EXHIBIT 10.54
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ASSET PURCHASE AGREEMENT
BETWEEN
THE TOP-FLITE GOLF COMPANY
(f/k/a SPALDING SPORTS WORLDWIDE, INC.)
AND
CALLAWAY GOLF COMPANY
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DATED AS OF JUNE 30, 2003
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TABLE OF CONTENTS
Page
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1. Purchase and Sale.............................................................................. 1
1.1 Assets to Be Transferred.............................................................. 1
1.2 Excluded Assets....................................................................... 2
1.3 Assumed Liabilities................................................................... 4
1.4 Excluded Liabilities.................................................................. 4
1.5 Purchase Price; Allocation of Purchase Price.......................................... 4
1.6 Assigned Inventory Adjustment......................................................... 6
1.7 Accounts Receivable................................................................... 8
1.8 Closing............................................................................... 12
1.9 Closing Deliveries by the Seller...................................................... 12
1.10 Closing Deliveries by the Purchaser................................................... 13
2. Representations and Warranties of the Seller................................................... 13
2.1 Due Incorporation and Authority....................................................... 13
2.2 Subsidiaries.......................................................................... 14
2.3 No Conflicts.......................................................................... 15
2.4 Organizational Documents.............................................................. 16
2.5 Financial Statements.................................................................. 16
2.6 No Material Adverse Change............................................................ 17
2.7 Tax Matters........................................................................... 17
2.8 Compliance with Laws.................................................................. 17
2.9 Permits............................................................................... 18
2.10 Environmental Laws.................................................................... 18
2.11 Contracts............................................................................. 19
2.12 Property.............................................................................. 21
2.13 Real Property......................................................................... 22
2.14 Intellectual Property................................................................. 24
2.15 Litigation............................................................................ 25
2.16 Brokers............................................................................... 25
2.17 Employee Benefit Plans................................................................ 25
2.18 Labor Matters......................................................................... 27
2.19 Insurance............................................................................. 28
2.20 Suppliers and Customers............................................................... 28
2.21 Interested Party Transactions......................................................... 28
2.22 Off Balance Sheet Liabilities......................................................... 28
2.23 All Assets............................................................................ 29
2.24 Inventory............................................................................. 29
2.25 Receivables........................................................................... 29
2.26 DISCLAIMER............................................................................ 29
3. Representations and Warranties of the Purchaser................................................ 30
3.1 Due Incorporation and Authority....................................................... 30
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3.2 No Conflicts.......................................................................... 30
3.3 Brokers............................................................................... 31
3.4 Financing............................................................................. 31
3.5 Litigation............................................................................ 31
3.6 Independent Investigation............................................................. 31
4. Covenants and Agreements....................................................................... 31
4.1 Conduct of Business................................................................... 31
4.2 Confidentiality....................................................................... 34
4.3 Expenses.............................................................................. 35
4.4 Public Announcements.................................................................. 35
4.5 Access to Information................................................................. 35
4.6 Regulatory and Other Authorizations; Consents......................................... 36
4.7 Further Action; Additional Assignments of Intellectual Property....................... 36
4.8 Employee Matters...................................................................... 37
4.9 Bankruptcy Court Approval............................................................. 39
4.10 Subsidiary Compliance................................................................. 41
4.11 Books and Records..................................................................... 41
4.12 Directors, Officers and Affiliates.................................................... 41
4.13 Tax Matters........................................................................... 42
4.14 Cure Costs............................................................................ 43
4.15 Notification of Certain Matters....................................................... 43
4.16 Title Insurance....................................................................... 43
4.17 Name Change........................................................................... 44
4.18 Performance by the Foreign Subsidiaries............................................... 44
5. Conditions Precedent to the Obligation of the Purchaser........................................ 44
5.1 Representations and Warranties; Covenants............................................. 44
5.2 No Order.............................................................................. 45
5.3 HSR Act Filing........................................................................ 45
5.4 Bankruptcy Filing..................................................................... 45
5.5 Consents.............................................................................. 45
5.6 Closing Documents..................................................................... 45
5.7 Releases.............................................................................. 45
6. Conditions Precedent to the Obligation of the Seller to Close.................................. 45
6.1 Representations and Warranties; Covenants............................................. 45
6.2 No Order.............................................................................. 46
6.3 HSR Act Filing........................................................................ 46
6.4 Sale Approval Order................................................................... 46
6.5 Closing Documents..................................................................... 46
7. Termination of Agreement....................................................................... 46
7.1 Termination Prior to Closing; Break-Up Fee............................................ 46
7.2 Termination Payments.................................................................. 47
7.3 Survival After Termination............................................................ 48
7.4 Waiver................................................................................ 48
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8. Indemnification................................................................................ 49
8.1 Indemnification by the Seller......................................................... 49
8.2 Seller Limitations.................................................................... 49
8.3 Indemnification by the Purchaser...................................................... 50
8.4 Purchaser's Limitations............................................................... 50
8.5 Notice and Procedure.................................................................. 51
8.6 Remedies.............................................................................. 53
8.7 Survival of Representations; Indemnity Periods........................................ 54
9. Miscellaneous.................................................................................. 54
9.1 Certain Definitions................................................................... 54
9.2 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial..................... 64
9.3 Notices............................................................................... 65
9.4 Entire Agreement...................................................................... 66
9.5 Waivers and Amendments................................................................ 66
9.6 Governing Law......................................................................... 66
9.7 Binding Effect; Assignment............................................................ 66
9.8 Usage................................................................................. 66
9.9 Articles and Sections................................................................. 66
9.10 Interpretation........................................................................ 66
9.11 Severability of Provisions............................................................ 67
9.12 Counterparts.......................................................................... 67
9.13 No Third Party Beneficiaries.......................................................... 67
9.14 Bulk Transfer Law..................................................................... 67
SCHEDULES
1 Foreign Jurisdiction Disclosure
1.1(a) Subsidiary Assets
1.1(b) Assumed Contracts
1.2(b) Excluded Inventory
1.2(c) Excluded Equipment
1.2(d) Excluded Permits
1.2(e) Excluded Contracts
1.2(f) Excluded Intellectual Property
1.2(g) Excluded Information
1.2(h) Excluded Securities
1.5(e) Tour Contracts
1.5(f) Signing Bonuses
1.6(a) Assigned Inventory
1.7(a) Prioritization of Current Receivables
2.2 Subsidiaries
2.2(d) Ownership Interests in Subsidiaries
2.3(b) Seller Consents and Notices
2.5 Sporting Goods Financials
2.7 Tax Matters
2.10 Environmental Matters
2.11(a) Material Contracts
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2.11(b) Material Contract Defaults
2.12 Liens
2.13(a) Owned Real Property
2.13(b) Leased Real Property
2.13(c) Entire Premises
2.13(d) Space Leases
2.13(e) Improvements
2.13(f) Certificates of Occupancy
2.13(j) Formerly Owned and Leased Real Property
2.14 Intellectual Property
2.15 Litigation
2.17(a) Benefit Plans
2.17(b) Title IV Plan
2.17(d) Welfare Benefit Coverage
2.17(i) Severance and Bonus
2.18 Labor Matters
2.19 Insurance Policies
2.20 Suppliers and Customers
2.21 Interested Party Transactions
2.22 Off Balance Sheet Liabilities
2.23 Asset Sufficiency
4.1(b) Conduct of Business
4.9(a) Bidding Procedures
4.16 Title Insurance
5.5 Consents Required for Closing
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of ▇▇▇▇ of Sale
Exhibit C Form of Bidding Procedures Order
Exhibit D Form of Sale Approval Order
Exhibit E Form of Indemnity Escrow Agreement
Exhibit F Form of Current Receivables Escrow Agreement
Exhibit G Forms of Assignment and Assumption for Intangible Property
Exhibit H Forms of Deed
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ASSET PURCHASE AGREEMENT, dated as of June 30, 2003 (the
"Agreement"), by and among The Top-Flite Golf Company (f/k/a Spalding Sports
Worldwide, Inc.), a Delaware corporation (the "Seller"), and Callaway Golf
Company or its permitted assign (the "Purchaser"). Other capitalized terms used
herein shall have the respective meanings ascribed to them in Section 9.1(a).
W I T N E S S E T H:
WHEREAS, the Seller and its Subsidiaries, among other things,
engage in the business of manufacturing, marketing, distributing, and selling
golf balls and golf related goods, as more specifically set forth herein;
WHEREAS, the Purchaser desires to purchase certain assets of
the Seller and to assume certain liabilities of the Seller, and the Seller
desires to sell such assets to the Purchaser and to assign such liabilities to
the Purchaser, all on the terms and conditions set forth in this Agreement and
in accordance with Sections 105, 363 and 365 of Title 11 of the United States
Code (as in effect for cases filed on the Petition Date, the "Bankruptcy Code")
and other applicable provisions of the Bankruptcy Code (the "Acquisition");
WHEREAS, on the date hereof (the "Petition Date"), immediately
prior to the execution and delivery of this Agreement, the Seller and Lisco
Sports, Inc. have filed a voluntary bankruptcy petition (the "Bankruptcy Case")
with the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court");
WHEREAS, it is contemplated that the Assets will be sold
pursuant to an order of the Bankruptcy Court approving such sale under Section
363 of the Bankruptcy Code, and such sale will include the assumption by the
Purchaser of the Assumed Contracts under Section 365 of the Bankruptcy Code, and
the terms and conditions of this Agreement; and
WHEREAS, the Seller desires to sell the Assets and to assign
the Assumed Contracts to further its reorganization efforts and to enable it to
consummate a plan of reorganization in the Bankruptcy Case.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the parties hereto agree as follows:
1. Purchase and Sale.
1.1 Assets to Be Transferred. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Seller shall sell,
assign, transfer, convey and deliver (or cause to be transferred, sold,
assigned, conveyed and delivered) to the Purchaser or its designated permitted
assigns, and the Purchaser or its designated permitted assigns shall purchase
and assume from the Seller, all of the Seller's right, title and interest in and
to all of the Seller's properties, assets, and rights of every nature, kind
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and description, tangible and intangible (including goodwill) used by the Seller
in the conduct of the Business, wherever such properties, assets and rights are
located, whether real, personal or mixed, whether accrued, contingent or
otherwise, other than the Excluded Assets (such rights, title and interests in
and to all such assets, properties and claims being collectively referred to
herein as the "Assets"), in accordance with, and with all of the protections
afforded by, Sections 363 and 365 of the Bankruptcy Code. Subject to, and only
as expressly limited by, Section 1.2, the Assets shall include all of the
Seller's right, title, and interest in and to the assets, properties, rights and
claims described in clauses (a) through (m) below:
(a) the Subsidiary Assets;
(b) all Assumed Contracts;
(c) all Intellectual Property;
(d) all Assigned Current Receivables;
(e) all Assigned Inventory;
(f) all Equipment;
(g) all Prepaid Expenses;
(h) all Books and Records;
(i) all Permits;
(j) all of the Assigned Sporting Goods Rights;
(k) all telephone numbers, addresses (including
electronic mail addresses) used by the Seller or the Subsidiaries primarily in
connection with the operation or conduct of the Business;
(l) all goodwill arising primarily in connection with the
ownership, operation or conduct of the Assets and the Business; and
(m) all other property and assets of the Business,
moveable and immoveable, real and personal, tangible or intangible, of every
kind and description and wheresoever situated, including the full benefit of all
representations, warranties, guarantees, indemnities, undertakings,
certificates, covenants, agreements and all security therefor received by the
Seller on the purchase or other acquisition of any part of the Assets.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained in this Agreement, the following assets, properties and rights
(collectively, the "Excluded Assets") shall not be included in the Assets and
shall be retained by the Seller:
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(a) any cash, bank deposits and cash equivalents;
(b) all Excluded Inventory;
(c) all Excluded Equipment;
(d) all Excluded Permits;
(e) all Excluded Contracts;
(f) all Excluded Intellectual Property;
(g) the Excluded Information;
(h) the Excluded Securities;
(i) all Retained Receivables and all causes of action
relating or pertaining to such Retained Receivables;
(j) any insurance proceeds or other rights of the Seller
under insurance policies of the Seller with respect to Claims made in respect
of, and to the extent attributable to, the Business;
(k) all rights under all warranties, representations, and
guarantees made by suppliers, manufacturers and contractors primarily in
connection with the ownership, operation or conduct of the Excluded Operations;
(l) all telephone numbers, addresses (including
electronic mail addresses) used primarily in connection with the operation or
conduct of the Excluded Operations;
(m) all goodwill arising primarily in connection with the
ownership, operation or conduct of the Excluded Operations;
(n) all of the Excluded ETONIC Rights and Excluded
Sporting Goods Rights;
(o) any rights to refunds, rebates, abatements or other
refunds of any Taxes with respect to any Subsidiary, the Assets or the Business;
(p) the Subsidiary Stock; and
(q) all of the rights and claims of the Seller for
avoidance actions available to the Seller under the Bankruptcy Code, of whatever
kind or nature, as set forth in Sections 544 through 551 and any other
applicable provisions of the Bankruptcy Code, and any related claims and actions
arising under such sections by operation of law or otherwise, including any and
all proceeds of the foregoing.
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1.3 Assumed Liabilities. At the Closing, the Purchaser shall
assume no liability or obligation of the Seller except with respect to the
Liabilities expressly set forth in this Section 1.3 (the "Assumed Liabilities"),
which the Purchaser shall pay, perform and discharge in accordance with their
terms (whether fixed or contingent, matured or unmatured, arising by law or by
Contract or otherwise), subject to any defenses or claimed offsets asserted in
good faith against the obligee to whom such liabilities or obligations are owed:
(a) all Liabilities resulting from the ownership, use,
operation or maintenance of the Assets or the conduct of the Business by the
Purchaser after the Closing;
(b) all Liabilities under the Assumed Contracts arising
after the Closing Date;
(c) all Liabilities related to the Purchaser's employment
of the Transferred Employees after the Closing Date;
(d) all Liabilities associated with the Intellectual
Property arising after the Closing Date; and
(e) all of the Assumed Sporting Goods Obligations.
1.4 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, the parties expressly acknowledge and agree that
the Purchaser shall not assume or in any manner whatsoever be liable or
responsible for any Liability of the Seller, or any predecessors or Affiliates
of the Seller, or any of their Representatives or any Claim against any and all
of the foregoing, whether matured or unmatured, known or unknown, contingent or
absolute, direct or indirect, whensoever incurred, whether or not related to the
Business, other than Assumed Liabilities. All such Liabilities other than
Assumed Liabilities are collectively referred to as the "Excluded Liabilities."
1.5 Purchase Price; Allocation of Purchase Price.
(a) Subject to the terms and conditions hereof, in
reliance upon the representations and warranties of the Seller and the covenants
of the Seller herein set forth, and as consideration for the sale and purchase
of the Assets, at the Closing, the Purchaser shall assume the Assumed
Liabilities and shall tender the Purchase Price. On the Closing Date, the
"Purchase Price" shall be the sum of: (i) the Closing Cash Payment (defined in
subparagraph (b) below); plus (ii) the Indemnity Deposit; plus (iii) the Current
Receivables Deposit; plus (iv) the aggregate Straddle Period Accruals; plus (v)
the Signing Bonuses. The Purchase Price shall be adjusted after the Closing Date
if, and to the extent, that (x) the Purchaser is required to remit to the Seller
an amount in cash pursuant to Section 1.6(d) or (y) the Purchaser is entitled to
an amount in cash from the Current Receivables Deposit pursuant to Section
1.6(d).
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(b) The Closing Cash Payment shall be paid by the
Purchaser to the Seller at the Closing as provided in Section 1.10(a). The
"Closing Cash Payment" shall initially be ONE HUNDRED TWENTY FIVE MILLION
DOLLARS ($125,000,000) minus the sum of: (i) the Indemnity Deposit; plus (ii)
the Current Receivables Deposit; plus (iii) the aggregate Straddle Period
Accruals; plus (iv) the Signing Bonuses. The amount of the Closing Cash Payment
required to be paid by the Purchaser to the Seller at the Closing shall be
reduced, if necessary, in accordance with Section 1.6(a).
(c) The Indemnity Deposit shall be delivered by the
Purchaser to the Escrow Agent as provided in Section 1.10(b) and shall be held
and disbursed by the Escrow Agent in accordance with the terms and conditions of
the Indemnity Escrow Agreement.
(d) The Current Receivables Deposit shall be delivered by
the Purchaser to the Escrow Agent as provided in Section 1.10(c) and shall be
held and disbursed by the Escrow Agent in accordance with the terms and
conditions of the Current Receivables Escrow Agreement.
(e) The parties acknowledge that certain payments are
required to be made pursuant to the Assumed Contracts listed on Schedule 1.5(e)
hereto (the "Tour Contracts"). All required payments earned under the Tour
Contracts prior to the Closing Date and not yet paid by the Seller, including,
without limitation, win bonuses and the pro rata portion of any base
compensation (the "Straddle Period Accruals") shall be (i) treated as an offset
against the Purchase Price and (ii) included in the calculation of the Purchase
Price and the Closing Cash Payment in the manner set forth above. Any Straddle
Period Accruals earned as of the Closing Date shall be paid by the Purchaser.
Any year end bonuses, including bonuses based on money list standings (the "Year
End Bonuses"), shall be prorated based on the period of time prior to and after
the Closing. The Seller shall be responsible for the portion of Year End Bonuses
earned prior to the Closing and the Purchaser shall be responsible for the
portion of Year End Bonuses earned after the Closing. The Purchaser shall pay
the Year End Bonuses and shall immediately be reimbursed from the Indemnity
Deposit for the payments relating to Year End Bonuses (without giving effect to
the Purchaser Recovery Threshold) in an amount equal to the aggregate amount of
Year End Bonuses paid by the Purchaser multiplied by a fraction, the numerator
of which is the number of days between (and including) January 1, 2003 and the
Closing Date, and the denominator of which is 365.
(f) The Signing Bonuses shall be paid by the Purchaser
promptly after the Closing to the Transferred Employees set forth on Schedule
1.5(f).
(g) The Purchaser shall prepare an allocation of the
Purchase Price (and all other capitalized costs) among the Assets in accordance
with Code ss.1060 and the Treasury regulations thereunder (and any similar
provision of state, local or foreign law, as appropriate), which allocation
shall be mutually agreed upon by the Seller and the Purchaser. The Purchaser
shall deliver such allocation to the Seller within sixty (60) days after the
Final Adjustment Date. If the Seller and the Purchaser are unable to agree on
such allocation within thirty (30) days after delivery by the Purchaser to the
Seller of
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such allocation, they shall immediately, upon the expiration of such 30-day
period, refer their remaining differences to the Independent Accountants, who
shall determine such allocation among the Assets. The Purchaser and the Seller
and their respective Affiliates shall report, act and file Tax Returns
(including, but not limited to Internal Revenue Service Form 8594) in all
respects and for all purposes consistent with such allocation prepared by the
Purchaser and reasonably consented to by the Seller. The Seller shall timely and
properly prepare, execute, file and deliver all such documents, forms and other
information as the Purchaser may reasonably request to prepare such allocation.
Neither the Purchaser nor the Seller shall take any position (whether in audits,
tax returns or otherwise) which is inconsistent with such allocation except
pursuant to Requirements of Law.
1.6 Assigned Inventory Adjustment.
(a) Not later than five (5) Business Days preceding the
Closing Date, the Seller shall in good faith prepare, or cause to be prepared,
and deliver to the Purchaser a certificate signed by the chief financial officer
(or such other Person serving in a similar capacity) of the Seller setting forth
its estimate of the Deemed Closing Date Inventory Value of the Assigned
Inventory (expressed in United States dollars) as of the close of business on
the Closing Date (the "Target Inventory") without giving effect to the
consummation of any of the transactions contemplated hereby (the "Target
Inventory Statement"). On the Closing Date, the Closing Cash Payment shall be
adjusted as follows: (i) if the amount of the Target Inventory set forth in the
Target Inventory Statement plus the Deemed Closing Date A/R Value of the
Assigned Current Receivables is equal to or greater than $90,000,000, there
shall be no adjustment to the Closing Cash Payment based on the amount of the
Target Inventory and the Assigned Current Receivables; and (ii) if the amount of
the Target Inventory set forth in the Target Inventory Statement plus the Deemed
Closing Date A/R Value of the Assigned Current Receivables is less than
$90,000,000, the Purchaser shall reduce the Closing Cash Payment (and,
accordingly, the amount paid at Closing) by the amount of such deficiency. If
the Target Inventory exceeds $43,650,000, it shall be deemed for purposes of
this Section 1.6(a) to equal $43,650,000 notwithstanding such excess. The Seller
shall cause there to be sufficient Inventory as of the Closing Date so that the
Deemed Closing Date Inventory Value is at least $33,950,000.
(b) As soon as practicable, but in no event later than
thirty (30) days following the Closing, the Purchaser shall in good faith
prepare, or cause to be prepared, and deliver to the Seller a certificate signed
by the chief financial officer of the Purchaser setting forth its determination
of the Deemed Closing Date Inventory Value of Assigned Inventory (expressed in
United States dollars) as of the close of business on the Closing Date (the
"Closing Inventory") but without giving effect to the consummation of any of the
transactions contemplated hereby (the "Closing Date Statement").
