EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BETWEEN
XXXXXXX ACQUISITION SUB, INC.
AND
XXXXXXX SPORTS INC.
Dated as of April 27, 2001
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TABLE OF CONTENTS
PAGE
ARTICLE I. SALE AND PURCHASE OF STOCK..........................................1
SECTION 1.01 SALE AND PURCHASE OF STOCK AND ADDITIONAL ASSETS.......1
SECTION 1.02 PAYMENT OF PURCHASE PRICE..............................2
SECTION 1.03 FUNDED DEBT ADJUSTMENT.................................2
SECTION 1.04 TAXES AND FEES.........................................4
ARTICLE II. CLOSING............................................................5
SECTION 2.01 CLOSING................................................5
SECTION 2.02 DELIVERIES AT CLOSING..................................5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER......................6
SECTION 3.01 ORGANIZATION AND QUALIFICATION.........................6
SECTION 3.02 SELLER SUBSIDIARIES....................................7
SECTION 3.03 ORGANIZATIONAL DOCUMENTS...............................7
SECTION 3.04 CAPITALIZATION.........................................7
SECTION 3.05 AUTHORITY; BINDING OBLIGATION..........................8
SECTION 3.06 NO CONFLICT............................................8
SECTION 3.07 SEC FILINGS; FINANCIAL STATEMENTS; BOOKS AND RECORDS...9
SECTION 3.08 ABSENCE OF UNDISCLOSED LIABILITIES....................10
SECTION 3.09 ASSETS................................................10
SECTION 3.10 ABSENCE OF CERTAIN DEVELOPMENTS.......................11
SECTION 3.11 LITIGATION; COMPLIANCE WITH LAW.......................14
SECTION 3.12 ENVIRONMENTAL MATTERS.................................15
SECTION 3.13 CONTRACTS; NO DEFAULT.................................16
SECTION 3.14 LABOR RELATIONS.......................................17
SECTION 3.15 PENSION AND BENEFIT PLANS.............................17
SECTION 3.16 TAXES AND TAX MATTERS.................................20
SECTION 3.17 INSURANCE.............................................21
SECTION 3.18 PRODUCTS LIABILITY AND WARRANTY.......................22
SECTION 3.19 ARRANGEMENTS WITH RELATED PARTIES.....................22
SECTION 3.20 BROKER'S FEES.........................................23
SECTION 3.21 CORPORATE RECORDS.....................................23
SECTION 3.22 TANGIBLE PERSONAL PROPERTY............................23
SECTION 3.23 REAL PROPERTY.........................................23
SECTION 3.24 RECEIVABLES...........................................25
SECTION 3.25 INVENTORIES AND RETURNS...............................26
SECTION 3.26 CERTAIN INTERESTS.....................................26
SECTION 3.27 CUSTOMERS.............................................27
SECTION 3.28 SUPPLIERS.............................................27
SECTION 3.29 INTELLECTUAL PROPERTY.................................27
SECTION 3.30 FULL DISCLOSURE.......................................30
SECTION 3.31 QUALITY ASSURANCE.....................................30
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE BUYER.......................30
SECTION 4.01 ORGANIZATION AND QUALIFICATION........................30
SECTION 4.02 ORGANIZATIONAL DOCUMENTS..............................30
SECTION 4.03 AUTHORITY; BINDING OBLIGATION.........................30
SECTION 4.04 NO CONFLICT...........................................31
SECTION 4.05 LITIGATION............................................31
SECTION 4.06 INVESTMENT REPRESENTATIONS............................31
SECTION 4.07 BROKER'S FEES.........................................31
SECTION 4.08 FINANCING COMMITMENT..................................31
SECTION 4.09 NO "ACTUAL KNOWLEDGE" OF BREACH.......................32
ARTICLE V. COVENANTS AND AGREEMENTS...........................................32
SECTION 5.01 CONDUCT OF THE BUSINESS UNTIL THE CLOSING DATE........32
SECTION 5.02 COMMERCIALLY REASONABLE EFFORTS TO SATISFY
CONDITIONS..........................................34
SECTION 5.03 TAX MATTERS...........................................35
SECTION 5.04 NO SOLICITATION OF COMPETING TRANSACTIONS.............39
SECTION 5.05 INSURANCE.............................................39
SECTION 5.06 NON-COMPETITION AGREEMENTS............................40
SECTION 5.07 CHANGE OF NAME........................................40
SECTION 5.08 OTHER ACTIONS.........................................40
SECTION 5.09 ACCESS AND INFORMATION................................40
SECTION 5.10 PUBLICITY.............................................41
SECTION 5.11 EMPLOYEE BENEFIT MATTERS..............................41
SECTION 5.12 TRANSACTION EXPENSES..................................42
SECTION 5.13 PAYMENT OF BROKER FEES................................42
SECTION 5.14 PERMIT TRANSFER, ASSIGNMENT OR REISSUANCES............42
SECTION 5.15 NON-COMPETITION.......................................42
SECTION 5.16 DIRECTORS' AND OFFICERS' INSURANCE
AND INDEMNIFICATION.................................44
SECTION 5.17 APPAREL SUPPLY AGREEMENT..............................45
SECTION 5.18 ADDITIONAL ASSETS.....................................45
SECTION 5.19 TRANSFER OF MEMBERSHIP INTERESTS......................46
SECTION 5.20 USE OF PROCEEDS AND REPRESENTATION AND
WARRANTY INSURANCE..................................46
SECTION 5.21 ESTOPPEL CERTIFICATES.................................47
SECTION 5.22 NOTIFICATION OF CLAIMS................................47
ARTICLE VI. CONDITIONS 48
SECTION 6.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER
THIS AGREEMENT......................................48
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF THE BUYER................48
SECTION 6.03 CONDITIONS TO OBLIGATIONS OF THE SELLER...............51
ARTICLE VII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION......52
SECTION 7.01 SURVIVAL..............................................52
SECTION 7.02 AGREEMENT TO INDEMNIFY................................54
SECTION 7.03 LIMITATIONS ON INDEMNIFICATION........................55
SECTION 7.04 INDEMNIFICATION PROCEDURE.............................55
SECTION 7.05 FUTURE OPERATION OF THE BUSINESS......................56
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ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER...............................57
SECTION 8.01 TERMINATION...........................................57
SECTION 8.02 AMENDMENT.............................................58
SECTION 8.03 EXTENSION; WAIVER.....................................58
ARTICLE IX. GENERAL PROVISIONS................................................58
SECTION 9.01 NOTICES...............................................58
SECTION 9.02 HEADINGS..............................................59
SECTION 9.03 SEVERABILITY..........................................59
SECTION 9.04 ENTIRE AGREEMENT......................................60
SECTION 9.05 ASSIGNMENT............................................60
SECTION 9.06 PARTIES IN INTEREST...................................60
SECTION 9.07 MUTUAL DRAFTING.......................................60
SECTION 9.08 GOVERNING LAW; JURISDICTION...........................60
SECTION 9.09 ARBITRATION...........................................60
SECTION 9.10 ENFORCEMENT...........................................61
SECTION 9.11 COUNTERPARTS..........................................61
SECTION 9.12 SINGULAR AND PLURAL...................................61
ARTICLE X. DEFINITIONS........................................................61
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LIST OF EXHIBITS
Exhibit A - Commitment Letters
Exhibit B - [intentionally omitted]
Exhibit C - Transitional Trademark License Agreement
Exhibit D - Opinion of Seller's Counsel
Exhibit E - Xxxx of Sale and Assignment
Exhibit F - Apparel Supply Agreement
Exhibit G - Escrow Agreement
Exhibit H - Funded Debt, Excluded Assets and Profit Adjustments
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LIST OF SCHEDULES
Schedule I Additional Assets
Schedule 1.01 Subsidiary Stock
Schedule 1.03 Funded Debt Adjustment
Schedule 1.04 Taxes and Fees
Schedule 3.07(b-1) Unaudited Seller Subsidiary Consolidated Financial
Statements
Schedule 3.07(b-2) Audited Financial Statements
Schedule 3.25 List of Inventories
Schedule 4.09 No "Actual Knowledge" of Breach
Schedule 5.05 Insurance
Schedule 5.06 Non-Competition Agreements
Schedule 5.16 D&O Insurance Policies
Schedule 6.02(q) List of Real Property Covered by a Title Insurance
Schedule 6.02(r)(i) Estoppel Certificates With Respect to Real Property
Leases
Schedule 6.02(r)(ii) Estoppel Certificates With Respect to Lease/Sublease
Agreements
Seller Disclosure Letter
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of April 27, 2001 (this
"Agreement"), is entered into by and among Xxxxxxx Acquisition Sub, Inc., a
corporation organized under the laws of the State of Delaware (the "Buyer"), and
Xxxxxxx Sports Inc., a corporation organized under the laws of the State of
Delaware (the "Seller") (the Buyer and the Seller individually hereinafter
referred to as "Party" and collectively hereinafter referred to as the
"Parties").
WHEREAS, the Seller is engaged through the Seller Subsidiaries in the
business of the design, marketing, reconditioning, distribution and retailing of
football and baseball helmets, shoulder pads, practice wear, athletic uniforms
and other sports equipment and sports collectible products and trademark
licensing (the "Business");
WHEREAS, the Buyer desires to purchase all of the capital stock of each
of the wholly-owned Subsidiaries of the Seller which are engaged in the
Business, specifically: Xxxxxxx, Inc., All American Sports Corporation, Ridmark
Corporation, RHC Licensing Corporation, MacMark Corporation, Proacq Corp. and
Equilink Licensing Corporation (collectively, the "Seller Subsidiaries") and
certain additional assets of the Seller and its Affiliates, including, without
limitation, the Xxxxxxx.xxx Internet site and related software, documentation
and agreements, all as set forth in SCHEDULE I (the "Additional Assets"), and
the Seller desires to sell all of the capital stock of each Seller Subsidiary
and the Additional Assets to the Buyer (collectively, the "Stock Purchase");
WHEREAS, the respective Boards of Directors of the Buyer and the Seller
have duly approved the Stock Purchase and the related transactions described
herein;
WHEREAS, each of the Buyer and the Seller desires to make certain
representations, warranties and covenants in connection with the Stock Purchase;
and
WHEREAS, certain terms used in this Agreement are defined in Article X
hereof.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, and intending to be legally bound hereby, the Parties agree as
follows.
ARTICLE I.
SALE AND PURCHASE OF STOCK
SECTION 1.01 SALE AND PURCHASE OF STOCK AND ADDITIONAL ASSETS.
The Seller agrees to sell all of the capital stock of each of the Seller
Subsidiaries as set forth on SCHEDULE 1.01(A) (collectively, the "Subsidiary
Stock") and the Additional Assets, and the Buyer agrees to purchase the
Subsidiary Stock and the Additional Assets, on the terms and subject to the
conditions set forth herein.
SECTION 1.02 PAYMENT OF PURCHASE PRICE.
(a) The aggregate purchase price for the Subsidiary Stock and the
Additional Assets shall be $61,000,000 (the "Purchase Price"). The Purchase
Price is subject to adjustment in accordance with Section 1.03 below.
(b) Prior to the Closing Date and consistent with the proviso set forth
in Section 5.03(a)(ii) below, the Buyer shall prepare and deliver to the Seller
a proposed schedule for allocating the Purchase Price which will be based upon
the consolidated balance sheet of the Seller Subsidiaries as of March 31, 2001,
which balance sheet shall be prepared in accordance with the provisions of
Sections 1.03(a)(i) and 3.07(b)(the first and third sentences thereof) (the
"Basis"). The Seller will have fifteen (15) Business Days to review the Buyer's
proposed Basis. If the Seller disagrees with the proposed Basis, the Buyer and
the Seller shall within five (5) Business Days discuss and attempt to resolve
the dispute in good faith. If no agreement is reached at the end of the five (5)
Business Day discussion period, any dispute will be referred to the Independent
Auditor, whose determination shall be final and binding. Within 60 days after
the later of (i) the Closing Date and (ii) the resolution of any dispute
regarding the determination of the final Basis in accordance with this Section
1.02(b), the Buyer shall in good faith prepare and deliver to the Seller a
schedule for allocating the Purchase Price in accordance with the final Basis
(the "Allocation Schedule"). The Seller will have fifteen (15) Business Days to
review the Buyer's proposed Allocation Schedule. If the Seller disagrees with
any of the Buyer's allocations in the proposed Allocation Schedule, the Buyer
and the Seller shall within five (5) Business Days discuss and attempt to
resolve the disputed allocations in good faith. If no agreement is reached at
the end of the five (5) Business Day discussion period, any allocations in
dispute will be referred to the Independent Auditor, whose determination shall
be final and binding. The Buyer and the Seller will file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with the final Allocation Schedule.
SECTION 1.03 FUNDED DEBT ADJUSTMENT.
(a) On or before the tenth Business Day prior to the Closing, the
Seller shall provide to the Buyer (i) an estimated unaudited consolidated
balance sheet of the Seller Subsidiaries as of the Closing Date, adjusted to
exclude the Excluded Assets (the "Estimated Closing Balance Sheet"), (ii) an
estimated unaudited consolidated profit and loss statement of the Seller
Subsidiaries (the "Estimated P/L Statement"), adjusted to reflect the Profit
Adjustments, for the period commencing January 1, 2001 and ending the Closing
Date (the "Target Period"), and (iii) an estimated calculation (the "Estimated
Funded Debt Calculation") of the Funded Debt to be outstanding as of the close
of business on the Closing Date (the "Closing Funded Debt"), as certified by the
chief financial officer of the Seller, which Closing Funded Debt shall be
computed from amounts reflected in the Estimated Closing Balance Sheet and
Estimated P/L Statement and shall not exceed (x) $16,907,000, in the event the
Closing occurs on or prior to June 7, 2001, (y) $17,541,000, in the event the
Closing occurs after June 7, 2001 but before June 23, 2001, or (z) $18,036,000,
in the event the Closing occurs on or after June 23, 2001. The Estimated Closing
Balance Sheet and Estimated P/L Statement shall be determined in good faith on a
reasonable basis using the then available information of the Seller, and shall
be certified by the chief financial officer of the Seller.
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(b) As promptly as practicable after the Closing (but in no event later
than 30 days after the Closing), the Buyer shall provide to the Seller (i) an
unaudited consolidated balance sheet of the Seller Subsidiaries as of the
Closing, adjusted to exclude the Excluded Assets (the "Closing Balance Sheet"),
(ii) an unaudited consolidated profit and loss statement of the Seller
Subsidiaries for the Target Period, adjusted to reflect the Profit Adjustments
(the "Closing P/L Statement"), and (iii) a final calculation of the Closing
Funded Debt, as certified by the chief financial officer of the Buyer and
reconciled against the Closing Balance Sheet and Closing P/L Statements and
applicable bank statements (the "Buyer's Certification").
(c) The Estimated Closing Balance Sheet, Closing Balance Sheet,
Estimated P/L Statement and Closing P/L Statement (i) will be prepared in
accordance with the books of account and other financial records of the Seller
Subsidiaries, (ii) will present fairly in all material respects the consolidated
financial condition of the Seller Subsidiaries as of the Closing Date or the
period then ended, (iii) will have been prepared in accordance with GAAP applied
on a basis consistent with the past practices of the Sellers Subsidiaries, the
Seller Subsidiary Consolidated Financial Statements and the Audited Financial
Statements, and (iv) will include all adjustments (consisting of only normal
recurring adjustments and adjustments to reflect the Profit Adjustments and
exclude the Excluded Assets) that are necessary for a fair and accurate
presentation of the financial condition of the Seller Subsidiaries for the
period covered thereby; provided, however, that the Estimated Closing Balance
Sheet, Closing Balance Sheet, Estimated P/L Statement and the Closing P/L
Statement will be subject to normal year-end non-material adjustments and may
lack complete footnotes in accordance with GAAP.
(d) Within 21 days after delivery of the Closing Balance Sheet, Closing
P/L Statement and Buyer's Certification, the Seller may notify the Buyer in
writing of any changes or objections thereto, specifying in reasonable detail
any such objections or changes. If the Seller has no objections or changes to
the Closing Balance Sheet, Closing P/L Statement or Buyer's Certification, or if
the Buyer and the Seller agree on the resolution of all objections or changes,
then such Closing Balance Sheet, Closing P/L Statement and Buyer's Certification
shall be final and binding and shall be referred to as the "Final Closing
Balance Sheet", the "Final Closing P/L Statement" and "Final Buyer's
Certification", respectively. If the Buyer and the Seller shall fail to reach an
agreement with respect to all objections or changes within the 14-day period
immediately following the date of the Buyer's receipt of the Seller's objections
or changes to the Closing Balance Sheet, the Closing P/L Statement and Buyer's
Certification, then all disputed objections or changes shall be submitted for
resolution to the Independent Auditor. The Seller and the Buyer shall use
reasonable efforts to cause the Independent Auditor, within 21 days of its
appointment, to use its best judgment in resolving the disputes submitted to it.
The Closing Balance Sheet, Closing P/L Statement and Buyer's Certification, as
adjusted pursuant to the judgment of the Independent Auditor, shall be final and
binding and shall be referred to as the "Final Closing Balance Sheet", "Final
Closing P/L Statement" and "Final Buyer's Certification", respectively. In the
event that the Independent Auditor resolves all disputes presented to it in the
manner proposed by one Party, the fees and expenses of the Independent Auditor
relating to the resolution of such dispute shall be paid by the other Party. In
all other events, the fees and expenses of the Independent Auditor shall be
shared in the same proportion that the Seller's position, on the one hand, and
the Buyer's position, on the other, initially presented to the Independent
Auditor bears to the final resolution as determined by the Independent Auditor.
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(e) The Buyer agrees to permit the Seller and the Seller's Accountant,
legal counsel and the Independent Auditor, if any, to have reasonable access
during normal business hours to its books and records as they relate to the
Business and the related books and records, including, without limitation, the
work papers of their respective accountants, and to have reasonable access to
the Buyer's representatives or its accountants, in connection with the
preparation and review of the Closing Balance Sheet, Closing P/L Statement,
Buyer's Certification, Final Closing Balance Sheet, Final Closing P/L Statement
and Final Buyer's Certification. The expenses incurred pursuant to this Section
1.03(e) shall initially be incurred by the Party requesting such work papers or
access, provided, however, that if the parties shall use the services of an
Independent Auditor pursuant to Section 1.03(d), such expenses incurred pursuant
to this Section 1.03(e) shall be deemed to be expenses of the Independent
Auditor and shall be allocated in the manner provided in Section 1.03(d).
(f) If the Closing Funded Debt as set forth in the Estimated Funded
Debt Calculation exceeds $8,831,000 (the "Target Amount"), at the Closing the
Buyer shall pay to the Seller the amount of such excess (the "Funded Debt
Excess"), minus $1,000,000 (the "Escrow Deposit", and together with any
interests or earnings thereon, the "Escrow Amount"), which Escrow Deposit shall
be deposited at the Closing with the Escrow Agent in an account (the "Escrow
Account") in accordance with the Escrow Agreement.
(g) Upon determination of the Final Closing Balance Sheet, Final
Closing P/L Statement and Final Buyer's Certification in accordance with Section
1.03(d), the Purchase Price shall be adjusted as follows: The Escrow Agent shall
release to the Seller from the Escrow Account the amount, if any, required to be
paid to the Seller which together with the payment made by the Buyer to the
Seller at Closing pursuant to Section 1.03(f) equals the Funded Debt Excess as
determined based on the Final Buyer's Certification. The balance of the Escrow
Account, if any, shall be paid to the Buyer. In the event that the Funded Debt
Excess as determined based on the Final Buyer's Certification exceeds the sum of
(i) the payment made by the Buyer to the Seller at Closing pursuant to Section
1.03(f) and (ii) the Escrow Amount at the time of disposition of the Escrow
Account, the Buyer shall pay to the Seller the amount of such excess. The Seller
shall pay to the Buyer the amount, if any, the Seller received at Closing
pursuant to Section 1.03(f) in excess of the Funded Debt Excess as determined
based on the Final Buyer's Certification. Any amounts to be paid pursuant to
this Section 1.03(g) shall be paid within five (5) Business Days following the
determination of the Final Closing Balance Sheet and the Final Closing P/L
Statement.
(h) An illustration of the adjustment under this Section 1.03 is set
forth on Schedule 1.03. In no event shall the increase in the Purchase Price
pursuant to this Section 1.03 exceed $15,000,000.
SECTION 1.04 TAXES AND FEES.
At the Closing, the Buyer will pay $285 as payment for the sales, use, transfer,
documentary or other similar Tax and recording and filing fees set forth on
Schedule 1.04 and applicable to the transfer of the Subsidiary Stock and the
Additional Assets; PROVIDED that all other sales, use, transfer, documentary or
other similar Tax and recording and filing fees, if any, shall be the
responsibility of the Seller.
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ARTICLE II.
CLOSING
SECTION 2.01 CLOSING.
The Closing shall take place at the offices of Proskauer Rose LLP, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 effective at 11:59 p.m. on the Closing Date.
SECTION 2.02 DELIVERIES AT CLOSING.
(a) At the Closing, the Buyer shall deliver to the Seller:
(i) the Purchase Price, payable as set forth in Section 1.02;
(ii) a certificate of an authorized officer of the Buyer
certifying to the fulfillment of the conditions set forth in Sections 6.03(a)
and (b);
(iii) a copy of the resolutions of the Buyer's Board of
Directors, authorizing the execution, delivery and performance of this
Agreement, certified by an authorized officer of the Buyer;
(iv) the Escrow Agreement, duly executed by the Buyer and the
Seller;
(v) [intentionally omitted];
(vi) [intentionally omitted];
(vii) the Transitional Trademark License Agreement referred to
in Section 5.07; and
(viii) such other instruments and certificates as may be
reasonably requested by the Seller.
(b) At the Closing, the Seller shall deliver to the Buyer:
(i) all certificates representing Subsidiary Stock duly
endorsed in blank or accompanied by stock powers duly endorsed in blank;
(ii) a certificate of the Seller certifying to the fulfillment
of the conditions set forth in Sections 6.02(a) and (b);
(iii) a copy of the resolutions of (i) the Seller's Board of
Directors and (ii) the Board of Directors of each Seller Subsidiary, authorizing
the execution, delivery and performance of this Agreement, certified by an
authorized officer of the Seller or such Seller Subsidiary, as the case may be;
(iv) copies of the Closing Consents;
5
(v) the Escrow Agreement, duly executed by the Buyer and the
Seller;
(vi) [intentionally omitted];
(vii) [intentionally omitted];
(viii) the opinion of Seller's counsel, Xxxxxxx Berlin Shereff
Xxxxxxxx, LLP, to be delivered pursuant to Section 6.02(j);
(ix) the certificates to be delivered pursuant to Sections
6.02(m), (n) and (o);
(x) the minute books, stock register certificate books and
stock record books of each Seller Subsidiary;
(xi) the estoppel certificates to be delivered pursuant to
Section 6.02(r);
(xii) the Xxxx of Sale and Assignment to be delivered pursuant
to Section 6.02(v);
(xiii) the Transitional Trademark License Agreement referred
to in Section 5.07;
(xiv) the documents evidencing the releases referred to in
Section 6.02(p);
(xv) the documents evidencing the materials to be delivered
pursuant to Section 6.02(x); and
(xvi) such other instruments and certificates as may be
reasonably requested by the Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the Disclosure Letter delivered by the Seller to the
Buyer prior to the execution and delivery of this Agreement (the "Seller
Disclosure Letter"), the Seller hereby represents, warrants to and agrees with
the Buyer as follows:
SECTION 3.01 ORGANIZATION AND QUALIFICATION.
The Seller is a corporation duly organized, validly existing and in good
standing under Delaware Law, and has the corporate power and authority to own,
operate and lease its Assets, to carry on its business as currently conducted,
to execute and deliver this Agreement and to carry out the transactions
contemplated hereby. The Seller is duly licensed or qualified to conduct
business as a foreign corporation and is in good standing in the states,
countries and territories listed in Section 3.01 of the Seller Disclosure Letter
and in each jurisdiction where the nature of its business or the ownership,
operation or leasing of its Assets makes such qualification necessary, except
where failure to so qualify would not be reasonably expected to have a Seller
Material Adverse Effect.
6
SECTION 3.02 SELLER SUBSIDIARIES.
(a) Section 3.02 of the Seller Disclosure Letter lists each Seller
Subsidiary. Section 3.02 of the Seller Disclosure Letter sets forth (a) the
authorized capital stock or other equity interests of each Seller Subsidiary,
(b) the number of issued and outstanding shares of capital stock or other equity
interests of each Seller Subsidiary, (c) the names and holders of the shares of
capital stock or other equity interests of each Seller Subsidiary and (d) the
percentage of the issued and outstanding capital stock or other equity interests
of each Seller Subsidiary owned by the Seller and each Seller Subsidiary. Each
Seller Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its state or jurisdiction of incorporation (as listed
in Section 3.02 of the Seller Disclosure Letter), and has the requisite power
and authority to own, operate and lease its Assets and to carry on its business
as currently conducted. Each Seller Subsidiary is duly licensed or qualified to
conduct business as a foreign Person and is in good standing in each
jurisdiction (i) where it owns or leases Real Property and (ii) where the nature
of its business or the ownership, operation or the leasing of its Assets makes
such qualification necessary except where failure to so qualify would not be
reasonably expected to have a Seller Material Adverse Effect.
(b) The Seller does not own, control or hold the power to vote,
directly or indirectly of record, beneficially or otherwise, any capital stock
or any equity or ownership interest in any Person engaged in the Business, other
than the Seller Subsidiaries.
SECTION 3.03 ORGANIZATIONAL DOCUMENTS.
The Seller has furnished to the Buyer a true and complete copy of the
certificate of incorporation and bylaws of each Seller Subsidiary, as in effect
on the date of this Agreement. Neither the Seller nor any Seller Subsidiary is
in violation of any of the provisions of its respective organizational
documents.
SECTION 3.04 CAPITALIZATION.
