal from the Real
Property, the Amsterdam Property or by Driessen, or (ii) caused by, or any
condition at the Real Property or the Amsterdam Property or any other facility
now or formerly owned or operated by Driessen, consisting of the presence or
Release on or prior to the Closing Date of Hazardous Substances on, under or
emanating from the Real Property or the Amsterdam Property or any other
facility now or formerly owned or operated by Driessen, that (A) are set forth
in the Environmental Reports or (B) are discovered by Purchaser and disclosed
to Seller within 5 years after the Closing Date in accordance with Section
5.14.
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"PRIOR SURVEY" shall mean the survey for the Real Property last
revised February 1, 1996 and prepared by Bock & Clark's National Surveyor's
Network.
"PRIOR TITLE REPORT" shall mean the pro forma title commitment (as
marked, and excluding those items marked "omit" or "omitted") for the Real
Property issued by Chicago Title, dated November 13, 1995 and bearing
commitment number FL. 014 10 N 69326.
"PURCHASE PRICE" shall mean $25,300,000 (which amount includes the
Driessen Consideration), as subject to adjustment pursuant to Section 2.6.
"PURCHASED ASSETS" shall have the meaning set forth in Section 2.1.
"PURCHASER'S PLANS" shall have the meaning set forth in Section
5.10(c).
"REAL PROPERTY" shall mean the real property commonly known as 4121
South U.S. Hwy. 1, Edgewater, Florida 32141, and described on Schedule 2.1(a),
together with all rights, privileges, appurtenances and easements pertaining
thereto, and all buildings, plants, facilities, fixtures, structures,
improvements and other real property situated or located at such location.
"RECEIVABLES" shall have the meaning set forth in Section 2.1.
"RELEASE" shall mean any release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the environment or movement through or in the air, soil,
surface water or ground water or other property.
"REMEDIAL ACTION" shall mean all actions, including any studies,
investigations, capital expenditures and/or operational expenditures, required
by a Governmental Authority or required under any Environmental Law, to (a)
clean up, remove, treat, or in any other way ameliorate or address any
Hazardous Materials or other substance in the environment; (b) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Material so it does not endanger or threaten to endanger the public health or
welfare of the indoor or outdoor environment; or (c) bring a Person into
compliance with any Environmental Law.
"SAFETY PROGRAMS" shall mean (a) action taken by Seller such that the
Business and the Real Property are in compliance with air and dust processing
and ventilation requirements for the Real Property under applicable
Environmental Laws, (b) action taken by Seller such that the Business is in
compliance with applicable Environmental Laws for stormwater run-off and
discharge on the Real Property, (c) action taken by Seller such that the
Business is in compliance with all Laws applicable to the management of
wastes, including Hazardous Materials, including the matters listed on Exhibit
D, and (d) the soil evaluation and other Remedial Action required by Exhibit
E.
"SELLER ASSIGNED CONTRACTS" shall have the meaning set forth at
Section 2.2 below.
"SELLER'S LIABILITIES" mean all debts, claims, obligations or other
liabilities of Seller or any of its Affiliates (other than Driessen), absolute
or contingent, known or unknown, including, without limitation:
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(a) all liabilities with respect to any Taxes, including
state, local or Federal Taxes (including interest, penalties, and
additions to such Taxes) for, or properly attributable to, any
periods ending on or prior to the Closing Date (including, with
respect to any taxable period that includes but does not end on the
Closing Date, Taxes with respect to the portion of such period that
includes and ends on the Closing Date calculated as if such taxable
period ended at the consummation of the Closing on the Closing Date),
including any Taxes payable by Seller as a result of the consummation
of the transactions contemplated by this Agreement (except to the
extent that Purchaser expressly assumes responsibility for taxes
pursuant to Section 10.1);
(b) all liabilities arising from Pre-Closing Environmental
Conditions;
(c) all liabilities relating to any Environmental Laws with
respect to any location other than the Real Property including,
without limitation, any other facility owned or operated by Seller,
the Seller's former Rockland, Massachusetts facility and any site at
which was disposed any Hazardous Substance generated by the Seller;
(d) all accounts payable not constituting Assumed
Liabilities and all liabilities for borrowed funds;
(e) all liabilities under (i) any Contracts not being
assigned to Purchaser pursuant to this Agreement or (ii) any Excluded
Asset;
(f) all liabilities to the employees of Seller, including
all employee compensation and benefit obligations and any claims with
respect to severance or termination of employment, except to the
extent Purchaser expressly assumes responsibility for such matters in
Section 5.10;
(g) all product liability claims against Seller, but
only to the extent Seller retains responsibility for such matters in
Section 5.10;
(h) all liabilities relating to the operation of, or the
goods produced or sold by, the Whaler Technologies division of Seller;
and
(i) all liabilities relating to any litigation pending as of
the Closing Date or threatened in writing as of the Closing Date
against Seller including, without limitation, the matters set forth
on Schedule 3.21, except for litigation to the extent arising out of
warranty claims.
"SELLER'S PLANS" shall have the meaning set forth in Section 3.16.
"TAX RETURN" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"TAXES" shall mean all taxes, charges, fees, duties (including
customs duties), levies or other assessments, including without limitation,
income, gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise, value
added, stamp, leasing, lease, user, transfer, fuel, excess profits,
occupational, interest equalization, windfall profits, severance, license,
payroll, environmental, capital stock, disability, employee's income
withholding,
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other withholding, unemployment and Social Security taxes, which are imposed
by any Governmental Authority, and such term shall include any interest,
penalties or additions to tax attributable thereto.
"TITLE COMPANY" shall have the meaning set forth in Section 5.9.
"TITLE INSURANCE" shall have the meaning set forth in Section 5.9.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, assign, convey, transfer and
deliver (1) to Purchaser, and Purchaser shall purchase, acquire and take
assignment and delivery of, the Purchased Assets, and (2) to Normal Duns, and
Normal Duns shall purchase, acquire and take assignment and delivery of, the
Driessen Shares. The "PURCHASED ASSETS" shall mean all assets of Seller other
than the Excluded Assets, wherever located and in whatever form, real,
personal, tangible or intangible, including, without limitation, all of
Seller's right, title and interest in and to the following:
(a) The Real Property.
(b) Equipment. All machinery, equipment, furniture,
telephones, tools, dies, molds, plugs, castings, spare and
replacement parts, tooling, supplies, maintenance equipment, computer
equipment, materials and other personal property located or usually
located at the Real Property or otherwise used in connection with or
necessary to the Business, including those items listed on Schedule
2.1(b).
(c) Vehicles. All trucks, trailers, automobiles and
other vehicles of Seller used in connection with the Business,
including those vehicles listed on Schedule 2.1(c).
(d) Inventories. All inventories, wherever located,
including all raw materials, work in process, finished goods and
supplies inventories (the "INVENTORIES").
(e) Information and Records. All records, files,
notebooks, confidential and nonconfidential information (including
electronic information), price lists, marketing information, sales
records, customer lists and files (including customer credit and
collection information), legal and accounting records, personnel and
labor relations records, employee benefits and compensation plans and
records, environmental control, monitoring and test records, plats
and surveys of the Real Property, plans and designs of buildings,
structures, fixtures and equipment, tax records, historical and
financial records and files, and all other proprietary information
related to, or used in connection with, the Business.
(f) Intellectual Property. The name "BOSTON WHALER" and
any derivation thereof, and all tradenames, trade dress, corporate
names and logos, trademarks, service marks, patents, copyrights (and
any registrations with any Governmental Authority of, and applications
for registration pending with respect to, any of the foregoing),
trade secrets, mask works, technology, inventions, processes,
designs, know-how, computer software and data, formulas, goodwill,
any licenses related to any of the foregoing, to the extent
assignable, and all other intangible Intellectual Property assets
related to the Business,
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including (without limitation) those items described on Schedule
2.1(f), including such rights to sue and recover for past
infringement or misappropriation thereof and to receive all income,
royalties, damages and payments for past and future infringements
thereof (collectively, the "INTELLECTUAL PROPERTY").
(g) Receivables. All accounts receivable, notes receivables
and other receivables arising from the operation of the Business (the
"RECEIVABLES").
(h) Permits. To the extent assignable, all licenses,
permits, variances, interim permits, permit applications, approvals
or other authorizations under any Law applicable to the Business or
otherwise required in connection with the Business or the ownership
or operation of the Purchased Assets or the Driessen Assets,
including those listed on Schedule 2.1(h) (the "PERMITS").
(i) Phone Numbers. All phone numbers and facsimile numbers
used in the Business.
(j) Records. The books and records of Driessen,
including the corporate minute book and shareholders' register.
(k) Other Assets. To the extent not included in the
foregoing, any assets which were included in the Balance Sheet and
all other assets of Seller (except for Excluded Assets), including
the Seller Assigned Contracts and any warranties or other rights,
claims, demands or causes of action relating to the Purchased Assets.
2.2 Assignment of Certain Contracts.
Subject to the terms and conditions of this Agreement,
Seller shall assign and transfer to Purchaser, effective as of the Closing
Date, all of its right, title and interest in, and Purchaser will take
assignment of, the following Contracts of Seller (the "SELLER ASSIGNED
CONTRACTS"):
(a) Personal Property Leases. The leases of equipment,
machinery, vehicles, computer software and hardware, and other
personal property set forth on Schedule 2.2(a).
(b) Purchase Orders and Contracts. All Contracts for
the purchase of goods, materials or services set forth on Schedule
2.2(b)
(c) Customer Contracts. All contracts for the sale of
goods or services relating to the Business which are listed on
Schedule 2.2(c), and all customer deposits made under such Contracts.
(d) Floorplan Contracts. All floorplan contracts which
are listed on Schedule 2.2(d) and all guarantees listed on Schedule
2.2(d), to the extent relating to the products sold by Seller (the
"FLOORPLAN CONTRACTS"), provided that the amount guaranteed under the
Guarantee of Hawley's floorplan obligations to Eaglemark, Inc., shall
not exceed $250,000.
(e) Marketing Contracts. All marketing or promotion
contracts that are listed on Schedule 2.2(e) (the "MARKETING
CONTRACTS").
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(f) Other Contracts. Those other Contracts of Seller listed
on Schedule 3.13 as of the date hereof and not referred to in Section
2.3 and such other Contracts (i) as shall be entered into between
March 14, 1996 and the Closing Date in the ordinary course of
business and are orders for the sale of Seller's goods or services or
purchases of goods, materials or services from unaffiliated parties,
(ii) not of a type required to be listed on Schedule 3.13 or (iii)
which are added to Schedule 3.13 with Purchaser's written consent,
which shall not be unreasonably withheld.
(g) Executive Contracts. The Executive Employment Contracts
listed in Schedule 2.2(g).
2.3 Excluded Assets. Notwithstanding the foregoing, Seller shall not
assign and transfer, and Purchaser shall not take assignment of, (a) any
Contract listed on Schedule 2.3, (b) any Contract not referred to in Section
2.2, (c) all books and records of Seller and Driessen to the extent related to
the other Excluded Assets or the Seller's Liabilities and not the Purchased
Assets or Assumed Liabilities, (d) all claims of Seller for refunds, credits,
carrybacks or carryforwards in connection with any Taxes for tax periods
ending on or prior to the Closing Date and the proceeds thereof (except as set
forth in Section 9.6), (e) all of the bank accounts identified in Schedule
2.3(e) (the "RETAINED BANK ACCOUNTS"), (f) all cash and cash equivalents, such
as bank deposits (including, but not limited to, amounts on deposit in the
Retained Bank Accounts), certificates of deposit and marketable securities
(other than any cash or cash equivalents included in the Driessen Assets), (g)
all insurance policies, binders and related prepaid expenses, other than
insurance policies in which Driessen is the first named insured, (h) all
rights, claims, demands and causes of action which Seller or any of its
Affiliates may have against any Person to the extent related to any of the
Seller's Liabilities or any Excluded Assets, including all proceeds remitted
to Seller or any of its Affiliates from claims, rights, demands and causes of
action with respect thereto, or to any Assumed Liability to the extent
Purchaser has previously received all indemnity payments from Seller with
respect to such Assumed Liability, (i) all tooling, molds and dies and all
other assets relating exclusively to Whaler Technologies (the "WHALER
TECHNOLOGIES ASSETS"), and (j) any goodwill shown on the Balance Sheet
(collectively the "EXCLUDED ASSETS"). The Excluded Assets shall be retained by
Seller and are not being sold or assigned to Purchaser hereunder.
2.4 Assumed Liabilities. At the Closing, Purchaser shall assume,
and agree to pay, perform, fulfill and discharge, the obligations of Seller:
(a) under the Seller Assigned Contracts and Permits
(other than to the extent such obligations would be a violation of
Law);
(b) all liabilities and obligations of Seller for
warranty claims for goods manufactured or sold by Seller on or before
the Closing Date;
(c) all those liabilities and obligations with respect
to Continuing Employees as set forth in Section 5, but only to the
extent specifically set forth in Section 5;
(d) (i) all liabilities and obligations of Seller that
are reflected on the Balance Sheet to the extent such liabilities or
obligations have not been paid or discharged prior to the Closing
Date, and (ii) such categories of liabilities and obligations
incurred in the ordinary course of business consistent with past
practice since December 31, 1995, including, without
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limitation, all accounts payable, accrued expenses, trade obligations
and notes payable (other than intercompany notes), but only to the
extent set forth on the Closing Schedule;
(e) any liabilities arising from any Post-Closing
Environmental Conditions at the Real Property; and
(f) all liabilities and obligations from or in
connection with any product of the Business manufactured by Purchaser
after the Closing Date, and the operation, possession or use of the
Purchased Assets by Purchaser after the Closing Date; and
(g) liabilities and obligations for product liability
matters, to the extent that Purchaser assumes such liabilities and
obligations pursuant to Section 5.10.
The obligations of Purchaser under this Section 2.4 shall be referred to
collectively as the "ASSUMED LIABILITIES." Except as specifically set forth
above, neither Purchaser nor any of its Affiliates shall assume or otherwise
be liable in respect of any debt, claim, obligation or other liability of
Seller or any of its Affiliates whatsoever, including any payable, debt, tort,
violation of Law or breach of any Contract.
2.5 Closing. The Closing shall take place at the offices of Mayer,
Brown & Platt, 190 South LaSalle Street, Chicago, Illinois 60603 at 9:00 A.M.
on May 24, 1996 or, if the conditions set forth in Section 6.3 and 7.3 are not
satisfied on or before May 24, 1996, the first business day thereafter which
is a Friday and at least five Business Days after satisfaction of the
conditions in Sections 6.3 and 7.3. The Closing, and all transactions to occur
at the Closing, shall be deemed to have taken place at, and shall be effective
as of, the close of business on the Closing Date.
2.6 Payment of Purchase Price.
(a) In consideration for the transfer of the Purchased
Assets to Purchaser, Purchaser shall pay (i) Seller, by electronic
bank transfer directly to Seller's Account No. 280321 at NationsBank
of North Carolina, Charlotte an amount equal to the Purchase Price
(less the Escrow Amount and the Driessen Consideration), adjusted as
follows: (A) in the event that the Net Tangible Equity, as indicated
on a statement setting forth the Net Tangible Equity as derived from
a consolidated balance sheet of the Business as of the end of the
calendar month most recently closed preceding the month in which the
Closing Date occurs, and prepared on a basis consistent with the
Balance Sheet (the "MOST RECENT NET TANGIBLE EQUITY") exceeds
$16,222,000 (the "BASE NET TANGIBLE EQUITY"), the Purchase Price
shall be increased by the amount of such excess; or (B) in the event
that the Most Recent Net Tangible Equity is less than the Base Net
Tangible Equity, the Purchase Price shall be reduced by the amount of
such shortfall and (ii) the Escrow Amount to the Escrow Agent, by
electronic bank transfer, to be held thereby as required by the
Escrow Agreement. The Escrow Amount shall be disbursed in accordance
with the terms of the Escrow Agreement. The Escrow Agreement shall
provide, among other things, that the amount held thereunder shall be
disbursed to Purchaser in respect of amounts due to Purchaser under
Section 9.2. The Escrow Amount shall not limit Purchaser's right of
recovery under this Agreement, at law or in equity, including any
right of recovery under Sections 9.2. In consideration of the
transfer of the Driessen Shares to Normal Duns, Normal Duns shall pay
to Seller, by electronic bank
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transfer directly to Seller's account No. 280321 at Nations Bank of
North Carolina, Charlotte, an amount equal to the Driessen
Consideration.