(c) The Seller shall, within thirty (30) calendar days
after the delivery by the Purchaser of the Closing Date Statement, complete its
review of the Closing Date Statement and the Closing Inventory reflected
thereon. In the event that the Seller disagrees with the Closing Date Statement,
the Seller shall inform the Purchaser in
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writing (the "Objection") on or before the last day of such thirty (30) calendar
day period, setting forth a description in reasonable detail of the basis of its
objection(s) and the adjustments to the Closing Date Statement and the Closing
Inventory reflected thereon which the Seller believes should be made; provided,
that, no Objection may be made by the Seller if the amount of Closing Inventory
reflected on the Closing Date Statement is within $100,000 of the amount that
the Seller reasonably believes in good faith to be the actual Closing Inventory
amount. Until the Final Adjustment Date (as defined below), each party and its
Representatives will be afforded reasonable access to the Business' books,
records and personnel during normal business hours, for the purposes of
preparing, evaluating and resolving disputes regarding the Closing Date
Statement and the Closing Inventory reflected thereon. Upon receipt of the
Objection, the Purchaser shall have ten (10) Business Days to review and respond
in writing to the Objection (and failure to do so will be deemed an acceptance
by the Purchaser of the adjustments set forth in the Objection). During such ten
(10) Business Day review period and, if the response referred to in the
foregoing sentence is timely delivered, during the subsequent ten (10) calendar
day period the parties shall seek in good faith to resolve any differences which
they may have with respect to the matters specified in the Objection. If the
Purchaser and the Seller are unable to resolve all of their differences with
respect to the Objection within the ten (10) calendar day period following
completion of the Purchaser's review of the Objection, they shall immediately
upon the expiration of such ten (10) calendar day period refer their remaining
differences to the Independent Accountants, who shall determine on the basis of
the standards set forth in the definition of Deemed Closing Date Inventory
Value, and only with respect to the remaining differences so submitted, whether
and to what extent, if any, the Closing Date Statement and the Closing Inventory
reflected thereon require adjustment. The parties shall instruct the Independent
Accountants to deliver a written determination to the Purchaser and the Seller
no later than the 20th calendar day after the Objection (or the unresolved
portion thereof) is referred to the Independent Accountants. The Purchaser and
the Seller will furnish to the Independent Accountants such work papers and
other documents and information relating to the Objection as the Independent
Accountants may reasonably request and the Purchaser and the Seller will be
afforded the opportunity to present to the Independent Accountants any material
relating to the determination and to discuss the determination with the
Independent Accountants (provided that there shall be no ex parte conversations
or meetings). The Independent Accountants shall act as an arbitrator for
purposes of resolving the Objection, and not as an expert. The Independent
Accountants will be required to enter into a customary engagement letter. The
determination by the Independent Accountants will be binding and conclusive on
the parties for all purposes. The Independent Accountants shall address only
those issues in dispute, and may not assign a value to any item greater than the
greatest value for such item claimed by either party or lower than the lowest
value claimed by either party. Half of the fees and expenses of the Independent
Accountants shall be borne by the Seller, on the one hand, and the other half
shall be borne by the Purchaser, on the other hand. The "Final Closing Date
Statement" shall be (i) the Closing Date Statement in the event that (x) no
Objection is delivered to the Purchaser during the thirty (30) calendar day
period specified above in this Section 1.6(c) for making Objections or (y) the
Seller and the Purchaser so agree, (ii) the Closing Date Statement, adjusted in
accordance with the Objection, in the event
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that the Purchaser does not respond to the Objection within the ten (10)
Business Day period following receipt by the Purchaser of the Objection or
agrees with the Objection, or (iii) the Closing Date Statement, as adjusted by
either (x) the agreement of the Seller and the Purchaser or (y) the Independent
Accountants.
(d) On the date the Final Closing Date Statement is
issued (such date being the "Final Adjustment Date"), the Purchase Price shall
be adjusted as follows: (i) if the amount of Closing Inventory set forth in the
Final Closing Date Statement is equal to the Target Inventory there shall be no
adjustment to the Purchase Price based on the amount of the Closing Inventory;
(ii) if the amount of the Closing Inventory set forth in the Final Closing Date
Statement is greater than the Target Inventory, the Purchaser shall pay the
Seller the amount of such excess; provided, that, if the Closing Inventory
exceeds $43,650,000, it shall be deemed for purposes of this clause (ii) to
equal $43,650,000 notwithstanding such excess; and (iii) if the amount of the
Closing Inventory set forth in the Final Closing Date Statement is less than
both the Target Inventory and $43,650,000 (the "Seller's Inventory Deficiency"),
the excess (x) of the lesser of (1) the Target Inventory (without giving effect
to the last sentence of Section 1.6(a)) and (2) $43,650,000 over (y) the Closing
Inventory shall be paid to the Purchaser from the Indemnity Deposit (without
giving effect to the Purchaser Recovery Threshold) up to a maximum of such
Indemnity Deposit in immediately available funds in accordance with the terms of
the Indemnity Escrow Agreement. The Purchaser acknowledges and agrees that the
Indemnity Deposit is the sole source of funding to satisfy the Seller's
Inventory Deficiency and under no circumstances shall the Purchaser be entitled
to any amount of the Seller's Inventory Deficiency which exceeds the Indemnity
Deposit.
(e) Any payments required under Section 1.6(d) shall (i)
bear interest at the Discount Rate (the "Applicable Interest") and shall accrue
from the Closing Date to, and including, the date such payment is actually made
and (ii) be made within five (5) Business Days after the Final Adjustment Date
by wire transfer of immediately available funds to an account specified by the
Seller or the Purchaser, as applicable.
(f) In the event that Ernst & Young LLP, refuses to be
retained as the Independent Accountant for purposes of Section 1.6(c), the
Purchaser and the Seller (or, if the Purchaser and the Seller are unable to so
agree within ten (10) Business Days of Ernst & Young LLP refusing to be so
retained, the Purchaser's and the Seller's respective independent accounting
firms) shall jointly select another independent accounting firm of recognized
national standing, which firm shall be deemed to be the "Independent
Accountants" for purposes of Section 1.6(c).
1.7 Accounts Receivable.
(a) Assigned Current Receivables.
(i) The Purchaser shall purchase from the Seller
Current Receivables having a Deemed Closing Date A/R Value equal to the
excess of $90,000,000 over the Target Inventory (such excess, the
"Assigned A/R Value" and such purchased Current Receivables, the
"Assigned Current Receivables").
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To the extent, if any, that the Deemed Closing Date A/R Value of the
Current Receivables exceeds the Assigned A/R Value (such excess, the
"Retained A/R Value"), the Seller shall retain the Current Receivables
having a Deemed Closing Date A/R Value equal to the Retained A/R Value.
In the event that there is Retained A/R Value, the Seller shall retain
all Current Receivables from the customers of the Seller set forth on
Schedule 1.7(a), in the order (from top down) set forth on Schedule
1.7(a) until the Deemed Closing Date A/R Value of such retained Current
Receivables equals the Retained A/R Value (such retained Current
Receivables, the "Retained Current Receivables"). If the allocation of
a Current Receivable pursuant to the immediately preceding sentence
would result in:
(A) a customer's Current Receivable
being divided between the Seller and the Purchaser, the Seller shall
retain the least current portion of the Current Receivable of the
customer and the Seller's portion of the proceeds thereof shall be paid
in accordance with Section 1.7(b) below; or
(B) a single invoice of such Current
Receivables being divided between the Seller and the Purchaser, such
invoice shall be so divided and the Seller's portion of the proceeds
thereof shall be paid in accordance with Section 1.7(b) below.
(ii) An amount equal to the Current Receivables
Deposit shall be delivered to the Escrow Agent pursuant to Section
1.10(c) herein and held, in accordance with the Current Receivables
Escrow Agreement, for a period not to exceed 180 days after the Closing
Date; provided that no portion of the Current Receivables Deposit shall
be released from the Current Receivables Escrow Agreement prior to the
expiration of the period in which the Purchaser is entitled to make an
election pursuant to subparagraph (iii) below.
(iii) The Purchaser shall: (A) use commercially
reasonable efforts and, in any event, no less effort than the Purchaser
uses to collect its own accounts receivable when collecting the
Assigned Current Receivables and (B) not settle, modify or compromise
any Assigned Current Receivable without the prior consent of the
Seller. In the event that the Purchaser requests that the Seller
consent to a settlement, modification or compromise of an Assigned
Current Receivable, the Seller agrees to respond to such request within
five (5) Business Days after such request is received by the Seller. If
on the 181st day after the Closing Date there are Assigned Current
Receivables which remain uncollected, the Purchaser may elect, in its
sole discretion on an account-by-account basis, within five (5)
Business Days after such 181st day to either (x) assign such
uncollected Assigned Current Receivables to the Seller and deduct an
amount equal to the Deemed Closing Date A/R Value of such uncollected
Assigned Current Receivables (the "Current Receivables Deficiency")
from the Current Receivables Deposit, (y) continue to collect such
uncollected Assigned Current Receivables without any deduction from the
Current Receivables Deposit or (z) any combination of clauses (x) and
(y); provided, that the Purchaser shall be
10
permitted to recover the Current Receivables Deficiency only to the
extent that it is equal to or less than, as the case may be, the
Current Receivables Deposit. If the Purchaser fails to provide notice
of its election on or prior to the fifth Business Day after such 181st
day, it will be deemed to have irrevocably elected to proceed in
accordance with clause (x) of the preceding sentence. If the Purchaser
elects to proceed with clause (x) or (z) above, then it shall execute
and deliver, concurrently with the release of funds from the Current
Receivables Deposit, an instrument of transfer substantially in the
form of the ▇▇▇▇ of Sale and transfer such Current Receivables to the
Seller free and clear of all Liens. Any remaining balance of the
Current Receivables Deposit, after giving effect to this Section
1.7(a), shall be paid to the Seller in accordance with the Current
Receivables Escrow Agreement. The Purchaser acknowledges and agrees
that the Current Receivables Deposit is the sole source of funding to
satisfy the Current Receivables Deficiency and under no circumstances
shall the Purchaser be entitled to any amount of the Current
Receivables Deficiency which exceeds the Current Receivables Deposit.
(iv) Not later than five (5) Business Days
preceding the Closing Date, the Seller shall in good faith prepare, or
cause to be prepared, and deliver to the Purchaser a certificate signed
by the Chief Financial Officer (or such other Person serving in a
similar capacity) of the Seller setting forth a reconciliation between
the Deemed Closing Date A/R Value of the Assigned Current Receivables
and the Deemed Closing Date A/R Value of the Assigned Current
Receivables less the amount of "A&P" (which pertains solely to co-op
advertising and other similar promotional items that are generally
dilutive to such Assigned Current Receivables and which shall be
determined on the same basis as "A&P" is determined in the Financial
Statements) as of the Closing Date that are deductible from the
Assigned Current Receivables (the "A/R Reconciliation"). If the A/R
Reconciliation, as determined by the Seller and the Purchaser, is
greater than $100,000, (A) the Current Receivables Deposit shall be
increased by an amount in cash equal to the A/R Reconciliation and (B)
the Closing Cash Payment shall be correspondingly reduced in accordance
with Section 1.5(b).
(b) Retained Receivables.
(i) The Purchaser shall collect, on behalf of
and for the account of the Seller, all Retained Current Receivables for
a period of 180 days after the Closing Date (the "Collection Period").
In collecting such Retained Current Receivables, the Purchaser shall:
(A) use commercially reasonable efforts and, in any event, no less
effort that the Purchaser uses to collect its own accounts receivable;
(B) shall not interfere with or prejudice the payment or collection of
such Retained Current Receivables; and (C) not settle, modify or
compromise any Retained Current Receivable without the prior consent of
the Seller. In the event that the Purchaser requests that the Seller
consent to a settlement, modification or compromise of a Retained
Current Receivable, the Seller agrees to respond to such request within
five (5) Business Days after such request is received by the Seller. As
compensation for collecting such Retained
11
Current Receivables, the Seller shall pay to the Purchaser a collection
fee equal to 2% of the payments collected by the Purchaser on Retained
Current Receivables (the "Collection Fee").
(ii) The Purchaser shall remit to the Seller on a
bi-weekly basis: (A) all payments received by the Purchaser on Retained
Current Receivables less the Collection Fee and (B) a reasonably
detailed accounting of the Retained Current Receivables as of such
date, which shall include the amount received, the Retained Current
Receivables as to which such payment was received and the Retained
Current Receivables outstanding. During the Collection Period, upon
reasonable notice, the Purchaser shall afford the Seller reasonable
access, during normal business hours, to the books and records of the
Purchaser relating to the Retained Current Receivables. The Seller may,
in its sole discretion, elect to have a Representative of the Seller
present at the Purchaser's offices during normal business hours to
monitor the collection by the Purchaser of the Retained Current
Receivables.
(iii) All records and other information regarding
the Retained Current Receivables not collected by the Purchaser during
the Collection Period shall be provided to the Seller on the 181st day
after the Closing Date. The Seller may elect, in its sole discretion,
to notify the Purchaser at any time during the Collection Period of its
desire to collect on an account-by-account basis any or all Retained
Current Receivables. Upon receipt of such notification, the Purchaser
shall immediately terminate its efforts to collect the designated
Retained Current Receivables and provide, with regard to such
uncollected Retained Current Receivables, all records and other
information. The Purchaser acknowledges and agrees that it is not
entitled to the Collection Fee for any Retained Current Receivable
collected by the Seller nor for any uncollected Retained Current
Receivable.
(c) Unidentified Accounts Receivables. In the event that
the Purchaser receives a payment from a third party that, pursuant to the terms
of this Agreement, should have been paid to the Seller or the Foreign
Subsidiaries, the Purchaser agrees to promptly remit such payment to the Seller.
In the event that the Seller or the Foreign Subsidiaries receive a payment from
a third party that, pursuant to the terms hereof, should have been paid to the
Purchaser, the Seller agrees to promptly remit such payment to the Purchaser. If
any party fails to forward payments to which another party is entitled, such
party shall be entitled to make a claim for indemnification pursuant to Article
VIII hereof, which claim shall not be subject to the Purchaser Recovery
Threshold or the Seller Recovery Threshold, as the case may be. In the event
that any party receives an unidentified payment from a customer, the recipient
shall inquire of the customer as to the application thereof and, lacking a
response, shall work closely and cooperatively with the other party to determine
how the payment shall be applied. If the parties are unable to make such a
determination, the payment shall be applied on a pro rata basis to the
outstanding invoices of that customer.
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(d) Returns. The Purchaser shall accept all goods sold by
each of the Seller and the Foreign Subsidiaries prior to the Closing and
returned to the Purchaser (the "Returned Goods"). For any Returned Goods
returned to the Purchaser after the Closing Date and for which a customer took
an allowance or credit on an Assigned Current Receivable, upon the Purchaser's
receipt of such Returned Goods, the Purchaser shall be entitled to be reimbursed
from the Current Receivables Deposit on the 181st day after the Closing Date for
the excess of such allowance or credit taken by a customer, if any, over the
value of the Returned Goods, which shall be determined in the same manner as set
forth in the definition of Deemed Closing Date Inventory Value. For any Returned
Goods returned to the Purchaser after the Closing Date and for which a customer
took an allowance or a credit on a Retained Receivable, upon the Purchaser's
receipt of such Returned Goods, the Purchaser shall pay the Seller the value of
such Returned Goods, which shall be determined in the same manner as set forth
in the definition of Deemed Closing Date Inventory Value.
1.8 Closing. Subject to the terms and conditions of this Agreement
and the Sale Approval Order, the sale and purchase of the Assets and the
assumption of the Assumed Liabilities contemplated by this Agreement shall take
place at a closing (the "Closing") to be held at the offices of ▇▇▇▇, Weiss,
Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
at 10:00 A.M., New York time, on the third (3rd) Business Day following the
satisfaction or waiver of all conditions to the obligations of the parties set
forth in Sections 5 and 6 (other than those conditions which by their nature can
only be satisfied at the Closing), or at such other place or at such other time
or on such other date as the Seller and the Purchaser may mutually agree upon in
writing (the day on which the Closing takes place being the "Closing Date").
1.9 Closing Deliveries by the Seller. At the Closing, unless
otherwise waived in writing by the Purchaser, the Seller shall deliver or cause
to be delivered to the Purchaser:
(a) duly executed Bills of Sale to transfer the Assets
which are tangible property to the Purchaser (or its permitted assign) free and
clear of all Encumbrances, other than Permitted Encumbrances, or evidence such
transfer on the public records;
(b) duly executed Assignments of Intangible Property
substantially in the form of Exhibit G to transfer the Assets which are
intangible property to the Purchaser (or its permitted assign) free and clear of
all Encumbrances, other than Permitted Encumbrances, or evidence such transfer
on the public records;
(c) executed counterparts of the Indemnity Escrow
Agreement;
(d) executed counterparts of the Current Receivables
Escrow Agreement;
(e) executed counterparts of the Assignment and
Assumption Agreement;
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(f) duly executed and acknowledged deeds, in
substantially the form of Exhibit H hereto, conveying each Owned Real Property
to the Purchaser free and clear of all Encumbrances, other than Permitted
Encumbrances;
(g) a receipt for the Closing Cash Payment; and
(h) a certificate signed by the Chief Financial Officer
(or such other Person serving in a similar capacity) of the Seller setting forth
the aggregate Straddle Period Accruals as of the Closing Date.
1.10 Closing Deliveries by the Purchaser. At the Closing, unless
otherwise waived in writing by the Seller, the Purchaser shall deliver or cause
to be delivered to the Seller (or the Escrow Agent where required):
(a) an amount equal to the Closing Cash Payment by wire
transfer of immediately available funds to account (or accounts) designated by
the Seller at least two (2) Business Days prior to the Closing Date;
(b) an amount in cash equal to the Indemnity Deposit by
wire transfer of immediately available funds to the Escrow Agent in accordance
with the Indemnity Escrow Agreement;
(c) an amount in cash equal to the Current Receivables
Deposit by wire transfer of immediately available funds to the Escrow Agent in
accordance with the Current Receivables Escrow Agreement;
(d) executed counterparts of the Indemnity Escrow
Agreement;
(e) executed counterparts of the Current Receivables
Escrow Agreement; and
(f) executed counterparts of the Assignment and
Assumption Agreement.
2. Representations and Warranties of the Seller. Except as set
forth in the schedules to this Agreement (the "Schedules") delivered by the
Seller on the date hereof, each of which Schedule shall specify the section to
which such Schedule relates and shall be deemed to qualify such section and any
section to which such exception or disclosure is reasonably apparent, the Seller
represents and warrants to the Purchaser on the date hereof, that:
2.1 Due Incorporation and Authority. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Seller is licensed, registered, qualified or admitted to
do business in each material jurisdiction in which the ownership, use or leasing
of any of the Seller's assets or properties or the conduct or nature of the
Business makes such licensing, qualification, or admission necessary. The Seller
has all requisite corporate power and authority to own, lease and operate its
material properties and to carry on its business as now being
14
conducted. Subject to the entry of the Sale Approval Order, (a) the Seller has
all requisite corporate power and authority to enter into this Agreement, carry
out its obligations hereunder and consummate the transactions contemplated
hereby and (b) the execution and delivery by the Seller of this Agreement, the
performance by the Seller of its respective obligations hereunder and the
consummation by the Seller of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of the Seller and
no other corporate proceedings on the part of the Seller are necessary to
authorize the execution and delivery of this Agreement or to consummate the
other transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Seller, and, upon entry of the Sale Approval Order
(assuming the due authorization, execution and delivery of this Agreement by the
Purchaser), this Agreement constitutes the legal, valid and binding obligation
of the Seller enforceable against the Seller in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors rights generally or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
2.2 Subsidiaries.
(a) Schedule 2.2 sets forth the name and jurisdiction of
organization of each corporation, limited liability company, or other entity
(each, a "Subsidiary," and collectively, the "Subsidiaries") in which the Seller
directly or indirectly owns or has the power to vote shares of any capital stock
or other ownership interests having voting power to elect a majority of the
directors of such corporation or other Persons performing similar functions for
such entity, as the case may be. Except for the Excluded Securities and as set
forth on Schedule 2.2(d), the Seller does not directly or indirectly own any
interest in any other Person.
(b) Each of the Subsidiaries is duly organized, validly
existing and (to the extent the concept of good standing exists in the
applicable jurisdiction) in good standing under the laws of its jurisdiction of
organization. Each of the Subsidiaries has all requisite corporate or other
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to have such power and
authority would not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.
(c) Each Subsidiary is duly qualified or licensed to do
business in all other jurisdictions where such Subsidiary currently conducts
business that requires such qualification or licensing, except where the failure
to so qualify or be licensed would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
(d) The authorized and issued shares of capital stock or
other ownership interests of each of the Subsidiaries are set forth on Schedule
2.2(d). All of the issued and outstanding capital stock and other ownership
interests of each of the Subsidiaries is owned by the Seller, free and clear of
any Encumbrance, except for Liens that shall be released at or prior to the
Closing. All of the outstanding shares of capital
15
stock of each of the Subsidiaries are duly authorized and validly issued, fully
paid and nonassessable. No other class of capital stock or other ownership
interests of any of the Subsidiaries is authorized or outstanding.
(e) Other than as set forth above, there are no
securities, options, warrants, calls, rights, commitments, Contracts,
arrangements or undertakings of any kind to which any of the Subsidiaries is a
party or by which any of them is bound or affected obligating any of its
Subsidiaries to issue, deliver or sell, or redeem, repurchase, acquire or pay
for or cause to be issued, delivered or sold, or redeemed, repurchased, acquired
or paid for additional shares of capital stock, equity interests or other voting
securities of any of the Subsidiaries, or obligating any of the Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right commitment, Contract, arrangement or undertaking.
2.3 No Conflicts. Subject only to the entry of the Sale Approval
Order, the execution and delivery by the Seller of this Agreement, the
consummation of the transactions contemplated hereby, and the performance by the
Seller of this Agreement in accordance with its terms will not:
(a) violate the certificate of incorporation or by-laws
(or comparable instruments) of the Seller or any of the Subsidiaries;
(b) require the Seller to obtain any consents, approvals,
authorizations or actions of, or make any filings with or give any notices to,
any Governmental Bodies or any other Person, except for (i) the notification
requirements of the HSR Act (and any foreign counterparts thereof), (ii) as set
forth on Schedule 2.3(b) (the "Seller Consents and Notices"), or (iii) consents,
approvals, or authorizations of, or declarations or filings with, the Bankruptcy
Court;
(c) if the Seller Consents and Notices are obtained or
made, violate or result in the breach of any of the terms and conditions of,
cause the termination of or give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time, or both, constitute)
a default under, any Material Contract or Assumed Contract, or result in the
creation of any Encumbrance upon any of the properties of the Seller or any of
the Subsidiaries pursuant to the terms of any Material Contract or Assumed
Contract; or
(d) violate any Requirement of Law to which the Seller or
any of the Subsidiaries or any of their respective assets or properties are
subject.
provided, however, that the Seller makes no representations or warranties in
this Section 2.3 with respect to Environmental Laws, which are specifically and
exclusively addressed in Section 2.10; and provided, further, that each of the
cases set forth in clauses (b) through (d) above is subject to exceptions that
would not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
16
2.4 Organizational Documents. The Seller has previously made
available to the Purchaser true, accurate, and complete copies of the
certificate of incorporation and bylaws, or comparable instruments, of each of
the Subsidiaries as in effect on the date hereof. None of the Subsidiaries is in
violation of its certificate of incorporation, bylaws or other similar
organizational document.
