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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
Date of Report
(Date of earliest
event reported): May 11, 1995
Johnson Worldwide Associates, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 0-16255 39-1536083
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
1326 Willow Road, Sturtevant, Wisconsin 53177
(Address of principal executive offices, including zip code)
(414) 884-1500
(Registrant's telephone number)
Item 2. Acquisition or Disposition of Assets.
Johnson Worldwide Associates, Inc. ("JWA") acquired substantially
all of the assets of the SpiderWire/TM/ product line (the "Acquired
Business") of Safari Land Ltd., Inc., a California corporation
("Safariland"), pursuant to an Asset Purchase Agreement, dated as of March
31, 1995, by and between JWA and Safariland (the "Purchase Agreement").
JWA's acquisition of the assets of the Acquired Business as well as the
consummation of the transactions related thereto is referred to herein as
the "Acquisition." To date, JWA has paid a total cash consideration of
$23,420,000 in the Acquisition, which amount includes $3,415,000 paid on
May 11, 1995 in connection with the post-closing valuation of the Acquired
Business' work-in-process and finished goods inventory (the "Inventory"),
and accrued $250,000 of direct acquisition costs.
Pursuant to the Purchase Agreement, JWA acquired all of the right,
title and interest of Safariland to (i) all of the Acquired Business' (a)
personal property, (b) trademarks, copyrights and other intellectual
property, (c) sales and promotional literature, (d) records, files,
customer lists and other data, (e) Inventory, (f) interests in the name
"SpiderWire" and derivatives therefrom and names similar thereto, and (g)
general intangibles, and (ii) certain of the Acquired Business' contracts,
purchase orders and sales orders. All other assets of the Acquired
Business (including, without limitation, cash, tax credits, real property,
notes, accounts receivable, and raw materials inventory) were retained by
Safariland. Except for certain contractual obligations relating to the
Acquired Business and certain discretionary product return
responsibilities, JWA did not assume any of the liabilities of the
Acquired Business or Safariland.
JWA acquired the assets of the Acquired Business from Safariland
for (i) the assumption of certain contractual and other liabilities of the
Acquired Business; (ii) $20,004,625 in cash at or prior to the closing of
the Acquisition; (iii) $1,000,000 in cash payable after all obligations of
a third party relating to the marketing and promotion of certain products
of the Acquired Business and JWA have been satisfied; (iv) the value of
the Inventory, which was paid to Safariland on May 11, 1995; (v) an
additional payment equal to thirty-five percent (35%) of the annual
prorated gross profit on sales by JWA of certain of the products of the
Acquired Business in excess of $25,000,000 minus eighteen percent (18%) of
the annual net sales of such products in excess of $25,000,000 for each of
JWA's fiscal years 1996 through 2001; and (vi) an additional payment of up
to $4,000,000 if fiscal year 1996 net sales of a certain product of the
Acquired Business achieves specified levels of sales and profitability.
However, in the event JWA does not sell or use all of the Inventory
acquired in the Acquisition by March 31, 1996, Safariland is obligated to
refund to JWA the price which JWA paid for such unsold or unused Inventory
items. The purchase price paid by JWA for the assets of the Acquired
Business was determined on the basis of arm's length negotiations between
the parties.
In connection with the Acquisition, (i) JWA entered into a long-
term, exclusive supply agreement with AlliedSignal Inc., the manufacturer
of the advanced Spectra/R/ microfilament fiber and proprietary
encapsulated Spectra/R/ fiber-based microfilament fishing line used in the
products of the Acquired Business; (ii) JWA and Safariland entered into a
120-day service agreement pursuant to which Safariland will provide JWA
with production, shipping, invoicing, order processing and other services
in return for a fee of $25,000 per month; (iii) JWA and Safariland entered
into an agreement pursuant to which Safariland guaranteed JWA specified
quantities of one product of the Acquired Business at a set price through
September 30, 1995. In addition, under the Purchase Agreement Safariland
agreed to sell to JWA, at specified prices, such raw materials of the
Acquired Business on hand as of the closing of the Acquisition as JWA may
order during the 12 months following the closing and Safariland agreed to
divert or supply JWA with finished goods and/or raw materials used in
making the products of the Acquired Business in the event AlliedSignal
Inc. is unable to supply JWA with sufficient quantities of such goods
and/or materials.
To provide interim financing for the Acquisition and to pay costs
associated with the Acquisition, JWA entered into an unsecured $30,000,000
line of credit, effective as of April 3, 1995 (the "Credit Agreement"),
with The First National Bank of Chicago. JWA borrowed $20,005,000 under
the Credit Agreement or other existing credit facilities at or prior to
the closing of the Acquisition and borrowed an additional $3,415,000 under
the Credit Agreement in connection with the May 11, 1995 payment of the
Inventory value. Committed permanent financing for the Acquisition, in
the form of $30,000,000 of unsecured senior notes (the "Senior Notes")
bearing interest of 7.77%, will be issued October 15, 1995, at which time
any amounts outstanding under the Credit Agreement will be retired. The
Senior Notes will have annual principal payments of $3,000,000 to
$5,000,000 beginning October 1999 with a final payment due in October
2005.
The Purchase Agreement and the Credit Agreement are filed as
exhibits to this Current Report on Form 8-K and are incorporated herein by
reference. The brief summaries of the material provisions of such
agreements set forth above are qualified in their entirety by reference to
each respective agreement filed as an exhibit hereto.
Safariland, through the Acquired Business, was engaged in the
marketing, distribution and sale of fishing tackle products and JWA
intends to continue that business.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable for JWA to provide the required financial
statements for the Acquired Business at the time this Current Report on
Form 8-K is filed. In addition, JWA has requested that the Securities and
Exchange Commission, among other things, waive certain of the audit
requirements for such financial statements pursuant to Rule 3-13 of
Regulation S-X. The required financial statements for the Acquired
Business, as such may be modified and/or waived by the Securities and
Exchange Commission, will be filed as soon as practicable but in no event
later than July 25, 1995.
(b) Pro Forma Financial Information.
JOHNSON WORLDWIDE ASSOCIATES, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma financial information relates to
the acquisition (such acquisition as well as the consummation of certain
related transactions is referred to herein as the "Acquisition") by
Johnson Worldwide Associates, Inc. ("JWA") of substantially all of the
assets of the SpiderWire/TM/ product line (the "Business") of Safari Land
Ltd., Inc. The Acquisition, which was accounted for using the purchase
method of accounting, was deemed to be effective as of the close of
business on March 31, 1995. The pro forma financial information also
gives effect to the pending acquisition of substantially all of the assets
of the Neptune product line ("Neptune") of Goldeneye Products, Inc., which
is expected to close on June 30, 1995 and will be accounted for using the
purchase method of accounting (the "Neptune Acquisition"). The pro forma
amounts have been prepared based on certain purchase accounting and other
pro forma adjustments (as described in the accompanying notes) to the
historical financial statements of JWA, the Business and Neptune.
The unaudited pro forma condensed consolidated statements of
operations reflect the historical results of operations of JWA, the
Business and Neptune for the fiscal year ended September 30, 1994, and the
six months ended March 31, 1995, with pro forma acquisition adjustments as
if the Acquisition and the Neptune Acquisition had occurred as of the
beginning of the respective periods. The unaudited pro forma condensed
consolidated balance sheet reflects the historical financial position of
JWA, the Business and Neptune at March 31, 1995, with pro forma
acquisition adjustments as if the Acquisition and the Neptune Acquisition
had occurred on March 31, 1995. The pro forma adjustments are described
in the accompanying notes and give effect to events that are (a) directly
attributable to the Acquisition and the Neptune Acquisition, (b) factually
supportable, and (c) in the case of certain income statement adjustments,
expected to have a continuing impact.
The unaudited pro forma condensed consolidated financial statements
should be read in connection with JWA's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994 along with the financial statements
of the Business and related notes that will appear elsewhere in this
Current Report on Form 8-K.
The unaudited pro forma financial information presented is for
information purposes only and does not purport to represent what JWA's
financial position or results of operations as of the dates presented
would have been had the Acquisition and the Neptune Acquisition in fact
occurred on such date or at the beginning of the periods indicated or to
project JWA's financial position or results of operations for any future
date or period.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
(unaudited)
(thousands, except share Acquired Pro Forma
data) JWA Businesses Adjustments Pro Forma
Assets
Current assets:
Cash $ 2,280 $ -- $ -- $ 2,280
Accounts receivable
less allowance for
doubtful accounts of
$2,704 109,238 -- -- 109,238
Inventories 96,275 4,130 -- 100,405
Other current assets 13,892 76 -- 13,968
--------- --------- --------- ---------
Total current assets 221,685 4,206 -- 225,891
Property, plant and
equipment 29,389 111 -- 29,500
Intangible assets 36,432 -- 23,944 60,376
Other assets 3,172 -- (900) 2,272
-------- --------- --------- ---------
Total assets $290,678 $ 4,317 $ 23,044 $318,039
======== ======== ========= ========
Liabilities and
Shareholders' Equity
Current liabilities:
Notes payable and
current maturities
of long-term
obligations $ 65,751 $ -- $ -- $ 65,751
Accounts payable 18,751 -- -- 18,751
Other accrued
liabilities 27,492 -- -- 27,492
------- -------- -------- --------
Total current
liabilities 111,994 -- -- 111,994
Long-term obligations,
less current maturities 36,407 -- 27,361 63,768
Other liabilities 5,708 -- -- 5,708
-------- -------- --------- ---------
Total liabilities 154,109 -- 27,361 181,470
Shareholders' equity:
Common stock:
Class A shares issued
6,866,296 343 -- -- 343
Class B shares issued
1,230,099 62 -- -- 62
Capital in excess of
par value 43,380 -- -- 43,380
Retained earnings 84,031 -- -- 84,031
Contingent compensation (210) -- -- (210)
Cumulative translation
adjustment 9,600 -- -- 9,600
Treasury stock (637) -- -- (637)
---------- ----------- ---------- ---------
Total shareholders'
equity 136,569 -- -- 136,569
---------- ----------- ---------- ---------
Total liabilities and
shareholders'
equity $290,678 $ -- $ 27,361 $318,039
========= ========= ========= =========
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
(unaudited)
(thousands, except per share Acquired Pro Forma
data) JWA Businesses Adjustments Pro Forma
Net sales $284,343 $ 9,069 $ (600) $292,812
Cost of sales 173,869 5,169 -- 179,038
-------- ---------- --------- --------
Gross profit 110,474 3,900 (600) 113,774
Operating expenses 91,536 4,977 1,018 97,531
-------- --------- --------- ----------
Operating profit (loss) 18,938 (1,077) (1,618) 16,243
Interest expense 6,845 121 1,639 8,605
Other (income) expenses, net (391) -- -- (391)
-------- --------- ---------- --------
Income (loss) from
continuing operations
before income taxes 12,484 (1,198) (3,257) 8,029
Income tax expense (benefit) 4,338 (416) (1,130) 2,792
-------- --------- -------- --------
Income (loss) from
continuing operations $ 8,146 $ (782) $ (2,127) $ 5,237
======= ======= ========= ========
Earnings per common share:
Continuing operations $ 1.01 $ .65
======= =======
Weighted average common and
common equivalent shares
outstanding 8,068 8,068
======== =======
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1995
(unaudited)
(thousands, except per Acquired Pro Forma
share data) JWA Businesses Adjustments Pro Forma
Net sales $159,259 $ 13,077 $ (300) $172,036
Cost of sales 96,595 8,009 -- 104,604
------- -------- -------- --------
Gross profit 62,664 5,068 (300) 67,432
Operating expenses 52,736 4,048 509 57,293
-------- -------- -------- ---------
Operating profit 9,928 1,020 (809) 10,139
Interest expense 3,022 319 1,155 4,496
Other (income)
expenses, net (466) 1 -- (465)
------ ------- -------- -------
Income before
income taxes 7,372 700 (1,964) 6,108
Income tax expense 2,860 272 (762) 2,370
------- ------- ------- --------
Net income $ 4,512 $ 428 $ (1,202) $ 3,738
======= ======= ======= ========
Earnings per common
share $ .56 $ .46
======= ========
Weighted average
common and common
equivalent shares
outstanding 8,075 8,075
======= =======
See accompanying notes to unaudited pro forma condensed consolidated
financial statements.
JOHNSON WORLDWIDE ASSOCIATES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1
The pro forma condensed consolidated balance sheet has been prepared to
reflect the purchase by JWA of selected assets of the Business from Safari
Land Ltd., Inc. ("Safariland") and selected assets and liabilities of
Neptune from Goldeneye Products, Inc. ("Goldeneye") (together, the
"Acquired Businesses"). Selected assets acquired have been recorded at
net book value at March 31, 1995, which approximates fair market value.
The pro forma adjustments as of March 31, 1995 reflect the following:
(a) The financing for the acquisitions.
(b) The allocation of excess of cost over the fair value of net assets
acquired to goodwill.
(c) The reclassification of prepayments made by JWA, and included in the
purchase price, to an intangible asset.
NOTE 2
The pro forma condensed consolidated statements of operations for the year
ended September 30, 1994 and the six months ended March 31, 1995 are based
on the financial statements of JWA and the Business for the twelve months
ended September 30, 1994 and for the six months ended March 31, 1995,
respectively, and Neptune for the twelve months ended June 30, 1994 and
for the six months ended December 31, 1994, respectively, after giving
effect to the following pro forma adjustments:
(a) Additional interest expense resulting from the debt obtained to
finance the acquisition and provide working capital, at rates in
effect at the beginning of, or during the respective periods, as
appropriate.
(b) Additional operating expenses, primarily amortization expense,
resulting from the amortization of intangible assets based on a useful
life of 25 years.
(c) Reduction of net sales resulting from the elimination of royalty
payments to Safariland from JWA.
(d) Provision for income tax benefits resulting from the proforma
adjustments using statutory tax rates.
NOTE 3
The financial statements of the Acquired Businesses have been extracted
from the full financial statements of Safariland and Goldeneye. Certain
expenses, such as executive salaries, have not been allocated to the
Acquired Businesses. Certain expenses, such as interest, have been
estimated. Income tax expense or benefit has been calculated using
statutory tax rates. Similarly, certain assets of Safariland and
Goldeneye, such as cash and accounts receivable, and all liabilities, were
not acquired and are not reflected in the assets and liabilities of the
Acquired Businesses.
(c) Exhibits.
The exhibits listed in the accompanying Exhibit Index are filed as
part of this Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
JOHNSON WORLDWIDE ASSOCIATES, INC.
Date: May 26, 1995 By: /s/ Carl G. Schmidt
Carl G. Schmidt
Senior Vice President and Chief
Financial Officer, Secretary and
Treasurer
JOHNSON WORLDWIDE ASSOCIATES, INC.
EXHIBIT INDEX TO FORM 8-K
Report Dated May 11, 1995
Exhibit
(2) Asset Purchase Agreement by and between
Johnson Worldwide Associates, Inc. and
Safari Land Ltd., Inc., dated as of
March 31, 1995*
(4) Unsecured Line of Credit Letter
Agreement by and between Johnson
Worldwide Associates, Inc. and The First
National Bank of Chicago, effective as
of April 3, 1995
___________________
* The schedules and exhibits to this document are not being filed
herewith. The registrant agrees to furnish supplementally a copy of any
such schedule or exhibit to the Securities and Exchange Commission upon
request.
ASSET PURCHASE AGREEMENT
BETWEEN
JOHNSON WORLDWIDE ASSOCIATES, INC.
AND
SAFARI LAND LTD., INC.