(a) Except as set forth in Section 3.04 of the Seller Disclosure
Letter, all the outstanding shares of each Seller Subsidiary's capital stock are
duly authorized, validly issued, fully paid and nonassessable and all such
shares are owned by the Seller or a Seller Subsidiary free and clear of all
Liens. None of the outstanding shares of any Seller Subsidiary's capital stock
have been issued in violation of any federal or state securities Laws. Upon
transfer of the Subsidiary Stock to the Buyer, the Buyer will acquire good,
valid, legal, equitable and marketable title to the Subsidiary Stock, free and
clear of all Liens. Since the date of this Agreement, there have been no changes
to the authorized capital stock of any Seller Subsidiary. There are no accrued
and unpaid dividends with respect to any outstanding shares of capital stock of
any Seller Subsidiary.
(b) No options or rights of any kind to acquire any shares of capital
stock of any Seller Subsidiary have been issued, granted or otherwise committed.
There are no options, warrants, calls, rights, commitments or agreements of any
character to which the Seller or any Seller Subsidiary is a party, or by which
the Seller or any Seller Subsidiary is bound, obligating the Seller or any
Seller Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of any Seller Subsidiary. There are no
voting trusts, proxies or
7
other similar agreements or understandings with respect to the shares of capital
stock of any Seller Subsidiary. There are no obligations, contingent or
otherwise, of the Seller or any Seller Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock of any Seller Subsidiary or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any Seller Subsidiary or any other entity.
SECTION 3.05 AUTHORITY; BINDING OBLIGATION.
The Seller has full corporate power and authority to execute and deliver this
Agreement and the other Transaction Documents and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents and the consummation by the Seller of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Seller's Board of Directors and have been duly authorized by all
necessary corporate action. This Agreement and the other Transaction Documents
have been and will be, as the case may be, duly executed and delivered by the
Seller and constitute legal, valid and binding obligations of the Seller
(assuming this Agreement and the other Transaction Documents have been and will
be, as the case may be, duly executed and delivered by the Buyer and constitute
legal, valid and binding obligations of the Buyer), enforceable in accordance
with their respective terms, except as such enforceability may be subject to the
effects of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar Laws affecting creditors' rights generally
and subject to the effects of general equitable principles (whether considered
in a proceeding in equity or at law).
SECTION 3.06 NO CONFLICT.
The execution, delivery and performance by the Seller of this Agreement, the
fulfillment of and compliance with the terms and provisions hereof, and the
consummation by the Seller of the transactions contemplated hereby, do not and
will not: (i) conflict with, or violate any provision of, the certificate of
incorporation or by-laws of the Seller or any Seller Subsidiary; (ii) subject to
obtaining the consents, approvals, authorizations and permits of, and making
filings with or notifications to, the Persons set forth in Section 3.06 of the
Seller Disclosure Letter, conflict with or violate any Law applicable to the
Seller or any Seller Subsidiary, or any of their Assets, businesses or affairs,
except as would not be reasonably expected to have a Seller Material Adverse
Effect; (iii) subject to obtaining the consents, approvals, authorizations and
permits of, and making filings with or notifications to, the Persons set forth
in Section 3.06 of the Seller Disclosure Letter, conflict with, result in any
breach of, or constitute a default (or an event that with notice or lapse of
time or both would be reasonably expected to become a default) or result in the
termination, acceleration or loss of benefit under any agreement to which the
Seller or any Seller Subsidiary is a party or by which the Seller or any Seller
Subsidiary, or any of their Assets, businesses or affairs, may be bound, except
as would not be reasonably expected to have a Seller Material Adverse Effect; or
(iv) subject to obtaining the consents, approvals, authorizations and permits
of, and making filings with or notifications to, the Persons set forth in
Section 3.06 of the Seller Disclosure Letter, result in or require the creation
or imposition of, or result in the acceleration of, any indebtedness or any Lien
of any nature upon, or with respect to, the Seller or any Seller Subsidiary or
any of its Assets, businesses or affairs.
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SECTION 3.07 SEC FILINGS; FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) The Seller has filed all forms, reports, statements and other
documents required to be filed with the SEC since January 1, 1999, and has
heretofore delivered to the Buyer (to the extent not publicly available in XXXXX
format on the SEC's web site), in the form filed with the SEC since such date,
together with any amendments thereto, all of its (i) Annual Reports on Form
10-K, (ii) Quarterly Reports on Form 10-Q, (iii) proxy statements relating to
meetings of stockholders (whether annual or special), (iv) reports on Form 8-K
and (v) other reports or registration statements filed by the Seller
(collectively, whether or not required to be delivered to Buyer, the "Seller SEC
Reports"). As of their respective filing dates, the Seller SEC Reports (i)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act, as applicable, and (ii) with respect to the
Business, did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. As of the date hereof, the Seller
SEC Reports, taken as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(b) Attached as SCHEDULE 3.07(B-1) hereto are true and complete copies
of the unaudited consolidated balance sheets of the Seller Subsidiaries as of
December 31, 1998 and December 31, 1999 and the related unaudited consolidated
statements of income, stockholders' equity and cash flows of the Seller
Subsidiaries for the twelve-month periods then ended, including all related
notes and schedules (the "Seller Subsidiary Consolidated Financial Statements").
Attached as Schedule 3.07(b-2) are true and correct copies of (x) the audited
consolidated statement of operations of the Seller Subsidiaries for the 12-month
period ended December 31, 2000, adjusted to reflect the Profit Adjustments (the
"Audited Statement of Operations"), (y) the audited consolidated balance sheet
of the Seller Subsidiaries as of December 31, 2000, adjusted to exclude the
Excluded Assets (the "Audited Balance Sheet"), and (z) the audited statement of
cash flows of the Seller Subsidiaries for the twelve-month period ended December
31, 2000 (the "Audited Statement of Cash Flows," and together with the Audited
Statement of Operations and the Audited Balance Sheet, the "Audited Financial
Statements"), in each case accompanied by the unqualified report thereon by the
Seller's Accountant and a true and correct copy of the customary management
representation letter from the Seller's management to the Seller's Accountant
with respect to the Audited Financial Statements. The Seller Subsidiary
Consolidated Financial Statements, including all related notes and schedules,
(i) were prepared in accordance with the books of account and other financial
records of the Seller Subsidiaries, (ii) present fairly in all material respects
the consolidated financial condition and results of operations of the Seller
Subsidiaries as at the respective dates thereof and for the periods covered
thereby, (iii) have been prepared in accordance with GAAP applied on a basis
consistent with the Audited Financial Statements and the past practices of the
Seller Subsidiaries throughout the periods involved (except as may be noted
therein) and (iv) include all adjustments (consisting of only normal recurring
adjustments and adjustments to reflect the Profit Adjustments and exclude the
Excluded Assets) that are necessary for a fair and accurate presentation of the
financial condition of the Seller Subsidiaries and the results of operations and
cash flows of the Seller Subsidiaries as of the dates thereof or for the periods
covered thereby. The Audited Financial Statements, including all related notes
and schedules, (a) were prepared in accordance with the
9
books of account and other financial records of the Seller Subsidiaries, (b)
present fairly in all material respects the consolidated financial condition and
results of operations of the Seller Subsidiaries as at the respective dates
thereof and for the periods covered thereby, (c) have been prepared in
accordance with GAAP applied on a basis consistent with the Seller Subsidiary
Consolidated Financial Statements and the past practices of the Seller
Subsidiaries throughout the periods involved (except as may be noted therein)
and (d) include all adjustments (consisting of only normal recurring adjustments
and adjustments to reflect the Profit Adjustments and exclude the Excluded
Assets) that are necessary for a fair and accurate presentation of the financial
condition of the Seller Subsidiaries and the results of operations and cash
flows of the Seller Subsidiaries as of the dates thereof or for the periods
covered thereby.
(c) The books of account and other financial records of the Seller
Subsidiaries (i) accurately reflect all material items of income and expense and
all assets and liabilities of the Seller Subsidiaries and the Business, (ii) are
in all material respects complete and correct and do not contain or reflect any
material inaccuracies or discrepancies and (iii) have been maintained in
accordance with good business and accounting practices.
(d) Except as set forth in Section 3.07(d) of the Seller Disclosure
Letter, all income and assets set forth in the Seller Subsidiary Consolidated
Financial Statements and Audited Financial Statements arise out of or are used
solely in the Business.
(e) The average of the balance of the Funded Debt as of October 31,
2000, November 30, 2000 and December 31, 2000 equals the Target Amount.
SECTION 3.08 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth in Section 3.08 of the Seller Disclosure Letter, there are
no liabilities or obligations of any nature whatsoever (whether absolute or
contingent, matured or unmatured) of any Seller Subsidiary that are not
reflected, or reserved against, on the Audited Balance Sheet, except for those
liabilities or obligations that have been incurred after the Audited Balance
Sheet Date in the Ordinary Course of Business consistent with the past practices
of such Seller Subsidiary, and which do not and will not materially impair the
ability of the Seller to perform its obligations under this Agreement or under
any other Transaction Document.
SECTION 3.09 ASSETS.
(a) Each Seller Subsidiary has good, valid and marketable title to, or a valid
leasehold interest in, all Assets respectively owned or leased by them,
including, without limitation, all Assets reflected in the Audited Balance Sheet
and all Assets acquired by any Seller Subsidiary since the Audited Balance Sheet
Date (except for non-material Assets reflected in the Audited Balance Sheet or
acquired since such date which have been sold or otherwise disposed of in the
Ordinary Course of Business), free and clear of all Liens other than Liens
reflected on the Seller Subsidiary Consolidated Financial Statements and
Permitted Liens. The Seller has good, valid and marketable title to all of the
Additional Assets (except for non-material Additional Assets reflected in the
Audited Balance Sheet or acquired since such date which have been sold or
otherwise disposed of in the Ordinary Course of Business), free and clear of all
Liens other than Liens reflected on the Seller Subsidiary Consolidated Financial
Statements and Permitted Liens.
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All personal property of each Seller Subsidiary is in good operating condition
and repair, ordinary wear and tear excepted, and is suitable and adequate for
the uses for which it is intended or is being used. Except as set forth in
Section 3.09 of the Seller Disclosure Letter, the Assets of the Seller
Subsidiaries, taken as a whole, and the Additional Assets constitute all of the
Assets relating to or used or held for use in connection with the Business
during the past twelve months or necessary for the conduct of the Business.
Except for Assets disposed of in the Ordinary Course of Business and the
Additional Assets, the Assets of the Seller Subsidiaries constitute all the
Assets necessary to conduct the Business on a stand-alone basis as presently
conducted and as conducted during the past three years.
(b) Immediately following the consummation of the transactions
contemplated by this Agreement, each Seller Subsidiary will continue to own,
pursuant to good and marketable title, or lease, under valid and subsisting
leases disclosed in Section 3.09 of the Seller Disclosure Letter, subject to
obtaining the consents to the leases set forth in Section 3.06 of the Seller
Disclosure Letter, or otherwise retain its interest in, the Assets of such
Seller Subsidiary without incurring any penalty or other adverse consequences,
including, without limitation, any increase in any material respect in rentals,
royalties or licenses or other fees imposed as a result of, or arising from, the
consummation of the transactions contemplated by this Agreement. Subject to
obtaining the consents of the members of MacGregor Corporation to the transfer
to the Buyer or the Buyer's designees of the membership interests held by Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxx and Xxxxxxx Xxxxxxxx in XxxXxxxxx Corporation or the
substitution of the Buyer's designees as members of MacGregor Corporation in
lieu of such transfer, immediately following the consummation of the
transactions contemplated by this Agreement, the Buyer will own, pursuant to
good and marketable title, the Additional Assets without incurring any penalty
or other adverse consequences, including, without limitation, any increase in
any material respect in rentals, royalties or licenses or other fees imposed as
a result of, or arising from, the consummation of the transactions contemplated
by this Agreement.
SECTION 3.10 ABSENCE OF CERTAIN DEVELOPMENTS.
Since the Audited Balance Sheet Date, except as expressly contemplated by this
Agreement or as disclosed in Section 3.10 of the Seller Disclosure Letter, the
Seller Subsidiaries have conducted Business only in the Ordinary Course of
Business and consistent with past practices. Since the Audited Balance Sheet
Date, except as set forth in Section 3.10 of the Seller Disclosure Letter, no
event or events have occurred which individually or in the aggregate have had or
would be reasonably expected to have a Seller Material Adverse Effect. For
purposes of the immediately preceding sentence, payments made in the Ordinary
Course of Business which would be deemed a Seller Material Adverse Effect solely
by reason of the fact that such amounts exceeded the applicable $100,000 and
$250,000 thresholds for Seller Material Adverse Effect shall not be deemed to
have a Seller Material Adverse Effect. Notwithstanding the foregoing, except as
set forth in Section 3.10 of the Seller Disclosure Letter or as expressly
contemplated by this Agreement, since the Audited Balance Sheet Date, neither
the Seller nor any Seller Subsidiary has, with respect to any of the Seller
Subsidiaries or the Business:
(a) increased in any manner the compensation or fringe benefits of, or
paid any bonus to, any Managerial Employee, other than in the Ordinary Course of
Business;
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(b) granted any severance or termination pay to, or entered into any
severance agreement with, any Managerial Employee, or entered into any
employment agreement with any such Managerial Employee;
(c) established, adopted, entered into or amended any Benefit Plan or
other arrangement of the Seller Subsidiaries, except as may be required to
comply with applicable Law;
(d) granted to any Managerial Employee any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Benefit Plan
or other arrangement (including the grant of stock options, stock appreciation
rights, stock-based or stock-related awards, performance units or restricted
stock, or the removal of existing restrictions in any Benefit Plan or other
arrangement or agreement or awards made thereunder);
(e) promoted or fired any Managerial Employee;
(f) declared, set aside or paid any dividend on, or made any other
distribution in respect of, outstanding shares of the Subsidiary Stock;
(g) sold, leased, exchanged, mortgaged, pledged, transferred or
otherwise disposed of any of the Assets, other than the sale of Inventories and
other personal property in the Ordinary Course of Business consistent with past
practice;
(h) made or agreed to make any new capital expenditures related to the
Business to the extent that such new capital expenditures exceed $100,000 in the
aggregate;
(i) amended, terminated (other than in accordance with its terms) or
modified in any material respect or consented to the termination of any Seller
Contract, Real Property Lease or Lease/Sublease Agreement, or the rights
thereunder;
(j) permitted or allowed any Assets to be subjected to any Liens other
than Permitted Liens;
(k) discharged or otherwise obtained the release of any Lien;
(l) paid or otherwise discharged any (i) liability incurred in the
Ordinary Course of Business, except in the Ordinary Course of Business
consistent with past practice, or (ii) any other liability;
(m) settled any claims outside the Ordinary Course of Business or
settled any suits, judgments or other legal actions, without the prior written
consent of the Buyer;
(n) made any loan to, guaranteed any indebtedness of, or otherwise
incurred any indebtedness on behalf of any other Person, other than Intercompany
Debt included in the calculation of Funded Debt;
(o) other than in the Ordinary Course of Business, failed to pay any
creditor (including, without limitation, trade creditors) any amount owed to
such creditor upon the later of when such amount became due or within the
applicable grace period;
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(p) except as set forth in Section 3.13 of the Seller Disclosure
Letter, issued any purchase orders for Inventory outside the Ordinary Course of
Business consistent with past practices or entered into any Seller Contract
outside the Ordinary Course of Business;
(q) entered into any Contract or transaction with any Employee or any
director, officer or shareholder of the Seller or any Seller Subsidiary (or with
any relative, beneficiary, spouse or Affiliate of such Person, PROVIDED that,
for purposes of this Section 3.10(q), a shareholder of the Seller who owns less
than 5% of the capital stock of the Seller and who is not otherwise an Affiliate
shall not be deemed an Affiliate), including, without limitation, any retention
or non-competition agreement or arrangement or any agreement or arrangement
which may involve payments or other obligations upon a Change in Control, with
respect to which the Buyer or any Seller Subsidiary may at any time be obligated
to make payment in whole or in part;
(r) except as reflected in the Audited Balance Sheet, written down or
written up (or failed to write down or write up in accordance with GAAP
consistent with past practices) the value of any Inventories (other than in the
Ordinary Course of Business consistent with past practices and in accordance
with GAAP) or the stated amounts of any Receivables or revalued any Assets,
except against reserves for doubtful accounts recorded in the Ordinary Course of
Business consistent with past practices;
(s) amended, terminated, canceled or compromised any claims or waived
any other rights individually in excess of $25,000;
(t) made any change in its method of accounting or accounting practice
or policy;
(u) failed to maintain the Assets in all material respects in
accordance with past business practice and in good operating condition and
repair;
(v) other than indebtedness included in the calculation of Funded Debt,
incurred any indebtedness for borrowed money;
(w) amended or restated its certificate of incorporation or bylaws;
(x) disclosed any secret or confidential Patents, Copyrights, Marks,
Licensed IP Agreements, Seller IP Agreements or Know-How (except by way of
issuance of a patent) or permitted to lapse or become abandoned any material
Patents, Copyrights, Marks, Licensed IP Agreements, Seller IP Agreements or
Know-How (or any registration or grant thereof or any application relating
thereto) to which, or under which, any Seller Subsidiary has any right, title,
interest or license;
(y) made any election or settled or compromised any material liability
with respect to Taxes;
(z) suffered any material casualty, loss or damage with respect to any
of its Assets, whether or not such loss or damage was covered by insurance;
13
(aa) merged with, entered into a consolidation with or acquired any
equity interest in, any Person or otherwise acquired a substantial portion of
the capital stock, assets or business of any Person or any division or line of
business thereof, or otherwise acquired any assets;
(bb) issued or sold or purchased, redeemed or otherwise acquired any
capital stock, notes, bonds or other securities, or any option, warrant or other
right to acquire the same, of any other interest in the Seller Subsidiaries;
(cc) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.10 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in this Section 3.10,
except as expressly contemplated by this Agreement.
SECTION 3.11 LITIGATION; COMPLIANCE WITH LAW.
(a) As of the date hereof, except as set forth in Section 3.11 of the
Seller Disclosure Letter, there are: (i) no claims, actions, suits,
investigations, or proceedings pending or, to the Seller's knowledge, threatened
against, relating to or affecting the Seller or any of the Seller Subsidiaries
or the Business or Assets and (ii) no orders of any Governmental Entity or
arbitrator outstanding against the Seller or any Seller Subsidiary, the Business
or the Assets that would be reasonably expected to have a Seller Material
Adverse Effect or prevent or enjoin, or delay in any respect, consummation of
the transactions described herein. As of the date hereof, Section 3.11 of the
Seller Disclosure Letter includes a description of all claims, actions, suits,
investigations or proceedings involving the Seller or any Seller Subsidiary or
the Business or the Assets, or any Employee or officer, director or stockholder
of the Seller or any Seller Subsidiary, in connection with the Business
occurring, arising or existing during the past five (5) years through the date
hereof, other than claims, actions, suits, investigations or proceedings which
do not concern any product or equipment manufactured, shipped, sold or delivered
by the Seller or any Seller Subsidiary and which are or have been covered in
full (other than with respect to self-insured retentions) by insurance.
(b) Except as set forth in Section 3.11(b) of the Seller Disclosure
Letter, for the past five (5) years, the Seller and each Seller Subsidiary have
complied and are in compliance in all respects with all Laws applicable to the
Business or the Assets, the failure to comply with which, individually or in the
aggregate, would be reasonably expected to have a Seller Material Adverse
Effect. Neither the Seller nor any Seller Subsidiary has received notice that it
cannot or is not expected to become a member of the "fair labor association"
referred to in Section 3.11(b) of the Seller Disclosure Letter, and to the
knowledge of the Seller, Xxxxxxx, Inc. is eligible to become a member of such
association. No customer of the Seller Subsidiaries or the Business has
terminated or not renewed, given notice of termination or non-renewal of, or, to
the knowledge of the Seller, threatened to terminate or not renew, any Contract
or license with the Seller Subsidiaries or the Business as a result of the
failure of the Seller or the Seller Subsidiaries to be a member of such
association. To the knowledge of the Seller, no customer of the Seller
Subsidiaries or the Business has adopted any rules or regulations relating to
such association that, if any Seller Subsidiary became a member of such
association, would be reasonably expected to have a Seller Material Adverse
Effect. Neither the Seller nor any Seller Subsidiary has received notice from
any Governmental Entity or other Person of any violation of Law
14
applicable to the Seller, the Seller Subsidiaries, the Business or the Assets,
except for violations which would not be reasonably expected to have a Seller
Material Adverse Effect. The Seller and each Seller Subsidiary have obtained and
hold all Licenses (all of which are in full force and effect) from all
Government Entities applicable to the Business or the Assets, the failure of
which to obtain and hold would be reasonably expected to have a Seller Material
Adverse Effect. No material violations are or have been recorded in respect of
any such License and no proceeding is pending to revoke or limit any such
License.
SECTION 3.12 ENVIRONMENTAL MATTERS.
Except as set forth in Section 3.12 of the Seller Disclosure Letter:
(a) Each of the Seller and each Seller Subsidiary is in compliance, and
has at all times complied, with all Environmental Laws applicable to the real
property presently owned, leased or operated by the Seller or any Seller
Subsidiary (the "Property"), the Assets and the Business, except where the
failure to comply would not be reasonably expected to have a Seller Material
Adverse Effect.
(b) To the knowledge of the Seller, neither the Seller nor any Seller
Subsidiary or any Property has any liability under any Environmental Law which,
individually or in the aggregate, would be reasonably expected to have a Seller
Material Adverse Effect.
(c) There are no pending or, to the knowledge of the Seller,
threatened, actions, suits, claims, legal proceedings or other proceedings based
on, and neither the Seller nor any Seller Subsidiary has received any notice,
whether written or oral, of any complaint, order, directive, citation, notice of
responsibility, notice of potential responsibility, liabilities or information
request from any Governmental Entity or any other Person arising out of, in
connection with or attributable to: (i) the current or past presence at any part
of the Property of any Hazardous Material; (ii) the off-site disposal of any
Hazardous Material originating on or from the Property; or (iii) any violation
of or non-compliance with Environmental Laws at any part of the Real Property or
otherwise arising from the Seller's or any Seller Subsidiary's activities which,
individually or in the aggregate, would be reasonably expected to have a Seller
Material Adverse Effect.
(d) Neither the Seller nor any Seller Subsidiary, nor to the knowledge
of the Seller or any Seller Subsidiary, any other person or entity, has engaged
in, authorized, allowed or suffered any operations or activities upon any part
of the Real Property for the purpose of or in any way involving the handling,
manufacture, treatment, processing, storage, use, generation, release,
discharge, spilling, emission, dumping or disposal of any Hazardous Material at,
on, under or from any part of the Real Property, except in full compliance with
all applicable Environmental Laws.
(e) To the knowledge of the Seller and each Seller Subsidiary, there
are no conditions existing at any Real Property or with respect to the Business
or the Assets that require remedial or corrective action, removal, monitoring or
closure pursuant to the Environmental Laws.
(f) Each of the Seller and each Seller Subsidiary has all the permits,
licenses, authorizations and approvals necessary for the conduct of the Business
and for the operations on,
15
in or at the Real Property or the Assets which are required under applicable
Environmental Laws (the "Environmental Permits"). To the knowledge of the Seller
and each Seller Subsidiary, each of the Seller and each Seller Subsidiary is in
full compliance with the terms and conditions of all such Environmental Permits.
(g) Neither the Seller nor any Seller Subsidiary has contractually, nor
has the Seller or any Seller Subsidiary received written notice that by
operation of law it has, assumed or succeeded to any environmental liabilities
or obligations of any predecessors of any other person or entity, that are
reasonably likely to have a Seller Material Adverse Effect.
(h) The Seller has provided or made available to the Buyer all material
environmental reports, assessments, audits, studies and investigations in its
custody, possession or control concerning the Business, the Assets and the
Property.
SECTION 3.13 CONTRACTS; NO DEFAULT.
Set forth in Section 3.13 of the Seller Disclosure Letter is a list of all
Seller Contracts other than those Seller Contracts described in clauses (i)(a)
and (b) and (ii)(a) and (b) to the definition of "Seller Contracts" set forth in
this Agreement. True and correct copies of all such Seller Contracts have been
provided or made available to the Buyer. Except for those Seller Contracts
specifically listed in Section 3.13 of the Seller Disclosure Letter under the
caption entitled "Seller Contracts That May No Longer Be In Full Force And
Effect Prior To Closing", each of the Seller Contracts is in full force and
effect, constitutes a valid and binding obligation of, and is legally
enforceable against, the respective Seller Subsidiary in accordance with its
terms and, to the knowledge of the Seller, is a valid, binding and enforceable
obligation of the other parties thereto, except as such enforceability may be
subject to the effects of any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar Laws affecting creditors'
rights generally or subject to the effects of general equitable principles
(whether considered in a proceeding in equity or at law). With respect to each
Seller Contract listed in Section 3.13 of the Seller Disclosure Letter the term
of which has expired, (i) since the expiration of the term of such Seller
Contract, the parties thereto have conducted their relationship in the same
manner and subject to the same Contract terms and conditions as they operated
during the term of such Seller Contract, and (ii) the Seller has no reason to
believe that such Seller Contract will not be renewed, at the option of the
Seller Subsidiary party thereto, on substantially the same terms and conditions.
The Seller agrees that any such renewal obtained prior to Closing will include,
if necessary, a consent to the transactions contemplated hereunder. Each Seller
Contract, upon consummation of the transactions contemplated by this Agreement
and the other Transaction Documents, shall continue to be legal, valid, binding
and enforceable on terms identical to those currently in effect and shall
continue in full force and effect without penalty or adverse consequence,
subject to obtaining the consents set forth in Section 3.06 of the Seller
Disclosure Letter. There has not been (A) any failure by any Seller Subsidiary
or, to the knowledge of the Seller, any other party to a Seller Contract to
comply with all provisions thereof which default or failure to perform would be
reasonably expected to have a Seller Material Adverse Effect or (B) any default
by any Seller Subsidiary or, to the knowledge of the Seller, any other party
thereunder under a Seller Contract, which default or failure to perform would be
reasonably expected to have a Seller Material Adverse Effect. Neither the Seller
nor
16
any Seller Subsidiary is a guarantor or otherwise liable for any liability or
obligation (including indebtedness) of any other Person other than any Seller
Subsidiary.
