STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of May 5, 1997 (the
"Agreement"), by and between Xxxxxxx X. Xxxx ("Executive"), Chairman, President
and Chief Executive Officer of Varsity Spirit Corporation, a Tennessee
corporation (collectively with any successor to its business, "Varsity"), and
Xxxxxxx Sports Inc., a Delaware corporation (the "Seller").
Seller, Cheer Acquisition Corp. and Varsity have entered into
an Agreement and Plan of Merger (the "Merger Agreement"), dated as of May 5,
1997, pursuant to which, among other things, Varsity will become a wholly owned
subsidiary of Seller.
This Agreement sets forth the terms and conditions upon which
Seller is selling to Executive, and Executive is purchasing from Seller, a
number of shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of Seller equal to the net after-tax proceeds (assuming a 28% tax rate
and a basis in the shares of $.1666) received by the Executive in the Offer or
Merger as a result of the sale of 251,165 of his 553,455 shares of common stock
of Varsity ("Target Common Stock") divided by the Purchase Price (as defined in
Section 2 hereof)(such number of shares being referred to herein as the
"Shares").
In consideration of the mutual agreements contained herein,
and intending to be legally bound hereby, the parties agree as follows:
1. Effective Date. This Agreement shall become effective on
the acceptance for payment of shares of Target Common Stock pursuant to the
Offer (as defined in the Merger Agreement) (the "Effective Date"); provided,
however, that if the Merger Agreement is terminated in accordance with its
terms, then, at the time of such termination, this Agreement shall be deemed
cancelled and of no force and effect.
2. Purchase and Sale of Certain Shares. On or before the
fifth business day after the Effective
Date, or on such later date as shall be mutually agreed upon between the
parties, Seller shall sell to Executive, and Executive shall purchase from
Seller, all of the Shares for a price equal to the average closing price of the
Common Stock, as reported on the NASDAQ National Market System for the 20
trading days ending on the day immediately preceding the Effective Date,
provided, that in no event shall such purchase price per Share be more than
$4.50 nor less than $2.80 (the "Purchase Price"), payable in cash. If Executive
shall die prior to the consummation of the transaction described herein,
Executive's estate shall consummate such transaction in accordance with the
terms of this Agreement.
3. Closing; Deliveries at the Closing. At the closing of the
sale and purchase of the Shares contemplated by Section 2 hereof (the
"Closing"), (a) Seller will deliver to Executive (i) stock certificates
representing all the Shares duly endorsed, together with stock powers duly
executed in blank relating to such certificates, or other evidences of transfer
reasonably satisfactory to Executive and (b) Executive will deliver to Seller
the Purchase Price by a wire transfer of federal funds to a bank account or
accounts previously designated in writing to Executive by Seller. The Closing
shall be held at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
4. Representations and Warranties of Seller. Seller represents
and warrants to Executive as follows:
a. Seller has the requisite corporate power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated hereby, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Agreement;
b. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
c. this Agreement has been duly and validly
authorized, executed and delivered by Seller, and constitutes a valid and
binding obligation of Seller, enforceable in accordance with its terms;
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d. the Shares, upon receipt of the Purchase Price,
will be validly issued, duly authorized and free of any preemptive rights;
e. upon issuance to Executive by Seller of the
Shares at the Closing, Executive will have good and marketable title to the
Shares, free and clear of all Liens;
f. the execution of this Agreement by Seller does
not, and the performance by Seller of its obligations hereunder will not,
constitute a violation of, conflict with or result in a default under any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Seller is a party or by which Seller is bound or any judgment,
decree or order applicable to Seller; and
g. neither the execution and delivery of this
Agreement nor the performance by Seller of its obligations hereunder will
violate any provision of law applicable to Seller or require any consent or
approval of, or filing with or notice to, any public body or authority under any
provision of law applicable to Seller other than notices or filings pursuant to
the federal securities laws.