DATED AS OF MARCH 31, 1995
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . 1
1.1. Definition of "Business". . . . . . . . . . . . . . . . . 1
1.2. Assets to be Transferred . . . . . . . . . . . . . . . . . 1
1.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . 3
2. ASSUMPTION OF CERTAIN SPECIFIC LIABILITIES . . . . . . . . . . . 4
2.1. Certain Specific Liabilities to be Assumed . . . . . . . . 4
2.2. Liabilities Not to be Assumed . . . . . . . . . . . . . . 5
3. PURCHASE PRICE - PAYMENT . . . . . . . . . . . . . . . . . . . . 7
3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 7
3.2. Payment of Purchase Price . . . . . . . . . . . . . . . . 7
3.3. Sales; Inventory Value . . . . . . . . . . . . . . . . . . 8
3.4. Allocation of Purchase Price . . . . . . . . . . . . . . . 9
3.5. Additional Payments . . . . . . . . . . . . . . . . . . . 9
3.6. EMF Payments . . . . . . . . . . . . . . . . . . . . . . . 11
4. REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . . . . . 13
4.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . 14
4.4. Financial Statements . . . . . . . . . . . . . . . . . . . 14
4.5. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 15
4.6. Inventory . . . . . . . . . . . . . . . . . . . . . . . . 15
4.7. Absence of Certain Material Changes . . . . . . . . . . . 15
4.8. Absence of Undisclosed Liabilities . . . . . . . . . . . . 17
4.9. No Litigation . . . . . . . . . . . . . . . . . . . . . . 17
4.10. Compliance With Laws and Orders . . . . . . . . . . . . . 18
4.11. Title to and Condition of Properties . . . . . . . . . . 18
4.12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 19
4.13. Contracts and Commitments . . . . . . . . . . . . . . . . 19
4.14. Employee Benefit Plans . . . . . . . . . . . . . . . . . 21
4.15. Trade Rights . . . . . . . . . . . . . . . . . . . . . . 23
4.16. Major Customers and Suppliers . . . . . . . . . . . . . . 24
4.17. Product Warranty and Product Liability . . . . . . . . . 24
4.18. Affiliates' Relationships to Business . . . . . . . . . . 25
4.19. Assets Necessary to Business . . . . . . . . . . . . . . 25
4.20. No Brokers or Finders . . . . . . . . . . . . . . . . . . 25
4.21. Disclosure . . . . . . . . . . . . . . . . . . . . . . . 25
4.22. Dornsife & Associates' Obligations . . . . . . . . . . . 25
5. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . 26
5.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3. No Brokers or Finders . . . . . . . . . . . . . . . . . . 26
5.4. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 26
6. RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1. Noncompetition; Use and Disclosure . . . . . . . . . . . . 27
6.2. HSR Act Filings . . . . . . . . . . . . . . . . . . . . . 28
6.3. Termination of License Agreement and Distribution
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4. Product Liability Matters . . . . . . . . . . . . . . . . 29
6.5. Use of Name . . . . . . . . . . . . . . . . . . . . . . . 29
6.6. Sales Tax Matters . . . . . . . . . . . . . . . . . . . . 29
6.7. Access to Information and Records . . . . . . . . . . . . 29
6.8. Service Agreement . . . . . . . . . . . . . . . . . . . . 30
6.9. Supply from AlliedSignal . . . . . . . . . . . . . . . . . 30
6.10. Supply of Raw Materials of the Business . . . . . . . . . 30
7. FURTHER COVENANTS OF COMPANY . . . . . . . . . . . . . . . . . . 30
7.1. Conduct of Business Pending the Closing . . . . . . . . . 30
7.2. Consents . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3. Other Action . . . . . . . . . . . . . . . . . . . . . . . 32
7.4. Continuing Disclosure . . . . . . . . . . . . . . . . . . 32
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . . . . . 32
8.1. Representations and Warranties True on the Closing Date . 32
8.2. Compliance With Agreement . . . . . . . . . . . . . . . . 32
8.3. Absence of Litigation . . . . . . . . . . . . . . . . . . 32
8.4. Consents and Approvals . . . . . . . . . . . . . . . . . . 33
8.5. Due Diligence Investigation; No Material Adverse Change . 33
8.6. Discussions with Customers and Suppliers . . . . . . . . . 33
8.7. Manufacturing/Supply Agreement . . . . . . . . . . . . . . 33
8.8. Braider's Agreement . . . . . . . . . . . . . . . . . . . 33
8.9. HSR Act Waiting Period . . . . . . . . . . . . . . . . . . 33
9. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS . . . . . . . . . 34
9.1. Representations and Warranties True on the Closing Date . 34
9.2. Compliance With Agreement . . . . . . . . . . . . . . . . 34
9.3. Absence of Litigation . . . . . . . . . . . . . . . . . . 34
9.4. HSR Act Waiting Period . . . . . . . . . . . . . . . . . . 34
10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1. By Company . . . . . . . . . . . . . . . . . . . . . . . 34
10.2. By Buyer . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3. Indemnification of Third-Party Claims . . . . . . . . . . 35
10.4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . 36
11. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.1. Documents to be Delivered by Company . . . . . . . . . . 37
11.2. Documents to be Delivered by Buyer . . . . . . . . . . . 38
12. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.1. Right of Termination Without Breach . . . . . . . . . . . 39
12.2. Termination for Breach . . . . . . . . . . . . . . . . . 39
12.3. Repayment . . . . . . . . . . . . . . . . . . . . . . . . 40
13. RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . 41
13.1. Arbitration . . . . . . . . . . . . . . . . . . . . . . . 41
13.2. Arbitrators . . . . . . . . . . . . . . . . . . . . . . . 41
13.3. Procedures; No Appeal . . . . . . . . . . . . . . . . . . 41
13.4. Authority . . . . . . . . . . . . . . . . . . . . . . . . 41
13.5. Entry of Judgment . . . . . . . . . . . . . . . . . . . . 41
13.6. Confidentiality . . . . . . . . . . . . . . . . . . . . . 41
13.7. Continued Performance . . . . . . . . . . . . . . . . . . 41
13.8. Tolling . . . . . . . . . . . . . . . . . . . . . . . . . 42
14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 42
14.1. Disclosure Schedule . . . . . . . . . . . . . . . . . . . 42
14.2. Further Assurance . . . . . . . . . . . . . . . . . . . . 42
14.3. Disclosures and Announcements . . . . . . . . . . . . . . 42
14.4. Assignment; Parties in Interest . . . . . . . . . . . . . 42
14.5. Law Governing Agreement . . . . . . . . . . . . . . . . . 43
14.6. Amendment and Modification . . . . . . . . . . . . . . . 43
14.7. Notice . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 44
14.9. Entire Agreement . . . . . . . . . . . . . . . . . . . . 45
14.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . 45
14.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . 45
14.12. Glossary of Terms . . . . . . . . . . . . . . . . . . . . 45
Disclosure Schedule
Schedule 1.2.(b) - Personal Property Leases
Schedule 1.3.(e) - Certain Relationships
Schedule 2.1.(a) - Assumed Contracts
Schedule 2.2.(m) - Seasonal Program Arrangements
Schedule 3.2.(b) - Dornsife & Associates' Obligations
Schedule 3.3.(b) - Inventory Value
Schedule 4.1.(c) - Foreign Corporation Qualification
Schedule 4.3 - Violation, Conflict, Default,
Consents
Schedule 4.4.(a) - Company Financial Statements
Schedule 4.4.(b) - Business Financial Statements
Schedule 4.5 - Tax Matters
Schedule 4.6 - Inventory Off Premises
Schedule 4.7 - Certain Material Changes
Schedule 4.8 - Undisclosed Liabilities
Schedule 4.9 - Litigation Matters
Schedule 4.10.(a) - Noncompliance with Laws
Schedule 4.10.(b) - Licenses, Permits and Registrations
Schedule 4.11.(a)(i) - Pre-Closing Liens
Schedule 4.11.(a)(ii) - Post-Closing Liens
Schedule 4.11.(b) - Tangible Property
Schedule 4.12 - Insurance
Schedule 4.13.(b) - Purchase Commitments
Schedule 4.13.(c) - Sales Commitments
Schedule 4.13.(d) - Contracts with Affiliates and Certain
Others
Schedule 4.13.(f) - Loan Agreements, etc.
Schedule 4.13.(g) - Guarantees
Schedule 4.13.(i) - Restrictive Agreements
Schedule 4.13.(j) - Other Material Contracts
Schedule 4.15 - Trade Rights
Schedule 4.16.(a) - Major Customers
Schedule 4.16.(b) - Major Suppliers
Schedule 4.16.(c) - Dealers and Distributors
Schedule 4.17 - Product Warranty and Product Liability
Schedule 4.18.(a) - Contracts with Affiliates
Schedule 6.10 - Raw Materials
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement"), dated as of March 31,
1995, by and between Johnson Worldwide Associates, Inc., a Wisconsin
corporation ("Buyer"), and Safari Land Ltd., Inc., a California
corporation ("Company").
W I T N E S S E T H:
WHEREAS, Company is engaged in the design, manufacture,
production, marketing, distribution and sale of products in the law
enforcement gear, automotive accessory and fishing line product markets.
WHEREAS, Buyer desires to purchase from Company, and Company
desires to sell to Buyer, the property and assets of Company's
SpiderWire/R/ Product Line and certain other assets of the Company, as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and
conditions hereinafter set forth, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1. Definition of "Business". As used herein, "Business" shall
mean the design, manufacture, production, marketing, distribution,
exploitation, sale and related research and development by Company and its
affiliates of recreational products made with Spectra/R/ fiber, which
includes all products under the SpiderWire/R/ and "SpiderWire/R/ Fusion"
(or "SpiderWire/R/ 2000") trade names, including, without limitation,
braided and encapsulated microfilament fishing line, fishing rods and
reels, lures, string cord or line for kites, fishing and other general
purposes, and sportswear marketed to the fishing industry. "Business"
shall include, without limitation and except as otherwise specifically
provided herein, all operations of the Company related to products
associated by trade name or otherwise with the SpiderWire/R/ Product Line
of the Company on the date hereof.
1.2. Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date (as hereinafter
defined), Company shall sell, transfer, convey, assign and deliver to
Buyer (or upon Buyer's request, to one or more wholly owned subsidiaries
of Buyer as designated by Buyer), and Buyer shall purchase and accept, all
of the business, rights, claims and assets (of every kind, nature,
character and description, whether personal, tangible or intangible,
accrued, contingent or otherwise, and wherever situated) of Company that
relate to or are otherwise necessary to conduct the Business, but only to
the extent specifically provided for herein or in one of the schedules
attached hereto (collectively, the "Purchased Assets"). The Purchased
Assets shall include all the following assets or rights of the Company
related to the Business, to the extent so used, held, related, acquired or
developed:
1.2.(a) Personal Property. All machinery, equipment,
apparatus, vehicles, tools, kits, supplies, spare parts, furniture,
removable fixtures and all other personal property not included in
inventory (other than personal property leased pursuant to Personal
Property Leases, as hereinafter defined).
1.2.(b) Personal Property Leases. All leases of machinery,
equipment, vehicles, furniture and other personal property leased
by Company (the "Personal Property Leases") and described in
Schedule 1.2.(b).
1.2.(c) Trade Rights. All the Company's interest in any
Trade Rights. As used herein, the term "Trade Rights" shall mean
and include: (i) all United States, state and foreign trademark
rights, business identifiers, trade dress, service marks, trade
names, and brand names, all common law rights therein, all
registrations and renewals thereof, and applications therefor, and
all goodwill associated with the foregoing accruing from the dates
of first use thereof; (ii) all United States and foreign
copyrights, copyright registrations and copyright applications,
renewals, extensions and reissues thereof, and all other rights
associated with the foregoing and the underlying works of
authorship; (iii) all United States and foreign patents and patent
applications and all other international proprietary rights
associated therewith; (iv) all contracts or agreements granting any
right, title, license or privilege under the intellectual property
rights of any third party; (v) all inventions, mask works and mask
work registrations, know-how, discoveries, improvements, designs,
trade secrets, shop and royalty rights, employee covenants and
agreements respecting intellectual property and noncompetition and
all other types of intellectual property; and (vi) all claims for
infringement or breach of any of the foregoing.
1.2.(d) Contracts. All the Company's rights in, to and under
all contracts, purchase orders and sales orders (hereinafter
"Contracts") of Company described in Schedules 1.2.(b), 2.1.(a) or
2.2.(m) or described in Section 2.1.(a). To the extent that any
Contract for which assignment to Buyer is provided herein is not
assignable without the consent of another party, this Agreement
shall not constitute an assignment or an attempted assignment
thereof if such assignment or attempted assignment would constitute
a breach thereof. Company and Buyer agree to use their reasonable
best efforts (without any requirement on the part of Buyer to pay
any money or agree to any change in the terms of any such Contract)
to obtain the consent of such other party to the assignment of any
such Contract to Buyer in all cases in which such consent is or may
be required for such assignment. If any such consent shall not be
obtained, Company agrees to cooperate with Buyer in any reasonable
arrangement designed to provide for Buyer the benefits intended to
be assigned to Buyer under the relevant Contract, including
enforcement at the cost and for the account of Buyer of any and all
rights of Company against the other party thereto arising out of
the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be
made, Buyer, upon notice to Company, shall have no obligation
pursuant to Section 2.1 or otherwise with respect to any such
Contract and any such Contract shall not be deemed to be a
Purchased Asset hereunder.
1.2.(e) Literature. All sales literature, promotional
literature, catalogs and similar materials.
1.2.(f) Records and Files. All records, files, invoices,
customer lists, blueprints, specifications, designs, drawings,
computer databases, operating data and other data, however
embodied.
1.2.(g) Inventory. All inventories of the Business
constituting work-in-process and finished goods (including all such
in transit) at the Closing, together with related packaging
materials (collectively, "Inventory").
1.2.(h) Licenses, Permits and Registrations. All licenses,
permits, registrations and approvals relating to the Business other
than those relating solely to the operation of Company's
facilities.
1.2.(i) Business Name. The name "SpiderWire" and derivatives
therefrom and names similar thereto, and all rights to use or allow
others to use such names.
1.2.(j) General Intangibles. All prepaid expenses and items,
all causes of action, claims, demands and rights against third
parties arising out of occurrences after the Closing, and other
intangible rights and assets, including all goodwill associated
with the Business and the Purchased Assets.
1.3. Excluded Assets. Company shall retain all of its rights,
claims and assets not described in Section 1.1. Without limiting the
generality of the foregoing, and any contrary provisions of Section 1.1
notwithstanding, Company shall not sell, transfer, assign, convey or
deliver to Buyer, and Buyer will not purchase or accept, the following
assets of Company:
1.3.(a) Cash and Cash Equivalents. All cash and cash
equivalents.
1.3.(b) Consideration. The consideration delivered by Buyer
to Company pursuant to this Agreement.
1.3.(c) Tax Credits and Records. Federal, state and local
income and franchise tax credits and tax refund claims and
associated returns and records. Buyer shall have reasonable access
to such records related to the Business or the Purchased Assets and
may make excerpts therefrom and copies thereof.
1.3.(d) Real Property. All of the real property, including
non-removable fixtures related to the Business, buildings,
improvements and all appurtenant rights, owned by Company and all
of Company's real property leases.
1.3.(e) Obligations of Affiliates. Notes, drafts, accounts
receivable or other obligations for the payment of money, made or
owed by any Affiliate of Company. For purposes of this Agreement,
the term "Affiliate" shall mean and include all shareholders,
directors and officers of Company; the spouse of any such person;
any person who would be the heir or descendant of any such person
if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest (except through
ownership of less than 5% of the outstanding shares of any entity
whose securities are listed on a national securities exchange or
traded in the national over-the-counter market); provided, however,
that Innovative Textiles, Inc., Rodney Dornsife and Dornsife &
Associates, each of which has the relationships, Contracts and
agreements with the Company as described on Schedule 1.3.(e), shall
not be deemed to be "Affiliates" (or "affiliates") of Company for
purposes of this Agreement.
1.3.(f) Notes and Accounts Receivable. All notes, drafts and
accounts receivable.
1.3.(g) Raw Materials. All inventories of the Business
constituting raw materials, except as otherwise provided in Section
6.10.
2. ASSUMPTION OF CERTAIN SPECIFIC LIABILITIES
2.1. Certain Specific Liabilities to be Assumed. As used in this
Agreement, the term "Liability" shall mean and include any direct or
indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed,
known or unknown, asserted or unasserted, liquidated or unliquidated,
secured or unsecured. Subject to the terms and conditions of this
Agreement, on the Closing, Buyer shall assume and agree to perform and
discharge the following, and only the following, Liabilities of Company
(collectively, the "Assumed Liabilities"):
2.1.(a) Contractual Liabilities. Company's Liabilities
arising from and after the Closing under and pursuant to the
following Contracts:
(i) All Contracts described in Schedules 1.2.(b),
2.1.(a) or 2.2.(m); provided, however, that Buyer is not
assuming any Liability of Company arising from and after the
Closing under the contracts, arrangements or marketing plans
described in Schedule 2.2.(m) for Company's pro rata portion
(determined on a dollar, unit or other appropriate basis) of
the 1995 seasonal "program" arrangements described in Section
2.2.(m); and provided further, that Buyer is not assuming any
Liability of Company arising under the SpiderWire/R/ Marketing
Plan and Budget for Fiscal 1995 (prepared with Dornsife &
Associates) that was incurred for any period prior to the
Closing (regardless of when billed).
(ii) Every Contract entered into by Company after
the date hereof in the ordinary course of conducting the
Business which does not involve consideration or other
expenditure by Company payable or performable on or after the
Closing in excess of $5,000 or over a period of more than
three months and which is disclosed to Buyer on or before it
is entered into.
