EXHIBIT 2.1
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
DATED AS OF
JUNE 29, 2004
BY AND AMONG
TGW ACQUISITION CORPORATION
THE GOLF WAREHOUSE, L.L.C.,
SPORTS CAPITAL PARTNERS, LP,
SPORTS CAPITAL WAREHOUSE, L.P.,
SPORTS CAPITAL PARTNERS (CEV) LLC,
XXXXXX ENTERPRISES, INC.,
XXXX X. XXXXXX,
R. XXXXXXX XXXXXX,
AND
XXXXXXX X. XXXXXX
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TABLE OF CONTENTS
PAGE
ARTICLE I PURCHASE AND SALE................................................................ 1
Section 1.1 Purchase and Sale of Membership Interests............................... 1
Section 1.2 Purchase Price.......................................................... 1
Section 1.3 Purchase Price Adjustments.............................................. 2
Section 1.4 Payment of Purchase Price; Escrow Release............................... 2
Section 1.5 Post-Closing Adjustments................................................ 3
Section 1.6 Tax Characterization.................................................... 4
Section 1.7 Allocation.............................................................. 4
Section 1.8 Payment of Bank Borrowings and Cash Distribution to the Sellers......... 5
ARTICLE II THE CLOSING...................................................................... 5
Section 2.1 The Closing............................................................. 5
Section 2.2 Deliveries at the Closing............................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 5
Section 3.1 Organization and Corporate Power........................................ 6
Section 3.2 Authorization of Transactions........................................... 6
Section 3.3 Noncontravention........................................................ 6
Section 3.4 Insider Interests....................................................... 6
Section 3.5 Brokers' Fees........................................................... 7
Section 3.6 Capitalization.......................................................... 7
Section 3.7 Subsidiaries and Investments............................................ 7
Section 3.8 Financial Statements.................................................... 7
Section 3.9 Events Subsequent to the Latest Balance Sheet........................... 7
Section 3.10 Absence of Undisclosed Liabilities...................................... 8
Section 3.11 Legal Compliance........................................................ 8
Section 3.12 Title to Assets......................................................... 8
Section 3.13 Title to Property....................................................... 8
Section 3.14 Tax Matters............................................................. 9
Section 3.15 Intellectual Property................................................... 9
Section 3.16 Contracts and Commitments............................................... 10
Section 3.17 Insurance............................................................... 11
Section 3.18 Litigation.............................................................. 11
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TABLE OF CONTENTS
(continued)
PAGE
Section 3.19 Employees............................................................... 11
Section 3.20 Employee Benefits....................................................... 11
Section 3.21 Environmental, Health and Safety Matters................................ 12
Section 3.22 Suppliers............................................................... 12
Section 3.23 Inventory............................................................... 12
Section 3.24 Customer List........................................................... 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................................... 13
Section 4.1 Organization of the Sports Capital Entities and Enterprises............. 13
Section 4.2 Authorization of Transaction............................................ 13
Section 4.3 Noncontravention........................................................ 13
Section 4.4 Brokers' Fees........................................................... 13
Section 4.5 Title to Membership Interests........................................... 13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER.......................................... 13
Section 5.1 Organization of Buyer................................................... 13
Section 5.2 Authorization of Transaction............................................ 13
Section 5.3 Noncontravention........................................................ 14
Section 5.4 Brokers' Fees........................................................... 14
Section 5.5 Available Funds......................................................... 14
Section 5.6 Investment.............................................................. 14
ARTICLE VI COVENANTS........................................................................ 14
Section 6.1 Affirmative Covenants Concerning the Company............................ 14
Section 6.2 Negative Covenants Concerning the Company............................... 15
Section 6.3 Certain Other Covenants................................................. 15
ARTICLE VII CONDITIONS TO CLOSING............................................................ 16
Section 7.1 Conditions to Closing Obligations of Buyer.............................. 16
Section 7.2 Conditions to Closing Obligations of the Sellers........................ 17
ARTICLE VIII TERMINATION...................................................................... 18
Section 8.1 Termination............................................................. 18
Section 8.2 Effect of Termination................................................... 19
ARTICLE IX SURVIVAL; INDEMNIFICATION........................................................ 19
Section 9.1 Survival................................................................ 19
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TABLE OF CONTENTS
(continued)
PAGE
Section 9.2 Indemnification by the Sellers.......................................... 19
Section 9.3 Indemnification by Buyer................................................ 20
Section 9.4 Third-Party Claims...................................................... 21
Section 9.5 Objections to Claims for Indemnification................................ 21
Section 9.6 Resolution by the Parties............................................... 21
Section 9.7 Arbitration............................................................. 21
ARTICLE X ADDITIONAL AGREEMENTS............................................................ 22
Section 10.1 Press Releases.......................................................... 22
Section 10.2 Transaction Expenses.................................................... 22
Section 10.3 Transfers and Other Taxes............................................... 22
Section 10.4 Further Assurances...................................................... 22
Section 10.5 Transition Assistance................................................... 22
Section 10.6 Certain Tax Matters..................................................... 23
Section 10.7 Noncompetition, Nonsolicitation and Confidentiality..................... 24
ARTICLE XI DEFINITIONS...................................................................... 25
ARTICLE XII MISCELLANEOUS.................................................................... 28
Section 12.1 No Third Party Beneficiaries............................................ 28
Section 12.2 Entire Agreement........................................................ 28
Section 12.3 Successors and Assigns.................................................. 28
Section 12.4 Counterparts............................................................ 28
Section 12.5 Headings................................................................ 28
Section 12.6 Notices................................................................. 28
Section 12.7 Governing Law........................................................... 30
Section 12.8 Amendments and Waivers.................................................. 30
Section 12.9 Incorporation of Exhibits and Schedules................................. 30
Section 12.10 Construction............................................................ 30
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is
made as of June 29, 2004, by and among TGW Acquisition Corporation, a Delaware
corporation ("Buyer"), The Golf Warehouse, L.L.C., a Delaware limited liability
company (the "Company"), Sports Capital Partners, LP, a Delaware limited
partnership, Sports Capital Warehouse, L.P., a Delaware limited partnership, and
Sports Capital Partners (CEV), LLC, a Delaware limited liability company,
(collectively, the "Sports Capital Entities"), Xxxxxx Enterprises, Inc., a
Kansas corporation ("Enterprises"), and Xxxx X. Xxxxxx, R. Xxxxxxx Xxxxxx and
Xxxxxxx X. Xxxxxx (collectively, the "Founders"). The Sports Capital Entities,
Enterprises and the Founders are collectively referred to herein as the
"Sellers", and Buyer, the Sports Capital Entities, Enterprises and the Founders
are collectively referred to herein as the "Parties".
WHEREAS, the Sports Capital Entities own 7,065 Class A Units of the
Company in the aggregate; and
WHEREAS, Xxxxxx Enterprises owns 524 Class A Units and 1,920 Class B
Units of the Company; and
WHEREAS, the Founders own 270 Class C Units of the Company in the
aggregate (the Class A Units, the Class B Units and the Class C Units are
referred to collectively herein as the "Membership Interests" or "Units"); and
WHEREAS, this Agreement contemplates a transaction in which Buyer
will purchase from the Sellers, and the Sellers will sell to Buyer, all of the
outstanding Membership Interests of the Company in return for cash consideration
set forth below.
NOW, THEREFORE, in consideration of the mutual promises herein made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1 Purchase and Sale of Membership Interests. On and
subject to the terms and conditions of this Agreement, Buyer agrees to purchase
from the Sellers, and the Sellers agree to sell to Buyer, all of the issued and
outstanding Membership Interests for the cash consideration specified below in
Section 1.2.
Section 1.2 Purchase Price. Subject to adjustments in accordance
with Section 1.3, Buyer shall pay to the Sellers in the aggregate $30,000,000
(the "Purchase Price") for all the issued and outstanding Membership Interests.
The Purchase Price shall be allocated among the Sellers as set forth in Schedule
1.2, which the Sellers agree is in accordance with Section 5.2 of the Company's
Limited Liability Company Agreement.
Section 1.3 Purchase Price Adjustments.
(a) On or before the Closing Date, the Company shall prepare
and deliver to Buyer a preliminary unaudited consolidated balance sheet of
the Company as of the Closing Date showing a good faith estimate of the
amount of the Company's Working Capital as of the Closing Date (the
"Reference Balance Sheet") accompanied by a certificate of the chief
financial officer of the Company to that effect. The Reference Balance
Sheet shall (i) be prepared in accordance with GAAP consistently applied,
subject to the absence of footnotes thereto and subject to normal year-end
adjustments, and (ii) incorporate all accounting methods utilized by the
Company in connection with the preparation of the consolidated balance
sheet of the Company as of the Latest Balance Sheet included as part of
the Financial Statements (which balance sheet was prepared on the basis of
revenue recognition upon the shipment of products); provided, however,
that for purposes of preparing the Reference Balance Sheet, the Reference
Balance Sheet shall not reflect any liabilities that are to be paid on or
prior to the Closing. The Cash amount included in the Working Capital
amount on the Reference Balance Sheet shall be at least Three Hundred
Thousand Dollars ($300,000).
(b) If the Company's Working Capital amount set forth on the
Reference Balance Sheet is less than One million Five Hundred Thousand
Dollars ($1,500,000) (the amount by which the Working Capital is less than
$1,500,000 is referred to herein as the "Working Capital Shortfall"), then
the Purchase Price will be reduced by the exact amount of the Working
Capital Shortfall. If the Company's Working Capital amount set forth on
the Reference Balance Sheet is greater than One Million Five Hundred
Thousand Dollars ($1,500,000) (the amount by which the Working Capital is
greater than $1,500,000 is referred to as the "Working Capital Surplus"),
then the Purchase Price will be increased by the exact amount of the
Working Capital Surplus.
Section 1.4 Payment of Purchase Price; Escrow Release.
(a) On the Closing Date, Buyer will (i) pay or cause to be
paid to the Sellers (or to such third parties as the Sellers may
designate) an aggregate amount equal to the Purchase Price after
adjustments as set forth in Section 1.3 less Four Million Dollars
($4,000,000) (the "Escrow Amount"), and (ii) deposit with the escrow agent
(the "Escrow Agent") identified in the form of the Escrow Agreement
attached hereto as Exhibit 1.4(a) (the "Escrow Agreement") the Escrow
Amount, which shall be held in an escrow account (the "Escrow Fund") and
disbursed in accordance with the terms of the Escrow Agreement. All
payments shall be made by wire transfer of immediately available funds to
such bank accounts as shall be designated in writing by the Sellers or the
Escrow Agent, as applicable, at least one business day prior to the
Closing Date.
(b) (i) On the 90th day after the Closing Date, the Escrow
Agent shall distribute from the Escrow Fund to the Sellers on a pro
rata basis $500,000 or the balance of the Escrow Fund if such
balance on such date is less than $500,000.
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(ii) On the 180th day after the Closing Date, the
Escrow Agent shall distribute from the Escrow Fund to the Sellers on
a pro rata basis $500,000 or the balance of the Escrow Fund if such
balance on such date is less than $500,000.
(iii) On the first anniversary of the Closing Date, the
Escrow Agent shall distribute from the Escrow Fund to the Sellers on
a pro rata basis $1,500,000 or the balance of the Escrow Fund if
such balance on such date is less than $1,500,000.
(iv) The funds remaining in the Escrow Fund on the
540th day after the Closing Date shall be paid by the Escrow Agent
to the Sellers.
(v) All payments to the Sellers under this paragraph
(b) shall be made in accordance with and subject to the Escrow
Agreement.
(c) All payments to the Sellers pursuant to this Section 1.4
and Section 1.5 shall be made pro rata to the Sellers in accordance with
their pro rata percentage of the Purchase Price received by them as set
forth on Schedule 1.4(c).
Section 1.5 Post-Closing Adjustments.
(a) As soon as possible and in any event no later than sixty
(60) days following the Closing Date, Buyer shall cause to be prepared and
delivered to the Sellers the final unaudited consolidated balance sheet of
the Company as of the Closing Date showing the amount of the Company's
Working Capital as of the Closing Date (the "Closing Date Balance Sheet")
accompanied by a certificate of the chief financial officer of Buyer to
that effect. The Closing Date Balance Sheet shall (i) be prepared in
accordance with GAAP consistently applied, subject to the absence of
footnotes thereto and subject to normal year-end adjustments, and (ii)
incorporate all accounting methods utilized by the Company in connection
with the preparation of the consolidated balance sheet of the Company as
of the Latest Balance Sheet included as part of the Financial Statements
(which balance sheet was prepared on the basis of revenue recognition upon
the shipment of products); provided, however, that for purposes of
preparing the Closing Date Balance Sheet, the Closing Date Balance Sheet
shall not reflect any liabilities that were paid on or prior to the
Closing.
(b) Unless within thirty (30) calendar days after receipt of
the Closing Date Balance Sheet the Seller Representative shall deliver to
Buyer a statement describing his objections to the Closing Date Balance
Sheet (a "Statement of Objection"), the amount of the Working Capital
reflected on the Closing Date Balance Sheet shall be deemed final and
binding on the parties hereto.
(c) If the Seller Representative shall deliver to Buyer a
timely Statement of Objection, Buyer and the Seller Representative and
their respective independent accountants shall attempt in good faith to
resolve such dispute within fifteen (15) calendar days after receipt by
Buyer of such Statement of Objection. In the event that such parties are
unable to resolve such dispute within such period, such parties agree
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that KPMG LLP (Chicago office) (or such other nationally recognized
accounting firm mutually agreed to by the parties) (the "Arbitrator")
shall be retained to resolve such dispute as soon as reasonably
practicable. The fees and expenses of the Arbitrator shall be shared
equally by the Sellers on one hand and Buyer on the other hand.
(d) Buyer and the Seller Representative shall direct the
Arbitrator to review the books and records of the Company as necessary in
order to verify the accuracy of the Closing Date Balance Sheet and the
determination of the Working Capital. The determination of the Arbitrator
as to the Working Capital on the Closing Date Balance Sheet shall be final
and binding upon the parties hereto, as well as the Escrow Agent.
(e) After the determination of the final Working Capital
amount on the Closing Balance Sheet in accordance with this Section 1.5:
(i) If the Company's Working Capital amount on the
Closing Date Balance Sheet exceeds the Working Capital amount on the
Reference Balance Sheet (the amount by which the Working Capital on
the Closing Balance Sheet is greater than the Working Capital on the
Reference Balance Sheet is referred to herein as the
"Understatement"), then Buyer shall pay the amount of the
Understatement to the Sellers within ten (10) days after the Working
Capital on the Closing Date Balance Sheet is determined final.
(ii) If the Company's Working Capital amount set forth
on the Closing Date Balance Sheet is less than the Working Capital
amount set forth on the Reference Balance Sheet (the amount by which
the Working Capital on the Closing Balance Sheet is less than the
Working Capital on the Reference Balance Sheet is referred to herein
as the "Overstatement"), then (i) if such Overstatement is $100,000
or less, then the Escrow Agent shall disburse to Buyer the amount of
the Overstatement from the Escrow Fund immediately after the Working
Capital on the Closing Date Balance Sheet is determined final or
(ii) if such Overstatement is more than $100,000, then each of the
Sellers shall pay its or his pro rata amount of the Overstatement
based on the percentages set forth in Schedule 1.4(c) to Buyer
within thirty (30) days after the Working Capital on the Closing
Date Balance Sheet is determined final.
Section 1.6 Tax Characterization. Buyer and the Sellers acknowledge
that the sale of the Units contemplated hereunder is, and shall be treated as a
purchase of the assets of the Company by Buyer for federal, state, local and
foreign income Tax purposes. Buyer and each Seller shall file all of their
respective income Tax Returns in connection therewith in a manner consistent
with such treatment and shall take no position contrary thereto unless required
to do so by applicable Tax laws.
Section 1.7 Allocation. Schedule 1.7 sets forth an allocation of the
Purchase Price (and all other capitalized costs) among the assets of the Company
in accordance with Section 1060 of the Code and the Treasury regulations
thereunder (and any similar provision of state, local or foreign law, as
appropriate). Buyer and the Sellers shall report, act and file Tax Returns
(including, but not limited to IRS Forms 8594) in all respects and for all
purposes
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consistent with Schedule 1.7. Neither Buyer nor any Seller shall take any
position (whether in audits, Tax Returns or otherwise) which is inconsistent
with such allocation unless required to do so by applicable law.
Section 1.8 Payment of Bank Borrowings and Cash Distribution to the
Sellers. Immediately prior to the Closing, the Sellers will cause the Company
(a) first, to pay in full all borrowings under the Company's line of credit and
bank installment loans ("Bank Facility") set forth on Schedule 1.8 and (b)
second, to pay the Sellers an amount in the aggregate equal to the Seller's good
faith estimate of the consolidated Cash of the Company in excess of $300,000 as
of the Closing. The Sellers may cause the Company to make any such payment to
them in the form of a distribution or any other similar transaction.
ARTICLE II
THE CLOSING
Section 2.1 The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place on the 29th day
of June 2004 at 10:00 a.m. New York City time following the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
the Parties may mutually determine (the "Closing Date").
Section 2.2 Deliveries at the Closing. Subject to the terms and
conditions set forth herein, at the Closing:
(a) Buyer shall pay the Purchase Price less the Escrow
Amount to the Sellers in accordance with Section 1.4(a);
(b) Buyer shall deposit the Escrow Amount with the Escrow
Agent in accordance with Section 1.4(a)
(c) Buyer will deliver to the Sellers (i) the various
certificates, instruments and documents referred to in Section 7.2,
and (ii) such other documents required to effect the transactions
contemplated hereby as the Sellers may reasonably request in form
and substance reasonably satisfactory to the Sellers and consistent
with the provisions of this Agreement; and
(d) The Company and/or the Sellers, as the case may be, will
deliver to Buyer (i) the various certificates, instruments and
documents referred to in Section 7.1, (ii) all books and records of
the Company and (iii) such other documents required to effect the
transactions contemplated hereby as Buyer may reasonably request in
form and substance reasonably satisfactory to Buyer and consistent
with the provisions of this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Representations and Warranties of the Company. The Company
represents and warrants to Buyer as follows, except as otherwise disclosed in
the Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this Article
III; provided, however, that a matter disclosed in reference to any particular
section or subsection will be deemed to be disclosed for purposes of any other
section or subsections of this Article III, if the matter is disclosed in such a
way to make its relevance to such other sections or subsections reasonably
apparent.