5. Representation and Warranties of Executive. Executive
represents and warrants to Seller as follows:
a. Executive has the legal capacity, power and
authority to enter into and perform all of Executive's obligations under this
Agreement;
b. this Agreement has been duly and validly
authorized, executed and delivered by Executive and constitutes a valid and
binding obligation of Executive, enforceable in accordance with its terms;
c. the execution of this Agreement by Executive does
not, and the performance by Executive of its obligations hereunder will not,
constitute a violation of, conflict with or result in a default under any
contract, commitment, agreement, understanding, arrangement or restriction of
any kind to which Executive is a party or by which Executive is bound or any
judgment, decree or order applicable to Executive;
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d. neither the execution and delivery of this
Agreement nor the performance by Executive of its obligations hereunder will
violate any provision of law applicable to Executive or require any consent or
approval of, or filing with or notice to, any public body or authority under any
provision of law applicable to Executive;
e. Executive is acquiring the Shares solely for
Executive's own account for investment and not with a view to, or for sale in
connection with, any distribution or other disposition thereof;
f. Executive acknowledges receipt of advice from
Parent that (i) the Shares have not been registered under the Securities Act of
1933 (the "Securities Act") and are "restricted securities", (ii) the Shares
must be held indefinitely and Executive must continue to bear the economic risk
of the investment in the Shares, unless such Shares are subsequently registered
under the Securities Act, or an exemption from such registration is available,
(iii) an appropriate restrictive legend shall be placed on the certificate(s)
representing the Shares, and (iv) a notation shall be made in the appropriate
records of Parent indicating that the Shares are subject to restrictions on
transfer and appropriate stop-transfer restrictions will be issued to the
transfer agent with respect to the Shares. In addition, Executive has been given
access to and the opportunity to examine all documents and ask questions of, and
receive answers from, Parent and its representatives concerning the business,
assets, liabilities, results of operations and
financial condition of Parent and its subsidiaries and the terms and conditions
of the Merger and related transactions; and
g. either (i) Executive is an "accredited investor"
as such term is defined in Rule 501(a) promulgated under the Securities Act or
(ii) (A) Executive's financial situation is such that the Executive can afford
to bear the economic risk of holding the Shares for an indefinite period of
time, (B) Executive can afford to suffer complete loss of his investment in the
Shares, and (c) Executive's knowledge and experience in financial and business
matters are such that Executive is capable of evaluating the merits and risks of
his investment in the Shares.
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6. Expenses. All fees and expenses incurred by any of the
parties hereto shall be borne by the party incurring such fees and expenses. All
sales, transfer or other similar taxes payable in connection with this Agreement
will be borne by the party incurring such taxes, except that Seller shall be
responsible for all stock transfer taxes with respect to the transactions
contemplated hereby.
7. Brokerage. Each of Executive and Seller represents and
warrants to the other that the negotiations relevant to this Agreement have been
carried on by each of Executive, on the one hand, and Seller, on the other hand,
directly with the other, and that there are no claims for finder's fees or
brokerage commissions or other like payments in connection with this Agreement
or the transactions contemplated hereby. Executive, on the one hand, and Seller,
on the other hand, agree to indemnify and hold harmless the other from and
against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred by reason of any written or oral
agreement entered into by it.
8. Stop Transfer. The Executive shall not request that the
Seller register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Seller's Common Stock, par value $0.01 per
share, by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, the term "Shares" shall refer to and include the
Shares as well as all such stock dividends and distributions and any shares into
which or for which any or all of the Shares may be changed or exchanged.
9. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions will remain in full force and effect and will in no
way be affected, impaired or invalidated.
10. Survival of Representations, Warranties, etc. All
representations, warranties, agreements and
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covenants made by each of the parties pursuant to this Agreement will survive
the Closing hereunder.