(iii) Every other Contract to which Company is a
party (if and to the extent that such contract relates to the
Business) which Buyer elects to assume at any time after the
Closing by giving written notice to Company; provided that
such election by Buyer shall not constitute a waiver of any
rights of indemnification or other rights under this Agreement
which Buyer may have by virtue of such Contract, or any of its
provisions, constituting a breach of any representation or
warranty made by Company herein.
The Contracts described in subsections 2.1.(a)(i), (ii) and
(iii) above are hereinafter collectively described as the "Assumed
Contracts."
2.1.(b) Liabilities Under Certain Permits and Licenses.
Company's Liabilities arising from and after the Closing under
those certain permits and licenses listed in Schedule 4.10.(b)
which relate to the conduct of the Business (other than those
relating solely to the operation of Company's facilities) and which
have been assigned to Buyer at the Closing.
2.1.(c) Liabilities for Product Returns Related to
Discretionary Balancing of Inventories. Company's Liabilities for
product returns related to discretionary balancing of inventories
approved by Buyer with respect to individual customer inventories.
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Buyer is not assuming any
Liabilities of Company and all such Liabilities shall be and remain the
responsibility of Company. Notwithstanding the provisions of Section 2.1,
Buyer is not assuming, and Company shall not be deemed to have transferred
to Buyer, the following Liabilities of Company:
2.2.(a) Real Property. Any and all Liabilities relating to,
arising out of or in connection with any real property at any time
owned by Company and used in the Business, including, but not
limited to, liabilities relating to, arising out of or in
connection with any past or present events, conditions,
circumstances, activities, practices, incidents, actions, omissions
or plans related to the manufacture, processing, distribution, use,
transfer, treatment, generation, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release
into the environment of any pollutants, contaminants, chemicals or
industrial toxic, hazardous or petroleum or petroleum-based
substance or waste.
2.2.(b) Taxes Arising from Transaction. Any Federal,
foreign, state or other taxes applicable to, imposed upon or
arising out of the sale or transfer of the Purchased Assets to
Buyer and the other transactions contemplated by this Agreement,
including but not limited to any income, transfer, sales, excise,
use, gross receipts or documentary stamp taxes and all Colorado,
Ohio and/or Kentucky sales and/or excise taxes (if the Inventory
held by braiders for the Business is deemed to be owned by the
Company).
2.2.(c) Income and Franchise Taxes. Any Liability of Company
for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account
thereof).
2.2.(d) Insured Claims. Any Liability of Company which the
Company is insured against, to the extent such Liability is or will
be paid by an insurer.
2.2.(e) Product Liability. Any Liability of Company arising
out of or in any way relating to or resulting from any product
manufactured, assembled or sold prior to the Closing or during the
eight (8) weeks following the Closing, including, but not limited
to, any Liability of Company for claims made for injury to person,
damage to property or other damage, whether made in product
liability, tort, breach of warranty or otherwise, and any product
warranty or product return (other than returns related to
discretionary balancing of inventories approved by Buyer with
respect to individual customer inventories and product returns of
non-defective or obsolete inventory reflected in "SpiderWire/R/
Excess Profit" in fiscal 1996 under Section 3.5.(c)) Liabilities of
Company or the Business on products produced by the Business prior
to the Closing and during the eight weeks (8) weeks following the
Closing. After the eighth week following the Closing, Buyer shall
direct the braiders for the Business to make a definitive mark on
all further products manufactured, assembled or sold so as to
easily determine whether Company or Buyer has responsibility for
any such product Liability.
2.2.(f) Litigation Matters. Any Liability with respect to
any action, suit, proceeding, arbitration, investigation or
inquiry, whether civil, criminal or administrative ("Litigation"),
whether or not described in Schedule 4.9, arising out of or in any
way related to or resulting from the conduct of the Business prior
to the Closing.
2.2.(g) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
2.2.(h) Transaction Expenses. All Liabilities incurred by
Company in connection with this Agreement and the transactions
contemplated herein.
2.2.(i) Liability For Breach. Liabilities of Company for any
breach or failure to perform any of Company's covenants and
agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing, any other contract, whether or not assumed
hereunder, including breach arising from assignment of contracts
hereunder without consent of third parties.
2.2.(j) Liabilities to Affiliates. Liabilities of Company to
its present or former Affiliates.
2.2.(k) Violation of Laws or Orders. Liabilities of Company
for any violation of or failure to comply with any statute, law,
ordinance, rule or regulation (collectively, "Laws") or any order,
writ, injunction, judgment, plan or decree (collectively, "Orders")
of any court, arbitrator, department, commission, board, bureau,
agency, authority, instrumentality or other body, whether federal,
state, municipal, foreign or other (collectively, "Government
Entities").
2.2.(l) Employees. Any Liability of Company relating to
employees of the Business (such employees shall remain employees of
Company after the Closing), including, without limitation, any
Liability of Company under or with respect to any employee benefit
plan, program, contract or arrangement of Company covering past or
present employees of the Business and their beneficiaries or
imposed by law as a result of the transactions contemplated hereby.
2.2.(m) Seasonal Program Arrangements. Other than for those
arrangements described on Schedule 2.2.(m) (and then only to the
extent not limited by Section 2.1.(a)(i)), any and all Liabilities
of Company or the Business for all seasonal "program" arrangements
with Company accounts, including, without limitation, volume
rebates, advertising and co-op programs, freight allowances and
other vendor or seller discount programs.
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be (i) the assumption of the Assumed
Liabilities, and (ii) the sum of $21,000,000 (the "Fixed Purchase Price")
plus (a) the Inventory Value, as defined and set forth in Section 3.3, (b)
the Additional Payments, if any, as defined and set forth in Section 3.5
and (c) the EMF Payments, if any, as defined and set forth in Section 3.6.
3.2. Payment of Purchase Price. The Purchase Price shall be paid
by Buyer as follows:
3.2.(a) Assumption of Liabilities. On the Closing Date,
Buyer shall deliver to Company such documents and instruments as
are reasonably required to evidence the assumption of the Assumed
Liabilities.
3.2.(b) Cash to Company. Buyer shall deliver, or cause to be
delivered, to Company the Fixed Purchase Price as follows:
(i) $500,000 upon execution of the letter of intent
regarding the transactions contemplated by this Agreement (the
parties hereto acknowledge that such amount has been paid to
Company prior to the date hereof).
(ii) $1,000,000 upon execution of this Agreement.
(iii) The remainder minus $1,000,000 on the Closing
Date, together with interest (if any) on such amount accruing
from April 10, 1995 through the Closing Date at the rate per
annum equal to the prime interest rate in effect from time to
time as set forth in The Wall Street Journal.
(iv) The remaining $1,000,000 within five (5)
business days after all obligations of Dornsife & Associates
related to marketing and promotion of SpiderWire/R/ and
SpiderCast/R/ products, some of which are set forth on
Schedule 3.2.(b), are satisfied in full (as determined by
Buyer in its sole judgment, which will not be unreasonably
withheld).
3.2.(c) Method of Payment. All payments under this Section
3.2 shall be made in the form of certified or bank cashier's check
payable to the order of Company or, at the Company's option, by
wire transfer of immediately available funds to an account
designated by the Company not less than 48 hours prior to the time
for payment specified herein.
3.3. Sales; Inventory Value.
3.3.(a) Sales. Beginning as of the close of business on
March 31, 1995, Company will keep books and records for the
Business as would be required under the Service Agreement (as
hereinafter defined). Upon the Closing, the gross sales on or
after the close of business on March 31, 1995, all costs incurred
in connection therewith (including any accounts payable and
commissions), and all proceeds of such sales (including accounts
receivable and cash) will be deemed for the account of Buyer. At
the Closing, the Company will assign all accounts receivable or
proceeds other than cash, and will pay over all cash proceeds,
arising from such sales to Buyer. It is the intention of the
parties that upon Closing, the Business will be deemed for all
business and accounting purposes as having been operated for the
period from the close of business on March 31, 1995 to the Closing
Date by the Company for the benefit and account of Buyer in the
manner described in the Service Agreement.
3.3.(b) Inventory Value. On or before the thirtieth (30th)
day following the Closing Date, Buyer shall pay Company the value
indicated on Schedule 3.3.(b) (the "Inventory Value") for the
Inventory delivered to Buyer at the Closing. Inventory shall be
valued for purposes of Schedule 3.3.(b) at the lower of cost or
fair market value. The valuation of the Inventory to be delivered
to Buyer at the Closing shall be based on Company's books of
account and financial records and on a physical inventory taken by
the chief financial or accounting officers of each of Company and
Buyer as of the close of business on March 31, 1995. The parties
hereto agree that, notwithstanding anything contained herein to the
contrary, on or prior to April 19, 1996 Buyer shall deliver a
schedule to Company setting forth all Inventory at the Inventory
Value set forth on Schedule 3.3.(b) which has (i) not been sold by
Buyer between the Closing Date and March 31, 1996, (ii) not been
converted into finished goods by Buyer between the Closing Date and
March 31, 1996, (iii) been converted into finished goods but such
finished goods have not been sold by Buyer between the Closing Date
and March 31, 1996 and/or (iv) not been used (e.g., packaging
materials) by Buyer within such period (the aggregate of the amount
set forth in Section 3.3.(b)(i), (ii), (iii) and (iv) hereinafter
the "Refund Amount"). Company shall pay Buyer, within ten (10)
days of receipt of Buyer's schedule, by certified or bank cashier's
check, the Refund Amount. In the event Company refuses or fails to
pay the Refund Amount in accordance with this Section 3.3.(b), then
Buyer shall have the right to set-off the Refund Amount, together
with interest on the outstanding balance thereof at the prime
interest rate in effect from time to time as set forth in The Wall
Street Journal, against any Additional Payments and/or EMF Payments
due to or to be due Company under this Agreement.
3.4. Allocation of Purchase Price. The aggregate Purchase Price
(including the assumption by Buyer of the Assumed Liabilities but
excluding the Inventory Value, any Additional Payments or any EMF
Payments) shall be allocated among the Purchased Assets for tax purposes
on the basis of the relative fair market values of such properties as of
the Closing Date, which values shall be determined by Buyer and be subject
to Company's consent, which consent shall not be unreasonably withheld.
Company and Buyer covenant and agree that they will follow and use such
allocation in all tax returns, filings or other related reports made by
them to any governmental agencies. To the extent that disclosures of this
allocation are required to be made by the parties to the Internal Revenue
Service ("IRS") under the provisions of Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any regulations
thereunder, Buyer and Company will disclose such reports to the other
prior to filing with the IRS.
3.5. Additional Payments. Buyer shall also make the following
payments to the Company ("Additional Payments") if and to the extent the
conditions requiring such Additional Payments are satisfied:
3.5.(a) Report. Prior to or on the date in which Buyer
publicly releases its fiscal year-end financial results in each of
1996, 1997, 1998, 1999, 2000 and 2001, Buyer or KPMG Peat Marwick
LLP ("Buyer's Accountants") shall prepare and deliver to the
Company a report ("Report") setting forth (i) the SpiderWire/R/
Excess Profit (as hereinafter defined) earned during the Buyer's
preceding fiscal year and (ii) the amount of the Additional
Payments, if any, required pursuant to Section 3.5.(b) for the
Buyer's preceding fiscal year. Each Report shall be prepared from
the statement of income of Buyer (or, if available, the Business)
for the appropriate fiscal year ended on or about September 30,
which statement will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis in
accordance with the books and records of Buyer (or, if appropriate,
the Business) and fairly presents, in accordance with generally
accepted accounting principles, the results of operations of Buyer
(or, if appropriate, the Business) for such year.
3.5.(b) Payment of Additional Payments. On the tenth
business day after each Report is delivered to Company (or, if
there is a dispute regarding any aspect of the Report, after such
dispute is finally resolved), Buyer shall deliver to Company an
aggregate sum equal to thirty-five percent (35%) of the
SpiderWire/R/ Excess Profit earned during the Buyer's preceding
fiscal year. Such amount shall be paid by delivery to Company of a
certified or bank cashier's check payable to the order of Company.
3.5.(c) SpiderWire/R/ Excess Profit. As used in this
Agreement, the term "SpiderWire/R/ Excess Profit" shall mean the
prorated SpiderWire/R/ Profit (as hereinafter defined) attributable
to sales by Buyer of the Fishing Line Products (as hereinafter
defined) included in the Business in excess of $25,000,000 for such
fiscal year. "SpiderWire/R/ Profit" means the gross profit on
sales by Buyer of the Fishing Line Products included in the
Business reduced by eighteen percent (18%) of such net sales (gross
sales less discounts, returns and freight allowances) of such
products. SpiderWire/R/ Excess Profit shall be calculated by
multiplying SpiderWire/R/ Profit by the fraction whose numerator is
annual net sales by Buyer of the Fishing Line Products included in
the Business in excess of $25,000,000 and whose denominator is
total annual net sales by Buyer of the Fishing Line Products
included in the Business. As used in this Agreement, the term
"Fishing Line Products" shall mean (i) all Spectra/R/ 1000 and 2000
based braided fishing line, (ii) all Spectra/R/ 1000 based
encapsulated microfilament fishing line and (iii) if (and only if)
Buyer and AlliedSignal Inc. enter into an agreement or agreements
for the supply of Spectra/R/ 2,000, 3000, etc. based encapsulated
microfilament fishing line on substantially the same terms and
conditions (including, without limitation, exclusivity and price)
as set forth in the Manufacturing/Supply Agreement (as hereinafter
defined) for Spectra/R/ 1000 based encapsulated microfilament
fishing line, all Spectra/R/ 2000, 3000 etc. based encapsulated
microfilament fishing line; provided, however, that all fishing
line products of Buyer and its affiliates that are (1) based on a
monofilament or other fiber not encompassed in the preceding
clause, (2) based on any fiber or material which is supplied to
Buyer by any person or entity other than AlliedSignal Inc.,
(3) sold under any trade name, trademark, etc. other than "Spider"
or derivatives therefrom, regardless of the fiber or material which
such product is based on, or (4) marketed or under development
prior to or as of the date hereof, shall not be considered to be
Fishing Line Products included in the Business. The parties hereto
agree that, notwithstanding anything contained herein to the
contrary, any product returns resulting from sales of products of
the Business prior to the Closing shall be considered fiscal 1996
returns for purposes of calculating the SpiderWire/R/ Excess Profit
for such year.
3.5.(d) Dispute Resolution. In the event of a dispute or
disagreement relating to any Report, the SpiderWire/R/ Excess
Profit or the amount of any Additional Payment that Buyer and
Company are unable to mutually resolve within 15 days after written
objections to such Report are delivered to Buyer, either party may
elect to have all such disputes or disagreements resolved by an
accounting firm of nationally recognized standing ("Third
Accounting Firm") to be mutually selected by Buyer and Company or,
if no agreement is reached on such Third Accounting Firm, then by
Buyer's Accountants and Company's independent accountants. The
Third Accounting Firm shall make a final and binding resolution of
the SpiderWire/R/ Excess Profit earned during the appropriate
fiscal year and the amount of the Additional Payment required
pursuant to Section 3.5.(b); provided, however, that in resolving
such dispute, the Third Accounting Firm shall choose between the
positions and amounts advocated by either Buyer or Company and
shall not provide a third or independent resolution of such
dispute. The Third Accounting Firm shall be instructed to use
every reasonable effort to perform its services within 15 days of
submission of the Report to it and, in any case, as soon as
practicable after such submission. The fees and expenses for the
services of the Third Accounting Firm shall be paid by the Company
unless the amount of the Additional Payment required pursuant to
Section 3.5.(b) for the appropriate fiscal year, as determined by
the Third Accounting Firm, is more than $100,000 greater than the
amount set forth in Buyer's Report for such fiscal year, in which
case the lesser of the actual fees and expenses for the services of
the Third Accounting Firm or $10,000 shall be paid by Buyer, and
Company shall pay any remaining balance of such fees and expenses.
3.6. EMF Payments. Buyer shall also make the following payments
to the Company ("EMF Payments") if and to the extent the conditions
requiring such EMF Payments are satisfied:
3.6.(a) Triggering Events. In the event Buyer's fiscal year-
end 1996 net sales (gross sales less discounts, returns and freight
allowances) of the encapsulated microfilament fishing line (known
as "EMF" or "SpiderWire Fusion") of the Business equal or exceed
$15,000,000, then Buyer shall deliver the following sums to
Company:
(i) The amount determined by multiplying the
applicable "EMF Payment Factor" in the table in (iii) below
times $2,000,000, which amount shall be paid to Company within
ten (10) business days after such net sales equal $15,000,000;
and
(ii) The amount determined by multiplying the
applicable "EMF Payment Factor" in the table in (iii) below
times forty percent (40%) of all such net sales between
$15,000,000 and $20,000,000, which amount(s) shall be paid to
Company on a monthly basis within ten (10) business days after
the end of each month in which fiscal year-end 1996 net sales
of "EMF" or "SpiderWire/R/ Fusion" exceed $15,000,000 and are
less than $20,000,000.