Section 3.1 Organization and Corporate Power. The Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and is qualified to do business in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be qualified. Schedule 3.1 lists all of the jurisdictions in
which the Company is qualified to do business as a foreign company. The Company
has full power and authority and all licenses, permits and authorizations
necessary to own, lease and operate its properties and business and to conduct
its business.
Section 3.2 Authorization of Transactions. The Company has full
limited liability company power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
has been authorized by all requisite action on the part of the Company, no other
proceedings on the part of the Company are necessary to approve and authorize
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, and this Agreement constitutes the valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms and conditions, subject to the effect of bankruptcy,
insolvency, reorganization or other similar laws and to general principles of
equity (whether considered in proceedings at law or in equity (collectively,
"Bankruptcy Exceptions")).
Section 3.3 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (A) violate any statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any government, governmental
agency, or court to which the Company is subject, (B) violate any provision of
the Operating Agreement or other constitutive documents or (C) conflict with,
result in a breach of, or constitute a default under, any agreement, contract,
lease, license, instrument or other arrangement to which the Company is a party
or by which the Company is bound, except for any such violations, breaches or
defaults that could not reasonably be expected to have a Material Adverse
Effect. The Company is not required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency or any other Person in order for the Parties to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement, except for any notice, filing, authorization, consent or approval the
absence of which could not reasonably be expected to have a Material Adverse
Effect.
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Section 3.4 Insider Interests. No officer, director, member or, to
the Company's knowledge Affiliate of the Company and, to the knowledge of the
Company, no relative of such an officer, director, member or Affiliate has any
agreement with the Company or any interest in any property (real, personal or
mixed, tangible or intangible) used by or pertaining to the Company, except
solely as a member or Affiliate or employee.
Section 3.5 Brokers' Fees. Except with respect to Xxxxxx Xxxxxx
Partners, the Company has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement. The fees and expenses owed Xxxxxx Xxxxxx
Partners in connection with the transactions contemplated hereby shall be paid
by the Sellers and not the Company.
Section 3.6 Capitalization. Schedule 3.6 lists the legal and
beneficial owners of Units in the Company, and no other Units or equity
interests in the Company have been authorized, have been issued or are
outstanding. There are no subscription rights or other agreements or commitments
to which the Company is a party or which are binding upon the Company providing
for the issuance, disposition or acquisition of any equity interest in the
Company (other than this Agreement). There are no voting trusts, proxies or
other agreements or understandings the respect to the voting of any equity
interests in the Company. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
equity interests in the Company.
Section 3.7 Subsidiaries and Investments. Schedule 3.7 lists all
Subsidiaries. Other than the Subsidiaries, the Company does not own, directly or
indirectly, any stock, partnership interest, limited liability company interest
or other security or ownership interest in, or any security issued by, any other
Person.
Section 3.8 Financial Statements. Attached hereto as Schedule 3.8
are the following financial statements (collectively the "Financial
Statements"): (i) audited balance sheets and statements of income as of and for
the year ended December 31, 2003, 2002 and 2001 for the Company, and (ii)
unaudited balance sheet and statement of income (the "Recent Financial
Statements") as of and for the three months ended March 31, 2004. The Financial
Statements have been prepared in accordance with GAAP throughout the periods
covered thereby and present fairly the financial condition of the Company as of
such dates and the results of operations and cash flows of the Company for such
periods; provided that the Recent Financial Statements do not contain footnotes
and are subject to normal year-end and audit adjustments. The unaudited balance
sheet of the Company as of March 31, 2004 is referred to herein as the "Latest
Balance Sheet".
Section 3.9 Events Subsequent to the Latest Balance Sheet. Since the
date of the Latest Balance Sheet, there has not been any material adverse change
in the business, assets, financial condition, or operating results of the
Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").
Since that date:
(a) the Company has not sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than
inventory in the ordinary course of
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business and assets having an aggregate fair market value not in
excess of $100,000
(b) the Company has not entered into any transaction with
any of its directors, officers, employees or Affiliates or any third
party other than in the ordinary course of business and other than
transactions involving amounts that do not exceed $50,000 in the
aggregate per annum;
(c) there has not been any other occurrence, event, or
transaction outside the ordinary course of business involving the
Company and which is material and adverse;
(d) the Company has not redeemed or purchased, directly or
indirectly, any of its equity securities or declared or paid any
distributions;
(e) the Company has not issued, sold or transferred any of
its equity securities;
(f) the Company has not borrowed any amount or issued or
exchanged any notes or other evidences of any Indebtedness or
incurred or become subject to any obligations or liabilities
(whether absolute or contingent), except under the Company's bank
agreement and current liabilities incurred in the ordinary course of
business consistent with past practice; and
(g) the Company has not agreed to do any of the foregoing.
Section 3.10 Absence of Undisclosed Liabilities. The Company has no
liability (whether absolute or contingent, and whether accrued or unaccrued),
except for (a) liabilities reflected on the Latest Balance Sheet, (b)
liabilities under this Agreement and agreements, contracts, purchase orders and
other similar arrangements set forth on Schedule 3.10 attached hereto, (c)
liabilities incurred in the ordinary course of business consistent with past
practice and (d) liabilities under unclaimed property or escheat laws which will
not exceed $25,000 in the aggregate (none of which, alone or in the aggregate,
will have a Material Adverse Effect).
Section 3.11 Legal Compliance. The Company has complied and is in
compliance with all applicable laws, rules and regulations, except where failure
to so comply would not have a Material Adverse Effect, and no action, suit,
proceeding, hearing, investigation, complaint, claim, demand, or notice has been
filed or pending, or to the Company's knowledge threatened, against the Company
alleging any failure to so comply.
Section 3.12 Title to Assets. The Company owns good and marketable
title, free and clear of all Liens (other than Liens for current taxes not yet
due and payable) to all of the properties and assets reflected on the Latest
Balance Sheet, except for the properties and assets which have been disposed of
in the ordinary course of business and the properties leased by the Company. To
the Company's knowledge, the facilities, machinery, equipment and other tangible
assets of the Company are in good operating condition and repair (except
ordinary wear and tear), are fit for their particular purpose, and are usable in
the ordinary course of business.
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The Company owns or leases under valid leases all of the assets necessary to
allow the Company to conduct its business as it is currently conducted in all
material respects.
Section 3.13 Title to Property.
(a) The Company owns no real property.
(b) Schedule 3.13 sets forth a list of all of the leases and
subleases ("Leases") and each leased and subleased parcel of real property
in which the Company has a leasehold and subleasehold interest (the
"Leased Real Property"). Each of the Leases is in full force and effect
and the Company holds a valid and existing leasehold or subleasehold
interest under each of the Leases. With respect to each Lease: (i) subject
to Bankruptcy Exceptions, the Lease is legal, valid, binding, enforceable
and in full force and effect; (ii) subject to Bankruptcy Exceptions, the
Lease will continue to be legal, valid, binding, enforceable and in full
force and effect following the Closing; and (iii) neither the Company nor,
to the Company's knowledge any other party to the Lease is in breach or
default, and no event has occurred which, with notice or lapse of time,
would constitute such a breach or default or permit termination,
modification or acceleration under the Lease.
Section 3.14 Tax Matters. (a) The Company has timely filed all Tax
Returns which are required to be filed and has paid all Taxes due and payable by
the Company on such Tax Returns or otherwise, except where the failure to file
such Tax Returns or to pay such Taxes would not have a Material Adverse Effect;
(b) all such Tax Returns are true, complete and accurate in all material
respects; (c) the Company has made available to Buyer copies of all such Tax
Returns for taxable periods ended on or after December 31, 2000; (d) no action,
suit, proceeding or audit regarding Taxes is now in progress or proposed in
writing against the Company; (e) the Company has not requested or been granted
an extension of the time for filing any Tax Return which has not yet been filed;
(f) the Company has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency;
(g) the Company has withheld and paid all Taxes required to have been withheld
and paid, including Taxes withheld and paid in connection with amounts paid or
owing to any member, employee, independent contractor, creditor or other third
party; (h) the Company is not a party to any Tax sharing or similar agreement;
and (i) the Company has been treated as a partnership and not as an association
taxable as a corporation for federal income tax purposes since its inception.
Schedule 3.14 sets forth a list of all states and foreign countries in which the
Company files Tax Returns.
Section 3.15 Intellectual Property.
(a) Schedule 3.15 contains a complete and accurate list of
all (1) patented or registered Intellectual Property Rights owned, filed
or used by or on behalf of the Company, (2) pending patent applications
and applications for registrations of other Intellectual Property Rights
filed by the Company, (3) trade names and corporate names and unregistered
trademarks and service marks owned or used by the Company, (4) computer
software owned and/or used by the Company (other than mass-marketed
software with a license fee of less than $50,000), and (5) licenses or
similar agreements
- 9 -
or arrangements for Intellectual Property Rights to which the Company is a
party, either as licensee or licensor. The loss or expiration of any
Intellectual Property Right or related group of Intellectual Property
Rights owned or used by the Company or any of its Subsidiaries would not
reasonably be expected to have a Material Adverse Effect.
(b) (1) The Company owns or has a license to use all of
the Intellectual Property Rights necessary for the operation of the
business of the Company as such business is currently conducted, except
for any failure to so own or have a license to use that could not
reasonably be expected to have a Material Adverse Effect, (2) no claim by
any third party contesting the validity, enforceability, use or ownership
of any of the Intellectual Property Rights has been received by the
Company or is outstanding or, to the Company's knowledge, threatened, and
(3) the Company has not received any notices of any alleged infringement
or misappropriation by any third party with respect to the Intellectual
Property.
Section 3.16 Contracts and Commitments. Schedule 3.16 sets forth a
list of all material contracts of the Company (each, a "Material Contract").
Other than the Material Contracts, the Company is not a party to or bound by,
whether written or oral any:
(a) (i) contract for the employment of any officer,
individual employee, or other person or entity on a full-time,
part-time, consulting or other basis or (ii) agreement relating to
loans to or from officers, directors or Affiliates;
(b) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging or otherwise placing a Lien on
any asset or group of assets of the Company;
(c) guarantee of any obligation for borrowed money or
otherwise;
(d) agreement with respect to the lending or investing of
funds;
(e) lease or agreement under which it is lessee of or holds
or operates any property, real or personal, owned by any other
party;
(f) lease or agreement under which it is lessor of or
permits any third party to hold or operate any property, real or
personal, owned or controlled by it;
(g) assignment, license, indemnification or agreement with
respect to any form of intangible property, including any patent,
trademark, trade name, copyright, know-how, trade secret or
confidential information;
(h) except for purchase orders for inventory in the ordinary
course of business, contract or group of related contracts with the
same party for the purchase or sale of products or services or for
future expenditures of the Company in excess of $100,000;
- 10 -
(i) contract relating to the distribution, marketing or
sales of its products other than purchase orders, customer orders
and contracts involving aggregate consideration in any 12-month
period of less than $100,000; and
(j) any other agreement not entered into in the ordinary
course of business which obligates the Company in excess of $50,000
per annum or has a term remaining beyond one year from the Closing
Date.
Subject to Bankruptcy Exceptions, each Material Contract is, and will continue
to be immediately following the Closing, legal, valid, binding, enforceable and
in full force and effect. The Company, and to the Company's knowledge each other
party to the Material Contract, has performed all obligations required to be
performed by it and is not in default under or in breach of nor in receipt of
any claim of default or breach under any Material Contract, except for any such
nonperformance, breach or default that could not reasonably be expected to have
a Material Adverse Effect; and to the Company's knowledge no event has occurred
which with the passage of time or the giving of notice would result in a
default, breach or event of noncompliance under any such agreement and would
allow any other party to such agreement to terminate, modify or accelerate any
rights under any such agreement.
Section 3.17 Insurance. Schedule 3.17 lists each insurance policy
maintained by the Company with respect to its properties, assets and business.
All of such insurance policies are in full force and effect, the Company has
paid all premiums due thereon through the date of this Agreement and through the
Closing Date, and the Company is not in default with respect to its obligations
under any of such insurance policies and has not received any notification of
cancellation of any of such insurance policies. All insurance policies
applicable to the matters described in Schedule 3.17 will continue to be made
available to the Company following the Closing.
Section 3.18 Litigation. Other than routine, immaterial claims by
customers relating to customer purchases, there are no claims actions, suits,
proceedings, orders, governmental investigations or inquiries or claims pending
or, to the Company's knowledge, threatened against the Company, the Company's
assets or the equity interests of the Company, before or by any court,
governmental department, commission, board, bureau, agency or instrumentality.
The Company is in compliance with all of its obligations under any settlement
agreements pertaining to litigation settled by the Company within the last three
years, except for any non-compliance of such obligations that could not
reasonably be expected to have a Material Adverse Effect.
Section 3.19 Employees.
(A) The Company has complied and is in compliance in all material
respects with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes, and (B) to the Company's
knowledge no current or former employee of the Company has any claim against the
Company for (x) overtime pay, wages, salary or bonus, excluding current payroll
periods; (y) vacation time, excluding time earned in the current payroll
periods; or (z) any violation of any statute, ordinance or regulation relating
to wages, maximum hours or other
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terms or conditions of employment of such employee, including, without
limitation, any claim, or basis thereof for any action or proceeding against the
Company relating to an unfair labor practice, discrimination in employment,
sexual harassment or occupational and health safety standards. There is not now
pending any charge or complaint against the Company or any of the Company's
employees, officers or directors by the National Labor Relations Board, any
state or local labor or employment agency or any representative thereof.
Section 3.20 Employee Benefits. Neither the Company nor any
Affiliates has at any time maintained, contributed to or had any liability
(under or with respect to) and does not currently maintain, contribute to or
have any liability under (or with respect to): (A) any written or oral "employee
benefit plan," as such term is defined in Section 3(3) of ERISA, whether or not
terminated; (B) any written or oral deferred compensation, retirement,
severance, equity, bonus, incentive, fringe benefit, or other employee welfare
plan, program, policy or arrangement of any kind, whether or not terminated; or
(C) any Multiemployer Plan with respect to any employee, officer, director or
consultant of the Company. The Company has timely filed all Form 5500s, which
are required to be filed. Schedule 3.20 hereto contains an accurate and complete
list of each collective bargaining agreement and each other written or oral
agreement, arrangement or policy of any kind with or for the benefit of any
employee, officer, director or consultant of the Company (including, without
limitation, each employment agreement) with respect to which the Company has any
liability.
Section 3.21 Environmental, Health and Safety Matters.
(a) The Company has complied and is in compliance, in all
material respects, with all Environmental and Safety Requirements.
(b) Without limiting the generality of the foregoing, the
Company has, in all material respects, obtained and complied with, and is
in compliance with, all permits, licenses and other authorizations that
may be required pursuant to Environmental and Safety Requirements for the
occupation of its facilities and the operation of its business.
(c) The Company has not received any written notice, report
or other information regarding any actual or alleged violation of
Environmental and Safety Requirements or any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective
obligations, relating to the Company or its facilities and arising under
Environmental and Safety Requirements.
Section 3.22 Suppliers. Schedule 3.22 lists the ten largest
suppliers of the Company during the twelve-month period ended December 31, 2003.
No such supplier has terminated or materially reduced its business with the
Company in the last 12 months, which reduction could reasonably be expected to
have a Material Adverse Effect. The Company has not received, and has no
knowledge of, any notice that any such supplier intends to terminate or
materially reduce its business with the Company.
- 12 -
Section 3.23 Inventory. All inventory of the Company is new and
saleable (other than used inventory which is clearly identified as such and
damaged inventory which the Company can return to suppliers or otherwise obtain
credit) in the ordinary course of business and is not obsolete, subject to
adequate reserves which have been provided in the Financial Statements. The
present quantity and quality of inventory is reasonable and adequate to conduct
the Company's business in the ordinary course consistent with past practice. The
Company's inventory in the Latest Balance Sheet is valued at the lower of cost
or fair market value, all in accordance with GAAP consistently applied.
Section 3.24 Customer List. Schedule 3.24 sets forth a complete and
accurate list in all material respects of the number of multi- and single-buyer
customers who have purchased merchandise from the Company for the periods
indicated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Representations and Warranties of the Sellers. Each of the Sellers,
severally and not jointly, represents and warrants to Buyer as follows:
Section 4.1 Organization of the Sports Capital Entities and
Enterprises. Such Seller that is not an individual is a corporation, partnership
or limited liability company duly organized, validly existing, and in good
standing under the laws of the States of Delaware or Kansas, as the case may be.
Section 4.2 Authorization of Transaction. Such Seller has full power
and authority to execute and deliver this Agreement and to perform its or his
obligations hereunder. The execution and consummation of the transactions
contemplated hereby have been duly authorized by all requisite action on the
part of the Sports Capital Entities and Enterprises. This Agreement constitutes
the valid and legally binding obligation of such Seller, enforceable against
such Seller in accordance with its terms, subject to Bankruptcy Exceptions.
Section 4.3 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which such Seller is subject, (b) violate any
provision of any organizational document of the Sports Capital Entities or
Enterprises or (c) conflict with, result in a breach of, constitute a default
under any agreement, contract, lease, license, instrument, or other arrangement
to which such Seller is a party or by which it or he is bound or to which any of
its or his assets is subject.
Section 4.4 Brokers' Fees. Except with respect to Xxxxxx Xxxxxx
Partners, such Seller has no liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
Section 4.5 Title to Membership Interests. Such Seller has good and
marketable title to the Membership Interests owned by such Seller as set forth
in this Agreement, free and clear of all Liens.