11. Incidental Registration Rights. If Seller proposes to
file a registration statement under the Securities Act with respect to (a) an
offering by Seller for its own account or (b) an offering for the account of any
of its respective securityholders of any shares of Common Stock (other than a
registration statement on Form S-4 or S-8 (or any substitute form therefor that
may be adopted by the Securities and Exchange Commission)), then Seller shall
give written notice of such proposed filing to the Executive as soon as
practicable (but in no event less than 20 days before the anticipated filing
date), and such notice shall offer the Executive the opportunity to register
such number of shares of Common Stock being purchased hereunder as such
Executive may request (a "Piggy-Back Registration"). With respect to any
offering described in the preceding sentence which is an underwritten offering
(an "Underwritten Offering"), Seller shall use all reasonable efforts to cause
the managing underwriter or underwriters of such proposed Underwritten Offering
to permit the securities requested to be included in a Piggy-Back Registration
to be included on the same terms and conditions as any similar securities of
Seller included therein. Notwithstanding anything contained herein, if the
managing underwriter or underwriters of an Underwritten Offering determines and
so notifies the Executive in writing that the success of the Underwritten
Offering would be materially and adversely affected by inclusion of any or all
securities requested to be included by Executive, either because of (i) the
size of the offering that the Executive, Seller and any other persons intend to
make or (ii) the kind of securities that the Executive, Seller and any other
persons or entities intend to include in such offering, then in such event the
amount of securities to be offered for the account of Executive shall be
reduced (such reduction to be pro rata based on the number of such securities so
proposed to be sold by the Seller, on the one hand, and the Executive and the
three other Varsity executives executing similar agreements with Seller on the
date hereof, on the other hand) and the Executive) to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter or underwriters. The Seller
agrees that henceforth, and
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until the earlier of the date the Executive shall have registered or divested
the Shares, it will not grant additional Piggy-Back Registration rights to any
person or entity which provides for rights with respect to participation in an
offering superior to those provided herein to the Executive. The Executive
agrees that he may not participate in any Underwritten Offering unless he (a)
agrees to sell his securities on the basis provided in any underwriting
arrangements approved by the Seller and (b) completes and executes all customary
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements. The Seller represents and warrants that except for the
Registration Rights Agreement, dated as of November 8, 1996, between the Seller
and Silver Oak Capital, L.L.C., no other agreements executed by the Seller
provide for superior piggy-back registration rights than those granted herein.
12. Miscellaneous.
a. This Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, whether oral or written,
among the parties hereto with respect to the subject matter hereof. This
Agreement may not be amended orally, but only by an instrument in writing signed
by each of the parties to this Agreement.
b. (i) Seller will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Seller to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that Seller would be required to perform it if no such succession had taken
place.
(ii) This Agreement is a personal contract and the rights and
obligations of the Executive hereunder may not be sold, transferred, assigned,
pledged, encumbered, or hypothecated by him, except as otherwise expressly
permitted by the provisions of this Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisee and legatees.
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c. Section headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
d. This Agreement may be executed in counterparts,
each of which shall, when executed, be deemed to be an original,
and both of which shall be deemed to be one and the same instrument.
e. This Agreement shall be governed by and construed
and enforced in accordance with the substantive laws of the State of Delaware,
without reference to the conflict of laws principles thereof.
f. All notices and other communications under this
Agreement shall be in writing and delivery thereof shall be deemed to have been
made either (i) if mailed, when received, or (ii) when transmitted by hand
delivery, telegram, telex, or facsimile transmission, to the party entitled to
receive the same at the addresses indicated below or at such other address as
such party shall have specified by written notice to the other parties hereto
given in accordance herewith:
(1) If to Seller:
Xxxxxxx Sports Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
(2) If to Executive:
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
with a copy to:
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Xxxxxxx, Carton & Xxxxxxx
Quaker Tower
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
g. This Agreement may not be amended,
modified or supplemented except upon execution and delivery of a written
agreement executed by the parties hereto.
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IN WITNESS WHEREOF, and intending to be legally bound hereby,
Executive and Seller have executed or caused this Agreement to be executed on
the date first above written.
XXXXXXX SPORTS INC.
By /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Chief Executive
Officer
By /s/ Xxxxxxx X. Xxxx
Name: Xxxxxxx X. Xxxx
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