(iii) The amounts payable under this Section 3.6 are
determined in part by the gross margin (net sales less costs
of goods sold as determined in accordance with generally
accepted accounting principles, applied on a consistent basis)
on the sales of the "EMF" or "SpiderWire/R/ Fusion" products.
The EMF Payments defined in (i) and (ii) hereof will be
calculated utilizing the following table:
EMF
Gross EMF
Margin Payment
% Factor
*> 40% 100%
*> 39%, < 40% 90%
*> 38%, < 39% 80%
*> 37%, < 38% 70%
*> 36%, < 37% 60%
*> 35%, < 36% 50%
*> 34%, < 35% 40%
*> 33%, < 34% 30%
*> 32%, < 33% 20%
*> 31%, < 32% 10%
*< 30% 0%
* Equal to or
3.6.(b) Report and Method of Payment. The occurrence of the
triggering event(s) and the amount of any EMF Payments will be
determined by Buyer based on a report, which shall be prepared by
Buyer, certified by Buyer's Chief Financial Officer and sent to
Company. Such report shall be prepared in the same manner as set
forth in the second sentence of Section 3.5.(a). In the event of
any dispute or disagreement relating to the report or the amount of
any EMF Payments that Buyer and Company are unable to mutually
resolve within 15 days after written objections to such report are
delivered to Buyer, the dispute resolution provisions of Section
3.5.(d) shall apply. Any amounts payable under Section 3.6.(a)(i)
shall be made by delivery to Company of a certified or bank
cashier's check payable to the order of Company and any amounts
payable under Section 3.6.(a)(ii) shall be made by delivery to
Company of a Buyer check.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company makes the following representations and warranties to
Buyer, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, shall be unaffected by
any investigation heretofore or hereafter made by Buyer, or any knowledge
of Buyer other than as specifically disclosed in the Disclosure Schedule
(as hereinafter defined) delivered to Buyer at the time of the execution
of this Agreement, and shall survive the Closing of the transactions
provided for herein.
4.1. Corporate.
4.1.(a) Organization. Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of California
4.1.(b) Corporate Power. Company has all requisite corporate
power and authority to own, operate and lease its properties, to
carry on its business as and where such is now being conducted, to
enter into this Agreement and the other documents and instruments
to be executed and delivered by Company pursuant hereto and to
carry out the transactions contemplated hereby and thereby.
4.1.(c) Qualification. Company is duly licensed or qualified
to do business as a foreign corporation, and is in good standing,
in each jurisdiction wherein the character of its properties which
are Purchased Assets or the nature of the Business makes such
licensing or qualification necessary; such jurisdictions are listed
in Schedule 4.1.(c).
4.1.(d) No Subsidiaries. No portion of the Business is
conducted by the Company by means of any subsidiary or any other
interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by
Company pursuant hereto and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Company. No other or further corporate act or proceeding on
the part of Company or its shareholders is necessary to authorize this
Agreement or the other documents and instruments to be executed and
delivered by Company pursuant hereto or the consummation of the
transactions contemplated hereby and thereby, and it is not intended that
Company be dissolved or its remaining operations terminated. This
Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by Company pursuant
hereto will constitute, valid binding agreements of Company, enforceable
in accordance with their respective terms, except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, and by general equitable principles.
4.3. No Violation. Except as set forth on Schedule 4.3, neither
the execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Company pursuant hereto, nor
the consummation by Company of the transactions contemplated hereby and
thereby (a) will violate any applicable Law or Order applicable to
Company, (b) except as may be required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), will require any authorization,
consent, approval, exemption or other action by or notice to any
Government Entity (including, without limitation, under any
"plant-closing" or similar law), or (c) subject to obtaining the consents
referred to in Schedule 4.3, will violate or conflict with, or constitute
a default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any
Lien (as hereinafter defined), upon any of the assets of Company under,
any term or provision of (i) the Articles of Incorporation or By-laws of
Company or (ii) any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which Company is a
party or by which Company or any of its assets or properties may be bound
or affected.
4.4. Financial Statements.
4.4.(a) Company Financial Statements. Included as Schedule
4.4.(a) are true and complete copies of the financial statements of
Company consisting of (i) a balance sheet of Company as of
September 30, 1994, and the related statements of income and cash
flows for the fiscal year then ended (including the notes contained
therein or annexed thereto), which financial statements have been
reported on, and are accompanied by, the signed review report of
McGladrey & Pullen, LLP, independent accountants for Company for
such year, and (ii) an unaudited balance sheet of Company as of
December 31, 1994 (the "Recent Balance Sheet"), and the related
unaudited statement of income for the three months then ended. All
of such financial statements (including all notes and schedules
contained therein or annexed thereto) are true, complete and
accurate, have been prepared in accordance with generally accepted
accounting principles (except for the nature and amount of the
exceptions thereto set forth in Schedule 4.4.(a)) applied on a
consistent basis, have been prepared in accordance with the books
and records of Company, and fairly present, in accordance with
generally accepted accounting principles (except as specified
above), the assets, liabilities and financial position, the results
of operations and cash flows of Company as of the dates and for the
fiscal year and periods indicated.
4.4.(b) Business Financial Statements. Included as Schedule
4.4.(b) are financial statements of the Business (the "Business
Financial Statements"), consisting of statements of income and
expense of the Business for the fiscal year ended September 30,
1994, the three month period ended December 31, 1994, and the five
month period ended February 28, 1995. All of such financial
statements are, or are prepared from and consistent in all respects
with, such financial reports as have been prepared and used by the
Company in the ordinary course in managing the Business and
measuring and reporting its operating results; have been prepared
in accordance with generally accepted accounting principles (except
for the nature and amount of the exceptions thereto set forth in
Schedule 4.4.(b)) applied on a consistent basis, and with the books
and records of the Company; and fairly present the assets,
liabilities and financial position and the results of operations of
the Business as of the dates and for the periods indicated. Where
any asset, liability or item of income or expense arises out of an
allocation to the Business of a portion of any asset, liability or
item of income or expense of the Company which relates in part to
any operation other than the Business, this fact, and the method of
calculating the allocation, shall be set forth.
4.5. Tax Matters. Except as set forth on Schedule 4.5: (i) all
state, foreign, county, local and other tax returns relating primarily to
the Business or the Purchased Assets, or required to be filed by or on
behalf of Company in any jurisdiction required to be listed in Schedule
4.1.(c) or any political subdivision thereof, have been timely filed and
the taxes paid or adequately accrued; (ii) Company has duly withheld and
paid all taxes which it is required to withhold and pay relating to
salaries and other compensation heretofore paid to the employees of the
Business; and (iii) Company has not received any notice of underpayment of
taxes or other deficiency which has not been paid and there are
outstanding no agreements or waivers extending the statutory period of
limitations applicable to any tax return or report relating primarily to
the Business or the Purchased Assets, or required to have been filed by
Company in any jurisdiction required to be listed in Schedule 4.1.(c) or
any political subdivision thereof.
4.6. Inventory. All inventory of the Business reflected on the
Recent Balance Sheet consists of a quality usable and saleable in the
ordinary course of business, had a commercial value at least equal to the
value reflected on such balance sheet and is valued in accordance with
generally accepted accounting principles at the lower of cost (on a FIFO
basis) or market. All inventory purchased since the date of such balance
sheet consists of a quality and quantity usable and saleable in the
ordinary course of business. Except as specifically described in Schedule
4.6, all Inventory of the Business is owned by Company and is located on
premises owned or leased by Company. All work-in-process contained in
Inventory constitutes items in process of production pursuant to contracts
or open orders taken in the ordinary course of business, from regular
customers of the Business with no recent history of credit problems with
respect to Company; neither Company nor any such customer is in material
breach of the terms of any obligation to the other, and no valid grounds
exist for any set-off of amounts billable to such customers on the
completion of orders to which work-in-process relates. All work-in-
process contained in Inventory is of a quality ordinarily produced in
accordance with the requirements of the orders to which such work-in-
process is identified, and will require no rework with respect to services
performed prior to Closing except to the extent labor attributable to such
rework has been reasonably taken into consideration in valuing the work-
in-process pursuant to Section 3.3.(a).
4.7. Absence of Certain Material Changes. Except as and to the
extent set forth in Schedule 4.7, since the date of the Recent Balance
Sheet there has not been:
4.7.(a) No Material Adverse Change. Any material adverse
change in the financial condition, assets, Liabilities, business,
prospects or operations of the Business;
4.7.(b) No Material Damage. Any loss, damage or destruction,
whether covered by insurance or not, having, or reasonably expected
to have, a material adverse effect upon the Business or the
Purchased Assets;
4.7.(c) No Nonordinary Commitments. Any commitment or
transaction by Company in connection with or affecting the Business
(including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business
consistent in amount and nature with past practice;
4.7.(d) No Nonordinary Disposition of Property. Any sale,
lease or other transfer or disposition of any properties or assets
of Company that are Purchased Assets (or would have been Purchased
Assets had no sale, lease, transfer or disposition occurred),
except for the usage or sale of inventory items in the ordinary
course of business consistent in amount and nature with past
practice;
4.7.(e) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by Company which affects the
Business or the Purchased Assets;
4.7.(f) No Liens. Any Lien made on any of the properties or
assets of Company that are Purchased Assets (or would become
Purchased Assets if not sold, leased, transferred or disposed of
prior to the Closing Date) other than mechanics' and materialmens'
liens arising in the ordinary course of business;
4.7.(g) No Amendment of Contracts. Any entering into,
amendment or termination by Company of any Contract in connection
with or affecting the Business, or any waiver of material rights
thereunder, other than in the ordinary course of business
consistent with past practice;
4.7.(h) Loans and Advances. Any loan or advance by the
Business (other than advances to employees in the ordinary course
of business for travel and entertainment in accordance with past
practice);
4.7.(i) Credit and Price Concessions. Any grant of credit or
price concessions to any customer of the Business or distributor of
its products on terms or in amounts more favorable than those which
have been extended to such customer or distributor in the past, any
other change in the terms of any credit or price concessions
heretofore extended, or any other change of Company's policies or
practices with respect to the granting of credit or price
concessions in connection with the Business;
4.7.(j) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to
the financial condition or results of operations of the Business;
4.7.(k) No Write-Downs or Ups. Any write-down or write-up of
the value of any inventory of the Business, except for write-downs
and write-ups in the ordinary course of business.
4.7.(l) No Accounting Change. Any change in accounting
methods or practices affecting any of the properties or assets of
Company that are Purchased Assets or the Business;
4.7.(m) No Unusual Events. Any other event or condition not
in the ordinary course of Company's operation of the Business; or
4.7.(n) Agreements. Any agreements entered into to do any of
the foregoing.
4.8. Absence of Undisclosed Liabilities. Except as and to the
extent specifically disclosed in the Recent Balance Sheet or in Schedule
4.8 and except for Liabilities not being assumed by Buyer under this
Agreement, the Business does not have any Liabilities, other than
commercial liabilities and obligations incurred since the date of the
Recent Balance Sheet in the ordinary course of business and consistent in
amount and nature with past practice and none of which has or will have a
material adverse effect on the financial condition or results of
operations of the Business by Buyer after the Closing. Except as and to
the extent described in the Recent Balance Sheet or in Schedule 4.8 and
except for Liabilities not being assumed by Buyer under this Agreement,
Company has no knowledge of any basis for the assertion against the
Company of any liability in connection with or affecting the Business or
the Purchased Assets, and there are no circumstances, conditions,
happenings, events or arrangements, contractual or otherwise, which may
give rise to such Liabilities, except commercial liabilities and
obligations incurred in the ordinary course of the Business and consistent
in amount and nature with past practice.
4.9. No Litigation. Except as set forth in Schedule 4.9, there is
no Litigation pending or threatened against Company or its officers or
directors (in such capacities) that in any way involves the Business, the
Purchased Assets or the Assumed Liabilities, nor does Company know, or
have grounds to know, of any basis for any Litigation. Schedule 4.9 also
identifies all Litigation that in any way involves the Business, the
Purchased Assets or the Assumed Liabilities to which Company or any of its
officers or directors have been parties since January 1, 1992, including
current status thereof. Except as set forth in Schedule 4.9, neither
Company, the Purchased Assets nor the Assumed Liabilities is subject to
any Order of any Government Entity.
4.10. Compliance With Laws and Orders.
4.10.(a) Compliance. Except as set forth in Schedule
4.10.(a), the Business (including each and all of its operations,
practices, properties and assets) is in compliance with all
applicable Laws and Orders, including, without limitation, those
applicable to discrimination in employment, occupational safety and
health, trade practices, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement
and labor relations, product advertising, storage, use and handling
of toxic and chemical substances and pollution, discharge,
handling, disposal and emission of wastes, materials and gases into
the environment, other than Laws which, if violated by Company
would not have a material adverse effect on the Business. Except
as set forth in Schedule 4.10.(a), Company has not received notice
of any violation or alleged violation of, and is subject to no
Liability for past or continuing violation of, any Laws or Orders
with respect to the operations of the Business. All reports,
registrations and returns required to be filed by Company with any
Government Entity have been filed, and were accurate and complete
when filed. Company has delivered to Buyer copies of all reports
of Company for the past five (5) years required under the federal
Occupational Safety and Health Act of 1970, as amended, and under
all other applicable health and safety laws and regulations, with
respect to the operations of the Business. The deficiencies, if
any, noted on such reports have been corrected.
4.10.(b) Licenses, Permits and Registrations. Company has
all licenses, permits, registrations, approvals, authorizations and
consents of all Government Entities and all certification
organizations required for the conduct of the Business and the
operation of its facilities. All such licenses, permits,
approvals, authorizations and consents are described in Schedule
4.10.(b), are in full force and effect and those related to the
conduct of the Business (other than those related solely to the
operation of Company's facilities) are assignable to Buyer in
accordance with the terms hereof. Except as set forth in Schedule
4.10.(b), the Business (including its operations, properties and
assets) is and has been in compliance with all such permits,
registrations, licenses, approvals, authorizations and consents.
4.11. Title to and Condition of Properties.
4.11.(a) Marketable Title. Company has good, valid and
marketable title to all the Purchased Assets, free and clear of all
mortgages, liens (statutory or otherwise), security interests,
claims, pledges, licenses, equities, options, conditional sales
contracts, assessments, levies, covenants, reservations,
restrictions, exceptions, limitations, charges or encumbrances of
any nature whatsoever (collectively, "Liens") except those
described in Schedule 4.11.(a)(i). None of the Purchased Assets
are subject to any restrictions with respect to the transferability
thereof and Company's title thereto will not be affected in any way
by the transactions contemplated by this Agreement other than to
the extent provided hereunder. Company has complete and
unrestricted power and right to sell, assign, convey and deliver
the Purchased Assets to Buyer as contemplated hereby. At Closing,
Buyer will receive good and marketable title to all the Purchased
Assets, free and clear of all Liens of any nature whatsoever except
those described in Schedule 4.11.(a)(ii).
4.11.(b) Condition. All tangible property and assets
constituting Purchased Assets hereunder (all of which is set forth
on and described in Schedule 4.11.(b)) are in good operating
condition and repair, free from any defects (except such minor
defects as do not interfere with the use thereof in the conduct of
the normal operations of Company), have been maintained consistent
with the standards generally followed in the industry and are
sufficient to carry on the business of Company as conducted during
the preceding 12 months.
4.12. Insurance. Set forth in Schedule 4.12 is a complete and
accurate list and description of all policies of fire, liability, product
liability, and other forms of property or liability insurance presently in
effect with respect to the Business or the Purchased Assets, true and
correct copies of which have heretofore been delivered to Buyer. Schedule
4.12 sets forth, without limitation, the carrier, the description of
coverage, the limits of coverage, retention or deductible amounts, amount
of annual premiums, date of expiration and the date through which premiums
have been paid with respect to each such policy, and any pending claims in
excess of $5,000. All such policies are valid, outstanding and
enforceable policies. No notice of cancellation or termination has been
received with respect to any such policy, and Company has no knowledge of
any act or omission of Company which could result in cancellation of any
such policy prior to its scheduled expiration date. Company has duly and
timely made all claims it has been entitled to make under each such policy
of insurance. There is no claim by Company pending under any such
policies as to which coverage has been questioned, denied or disputed by
the underwriters of such policies, and Company knows of no basis for
denial of any claim under any such policy. Company has not received any
written notice from or on behalf of any insurance carrier issuing any such
policy that insurance rates therefor will hereafter be substantially
increased (except to the extent that insurance rates may be increased for
all similarly situated risks) or that there will hereafter be a
cancellation or an increase in a deductible (or an increase in premiums in
order to maintain an existing deductible) or nonrenewal of any such
policy. Such policies are sufficient in all material respects for
compliance by Company with all requirements of law and with the
requirements of all material contracts to which Company is a party.