- 13 -
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Representations and Warranties of Buyer. Buyer represents and
warrants to the Sellers as follows:
Section 5.1 Organization of Buyer. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
Section 5.2 Authorization of Transaction. Buyer has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and consummation of the transactions contemplated
hereby have been duly authorized by all requisite action on the part of Buyer.
This Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to Bankruptcy
Exceptions.
Section 5.3 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
organizational documents or (b) conflict with, result in a breach of, constitute
a default under any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to which any of
its assets is subject.
Section 5.4 Brokers' Fees. Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement, other than Xxxx Capital, LLC.
Section 5.5 Available Funds. Buyer has sufficient cash on-hand or
available through its credit facility to fund the Purchase Price.
Section 5.6 Investment. Buyer is not acquiring the Units with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933, as amended.
ARTICLE VI
COVENANTS
Section 6.1 Affirmative Covenants Concerning the Company. Following
the date hereof and at all times prior to the Closing Date, the Company shall:
(a) (i) conduct the Company's business in the ordinary
course of business and (ii) preserve intact the Company's business
organization, Intellectual Property Rights, contracts, licenses,
permits and authorizations;
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(b) maintain the Company's cash management practices,
maintain the Company's policies, practices and procedures with
respect to collection of trade receivables and pay vendors in
accordance with its normal payment terms consistent with past
practice, in each case, in the ordinary course of business;
(c) comply in all material respects with all legal
requirements and contractual obligations applicable to or binding
upon the Company or relating to the Company's business or assets;
and
(d) use the Company's reasonable efforts to satisfy each of
the Closing conditions expressly set forth in Section 7.1 as soon as
practicable.
Section 6.2 Negative Covenants Concerning the Company. Following the
date hereof and at all times prior to the Closing Date (except as otherwise
provided in this Agreement), the Company shall not:
(a) mortgage, pledge or subject to any Lien (except those
for Taxes not yet due and payable) any of the Company's assets;
(b) terminate or in any way encourage the resignation of any
key employee for any reason other than such employee's gross
negligence or willful misconduct;
(c) enter into any agreements (i) for the purchase of goods
for consideration in excess of $100,000 other than purchase orders
for inventory in the ordinary course of business, or (ii) any
contract for the purchase of equipment in excess of $50,000, in each
case without obtaining the prior written approval of Buyer;
(d) issue or authorize the issuance of, or purchase or
propose the purchase of, any equity interests of the Company, or
declare, pay, make or otherwise effectuate any cash distributions or
any distributions, redemptions or other transactions involving the
Company's equity interests;
(e) take any action or inaction which would result in the
representations and warranties contained in Article 3 or elsewhere
in this Agreement or in any schedule, attachment or exhibit hereto
or in any certificate delivered by the Sellers to Buyer to not be
true and correct in all respects as of the Closing; or
(f) enter into any commitment to do any of the foregoing.
Section 6.3 Certain Other Covenants.
(a) Reasonable Access. At all times prior to the Closing
Date, the Company will permit Buyer, Buyer's Affiliates, and their
respective employees, accountants, legal counsel and other
representatives to have reasonable access (at reasonable times, upon
reasonable notice, through coordination with a
- 15 -
representative of Xxxxxx Xxxxxx Partners and in a manner so as not
to interfere with the normal business operations of the Company) to
the premises, properties, personnel, books, records, contracts, Tax
records, and documents of or pertaining to the Company and its
business, as is reasonably necessary to consummate the transactions
contemplated herein.
(b) Notice of Developments. At all times prior to the
Closing Date, (i) each of the Company and the Sellers will give
prompt written notice to Buyer of the occurrence or non-occurrence
of any event which is likely to cause any representation or warranty
of the Company or such Seller, respectively, contained in this
Agreement to be untrue or inaccurate in any material respect at or
prior to the Closing Date and (ii) each Party will give prompt
written notice to the other of any development adversely affecting
the ability of the notifying Party to consummate the transactions
contemplated by this Agreement. No disclosure by any Party pursuant
to this Section 6.3(b)(ii) shall be deemed to amend or supplement
the schedules attached hereto delivered by such Party or to prevent
or cure any misrepresentation, breach of warranty, or breach of
covenant by such Party.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to Closing Obligations of Buyer. The
obligation of Buyer to consummate the transactions contemplated hereby is
subject to satisfaction at or prior to the Closing Date of the following
conditions:
(a) the representations and warranties of the Company set
forth in Article 3 and of the Sellers set forth in Article 4 shall
be true and correct in all material respects, in each case at and as
of the Closing Date, as though the Closing Date were substituted for
the date hereof throughout such representations and warranties,
except for representations and warranties that are made by their
terms as of a specified date, which shall be true and correct as of
a specified date, and except for changes contemplated by this
Agreement;
(b) each of the Sellers and the Company shall have performed
and complied in all material respects with all of their respective
covenants and agreements set forth in this Agreement through the
Closing Date;
(c) all governmental or third party filings, licenses,
consents, authorizations, waivers and approvals that are required to
be made or obtained for and the transactions contemplated hereby
will have been duly made and obtained;
(d) as of the Closing Date, no suit, action or proceeding
before any court or administrative agency shall be pending wherein
any adverse judgment, decree, order or injunction would (i) prevent
the consummation of the transactions contemplated by this Agreement,
(ii) cause any of such transactions to be
- 16 -
rescinded following consummation of the transactions contemplated by
this Agreement, or (iii) materially and adversely affect the right
of the Company to operate or control the Company's business or
assets;
(e) as of the Closing Date, the Company shall have Cash on
hand of $300,000 after paying in full all borrowings under the Bank
Facility;
(f) the Professional Services Agreement, dated as of October
14, 1999, by and between Sports Capital Partners, L.L.C. and the
Company shall have been terminated;
(g) each of (i) Senior Management Agreement, dated as of
October 14, 1999, by and between Xxxx X. Xxxxxx and the Company,
(ii) Senior Management Agreement, dated as of October 14, 1999, by
and between R. Xxxxxxx Xxxxxx and the Company, and (iii) Senior
Management Agreement, dated as of October 14, 1999, by and between
Xxxxxxx X. Xxxxxx and the Company shall have been terminated;
(h) each of the Founders shall have entered into an
employment agreement with the Company, substantially in the form of
Exhibit 7.1(h) (the "Employment Agreement");
(i) the Company shall have delivered to Buyer (i) a
certificate signed by an officer of the Company and each of the
Sellers to the effect that each of the conditions specified above in
subsections (a) - (g), inclusive, are satisfied in all respects; and
(ii) an opinion of counsel for the Company and the Sellers in the
form attached hereto as Exhibit 7.1(i); and
(j) the suppliers listed on Schedule 3.22 and The Golf
Channel shall have indicated their intention to continue their
relationship with the Company after the Closing.
Section 7.2 Conditions to Closing Obligations of the Sellers. The
obligation of the Sellers to consummate the transactions contemplated hereby is
subject to satisfaction at or prior to the Closing Date of the following
conditions:
(a) Buyer's representations and warranties set forth in
Article 5 shall be true and correct in all material respects, in
each case at and as of the Closing Date, as though the Closing Date
were substituted for the date hereof throughout such representations
and warranties, except for representations and warranties that are
made by their terms as of a specified date, which shall be true and
correct as of a specified date and except for changes contemplated
by this Agreement;
(b) Buyer shall have performed and complied in all material
respects with all of its covenants and agreements set forth in this
Agreement through the Closing Date;
- 17 -
(c) all governmental or third party filings, licenses,
consents, authorizations, waivers and approvals that are required to
be made or obtained for and the transactions contemplated hereby
will have been duly made and obtained;
(d) Buyer shall have delivered to the Company a certificate
signed by an officer of Buyer to the effect that each of the
conditions specified in subsections (a) and (b) are satisfied in all
respects and;
(e) Buyer shall have sufficient cash on hand or available
under its credit facility to fund the Purchase Price.
All actions to be taken by any Party in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to the other Party. Any Party
may waive any condition to such Party's obligation, in whole or in part,
specified in this Article 7 if or he executes a writing so stating at or prior
to the Closing Date; provided, however, that consummation of the Closing by a
Party prior to the satisfaction of any closing condition in this Article 7 shall
not operate as a waiver of any indemnification rights such Party may otherwise
have hereunder as a result of any breach of any representation, warranty or
covenant of any other Party contained.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. The Parties may terminate this Agreement as
provided below:
(a) Buyer and the Sports Capital Entities may terminate this
Agreement on behalf of all Sellers by mutual written consent at any
time prior to the Closing.
(b) Buyer may terminate this Agreement by giving written
notice to the Sellers at any time prior to the Closing Date in the
event the Sellers are in material breach of any representation,
warranty, covenant or closing condition contained in this Agreement
and such breach has not been cured within thirty (30) days after
notice of such breach.
(c) The Sports Capital Entities may terminate this Agreement
on behalf of all Sellers by giving written notice to Buyer at any
time prior to the Closing Date in the event Buyer is in material
breach of any representation, warranty, covenant or closing
condition contained in this Agreement and such breach has not been
cured within thirty (30) days after notice of such breach.
(d) Buyer may terminate this Agreement at any time prior to
the Closing Date if the Closing shall not have occurred on or prior
to the close of business on July 15, 2004 as a result of the
non-satisfaction of the conditions set forth in Section 7.1;
provided that Buyer is not in material breach of any of its
- 18 -
representations, warranties or covenants contained in this
Agreement; and provided, further, that Buyer will not be entitled to
terminate this Agreement pursuant to this Article 8 if Buyer's
willful or knowing breach of this Agreement has prevented the
consummation of the transactions contemplated hereby.
(e) The Sports Capital Entities may terminate this Agreement
on behalf of all Sellers by giving written notice to Buyer at any
time prior to the Closing Date if the Closing shall not have
occurred on or before the close of business on July 15, 2004 as a
result the non-satisfaction of the conditions set forth in Section
7.2; provided that the Sellers are not in material breach of any of
its representations, warranties or covenants contained in this
Agreement; and provided, further, that the Sports Capital Entities
will not be entitled to terminate this Agreement pursuant to this
Article 8 if the Sellers' willful or knowing breach of this
Agreement has prevented the consummation of the transactions
contemplated hereby.
Section 8.2 Effect of Termination. If any Party terminates this
Agreement pursuant to Section 8.1, all obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided, however, that Articles
9, 11 and 12 and the Non Disclosure Agreement shall survive such termination.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
Section 9.1 Survival. All representations, warranties, covenants and
agreements set forth in the this Agreement or in any certificate or other
writing delivered in connection with this Agreement shall survive the Closing
and the consummation of the transactions contemplated hereby notwithstanding any
examination made for or on behalf of any Party provided that (i) the
representations and warranties contained in Section 3.14 and Section 3.21 shall
survive until 30 days following the expiration of the applicable statute of
limitations for third-party or governmental claims in respect thereof, (ii) the
representations and warranties contained in Section 3.2, Section 3.5 and Section
4.5 shall survive indefinitely and (iii) all other representations and
warranties contained in Article 3 shall terminate at midnight, New York City
time, 18 months following the Closing Date except to the extent that a claim has
been made by the Buyer Parties in respect of a breach thereof on or prior to
such date.
Section 9.2 Indemnification by the Sellers. The Sellers shall
severally, and not jointly, indemnify Buyer and its Affiliates, officers,
directors, employees, agents, representatives, successors and permitted assigns
(collectively, the "Buyer Parties") and shall hold each of them harmless from
and against and pay on behalf of or reimburse such Buyer Parties in respect of
any loss (including, without limitation, diminution in value), liability,
demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty,
fine or expense, whether or not arising out of third party claims (including,
without limitation, interest, penalties, reasonable attorneys' fees and
expenses, court costs and all amounts paid in investigation, defense or
settlement of any of
- 19 -
the foregoing) (collectively, "Losses") which any such Buyer Party may suffer,
sustain or become subject to, as a result of, in connection with, relating or
incidental to or by virtue of:
(a) the breach of any representation or warranty of
the Sellers or the Company contained in this Agreement or any schedule or
exhibit hereto;
(b) the breach of any covenant or agreement of the
Sellers or the Company contained in this Agreement; or
(c) the assertion or recovery against any of the Buyer
Parties of any liability or obligation of the Company or the Sellers for
Taxes for any period or portion thereof ending on or before the Closing
Date.
Notwithstanding the foregoing, the obligation of the
Sellers to provide indemnification pursuant to this Section 9.2 shall be
subject to the following limitations:
(i) The Sellers shall have no obligation to provide
indemnification unless the Losses exceed $250,000 in the aggregate
(in which event the Sellers shall provide indemnification for all
such Losses);
(ii) The Sellers' total liability pursuant to this
Section 9.2 for Losses shall be limited to $4,000,000 and each
Seller's individual liability (in the aggregate not per individual
claim) shall not exceed such Seller's pro rata share of such Losses
based upon the percentage of the Purchase Price received by such
Seller;
(iii) No Seller shall be liable for any Losses arising
from the breach of any representation or warranty of any other
Seller contained in Article 4; and
(iv) the amount of Losses for which indemnification is
provided under this Section 9.2 shall be offset by (A) amounts that
are reimbursable by insurance and (B) any Tax benefits realized from
the Loss in the year such Loss is realized. After the Closing, the
indemnity provisions contained in this Section 9.2 shall be the
Buyer Parties' sole and exclusive remedy for breaches of this
Agreement. Buyer agrees to use commercially reasonable efforts to
make any claims for insurance, Tax benefits and/or indemnification
available from a third party(ies) with respect to Losses for which
it will seek indemnification hereunder and to diligently pursue such
claims in good faith. If any such insurance proceeds and/or other
amounts are received by any Buyer Party of any amount otherwise
required to be paid to any Buyer Party pursuant to this Section 9.2,
Buyer shall repay to the Sellers, promptly after receipt of such
insurance proceeds and/or other amounts, the amount that the Sellers
would not have had to pay pursuant to this Section 9.2 had such
insurance proceeds and/or other amounts been received by the Buyer
Parties prior to such Sellers' payment under this Section 9.2.
(v) Nothing contained herein shall prevent Buyer from
bringing, and the time limitations set forth in Section 9.1 shall
not apply to, a claim for fraud or willful misconduct against the
Sellers.
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(vi) To the extent that the Sellers have any obligation
or liability pursuant to this Section 9.2, such obligation or
liability shall be discharged solely through the Escrow Fund (to the
extent then available) in accordance with the Escrow Agreement and
this Agreement.
Section 9.3 Indemnification by Buyer. Buyer shall indemnify the
Sellers, and their respective Affiliates, officers, directors, members,
employees, agents, representatives, successors and permitted assigns
(collectively, the "Seller Parties") from and against and pay on behalf of or
reimburse such Seller Parties in respect of any Loss which any Seller Party may
suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of: (i) the breach of any representation
or warranty of Buyer contained in this Agreement or any schedule or exhibit
hereto and (ii) the breach of any covenant or agreement of Buyer contained in
this Agreement.
Section 9.4 Third-Party Claims.
(a) Procedures. In the event any demands or claims are
asserted against a Buyer Party or any actions, suit or proceedings are
commenced against a Buyer Party for which the Sellers are obligated to
indemnify such Buyer Party under Section 9.2, then Buyer shall give prompt
notice thereof to the Sellers in order to permit the Sellers the necessary
time to evaluate the merits of such demand, claim, action, suit or
proceeding. The Sellers shall have the right, but not the obligation, to
assume the defense of any such claim. In the event the Sellers do not
notify Buyer that they are assuming the defense of such claim within
thirty (30) days after receipt of notice of the claim from Buyer, Buyer
shall, and shall cause the Buyer Parties to, at the Sellers' expense
vigorously defend any actions, suits or proceedings that are subject to
indemnification pursuant to Section 9.2 with counsel reasonably acceptable
to the Sellers, unless the Sellers have authorized settlement of such
action, suit or proceeding. Buyer, if the Sellers have assumed the defense
of such claim, or the Sellers, if they have not assumed the defense of
such claim, shall be entitled to participate in the defense of any such
action, with their counsel and at their own expense.
(b) Settlement and Compromise. Neither Buyer nor a Buyer
Party may settle or compromise any demands, claims, actions, suits or
proceedings for which the Buyer Parties have sought indemnification from
the Seller without the Sellers' consent (such consent not to be
unreasonably withheld). The Sellers may not settle or compromise any
demands, claims, actions, suits or proceedings for which the Buyer Parties
have sought indemnification hereunder without Buyer's consent (such
consent not to be unreasonably withheld).
Section 9.5 Objections to Claims for Indemnification. The Sellers
may make a written objection ("Objection") to any claim for indemnification. The
Objection shall be delivered to Buyer within thirty (30) days after delivery of
written notice to Sellers stating that a Buyer Party has incurred Losses.
Section 9.6 Resolution by the Parties. The Parties shall attempt in
good faith to resolve any claim for indemnification to which an Objection is
made.
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Section 9.7 Arbitration. If the Parties are unable to resolve a
claim for indemnification to which an Objection has been made within thirty (30)
days after delivery of the Objection to Buyer (as such period may be extended by
mutual agreement between the Parties), any Party may serve the other with a
written demand for arbitration within ten (10) days of the expiration of such
30-day period, whether or not a court action has been commenced by any party
relating to such dispute, and such demand for arbitration shall be binding on
the parties. Such arbitration shall be held in New York, New York and shall be
conducted before a single arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The arbitrator shall
be chosen by the Sports Capital Entities and Buyer; provided, however, that if
the Sports Capital Entities and Buyer cannot agree on the arbitrator, either the
Sports Capital Entities or Buyer can request that the American Arbitration
Association select the arbitrator. The arbitrator shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrator, to discover relevant information from the opposing
parties about the subject matter of the dispute. The arbitrator shall rule upon
motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a court of
law or equity, should the arbitrator determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator shall be written,
shall be in accordance with applicable law and with this Agreement, and shall be
supported by written findings of fact and conclusions of law which shall set
forth the basis for the decision of the arbitrator. The decision of the
arbitrator regarding any claim for indemnification to which an Objection has
been made shall be binding and conclusive. The Parties agree to complete such
arbitration as expeditiously as reasonably possible.