(b) As soon as practicable and in no event later than
forty-five (45) days after the Closing Date, Seller shall deliver to
Purchaser a schedule setting forth the Net Tangible Equity,
determined in accordance with GAAP as of the Closing Date, provided
that, in determining the Net Tangible Equity, (i) all reserves and
accruals relating to the Assumed Liabilities as stated on Seller's
Balance Sheet shall conform with GAAP consistently applied as of the
Closing Date, (ii) the amount of the reserve for the matters stated
at clause (b) of Section 2.4 shall equal $1,218,000, and (iii)
interest on obligations under Floorplan Contracts shall be calculated
in the same manner (as a period expense) as such interest has been
calculated by Seller. In addition, in the event that any cash is
included in the Purchased Assets (other than as contemplated in
Section 2.3(f)), Purchaser shall remit such cash to Seller as
promptly as possible. In the event such cash is not remitted to
Seller, the parties agree that such cash shall be included as a
Purchased Asset for purposes of the calculation of Net Tangible
Equity on the Closing Schedule. Purchaser and Seller and their
respective representatives will jointly determine the time of, and
will observe and participate in, all physical inventories taken in
connection with preparation of such schedule. The schedule delivered
pursuant to this section shall be audited and accompanied by a report
of Ernst & Young, Seller's independent accountants ("SELLER'S
AUDITORS"), to the effect that such schedule and any related notes
thereto were prepared in accordance with GAAP and this Agreement. In
rendering the foregoing audit and report, Seller's Auditors shall
permit Arthur Andersen L.L.P., Purchaser's independent accountants
("PURCHASER'S AUDITORS"), to review, at their request, following
receipt of the report of Seller's Auditors, the report of Seller's
Auditors, including all work papers, schedules and calculations
related thereto.
(c) If Purchaser does not dispute such audited schedule and
report, such audited schedule shall be the "CLOSING SCHEDULE". If
Purchaser disputes such audited schedule or report or any item
included therein, such dispute shall be resolved in the following
manner:
(i) Purchaser shall notify Seller in writing within
twenty-one (21) days after Purchaser's receipt of the
audited schedule, which notice shall specify in reasonable
detail the nature of the dispute;
(ii) during the thirty (30) day period following
Seller's receipt of such notice, Seller and Purchaser shall
attempt to resolve such dispute; and
(iii) if at the end of such 30 day period Seller
and Purchaser shall have failed to resolve such dispute in
writing, the matter shall be referred to the offices of
Price Waterhouse LLP, (the "REFEREE"). The Referee shall act
as an arbitrator and shall issue its report resolving all
disputes as to the audited schedule within thirty (30) days
after such dispute is referred to it. The audited schedule,
as modified by any adjustments determined to be appropriate
by the Referee, shall then be the Closing Schedule. Each of
the parties hereto shall bear all costs and expenses
incurred by it in connection with such arbitration, except
that the fees and expenses of the Referee hereunder shall be
borne equally by Seller and Purchaser. This provision for
arbitration shall be specifically enforceable by the
parties. The decision of the
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Referee in accordance with the provisions hereof shall be
final and binding (absent manifest error) and there shall be
no right of appeal therefrom.
(d) From the Closing Date until the final determination of
the Closing Schedule, each party will grant to the other and its
respective representatives reasonable access during usual business
hours to the agents and employees of such party and to the books,
records and files of the business in its possession to enable such
party to review and otherwise satisfy itself as to the accuracy of
the Closing Schedule and the preparation thereof.
(e) In the event that the Net Tangible Equity as reflected
on the Closing Schedule (the "CLOSING NET TANGIBLE EQUITY") is less
than the Most Recent Net Tangible Equity used for purposes of
adjusting the Purchase Price pursuant to Section 2.6(a), then the
amount of the Purchase Price, as previously adjusted pursuant to
Section 2.6(a), shall be decreased by the amount by which the Closing
Net Tangible Equity is less than the Most Recent Net Tangible Equity.
In the event that the Closing Net Tangible Equity is more than the
Most Recent Net Tangible Equity used for purposes of adjusting the
Purchase Price pursuant to Section 2.6(a), then the amount of the
Purchase Price, as previously adjusted pursuant to Section 2.6(a),
shall be increased by the amount by which the Closing Net Tangible
Equity is more than the Most Recent Net Tangible Equity. No later
than five (5) days after the date of the final determination of the
Closing Schedule, Seller shall pay Purchaser or Purchaser shall pay
Seller, as appropriate, by wire transfer of immediately available
funds, the amount of such deficiency or excess, as the case may be,
with interest thereon at a per annum rate equal to the Prime Rate,
accrued from the Closing Date to the date of payment. The "PRIME
RATE" shall mean the rate announced by The First National Bank of
Chicago as its corporate base interest rate at Chicago, Illinois on
the Closing Date.
2.7 Consistent Treatment. The parties shall allocate the purchase
price among the Purchased Assets, the Driessen Shares and the covenant not to
compete set forth in Section 5.5 in accordance with Schedule 2.7, treat and
report the transactions contemplated by this Agreement in all respects
consistently with such allocation upon all Tax Returns and for purposes of any
Taxes, and not take any action inconsistent with such obligation.
2.8 Procedures for Purchased Assets not Transferable. If, either by
virtue of the provisions thereof or under applicable Law, any of the Contracts
or any other property or rights included in the Purchased Assets are not
assignable or transferable without the consent of some other Person, or if any
of the Driessen Assets would be impaired or adversely affected by the
consummation of the transactions contemplated hereby without the consent of
some other person, Seller shall diligently use all commercially reasonable
efforts to obtain such consent prior to the Closing Date and Purchaser shall
use all commercially reasonable efforts to assist in that endeavor. If any
such consent cannot be obtained prior to the Closing Date and the Closing
occurs, this Agreement and the related instruments of transfer shall not
constitute an assignment or transfer thereof, but Seller shall diligently use
all commercially reasonable efforts for a period of nine months following the
Closing Date to obtain such consent as soon as possible after the Closing Date
or otherwise obtain for Purchaser the practical benefit of such property or
rights and Purchaser shall use all commercially reasonable efforts to assist
in that endeavor. With respect to each Contract for which a necessary consent
has not been obtained prior to the Closing, Seller shall obtain for Purchaser
or Driessen (as the case may be), at no additional cost to Purchaser or
Driessen, the benefits of such Contract (including all payments due to Seller
thereunder) until such consent is obtained. With respect to any
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right under such Contract (including any right to payment), at Purchaser's
request, Seller shall institute legal proceedings to enforce such rights;
provided that such litigation shall be at the sole cost of Purchaser and
Purchaser shall control the conduct of such litigation. Except as so
requested, Seller shall have no obligation to take such action. Furthermore,
until such consent is obtained, Purchaser shall not assume Seller's
obligations with respect to such Contract but shall, as Seller's agent and on
behalf of Seller, pay, perform and discharge fully Seller's obligations
thereunder to the extent that such obligations would have otherwise
constituted Assumed Liabilities. Without Purchaser's prior written consent,
Seller shall take no action to terminate or modify any such Contract.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller jointly and severally represent and warrant to
Purchaser, as of the date of this Agreement and as of the Closing Date (such
representations and warranties being remade on the Closing Date), as follows:
3.1 Due Incorporation; Subsidiaries. Parent, Seller and Driessen are
duly organized, validly existing and, in the case of Parent and Seller, in
good standing under the laws of their respective jurisdictions of
incorporation, and possess all requisite power and authority to own, lease and
operate their respective properties and to carry on their respective
businesses as they are now being owned, leased, operated and conducted.
Driessen has been properly registered with the local chamber of commerce and
has not been dissolved or declared bankrupt. Seller and Driessen are duly
licensed or qualified to do business and in good standing as a foreign
corporation in each jurisdiction where the nature of the properties owned,
leased or operated by it or the Business requires such licensing or
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Purchased Assets, Driessen, the Driessen Shares
or the Business.
3.2 Due Authorization. Parent and Seller have full power and
authority to enter into this Agreement and the Escrow Agreement and to
consummate the transactions contemplated hereby and thereby (other than the
approval and adoption of this Agreement and the transactions contemplated
hereby by the written consent of the stockholders of Parent pursuant to
Section 271 of the Delaware General Corporation Law (the "DGCL")). The
execution, delivery and performance by Parent and Seller of this Agreement and
the Escrow Agreement have been duly and validly approved by all necessary
corporate action. Parent and Seller have duly and validly executed and
delivered this Agreement. This Agreement constitutes and, on the Closing Date,
the Escrow Agreement will constitute, the legal, valid and binding obligation
of Parent and Seller, in each case enforceable in accordance with its terms,
except as such enforceability may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally, or (b) by equitable
limitations on the availability of specific remedies.
3.3 Consents and Approvals. No consent, authorization or approval of,
filing or registration with, or cooperation from, any Governmental Authority
or any other Person not a party to this Agreement is necessary in connection
with the execution, delivery and performance by Parent and Seller of this
Agreement and the Escrow Agreement and the consummation by Parent and Seller
of the transactions contemplated hereby or thereby, or otherwise necessary
with respect to the Driessen Assets, other than (a) the consents set forth on
Schedule 3.3, (b) as required by applicable requirements of the HSR Act, (c)
as required by applicable requirements of the Securities and
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Exchange Commission (the "SEC") or The National Association of Securities
Dealers, (d) filings and consents that may be required under any Environmental
Law necessitated by the transactions contemplated herein and (e) as required
by Sections 228 and 271 of the DGCL and any other applicable sections of the
DGCL. Except for matters set forth in Schedule 3.3, the execution, delivery
and performance by Seller and Parent of this Agreement and the Escrow
Agreement does not and will not (i) violate or conflict with, result in a
breach or termination of, constitute a default under, or permit cancellation
of any Seller Assigned Contract or any Material Contract to which Driessen is
a party, (ii) result in the creation of any Lien upon any of the Purchased
Assets, the Driessen Assets or the Driessen Shares, or (iii) violate or
conflict with any provision of the Certificate of Incorporation or By-laws of
Seller or the Articles of Association or other charter documents of Driessen.
3.4 Financial Statements. Except as set forth in Schedule 3.4, the
Financial Statements have been prepared in accordance with GAAP consistently
applied and present fairly the financial position, assets and liabilities of
Seller and Driessen on a consolidated basis and Parent (as the case may be) as
of the dates thereof and the revenues, expenses, results of operations and
cash flows of Seller and Driessen on a consolidated basis and Parent (as the
case may be), for the periods covered thereby. The Financial Statements are in
accordance with the books and records of Seller and Driessen on a consolidated
basis and Parent (as the case may be), and do not reflect any transactions
which are not bona fide transactions. Except as set forth in Schedule 3.4 or
in the respective Financial Statements, neither Seller, Driessen nor Parent
has any material liabilities, debts, claims or obligations, whether accrued,
absolute, contingent or otherwise, whether due or to become due, other than
trade payables to third parties and accrued expenses incurred in the ordinary
course of business since December 31, 1995. Schedule 3.4 sets forth a true and
correct copy of the Balance Sheet.
3.5 No Adverse Effects or Changes. Except as listed on Schedule 3.5,
since December 31, 1995 through March 15, 1996, neither Seller nor Driessen
has (a) suffered any damage or destruction to, or loss of, any of its assets
or properties (whether or not covered by insurance) in excess of $25,000; (b)
permitted the imposition of a Lien (other than Permitted Exceptions) on, or
disposed of, any of its assets (other than sales of Inventories in the
ordinary course of business, consistent with past practice); (c) terminated or
entered into any Material Contract; (d) cancelled, waived, released or
otherwise compromised any trade debt, receivable or claim exceeding $25,000
individually or $50,000 in the aggregate; (e) made or committed to make any
capital expenditures or capital additions or betterments in excess of $10,000
individually or $50,000 in the aggregate; whether individually or as a part of
related transactions; (f) entered into, adopted, amended (except as may be
required by Law and except for immaterial amendments) or terminated any bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of any
director, officer or employee, or increased in any manner the compensation or
fringe benefits of any director, officer or employee or paid any benefit not
required by any existing plan and arrangement (except for normal salary
increases consistent with past practice) or entered into any contract,
agreement, commitment or arrangement to do any of the foregoing; (g) disposed
of or permitted the lapse in registration of any Intellectual Property; (h)
experienced any Material Adverse Change in the accounts receivable or accounts
payable; (i) changed its accounting methods, systems, policies, principles or
practices; (j) incurred indebtedness (other than for floor plan repurchase
obligations and trade payables in the ordinary course of business); (k)
otherwise experienced a Material Adverse Change; or (l) with respect to
Driessen, (i) made any tax election or settled or
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compromised any tax liability, or waived or extended the statute of
limitations in respect of any such Taxes, or (ii) amended its charter
documents or its governing documents.
3.6 Title to Properties. Except as disclosed on Schedule 3.6, and
except for Permitted Exceptions, Seller has good and marketable title to, and
is the lawful owner of, the Purchased Assets, free and clear of any Lien.
Seller has good and marketable title to, and is the lawful owner of, the
Driessen Shares, free and clear of any Lien, except for items falling under
clause (d) and (f) of Permitted Exceptions. Except for Permitted Exceptions,
Driessen has good and marketable title to, and is the lawful owner of, the
Driessen Assets, free and clear of any Lien. The Purchased Assets and the
Driessen Assets include (other than assets leased under the leases set forth
on Schedule 2.2(a), Inventories disposed of in the ordinary course of business
since the date of the Balance Sheet and the Excluded Assets) (a) all of the
tangible and intangible assets, properties and rights used in connection with
or material to the Business and (b) all of the tangible and intangible assets,
properties and rights reflected in the Balance Sheet and Driessen's balance
sheet dated December 31, 1995. Except as set forth in Schedule 3.6 and except
for Contracts listed on Schedule 2.2 or 3.13, no other Person (including
Parent or any of its Affiliates), owns any assets, properties or rights
relating to or used in the Business, performs or furnishes services for the
benefit of the Business, or is a party to or otherwise enjoys rights under any
Contracts or arrangements pertaining to the operation of Seller, Driessen or
the Business. To the knowledge of Seller, the Assignment, deeds, endorsements
and other instruments of transfer delivered at the Closing by Seller to
Purchaser will be sufficient to transfer to Purchaser the entire right, title
and interest, legal and beneficial, in the Purchased Assets and the Driessen
Shares, free and clear of any Lien (except as set forth on Schedule 3.6, and
except for Permitted Exceptions). Except as set forth on Schedule 3.6, all
tangible personal property of Seller (including all tooling, molds and dies)
is located at the Real Property and all tangible property of Driessen is
located at the Amsterdam Property. The Purchased Assets and the Driessen
Assets constitute all of the assets material to the production by Seller of
the income shown on the December 31, 1995 income statement of Seller (but the
foregoing shall not constitute a representation of the prospective income
production of Purchaser using the Purchased Assets or Driessen using the
Driessen Assets). Seller enjoys peaceful and undisturbed possession under all
leases set forth on Schedule 2.2(a), subject to the terms thereof. Schedule
3.6 sets forth as of the date hereof a true and complete schedule of all
tooling, molds and dies used by Seller or in the Business. Schedule 3.6 sets
forth a true and complete schedule of the personal property leased by
Driessen.