SECTION 3.14 LABOR RELATIONS.
Except as set forth in Section 3.14 of the Seller Disclosure Letter, there are
no collective bargaining or other labor union Agreements to which the Seller or
any Seller Subsidiary is a party. There are, and for the past two (2) years have
been, no strikes, work stoppages, union organization efforts or lawsuits (other
than grievance proceedings) pending or, to the knowledge of the Seller,
threatened between the Seller or any Seller Subsidiary and (a) any current or
former Employees except where such activity or lawsuits would not be reasonably
expected to have a Seller Material Adverse Effect or (b) any union or other
collective bargaining unit representing such Employees. The Seller and each
Seller Subsidiary have complied and are in compliance with all Laws relating to
employment or the workplace with respect to the Business, including, without
limitation, Laws relating to wages, hours, collective bargaining, safety and
health, work authorization, equal employment opportunity, immigration,
withholding, unemployment compensation, worker's compensation, employee privacy
and right to know, except where the failure so to comply would not be reasonably
expected to have a Seller Material Adverse Effect.
SECTION 3.15 PENSION AND BENEFIT PLANS.
(a) Section 3.15(a) of the Seller Disclosure Letter sets forth a
correct and complete list of all the material employee benefit plans,
agreements, commitments, practices or arrangements of any type providing any
employee benefits (including, but not limited to, plans described in Section
3(3) of ERISA) currently maintained, sponsored or contributed to by the Seller
or any Seller Subsidiary, or to which the Seller or any Subsidiary is currently
making or is required to make contributions, with respect to the Business
(collectively, the "Benefit Plans").
(b) With respect to each Benefit Plan, the Seller has made available to
Buyer true and complete copies of: (i) any written plan texts and agreements or
summary of any unwritten arrangements; (ii) the summary plan description
currently in effect and all material modifications thereto, if any; (iii) the
three most recent annual returns in the federal Form 5500 series, if applicable;
(iv) any collective bargaining agreements; (v) the most recent annual and
periodic accounting of plan assets, if applicable; (vi) the most recent
determination letter, if any, received from the United States Internal Revenue
Service; (vii) the most recent actuarial valuation, if applicable; and (viii)
any material correspondence from any Governmental Entity.
(c) Except as set forth in Section 3.15(c) of the Seller Disclosure
Letter, with respect to each Benefit Plan: (i) if intended to qualify under
Section 401(a) of the Code, such Benefit Plan so qualifies, and its trust, if
applicable, is exempt from taxation under Section 501(a) of the Code and such
plan has received a letter to such effect from the IRS stating that the Benefit
Plan satisfies the provisions of TRA 86; (ii) such Benefit Plan has been
administered and enforced in all material respects in accordance with its terms
and all applicable Laws; (iii) no material breach of fiduciary duty or
prohibited transaction (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) has occurred; (iv) no litigation or claim (other than
routine claims for benefits or overpayments of benefits), and no governmental
administrative proceeding, audit or investigation, is pending or, to the
knowledge of the Seller, threatened; (v) no "reportable event"
17
(within the meaning of Section 4043(b) of ERISA) has occurred with respect to
which the Seller, any Seller Subsidiary or such Benefit Plan may be liable or
otherwise damaged; (vi) no such Benefit Plan requires the Seller or any Seller
Subsidiary to continue to employ any employee, director or consultant; and (vii)
the Seller or each Seller Subsidiary, as the case may be, has expressly reserved
in itself the right to amend, modify or terminate such Benefit Plan, or any
portion of it, without liability.
(d) No Benefit Plan is a "multiemployer plan" (within the meaning of
Section 3(37) or Section 4001(a)(3) of ERISA) or a "multiple employer plan"
(within the meaning of Section 4064 of ERISA or Section 413(c) of the Code).
Neither the Seller nor any Seller Subsidiary has a current or potential
liability or obligation, whether direct or indirect, with respect to any
multiemployer plan or multiple employer plan nor have they had any obligation to
contribute to such plans.
(e) In the case of each Benefit Plan which provides welfare benefits of
the type described in Section 3(1) of ERISA: (i) the book reserves therefor on
the Seller Subsidiary Consolidated Financial Statements are adequate to
discharge when due the accrued, unfunded liabilities for medical or death
benefits with respect to current or former Employees, directors or consultants
of the Seller or any Seller Subsidiary beyond their termination of employment
(in addition to coverage mandated by Sections 601-608 of ERISA and 4980B(f) of
the Code); and (ii) each such plan which provides medical or death benefits with
respect to current or former Employees of the Seller or any Seller Subsidiary
has been administered in all material respects in compliance with Sections
601-608 of ERISA and 4980B(f) of the Code.
(f) The consummation of the transactions contemplated by this Agreement
will not entitle any individual to severance pay from any Seller Subsidiary or
accelerate the time of payment or vesting, or increase the amount, of
compensation due to any individual from any Seller Subsidiary, and no payment
made or contemplated under any Benefit Plan constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code.
(g) The Seller, Seller Subsidiaries and ERISA Affiliates have never
sponsored, maintained or contributed to any employee benefit plans or
arrangements outside of the United States.
(h) Neither the Seller nor the Seller Subsidiaries have, or will have,
any material liability with respect to any employee benefit plan, other than a
Benefit Plan, it has ever maintained, or with respect to an employee benefit
plan maintained by any entity that would be deemed a single employer with the
Seller or any Seller Subsidiary under Section 414(b), (c), (m) or (s) of the
Code (an "ERISA Affiliate") (including predecessors), including, without
limitation, liabilities under Title IV of ERISA, Section 412 of the Code, and
Section 302(a)(2) of ERISA. All premiums due to the PBGC by the Seller and the
Seller Subsidiaries have been paid on a timely basis.
(i) Except as set forth in Section 3.15(i) of the Seller Disclosure
Letter, with respect to each of the Benefit Plans:
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(i) all payments required by any Benefit Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums, or intercompany charges) with
respect to all periods through the date of the Closing shall have been made
prior to the Closing (on a pro rata basis where such payments are otherwise
discretionary at year end) or provided for by the Seller as applicable on its
financial statements. All such payments and contributions intended to be
deducted for income tax purposes have been fully deducted; and no such deduction
has been challenged or disallowed or is expected to be challenged or disallowed;
(ii) no "accumulated funding deficiency" (within the meaning
of Section 302 of ERISA and Section 412 of the Code), has been or would
reasonably be expected to be incurred, whether or not waived, and no excise or
other taxes have been or would reasonably be expected to be incurred or are due
and owing with respect to the Benefit Plan because of any failure to comply with
the minimum funding standards of ERISA and the Code. No security under Section
401 (a)(29) of the Code has been or is currently expected to be required;
(iii) no proceeding has been or is currently expected to be
initiated to terminate any Benefit Plan subject to Title IV of ERISA;
(iv) except as set forth on Section 3.15(i) of the Seller
Disclosure Letter, in the case of plans subject to Title IV of ERISA, the
present value of all "benefit liabilities" (whether or not vested) (within the
meaning of Section 4001(a)(16) of ERISA) based on the actuarial assumptions used
for funding purposes, as required by the PBGC for the Benefit Plan's
termination, did not exceed as of the most recent Benefit Plan actuarial
valuation date the then current fair market value of the assets of such Benefit
Plan and no amendments or other modifications to such Benefit Plan or its
actuarial assumptions were adopted since the date of such Benefit Plan's most
recent actuarial report;
(v) each Benefit Plan intended to meet requirements for
tax-favored treatment under any provision of the Code, including, without
limitation, Sections 79, 105, 106, 117, 120, 125, 127, 129, 132, 162(m), 404,
419, 419A, or 501(c)(9) of the Code satisfies the applicable requirements for
such treatment under the Code; and
(vi) with respect to each Benefit Plan that is funded mostly
or partially through an insurance policy, neither the Seller nor any of the
Seller Subsidiaries has any liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring on or before the Closing.
(vii) except as set forth in Section 3.15(i) of the Seller
Disclosure Letter, no ERISA Affiliate other than the Seller and the Seller
Subsidiaries maintains any employee benefit plan in which any of the Employees
participate.
(j) Except as set forth in Section 3.15(j) of the Seller Disclosure
Letter, neither the Seller nor any of the Seller Subsidiaries has any
obligation, whether legally binding or not, to create any additional plan,
agreement, or arrangement that provides employee benefits, or to modify or
change any existing Benefit Plan.
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(k) Except as set forth in Section 3.15(k) of the Seller Disclosure
Letter, neither the Seller nor the Seller Subsidiaries has any unfunded
liabilities pursuant to any Benefit Plan of deferred compensation that is not
intended to be qualified under Section 401(a) of the Code.
SECTION 3.16 TAXES AND TAX MATTERS.
(a) The Seller and each Seller Subsidiary have paid, or reserved in
accordance with GAAP, all Taxes due and payable by any of them with respect to
the Business, the Assets and/or the Seller Subsidiaries for or with respect to
all periods up to and including the date hereof.
(b) The Seller and each Seller Subsidiary have filed all Seller Tax
Returns that it was required to file, except where the failure to file such Tax
Returns would not have a Seller Material Adverse Effect. All such Seller Tax
Returns were accurate and complete in all material respects. Except as set forth
in Section 3.16 of the Seller Disclosure Letter, none of the Seller or any
Seller Subsidiary is the beneficiary of any extension of time within which to
file any Seller Tax Return, which has not yet been filed. None of the Seller or
any Seller Subsidiary has given any currently effective waiver of any statute of
limitations in respect of Taxes with respect to the Business or agreed to any
currently effective extension of time with respect to a Tax assessment or
deficiency with respect to the Business. There are no Liens on any of the Assets
of the Seller or any Seller Subsidiary that arose in connection with any failure
(or alleged failure) to pay any Tax with respect to the Business except for
Liens reflected on the Seller Subsidiary Consolidated Financial Statements or
Permitted Liens.
(c) The Seller and each Seller Subsidiary have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any Employee, independent contractor or stockholder with respect to the
Business.
(d) There is no dispute or claim concerning any liability for Taxes of
the Seller or any Seller Subsidiary with respect to the Business either (i)
claimed or raised by any Governmental Entity in writing or (ii) as to which the
Seller has knowledge based upon personal contact with any agent of such
Governmental Entity. The Seller and each Seller Subsidiary have delivered or
made available to the Buyer copies of Seller Tax Returns filed with respect to
taxable periods of Seller and any Seller Subsidiary ended on or after December
31, 1998. Except as set forth in Section 3.16 of the Seller Disclosure Letter,
no Seller Tax Return for taxable periods ended on or after December 31, 1996 has
been the subject of an Income Tax audit and no Seller Tax Return for taxable
periods occurring in 1999, 2000 or 2001 has been the subject of any other audit.
Section 3.16 of the Seller Disclosure Letter indicates those Seller Tax Returns
that currently are the subject of an audit.
(e) None of the Seller or any Seller Subsidiary is a party to any Tax
allocation or sharing agreement, other than such agreements between or among the
Seller and/or any of the Seller Subsidiaries that are made with the Buyer's
permission or are in effect at the date of this Agreement and will be terminated
without liability on the part of any Seller Subsidiary at Closing. None of the
Seller or any Seller Subsidiary (A) has been a member of an "affiliated group,"
as defined in Section 1504(a) of the Code, filing a consolidated federal income
Tax Return (other than a group the common parent of which is or was the Seller)
or (B) has any liability for the Taxes of any Person (other than any member of
the group the common parent of
20
which is or was the Seller) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign Law), as a transferee or successor, by
contract or otherwise.
SECTION 3.17 INSURANCE.
(a) Section 3.17 of the Seller Disclosure Letter lists all policies of
title, asset, fire, hazard, casualty, liability, life, directors and officers
liability, worker's compensation and other forms of insurance of any kind owned
or held by the Seller or any Seller Subsidiary with respect to the Business or
the Assets, including product liability insurance. The Seller has heretofore
delivered or made available to the Buyer true, correct and complete copies of
all such policies. All such policies: (a) are with insurance companies
reasonably believed by the Seller to be financially sound and reputable; (b) are
in full force and effect and no notice of cancellation or termination has been
received thereunder; (c) are sufficient for compliance by the Seller and by each
Seller Subsidiary with all requirements of Law, all Contracts with respect to
the Business to which Seller or any Seller Subsidiary is a party and all Real
Property Leases and Lease/Sublease Agreements; (d) are legal, valid, binding and
outstanding policies enforceable against the insurer; (e) insure against risks
of the kind customarily insured against and in amounts customarily carried by
companies similarly situated and by companies engaged in similar businesses and
owning similar assets to the Business; (f) insure all material Assets and risks
of the Seller, the Seller Subsidiaries and the Business; (g) have the policy
expiration dates set forth in Section 3.17 of the Seller Disclosure Letter; and
(h) except as set forth in Section 3.17 of the Seller Disclosure Letter, will
continue to be legal, valid, binding and enforceable in accordance with its
terms and in full force and effect on terms identical to those in effect on the
date hereof, without penalty or adverse consequence, upon consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
(b) Neither the Seller nor any Seller Subsidiary has been refused any
insurance with respect to the Business or the Assets, nor has such coverage been
limited by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance, nor has such coverage been limited,
disclaimed or discharged with respect to any claim made under any policy in
force for the benefit of the Seller or the Seller Subsidiaries since January 1,
1990. Neither the Seller nor any Seller Subsidiary is in any respect in breach
of or default under any such policy (including any breach or default with
respect to the payment of premiums or the giving of notice), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default or permit termination or modification under such policy. All premiums
required to be paid under the Insurance Policy have been paid, such premiums
total $7,333,239 and the remaining premiums to be paid total $3,075,000,
exclusive of brokerage fees which are not greater than customary and usual
brokerage fees. No payment has been made under either the Finite Risk Coverage
or the Excess Coverage, and the full unexhausted limits of these coverages
remain in full force and effect. The Finite Risk Coverage has not been commuted
and will not be commuted prior to the Closing. The Seller has not invoked and
will not invoke before the Closing "Endorsement 13" of the Insurance Policy with
respect to any claim. The Seller's accounting reserves for pending claims and
unasserted known claims are good faith estimates based upon historical averages
and methodology consistently applied. Except as set forth in Section 3.17 of the
Seller Disclosure Letter, at the time of the Closing all insurance policies
currently in effect will be outstanding and in full force and effect.
21
(c) Except as set forth in Section 3.17 of the Seller Disclosure
Letter, there is no material claim by the Seller or any Seller Subsidiary under
any insurance policy listed in Section 3.17 of the Seller Disclosure Letter.
Except as set forth in Section 3.17 of the Seller Disclosure Letter, neither the
Business nor the Assets has had any casualty loss or occurrence which may give
rise to any claim of any kind not covered by insurance and the Seller is not
aware of any occurrence which may give rise to any claim not covered by
insurance.
SECTION 3.18 PRODUCTS LIABILITY AND WARRANTY.
(a) Except as set forth in Section 3.18 of the Seller Disclosure
Letter, as of the date hereof there is no claim concerning any product or
equipment manufactured, shipped, sold or delivered by the Seller or any Seller
Subsidiary which is pending or, to the knowledge of the Seller, threatened,
which alleges the occurrence of any bodily injury or other adverse health
condition resulting from either an alleged defect in design, manufacture or
materials of any such product, an alleged failure to warn as to the condition or
use of any such product, or an alleged breach of implied warranties or
representations made with respect to any such product. Section 3.18 of the
Seller Disclosure Letter contains a list of all such claims arising or existing
during the past five (5) years. Except as set forth in Section 3.18 of the
Seller Disclosure Letter, no Governmental Entity regulating the marketing,
testing or advertising of any of the products currently manufactured, sold,
distributed or used in connection with the Business has requested that any such
product be removed from the market, that substantial new product testing be
undertaken as a condition to the continued manufacturing, selling, distribution
or use of any such product, or that such products be modified in a way that
would be reasonably expected to have a Seller Material Adverse Effect. Except as
set forth in Section 3.18 of the Seller Disclosure Letter, all athletic helmets
or faceguards (except for those sold as replicas for display purposes only)
manufactured, shipped, sold, delivered or reconditioned by the Business are and
have always been in compliance with the then applicable industry standards,
including, without limitation, the standards of the National Operating Committee
for Safety in Athletic Equipment.
(b) Section 3.18 of the Seller Disclosure Letter contains a description
of all product and service warranties given by the Seller or any Seller
Subsidiary to the customers of the Seller Subsidiaries or the Business. Except
as disclosed in Section 3.18 of the Seller Disclosure Letter, there are no
claims concerning any such product or service warranties which are pending or,
to the knowledge of the Seller, threatened, which allege the breach of any
express or implied warranties with respect to such products or services or that
would be reasonably expected to impose material liability on the Seller or the
Seller Subsidiaries in connection therewith.
SECTION 3.19 ARRANGEMENTS WITH RELATED PARTIES.
(a) Except as set forth in Section 3.19 of the Seller Disclosure
Letter, no present or former officer, director, or other Person known to the
Seller to be an Affiliate of the Seller or any Seller Subsidiary, nor any Person
known to the Seller to be an Affiliate of such Person, is currently a party to
any transaction or agreement with any Seller Subsidiary, including any Contract
providing for any loans, advances, the employment of, furnishing of services by,
rental of its Assets from or to, or otherwise requiring payments to, any such
Person. For purposes of this Section 3.19(a), a shareholder of the Seller who
owns less than 5% of the capital stock of the Seller and who is not otherwise an
Affiliate shall not be deemed an Affiliate.
22
(b) All transactions (including, but not limited to loans, licenses,
sales and the provision of services) between the Seller Subsidiaries and the
Seller or any business or other entity owned or Controlled either directly or
indirectly by the Seller or its shareholders have been entered into and
conducted at all times at arms' length.
(c) Other than the Intercompany Debt, there is no intercompany
indebtedness, nor are there are any loans, leases, accounts or charges payable
or receivable, between the Seller Subsidiaries, on the one hand, and the Seller,
the Seller Subsidiaries or the Remaining Subsidiaries, on the other hand.
SECTION 3.20 BROKER'S FEES.
Except as set forth in Section 3.20 of the Seller Disclosure Letter, neither the
Seller nor any Seller Subsidiary has any liability or obligation to pay any fees
or commissions to any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 3.21 CORPORATE RECORDS.
The minute books of the Seller and each Seller Subsidiary contain accurate
records of all meetings and accurately reflect all corporate action taken by the
stockholders, board of directors and all committees of the board of directors of
the Seller and each Seller Subsidiary, respectively. Complete and accurate
copies of such minute books, stock register certificate books and stock record
books of the Seller and each Seller Subsidiary have been provided or made
available to the Buyer.
SECTION 3.22 TANGIBLE PERSONAL PROPERTY.
Section 3.22 of the Seller Disclosure Letter lists (i) all Tangible Personal
Property having a book value per item in excess of $20,000 as of the Audited
Balance Sheet Date and (ii) all Tangible Personal Property having a book value
per item in excess of $20,000 acquired since the Audited Balance Sheet Date.
There has been no material adverse change to the quality or quantity of the
Tangible Personal Property since the Audited Balance Sheet Date.
SECTION 3.23 REAL PROPERTY.
(a) Section 3.23(a) of the Seller Disclosure Letter contains a true and
correct description of each parcel of real property leased by a Seller
Subsidiary as lessee and used or held for use in connection with the Business
(together with all buildings, structures, facilities, fixtures and other
improvements thereon, the "Leased Real Property"), and lists each such lease
(the "Real Property Leases"), including the location of the property, term and
the respective Seller Subsidiary which is the lessee thereunder. Except as set
forth in Section 3.23(a) of the Seller Disclosure Letter, no Seller Subsidiary
is the lessee of any real property.
(b) Section 3.23(b) of the Seller Disclosure Letter contains a true and
correct description of each parcel of real property owned by a Seller Subsidiary
and used or held for use in connection with the Business (together with all
buildings, structures, facilities, fixtures and other improvements thereon, the
"Owned Real Property"; the Leased Real Property and the Owned Real Property are
collectively referred to as the "Real Property"), and identifies the respective
23
Seller Subsidiary which is the owner of each such parcel of Owned Real Property.
Except as set forth in Section 3.23(b) of the Seller Disclosure Letter, no
Seller Subsidiary is the owner of any real property.
(c) Each Seller Subsidiary identified in Section 3.23(a) of the Seller
Disclosure Letter has a good and subsisting leasehold estate in the Leased Real
Property that it leases, free and clear of all leases, subleases, occupancy
agreements and other rights of occupancy or possession (collectively,
"Lease/Sublease Agreements"), Liens and other exceptions to title, other than
Permitted Liens. Each Seller Subsidiary identified in Section 3.23(a) of the
Seller Disclosure Letter is in sole possession of each parcel of Leased Real
Property that it leases, free and clear of all Lease/Sublease Agreements. Each
Real Property Lease is a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Seller Subsidiary that is a party thereto and
of each other Person that is a party thereto. Each Real Property Lease, upon
consummation of the transactions contemplated by this Agreement, shall continue
to be legal, valid, binding and enforceable in accordance with its terms and
shall continue in full force and effect without penalty or adverse consequence,
subject to obtaining the consents set forth in Section 3.06 of the Seller
Disclosure Letter and the consents and waivers of recapture rights set forth in
Section 3.23(c) of the Seller Disclosure Letter. Consummation of the
transactions contemplated by this Agreement shall not result in or give rise to
a default or right of termination under any Real Property Lease. All rent
presently due under each Real Property Lease has been paid in full and neither
the Seller nor any Seller Subsidiary has received any written notice of or
otherwise has knowledge of any default (or any condition or event which, after
notice or lapse of time or both, would reasonably be expected to constitute a
default) under any Real Property Lease.
(d) Except as disclosed in Section 3.23(d) of the Seller Disclosure
Letter, each Seller Subsidiary identified in Section 3.23(b) of the Seller
Disclosure Letter has good fee simple title to the Owned Real Property that it
owns, free and clear of all Lease/Sublease Agreements, Liens and other
exceptions to title, other than Permitted Liens. Except as disclosed in Section
3.23(d) of the Seller Disclosure Letter, each Seller Subsidiary identified in
Section 3.23(b) of the Seller Disclosure Letter is in sole possession of each
parcel of Owned Real Property that it owns, free and clear of all Lease/Sublease
Agreements.
(e) Section 3.23(e) of the Seller Disclosure Letter contains a true and
complete list of each Lease/Sublease Agreement pursuant to which a Seller
Subsidiary, as lessor or sublessor, grants a leasehold or subleasehold interest
or other right of occupancy or possession in any Real Property. Each
Lease/Sublease Agreement identified in Section 3.23(e) of the Seller Disclosure
Letter) is a legal, valid and binding agreement, enforceable in accordance with
its terms, of the Seller Subsidiary that is a party thereto and of each other
Person that is a party thereto. Each Lease/Sublease Agreement, upon consummation
of the transactions contemplated by this Agreement, shall continue to be legal,
valid, binding and enforceable in accordance with its terms and shall continue
in full force and effect without penalty or adverse consequence, subject to
obtaining the consents, if any, required under the terms of each Lease/Sublease
Agreement as set forth in Section 3.06 of the Seller Disclosure Letter. Except
as set forth in Section 3.23(e) of the Seller Disclosure Letter, all rent
presently due under each Lease/Sublease Agreement has been paid in full and
neither the Seller nor any Seller Subsidiary has received any written notice of
or otherwise has knowledge of any default (or any condition or event which,
after notice or
24
lapse of time or both, would reasonably be expected to constitute a default)
under any Lease/Sublease Agreement.
(f) Neither the Seller nor any of the Seller Subsidiaries owes any
brokerage commissions with respect to any Real Property, Real Property Lease or
Lease/Sublease Agreement.
(g) Each Seller Subsidiary is in compliance with all Laws applicable to
the Real Property and Improvements which such Seller Subsidiary owns or leases,
the failure to comply with which would reasonably be expected to result in the
issuance of a material violation by any Governmental Entity against such Real
Property or Improvements or would reasonably be expected to give rise to a
default under any Real Property Lease or Lease/Sublease Agreement relating
thereto. Each Seller Subsidiary has obtained and presently holds all Licenses
required by Laws applicable to the Real Property and Improvements which such
Seller Subsidiary owns or leases, the failure to obtain or hold would reasonably
be expected to result in the issuance of a violation by any Governmental Entity
against such Real Property or Improvements or would reasonably be expected to
give rise to a default under any Real Property Lease or Lease/Sublease Agreement
relating thereto.
(h) The Seller has delivered or made available to the Buyer prior to
the execution of this Agreement true and complete copies of: (i) all deeds,
leases, mortgages, deeds of trust, certificates of occupancy, title insurance
policies, title reports, surveys and similar documents, and all amendments
thereof, with respect to the Real Property, in the actual possession or under
the control of the Seller, (ii) all Real Property Leases (including any
amendments and renewal letters), and (iii) all Lease/Sublease Agreements
(including any amendments and renewal letters).
(i) Except as disclosed in Section 3.23(i) of the Seller Disclosure
Letter, no tenant or other party in possession of any of the Real Property has
any right to purchase or lease, or holds any right of first refusal to purchase
or lease, such properties.
(j) Except as disclosed in Section 3.23(j) of the Seller Disclosure
Letter, the buildings, structures, facilities, fixtures and other improvements
constituting a portion of the Real Property are in good operating condition and
in a state of good maintenance and repair, ordinary wear and tear excepted, and
are adequate and suitable for the purposes for which they are presently being
used. Neither the Seller nor any Seller Subsidiary has received any written
notice under any Real Property Lease or Lease/Sublease Agreement to repair or
pay for any repair to the related Real Property which has not been complied
with. To the knowledge of the Seller, if any Real Property subject to a Real
Property Lease were surrendered to the landlord thereunder in its present
condition, such Real Property would be required to be accepted by the landlord
in such condition pursuant to the terms of the related Real Property Lease.