ARTICLE X
ADDITIONAL AGREEMENTS
Section 10.1 Press Releases. Except as may otherwise be required by
law, the timing and content of all written press releases and other written
public announcements and all written announcements to the Company's customers,
suppliers, licensors or employees relating to the transactions contemplated by
this Agreement shall be jointly prepared and agreed by the Sellers and Buyer.
Section 10.2 Transaction Expenses. The Company shall pay all
expenses incurred by the Company and the Sellers (other than the fees and
expenses of Xxxxxx Xxxxxx Partners in connection with the transactions
contemplated hereby), and Buyer shall pay all expenses incurred by Buyer in
connection with the transactions contemplated hereby (whether consummated or
not).
Section 10.3 Transfers and Other Taxes. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall be paid
by Buyer when due, and Buyer will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees.
- 22 -
Section 10.4 Further Assurances. The Company and the Sellers shall
execute and deliver such further documents and instruments of conveyance and
transfer and take such additional action as Buyer may reasonably request to
effect, consummate, confirm or evidence the transactions contemplated by this
Agreement.
Section 10.5 Transition Assistance. From the date hereof, neither
the Company nor any of the Sellers shall in any manner take or cause to be taken
any action which is designed, intended or might reasonably be anticipated to
have the effect of discouraging customers, employees, suppliers, lessors, and
other associates of the Company from maintaining the same business relationships
with the Company after the date of this Agreement as were maintained with the
Company prior to the date of this Agreement. The Company and the Founders shall
cooperate reasonably with Buyer and the Company to enable Buyer and the Company
to comply with all legal disclosure obligations in respect of periods prior to
the Closing (including, without limitation, in connection with Tax filings,
securities transactions and the like), and shall provide such information or
testimony as may be reasonably requested by Buyer and/or the Company in
connection with any litigation, arbitration, investigation or other proceeding
to the extent related to periods prior to the Closing.
Section 10.6 Certain Tax Matters.
(a) Sellers shall prepare or cause to be prepared and file
or cause to be filed at the Sellers' expense all Tax Returns of the
Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date.
(b) Buyer shall prepare (or cause to be prepared) and file
(or cause to be filed) at the Buyer's expense all Tax Returns of the
Company or relating to the operation of the Company's business or the
ownership of the Company's assets for all periods ending after the Closing
Date. To the extent any Taxes shown due on such Tax Returns are
indemnifiable by the Sellers, (i) such Tax Returns shall be prepared in a
manner consistent with prior practice unless otherwise required by
applicable laws; (ii) Buyer shall provide the Sellers with copies of each
such Tax Return at least 30 days prior to the due date for filing such Tax
Return; and (iii) the Sellers shall have the right to review and approve
(which approval shall not be unreasonably withheld) such Tax Returns for
15 days following the receipt thereof.
(c) Buyer and the Sellers shall promptly notify each other
in writing of any notice of any Tax audits of or assessments against the
Company for any period including or ending prior to the Closing Date. The
failure of one party to notify the other party of any such audit or
assessment shall not relieve the other party of its indemnification
obligations under this Agreement, except to the extent any such failure
actually prejudices the defense of any Tax claim. The Sellers shall, at
their expense and in their discretion, either settle any Tax claim with
respect to any Tax assessed against the Company for any period ending on
or prior to the Closing Date at such time and on such terms as they shall
deem appropriate or assume the entire defense thereof; provided, however,
that the Sellers shall in no event take any position in such settlement or
defense that subjects Buyer or the Company to any civil fraud or any civil
or criminal penalty.
- 23 -
(d) From and after the Closing Date, Buyer and the Sellers
shall each (x) provide the other with such assistance as may reasonably be
requested by the other party in connection with the preparation of any Tax
Return, or the conduct of any audit or other examination by any
governmental entity or judicial or administrative proceedings relating to
liability of the Company for Taxes; (y) retain and provide the other with
any record or other information that reasonably may be relevant to such
Tax Return; and (z) provide the other with adequate information, including
but not limited to any final determination of any such audit or
examination, proceeding or determination that reasonably may be expected
to affect any amount required to be shown on any Tax Return of the other
party for any period.
Section 10.7 Noncompetition, Nonsolicitation and Confidentiality.
(a) For a period beginning on the Closing Date and ending on
the later of (i) two years from the Closing Date and (ii) two years after
the date the Founder ceases to be employed by the Company, Buyer or an
Affiliate of Buyer (the "Noncompete Period"), each of the Founders shall
not, directly or indirectly, either for himself or for any other Person,
permit his name to be used by or Participate in any business or enterprise
that markets, distributes or sells products that are competitive with
those marketed, distributed or sold by the Company by means of direct
marketing (Internet, on-line, catalog, etc.) or through retail stores
(wherever located) (the "Competitive Activities"). For purposes herein,
the term "Participate" includes any direct or indirect interest in any
enterprise, whether as an officer, director, employee, partner, member,
sole proprietor, agent, representative, independent contractor,
consultant, franchisor, franchisee, creditor, owner or otherwise.
(b) During the Noncompete Period, each of the Founders shall
not, directly or indirectly (i) induce or attempt to induce any employee
of the Company or its Affiliates to leave their employ or in any way
interfere with the relationship between the Company or its Affiliates and
any of their employees or actually hire any of their employees (whether as
an employee, consultant, independent contractor or otherwise); provided
that if such Founder is terminated by the Company without Cause (as
defined in the Employment Agreement), the foregoing shall not apply to the
Founder's siblings, spouse or lineal descendants, or (ii) induce or
attempt to induce any supplier, licensee, licensor, franchisee, or other
business relation of the Company or its Affiliates to cease doing business
with them or in any way interfere with the relationship with the Company
or its Affiliates and any customer or business relation.
(c) Each of the Sellers agrees that he or it shall not,
directly or indirectly, use for his or its own purposes or use for or
disclose to any third party any of confidential information of the Company
without the prior written consent of Buyer or the Company, unless and to
the extent that such confidential information (i) becomes generally known
to and available for use by the public other than as a result of such
Seller's acts or omissions to act; (ii) are rightfully received by such
Seller from a party who was not subject to any obligations of
confidentiality; or (iii) are required by order of a court of competent
jurisdiction (by subpoena or similar process) to be disclosed or discussed
by the Seller (provided that in such case, the Seller shall promptly
inform
- 24 -
Buyer or the Company of such order, shall cooperate with Buyer or the
Company in attempting to obtain a protective order or to otherwise
restrict such disclosure, and shall only disclose such confidential
information to the minimum extent necessary to comply with any such court
order).
(d) The Sellers acknowledge and agree that Buyer's and the
Company's remedy at law for any breach of the Sellers' obligations and
covenants under this Section 10.7 would be inadequate and Sellers agree
that temporary and permanent injunctive relief may be granted in a
proceeding brought to enforce any provisions hereof without necessity of
proof of actual damage. Nothing contained herein shall in any way limit or
exclude any and all other rights or remedies granted by law or equity to
Buyer and the Company.
(e) It is understood and agreed that should any portion,
provision or clause of this Section 10.7 be deemed too broad to permit
enforcement to its full extent, then it shall be enforced to the maximum
extent permitted by applicable law, and the Founders hereby consent and
agree that such scope shall be modified by the court in any proceeding
brought to enforce such restriction.
ARTICLE XI
DEFINITIONS
In addition to the other definitions contained herein, the following
definitions shall apply for purposes of this Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Bankruptcy Exceptions" has the meaning set forth in Section 3.2.
"Cash" means cash and cash equivalents (including deposits,
certificates of deposit, marketable securities and short term investments but
excluding restricted cash) calculated in accordance with GAAP applied on a basis
consistent with the preparation of the Financial Statements.
"Class A Units" means a unit representing a fractional part of the
ownership of the Company and having the rights, preferences and obligations
specified with respect to Class A Units in the Operating Agreement.
"Class B Units" means a unit representing a fractional part of the
ownership of the Company and having the rights, preferences and obligations
specified with respect to Class B Units in the Operating Agreement.
"Class C Units" means a unit representing a fractional part of the
ownership of the Company and having the rights, preferences and obligations
specified with respect to Class C Units in the Operating Agreement.
- 25 -
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Company's knowledge" means the actual knowledge of any of the
Founders.
"Environmental and Safety Requirements" means all applicable
foreign, federal, state and local statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Financial Statements" has the meaning set forth in Section 3.8.
"GAAP" means United States generally accepted accounting principles.
"Indebtedness" means, as of any specified date, the Company's
aggregate liabilities and obligations, including, without limitation, any
capitalized leases, indebtedness for borrowed money and guarantees of
indebtedness and any interest, premium or penalty required with respect to
repayment thereof on such date; but excluding trade payables incurred in the
ordinary course of business.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures, (ii) inventions (whether or not patentable and
whether or not reduced to practice), (iii) trademarks, service marks, trade
dress, trade names, logos and corporate names and registrations and applications
for registration thereof together with all of the goodwill associated therewith,
(iv) registered or unregistered statutory and common law copyrights and
copyrightable works and registrations and applications for registration thereof,
(v) mask works and registrations and applications for registration thereof, (vi)
computer software, data, databases and documentation thereof, (vii) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, know-how, manufacturing and production processes
and techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical and computer data, documentation and
software, financial business and marketing plans, customer and supplier lists
and information, marketing materials and all other proprietary rights), and
(viii) copies and tangible embodiments thereof (in whatever form or medium).
"Leases" has the meaning set forth in Section 3.13.
- 26 -
"Leased Real Property" has the meaning set forth in Section 3.13.
"Lien" means any security interest, pledge, bailment (in the nature
of a pledge or for purposes of security), mortgage, deed of trust, the grant of
a power to confess judgment, conditional sales and title retention agreement
(including any lease in the nature thereof), charge, encumbrance or other
similar arrangement or interest in real or personal property.
"Material Adverse Effect" has the meaning set forth in Section 3.9.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of
ERISA.
"Non Disclosure Agreement" means the non-disclosure agreement
between Xxxxxx Xxxxxx Partners and The Sportman's Guide, Inc. dated March 8,
2004.
"Operating Agreement" means the operating agreement of the Company
dated as of October 14, 1999, as amended and supplemented from time to time.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Seller Representative" means the person or entity identified in
writing by the Sports Capital Entities as the Seller Representative under this
Agreement.
"Sports Capital Entities" means Sports Capital Partners, LP., a
Delaware limited partnership, Sports Capital Partners (CEV), LLC, a Delaware
limited liability company, Sports Capital Warehouse, LP., a Delaware limited
partnership and their respective successors and assigns.
"Subsidiary" or "Subsidiaries" means any Person, if the Company (or
another Subsidiary of the Company) (i) serves as a general partner, managing
member, or trustee with respect to such Person, (ii) holds an equity interest in
such Person (directly or indirectly through another Subsidiary or Subsidiaries)
and such Person is not classified as either a corporation or an association
taxable as a corporation for federal income tax purposes, or (iii) owns or
controls directly or indirectly (A) at least a majority (by number of votes) of
the outstanding shares of capital stock (or other shares of beneficial interest)
entitled ordinarily to vote for the election of such Person's directors (or in
the case of a Person that is not a corporation, for those Persons exercising
functions similar to directors of a corporation), or (B) in the case of a Person
other than a corporation, a fifty percent (50%) or greater interest in the
capital and/or profits of such Person.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, natural resources, customs, duties,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not, and
- 27 -
including any express or implied obligation of the Company to indemnify or
otherwise assume or succeed to the Tax liability of any other Person.
"Tax Return" means any return, declaration, report, claim for
refund, information return, or other document, including any related or
supporting schedule, statement, information or attachment, and including any
amendment thereof filed or required to be filed in connection with the
determination, assessment or collection of Taxes of any party or the
administration of any laws, regulations or administrative requirements relating
to any Taxes.
"Working Capital" means the amount of the Company's total current
assets (including Cash) less the amount of the Company's total current
liabilities, calculated in accordance with GAAP.
ARTICLE XII
MISCELLANEOUS
Section 12.1 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns, provided that the provisions in
Article 9 above concerning the Buyer Parties' and Seller Parties' rights to
indemnification are intended for the benefit of the Buyer Parties and the Seller
Parties, respectively.
Section 12.2 Entire Agreement. This Agreement (including the
documents referred to herein and therein) and the Non-Disclosure Agreement
constitutes the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, that may have related in any way to the subject matter hereof. The
Non-Disclosure Agreement shall survive the termination of this Agreement.
Section 12.3 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns; provided that neither the Company nor any
Seller may assign either this Agreement or any of its or his rights, interests,
or obligations hereunder without the prior written approval of Buyer.
Section 12.4 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Section 12.5 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 12.6 Notices. Any notice provided for in this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, when telecopied (with hard copy to follow), one
business day after being deposited with a reputable overnight courier for next
day delivery (charges prepaid), when telecopied (with machine
- 28 -
confirmation of receipt and hard copy to follow) or three business days after
being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notice will be sent to Buyer or the Company,
the Sports Capital Entities, Enterprises, the Founders or the Company (as
applicable) at the address or telecopy number indicated below:
Notices to Buyer:
TGW Acquisition Corporation
000 Xxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx
With a copy (which shall not constitute notice) to:
Xxxxxxxxx, Xxxxxx & Xxxxx P.L.L.
0000 Xxxxxxxxxx Xxxxx XX
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
Notices to the Company, the Sports Capital Entities, the
Founders and/or Enterprises:
The Golf Warehouse, L.L.C.
0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxx X. Xxxxxx
Sports Capital Partners, LP.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxx Xxxxxx
With a copy (which shall not constitute notice) to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxx Xxxxxx
Xxxxxxxx Xxxxxxx LLP
Bank of America Center
000 X. Xxxxxxxx, Xxxxx 000
- 00 -
Xxxxxxx, Xxxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxx XX
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means, but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is received
by the intended recipients. Any Party may change the address or telecopy number
to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Party notice in the manner herein set
forth.
Section 12.7 Governing Law. This Agreement shall be governed by and
construed it accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 12.8 Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 12.9 Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
Section 12.10 Construction. Where specific language is used to
clarify by example a general statement contained herein, such specific language
shall not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. The language used in this
Agreement shall be deemed to be the language chosen by the Parties to express
their mutual intent, and no rule of strict construction shall be applied against
any Party.
* * * * *
- 30 -
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first above written.
TGW ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
THE GOLF WAREHOUSE, L.L.C.
By: /s/ R. Xxxxxxx Xxxxxx
-------------------------------------
R. Xxxxxxx Xxxxxx, its President
XXXXXX ENTERPRISES, INC.
a Kansas corporation
By: /s/ R. Xxxxxxx Xxxxxx
-------------------------------------
R. Xxxxxxx Xxxxxx, its President
/s/ Xxxx X. Xxxxxx
-----------------------------------------
Xxxx X. Xxxxxx
/s/ R. Xxxxxxx Xxxxxx
-----------------------------------------
R. Xxxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxx
SPORTS CAPITAL PARTNERS, L.P.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President of Sports
Capital Partners, LLC, its
General Partner
- 31 -
SPORTS CAPITAL WAREHOUSE, L.P.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President of Sports
Capital Partners, LLC, its
General Partner
SPORTS CAPITAL PARTNERS (CEV), L.L.C.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President of Sports
Capital Partners, LLC, its
Managing Member
- 32 -
EXHIBIT 1.4(a)
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Escrow Agreement") dated as of June 29, 2004, by
and among JPMorgan Chase Bank, a New York banking corporation as escrow agent
(the "Escrow Agent"), TGW Acquisition Corporation, a Delaware corporation
("Buyer"), The Golf Warehouse, L.L.C., a Delaware limited liability company (the
"Company"), Sports Capital Partners, L.P., a Delaware limited partnership,
Sports Capital Warehouse, L.P., a Delaware limited partnership, Sports Capital
Partners (CEV), L.L.C., a Delaware limited liability company, Xxxxxx
Enterprises, Inc., a Kansas corporation, Xxxx X. Xxxxxx, R. Xxxxxxx Xxxxxx and
Xxxxxxx X. Xxxxxx (collectively, the "Sellers") and Sports Capital Partners,
LLC, a Delaware limited liability company, as the Seller Representative.
W I T N E S S E T H:
WHEREAS, Buyer, the Company and the Sellers have entered into a Membership
Interest Purchase Agreement (the "Purchase Agreement"), dated as of June 29,
2004, providing for the sale of all of the outstanding Membership Interests of
the Company (capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Purchase Agreement);
WHEREAS, pursuant to the Purchase Agreement, it is a condition to Closing
that the parties thereto enter into this Escrow Agreement and that four million
dollars ($4,000,000) of the Purchase Price (the "Escrow Amount") be delivered to
the Escrow Agent; and
WHEREAS, pursuant to the Purchase Agreement, the Escrow Agent, Buyer, the
Company and the Sellers have agreed to enter into this Escrow Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained in this Escrow Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Deposit of Escrow Amount. Pursuant to the Purchase Agreement,
at the Closing, Buyer shall deposit in escrow with the Escrow Agent the Escrow
Amount (the "Escrow Fund"). The Escrow Amount shall be held to reimburse Buyer
for any amount that Buyer is entitled under Section 1.5(e) and Section 9.2 of
the Purchase Agreement. The amount of Escrow Fund beneficially owned by each
Seller and the address of each Seller are set forth on Annex A attached hereto.
Section 2. Release of Escrow Fund.
(a) In accordance with and subject to this Escrow Agreement, the Escrow
Agent shall distribute amounts from the Escrow Fund to the Sellers as follows:
1
(i) On the 90th day after the Closing Date, the Escrow Agent shall
distribute from the Escrow Fund to the Sellers on a pro rata basis $500,000 or
the balance of the Escrow Fund if such balance on such date is less than
$500,000.
(ii) On the 180th day after the Closing Date, the Escrow Agent
shall distribute from the Escrow Fund to the Sellers on a pro rata basis
$500,000 or the balance of the Escrow Fund if such balance on such date is less
than $500,000.