3.7 Computer System. Except as disclosed in Schedule 3.7, all
computer hardware and software and related materials used by Seller or
Driessen and constituting the Leasetec System and all other material computer
systems (collectively, "COMPUTER SYSTEM") are in good working order and
condition. The use of the Computer System by the Business (including any
software modifications) (a) has not violated or infringed upon and, to the
knowledge of Seller and Parent, will not violate or infringe upon, the rights
of any third parties and (b) has not resulted and will not result in the
termination of any maintenance, service or support agreement relating to any
part of the Computer System or any reduction in the services provided to the
Business, warranties available to the Business or rights of the Business
thereunder. At the Closing, Seller will transfer to Purchaser, all user and
service documentation for the Leasetec System.
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3.8 Real Property.
(a) Except as set forth on Schedule 3.8, Seller and Driessen
operate the Business at the Real Property and at the Amsterdam
Property, respectively, and at no other locations. Except as set
forth on Schedule 3.8, Seller is not a party to any lease of any real
property, whether as lessor or as lessee. No written notice has been
received by Seller or Parent from any Governmental Authority
requiring or advising the need for any repair, alteration,
restoration or improvement in connection with the Real Property or
the Amsterdam Property that has not been fully complied with. Except
as set forth on Schedule 3.8, other than the Real Property and the
Amsterdam Property, neither Seller nor Driessen have any interest in
any other real property.
(b) Seller has good and marketable legal and beneficial
title to each parcel of the Real Property free and clear of all Liens
and exceptions to title, except for the Permitted Exceptions. Upon
consummation of the Closing, Purchaser shall have good and marketable
legal and beneficial title to each parcel of the Real Property, free
and clear of all exceptions to title and all Liens (other than
Permitted Exceptions, other than (i) exceptions 1-4 (provided that
the parties agree that exceptions 2(b) and 2(c) will be replaced by
survey exceptions based on the prior survey) and 15 noted on Schedule
B, Section 2 of the Prior Title Report, (ii) the condition relating
to the ingress/egress easement O.R. book 2840, page 274 noted on the
Prior Survey, and (iii) the Liens listed on Schedule 1.2). Seller, as
title holder to the Real Property, has valid and enforceable rights
of ingress and egress to and from the Real Property, adequate to
operate the Business. At Closing, such rights will be transferred to
Purchaser by reason of the Purchaser's acquisition of the Real
Property. Seller has provided Purchaser true and complete copies of
the most recent title insurance commitments or policies and surveys
in the possession of Seller for the Real Property, but Seller makes
no representations as to the accuracy or completeness thereof. Except
as set forth in Schedule 3.8(b), all contractors, subcontractors,
suppliers, architects, engineers, and others who have performed
services or labor or have supplied materials in connection with
Seller's acquisition, development, ownership, or management of the
Real Property have been paid in full or will be paid in full prior to
the Closing.
(c) Except as set forth in Section 3.8(c), to the knowledge
of Seller, the buildings, plants, facilities, fixtures, structures
and improvements on the Real Property and the Amsterdam Property are
structurally sound, have no material defects and are in good
operating condition and repair (normal wear and tear excepted). Each
such building, plant, facility, fixture, structure and improvement
has been maintained consistent with standards generally followed in
Seller's industry. Except as identified in the Prior Title Report and
the Prior Survey, none of the buildings, plants, facilities,
fixtures, structures and improvements or appurtenances on the Real
Property or the Amsterdam Property or any equipment therein, the
operation thereof or any operation conducted therein, in each case as
presently conducted, violate any restrictive covenant or any
provision of any Law (including any zoning law but excluding any
Environmental Law (which is addressed at Section 3.20)). Except as
set forth on the Prior Title Report or the Prior Survey, the Real
Property and all improvements thereon do not encroach on any property
owned by others. Except as set forth on the Prior Title Report or the
Prior Survey, no property or improvement of any other Person
encroaches on the Real Property. No condemnation, zoning or other
proceeding is pending or, to the knowledge of Seller or Parent,
threatened with respect to the Real Property or the Amsterdam
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Property or any portion thereof. Except as set forth in Schedule
3.8(c), the Real Property and the Amsterdam Property each have
adequate water supply, storm and sanitary sewer facilities, adequate
access to gas, telephone, electric connections and other public
utilities in order to operate the Business as currently conducted and
all connection charges relating thereto have been paid. Neither
Seller nor Driessen conduct manufacturing operations at the Amsterdam
Property, other than knock-down assembly.
(d) The leases set forth on Schedule 3.8 cover all of the
real estate leased, used or occupied by Driessen in connection with
the Business. Each of the leases set forth on Schedule 3.8 is in full
force and effect and Driessen holds a valid and existing leasehold
interest under each of such leases. Driessen is not in material
default, and no circumstances exist which would result in such
default (including upon the giving of notice or the passage of time,
or both), under any of such leases, and no other party to such leases
has the right to terminate or accelerate performance under or
otherwise modify any of such leases. To Seller's knowledge, no lessor
under any such lease is in default under any of such leases in its
duties to the lessee. Except as set forth in Schedule 3.8(d), neither
Seller nor Driessen have assigned, transferred, conveyed, subjected
to a Lien, or otherwise encumbered any interest in any of the leases
set forth on Schedule 3.8.
3.9 Personal Property. Except as disclosed on Schedule 3.9, all of
the tangible assets (whether owned or leased) included in the Purchased Assets
and the Driessen Assets (a) are suitable for the purposes for which such
assets are presently used in the Business, and (b) have been maintained and
are in good operating condition and repair (normal wear and tear excepted).
3.10 Inventories. Schedule 3.10 contains a true and accurate schedule
as of February 29, 1996 of all Inventories of Seller and of Driessen as of
March 19, 1996. Schedule 3.10 sets forth a complete listing of all such items
of the Seller that have remained in inventory for more than 12 months prior to
December 31, 1995. Except as described on Schedule 3.10, each item of the
Inventories of Seller is of merchantable quality, usable and saleable in the
ordinary course of business, and not obsolete. All of the obsolete inventories
of Driessen have been appropriately reflected on the balance sheet of
Driessen. All Inventories of Seller and Driessen are fairly reflected in the
inventory accounts on the balance sheets included in the Financial Statements
including all appropriate reserves, and are valued at the lower of cost or
market, all in accordance with GAAP. Other than as set forth in Schedule 3.10,
neither Seller nor Driessen is under any obligation with respect to the return
of any Inventories. Except as set forth on Schedule 3.10, all of the
Inventories are located at the Real Property or the Amsterdam Property and
none of the Inventories have been subject to any theft or other unlawful
diversion or are held on assignment or consignment.
3.11 No Third Party Options. There are no agreements, options,
commitments or rights with, of or to any Person (other than Purchaser) to
acquire any of Seller's or Driessen's assets, properties or rights or shares
except for those Contracts entered into for the sale of Inventories in the
ordinary course of business, consistent with past practice.
3.12 Intellectual Property. Schedule 2.1(f) includes a true and
complete list as of March 13, 1996, of all of the patents, patent
applications, trade names, trademark, registrations, trademark applications,
copyright registrations, copyright applications and licenses therefor included
in the Intellectual Property and used in the conduct of the Business. Except
as disclosed on Schedule 3.12(a) and except for consumer off-the-shelf
software used in the Business:
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(a) All of the Intellectual Property is owned by Seller or
Driessen, free and clear of all Liens (other than Permitted
Exceptions), are valid and enforceable, and are not subject to any
license, royalty or other agreement, and neither Seller nor Driessen
has granted any license or agreed to pay or receive any royalty in
respect of any of such Intellectual Property. All registration and
maintenance fees that have become due and payable to any Governmental
Authority with respect to any Intellectual Property set forth in
Section 2.1(f) have been paid and no act or omission has occurred to
cancel, impair, dedicate to the public or entitle any Governmental
Authority to cancel, modify, forfeit or hold abandoned any such
Intellectual Property. Seller and Driessen own or possess, and Seller
will transfer to the Purchaser at the Closing or Driessen will
continue to own or possess after the Closing, adequate rights to all
intellectual property necessary to conduct the Business as presently
conducted.
(b) Except as set forth on 3.12(b), to the knowledge of
Seller, the products manufactured or sold by Seller or Driessen and
any process, method, part, design, material or other intellectual
property it employs, and the marketing and use by Seller of any such
product, service or other intellectual property, do not infringe any
intellectual property or confidential or proprietary rights of
another. Neither Seller nor Driessen has received any notice
contesting its right to use the Intellectual Property. To the
knowledge of Seller and Parent, no products manufactured or
activities conducted by any other Person infringe on the Intellectual
Property.
3.13 Contracts.
(a) All of the Material Contracts are in full force and
effect and constitute the legal, valid and binding obligations of
Seller or Driessen and, to the knowledge of Seller, the other parties
thereto. All of the Material Contracts are enforceable in accordance
with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors
generally and by equitable limitations on the availability of
specific remedies. No termination notice has been delivered by any
party to any other party with respect to any Material Contract.
Seller has delivered to Purchaser true and complete copies of each
written Material Contract and a complete and accurate written
description of any Material Contract not reduced to writing.
Notwithstanding anything to the contrary in this Section 3.13,
accounts receivable and product warranties shall not be deemed
Material Contracts or Contracts for purposes of this Section 3.13.
(b) Schedule 3.13 lists as of March 15, 1996 all the
Contracts and arrangements of the following types to which either
Seller or Driessen is a party, by which it is bound, or to which any
of its assets or properties is subject:
(i) any labor agreement;
(ii) any Contract or arrangement of any kind with
any employee, officer, director or stockholder of Seller or
Driessen or any of their respective Affiliates of such
individuals, or any Contract or other arrangement of any
kind with Parent or any Affiliate of Parent;
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(iii) any Contract or arrangement with a sales
representative, manufacturer's representative, distributor,
dealer, broker, sales agency, advertising agency or other
Person engaged in sales, distributing or promotional
activities, or any Contract to act as one of the foregoing
on behalf of any Person (other than purchase and sales
orders and other Contracts of a type listed at (iv) below);
(iv) any Contract or arrangement of any nature
having an aggregate value in excess of $30,000 ($50,000 in
the case of purchase and sales orders) or not terminable on
notice of thirty (30) days or less;
(v) any indenture, credit agreement, loan
agreement, note, mortgage, security agreement, letter of
credit, loan commitment, guaranty, repurchase agreement or
other Contract or arrangement relating to the borrowing of
funds, an extension of credit or financing, pledging of
assets or guarantying the obligations of any Person;
(vi) any Contract or arrangement involving Seller
or Driessen as a participant in a partnership, joint venture
or other cooperative undertaking;
(vii) any Contract or arrangement involving any
restrictions on Seller with respect to the geographical area
of operations or scope or type of business of Seller or
Driessen;
(viii) any power of attorney or agency agreement or
arrangement pursuant to which a Person is granted the
authority to act for or on behalf of Seller or Driessen, or
Seller or Driessen is granted the authority to act for or on
behalf of any Person;
(ix) any Contract relating to the Computer System;
(x) any Contract granting to any Person a right at
such Person's option to purchase or acquire any asset (other
than Inventory in the ordinary course of business) or
property of Seller or Driessen (or interest therein);
(xi) any Contract for capital improvements or
expenditures in excess of $10,000 individually or $50,000 in
the aggregate;
(xii) any Contract for which the full performance
thereof may extend beyond sixty (60) days from the date of
this Agreement (other than purchase and sales orders in the
ordinary course of business);
(xiii) any Contract not made in the ordinary course
of business which is to be performed in whole or in part at
or after the date of this Agreement;
(xiv) any Contract or arrangement relating to
management support, facilities support or similar
arrangement;
(xv) any Contract whereby any Person agrees (A)
not to compete with Seller or Driessen or (B) to maintain
the confidentiality of any information of Seller or
Driessen;
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(xvi) any Contract relating to the sale, voting or
registration of the capital stock of Driessen, any
registration rights agreements, stockholders agreements,
buy-sell agreements, any first offer or right of refusal
agreements, any voting agreements, any board representation
agreements or any other similar agreements relating to
Driessen's equity securities; and
(xvii) any Contract or arrangement not specified
above that is material to Seller or Driessen.
(c) Except as set forth in Schedule 3.13(c), since March 15,
1996, neither Seller nor Driessen has entered into any Contract other
than in the ordinary course of business, consistent with past
practice.
3.14 Permits. Schedule 2.1(h) is a true and accurate list as of the
date hereof of all Permits held by Seller or Driessen and used in the
Business. Except for such Permits, there are no permits, licenses, consents or
authorizations, whether federal, state, local or foreign, which are necessary
for the lawful operation of the Business. Seller and Driessen are in full
compliance in all material respects with all requirements and limitations
under such Permits. No employee, officer, director or Affiliate of Seller or
Driessen owns or has any interest in any such Permit.
3.15 Insurance. Schedule 3.15 contains an accurate and complete list
as of the date hereof of all policies of fire, liability, workmen's
compensation, public and product liability, title and other forms of insurance
owned, held by or applicable to Seller, its assets or the Business. Seller has
heretofore delivered to Purchaser a true and complete summary description of
all such policies, including all occurrence-based policies applicable to
Seller, Driessen or the Business for all periods prior to the Closing Date.
All such policies are in full force and effect. No notice of cancellation or
termination has been received with respect to any such policy. No insurer has
cancelled or refused to renew any insurance applicable to Seller or Driessen
nor has any insurer applied any additional restrictions to any existing
insurance policy during the term of the policy or upon renewal during the
period that Parent has owned Seller.
3.16 Employee Benefit Plans and Employment Agreements.
(a) Schedule 3.16 is a list as of the date of this Agreement
of all material employment contracts, and employee benefit plans,
programs, policies and arrangements (including all collective
bargaining, stock purchase, stock option, compensation, deferred
compensation, pension, retirement, severance, termination,
separation, vacation, sickness, health insurance, welfare and bonus
plans, arrangements, and agreements) for the benefit of continuing
employees or former employees of Seller or Driessen and under or with
respect to which Seller or Driessen has any obligation or liability
(collectively, the "SELLER'S PLANS").
(b) Seller has provided or made available to Purchaser true
and correct copies of each of Seller's Plans and all contracts
relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, administration
contracts, investment management agreements, subscription and
participation agreements, and recordkeeping agreements, each as in
effect on the date hereof, to the extent such Seller's Plans are in
written form. Except as set forth on Schedule 3.16, Seller's Plans
that are material are in written form. To the extent applicable, a
true and correct copy of the most
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recent annual report, actuarial report, summary plan description, and
Internal Revenue Service determination letter with respect to each of
Seller's Plans has been supplied or made available to Purchaser by
Seller.
(c) With respect to each of Seller's Plans that is an
"employee pension benefit plan" (within the meaning of section 3(2)
of ERISA) and except as set forth on Schedule 3.16:
(i) no such Seller's Plan is a multiemployer plan
(as defined in Section 3(37) of ERISA) or is
subject to title IV of ERISA;
(ii) each such Seller's Plan which is intended to be
tax qualified under sections 401(a) and 501(a)
of the Code, complies and has been administered
in form and in operation in all material
respects with all applicable requirements of
law, including, sections 401(a) and 501(a) of
the Code; no event has occurred which is
reasonably expected to cause any such Seller's
Plan to fail to so comply with such
requirements; and
(iii) there are no material actions, suits or claims
(other than routine claims for benefits) pending
or, to the knowledge of Seller, threatened
involving any such Seller's Plan or the assets
thereof and no facts exist which is reasonably
expected to give rise to any such actions, suits
or claims (other than routine claims for
benefits).
