STOCK OPTION AGREEMENT
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This Stock Option Agreement (this "Option Agreement"), dated as of
April 28, 1997, is made by and between Brunswick Corporation, a Delaware
corporation ("Brunswick"), and Xxxx Sports Corp., a Delaware corporation (the
"Company").
R E C I T A L S
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A. Brunswick and the Company are parties to that certain Asset Purchase
Agreement dated April 1, 1997 (the "Purchase Agreement") pursuant to which
Brunswick is purchasing certain assets of the Company on the date hereof.
B. In consideration of Brunswick entering into the Purchase Agreement,
the Company wishes to grant Brunswick the option to purchase certain of the
Company's capital stock, as set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
covenants set forth herein, the parties agree as follows:
A G R E E M E N T
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1. Preamble; Recitals. The preamble and recitals set forth above are
incorporated into and form a part of this Agreement.
2. Option to Purchase Shares. The Company hereby irrevocably grants to
Brunswick the option, exercisable in accordance with the terms hereof, to
purchase from the Company 600,000 shares of the Company's common stock, $.01 par
value ("Common Stock"), at a price per share equal to $7.50 (the "Option"). The
number of shares subject to this Option, and the per share purchase price, are
subject to adjustment pursuant to Section 5 below. Such Option may be exercised
in whole or in part by Brunswick by written notice to the Company on or prior to
April 28, 2000 (the "Expiration Date"). The purchase and sale of shares pursuant
hereto shall be consummated on the third business day following the date of
Brunswick's delivery of its exercise notice to the Company. The shares subject
to purchase by Brunswick hereunder shall be referred to as the "Option Shares".
The Option Shares shall bear a restrictive legend reflecting the fact that such
shares have not been registered under the Securities Act of 1933 (the "Act").
Payment for the Option Shares shall be made by Brunswick to the Company by wire
transfer of next-day funds. One or more stock certificates (as directed by
Brunswick) evidencing the Option Shares shall be delivered to Brunswick within
three business days after payment by Brunswick. The Option Shares, however,
shall be deemed issued to Brunswick on the date Brunswick makes payment
therefor.
3. Election by the Company.
(a) At the Company's option after receipt of Brunswick's
written notice pursuant to Section 2 above, in lieu of issuing the
Option Shares pursuant to Section 2 above, it may pay Brunswick, in
cash, the Market Spread Amount. The "Market Spread Amount" shall be the
amount by which the average of the high and low sales prices of the
shares of Common Stock, determined by reference to the price listed on
NASDAQ (or such other listing organization upon which the common stock
is traded) on the most recent trading day prior to the date Brunswick
exercises its option, exceeds the per share purchase price then in
effect. If the Company elects to pay the Market Spread Amount, it shall
make such payment by wire transfer of immediately available funds to an
account designated by Brunswick, such payment to be made no later than
three days after Brunswick's delivery of its exercise notice.
(b) At any time that, and provided that, the current per share
market price of the Company's common stock equals or exceeds $14.50
(subject to adjustment pursuant to Section 5 below), the Company may,
at its election and without Brunswick electing to exercise its Option
pursuant to Section 2 above, upon written notice to Brunswick, either
(i) issue to Brunswick the Option Shares in accordance with this
Agreement and require payment therefor from Brunswick in accordance
with this Agreement, or (ii) pay to Brunswick the applicable Market
Spread Amount without any further obligation to issue the Option
Shares.
4. Option Price. The Company acknowledges receipt from Brunswick of
$2,500,000 as full payment for the Option and other rights granted hereunder,
such amount to be allocated between the Option and goodwill and other
intangibles, as set forth on Schedule 4.
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5. Adjustments.
(a) If the Company shall, at any time, subdivide the
outstanding shares of common stock into a greater number of shares, the
per share purchase price shall be proportionally reduced and the number
of shares covered by the Option shall be proportionally increased.
Conversely, if the outstanding shares of common stock shall be combined
into a smaller number of shares, the per share purchase price shall be
proportionally increased and the number of shares covered by this
Option shall be proportionally reduced.