(iii) On the first anniversary of the Closing Date, the Escrow Agent
shall distribute from the Escrow Fund to the Sellers on a pro rata basis
$1,500,000 or the balance of the Escrow Fund if such balance on such date is
less than $1,500,000.
(iv) The funds remaining in the Escrow Fund on the 540th day after
the Closing Date shall be paid by the Escrow Agent to the Sellers.
(b) Whenever Buyer demands a claim that any portion of the Escrow Fund
be released from the Escrow Account to any Buyer Parties to which Buyer is
entitled under the provisions of Section 1.5(e) or Section 9.2 of the Purchase
Agreement (a "Claim"), Buyer shall give notice thereof (an "Escrow Claim
Certificate") to the Escrow Agent and the Seller Representative, which Escrow
Claim Certificate shall specify the dollar amount of the Claim, together with
the information contemplated pursuant to Section 3 of this Escrow Agreement. If
the Seller Representative shall not have objected to a Claim specified in an
Escrow Claim Certificate in accordance with Section 4 of this Escrow Agreement,
the Escrow Agent shall make payment to Buyer, or the identified Buyer Party, of
any Claims in accordance with Section 3 of this Escrow Agreement.
(c) In the event fund transfer instructions are given (other than in
writing at the time of the execution of this Escrow Agreement), whether in
writing, by telecopier or otherwise the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call-back to the person or
persons designated on the call-back schedule attached hereto, and the Escrow
Agent may rely upon the confirmations of anyone purporting to be the person or
persons so designated. The persons and telephone numbers for call-backs may be
changed only in writing actually received and acknowledged by the Escrow Agent.
If the Escrow Agent is unable to contact any of the authorized representatives
identified in the Call-Back Schedule, the Escrow Agent is hereby authorized to
seek confirmation of such instructions by telephone call-back to any one or more
of your executive officers, ("Executive Officers"), which shall include the
titles of President, Vice President, General Partner or Managing Member, as the
Escrow Agent may select. Such "Executive Officer" shall deliver to the Escrow
Agent a fully executed Incumbency Certificate, and the Escrow Agent may rely
upon the confirmation of anyone purporting to be any such officer. The Escrow
Agent and the beneficiary's bank in any funds transfer may rely solely upon any
account numbers or similar identifying numbers provided by the Buyer or the
Seller Representative to identify (i) the beneficiary, (ii) the beneficiary's
bank, or (iii) an intermediary bank. The Escrow Agent may apply any of escrowed
funds for any payment order it executes using any such identifying number, even
when its use may result in a person other than the beneficiary being paid, or
the transfer of funds to a bank other than the beneficiary's bank or an
2
intermediary bank designated. The parties to this Escrow Agreement acknowledge
that such security procedure is commercially reasonable.
Section 3. Claims Upon Escrow Fund
(a) Upon receipt by the Escrow Agent on or before the Termination Date
(as defined herein) of an Escrow Claim Certificate:
(i) stating that (1) an amount equal to the Overstatement (equal
to $100,000 or less) is owed to Buyer pursuant to the final Working Capital
amount on the Closing Date Balance Sheet determined in accordance with Section
1.5(e) of the Purchase Agreement, or (2) Losses exist in an aggregate amount
greater than $250,000 pursuant to Section 9.2(a), 9.2(b) or 9.2(c) of the
Purchase Agreement, and
(ii) specifying in reasonable detail the calculation of the
individual items included in the amount of Losses in such Claim, the date each
such item was paid, properly accrued or arose and the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
the Escrow Agent shall set aside from the Escrow Fund and hold in trust for the
benefit of Buyer and any Buyer Party such amount of cash having a value equal to
the amount requested.
(b) The Escrow Agent shall deliver such amount of cash equal to the
amount requested pursuant to Section 3(a) of this Escrow Agreement to Buyer or
the identified Buyer Party as soon as practicable following the earliest of: (i)
receipt of written authorization from the Seller Representative to make such
delivery; (ii) receipt of written notice from the arbitrator (with respect to
amounts payable under Section 1.5 or Section 9.2 of the Purchase Agreement, as
the case may be) or a final decision or order of a court of competent
jurisdiction of the claim; or (iii) the close of business on the thirtieth
(30th) day following receipt by the Escrow Agent of an Escrow Claim Certificate
to which the Seller Representative has not objected in accordance with Section 4
of this Escrow Agreement.
Section 4. Objections to Claims.
(a) At the time of delivery of any Escrow Claim Certificate to the
Escrow Agent, a duplicate copy of such Escrow Claim Certificate shall be
delivered to the Seller Representative, and for a period of thirty (30) days
after such delivery to the Escrow Agent of such Escrow Claim Certificate, the
Escrow Agent shall not make any payment from the Escrow Fund pursuant to Section
3 of this Escrow Agreement in respect of the Claims described in such Escrow
Claim Certificate unless the Escrow Agent shall have received written
authorization from the Seller Representative to make such payment. As soon as
practicable after the expiration of such thirty (30) day period, the Escrow
Agent shall deliver an amount of cash equal to such Claim from the Escrow Fund;
provided, that no such payment or delivery may be made if the Seller
Representative shall object in a written statement to the Claim made in the
Escrow Claim Certificate specifying in reasonable detail the nature of such
objection and the basis therefore under the terms of
3
this Escrow Agreement or the Purchase Agreement, and such statement shall have
been delivered to the Escrow Agent and to Buyer prior to the expiration of such
thirty (30) day period (an "Objection").
(a) Buyer and the Seller Representative shall attempt in good faith to
resolve any Objection. If they are unable to resolve any Objection, such
Objection shall be resolved pursuant to Section 1.5 or Section 9.7 of the
Purchase Agreement, as the case may be. The decision of the arbitrator as
determined pursuant to Section 1.5 or Section 9.7 of the Purchase Agreement, as
the case may be, as to validity and amount of any Claim in such Escrow Claim
Certificate shall be binding and conclusive upon the parties to this Escrow
Agreement and the Escrow Agent shall be entitled to make or withhold payments
out of the Escrow Fund in accordance therewith.
Section 5. Investment of Funds.
(a) General. The Escrow Amount shall be invested and reinvested by the
Escrow Agent in Approved Investments (as hereinafter defined) or in such other
investments as agreed to by the joint written direction of both Buyer and the
Seller Representative. As used herein, "Approved Investments" shall mean
short-term (thirty (30) days or less maturity) (i) direct obligations of the
United States or any agency thereof, (ii) commercial paper rated as Prime-1 by
Xxxxx'x Investors Service, or as A-1 by Standard & Poor's Corp., or similarly
rated by any successor to either of such investment rating services, (iii)
certificates of deposit, time deposits or banker's acceptances of any bank
having capital and surplus in excess of $250,000,000, or (iv) a money market
fund which invests principally in short-term securities issued or guaranteed by
the U. S. Government, its agencies or instrumentalities. All income earned on
such invested funds shall be retained within the Escrow Account. The Escrow
Amount and all earnings, dividends, distributions or interest earned on funds in
the Escrow Account is referred to herein as the "Escrow Fund".
The Escrow Agent shall in its sole discretion vote any and all shareholder
proxies, which may be solicited from time to time in connection with such
investment. The Escrow Agent shall have no responsibility or liability for any
diminution in value of any assets held hereunder which may result from any
investments or reinvestment made in accordance with any provision which may be
contained herein.
In the event that the Escrow Agent does not receive investment
instructions to invest funds held in the escrow account, the Escrow Agent shall
invest such funds in a money market account with JPMorgan Chase Bank, or a
successor or similar fund, which invests in short-term securities issued or
guaranteed by the U. S. Government, its agencies or instrumentalities.
(b) Tax Reporting. Upon execution of this Escrow Agreement, each party
shall provide the Escrow Agent with a fully executed W-8 or W-9 Internal Revenue
Service form, which shall include their Tax Identification Number as assigned by
the Internal Revenue Service. Notwithstanding anything to the contrary herein,
for the
4
period prior to the termination of this Agreement, Buyer shall be treated as the
owner of the assets held in the Escrow Account for all income tax purposes
(including, without limitation, for information reporting purposes).
Accordingly, Buyer shall take into account all items of income (including
interest earned on the cash portion of the Escrow Fund), deduction, and credit
with respect to the Escrow Account during such period. The Escrow Agent shall
distribute to Buyer, no later than the 10th of each month, an amount equal to
thirty-six percent (36%) of the income earned on the cash portion of the Escrow
Fund during the prior calendar month.
(c) Standard of Care Relating to Investments. The Escrow Agent shall not
commingle the Escrow Fund with any other deposits or accounts, or with its own
funds, except in the manner reasonably required for the administration of funds
by a reasonable person under applicable law and shall not use any part or all of
such funds for its own benefit; provided, however, that nothing herein shall
diminish the Escrow Agent's obligation to apply the full amount of any cash
received by the Escrow Agent with respect to the Escrow Amount in accordance
with the terms hereof.
(d) Risk of Losses. Notwithstanding anything in this Section 5 to the
contrary, all expenses and risk of loss of any investment hereunder shall be
born by the party or parties to whom or which all or a portion of the Escrow
Amount relating to such investment are ultimately released.
Section 6. Termination of Escrow. The escrow provided for herein shall
terminate on the 540th day after the Closing Date (the "Termination Date").
Promptly following the Termination Date, but not later than ten (10) business
days following termination, the Escrow Agent shall deliver to each Seller that
amount of Escrow Fund not required to satisfy any unsatisfied Claims specified
in any Escrow Claim Certificate theretofore delivered to the Escrow Agent prior
to the Termination Date with respect to facts and circumstances existing prior
to the Termination Date. As soon as all such Claims for which cash has been
retained in the Escrow Fund at the Termination Date have been resolved, the
Escrow Agent shall deliver to such Sellers all remaining Escrow Fund and not
required to satisfy such Claims and expenses. Each Seller shall receive a pro
rata amount of the Escrow Fund available for distribution based on the
percentage of the Escrow Fund beneficially owned by such Seller as set forth on
Annex A attached hereto.
Section 7. Duties of Escrow Agent. The Escrow Agent's duties and
responsibilities in connection herewith shall be limited to those expressly set
forth herein. The Escrow Agent shall not be liable or responsible for any act
performed or omitted hereunder in good faith and in the exercise of its own best
judgment. The Escrow Agent may rely upon any written notice, demand, certificate
or other document which it believes in good faith to be genuine and executed or
delivered by the person purporting to execute or deliver such document. The
Escrow Agent may confer with legal counsel in the event of any dispute or
question with respect to its duties hereunder and shall be fully protected in
acting in good faith in accordance with the opinions and instructions of such
counsel. The Escrow Agent is hereby authorized to comply with any court order,
5
arbitration ruling or other legal process which stays, enjoins, directs or
otherwise affects the transfer or release of the Escrow Fund or any party
hereto. In no event shall the Escrow Agent be liable to any party hereto for any
special, indirect or consequential loss or damage of any kind whatsoever, even
if the Escrow Agent has been advised of such loss or damage. In the event of any
disagreement resulting from adverse claims or demands being made with respect to
any portion of the Escrow Fund, the Escrow Agent may refuse to comply with any
such claims or demands, or refuse to take any other action hereunder, so long as
such disagreement continues and the Escrow Agent shall not be liable to any
person for its failure or refusal to act and may continue to refuse to act until
the rights of the parties have been fully and finally adjudicated by a court of
competent jurisdiction (or by an arbitrator or arbitrators) or until the Escrow
Agent shall have received a written notice signed by all disagreeing parties
instructing the Escrow Agent to act or refrain from acting as specified therein.
Section 8. Fees and Expenses of Escrow Agent. The Escrow Agent shall be
paid a reasonable fee for its services under this Escrow Agreement, as set forth
on Schedule A, and shall be reimbursed for its reasonable expenses incurred in
connection with the administration of the escrow. The Escrow Agent shall provide
an invoice reflecting such fees and expenses to Buyer and the Seller
Representative, which invoice shall be due and payable thirty (30) calendar days
after its date. All such fees and expenses shall be shared equally between Buyer
and the Sellers. The Sellers hereby direct, and Buyer hereby agrees, that all
fees and expenses owed by the Sellers to the Escrow Agent pursuant to this
Escrow Agreement may be removed from the Escrow Account when due and payable,
unless the Seller Representative provides written notice to the Escrow Agent
that such fees and expenses are in dispute.
Section 9. Indemnification of Escrow Agent. The Sellers, on the one hand,
and Buyer, on the other, each agrees to indemnify the Escrow Agent and hold it
harmless against one-half of any loss, liability or expense (including
reasonable attorneys' fees and expenses) incurred by the Escrow Agent and
arising out of or in connection with the performance of its duties and
obligations in accordance with the provisions of this Escrow Agreement, except
for any loss, liability or expense incurred as a result of the gross negligence
or willful misconduct of the Escrow Agent. This indemnification obligation shall
survive the resignation or removal, or the termination of this Escrow Agreement
until extinguished by any applicable statute of limitations.
Section 10. Successor Escrow Agent. The Escrow Agent may resign as the
Escrow Agent under this Escrow Agreement (including the Purchase Agreement) by
delivering thirty (30) calendar days' prior written notice to the Seller
Representative and Buyer. The Seller Representative and Buyer may mutually agree
to remove the Escrow Agent at any time upon written notice to the Escrow Agent.
If the Escrow Agent resigns or is removed, a successor Escrow Agent shall be
appointed by mutual agreement of the Seller Representative and Buyer and such
resignation or removal shall take effect upon the effectiveness of such
appointment and all obligations of the predecessor Escrow Agent under this
Escrow Agreement (including the Purchase Agreement) shall cease at such time. If
the Seller Representative and Buyer are unable to agree upon a successor,
6
or shall have failed to appoint a successor prior to the expiration of thirty
(30) calendar days following receipt of the notice of resignation or removal,
the Escrow Agent may petition any court of competent jurisdiction for the
appointment of a successor escrow agent or for other appropriate relief, and any
such resulting appointment shall be binding upon all of the parties hereto. Any
successor Escrow Agent serving under this Escrow Agreement at any time shall be
entitled to all the rights and indemnities granted to the Escrow Agent under
this Escrow Agreement as if originally named herein.
Section 11. 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, (i) when received if given in person or by courier or a courier
service, (ii) on the date of transmission if sent by telex, facsimile or other
wire transmission (or the next succeeding business day, if such date of
transmission is not a business day) or (iii) three business days (seven business
days for overseas mail) after being deposited in the U. S. mail, certified or
registered mail, postage prepaid:
(a) If to the Seller Representative, addressed as follows:
Sports Capital Partners, LLC
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Attention: Xxxx Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
R. Xxxxxxx Xxxxxx
0000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxx 00000
with a copy to:
Xxxxxxxx Xxxxxxx LLP
Bank of America Center
000 X. Xxxxxxxx, Xxxxx 000
0
Xxxxxxx, Xxxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxx XX
(b) If to Buyer, addressed as follows:
TGW Acquisition Corporation
000 Xxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxxxx, Xxxxxx & Xxxxx P.L.L.
0000 Xxxxxxxxxx Xxxxx XX
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) If to the Escrow Agent, addressed as follows:
JPMorgan Chase Bank
0 Xxx Xxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
Section 12. Amendment. This Escrow Agreement may be amended, modified or
supplemented but only in writing signed by Buyer, the Seller Representative and
the Escrow Agent.
Section 13. Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Escrow Agreement shall be effective unless in writing, and no waiver in any one
or more instances shall be deemed to be a further or continuing waiver of any
such condition or breach in other instances or
8
a waiver of any other condition or breach of any other term, covenant,
representation or warranty.
Section 14. Counterparts. This Escrow 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.
Section 15. Interpretation. The headings preceding the text of Sections
included in this Escrow Agreement and the headings to Schedules attached to this
Escrow Agreement are for convenience only and shall not be deemed part of this
Escrow Agreement or be given any effect in interpreting this Escrow Agreement.
The use of the masculine, feminine or neuter gender herein shall not limit any
provision of this Escrow Agreement. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively. Underscored references to Sections
or Schedules shall refer to those portions of this Escrow Agreement.
Section 16. Governing Law. THIS ESCROW AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 17. Further Assurances. Upon reasonable request of any party, each
other party will on and after the date hereof execute and deliver such other
documents, releases, assignments and other instruments as may be required to
carry out the purposes of this Escrow Agreement.
Section 18. Severability. If any provision of this Escrow Agreement shall
be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions hereof shall not be affected thereby, and
there shall be deemed substituted for the provision at issue a valid, legal and
enforceable provision as similar as possible to the provision at issue.
Section 19. Remedies Cumulative. The remedies provided in this Escrow
Agreement shall be cumulative and shall not preclude the assertion or exercise
of any other rights or remedies available by law, in equity or otherwise.
Section 20. Entire Understanding. This Escrow Agreement and Section 1.4,
Section 1.5, and Article IX of the Purchase Agreement, set forth the entire
agreement and understanding of the parties hereto with respect to the matters
set forth herein and supersedes any and all prior agreements, arrangements and
understandings among the parties.
Section 21. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ESCROW
AGREEMENT, SHALL BE BROUGHT
9
AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. EACH OF THE
PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE. EACH OF THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
Section 22. No Presumption Against Drafter. Each of the parties hereto has
jointly participated in the negotiation and drafting of this Agreement and has
been represented by counsel of its choice. In the event of any ambiguity or a
question of intent or interpretation arises, this Escrow Agreement shall be
construed as if drafted jointly by each of the parties hereto and no
presumptions or burdens of proof shall arise favoring any party by virtue of the
authorship of any of the provisions of this Escrow Agreement.
Section 23. Miscellaneous. Nothing herein shall in any event amend, or in
any other respect modify, the rights and obligations of the parties to the
Purchase Agreement.
Section 24. Successor. Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
Section 25. Force Majeure. In the event that the Escrow Agent is unable to
perform its obligations under the terms of this Escrow Agreement because of acts
of God, strikes, equipment or transmission failure or damage reasonably beyond
its control, or other cause reasonably beyond its control, the Escrow Agent
shall not be liable for damages to the other parties for any damages resulting
from such failure to perform otherwise from such causes. Performance under this
Escrow Agreement shall resume when the Escrow Agent is able to perform
substantially.