(d) Except as set forth on Schedule 3.6(d), each Seller's
Plan which is maintained or contributed to by Driessen or with
respect to which Driessen has any liability complies and has been
administered in form and operation in all material respects with
applicable Law and no notice has been issued by any Governmental
Authority questioning or challenging such compliance which could be
reasonably expected to result in any material liability to Driessen.
3.17 Employees. Schedule 3.17 contains a true, complete and accurate
list of the names, titles, annual compensation and all bonuses and similar
payments made for the current and preceding two (2) years for each director
and officer of Seller or Driessen and each employee of Seller or Driessen who
has an annual base salary of $50,000 or more. Except as disclosed on Schedule
3.17, there is no, and during the past two years there has been no, labor
strike, picketing, dispute, slow-down, work stoppage, union organization
effort, grievance filing or proceeding, or other labor difficulty actually
pending or, to the knowledge of Seller, threatened against or involving Seller
or Driessen. Neither Seller nor Driessen is a party to any collective
bargaining agreement and no such agreement determines the terms and conditions
of the employment of employees of Seller. No collective bargaining agent has
been certified as a representative of any of employees of Seller and no
representation campaign or election is now in progress with respect to any
employees of Seller. As of February 29, 1996, (a) Seller had approximately 376
full-time employees and approximately 5 part-time employees and (b) Driessen
had approximately 12 full-time employees and approximately 4 part-time
employees. Seller is in compliance in all material respects with its
obligations pursuant to the Worker Adjustment and Retraining Notification Act
of 1988 ("WARN") and all other obligations arising under any other applicable
Law relating to the termination of employees. Seller has not within the past
two years effected any "plant closing" or "mass layoff" as those terms are
defined in WARN (such closings and layoffs being referred to as "WARN
Events"), affecting in whole or in part any
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facility, site of employment or operating unit of its business or any
employee, without complying, in all material respects, with the notice
requirements and other provisions of WARN, nor has Seller taken any action
which could be reasonably expected to result in a WARN Event with respect to
the operations or business of Seller prior to the Closing Date. No employee
subject to an Executive Employment Contract listed on Schedule 2.2(g) serves,
or has served within the past two years, as an officer, director, employee or
agent of any Affiliate of Seller. Except as set forth in Schedule 3.17, Seller
has not received notice that any of its executive employees intends to
terminate his employment with Seller or would not be willing to work for
Purchaser. Driessen has complied in all material respects with all Laws
relating to employment
3.18 Taxes. (a) Except for current Taxes not due and payable through
the Closing (such Taxes to be paid when due by Seller), Seller has paid to,
and where necessary collected or withheld and remitted to, the proper
Governmental Authority all Taxes related to taxable periods or portions
thereof ending on the Closing (including governmental charges, assessments and
required contributions of Seller with respect to the Business) that may result
in the filing of a Lien on the Purchased Assets or that may result in the
imposition of transferee or other liability on Purchaser for the payment of
such Taxes.
(b) The amounts provided as a liability on the most recent
balance sheet as of the Closing of Driessen for all Taxes are adequate to
cover all unpaid liabilities for all Taxes, whether or not disputed, that have
accrued with respect to or are applicable to the period through the Closing or
to any years and periods prior thereto and for which Driessen may be directly
or contingently liable in its own right or as a transferee of the assets of,
or successor to, any Person. There are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the properties or assets of
Driessen. Except as set forth on Schedule 3.18, Driessen has not granted or
been requested to grant any waiver of any statutes of limitations applicable
to any claim for Taxes.
(c) All Tax Returns have been filed for Driessen, and all
other filings in respect of Taxes have been made for Driessen, for all periods
through the Closing as required by applicable Law. All Taxes shown as due on
all such Tax Returns and other filings have been paid. Each such Tax Return
and filing is true, accurate and complete. Except as set forth on Schedule
3.18, none of the Tax Returns or other filings that include the operations of
Driessen has ever been audited or investigated by any Governmental Authority,
and no facts exist which would constitute grounds for the assessment of any
additional Taxes by any Governmental Authority with respect to the taxable
years covered in such Tax Returns and filings. No material issues have been
raised in any examination by any Governmental Authority with respect to the
businesses and operations of Driessen which, by application of similar
principles, reasonably could be expected to result in a proposed adjustment to
the liability for Taxes for any other period not so examined. All Taxes which
Driessen is required by Law to withhold or collect, including amounts required
to be withheld for Taxes of employees and other withholding taxes, have been
duly withheld or collected and, to the extent required, have been paid over to
the proper Governmental Authorities or are held in separate bank accounts for
such purpose. All statements required to be furnished to payees by Driessen
have been furnished to such payees, and the information set forth on such
information returns and statements is true, accurate and complete.
(d) Driessen is not a party to any tax sharing or tax
indemnification agreement.
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(e) The basis of all depreciable or amortizable assets, and
the methods used in determining allowable depreciation or amortization
deductions of Driessen are correct and in compliance with applicable Law in
all material respects.
3.19 No Defaults or Violations. Except as disclosed on Schedule 3.19:
(a) Neither Seller nor Driessen is in breach or default
under the terms of any Material Contract to which it is a party or by
which it is bound, no event has occurred or circumstance exists
which, with notice or lapse of time or both, would constitute a
breach or default by Seller or Driessen under any such Material
Contract, and, to the knowledge of Seller, no other party to any such
Material Contract is in breach or default under any such Material
Contract.
(b) Except for environmental matters (which are covered by
Section 3.20), Seller and Driessen are in compliance with, and no
violation exists under, any Laws applicable to Seller, Driessen or
the Business, and neither Seller nor Driessen is aware that any event
has occurred or circumstance exists which, with or without notice or
lapse of time or both, would constitute a violation under any such
Law.
(c) No notice from any Governmental Authority has been
received within the past two years claiming any violation of any Law
or requiring any work, construction (other than pursuant to sales
contracts with Governmental Authorities), or expenditure, or
asserting any Tax, assessment or penalty, with respect to Seller or
Driessen. Schedule 3.19 sets forth a description of any uncompleted
improvement program required by any Governmental Authority with
respect to the Real Property or the Amsterdam Property.
3.20 Environmental Matters. The Safety Programs have been fully and
satisfactorily completed. Except as disclosed in Schedule 3.20:
(a) Neither Seller nor Driessen has used or stored any, and
there are no, Hazardous Substances in, on, or at the Real Property or
the Amsterdam Property except for substances which are used or are to
be used in the ordinary course of business (which inventories have
been stored and used in accordance with all applicable Environmental
Laws and Environmental Permits). There is not now at the Real
Property or the Amsterdam Property any (i) underground storage tank
or surface impoundments, (ii) asbestos-containing materials or (iii)
polychlorinated biphenyls, except in compliance with applicable
Environmental Laws.
(b) No notice has been received from any Governmental
Authority or any other Person that Seller or Driessen is responsible
(or potentially responsible) for any Remedial Action at any location
or that the Real Property is required or may be required to be
subject to Remedial Action. All Remedial Action (in addition to the
Safety Programs) previously required under any Environmental Law with
respect to the Real Property has been completed. Included within the
Permits are all Environmental Permits necessary for the operation of
the Business as presently operated or contemplated by the Seller's
1996 Business Plan, a copy of which has been delivered to Purchaser.
There is no (i) civil, criminal or administrative claim, suit,
proceeding or investigation (including a request for information)
pending or, to the knowledge of Seller, threatened with respect to
the Business or the Real Property or the Amsterdam Property relating
in any way to any Environmental Laws, Environmental Permits
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or Remedial Action and Seller does not know of any fact or
circumstance which would give rise to any such claim, suit,
proceeding or investigation, or (ii) outstanding written orders or
Contracts with any Governmental Authority relating in any way to
Environmental Laws, Environmental Permits or Remedial Action. Seller
and Driessen have timely filed all reports and notifications required
to be filed with respect to, and obtained and maintained all
Environmental Permits required for, the Real Property and the
Amsterdam Property, all improvements on the foregoing and all
operations conducted therein, and has generated and maintained all
required records and data under all applicable Environmental Law, and
all operations conducted therein are in compliance in all material
respects with such Environmental Laws.
(c) During the period that Seller has owned the Real
Property and, to Seller's knowledge, during any period prior thereto,
no condition has existed or event has occurred with respect to the
Real Property that could, with or without notice, passage of time or
both, give rise to any present or future liability with respect to
the Real Property pursuant to any Environmental Law. During the
period that Seller has owned the stock of Driessen and, to Seller's
knowledge, during any period prior thereto, no condition has existed
or event has occurred with respect to Driessen or the Amsterdam
Property that could, with or without notice, passage of time or both,
give rise to any present or future liability with respect to Driessen
or the Amsterdam Property pursuant to any Environmental Law.
3.21 Litigation; Product Liabilities. (a) Except as disclosed in
Schedule 3.21, as of March 15, 1996, there are no actions, suits,
arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations pending or, to the knowledge of Seller, threatened
against or affecting Seller or Driessen or any of their respective officers,
directors, employees, agents or stockholders in their capacity as such, or any
of its properties or businesses. Seller is not aware of any facts or
circumstances which may give rise to any of the foregoing. Except as set forth
on Schedule 3.21, all of the proceedings pending or threatened against Seller
or Driessen are covered by insurance policies and are being defended by
Seller, subject to such deductibles as are set forth in such policies.
Schedule 3.21 is a complete and accurate list as of the date hereof of all
pending actions asserted by Seller or Driessen. Except as disclosed in
Schedule 3.21, neither Seller nor Driessen is subject to (a) any order,
judgment, decree, injunction, stipulation or consent order of or with any
court or other Governmental Authority or (b) any settlement agreement with any
Governmental Authority or other Person. Neither Seller nor Driessen have
entered into any agreement to settle or compromise any proceeding pending or
threatened against it which has involved any obligation other than the payment
of money or for which Seller or Driessen has any continuing obligation. As of
the date hereof, there are no claims, actions, suits, proceedings or
investigations pending or to the knowledge of Seller or Parent, threatened by
or against Seller or Parent relating to this Agreement or the transactions
contemplated hereby or thereby.
(b) Schedule 3.21 sets forth a summary of all product liability
claims filed against Seller or Driessen (or any predecessor of Seller or
Driessen) since July 1, 1993.
3.22 Related Parties. Except as disclosed on Schedule 3.22, neither
Parent nor any of its Affiliates have or claim to have any direct or indirect
interest in any other Person which conducts a business similar to, has any
Contract or arrangement with, or does business or is involved in any way with,
Seller or Driessen. Schedule 3.22 contains a complete and accurate description
as of the date hereof of all such Persons, interests, arrangements and other
matters.
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3.23 Intercompany Services and Transactions. Schedule 3.23 contains a
complete and accurate list as of the date hereof of all agreements or
arrangements (whether written or unwritten) relating to all intercompany
services and transactions existing between Seller or Driessen and any of their
respective Affiliates during the past two (2) years.
3.24 Customers and Suppliers. Schedule 3.24 sets forth (a) a list of
the 100 largest customers of Seller and the 10 largest customers of Driessen,
in terms of revenue during each of the 1994 and 1995 calendar years and the
portion of 1996 prior to March 1, 1996 (collectively, the "MAJOR CUSTOMERS"),
showing the total revenue received in each such period from each such
customer; and (b) a list of the 50 largest suppliers of Seller and the five
largest suppliers of Driessen, in terms of purchases during the 1995 calendar
year and the portion of 1996 prior to March 9, 1996 (collectively, the "MAJOR
SUPPLIERS"), and showing the approximate total purchases in each such period
from each such supplier. Except to the extent set forth in Schedule 3.24,
since January 1, 1995 through the date hereof, there has not been any adverse
change in the business relationship with, and there has been no material
dispute of Seller with, any of the top 10 Major Customers or top 10 Major
Suppliers of Seller and Driessen. Seller has received no written notice as of
March 15 that any Major Customer or Major Supplier intends to reduce its
purchases from or sales to (as the case may be) the Business.
3.25 Receivables. All Receivables of Seller and Driessen have arisen
from bona fide transactions in the ordinary course of business.
3.26 Product Warranties. (a) Except as set forth on Schedule 3.26, as
of the date hereof, there is no written claim against or liability of Seller
or Driessen (or any predecessor of Seller or Driessen) on account of product
warranties or with respect to the manufacture, sale, distribution or rental of
defective products and to the knowledge of Seller or Parent there is no basis
for any such claim on account of defective products heretofore manufactured,
sold, distributed or rented.
(b) Schedule 3.26 sets forth copies of all product warranties issued
for Seller's products or products sold by Driessen during the past two (2)
years. In each of the past two years, payments under such written warranty
claims have not exceeded 3% of Seller's net sales for that year (including
Driessen's net sales for that year).
3.27 Due Diligence Materials. To the knowledge of Seller, except as
set forth on Schedule 3.27, Seller has provided to Purchaser or its
representatives all documents (to the extent that such documents exist)
described in the Due Diligence Request of Purchaser delivered to MacAndrews &
Forbes Holdings Inc. on December 19, 1995, a copy of which marked to be
applicable to this Agreement is set forth in Schedule 3.27 (the "Document
Request"), as such requests pertain to Seller and Driessen; provided, however,
that the existence of a document not previously furnished to Purchaser in
response to the Document Request shall not be deemed a breach of this Section
3.27 to the extent that such document is of a type covered by one of the
representations and warranties provided in Article III of this Agreement but
would not have had to be identified on a schedule to this Agreement. Seller
has furnished Purchaser with a true and correct copy of its fixed assets
listing as of January 31, 1996 showing, among other things, the acquisition
cost of, and cumulative depreciation taken to date of Seller's fixed assets
purchased since January 1, 1990 having an original acquisition cost in excess
of $5,000.
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3.28 Brokers. Neither Purchaser nor any Affiliate of Purchaser
(including, after the Closing, Driessen) has or shall have any liability or
otherwise suffer or incur any Loss as a result of or in connection with any
brokerage or finder's fee or other commission of any Person retained by
Parent, Seller or any of their respective Affiliates in connection with any of
the transactions contemplated by this Agreement.
3.29 Accuracy of Statements. Neither this Agreement nor any schedule
or exhibit hereto contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
3.30 Capitalization. The authorized capital stock of Driessen
consists of 100 shares having a nominal value of NLG 1,000 (the "AUTHORIZED
CAPITAL"), of which 26 shares are issued and outstanding as of the date
hereof. Seller is the registered legal and beneficial owner of 100% of the
issued and outstanding shares of Authorized Capital. Driessen has never
authorized, offered, sold or issued any shares of capital stock other than the
Authorized Capital. All offerings, sales and issuances by Driessen of shares
of Authorized Capital have been conducted in accordance with all applicable
Laws. Since December 31, 1995, there has not been, and from the date hereof
there will not be, any increase in the number of outstanding shares of
Authorized Capital. All of the issued and outstanding shares of Authorized
Capital have been duly authorized and are validly issued, fully paid and
nonassessable and are not subject to any preemptive rights. There are no
outstanding or authorized options, warrants, rights, contracts, rights of
first refusal or first offer, calls, puts, rights to subscribe, conversion
rights, or other agreements or commitments to which Driessen is a party or
which are binding upon Driessen providing for the issuance, disposition or
acquisition of any of its capital stock or securities convertible or
exchangeable for its capital stock and, to date, no condition has been met
under any contract which would require or otherwise obligate Driessen to issue
any of the foregoing. There are no outstanding or authorized stock
appreciation, phantom stock, or similar rights with respect to Driessen, and,
except as provided in Driessen's Articles of Association, there are no
contractual or statutory preemptive rights or similar restrictions with
respect to the issuance or transfer of any shares of Authorized Capital. There
are no voting trusts, proxies or any other agreements, restrictions or
understandings with respect to the voting of any of the capital stock of
Driessen. Since December 31, 1995, Driessen has not declared, set aside or
paid any dividend or distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock.