(b) In the event of any reorganization, reclassification,
consolidation, merger, or sale of all or substantially all of the
assets of the Company (a "Sale Event"), Brunswick shall subsequently
have the right to exercise the Option prior to the occurrence of any
Sale Event or to purchase and receive the securities or assets that
Brunswick would have received or been entitled to receive had Brunswick
been a holder of an aggregate number of outstanding shares subject to
this Option at the effective time of the reorganization,
reclassification, consolidation, merger, or sale. This right shall be
on the basis and on the terms and conditions specified in this Option.
(c) If the Company shall declare or effect a stock dividend or
distribution on its common stock, or make a distribution to holders of
its common stock of any security convertible into its common stock or
any other asset, or take any other action that affects its capital
structure as it relates to its common stock, an appropriate and
equitable adjustment shall be made to the per share purchase price and
number of shares subject to this Option to account for, and give
Brunswick the benefit of, such dividend, distribution or other action.
Notwithstanding the foregoing, exercise of conversion privileges
existing as of the date hereof under the Company's 4 1/4% Convertible
Subordinated Debentures due 2000 shall not require adjustment to the
per share purchase price or number of shares.
6. Ability to Effect Issuance. The Company covenants and agrees that
all shares that may be issued on the exercise of the
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rights represented by this option shall, on issuance, be fully paid and
nonassessable and free from all (other than any income tax liability of
Brunswick) liens, and charges related to such issuance. The Company further
covenants and agrees that during the period within which the rights represented
by this option may be exercised, the Company shall, at all times, have
authorized and reserved for issuance on the exercise of this option a sufficient
number of the shares subject to this Option to provide for its exercise. All
corporate action on the part of the Company necessary for the authorization,
execution, delivery and performance by the Company of its obligations under this
Agreement and for the authorization and issuance of the Option and the Option
Shares has been taken, and this Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms.
7. Securities Matters.
(a) The Company represents and warrants to Brunswick that the
Common Stock (including, without limitation, the Option Shares)
conforms to all statements relating thereto (including, without
limitation, statements relating to dividend, voting, conversion and
exchange features) contained in the Commission Documents (as defined
below). Except as set forth in the Commission Documents, there are no
outstanding (i) securities or obligations of the Company convertible
into or exchangeable for any shares of capital stock of the Company or
(ii) warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations.
(b) Since December 31, 1996, except as otherwise disclosed in
filings with the Commission, (i) there has been no material adverse
change in the condition, financial or otherwise, or the earnings or
business affairs of the Company, (ii) there have been no filings by the
Company of a current report on Form 8-K or transactions entered into by
the Company which required the filing of a current report on Form 8-K,
(iii) there has been no dividend or distribution of any kind declared,
paid or made by the Company on its capital stock, and (iv) there has
not been any change in the capital stock of the Company, or any
material change in the long-term debt of the Company. There are no
contracts or
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documents of the Company which are required to be described in the
Commission Documents or filed as exhibits thereto which have not been
so described or so filed or incorporated by reference.
(c) Each report, schedule, registration statement, prospectus,
and proxy statement and other reports filed by the Company with the
Commission since April 1, 1992 (the "Commission Documents") are all the
documents (other than preliminary material) that the Company was
required to file with the Commission since such date. As of their
respective dates, each of the Commission Documents complied in all
material respects with the requirements of the Act and the Securities
Exchange Act of 1934, as the case may be, and the rules and regulations
of the Securities and Exchange Commission (the "Commission").
8. Resale of Option Shares. Within 20 business days after the date
Brunswick delivers its notice of the exercise of its Option or the Company
delivers to Brunswick the notice contemplated by Section 3(b) above, the
Company, (at a cost shared equally between the Company and Brunswick), shall
prepare and file with the Commission, on not more than one occasion, a
registration statement on Form S-3, or such other form as is required or
appropriate under the circumstances, covering the resale on a continuous or
delayed basis of the Option Shares (the "Registration Statement").