(k) The Seller has not received any written notice from any
Governmental Entity of any condemnation or eminent domain proceedings pending or
threatened against any of the Real Property or the Improvements.
SECTION 3.24 RECEIVABLES.
Section 3.24 of the Seller Disclosure Letter sets forth an aged list of the
Receivables of the Business as of the Audited Balance Sheet Date, showing
separately those Receivables that, as of
25
such date, had been invoiced or billed by the Business and are: (a) in the case
of Xxxxxxx, Inc., (i) current or not yet due, (ii) one day to 30 days past due,
(iii) 31 to 60 days past due, (iv) 61 to 90 days past due, or (iv) more than 90
days past due; and (b) in the case of All American Sports Corporation, (i)
invoices designated as due on a future specific date ("Dated Invoices"), as
opposed to invoices which are due 30 days from invoice date ("Non-dated
Invoices"), which are not yet due, (ii) Non-dated Invoices outstanding 30 days
or less together with Dated Invoices one day to 30 days past due, (iii)
Non-dated Invoices outstanding 31 to 60 days together with Dated Invoices 31 to
60 days past due, (iv) Non-dated Invoices outstanding 61 to 90 days together
with Dated Invoices 61 to 90 days past due, (v) Non-dated Invoices outstanding
91 to 120 days together with Dated Invoices 91 to 120 days past due, and (vi)
Non-dated Invoices outstanding over 120 days together with Dated Invoices over
120 days past due. Except as set forth in Section 3.24 of the Seller Disclosure
Letter and subject to the reserves therefor reflected on the Audited Balance
Sheet, all such Receivables (x) arose from the sale of Inventory or services to
Persons not affiliated with the Seller or any Seller Subsidiary and in the
Ordinary Course of Business consistent with past practice and (y) constitute or
will constitute, as the case may be, only valid and enforceable claims of the
Seller Subsidiaries.
SECTION 3.25 INVENTORIES AND RETURNS.
SCHEDULE 3.25 contains a list of the Inventories of the Business as of the
Audited Balance Sheet Date, setting forth a brief description of each item by
category and quantity, and by unit and aggregate values. Subject to amounts
reserved therefor on the Audited Balance Sheet as adjusted for operations and
transactions through the Closing Date consistent with past practice, the values
at which all Inventories are carried on the Audited Balance Sheet reflect
historical inventory valuation policy of the Business stating such Inventories
at the lower of cost (determined using first in, first out method for
substantially all Inventories) or market value. The Seller Subsidiaries have
good and valid title to the Inventories free and clear of all Liens except for
Permitted Liens. The Inventories (i) are in good and marketable condition, (ii)
subject to reserves reflected in the Audited Balance Sheet and except for the
retail products set forth in Section 3.25 of the Seller Disclosure Letter, do
not and will not consist of items that are obsolete or damaged, and (iii) do not
and will not consist of any items held or sold on consignment except as set
forth in Section 3.25 of the Seller Disclosure Letter. No Seller Subsidiary is
under any obligation or liability with respect to accepting returns of items of
Inventory or merchandise in the possession of its customers, other than as set
forth in Section 3.25 of the Seller Disclosure Letter. Except as set forth in
Section 3.25 of the Seller Disclosure Letter, no Seller Subsidiary has acquired
or committed to acquire or manufacture Inventory for sale which is not of a
quality and quantity usable in the Ordinary Course of Business and consistent
with past practice, nor has any Seller Subsidiary changed the price of any
Inventory except (i) for price reductions to reflect any reductions in the cost
or market value thereof to such Seller Subsidiary, (ii) for increases to reflect
any increase in the cost thereof to such Seller Subsidiary, and (iii) as set
forth in Section 3.25 of the Seller Disclosure Letter. Section 3.25 of the
Seller Disclosure Letter contains a complete list of the addresses of all
warehouses and other facilities in which the Inventories are located.
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SECTION 3.26 CERTAIN INTERESTS.
(a) Except as disclosed in Section 3.26 of the Seller Disclosure
Letter, neither the Seller, nor any Seller Subsidiary, nor any officer,
director, manager or Affiliate of such Person: (i) has any direct or indirect
financial interest in any competitor, supplier or customer of the Seller, any
Seller Subsidiary or the Business; (ii) owns, directly or indirectly, in whole
or in part, or has any other interest in, any tangible or intangible property or
other Assets which any Seller Subsidiary uses or has used in the conduct of the
Business or otherwise; (iii) has outstanding any indebtedness to the Seller or
any Seller Subsidiary other than advances for business expenses not exceeding
$5,000 in the aggregate; or (iv) is a party to any Contract with any Seller
Subsidiary. For purposes of this Section 3.26(a), a shareholder of the Seller
who owns less than 5% of the capital stock of the Seller and who is not
otherwise an Affiliate shall not be deemed an Affiliate.
(b) No Seller Subsidiary is a party, obligor, or co-obligor to an open
transaction (including but not limited to open option, forward, futures, swap or
notional principal contract or debt instrument) except as otherwise set forth in
this Agreement.
SECTION 3.27 CUSTOMERS.
Section 3.27 of the Seller Disclosure Letter lists the names and addresses of
the 20 largest customers of the Business (based on revenues) during each of the
twelve-month periods ended December 31, 1998, December 31, 1999 and December 31,
2000.
SECTION 3.28 SUPPLIERS.
Section 3.28 of the Seller Disclosure Letter lists the names and addresses of
the 10 largest suppliers of raw materials, supplies, merchandise and other goods
or services to the Business (based on expenditures) during each of the
twelve-month periods ended December 31, 1998, December 31, 1999 and December 31,
2000, and the dollar amount purchased by the Business with respect to each such
supplier during each such period. Except as set forth in Section 3.28 of the
Seller Disclosure Letter, neither the Seller nor any Seller Subsidiary has
received any notice, or has knowledge, that any such supplier included in the
list for December 31, 2000 as at the Audited Balance Sheet Date will not sell
raw materials, supplies, merchandise and other goods to the Buyer at any time
after the Closing Date on terms and conditions substantially similar to those
used in its current sales to the Seller or the Seller Subsidiaries, subject only
to general and customary price changes and assuming the Buyer's ongoing
compliance with any terms of payment or credit.
SECTION 3.29 INTELLECTUAL PROPERTY.
(a) The Seller and each of the Seller Subsidiaries own or (pursuant to
license, sublicense, agreement or permission) have the right to use all
Intellectual Property necessary for the operation of the Business in the manner
presently conducted. The Intellectual Property that is owned by the Seller and
the Seller Subsidiaries is herein referred to as "Seller IP". The Intellectual
Property which the Seller and the Seller Subsidiaries have the right to use,
other than as owners, is herein referred to as "Licensed IP." As of the date of
this Agreement, neither the Seller nor any Seller Subsidiary has received any
written notice that its rights in the Seller IP or Licensed IP have been
declared unenforceable or otherwise invalid by any court or Governmental Entity.
The Seller and the Seller Subsidiaries have taken all action reasonably
27
necessary to maintain and protect their rights in and to each item of Seller IP
and Licensed IP. There are no rights of any Person that would interfere with or
prevent the transfer to the Buyer of all of the rights of Seller and the Seller
Subsidiaries in and to the Seller IP and Licensed IP. There is no existing third
party infringement, misuse, or misappropriation of the Seller IP or, to the
knowledge of the Seller, Licensed IP (other than "shrink-wrap" Licensed IP that
is widely and commercially available).
(b) Section 3.29(b) of the Seller Disclosure Letter sets forth a list,
including registration and application serial numbers where appropriate, of: (i)
all registered patents issued to, and/or patents pending filed by, the Seller
and the Seller Subsidiaries ("Patents"); and (ii) all copyright registrations
issued to, and or copyright registration applications filed by, the Seller and
the Seller Subsidiaries ("Copyrights"). All such patent registrations and
copyright registrations are valid and subsisting. The Seller's and the Seller
Subsidiaries have taken all steps reasonably necessary to maintain and protect
their right, title and interest in and to the Patents, Know-How and Copyrights,
including in response to any actions taken by Governmental Entities.
(c) Section 3.29(c) of the Seller Disclosure Letter sets forth a list,
broken out by the respective owners Ridmark Corporation, Xxxxxxx, Inc., MacMark
Corporation and Equilink Licensing Corporation (as well as trademarks owned by
various other entities for which assignment is pending to one of the
aforementioned corporations), including registration and application serial
numbers where appropriate, of all: (i) trademarks, service marks, brand names,
trade dress, certification marks, and logos ("Marks") in respect of which Seller
and the Seller Subsidiaries (x) have obtained registration ("TM Registrations"),
(y) have applied for registration either on the basis of use or intent-to-use
("TM Applications"), or (z) are using without registration or application
("Unregistered Marks"); and (ii) URLs that have been registered or reserved by
the Seller and the Seller Subsidiaries ("Domain Names"). All the TM
Registrations and Domain Names are valid and subsisting. The Seller's and the
Seller Subsidiaries have taken all steps reasonably necessary to maintain and
protect their right, title and interest in and to the Marks, TM Registrations,
TM Applications, Unregistered Marks and Domain Names.
Schedule 3.29(c) also sets forth a list of all trademarks, including
registration and application serial numbers, that are owned by MacGregor
Corporation (the "MacMarks"). The Licensed IP expressly but without limitation
includes the MacMarks. Under the June 8, 1984 License Agreement between
MacGregor Corporation and MacGregor Sporting Goods, Inc., the Seller and the
Seller Subsidiaries (as successors-in-interest to MacGregor Sporting Goods,
Inc.) own a perpetual exclusive license to use the MacMarks on and in connection
with all athletic products, except golf clubs, balls, bags and other products
used exclusively in connection with the sport of golf. MacGregor Corporation has
taken all steps reasonably necessary to maintain and protect its right, title
and interest in and to the MacMarks.
The Marks and the MacMarks collectively represent all of the
trademarks, service marks, brand names, trade dress, certification marks and
logos that are either used, intended to be used and/or owned by the Seller and
the Seller's Subsidiaries in connection with the Business. Without limiting the
generality of the foregoing, no third party or parties own registrations or
applications to register trademarks, service marks, brand names, certification
marks and/or logos that incorporate the words or designs XXXXXXX, the R Logo,
MACGREGOR or the M Logo in
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respect of athletic products in the U.S or Canada or, to the knowledge of the
Seller, in any other country or territory.
(d) Section 3.29(d) of the Seller Disclosure Letter sets forth a list
of all licenses, agreements, authorizations and/or permissions pursuant to which
Seller and the Seller Subsidiaries use any one or more items of Licensed IP
("Licensed IP Agreements"). The Seller and the Seller Subsidiaries have
delivered or made available to the Buyer correct and complete copies of the
Licensed IP Agreements. Neither the Seller nor any Seller Subsidiary is in
breach of any one or more of the Licensed IP Agreements, which, individually or
in the aggregate, would have a Seller Material Adverse Effect. The consummation
of the Stock Purchase shall not cause a breach thereof.
(e) Section 3.29(e) of the Seller Disclosure Letter sets forth a list
of all licenses, agreements, authorizations and/or permissions pursuant to which
Seller, the Seller Subsidiaries and MacGregor Corporation have granted to any
Person a right to use any one or more items of Seller IP or sublicense right to
use any one or more items of Licensed IP ("Seller IP Agreements"). The Seller
and the Seller Subsidiaries have delivered or made available to the Buyer true
and correct copies of the Seller IP Agreements. Neither the Seller nor any
Seller Subsidiary is in breach of, and/or has incurred any indemnification
obligation under, any one or more of the Seller IP Agreements, which,
individually or in the aggregate, would have a Seller Material Adverse Effect.
The consummation of the Stock Purchase shall not cause a breach of the Seller IP
Agreements.
(f) Neither the Seller nor any of the Seller Subsidiaries has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property right of any Person in a manner that,
individually or in the aggregate, would have a Seller Material Adverse Effect.
The continued operation of the Business as presently conducted will not
interfere with, infringe upon, misappropriate or otherwise come into conflict
with any Intellectual Property right of any Person in a manner that,
individually or in the aggregate, would have a Seller Material Adverse Effect.
(g) Except as set forth in Section 3.29(g) of the Seller Disclosure
Letter, the Seller and the Seller Subsidiaries possess all right, title and/or
interest, as the case may be, in and to all items of Seller IP free and clear of
any Liens or other restrictions. MacGregor Corporation possesses all right,
title and interest in and to the MacMarks free and clear of any Liens or other
restrictions. No item of Seller IP or, to the knowledge of the Seller, Licensed
IP (other than "shrink-wrap" Licensed IP that is widely and commercially
available) is subject to any outstanding injunction, judgment, order, decree,
ruling or charge. No action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending (or, to the knowledge of the Seller and
the Seller Subsidiaries, is threatened) which challenges the legality, validity,
enforceability, or ownership of, and/or the Seller's and Seller Subsidiaries'
right to use, any one or more items of the Seller IP or, to the knowledge of the
Seller, of the Licensed IP (other than "shrink-wrap" Licensed IP that is widely
and commercially available). Neither the Seller nor any of the Seller
Subsidiaries has agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to any one or
more items of Seller IP or Licensed IP.
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SECTION 3.30 FULL DISCLOSURE.
(a) No representation or warranty of the Seller in this Agreement or
any other Transaction Document contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
(b) The Seller does not have any knowledge of any facts pertaining to
the Seller Subsidiaries or the Business or the Assets that would be reasonably
expected to have a Seller Material Adverse Effect and that have not been
disclosed in this Agreement, the Schedules and Exhibits hereto and the
Transaction Documents, except for any facts relating solely to general economic,
business or political developments affecting the economy generally.
SECTION 3.31 QUALITY ASSURANCE.
To the knowledge of the Seller, neither National Football League Properties nor
the National Football League's competition committee has any reasonable basis
upon which to determine, nor to the knowledge of the Seller has determined, that
the quality of the helmets and shoulder pads manufactured, shipped, sold or
delivered by the Business is not "comparable to the best available technology",
as such term is defined in the NFL Contract.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents, warrants to and agrees with the Seller as follows:
SECTION 4.01 ORGANIZATION AND QUALIFICATION.
The Buyer is a corporation duly organized, validly existing and in good standing
under Delaware Law and has the corporate power and authority to own, operate and
lease its assets, to carry on its business as currently conducted, to execute
and deliver this Agreement and to carry out the transactions contemplated
hereby. The Buyer is duly licensed or qualified to conduct business as a foreign
corporation and is in good standing in the states, countries and territories
where the nature of its business or the ownership, operation or leasing of its
assets makes such qualification necessary, except where failure to so qualify
would not be reasonably expected to have a Buyer Material Adverse Effect.
SECTION 4.02 ORGANIZATIONAL DOCUMENTS.
The Buyer has furnished to Seller a true and complete copy of the organizational
documents of the Buyer, as in effect on the date of this Agreement. The Buyer is
not in violation of any of the provisions of its organizational documents.
SECTION 4.03 AUTHORITY; BINDING OBLIGATION.
The Buyer has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery by the Buyer of
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this Agreement and the consummation by the Buyer of the transactions
contemplated by this Agreement, have been duly and validly approved by the
Buyer's Board of Directors. This Agreement has been duly executed and delivered
by the Buyer and constitutes a legal, valid and binding obligation of the Buyer
(assuming the Agreement has been duly executed and delivered by the Seller and
constitutes a legal, valid and binding obligation of the Seller), enforceable in
accordance with its terms, except as such enforceability may be subject to the
effects of any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar Laws affecting creditors' rights generally
and subject to the effect of general equitable principles (whether considered in
a proceeding in equity or at law).
SECTION 4.04 NO CONFLICT.
The execution, delivery and performance by the Buyer of this Agreement, the
fulfillment of and compliance with the terms and provisions hereof, and the
consummation by the Buyer of the transactions contemplated hereby, do not and
will not: (i) conflict with, or violate any provision of, the organizational
documents of the Buyer; or (ii) subject to obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, the
applicable Governmental Entity pursuant to the applicable requirements, if any,
of the HSR Act, conflict with or violate any Law applicable to the Buyer, or any
of its assets; except for any such conflict or violation described in clause
(ii) above that would not have a Buyer Material Adverse Effect and that would
not prevent the Buyer from consummating the transactions described herein.
SECTION 4.05 LITIGATION.
There are: (a) no claims, actions, suits, investigations, or proceedings pending
or, to the Buyer's knowledge, threatened against, relating to or affecting the
Buyer or its Subsidiaries before any Governmental Entity or arbitrator, that
would be reasonably expected to have a Buyer Material Adverse Effect or that
would be reasonably expected to prevent or enjoin, or delay in any material
respect, consummation of the transactions described herein; and (b) no orders of
any Governmental Entity or arbitrator outstanding against the Buyer or any of
its Subsidiaries that would be reasonably expected to prevent or enjoin, or
delay in any material respect, consummation of the transactions described
herein.
SECTION 4.06 INVESTMENT REPRESENTATIONS.
The Buyer is purchasing the Subsidiary Stock for investment purposes and has no
intent to distribute or make a public offering of such stock in violation of
applicable law. The Buyer is an "accredited investor" within the meaning of Rule
501 under the Securities Act.
SECTION 4.07 BROKER'S FEES.
Neither the Buyer nor any of its Subsidiaries has any liability or obligation to
pay any fees or commissions to any broker, finder or similar agent in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Buyer.
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SECTION 4.08 FINANCING COMMITMENT.
The parent of the Buyer has obtained commitment letters with respect to the
funding of the Buyer's obligations in connection with the Stock Purchase, which
letters are attached hereto as Exhibit A.
SECTION 4.09 NO "ACTUAL KNOWLEDGE" OF BREACH.
(a) Subject to the qualifications set forth in the three immediately
succeeding sentences and except for the matters set forth in the Seller
Disclosure Letter, as of the date hereof, the Buyer does not have actual
knowledge of any material breach by the Seller of any of the representations and
warranties contained in Article III of this Agreement. For purposes of this
Section 4.09, the Buyer shall have "actual knowledge" of only those matters
Xxxxx X.X. Xxxxxxxxx or W. Xxxxxx Xxxx unambiguously and unequivocally actually
know to constitute a material breach by the Seller of the representations and
warranties and to which they devoted specific substantive attention. "Actual
knowledge" shall not include any imputed knowledge whatsoever (and therefore the
Buyer shall not be imputed to have actual knowledge of any information contained
in due diligence reports or memoranda (whether formal or informal) prepared by
other Persons, including counsel to the Buyer or counsel to the Buyer's
Financing Sources) and shall not include knowledge with respect to any matter
set forth in Schedule 4.09. The Buyer shall have no duty to investigate any
matter which might give rise to a breach by the Seller of the representations
and warranties. The only consequence of a breach of the representation set forth
in this Section 4.09 shall be to release the Seller of any indemnification
obligation with respect to such breach by the Seller to the extent of such
actual knowledge.
(b) (i) If, after the date hereof and prior to the Closing, the Buyer
acquires actual knowledge of any material breach by the Seller of any of the
representations and warranties of the Seller contained in Article III of this
Agreement, and does not notify the Seller of such material breach prior to the
Closing, the Buyer shall be deemed, to the extent of such actual knowledge as of
the Closing Date, to have consented to and waived such breach upon the Closing
and shall not thereafter be entitled to seek indemnification under this
Agreement for Losses resulting from such breach. (ii) In the event the Buyer
notifies the Seller of any such breach, the Buyer shall not be prevented or
limited from seeking indemnification in accordance with this Agreement and
recovering any Losses that the Buyer may incur as a result of such breach.
ARTICLE V.
COVENANTS AND AGREEMENTS
SECTION 5.01 CONDUCT OF THE BUSINESS UNTIL THE CLOSING DATE.
The Seller hereby covenants and agrees that, from the date of this Agreement
until the Closing Date, the Seller, unless otherwise expressly authorized by
this Agreement or consented to in writing by the Buyer, will carry on the
Business only in the Ordinary Course of Business (including taking all steps
necessary to maintain and protect the right, title and interest of the Seller
and the Seller Subsidiaries in and to the Seller IP and Licensed IP), use
commercially reasonable efforts to preserve intact the Seller Subsidiaries, the
Business and the Assets, maintain its rights and franchises with respect to the
Business, retain the services of the officers
32
and Employees of the Business and maintain its relationships with customers,
suppliers and others having business dealings with the Seller and the Seller
Subsidiaries, and use commercially reasonable efforts to keep in full force and
effect liability insurance and bonds comparable in amount and scope of coverage
to that currently maintained with respect to the Business. Except as set forth
in Section 5.01 of the Seller Disclosure Letter, without limiting the generality
of the foregoing, the Seller and the Seller Subsidiaries will not, with respect
to any of the Seller Subsidiaries or the Business or the Assets:
(a) increase in any manner the compensation or fringe benefits of, or
pay any bonus to, any Employee, other than in the Ordinary Course of Business;
(ii) grant any severance or termination pay (other than pursuant to the normal
severance practices or existing agreements of the Seller in effect on the date
of this Agreement) to, or enter into any severance agreement with, any Employee,
or enter into any employment agreement with any Managerial Employee, (iii)
establish, adopt, enter into or amend any Benefit Plan or other arrangement of
the Seller Subsidiaries, except as may be required to comply with applicable
Law; (iv) grant to any Employee any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Benefit Plan or other
arrangement (including the grant of stock options, stock appreciation rights,
stock-based or stock-related awards, performance units or restricted stock, or
the removal of existing restrictions in any Benefit Plan or other arrangement or
agreement or awards made thereunder); or (v) promote or fire any Managerial
Employee;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, outstanding shares of the Subsidiary Stock;
(c) sell, lease, exchange, mortgage, pledge, transfer or otherwise
subject to any Lien or dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise subject to any Lien or dispose of, any of the
Assets, except for the sale or disposition of Inventories in the Ordinary Course
of Business;
(d) make or agree to make any new capital expenditures related to the
Business other than to the extent that such new capital expenditures do not
exceed $200,000 in the aggregate;
(e) take any action or fail to take any action other than in the
Ordinary Course of Business that would adversely affect the ability of the
Seller prior to the Closing Date to obtain consents of third parties or
approvals of Government Entities required to consummate the transactions
contemplated in this Agreement;
(f) amend, modify, terminate (partially or completely), surrender,
grant any waiver under or give any consent with respect to any Real Property
Lease, Lease/Sublease Agreement or Seller Contract without the prior written
consent of the Buyer or Xxxxxxx Xxxxxxx, provided that the Buyer or Xxxxxxx
Xxxxxxx shall not unreasonably withhold or delay its consent to any immaterial
modification of such Contracts;
(g) settle any claims outside the Ordinary Course of Business in excess
of $25,000, or settle any suits, judgments or other legal actions, without the
prior written consent of the Buyer;
(h) materially alter any Real Property or enter into any agreement with
respect to any such material alteration, except to the extent required under
Real Property Leases,
33
Lease/Sublease Agreements, Laws or the requirements of the insurance policies
listed in Section 3.17 of the Seller Disclosure Letter;
(i) violate, breach or default in any material respect, or take or fail
to take any action that (with or without notice or lapse of time or both) would
constitute a material violation, breach or default under, any term or provision
of any Real Property Lease, Lease/Sublease Agreement or Seller Contract;
(j) incur any indebtedness for borrowed money, other than indebtedness
included in the calculation of Funded Debt;
(k) fail to fully and timely comply with all requirements of the
insurance policies listed in Section 3.17 of the Seller Disclosure Letter;
(l) without the prior written consent of the Buyer or Xxxxxxx Xxxxxxx,
(i) enter into any Seller Contract which may give rise to obligations or
liabilities in excess of $25,000 other than in the Ordinary Course of Business,
(ii) enter into as a licensor any license agreement or arrangement, (iii) enter
into as a licensee any license agreement or arrangement which may give rise to
obligations or liabilities in excess of $50,000, other than, on substantially
similar terms, direct substitutions of (A) existing agreements or (B) the
operational but expired agreements set forth in Section 3.13 of the Seller
Disclosure Letter under the Caption entitled "Seller Contracts That May No
Longer Be In Full Force And Effect Prior To Closing", (iv) enter into any
Contract for the purchase of any Special Inventory with any supplier, or (v)
purchase any inventory for any sports collectible product which generated less
than $100,000 in aggregate revenues for the Seller Subsidiaries during calendar
year 2000; or
(m) authorize, or commit or agree to do any of the foregoing.
SECTION 5.02 COMMERCIALLY REASONABLE EFFORTS TO SATISFY CONDITIONS.