2.5 Financial Statements.
(a) The audited balance sheet of SHC, Inc. and its
consolidated subsidiaries, including the Seller and the Subsidiaries, as of
December 31, 2001, the audited statements of income and cash flows of SHC, Inc.
and its consolidated subsidiaries, including the Seller and the Subsidiaries,
for each of the fiscal years ended December 31, 2000 and 2001, the unaudited
balance sheet of SHC, Inc. and its consolidated subsidiaries, including the
Seller and the Subsidiaries, as of December 31, 2002 and March 31, 2003, and the
unaudited statements of income of SHC, Inc. and its consolidated subsidiaries,
including the Seller and the Subsidiaries, for the year ended December 31, 2002
and the three months ended March 31, 2003 (in each case, including the notes
thereto, if any , the "SHC Financial Statements"), copies of which have been
delivered to the Purchaser, are true, complete and accurate in all material
respects and fairly present in all material respects the financial position and
results of operations of SHC, Inc. and its consolidated subsidiaries, including
the Seller and the Subsidiaries, as of their respective date, and the income and
cash flows of SHC, Inc. and its consolidated subsidiaries, including the Seller
and the Subsidiaries, for the periods covered thereby (except in the case of the
unaudited financial statements, for normal, year-end audit adjustments and the
absence of footnotes). The SHC Financial Statements have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied during the periods covered, except as indicated in any
notes thereto. Unaudited summary income statement information containing the
line items listed on Schedule 2.5 of the Sporting Goods Business for the
12-month period ended December 31, 2002 (the "Sporting Goods Financials") has
been provided to the Purchaser and has been prepared in accordance with the
books of account and other financial records of the Sporting Goods Business. The
Sporting Goods Financials have been prepared in accordance with GAAP applied on
a consistent basis, are true, complete and accurate in all material respects
with respect to the line items set forth therein and fairly present in all
material respects the financial results of operations of the Sporting Goods
Business, to the extent set forth in such line items and without giving affect
to any other matters including those relating to allocations for selling,
general and administrative expenses of the Sporting Goods Business for the year
December 31, 2002. Except as disclosed in the SHC Financial Statements, neither
SHC, Inc. nor its consolidated subsidiaries, including the Seller and the
Subsidiaries, has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise that would be required by GAAP to be reflected
in the SHC Financial Statements, other than liabilities and obligations incurred
since March 31, 2003, in the ordinary course of business consistent with past
practices and other than liabilities and obligations in connection with sales of
the ETONIC Business and the Sporting Goods Business. The SHC Financial
Statements and the Sporting Goods Financials are collectively referred to herein
as the "Financial Statements."
17
2.6 No Material Adverse Change. Except (a) as contemplated by this
Agreement, the filing and prosecution of the Bankruptcy Case and the operation
of the Business in bankruptcy pursuant to the Bankruptcy Case, (b) as disclosed
in the Financial Statements, and (c) for sale of the ETONIC Business and the
sale of the Sporting Goods Business, since March 31, 2003, there has not been:
(i) any damage, destruction or loss, whether or not covered by insurance, that
would reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect; (ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of the shares of the Subsidiary Stock; (iii) any change, occurrence or
circumstance in the financial condition, business, results of operations,
properties or assets of the Seller or any of Subsidiaries that would reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect; or (iv) except as required by GAAP, any change by SHC, Inc., the Seller,
or any Subsidiary in its respective accounting principles, practices, or
methods.
2.7 Tax Matters. Except as otherwise set forth on Schedule 2.7:
(a) all material Tax Returns required to be filed with
respect to each of the Seller and the Subsidiaries have been filed in a timely
manner (within any applicable extensions of time) through the date of this
Agreement, and all Taxes shown on such Tax Returns have been timely paid, except
for Taxes that are being contested in good faith and for payment of which
adequate reserves will have been set up as of the Closing Date;
(b) there are no waivers or arrangements extending the
statutory period of limitations applicable to any Claim for Taxes due from or
with respect to the Seller or any of the Subsidiaries for any taxable period;
(c) to the Seller's Knowledge, (A) the Tax Returns of the
Seller and the Subsidiaries are not currently under audit or examination by the
IRS and (B) no audit or other proceeding by any court, governmental or
regulatory authority or similar authority is pending, and neither the Seller nor
any of the Subsidiaries has received any written notification that such an audit
or proceeding may be commenced, with respect to any Taxes due from the Seller or
any of the Subsidiaries; and
(d) each of the Seller and its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
any amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and all Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed.
2.8 Compliance with Laws. Neither the Seller nor any of the
Subsidiaries is in violation of any domestic, foreign, federal, state or local
statute, law, rule, regulation, order, writ, ordinance, judgment, governmental
directive, injunction, decree or other requirement of any Governmental Body
("Requirement of Law"), which violation would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect; provided,
however, that the Seller makes no representations or warranties in this Section
2.8 with respect to Tax laws, Environmental Laws or ERISA and
18
employee benefit and labor laws, which are specifically and exclusively
addressed in Sections 2.7, 2.10, 2.17 and 2.18, respectively.
2.9 Permits. Each of the Seller and the Subsidiaries has all
material licenses, franchises, permits, variances, exemptions, orders,
approvals, and authorizations of such Governmental Bodies as are necessary for
the lawful conduct of the Business (collectively, "Permits"). The Seller and
each of the Subsidiaries is in compliance with the terms of the Permits held by
it and such Permits are valid and in full force and effect and will not be
terminated in whole or in part as a result of the transactions contemplated by
this Agreement, except as would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
2.10 Environmental Laws.
(a) The term "Environmental Law" means all applicable
Requirements of Law relating to: (i) the protection, investigation or
restoration of the environment or natural resources; (ii) the handling, use,
presence, disposal, release or threatened release of any Hazardous Material; or
(iii) noise, odor, wetlands, pollution or contamination.
(b) The term "Hazardous Material" means any material or
substance: (i) the presence of which requires Remediation or, solely on account
of its presence, investigation under any Environmental Law; (ii) the generation,
storage, treatment, release, emission, transportation, disposal, Remediation,
removal, handling or management of which is regulated by any Environmental Law;
(iii) that is defined as a "solid waste," "pollutant or contaminant," "hazardous
waste" or "hazardous substance" under any Environmental Law; (iv) that contains
gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyl
(PCBs) or asbestos; (v) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic or mutagenic or otherwise hazardous and is
regulated by any Governmental Body having or asserting jurisdiction over the
Seller or the Business; or (vi) that is regulated by any Governmental Body
having or asserting jurisdiction over workplace hazards.
(c) The term "Remediation" means any investigation,
monitoring, clean-up, containment, remediation, mitigation, removal, disposal or
treatment of Hazardous Materials, including without limitation the preparation
and implementation of any work plans and the obtaining of authorizations,
approvals and permits from Governmental Authorities with respect thereto.
(d) Except as set forth on Schedule 2.10, the Seller and
its Subsidiaries have obtained all material approvals, authorizations,
certificates, consents, licenses, orders and permits or other similar
authorizations of all Governmental Bodies, or from any other Person, that are
required under any Environmental Law ("Environmental Permits").
(e) Except as set forth on Schedule 2.10, the Seller and
its Subsidiaries are and have been since January 1, 2001 in substantial
compliance with all material terms and conditions of all Environmental Permits
that are used in the Business or that relate to
19
the Seller or the Assets, and all other material limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws.
(f) Except as set forth on Schedule 2.10, there have been
and are no material events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Seller, the Subsidiaries, the
Business, the Assets, the Owned Real Property, the Leased Real Property, or the
Formerly Owned and Leased Real Property that violate any Environmental Law, or
that have given rise to any Liability under any Environmental Law (including,
without limitation, any Hazardous Materials which have been released, disposed
of, emitted, treated, stored, generated, placed, deposited, discharged, or
spilled at, upon or under any facility ever owned, operated or leased by the
Seller or its Subsidiaries, or any facility to which the Seller or the
Subsidiaries have sent any Hazardous Material), or otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any Hazardous Material or resulting
from exposure to workplace hazards.
(g) Except as set forth on Schedule 2.10, the Seller and
its Subsidiaries have not, as of the date hereof, received any written notice,
claim, subpoena, or summons, or been threatened in writing with any notice,
claim, subpoena, or summons, from any Person, including without limitation any
Governmental Body, alleging (a) any material Liability of the Seller or its
Subsidiaries under any Environmental Law or (b) any material violation by the
Seller or its Subsidiaries of any Environmental Law.
2.11 Contracts.
(a) Schedule 2.11(a) hereto sets forth a complete and
accurate list of the material Contracts as of the date hereof to which the
Seller or any of the Subsidiaries is a party or by which any of their properties
is bound (collectively, "Material Contracts"):
(i) the Sporting Goods Sale Agreements, the
ETONIC Sale Agreements, and the Contracts of the Seller or any of the
Subsidiaries that constitute Excluded Assets;
(ii) manufacturing Contracts and Contracts for
the purchase or lease of personal property with any supplier or for the
furnishing of services to the Seller or any of the Subsidiaries that in
each case involve payments in excess of $100,000, other than short-term
purchase orders entered into in the ordinary course of business
consistent with past practice;
(iii) broker, distributor, dealer, manufacturer's
representative, reseller, agency, and sales promotion Contracts
involving payments in excess of $100,000, material exclusive dealing or
exclusivity agreements and any other
20
material Contract that compensates any Person, other than employees or
consultants of the Seller or any of the Subsidiaries, based on any
sales by the Seller or any of the Subsidiaries;
(iv) leases and subleases of Real Property;
(v) Contracts with any Governmental Body in an
amount or having a value in excess of $100,000;
(vi) Contracts that contemplate or involve the
performance of services or sales of products by the Seller or any of
the Subsidiaries having a value in excess of $100,000 in the aggregate,
which in either case are not terminable by the Seller or any of the
Subsidiaries without material penalty or not more than 90 days' prior
notice;
(vii) Contracts pursuant to which the Seller or
any of the Subsidiaries has granted any exclusive marketing,
manufacturing, license, sales representative, distribution, or other
right to any third party;
(viii) Contracts with any current or former
officer, director, shareholder, employee, consultant, agent or other
representative or with an entity in which any of the foregoing is a
controlling person of the Seller having a value in excess of $100,000;
(ix) Contracts for management services with any
Person;
(x) Contracts containing covenants of the Seller
or any of the Subsidiaries not to compete in any line of business or
with any other Person in any geographical area or covenants of any
other Person not to compete with the Seller or any of the Subsidiaries
in any line of business or in any geographical area;
(xi) Contracts of the Seller or any Subsidiary
pursuant to which the Seller or any Subsidiary received (or was
entitled to receive) or paid (or was obligated to pay) more than
$100,000 in the twelve (12) month period ended March 31, 2003 (provided
such Contract remains in effect as of the date hereof);
(xii) Contracts in effect on the date of this
Agreement under which the Seller or any Subsidiary is entitled to
receive hereafter more than $100,000;
(xiii) Contracts that will be subject to default,
termination, repricing or renegotiation upon the consummation of the
transactions contemplated by this Agreement;
(xiv) Contracts of the Seller or any Subsidiary
relating to, and evidences of, indebtedness for borrowed money, any
mortgage, security
21
agreement, or the deferred purchase price of property (whether
incurred, assumed, guaranteed or secured by any asset);
(xv) each partnership, joint venture, joint
marketing or other similar Contract or arrangement to which the Seller
or any Subsidiary is a party or by which it is otherwise bound;
(xvi) Contracts granting to the Seller or any
Subsidiary any material right under or with respect to any Intellectual
Property;
(xvii) Contracts under which the Seller or any
Subsidiary grants any material right under or with respect to any
Intellectual Property to another Person;
(xviii) each Contract that requires the Seller or
any Subsidiary to grant "most favored customer" pricing to any other
Person; and
(xix) each Contract that is otherwise material to
the Seller and the Subsidiaries, taken as a whole.
(b) Copies of all Material Contracts have been previously
delivered to or made available by the Seller for inspection by the Purchaser,
and such copies are, true, complete, and correct. Subject to (i) the Bankruptcy
Case (including any breaches or defaults relating to the commencement thereof
and any payables that would have been paid but for the commencement thereof) and
(ii) the payment of the Cure Costs by the Seller and, except as disclosed on
Schedule 2.11(b) hereof: (A) each Material Contract is a valid and binding
obligation of the Seller or the Subsidiaries and, to the Seller's Knowledge, the
other parties thereto, and to the Seller's Knowledge, is in full force and
effect; (B) the Seller or its Subsidiaries have performed all material
obligations required to be performed by it to date under each Material Contract
and is not (with or without the lapse of time or the giving of notice, or both)
in breach or default thereunder; and (C) to the Seller's Knowledge, each of the
other parties to such Material Contracts has performed all obligations required
to be performed by it as of the date hereof under such Material Contracts and is
not (with or without the lapse of time or the giving of notice, or both) in
breach or default thereunder.
(c) Except as set forth on Schedule 2.11(c), the Seller
has not assigned any license or distribution rights or obligations under any
Contract to any other Party.
2.12 Property. The Seller or one of the Subsidiaries (subject to
the entry of, and the provision of, the Sale Approval Order) has good title,
free and clear of all Encumbrances, to all of the owned properties and assets,
real and personal, tangible or intangible, used in the conduct of the Business
that are reflected on the Financial Statements or were acquired after January 1,
2003 except for: (i) Liens incurred in the ordinary course of business; (ii)
Permitted Encumbrances; (iii) Liens that shall be released at or prior to the
Closing; and (iv) Liens set forth on Schedule 2.12 hereto; provided, however,
that the Seller makes no representations or warranties in this Section
22
2.12 with respect to its Intellectual Property and its Real Property, which are
specifically and exclusively addressed in Sections 2.14 and 2.13, respectively,
or with respect to the Excluded Assets. There are no Liens in favor of the PBGC
that will continue after the Closing with respect to any of the Assets, which
includes the Real Property and, to the Seller's Knowledge as of the date hereof,
the PBGC has not taken any actions to impose any such Liens. With respect to
leased properties and assets, the Seller and its Subsidiaries have valid
leasehold interests in such properties and assets. All tangible assets which are
leased by the Seller or any of its Subsidiaries have been maintained with the
manufacturers' standards and specifications required by each such lease such
that at each such termination of the lease such assets can be returned to their
owner without any further material obligation on the part of the Seller or any
of its Subsidiaries with respect thereto.
2.13 Real Property.
(a) Ownership of the Premises. The Seller or one of the
Subsidiaries is the owner of good and insurable fee title to the land described
on Schedule 2.13(a), including all easements, rights-of-way, strips, zones,
privileges, licenses, hereditaments, tenements and appurtenances belonging
thereto, and any right or interest in any open or proposed ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇, alleys, and rights-of-way in, across, in front of, contiguous
to, abutting or adjoining the land, and other rights and benefits running with
the land and/or the owner of the land and to all of the buildings, structures
and other improvements located thereon, including, without limitation,
electrical distribution systems, HVAC systems, walkways, driveways, parking
lots, plumbing, lighting, and mechanical equipment, and fixtures installed
thereon, and all rights, benefits and privileges appurtenant thereto
(collectively, the "Owned Real Property") free and clear of all Encumbrances,
except for (i) the matters listed on Schedule 2.13(a) and (ii) Permitted
Encumbrances. The Owned Real Property constitutes all of the real property owned
by the Seller and its Subsidiaries.
(b) Leased Properties. Schedule 2.13(b) is a true and
complete list of all leases, subleases, licenses and other agreements
(collectively, the "Real Property Leases") under which either the Seller or any
of its Subsidiaries uses or occupies or has the right to use or occupy, now or
in the future, any real property that is not Owned Real Property (the land,
buildings and other improvements covered by such Real Property Leases being
herein called the "Leased Real Property"). Subject to (x) the Bankruptcy Case
(including any breaches or defaults relating to the commencement thereof and any
payables that would have been paid but for the commencement thereof), and (y)
payment of the Cure Costs by the Seller, (i) all of the Real Property Leases set
forth on Schedule 2.13(b) are valid, existing, in full force and effect and
binding upon the Seller or its Subsidiaries, as the case may be, and the other
parties thereto in accordance with their terms, (ii) each of the Seller and its
Subsidiaries is in compliance with all material terms and requirements of each
such Real Property Lease, and all rent and other sums and charges payable by the
Seller or any of its Subsidiaries as tenant thereunder are current and (iii)
either the Seller or any of the Subsidiaries, whichever is applicable, holds the
leasehold estate and interest in each such Real Property Lease free and clear of
all
23
Encumbrances, other than Permitted Encumbrances and other than Liens that shall
be released at or prior to the Closing.
(c) Entire Premises. Except as set forth in Schedule
2.13(c), all of the land, buildings, structures and other improvements used by
the Seller or any of its Subsidiaries in the conduct of their respective
businesses are included in the Owned Real Property or the Leased Real Property.
The Leased Real Property and the Owned Real Property are hereinafter
collectively referred to as the "Real Property."
(d) Space Leases. Schedule 2.13(d) is a true and complete
schedule of all leases, subleases, licenses and other agreements (collectively,
the "Space Leases") granting to any Person or entity other than the Seller or
any of its Subsidiaries any right to the possession, use, occupancy or enjoyment
of the Real Property or any portion thereof.
(e) Improvements. Except as set forth on Schedule
2.13(e), all utilities and the plumbing, electrical, mechanical, heating,
ventilating and air-conditioning and other systems required for the present use
of the Real Property are installed and operating. All such utilities enter the
Real Property through adjoining public streets or through valid easements across
adjoining private lands, and all installation, connection and capital recovery
charges in connection with such utilities have been paid in full.
(f) Certificates of Occupancy. Schedule 2.13(f) is a true
and complete list of all certificates of occupancy in the Seller's possession
affecting the improvements located on the Real Property (the "Certificates of
Occupancy"). True, complete and correct copies of the Certificates of Occupancy
have been delivered to the Purchaser, and all Certificates of Occupancy are in
full force and effect except those which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
impacted premises. To the Seller's Knowledge and except if already issued or
amended, no material alteration, improvement or change in use of any building or
other improvement has been completed or commenced that would require the
issuance of a new certificate of occupancy or the amendment of an existing
Certificate of Occupancy.
(g) Zoning. To the Seller's Knowledge there is no
proposed or pending proceeding to change or redefine the applicable legal
requirements pertaining to zoning of any portion of the Real Property except
which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the impacted premises.
(h) Assessments. No proceeding seeking a reduction in
real estate taxes imposed upon the Real Property or the assessed valuation of
the Real Property or any portion thereof have been settled during the three (3)
year period preceding the date of this Agreement or are currently pending other
than as set forth on Schedule 2.13(h). There is no pending or, to the Seller's
Knowledge, proposed imposition of any special or other assessments affecting the
Real Property or any portion thereof or any penalties or interest due with
respect to real estate Taxes assessed against all or any portion of the
24
Real Property that are payable by the Seller or would result in a Lien against
the Real Property.
(i) Land Use. None of the Seller or any of its
Subsidiaries has received notice of, and to the Seller's Knowledge, there is not
any pending, threatened or contemplated action to change the zoning status of
the Real Property or eminent domain proceedings which would reasonably be
expected to have, individually and in the aggregate, a Material Adverse Effect
on the use or operation of any portion of the Real Property.
(j) Former Properties. Schedule 2.13(j) is a true and
complete schedule of all real property formerly owned or leased by the Seller
and any of its Subsidiaries on which manufacturing activities were conducted by
the Seller in connection with the Business over the past ten (10) years
("Formerly Owned and Leased Real Property").
2.14 Intellectual Property. Schedule 2.14 sets forth a complete and
accurate list of all current registrations and applications for registration in
the name of the Seller or the Subsidiaries for the Intellectual Property. Except
as set forth on Schedule 2.14, to the Seller's Knowledge, the Seller or one of
the Subsidiaries owns or possesses, free and clear of all Encumbrances, other
than Permitted Encumbrances, or has valid licenses on reasonable terms to use
all the Intellectual Property. To the Seller's Knowledge, all of such
Intellectual Property is valid and enforceable. The Seller has taken all
necessary actions to maintain and protect each item of such Intellectual
Property other than as would not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. Subject to (x) the
Bankruptcy Case (including any breaches or defaults relating to the commencement
thereof and any payables that would have been paid but for the commencement
thereof) and (y) payment of the Cure Costs by the Seller, the Seller and the
Subsidiaries are in compliance with the material terms of any license to or
license of Intellectual Property. Except as otherwise set forth on Schedule
2.14, neither the Seller nor any of the Subsidiaries has received any notice
that, and to the Seller's Knowledge, none of, the Intellectual Property or any
products or services owned, used, developed, provided, sold or licensed by the
Seller or any of the Subsidiaries in the operations of the Business by the
Seller or any of the Subsidiaries currently infringes upon or otherwise violates
any intellectual property rights of others other than as would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Except as set forth on Schedule 2.14, to the Seller's Knowledge, no
Person is infringing upon or otherwise violating any rights associated with such
Intellectual Property, in each case, other than as would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Except as otherwise set forth on Schedule 2.14, no Claim is pending
against the Seller or the Subsidiaries or, to the Seller's Knowledge, is
threatened, (i) contesting the right of the Seller or the Subsidiaries to make,
use, sell, import, export, license, or make available to any Person any of the
products or services of the Seller or any of the Subsidiaries currently sold,
offered, licensed or made available to any Person or used by the Seller in
connection with the Business with respect to the Seller or any of the
Subsidiaries or
25
(ii) opposing or attempting to cancel any of the rights associated with the
Intellectual Property, in each case, other than as would not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Except as otherwise set forth on Schedule 2.14, the Intellectual
Property is not subject to any material outstanding decree, order, judgment,
settlement, agreement, or stipulation that restricts in any manner the Seller's
or any of its Subsidiaries' use, transfer, or licensing thereof. To the Seller's
Knowledge, neither the Seller nor any of its Subsidiaries has knowingly
misrepresented or failed to disclose any facts or circumstances in any
application for Intellectual Property that would constitute fraud or
misrepresentation with respect to such application or that would otherwise
affect the validity or enforceability of the Intellectual Property. The
Intellectual Property and the license agreements transferred pursuant to this
Agreement constitute all of the Intellectual Property used in or necessary to
operate or conduct the Business as currently conducted. There are no Liens in
favor of the PBGC that will continue after the Closing with respect to the
Intellectual Property and, to the Seller's Knowledge as of the date hereof, the
PBGC has not taken any actions to impose any such Liens.