* * *
10
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered as of the date first above written.
JPMORGAN CHASE BANK as Escrow Agent
By:___________________________
Name:
Title:
TGW ACQUISITION CORPORATION
By:___________________________
Name:
Title:
THE GOLF WAREHOUSE, L.L.C.
By:___________________________
Name:
Title:
XXXXXX ENTERPRISES, INC.
a Kansas corporation
By:_________________________________
R. Xxxxxxx Xxxxxx, its President
____________________________________
Xxxx X. Xxxxxx
____________________________________
R. Xxxxxxx Xxxxxx
____________________________________
Xxxxxxx X. Xxxxxx
11
SPORTS CAPITAL PARTNERS, L.P.
By:___________________________
Name:
Title:
SPORTS CAPITAL WAREHOUSE, L.P.
By:___________________________
Name:
Title:
SPORTS CAPITAL PARTNERS (CEV), L.L.C.
By:___________________________
Name:
Title:
SPORTS CAPITAL PARTNERS, LLC
By:___________________________
Name:
Title:
12
ANNEX A
Pro Rata
Percentage of
Seller Escrow Fund Escrow Amount
Sports Capital Partners, L.P., 33.43% 1,337,232.17
Sports Capital Warehouse, L.P. 2.84% 113,768.30
Sports Capital Partners (CEV), L.L.C. 35.42% 1,416,599.65
Xxxxxx Enterprises, Inc.
Class A 212,793.97
Class B 779,346.16
-------------
24.80% 992,140.13
Xxxx X. Xxxxxx 1.17% 46,753.25
R. Xxxxxxx Xxxxxx 1.17% 46,753.25
Xxxxxxx X. Xxxxxx 1.17% 46,753.25
-------- -------------
Total 100.00% $ 4,000,000
======== =============
SCHEDULE A
$6,000 for the escrow period until the entire Escrow Fund is disbursed pursuant
to the terms of the Escrow Agreement.
CALL-BACK
SCHEDULE
TELEPHONE NUMBER(S) FOR CALL-BACKS AND
PERSON(S) DESIGNATED TO CONFIRM FUNDS TRANSFER INSTRUCTIONS
IF TO THE BUYER:
WIRE INSTRUCTIONS:
Xxxxx Fargo Bank, ABA #000000000, Account # 0000000000
NAME TELEPHONE NUMBER
---- ----------------
1. Xxxxxxx X. Xxxxxx, CFO (000) 000-0000
2. Xxxxxxx X. Xxxxxxx, President (000) 000-0000
3. Xxx Xxxxxxxx (000) 000-0000
IF TO THE SELLER REPRESENTATIVE:
WIRE INSTRUCTIONS:
NAME TELEPHONE NUMBER
---- ----------------
1. Xxxxx X. Xxxxxx (000) 000-0000
2. Xxxx Xxxxx (000) 000-0000
3. _________________ ________________
EXHIBIT 7.1(h)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of June 29, 2004 between THE GOLF WAREHOUSE,
L.L.C., a Delaware limited liability company (the "Company") and
_____________________ ("Employee").
RECITALS
A. Prior to the date hereof, Employee was _________________ and a
member of the Company. Effective as of the date hereof, TGW
Acquisition Corporation ("Buyer"), a wholly-owned subsidiary of The
Sportsman's Guide, Inc., has purchased from Employee and the other
members of the Company (the "Sellers") all of the outstanding
membership interests in the Company pursuant to the terms of a
Membership Interest Purchase Agreement dated as of June 29, 2004
(the "Purchase Agreement") among the Sellers and Buyer.
B. The obligations of Buyer to consummate the transactions contemplated
by the Purchase Agreement are subject to various conditions,
including that Employee enter into a new employment agreement with
the Company.
C. The Company and Buyer desire to retain Employee as an employee of
the Company, and Employee desires to continue such employment in
accordance with the terms set forth herein.
In consideration of the foregoing and the mutual covenants contained
herein, the parties agree as follows:
1. Employment. The Company hereby employs Employee to serve as
________________ and Employee hereby accepts such employment, upon the terms and
conditions of this Agreement.
2. Term. The term of Employee's employment hereunder shall commence on
the date of this Agreement and shall continue until terminated as provided
herein.
3. Duties. Employee shall have such duties as determined from time to
time by the President/CEO of The Sportsman's Guide, Inc. Employee shall perform
his duties faithfully, diligently and to the best of his ability and in
conformity with Company policies and directives. Employee shall devote his full
professional time to the business and affairs of the Company.
4. Compensation.
(a) Salary. The Company shall pay Employee a base salary of
$______________ per annum, or such higher rate as the President/CEO of The
Sportsman's Guide, Inc. may designate from time to time, payable at the times
and in accordance with the Company's standard payroll policy.
1
(b) Bonus. Employee shall participate in the annual bonus plan for
senior management of the Company.
(c) Stock Options. Employee shall be eligible to participate in
The Sportsman's Guide, Inc. employee stock option program.
(d) Benefits. Employee shall be entitled to Company-paid health
insurance with family coverage, disability insurance and other benefits made
available to the Company's senior management.
(e) Expense Reimbursement. The Company shall reimburse Employee
for reasonable expenses incurred on Company business upon submission of
satisfactory receipts or other accounting.
(f) Vacation. Employee shall be entitled to an annual vacation in
accordance with the Company's vacation policy for senior management.
5. Termination. This Agreement and Employee's employment hereunder
shall continue until Employee's resignation, disability (as determined by the
President/CEO of The Sportsman's Guide, Inc. in his good faith judgment), death
or until the President/CEO of The Sportsman's Guide, Inc. determines in his good
faith judgment that termination of Employee's employment is in the best
interests of the Company. If Employee's employment is terminated by the Company
without Cause, during the two year period commencing on the date of such
termination, the Company shall continue to pay Employee his base salary (as in
effect at the time of termination) in accordance with the Company's standard
payroll policy. Notwithstanding the foregoing, upon any breach by Employee of
the provisions of Section 7 hereof, the Company's obligation to make any further
severance payments hereunder shall immediately terminate, which termination
shall not limit, restrict or otherwise affect Employee's continuing obligations
under such section.
6. Inventions and Patents. Employee acknowledges that all inventions,
innovations, improvements, developments, methods, designs, analyses, drawings,
reports and all similar or related information (whether or not patentable) that
relate to the Company's actual or anticipated business, research and development
or existing or future products or services that are conceived, developed, made
or reduced to practice by Employee while employed by the Company ("Work
Product") belong to the Company and Employee hereby assigns, and agrees to
assign, all of the Work Product to the Company. Any copyrightable work prepared
in whole or in part by Employee in the course of his work for the Company shall
be deemed a "work made for hire" under the copyright laws, and the Company shall
own all rights therein. To the extent that any such copyrightable work is not a
"work made for hire," Employee hereby assigns and agrees to assign to the
Company all right, title and interest, including without limitation, copyright
in and to such copyrightable work. Employee shall promptly disclose such Work
Product and copyrightable work to the Company and perform all actions reasonably
requested by the Company (whether during or after his employment) to establish
and confirm the Company's
2
ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
7. Noncompete, Nonsolicitation and Confidentiality.
(i) In consideration of the terms and provisions hereof, Employee
agrees that during his employment with the Company, Buyer or an Affiliate of
Buyer and until the second anniversary of a termination of such employment (the
"Noncompete Period"), he shall not, directly or indirectly, either for himself
or for any other Person, permit his name to be used by or Participate in any
business or enterprise that markets, distributes or sells products that are
competitive with those marketed, distributed or sold by the Company by means of
direct marketing (Internet, on-line, catalogs, etc.) or through retail stores
(wherever located) (the "Competitive Activities"). For purposes of this
Agreement, the term "Participate" includes any direct or indirect interest in
any enterprise, whether as an officer, director, employee, partner, member, sole
proprietor, agent, representative, independent contractor, consultant,
franchisor, franchisee, creditor, owner or otherwise.
(ii) During the Noncompete Period, Employee shall not, directly or
indirectly (A) induce or attempt to induce any employee of the Company or its
Affiliates to leave their employ or in any way interfere with the relationship
between the Company or its Affiliates and any of their employees or actually
hire any of their employees (whether as an employee, consultant, independent
contractor or otherwise); provided that if Employee is terminated by the Company
without Cause, the foregoing shall not apply to Employee's siblings, spouse or
lineal descendants, or (B) induce or attempt to induce any supplier, licensee,
licensor, franchisee, or other business relation of the Company or its
Affiliates to cease doing business with them or in any way interfere with the
relationship with the Company or its Affiliates and any customer or business
relation.
(iii) Employee acknowledges that the information, observations and
data relating to the business of the Company or its Affiliates of a proprietary
and/or confidential nature which the Company possesses or which Employee has
obtained as an employee, officer, manager or member of the Company or will
obtain during the course of his employment with the Company after the date of
this Agreement are the confidential and proprietary property of the Company
("Confidential Information"). Employee agrees that he shall not, directly or
indirectly, use for his own purposes or use for or disclose to any third party
any of such Confidential Information without the prior written consent of Buyer
or the Company, unless and to the extent that the aforementioned matters (a)
become generally known to and available for use by the public other than as a
result of Employee's acts or omissions to act; (b) are rightfully received by
Employee from a party who was not subject to any obligations of confidentiality;
or (c) are required by order of a court of competent jurisdiction (by subpoena
or similar process) to be disclosed or discussed by Employee (provided that in
such case, Employee shall promptly inform Buyer or the Company of such order,
shall cooperate with Buyer or the Company in attempting to obtain a protective
order or to otherwise restrict such disclosure, and shall only disclose
Confidential Information to the minimum extent necessary to comply with any such
court order). Employee agrees to deliver to the Company upon termination of
employment, or at any other time the Company may request in writing, all
memoranda, notes, plans, records, reports and other
3
documents regardless of the format or media (and copies thereof), containing
Confidential Information which he may then possess or have under his control.
(iv) The parties acknowledge and agree that the Company will suffer
irreparable harm from a breach by Employee of any of the covenants or agreements
contained in this Section 7. In the event of an alleged or threatened breach by
Employee of any of the provisions of this Section 7, the Company or its
successors or assigns may, in addition to all other rights and remedies existing
in its or their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other equitable relief in order to enforce or
prevent any violations of the provisions hereof (including, without limitation,
the extension of the Noncompete Period by a period equal to the duration of the
violation of Section 7(a)). In the event of an alleged breach or violation by
Employee of any of the provisions of Section 7(a), the Noncompete Period shall
be tolled until such alleged breach or violation is resolved. Employee
acknowledges and agrees that these restrictions are reasonable, and acknowledges
and affirms that the Company conducts its business throughout the world.
(v) If, at the time enforcement is sought of any of the provisions
of this Section 7, a court holds that the restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area.
(vi) The Company and Employee agree that the covenants made in this
Section 7 are in addition to any noncompetition, nonsolicitation or
confidentiality provisions contained in the Purchase Agreement, shall be
construed as an agreement independent of any other provision of this Agreement
or the Purchase Agreement, and shall survive any order of a court of competent
jurisdiction terminating any other provision of this Agreement or the Purchase
Agreement.
8. Definitions. In addition to the other definitions contained herein,
the following definitions shall apply for purposes of this Agreement:
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
"Cause" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Affiliates or any of their
customers or suppliers or with respect to its members, (ii) conduct tending to
bring the Company, its members, or any of its Affiliates into substantial public
disgrace or disrepute, (iii) substantial and repeated failure to perform duties
of the office held by Employee as reasonably directed in writing by the
President/CEO of The Sportsman's Guide, Inc., which failure is not cured (if
curable) within five days after Employee receives written notice thereof from
the President/CEO of The Sportsman's Guide, Inc. or, if not
4
reasonably curable within such period, then within 45 days so long as Employee
is diligently attempting to cure, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Affiliates or (v) any breach of
Section 7 of this Agreement.
"Person" means an individual, partnership, limited liability company,
corporation, association, trust, joint venture, unincorporated organization,
governmental entity or department, agency or political subdivision thereof, or
any other legal entity.
9. Notices. Any notice provided for in this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, when telecopied (with hard copy to follow), one business day after
being deposited with a reputable overnight courier for next day delivery
(charges prepaid), when telecopied (with machine confirmation of receipt and
hard copy to follow) or three business days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid.
Such notice will be sent to the Company or Employee (as applicable) at the
address or telecopy number indicated below:
If to the Company:
The Golf Warehouse, L.L.C.
0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Executive Officer
with a copy to:
Xxxxxxxxx, Xxxxxx & Xxxxx P.L.L.
0000 Xxxxxxxxxx Xxxxx XX
Xxxxxx, Xxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
and a copy to:
The Sportsman's Guide, Inc.
000 Xxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx
If to Employee:
x/x Xxx Xxxx Xxxxxxxxx, X.X.X.
0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000
Telecopy: (000) 000-0000
5
Attn: _______________________
with a copy to:
Xxxxxxxx Xxxxxxx LLP
Bank of America Center
000 X. Xxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxx XX
or such other address or telecopy number or to the attention of such other
person as the recipient party shall have specified by prior written notice to
the sending party.
10. General Provisions.
(a) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Entire Agreement. This Agreement, the Purchase Agreement and
the other documents expressly referred to herein or therein constitute the
entire agreement between the parties and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, that
may have related in any way to the subject matter hereof, including, without
limitation, the Senior Management Agreement dated as of October 14, 1999 between
Employee and the Company. Employee hereby releases the Company from any
obligations or liability the Company owes or owed to Employee prior to the date
hereof.
(c) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
(d) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by Employee, the Company, Buyer
and The Sportsman's Guide, Inc. (who shall be deemed to be intended third-party
beneficiaries hereof) and their respective successors and assigns; provided that
the rights and obligations of Employee under this Agreement shall not be
assignable.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Kansas without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Kansas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Kansas.
6
(f) Remedies. Each of the parties to this Agreement, Buyer and The
Sportsman's Guide, Inc. will be entitled to enforce its rights under this
Agreement specifically, to recover damages and costs (including attorney's fees)
caused by any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company, Employee,
Buyer and The Sportsman's Guide, Inc. No waiver by any party of any default or
breach hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default or breach hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(h) Indemnification and Reimbursement of Payments on behalf of
Employee. The Company shall be entitled to deduct or withhold from any amounts
owing from the Company to Employee any federal, state, local or foreign
withholding taxes, excise taxes or employment taxes imposed with respect to
Employee's compensation or other payments from the Company or its Affiliates,
including, but not limited to, wages, bonuses, dividends and/or the receipt or
exercise of stock options. Employee shall indemnify the Company for any amounts
paid with respect to any such taxes, together with any interest, penalties and
related expenses thereto.
(i) Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
* * * * *
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE GOLF WAREHOUSE, L.L.C.
By: ________________________________
Name:
Title:
EMPLOYEE
_____________________________________
8
EXHIBIT 7.1(i)
June 29, 2004
TGW Acquisition Corporation
000 Xxxxxxx Xxxxxx Xxxxx
Xx. Xxxx, XX 00000
Re: The Golf Warehouse, L.L.C.
Ladies and Gentlemen:
We have acted as special counsel for (i) The Golf Warehouse, L.L.C., a
Delaware limited liability company (the "Company"), and (ii) Sports Capital
Partners, L.P., a Delaware limited partnership, Sports Capital Warehouse, L.P.,
a Delaware limited partnership, and Sports Capital Partners (CEV), L.L.C., a
Delaware limited liability company (collectively, the "Sports Capital
Entities"), in connection with the Membership Interest Purchase Agreement, dated
as of the date hereof (without the exhibits and schedules thereto, being
hereinafter referred to as the "Purchase Agreement"), by and among TGW
Acquisition Corporation ("Buyer"), the Company, the Sports Capital Entities,
Xxxxxx Enterprises, Inc., Xxxx X. Xxxxxx, R. Xxxxxxx Xxxxxx and Xxxxxxx X.
Xxxxxx. This opinion is being rendered to you pursuant to Section 7.1(i) of the
Purchase Agreement. Capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms in the Purchase Agreement.
In connection with this opinion, we have reviewed:
(i) the Purchase Agreement;
(ii) the Escrow Agreement; and
(iii) the Assignment of Membership Interests, dated the date hereof, from
each of the Sports Capital Entities to Buyer; and
The Purchase Agreement and the Escrow Agreement are collectively referred
to herein as the "Transaction Documents." In addition to the Transaction
Documents, we have examined such other documents, company records and questions
of law as we have deemed necessary for the purposes of rendering this opinion.
We have also examined such certificates of public officials, managing members,
members and officers of the Company and of Sports Capital Partners, LLC, the
general partner of Sports Capital Partners, LP and Sports Capital Warehouse, LP
and the managing member of Sports Capital Partners (CEV), LLC, and other Persons
as we have deemed relevant and appropriate as a basis for the opinions expressed
herein, and we have made no efforts to independently verify the facts set forth
in such certificates. True, complete
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 2
and correct copies of such certificates are attached hereto. Further, in making
the foregoing examinations, we have assumed the genuineness of all signatures
(other than the signatures of representatives of the Company and the Sports
Capital Entities on the Transaction Documents), the legal capacity of each
natural person signatory to any of the documents reviewed by us, the
authenticity of all documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as copies. In
making the foregoing examinations, we have assumed that all representations and
warranties made in the aforesaid documents (other than those which are expressed
herein as our opinions) were and are true, correct and complete.
In rendering the opinions expressed herein, we have assumed (i) that each
of the Transaction Documents has been duly authorized, executed and delivered by
each of the parties thereto other than the Company and the Sports Capital
Entities, (ii) that each such party other than the Company and the Sports
Capital Entities has the requisite power and authority to execute, deliver and
perform the Transaction Documents, (iii) that the Transaction Documents
constitute the legal, valid and binding obligation of each such other party
thereto, other than the Company and the Sports Capital Entities, enforceable
against each such party in accordance with their respective terms, (iv) that
there are no extrinsic agreements or understandings among the parties to the
Transaction Documents that would modify or affect the interpretation of the
terms of the Transaction Documents or the respective rights or obligations of
the parties thereunder, (v) that Buyer has paid the aggregate amount of
consideration to be paid to the Sellers as set forth in, and in accordance with
Section 1.4 of the Purchase Agreement and (vi) that each of the documents
examined by us (other than the Transaction Documents) has been duly authorized,
executed and delivered by each of the parties thereto.