3.31 Banks. Schedule 3.31 sets forth (a) the name of each bank, trust
company and stockbroker or other broker which maintains an account, credit
line or safe deposit box or vault for Driessen, (b) the name of each person
authorized to draw on any such account or credit line or to have access to any
such safe deposit box or vault and (c) the purpose of each such account,
credit line, safe deposit box or vault.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent and Seller, as of the
date of this Agreement and as of the Closing Date (such representations and
warranties being remade on the Closing Date), as follows:
4.1 Due Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization with all requisite power and authority to own, lease and operate
its properties and to carry on its business as they are now being owned,
leased, operated and conducted.
4.2 Due Authorization. Purchaser has full power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Purchaser of this Agreement
have been duly and validly approved by all necessary corporate action.
Purchaser has duly and validly executed and delivered this Agreement. This
Agreement constitutes the legal, valid and binding obligation of Purchaser,
enforceable in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of creditors' rights
generally or (b) by equitable limitations on the availability of specific
remedies.
4.3 Consents and Approvals. No consent, authorization or approval of,
filing or registration with, or cooperation from, any Governmental Authority
or any other Person not a party to this Agreement is necessary in connection
with the execution, delivery and performance by Purchaser of this Agreement
and the consummation by Purchaser of the transactions contemplated hereby or
thereby, other than (a) the consents set forth on Schedule 4.3 (each of which
will be obtained prior to Closing), (b) as required by applicable requirements
of the HSR Act, (c) as required by applicable requirements of the SEC and (d)
filings and consents that may be required under any environmental, health or
safety law or regulation necessitated by the transactions contemplated herein.
The execution, delivery and performance by Purchaser of this Agreement does
not and will not (i) violate or conflict with, result in a breach or
termination of, constitute a default under, or permit cancellation of any
material contract to which Purchaser is a party or to which any of its assets
is subject, or (ii) violate or conflict with any provision of Purchaser's
Certificate of Incorporation or by-laws.
4.4 Brokers. Purchaser has used no broker or finder in connection
with the transactions contemplated hereby.
4.5 Due Diligence Materials. Purchaser has no knowledge that Seller
has failed to comply with the Document Request or is otherwise in breach of
any of the representations or warranties contained in this Article III.
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ARTICLE V
COVENANTS
5.1 Preservation of Business. Seller covenants that Seller and
Driessen shall operate only in the ordinary and usual course of business
consistent with past practice and shall (a) use all commercially reasonable
efforts to preserve intact its respective present business organization and
personnel, (b) use all commercially reasonable efforts to preserve the good
will and advantageous relationships with customers, suppliers, independent
contractors, employees and other Persons material to the operation of the
Business, (c) use all commercially reasonable efforts to not permit any action
or omission which would cause any of the representations or warranties of
Parent or Seller contained herein to become inaccurate, including the
representations and warranties contained in Section 3.5, or any of the
covenants of Parent or Seller to be breached, (d) not terminate, modify or
amend any Material Contract or any Seller Assigned Contract, other than in the
ordinary course of business, (e) not make or permit Driessen to make any tax
election or settle or compromise any Tax Liability or waive or extend the
statue of limitations in respect of any taxes, (f) unless Seller or Driessen
first obtain Purchaser's written consent (which shall not be unreasonably
withheld), not enter into or become otherwise bound with respect to, or permit
Seller or Driessen to enter into or otherwise become bound with respect to,
any license or royalty agreement for any of the Intellectual Property or any
intellectual property owned by Driessen and (g) not enter into any new lease
affecting the Amsterdam Property.
5.2 Efforts. (a) Subject to the terms and conditions hereof, each
party hereto shall use all commercially reasonable efforts to facilitate the
consummation of the transactions contemplated hereby. No agreement will be
made by Seller or Driessen with any third party to obtain any consent or
approval to the transactions contemplated hereby except in accordance with a
plan previously agreed to by Purchaser. Each party shall make all filings,
applications, statements and reports to all Governmental Authorities which are
required to be made prior to the Closing Date by such party pursuant to
applicable Law in connection with this Agreement and the transactions
contemplated hereby.
(b) Parent has taken all action necessary in accordance with
the DGCL and its Certificate of Incorporation and By-laws to take action by
written consent to approve this Agreement, subject to compliance with
applicable requirements of the SEC, to consummate the transactions
contemplated herein. To that end, Meridian Sports Holdings Incorporated, the
majority stockholder of record of Parent, has delivered a letter to Purchaser
confirming that it has taken such action by written consent irrevocably in
favor of the transactions contemplated herein. Parent shall file with the SEC
and mail to the shareholders of Parent, as promptly as practicable, the
information statement required to be filed pursuant to Rule 14C of the
Securities Exchange Act of 1934 (the "INFORMATION STATEMENT") required to be
filed in connection with the transactions contemplated herein. The Information
Statement will set forth, and Seller hereby represents and warrants, that the
majority stockholder of record of Parent has taken all necessary action by
written consent to approve the transactions contemplated by this Agreement.
Seller shall provide Purchaser with copies of the Information Statement for
review prior to the filing thereof and copies of all filings made with the SEC
and other Governmental Authorities, including under the HSR Act. Purchaser
shall provide Seller with copies of all filings made under the HSR Act in
connection with this transaction.
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5.3 Maintenance of Insurance. Seller and Driessen shall continue to
maintain and carry its existing insurance through the Closing Date, and shall
not materially breach, default or terminate such insurance policies or
agreements.
5.4 Supplemental Information. From time to time prior to the Closing,
Parent and Seller will promptly disclose in writing to Purchaser any matter
occurring after the Effective Date which, if existing, occurring or known on
the Effective Date would have been required to be disclosed to Purchaser or
set forth on a Schedule to this Agreement or which would render inaccurate any
of the representations, warranties or statements set forth in Article III
hereof (each, a "Supplement"). The "EFFECTIVE DATE" shall mean, generally, the
date hereof, except that if a particular representation is qualified as of a
certain date, the Effective Date shall be such date with respect to such
representation and warranty. No Supplement provided pursuant to this Section,
however, shall be deemed to cure any breach of any representation, warranty or
covenant in this Agreement; provided, however, in the event that the Closing
occurs, any breach of a representation and warranty specifically disclosed by
a Supplement to a Schedule to be a breach of such representation and warranty
shall be deemed to have be irrevocably waived and all references to such
Schedule in this Agreement shall be deemed to give effect to such Supplement.
5.5 Noncompetition; Confidentiality.
(a) In order to induce Purchaser to enter into this
Agreement, each of Parent and Seller expressly covenants and agrees
that for a period of three (3) years from and after the Closing Date,
neither Seller, Parent, nor, in the case of clauses (i) or (ii), any
of their respective Subsidiaries (for so long as they remain
Subsidiaries) will directly or indirectly, without the prior express
written consent of Purchaser, (i) own, manage, operate, join,
control, consult with or participate in or be connected with any
business, individual, partnership, firm, corporation or other entity
which is engaged in the Business, wholly or partly, in Canada,
Mexico, the United States, Europe or Asia, (ii) disturb or attempt to
disturb any business relationship between any third party and
Purchaser or any of its Affiliates in connection with the Business,
or (iii) solicit or encourage any officer or employee employed by the
Business to leave the employ or retention of the Business. Nothing in
Section 5.5(a)(i) or (ii) shall limit, prohibit or restrict (A) the
operation of the respective businesses of the present subsidiaries of
Meridian Sports Incorporated in substantially the same manner as such
businesses are operated on the date hereof, provided, however, that
neither Parent, Seller nor any of their Subsidiaries will engage in
the manufacture or marketing of sport fishing or recreational boats
for saltwater applications (except for the operation of the Seller's
subsidiary, Master Craft Boat Company, as currently conducted) and
(B) the bona fide arms length sale of products or provision of
services, each in the ordinary course of business, to any Person
engaged in the Business.
(b) Except to the extent expressly required by Law, Parent
and Seller shall, and shall cause their Affiliates to, keep secret
and confidential indefinitely all non-public information concerning
Purchaser, Driessen, the Business and the Purchased Assets and not
disclose the same, either directly or indirectly, to any other
Person, or use the same in any way.
(c) Parent and Seller expressly agree that the remedies at
law for any breach of the provisions of this Section 5.5 would be
inadequate and that, in addition to any other remedies that Purchaser
may have, Purchaser shall be entitled to temporary and permanent
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injunctive relief without the necessity of proving actual damages or
posting bond. To the extent that any part of this Section 5.5 may be
invalid, illegal or unenforceable for any reason, it is intended that
such part shall be enforceable to the extent that a court of
competent jurisdiction shall determine that such part, if more
limited in scope, would have been enforceable. Parent and Seller
acknowledge that Purchaser would not enter into this Agreement or
acquire the Purchased Assets or the Driessen Shares unless Parent and
Seller agreed to the provisions of this Section 5.5.
5.6 Exclusivity. Neither Parent, Seller, Driessen nor any of their
respective directors, officers, employees, representatives, agents or
Affiliates shall, directly or indirectly, (a) take any action which would have
the effect of preventing or impairing the performance by Parent or Seller of
their obligations under this Agreement or (b) solicit, initiate, encourage,
respond favorably to, permit or condone inquiries or proposals from, or
provide any information to, or participate in any discussions or negotiations
with, any Person (other than Purchaser and its representatives) concerning (i)
any merger, sale of assets (other than inventory in the ordinary course of
business consistent with past practice), acquisition, business combination,
change of control or other similar transaction involving Seller or Driessen,
(ii) any purchase or other acquisition by any Person of any shares of capital
stock of Seller or Driessen or (iii) any debt financing involving Seller or
Driessen or any of their respective assets. Parent and Seller will promptly
advise Purchaser of, and communicate to Purchaser in writing the terms and
conditions of (and the identity of the Person making), any such inquiry,
proposal or offer received.
5.7 Use of Name. From and after the Closing Date, Parent, Seller,
their respective Affiliates and any provider of services to Seller, Parent or
their respective Affiliates will not directly or indirectly use in any manner
any name, trade name, trademark, service mark or logo used by the Business or
any word or logo that is similar in sound or appearance.
5.8 Interim Financial Statements. As soon as practicable after the
end of each calendar month prior to the Closing Date, Seller shall provide to
Purchaser financial statements of Seller and Driessen, consisting of a balance
sheet as of the end of such month and an income statement and statement of
cash flows for that month and for the portion of the calendar year then ended.
5.9 Title Insurance; Survey; Firpta. On the Closing Date, Purchaser
shall have obtained a 1992 ALTA Owner's Policy, dated as of the Closing Date
with Florida modifications (the "TITLE INSURANCE"), from a title company
licensed to do business in Florida and acceptable to Purchaser (the "TITLE
COMPANY"), in the aggregate policy amount of $1,800,000, showing Purchaser as
having good and marketable title to the Real Property subject only to the
Permitted Exceptions (other than (a) exceptions 1-4 (provided that the parties
agree that exceptions 2(b) and 2(c) will be replaced with a survey exception
based on the Prior Survey) and 15 noted on Schedule B, Section 2 of the Prior
Title Report, (b) the condition relating to ingress/egress easement O.R. book
2840, page 274 noted on the Prior Survey, (c) the Liens noted on Schedule 1.2)
and a survey exception based on the Prior Survey. The Title Insurance shall
include the following endorsements: ALTA 3.1 zoning (plus parking), survey,
Subdivision/Plat Act, owner's comprehensive, tax parcel, access, contiguity,
and (if applicable) minerals - surface damage. Seller shall furnish to
Purchaser, no later than thirty (30) days after the date hereof, a current
survey of the Real Property certified in favor of Purchaser and the Title
Company, prepared by a land surveyor registered in the State of Florida,
containing the Minimum Standard Detail Requirements for an ALTA/ACSM Land
Title Survey most recently adopted by American Land Title Association and
American Congress on Surveying and Mapping, and
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otherwise in form sufficient for the Title Company to waive or provide title
insurance over any matters which would be disclosed by an accurate survey and
in form and substance acceptable to Purchaser. On the Closing Date, Seller
shall deliver a duly executed certificate in the form specified in Treas. Reg.
Section 1.1445-2(b)(2)(iii).
5.10 Product Liability.
(a) Seller is and shall be solely responsible for any and
all claims for injury (including without limitation death) or claims for
damage, direct or consequential, resulting from or connected with goods
manufactured or sold or services provided by Seller, to the extent that such
injury or damage occurs on or before the Closing Date.
(b) Purchaser is and shall be solely responsible for any and
all claims for injury (including without limitation death) or claims for
damage, direct or consequential, resulting from or connected with goods
manufactured or sold or services provided by Seller, to the extent that such
injury or damage occurs after the Closing Date.
5.11 Employees and Employee Benefits.
(a) Effective as of the Closing Date, Purchaser shall offer
employment to all employees of Seller who are actively employed on the Closing
Date and those employees who are on leave for maternity or are on leave for
another nonserious disability and who are expected to return to active
employment within 120 days of the Closing Date. All employees described in
this paragraph (a) who accept Purchaser's offer of employment and become an
employee of Purchaser as of the Closing Date shall be referred to herein as
the "CONTINUING EMPLOYEES". Purchaser's offer of employment shall be on pay
levels, terms and conditions substantially comparable to the terms and
conditions of Seller's employment of the Continuing Employees immediately
prior to the Closing Date.
(b) Effective as of the Closing Date, Continuing Employees
who are participants in the BWI Plan shall have a fully vested and
nonforfeitable interest in their respective account balances thereunder and
shall be entitled to a distribution of their account balances under the BWI
Plan in accordance with and to the extent permitted by applicable law and the
provisions of the BWI Plan. Continuing Employees who receive an eligible
rollover distribution (within the meaning of section 402(f)(2) of the Code,
including a direct rollover distribution within the meaning of section
401(a)(31) of the Code, and regulations thereunder) from the BWI Plan shall,
subject to the provisions of section 402 of the Code and upon presentation of
the current IRS favorable determination letter (dated July, 1994) with respect
to the BWI Plan, or if material modifications are made to the BWI Plan
evidence reasonably satisfactory to Purchaser that the BWI Plan then meets the
applicable requirements of section 401(a) of the Code, be permitted to make a
rollover contribution to a defined contribution plan (as defined in section
3(34) of ERISA) established or maintained by Purchaser for the benefit of
Continuing Employees which is intended to be qualified under section 401(a) of
the Code. To the extent that, pursuant to the foregoing provisions of this
paragraph (b), a Continuing Employee is eligible to make a rollover
contribution of a direct rollover distribution (within the meaning of section
401(a)(31) of the Code and the regulations thereunder) from the BWI Plan to
the plan that is established or maintained by Purchaser pursuant this
paragraph (b), such rollover contribution may include promissory notes for
loans made to such Continuing Employee under the terms of the BWI Plan.