4.13. Contracts and Commitments.
4.13.(a) Personal Property Leases. Except as set forth in
Schedule 1.2.(b), Company has no leases of personal property used
or held for use in connection with the Business or the Purchased
Assets involving consideration or other expenditure in excess of
$5,000 or involving performance over a period of more than three
months.
4.13.(b) Purchase Commitments. Except as set forth in
Schedule 4.13.(b), Company has no purchase commitments for
inventory items or supplies in connection with the Business in
excess of three months normal usage, or which are at an excessive
price.
4.13.(c) Sales Commitments. Except as set forth in Schedule
4.13.(c), Company has no sales contracts or commitments to
customers or distributors in connection with or affecting the
Business or the Purchased Assets which aggregate in excess of
$5,000 to any one customer or distributor (or group of affiliated
customers or distributors). Company has no sales contracts or
commitments in connection with or affecting the Business or the
Purchased Assets except those made in the ordinary course of
business, at arm's length, and no such contracts or commitments are
for a sales price which would result in a loss to the Business.
4.13.(d) Contracts With Affiliates and Certain Others.
Except as set forth in Schedule 4.13.(d), Company has no agreement,
understanding, contract or commitment (written or oral) in
connection with or affecting the Business or the Purchased Assets
with any Affiliate or any other officer, employee, agent,
consultant, distributor, dealer or franchisee that is not
cancelable by Company on notice of not longer than 30 days without
liability, penalty or premium of any nature or kind whatsoever.
4.13.(e) Powers of Attorney. The Company has not given a
power of attorney, which is currently in effect, to any person,
firm or corporation for any purpose whatsoever in connection with
or affecting the Business or the Purchased Assets.
4.13.(f) Loan Agreements. Except as set forth in Schedule
4.13.(f), Company is not obligated under any loan agreement,
promissory note, letter of credit or other evidence of indebtedness
as a signatory, guarantor or otherwise, which obligation
constitutes or gives rise or could by its terms, through the giving
of notice or any other events short of judgment by a court, give
rise to a lien against any Purchased Asset.
4.13.(g) Guarantees. Except as disclosed on Schedule
4.13.(g), Company has not guaranteed the payment or performance of
any person, firm or corporation, agreed to indemnify any person or
act as a surety, or otherwise agreed to be contingently or
secondarily liable for the obligations of any person, in connection
with the Business or in any other way which affects the Business or
the Purchased Assets.
4.13.(h) Contracts Subject to Renegotiation. Company is not
a party to any contract with any governmental body which is subject
to renegotiation in connection with or affecting the Business or
the Purchased Assets.
4.13.(i) Burdensome or Restrictive Agreements. Except as set
forth on Schedule 4.13.(i), Company is not a party to nor is it
bound by any agreement, deed, lease or other instrument in
connection with or affecting the Business or the Purchased Assets
which is so burdensome as to materially affect or impair the
operation of the Business. Without limiting the generality of the
foregoing, Company is not a party to nor is it bound by any such
agreement requiring Company to assign any interest in any trade
secret or proprietary information constituting Purchased Assets
hereunder, or prohibiting or restricting Company in its operation
of the Business from competing in any business or geographical area
or soliciting customers or otherwise restricting it from carrying
on the Business anywhere in the world.
4.13.(j) Other Material Contracts. Company has no lease,
license, contract or commitment of any nature affecting the
Business and involving consideration or other expenditure in excess
$5,000, or involving performance over a period of more than three
months, or which is otherwise individually material to the
operations of the Business, except as explicitly described in
Schedule 4.13.(j) or in any other Schedule.
4.13.(k) No Default. Company is not in default under any
lease, license, contract or commitment in its operation of the
Business, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute
a default thereunder or cause the acceleration of any of Company's
obligations or result in the creation of any Lien on any Purchased
Asset. To Company's knowledge, no third party is in default under
any such lease, contract or commitment to which Company is a party,
nor has any event or omission occurred which, through the passage
of time or the giving of notice, or both, would constitute a
default thereunder, or give rise to an automatic termination, or
the right of discretionary termination thereof.
4.14. Employee Benefit Plans.
4.14.(a) Terminations, Proceedings, Penalties, etc. With
respect to each employee benefit plan (including, without
limitation, all pension, thrift, savings, profit sharing,
retirement, incentive bonus or other bonus, medical, dental, life,
accident insurance, benefit, employee welfare, disability, group
insurance, stock purchase, stock option, stock appreciation, stock
bonus, executive or deferred compensation, hospitalization and
other similar fringe or employee benefit plans, programs and
arrangements, and any employment or consulting contracts, "golden
parachutes," collective bargaining agreements, severance agreements
or plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee
manuals, and all written or binding oral statements of policies,
practices or understandings relating to employment, which are
provided to, for the benefit of, or relate to, any persons employed
by Company in its operation of the Business (hereinafter sometimes
referred to collectively as "Employee Plans/Agreements," and each
individually as an "Employee Plan/Agreement") that is subject to
the provisions of Title IV of ERISA and with respect to which the
Company or any of its assets may, directly or indirectly, be
subject to any Liability, contingent or otherwise, or the
imposition of any Lien (whether by reason of the complete or
partial termination of any such plan, the funded status of any such
plan, any "complete withdrawal" (as defined in Section 4203 of
ERISA) or "partial withdrawal" (as defined in Section 4205 of
ERISA) by any person from any such plan, or otherwise):
(i) no such plan has been terminated so as to
subject, directly or indirectly, any Purchased Assets to any
Liability or the imposition of any Lien under Title IV of
ERISA;
(ii) no proceeding has been initiated or threatened
by any person (including the Pension Benefit Guaranty
Corporation ("PBGC")) to terminate any such plan;
(iii) no condition or event currently exists or
currently is expected to occur that could subject, directly or
indirectly, any Purchased Assets to any Liability or the
imposition of any Lien under Title IV of ERISA, whether to the
PBGC or to any other person or otherwise on account of the
termination of any such plan;
(iv) if any such plan were to be terminated as of the
Closing, no Purchased Assets would be subject, directly or
indirectly, to any Liability or the imposition of any Lien
under Title IV of ERISA;
(v) no "reportable event" (as defined in Section
4043 of ERISA) has occurred with respect to any such plan;
(vi) no such plan which is subject to Section 302 of
ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code, respectively), whether or not waived;
and
(vii) no such plan is a multiemployer plan or a plan
described in Section 4064 of ERISA.
4.14.(b) Prohibited Transactions, etc. There have been no
"prohibited transactions" within the meaning of Section 406 or 407
of ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any
Employee Plan/Agreement, and no event or omission has occurred in
connection with which the Business or any of the Purchased Assets
or any Employee Plan/Agreement, directly or indirectly, could be
subject to any liability under ERISA, the Code or any other Law or
Order applicable to any Employee Plan/Agreement, or under any
agreement, instrument, statute, Law or Order pursuant to which
Company has agreed to indemnify or is required to indemnify any
person against liability incurred under any such Law or Order. The
consummation of the transactions contemplated by this Agreement,
will not result in any prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code for which an exemption is
not available.
4.14.(c) Controlled Group; Affiliated Service Group; Leased
Employees. Company is not and never has been a member of a
controlled group of corporations as defined in Section 414(b) of
the Code or in common control with any unincorporated trade or
business as determined under Section 414(c) of the Code. Company
is not and never has been a member of an "affiliated service group"
within the meaning of Section 414(m) of the Code. There are not
and never have been any leased employees within the meaning of
Section 414(n) of the Code who perform services for the Business,
and no individuals are expected to become leased employees with the
passage of time.
4.15. Trade Rights. Schedule 4.15 lists all Trade Rights that the
Company now has any interest in and which relate to or are otherwise
necessary to conduct the Business, specifying whether such Trade Rights
are owned, controlled, used or held (under license or otherwise) by
Company, and also indicating which of such Trade Rights are registered.
As to those matters shown in Schedule 4.15 as trademarks registered in the
United States and countries foreign thereto, Company represents that it is
the owner of all right, title and interest in such U.S. and foreign
trademark registrations. With respect to trademark applications indicated
as pending, Company has made available to Buyer all material information
of the Company and its trademark counsel relative to such matters. The
Company represents that it has undertaken in a prudent manner to obtain
registration of the Company's trademarks related to the Business relative
to the expected marketing of products included in, or contemplated by the
Company to be used in connection with, the Business. The trademarks shown
on Schedule 4.15 as being registered have been properly registered, all
pending registrations and applications for trademarks have been properly
made and filed and all annuity, maintenance, renewal and other fees
relating to registrations or applications are current. To the best of
Company's knowledge, there are no equitable defenses to enforcement of the
trademarks shown on Schedule 4.15 based on any act or omission of Company.
The Company owns no patents relative to the SpiderWire/R/ Product Line
products or processes of manufacturing the same, and has no applications
for patent pending with respect to such products or processes. The
Company owns no copyright registrations relative to the Business and has
no applications for copyright pending with respect thereto. The Company
represents that it is the owner of all copyright interests, rights, and
title in and to a stylized spider design as appearing in trademark
application Serial No. 74/493,477, filed on February 23, 1994. The
Company is the owner of all rights relating to trade secrets now used by
the Company in the design, manufacture, production, marketing,
distribution, exploitation, sale and related research and development by
Company of the SpiderWire/R/ Product Line ("Trade Secrets"). The Company
does not require any Trade Rights that it does not already own or have the
right to use, in order to conduct the Business as such is currently being
conducted. Company is not infringing and has not infringed any Trade
Rights of another in the operation of the Business, nor, to the best of
Company's knowledge, is any other person infringing the Trade Rights of
Company. The Company has not granted any license or made any assignment
of any Trade Rights listed on Schedule 4.15 or of any Trade Secrets, and
the Company does not pay any royalties or other consideration for the
right to use any Trade Rights of third parties. There is no Litigation
pending, or to the Company's knowledge, threatened to challenge the
Company's right, title or interest with respect to its continued use and
right to preclude others from using any Trade Rights of Company. The
consummation of the transactions contemplated by this Agreement will not
alter or impair any Trade Rights of Company.
4.16. Major Customers and Suppliers.
4.16.(a) Major Customers. Schedule 4.16.(a) contains a list
of the 20 largest customers, including distributors, of the
Business for each of the two (2) most recent fiscal years
(determined on the basis of the total dollar amount of net sales)
showing the total dollar amount of net sales to each such customer
during each such year. Company has no knowledge or information of
any facts indicating, nor any other reason to believe, that any of
the customers listed on Schedule 4.16.(a) will not continue to be
customers of the Business after the Closing at substantially the
same level of purchases as heretofore, that the fiscal 1995
forecast prepared by the Company for the Business is not reasonable
in all respects (based on the assumptions underlying such fiscal
1995 forecast, including, without limitation, the assumption that
Company would be operating the Business), or that the assumptions
underlying the fiscal 1995 forecast are not reasonable in all
respects.
4.16.(b) Major Suppliers. Schedule 4.16.(b) contains a list
of the 20 largest suppliers to the Business for each of the last
two fiscal years (determined on the basis of the total dollar
amount of purchases) showing the total dollar amount of purchases
from each such supplier during each such year. Company has no
knowledge or information of any facts indicating, nor any other
reason to believe, that any of the suppliers listed on Schedule
4.16.(b) will not continue to be suppliers to the Business after
the Closing and will not continue to supply the Business with
substantially the same quantity and quality of goods at competitive
prices.
4.16.(c) Dealers and Distributors. Schedule 4.16.(c)
contains a list by product line of all sales representatives,
dealers, distributors and franchisees of the Business, together
with representative copies of all sales representative, dealer,
distributor and franchise contracts and policy statements, and a
description of all substantial modifications or exceptions.
4.17. Product Warranty and Product Liability. Schedule 4.17
contains a true, correct and complete copy of Company's standard warranty
or warranties for sales of Products (as defined below) and, except as
stated therein, there are no warranties, commitments or obligations with
respect to the return, repair or replacement of Products. Schedule 4.17
sets forth the estimated aggregate annual cost to Company of performing
warranty obligations for customers of the Business for each of the three
(3) preceding fiscal years and the current fiscal year to the date of the
Recent Balance Sheet. Schedule 4.17 contains a description of all product
liability claims and similar Litigation relating to Products which are
presently pending or which, to Company's knowledge, are threatened, or
which have been asserted or commenced against Company within the last
three (3) years, in which a party thereto either requests injunctive
relief or alleges damages in excess of $5,000 (whether or not covered by
insurance). There are no defects in design, construction or manufacture
of Products which would adversely affect performance or create an unusual
risk of injury to persons or property. None of the Products has been the
subject of any replacement, field fix, retrofit, modification or recall
campaign and, to Company's knowledge, no facts or conditions exist which
could reasonably be expected to result in such a recall campaign. The
Products have been designed and manufactured so as to meet and comply with
all governmental standards and specifications currently in effect, and
have received all governmental approvals necessary to allow their sale and
use. As used in this Section 4.17, the term "Products" means any and all
products currently or at any time previously manufactured, distributed or
sold by Company, or by any predecessor of Company under any brand name or
mark under which products are or have been manufactured, distributed or
sold by Company, in or through the Business.
4.18. Affiliates' Relationships to Business.
4.18.(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements concerning the Business between
Company and any Affiliate or between the Business and other
business units of the Company are described on Schedule 4.18.(a).
4.18.(b) No Adverse Interests. No Affiliate has any direct
or indirect interest in (i) any entity which does business with
Company in connection with the operation of, or is competitive
with, the Business, or (ii) any property, asset or right which is
used by Company in the conduct of the Business.
4.19. Assets Necessary to Business. The Purchased Assets include
all property and assets (except for the Excluded Assets), tangible and
intangible, and all leases, licenses and other agreements, which are
necessary to permit Buyer to carry on, or currently used or held for use
in, the Business as presently conducted.
4.20. No Brokers or Finders. Neither Company nor any of its
directors, officers, employees, shareholders or agents have retained,
employed or used any broker or finder in connection with the transaction
provided for herein or in connection with the negotiation thereof.
4.21. Disclosure. No representation or warranty by Company in
this Agreement, nor the compliance certificate referred to in Section
11.1.(b) or any Schedule furnished or to be furnished by or on behalf of
Company pursuant to this Agreement, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not misleading. All
statements and information contained in such compliance certificate or the
Disclosure Schedule delivered by or on behalf of Company shall be deemed
representations and warranties by Company.
4.22. Dornsife & Associates' Obligations. To the best of Seller's
knowledge, after due inquiry of Dornsife & Associates, Schedule 3.2.(b)
contains a true, correct and complete listing of all outstanding
obligations of Dornsife & Associates related to marketing and promotion of
SpiderWire/R/ and SpiderCast/R/ products as of March 31, 1995.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to
Company, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date, shall be
unaffected by any investigation heretofore or hereafter made by Company or
any notice to Company, and shall survive the Closing of the transactions
provided for herein.
5.1. Corporate.
5.1.(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Wisconsin.
5.1.(b) Corporate Power. Buyer has all requisite corporate
power to enter into this Agreement and the other documents and
instruments to be executed and delivered by Buyer and to carry out
the transactions contemplated hereby and thereby.
5.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of
Buyer. No other corporate act or proceeding on the part of Buyer or its
shareholders is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by Buyer pursuant
hereto or the consummation of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the
other documents and instruments to be executed and delivered by Buyer
pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except insofar as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally, and by general equitable principles.
5.3. No Brokers or Finders. Neither Buyer nor any of its
directors, officers, employees or agents have retained, employed or used
any broker or finder in connection with the transaction provided for
herein or in connection with the negotiation thereof.
5.4. Disclosure. No representation or warranty by Buyer in this
Agreement, nor the compliance certificate referred to in Section 11.2.(c)
or any schedule furnished or to be furnished by or on behalf of Buyer
pursuant to this Agreement, contains or shall contain any untrue statement
of material fact or omits or shall omit a material fact necessary to make
the statements contained therein not misleading.