Notwithstanding the preceding sentence, the Company shall be entitled to
postpone for up to 120 days the filing of the Registration Statement if the
Board of Directors of the Company determines, in its good faith reasonable
judgment, that the filing of the Registration Statement and the sale of the
Option Shares contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition, disposition or
reorganization involving the Company or any of its subsidiaries and the Company
promptly gives Brunswick notice of such determination. The Company shall use its
best efforts, at the joint expense of the Company and Brunswick, to have the
Registration Statement declared effective by the Commission. The Company shall
take such steps as may be required to cause the Registration Statement to become
effective at the earliest practicable time. Additionally, the Company shall, at
the joint expense of the Company and Brunswick, from time to time after the
Registration Statement is declared
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effective until the Expiration Date (as defined below), (a) prepare and file
with the Commission such other amendments and supplements to the Registration
Statement and Prospectus, and take such other actions, as may be necessary to
keep the Registration Statement effective and to comply with the Act with
respect to the sale or other disposition by Brunswick of all or any of the
Option Shares whenever Brunswick shall desire to sell or dispose of the same;
(b) furnish to Brunswick such number of copies of the Prospectus and such other
documents as Brunswick may reasonably request to facilitate the sale or other
disposition by Brunswick of all or any of the Option Shares; (c) use every
reasonable effort to qualify the Option Shares under the blue sky laws and other
laws, if any, as Brunswick may request to enable Brunswick to consummate the
sale or other disposition of such shares in such jurisdictions; and (d)
immediately inform Brunswick in writing of the happening of any event as a
result of which the Prospectus includes an untrue statement of material fact or
omits to state a material fact required to be stated therein to make the
statements in the Prospectus not misleading. The "Expiration Date" shall mean
the first to occur of (i) the first anniversary of the date the Registration
Statement is declared effective by the Commission or (ii) the date when all the
Option Shares have been resold. The prospectus to be set forth in the
Registration Statement and relating to the Option Shares is referred to herein
as the "Prospectus". Nothing in this Section 8 shall require the Company to
qualify to do business in any jurisdiction where it is not currently qualified.
9. Transferability. This Option and the other rights granted hereunder
are fully transferable by Brunswick. The Company agrees that it will register in
its transfer books any transfer of this Option by Brunswick and that such
transferee shall have all the rights granted to Brunswick hereunder.
10. General.
(a) Amendment. This Option Agreement may be amended, modified
or supplemented only by written agreement of the parties.
(b) Notices. Any notice, request, instruction or other
document to be given hereunder by a party hereto shall be in writing
and shall be deemed to have been given, (a)
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when received if given in person or by courier or a courier service,
(b) on the date of transmission if sent by telex, facsimile or other
wire transmission or (c) three (3) Business Days after being deposited
in the U.S. mail, certified or registered mail, postage prepaid:
(a) If to the Company, addressed as follows:
Xxxx Sports Corp.
00000 X. Xxxxxx Xxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Facsimile No.: (000) 000-0000
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) If to Brunswick, addressed as follows:
Brunswick Corporation
Xxx Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxxx 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
(c) Counterparts. This Option Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(d) Applicable Law. This Option Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the
State of Delaware without giving effect to the principles of conflicts
of laws thereof.
(e) Construction. Each party and its counsel have reviewed
this Agreement and this Agreement shall be construed fairly. No rule of
construction shall apply construing this Agreement against the drafting
party.
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(f) Severability. If any provision of this Option Agreement
shall be held invalid, illegal or unenforceable, the validity, legality
and enforceability of the other provisions hereof shall not be affected
thereby, and there shall be deemed substituted for the provision at
issue a valid, legal and enforceable provision as similar as possible
to the provision at issue.
(g) Entire Understanding. This Option Agreement sets forth the
entire agreement and understanding of the parties hereto and supersedes
any and all prior agreements, arrangements and understandings among the
parties.
(h) Investment. Brunswick represents that (i) Brunswick is
acquiring the Option, and upon exercise thereof will acquire the shares
of Common Stock subject thereto, for investment for its own account and
not with a view to participating directly or indirectly in any resale,
distribution or underwriting thereof in violation of the Act or
applicable state securities laws, (ii) Brunswick will not offer or sell
the Option or the shares of Common Stock subject thereto in violation
of the Securities Act or applicable state securities laws, and (iii)
Brunswick acknowledges that its acquisition of the Option has not been,
and upon exercise thereof its acquisition of the shares of Common Stock
subject thereto initially will not be, registered under the Securities
Act by reason of an exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide
nature of the investment intent expressed herein.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Option Agreement on the date first set forth above.
BRUNSWICK CORPORATION XXXX SPORTS CORP.
By: Xxxxxxx X. Xxxxxxx By: Xxxxxx Xxxxxx
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Name: Xxxxxxx X. Xxxxxxx Name: Xxxxxx Xxxxxx
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Title: Assistant Secretary Title: Chief Financial Officer
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