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(c) To the extent applicable, Continuing Employees (and
their eligible dependents) shall be given credit under employee benefit plans,
programs, policies and arrangements, including vacation pay plans, that are
established or maintained by Purchaser for the benefit of Continuing Employees
(the "PURCHASER'S PLANS") for their service with Seller (i) for purposes of
eligibility to participate and vesting (but not benefit accrual except for
vacation pay) to the extent such service was taken into account under a
corresponding Seller's Plan, and (ii) for purposes of satisfying any waiting
periods, evidence of insurability requirements, or the application of any
pre-existing condition limitations and shall be given credit for amounts paid
under a corresponding Seller's Plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the
plans, programs, policies and arrangements maintained by Purchaser.
Notwithstanding the foregoing provisions of this paragraph (c), service and
other amounts shall not be credited to Continuing Employees (or their eligible
dependents) to the extent the crediting of such service or other amounts would
produce benefits which are substantially more favorable to Continuing
Employees than are provided to current employees of Purchaser who are covered
by similar plans, determined in the sole discretion of Purchaser.
(d) The parties hereto expressly acknowledge that Purchaser
shall be obligated to pay all liabilities under the Purchaser's Plans or
otherwise to or in respect of any Continuing Employee terminated for any
reason on or after the Closing Date, including without limitation, any
severance benefits payable in accordance with any Purchaser Plan and any
liability triggered under any unemployment compensation or other
government-mandated benefits relating to the termination of any Continuing
Employee on or after the Closing Date, including, without limitation, WARN.
Purchaser shall have no liability for, and Seller shall retain all
responsibility for, any claim by any Continuing Employee against Seller
asserting constructive termination based upon Purchaser's offer of employment
as of the Closing Date pursuant to paragraph (a).
(e) (i) Seller and Purchaser agree to take all actions
reasonably necessary to accomplish the transactions contemplated by this
Section 5.11. (ii) Purchaser shall assume all liabilities and obligations
under the retention agreements, each dated January 18, 1996, between Seller
and each of Joe Wilk, Peter Van Lancker, Douglas Fonte and David Evins, except
that Seller shall promptly pay Purchaser one-half of any amounts paid by
Purchaser pursuant to any of the foregoing retention agreements.
(f) Notwithstanding any other provision of this Agreement
and except as otherwise set forth in this Section 5.11, Purchaser shall not
assume or otherwise have any liability under or with respect to any Seller's
Plan, including liability for life, health, disability, retirement, severance
or other benefits whether incurred before, on or after the Closing Date.
(g) Nothing in this Agreement shall limit or restrict in any
way the rights of Purchaser to modify, amend, terminate or establish employee
benefit plans, programs, policies, or arrangements in whole or in part at any
time after the Closing Date, nor shall it require Purchaser to provide any
form or level of benefit to any employee after the Closing Date.
(h) All provisions contained in this Agreement with respect
to employee benefit plans or employee compensation are included for the sole
benefit of the respective parties hereto and do not and shall not create any
right in any other person, including, but not limited to, any Continuing
Employee, any participant in any benefit or compensation plan or any
beneficiary thereof.
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(i) Seller shall not discourage any employee from accepting
employment with Purchaser.
(j) Each of Seller and Purchaser agree that it will not
apply the alternative procedures contained in Section 5 of the Revenue
Procedure 84-77, 1984-2 C.B. 753. Purchaser shall furnish to each Continuing
Employee separate Forms W-2 disclosing all wages and other compensation paid
(and taxes withheld thereon) for the periods (i) beginning January 1, 1996 and
ending the Closing Date, and (ii) beginning the day after the Closing Date and
ending on December 31, 1996.
5.12 Access.
(a) Seller will permit representatives of Purchaser from and after
the date hereof up to the Closing Date to have full access at all reasonable
times to the books, accounts, records, properties, operations, facilities and
personnel pertaining to the Business, and will furnish Purchaser with such
financial and operating data concerning Seller as Purchaser shall from time to
time reasonably request; provided, however, that, notwithstanding the
foregoing, Purchaser shall not be provided access to customer accounts (other
than collection related data), product developments, marketing plans and sales
information (except, in each case, with respect to new model year information
necessary to ensure an orderly transition to the 1997 model year); provided
further that Purchaser will be permitted to meet with dealers, sales
representatives and other personnel for the purposes of ensuring an orderly
model year transition. The representatives of Purchaser that are furnished
information under this Section 5.12 shall keep such information strictly
confidential and shall not (i) disclose such information to any party, other
than executive personnel of Purchaser and third party advisors of Purchaser
that are involved in effecting the transactions contemplated herein, which
personnel and advisors shall use such information solely to assist in
effecting the transactions contemplated herein, or (ii) use such information
for any purpose other than to effect the transactions contemplated hereby.
Seller shall consult with Purchaser regarding any action to be taken by Seller
outside of the ordinary course of business. Seller shall have the sole
authority to decide whether to take such action, but Seller shall give
reasonable consideration to any concerns expressed by Purchaser. The foregoing
shall not constitute a waiver of the covenant at Section 5.1.
(b) Any access to the Real Property or the Amsterdam Property up to
the Closing Date shall be at Purchaser's sole risk and expense. All actions
taken by or on behalf of Purchaser at or upon the Real Property or the
Amsterdam Property shall be in accordance with all applicable Laws. Purchaser
shall promptly repair any damage to the Real Property or the Amsterdam
Property and any of Seller's other tangible properties or assets located at
the Real Property or the Amsterdam Property caused by Purchaser's
representatives. Purchaser shall indemnify and hold Seller harmless from and
against all Losses for personal injury, property damage or violation of law
which may be asserted against Seller as a direct result of the acts of
Purchaser's representatives prior to Closing at the Real Property or the
Amsterdam Property. The obligations of Purchaser under this paragraph shall
survive the Closing, or if the Closing does not occur, the termination of this
Agreement.
5.13 Organizational Documents. From the date hereof until the
Closing, Driessen shall not, without the prior written consent of Purchaser,
amend or propose to amend its Articles of Association or other charter
documents.
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5.14 Environmental Matters.
(a) Purchaser shall provide Seller with notice of any Pre-Closing
Environmental Condition arising under clause (ii)(B) of the definition thereof
which is a Seller's Liability pursuant to clause (b) of the definition of the
term Seller's Liability within 90 days of Purchaser's General Counsel
receiving written notice of the facts giving rise to such environmental
liability, or, in the case of third-party claims, Purchaser's General Counsel
receiving written notice from a third party of a claim with respect to a
Pre-Closing Environmental Condition that arises under clause (ii)(B) of the
definition thereof. To the extent Purchaser fails to satisfy the notice
requirements of this Section 5.14 with respect to an environmental liability
arising under clause (ii)(B) of the definition of Pre-Closing Environmental
Condition, such environmental liability shall be no longer be a Seller's
liability and shall deemed an Assumed Liability under Section 2.4, and neither
Parent nor Seller shall have any further liability for or obligation to take
any action with respect to any such environmental liability. The foregoing
notice requirement applies only with respect to Pre-Closing Environmental
Conditions arising under clause (ii)(B) of the definition of Pre-Closing
Environmental Conditions, and shall not be required in the case of Pre-Closing
Environmental Conditions arising under clauses (i) and (ii)(A) of the
definition of Pre-Closing Environmental Conditions.
(b) Seller shall provide to Purchaser, when available, the initial
draft of the Phase Two Report, investigatory work on which the Phase Two
Report is based having been subject to the reasonable approval of Purchaser as
to the scope of the investigation made and any recommended steps necessary to
attain compliance with applicable Environmental Law. Purchaser and Seller
shall review the draft Phase Two Report and shall agree that the actions
recommended are the only appropriate actions. Seller will, at its expense,
take such actions as are so recommended provided, that, if such actions are
continuing at the Closing Date, Purchaser shall afford to Seller and its
agents reasonable access to complete such actions.
5.15 Tax Matters.
(a) If Purchaser makes an election under Section 338 of the Code (or
any similar election under state, local or foreign law) (a "SECTION 338
ELECTION") with respect to its acquisition of the stock of Driessen under this
Agreement, then Purchaser shall promptly notify Seller and Parent of such
election and shall provide such notice as is required under the provisions of
Treasury Regulations [Section] 1.338-1(g)(4).
(b) If no Section 338 Election is made with respect to Purchaser's
acquisition of Driessen stock hereunder and if requested by Seller or Parent,
Purchaser agrees to provide Seller and Parent with the necessary information
relating to the amount of earnings and profits of Driessen for the first
taxable year of Driessen ending after the Closing Date so as to enable Seller
or Parent to determine (according to the provisions of Section 1248 and the
Treasury Regulations thereunder) the amount of such earnings and profits, if
any, which are attributable to the Driessen stock that was held by Seller
through the Closing Date.
5.16 Whaler Technologies Assets. Purchaser shall permit the Whaler
Technologies Assets to remain at the Real Property, at Seller's risk, until
the first anniversary of the Closing Date. If, by such first anniversary,
Seller has failed to request in writing that Purchaser return the Whaler
Technologies Assets to Seller, Purchaser shall cause the Whaler Technologies
Assets to be destroyed at Seller's cost (which shall include the direct labor
costs of Purchaser's personnel). If Seller requests
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in writing that Purchaser return the Whaler Technologies Assets, Purchaser
shall ship such Assets to the location designated by Seller, FOB the Real
Property, at Seller's cost. Purchaser shall also make available at reasonable
times and for a reasonable duration (not to exceed 10 business days in the
aggregate) at Seller's reasonable request and expense, one employee of the
Business who has expertise using the Whaler Technologies Assets to manufacture
product. Seller shall promptly repair any damage to the Real Property and any
of Purchaser's other tangible properties or assets located at the Real
Property caused by the presence at the Real Property of the Whaler
Technologies Assets or Purchaser's compliance with this Section 5.16. Seller
shall indemnify and hold harmless Purchaser from and against all Losses for
personal injury, property damage or for violation of Law that results from the
presence at the Real Property of the Whaler Technologies Assets or Purchaser's
compliance with this Section 5.15.
5.17 Licensing. If, after the date hereof and before the Closing
Date, Seller or Driessen enters into a license or royalty agreement regarding
the Intellectual Property, and Purchaser has given its prior written approval
to such agreement (as required by Section 5.1), then Purchaser shall assume
such agreement as a Seller Assigned Contract. Purchaser shall have no
obligation under that certain Licensing Services Memorandum dated November 18,
1994 between Meridian Sports Incorporated
and Revlon Consumer Products Corporation.
5.18 Driessen. If the laws of the Netherlands requires Normal Duns to
perform any obligation with respect to the employees of Driessen, Normal Duns
shall perform such obligation.
5.19 Production of Witnesses and Individuals. (a) From and after the
Closing Date, Purchaser and Driessen shall use reasonable efforts to make
available to Seller, upon written request and upon reasonable notice, the
employees of the Business or Driessen for fact finding, consultation and
interviews and, if required, as witnesses, in each case to the extent that any
such person may reasonably be required in connection with any action, claim,
suit, arbitration, subpoena, discovery request, proceeding or investigation in
which Seller may from time to time be involved relating to the Business,
Seller's Liabilities or the Excluded Assets. Unless required by Governmental
Authority, no provided employee shall be required to travel or to spend more
than two business days on any one occasion in fulfilling Purchaser's and
Driessen's obligations hereunder. Seller agrees to reimburse Purchaser for all
out-of-pocket expenses (but not labor charges or salary payments) incurred by
Purchaser or Driessen in connection with providing employees pursuant to this
Section 5.19.
(b) From and after the Closing Date, Parent and Seller shall use
reasonable efforts to make available to Purchaser, upon written request and
upon reasonable notice, the employees of the Parent or Seller for fact
finding, consultation and interviews and, if required, as witnesses to the
extent that any such person may reasonably be required in connection with any
action, claim, suit, arbitration, subpoena, discovery request, proceeding or
investigation in which Purchaser may from time to time be involved relating to
the Business, the Assumed Liabilities or the Purchased Assets. Unless required
by a Governmental Authority, no provided employee shall be required to travel
or spend more than two business days on any one occasion in fulfilling
Parent's and Seller's obligations hereunder. Purchaser agrees to reimburse
Parent for all out-of pocket expenses (but not labor charges or salary
payments) incurred by Parent or Seller in connection with provided employees
pursuant to this Section 5.19.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser and Normal Duns under Article II of this
Agreement are subject to the satisfaction of the following conditions
precedent on or before the Closing Date:
6.1 Warranties True. The representations and warranties of Parent and
Seller contained herein shall have been accurate, true and correct in all
material respects on and as of the date of this Agreement (without regard to
any schedule updates delivered by Seller pursuant to Section 5.4), and, except
to the extent such representations and warranties speak of an earlier date,
shall also be accurate, true and correct in all material respects on and as of
the Closing Date.
6.2 Compliance with Covenants. Parent and Seller shall have performed
and complied in all material respects with all of their respective covenants,
obligations and agreements contained in this Agreement to be performed by them
on or prior to the Closing Date.
6.3 Consents; Approvals . Purchaser shall have received written
evidence satisfactory to Purchaser that all consents and approvals of any
Governmental Authorities required for Purchaser's consummation of the
transactions contemplated hereby, ownership of the Purchased Assets and
Driessen Shares and operation of the Business have been obtained by Seller.
All waiting and review periods under the HSR Act shall have expired, without
adverse action being taken by any Governmental Authority to prevent
consummation of this Agreement and Parent shall have obtained all requisite
approval of its stockholders in accordance with the DGCL and the applicable
requirements of the SEC. Purchaser shall have received consents as may be
required for the transfer of the contracts listed on Schedule 6.3 except that
the foregoing condition shall not apply (a) with respect to the Eagle Credit
Contract listed thereon, if such consent cannot be obtained and Purchaser
could implement similar arrangements at substantially similar rates with a
credit company of equal reputation and capability and (b) with respect to the
government contract listed thereon if (i) Seller has diligently exercised
commercially reasonable efforts to establish a novation of such contract on
terms granting to Purchaser the benefits of such contract or (ii) such consent
cannot be obtained because of a circumstance specific and unique to Purchaser.
6.4 No Action. No order of any court or Governmental Authority shall
have been entered that enjoins, restrains or prohibits this Agreement or the
consummation of the transactions contemplated by this Agreement. No
governmental action shall be pending or threatened that seeks to enjoin,
restrain, prohibit or obtain damages with respect to this Agreement or the
complete consummation of the transactions contemplated by this Agreement. No
governmental investigation shall be pending or threatened that might result in
any such order, suit, action or proceeding.
6.5 No Material Adverse Change. Since December 31, 1995, none of
Seller, the Purchased Assets, Driessen or the Business shall have experienced,
a Material Adverse Change.