(a) Prior to the Closing, upon the terms and subject to the conditions
of this Agreement, the Buyer and the Seller agree to use their commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable (subject to any
applicable laws) to consummate and make effective the Stock Purchase and the
related transactions described herein as promptly as practicable including, but
not limited to, (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the transactions described herein and
the taking of such actions as are necessary to obtain any requisite approvals,
consents, orders, exemptions or waivers by any third party or Governmental
Entity, (ii) promptly furnishing all information required under the HSR Act and
(iii) the satisfaction of the other parties' conditions to Closing. In addition,
no Party hereto shall take any action after the date hereof that would
reasonably be expected to materially delay the obtaining of, or result in not
obtaining, any permission, approval or consent from any third party or
Governmental Entity necessary to be obtained prior to Closing. Except as
specifically provided, nothing herein shall require either Party to incur any
costs to obtain any consent set forth in Section 3.06 of the Seller Disclosure
Letter; provided that the Seller covenants and agrees to pay up to $200,000 to
obtain the Closing Consents; provided further that to the extent any of the
Closing Consents are incurred by the Seller on behalf of, or otherwise benefit,
the
34
Seller and/or any of the Remaining Subsidiaries (including, by way of example
and without limitation, costs in connection with the removal of the Seller
and/or any of the Remaining Subsidiaries as a beneficiary under the insurance
policies listed in Section 3.06 of the Seller Disclosure Letter and obtaining of
insurance for the Seller and/or any of the Remaining Subsidiaries to replace
such policies), any costs incurred by the Seller in connection therewith shall
not count against the $200,000; and PROVIDED, further, that the Seller shall not
be required to pay any money to obtain the consents of the National Football
League and/or any member team thereof and/or National Football League
Properties. Without limiting the foregoing, the Seller and the Buyer shall file
as soon as practicable notifications under the HSR Act and respond as promptly
as practicable to any inquiries received from the Federal Trade Commission and
the Antitrust Division of the Department of Justice for additional information
or documentation and respond as promptly as practicable to all inquires and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters. The Buyer shall pay all filing fees
required by the HSR Act. Concurrently with the filing of notifications under the
HSR Act or as soon as thereafter practicable, the Buyer and the Seller shall
each request early termination of the HSR Act waiting period. Notwithstanding
the foregoing, or any other covenant herein contained, in connection with the
receipt of any necessary approvals under the HSR Act, the Seller shall not be
entitled to divest or hold separate or otherwise take or commit to take any
action that limits the Buyer's freedom of action with respect of, or their
ability to retain, the Seller or any material portions thereof or any of the
businesses, product lines, properties or assets of the Seller, without the
Buyer's prior written consent.
(b) Prior to the Closing, each Party shall promptly consult with the
other Parties hereto with respect to, provide any necessary information with
respect to, and provide the other Parties (or their respective counsel) with
copies of, all filings made by such Party with any Governmental Entity or
another information supplied by such Party to a Governmental Entity in
connection with the Stock Purchase, this Agreement or the related transactions
described herein. Each Party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the transactions
contemplated herein. If any Party hereto or any director, officer or, to the
knowledge of such Party, other Affiliate thereof receives a request for
additional information or documentary material from any such Governmental Entity
with respect to the Stock Purchase, this Agreement or the related transactions
described herein, then such Party shall endeavor in good faith to make, or cause
to be made, as soon as reasonably practicable and after consultation with the
other parties, an appropriate response in compliance with such request.
(c) Subject to compliance with applicable Law, from the date hereof
until the Closing Date, the Seller shall confer on a regular and frequent basis
with one or more representatives of the Buyer to report operational matters that
are material and the general status of ongoing operations of the Business.
SECTION 5.03 TAX MATTERS.
(a) Section 338(h)(10) Election. The parties agree as follows with
respect to Code Section 338(h)(10):
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(i) The Seller and the Buyer shall make timely elections under
Section 338(h)(10) of the Code (and any corresponding election permitted under
state or local tax law) with respect to the Seller Subsidiaries (the "Section
338(h)(10) Elections"). At the Closing, (i) the Seller shall deliver to the
Buyer Internal Revenue Service Form 8023 and any other state or local forms
required for the Section 338(h)(10) Elections (collectively, the "Section 338
Forms"), each of the Section 338 Forms having been signed by the Seller and (ii)
the Buyer shall deliver to Seller the Section 338 Forms, each of the Section 338
Forms having been signed by the Buyer. Each of the Section 338 Forms shall to
the extent possible be completed at or prior to the Closing. To the extent that
any item on a form has not been so completed, the parties shall agree at the
Closing on the manner in which the item is to be determined, and the Buyer and
the Seller shall complete the form in accordance with that determination;
provided, however, that the Purchase Price allocation to be used in completing
the form in a manner consistent with paragraph (b) below. Each Party shall at
any time and from time to time after the Closing cooperate with the other Party
in connection with the Section 338 Elections, including the signing by them of
any other forms in order to accomplish the Section 338 Elections. The Seller
shall include any income, gain, loss, deduction, or other tax item resulting
from the Section 338(h)(10) Elections on its tax returns to the extent required
by applicable federal or state law. Each of the Buyer and the Seller shall
prepare and file its own set of the Section 338 Forms.
(ii) The Buyer and the Seller agree that the Purchase Price
for the Subsidiary Stock and the liabilities of the Seller Subsidiaries (plus
other relevant items) (the "Allocable Amount") shall be allocated as set forth
in Section 1.02(b) above; provided, however, that the Allocable Amount shall be
allocated for tax purposes among classes or categories of assets as provided by
the Code and the related Treasury Regulations. The relative fair market values
of the assets within each category and the amount allocated to the particular
assets within each category shall be determined by the Buyer and the Seller in a
manner consistent with any requirements of the Code and related Treasury
Regulations. The Buyer, the Seller Subsidiaries, and the Seller shall file all
tax returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation.
(b) CONTROL OF CONTESTS. The Seller shall control all audits or
determinations by any taxing authority of any Seller Subsidiary for any Pre
Closing Period or any Straddle Period and the Buyer shall have the right, at its
own expense, to participate in any audit or determination by any taxing
authority for any Pre Closing Period or Straddle Period; PROVIDED, HOWEVER, that
the Seller shall not have the right to agree to any assessment, deficiency,
settlement, or other adjustment or proposed adjustment of Taxes that would
affect any Seller Subsidiary with respect to any taxable period (including each
Straddle Period), without the Buyer's prior written consent.
(c) ACCESS TO INFORMATION; COOPERATION REGARDING TAX AND SECURITIES
LAWS MATTERS. In connection with (i) the preparation of the Seller Subsidiaries'
income Tax Returns or the review of the income Tax Returns or any other Tax
Returns, in either case for any Pre Closing Period or Straddle Period, or any
audit or other determination which the Seller and Buyer have agreed to contest
and (ii) compliance by the Seller after the Closing with the Seller's
obligations pursuant to applicable federal securities laws to file reports with
the SEC with respect to the Seller Subsidiaries ("Securities Reports"), the
Seller, the Seller Subsidiaries and the Buyer shall cooperate and assist each
other to the extent reasonably requested. Such cooperation and assistance shall
include the Buyer, after the Closing, causing the Seller Subsidiaries to provide
36
the Seller (and its attorneys and accountants) with the right, at reasonable
times and upon reasonable notice, to have access to any records or information
and personnel which may be relevant to determinations of Taxes attributable to
such periods and the preparation of such Securities Reports. The Buyer agrees to
cause the Seller Subsidiaries to retain all books and records with respect to
Tax matters for any Pre Closing Period or Straddle Period until the expiration
of the relevant status of limitations. The Seller shall reimburse the Seller
Subsidiaries for all reasonable out-of-pocket expenses incurred by the Seller
Subsidiaries or the Buyer in providing such assistance, including by way of
illustration and not by way of limitation, costs for copying any documents
requested by the Seller. Any information obtained pursuant to this Section
5.03(c) shall be held in strict confidence and shall be used solely in
connection with the reason for which it was requested. Immediately following the
Seller's use of any such information or documents, such information or documents
shall be returned to the Buyer.
(d) The Seller agrees to indemnify the Buyer for any of the Tax
liabilities of the Seller Subsidiaries that are attributable to any taxable
period commencing on or prior to May 31, 2001.
(e) In the event the Closing occurs after May 31, 2000, the Purchase
Price shall be subject to increase in accordance with the procedures set forth
in this Section 5.03(e) as follows:
(i) Except as provided in the next sentence, within 28 days
after the Closing, the Buyer shall deliver to the Seller a statement (the
"Segregated Accounting Period Statement") of Pre-Tax Income of the Seller
Subsidiaries for the period beginning June 1, 2001 up to and including the
Closing Date (the "Segregated Accounting Period Pre-Tax Income"). If no
Segregated Accounting Period Statement is generated, the Buyer shall deliver to
the Seller on or prior to August 28, 2001 a statement (the "Non-Segregated
Accounting Period Statement") of the aggregate pre-Tax income of the Seller
Subsidiaries for the months of May, June and July 2001 combined (the
"Non-Segregated Accounting Period Pre-Tax Income"). The Segregated Accounting
Period Statement or the Non-Segregated Accounting Period Statement shall be
generated directly from the accounting software system of the Seller
Subsidiaries in accordance with the past practices of the Seller Subsidiaries.
For purposes of this Section 5.03(e)(i), the term "Pre-Tax Income" shall mean
"Income before taxes" of the Seller Subsidiaries on a consolidated basis for the
applicable period, which shall be determined in accordance with the provisions
of Section 3.07(b).
(ii) Except as set forth in Section 5.03(e)(iii), if the
Closing has not been consummated on or prior to May 31, 2001 solely because the
Buyer is unable to obtain the contemplated equity financing to fund $22.5
million of the Stock Purchase, and provided that all other conditions precedent
to the obligations of the Buyer set forth in Sections 6.01 and 6.02 have been
satisfied in full (or waived by the Buyer), the Buyer shall, concurrently with
the delivery of the Segregated Accounting Period Statement, pay to the Seller,
as additional Purchase Price, an amount equal to 100% of the product of (A) the
Segregated Accounting Period Pre-Tax Income and (B) the Applicable Tax Rate
(such amount, the "Segregated Accounting Period Tax"). In the event that all
conditions precedent to obligations of the Buyer set forth in Sections 6.01 and
6.02 (other than in Sections 6.02(c)(with respect to the NFL Contract only),
6.02(d), 6.02(g), 6.02(q) and/or 6.02(u) (only with respect to orders or
proceedings arising after May 31, 2001) have been satisfied in full (or waived
by the Buyer), and the Closing has not been consummated on or prior to May 31,
2001, the Buyer shall pay to the
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Seller concurrently with the delivery of the Segregated Accounting Period
Statement only 50% (rather than 100%) of the Segregated Accounting Period Tax.
In no event shall the Buyer be obligated to pay to the Seller any Purchase Price
adjustment pursuant to this Section 5.03(e)(ii) unless the chief executive
officer and chief financial officer of the Seller certifies in writing (the
"Satisfaction Certificate") to the Buyer on or prior to June 5, 2001 that as of
May 31, 2001 the Seller has satisfied, or is ready, willing and able to satisfy
pending the Closing, the conditions precedent set forth in Section 6.02 (other
than in Sections 6.02(c) with respect to the NFL Contract, 6.02(d), 6.02(g),
6.02(q) and 6.02(u) (other than with respect to orders or proceedings arising
after May 31, 2001)) and Section 6.03(h). The Buyer shall have five (5) Business
Days following the receipt of the Satisfaction Certificate to notify the Seller
in writing, and provide a general description, of any dispute with respect
thereto. Within five (5) Business Days after the Buyer has given notice to the
Seller of such dispute the Parties shall attempt to resolve such dispute. If the
Parties are unable to resolve such dispute within the latter five (5) Business
Day period, then each Party may submit such dispute to arbitration within
fifteen (15) days after the expiration of such latter five (5) Business Day
period in accordance with Section 9.09 hereof.
(iii) In the event the Buyer has delivered to the Seller the
Non-Segregated Accounting Period Statement rather than the Segregated Accounting
Period Statement, then in lieu of the payment, if any, to be made pursuant to
Section 5.03(e)(ii) hereof, the Purchase Price shall be subject to adjustment as
follows: If the Closing has not been consummated on or prior to May 31, 2001
solely because the Buyer is unable to obtain the contemplated equity financing
from a Lincolnshire Management, Inc. fund (or obtain other financing
satisfactory to the Buyer on behalf of a Lincolnshire Management, Inc. fund) to
fund in part the Stock Purchase, and provided that all other conditions
precedent to the obligations of the Buyer set forth in Sections 6.01 and 6.02
have been satisfied in full (or waived by the Buyer), the Buyer shall, on or
prior to August 28, 2001, pay to the Seller, as additional Purchase Price, an
amount equal to 100% of the product of (A) the Non-Segregated Accounting Period
Pre-Tax Income and (B) the Applicable Tax Rate, multiplied by a fraction, the
numerator of which shall be the number of days elapsed from and including June
1, 2001 up to and including the Closing Date, and the denominator of which shall
be 92 (being the number of days in May, June and July combined) (such amount,
the "Non-Segregated Accounting Period Tax"). In the event that all conditions
precedent to obligations of the Buyer set forth in Sections 6.01 and 6.02 (other
than in Sections 6.02(c)(with respect to the NFL Contract only), 6.02(d),
6.02(g) (with respect to the debt financing), 6.02(q) and/or 6.02(u) (only with
respect to orders or proceedings arising after May 31, 2001), the result of
which the Buyer has not obtained its equity financing) have been satisfied in
full (or waived by the Buyer), and the Closing has not been consummated on or
prior to May 31, 2001, the Buyer shall pay to the Seller on or prior to August
28, 2001 only 50% (rather than 100%) of the Segregated Accounting Period Tax. In
no event shall the Buyer be obligated to pay to the Seller any Purchase Price
adjustment pursuant to this Section 5.03(e)(ii) unless the chief executive
officer and chief financial officer of the Seller provide the Buyer with a
Satisfaction Certificate on or prior to June 5, 2001 certifying that as of May
31, 2001 the Seller has satisfied, or is ready, willing and able to satisfy
pending the Closing, the conditions precedent set forth in Section 6.02 (other
than in Sections 6.02(c) with respect to the NFL Contract, 6.02(d), 6.02(g),
6.02(q), and 6.02(u) (other than with respect to orders or proceedings arising
after May 31, 2001)) and Section 6.03(h). The Buyer shall have five (5) Business
Days following the receipt of the Satisfaction Certificate to notify the Seller
in writing, and provide a general description, of any dispute with respect
thereto. Within five (5) Business Days after the Buyer has given notice to
38
the Seller of such dispute the Parties shall attempt to resolve such dispute. If
the Parties are unable to resolve such dispute within the latter five (5)
Business Day period, then each Party may submit such dispute to arbitration
within fifteen (15) days after the expiration of such latter five (5) Business
Day period in accordance with Section 9.09 hereof.
For avoidance of doubt, in no event shall any payment be due to the Seller under
this Section 5.03(e) in the event the Closing does not occur.
(f) NOTICE OF TAX AUDITS, ETC. Any Party who receives any written
notice of a pending or threatened Tax audit, assessment, or adjustment against
any Party which may give rise to liability of the Parties under this Agreement,
shall promptly notify the other Party. Failure to provide timely notice of such
pending or threatened action shall not release the Party who failed to receive
such notice from liability to the Party failing to give timely notice to unless
such failure precluded the defense of such pending or threatened action. The
foregoing shall not preclude the Party who failed to receive such notice from
recovering from the Party failing to give timely notice any additional costs or
expenses suffered or incurred by such Party as a result of such failure.
SECTION 5.04 NO SOLICITATION OF COMPETING TRANSACTIONS.
(a) Commencing on the date of this Agreement and ending with the
earlier to occur of the Closing or the termination of this Agreement in
accordance with its terms, the Seller shall not (and the Seller shall cause any
Remaining Subsidiary, any entity Controlled by the Seller or any Remaining
Subsidiary, and the officers, directors, employees, representatives and agents
of the Seller and each of the Remaining Subsidiaries and each entity Controlled
by the Seller or the Remaining Subsidiaries, including, but not limited to,
investment bankers, attorneys and accountants, not to), (i) directly or
indirectly, encourage, solicit or facilitate any inquiries or proposals that
constitute, or would reasonably be expected to lead to, an Acquisition Proposal
or (ii) participate in or initiate discussions or negotiations concerning, or
provide any information to, any Person or group (other than Buyer, any of its
Affiliates or representatives and agents) relating to, an Acquisition Proposal.
(b) Commencing on the date of this Agreement and ending with the
earlier to occur of the Closing or the termination of this Agreement in
accordance with its terms, neither the Seller's Board of Directors nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the Buyer, the approval or recommendation by the
Seller's Board of Directors or any committee thereof of the Stock Purchase, this
Agreement and the related transactions described herein, (ii) approve or
recommend or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into a letter of intent, agreement in principle, acquisition agreement or
any other agreement with respect to any Acquisition Proposal.
SECTION 5.05 INSURANCE.
At the Closing and at no cost to the Buyer, the Seller shall, in accordance with
Schedule 5.05, (i) deliver to the Buyer the legal, valid and binding endorsement
of each of the insurance policies set forth in Section 3.17 of the Seller
Disclosure Letter (with the exception of the directors' and officers' liability
insurance policy referred to therein), removing as beneficiaries under such
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policies the Seller and the Remaining Subsidiaries, and (ii) transfer and assign
its insured interest in the Insurance Policy to the Buyer, without cost to the
Buyer, except that the Remaining Subsidiaries will be removed from coverage and
the Seller will continue to be an additional insured. The Seller agrees to use
commercially reasonable efforts to obtain on or prior to the Closing the
acknowledgment or acceptance of coverage of Illinois National Insurance Company
of any pending, open or unresolved claims set forth or required to be set forth
on the loss run attached to Section 3.18 of the Seller Disclosure Letter and to
transfer to the Buyer at the Closing the benefits of such acknowledgments and
acceptances. To the extent that any refunds from the insurer are received by the
Buyer solely as a result of the removal of the Remaining Subsidiaries as
beneficiaries under the Insurance Policy, the Buyer agrees to pay such refunds
to the Seller within ten (10) Business Days from the date of receipt of such
refunds. From the date hereof until the Closing Date, the Seller agrees to
promptly notify the Buyer of any pending or threatened claim arising since the
date of this Agreement concerning any product or equipment manufactured,
shipped, sold or delivered by the Seller or any Seller Subsidiary relating to
the Business.
SECTION 5.06 NON-COMPETITION AGREEMENTS.
Simultaneously with the execution of this Agreement, the Buyer shall enter into
a non-competition agreement with each Person set forth on SCHEDULE 5.06 (each, a
"Non-Competition Agreement"). The term of each Non-Competition Agreement shall
commence as of the Closing Date.
SECTION 5.07 CHANGE OF NAME.
Commencing on the Closing Date, the Seller agrees to not use the words
"Xxxxxxx," "All American", "Ridmark", "RHC", "MacMark", "Proacq", "Equilink" or
words of similar import (the "Names") as part of any corporate name; PROVIDED,
HOWEVER, that the Seller shall be permitted to use the word "Xxxxxxx" in its
corporate name in accordance with the Transitional Trademark License Agreement
to be executed and delivered at Closing in the form attached as Exhibit C. As
soon as practicable, but in no event later than 90 days following the Closing
Date, the Seller shall amend its certificate of incorporation to change its
corporate name to a name not containing any of the Names. The Seller
acknowledges that the Names and all marks and logos related thereto shall be
owned by the Buyer, and that neither the Seller nor any of the Remaining
Subsidiaries or any Person Controlled by the Seller or any Remaining Subsidiary
shall have any direct or indirect rights in or to any of the Names or shall
contest the ownership or validity of any rights of the Buyer in or to the Names.
SECTION 5.08 OTHER ACTIONS
The Parties shall not, and shall not permit any of their respective Affiliates
to, take any action (to the extent such action is within the respective Party's
control) that would, or that would reasonably be expected to, result in (a) any
of the representations and warranties of such Party set forth in this Agreement
becoming untrue, or (b) any of the conditions set forth in Article VI of this
Agreement not being satisfied.
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SECTION 5.09 ACCESS AND INFORMATION.
For so long as this Agreement is in effect, and subject to applicable Laws, each
Party shall, and shall cause each of their respective Subsidiaries to, (a)
afford to the other Party and its officers, employees, accountants, consultants,
legal counsel and other representatives reasonable access during normal business
hours, subject to reasonable advance notice, to all of their respective
properties, Contracts, books, records and personnel as such other Party may
reasonably request, and (b) furnish promptly to the other Party (i) a copy of
each Contract filed with, or received from any Governmental Entity, and (ii) all
other information concerning their respective businesses, operations, assets,
liabilities and personnel as such other Party may reasonably request. In
addition to the foregoing, the Buyer shall have the right to undertake an
environmental assessment of each of the Real Properties currently owned or
leased for the conduct of the Business, and of the Business, including, without
limitation, a Phase I assessment. The Seller and the Seller Subsidiaries shall
cooperate with the Buyer and the Buyer's environmental consultant in the conduct
of the environmental assessments, and shall provide to the Buyer all known and
available information and documentation concerning any environmental matters
pertaining to all the Real Property, the Assets or the Business.
SECTION 5.10 PUBLICITY.
The Buyer and the Seller shall consult with each other before issuing any press
release or making any public statement with respect to the Stock Purchase, this
Agreement, or the transactions described herein, and shall not issue any such
press release or make any such public statement without the prior written
consent of the other Party, which consent shall not be unreasonably withheld,
conditioned or delayed; PROVIDED, HOWEVER, that a Party may, without the prior
consent of the other Party, issue such press release or make such public
statement as may upon the advice of counsel be required by Law or the rules and
regulations of a national securities exchange if it has used all commercially
reasonable efforts to consult with the other Party prior thereto.
SECTION 5.11 EMPLOYEE BENEFIT MATTERS.
(a) Until December 31, 2001, the Buyer shall maintain, or cause to be
maintained, for the benefit of the employees of the Seller Subsidiaries who
become employees of the Buyer, employee benefit plans and arrangements which in
the aggregate will provide retirement, health, welfare and insurance benefits
that are substantially comparable to the retirement, health, welfare and
insurance benefits provided to those employees immediately prior to the Closing
Date.
(b) With respect to any employee benefit plan, program or policy of the
Buyer that is made available to employees of the Seller or any Seller
Subsidiary: (i) service with the Seller and the Seller Subsidiaries by any such
employee prior to the Closing Date shall be credited for eligibility,
participation and vesting purposes under such plan, program or policy (but not
for purposes of accrual of benefits), and (ii) with respect to any welfare
benefit plans to which such employee may become eligible, the Buyer shall cause
such plans to provide credit for the year 2001 any co-payments or deductibles
and maximum out-of-pocket payments by such employees and waive all pre-existing
condition exclusions and waiting periods, other than limitations or waiting
periods to the extent that they had not been satisfied, under any welfare
benefit plans maintained by the Seller or the Seller Subsidiaries prior to the
Closing Date to the extent reported and reflected in the Audited Financial
Statements. The Buyer shall recognize vacation days previously accrued and
reserved for by the Seller or any Seller Subsidiary immediately prior to
41
the Closing Date. For purposes of the Buyer's severance program (if any), the
Buyer shall consider, among other factors, employee's service with the Seller
and any Seller Subsidiaries prior to the Closing Date.
SECTION 5.12 TRANSACTION EXPENSES.
Except as provided in Section 8.02 of this Agreement, each Party shall bear its
own expenses in connection herewith, including, without limitation, the fees of
each Party's respective legal counsel, financial advisors, accountants, brokers,
finders or investment bankers.
SECTION 5.13 PAYMENT OF BROKER FEES.
The Seller agrees to pay all fees, commissions or other compensation to the
Persons listed on Schedule 3.20 with respect to the transactions contemplated by
this Agreement, and agrees that neither the Buyer nor any of the Seller
Subsidiaries will be liable for any such fees, commissions or other
compensation.
SECTION 5.14 PERMIT TRANSFER, ASSIGNMENT OR REISSUANCES.
The Seller and Seller Subsidiaries shall assist the Buyer in the transfer,
assignment or securing of reissuance of any Environmental Permits and in the
provision of any required notice, to the extent that such Environmental Permits
required to operate the Business are required under applicable Environmental
Laws to be transferred, assigned or reissued, or notification is required to be
provided to facilitate the Stock Purchase contemplated under this Agreement.
SECTION 5.15 NON-COMPETITION.
(a) For a period of five years after the Closing Date (the "Restricted
Period"), the Seller agrees that the Seller shall not (and the Seller shall
cause the Remaining Subsidiaries and any Person Controlled by the Seller or the
Remaining Subsidiaries not to) engage, directly or indirectly, anywhere within
the United States and Canada (the "Restricted Territory") in any business that
sells, markets, manufactures, distributes, produces or supplies football and
baseball helmets, shoulder pads, football and baseball uniforms and other
football and baseball products (except practice wear), football and baseball
protective equipment products and sports collectible products ("Xxxxxxx
Products"), including but not limited to the kind of such Xxxxxxx Products sold,
marketed, manufactured, distributed, produced or supplied by the Seller or the
Seller Subsidiaries in the operation of the Business as of the Closing Date (a
"Xxxxxxx Competitive Business") or, without the prior written consent of the
Buyer, directly or indirectly, own any interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as partner, stockholder, consultant or otherwise, any
Person which engages or intends to engage in a Xxxxxxx Competitive Business in
the Restricted Territory.
As a separate and independent covenant, the Seller further agrees with
the Buyer that, during the Restricted Period, the Seller will not (and the
Seller shall cause the Remaining Subsidiaries and any Person Controlled by the
Seller or the Remaining Subsidiaries not to) in any way, directly or indirectly,
for the purpose of conducting or engaging in any Xxxxxxx Competitive Business or
selling, marketing, manufacturing, distributing, producing or supplying
42
Xxxxxxx Products, solicit, advise or otherwise do for such purpose, or attempt
to do for such purpose, business with any customers of the Buyer, the Seller
Subsidiaries or the Business or take away or interfere or attempt to interfere
with any customer, trade, business or patronage of the Buyer, the Seller
Subsidiaries or the Business or interfere with or attempt to interfere with any
officers, employees, representatives or agents of the Buyer, the Seller
Subsidiaries or the Business or hire, solicit, induce or attempt to induce any
of them to leave the employ of Buyer, the Seller Subsidiaries or the Business or
violate the terms of their Contracts, or any employment arrangements.
Notwithstanding the foregoing: (i) the Seller shall not during and
after the Restricted Period be prohibited by this Section 5.15(a) from
distributing to customers of the Buyer, the Seller Subsidiaries or the Business
cheerleading and dance team products and soccer products or from operating
cheerleading and dance team camps and competitions for such customers, and (ii)
Fox Athletic LLC, a subsidiary of the Seller ("Red Fox"), is hereby authorized
to sell Uniforms to the Buyer pursuant to, and in accordance with, the terms and
conditions of the Apparel Supply Agreement and Red Fox shall not be prohibited
during and after the Restricted Period from selling Uniforms, provided that such
Uniforms are sold by Red Fox, in bona fide arms-length transactions, only to
distributors of such Uniforms that are not Affiliates of the Seller or Red Fox
for resale only to retailers and not directly to schools or other customers.