2.15 Litigation. Except as set forth on Schedule 2.15 hereto and
except for the Bankruptcy Case and any and all actions, adversary proceedings
and litigation arising therefrom or related thereto, (a) there are no Claims,
including products liability Claims, pending or, to the Seller's Knowledge,
threatened against the Seller with respect to the Seller, any of the
Subsidiaries or the Real Property before any Governmental Body that, either
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or prevent or materially delay the consummation by the
Seller of the transactions contemplated by this Agreement and (b) neither the
Seller nor any of the Subsidiaries is subject to any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the Seller's Knowledge, continuing investigation by, any Governmental
Body, or any material order, writ, judgment, injunction, decree, determination
or award of any Governmental Body.
2.16 Brokers. Except for the fees payable by the Seller to Credit
Suisse First Boston, none of the Seller or any of the Subsidiaries has paid or
agreed to pay, or received any Claim with respect to, any brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated hereby.
2.17 Employee Benefit Plans. Except as set forth on Schedule 2.17
hereto:
(a) neither the Seller nor any Subsidiary maintains or
contributes to, or has any obligation to maintain or contribute to, any material
plan, program, arrangement, agreement or commitment which is an employment,
consulting or deferred compensation agreement, or any material executive
compensation, incentive bonus, retention bonus, or other bonus, employee
pension, profit-sharing, savings, retirement, stock option, stock purchase,
"make whole," severance pay, life, health, disability or accident insurance plan
or other employee benefit plan, program, arrangement, agreement or commitment,
in each case, whether or not subject to ERISA and whether oral or written
(individually, a "Benefit Plan," and collectively, the "Benefit Plans").
26
(b) none of the Seller, any Subsidiary or any Person who
would be considered a single employer with the Seller or any Subsidiary pursuant
to Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") (i) has
terminated within the last six years any plan subject to Title IV of ERISA or
Section 412 of the Code (any such plan, a "Title IV Plan"), (ii) incurred any
outstanding liability under Section 4062 of ERISA to the PBGC, or to a trustee
appointed under Section 4042 of ERISA, or (iii) has filed a notice of intent to
terminate any Title IV Plan or adopted any amendment to treat any such Title IV
Plan as terminated. To the Seller's Knowledge, no Benefit Plan that is subject
to Section 302 of ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code, whether or not waived, and no liability (other than for annual
premiums) to the PBGC has been incurred by the Seller or any of its ERISA
Affiliates. None of the Seller, any Subsidiary or any ERISA Affiliate has an
obligation to contribute or contributes to or had an obligation to contribute or
contributed to, within the last six years, any "multiemployer plan" (within the
meaning of Section 3(37) of ERISA).
(c) Neither the Seller nor any Subsidiary has any
obligation to provide or make available post-employment welfare benefits or
welfare benefit coverage for any employee or former employee, except as may be
required under COBRA.
(d) The Seller has made available to the Purchaser with
respect to each Benefit Plan, a true, correct and complete copy thereof and, to
the extent applicable: (i) the most recent documents constituting the Benefit
Plan and all amendments thereto; (ii) any related trust agreement or other
funding instrument; (iii) the most recent IRS determination letter; (iv) the
most recent summary plan description; and (v) the most recent (A) Form 5500 and
attached schedules, (B) audited financial statements, and (C) actuarial
valuation reports.
(e) No Benefit Plan requires or obligates the Purchaser
to assume the benefits or to have any liability thereunder except as required
under COBRA or other Requirements of Law. As of the date hereof, to the Seller's
Knowledge, except for routine claims for benefits, there are no pending,
threatened or anticipated claims by, related to or on behalf of any Benefit
Plan, by any participant or beneficiary of a Benefit Plan and there is no
pending or threatened proceeding , investigation or inquiry involving any
Benefit Plan by the IRS, the U.S. Department of Labor or any other Governmental
Body.
(f) As of the date hereof, to the Seller's Knowledge, (i)
each Benefit Plan intended to be qualified under Section 401(a) of the Code is
the subject of a currently effective favorable determination or opinion letter
from the IRS or an application for such a letter has been requested on behalf of
each such Benefit Plan and (ii) no event or circumstance has occurred or exists
which would result in the revocation of any such determination or opinion
letter.
(g) As of the date hereof, to the Seller's Knowledge, the
Seller, its Subsidiaries and its ERISA Affiliates have complied in all material
respects with the requirements of the health care continuation coverage
requirements of COBRA and none
27
of the Company or any of its ERISA Affiliates had engaged in a transaction or
has taken or failed to take any action in connection with which the Seller, its
Subsidiaries or any ERISA Affiliate would be subject to any liability for taxes
imposed pursuant to Section 4980B of the Code. There has not been any
"substantial elimination of coverage" (as described in Section 4980B(f)(3) of
the Code) with respect to a group health plan maintained by the Seller or any
ERISA Affiliate within one year before or after the Petition Date in respect of
any individual who would be an "M&A qualified beneficiary" (within the meaning
of Treasury Regulation Section 54.4980B-9, Q&A-4) as a result of the
Acquisition.
(h) With respect to each Benefit Plan that is subject to
applicable laws other than the laws of the United States and covers only
employees of the Foreign Subsidiaries (individually, a "Foreign Plan," and
collectively, "Foreign Plans") to the Seller's Knowledge: (i) each Foreign Plan
is in compliance in all material respects with the laws and regulations
regarding employee benefits, mandatory contributions and retirement plans in
each jurisdiction in which it has employees or conducts business; (ii)
contributions to and payments from each Foreign Plan, which are required to be
made on or prior to the Closing have been timely made; (iii) each Foreign Plan
has been administered at all times, and in all material respects, in accordance
with its terms; (iv) there are no pending investigations by any governmental
body involving any Foreign Plan, and no pending claims (except for claims for
benefits payable in the normal operation of the Foreign Plans), suits or
proceedings against any Foreign Plan or asserting any rights or claims to
benefits under any Foreign Plan; (v) the consummation of the transactions
contemplated by this Agreement will not by itself create or otherwise result in
any material liability, accelerated payment or any enhanced benefits with
respect to any Foreign Plan; (vi) none of the Foreign Plans is a "registered
pension plan" under applicable Canadian laws and regulations; and (vii) each
Foreign Plan can be amended or terminated without any material liability to any
of the Foreign Subsidiaries.
(i) To the Seller's Knowledge, Schedule 2.17(i) is a true
and complete list of: (i) the plans and agreements pursuant to which any current
or former employee of the Seller is entitled to receive any severance or
termination payment, or retention or other similar bonus; (ii) the names of the
employees or former employees who are entitled to receive such bonuses; and
(iii) the amount of such bonuses.
2.18 Labor Matters. Except as otherwise set forth on Schedule 2.18
hereto:
(a) none of the active employees of the Seller and the
Subsidiaries (the "Seller's Employees") is represented by a labor union that is
a party to any collective bargaining agreement, and, to the Seller's Knowledge,
there are currently no organizational campaigns, petitions or other unionization
activities seeking recognition of a collective bargaining unit including any of
the Seller's Employees; and
(b) there are no strikes, slowdowns or work stoppages
pending or, to the Seller's Knowledge, threatened involving any of the Seller's
Employees, and there has not been any such strike, slowdown or work stoppage
within the past three (3) years.
28
2.19 Insurance. Schedule 2.19 sets forth a true and complete list
of all insurance policies, binders of insurance or programs of self-insurance
held by the Seller and its Subsidiaries relating to the Business (collectively,
the "Insurance Policies"). True and complete copies of all Insurance Policies
have been provided or made available to the Purchaser. No insurer under any
Insurance Policy has canceled or generally disclaimed liability under any such
policy or, to the Seller's Knowledge, indicated any intent to do so or not to
renew any Insurance Policy except as required by state insurance law or as
replaced by comparable policies. The Seller and its Subsidiaries maintain, with
responsible insurance carriers, property, auto liability, workers' compensation,
and general liability insurance. The Insurance Policies are in full force and
effect and, except as otherwise set forth on Schedule 2.19, such Insurance
Policies have been in full force and effect, without gaps, continuously for at
least the past three (3) years. Neither the Seller nor any Subsidiary is in
default under any of the Insurance Policies, and none have failed to give any
notice or to present any claim under any such Insurance Policy in a due and
timely fashion.
2.20 Suppliers and Customers. Schedule 2.20 hereto lists, by dollar
volume paid for the year ended on December 31, 2002, the 10 largest suppliers
and the 10 largest customers of the Seller and each of the Subsidiaries other
than the suppliers and customers of the Excluded Operations. The relationships
of the Seller and the Subsidiaries with such suppliers and customers are, as of
the date hereof good commercial working relationships and as of the date hereof,
except as set forth on Schedule 2.20 hereto, no Person listed on Schedule 2.20
within the twelve months preceding the date hereof has threatened in writing to
cancel, materially reduce, or otherwise terminate, or to the Seller's Knowledge,
as of the date hereof, intends to cancel, materially reduce, or otherwise
terminate, its current level of business with the Seller or any of the
Subsidiaries.
2.21 Interested Party Transactions. To the Seller's Knowledge,
Schedule 2.21 sets forth a true, complete and correct list, as of the date
hereof, of any transaction, arrangement or relationship involving an amount of
$60,000 or more that any director, officer or other Affiliate of the Seller has
or has had in the last three years, directly or indirectly relating to: (i) an
economic interest in any Person that purchases from or sells or furnishes to,
the Seller or any Subsidiary, any goods or services other than Excluded
Securities; (ii) a beneficial interest in any material Contract; or (iii) any
contractual or other arrangement with the Seller or any Subsidiary; provided,
however, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any Person" for purposes of this Section 2.21.
2.22 Off Balance Sheet Liabilities. Schedule 2.22 sets forth a
true, complete and correct list, as of the date hereof, of all material
transactions, arrangements and other relationships between and/or among SHC,
Inc., any of its controlled Affiliates, and any special purpose or limited
purpose entity beneficially owned by or formed at the direction of SHC, Inc. or
any of its controlled Affiliates.
29
2.23 All Assets. Except as set forth on Schedule 2.23, the Assets
(other than the Excluded Assets) constitute all assets necessary for the
operation of the Business in substantially the manner heretofore conducted by
the Seller.
2.24 Inventory. The Seller has completed a physical inventory of
the Business on or after December 31, 2002. The Assigned Inventory consists, and
as of the close of business on the Closing Date, the Assigned Inventory will
consist, of items which are in all material respects free of any Defect and,
subject to inventory reserves set forth in the Financial Statements, of a
quality and quantity usable and salable in the ordinary course of business.
Since December 31, 2002, there have been no recalls or withdrawals of Inventory
produced or sold by or as a part of the Business or other similar federal,
state, or private actions with respect to such Assigned Inventory. All items
included in the Assigned Inventory are the property of the Seller or one of its
Subsidiaries. Except for Liens that will be released prior to the Closing, no
items included in the Assigned Inventory have been pledged as collateral or are
held by the Seller or any of its Subsidiaries on consignment from others.
2.25 Receivables. As of the date hereof, no account debtor (owing
more than $25,000 to the Seller) has refused (or to the Seller's Knowledge,
threatened to refuse) to pay its obligations with respect to any Assigned
Account Receivable for any reason. To the Seller's Knowledge, as of the date
hereof, no account debtor (owing more than $25,000 to the Seller) is insolvent
or bankrupt. All Current Receivables have been generated in the ordinary course
of the Business. With respect to unbilled Current Receivables in amounts greater
than $25,000, there exists no material fact that would prohibit or restrict the
billing of any such unbilled Accounts Receivable in the ordinary course of
business. Since March 31, 2003, neither the Seller nor any of its Subsidiaries
has made any material change in the selling, distribution, advertising, terms of
sale or collection practices of the Business, entered into any practices,
programs or long-term allowances not previously used in the ordinary course of
business of the Business or, with respect to the Business, engaged in the
practice of "loading" or any program, activity or other action that would
reasonably be expected to result, directly or indirectly, in a trade buy-in that
significantly in excess of normal customer purchasing patterns consistent with
past practice over the period beginning January 1, 2002 until the date hereof.
2.26 DISCLAIMER. The representations and warranties made by the
Seller in this Agreement are the exclusive representations and warranties made
by the Seller. The Seller hereby disclaims any other express or implied
representations and warranties. The Seller, directly or indirectly, does not
make, and hereby disclaims, any representations or warranties regarding
pro-forma financial information, financial projections or other forward-looking
statements of the Business. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
SELLER MAKES NO REPRESENTATIONS OR EXPRESS OR IMPLIED WARRANTIES AS TO THE
BUSINESS, THE ASSETS OR THE ASSUMED LIABILITIES, INCLUDING AS TO THEIR PHYSICAL
CONDITION, USABILITY, MERCHANTABILITY, PROFITABILITY OR FITNESS FOR ANY PURPOSE.
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3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller as follows:
3.1 Due Incorporation and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Purchaser has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, except where the failure to have such power and authority would not
reasonably be expected to materially impair or delay the ability of the
Purchaser to consummate the transactions contemplated hereby. The Purchaser has
all requisite corporate power and authority to enter into this Agreement, carry
out its obligations hereunder and consummate the transactions contemplated
hereby. The execution and delivery by the Purchaser of this Agreement, the
performance by the Purchaser of its obligations hereunder and the consummation
by the Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Purchaser and no
other corporate proceedings on the part of the Purchaser are necessary to
authorize the execution and delivery of this Agreement or to consummate the
other transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Purchaser, and, assuming the due authorization, execution
and delivery hereof by the Seller, this Agreement will constitute the legal,
valid and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, except to the extent enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws affecting creditors
rights generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
3.2 No Conflicts. The execution and delivery by the Purchaser of
this Agreement, the consummation of the transactions contemplated hereby, and
the performance by the Purchaser of this Agreement in accordance with its terms
will not:
(a) violate the certificate of incorporation or by-laws
of the Purchaser;
(b) require the Purchaser to obtain any material
consents, approvals, authorizations or actions of, or make any filings with or
give any notices to, any Governmental Bodies or any other Person, except for (i)
the notification requirements of the HSR Act (and any foreign counterpart
thereof) or (ii) consents, approvals or authorizations of, or declarations or
filings with, the Bankruptcy Court;
(c) violate or result in the breach of any of the terms
and conditions of, cause the termination of or give any other contracting party
the right to terminate, or constitute (or with notice or lapse of time, or both,
constitute) a material default under, any material Contract to which the
Purchaser is a party or by or to which each of the Purchaser or any of its
properties is or may be bound or subject; or
(d) violate any Requirement of Law to which the Purchaser
is subject;
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(e) provided, however, that each of the cases set forth
in clauses (b) through (d) above is subject to exceptions that would not
reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on the Purchaser.
3.3 Brokers. Except for Lazard Freres & Co. LLC, the fees and
expenses of which will be paid by the Purchaser, no Person retained by or on
behalf of the Purchaser or any of its respective Affiliates is entitled to any
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated hereby.
3.4 Financing. The Purchaser has, and at the Closing will have,
sufficient available funds to consummate the transactions contemplated by this
Agreement, including making all payments required pursuant to Article I.
Immediately following the Closing Date, the Purchaser will have sufficient funds
to operate the Business in all material respects in the ordinary course and in a
manner consistent with past practice and to assume the Assumed Liabilities.
3.5 Litigation. There are no Claims pending or, to the knowledge
of the Purchaser, threatened against the Purchaser, before any Governmental Body
that would prevent or materially delay the consummation by the Purchaser of the
transactions contemplated by this Agreement.
3.6 Independent Investigation. The Purchaser hereby acknowledges
and affirms that it has conducted and completed its own investigation, analysis
and evaluation of Business, that it has made all such reviews and inspections of
the financial condition, results of operations, properties, assets and prospects
of the Business as it has deemed necessary or appropriate, that it has had the
opportunity to request all information it has deemed relevant to the foregoing
from the Seller and has received responses it deems adequate and sufficient to
all such requests for information, and that in making its decision to enter into
this Agreement and to consummate the transactions contemplated hereby it has
relied solely on (i) its own investigation, analysis and evaluation of the
Business and (ii) the representations, warranties and covenants of the Seller
contained in this Agreement.
4. Covenants and Agreements.
4.1 Conduct of Business. Subject to (x) any obligations of the
Seller as a debtor or debtor-in-possession under the Bankruptcy Code, or (y) any
order of the Bankruptcy Court or other court of competent jurisdiction that, in
the case of clause (x) or (y) would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, the Seller agrees
that, from the date of this Agreement until the Closing, that:
(a) except (i) as expressly permitted or required by this
Agreement or (ii) as otherwise agreed to in writing by the Purchaser (which
agrees to respond in a commercially reasonable time frame to any request for
such agreement), the Seller shall use its commercially reasonable efforts to
operate the Business in the ordinary course of business consistent with past
practice and, to the extent consistent therewith, use, and
32
shall cause its Subsidiaries to use, commercially reasonable efforts to preserve
intact the Business, keep available the service of its officers and employees
and preserve its relationships with customers and suppliers.
(b) except (i) as expressly permitted or required by this
Agreement or on Schedule 4.1(b), (ii) as provided under, contemplated by, or
required or necessary for the consummation of the transactions under, the
Sporting Goods Sale Agreements or the ETONIC Sale Agreements, or (iii) as
otherwise agreed to in writing by the Purchaser (which agrees to respond in a
commercially reasonable time frame to any request for such agreement and to not
unreasonably withhold its agreement), none of the Seller or the Subsidiaries
shall:
(i) sell or convey any of its material assets,
except in the ordinary course of business consistent with past
practice;
(ii) change its method of accounting or any
accounting principle, method, estimate or practice, except in the
ordinary course of business consistent with past practice or as may be
required by GAAP or any other applicable Requirements of Law;
(iii) cancel, terminate or materially amend any
Material Contract that is an Assumed Contract;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or a
portion of the assets of, or by any other manner, any business or any
Person or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
Business;
(v) enter into any joint ventures, strategic
partnerships or alliances that are material to the Business;
(vi) except for the Sporting Goods Sale
Agreements and the ETONIC Sale Agreements, enter into any Contract the
effect of which would be to grant to a third party any license to use
any Intellectual Property;
(vii) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or reorganization, other than a plan of reorganization
in the Bankruptcy Case;
(viii) except as required by Requirements of Law or
Contracts currently binding on the Seller, increase any post-employment
welfare benefits or welfare benefit coverage to any individual who
would be an "M&A qualified beneficiary" (within the meaning of Treasury
Regulation Section 54.4980B-9, Q&A 4) as a result of the Acquisition;
(ix) amend its certificates of incorporation or
bylaws (or comparable instruments), or permit any Subsidiary to do the
same;
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(x) (A) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person except for
obligations of Subsidiaries incurred in the ordinary course of business
consistent with past practices; (B) make any loans, advances or capital
contributions to or investments in any other Person (other than to
Subsidiaries or customary loans or advances to employees in each case
in the ordinary course of business consistent with past practices); or
(C) pledge or otherwise encumber shares of its capital stock;
(xi) split, combine, or reclassify, any shares of
its capital stock, or declare, set aside or pay any dividend or other
distribution (whether in cash, stock, property, or any combination
thereof) with respect to any shares of its capital stock or any other
equity securities, or make any other actual, constructive, or deemed
distribution with respect to its capital stock, or otherwise make
payments to equity holders in their capacity as such (except for any
distribution of the proceeds from the ETONIC Sale under the ETONIC Sale
Agreements or the sale of the Sporting Goods Business under the
Sporting Goods Sale Agreements);
(xii) (A) acquire, sell, lease, license or dispose
of any assets or properties in any single transaction or series of
related transactions having a fair market value in excess of $100,000,
other than sales or licenses of its products in the ordinary course of
business consistent with past practices; (B) enter into any exclusive
license, distribution, marketing, sales or other agreement; (C) enter
into a "development services" or other similar agreement pursuant to
which it may purchase or otherwise acquire the services of another
Person, other than in the ordinary course of business consistent with
past practices; (E) sell, lease, license, transfer, encumber, or
otherwise dispose of any Intellectual Property; or (F) knowingly,
willfully or wantonly misappropriate or otherwise violate the rights of
any third party intellectual property;
(xiii) (A) enter into any Contract other than in
the ordinary course of business consistent with past practices that
would be material to the Seller and its Subsidiaries, taken as a whole;
(B) modify any standard warranty terms for and of its products or
services or amend or modify any product or service warranties in effect
as of the date hereof in any material manner that is adverse to it; (C)
enter into any Contract that contains non-competition restrictions,
including any restrictions relating to the conduct of the Business or
the sale of any of the Seller's products or any geographic
restrictions, in any case that would prohibit or restrict the Purchaser
or any of its affiliates from utilizing the Assets as currently used in
the conduct of the Business; or (D) authorize any new capital
expenditure or expenditures that, individually or in the aggregate for
the Seller and the Subsidiaries, exceed $100,000 other than in the
ordinary course of business;
(xiv) purchase, redeem or otherwise acquire,
directly or indirectly, any equity securities;
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(xv) issue, deliver, sell, authorize, pledge or
otherwise encumber, or agree or commit to issue, deliver, sell,
authorize, pledge or otherwise encumber, any shares of capital stock,
voting debt or any securities convertible into shares of capital stock
or voting debt, or subscriptions, rights, warrants or options to
acquire any shares of capital stock or voting debt or any securities
convertible into shares of capital stock or voting debt, or enter into
other agreements or commitments of any character obligating any of the
Seller to issue any such securities or rights;
(xvi) prepare or fail to file any Tax Return in a
manner inconsistent with past practices in preparing or filing similar
Tax Returns in prior periods or, on any such Tax Return, take any
position, make any election, or adopt any method that is inconsistent
with positions taken, elections made or methods used in preparing or
filing similar Tax Returns in prior periods, in each case, except to
the extent required by applicable law; or fail to pay any Taxes when
due;
(xvii) except in the ordinary course of business
consistent with past practice, engage in any transaction with, or enter
into any agreement, arrangement, or understanding with, directly or
indirectly, any of the Seller's Affiliates other than its employees;
(xviii) alter, through merger, liquidation,
reorganization, restructuring or in any other manner, the corporate
structure or ownership of any Subsidiary;
(xix) revalue any assets or properties, including
writing down the value of inventory or writing-off notes or accounts
receivable, other than in the ordinary course of business consistent
with past practices;
(xx) allow any Insurance Policy to be amended or
terminated without replacing such policy with a policy providing, in
the aggregate, substantially equivalent coverage, insuring comparable
risks and issued by an insurance company financially comparable to the
prior insurance company;
(xxi) agree in writing or otherwise to take any of
the actions described in (i) through (xx) above.