Based upon the foregoing, and upon an examination of such questions of law
as we have considered necessary or appropriate, and subject to the assumptions,
exceptions, qualifications and limitations set forth herein, we advise you that,
in our opinion:
1. The Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
and adequate limited liability company power and authority to enter into and
perform its obligations under the Transaction Documents, to consummate the
transactions contemplated by the Transaction Documents and to carry on its
business as presently conducted and own its properties. The Company is qualified
to do business as a foreign limited liability company and is in good standing in
the State of Kansas.
2. Each of the Sports Capital Entities is a limited partnership or a
limited liability company validly existing and in good standing under the laws
of State of Delaware with full and adequate limited partnership or limited
liability company, as applicable, power and authority to enter into and perform
its obligations under the Transaction Documents, to consummate the transactions
contemplated by the Transaction Documents and to carry on its respective
business as presently conducted.
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 3
3. The execution, delivery and performance by the Company of the
Transaction Documents have been duly authorized by all requisite limited
liability company action of the Company and its members, and each Transaction
Document has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
4. The execution, delivery and performance by each of the Sports Capital
Entities of the Transaction Documents have been duly authorized by all requisite
limited liability company or limited partnership, as the case may be, action of
such Sports Capital Entity and its members or partners, as the case may be, and
each Transaction Document has been duly executed and delivered by each of the
Sports Capital Entities and constitutes a valid and binding obligation of such
Sports Capital Entity, enforceable against such Sports Capital Entity in
accordance with its terms.
5. Neither the execution, delivery or performance by the Company of the
Transaction Documents, nor the consummation by the Company of the transactions
contemplated thereby will, except as set forth on Schedule 3.3 to the Purchase
Agreement, (i) violate any Applicable Law (as hereinafter defined), (ii) to our
knowledge, violate any judgment, order or decree or (iii) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default under the
agreements listed on Schedule 3.16 to the Purchase Agreement (the "Scheduled
Material Contracts"), copies of which have been provided to us by the Company.
Neither the execution, delivery or performance by any of the Sports Capital
Entities of the Transaction Documents, nor the consummation of any of the Sports
Capital Entities of the transactions contemplated thereby will (i) to our
knowledge, violate any judgment, order or decree or (ii) conflict with or result
in the breach of any of the terms, conditions or provisions of, or constitute
(with due notice or lapse of time, or both) a default under any agreement known
to us as to which any of the Sports Capital Entities is a party or by which it
is bound.
6. No consent, approval or authorization of, or declaration to or filing
with any governmental body under any Applicable Law is required in connection
with the execution and delivery of the Transaction Documents by the Company or
any Sports Capital Entity, or the consummation of any of the other transactions
contemplated thereby by the Company or any Sports Capital Entity.
7. Based in part upon the truth and accuracy of the representations of you
in the Purchase Agreement, the offer and sale of the membership interests of the
Company pursuant to the terms of the Purchase Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended.
The foregoing opinions are subject to the following assumptions,
exceptions, qualifications and limitations:
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 4
A. The foregoing opinions are expressly limited to matters under and
governed by the internal laws of the State of New York (exclusive of conflict of
law principles), the Delaware Limited Liability Company Act, the Delaware
Revised Uniform Limited Partnership Act and applicable Federal laws of the
United States of America, in each case as in effect on the date hereof and
which, in our experience, are normally applicable to the transactions provided
for in the Transaction Documents, in each case, however, exclusive of, and
without regard to, any Excluded Laws (collectively, the "Applicable Laws"). The
term "Excluded Laws" means all (i) municipal, political subdivision (whether
created or enabled through legislative action at the federal, state, regional or
local level), local and county ordinances, statutes, administrative decisions,
laws, rules and regulations, (ii) conflict of law principles and choice-of-law
statutes and rules, and (iii) statutes, laws, rules and regulations relating to
(a) pollution or protection of the environment, (b) zoning, land use, building
or construction, (c) operation of any asset or property, (d) labor, employment,
employee rights and benefits, or occupational safety and health, (e) antitrust,
(f) taxation and (g) Federal or state securities laws (which is covered by
paragraph 7 above), in each case with respect to each of subsections (i) through
(iii), (x) as interpreted, construed or enforced pursuant to any judicial,
arbitral or other decision or pronouncement, (y) as enacted, promulgated or
issued by, or otherwise existing in effect in, any jurisdiction, including,
without limitation, any State of the United States of America and the United
States of America, and (z) including, without limitation, any and all
authorizations, permits, consents, applications, licenses, approvals, filings,
registrations, publications, exemptions and the like required by any of them.
B. The opinions regarding the enforceability of the Transaction
Documents are subject to the following:
(1) The enforceability of such documents may be limited or
affected by (i) bankruptcy, insolvency, reorganization,
moratorium, liquidation, rearrangement, probate,
conservatorship, fraudulent transfer, fraudulent conveyance
and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of
creditors generally or providing for the relief of debtors,
(ii) the refusal of a particular court to grant (a) equitable
remedies, including, without limiting the generality of the
foregoing, specific performance and injunctive relief, or (b)
a particular remedy sought under such documents as opposed to
another remedy provided for therein or another remedy
available at law or in equity, (iii) general principles of
equity (regardless of whether such remedies are sought in a
proceeding in equity or at law), and (iv) judicial discretion.
(2) In rendering the foregoing opinions, we express no opinion as
to the availability of certain equitable remedies including
specific performance, and we express no opinion as to the
legality, validity, enforceability or binding effect of
covenants not to compete or of provisions of such
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 5
documents relating to indemnities and rights of contribution
to the extent prohibited by public policy or which might
require indemnification for losses or expenses caused by
negligence, gross negligence, willful misconduct, fraud or
illegality of an indemnified party.
(3) Further, we express no opinion herein with respect to
compliance with any of the anti-fraud provisions of applicable
Federal or state securities laws, rules or regulations.
C. In rendering the opinions expressed in paragraph 1 above
regarding valid existence and good standing of the Company, we have relied
solely on certificates of public officials of a recent date and have conducted
no further investigation. Such opinions are limited to the dates of such
certificates. Our opinion expressed in paragraph 1 above as to the Company
having the corporate power and authority to own properties and to carry on its
business as presently conducted is based solely on our understanding that the
business now conducted by the Company is on-line golf store. In rendering the
opinions expressed in paragraph 2 above regarding valid existence and good
standing of the Sports Capital Entities, we have relied solely on certificates
of public officials of a recent date and have conducted no further
investigation. Such opinions are limited to the dates of such certificates. Our
opinion expressed in paragraph 2 above as to each Sports Capital Entity having
the limited partnership or limited liability company, as applicable, power and
authority to carry on its respective business as presently conducted is based
solely upon our understanding that each Sports Capital Entity is a private
equity fund established to acquire, hold for investment and dispose of equity
and equity-related securities and other business interests of any and all types
and descriptions (including, without limitation, privately or publicly issued
capital stock, convertible instruments, partnership interests, limited liability
company interests, evidences of indebtedness, warrants, options or similar
contracts) issued by entities that are primarily engaged in sports, leisure and
related business throughout the world.
D. With respect to references herein to "known to us," "to our
knowledge" or words or phrases of similar import (whether or not modified by any
additional phrases), such references mean the actual, current knowledge that
those attorneys of this Firm who devoted substantive attention to the
transactions to which this opinion relates have obtained from the following,
which constituted the examination for the purposes of the applicable opinions:
(a) their review of documents in connection with rendering this opinion, which
review was limited to reviewing the Transaction Documents, the exhibits and
schedules thereto, certain Company records, the Scheduled Material Contracts,
certificates of officers of the Company and certificates of the general partner
of Sports Capital Entities, and which review did not include any examination of
courts, boards, other tribunals or public records with respect to any
litigation, investigation or proceedings, or judgments, orders or decrees, in
any event applicable to the Company or any Sports Capital Entity or any of their
respective properties; and (b) representations and warranties of any of the
parties set forth in the Transaction Documents or otherwise made to us in their
certifications and other writings.
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 6
The opinions expressed herein are solely for your benefit and may only be
relied upon by you. This opinion may not be furnished to (except in connection
with any legal or arbitral proceedings or as may be required by applicable law
or otherwise necessary to your defense in any such action), or relied upon by,
any other person without the prior written consent of this Firm. The opinions
expressed herein are as of the date hereof or, to the extent a reference to a
certificate or other document is made herein, as of the date of such certificate
or document, and we make no undertaking to amend or supplement such opinions as
facts and circumstances come to our attention or changes in the law occur which
could affect such opinions.
Very truly yours,
Fulbright & Xxxxxxxx L.L.P.
EXHIBIT 7.1(i)
June 29, 2004
TGW Acquisition Corporation
000 Xxxxxxx Xxxxxx Xxxxx
Xx. Xxxx, XX 00000
Re: The Golf Warehouse, L.L.C.
Ladies and Gentlemen:
We have acted as special counsel for (i) Xxxxxx Enterprises, Inc., a
Kansas corporation (the "Company"), and (ii) Xxxx X. Xxxxxx, R. Xxxxxxx Xxxxxx
and Xxxxxxx X. Xxxxxx (collectively, the "Founders") in connection with the
Membership Interest Purchase Agreement, dated as of the date hereof (without the
exhibits and schedules thereto, being hereinafter referred to as the "Purchase
Agreement"), by and among TGW Acquisition Corporation ("Buyer"), The Golf
Warehouse, L.L.C., a Delaware limited liability company, the Company, the Sports
Capital Entities, and the Founders. This opinion is being rendered to you
pursuant to Section 7.1(i) of the Purchase Agreement. Capitalized terms used and
not otherwise defined herein shall have the meanings given to such terms in the
Purchase Agreement.
In connection with this opinion, we have reviewed:
(i) the Purchase Agreement;
(ii) the Escrow Agreement;
(iii) the Employment Agreements; and
(iv) the Assignment of Membership Interests, dated the date hereof, from
each Founder and the Company to Buyer ("Assignment of Membership
Interests").
The Purchase Agreement, the Escrow Agreement, the Assignment of Membership
Interests, and the Employment Agreements are collectively referred to herein as
the "Transaction Documents." In addition to the Transaction Documents, we have
examined such other documents, company records and questions of law as we have
deemed necessary for the purposes of rendering this opinion. Further, in making
the foregoing examinations, we have assumed the genuineness of all signatures
(other than the signatures of the Founders and the representatives of the
Company on the Transaction Documents), the legal capacity of each natural person
signatory to any of the documents reviewed by us, the authenticity of all
documents submitted to us as originals and the conformity to authentic original
documents of all
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 2
documents submitted to us as copies. In making the foregoing examinations, we
have assumed that all representations and warranties made in the aforesaid
documents (other than those which are expressed herein as our opinions) were and
are true, correct and complete.
In rendering the opinions expressed herein, we have assumed (i) that each
of the Transaction Documents has been duly authorized, executed and delivered by
each of the parties thereto other than the Company and the Founders, (ii) that
each such party other than the Company and the Founders has the requisite power
and authority to execute, deliver and perform the Transaction Documents, (iii)
that the Transaction Documents constitute the legal, valid and binding
obligation of each such other party thereto enforceable against each such party
in accordance with their respective terms, (iv) that there are no extrinsic
agreements or understandings among the parties to the Transaction Documents that
would modify or affect the interpretation of the terms of the Transaction
Documents or the respective rights or obligations of the parties thereunder, (v)
that Buyer has paid the aggregate amount of consideration to be paid to the
Sellers as set forth in, and in accordance with Section 1.4 of the Purchase
Agreement and (vi) that each of the documents examined by us (other than the
Transaction Documents) has been duly authorized, executed and delivered by each
of the parties thereto.
Based upon the foregoing, and upon an examination of such questions of law
as we have considered necessary or appropriate, and subject to the assumptions,
exceptions, qualifications and limitations set forth herein, we advise you that,
in our opinion:
1. The Company is a corporation validly existing and in good standing
under the laws of the State of Kansas with full and adequate corporate power and
authority to enter into and perform its obligations under the Transaction
Documents to which it is a party and to consummate the transactions contemplated
by the Transaction Documents.
2. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a Party have been duly authorized by all
requisite corporate action of the Company, and each Transaction Document to
which it is a party has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
3. Each Transaction Document has been duly executed and delivered by each
of the Founders and constitutes a valid and binding obligation of the Founders,
enforceable in accordance with its terms.
4. No consent, approval or authorization of, or declaration to or filing
with any governmental body under any Applicable Law is required in connection
with the execution and delivery of the Transaction Documents by the Company or
any Founder, or the consummation of any of the other transactions contemplated
thereby by the Company or any Founder.
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 3
The foregoing opinions are subject to the following assumptions,
exceptions, qualifications and limitations:
A. The foregoing opinions are expressly limited to matters under and
governed by the internal laws of the State of Kansas (exclusive of conflict of
law principles), and applicable Federal laws of the United States of America, in
each case as in effect on the date hereof and which, in our experience, are
normally applicable to the transactions provided for in the Transaction
Documents, in each case, however, exclusive of, and without regard to, any
Excluded Laws (collectively, the "Applicable Laws"). To the extent that the laws
of a state or jurisdiction other than the laws of the State of Kansas control or
govern any of the Transaction Documents, we assume that the Transaction
Documents are valid, binding and enforceable in accordance with the laws of such
other state or jurisdiction. To the extent that the Transaction Documents
provide that the rights and obligations of the parties thereto are governed by
the laws of any state other than the State of Kansas, for the purposes hereof,
we have assumed that the laws of any such other state are identical to the laws
of the State of Kansas in all respects material to the opinions expressed
herein. The term "Excluded Laws" means all (i) municipal, political subdivision
(whether created or enabled through legislative action at the federal, state,
regional or local level), local and county ordinances, statutes, administrative
decisions, laws, rules and regulations, (ii) conflict of law principles and
choice-of-law statutes and rules, and (iii) statutes, laws, rules and
regulations relating to (a) pollution or protection of the environment, (b)
zoning, land use, building or construction, (c) operation of any asset or
property, (d) labor, employment, employee rights and benefits, or occupational
safety and health, (e) antitrust, (f) taxation and (g) Federal or state
securities laws, in each case with respect to each of subsections (i) through
(iii), (x) as interpreted, construed or enforced pursuant to any judicial,
arbitral or other decision or pronouncement, (y) as enacted, promulgated or
issued by, or otherwise existing in effect in, any jurisdiction, including,
without limitation, any State of the United States of America and the United
States of America, and (z) including, without limitation, any and all
authorizations, permits, consents, applications, licenses, approvals, filings,
registrations, publications, exemptions and the like required by any of them.
B. The opinions regarding the enforceability of the Transaction Documents
are subject to the following:
(1) The enforceability of such documents may be limited or
affected by 1) bankruptcy, insolvency, reorganization,
moratorium, liquidation, rearrangement, probate,
conservatorship, fraudulent transfer, fraudulent conveyance
and other similar laws (including court decisions) now or
hereafter in effect and affecting the rights and remedies of
creditors generally or providing for the relief of debtors, 2)
the refusal of a particular court to grant (a) equitable
remedies, including, without limiting the generality of the
foregoing, specific performance and injunctive relief, or (b)
a particular remedy sought under such documents as opposed to
another remedy provided for therein or another remedy
available at law or
TGW Acquisition Corporation
Purchase Agreement
June 29, 2004
Page 4
in equity, 3) general principles of equity (regardless of
whether such remedies are sought in a proceeding in equity or
at law), and 4) judicial discretion.
(2) In rendering the foregoing opinions, we express no opinion as
to the availability of certain equitable remedies including
specific performance, and we express no opinion as to the
legality, validity, enforceability or binding effect of
covenants not to compete or of provisions of such documents
relating to indemnities and rights of contribution to the
extent prohibited by public policy or which might require
indemnification for losses or expenses caused by negligence,
gross negligence, willful misconduct, fraud or illegality of
an indemnified party.
(3) Further, we express no opinion herein with respect to
compliance with any of the anti-fraud provisions of applicable
Federal or state securities laws, rules or regulations.
C. In rendering the opinions expressed in paragraph 1 above regarding
valid existence and good standing of the Company, we have relied solely on
certificates of public officials of a recent date and have conducted no further
investigation. Such opinions are limited to the dates of such certificates.
The opinions expressed herein are solely for your benefit and may only be
relied upon by you. This opinion may not be furnished to (except in connection
with any legal or arbitral proceedings or as may be required by applicable law
or otherwise necessary to your defense in any such action), or relied upon by,
any other person without the prior written consent of this Firm. The opinions
expressed herein are as of the date hereof or, to the extent a reference to a
certificate or other document is made herein, as of the date of such certificate
or document, and we make no undertaking to amend or supplement such opinions as
facts and circumstances come to our attention or changes in the law occur which
could affect such opinions.