(b) During the Restricted Period, the Buyer shall not (and the Buyer
shall cause the Seller Subsidiaries and any Person Controlled by the Buyer or
the Seller Subsidiaries not to) engage, directly or indirectly, anywhere within
the Restricted Territory, in the design and distribution of cheerleading and
dance team uniforms and products and soccer products or in the operation of
cheerleading competitions ("Varsity Products"), including but not limited to the
kind of such Varsity Products designed, distributed and operated by the Seller
in the operation of the Remaining Business as of the Closing Date (a "Varsity
Competitive Business") or, without the prior written consent of the Seller,
directly or indirectly, own any interest in, manage, operate, join, control,
lend money or render financial or other assistance to or participate in or be
connected with, as partner, stockholder, consultant or otherwise, any Person
which engages or intends to engage in a Varsity Competitive Business in the
Restricted Territory.
As a separate and independent covenant, the Buyer further agrees with
the Seller that, during the Restricted Period, the Buyer will not (and the Buyer
shall cause the Seller Subsidiaries and any Person Controlled by the Buyer or
the Seller Subsidiaries not to) in any way, directly or indirectly, for the
purpose of conducting or engaging in any Varsity Competitive Business or
designing, distributing or operating Varsity Products, solicit, advise or
otherwise do for such purpose, or attempt to do for such purpose, business with
any customers of the Seller, the Remaining Subsidiaries or the Remaining
Business or take away or interfere or attempt to interfere with any customer,
trade, business or patronage of the Seller, the Remaining Subsidiaries or the
Remaining Business or interfere with or attempt to interfere with any officers,
employees, representatives or agents of the Seller, the Remaining Subsidiaries
or the Remaining Business or hire, solicit, induce or attempt to induce any of
them to leave the employ of Seller, the Remaining Subsidiaries or the Remaining
Business or violate the terms of their Contracts, or any employment
arrangements.
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Notwithstanding the foregoing, the Buyer and the Seller Subsidiaries
shall not during and after the Restricted Period be prohibited by this Section
5.15(b) from carrying on the Business as it is presently conducted or proposed
to be conducted. In addition, any present and future licensees of any of the
Seller Subsidiaries shall not be prohibited during and after the Restricted
Period by this Section 5.15(b) from conducting any activity or utilizing any
right under any present and future license with the Seller Subsidiaries,
provided that none of the Buyer or the Seller Subsidiaries violates this Section
5.15.
(c) The Restricted Period applicable to each Party shall be extended by
the full length of any period during which the Seller or the Buyer, as the case
may be, is in breach of the terms of this Section 5.15.
(d) This Section 5.15 (including both Sections 5.15(a) and (b)) shall
terminate in its entirety and be of no further force and effect upon the sale,
transfer or other disposition, whether by sale of stock or assets, merger,
consolidation, combination or otherwise, of all or substantially all of the
Business or the Remaining Business to a bona fide third party purchaser
following the Closing.
(e) It is expressly understood, acknowledged and agreed by each Party
that the covenants set forth in this Section 5.15 constitute an essential
element of this Agreement and that, but for such covenants, such Party would not
have executed and delivered this Agreement nor be willing to perform the
transactions contemplated herein.
(f) Without intending in any way to limit the remedies available to the
Parties, each Party further acknowledges and agrees that if such Party breaches
any of the covenants contained in this Section 5.15, the other Party may seek
injunctive relief (without being required to post bond or any other undertaking
as a condition to obtaining such relief) in any court of competent jurisdiction
to restrain the breach or the threatened breach of, or otherwise specifically to
enforce, any of such covenants.
(g) The Parties agree and intend that the covenants contained in this
Section 5.15 shall be construed as a series of separate covenants, one for each
applicable county, state, country or province. Except for geographic coverage,
each such separate covenant shall be deemed identical in terms. It is understood
and agreed that, whenever possible, each provision, term and covenant of this
Section 5.15 shall be interpreted in such a manner as to be effective and valid
under applicable Law.
SECTION 5.16 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION.
(a) For a period of six years after the Closing Date, the Buyer shall
indemnify, defend and hold harmless any person who is now, or who has been at
any time prior to the date hereof, an officer or director of any Seller
Subsidiary (a "D&O Indemnified Party"), against all losses, claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
expenses), judgments, fines, and amounts paid in settlement in connection with
any actual or threatened action, suit, claim, proceeding or investigation (each,
a "D&O Claim") incurred or suffered by a D&O Indemnified Party relating to,
arising from or in connection with the fact that such person is or was a
director or, officer of a Seller Subsidiary, regardless of whether any such
44
D&O Claim pertains to any matter or fact arising, existing, or occurring prior
to, at or after the Closing Date, and regardless of whether such D&O Claim is
asserted or claimed prior to, at or after the Closing Date, to the full extent
that each such D&O Indemnified Party is indemnified under, and in accordance
with the terms and conditions of, the organizational documents of such Seller
Subsidiary and applicable Delaware Law.
(b) On the Closing Date, the Seller shall obtain, at the Buyer's
expense not to exceed $500,000, a run-off policy of directors' and officers'
liability insurance covering all the current officers and directors of the
Seller Subsidiaries and providing the coverage as set forth on SCHEDULE 5.16.
SECTION 5.17 APPAREL SUPPLY AGREEMENT.
(a) As of the date hereof, the Seller shall cause its All American
Sports Corporation and Varsity Spirit Corporation subsidiaries to enter into the
Apparel Supply Agreement with the Buyer.
(b) In the event of a sale of 50% or more of the capital stock or
assets of Varsity Spirit Corporation (whether by merger, consolidation, share
exchange or otherwise), the Seller hereby guarantees the payment and performance
when due of all obligations of Varsity Spirit Corporation under the Apparel
Supply Agreement. Such guarantee shall be absolute, present, primary,
continuing, irrevocable, unlimited and unconditional guarantee and is not
conditioned or contingent upon any effort to attempt to seek payment or
performance from any other person or entity or upon any other condition or
contingency. In order to enforce Seller's guarantee herein, the Buyer shall not
be required to first pursue any right or remedy against, or seek any redress
from, Varsity Spirit Corporation or any other person or entity, or take any
other action whatsoever with respect thereto.
SECTION 5.18 ADDITIONAL ASSETS.
(a) In the event that all or any portion of the Additional Assets are
co-mingled with other assets of the Seller or any of the Remaining Subsidiaries,
the Seller, at Seller's expense, shall deliver the Additional Assets to the
Buyer at the Closing in a manner that allows the Buyer to use the Additional
Assets on a stand-alone basis in the operation of the Business. The Seller
shall, and shall cause the Remaining Subsidiaries to, cease to operate the
football related portion of the Xxxxxxx.xxx web site. The Seller represents and
warrants that, immediately following the Closing, the software related to the
Xxxxxxx.xxx web site will operate fully on a stand-alone basis and that the
Varsity brand and any Xxxxxxx.xxx or other content not specifically authorized
by the Buyer will not be visible or apparent to a user of or visitor to the
Xxxxxxx.xxx web site. The Seller agrees that it will test such Xxxxxxx.xxx
software prior to the Closing Date and that it will modify or replace such
software as is necessary to ensure that such software will operate fully on a
stand-alone basis immediately following the Closing.
(b) The Parties hereto agree that the Additional Assets shall not
include the two computer servers owned by the Seller. The Seller represents to
the Buyer that the Seller is Party to an oral agreement with DTI and an oral
agreement with DoubleSpace with respect to the provision and maintenance of
hosting services. The Parties agree that both the Buyer and the Seller shall
have
45
the right to access the servers at any time after the Closing, provided that the
parties split, on a 50/50 basis, all costs attributable to the operation of the
servers, including the fees payable under the DTI and DoubleSpace agreements
referred to herein. The Seller represents to the Buyer that both the DTI and
DoubleSpace agreements are terminable by the Seller on short notice, that no
breakup, cancellation, termination or similar fees will result from any
termination thereof and that no increases in fees due to DTI or DoubleSpace, as
the case may be, will result from any termination thereof. In the event that
either the Buyer or the Seller desires to cease using the servers after the
Closing Date, such Party shall give the other Party not less than 30 days' prior
written notice of the date of cessation, PROVIDED, HOWEVER, that the Seller
shall not cease using the servers prior to August 31, 2001. From and after such
date of cessation, the non-ceasing Party shall be liable for all costs
attributable to the operation of the servers and will retain ownership (in the
case of the Seller) or obtain ownership (in the case of the Buyer) of the
servers. In the event that the Buyer is the non-ceasing Party, the Seller hereby
agrees to enter into a xxxx of sale, in substantially the same form as the Xxxx
of Sale attached to this Agreement as Exhibit E, to transfer, at no cost to the
Buyer, ownership of and good and valid title to the servers free and clear of
any Liens. The Seller hereby agrees to indemnify the Buyer for any breakup,
cancellation or similar fees that result from the Seller ceasing to use the
servers.
SECTION 5.19 TRANSFER OF MEMBERSHIP INTERESTS. On or prior to the Closing,
the Seller shall cause each of Xxxxx Xxxxxxxxxx, Xxxxx Xxxxx and Xxxxxxx
Xxxxxxxx to transfer their respective membership interests in MacGregor
Corporation to the Buyer or the Buyer's designee or substitute the Buyer's
designees as members of MacGregor Corporation in lieu of such transfer.
SECTION 5.20 USE OF PROCEEDS AND REPRESENTATION AND WARRANTY INSURANCE.
(a) The Seller agrees that it will not disburse (a "Disbursement") more
than the greater of (i) 25% of the Net Proceeds (as such term is defined in the
Indenture) of the transaction contemplated hereby or (ii) $12,500,000, for
purposes other than the permanent reduction of Indebtedness under the Credit
Facilities or the permanent reduction of other Senior Indebtedness (as such
terms are defined in the Indenture as of the date hereof) unless and until the
Seller purchases, at its sole cost and expense and subject to the next sentence
and Section 5.20(b), representation and warranty insurance acceptable to the
Buyer and delivers to the Buyer a buy-side policy (naming the Buyer as the named
insured) issued by an insurer with a Best's rating of A or better or an insurer
reasonably believed by the Seller to be financially sound and reputable. In
order to obtain such policy, the Seller agrees to pay in full, at the inception
of such policy, premium costs in an amount not to exceed $150,000. Subject to
the immediately preceding sentence and Section 5.20(b), such insurance shall
insure at least $3,000,000 of Losses. Such insurance shall be paid in full by
the Seller at its inception, and be in full force and effect at any time
thereafter a claim for indemnification is made pursuant to this Agreement.
(b) The Seller agrees to use commercially reasonable efforts to notify
the Buyer in writing at least 30 days prior to a Disbursement which would
require the purchase of the buy-side policy hereunder. The Seller shall keep the
Buyer fully informed of the Seller's efforts to obtain the buy-side policy
required under this Section 5.20, and shall provide to the Buyer for its review
and approval a form of such policy at least 10 days prior to such Disbursement.
The Buyer shall, within 10 days following receipt by the Buyer of such policy,
have the right in its sole discretion to either (i) accept such policy or (ii)
obtain a form of replacement policy to be
46
purchased by the Seller that is acceptable to the Buyer and that is customary
for transactions such as, and the size of, the transaction contemplated by this
Agreement, including the Seller's indemnity obligations under Article VII (it
being understood that to the extent that a replacement policy acceptable to the
Buyer, in the Buyer's sole discretion, cannot be obtained for $150,000 or less,
the Buyer shall have the option of paying the incremental amount in excess of
such $150,000 required in order for the Seller to obtain such acceptable
policy). In the event the Buyer does not notify the Seller of its election of
either of the alternatives set forth in (i) and (ii) above prior to such
Disbursement, then the Seller, prior and as a condition to making such
Disbursement, shall pay to the Buyer $150,000, which $150,000 (or a portion
thereof) shall be used by the Buyer to purchase, within 30 days following the
later of (A) such Disbursement and (B) the receipt by the Buyer of such
$150,000, a buy-side policy acceptable to the Buyer in its sole discretion. The
Buyer agrees to provide to the Seller within 10 days following the purchase of
the buy-side policy a copy of the policy, and to the extent that the Buyer
obtains the buy-side policy for less than $150,000, the Buyer shall within 10
days following receipt by the Buyer of the policy refund to the Seller the
difference, if any, between $150,000 and the amount paid by the Buyer for the
policy. If the Buyer does not obtain any policy within the 30-day period
referred to above, the Buyer shall within 10 days following the expiration of
such 30-day period refund to the Seller such $150,000, and the Seller shall then
purchase the buy-side policy initially provided to the Buyer hereunder by the
Seller.
(c) The Seller agrees that it will provide the Buyer with a written
statement, certified by the chief financial officer of the Seller, immediately
prior to disbursing more than $5,000,000, and again immediately prior to
disbursing more than $12,500,000 (including any prior Disbursements), of the Net
Proceeds of the transaction contemplated hereby for purposes other than the
permanent repayment of Senior Notes and Senior Indebtedness. In the event the
Seller is no longer a publicly-traded company, the Seller agrees to deliver to
the Buyer each month after such event and until the earlier to occur of (x) the
purchase of insurance as described in this Section 5.20 or (y) the first
anniversary of the Closing Date, monthly statements of the kind described in
Sections 1.03(a) and 3.07(b) and prepared in the manner represented therein,
certified by the chief financial officer of the Seller, to enable the Buyer to
monitor the use of the Net Proceeds hereunder. In no event shall any
modification, amendment or termination of the Indenture relieve the Seller of
any of its obligations under this Section 5.20.
(d) Subject to Section 7.01 hereof, the insurance required to be
purchased under this Section 5.20 shall be in addition to, rather than in lieu
of, the indemnification obligations of the Seller set forth in this Agreement
and shall not relieve the Seller of its indemnification obligations set forth in
this Agreement.
SECTION 5.21 ESTOPPEL CERTIFICATES.
The Seller shall use commercially reasonable efforts to obtain on or prior to
the Closing an estoppel certificate with respect to each Real Property Lease and
each Lease/Sublease Agreement, in each case in form and substance reasonably
satisfactory to the Buyer.
47
SECTION 5.22 NOTIFICATION OF CLAIMS
From the date of this Agreement and until the Closing Date, the Seller and the
Seller Subsidiaries shall notify the Buyer of: (i) any claims, actions, suits,
investigations, or proceedings filed or, to the knowledge of the Seller,
threatened against, relating to or affecting the Seller or any of the Seller
Subsidiaries or the Business or Assets and (ii) any orders of any Governmental
Entity or arbitrator issued against the Seller or any Seller Subsidiary, the
Business or the Assets that would be reasonably expected to have a Seller
Material Adverse Effect or prevent or enjoin, or delay in any respect,
consummation of the transactions described herein.
ARTICLE VI.
CONDITIONS
SECTION 6.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT.
The respective obligations of each Party to effect the transactions described
herein shall be subject to the satisfaction at or prior to the Closing Date of
the following conditions, any or all of which may be waived by agreement of the
Buyer and the Seller, in whole or in part, to the extent permitted by applicable
Law:
(a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any Law, in any case which is in effect and
which prevents or prohibits consummation of the transactions described herein;
provided, however, that the Parties shall use their commercially reasonable
efforts to cause any such Law to be vacated or lifted.
(b) HSR ACT. The applicable waiting period with respect to the
transactions described herein together with any extensions thereof, under the
HSR Act shall have expired or been terminated.
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF THE BUYER.
The obligation of the Buyer to consummate the transactions contemplated hereby
shall be subject to the fulfillment on or prior to the Closing Date of the
following conditions, any or all of which may be waived by the Buyer, in whole
or in part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. On and as of the Closing Date, the
representations and warranties of the Seller set forth in this Agreement shall
be true and correct, disregarding for this purpose any standard of materiality
contained in any such representation or warranty, except (i) for changes
specifically permitted by this Agreement, (ii) those representations and
warranties that address matters only as of a particular date which are true and
correct as of such date, and (iii) where the failure of such representations and
warranties to be true and correct do not, individually or in the aggregate, have
a Seller Material Adverse Effect, and the Buyer shall have received a
certificate of the Seller to that effect, dated the Closing Date, and signed on
behalf of the Seller by the chief executive officer and chief financial officer
thereof.
(b) PERFORMANCE OF OBLIGATIONS. The Seller shall have performed or
complied in all material respects with all conditions, agreements, obligations
and covenants required to be
48
performed or complied with by the Seller under this Agreement prior to the
Closing, and the Buyer shall have received a certificate signed by the chief
executive officer and chief financial officer of the Seller to such effect.
(c) CONSENTS. The Seller shall have obtained and shall have delivered
to the Buyer on or prior to the Closing Date copies of all Closing Consents
(including, without limitation, the consent required under the NFL Contract and
related license agreements with National Football League Properties, Inc. in
connection with the Stock Purchase).
(d) NON-COMPETITION AGREEMENTS. The Non-Competition Agreements shall be
in full force and effect as of the Closing Date.
(e) NO MATERIAL ADVERSE EFFECT. From the date hereof through and
including the Closing Date, no event, occurrence, fact, condition, change,
development or effect shall have occurred, exist or come to exist that,
individually or in the aggregate, has constituted or resulted in, or would
reasonably be expected to constitute or result in, a Seller Material Adverse
Effect, individually or in the aggregate.
(f) [intentionally omitted]
(g) FINANCING. Prior to the Closing Date, the Buyer shall have received
from the Financing Sources sufficient financing, on terms reasonably acceptable
to the Buyer.
(h) RESIGNATIONS OF OFFICERS AND DIRECTORS. (i) the Seller shall have
delivered to the Buyer an executed resignation from each member of the Board of
Directors of each Seller Subsidiary and, at the Buyer's request, any officers of
the Seller Subsidiaries. A list of all officers and directors shall be set forth
in Section 6.02(h) of the Seller Disclosure Letter, and (ii) the Seller shall
have delivered to the Buyer an assignment of the membership interests in
MacGregor Corporation held by Xxxxx Xxxxxxxxxx, Xxxxx Xxxxx and Xxxxxxx
Xxxxxxxx.
(i) ADDITIONAL DOCUMENTS. The Seller shall have delivered to the Buyer
such other documents, instruments and certificates as shall be reasonably
requested by the Buyer or the Buyer's counsel for the purpose of effecting the
transactions provided for and contemplated by this Agreement and the Transaction
Documents.
(j) OPINION OF COUNSEL FOR THE SELLER. The Buyer shall have received an
opinion, dated the Closing Date, from Xxxxxxx Berlin Shereff Xxxxxxxx, LLP,
counsel to the Seller, addressed to the Buyer and, if requested by the Buyer, to
the Financing Sources, in the form attached as Exhibit D.
(k) ESTIMATED FUNDED DEBT CALCULATION. The Seller shall have delivered
to the Buyer the Estimated Funded Debt Calculation in accordance with Section
1.03(a).
(l) ORGANIZATIONAL DOCUMENTS AND BOARD RESOLUTIONS. The Buyer shall
have received true, correct and complete copies of (i) the certificate of
incorporation, as amended to date, of the Seller and each Seller Subsidiary,
certified as of a recent date by the Secretary of State of the state of
incorporation of the Seller or such Seller Subsidiary, (ii) the bylaws of the
Seller and each Seller Subsidiary and (iii) resolutions duly and validly adopted
by the Board of Directors of
49
the Seller evidencing the authorization of the execution and delivery of this
Agreement, the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, in each case, accompanied by a
certificate of the Secretary or Assistant Secretary of the Seller and each
Seller Subsidiary, dated as of the Closing Date, stating that no amendments have
been made thereto from the date thereof through the Closing Date.
(m) INCUMBENCY CERTIFICATE. The Buyer shall have received a certificate
of the Seller, certifying as to the names and signatures of the Persons
authorized on behalf of the Seller to sign this Agreement and the other
Transaction Documents to be delivered by the Seller hereunder;
(n) GOOD STANDING CERTIFICATES. The Buyer shall have received good
standing certificates for the Seller and each Seller Subsidiary from the
Secretary of State of their respective states of incorporation and from the
Secretary of State of each other jurisdiction in which the operation of the
Business in such jurisdiction requires the Seller or such Seller Subsidiary to
qualify to do business as a foreign corporation, in each case dated as of a
recent date prior to the Closing Date.
(o) MINUTE BOOKS. The Buyer shall have received possession or
constructive possession of the minute books, the stock register certificate
books and the stock record books of each Seller Subsidiary.
(p) SATISFACTION OF CONSOLIDATED DEBT AND INTERCOMPANY DEBT. The Buyer
shall have received unconditional general releases in favor of the Seller
Subsidiaries from the Revolver Loan lenders and all other creditors under the
Consolidated Debt with respect to all obligations of the Seller Subsidiaries
arising under or related to the Consolidated Debt and all Liens on the Assets
(including, without limitation, the mortgage and other Liens on the Chicago,
Illinois real property) and the Subsidiary Stock arising under or related to the
Consolidated Debt, and the Seller or the Seller Subsidiaries, as the case may
be, shall have paid in full all Intercompany Debt and released the Buyer and the
Seller Subsidiaries from all obligations with respect thereto. Each of the
Seller Subsidiaries shall have been unconditionally released from and relieved
of all obligations under any loan agreement, guaranty, pledge or similar
agreement, including, without limitation, any obligations under the Subsidiary
Guaranty, any obligations under the Silver Oak Guaranty and all pledges of the
Subsidiary Stock, and the Seller shall have delivered to the Buyer all documents
required in order to evidence such releases.
(q) TITLE INSURANCE. Buyer's title insurance company shall be prepared
to issue, upon payment of the title premium at its regular rates, a 1992 ALTA
Owner's Policy of title insurance with respect to each Real Property listed in
SCHEDULE 6.02(Q), in the respective amounts indicated therein, subject only to
Permitted Liens;
(r) ESTOPPEL CERTIFICATES. Buyer shall have received (i) an estoppel
certificate with respect to each Real Property Lease listed in SCHEDULE
6.02(R)(I), and (ii) an estoppel certificate with respect to each Lease/Sublease
Agreement listed in SCHEDULE 6.02(R)(II), in each case in the form required to
be executed under the applicable lease documents if such a form is required
under the applicable Real Property Lease or Lease/Sublease Agreement or
otherwise in form and substance reasonably satisfactory to the Buyer.
50
(s) APPAREL SUPPLY AGREEMENT. The Apparel Supply Agreement shall be in
full force and effect as of the Closing Date and neither Varsity Spirit
Corporation nor All American Sports Corporation shall be in breach of or default
under the Apparel Supply Agreement.
(t) INTERNET OPERATIONS. The Seller and the Remaining Subsidiaries
shall have ceased to operate the football-related portion of the Xxxxxxx.xxx web
site.
(u) NO GOVERNMENTAL ORDER OR OTHER PROCEEDING OR LITIGATION. No order
of any Governmental Entity shall be in effect that restrains or prohibits the
transactions contemplated hereby, and no suit, action or other proceeding by any
Governmental Entity shall have been instituted or threatened which seeks to
restrain or prohibit the transactions contemplated hereby.
(v) XXXX OF SALE AND ASSIGNMENT. The Seller shall have delivered to the
Buyer a Xxxx of Sale and Assignment, in the form attached as Exhibit E hereto,
with respect to the Additional Assets.
(w) TRANSITIONAL TRADEMARK LICENSE AGREEMENT. The Seller shall have
executed and delivered to the Buyer the Transitional Trademark License Agreement
referred to in Section 5.07.
(x) INSURANCE. At no cost to the Buyer, the Seller shall have, in
accordance with SCHEDULE 5.05, (i) delivered to the Buyer the legal, valid and
binding endorsement of the insurance policies set forth in Section 3.17 of the
Seller Disclosure Letter, removing as beneficiaries under such policies the
Seller and the Remaining Subsidiaries, and (ii) transferred and assigned its
insured interest in the Insurance Policy to Buyer. In addition, the Seller shall
have obtained on or prior to the Closing the acknowledgement or acceptance of
coverage of Illinois National Insurance Company of any pending, open or
unresolved claims set forth or required to be set forth on the loss run attached
to Section 3.18 of the Seller Disclosure Letter and shall have transferred to
the Buyer at the Closing the benefits of such acknowledgments and acceptances.
(y) CLOSING DELIVERIES. The Seller shall have furnished to the Buyer
all of the agreements, documents and items specified in Section 2.02(b) to the
extent not specifically addressed in Section 6.02(a)-(x) above.
SECTION 6.03 CONDITIONS TO OBLIGATIONS OF THE SELLER.
The obligation of the Seller to consummate the transactions contemplated hereby
shall be subject to the fulfillment, on or prior to the Closing Date, of the
following conditions, any or all of which may be waived by the Seller, in whole
or in part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Buyer contained herein (other than in Section 4.09) shall be true in all
respects (in the case of any representation or warranty containing any
materiality or material adverse effect qualification) or in all material
respects (in the case of any representation or warranty without any materiality
or material adverse effect qualification) at and as of the date hereof and on
and as of the Closing Date with the same effect as though made at and as of the
Closing Date, and the Seller shall have received a certificate of the president
or chief executive officer of the Buyer to such effect.
51
(b) PERFORMANCE OF OBLIGATIONS. The Buyer shall have performed or
complied in all material respects with all conditions, agreements, obligations
and covenants required to be performed or complied with by the Buyer under this
Agreement prior to the Closing, and the Seller shall have received a certificate
of the president or chief executive officer of the Buyer to such effect.
(c) CONSENTS. The Buyer shall have obtained and shall have delivered to
the Seller on or prior to the Closing Date copies of all consents, approvals,
authorizations, permits, filings and notices required or appropriate to be
obtained by the Buyer in connection with the execution and delivery of this
Agreement and the consummation of the Stock Purchase and the related
transactions described herein. The Buyer shall have also obtained the consent
required under the NFL Contract and related license agreements with National
Football League Properties, Inc. in connection with the Stock Purchase.