6.6 Closing Deliveries. Purchaser shall have received, in form and
substance satisfactory to Purchaser, such agreements, documents, instruments
and certificates as shall be reasonably requested by Purchaser to consummate
the transactions contemplated hereby to and convey the Purchased Assets and
the Driessen Shares to Purchaser, as contemplated herein, including the
following duly executed agreements, releases, instruments and opinions:
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(a) the Intellectual Property Assignment;
(b) the Assignment and Assumption Agreement;
(c) a Warranty Deed for Real Property, transferring
to the Purchaser good and marketable fee simple title to the Real
Property, subject only to the Permitted Exceptions (other than (i)
exceptions 1-4 (provided that the parties agree that exceptions 2(b)
and 2(c) will be replaced with a survey exception based on the Prior
Survey) and 15 noted on Schedule B, Section 2 of the Prior Title
Report, (ii) the condition relating to ingress/egress easement O.R.
book 2840, page 274 noted on the Prior Survey and (iii) the Liens
listed on Schedule 1.2);
(d) the policy for the Title Insurance;
(e) a release of the Mortgage and Security Agreement
dated as of December 15, 1995 and all other liens against the Real
Property (other than Permitted Exceptions);
(f) UCC-3 release statements for all Lien filings
against, and all other Lien releases deemed appropriate by Purchaser
with respect to, the Purchased Assets (other than Permitted
Exceptions) and the Driessen Shares;
(g) the written consent of the agent on behalf of the
Lender Group to release all Liens for the benefit of the Lender Group
against the Purchased Assets (including an agreement by the agent for
the Lender Group to take such further actions as may be necessary to
release any such Lien);
(h) the opinion of Skadden, Arps, Slate, Meagher &
Flom, special counsel to Seller and Parent, as to the matters set
forth on Exhibit F;
(i) all required consents to the transfer of the
Seller Assigned Contracts identified on Schedule 6.3;
(j) releases of all Liens against Intellectual
Property (other than Permitted Exceptions);
(k) articles of amendment to the certificate of
incorporation of Seller changing Seller's name to a name not
containing the name "Boston Whaler" or any derivation thereof;
(l) copies of disclosures, reports and filings
required to be made by Parent or Seller by all applicable Law;
(m) a written release by Seller of all Continuing
Employees (including executive employees) from any non-competition
obligation relating to the business of Seller, Parent or their
respective affiliates;
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(n) assignment of Submerged Land Lease dated May 24,
1989, between the State of Florida and Boston Whaler, Inc., as
renewed, in form acceptable to Purchaser, and a consent of the State
of Florida to such assignment, in standard form for the State of
Florida;
(o) the Escrow Agreement;
(p) confirmation acceptable to Purchaser that a
Notarial Deed of Transfer has been properly executed transferring the
Driessen Shares to Normal Duns upon payment of the Driessen
Consideration; and
(q) documentation acceptable to Purchaser assigning
to Purchaser full rights as beneficiary under the letters of credit
listed on Schedule 2.2(c) or issued after the date hereof in favor of
Seller and then in effect or, alternatively, substitute letters of
credit, which substitute letters of credit shall name Purchaser as
beneficiary, along with all original documents required to draw under
such letters of credit.
6.7 Intercompany Release. All indebtedness of Driessen to Parent or
any Affiliate of Seller or Parent (other than Seller) shall have been fully
released and forgiven.
6.8 Updated Schedules. Seller shall have delivered updated schedules
to this Agreement to reflect changes therein from the Effective Date of the
representation and warranty pertaining to each such schedule to the Closing
Date, which updated Schedules shall not disclose a breach of any
representation or warranty contained herein when made on the date of this
Agreement or at Closing, or disclose a failure of any other condition to
Closing set forth in this Article VI.
ARTICLE VII
CONDITIONS PRECEDENT TO
OBLIGATIONS OF SELLER
The obligations of Seller under Article II of this Agreement are
subject to the satisfaction of the following conditions precedent on or before
the Closing Date:
7.1 Warranties True. The representations and warranties of Purchaser
contained herein shall have been accurate, true and correct in all material
respects on and as of the date of this Agreement, and shall also be accurate,
true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made by Purchaser on and as of the Closing
Date.
7.2 Compliance with Agreements and Covenants. Purchaser shall have
performed and complied in all material respects with all of its covenants,
obligations and agreements contained in this Agreement to be performed and
complied with by it on or prior to the Closing Date.
7.3 Consents and Approvals. All waiting and review periods under the
HSR Act shall have expired and Parent shall have obtained all requisite
approval of its stockholders in accordance with the DGCL and the applicable
requirements of the SEC.
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7.4 No Action. No court or governmental order shall have been entered
in any action or proceeding instituted by any party which enjoins, restrains
or prohibits this Agreement or the complete consummation of the transactions
as contemplated by this Agreement. No governmental action shall be pending or
threatened that seeks to enjoin, restrain, prohibit or obtain damages with
respect to this Agreement or the complete consummation of the transactions
contemplated by this Agreement. No governmental investigation shall be pending
or threatened that might result in any such order, suit, action or proceeding
shall be pending or threatened.
7.5 Closing Deliveries. Purchaser shall (a) along with Normal Duns,
make the payment required by Section 2.6(a), (b) deliver to Seller the
Assignment and Assumption Agreement, duly executed by Purchaser, (c) deliver
to Seller the opinion of Robert T. McNaney, General Counsel for Purchaser, as
the matters set forth on Exhibit G; and (d) deliver the Escrow Agreement.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time on
or prior to the Closing Date:
(a) By the written consent of Seller and Purchaser;
(b) By written notice of Seller or Purchaser to the other,
if any court of competent jurisdiction or other governmental body
shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated hereby and such order, decree, ruling
or other action shall have become final and nonappealable; and
(c) By written notice of either Purchaser or Seller, if
there shall have been a material breach of any covenant,
representation or warranty hereunder, and such breach shall not have
been remedied within ten (10) Business Days after receipt of a notice
in writing from the non- breaching party specifying the breach and
requesting such be remedied.
This Agreement shall terminate automatically, without further action of the
parties, if the Closing does not occur on or before July 31, 1996.
8.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 8.1, all obligations of the parties hereunder shall terminate,
except for the obligations of Parent and Seller set forth in Section 5.5(b) to
the extent that such obligations relate to non-public information concerning
Purchaser.
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ARTICLE IX
INDEMNIFICATION
9.1 Survival. The representations and warranties of the parties in
this Agreement or in any document delivered pursuant hereto shall survive the
Closing until twenty-eight (28) months after the Closing Date, provided,
however, that such time limitation shall not apply to the representations and
warranties set forth at (a) Section 3.6 (such representations and warranties
to survive forever), (b) Section 3.18 (such representations and warranties to
survive until the expiration of the statute of limitations applicable to the
Taxes in question, taking into account any extensions of such statute of
limitations), and (c) Section 3.20 (such representations and warranties to
survive until the fifth anniversary of the Closing Date). After the end of the
relevant survival period specified above, Seller's and Parent's obligations to
Purchaser and its Affiliates under Article IX with respect to such
representations and warranties shall expire and terminate. Notwithstanding
anything in this Agreement to the contrary, Purchaser's obligation to
indemnify Seller against the Assumed Liabilities shall survive forever and the
obligation of Seller and Parent to indemnify Purchaser against the Seller's
Liabilities shall survive forever.
9.2 Indemnification by Parent and Seller. Parent and Seller jointly
and severally agree to indemnify, defend and hold harmless each of the
Purchaser and its Affiliates (including Normal Duns) against any Losses
relating to or arising out of:
(a) any breach of any representation or warranty made by
Parent or Seller in this Agreement or any document delivered to
Purchaser at the Closing pursuant to this Agreement, provided,
however that neither Parent nor Seller shall have any liability under
this Section 9.2(a) with respect to breaches of such representations
and warranties until the aggregate Losses arising out of such
breaches equal or exceed $150,000 in the aggregate, at which point
Purchaser shall be entitled to recover all Losses in excess of such
$150,000, provided, further, that (i) the foregoing limitation shall
not apply to Losses arising out of any breaches of the
representations and warranties set forth at Sections 3.6, 3.18, and
3.20, and (ii) Seller shall have no indemnification obligation
pursuant to this Section 9.2(a) for Losses in excess of $10 million
in the aggregate, provided that the foregoing limitation shall not
apply to Losses arising out of any breaches of the representations
and warranties set forth at Sections 3.6, 3.18 and 3.20;
(b) any breach of any covenant made by Parent or Seller in
this Agreement or any document delivered to Purchaser at the Closing
pursuant to this Agreement;
(c) the bulk sales Laws of any jurisdiction applicable to
the transactions contemplated herein, and any Laws of any
jurisdiction imposing liability on Purchaser for Seller's Taxes,
including the failure to comply with any such Laws;
(d) Seller's Liabilities, including any Remedial Action
taken by Purchaser with respect to Pre-Closing Environmental
Conditions;
(e) any damage to any Purchased Assets relating to the
removal of any Excluded Assets from the Real Property; and
(f) any amount due from Seller to Purchaser pursuant to
Section 9.6 below.
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9.3 Indemnification by Purchaser. Purchaser agrees to indemnify,
defend and hold harmless Parent and Seller and each of their respective
Affiliates against any Losses relating to or arising out of (a) any breach of
any representation or warranty or covenant made by Purchaser in this Agreement
or any document delivered to Seller at the Closing or pursuant to this
Agreement, or (b) subject to Section 2.4, any Assumed Liability.
9.4 Claims. The provisions of this Section shall be subject to
Section 9.5. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement (including a claim or suit by a
third party) the indemnified Person shall promptly give notice to the
indemnifying Person of such claim. The failure of the indemnified Person to
give notice shall not relieve the indemnifying Person of its obligations under
this Article IX except to the extent that the indemnifying Person shall have
been prejudiced thereby. If the indemnifying Person does not object in writing
to such indemnification claim within 60 calendar days of receiving notice
thereof, the indemnified Person shall be entitled to promptly recover from the
indemnifying Person the amount of such claim, and no later objection by the
indemnifying Person shall be permitted. If the indemnifying Person agrees that
it has an indemnification obligation but objects that it is obligated to pay
only a lesser amount, the indemnifying Person shall promptly pay to the
indemnified Person the lesser amount, without prejudice to the indemnified
Person's claim for the difference. Upon receipt of an indemnification notice
pursuant to this Section 9.4 of a claim requiring Remedial Action, the
indemnifying party shall have the right to assume the management and control
of such Remedial Action. All such management and control actions taken shall
be subject to the reasonable approval of Purchaser. In addition, following the
Closing, Purchaser, on its own behalf and on behalf of Driessen, agrees to
give prompt notice to Seller of the assertion of any claim, or the
commencement of any suit, action, proceeding, investigation or audit with
respect to any Tax Return that includes the operations of Driessen for any
period or portion thereof ending on or before the Closing Date, shall
cooperate fully in any such action by furnishing or making available records,
books of account or other materials or taking such other actions as may be
necessary or helpful for the defense against the assertions of any taxing
authority as to any consolidated, combined, or separate Tax Return for such
periods.
9.5 Third Party Claims; Assumption of Defense. The indemnifying
Person may, at its own expense, (a) defend, contest or otherwise protect the
indemnified party against any claim, suit, action or proceeding and (b) upon
notice to the indemnified Person, and the indemnifying Person's delivering to
the indemnified Person a written agreement that the indemnified Person is
entitled to indemnification pursuant to Section 9.2 or 9.3 for all Losses
arising out of such claim, suit, action or proceeding and that the
indemnifying Person shall be liable for the entire amount of any Loss, may at
any time during the course of any such claim, suit, action or proceeding,
assume the defense thereof and, in the event of a claim requiring Remedial
Action, assume the management and control of such Remedial Action (any actions
taken in the course of such management and control shall be subject to the
reasonable approval of Purchaser); provided, however, that (i) the
indemnifying Person's counsel is reasonably satisfactory to the indemnified
Person, and (ii) the indemnifying Person shall thereafter consult with the
indemnified Person upon the indemnified Person's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. If the indemnifying Person assumes such defense, the indemnified
Person shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the indemnifying Person. If, however, counsel reasonably
determines in its judgment that representation by the indemnifying Person's
counsel of both the indemnifying Person and the indemnified Person would
present such counsel with a conflict of interest, then such
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indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the indemnifying Person shall
pay the fees and disbursements of such separate counsel. Whether or not the
indemnifying Person chooses to assume the defense of any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof. Any settlement or compromise made or caused to be made
by the indemnified Person or the indemnifying Person, as the case may be, of
any such claim, suit, action or proceeding of the kind referred to in Section
9.5 shall also be binding upon the indemnifying Person or the indemnified
Person, as the case may be, in the same manner as if a final judgment or
decree had been entered by a court of competent jurisdiction in the amount of
such settlement or compromise. The indemnifying Person shall not be permitted
to settle or compromise any claim, suit, action or proceeding without
obtaining the prior written consent of the indemnified Person, which shall not
be unreasonably withheld or delayed; provided, however, in the event that the
settlement offer will result in the indemnified Person having no losses
(monetary or otherwise) or continuing obligations with respect to the claim,
suit, action or proceeding, the indemnifying Person shall be permitted to
settle or compromise such claim, suit, action or proceeding without the prior
written consent of the indemnified Person. In the event that the indemnifying
Person does not elect to assume the defense of any claim, suit, action or
proceeding, then any failure of the indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the indemnifying Person of its
obligations hereunder.
9.6 Tax Returns and Tax Indemnity.
(a) Seller shall be responsible for paying, and shall
indemnify and hold Purchaser and any Affiliate of Purchaser harmless
from and against, any Taxes paid or incurred by Driessen for any Tax
period ending on or before the Closing ("PRE-CLOSING TAX PERIOD"),
and in the case of Tax periods beginning before and ending after the
Closing (a "STRADDLE PERIOD"), the portion of such periods which is
treated as ending on the Closing pursuant to Section 9.6(c) hereof.
Seller shall prepare, or cause to be prepared, and file, or cause to
be filed, on a timely basis all Tax Returns with respect to Driessen
for any Pre- Closing Tax Period. Seller shall, not later than 30 days
before the date of filing of such Tax Returns, provide Purchaser with
copies of all Tax Returns referred to in the preceding sentence in
substantially the form in which Seller proposes to file such Tax
Returns.
(b) Purchaser shall be responsible for paying, and shall
indemnify and hold Seller and any Affiliate of Seller harmless from
and against, any Taxes paid or incurred by Driessen for any Tax
period beginning after the Closing ("POST CLOSING TAX PERIOD") or the
portion of any Straddle Period treated as beginning after the Closing
in accordance with Section 9.6(c). Purchaser shall prepare, or cause
to be prepared, and file, or cause to be fled, on a timely basis all
Tax Returns with respect to Driessen for any Post-Closing Tax Period
or any Straddle Period. Purchaser shall, not later than 30 days
before the date of filing of any Tax Returns for the Straddle Period,
provide Seller with copies of all such Tax Returns in substantially
the form in which Purchaser proposes to file such Tax Returns.
(c) To the extent permitted by applicable Law or
administrative practice, the taxable period of Driessen shall end on
the Closing and Seller and Purchaser shall take any and all actions
required under applicable Law and administrative practice to
effectuate such a result. For purposes of determining liability for
Taxes with respect to a Straddle Period, such Straddle Period shall
be treated as two taxable periods, one of which ends on the Closing
and
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one of which begins on the Closing, and the Tax Liability of Driessen
shall be allocated between such two periods based on a closing of
Driessen's books on the Closing.
9.7 Refunds of Taxes and Carrybacks of Tax Attributes.
(a) To the extent requested by Seller and at the sole
expense of Seller, Purchaser shall, as promptly as practicable, claim
or cause to be claimed any refund available under Applicable Law
relating to Taxes for which Seller is responsible under Section 9.6.
If, after the Closing, Purchaser or any Affiliate of Purchaser
receives any such refund, to the extent such refund is not
specifically reflected as an asset on the most recent balance sheet
of Driessen as of the Closing, Purchaser shall promptly transfer, or
cause to be transferred, the amount of such refund (net of any
expenses incurred by Purchaser or any Affiliate of Purchaser in
obtaining such refund) to Seller, provided, however, that Purchaser
shall not be required to transfer or cause to be transferred such
refund to Seller or an Affiliate of Seller to the extent such refund
is attributable to a Tax Attribute (as defined in Section 9.7(c))
arising in a Post-Closing Tax Period being carried back to a
Pre-Closing Tax Period.
(b) Except for those refunds described in Section 9.7(a),
Purchaser shall be entitled to receive and retain any refunds of Tax
relating to Driessen. If, after the Closing, Seller or any Affiliate
of Seller receives any such refund, Seller shall promptly transfer,
or cause to be transferred, the amount of such refund (net of any
expenses incurred by Seller or any Affiliate of Seller in obtaining
such refund) to Purchaser.