6. RELATED MATTERS
6.1. Noncompetition; Use and Disclosure. Subject to the Closing,
and as an inducement to Buyer to execute this Agreement and complete the
transactions contemplated hereby, and in order to preserve the goodwill
associated with the Business, Company hereby covenants and agrees as
follows:
6.1.(a) Covenant Not to Compete. For a period of five (5)
years from the Closing Date, Company will not, directly or
indirectly:
(i) engage in, continue in or carry on any business
which competes with the Business or is substantially similar
thereto, including owning or controlling any financial
interest in any corporation, partnership, firm or other form
of business organization which is so engaged;
(ii) consult with, advise or assist in any way,
whether or not for consideration, any corporation,
partnership, firm or other business organization which is now
or becomes a competitor of Buyer in any aspect with respect to
the Business or Purchased Assets which Buyer is acquiring
hereunder, including, but not limited to, advertising or
otherwise endorsing the products of any such competitor;
soliciting customers or otherwise serving as an intermediary
for any such competitor; loaning money or rendering any other
form of financial assistance to or engaging in any form of
business transaction on other than an arms' length basis with
any such competitor; or
(iii) engage in any practice the purpose of which is
to evade the provisions of this covenant not to compete or to
commit any act which adversely affects the Buyer, Business,
Purchased Assets or Assumed Liabilities;
provided, however, that the foregoing shall not prohibit the
ownership of securities of corporations which are listed on a
national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed 5% of
the outstanding shares of any such corporation and shall not
prohibit the Company from manufacturing, marketing or selling
recreational products made with Spectra/R/ fiber that do not
compete with the current products of Buyer. The parties agree
that, since the scope of the Business is or will be carried at
throughout the world, the geographic scope of this covenant not to
compete shall extend throughout the world. The parties agree that
Buyer may sell, assign or otherwise transfer this covenant not to
compete, in whole or in part, to any person, corporation, firm or
entity that purchases all or part of the Business or the Purchased
Assets. In the event a court of competent jurisdiction determines
that the provisions of this covenant not to compete are excessively
broad as to duration, geographical scope or activity, it is
expressly agreed that this covenant not to compete shall be
construed so that the remaining provisions shall not be affected,
but shall remain in full force and effect, and any such over broad
provisions shall be deemed, without further action on the part of
any person, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in such
jurisdiction.
6.1.(b) Covenant on Use and Disclosure. Company shall not at
any time subsequent to the Closing, except as explicitly requested
by Buyer, (i) use for any purpose, (ii) disclose to any person, or
(iii) keep or make copies of documents, tapes, discs or programs
containing, any proprietary information concerning the Business,
the Purchased Assets or the Assumed Liabilities. For purposes
hereof, "proprietary information" shall mean and include, without
limitation, all Trade Rights which are Purchased Assets, all
customer lists and customer information of the Business, and all
other information however embodied concerning the processes,
apparatus, equipment, packaging, products, marketing, research,
development and distribution methods of the Business.
6.1.(c) Equitable Relief for Violations. Company agrees that
the provisions and restrictions contained in this Section 6.1. are
necessary to protect the legitimate continuing interests of Buyer
in acquiring the Business through the purchase of the Purchased
Assets and the assumption of the Assumed Liabilities, and that any
violation or breach of these provisions will result in irreparable
injury to Buyer for which a remedy at law would be inadequate and
that, in addition to any relief at law which may be available to
Buyer for such violation or breach and regardless of any other
provision contained in this Agreement, Buyer shall be entitled to
injunctive and other equitable relief as a court may grant after
considering the intent of this Section 6.1.
6.2. HSR Act Filings. To the extent such filings have not been
completed prior to the execution of this Agreement, each of Company and
Buyer shall, in cooperation with the other, file any reports or
notifications that may be required to be filed by it under the HSR Act,
with the Federal Trade Commission and the Antitrust Division of the
Department of Justice, and shall furnish to the other all such information
in its possession as may be necessary for the completion of the reports or
notifications to be filed by the other. The parties shall request early
termination of the waiting period under the HSR Act and use their best
efforts to obtain approval of the transactions contemplated hereby under
the HSR Act. Prior to making any communication, written or oral, with the
Federal Trade Commission, the Antitrust Division of the Department of
Justice or any other governmental agency or authority or members of their
respective staffs with respect to this Agreement or the transactions
contemplated hereby, a party shall consult with the other party hereto.
6.3. Termination of License Agreement and Distribution Agreement.
Effective as of the Closing, all provisions of that certain Trademark
License Agreement, dated as of May 10, 1994, as amended, by and between
Johnson Fishing, Inc., a wholly owned subsidiary of Buyer, and Company
(the "License Agreement") regarding the SpiderWire/R/, SpiderCast/R/,
SpiderLine/R/ and similar trademarks, and that certain oral Distribution
Agreement between Buyer and Company regarding the distribution of fishing
line made from Spectra/R/ fiber outside United States, shall automatically
terminate without any further deed or action by any party and all
obligations and commitments of each party under such agreements shall be
deemed to be fully satisfied (including, without limitation, any payment
or repayment of royalties, advances or the like) and all advances against
royalties paid to Company under the License Agreement shall be deemed to
be fully earned.
6.4. Product Liability Matters. Company, at its expense, shall
maintain each of its occurrence-type policy or policies of insurance
insuring against claims for personal injury and property damage arising
out of or resulting from any products manufactured in the Business by
Company prior to the Closing or during the eight (8) weeks following the
Closing. The insurance coverage set forth in this Section shall be
maintained by Company in an amount of not less than $1,000,000 for a
period of three (3) years following the Closing, with a deductible not
exceeding $50,000, and Company shall notify Buyer at least ten (10) days
prior to the effective date of any termination or cancellation of such
insurance. Following the Closing, Buyer shall continue to utilize
Company's product serial number system presently in effect or a similar
system which will permit the manufacturer of the products of the Business
to be determined.
6.5. Use of Name. Following the Closing, neither Company nor any
Affiliate shall, without the prior written consent of Buyer, make any use
of the name "SpiderWire" or any other names confusingly similar thereto.
6.6. Sales Tax Matters. Company has applied for and will continue
to use its best efforts to obtain a sales tax clearance certificate from
the California State Board of Equalization pursuant to Section 68.11 et.
seq. of the California Revenue and Taxation Code at or prior to the
Closing Date. In the event such sales tax clearance certificate shall not
have been obtained at or prior to the Closing Date, Company agrees to use
its best efforts to obtain the sales tax clearance certificate as soon as
possible after the Closing Date.
6.7. Access to Information and Records.
6.7.(a) Prior to Closing Date. During the period prior to
the Closing Date, Company shall give Buyer, its counsel,
accountants and other representatives (i) access during normal
business hours to all of the properties, books, records, contracts
and documents of Company relating to the Business or the Purchased
Assets or Assumed Liabilities for the purpose of such inspection,
investigation and testing as Buyer deems appropriate (and Company
shall furnish or cause to be furnished to Buyer and its
representatives all information with respect to the Business Buyer
may request); (ii) access to employees, agents and representatives
of the Business for the purpose of such meetings and communications
as Buyer reasonably desires; and (iii) with the prior consent of
Company in each instance (which shall not be unreasonably
withheld), access to vendors, customers, manufacturers of its
machinery and equipment, and others having business dealings with
the Business.
6.7.(b) After Closing Date. After the Closing Date, each
party will afford the other party, its counsel, accountants and
other representatives, during normal business hours, reasonable
access to the books, records and other data in such party's
possession relating directly or indirectly to the properties,
liabilities or operations of the Business, with respect to periods
prior to the Closing Date, and the right to make copies and
extracts therefrom, to the extent that such access may be
reasonably required by the requesting party for any proper business
purpose. Each party agrees for a period extending six (6) years
after the Closing Date not to destroy or otherwise dispose of any
such records without first offering in writing to surrender such
records to the other party, which party shall have ten (10) days
after receipt of such offer to agree in writing to take possession
thereof.
6.8. Service Agreement. On the Closing Date, Company and Buyer
shall execute and deliver a Service Agreement (the "Service Agreement"),
substantially in the form of Exhibit A hereto.
6.9. Supply from AlliedSignal. In the event AlliedSignal Inc. is
unable, for whatever reason, to supply Buyer after the Closing with
sufficient quantities of finished goods and/or raw materials used in
making the products of the Business (i.e. encapsulated microfilament and
other Spectra/R/ fiber based materials and fishing line) under the
Manufacturing/Supply Agreement, Company agrees to divert/supply such
shortfall portion of Company's supply of such goods and/or materials to
Buyer for Buyer's use in conducting the Business. Any such
diversion/supply by Company to Buyer shall be on terms substantially
similar to those between AlliedSignal Inc. and Buyer.
6.10. Supply of Raw Materials of the Business. Company agrees to
sell to Buyer, at the lower of cost (as specified as "standard cost" in
Schedule 6.10) or fair market value, such raw materials of the Business on
hand as of the Closing Date as Buyer may order from time to time from
Company. Company's obligation under this Section 6.10 shall continue for
a period of 12 months after the Closing or until the raw materials of the
Business on hand as of the Closing Date have been purchased by Buyer under
this Section 6.10, whichever occurs first.
7. FURTHER COVENANTS OF COMPANY
Company covenants and agrees as follows:
7.1. Conduct of Business Pending the Closing. From the date
hereof until the Closing Date, except as otherwise approved in writing by
the Buyer or as contemplated in this Agreement:
7.1.(a) No Changes. Company will carry on the Business
diligently and in the same manner as heretofore conducted and will
not make or institute any changes in its methods of purchase, sale,
management, accounting or operation.
7.1.(b) Maintain Organization. Company will take such action
as may be necessary to maintain, preserve, renew and keep in favor
and effect the existence, rights and franchises of the Business and
will use its best efforts to preserve the Business intact and to
preserve for Buyer its present relationships with suppliers and
customers and others having business relationships with the
Business.
7.1.(c) No Breach. Company will not do or omit any act, or
permit any omission to act, which may cause a breach of any
contract, commitment or obligation material to the Business, or any
breach of any representation, warranty, covenant or agreement made
by Company herein, or which would have required disclosure on
Schedule 4.7 had it occurred after the date of the Recent Balance
Sheet and prior to the date of this Agreement.
7.1.(d) No Material Contracts. No contract or commitment
will be entered into, and no purchase of raw materials, equipment
or supplies and no sale of assets (real, personal, or mixed,
tangible or intangible) or services will be made, by or on behalf
of Company in connection with its operation of the Business, except
contracts, commitments, purchases or sales which are in the
ordinary course of business and consistent in amount and nature
with past practice, are not material to the Business (individually
or in the aggregate) and would not have been required to be
disclosed in the Disclosure Schedule had they been in existence on
the date of this Agreement.
7.1.(e) Maintenance of Insurance. Company shall maintain all
of the insurance set forth in Schedule 4.12 and shall procure such
additional insurance with respect to the Business or the Purchased
Assets as shall be reasonably requested by Buyer.
7.1.(f) Maintenance of Property. Company shall use, operate,
maintain and repair all property constituting Purchased Assets
hereunder in a normal business manner.
7.1.(g) Interim Financials. Company will provide Buyer with
interim monthly financial statements of the Company and the
Business and other management reports as soon as they become
available.
7.1.(h) No Negotiations. Company will not directly or
indirectly (through any director, officer, representative, agent or
otherwise) solicit or furnish any information to any prospective
buyer, commence, or conduct presently ongoing, negotiations with
any other party or negotiate or enter into any agreement with any
other party concerning the sale of the Business or the Purchased
Assets or any part thereof, the sale of Company's capital stock
which would constitute a change in control or otherwise give rise
to Buyer's right of first refusal under Section 7.2 of the License
Agreement, or any merger or consolidation of Company with another
party (any of the foregoing, an "acquisition proposal"). Company
will immediately notify Buyer in writing if any inquiries or
proposals are received by, any information is requested from, or
any negotiations or discussions are sought to be initiated or
continued with Company with respect to an acquisition proposal.
7.2. Consents. Company will use its best efforts prior to the
Closing Date to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
7.3. Other Action. Company shall use its best efforts to cause
the fulfillment at the earliest practicable date of all of the conditions
to the Company's obligations to consummate the transactions contemplated
in this Agreement.
7.4. Continuing Disclosure. Company shall have a continuing
obligation to promptly notify Buyer in writing with respect to any matter
hereafter arising or discovered which, if existing or known at the date of
this Agreement, would have been required to be set forth or described in
the Disclosure Schedule (as hereinafter defined), but no such disclosure
shall cure any breach of any representation or warranty which is
inaccurate when made. The delivery of any information pursuant to this
Section 7.4 shall not constitute a waiver by Buyer of any of the
provisions of Section 8.1 hereof, and any and all adverse changes
contained in any such notices shall be considered in the determination of
whether the conditions set forth in Article 8 are satisfied.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing
Date shall be subject to the satisfaction (or waiver by Buyer) prior to or
on the Closing Date of each of the following conditions:
8.1. Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Company in this
Agreement, and the statements contained in the Disclosure Schedule or in
any certificate or exhibit delivered by Company pursuant to this
Agreement, shall be true and correct when made and shall be true and
correct at and as of the Closing Date as though such representations and
warranties were made or given on and as of the Closing Date, except for
any changes permitted by the terms of this Agreement or consented to in
writing by Buyer.
8.2. Compliance With Agreement. Company shall have performed and
complied in all material respects with all of its agreements and
obligations under this Agreement which are to be performed or complied
with by Company prior to or on the Closing Date, including the delivery of
the closing documents specified in Section 11.1.
8.3. Absence of Litigation. No Litigation shall have been
commenced or threatened, and no investigation by any Government Entity
shall have been commenced, against Buyer, Company or any of the
affiliates, officers or directors of any of them, seeking to restrain,
prevent or change the transactions contemplated hereby, or questioning the
validity or legality of any such transactions, or seeking damages in
connection with, or imposing any condition on, any such transactions.
8.4. Consents and Approvals. All approvals, consents and waivers
that are required to effect the transactions contemplated hereby shall
have been received, and executed counterparts thereof shall have been
delivered to Buyer not less than two business days prior to the Closing
Date. Notwithstanding the foregoing, receipt of the consent of any third
party to the assignment of an Assumed Contract which is not (and is not
required to be) disclosed in the Disclosure Schedule shall not be a
condition to Buyer's obligation to close hereunder, provided that the
aggregate of all such Contracts does not represent, in the reasonable
opinion of Buyer, a material portion of the sales or expenditures of the
Business. After the Closing Date, Company will continue to use its best
effects to obtain any such consents or approvals, and Company shall not
hereby be relieved of any liability hereunder for failure to perform any
of its covenants or for the inaccuracy of any representation or warranty.
8.5. Due Diligence Investigation; No Material Adverse Change.
Buyer's due diligence investigation of Company and the Business Financial
Statements shall not have disclosed any material misstatement or omission
with respect to the Business Financial Statements or any condition, event
or occurrence which, in the reasonable opinion of Buyer, materially
adversely affects, or is reasonably likely to materially adversely affect,
the financial condition, assets, liabilities, business, prospects or
operations of Company relating to the Business. There shall have been no
material adverse change, in the reasonable opinion of Buyer, in the
financial condition, assets, liabilities, business, prospects or operation
of Company relating to the Business since the Recent Balance Sheet.
8.6. Discussions with Customers and Suppliers. Buyer's
discussions with the customers of the Business set forth in Schedule
4.16.(a) and the suppliers of the Business set forth in Schedule 4.16.(b)
shall not have disclosed any condition, event or occurrence that would
have an adverse effect on the Purchased Assets or the Business, as
determined by Buyer in its sole reasonable judgment. All such discussions
by Buyer shall be conducted with a representative of the Company.
8.7. Manufacturing/Supply Agreement. Buyer and/or Company shall
have entered into a satisfactory (as determined by Buyer in its sole
judgment) manufacturing/supply agreement with AlliedSignal Inc. for
encapsulated microfilament and Spectra/R/ fiber based raw materials and
fishing line (the "Manufacturing/Supply Agreement").
8.8. Braider's Agreement. Company shall have entered into a
satisfactory (as determined by Buyer in its sole judgment) arrangement
with Buyer regarding the 1995 pricing schedule of Innovative Textiles,
Inc.
8.9. HSR Act Waiting Period. All applicable waiting periods
relating to the HSR Act shall have expired.
9. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of Company to be performed on the Closing
Date shall be subject to the satisfaction (or waiver by Company) prior to
or on the Closing Date of the following conditions:
9.1. Representations and Warranties True on the Closing Date.
Each of the representations and warranties made by Buyer in this Agreement
shall be true and correct when made and shall be true and correct at and
as of the Closing Date as though such representations and warranties were
made or given on and as of the Closing Date.
9.2. Compliance With Agreement. Buyer shall have performed and
complied in all material respects with all of its agreements and
obligations under this Agreement which are to be performed or complied
with by Buyer prior to or on the Closing Date, including the delivery of
the closing documents specified in Section 11.2.