(d) [intentionally omitted].
(e) [intentionally omitted].
(f) NO GOVERNMENTAL ORDER OR OTHER PROCEEDING OR LITIGATION. No order
of any Governmental Entity shall be in effect that restrains or prohibits the
transactions contemplated hereby, and no suit, action or other proceeding by any
Governmental Entity shall have been instituted or threatened which seeks to
restrain or prohibit the transactions contemplated hereby.
(g) TRANSITIONAL TRADEMARK LICENSE AGREEMENT. The Buyer shall have
executed and delivered to the Seller the Transitional Trademark License
Agreement referred to in Section 5.07.
(h) FAIRNESS OPINION. Xxxxxx Brothers Inc. shall have rendered a
fairness opinion with respect to the transactions contemplated hereby on or
prior to the execution of this Agreement, and such fairness opinion shall not
have been withdrawn as of the Closing.
(i) CLOSING DELIVERIES. The Buyer shall have furnished to the Seller
all of the agreements, documents and items specified in Section 2.02(a) to the
extent not specifically addressed in Section 6.03(a)-(h).
ARTICLE VII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 7.01 SURVIVAL.
Except as otherwise specifically provided for hereby, the representations and
warranties of the Seller included or provided for hereby shall survive until the
earlier of (i) the 15-month anniversary of the Closing Date or (ii) 30 days
following the delivery to the Buyer by the Buyer's Accountant of the audited
consolidated statements of operations and cash flows of the Seller Subsidiaries
for the 12-month period ending December 31, 2001 and the audited consolidated
balance sheet of the Seller Subsidiaries as of December 31, 2001; provided,
52
however, that (A) the representations and warranties contained in Section 3.12
(Environmental Matters) shall survive until the third anniversary of the Closing
Date, (B) the representations and warranties of the Seller contained in Section
3.01 (Organization and Qualification), Section 3.02 (Seller Subsidiaries),
Section 3.04 (Capitalization), Section 3.09(a) (Assets) (the first two sentences
thereof), Section 3.23(d) (Real Property) (the first sentence thereof) and
Section 3.29(g) (Intellectual Property) (the first two sentences thereof) and
any fraudulent misrepresentations (including any intentional failure to disclose
a material fact) shall survive the Closing indefinitely, notwithstanding any
applicable statute of limitations, and (C) the representations and warranties of
the Seller contained in Section 3.16 (Taxes), shall survive the Closing through
the expiration of any applicable statute of limitations period (each such period
is referred to herein as a "Survival Period"). Neither any Survival Period, nor
the liability of the Seller with respect to breaches of representations and
warranties, shall be reduced or limited by any investigation made at any time by
or on behalf of the Buyer.
(a) The Seller agrees that, prior to the sixth anniversary of the
Closing Date, it will not consummate the sale (the "Sale") of all or
substantially all of the assets or capital stock of the Seller or Varsity Spirit
Corporation or all or substantially all of the Remaining Business (whether by
merger, consolidation, business combination or otherwise) unless and until the
Seller purchases, at its sole cost and expense and subject to the next sentence
and Section 7.01(b), representation and warranty acceptable to the Buyer and
delivers to the Buyer a buy-side policy (naming the Buyer as the named insured)
(i) issued by an insurer with a Best's rating of A or better or an insurer
reasonably believed by the Seller to be financially sound and reputable and (ii)
with coverage which will not be diminished as a result of or by virtue of the
Sale and the resulting release of the Seller from its indemnification
obligations in accordance with Section 7.01(c). In order to obtain such policy,
the Seller agrees to pay in full, at the inception of such policy, premium costs
in an amount not to exceed $500,000. Subject to the immediately preceding
sentence and Section 7.01(b), such insurance shall insure at least $10,000,000
of Losses. Such insurance shall be paid in full by the Seller at its inception,
and be in full force and effect at any time thereafter a claim for
indemnification is made pursuant to this Agreement.
(b) The Seller agrees to notify the Buyer in writing at least 45 days
prior to any Sale. The Seller shall keep the Buyer fully informed of the
Seller's efforts to obtain the buy-side policy required under this Section 7.01,
and shall provide to the Buyer for its review and approval a form of such policy
at least 30 days prior to such Sale. The Buyer shall, within 30 days following
receipt by the Buyer of such policy, have the right in its sole discretion to
either (i) accept such policy or (ii) obtain a form of replacement policy to be
purchased by the Seller that is acceptable to the Buyer and that is customary
for transactions such as, and the size of, the transaction contemplated by this
Agreement, including the Seller's indemnity obligations under Article VII (it
being understood that to the extent that a replacement policy acceptable to the
Buyer, in the Buyer's sole discretion, cannot be obtained for $500,000 or less,
the Buyer shall have the option of paying the incremental amount in excess of
such $500,000 required in order for the Seller to obtain such acceptable
policy). In the event the Buyer does not notify the Seller of its election of
either of the alternatives set forth in (i) and (ii) above prior to such Sale,
then the Seller, prior and as a condition to making such Sale, shall purchase
the buy-side policy initially provided to the Buyer hereunder by the Seller.
53
(c) Notwithstanding anything to the contrary contained in this
Agreement, the Seller shall be relieved of its indemnification obligations under
this Agreement (i) at such times that the representation and warranty insurance
provided for in this Section 7.01 is in full force and effect, or (ii) if the
Sale takes place after the sixth anniversary of the Closing Date, upon the
consummation of the Sale.
SECTION 7.02 AGREEMENT TO INDEMNIFY.
(a) Subject to the terms and conditions set forth in this Article VII
and Section 4.09(b)(i), after the Closing Date, the Seller hereby covenants and
agrees to indemnify and hold harmless the Buyer and its stockholders, directors,
officers, employees, affiliates and representatives and their respective
successors and assigns (collectively, "Indemnified Buyers") against any and all
losses, claims, liabilities, obligations, fines, penalties, damages and
expenses, including reasonable attorneys' fees and disbursements and
consultants' fees and expenses, and any and all actions, suits, proceedings,
demands, assessments, Judgments, costs, costs of collection and legal and other
expenses incident to any of the foregoing (collectively, "Losses") incurred by
any of them resulting from or arising out of or in connection with: (i) any
breach of any of the representations or warranties (other than those
representations and warranties set forth in Section 3.16 of this Agreement) made
by the Seller in this Agreement or any other Transaction Document; (ii) any
breach of any of the representations or warranties made by the Seller in Section
3.16 of this Agreement; (iii) the failure of the Seller to perform in any
material respect any of the agreements or covenants contained in this Agreement
or any other Transaction Document; (iv) any liabilities in respect of
Consolidated Debt, including but not limited to the Revolver Loan; (v) any
broker's, finder's, financial advisor's or other similar fees and commissions
payable in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Seller or any Seller Subsidiary or
any of their respective Affiliates; (vi) (A) the offsite transportation,
treatment, storage or disposal of any Hazardous Material generated by the Seller
or any Seller Subsidiary on or prior to Closing, or (B) any liabilities arising
under any Environmental Laws relating to or resulting from conditions existing
or activities or omissions occurring on or prior to Closing; (vii) the Remaining
Claims; (viii) the Seller's failure to timely file with the IRS true and correct
annual reports (IRS Form 5500) with respect to any Benefit Plan, and its failure
to administer the applicable Benefit Plans in accordance with the provisions of
COBRA; (ix) any liabilities in respect of Securities Reports; (x) any Losses
with respect to any claims made by or concerning Antonio Care relating to the
Raleigh Athletic Equipment Corp. Pension Plan, including, without limitation, as
a result of: (A) the failure to administer such plan in material compliance with
all applicable laws, (B) any liabilities in excess of those reported on the most
recent actuarial and financial statements of such plan, and (C) any liabilities
to fund or pay benefits that have accrued as of the Closing Date in excess of
those that would be payable under the terms of the 1989 restated plan; and (xi)
any other matter as to which the Seller, pursuant to any other provision of this
Agreement, has agreed to indemnify the Buyer.
(b) Subject to the terms and conditions set forth in this Article VII,
after the Closing Date, the Buyer hereby agree to indemnify and hold harmless
the Seller, and its stockholders, directors, officers, employees, affiliates and
representatives and their respective successors and assigns against any and all
Losses incurred by any of them resulting from or arising out of the Surviving
Claims, except with respect to a Loss for which the Buyer is entitled to
54
indemnification hereunder, subject to the limitations contained in Section 7.03,
if any, which result from, arise out of or relate to a breach of a
representation, warranty or covenant of the Seller under this Agreement or any
of the Transaction Documents.
SECTION 7.03 LIMITATIONS ON INDEMNIFICATION.
(a) The Seller shall not be obligated to make any payment for
indemnification under Section 7.02(a)(i), (iii) and (vi) hereof in excess of
$10,000,000 (the "Cap"); PROVIDED, however, that with respect to Section
7.02(a)(iii), only those Losses arising out of or in connection with the failure
of the Seller to perform in any material respect any of the agreements or
covenants contained in this Agreement or any other Transaction Document to be
performed by the Seller following (rather than on or prior to) the Closing (and
not subject to indemnification under Section 7.02(a)(ii), (iv), (v), (vii),
(viii), (ix), (x) and (xi)) shall count against the Cap. The Seller shall not be
obligated to pay any amounts for indemnification under Section 7.02(a)(i) until
the Seller's aggregate indemnification obligations under Section 7.02(a)(i) and
any Losses resulting from breaches waived or released pursuant to Section
4.09(b)(i) equal or exceed $500,000 (the "Basket"); PROVIDED that, in such event
the indemnifying party shall only be obligated to pay indemnification to the
extent that its aggregate indemnification obligations exceed the Basket. The
Seller shall not be obligated to make any payment for indemnification under
Section 7.02(a)(vi) for which a claim was not made prior to the third
anniversary of the Closing Date. Notwithstanding anything herein to the
contrary, the Seller shall not be obligated to pay any amounts for
indemnification under Section 7.02(a)(i) for any Losses incurred by an
Indemnified Buyer which arise solely from liabilities for accounts receivable
and Inventory for which reserves are reflected on the Final Closing Balance
Sheet, until, and solely to the extent that, the amount of such Losses exceed
the amount of such reserves.
(b) The indemnification provisions of this Article VII shall constitute
the sole and exclusive Post Closing remedy of the parties hereto for any
inaccuracy, untruth, incompleteness or other breach of any representation or
warranty contained in or made pursuant to this Agreement or pursuant to any
agreement contemplated hereby, or for any breach of or failure to perform any
covenant or agreement made in this Agreement or any agreement contemplated
hereby or otherwise arising out of the transactions contemplated hereby, and the
parties hereto each waive any other remedy which they or any other person
entitled to indemnification hereunder may have at law or in equity with respect
thereto.
(c) The amount of Losses suffered by an indemnified party shall be
reduced by the amount equal to any insurance recovery received by such
indemnified party with respect to such Loss and shall be determined on an After
Tax Basis. "After Tax Basis" means the amount of the Loss shall be determined
with due regard to the net of all Tax effects resulting from the receipt by the
indemnified party of any payment against such Loss, as reasonably calculated by
the indemnified party and as reflected on such indemnified party's Tax Returns
in its sole discretion.
SECTION 7.04 INDEMNIFICATION PROCEDURE.
(a) An indemnified party shall provide written notice to each
indemnifying party of any claim of such indemnified party for indemnification
under this Agreement promptly after the date on which such indemnified party has
actual knowledge of the existence of such claim. Such
55
notice shall specify the nature of such claim in reasonable detail and the
indemnifying parties shall be given reasonable access to any documents or
properties within the control of the indemnified party as may be useful in the
investigation of the basis for such claim. The failure to so notify the
indemnifying parties shall not constitute a waiver of such claim except to the
extent such indemnified party is materially prejudiced by such failure (to the
extent determined by a court of competent jurisdiction).
(b) In the event any indemnified party seeks indemnification hereunder
based upon a claim asserted by a third party, the indemnifying parties shall
have the right (without prejudice to the right of any indemnified party to
participate at its expense through counsel of its own choosing) to defend or
prosecute such claim at its expense and through counsel of its own choosing if
it gives written notice of its intention to do so no later than 20 days
following notice thereof by an indemnified party or such shorter time period as
required so that the interests of the indemnified party would not be materially
prejudiced as a result of its failure to have received such notice; provided,
however, that, if the indemnified party shall have reasonably concluded that
separate counsel is required because, in the opinion of counsel to the
indemnified party, a conflict of interest would exist under applicable federal,
state, or local ethical Laws governing the conduct of attorneys (other than
solely by reason of the fact that the indemnified party is a party seeking
indemnification pursuant to this Agreement), the indemnified party shall have
the right to select a separate counsel (but not more than one law firm together
with local counsel, if necessary) to participate in the defense of such action
on its behalf, at the sole expense of the indemnifying party. If the
indemnifying party does not so choose to defend or prosecute any such claim
asserted by a third party for which any indemnified party would be entitled to
indemnification hereunder, then the indemnified party shall be entitled to
recover from the indemnifying party, all of the reasonable attorney's fees and
other costs and expenses of litigation of any nature whatsoever incurred in the
defense of such claim. Notwithstanding the assumption of the defense of any
claim by an indemnifying party pursuant to this paragraph, no claim may be
settled by the indemnifying party without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld or delayed.
(c) The indemnifying party and the indemnified party shall cooperate in
furnishing evidence and testimony and in any other manner which the other may
reasonably request, and shall in all other respects have an obligation of good
faith dealing, one to the other, so as not to unreasonably expose the other to
undue risk of loss.
SECTION 7.05 FUTURE OPERATION OF THE BUSINESS.
Notwithstanding anything to the contrary in this Agreement, the Seller shall not
be liable for any act, omission, circumstance or condition relating to the
operation or ownership of the Business or the Real Estate on which the Business
operates, that first occurs after the Closing Date or resulting from the Buyer's
failure, or the failure of any of its properties, to comply with applicable Law,
including, without limitation, Environmental Laws, after the Closing even if the
Assets are owned or operated after the Closing in the manner owned or operated
prior to Closing.
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ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 TERMINATION.
This Agreement may be terminated at any time (except where otherwise indicated)
prior to the Closing Date:
(a) By mutual written consent of the Buyer and Seller;
(b) By either of the Seller or the Buyer:
(i) if the transactions described herein have not been
consummated by June 30, 2001, or such other date, if any, as the Buyer and the
Seller shall agree upon; provided, however, that the right to terminate this
Agreement under this Section 8.01(b)(i) shall not be available to any Party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Stock Purchase or the related
transactions described herein to be consummated on or prior to such date; or
(c) if any order of any Governmental Entity shall be in effect that
restrains or prohibits the transactions contemplated hereby, or if any suit,
action or other proceeding by any Governmental Entity shall have been instituted
or threatened which seeks to restrain or prohibit the transactions contemplated
hereby.
(d) By the Seller:
(i) if the Buyer shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement which would
give rise to the failure of a condition set forth in Sections 6.01 or 6.02,
which breach cannot be or has not been cured within 15 days after the giving of
written notice by the Seller to the Buyer.
(ii) if the fairness opinion referred to in Section 6.03(h) is
withdrawn by Xxxxxx Brothers Inc, provided that such termination shall only be
effective (i) upon prior written notice to the Buyer and (ii) upon the payment
by the Seller to the Buyer, by wire transfer on the date of termination, of a
termination fee of $3,500,000. Notwithstanding the foregoing, a termination by
the Seller shall also be effective upon the Seller's payment to the Buyer, by
wire transfer on the date of termination, of a termination fee in the lesser
amount of $1,500,000 if the fairness opinion is withdrawn by Xxxxxx Brothers
Inc. upon prior written notice to the Buyer and all but not less than all of the
following conditions have been satisfied: (A) the fairness opinion has been
withdrawn solely because Xxxxxx Brothers Inc. has in good faith determined the
Purchase Price is not fair to the stockholders of the Seller, (B) on or prior to
the date of termination, the Seller has not received any Superior Offer for the
sale of the Seller Subsidiaries or the Business, (C) on or prior to the date of
termination, the Seller has not received any Offer for the sale of the Seller,
(D) applicable federal and state law shall change to require that the fairness
opinion be in effect as of the Closing in order to consummate the transactions
contemplated hereby, and (E) the Board of Directors of the Seller determines
that the Board has a fiduciary duty to not consummate the transactions
contemplated hereby as a result of the
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withdrawal of the fairness opinion, and the Seller shall have received an
opinion of legal counsel to such effect.
(e) By the Buyer:
(i) if the Seller shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement which would
give rise to the failure of a condition set forth in Sections 6.01 or 6.03
hereto, which breach cannot be or has not been cured within 15 days after the
giving of written notice by Buyer to the Seller.
SECTION 8.02 AMENDMENT.
Subject to applicable Law, this Agreement may be amended by the Parties at any
time prior to the Closing Date. This Agreement may not be amended except by an
instrument in writing signed by both Parties.
SECTION 8.03 EXTENSION; WAIVER.
At any time prior to the Closing Date, the Parties may (a) extend the time for
the performance of any of the obligations or other acts of the other Party, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any Contracts, documents, certificates or other instruments delivered
pursuant hereto, and (c) waive compliance with any of the Agreements or
conditions contained in this Agreement. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the Party to be bound
thereby. The failure of either Party to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01 NOTICES.
All notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses or sent by electronic transmission to the following facsimile numbers
(or at such other address or facsimile number for a Party as shall be specified
by like notice):
(a) If to the Buyer:
Xxxxxxx Acquisition Sub, Inc.
c/o Lincolnshire Management, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. X. Xxxxxxxxx, Vice President
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With a copy (which shall not constitute notice) to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(b) If to the Seller:
Xxxxxxx Sports Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx, President and
Chief Executive Officer
With a copy (which shall not constitute notice) to:
Varsity Spirit Corporation
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxx, President and
Chief Executive Officer
and:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
SECTION 9.02 HEADINGS.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 9.03 SEVERABILITY.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
described herein is not affected in any manner materially adverse to either
Party.
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Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions described herein are fulfilled to the extent possible.
SECTION 9.04 ENTIRE AGREEMENT.
This Agreement, together with the Confidentiality Agreement, constitute the
entire agreement of the Parties and supersede all prior agreements and
undertakings, both written and oral, between the Parties, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other Person any rights or remedies hereunder.
SECTION 9.05 ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either Party (whether by operation of Law or otherwise)
without the prior written consent of the other Party; PROVIDED, HOWEVER, that
the Buyer shall have the right to assign this Agreement without the prior
written consent of the Seller to a direct or indirect Subsidiary of the Buyer,
but no such assignment shall relieve the Buyer of its obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the Parties and their respective
successors and assigns.
SECTION 9.06 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure solely to the benefit of each
Party, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.07 MUTUAL DRAFTING.
Each Party has participated in the drafting of this Agreement, which each Party
acknowledges is the result of extensive negotiations between the Parties.
Consequently, this Agreement shall be interpreted without reference to any rule
or precept of law that states that any ambiguity in a document be construed
against the drafter.
SECTION 9.08 GOVERNING LAW; JURISDICTION.
This Agreement shall be governed by, and construed in accordance with, the Laws
of the State of New York, regardless of the Laws that might otherwise govern
under applicable principles of conflicts of law. Each Party hereto hereby (a)
irrevocably and unconditionally submits in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the general jurisdiction of the state and federal courts
in the State of New York, and appellate courts thereof, and (b) consents that
any action or proceeding may be brought in such courts and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same.
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SECTION 9.09 ARBITRATION
Any dispute arising out of or relating to the Satisfaction Certificate referred
to in Section 5.03(e), to the extent not resolved by the Parties in accordance
with such Section, shall be settled by arbitration in accordance with the rules
of the American Arbitration Association then in effect and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in New York, New York.
SECTION 9.10 ENFORCEMENT.
The Parties agree that irreparable damage could occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of New York or
in New York state court, this being in addition to any other remedy to which
they are entitled at law or in equity.
SECTION 9.11 COUNTERPARTS.
This Agreement may be executed and delivered in one or more counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
SECTION 9.12 SINGULAR AND PLURAL.
Any reference in this Agreement to the singular includes a reference to the
plural and vice versa.
ARTICLE X.
DEFINITIONS
For purposes of this Agreement, the following terms, and the singular and plural
thereof, shall have the meanings set forth below:
"Acquisition Agreement" means any acquisition, merger or similar
agreement entered into at any time prior to the date hereof by the Seller or the
Seller Subsidiaries and relating to the Business.
"Acquisition Proposal" means any proposal or offer to acquire, directly
or indirectly, any significant part of the Business or any capital stock of any
Seller Subsidiary, whether by sale of assets, tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transactions involving the Seller or any Seller
Subsidiary.
"Additional Assets" is defined in the Preamble to this Agreement.
"Affiliate" means: (a) with respect to an individual, any member of
such individual's family residing in the same household; (b) with respect to an
entity, any officer, director, stockholder, partner or investor of or in such
entity or of or in any Affiliate of such entity; and (c)
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with respect to a Person, any Person which directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with such Person or entity.
"After Tax Basis" is defined in Section 7.03(c).
"Agreement" is defined in the Preamble to this Agreement and shall
include the Exhibits and Seller Disclosure Letter to this Agreement.
"Allocation Schedule" is defined in Section 1.02(b) of this Agreement.
"Apparel Supply Agreement" means the Apparel Supply Agreement among the
Buyer, All American Sports Corporation and Varsity Spirit Corporation, in the
form of Exhibit F attached hereto.
"Applicable Tax Rate" means 34% with respect to the income generated by
Equilink Licensing Corporation and RHC Licensing Corporation and 38% with
respect to the income generated by the other Seller Subsidiaries.
"Assets" means the assets of the Seller Subsidiaries of every kind and
everything that is or may be available for the payment of liabilities (whether
inchoate, tangible or intangible), including, without limitation, any real and
personal property, and the Additional Assets.
"Audited Balance Sheet" is defined in Section 3.07(b) of this
Agreement.
"Audited Balance Sheet Date" means December 31, 2000.
"Audited Financial Statements" is defined in Section 3.07(b) of this
Agreement "Audited Statement of Cash Flows" is defined in Section 3.07(b) of
this Agreement.
"Audited Statement of Operations" is defined in Section 3.07(b) of this
Agreement.
"Basis" is defined in Section 1.02(b) of this Agreement.
"Benefit Plan" is defined in Section 3.15 of this Agreement.
"Business" is defined in the Preamble of this Agreement.
"Business Day" means a day other than a Saturday, a Sunday or any other
day on which commercial banks in the City of New York are authorized or
obligated to be closed.
"Buyer" is defined in the Preamble to this Agreement.
"Buyer Material Adverse Effect" means, with respect to the Buyer, any
event, change or effect that, individually or when taken together with any
related events, would be materially adverse to the business or operations of the
Buyer and its Subsidiaries, taken as a whole.
"Buyer's Accountant" means PricewaterhouseCoopers.
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"Buyer's Certification" is defined in Section 1.03(b) of this
Agreement.
"Cap" is defined in Section 7.03(a) of this Agreement.
"Change in Control" means the sale, transfer or other disposition, in
one or a series of related transactions, whether by merger, consolidation,
combination or otherwise, of more than 50% of the capital stock or assets of the
Seller or any Seller Subsidiary;
"Closing" means the consummation of the transactions contemplated by
Article I. Closing shall occur upon satisfaction (or waiver) of all conditions
precedent set forth in Article VI).
"Closing Consents" means any consents required (i) for the Seller, in
accordance with Schedule 5.05, to deliver to the Buyer the legal, valid and
binding endorsement of the insurance policies set forth in Section 3.17 of the
Seller Disclosure Letter, removing as beneficiaries under such policies the
Seller and the Remaining Subsidiaries, (ii) for the Seller to transfer and
assign its insured interest in the Insurance Policy to Buyer, (iii) under the
NFL Contract and related license agreements with the National Football League
and/or any member team thereof and/or National Football League Properties, Inc.
in connection with the Stock Purchase or the change of control of Xxxxxxx, Inc.,
and (iv) under each of the other agreements set forth in Section 3.06 of the
Seller Disclosure Letter, other than the agreements listed under the caption
entitled "Automotive".
"Closing Balance Sheet" is defined in Section 1.03(b) of this
Agreement.
"Closing Date" means the date of the Closing.
"Closing Funded Debt" is defined in Section 1.03(a) of this Agreement.
"Closing P/L Statement" is defined in Section 1.03(b) of this
Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and all regulations promulgated pursuant thereto or in connection
therewith.
"Confidentiality Agreement" means the Confidentiality Agreement, dated
September 5, 2000 among the Parties.
"Consolidated Debt" means, as of the Closing Date, the aggregate amount
of all indebtedness (including seasonal debt), including all principal,
interest, prepayment premiums, fees, expenses and other required payments with
respect to such indebtedness, for borrowed money for which the Seller
Subsidiaries or the Business is liable or for which the Seller Subsidiaries or
the Business is indirectly liable as a guarantor, as an account debtor in
respect of letters of credit or by virtue of having pledged Assets as collateral
therefor or otherwise, including without limitation, the Funded Debt and the
Revolver Loan giving rise to the Funded Debt.
"Contract" means any agreement or arrangement (whether written or oral)
between or among two or more Persons with respect to their relative rights
and/or obligations or with respect
63
to a thing done or to be done, including, without limitation, agreements
denominated as contracts, leases, promissory notes, covenants, easements, rights
of way, commitments, arrangements and understandings.
"Control", when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the term "Controlled" has the meaning correlative to the foregoing.
"Copyrights" is defined in Section 3.29(b) of this Agreement.
"Dated Invoices" is defined in Section 3.24 of this Agreement.
"Delaware Law" means the Delaware General Corporation Law.
"Disbursement" is defined in Section 5.20(a) of this Agreement.
"D&O Indemnified Party" is defined in Section 5.16(a) of this
Agreement.
"D&O Claim" is defined in Section 5.16(a) of this Agreement.