(xxii) Notwithstanding anything in this Agreement
to the contrary, all of the actions described in this Section 4.1 relate solely
to the Business and the Purchaser acknowledges that the Seller can take any
actions, in its sole and absolute discretion, relating solely to the Excluded
Assets and Excluded Liabilities.
4.2 Confidentiality. Each party hereto hereby reaffirms the
confidentiality letter agreement, dated September 16, 2002 (the "Confidentiality
Agreement"), between the Seller and the Purchaser, and agrees to fulfill its
obligations thereunder. To the extent
35
that a party hereto is not a party to the Confidentiality Agreement, such party
hereby agrees to be bound by the confidentiality provisions contained therein.
If this Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement shall nonetheless continue in full force and effect.
The Purchaser agrees to maintain, before and after the Closing, the
confidentiality of all information concerning the Seller (including the amounts
paid to the Seller hereunder) except as may be required under a Requirement of
Law, in which case the Purchaser shall promptly notify the Seller of any such
requirement and the Seller shall be permitted to seek confidential treatment for
such information. Notwithstanding anything herein to the contrary, any party to
this Agreement (and each of its Representatives) may disclose to any and all
Persons, without limitation of any kind, the tax treatment and tax structure of
the transactions contemplated by this Agreement, and all materials of any kind
(including opinions or other tax analyses) related to such tax treatment and tax
structure; provided that this sentence shall not permit any Person to disclose
the name of, or other information that would identify, any party to such
transactions or to disclose confidential information regarding such
transactions.
4.3 Expenses. Other than all HSR Act filing fees (and fees
required to be paid by foreign counterparts of the HSR Act), which shall be the
responsibility of the Purchaser, and except as otherwise specifically provided
herein, the Purchaser and the Seller shall bear their respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of their Representatives.
4.4 Public Announcements. No party to this Agreement shall make,
or cause to be made, any press release or public announcement in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without prior approval of the other party, which approval shall
not be unreasonably withheld or delayed, unless such disclosure is required by
applicable law or the rules of any stock exchange. The parties shall cooperate,
using commercially reasonable efforts, as to the timing and contents of any such
announcement, including any such announcement required by applicable law or the
rules of any stock exchange. Notwithstanding the above, the parties shall agree
as to the timing and contents of the first press release announcing this
Agreement.
4.5 Access to Information.
(a) From the date hereof until the Closing, upon
reasonable notice, the Seller shall, and shall cause each of its officers,
directors, employees, auditors and agents to, (i) afford the officers, employees
and Representatives of the Purchaser reasonable access, during normal business
hours, to the offices, plants, warehouses, properties, books and records of the
Seller and the Subsidiaries and (ii) furnish to the officers, employees and
Representatives of the Purchaser such additional financial and operating data
and other information regarding the operations of the Seller and the
Subsidiaries as the Purchaser may from time to time reasonably request;
provided, however, that such investigation shall not unreasonably interfere with
the operations of the Seller, the Subsidiaries or any of their Affiliates; and
provided further, however, that the auditors of
36
the Seller shall not be obliged to make any work papers available to any Person.
The Confidentiality Agreement shall remain in full force and effect
notwithstanding anything therein to the contrary and all information received by
the Purchaser under this Section 4.5 shall be subject thereto.
(b) From the date hereof until the Closing, the Seller
shall furnish to the Purchaser, as soon as reasonably practicable after the end
of each fiscal month or quarter, as the case may be, such monthly or quarterly
financial reports, statements and other information as the Seller customarily
prepares at the end of such fiscal periods. Such information shall be prepared
in accordance with the books and records of the Seller and shall fairly present
the matters covered by such information.
4.6 Regulatory and Other Authorizations; Consents.
(a) Each of the parties hereto shall use its commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under any
Requirement of Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement, (ii) obtain any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made in connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
including the Seller Consents and Notices, and (iii) make all filings and give
any notice, and thereafter make any other submissions either required or
reasonably deemed appropriate by each of the parties, with respect to this
Agreement and the transactions contemplated hereby required under any
Requirement of Law, including applicable securities and antitrust Requirements
of Law, and the rules and regulations of any stock exchange on which the
securities of any of the parties are listed or traded. Commercially reasonable
efforts shall not obligate the Seller or the Purchaser to make or offer to make
any payments to obtain any consents, licenses, permits, waivers, approvals,
authorizations or orders.
(b) The parties hereto shall work closely and
cooperatively and consult with each other in connection with the making of all
such filings and notices, including by providing copies of all such documents to
the non-filing party and its advisors a reasonable period of time prior to
filing or the giving of notice. No party to this Agreement shall consent to any
voluntary extension of any statutory deadline or waiting period or to any
voluntary delay of the consummation and the transactions contemplated in this
Agreement at the behest of any Governmental Body without the consent and
agreement of the other parties to this Agreement, which consent shall not be
unreasonably withheld or delayed. Each party shall promptly inform the others of
any material communication from any Governmental Body regarding any of the
transactions contemplated by this Agreement.
4.7 Further Action; Additional Assignments of Intellectual
Property. Each of the parties hereto shall execute such documents and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and give effect to the transactions contemplated hereby. From
time to time after the Closing, the Seller shall at
37
the Purchaser's expense prepare all documents and take all actions reasonably
necessary to further the sale and assignment of the Intellectual Property to the
Purchaser hereunder. Such Intellectual Property assignments shall be in
recordable form based on the local law requirements. The Purchaser assumes
responsibility for and will bear the expenses of recording such Intellectual
Property assignments in all jurisdictions. Following the Closing, the Seller
shall have no obligation or responsibility for maintaining or prosecuting any
Intellectual Property transferred to the Purchaser hereunder.
4.8 Employee Matters.
(a) From and after the date of this Agreement, the
Purchaser, or any of its Affiliates, in their sole and absolute discretion and
after consulting the management of the Seller, may: (i) communicate with any of
the Seller's or the Subsidiaries' current employees about possible employment
with the Purchaser after the Closing Date; and/or (ii) offer employment to any
of the Seller's or the Subsidiaries' employees as of the Closing Date on terms
and conditions which are generally comparable to those applicable to similarly
situated employees of the Purchaser. It is the intent of the Purchaser to make
offers of employment to a substantial number of the Seller's and the
Subsidiaries' active employees on the Closing Date. Those of the employees that
accept the Purchaser's offer of employment and become employed by the Purchaser
are referred to in this Agreement as "Transferred Employees," as of the Closing
Date. Nothing contained herein shall require the Purchaser to provide any
specific form of benefit or inhibit the Purchaser's ability to establish, amend
or terminate any employee benefit plan of the Purchaser following the Closing.
All employment offers are subject to the satisfactory completion by the
Purchaser of its customary employment interview, background checks and drug
testing procedures. Nothing in this Agreement shall prevent the Purchaser from
terminating the employment of any Transferred Employee at any time.
(b) To the extent that service is relevant for purposes
of eligibility or vesting under any employee benefit plan, program or
arrangement established or maintained by the Purchaser and provided to the
Transferred Employees (excluding any equity-related plan, program or
arrangement), the Purchaser shall credit the Transferred Employees under such
plan, program or arrangement for service on or prior to the Closing with the
Seller and its Subsidiaries as service with the Purchaser to the extent the
Seller recognized such service under any comparable plan, program or arrangement
of the Seller; provided, however, that Purchaser shall not be required to
provide the Transferred Employees with any credit for service with the Seller
and its Subsidiaries for the purpose of benefit accrual under any of the
Purchaser's defined benefit plans.
(c) The Seller and its Subsidiaries acknowledge that,
except as required by Requirements of Law, the Purchaser shall not assume any
liability related to any Benefit Plan that is sponsored or maintained by the
Seller, any Subsidiary or any ERISA Affiliate (whether former or current).
(d) The Purchaser acknowledges that to the extent the
Seller and its ERISA Affiliates cease to provide any group health plan to any
employee, if required by a Requirement of Law, the Purchaser shall be treated as
a "successor employer" pursuant
38
to Treasury Regulation Section 54.4980B-9, Q&A-8(c). The Seller will notify the
Purchaser in writing of the termination of any "group health plan" maintained by
the Seller or any of its ERISA Affiliates and will use commercially reasonable
efforts to provide to the Purchaser as soon as practicable following the
Seller's decision to terminate such plan (but in no event later than 15 days
following the termination of such plan) a list of the names and addresses of any
individual who would be an "M&A qualified beneficiary" (within the meaning of
Treasury Regulation Section 54.4980B-9, Q&A-4) under such group health plan.
(e) The Seller shall be responsible for any liabilities
or obligations (i) arising under the WARN Act, if any, and (ii) resulting from
or precipitated by layoffs, if any, in respect of employees of the Seller whose
employment was terminated on or prior to Closing. The Purchaser shall be
responsible for any liabilities or obligations arising under the WARN Act in
respect of any Transferred Employees. For the sake of clarity, and without
limiting any other provision of this Agreement, the parties acknowledge and
agree that, except as set forth in Section 4.8(d), the Purchaser shall have no
liability for the payment of any amounts due to the Seller's current or former
employees under agreements with or plans of the Seller, including, without
limitation, termination, severance, and retention payments and any obligation to
provide health, disability, life, retirement, or other benefits (whether covered
by insurance or not).
(f) The Purchaser shall pay the Signing Bonuses to the
Transferred Employees set forth on Schedule 1.5(f) promptly after the Closing.
(g) In the event that the Sporting Goods Transition
Services Agreement is not terminated prior to the Closing Date, and the
Purchaser, therefore, assumes such Contract in accordance with Section 1.1(b),
the Purchaser shall be reimbursed in an amount (the "Transitional Employee
Reimbursement Amount") equal to the lesser of (i) the actual out-of-pocket
expenses incurred by the Purchaser associated with the termination of the
Transferred Employees whose services are no longer required to carry out the
transactions contemplated by the Sporting Goods Transition Services Agreement
(the "Transitional Employees") and (ii) $100,000. In order to determine the
amount of the Transitional Employee Reimbursement Amount, the Purchaser shall
provide the Seller, within fifteen (15) days after the termination of the
Sporting Goods Transition Services Agreement, with a statement, prepared in good
faith and certified by the chief financial officer of the Purchaser, that
identifies (A) the terminated Transitional Employees and (B) the amount of
out-of-pocket expenses incurred by the Purchaser in connection with the
termination of such Transitional Employees. Upon delivery of the foregoing
statement, the Purchaser shall be immediately, and no later than three (3)
Business Days after delivery of such statement, reimbursed from the Indemnity
Deposit (without giving effect to the Purchaser Recovery Threshold) in an amount
equal to the Transitional Employee Reimbursement Amount determined in accordance
with this Section 4.8(g). For the sake of clarity, only those Transferred
Employees terminated within fifteen (15) days of the termination of the Sporting
Goods Transition Services Agreement may be deemed by the Seller to be terminated
Transitional Employees.
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4.9 Bankruptcy Court Approval. No later than three (3) Business
Days after the execution of this Agreement, the Seller will file a motion or
motions with the Bankruptcy Court seeking entry of (a) an order of the
Bankruptcy Court regarding the Acquisition establishing notice and service
requirements to creditors and parties in interest with respect to the
Acquisition, approving the Break-Up Fee and the Expense Reimbursement, and
approving the bidding procedures (the "Bidding Procedures") set forth on
Schedule 4.9 hereto (the "Bidding Procedures Order"), and (b) an order of the
Bankruptcy Court approving the sale of the Assets to the Purchaser pursuant to
the terms of this Agreement (the "Sale Approval Order"):
(a) The Bidding Procedures Order. The Bidding Procedures
Order shall be substantially in the form (with such changes thereto as the
Purchaser shall approve (such approval not to be unreasonably withheld,
conditioned or delayed)) of Exhibit C hereto, and shall, among other matters:
(i) approve the Break-Up Fee and the Expense
Reimbursement and provide that, if the obligation of the Seller to pay
the Purchaser the Break-Up Fee and/or the Expense Reimbursement arises,
such obligation shall constitute an administrative expense under
Section 503(b) and 507(a)(1) of the Bankruptcy Code and shall be
payable in accordance with the provisions of this Agreement without
further order of the Bankruptcy Court;
(ii) approve the Bidding Procedures; and
(iii) schedule a hearing to consider entry of the
Sale Approval Order and provide that notice of such hearing be given to
all of the Seller's creditors, interest holders of record, the
Environmental Protection Agency, all state/local environmental agencies
in any jurisdiction where the Seller owns or has owned or used real
property, the Internal Revenue Service, all state/local taxing
authorities in jurisdictions where the Seller has or may have any tax
liability, and potential other purchasers identified by the Seller and
otherwise in accordance with Bankruptcy Rule 2002, and that the Seller
publish notice of such hearing in the Chicopee Gazette.
(b) The Sale Approval Order. The Sale Approval Order
shall be substantially in the form (with such changes thereto as the Purchaser
shall approve (such approval not to be unreasonably withheld, conditioned or
delayed)) of Exhibit D hereto, and shall, among other matters:
(i) approve the Acquisition on the terms set
forth herein;
(ii) find that, as of the Closing Date, the
transactions contemplated by this Agreement effect a legal, valid,
enforceable and effective sale and transfer of the Assets to the
Purchaser and shall vest the Purchaser with title to the Assets free
and clear of all Encumbrances, except as expressly provided by this
Agreement;
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(iii) find that the consideration provided by the
Purchaser pursuant to this Agreement constitutes reasonably equivalent
value and fair consideration for the Assets;
(iv) find that, as of the Closing Date, the
Contracts to be assumed by the Seller and assigned to the Purchaser
pursuant to this Agreement will have been duly assigned to the
Purchaser in accordance with Section 365 of the Bankruptcy Code;
(v) find that the Purchaser is a good faith
purchaser of the Assets pursuant to Section 363(m) of the Bankruptcy
Code;
(vi) order that the Contracts to be assumed by
the Seller and assigned to the Purchaser pursuant to this Agreement
will be transferred to, and remain in full force and effect for the
benefit of the Purchaser, notwithstanding any provision in any such
Contract or lease or any Requirement of Law (including those described
in Sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits,
restricts or limits in any way such assignment or transfer;
(vii) approve any other agreement to the extent
provided by this Agreement;
(viii) find that the Seller gave due and proper
notice of the Acquisition to each party entitled thereto;
(ix) authorizes the Seller to assume and assign
to the Purchaser each of the Assumed Contracts;
(x) find that the Purchaser has satisfied all
requirements under Sections 365(b)(1) and 365(f)(2) of the Bankruptcy
Code to provide adequate assurance of future performance of the Assumed
Contracts and that the Purchaser has guaranteed the obligations of any
assign which has assumed an Assumed Contract;
(xi) authorize and direct the Seller to pay all
Cure Costs under the Assumed Agreements out of the proceeds of the
Acquisition;
(xii) enjoin and forever bar the nondebtor party
or parties to each Assumed Contract from asserting against the
Purchaser or any of the Assets: (a) any default existing as of the
Closing Date and (b) any objection to the assumption and assignment of
such nondebtor party's Assumed Contract;
(xiii) find that, to the extent permitted by law,
the Purchaser is not a successor to the Seller or its bankruptcy estate
by reason of any theory of law or equity, and the Purchaser shall not
assume or in any way be responsible for any liability or obligation of
any of the Seller and/or its bankruptcy estate, except as otherwise
expressly provided in this Agreement; and
41
(xiv) order that, notwithstanding the provisions
of Federal Rules of Bankruptcy Procedure 6004(g) and 6006(d), the Sale
Approval Order is not stayed and is effective immediately upon entry.
4.10 Subsidiary Compliance. The Seller shall cause its Subsidiaries
which are not a party hereto, if any, to comply with all of the Subsidiaries'
obligations under or relating to this Agreement.
4.11 Books and Records.
(a) The Purchaser agrees that it shall preserve and keep
all books and records in respect of the operations of the Business in the
Purchaser's possession for a period of at least seven (7) years from the Closing
Date. After such seven-year period, if at any time the Purchaser shall desire to
dispose of any of such books and records, then the Purchaser shall provide
written notice to the Seller at least ninety days prior to such intended
disposition and shall provide the Seller with an opportunity, at its cost and
expense, to remove and retain all or any part of such books and records as the
Seller may select. At any time prior to such disposition, Representatives of the
Seller shall, upon reasonable notice, have access thereto during normal business
hours to examine, inspect and copy such books and records.
(b) If, in order to properly prepare documents required
to be filed with Governmental Bodies or its financial statements, it is
necessary that either party hereto or any successors thereto be furnished with
additional information relating to the Business, the Assets or the Assumed
Liabilities, and such information is in the possession of the other party hereto
or any successor thereto or any of their respective Affiliates, such party
agrees to use commercially reasonable efforts to furnish or cause to be
furnished such information to such other party, at the reasonable cost and
expense of the party being furnished such information.
4.12 Directors, Officers and Affiliates. Except in the case of
fraud, the Purchaser agrees that none of the officers, directors and Affiliates
of the Seller or any of the Subsidiaries as of the Closing Date shall have any
Liability or responsibility to the Purchaser for (and the Purchaser
unconditionally releases such officers, directors and Affiliates from) any
Liability:
(a) arising out of, or relating to, the organization,
management, operation or conduct of the businesses of the Seller or any of the
Subsidiaries relating to any matter, occurrence, action or activity prior to the
Closing Date;
(b) relating to this Agreement and the transactions
contemplated hereby;
(c) arising out of or due to any inaccuracy or breach of
any representation or warranty or the breach of any covenant, undertaking or
other agreement of the Seller contained in this Agreement, the Schedules hereto
or in any certificate contemplated hereby and delivered by the Seller in
connection herewith; or
42
(d) relating to any information (whether written or
oral), documents or materials furnished by the Seller.
4.13 Tax Matters.
(a) Sales, Use and Other Transfer Taxes. The Purchaser
shall provide the Seller with resale exemption certificates as is appropriate.
In accordance with Section 1146(c) of the Bankruptcy Code, the parties
acknowledge that the making or delivery of any instrument of transfer, including
the filing of any deed or other document of transfer to evidence, effectuate or
perfect the rights, transfers and interest contemplated by this Agreement, shall
be in contemplation of a plan or plans of reorganization to be confirmed in the
Bankruptcy Case, and as such shall be free and clear of any and all transfer
Tax, stamp Tax or similar Taxes. The instruments transferring the Assets to the
Purchaser shall contain the following endorsement:
"Because this [instrument] has been authorized pursuant to
Order of the United States Bankruptcy Court for the District
of Delaware, in contemplation of a plan of reorganization of
the Seller, it is exempt from transfer taxes, stamp taxes or
similar taxes pursuant to 11 U.S.C. Section 1146(c)."
In the event real estate transfer Taxes are required to be
paid in order to record the deeds to be delivered to the Purchaser in accordance
herewith, or in the event any such Taxes are assessed at any time thereafter,
such real estate transfer Taxes incurred as a result of the transactions
contemplated hereby shall be paid by the Purchaser. The Purchaser shall also be
responsible for all of the excise, sales, value added, use, registration, stamp,
franchise, transfer and similar Taxes, levies, charges and fees incurred in
connection with the transactions contemplated by this Agreement and which are
not otherwise exempt pursuant to the applicable sections of the Bankruptcy Code.
The Seller shall be responsible for all income, profit, and similar taxes
incurred or imposed with respect to the sale of the Assets by the Seller. The
parties hereto agree to cooperate in the filing of all necessary documentation
and all Tax Returns with respect to all such Taxes, including any available
pre-sale filing procedure.
(b) Wage Reporting. The Purchaser and the Seller agree to
utilize, or cause their respective Affiliates to utilize, the standard procedure
set forth in Revenue Procedure 96-60, 1996-2 C.B. 399, with respect to wage
reporting.
(c) Cooperation. The parties hereto shall cooperate with
each other and with each other's respective Representatives, including
accounting firms and legal counsel, in connection with the preparation or audit
of any Tax Return(s) and any Tax claim or litigation in respect of the Assets
and Assumed Liabilities that include whole or partial taxable periods,
activities, operations or events on or prior to the Closing Date, which
cooperation shall include, but not be limited to, making available employees, if
any, for the purpose of providing testimony and advice, or original documents,
or either of them.
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4.14 Cure Costs. The Seller shall be exclusively responsible for
payment all Cure Costs.