9.3. Absence of Litigation. No Litigation shall have been
commenced or threatened, and no investigation by any Government Entity
shall have been commenced, against Buyer, Company or any of the
affiliates, officers or directors of any of them, seeking to restrain,
prevent or change the transactions contemplated hereby, or questioning the
validity or legality of any such transactions, or seeking damages in
connection with, or imposing any condition on, any such transactions.
9.4. HSR Act Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
10. INDEMNIFICATION
10.1. By Company. Subject to the terms and conditions of this
Article 10, Company hereby agrees to indemnify, defend and hold harmless
Buyer, and its directors, officers, employees, agents and controlled and
controlling persons (hereinafter "Buyer's affiliates"), from and against
all Claims (as hereinafter defined) asserted against, resulting to,
imposed upon, or incurred by Buyer, Buyer's affiliates, the Business or
the Purchased Assets, directly or indirectly, by reason of, arising out of
or resulting from (a) the inaccuracy or breach of any representation or
warranty of Company contained in or made pursuant to this Agreement
(regardless of whether such breach is deemed "material"); (b) the breach
of any covenant of Company contained in this Agreement (regardless of
whether such breach is deemed "material"); or (c) any Claim of or against
Buyer, the Purchased Assets or the Business not specifically assumed by
Buyer pursuant hereto. As used in this Article 10, the term "Claim" shall
include (i) all Liabilities; (ii) all losses, damages (including, without
limitation, consequential damages, and diminution in value of the Business
related to claims arising out of a breach by Company of Sections 4.4 or
4.15 only), judgments, awards, settlements, costs and expenses (including,
without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and
expenses); and (iii) all demands, claims, actions, costs of investigation,
causes of action, proceedings and assessments, whether or not ultimately
determined to be valid.
10.2. By Buyer. Subject to the terms and conditions of this
Article 10, Buyer hereby agrees to indemnify, defend and hold harmless
Company, its directors, officers, employees, agents and controlling
persons, from and against all Claims asserted against, resulting to,
imposed upon or incurred by any such person, directly or indirectly, by
reason of or resulting from (a) the inaccuracy or breach of any
representation or warranty of Buyer contained in or made pursuant to this
Agreement (regardless of whether such breach is deemed "material"); (b)
the breach of any covenant of Buyer contained in this Agreement
(regardless of whether such breach is deemed "material"); or (c) all
Claims of or against Company specifically assumed by Buyer pursuant
hereto.
10.3. Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 10 with
respect to Claims relating to third parties shall be subject to the
following terms and conditions:
10.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will
give the party from whom indemnification is sought (the
"Indemnifying Party") prompt written notice of any such Claim, and
the Indemnifying Party will undertake the defense thereof by
representatives chosen by it upon written notice to the Indemnified
Party. Failure of the Indemnified Party to give such notice shall
not affect the Indemnifying Party's duty or obligations under this
Article 10, except to the extent the Indemnifying Party is
prejudiced thereby. If the Indemnifying Party undertakes the
defense of any such Claim, then the Indemnifying Party shall be
deemed to accept that it has an indemnification obligation to the
Indemnified Party under this Article 10 with respect to such Claim.
So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle
such Claim. The Indemnified Party shall make available to the
Indemnifying Party or its representatives all records and other
materials required by them and in the possession or under the
control of the Indemnified Party, for the use of the Indemnifying
Party and its representatives in defending any such Claim, and
shall in other respects give reasonable cooperation in such
defense.
10.3.(b) Failure to Defend. If the Indemnifying Party,
within 10 days after notice of any such Claim (or sooner if the
nature of the Claim so requires), fails to defend such Claim
actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise
or settlement of such Claim, or consent to the entry of a judgment
with respect to such Claim, on behalf of and for the account and
risk of the Indemnifying Party, and the Indemnifying Party shall
thereafter have no right to challenge the Indemnified Party's
defense, compromise, settlement or consent to judgment.
10.3.(c) Indemnified Party's Rights. Anything in this
Section 10.3 to the contrary notwithstanding, (i) if there is a
reasonable probability that a Claim may materially and adversely
affect the Indemnified Party other than as a result of money
damages or other money payments, the Indemnified Party shall have
the right to defend, compromise or settle such Claim, and (ii) the
Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the
entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all Liability in respect of
such Claim.
10.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 10. The right to
pursue Claims under any one or more provisions of this Article 10 shall
not be exclusive of any other rights or remedies at law or equity which
the Indemnified Party may have against the Indemnifying Party under this
Article 10.
10.4.(a) Set-Off. At the option of the Indemnified Party,
such Claim may be satisfied (or partially satisfied) by the
Indemnified Party setting off any Claim amount against other
amounts owed to the Indemnifying Party by the Indemnified Party.
Prior to any such set-off, the Indemnified Party shall provide the
Indemnifying Party with at least 10 days advance notice of such
intention to exercise such set-off rights. Such notice shall
include a description of the Claim, including the amount thereof,
and the method by which the Indemnified Party intends to exercise
such set-off rights. If, during such 10-day period, the
Indemnifying Party objects to the exercise of such set-off rights,
the Indemnifying Party shall notify the Indemnified Party of such
objection in writing, and shall describe the basis for such
objection and the amount of the Claim as to which the Indemnifying
Party does not believe should be subject to such set-off rights.
Upon receipt of such notice of objection, both the Indemnified
Party and the Indemnifying Party shall use all reasonable efforts
to cooperate and arrive at a mutually acceptable resolution of such
dispute within the next 30 days. If a mutually acceptable
resolution cannot be reached between the Indemnified Party and the
Indemnifying Party within such 30-day period, either party may
submit the dispute for resolution by arbitration as provided for in
Article 13. During the pendency of any dispute under this Section
10.4.(a), the Claim amounts owed to the Indemnifying Party by the
Indemnified Party which are the subject of the disputed set-off
shall be withheld from payment until the dispute is finally
resolved. If it is finally determined that all or a portion of
such withheld amount was not owed to the Indemnified Party, the
Indemnified Party shall promptly pay the Indemnifying Party such
amount not owed, together with the interest from the date that
payment should have been made until the date of actual payment, at
an annual rate equal to the prime interest rate then in effect as
set forth in The Wall Street Journal.
10.4.(b) Payment of Third Party Claim. Upon judgment,
determination, settlement or compromise of any third party Claim,
the Indemnifying Party shall pay promptly on behalf of the
Indemnified Party, and/or to the Indemnified Party in reimbursement
of any amount theretofore required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and
all other Claims of the Indemnified Party with respect thereto,
unless in the case of a judgment an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an
adverse judgment, then the Indemnifying Party shall post and pay
the cost of the security or bond to stay execution of the judgment
pending appeal. Upon the payment in full by the Indemnifying Party
of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement,
against the third party who made such third party Claim.
11. CLOSING
The closing of this transaction ("the Closing") shall take place at
the offices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, at 10:00 A.M. on a date to be specified by the parties
hereto, which shall be as soon as practicable following fulfillment or
waiver of the conditions specified in Articles 8 and 9. Such date is
referred to in this Agreement as the "Closing Date". The Closing shall be
deemed to be effective for all business and accounting purposes as of the
close of business on March 31, 1995.
11.1. Documents to be Delivered by Company. On the Closing Date,
Company shall deliver, or caused to be delivered, to Buyer the following
documents, in each case duly executed or otherwise in proper form:
11.1.(a) Bills of Sale. Bills of sale and such other
instruments of assignment, transfer, conveyance and endorsement as
will be sufficient in the opinion of Buyer and its counsel to
transfer, assign, convey and deliver to Buyer the Purchased Assets
free and clear of all Liens, except those described in Schedule
4.11.(a)(ii).
11.1.(b) Compliance Certificate. A certificate signed by
Neale A. Perkins, the Chairman of the Board and Chief Executive
Officer of Company, that each of the representations and warranties
made by Company in this Agreement is true and correct on and as of
the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of
the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Buyer), and that
Company has performed and complied in all material respects with
all of Company's obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date. Such
certificate shall constitute a representation and warranty of
Company as to the matters set forth therein but shall not give rise
to any personal liability of the signatory thereto.
11.1.(c) Opinions of Counsel. A written opinion of Inglis,
Ledbetter & Gower, counsel to Company, dated as of the Closing
Date, addressed to Buyer, in a form reasonably satisfactory to
Buyer. A written opinion of Christie, Parker & Hale, intellectual
property counsel to Company, dated as of the Closing Date,
addressed to Buyer, in a form reasonably satisfactory to Buyer.
11.1.(d) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Company authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
11.1.(e) Articles; By-laws. A copy of the By-laws of Company
certified by the Secretary of Company, and a copy of the Articles
of Incorporation of Company certified by the Secretary of State of
the state of incorporation of Company.
11.1.(f) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and
delivered to Buyer pursuant to the terms hereof.
11.1.(g) Service Agreement. The Service Agreement referred
to in Section 6.8, duly executed by Company.
11.1.(h) Other Documents. All other documents, instruments
or writings required to be delivered to Buyer at or prior to the
Closing Date pursuant to this Agreement and such other certificates
of authority and documents as Buyer may reasonably request.
11.2. Documents to be Delivered by Buyer. On the Closing Date,
Buyer shall deliver to Company the following documents, in each case duly
executed or otherwise in proper form:
11.2.(a) Fixed Purchase Price. To Company, a certified or
bank cashier's check (or wire transfer) as required by Section
3.2.(b).
11.2.(b) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of Company and its counsel to evidence the assumption by
Buyer of the Assumed Liabilities.
11.2.(c) Compliance Certificate. A certificate signed by
Carl G. Schmidt, the Vice President, Chief Financial Officer,
Treasurer and Secretary of Buyer that the representations and
warranties made by Buyer in this Agreement are true and correct on
and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of
the Closing Date (except for any changes permitted by the terms of
this Agreement or consented to in writing by Company), and that
Buyer has performed and complied in all material respects with all
of Buyer's obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date. Such
certificate shall constitute a representation and warranty of Buyer
as to the matters set forth therein but shall not give rise to any
personal liability of the signatory thereto.
11.2.(d) Opinion of Counsel. A written opinion of Foley &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed
to Company, in substantially the form of Exhibit B hereto.
11.2.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
11.2.(f) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and
delivered to Company by Buyer pursuant to the terms hereof.
11.2.(g) Service Agreement. The Service Agreement referred
to in Section 6.8, duly executed by Buyer.
11.2.(h) Other Documents. All other documents, instruments
or writings required to be delivered to Company at or prior to the
Closing Date pursuant to this Agreement and such other certificates
of authority and documents as Company may reasonably request.
12. TERMINATION
12.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party (other than as set forth
in Section 12.3) at any time prior to the Closing Date:
12.1.(a) by mutual written agreement of Buyer and Company, or
12.1.(b) by either Buyer or Company if the Closing Date shall
not have occurred on or before April 17, 1995; provided the
terminating party has not, through breach of a representation,
warranty or covenant, prevented the Closing from occurring on or
before such date.
12.2. Termination for Breach.
12.2.(a) Termination by Buyer. If (i) there has been a
violation or breach by Company of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Buyer; (ii) there has been a failure
of satisfaction of a condition to the obligations of Buyer which
has not been so waived; or (iii) Company shall have attempted to
terminate this Agreement under this Article 12 or otherwise without
grounds to do so, then Buyer may, by written notice to Company at
any time prior to the Closing Date, provided that such violation,
breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section
12.2.(c) hereof. Notwithstanding anything contained in clause (ii)
of this Section 12.2.(a) to the contrary, Buyer shall not have a
right of termination by reason of the non-satisfaction of the
condition to Buyer's obligation to close set forth in Section 8.6
(and Buyer shall be deemed to have waived such condition) if Buyer
does not provide written notice to Company of its intent to
terminate this Agreement as a result of the non-satisfaction of
such condition before 5:00 p.m. (central time) on April 14, 1995.
12.2.(b) Termination by Company. If (i) there has been a
violation or breach by Buyer of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Company; (ii) there has been a
failure of satisfaction of a condition to the obligations of
Company which has not been so waived; or (iii) Buyer shall have
attempted to terminate this Agreement under this Article 12 or
otherwise without grounds to do so, then Company may, by written
notice to Buyer at any time prior to the Closing Date, provided
that such violation, breach, failure or wrongful termination
attempt is continuing, terminate this Agreement with the effect set
forth in Section 12.2.(c) hereof.
12.2.(c) Effect of Termination. Termination of this
Agreement pursuant to this Section 12.2 shall not in any way
terminate, limit or restrict the rights and remedies of any party
hereto against any other party which has violated, breached or
failed to satisfy any of the representations, warranties,
covenants, agreements, conditions or other provisions of this
Agreement prior to termination hereof. In addition to the right of
any party under common law to redress for any such breach or
violation, each party whose breach or violation has occurred prior
to termination shall jointly and severally indemnify each other
party for whose benefit such representation, warranty, covenant,
agreement or other provision was made ("indemnified party") from
and against all Claims asserted against, resulting to, imposed
upon, or incurred by the indemnified party, directly or indirectly,
by reason of, arising out of or resulting from such breach or
violation. Subject to the foregoing, the parties' obligations
under Section 14.8 of this Agreement shall survive termination.
12.3. Repayment. In the event this Agreement is terminated,
regardless of the reason therefor, Company shall return to Buyer, in cash
and within 90 days of the termination of this Agreement, all amounts paid
by Buyer pursuant to Sections 3.2(b)(i) and/or (ii). Any such repayment
to Buyer pursuant to this Section 12.3 shall include interest, from the
date the original payment was made by Buyer to Company under Section
3.2(b)(i) and/or (ii), on the unpaid balance at the rate of ten percent
(10%) per annum, which interest will be paid on a monthly basis during the
90 day repayment period. Buyer, at its option, may satisfy (or partially
satisfy) Company's repayment obligation by setting off any amount owed to
Buyer against other amounts owed to Company by Buyer.
13. RESOLUTION OF DISPUTES
13.1. Arbitration. Except for disputes covered by Section
3.5.(d), any dispute, controversy or claim arising out of or relating to
this Agreement or any contract or agreement entered into pursuant hereto
or the performance by the parties of its or their terms shall be settled
by binding arbitration held in Chicago, Illinois in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then
in effect, except as specifically otherwise provided in this Article 13.
Notwithstanding the foregoing, Buyer may, in its discretion, apply to a
court of competent jurisdiction for equitable relief from any violation or
threatened violation of the covenant not to compete and/or the use and
disclosure provisions contained Section 6.1 hereof.
13.2. Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed $200,000, then the panel to be appointed shall
consist of three neutral arbitrators; otherwise, one neutral arbitrator.
13.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as
practicable, and if reasonably practicable, within 120 days after the
selection of the arbitrator(s). The arbitrator(s) shall give the parties
written notice of the decision, with the reasons therefor set out, and
shall have 30 days thereafter to reconsider and modify such decision if
any party so requests within 10 days after the decision. Thereafter, the
decision of the arbitrator(s) shall be final, binding, and nonappealable
with respect to all persons, including (without limitation) persons who
have failed or refused to participate in the arbitration process.
13.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or
preliminary relief, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorneys fees and expenses in such
manner as is determined to be appropriate by the arbitrator(s).
13.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject
matter jurisdiction. Company and Buyer hereby submit to the in personam
jurisdiction of the Federal and State courts in Illinois for the purpose
of confirming any such award and entering judgment thereon.
13.6. Confidentiality. All proceedings under this Article 13, and
all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties.
13.7. Continued Performance. The fact that the dispute resolution
procedures specified in this Article 13 shall have been or may be invoked
shall not excuse any party from performing its obligations under this
Agreement and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith, subject to
any rights to terminate this Agreement that may be available to any party
and to the right of setoff provided in Section 10.4 hereof.
13.8. Tolling. All applicable statutes of limitation shall be
tolled while the procedures specified in this Article 13 are pending. The
parties will take such action, if any, required to effectuate such
tolling.
14. MISCELLANEOUS
14.1. Disclosure Schedule. The Schedules to this Agreement have
been compiled in a bound volume ("Disclosure Schedule"), executed by
Company and dated and delivered to Buyer on the date of this Agreement
(with a substantially complete preliminary copy thereof delivered by or on
behalf of Company to Buyer at least five business days prior to the date
hereof). Information set forth in the Disclosure Schedule specifically
refers to the article and section of this Agreement to which such
information is responsive and such information shall not be deemed to have
been disclosed with respect to any other article or section of this
Agreement or for any other purpose. The Disclosure Schedule includes a
table of contents and/or index to all of the information and documents
contained therein. The Disclosure Schedule shall not vary, change or
alter the language of the representations and warranties contained in this
Agreement and, to the extent the language in the Disclosure Schedule does
not conform in every respect to the language of such representations and
warranties, the language in the Disclosure Schedule shall be disregarded
and be of no force or effect.