"Domain Names" is defined in Section 3.29 of this Agreement.
"Employees" means the employees of the Seller and the Seller
Subsidiaries who are employed in the operation of the Business.
"Environmental Laws" means any federal, state, foreign or local Law,
including the common law, relating to public health or safety, or pollution,
damage to or protection of the environment including, without limitation, Laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface), natural resources, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, generation, disposal, transport or handling of any Hazardous Material.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated pursuant thereto or in connection
therewith.
"ERISA Affiliate" is defined in Section 3.15(h) of this Agreement.
"Escrow Agent" means Proskauer Rose LLP.
"Escrow Agreement" means the Escrow Agreement to be executed on the
Closing Date among the Buyer, the Seller and the Escrow Agent, in the form of
Exhibit G attached hereto.
"Escrow Account" is defined in Section 1.03(f) of this Agreement.
"Escrow Amount" is defined in Section 1.03(f) of this Agreement.
"Escrow Deposit" is defined in Section 1.03(f) of this Agreement.
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"Estimated Closing Balance Sheet" is defined in Section 1.03(a) of this
Agreement.
"Estimated Funded Debt Calculation" is defined in Section 1.03(a) of
this Agreement.
"Estimated P/L Statement" is defined in Section 1.03(a) of this
Agreement.
"Excess Coverage" means two layers of excess coverage of $20,000,000
under the Insurance Policy covering claims arising from events occurring (i)
between January 1, 1985 and January 31, 1998 and (ii) between January 31, 1998
and January 31, 2005, respectively.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Assets" mean (i) the assets relating to the Seller's New York
office, (ii) the assets of the Xxxxxxx.xxx Internet Division and Xxxxxxx.xxx
Internet Division of the Seller, (iii) liabilities for insurance financing for
entities other than the Seller Subsidiaries, (iv) deferred financing costs, and
(v) the assets that are not related to the Business for which amounts are shown
on Exhibit H.
"Final Buyer's Certification" is defined in Section 1.03(d) of this
Agreement.
"Final Closing Balance Sheet" is defined in Section 1.03(d) of this
Agreement.
"Final Closing P/L Statement" is defined in Section 1.03(d) of this
Agreement.
"Financing Sources" means the lender, lenders and/or other providers of
debt and/or equity financing to the Buyer in connection with the Stock Purchase.
"Finite Risk Coverage" means the finite risk structured excess layer of
$2,250,000 in excess of a totally self-insured retention of $750,000 under the
Insurance Policy.
"Funded Debt" means the outstanding balance on the Seller's Revolver
Loan, plus the outstanding balance of the Intercompany Debt in excess of
$32,731,000, less the amount of Excluded Assets, less the amount of cash used
for Profit Adjustment items on a cumulative basis from October 31, 2000, plus
interest computed at the rate 8% per annum from October 31, 2000 but excluding
interest on the Target Amount for the period after December 31, 2000, as more
fully set forth on Exhibit H.
"Funded Debt Excess" is defined in Section 1.03(f) of this Agreement.
"GAAP" means United States generally accepted accounting principles
consistently applied in accordance with past practices.
"Governmental Entities" (including the term "Governmental") means any
governmental, quasi-governmental or regulatory authority, whether domestic or
foreign.
"Hazardous Material" means any substance, chemical, waste, material or
pollutant that is defined in or regulated under any Environmental Law,
including, without limitation: (i) any
65
"hazardous substance" as now defined pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.9601(14); (ii) any
"pollutant or contaminant" as defined in 42 U.S.C. ss.9601(33); (iii) any
material now defined as "hazardous waste" pursuant to 40 C.F.R. Part 261; (iv)
any petroleum or petroleum-derived products, including crude oil and any
fraction thereof; (v) natural synthetic gas usable for fuel; (vi) any "hazardous
chemical" as defined pursuant to 29 C.F.R. Part 1910; and (vii) any asbestos,
polychlorinated biphenyl ("PCB"), urea formaldehyde, lead-based plant, radon,
radium, or isomer of dioxin, or any material or thing containing or composed of
such substance or substances.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Income Taxes" mean any Taxes that are measured by gross or net income,
or a portion thereof (including, without limitation, excess profits Taxes,
minimum Taxes, Taxes on or measured by items of Tax preference, alternative
minimum Taxes, withholding Taxes, capital gain Taxes, accumulated earnings
Taxes, personal holding company Taxes and Taxes such as superfund Taxes with
respect to environmental projects, including any Taxes imposed by Section 59A of
the Code), gross or net receipts, or are in the nature of capital stock Taxes,
capital adequacy or reserves, net worth Taxes, franchise, occupation or conduct
of business Taxes, license Taxes, and other similar Taxes (other than Taxes in
the nature of sales, use, ad valorem property or rental Taxes).
"Indemnified Buyers" is defined in Section 7.02(a) of this Agreement.
"Indenture" means the Indenture filed on Form S-4 with the SEC on
August 7, 1997 relating to the 10-1/2% Senior Notes due 2007 of the Seller.
"Independent Auditor" means KPMG Peat Marwick.
"Insurance Policy" means the product liability insurance policy between
the Seller and Illinois National Insurance Company, a wholly owned subsidiary of
American International Group, Inc.
"Intellectual Property" means (i) registered and unregistered
trademarks, service marks, brand names, trade dress, certification marks, and
logos, and the goodwill of the business associated therewith; (ii) registrations
or reservations of domain names with any one or more domain name registries;
(iii) registered and unregistered copyright; (iv) know-how, inventions,
processes, formulae, discoveries and ideas, whether patentable or not in any
jurisdiction; (v) patent rights, including registered patents, patents pending
and all divisions, re-issues, re-examinations and extensions thereof; (vi) trade
secrets and confidential information; and (vii) computer programs (including all
source codes); and (viii) any and all other intellectual property and
proprietary rights.
"Intercompany Debt" means (i) funds borrowed on the revolving line of
credit with Bank of America used directly by, or for use by, the Seller and the
Remaining Subsidiaries, (ii) repayments of the revolver debt by the Seller or
the Remaining Subsidiaries, (iii) funds expended, or received, by Xxxxxxx, Inc.
on behalf of the Seller or the Remaining Subsidiaries which caused Xxxxxxx, Inc.
to borrow, or repay, amounts from, or to, the revolver debt, and (iv)
66
any other amounts due to the Seller or any of the Remaining Subsidiaries from
the Seller Subsidiaries or from the Seller or any of the Remaining Subsidiaries
to the Seller Subsidiaries.
"Inventories" means all inventory, merchandise, finished goods, raw
materials, work-in-process, packaging, supplies and similar personal property
owned by any Seller Subsidiary and held or stored by or for any Seller
Subsidiary or in transit in connection therewith, for use in the operation of
the Business as of a particular date, whether or not recorded on the books or
financial records of the Seller Subsidiaries, and any prepaid deposits for any
of the same at such date.
"Know-How" means know-how, inventions, processes, formulae, discoveries
and trade secrets owned and/or used in the operation of the Business by the
Seller and the Seller Subsidiaries.
"Knowledge" will be deemed to be present with respect to a Party when
the matter in question is known, or upon reasonable investigation, should have
been known, to the officer, director or employee primarily responsible for the
matter in question, except as set forth in Section 4.09.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, writs, injunctions,
judgments and decrees applicable to the specified Person and to the businesses
and assets thereof (including, without limitation, Laws relating to the
protection of classified information; the sale, leasing, ownership or management
of real property; employment practices, terms and conditions, and wages and
hours; building standards, land use and zoning; safety, health and fire
prevention; and environmental protection, including Environmental Laws).
"Leased Real Property" is defined in Section 3.25 of this Agreement.
"Lease/Sublease Agreement" is defined in Section 3.25 of this
Agreement.
"License" means any franchise, authorization, license, permit,
easement, variance, exemption, certificate or approval of any Governmental
Entity.
"Licensed IP" is defined in Section 3.29(a) of this Agreement.
"Licensed IP Agreements" is defined in Section 3.29 of this Agreement.
"Lien" means any mortgage, lien, pledge, security interest, deed of
trust, encroachment, reservation, order, decree, judgment, charge or claim of
any kind.
"Losses" is defined in Section 7.02(a) of this Agreement.
"MacMarks" is defined in Section 3.29(g) of this Agreement.
"Managerial Employee" means the following: (i) an officer of the Seller
or the Seller Subsidiaries employed in the operation of the Business, (ii)
Xxxxxxx Xxxxxxx and Xxxxxxxx
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Simon, or (iii) an Employee whose annual compensation exceeds $100,000, but
shall specifically not include Xxxxx Xxxxxxxxxx, Xxxxx Xxxxx and Xxxxxxx
Xxxxxxxx.
"Marks" is defined in Section 3.29(c) of this Agreement.
"NFL Contract" means the NFL Promotional Rights Agreement dated June 1,
1990 between Xxxxxxx, Inc. and National Football League Properties, Inc., as
amended and supplemented to date.
"Non-Competition Agreement" is defined in Section 5.06 of this
Agreement.
"Non-dated Invoices" is defined in Section 3.24 of this Agreement.
"Non-Segregated Accounting Period Pre-Tax Income" is defined in Section
5.03(e) of this Agreement.
"Non-Segregated Accounting Period Statement" is defined in Section
5.03(e) of this Agreement.
"Non-Segregated Accounting Period Tax" is defined in Section 5.03(e) of
this Agreement.
"Offer" shall mean any written proposal to acquire, directly or
indirectly, whether by merger, consolidation, combination or otherwise, more
than a majority of the shares then outstanding, or all or substantially all of
the assets, of the Seller, the Seller Subsidiaries and the Business, as the case
may be.
"Ordinary Course of Business" means ordinary course of business of the
Seller and the Seller Subsidiaries with respect to the Business consistent with
past practices.
"Owned Real Property" is defined in Section 3.25 of this Agreement.
"Party" and "Parties" are defined in the Preamble to this Agreement.
"Patents" is defined in Section 3.29(b) of this Agreement.
"Permitted Liens" means (i) easements, restrictions, covenants or
rights of way currently of record against any of the Real Property which do not
interfere with, or increase the cost of operation of, the Business in any
material respect, (ii) minor irregularities of title which do not interfere
with, or increase the cost of operation of, the Business in any material
respect, (iii) Liens for Taxes not yet due and payable, or for Taxes being
contested in good faith, (iv) warehouse and materialmen's liens and (v) other
Liens similar to clauses (i) through (iv); PROVIDED, HOWEVER, that any or all of
the foregoing do not materially affect the utility or value of the Assets or
other matters to which they relate.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or other
entity, or a Governmental Entity.
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"Pre Closing Period" means all taxable periods of a Seller Subsidiary
on or prior to the Closing Date, including the taxable period ending as of the
close of business on the Closing Date.
"Pre-Tax Income" is defined in Section 5.03(e)(i) of this Agreement.
"Profit Adjustments" mean adjustments to: (i) exclude profits and
losses of the Xxxxxxx.xxx Internet Division and Xxxxxxx.xxx Internet Division;
(ii) exclude the reversal of the Seller's 1998 restructuring accrual; (iii)
exclude interest expenses; (iv) exclude management fees and general expense
allocations from the Seller or the Remaining Subsidiaries; (v) include the
expenses for Xxxxxxxx Xxxxx'x salary and fringe benefits, as more fully set
forth on Exhibit H; and (vi) exclude other expenses recorded on the books and
records of the Seller Subsidiaries that were incurred on behalf of the Seller
and the Remaining Subsidiaries.
"Property" is defined in Section 3.13 of this Agreement.
"Purchase Price" is defined in Section 1.02 of this Agreement.
"Real Property" and "Real Property Leases" are defined in Section 3.23
of this Agreement.
"Receivables" means any and all accounts receivable, notes and other
amounts receivable by any Seller Subsidiary or the Business from third parties
(including, without limitation, customers) arising from the conduct of the
Business before the Closing Date.
"Red Fox" is defined in Section 5.15(a) of this Agreement.
"Remaining Business" means all business of the Seller and the Remaining
Subsidiaries, including, without limitation, the business of the design and
distribution of cheerleading and dance team uniforms and the operation of
cheerleading and dance team camps and competitions.
"Remaining Claims" shall mean any and all damage, loss, claim, expense,
deficiency or cost arising from any and all incidences related to the Remaining
Business, including without limitation, any pending or threatened or inchoate
claims, actions, suits or proceedings by any employee, Governmental Entity or
third party arising against the Buyer or the Seller Subsidiaries with respect to
the Remaining Business.
"Remaining Subsidiaries" means all subsidiaries of the Seller other
than the Seller Subsidiaries, including, without limitation, Varsity Spirit
Corporation, Varsity USA Inc., Varsity Spirit Fashions & Supplies, Inc.,
International Logos, Inc., Varsity/Intropa Tours, Inc. and Xxxxxxx.xxx
Corporation.
"Revolver Loan" means the loan made pursuant to that certain Amended
and Restated Loan, Guarantee and Security Agreement dated as of April 20, 1999,
as amended, among the Seller, the Bank of America National Trust and Savings
Association and the other parties listed therein.
"Xxxxxxx Competitive Business" is defined in Section 5.15(a) of this
Agreement.
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"Xxxxxxx.xxx Internet Division" means the xxxxxxx.xxx web site and all
hardware, software, documentation, Intellectual Property and agreements related
to the operation of such web site including, without limitation, Internet
servers and lease and service agreements thereof, all source codes, objects
codes, computer programs, CD-Roms, protocols, schemes, drawings, e-mail and
Internet access software, manuals, Internet service provider agreements,
Intellectual property license agreements, agreements related to advertising,
agreements related to the posting of links of other Internet users, and all
other business agreements related to such web site.
"Xxxxxxx Products" is defined in Section 5.15(a) of this Agreement.
"Sale" is defined in Section 7.01(a) of this Agreement.
"Satisfaction Certificate" is defined in Section 5.03(e)(ii) of this
Agreement.
"SEC" means the Securities and Exchange Commission.
"Section 338 Forms" is defined in Section 5.03 of the Agreement.
"Section 338(h)(10) Elections" is defined in Section 5.03 of the
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Reports" is defined in Section 5.03(c) of this Agreement.
"Segregated Accounting Period Pre-Tax Income" is defined in Section
5.03(e) of this Agreement.
"Segregated Accounting Period Statement" is defined in Section 5.03(e)
of this Agreement.
"Segregated Accounting Period Tax" is defined in Section 5.03(e) of
this Agreement.
"Seller" is defined in the Preamble to this Agreement.
"Seller Contracts" means the following Contracts of the Seller
Subsidiaries or otherwise relating to the Business:
(i) (a) each Contract made in the Ordinary Course of Business
with any supplier for the purchase of Inventory for the retail division
of Xxxxxxx, Inc. under the terms of which the Seller Subsidiaries (A)
have paid or otherwise given consideration or are reasonably likely to
pay or otherwise give consideration of more than $75,000 in the
aggregate during the 12 months ended December 31, 2001, (B) are
reasonably likely to pay or otherwise give consideration of more than
$75,000 in the aggregate over the remaining term of such Contract or
(C) cannot cancel such Contract without penalty or further payment and
without more than 30 days notice; (b) each Contract made in the
Ordinary Course of Business with any supplier for the purchase of
Inventory, spare parts, other materials or personal property with any
supplier, for the furnishing of services to
70
the Seller Subsidiaries or otherwise related to the Business (and not
required to be set forth in (a) above), under the terms of which the
Seller Subsidiaries (A) have paid or otherwise given consideration or
are reasonably likely to pay or otherwise give consideration of more
than $50,000 in the aggregate during the 12 months ended December 31,
2001, (B) are reasonably likely to pay or otherwise give consideration
of more than $50,000 in the aggregate over the remaining term of such
Contract or (C) cannot cancel such Contract without penalty or further
payment and without more than 30 days notice; (c) each Contract which
would be listed in (a) above but is entered into other than in the
Ordinary Course of Business; and (d) each Contract which would be
listed in (b) above but is entered into other than in the Ordinary
Course of Business.
(ii) (a) each Contract made in the Ordinary Course of Business
for the sale of Inventory by the retail division of Xxxxxxx, Inc. which
(A) has involved consideration or is reasonably likely to involve
consideration of more than $75,000 in the aggregate during the 12
months ended December 31, 2001, (B) is reasonably likely to involve
consideration of more than $75,000 in the aggregate over the remaining
term of such Contract or (C) cannot be canceled by the Seller
Subsidiaries without penalty or further payment and without more than
30 days notice; (b) each Contract made in the Ordinary Course of
Business for the sale of Inventory or other personal property or for
the furnishing of services by the Seller Subsidiaries or the Business
(and not required to be set forth in (a) above) which (A) has involved
or is reasonably likely to involve consideration of more than $75,000
in the aggregate during the 12 months ended December 31, 2001, (B) is
reasonably likely to involve consideration of more than $75,000 in the
aggregate over the remaining term of such Contract or (C) cannot be
canceled by the Seller Subsidiaries without penalty or further payment
and without more than 30 days notice; (c) each Contract which would be
listed in (a) above but is entered into other than in the Ordinary
Course of Business, and (d) each Contract which would be listed in (b)
above but is entered into other than in the Ordinary Course of
Business.
(iii) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising Contracts, in each case which
provides for average annual payments in excess of $25,000;
(iv) all management Contracts and Contracts with independent
contractors or consultants (or similar arrangements) which may give
rise to obligations or liabilities exceeding $25,000;
(v) all Contracts with any Governmental Entity, other than
Contracts for the supply of football and baseball helmets, shoulder
pads, practice wear, uniforms and other protective equipment in the
Ordinary Course of Business;
(vi) any Contract for the employment of any individual by or
for the Seller Subsidiaries or the Business on a full-time, consulting
or other basis which provides for aggregate payment in excess of
$50,000;
71
(vii) all Contracts that limit or purport to limit the ability
of any Seller Subsidiary, the Business or any Employee to compete in
any line of business or with any Person or in any geographic area or
during any period of time;
(viii) all Contracts between or among a Seller Subsidiary and
an Affiliate of such Seller Subsidiary, including the Seller (for
purposes of this definition, a shareholder of the Seller who owns less
than 5% of the capital stock of the Seller and who is not otherwise an
Affiliate shall not be deemed an Affiliate);
(ix) all Contracts providing for benefits under any Benefit
Plan;
(x) all Contracts relating to indebtedness of the Seller
Subsidiaries which provide for payments exceeding $50,000 in the
aggregate or which provide for acceleration in the due date of any
payments upon a Change in Control;
(xi) any Contract with an Employee which involves a payment or
other obligation upon a Change in Control;
(xii) all leases and subleases for Tangible Personal Property
and any and all material ancillary documents pertaining thereto which
may give rise to obligations or liabilities exceeding $50,000;
(xiii) the NFL Contract and all licenses to permit the Seller
Subsidiaries to supply merchandise or display trademarks which may give
rise to obligations or liabilities exceeding $50,000;
(xiv) [intentionally omitted];
(xv) any joint venture, partnership or development agreement;
(xvi) any stock redemption, purchase agreements or other
agreements affecting or relating to the capital stock of any of the
Seller Subsidiaries;
(xvii) any Acquisition Agreement; and
(xviii) all other Contracts, whether or not made in the
Ordinary Course of Business, which are material to either the Seller
Subsidiaries or the conduct of the Business or its Assets or the
absence of which would be reasonably expected to have a Seller Material
Adverse Effect, including any Contract that may result in the payment
or receipt of more than $100,000.
"Seller Disclosure Letter" is defined in the preamble of Article III of
this Agreement.
"Seller IP" is defined in Section 3.29(a) of this Agreement.
"Seller Material Adverse Effect" means any events, changes or effects
that, individually or when taken together with any related events, result in a
payment by the Seller, the Seller Subsidiaries or the Business, individually or
in the aggregate, in excess of the applicable
72
thresholds set forth in the next four sentences or otherwise are materially
adverse to the business, Assets, operations, condition (financial or otherwise),
results of operations or prospects of the Business or the business operations of
the Seller Subsidiaries, taken as a whole, including, without limitation, a
breach of the Apparel Supply Agreement. For purposes of this Agreement, as it
relates to representations and warranties made as of the date hereof, the dollar
thresholds for a Seller Material Adverse Effect on the date hereof shall be
$100,000 individually or $250,000 in the aggregate. For purposes of this
Agreement as it relates to the conditions to closing set forth in Sections
6.02(a)(iii) and 6.02(e), the dollar threshold for a Seller Material Adverse
Effect shall be $500,000 individually or in the aggregate. For purposes of this
Agreement as it relates to the determination of the amount of indemnification
obligations of the Seller which fill the Basket, the dollar thresholds for a
Seller Material Adverse Effect shall be $50,000 individually. For purposes of
this Agreement as it relates to the determination of the amount of
indemnification obligations of the Seller if the Basket is filled, the dollar
threshold for a Seller Material Adverse Effect shall be $25,000 individually.
"Seller's Accountant" means Xxxxx Xxxxxxxx.
"Seller SEC Reports" is defined in Section 3.07(a) of this Agreement.
"Seller Subsidiaries" is defined in the Preamble of this Agreement.
"Seller Subsidiary Consolidated Financial Statements" is defined in
Section 3.07(b) of this Agreement.
"Seller Tax Returns" means all Tax Returns required to be filed by the
Seller or any Seller Subsidiary with respect to the Business.
"Seller Stockholders" means the stockholders of the Seller.
"Silver Oak Guaranty" means the guaranty of certain obligations of the
Seller Subsidiaries in connection with the Note Purchase Agreement dated October
30, 1996 between the Seller and Silver Oak Capital, L.L.C.
"Special Inventory" means sports collectible products for which the
inventory turnover rate, being the ratio of cost of products sold in calendar
year 2000 to the amount of such products on hand as of December 31, 2000, as
reflected on the Audited Balance Sheet and Audited Statement of Operations, was
less than a ratio of 0.75:1.
"Straddle Period" means all taxable periods of a Seller Subsidiary that
begin before the Closing Date and end after the Closing Date which are
attributable to the portion of such period ending on, and which includes, the
Closing Date.
"Stock Purchase" is defined in the Preamble of this Agreement.
"Subsidiary" means a corporation, partnership, joint venture or other
entity of which any Person owns, directly or indirectly, at least fifty percent
(50%) of the outstanding securities or other interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body or otherwise exercise Control of such entity.
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"Subsidiary Guaranty" has the meaning prescribed for such term in the
Indenture.
"Subsidiary Stock" is defined in Section 1.01 of this Agreement.
"Superior Offer" shall mean an Offer on terms that the Board of
Directors of the Seller determines in good faith to be more favorable to the
Seller and its stockholders then the transaction contemplated herein based on
written advice of the Seller's financial advisor that the value of the
consideration provided for in such Offer is superior to the value of the
consideration provided for under this Agreement for which financing, to the
extent required, is then committed.
"Surviving Claims" shall mean any and all damage, loss, claim, expense,
deficiency or cost arising from any and all incidences related to the Business,
including without limitation, any pending or threatened or inchoate claims,
actions, suits or proceedings by any Employee, Governmental Entity or third
party arising against the Seller Subsidiaries or the Seller, with respect to the
Business.
"Tangible Personal Property" means all equipment, machinery, tools,
tooling, dies, molds, spare parts, supplies, furniture, fixtures, personalty,
vehicles and other tangible personal property used or necessary in the conduct
of the Business or owned or leased by any Seller Subsidiary, whether or not
carried as an asset on the books or other financial records of the Seller
Subsidiaries.
"Target Amount" is defined in Section 1.03(f) of this Agreement.
"Target Period" is defined in Section 1.03(a) of this Agreement.
"Taxes" (including the terms "Tax" and "Taxing") means all federal,
state, local and foreign taxes (including, without limitation, income, profit,
franchise, sales, use, real property, personal property, ad valorem, excise,
employment, social security and wage withholding taxes) and installments of
estimated taxes, assessments, deficiencies, levies, imports, duties, License
fees, registration fees, withholdings, or other similar charges of every kind,
character or description imposed by any Governmental Entity, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"Tax Returns" means all federal, state, local, foreign and other
applicable returns, declarations, reports and information statements with
respect to Taxes required to be filed with the United States Internal Revenue
Service, and its successors, or any other Governmental Entity or Tax authority
or agency, including, without limitation, consolidated, combined and unitary Tax
returns.
"TM Registrations" is defined in Section 3.29 of this Agreement.
"Transaction Documents" means this Agreement, the Schedules and
Exhibits to this Agreement and any certificate delivered by or on behalf of the
Buyer or the Seller pursuant to this Agreement.
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"Treasury Regulations" or "Regulations" shall mean the regulations,
including any temporary or proposed regulations, promulgated under the Code, as
such Treasury Regulations may be amended from time to time.
"Uniforms" is defined in the preamble to the Apparel Supply Agreement.
"Unregistered Marks" is defined in Section 3.29 of this Agreement.
"Varsity Competitive Business" is defined in Section 5.15(b) of this
Agreement.
"Xxxxxxx.xxx Internet Division" means the xxxxxxx.xxx web site and all
hardware, software, documentation, Intellectual Property and agreements related
to the operation of such web site including, without limitation, Internet
servers and lease and service agreements thereof, all source codes, objects
codes, computer programs, CD-Roms, protocols, schemes, drawings, e-mail and
Internet access software, manuals, Internet service provider agreements,
Intellectual property license agreements, agreements related to advertising,
agreements related to the posting of links of other Internet users, and all
other business agreements related to such web site.
"Varsity Products" is defined in Section 5.15(b) of this Agreement.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed and delivered, or have
caused this Agreement to be duly executed and delivered, as of the date first
set forth herein above.
XXXXXXX ACQUISITION SUB, INC.
By: /s/ W. XXXXXX XXXX
-----------------------------------------
Name: W. Xxxxxx Xxxx
Title: Vice President and Secretary
XXXXXXX SPORTS INC.
By: /s/ XXXXX XXXXX
------------------------------------------
Name: Xxxxx Xxxxx
Title: President and Chief Executive Officer
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