4.15 Notification of Certain Matters. Each party promptly shall
provide the other written notice of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which has caused or would be likely to
cause any representation or warranty contained in this Agreement to become
untrue or inaccurate such that the conditions set forth in Sections 5 and 6, as
applicable, would not be satisfied and (b) any failure of the Seller or the
Purchaser, as the case may be, to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder such that the conditions set forth in Sections 5 and 6, as applicable,
would not be satisfied; provided, however, that the delivery of any notice
pursuant to this Section 4.15 shall not cure such breach or non-compliance or
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; provided further, however, that if such notified party
consummates the transactions herein after waiving satisfaction of the condition
set forth in Section 5.1 or 6.1, as the case may be, such consummation will be
deemed to cure such breach or non-compliance and such notified party shall be
deemed to waive any remedies hereunder to the extent of such notification. For
the sake of clarity, in accordance with Section 5.1 and Section 6.1, if a party
notifies the other of a breach of one or more representations or warranties, but
such breach or breaches do not, individually or in the aggregate, constitute a
Material Adverse Effect, as to the Seller, or a material adverse effect, as to
the Purchaser (each such breach, if any, being referred to herein as a "Minor
Deficiency"), the Purchaser or the Seller, as the case may be, will be required,
in accordance with Section 5.1 or 6.1, as applicable, to consummate the
transactions contemplated by this Agreement (assuming that all other enumerated
conditions are satisfied). In no event shall the notification of, or the
consummation of the transactions contemplated by this Agreement with notice of,
a Minor Deficiency be deemed to be a waiver of such Minor Deficiency, or limit
or otherwise affect the remedies available hereunder to the party having notice
of such Minor Deficiency after the Closing.
4.16 Title Insurance. The Seller shall use commercially reasonable
efforts to obtain:
(i) an ALTA Owner's Policy of Title Insurance
(with no exclusion for creditor's rights) issues by Chicago Title
Company for each parcel of Owned Real Property listed on Schedule 4.16,
with liability in the amount of that portion of the Purchase Price
allocated to such parcel of Owned Real Property, insuring fee title in
the Owned Real Property as vested in the Purchaser subject only to
those matters as may have been specifically approved by the Purchaser;
and
(ii) an ALTA Leasehold Owner's Policy of Title
Insurance (with no exclusion for creditor's rights) issued by Chicago
Title Company for each parcel of Leased Real Property, listed on
Schedule 4.16, with liability in the amount of that portion of the
Purchase Price allocated to such parcel of Leased Real Property,
insuring leasehold title in the Leased Real Property as vested in the
44
Purchaser subject only to those matters as may have been specifically
approved by the Purchaser.
4.17 Name Change. From and after the Closing, the Purchaser shall
own all of the corporate names, trade names and trademarks included in the
Intellectual Property, including, without limitation, the "Top-Flite" name,
together with all related designs (collectively, the "Top-Flite Name"). The
Seller and Top-Flite, Inc. shall, and shall cause each Subsidiary to, promptly,
following the Closing Date, but in no event later than 6 months, change its name
so that it ceases to use the Top-Flite Name.
4.18 Performance by the Foreign Subsidiaries. The Seller shall take
all actions necessary to ensure that the Foreign Subsidiaries shall perform and
comply with this Agreement and shall (and cause any of the Foreign Subsidiaries,
if applicable, to) take such further actions as may be reasonably required to
carry out the provisions hereof and give effect to the transactions contemplated
by this Agreement. The Foreign Subsidiaries shall not be a "Seller" hereunder.
The Seller shall convey as soon as practicable after the Closing any Assets of
the Foreign Subsidiaries not conveyed at the Closing by executing an instrument
of transfer substantially in the form of the ▇▇▇▇ of Sale. The Purchaser
acknowledges that certain or all of the Assets of the Foreign Subsidiaries may
not be conveyed at the Closing and that the failure to convey such Assets will
not breach any representation and warranty, covenant or condition herein. Until
such Assets of the Foreign Subsidiaries have been conveyed, the Seller shall
cooperate, and shall cause Foreign Subsidiaries to cooperate, to provide the
Purchaser with the benefit of such Assets and the Purchaser shall cooperate to
assume the obligations associated with such Assets. If a material amount of the
Assets held by the Foreign Subsidiaries cannot be transferred at the Closing,
the parties agree that the payment of a portion of the Closing Cash Payment (the
exact amount of which shall be mutually agreed upon by the parties based upon
the facts and circumstances then existing) shall be delayed until such time as
such Assets are successfully transferred to the Purchaser.
5. Conditions Precedent to the Obligation of the Purchaser. The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the fulfillment on or prior to the Closing Date of each
of the following conditions, any one or more of which (to the extent permitted
by law) may be waived by the Purchaser:
5.1 Representations and Warranties; Covenants. The representations
and warranties of the Seller contained in this Agreement shall be true and
correct (without giving effect to any materiality or Material Adverse Effect
qualifiers set forth therein), as of the date of this Agreement and as of the
Closing with the same force and effect as if made as of the Closing, other than
such representations and warranties that are made as of another date, which
representations and warranties shall be true and correct as of such date, except
where the failure of the representations and warranties described in this
Section 5.1 to be true and correct would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. The covenants and
agreements contained in this Agreement to be complied with by the Seller at or
before the Closing
45
shall have been complied with in all material respects. The Purchaser shall have
received a certificate of the Seller to such effect signed by a duly authorized
officer thereof.
5.2 No Order. No Governmental Body shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
has the effect of making the transactions contemplated by this Agreement illegal
or otherwise restraining or prohibiting consummation of such transactions and
which are not satisfied or resolved or preempted by the Sale Approval Order.
5.3 HSR Act Filing. Each party to this Agreement required to file
a notification and report form in compliance with the HSR Act (and foreign
counterparts thereof) shall have filed such form and the applicable waiting
period with respect to each such form (including any extensions thereof) shall
have expired or been terminated.
5.4 Bankruptcy Filing. The Bankruptcy Case shall not have been
dismissed or converted to Chapter 7 of the Bankruptcy Code and no trustee shall
have been appointed. The Bankruptcy Court shall have entered the Sale Approval
Order and it shall not have been vacated, reversed or stayed.
5.5 Consents. All material consents and notices required to be
obtained or made to enable the Seller and the Subsidiaries to assign and the
Purchaser to assume the Assigned Contracts listed on Schedule 5.5 shall have
been obtained or made by the Seller or the Subsidiaries.
5.6 Closing Documents. The Seller shall have delivered to the
Purchaser on the Closing Date the documents required to be delivered pursuant to
Section 1.9.
5.7 Releases. The Seller shall release, and shall execute such
documents as are necessary or appropriate to evidence such release, all
Transferred Employees, as of the time of the Closing, from any and all
noncompetition and nonsolicitation restrictions to which such transferred
Employees may be subject pursuant to any agreement with or plan of the Seller.
6. Conditions Precedent to the Obligation of the Seller to Close.
The obligation of the Seller to consummate the transactions contemplated by this
Agreement is subject to the fulfillment on or prior to the Closing Date of each
of the following conditions, any one or more of which (to the extent permitted
by law) may be waived by the Seller:
6.1 Representations and Warranties; Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct (without giving effect to any materiality or material adverse effect to
the Purchaser qualifiers set forth therein), as of the date of this Agreement
and as of the Closing, with the same force and effect as if made as of the
Closing, other than such representations and warranties that are made as of
another date, which representations and warranties shall be true and correct as
of such date, except where failure of the representations and warranties
46
described in this Section 6.1 to be true and correct would not, individually or
in the aggregate, reasonably be expected to result in a material adverse effect
to the Purchaser. The covenants and agreements contained in this Agreement to be
complied with by the Purchaser at or before the Closing shall have been complied
with in all material respects. The Seller shall have received a certificate of
the Purchaser to such effect signed by a duly authorized officer thereof.
6.2 No Order. No Governmental Body shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
has the effect of making the transactions contemplated by this Agreement illegal
or otherwise restraining or prohibiting consummation of such transactions and
which are not satisfied or resolved or preempted by the Sale Approval Order.
6.3 HSR Act Filing. Each party to this Agreement required to file
a notification and report form in compliance with the HSR Act (and foreign
counterparts thereof) shall have filed such form and the applicable waiting
period with respect to each such form (including any extensions thereof) shall
have expired or been terminated.
6.4 Sale Approval Order. The Bankruptcy Court shall have entered
the Sale Approval Order, and the Sale Approval Order shall have become a Final
Order and not have been vacated, reversed or stayed.
6.5 Closing Documents. The Purchaser shall have delivered to the
Seller on the Closing Date the documents and payments required to be delivered
by it pursuant to Section 1.10.
7. Termination of Agreement.
7.1 Termination Prior to Closing; Break-Up Fee. Notwithstanding
anything herein to the contrary, this Agreement may be terminated, and the
transactions contemplated by this Agreement abandoned, upon notice by the
terminating party to the other party:
(a) at any time before the Closing, by the mutual written
consent of the Seller and the Purchaser;
(b) by either the Seller or the Purchaser if the Closing
shall not have occurred prior to October 31, 2003; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the failure
of the Closing to occur prior to such date;
(c) at any time before the Closing, by the Purchaser on
the one hand, or the Seller, on the other hand, in the event of a material
breach of this Agreement by the non-terminating party or if the satisfaction of
any condition to such party's obligations under this Agreement becomes
impossible with the use of commercially reasonable
47
efforts and the failure of such condition to be satisfied is not caused by a
breach by the terminating party;
(d) by either the Seller or the Purchaser, if the
Bankruptcy Court approves a sale, transfer or other disposition by the Seller of
all or substantially all of the assets of the Seller relating to the Business or
all or a substantial part of any of the Assets to a Person (or group of Persons)
other than the Purchaser (a "Competing Transaction");
(e) by the Purchaser (provided that the Purchaser is not
then in material breach of any provision of this Agreement), if any of the
following shall occur:
(i) the Bankruptcy Case is dismissed or
converted to chapter 7 of the Bankruptcy Code or a trustee is appointed
for the Seller;
(ii) the Bidding Procedures Order shall not have
been entered on or before the thirtieth (30th) day after the date
hereof; provided, however, that the Purchaser shall not be entitled to
exercise its rights under this clause (ii) later than five (5) Business
Days after such thirty day period has expired or if the Bidding
Procedures Order has been entered by the Bankruptcy Court prior to the
Purchaser exercising such rights;
(iii) if the Sale Approval Order has not been
entered by the Bankruptcy Court within seventy-five (75) days after the
date hereof; provided, however, that the Purchaser shall not be
entitled to exercise its rights under this clause (iii) later than five
(5) Business Days after such seventy-five day period has expired or if
the Sale Order has been entered by the Bankruptcy Court prior to the
Purchaser exercising such rights.
7.2 Termination Payments.
(a) In the event that this Agreement is terminated under
Section 7.1(b), (c) (with respect to Sections 7.1(b) and (c), only if and to the
extent that the Seller has not used commercially reasonable efforts to
consummate the transactions herein) or (e), and provided that the Purchaser is
not in material breach of any provision of this Agreement prior to such
termination, the Seller shall be obligated to pay the Purchaser an amount in
cash equal to the total amount of fees, costs and expenses incurred by the
Purchaser in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including without limitation
all filing and notification fees, and all fees and expenses of the Purchaser's
Representatives (the "Expense Reimbursement"). The Expense Reimbursement shall
not exceed $1,250,000 (the "Expense Reimbursement Limit"). For purposes of both
this Section 7.2(a) and Section 7.2(b) below, and provided that the Expense
Reimbursement does not exceed the Expense Reimbursement Limit, the Seller
acknowledges and agrees that the Expense Reimbursement is a reasonable amount
given the size and complexity of the transactions contemplated by this
Agreement. The Expense Reimbursement shall be paid by wire transfer or other
means acceptable to the Purchaser not later than five (5) Business Days
following the Seller's receipt of written notice from the Purchaser describing
the fees and
48
expenses which constitute the Expense Reimbursement in reasonable detail (the
"Expense Reimbursement Notice").
(b) In the event that this Agreement is terminated under
Section 7.1(d), and provided that the Purchaser is not in material breach of any
provision of this Agreement prior to such termination, the Seller shall: (i) pay
the Purchaser, in cash, the Expense Reimbursement (up to the Expense
Reimbursement Limit) by wire transfer or other means acceptable to the Purchaser
not later than five (5) Business Days following receipt by the Seller of the
Expense Reimbursement Notice; and (ii) pay to the Purchaser, in cash, the sum of
$4,375,000 (the "Break-up Fee") not later than the earlier of: (A) five (5)
Business Days after the closing of a Competing Transaction and (B) five (5)
Business Days after the date of the termination of a Competing Transaction prior
to closing; provided that the Break-up Fee shall only be payable by the Seller
pursuant to Section 7.2(b)(ii)(B) if the Seller retains a good faith deposit
remitted to the Seller by a purchaser in a Competing Transaction. The Purchaser
acknowledges and agrees that if the Bidding Procedures, other than the amount of
the Break-Up Fee and/or the Expense Reimbursement, set forth in the Bidding
Procedures Order are approved and if payment of the full amount of such Break-Up
Fee and/or Expense Reimbursement are otherwise assured to the Purchaser, then
the Purchaser may not terminate this Agreement pursuant to Section 7.1(e)(ii).
(c) The Purchaser acknowledges that the Purchaser shall
not be relieved of its obligations hereunder if approval by the Bankruptcy Court
of the provisions of Section 7.2(b)(ii)(B) herein is not obtained but payment of
the Break-Up Fee in the circumstances set forth in Section 7.2(b)(ii)(B) is
otherwise assured.
7.3 Survival After Termination. If this Agreement is terminated
pursuant to Section 7.1 and the transactions contemplated hereby are not
consummated, this Agreement shall become null and void and have no further force
or effect, except that any such termination shall be without prejudice to the
rights of any party on account of the nonsatisfaction of the conditions set
forth in Articles 5 and 6 resulting from the intentional or willful breach or
violation of the representations, warranties, covenants or agreements of another
party under this Agreement. Notwithstanding anything in this Agreement to the
contrary, the provisions of Sections 4.2, 4.3, 7.2, this Section 7.3, and
Section 9 shall survive any termination of this Agreement.
7.4 Waiver. Each party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto, (c) waive
compliance with any of the agreements of the other party contained herein, or
(d) waive satisfaction of any condition to its obligations hereunder. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby.
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8. Indemnification.
8.1 Indemnification by the Seller. Subject to Section 4.15 and to
the extent provided in this Article VIII, from and after the Closing Date, the
Seller shall indemnify, defend and hold harmless the Purchaser's Indemnified
Persons, and each of them, from and against any Losses incurred or suffered by
the Purchaser's Indemnified Persons as a result of or arising from:
(a) any breach of any representation or warranty of the
Seller;
(b) the breach of any covenant, agreement or other
obligation of the Seller set forth in this Agreement;
(c) the Excluded Liabilities;
(d) payments to be made under the Infiniti Settlement
Agreement with regard to sales made on or before June 30, 2004;
(e) the Seller's pro rata portion of the Year End Bonuses
paid by the Purchaser and calculated in accordance with Section 1.5(e);
(f) any payments required to be paid by the Seller
pursuant to Section 1.6(d);
(g) any payments required to be paid by the Seller
pursuant to Section 1.7(c); and
(h) any payments required to be paid by the Seller
pursuant to Section 4.8(g).
8.2 Seller Limitations. Notwithstanding anything in this Agreement
to the contrary, in no event shall any of the Purchaser's Indemnified Persons
recover, or seek to recover, by claim for indemnification or otherwise, any
Losses until:
(a) notice thereof shall have been given by or on behalf
of any of the Purchaser's Indemnified Persons to the Seller in the manner
provided in Section 8.5; and
(b) the aggregate of all Losses recoverable by the
Purchaser's Indemnified Persons exceeds $750,000 (the "Purchaser Recovery
Threshold"), in which event all Losses in excess of the Purchaser Recovery
Threshold shall be recoverable by the Purchaser's Indemnified Persons in
accordance with the terms of this Agreement; provided, that no loss exceeding
the Indemnity Deposit shall be recoverable; and provided further that amounts
payable by the Seller pursuant to Sections 8.1(d), (e), (f), (g) and (h): (A)
shall not be subject to the Purchaser Recovery Threshold; (B) shall be paid
promptly out of the Indemnity Deposit in accordance with the Indemnity Escrow
Agreement, and (C) shall not be included in the calculation of determining
whether the aggregate of all Losses recoverable by the Purchaser's Indemnified
Parties for claims made pursuant to Sections 8.1(a), (b), and (c) exceeds the
Purchaser Recovery Threshold.
50
(c) the obligations of the Seller under Section 8.1 shall
be deemed to be waived by the Purchaser's Indemnified Persons to the extent of
any waiver of Section 6.1 as provided in Section 4.15.
The Purchaser acknowledges and agrees that the Indemnity
Deposit is the sole source of funding for any Claims for indemnification for the
Purchaser Indemnified Parties and under no circumstances shall any Purchaser
Indemnified Party be entitled to be indemnified to the extent the Losses exceed
the Indemnity Deposit.
8.3 Indemnification by the Purchaser. Subject to Section 4.15 and
to the extent provided in this Article VIII, from and after the Closing Date,
the Purchaser shall indemnify, defend and hold harmless the Seller's Indemnified
Persons, and each of them, from and against any Losses incurred or suffered by
the Seller's Indemnified Persons as a result of or arising from:
(a) any breach in any representation or warranty of the
Purchaser;
(b) the breach of any covenant, agreement or other
obligation of the Purchaser set forth in this Agreement;
(c) the Assumed Liabilities; and
(d) any payments required to be paid by the Purchaser
pursuant to Section 1.7(c).
8.4 Purchaser's Limitations. Notwithstanding anything in this
Agreement to the contrary, in no event shall any of the Seller's Indemnified
Persons recover, or seek to recover, by claim for indemnification or otherwise,
any Losses until:
(a) notice thereof shall have been given by or on behalf
of any of the Seller's Indemnified Persons to the Purchaser in the manner
provided in Section 8.5;
(b) the aggregate of all Losses recoverable by the
Seller's Indemnified Persons exceeds $750,000 (the "Seller Recovery Threshold"),
in which event all Losses in excess of the Seller Recovery Threshold shall be
recoverable by the Seller's Indemnified Persons in accordance with the terms of
this Agreement; provided that amounts payable by the Purchaser pursuant to
Section 8.3(d): (A) shall not be subject to the Seller Recovery Threshold; (B)
shall be paid promptly by the Purchaser; and (C) shall not be included in the
calculation of determining whether the aggregate of all Losses recoverable by
the Seller's Indemnified Parties for claims made pursuant to Section 8.3(a),
(b), and (c) exceeds the Seller Recovery Threshold; and
(c) the obligations of the Purchaser under Section 8.3
shall be deemed to be waived by the Seller's Indemnified Persons to the extent
of any waiver of Section 5.1 as provided in Section 4.15.
51
8.5 Notice and Procedure. All claims for indemnification by any
Indemnified Party against an Indemnifying Party under this Article VIII shall be
asserted and resolved as follows:
(a) (i) If any claim or demand for which an Indemnifying
Party would be liable for Losses to an Indemnified Party is alleged or asserted
by a Person other than any of Purchaser's Indemnified Persons or any of Seller's
Indemnified Persons (a "Third Party Claim"), the Indemnified Party shall deliver
written notice (a "Claim Notice") promptly to the Indemnifying Party, together
with a copy of all papers served, if any, and specifying the nature of and
alleged basis for the Third Party Claim and, to the extent then feasible, the
alleged amount or the estimated amount of the Third Party Claim. If the
Indemnified Party fails to deliver the Claim Notice to the Indemnifying Party
within twenty (20) days after the Indemnified Party receives notice of such
Third Party Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim if, and only to the
extent that, the Indemnifying Party's ability to defend the Third Party Claim
has been prejudiced by such failure. The Indemnifying Party will notify the
Indemnified Party within thirty (30) days after receipt of the Claim Notice (the
"Notice Period") whether the Indemnifying Party intends, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against the
Third Party Claim. Should the Indemnifying Party elect to assume the defense of
a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, except as provided by
Section 8.5(a)(ii).
(i) If the Indemnifying Party notifies the
Indemnified Party within the Notice Period that the Indemnifying Party
intends to defend the Indemnified Party against the Third Party Claim,
then the Indemnifying Party will have the right to defend, at its sole
cost and expense, the Third Party Claim by all appropriate proceedings,
which proceedings will be diligently prosecuted by the Indemnifying
Party to a final conclusion or settled at the discretion of the
Indemnifying Party (with the consent of the Indemnified Party, which
shall not be unreasonably withheld or delayed). The Indemnifying Party
will have full control of such defense and proceedings; provided,
however, that the Indemnified Party may file during the Notice Period,
at the sole cost and expense of the Indemnified Party, any motion,
answer or other pleading that the Indemnified Party may deem necessary
or appropriate to protect its interests and not prejudicial to the
Indemnifying Party (it being understood and agreed that if an
Indemnified Party takes any such action that is prejudicial or
conclusively causes a final adjudication that is materially adverse to
the Indemnifying Party (including, but not limited to, any admission of
any liability with respect to, or settlement, compromise or discharge
of, such Third Party Claim without the Indemnifying Party's prior
written consent), the Indemnifying Party will be relieved of its
obligations hereunder with respect to that portion of the Third Party
Claim prejudiced by the Indemnified Party's action); provided, further,
however, that, if requested by the Indemnifying Party, the Indemnified
Party shall cooperate, at the sole cost and expense of the Indemnifying
Party, with the Indemnifying Party and its counsel in contesting any
Third Party Claim that the Indemnifying Party elects to contest or,
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if appropriate in the judgment of the Indemnified Party, in making any
counterclaim or cross-claim against any Person (other than the
Indemnified Party). Such cooperation shall include the retention and
(upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information that are reasonably
relevant to such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided thereunder. The Indemnified Party
may participate in, but not control, any defense or settlement of any
Third Party Claim assumed by the Indemnifying Party pursuant to this
Section 8.5(a)(ii) and, except as provided in this Section 8.5(a)(ii),
the Indemnified Party will bear its own costs and expenses with respect
to such participation. Notwithstanding the foregoing, the Indemnifying
Party may not assume the defense of the Third Party Claim if (1) the
Persons against whom the claim is made, or any impleaded Persons,
include both the Indemnifying Party and any Indemnified Party, and (2)
representation of both such Persons by the same counsel would be
inappropriate due to conflicting interests between them, in which case
any Indemnified Party shall have the right to defend the Third Party
Claim and to employ counsel at the expense of the Indemnifying Party.