14.2. Further Assurance. From time to time, at Buyer's request
and without further consideration, Company will execute and deliver to
Buyer such documents and take such other action as Buyer may reasonably
request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title
to the Business and the Purchased Assets being transferred hereunder.
14.3. Disclosures and Announcements. Both the timing and the
content of all disclosure to third parties and public announcements
concerning the transactions provided for in this Agreement by either
Company or Buyer shall be subject to the approval of the other in all
essential respects, except that Company's approval shall not be required
(although Company will be given the opportunity to review) as to any
statements and other information which Buyer may make pursuant to offers
or sales of securities to employees or others, disclosures necessary in
the ordinary course of business, disclosures by Buyer deemed necessary or
advisable as a result of Securities and Exchange Commission or Nasdaq
Stock Market requirements, or as otherwise required by law.
14.4. Assignment; Parties in Interest.
14.4.(a) Assignment. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be
assigned, transferred or encumbered without the prior written
consent of the other party. Notwithstanding the foregoing, Buyer
may, without consent of the Company, cause one or more subsidiaries
of Buyer to carry out all or part of the transactions contemplated
hereby.
14.4.(b) Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successors and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other
person any right or remedy under or by reason of this Agreement.
14.5. Law Governing Agreement. This Agreement may not be modified
or terminated orally, and shall be construed and interpreted according to
the internal laws of the State of Wisconsin, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.
14.6. Amendment and Modification. Buyer and Company may amend,
modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
14.7. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or
other electronic means of transmitting written documents; or (c) sent to
the parties at their respective addresses indicated herein by registered
or certified U.S. mail, return receipt requested and postage prepaid, or
by private overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
Johnson Worldwide Associates, Inc.
1326 Willow Road
Sturtevant, Wisconsin 53177
Attention: Carl G. Schmidt
Facsimile: (414) 884-1731
(with a copy to)
Benjamin F. Garmer, III
Foley & Lardner
777 East Wisconsin Avenue 53202
Facsimile: (414) 297-4900
or to such other person or address as Buyer shall furnish to Company in
writing.
(b) If to Company, to:
Safari Land Ltd., Inc.
3120 East Mission Boulevard
Ontario, California 91761
Attention: Neale A. Perkins, Scott T. O'Brien
and David M. Holmes
Facsimile: (909) 923-7181
(with a copy to)
Michael K. Inglis
Inglis, Ledbetter & Gower
500 South Grand Avenue, 18th Floor
Los Angeles, California 90071
Facsimile: (213) 622-2857
or to such other person or address as Company shall furnish to Buyer in
writing.
If personally delivered, such communication shall be deemed
delivered upon actual receipt; if electronically transmitted pursuant to
this paragraph, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof
of delivery); if sent by overnight courier pursuant to this paragraph,
such communication shall be deemed delivered upon receipt; and if sent by
U.S. mail pursuant to this paragraph, such communication shall be deemed
delivered as of the date of delivery indicated on the receipt issued by
the relevant postal service, or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to
this Agreement may change its address for the purposes of this Agreement
by giving notice thereof in accordance with this Section.
14.8. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
14.8.(a) Brokerage. Company and Buyer each represent and
warrant to each other that there is no broker involved or in any
way connected with the transfer provided for herein. Buyer agrees
to indemnify, defend and hold harmless Company from and against all
claims for brokerage commissions or finder's fees incurred through
any act of Buyer in connection with the execution of this Agreement
or the transactions provided for herein. Company agrees to
indemnify, defend and hold harmless Buyer from and against all
claims for brokerage commissions or finder's fees incurred through
any act of Company in connection with the execution of this
Agreement or the transactions provided for herein.
14.8.(b) Expenses to be Paid by Company. Company shall pay,
and shall indemnify, defend and hold harmless Buyer from and
against, each of the following:
(i) Transfer Taxes. Any sales, use, excise,
transfer or other similar tax imposed with respect to the
transfer of the Purchased Assets pursuant to this Agreement,
including but not limited to any Colorado, Ohio and/or
Kentucky sales and/or excise tax (if the Inventory held by
braiders for the Business is deemed to be owned by the
Company), and any interest or penalties related thereto.
(ii) Professional Fees. All fees and expenses of
Company's legal, accounting, investment banking and other
professional counsel in connection with the transactions
contemplated hereby.
14.8.(c) Other. Except as otherwise provided herein, each of
the parties shall bear its own expenses and the expenses of its
counsel and other agents in connection with the transactions
contemplated hereby.
14.8.(d) Costs of Litigation or Arbitration. The parties
agree that the prevailing party in any action or arbitration
brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party or
parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action or
arbitration, including without limitation attorneys' fees and
prejudgment interest.
14.9. Entire Agreement. This Agreement, along with the Disclosure
Schedule, exhibits and certificates to be executed and delivered by either
party pursuant hereto, embody the entire agreement between the parties
hereto with respect to the transactions contemplated herein, and there
have been and are no agreements, representations or warranties between the
parties other than those set forth or provided for herein.
14.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
14.12. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"acquisition proposal" - Section 7.1.(h)
"Additional Payments" - Section 3.5.
"Affiliate" - Section 1.3.(e)
"Aggregate Net Asset Value" - Section 3.3
"Assumed Contracts" - Section 2.1.(a)
"Assumed Liabilities" - Section 2.1
"Business" - Section 1.1
"Business Financial Statements" - Section 4.4.(b)
"Buyer's Accountants" - Section 3.5.(a)
"Buyer's affiliates" - Section 10.1
"Claim" - Section 10.1
"Closing" - Preamble to Article 11
"Closing Date" - Preamble to Article 11
"Code" - Section 3.4
"Contracts" - Section 1.2.(d)
"Disclosure Schedule" - Section 14.1
"EMF Payments" - Section 3.6
"Employee Plans/Agreements" - Section 4.14.(a)
"ERISA" - Section 4.14.(a)
"Fishing Line Products" - Section 3.5.(c)
"Fixed Purchase Price" - Section 3.1
"Government Entities" - Section 2.2.(k)
"HSR Act" - Section 4.3
"IRS" - Section 3.4
"Indemnified Party" - Section 10.3.(a)
"Indemnifying Party" - Section 10.3.(a)
"Inventory" - Section 1.2.(g)
"Inventory Value" - Section 3.3.(b)
"Laws" - Section 2.2.(k)
"Liability" - Section 2.1
"License Agreement" - Section 6.3
"Liens" - Section 4.11.(a)
"Litigation" - Section 2.2.(f)
"Manufacturing/Supply Agreement" - Section 8.7
"Orders" - Section 2.2.(k)
"PBGC" - Section 4.14.(a)(ii)
"Personal Property Leases" - Section 1.2.(b)
"Products" - Section 4.17.
"proprietary information" - Section 6.1.(b)
"Purchased Assets" - Section 1.2.
"Purchase Price" - Section 3.1.
"Recent Balance Sheet" - Section 4.4.(a)
"Refund Amount" - Section 3.3.(b)
"Report" - Section 3.5.(a)
"Service Agreement" - Section 6.8
"SpiderWire/R/ Excess Profit" - Section 3.5.(c)
"SpiderWire/R/ Profit" - Section 3.5.(c)
"Trade Rights" - Section 1.2.(c)
"Trade Secrets" - Section 4.15
"Third Accounting Firm" - Section 3.5.(d)
Where any group or category of items or matters is defined collectively in
the plural number, any item or matter within such definition may be
referred to using such defined term in the singular number.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
SAFARI LAND, LTD., INC.
("Company")
By: /s/ Neale A. Perkins
Name: Neale A. Perkins
Title: Chairman and Chief Executive Officer
JOHNSON WORLDWIDE ASSOCIATES, INC.
("Buyer")
By: /s/ Carl G. Schmidt
Name: Carl G. Schmidt
Title: Vice President, Chief Financial Officer, Secretary
and Treasurer
FIRST CHICAGO
The First National Bank of Chicago
Mail Suite
One First National Plaza
Chicago, Illinois 60670
Telephone: (312) 732-4000
March 23, 1995
Johnson Worldwide Associates, Inc.
1326 Willow Road
Sturtvant, Wisconsin 53177
Attention: Carl G. Schmidt
Vice President, Chief Financial Officer, Secretary and Treasurer
Gentlemen:
We are pleased to establish a committed unsecured line of credit for
Johnson Worldwide Associates, Inc. ("Company") in the amount of
$30,000,000 ("Loan Amount") which shall continue from March 28, 1995
through December 31, 1995 (the "Termination Date") on the following terms:
1. The First National Bank of Chicago ("the Bank") agrees to make loans
to the Company from time to time from the date hereof to the
Termination Date, at such times and in such amounts as the Company
shall request, in an aggregate amount at any time outstanding not in
excess of the Loan Amount. Each loan under this line of credit
("Loan") will be of a type selected by the Company as described
below. Any authorized person may request Loans by telephone,
telecopy or telex. Such request shall specify (a) the proposed
borrowing date (which may be the date of the borrowing request except
as provided in paragraph 4 with respect to Eurodollar Loans), (b) the
aggregate principal amount of the proposed Loan, the type of loan to
be made by the Bank and (d) in the case of a Fixed CD Loan or
Eurodollar Loan, the maturity date for such a loan.
The maturity of a fixed CD Loan may be 30, 60, 90 or 180 days from
the borrowing date. The maturity of a Eurodollar Loan may be one,
two, three, six or nine months from the borrowing date.
An "authorized person" means anyone authorized to borrow on behalf of
the Company by any resolution or other appropriate evidence of
authority which has been furnished to the Bank or any person
designated in writing by an authorized person.
Until any outstandings under this line of credit are repaid in full
and the line of credit is canceled, unless the Bank shall otherwise
agree in writing, the Company agrees to perform and comply with those
covenants specified in Articles V and VI of that certain $25,000,000
Revolving and Term Loan Agreement dated as of October 2, 1991 among
Johnson Worldwide Associates, Inc., The First National Bank of
Chicago, First Wisconsin National Bank of Milwaukee, Societe Generale
and The First National Bank of Chicago, as Agent, (the "Agreement"),
whether or not said Agreement remains in effect. The Company
acknowledges and agrees that failure to perform such covenants in
full in accordance with the terms of the Agreement (after giving
effect to any applicable grace period) or the occurrence of any
Default or Event of Default (as defined in the Agreement), whether or
not waived by the banks party thereto shall give rise, at the option
of the Bank, to the immediate termination of this line of credit and,
in addition, the Bank may declare all unpaid principal and interest
on the loans and unpaid fees immediately due and payable and any
indebtedness from the Bank to the Company may be offset and applied
toward the payment of all unpaid principal, interest and fees payable
hereunder. The Company expressly waives any presentment, demand,
protest or notice now, or hereafter, required by applicable law and
agrees to pay all cost and expenses of collection.
2. This line of credit will be subject to the following terms:
a. Loans under this line of credit will bear interest, at the
Company's option, at either (i) the Alternate Base Rate of
interest announced by the Bank from time to time, changing when
and as the Alternate Base Rate changes ("Alternate Base Rate
Loan"), (ii) if available, the Fixed CD rate on the date of
borrowing plus 50 b.p. per annum, fixed until the maturity of
the loan ("Fixed CD Loans"), or (iii) if available, the
Eurodollar Rate determined two business days prior to the date
the loan is made plus 37.5 b.p. per annum, fixed until the
maturity of the loan;
b. a fee equal to 10.0 b.p. per annum will be calculated against
the unused portion of said line of credit from March 28, 1995 to
and including the Termination Date. This fee will be payable
quarterly on the last business day of June, September, December
and March;
c. interest and fees will be calculated for actual days elapsed on
a 360-day year basis. Interest on Alternate Base Rates Loans
shall be payable on the last day of each month. Interest on
Fixed CD Loans and Eurodollar Loans shall be payable on the
maturity date of each such Loan. Any interest not paid when due
shall be payable thereafter on demand; and
d. this line of credit can be reduced or canceled in whole or in
part by the Company at any time with three business days' notice
provided that Eurodollar Loans and Fixed CD Rate Loans may not
be prepaid prior to the end of their interest periods.
3. The First Chicago "Alternate Base Rate: means the greater of (i) the
corporate base rate of interest announced by First Chicago from time
to time, changing when and as said rate changes or (ii) the Federal
Funds rate plus 50 b.p.
"Federal Funds" shall mean, for any date, the weighted average of the
rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding business day by the Federal Reserve
Bank of New York or if such rate is not so published for any day
which is a business day, the average of the quotations for the day of
such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason the
bank shall have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the Federal
Funds rate for any reason, the Alternate Base Rate shall be
determined without regard to clause (ii) above.
4. The "Eurodollar Rate" for a Loan is the rate at which offshore
deposits in U.S. Dollars with a maturity and in an amount equal to
the loan are offered to the Bank by first class banks in the London
interbank market two business days prior to the date that the Company
borrows, adjusted for reserves applicable to Eurocurrency liabilities
under Regulation D issued by the Federal Reserve Board. The maturity
of loans may be 1, 2, 3, 6, or 9 months, as selected by the Company
in its borrowing request, provided that no maturity extends beyond
the Termination Date of this line of credit. The Company agrees to
give the Bank two business days' prior notice of its desire to borrow
at the Eurodollar Rate.
5. "Fixed CD Rate" means, for an interest period of 30, 60, 90 or 180
days as specified in the Company's borrowing request (provided that
no maturity extends beyond the Termination Date of this line of
credit), the rate determined by the Bank to be the average of the
prevailing bid rates in the secondary market on the borrowing date
quoted by three certificate of deposit dealers of recognized standing
for the purchase of certificates of the Bank in the amount and for
the interest period of the loan, adjusted for reserves under
Regulation D of the Federal Reserve System and FDIC insurance
premiums. The Company agrees to give the Bank one business days'
prior notice of its desire to borrow at the Fixed CD Rate.
6. The availability of Fixed CD Loans and Eurodollar Loans hereunder
shall cease if the making of such Loans would violate any applicable
law, rule, regulation, or interpretation by any governmental
authority and, if the maintenance of such Loans would violate any
such applicable provision, such Loans shall be immediately paid in
full or converted to alternate Base Rate Loans at the Company's
option.
7. The availability of Eurodollar Loans shall be suspended during any
period during which the Bank determines that there are no Eurodollars
available to it in the London interbank market for the maturity and
in the amount of the Loan requested or that the applicable Eurodollar
Rate does not adequately reflect the cost to it of funding or
maintaining Eurodollar Loans.
If any change in any law, regulation or directive (including, without
limitation, Regulation D of the Board of Governors of the Federal
Reserve System) imposes any condition the result of which is to
increase the cost to the Bank of making, funding or maintaining any
fixed rate loan hereunder or reduces any amount receivable by the
Bank hereunder in connection with a fixed rate loan, the Company
shall pay the Bank the amount received which the Bank determines is
attributable to making, funding and maintaining the fixed rate loans
hereunder. The Bank shall provide a statement in reasonable detail
showing its calculation of such amount.
8. Loans hereunder will be evidenced by a note in substantially the form
attached hereto. The Company hereby authorizes the Bank to indicate
the amount of each Loan and repayment and interest rate and maturity
of each Loan on the schedule attached to the note or to otherwise
record Loans and payments in accordance with the Bank's usual
practice. The Bank's records shall constitute rebuttably presumptive
evidence of the subject matter thereof.
9. The Company will provide the following prior to the making of the
initial request for Loans:
a. copies, certified by the Secretary or Assistant Secretary of the
Company of resolutions of the board of directors of the Company
authorizing it to make requests for Loans and borrow as
described in this letter;
b. an incumbency certificate, executed by the Secretary or
Assistant Secretary of the Company, identifying by name and
title and bearing signature of the officers authorized to enter
into the transactions contemplated in this letter on behalf of
the Company;
c. a note which will be used to evidence loans hereunder in
substantially the form attached hereto duly executed by the
Company ("Note").
10. The Bank may sell assignments (with permission of the Company, not to
be unreasonably withheld) and participations in the borrowings
hereunder and may disclose information relating to the financial
condition of the Company to participants and potential participants.
11. This line of credit and the Note shall be governed by the internal
law of the state of Illinois (and not the law of conflicts), giving
effect, however, to federal laws applicable to national banks.
If the above items and conditions are acceptable to you, please have an
authorized signatory sign the attached copy of this letter and return it
to my attention. This offer will expire on April 15, 1995 if not accepted
prior to that date.
THE FIRST NATIONAL BANK OF CHICAGO
/s/ Deborah E. Stevens
Deborah E. Stevens
Vice President
Agreed and Accepted:
JOHNSON WORLDWIDE ASSOCIATES, INC.
By: /s/ Carl G. Schmidt
Title: Vice President
Date: 4/3/95