(c) Neither Purchaser nor any Affiliate of Purchaser
(including Driessen) shall be permitted to carryback any Tax
Attribute (as defined herein) to any Pre-Closing Tax Period of
Driessen without the written consent of Seller. For purposes of this
Agreement, "TAX ATTRIBUTE" shall mean any net operating loss, net
capital loss, investment tax credit, other credit or tax attribute.
9.8 Adjustments.
(a) Pre-Closing Tax Period Adjustments. If any Adjustment
(as defined in Section 9.8(c)) is made to any Tax Return of Driessen
attributable to periods or portions thereof ending on or before the
Closing, and if such Adjustment results in any increase in any Tax
liability borne by Seller hereunder, and results in a Tax benefit
(including without limitation any benefit attributable to a decrease
in income or increase in deduction or credit) to Driessen, Purchaser
or any Affiliate of Purchaser with respect to any taxable period or
portion thereof beginning on or after the Closing, then Purchaser
shall pay to Seller the amount of such Tax benefit within 30 days
after (i) an actual reduction in Taxes payable by Driessen, Purchaser
or any Affiliate of Purchaser or (ii) the receipt by Driessen,
Purchaser or any Affiliate of Purchaser of a refund of Taxes
previously paid by Driessen, Purchaser or any Affiliate of Purchaser,
to the extent attributable to such Adjustment; provided that the
amount payable by Purchaser shall not exceed the detriment to Seller
arising from such Adjustment.
(b) Post-Closing Tax Period Adjustments. If any Adjustment
is made to any Tax Return of Driessen attributable to any taxable
period or portion thereof commencing on or after the Closing and if
such Adjustment results in an increase in any Tax liability borne by
Purchaser, Driessen or any Affiliate of Purchaser, and results in a
Tax benefit (including
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without limitation any benefit attributable to a decrease in income
or increase in deduction or credit) to Seller or any Affiliate of
Seller (including Driessen for any Pre-Closing Tax Period or any
portion of the Straddle Period prior to the Closing) with respect to
any taxable period or portion thereof ending on or before the
Closing, then Seller shall pay to Purchaser the amount of such Tax
benefit within 30 days after (i) an actual reduction in Taxes payable
by Seller or any Affiliate of Seller (including Driessen for any
Pre-Closing Tax Period or any portion of the Straddle Period prior to
the Closing) or (ii) the receipt by Seller or any Affiliate of Seller
of a refund of Taxes previously paid by Driessen (for any Pre-Closing
Tax Period or any portion of the Straddle Period prior to the
Closing), Seller or any Affiliate of Seller, provided that the amount
payable by Seller shall not exceed the detriment to Purchaser or any
Affiliate of Purchaser (including Driessen) arising from such
Adjustment.
(c) For purpose of this Agreement, "ADJUSTMENTS" shall mean
an adjustment to any Tax Return as a result of or in settlement of
any audit, other administrative proceeding or judicial proceeding or
as a result of the filing of an amended Tax Return to reflect the
consequence of any determination made in connection with any such
audit or proceeding.
9.9 Record Retention. Following the Closing, Seller and Purchaser, on
its own behalf and on behalf of Driessen, agree to retain all existing records
for all tax periods that remain subject to audit by action of statute or
waiver for all periods or portions thereof through and including the Closing.
To the extent that such records are currently maintained in both a hard copy
and an electronic media format, both such types of records that pertain to the
income or operations of Driessen prior to the close of business on the Closing
Date shall be retained by Driessen and will not be destroyed without prior
written approval of Seller or Purchaser, as the case may be.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall bear its own expenses with respect to the
transactions contemplated hereby. Purchaser shall pay all sales, use, stamp,
transfer, service, recording, real estate and like taxes or fees, if any,
imposed in connection with the transfer of the Purchased Assets, provided,
that Seller shall promptly reimburse Purchaser for one-half of all such taxes
and fees upon request therefor. Seller and Purchaser shall each pay one-half
of the fees required in connection with the filings under the HSR Act.
Purchaser and Seller shall each pay one-half of the (a) SEC filing fee for the
informational statement required to be filed pursuant to Rule 14C of the
Securities Exchange Act of 1934 in connection with the approval by Parent's
majority stockholder of the transactions contemplated hereby and (b) the fees
for the Title Insurance and (c) the Surveyor's fees for the Survey.
10.2 Amendment. This Agreement may be amended, modified or
supplemented only by written agreement of the parties.
10.3 Notices. Any notice, request, instruction or other document to
be given hereunder by a party hereto shall be in writing and shall be deemed
to have been given, (a) when received if given in person or by courier or a
courier service, (b) on the date of transmission if sent by telex, facsimile
or other wire transmission or (c) three (3) Business Days after being
deposited in the U.S. mail, certified or registered mail, postage prepaid:
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(a) If to Parent or Seller, addressed as follows:
Meridian Sports Incorporated
625 Madison Avenue, 12th Floor
New York, New York 10022
Attention: General Counsel
Facsimile No.: (212)527-5056
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York
Attention: Randall H. Doud
Facsimile No.: (212) 735-2000
(b) If to Purchaser, addressed as follows:
Brunswick Corporation
One North Field Court
Lake Forest, Illinois 60045-4811
Attention: General Counsel
Facsimile No.: (847) 735-4050
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: John R. Sagan
Facsimile No.: (312) 701-7711
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
10.4 Effect of Investigation. Any due diligence review, audit or
other investigation or inquiry undertaken or performed by or on behalf of
Purchaser shall not limit, qualify, modify or amend the representations,
warranties or covenants of, or indemnities by, Parent or Seller made pursuant
to this Agreement, irrespective of the knowledge and information received (or
which should have been received) therefrom by Purchaser.
10.5 Waivers. The failure of a party to require performance of any
provision shall not affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective
unless in writing or as set forth in Section 5.4. No waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty. Consummation
of the transactions contemplated herein shall not be deemed a waiver of a
breach of or
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inaccuracy in any representation, warranty or covenant or of any party's
rights and remedies with regard thereto, unless such breach or inaccuracy was
waived in accordance with the second sentence of this Section 10.5.
10.6 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.7 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of
the masculine, feminine or neuter gender shall not limit any provision of this
Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitation,"
respectively. If any representation or warranty is qualified by knowledge, the
party making such representation or warranty hereby confirms that it has made
a diligent inquiry into the matter addressed by the representations or
warranty. No specific representation, warranty or covenant contained herein
shall limit the generality or applicability of a more general representation,
warranty or covenant contained herein. A breach of or inaccuracy in any
representation, warranty or covenant shall not be affected by the fact that
any more general or less general representation, warranty or covenant was not
also breached or inaccurate. The language in all parts of this Agreement shall
be construed, in all cases, according to its fair meaning. The parties
acknowledge that each party and its counsel have reviewed and revised this
Agreement and that any rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
10.8 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Illinois without giving effect to the principles of conflicts of law thereof.
10.9 Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Normal Duns shall be entitled to all rights, remedies and benefits
granted to Purchaser under or with respect to this Agreement.
10.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and no provision of this Agreement shall be
deemed to confer rights upon any other Person.
10.11 Publicity. The parties shall cooperate on the form, content,
timing and manner of any press release or releases issued in respect of this
Agreement. Nothing in this Section shall prevent such parties from discussing
such transactions with those Persons whose approval, agreement or opinion, as
the case may be, is required for consummation of such transactions.
10.12 Further Assurances. Upon the request of Purchaser, Parent and
Seller will, on and after the Closing Date, execute and deliver to Purchaser
such other documents, further releases, assignments and other instruments as
may be required or deemed appropriate by Purchaser and Seller to effect or
evidence transfer and assignment to Purchaser of all or any of the Purchased
Assets and the Driessen Shares, and to otherwise carry out the purposes of
this Agreement. At the request of Seller or Parent, the Purchaser will, on or
after the Closing Date, execute and deliver such other documents, further
releases, assignments and other instruments as may be required or deemed
appropriate by Seller in order effectively to assume from Seller all of the
Assumed Liabilities, to
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confirm Seller's right, title and interest in and to the Excluded Assets and
to otherwise carry out the purposes of this Agreement. Each party hereto shall
promptly cooperate with and reply to any supplemental or "second" request by a
Governmental Authority pursuant to the HSR Act for supplemental information
related to the filings under the HSR Act with respect to the transaction
contemplated hereby. To the extent requested in writing, Purchaser shall, at
Seller's cost and expense, provide Seller with copies of records relating to
the Purchased Assets related to the period prior to Closing.
10.13 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
10.14 Remedies Cumulative. The remedies provided in this Agreement
shall be cumulative and shall not preclude the assertion or exercise of any
other rights or remedies available by law, in equity or otherwise.
10.15 Liability of Parent and Seller. Whenever this Agreement
requires Seller or Parent to take any action, such requirement will be deemed
to include an undertaking on the part of each of Parent and Seller. Parent and
Seller shall be jointly and severally liable for all of the obligations to be
performed by any of them under this Agreement and any representation or
warranty made by any of them.
10.16 Forum. Purchaser, Seller and Parent agree that any suit, action
or proceeding (a) brought by Seller or Parent in connection with or arising
out of this Agreement or the Escrow Agreement shall be brought solely in the
Federal Courts of the Northern District of Illinois (or in the State Courts of
Lake County, Illinois, solely in the event that the Federal Courts lack
subject matter jurisdiction over such action, suit or proceeding), and (b)
brought by Purchaser in connection with or arising out of this Agreement or
the Escrow Agreement shall be brought solely in the Federal Courts of the
Southern District of New York (or in the State Courts of New York County,
solely in the event that the Federal Courts lack subject matter jurisdiction
over such action, suit or proceeding). Each of Purchaser, Seller and Parent
consent to the jurisdiction of such Courts for any such suit, action or
proceeding. Each of Purchaser, Seller and Parent irrevocably waives any
defenses of lack of personal jurisdiction, improper venue or forum non
conveniens as to any such action, suit or proceeding brought in the Courts
specified in the preceding sentence. Each of Purchaser, Seller and Parent also
irrevocably agree that service of process in any such action, suit or
proceeding shall be deemed good and effective if made in any manner (other
than by mail) specified for delivery of written notice pursuant to Section
10.3 hereof.
10.17 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
Purchaser may assign this Agreement or any of its rights hereunder to any of
its direct or indirect wholly owned subsidiaries. In the event of such
assignment, Purchaser shall be responsible for all obligations of such
subsidiary and shall continue to be bound in all respects by the provisions
hereof. Neither Seller nor Parent may assign this Agreement without the
written consent of Purchaser.
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10.18 Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings among the parties.
* * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
BRUNSWICK CORPORATION
By: /s/ Robert T. McNaney
------------------------------------------
Name: Robert T. McNaney
Title: General Counsel
NORMAL DUNS, B.V., for purposes of Article II
and Section 5.18
By: /s/ Robert T. McNaney
------------------------------------------
Name: Robert T. McNaney
Title: General Counsel
BOSTON WHALER, INC.
By: /s/ Mark L. Wilson
------------------------------------------
Name: Mark L. Wilson
Title: Vice President
MERIDIAN SPORTS INCORPORATED
By: /s/ Mark L. Wilson
------------------------------------------
Name: Mark L. Wilson
Title: Executive Vice President and Chief
Financial Officer
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Annex B
May 8, 1996
Board of Directors
Meridian Sports Incorporated
625 Madison Avenue
New York, NY 10022
Dear Sirs:
You have asked us to advise you whether the consideration to
be received by Meridian Sports Incorporated (the "Company") in exchange for
substantially all the assets and liabilities of Boston Whaler, Inc. ("Boston
Whaler"), a wholly owned subsidiary of the Company, pursuant to the terms of
the Asset Purchase Agreement, dated as of March 29, 1996 (the "Purchase
Agreement"), between the Company and Brunswick Corporation (the "Acquiror"),
is fair to the Company from a financial point of view. The Purchase Agreement
provides for the sale ("Sale") to the Acquiror of substantially all of the
assets and liabilities of Boston Whaler in exchange for a cash purchase price,
subject to tangible net worth and other post-closing adjustments, expected to
be approximately $25.3 million, including $1.25 million to be placed in
escrow.
In arriving at our opinion, we have reviewed certain
publicly available business and financial information relating to Boston
Whaler, as well as the Purchase Agreement. We have also reviewed certain other
information, including financial forecasts for Boston Whaler, provided to us
by the Company, and have met with the Company's and Boston Whaler's management
to discuss the business and prospects of Boston Whaler.
We have also considered certain financial data of Boston
Whaler, and we have compared that data with similar data for publicly held
companies in businesses similar to those of Boston Whaler and we have
considered the financial terms of certain other business combinations and
other transactions which have recently been effected. We also considered such
other information, financial studies, analyses and investigations and
financial, economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the foregoing
information and have relied on its being complete and accurate in all material
respects. With respect to the financial forecasts, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the Company's and Boston Whaler's management as to
the future financial performance of Boston Whaler. In addition, we have not
made an
B-1
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Board of Directors
Meridian Sports Incorporated
May 8, 1996
Page 2
independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of Boston Whaler, nor have we been furnished with any such
evaluations or appraisals. Our opinion is necessarily based upon financial,
economic, market and other conditions as they exist and can be evaluated on
the date hereof. We were not requested to, and did not, solicit third party
indications of interest in acquiring Boston Whaler.
We have not acted as financial advisor to the Company in
connection with the Sale. We have from time to time provided investment
banking services to MacAndrews & Forbes Holdings Inc., the Company's majority
shareholder, for which we have received customary compensation. We will
receive a fee for rendering this opinion.
In the ordinary course of our business, CS First Boston and
its affiliates may actively trade the equity securities of the Company and the
Acquiror for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of
the Board of Directors of the Company in connection with its consideration of
the fairness from a financial point of view of the consideration to be
received by the Company in connection with the Sale. This letter is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection
with the Sale, nor shall this letter be used for any other purposes, without
CS First Boston's prior written consent, except that this opinion may be
included in its entirety in any filing made by the Company with the Securities
and Exchange Commission with respect to the Sale.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the consideration to be received by the Company
in the Sale is fair to the Company from a financial point of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
B-2
ERNST & YOUNG LLP 787 Seventh Avenue Phone: 212-773-3000
New York, New York 10019
Independent Auditors' Report on Compliance
The Board of Directors and Stockholders
Meridian Sports Incorporated
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Meridian Sports Incorporated and its subsidiaries
(collectively "the Company") as of December 31, 1995 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended, and have issued our report thereon dated March 19, 1996.
In connection with our audit, nothing came to our attention that caused us to
believe that the Company failed to comply with the terms, covenants, provisions,
or conditions of Section 9.13 of the Second Amendment to the Credit Facilities
and Reimbursement Agreement ("the Company Credit Agreement") among the Company,
NationsBank, National Association, Credit Suisse and Fleet Bank dated January
19,1996 (effective as of December 15, 1996), insofar as they relate to
accounting matters. We did note that the Company failed to comply with the
terms, covenants, provisions, or conditions of Section 9.1, Section 9.2, Section
9.3, Section 9.4 and Section 9.19 of the Company Credit Agreement as of and for
the year ended December 31, 1995. On February 28, 1996 and March 29, 1996, the
Company received waiver letters for such noncompliance which provide extensions
for the Company to comply with such covenants in accordance with their terms
through March 31, 1996 and June 30, 1996, respectively. However, our audit was
not directed primarily toward obtaining knowledge of such noncompliance.
This report is intended solely for the use of the Company, NationsBank, National
Association, Credit Suisse and Fleet Bank, and should not be used for any other
purpose.
/s/ Ernst & Young LLP
New York, New York
March 19, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