(ii) If the Indemnifying Party fails to notify
the Indemnified Party within the Notice Period that the Indemnifying
Party intends to defend the Indemnified Party against the Third Party
Claim, or if the Indemnifying Party gives such notice but fails to
diligently prosecute or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within the
Notice Period, then the Indemnified Party will have the right (but not
the obligation) to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings will be diligently prosecuted by the
Indemnified Party to a final conclusion or settled at the discretion of
the Indemnified Party. In any such instance, the Indemnified Party will
have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that, if requested
by the Indemnified Party, the Indemnifying Party shall cooperate, at
the sole cost and expense of the Indemnifying Party, with the
Indemnified Party and its counsel in contesting the Third Party Claim
which the Indemnified Party is contesting, or, if appropriate and
related to the Third Party Claim in question, in making any
counterclaim or cross claim against any Person (other then the
Indemnifying Party).
(iii) If the Indemnifying Party notifies the
Indemnified Party within the Notice Period that the Indemnifying Party
disputes its obligation to indemnify the Indemnified Party against the
Third Party Claim, and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party will not be required to bear
the costs and expenses of the Indemnified Party's defense pursuant to
Section 8.5(a) or of the Indemnifying Party's participation therein at
the Indemnified Party's request, and the Indemnified Party will
reimburse the Indemnifying Party in full for all reasonably incurred
costs and expenses.
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(b) In the event any Indemnified Party should have a
claim against any Indemnifying Party that is not a Third Party Claim, the
Indemnified Party shall deliver a written notice (an "Indemnity Notice") with
reasonable promptness to the Indemnifying Party specifying the nature of and
specific basis for the claim and, to the extent then feasible, the amount or the
estimated amount of the claim. The failure by any Indemnified Party to give
timely notice referred to in the preceding sentence shall not impair such
Person's rights hereunder except to the extent that an Indemnifying Party
demonstrates that it has been significantly prejudiced thereby. If the
Indemnifying Party does not notify the Indemnified Party within thirty (30) days
following its receipt of the Indemnity Notice that the Indemnifying Party
disputes its obligation to indemnify the Indemnified Party hereunder, the claim
will be conclusively deemed a liability of the Indemnifying Party hereunder.
(c) If the Indemnifying Party timely disputes its
liability with respect to a claim described in a Claim Notice or an Indemnity
Notice, the Indemnifying Party and the Indemnified Party shall proceed promptly
and in good faith to negotiate a resolution of such dispute within sixty (60)
days following receipt of the Claim Notice or Indemnity Notice.
(d) Except where liability is disputed pursuant to
Section 8.5(c), the Indemnifying Party shall pay the amount of any liability to
the Indemnified Party within thirty (30) days following the final resolution of
any Third Party Claim or any such other Claim by the Indemnified Party. In the
event the Indemnified Party is not paid in full for its claim in a timely manner
after the Indemnifying Party's obligation to indemnify and the amount thereof
has been determined, the amount due shall bear interest from the date that the
Indemnifying Party received the Claim Notice or the Indemnity Notice until paid
at the Discount Rate provided, and in addition to any other rights it may have
against the Indemnifying Party, the Indemnified Party shall have the right to
set-off the unpaid amount of such Claim against any amounts owed by it to the
Indemnifying Party.
(e) Any estimated amount of a Claim submitted in a Claim
Notice or an Indemnity Notice shall not be conclusive of the final amount of
such Claim, and the giving of a Claim Notice when an Indemnity Notice is
properly due, or the giving of an Indemnity Notice when a Claim Notice is
properly due, shall not impair such Indemnified Party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
prejudiced thereby.
8.6 Remedies. The indemnification provisions of this Article VIII
shall be the sole and exclusive remedy of the parties following the Closing,
including for any Claims for the recovery of Losses, whether directly or by way
of contribution, for any and all breaches or alleged breaches of any
representation, warranties, covenants or agreements of the parties or other
provision of this Agreement or the transactions contemplated hereby other than
for claims of, or causes of action arising from fraud. Under no circumstances
shall any Indemnified Party be entitled to be indemnified for punitive or other
similar damages.
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8.7 Survival of Representations; Indemnity Periods.
Notwithstanding any right of the Purchaser (whether or not exercised) to
investigate the Business or any right of any party (whether or not exercised) to
investigate the accuracy of the representations and warranties of the other
party contained in this Agreement, the Seller has, on the one hand, and the
Purchaser has, on the other hand, the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement. The representations and warranties in this Agreement made by the
Seller and the Purchaser respectively will survive the Closing until the one
year anniversary of the Closing Date (the "Survival Period"); provided that:
(a) any representation, warranty, covenant or agreement
that would otherwise terminate in accordance with the Survival Period shall
survive if a Claim Notice or an Indemnity Notice , in either case specifying in
reasonable detail the nature of the Claim, shall have been given on or prior to
the expiration of such Survival Period, until the related Claim for
indemnification has been satisfied or otherwise resolved as provided in this
Section 8; provided, however, that all Claims for indemnification specified in
the Claim Notice or Indemnity Notice must be asserted prior to the expiration of
the Survival Period and if any such Claim is not made before the expiration of
the Survival Period, the Indemnified Party shall not be entitled to
indemnification; and
(b) covenants and agreements to be performed after the
Closing Date will survive the Closing for the term specified therein, or, if no
term is specified, indefinitely.
9. Miscellaneous.
9.1 Certain Definitions.
(a) As used in this Agreement, the following terms have
the following meanings:
"ACCOUNTS RECEIVABLE" means accounts receivable and all trade
receivables arising primarily in connection with the operation or conduct of the
Business or the Subsidiaries, together with any unpaid interest accrued thereon
from the respective obligors and any security or collateral therefor, including
recoverable deposits.
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person.
"ASSIGNED INVENTORY" means all Inventory other than the Excluded
Inventory.
"ASSIGNED SPORTING GOODS RIGHTS" means the rights of the Seller under
Sections 5.3, 5.5, 5.9, 5.19 and 5.22 and Article XI (to the extent applicable)
of the Sporting Goods APA and the Sporting Goods Transition Services Agreement
(other than amounts owing to the Seller on the Closing Date).
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"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and
Assumption Agreement substantially in the form of Exhibit A hereto to be
executed by the Purchaser and the Seller on the Closing Date.
"ASSIGNMENTS OF INTANGIBLE PROPERTY" means the Assignments of
Intangible Property substantially in the form of Exhibit G hereto to be executed
by the Seller on the Closing Date.
"ASSUMED CONTRACTS" means the Contracts listed on Schedule 1.1(b).
"ASSUMED SPORTING GOODS OBLIGATIONS" means the obligations of the
Seller under Sections 5.2(c), 5.3, 5.5, 5.6 (to the extent applicable), 5.9,
5.12, 5.14, 5.19, 5.22 and 5.23 and Article XI (to the extent applicable) of the
Sporting Goods APA and the Sporting Goods Transition Services Agreement.
"▇▇▇▇ OF SALE" means Bills of Sale substantially in the form of Exhibit
B hereto to be executed by the Seller on the Closing Date.
"BOOKS AND RECORDS" means all files, documents, instruments, papers,
books and records, including Tax books and records (whether stored or maintained
in hard copy, digital or electronic format or otherwise) of the Seller used by
the Seller primarily in connection with the ownership, operation or conduct of
the Business or the Assets, including Contracts, customer lists, customer
information and account records, computer files, data processing records,
employment and personnel records, advertising and marketing data and records,
credit records, records relating to suppliers and other data.
"BUSINESS" means the Seller's and the Subsidiaries' business of (i)
manufacturing, marketing, distributing and selling golf clubs, golf balls, golf
shoes, golf bags, golf gloves, golf equipment and golf-related hard goods and
(ii) licensing third parties to use the TOP-FLITE, ▇▇▇ ▇▇▇▇▇, STRATA and related
trademarks on other products.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which banks located in New York, New York are authorized or obligated to
close.
"CLAIM" means a suit, claim, action, proceeding, inquiry,
investigation, litigation, demand, charge, complaint, grievance, arbitration,
indictment, information, or grand jury subpoena.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985 as described in Section 4980B of the Code, sections 601 et seq. of ERISA,
each as amended, and the regulations promulgated thereunder.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACT" means any written or oral agreement, arrangement,
understanding, lease or instrument or other contractual or similar arrangement
or commitment.
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"CURE COSTS" means the cure, compensation and restatement, costs and
expenses of or relating to the assumption and assignment of the Assumed
Contracts, Real Property Leases and Permits included in the Assets assumed and
assigned to the Purchaser hereunder pursuant to Section 365 of the Bankruptcy
Code.
"CURRENT RECEIVABLES" means all Accounts Receivable that as of the
Closing Date are not more than 90 days past due. For the sake of clarity,
Current Receivables shall not include any accounts receivable associated with
the ETONIC business or the Sporting Goods Business.
"CURRENT RECEIVABLES DEPOSIT" means an amount equal to 10% of the
Deemed Closing Date A/R Value of the Assigned Current Receivables, which shall
be in cash to be delivered by the Purchaser to the Escrow Agent pursuant to
Section 1.10(c) and subject to the Current Receivables Escrow Agreement.
"CURRENT RECEIVABLES ESCROW AGREEMENT" means the Current Receivables
Escrow Agreement by and among the Seller, the Purchaser and the Escrow Agent,
pursuant to which the Current Receivables Deposit will be delivered to the
Escrow Agent at the Closing to secure certain obligations of the Seller under
this Agreement, substantially in the form of Exhibit F attached hereto.
"DEEMED CLOSING DATE A/R VALUE" means the gross asset value of the
Current Receivables, or any subset thereof (where applicable), as of the Closing
Date, excluding all reserves, but otherwise determined in accordance with the
same method of valuation as that used in the Financial Statements and the books
and records of the Seller consistent with past practices.
"DEEMED CLOSING DATE INVENTORY VALUE" means (i) the consolidated
standard cost, including both the variable and fixed overhead, of the Inventory,
excluding all intercompany profit, all reserves and capitalized variances, but
otherwise determined in accordance with the same method of valuation as that
used in the Financial Statements and the books and records of Seller multiplied
by (ii) 0.97.
"DEFECT" means a defect, fault, imperfection, impurity or dangerous
propensity of any kind, whether in design, manufacture, production, materials,
workmanship, processing or otherwise, including, without limitation, any failure
to warn or breach of express or implied warranties or representations, or the
failure to warn of the existence of any defect, fault, imperfection, impurity or
dangerous propensity with respect to the products sold in the course of
operating the Business.
"DISCOUNT RATE" means the discount rate as reported in The Wall Street
Journal, New York Edition on the Closing Date.
"ENCUMBRANCES" means all Liens, claims, conditional sales agreements,
rights of first refusal or options.
"EQUIPMENT" means all equipment, furniture, fixtures, machinery, tools,
plant, inventory, supplies, testing equipment, motor vehicles, office equipment,
computers and
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peripheral equipment and supplies of the Seller, which are used primarily in
connection with the ownership, conduct or operation of the Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means U.S. Bank National Association.
"ETONIC BUSINESS" means the ETONIC golf shoe and golf glove business
formerly operated by the Seller, together with the Seller's former rights as
licensor of the trademark ETONIC for use on athletic shoes, apparel, and other
products.
"ETONIC SALE AGREEMENTS" means collectively each of the following
agreements, dated as of April 8, 2003: (i) the Asset Purchase Agreement (the
"ETONIC APA") between the Seller, Lisco Sports, Inc. and ETONIC Worldwide LLC
("EWL"); (ii) the Transition Services Agreement (the "ETONIC Transition Services
Agreement") by and between EWL and the Seller; (iii) the Escrow Agreement (the
"ETONIC Escrow Agreement") by and among EWL, the Seller and ▇▇▇▇▇ Brothers
▇▇▇▇▇▇▇▇ & Co.; and (iv) all other agreements and documents entered into in
connection therewith, each, as may be amended and supplemented from time to
time.
"EXCLUDED CONTRACTS" means all Contracts other than those listed on
Schedule 1.1(b).
"EXCLUDED EQUIPMENT" means the Equipment of the Seller and the
Subsidiaries listed on Schedule 1.2(c).
"EXCLUDED ETONIC RIGHTS" means all rights of the Seller pursuant to the
ETONIC Sale Agreements.
"EXCLUDED INFORMATION" means all customers lists, customer information
and account records, and records relating to suppliers described on Schedule
1.2(g), in each case that relate primarily to the Excluded Operations.
"EXCLUDED INTELLECTUAL PROPERTY" means the Intellectual Property listed
on Schedule 1.2(f).
"EXCLUDED INVENTORY" means the Inventory of the Seller and its
Subsidiaries listed on Schedule 1.2(b). Such Excluded Inventory relates
primarily to the Excluded Operations and includes Inventory defined as "Excluded
Inventory" pursuant to the Sporting Goods APA.
"EXCLUDED PERMITS" means the Permits of the Seller and the Subsidiaries
listed on Schedule 1.2(d).
"EXCLUDED OPERATIONS" means the assets sold pursuant to the ETONIC APA,
the assets sold pursuant to the Sporting Goods APA, the ETONIC Business and the
Sporting Goods Business.
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"EXCLUDED SECURITIES" means the securities described on Schedule 1.2(h)
which were issued in connection with proceedings of a bankruptcy of a customer.
"EXCLUDED SPORTING GOODS RIGHTS" means the rights of the Seller
pursuant to the Sporting Goods Sale Agreements other than the Assigned Sporting
Goods Rights.
"FINAL ORDER" means an order of the Bankruptcy Court or other court of
competent jurisdiction: (a) as to which no appeal, notice of appeal, motion to
amend or make additional findings of fact, motion to alter or amend judgment,
motion for rehearing or motion for new trial has been timely filed or, if any of
the foregoing has been timely filed, it has been disposed of in a manner that
upholds and affirms the subject order in all material respects without the
possibility for further appeal or rehearing thereon; (b) as to which the time
for instituting or filing an appeal, motion for rehearing or motion for new
trial shall have expired; and (c) as to which no stay is in effect; provided,
however, that the filing or pendency of a motion under Federal Rule of
Bankruptcy Procedure 9024 shall not cause an order not to be deemed a "Final
Order" unless such motion shall be filed within ten (10) days of the entry of
the order at issue.
"FOREIGN SUBSIDIARIES" means the Subsidiaries other than Lisco Sports,
Inc.
"GOVERNMENTAL BODY" means a domestic or foreign national, federal,
state, provincial, or local governmental, regulatory or administrative
authority, department, agency, commission, court, tribunal, arbitral body or
self-regulated entity.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNIFIED PARTY" means any Person entitled to indemnification under
Article VIII.
"INDEMNIFYING PARTY" means any Person obligated to indemnify another
Person under Article VIII.
"INDEMNITY DEPOSIT" means initially $12,500,000 in cash to be delivered
by the Purchaser to the Escrow Agent pursuant to Section 1.10(b) and subject to
the Indemnity Escrow Agreement. In accordance with the Indemnity Escrow
Agreement, on the six month anniversary of the Closing Date, the Released Amount
shall be released to the Seller. The "Released Amount" shall be (i) the
remaining Indemnity Deposit on the six month anniversary of the Closing Date
minus (ii) the sum of (A) $6,250,000, plus (B) any amount then payable to the
Purchaser's Indemnified Persons, plus (C) any additional Third Party Claims or
Indemnity Claims claimed in good faith by the Purchaser's Indemnified Persons
and disputed in good faith by the Seller as the Indemnifying Party. If the
result of the foregoing calculation results in the Released Amount being zero or
a negative number, then no amount shall be released from the Indemnity Deposit
on the six month anniversary of the Closing Date.
"INDEMNITY ESCROW AGREEMENT" the Indemnity Escrow Agreement by and
among the Seller, the Purchaser and the Escrow Agent, pursuant to which the
Indemnity
59
Deposit will be delivered to the Escrow Agent at the Closing to secure certain
obligations of indemnity of the Seller under this Agreement substantially in the
form of Exhibit E attached hereto.
"INDEPENDENT ACCOUNTANTS" means Ernst & Young LLP.
"INFINITI SETTLEMENT AGREEMENT" means the settlement agreement between
the Seller and the Infiniti Golf Company, to be entered into following the
Closing and relating to the item disclosed on Schedule 2.15, which agreement
shall not be amended or modified by the Purchaser without the prior written
consent of the Seller; provided that the Purchaser may amend or modify the
Infiniti Settlement Agreement without the consent of the Seller so long as such
amendment or modification does not increase the amount of the indemnification
obligation owed by the Seller to the Purchaser.
"INTELLECTUAL PROPERTY" means all (i) inventions, discoveries,
processes, designs, techniques, developments and related improvements, whether
or not patentable, (ii) United States patents, patent applications, divisionals,
continuations, reissues, renewals, registrations, confirmations,
re-examinations, extensions and any provisional applications, of any such
patents or patent applications, and any foreign or international equivalent of
any of the foregoing, (iii) any United States registered or pending trademark,
trade dress, service ▇▇▇▇, service name, trade name, brand name, logo, domain
name, or business symbol and any foreign or international equivalent of any of
the foregoing, and all goodwill associated therewith, (iv) any work
specifications, software (including object and source code listing) and artwork,
and (v) technical, scientific, and other know-how and information, trade
secrets, methods, processes, practices, formulas, designs, assembly procedures,
specifications owned by, or used primarily in the operation of the Business by,
the Seller and the Subsidiaries, in each case, other than the Excluded
Intellectual Property.
"INVENTORY" means all inventory of the Seller and its Subsidiaries,
wherever located, including raw materials, supplies, packaging, spare parts,
finished goods and work-in-process, and additions thereto and all other
materials and supplies to be used or intended for use or consumed in the
production of products primarily related to the Business.
"IRS" means the United States' Internal Revenue Service.
"LIABILITIES" means any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, ▇▇▇▇▇▇ or inchoate matured or unmatured, or otherwise. Without
limiting the foregoing in any manner, the term "Liabilities" includes and refers
to all liabilities and obligations for or with respect to Taxes, including
without limitation, liabilities for Taxes of any Person under Treasury
Regulation Section 1.1502-6
60
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
"LIEN" means any security interest, mortgage, pledge, lien,
encumbrance, charge or claim (as defined in Section 101(5) of the Bankruptcy
Code).
"LOSSES" means any and all damages, costs, losses, Liabilities,
expenses or obligations (including all Taxes, interest, penalties, court costs,
costs of preparation and investigation, and reasonable attorneys', accountants',
and other professional advisors' fees and expenses).
"MATERIAL ADVERSE EFFECT" means any change in, or effect on, the
Business that is materially adverse to the results of operations or the
financial condition of the Seller or the Business, other than (i) changes or
effects resulting from the transactions contemplated by this Agreement, the
announcement thereof or any actions by Seller with regard to, including any
failure to pay, Excluded Liabilities, (ii) changes in U.S. general economic or
securities market conditions, (iii) changes or conditions generally affecting
the golf or golf equipment industry or the industry for other golf related
equipment, (iv) changes resulting from acts of terrorism or acts of war or
escalation of hostilities, whether occurring within or outside the United
States, or any effect of any such acts or hostilities on general economic or
other conditions, except to the extent such acts disproportionately affect (in a
manner that is material and adverse) the Seller or the Business or (v) changes
or effects resulting from or relating to the Bankruptcy Case.
"PAST DUE RECEIVABLES" means all Accounts Receivable that as of the
Closing Date are more than 90 days past due.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
entity thereto.
"PERMITTED ENCUMBRANCE" means (a) Liens for Taxes and assessments not
yet payable, (b) inchoate mechanics' Liens for work in progress, (c)
materialmen's, mechanics', carriers', workmen's and repairmen's Liens arising in
the ordinary course and not past due and payable or the payment of which is
being contested in good faith by appropriate proceedings, (d) Liens that will be
released at or prior to Closing, (e) (i) easements, rights-of-way, servitudes,
permits, licenses, surface leases, ground leases to utilities, municipal
agreements, railway siding agreements and other rights, all as reflected in the
official records of the jurisdictions where the Real Property is located, (ii)
conditions, covenants or other restrictions reflected in the official records of
the jurisdictions where the Real Property is located, and (iii) easements for
streets, alleys, highways, telephone lines, gas pipelines, power lines, railways
and other easements and rights-of-way on, over or in respect of any Real
Property, all as reflected in the official records of the jurisdictions where
the Real Property is located and that, with respect to clauses (a), (b), (c),
and (d) above and this clause (e), individually or in the aggregate, do not or
would not reasonably be expected to materially and adversely affect the current
use or value of the Real Property subject thereto or the operations of the
Seller as it is currently conducted, and (f) Liens related to purchase money
security interests entered
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into in the ordinary course of business. Notwithstanding any provision herein to
the contrary, a "Permitted Encumbrance" shall not include a Lien in favor of the
PGBC.
"PERSON" means any individual, corporation, partnership, limited
liability company, limited liability partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
"PREPAID EXPENSES" means all credits, prepaid expenses (including
unamortized advertising expenses), deferred charges, advance payments, security
deposits, and prepaid items (including in respect of Taxes) of the Seller
arising primarily in connection with the operation or conduct of the Assets or
the Business, in each case which are paid or prepaid by the Seller on or prior
to the Closing Date and that correspond to, or are to be amortized during, a
period after the Closing Date, which shall be valued based upon the same method
of valuation used in preparing the Financial Statements and on the books of
accounts and other financial records of the Business.
"PURCHASER'S INDEMNIFIED PERSONS" means the Purchaser and the
Purchaser's stockholders, members, Affiliates, successors and assigns, and their
respective stockholders, partners, Affiliates, directors, trustees, officers,
employees, agents and Representatives.
"REPRESENTATIVE" means, with respect to a particular Person, any
director, officer, manager, partner, member, employee, agent, consultant,
advisor or other representative of such Person, including legal counsel,
accountants, and financial advisors.
"RETAINED RECEIVABLES" means all Past Due Receivables, all Retained
Current Receivables and all Accounts Receivable of the Seller that relate
primarily to the Excluded Operations.