Very truly yours,
XXXXXXXX XXXXXXX LLP
SCHEDULES TO THE
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among TGW ACQUISITION CORPORATION
SPORTS CAPITAL PARTNERS, L.P.,
a Delaware limited partnership,
SPORTS CAPITAL WAREHOUSE, L.P.,
a Delaware limited partnership
SPORTS CAPITAL PARTNERS (CEV), L.L.C.,
a Delaware limited liability company,
XXXXXX ENTERPRISES, INC.,
a Kansas Corporation,
XXXX X. XXXXXX,
R. XXXXXXX XXXXXX
and
XXXXXXX X. XXXXXX
dated as of June 29, 2004
1
Schedule 1.2
Purchase Price
Net Proceeds before the Escrow Fund: $30,178,208.90
Pro Rata Total Purchase
Return of Distribution of Percentage Price Allocated
Seller Capital Remainder (a) (b) to Seller
Sports Capital Partners, LP 1,402,381.05 7,609,844 33.43% 10,349,457.36
Sports Capital Warehouse, LP 119,309.55 647,426 2.84% 880,503.98
Sports Capital Partners CEV, LLC 1,723,291.40 8,061,504 35.42% 11,201,395.07
Xxxxxx Enterprises, Inc.:
Class A 145,256.40 1,210,956 1,569,006.11
Class B 25,000.00 4,435,058 5,239,404.56
------------
24.8% 6,808,410.67
Xxxx X. Xxxxxx 266,061 1.17% 312,813.94
R. Xxxxxxx Xxxxxx 266,061 1.17% 312,813.94
Xxxxxxx X. Xxxxxx 266,061 1.17% 312,813.94
------------- --------------- ------ --------------
Total $3,415,238.40 $ 22,762,971 100.00% $30,178,208.90
============= =============== ====== ==============
(b) Pro rata percentage is computed by dividing the Seller's distribution
amount (column (a)) after return of capital by the total distribution
amount available to all Sellers after return of capital.
2
Schedule 1.4(c)
Sellers Pro Rata Percentages of the Purchase Price
Pro Rata
Percentage
of Escrow
Seller Fund Escrow Amount
Sports Capital Partners, LP 33.43% 1,337,232.17
Sports Capital Warehouse, LP 2.84% 113,768.30
Sports Capital Partners CEV, LLC 35.42% 1,416,599.65
Xxxxxx Enterprises, Inc.:
Class A 212,793.97
Class B 779,346.16
----------
24.8% 992,140.13
Xxxx X. Xxxxxx 1.17% 46,753.25
R. Xxxxxxx Xxxxxx 1.17% 46,753.25
Xxxxxxx X. Xxxxxx 1.17% 46,753.25
------ ------------
Total 100.00% $ 4,000,000
====== ============
3
Schedule 1.7
Allocation of Purchase Price
PURCHASE PRICE PER SECTION 1.2 $ 30,000,000
PURCHASE PRICE ADJUSTMENT PER SECTION 1.3 $ 1,231,951
ESTIMATED COST OF COMPLETING ACQUISITION $ 800,000
------------
TOTAL ACQUISITION COSTS $ 32,031,951
TANGIBLE NET ASSETS:
WORKING CAPITAL $ 3,935,503
FIXED ASSETS, NET $ 1,100,000 $ 5,035,503
------------
------------
AMOUNT OF INTANGIBLES $ 26,996,448
------------
ALLOCATION OF INTANGIBLES:
CUSTOMER LIST $ 200,000
OPT IN E-MAIL ADDRESSESS $ 50,000
NONCOMPETE AGREEMENTS $ 500,000
TRADENAME/URL'S $ 10,200,000
GOODWILL $ 16,046,448 $ 26,996,448
------------ ------------
4
Schedule 1.8
Payment of Bank Borrowings and Cash Distribution to the Sellers
Loan with Central Bank and Trust Co. located at 0000 X. 00xx Xxxxxxx, XX 00000
on March 21, 2000 for $600,000.00, which matures on March 21, 2005.
Loan with Central Bank and Trust Co. on January 9, 2002 for $196,420.15, which
matures on August 30, 2005.
Line of Credit and Commercial Loan Agreement, dated January 29, 2004, with
Central Bank and Trust Co., for maximum amount of $2,502,500 (related agreements
include Security Agreement, dated January 9, 2002; Security Agreement, dated
August 31, 2000; and letter of agreement dated January 8, 2004).
See also Schedule 3.9.
5
Schedule 3.1
Organization and Corporate Power
The Company is qualified as a foreign corporation in the following
jurisdictions:
- Kansas
6
Schedule 3.3
Noncontravention
The following agreements contain change of control provisions:
General Agreements:
Advertising Agreement (effective as of January 1, 2003) by and between with The
Golf Warehouse, Inc. and The Golf Channel.
Xxxxxxxxx@Xxxxxx.xxx Participation Agreement (effective as of February 26, 2003)
by and between The Golf Warehouse, Inc. and Xxxxxx.xxx Payments, Inc.
A binding letter of agreement, dated December 18, 2002, by and between with The
Golf Warehouse, Inc. and PGA TOUR, Inc. for the Company to build and develop a
PGA TOUR branded e-commerce site, a PGA TOUR branded online auction business,
and a set of PGA TOUR branded consumer print catalog offerings.
Dedicated Web Hosting Services Agreement between The Golf Warehouse and
Interland Inc., a webhosting company in Atlanta, Georgia (currently under
negotiation for extension).
Software License Agreement with BoldMotion Corporation dated December 4, 2003.
Security Agreement, dated May 23, 2002, with Acushnet Company for the purchase
of Acushnet products.
Work Authorization Agreement with Gateway Companies, Inc. dated May 7, 2000.
Service Agreement with Waste Connections, Inc. dated March 21, 2003.
Information Technology Lease Agreement, dated February 13, 2001, with Cisco
Systems Capital for the leasing of the telephone software and hardware
equipment.
Vendor Agreements:
Gear for Sports, Inc.
ClickAction Inc.
Apple Sports, Inc.
Xxxx Xxxxx Lauren
Pro Tour Memorabilia, LLC
Nike
Xxxxxx/Apple Sports, Inc.
Sonartec Driving Cavity
Oakley
7
The following agreements require notice of change of control of ownership, but
not consent:
Lease agreement for a certain portion of warehouse building located at 0000 X.
00xx Xxxxxx, Xxxxxxx, Xxxxxx, dated November 19, 1999, by and between Xxxxxxx X.
Xxxxx, as trustee of the Xxxxx Xxxxx Trust, created pursuant to a Trust
Agreement dated October 4, 1996, executed by Xxxxxxx X. Xxxxx as grantor, and
Xxxxxxx X. Xxxxx as trustee and THE GOLF WAREHOUSE, L.L.C., as amended by the
First Amendment Agreement for additional space in the warehouse building located
at 0000 X. 00xx Xxxxxx, Xxxxxxx, Xxxxxx, dated March 1, 2003, by and between
U.S. Business Center, L.L.C., successor in interest to Xxxxxxx X. Xxxxx, as
trustee of the Xxxxx Xxxxx Trust, created pursuant to a Trust Agreement dated
October 4, 1996, and The Golf Warehouse, L.L.C.
8
Schedule 3.4
Insider Interests
NONE
9
Schedule 3.6
Capitalization
UNITS
Class A Units:
Sports Capital Partners, LP (IMG Domestic) 3,294
Sports Capital Warehouse, LP (Cayman) 280
Sports Capital Partners CEV, LLC 3,490
Subtotal Falconhead: 7,065
Xxxxxx Enterprises, Inc. 524
Total Class A Units: 7,589
Class B Units:
Xxxxxx Enterprises, Inc. 1,920
Class C Units:
Xxxx X. Xxxxxx 90
R. Xxxxxxx Xxxxxx 90
Xxxxxxx X. Xxxxxx 90
Total Class C Units: 270
TOTAL UNITS: 9,779
10
Schedule 3.7
Subsidiaries and Investments
NONE
11
Schedule 3.8
Financial Statements
Attached are:
- Audited balance sheet and statements of operation, and cash flows as
of and for the year ended December 31, 2001, 2002, and 2003; and
- Unaudited balance sheet and statements of operation, and cash flows
as of and for the three months ended March 31, 2004.
The revenue recognition policy used to prepare the financial statements as of
and for the three months ended March 31, 2004 was different from the revenue
recognition policy used to prepare the audited financial statements as of and
for the year ended December 31, 2003:
- for the March 31, 2004 financial statements, the Company recorded
sales at the time of shipment; and
- for the December 31, 2003 financial statements, the Company recorded
retail sales at the time the customer takes possession of the
merchandise and purchases are paid for, primarily with either cash
or credit card and catalog and e-commerce sales upon customer
receipt of merchandise.
12
Schedule 3.9
Events Subsequent to the Latest Balance Sheet
(b) The Company and the Sellers have agreed to make the following payments
simultaneously with the Closing out of the proceeds from sale of the Membership
Interests:
- A transaction fee of $300,000 to Falconhead Capital.
- Special one time bonuses in connection with the sale of the Company
as follows: $37,500 to R. Xxxxxxx Xxxxxx, $37,500 to Xxxx X. Xxxxxx
and $10,000 to Xxxxxxx X. Xxxxxx.
13
Schedule 3.10
Absence of Undisclosed Liabilities
See Schedules 3.9, 3.18 and 3.21.
14
Schedule 3.12
Title to Assets
Loan with Central Bank and Trust Co. located at 0000 X. 00xx Xxxxxxx, XX 00000
on March 21, 2000 for $600,000.00, which matures on March 21, 2005.
Loan with Central Bank and Trust Co. on January 9, 2002 for $196,420.15, which
matures on August 30, 2005.
Line of Credit and Commercial Loan Agreement, dated January 29, 2004, with
Central Bank and Trust Co., for maximum amount of $2,502,500 (related agreements
include Security Agreement, dated January 9, 2002; Security Agreement, dated
August 31, 2000; and letter of agreement dated January 8, 2004).
Security Agreement, dated May 23, 2002, with Acushnet Company for the purchase
of Acushnet products.
Information Technology Lease Agreement, dated February 13, 2001, with Cisco
Systems Capital for the leasing of the telephone software and hardware
equipment.
Equipment Lease Agreement, dated January 20, 2003, with Kyocera Mita for the
leasing of the KM-2530 Digital Copier.
15
Schedule 3.13
Title to Property
Lease agreement for a certain portion of warehouse building located at 0000 X.
00xx Xxxxxx, Xxxxxxx, Xxxxxx, dated November 19, 1999, by and between Xxxxxxx X.
Xxxxx, as trustee of the Xxxxx Xxxxx Trust, created pursuant to a Trust
Agreement dated October 4, 1996, executed by Xxxxxxx X. Xxxxx as grantor, and
Xxxxxxx X. Xxxxx as trustee and THE GOLF WAREHOUSE, L.L.C., as amended by the
First Amendment Agreement for additional space in the warehouse building located
at 0000 X. 00xx Xxxxxx, Xxxxxxx, Xxxxxx, dated March 1, 2003, by and between
U.S. Business Center, L.L.C., successor in interest to Xxxxxxx X. Xxxxx, as
trustee of the Xxxxx Xxxxx Trust, created pursuant to a Trust Agreement dated
October 4, 1996, and The Golf Warehouse, L.L.C.
16
Schedule 3.14
Tax Matters
List of all states and foreign countries in which the Company is required to
file Tax Returns
Kansas
17
Schedule 3.15
Intellectual Property
The Company's trade names are as follows:
The Golf Warehouse xxxxxxxxxx.xxx
The Golf Warehouse, L.L.C. xxx-xxxxxxx.xxx
Xxxxxxxxxxxxxxxx.xxx xxx-xxxxxxx.xxx
xxx.xxx xxxxxxxxxx.xxx
xxxxxxxxxxxxxxx.xxx xxx-xxxxxxx.xxx
xxxxx0x.xxx xxxxxxxxxxx.xxx
xxxxxxxx.xxx xxx-xxx.xxx
xxxxxxxx.xxx xxxxxxx.xxx
xxxx-xxxx.xxx xxxxxxxx.xxx
xxxxxxxx.xxx xxxxxxxxx.xxx
xxxx-xxxx.xxx xxxxxxxx.xxx
xxxxxxxx.xxx xxxxxxxxxxxxxxxxxxx.xxx
xxxxxxxx.xxx xxxxxxxxxxxxxxxxxxx.xxx
xxxxxxx-xxxxxxxxx.xxx xxxxxxxxxxxxxxxx.xxx
xxxxxxx-xxxxxxxxx.xxx xxxxxxxxxxxxxxxx.xxx
xxxxxxxxxxxxx.xxx xxxxxxxxxxxxxxxx.xxx
xxxx-xxxxxxxxx.xxx xxxxxxxxxxxxxxxx.xxx
xxxxxxxxxxxxx.xxx xxxxxxxxxxxxxxxx.xxx
xxxx-xxxxxxxxx.xxx xxxxxxxxxxxxxxxx.xxx
xxxxxxxxxxxxx.xxx xxxxxxxxxxxxxxxxxx.xxx
xxxxxxxxxxxxxxx.xxx xxxxxxxxxxxxxxxxxx.xxx
xxx.xxx xxxxxxxxxxxxxxxxxx.xxx
The Company currently utilizes the following non-mass marketed software systems:
MACS, Great Plains Financial Software, Oracle, Unitymail, and MSDN.
The Company entered into a software license agreement, dated December 4, 2003,
with BoldMotion Corporation, under which BoldMotion granted the Company a
non-exclusive, non-sublicensable, non-transferrable license to use software
product called Motion Pages.
A binding letter of agreement, dated December 18, 2002, by and between with The
Golf Warehouse, Inc. and PGA TOUR, Inc. for the Company to build and develop a
PGA TOUR branded e-commerce site, a PGA TOUR branded online auction business,
and a set of PGA TOUR branded consumer print catalog offerings.
The Company owns the website xxx.xxx and licenses the related software to
operate its e-commerce platform.
18
Schedule 3.16
Contracts and Commitments
Employment Agreements:
Senior Management Agreement, dated as of October 14, 1999 with Xxxx X. Xxxxxx.
Senior Management Agreement, dated as of October 14, 1999 with R. Xxxxxxx
Xxxxxx.
Senior Management Agreement, dated as of October 14, 1999 with Xxxxxxx X.
Xxxxxx.
The Senior Management Agreements are the only written agreements with employees.
All other employees are at will employees employed in the normal course of
business. See also Schedule 3.20.
Loan Agreements:
Loan with Central Bank and Trust Co. located at 0000 X. 00xx Xxxxxxx, XX 00000
on March 21, 2000 for $600,000.00, which matures on March 21, 2005.
Loan with Central Bank and Trust Co. on January 9, 2002 for $196,420.15, which
matures on August 30, 2005.
Line of Credit and Commercial Loan Agreement, dated January 29, 2004, with
Central Bank and Trust Co., for maximum amount of $2,502,500 (related agreements
include Security Agreement, dated January 9, 2002; Security Agreement, dated
August 31, 2000; and letter of agreement dated January 8, 2004).
Lease Agreements:
See Schedules 3.12 and 3.13
License Agreements:
See Schedule 3.15
Distribution, Marketing or Sales Agreements:
Advertising Agreement (effective as of January 1, 2003) by and between with The
Golf Warehouse, Inc. and The Golf Channel.
Xxxxxxxxx@Xxxxxx.xxx Participation Agreement (effective as of February 26, 2003)
by and between The Golf Warehouse, Inc. and Xxxxxx.xxx Payments, Inc.
A binding letter of agreement, dated December 18, 2002, by and between with The
Golf Warehouse, Inc. and PGA TOUR, Inc. for the Company to build and develop a
PGA TOUR
19
branded e-commerce site, a PGA TOUR branded online auction business, and a set
of PGA TOUR branded consumer print catalog offerings.
Link Share Agreement with various internet related services.
Other Material Agreements:
Dedicated Web Hosting Services Agreement between The Golf Warehouse and
Interland Inc., a webhosting company in Atlanta, Georgia (currently under
negotiations for extension).
See also Schedule 3.3.
20
Schedule 3.17
Insurance
Directors & Officers Liability Insurance for September 30, 2003 through
September 30, 2004 (see attached renewal quotation letter for terms thereof).
See also attached Summary of Insurance.
21
Schedule 3.18
Litigation
California Foundation for Business Ethics, Inc. v. TGW and PGA: This case has
been settled. The Company's obligation pursuant to the settlement is to
distribute coupons to certain past customers in the State of California.
In "Beyond Interactive Inc. (formerly known as Media Dot Com Digital) and Grey
Global Group, Inc. (formerly known as Grey Advertising Inc.) v. The Golf
Warehouse LLC, Supreme Court of the State of New York, County of New York, Index
No. 600047/02," plaintiff sought to recover $161,098 allegedly owed due to
plaintiff acting as the agency of record ("AOR") for media advertising for the
Company. The Company has answered the Verified Complaint, denied liability and
asserted counterclaims in which the Company sought damages arising from
plaintiff's misrepresentations that induced the Company to retain plaintiff as
its AOR and plaintiff's inadequate and unsatisfactory performance as the
Company's AOR.
22
Schedule 3.20
Employee Benefits
Group health and dental plan.
Employee benefit policy described in the Company's Employee Handbook last
revised November 2003.
Employment Agreements
Senior Management Agreement, dated as of October 14, 1999 with Xxxx X. Xxxxxx.
Senior Management Agreement, dated as of October 14, 1999 with R. Xxxxxxx
Xxxxxx.
Senior Management Agreement, dated as of October 14, 1999 with Xxxxxxx X.
Xxxxxx.
23
Schedule 3.21
Environmental, Health and Safety Matters
The Company is party to various fully insured workmen's compensation claims in
the ordinary course of business.
24
Schedule 3.22
Suppliers
TaylorMade
Titleist
Nike
Callaway
Armour/Teardrop/Ram
Footjoy
Mizuno
Xxxx
Xxxxx
Cobra
The Company approached the above suppliers regarding their intended
relationships with the Company after the Closing. The Company has received
certain documents relating to post-Closing relationships with the Company from
all of the above suppliers except Ping.
25
Schedule 3.24
Customer List
NUMBER OF NUMBER OF NUMBER OF
RECENCY HOUSEHOLDS MULTI BUYERS SINGLE BUYERS
------- ---------- ------------ -------------
0 to 3 Months 90,809 46,109 44,700
4 to 6 Months 52,639 19,760 32,879
7 to 12 Months 81,978 29,906 52,072
TOTAL 225,426 95,775 129,651
13 to 24 Months 109,525 31,247 78,278
25 to 36 Months 73,221 16,003 57,218
37 Plus Months 54,052 8,789 45,263
TOTAL 236,798 56,039 180,759
GRAND TOTAL 462,224 151,814 310,410
26