"SELLER'S INDEMNIFIED PERSONS" means the Seller and the Seller's
stockholders, members, Affiliates, successors and assigns, and their respective
stockholders, partners, Affiliates, directors, trustees, officers, employees,
agents and Representatives.
"SELLER'S KNOWLEDGE" means the actual knowledge of the Chief Executive
Officer of the Seller, the Chief Financial Officer of the Seller, the General
Counsel of the Seller and the Executive Vice President of Operations of the
Seller, or persons serving in such capacities to the extent that any such office
is not held by a Person.
"SIGNING BONUSES" means payments made promptly following the Closing
pursuant to Section 1.5(f) to those Transferred Employees set forth on Schedule
1.5(f) in the amount set forth on such Schedule opposite the name of each Person
listed thereon.
"SPORTING GOODS BUSINESS" means the business sold to ▇▇▇▇▇▇▇ pursuant
to the Sporting Goods APA (which is referenced below).
"SPORTING GOODS SALE AGREEMENTS" means collectively each of the
following agreements: (i) the Asset Purchase Agreement, dated as of April 16,
2003, (the "Sporting Goods APA") by and between the Seller, Spalding Australia
Pty Ltd., SHC, Inc. and
62
▇▇▇▇▇▇▇ Corporation ("▇▇▇▇▇▇▇"), (ii) the Transition Services Agreement (the
"Sporting Goods Transition Services Agreement"), dated as of May 16, 2003, by
and between the Seller and ▇▇▇▇▇▇▇, (iii) the Security Agreement (the "Sporting
Goods Security Agreement"), dated as of May 16, 2003, by and among the Seller
and ▇▇▇▇▇▇▇, (iv) the Control Agreement, dated as of May 16, 2003, by and among
the Seller, ▇▇▇▇▇▇▇ and Wachovia Bank, and (v) all other agreements and
documents entered into in connection thereto, each, as may be amended or
supplemented from time to time.
"SUBSIDIARY ASSETS" means the Assets of the Subsidiaries listed on
Schedule 1.1(a).
"SUBSIDIARY STOCK" means the capital stock of each Subsidiary that is
held of record by the Seller.
"TAX" or "TAXES" means all taxes, charges, fees, imposts, levies or
other assessments, including all net income, franchise, profits, gross receipts,
capital, sales, use, ad valorem, value added, transfer, transfer gains,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, real or personal
property, and estimated taxes, customs duties, fees, assessments and charges of
any kind whatsoever, together with any interest and any penalties, fines,
additions to tax or additional amounts thereon, imposed by any taxing authority
(federal, state, local or foreign) and shall include any transferee liability in
respect of Taxes.
"TAX RETURNS" means all returns, declarations, reports, forms,
estimates, information returns and statements required to be filed in respect of
any Taxes or to be supplied to a taxing authority in connection with any Taxes.
(b) (b) The following capitalized terms are defined in the following Sections of
this Agreement:
Term Section
---- -------
Acquisition.......................................................................... Recitals
Agreement............................................................................ Preamble
Applicable Interest.................................................................. 1.6(e)
A/R Reconciliation................................................................... 1.7(a)(iv)
Assets............................................................................... 1.1
Assigned A/R Value................................................................... 1.7(a)(i)
Assigned Current Receivables......................................................... 1.7(a)(i)
Assumed Liabilities.................................................................. 1.3
Bankruptcy Case...................................................................... Recitals
Bankruptcy Code...................................................................... Recitals
Bankruptcy Court..................................................................... Recitals
Benefit Plan......................................................................... 2.17(a)
Bidding Procedures................................................................... 4.9
Bidding Procedures Order............................................................. 4.9
Break-Up Fee......................................................................... 7.2(b)
63
Term Section
---- -------
Certificate of Occupancy............................................................. 2.13(f)
Claim Notice......................................................................... 8.5(a)
Closing.............................................................................. 1.8
Closing Date......................................................................... 1.8
Closing Date Statement............................................................... 1.6(b)
Closing Inventory.................................................................... 1.6(b)
Collection Fee....................................................................... 1.7(b)(i)
Collection Period.................................................................... 1.7(b)(i)
Competing Transaction................................................................ 7.1(d)
Confidentiality Agreement............................................................ 4.2
Current Receivables Deficiency....................................................... 1.7(a)(iii)
Environmental Law.................................................................... 2.10(a)
Environmental Permits................................................................ 2.10(e)
Excluded Assets...................................................................... 1.2
Excluded Liabilities................................................................. 1.4
Expense Reimbursement................................................................ 7.2(a)
Expense Reimbursement Limit.......................................................... 7.2(a)
Final Adjustment Date................................................................ 1.6(d)
Final Closing Date Statement......................................................... 1.6(c)
Financial Statements................................................................. 2.5
Foreign Plans........................................................................ 2.17(h)
Formerly Owned and Leased Real Property.............................................. 2.13(j)
GAAP................................................................................. 2.5
Hazardous Material................................................................... 2.10(b)
Indemnity Notice..................................................................... 8.5(b)
Insurance Policies................................................................... 2.19
Leased Real Property................................................................. 2.13(b)
Material Contracts................................................................... 2.11(a)
Minor Deficiency..................................................................... 4.15
Objection............................................................................ 1.6(c)
Owned Real Property.................................................................. 2.13(a)
Permits.............................................................................. 2.9
Petition Date........................................................................ Recitals
Purchase Price....................................................................... 1.5
Purchaser............................................................................ Preamble
Real Property........................................................................ 2.13(c)
Real Property Leases................................................................. 2.13(b)
Requirement of Law................................................................... 2.8
Remediation.......................................................................... 2.10(c)
Retained A/R Value................................................................... 1.7(a)(i)
Retained Current Receivables......................................................... 1.7(a)(i)
Returned Goods....................................................................... 1.7(d)
Sale Approval Order.................................................................. 4.9
Schedules............................................................................ 2
Seller............................................................................... Preamble
64
Term Section
---- -------
Seller Consents and Notices.......................................................... 2.3(b)
Seller's Employees................................................................... 2.18(a)
Seller's Inventory Deficiency........................................................ 1.6(d)
Space Leases......................................................................... 2.13(d)
Sporting Goods Financials............................................................ 2.5
Straddle Period Accruals............................................................. 1.5(e)
Subsidiaries......................................................................... 2.2(a)
Survival Period...................................................................... 8.7
Target Inventory..................................................................... 1.6(a)
Target Inventory Statement........................................................... 1.6(a)
Title IV Plan........................................................................ 2.17(b)
Top-Flite Name....................................................................... 4.17
Tour Contracts....................................................................... 1.5(e)
Transitional Employee Reimbursement Amount........................................... 4.8(g)
Transitional Employees............................................................... 4.8(g)
Year End Bonuses..................................................................... 1.5(e)
9.2 Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial.
(a) The Purchaser and the Seller irrevocably and
unconditionally consent to submit to the jurisdiction of the Bankruptcy Court
for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agree not to commence any litigation
relating hereto except in the Bankruptcy Court).
(b) Any and all service of process and any other notice
in any such Claim shall be effective against any party if given personally or by
registered or certified mail, return receipt requested, or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such party as
herein provided. Nothing herein contained shall be deemed to affect the right of
any party to serve process in any manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY.
(d) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE WAIVER IN SECTION 9.2(c), (ii) SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY MAKES SUCH WAIVER
VOLUNTARILY AND (iv) SUCH PARTY HAS
65
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS, AGREEMENTS AND CERTIFICATIONS IN SECTION 9.2(c) AND THIS SECTION
9.2(d).
9.3 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) on the day of delivery if delivered in person, or if delivered by
facsimile upon confirmation of receipt, (b) on the first (1st) Business Day
following the date of dispatch if delivered by a nationally recognized express
courier service, or (c) on the tenth (10th) Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated by notice given in
accordance with this Section 9.3 by the party to receive such notice:
(a) if to the Purchaser, to:
Callaway Golf Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Jamboree Center
▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Seller, to:
The Top-Flite Golf Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
66
9.4 Entire Agreement. This Agreement, together with the
Confidentiality Agreement and any other collateral agreements executed in
connection with the consummation of the transactions contemplated hereby,
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements, written or oral, with respect
thereto. Any exception or disclosure made by Seller in the Schedules to this
Agreement with regard to a representation of the Seller shall be deemed made
with respect to any other representation by such party to which such exception
or disclosure is reasonably apparent.
9.5 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Purchaser and the Seller or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. All remedies, rights, undertakings, obligations,
and agreements contained herein shall be cumulative and not mutually exclusive.
9.6 Governing Law. This Agreement and all Claims with respect
thereto shall be governed by and construed in accordance with federal bankruptcy
law, to the extent applicable, and, where state law is implicated, the laws of
the State of New York without regard to any conflict of laws rules thereof that
might indicate the application of the laws of any other jurisdiction.
9.7 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns. This Agreement is not assignable by any party without the prior written
consent of the other party; provided that the Purchaser, in its sole discretion,
may assign this Agreement to a wholly-owned subsidiary of the Purchaser,
provided, further that the Purchaser shall not be relieved of any of its
obligations under this Agreement as a result of such assignment.
9.8 Usage. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation."
9.9 Articles and Sections. All references herein to Articles and
Sections shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require. The Article and Section headings in this
Agreement are for reference only and shall not affect the interpretation of this
Agreement.
9.10 Interpretation. The parties acknowledge and agree that (a)
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have
67
contributed to its revision, (b) the rule of construction to the effect that any
ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement, and (c) the terms and provisions of this
Agreement shall be construed fairly as to all parties, regardless of which party
was generally responsible for the preparation of this Agreement.
9.11 Severability of Provisions. If any provision or any portion of
any provision of this Agreement shall be held invalid or unenforceable, the
remaining portion of such provision and the remaining provisions of this
Agreement shall not be affected thereby. If the application of any provision or
any portion of any provision of this Agreement to any Person or circumstance
shall be held invalid or unenforceable, the application of such provision or
portion of such provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby.
9.12 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts together shall constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the parties
hereto.
9.13 No Third Party Beneficiaries. Except as otherwise set forth in
Section 4.12 or with respect to the Assumed Sporting Goods Obligations, no
provision of this Agreement is intended to, or shall, confer any third party
beneficiary or other rights or remedies upon any Person other than the parties
hereto. Without limiting the generality of the foregoing and except as otherwise
set forth in Section 4.12 or, with respect to the Assumed Sporting Goods
Obligations, the Sporting Goods Sale Agreements, no provision of this Agreement
shall create any third party beneficiary rights in any employee or former
employee of the Seller or any of the Subsidiaries (including any beneficiary or
dependent thereof) in respect of continued employment by the Seller or any of
the Subsidiaries or otherwise.
9.14 Bulk Transfer Law. The Purchaser hereby waives compliance by
the Seller with the provisions of any so-called bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
[Remainder of Page Intentionally Left Blank]
68
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
CALLAWAY GOLF COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board,
President and Chief Executive Officer
THE TOP-FLITE GOLF COMPANY
(f/k/a SPALDING SPORTS
WORLDWIDE, INC.)
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
Exhibit A
[Form of]
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________,
2003 (this "Agreement"), by and between The Top-Flite Golf Company (f/k/a
Spalding Sports Worldwide, Inc.), a Delaware corporation (the "Seller"), and
Callaway Golf Company, a Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the parties have entered into an Asset Purchase
Agreement dated as of June 30, 2003 (the "Asset Purchase Agreement"; capitalized
terms used and not defined herein are used herein as defined in the Asset
Purchase Agreement), providing for the sale to the Purchaser of certain assets
of the Seller and the assignment to the Purchaser of certain liabilities of the
Seller; and
WHEREAS, the execution and delivery of this Agreement by the
Seller and the Purchaser is a condition to the obligations of the parties to
consummate the transactions contemplated by the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, the parties hereby agree
as follows:
1. The Seller hereby assigns, transfers, and conveys to
the Purchaser all of the Seller's legal, beneficial, and other right, title and
interest in and to the Assumed Contracts.
2. The Purchaser hereby assumes and agrees to pay,
perform and discharge in accordance with their terms (whether fixed or
contingent, matured or unmatured, arising by law or by Contract or otherwise),
subject to any defenses or claimed offsets asserted in good faith against the
obligee to whom such liabilities or obligations are owed, all the Assumed
Liabilities as set forth in Section 1.3 of the Asset Purchase Agreement.
3. Any notice, request or other document to be given
hereunder to either party hereto shall be given in accordance with Section 9.3
of the Asset Purchase Agreement.
4. This Agreement is not assignable without the prior
written consent of the Seller; provided that the Purchaser, in its sole
discretion, may assign this Agreement to a wholly-owned subsidiary of the
Purchaser; provided, further that the Purchaser shall not be relieved of any of
its obligations under this Agreement or the Asset Purchase Agreement as a result
of such assignment.
5. This Agreement and all Claims with respect thereto
shall be governed by and construed in accordance with federal bankruptcy law, to
the extent applicable, and, where state law is implicated, the laws of the State
of New York without regard to any conflict of laws rules thereof that might
indicate the application of the laws of any other jurisdiction.
6. This Agreement may not be amended, waived or
otherwise modified except by a written instrument signed by the parties hereto.
7. The Seller and the Purchaser shall execute,
acknowledge (if appropriate) and deliver, or cause the execution,
acknowledgement and delivery to others of such further documents and instruments
as may reasonably be requested by the other party to implement the purposes of
this Agreement.
6. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
CALLAWAY GOLF COMPANY
By: _____________________________
Name:
Title:
THE TOP-FLITE GOLF COMPANY (f/k/a
SPALDING SPORTS WORLDWIDE,
INC.)
By: _____________________________
Name:
Title:
Exhibit B
[Form of]
▇▇▇▇ OF SALE
▇▇▇▇ OF SALE, dated as of _________, 2003 from The Top-Flite
Golf Company (f/k/a Spalding Sports Worldwide, Inc.), a Delaware corporation
(the "Seller"), to Callaway Golf Company, a Delaware corporation (the
"Purchaser").
WHEREAS, the Seller and the Purchaser have entered into an
Asset Purchase Agreement, dated as of June 30, 2003 (the "Asset Purchase
Agreement"; capitalized terms used and not defined herein are used herein as
defined in the Asset Purchase Agreement), providing for the sale to the
Purchaser of certain assets of the Seller and the assignment to the Purchaser of
certain liabilities of the Seller; and
WHEREAS, the execution and delivery of this ▇▇▇▇ of Sale by
the Seller is a condition to the obligations of the Purchaser to consummate the
transactions contemplated by the Asset Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged and pursuant to the
Asset Purchase Agreement, the Seller by these presents hereby agrees as follows:
1. Sale and Assignment of Assets and Properties. The
Seller does hereby sell, assign, transfer, convey, grant, bargain, set over,
release, deliver and confirm unto the Purchaser, its successors and assigns,
forever, the entire right, title and interest of the Seller in all of the
Seller's properties, assets, and rights of every nature, kind and description,
tangible and intangible (including goodwill) used by the Seller in the conduct
of the Business, wherever such properties, assets and rights are located,
whether real, personal or mixed, whether accrued, contingent or otherwise, as
the same may exist on the Closing Date, other than the Excluded Assets (such
rights, title and interests in and to all such assets, properties and claims
being collectively referred to herein as the "Assets"), in accordance with, and
with all of the protections afforded by, Sections 363 and 365 of the Bankruptcy
Code. Subject to, and only as expressly limited by, the Excluded Assets, the
Assets shall include all of the Seller's right, title, and interest in and to
the assets, properties, rights and claims described in clauses (a) through (m)
below:
(a) the Subsidiary Assets;
(b) all Assumed Contracts;
(c) all Intellectual Property;
(d) all Assigned Current Receivables;
(e) all Assigned Inventory;
(f) all Equipment;
(g) all Prepaid Expenses;
(h) all Books and Records;
(i) all Permits;
(j) all of the Assigned Sporting Goods Rights;
(k) all telephone numbers, addresses (including
electronic mail addresses) used by the Seller or the Subsidiaries primarily in
connection with the operation or conduct of the Business;
(l) all goodwill arising primarily in connection with the
ownership, operation or conduct of the Assets and the Business; and
(m) all other property and assets of the Business,
moveable and immoveable, real and personal, tangible or intangible, of every
kind and description and wheresoever situated, including the full benefit of all
representations, warranties, guarantees, indemnities, undertakings,
certificates, covenants, agreements and all security therefor received by the
Seller on the purchase or other acquisition of any part of the Assets.
2. Further Assurances. The Seller hereby agrees to
execute, acknowledge (if appropriate) and deliver, or cause the execution,
acknowledgment and delivery, of such further documents and instruments as may be
reasonably requested by the Purchaser to implement the purposes of this ▇▇▇▇ of
Sale.
3. No Rights in Third Parties. Nothing expressed or
implied in this ▇▇▇▇ of Sale is intended to or shall confer upon any Person,
other than the parties and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this ▇▇▇▇ of Sale.
4. Successors and Assigns. This ▇▇▇▇ of Sale shall bind
and inure to the benefit of the parties and their respective successors and
assigns.
5. Governing Law. This ▇▇▇▇ of Sale and all Claims with
respect thereto shall be governed by and construed in accordance with federal
bankruptcy law, to the extent applicable, and, where state law is implicated,
the laws of the State of New York without regard to any conflict of laws rules
thereof that might indicate the application of the laws of any other
jurisdiction.
6. Counterparts. This ▇▇▇▇ of Sale may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Seller has caused this ▇▇▇▇ of Sale to be duly
executed as of the day and year first above written.
THE TOP-FLITE GOLF COMPANY (f/k/a
SPALDING SPORTS WORLDWIDE,
INC.)
By: _____________________________
Name:
Title:
Accepted and Agreed to:
CALLAWAY GOLF COMPANY
By: _____________________
Name:
Title:
Exhibit C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
SHC, INC., et al., ) Case No. 03-_____ (___)
)
) (Jointly Administered)
Debtors. )
ORDER APPROVING DEBTORS' MOTION FOR ORDER (A) APPROVING
SALE PROCEDURES INCLUDING, WITHOUT LIMITATION, EXPENSE
REIMBURSEMENT AND BREAK-UP FEE; (B) APPROVING FORM AND
MANNER OF NOTICE; (C) SCHEDULING A HEARING TO CONSIDER THE
SALE OF SUBSTANTIALLY ALL OF THE DEBTORS' ASSETS; AND (D)
GRANTING RELATED RELIEF
Upon the motion (the "Motion") of SHC, Inc., Top-Flight, Inc.,
The Top-Flite Golf Company ("Top-Flite") and Lisco Sports, Inc., the
above-captioned debtors and debtors-in-possession (collectively, the "Debtors"),
requesting entry of an order (A) approving the sale procedures (the "Sale
Procedures") with respect to the proposed sale (the "Asset Sale") of
substantially all of the Debtors' assets (the "Assets"), including the Expense
Reimbursement and Break-Up Fee as set forth below and in the Asset Purchase
Agreement between Callaway Golf Company (the "Purchaser") and Top-Flite (the
"Agreement"); (B) approving the form and manner of notice of the Auction(1) and
the Sale Procedures; (C) scheduling a hearing (the "Sale Hearing") and objection
and competing bid deadline with respect to the Asset Sale; and (D) granting
related relief; and the Court having determined that the relief requested in the
Motion is in the best interests of the
------------------
(1) Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Motion or in the Agreement.
Debtors, their estates, their creditors and other parties-in-interest; and due
and adequate notice of the Motion having been given under the circumstances; and
upon the Declarations of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in support of
the Motion and the Debtors' motion to authorize the Asset Sale, and the
remainder of the record herein; and after due deliberation thereon; and good and
sufficient cause appearing therefore, it is hereby
FOUND, CONCLUDED AND DECLARED THAT:(2)
A. This Court has jurisdiction over this matter and over
the property of the Debtors and their bankruptcy estates pursuant to 28
U.S.C. Sections 157(a) and 1334.
B. This is a core proceeding pursuant to 28
U.S.C. Section 157(b)(2)(A), (M) and (O).
C. Good and sufficient notice of the Motion and the
relief sought therein has been given and no other or further notice is required.
A reasonable opportunity to object or be heard regarding the relief requested in
the Motion has been afforded to parties in interest.
D. The Debtors' proposed notices of (i) the Asset Sale,
(ii) the assumption and assignment of unexpired leases, license agreements and
executory contracts and any cure amounts payable in respect thereof, as
described or referred to in the Agreement, and (iii) the Sale Procedures, are
appropriate and reasonably calculated to provide all interested parties with
timely and proper notice of the Auction, the Asset Sale,
------------------
(2) Findings of fact shall be construed as conclusions of law and
conclusions of law shall be construed as findings of fact when
appropriate. See Fed. R. Bankr. P. 7052.
2
and the assumption and assignment of unexpired leases, license agreements and
executory contracts and the Sale Procedures to be employed in connection
therewith.
E. The Debtors have demonstrated a sound business
justification for authorizing the payment of the Expense Reimbursement and
Break-Up Fee to the Purchaser under the circumstances set forth in the Motion
and the Agreement.
F. The Expense Reimbursement and Break-Up Fee are fair
and reasonable, and were negotiated by the parties in good faith and at arms'
length.
G. The Debtors' payment of the Expense Reimbursement and
Break-Up Fee to the Purchaser, as set forth in the Agreement, is (a) an actual
and necessary cost and expense of preserving the Debtors' bankruptcy estates,
within the meaning of section 503(b) of the Bankruptcy Code, (b) of substantial
benefit to the Debtors' estates, (c) reasonable and appropriate, including in
light of the size and nature of the Asset Sale and the efforts that have been
and will be expended by the Purchaser even though the proposed Asset Sale to the
Purchaser is subject to higher or better offers, and (d) necessary to ensure
that the Purchaser will continue to pursue its proposed acquisition of the
Assets.
H. The Expense Reimbursement and Break-Up Fee were and
are material inducements for, and conditions of, the Purchaser's entering into
the Agreement. The Purchaser is unwilling to commit to hold open its offer to
purchase the Assets under the terms of the Agreement unless it is assured of
payment of the Expense Reimbursement and Break-Up Fee as more fully set forth in
the Agreement. Assurance to the Purchaser of payment of the Expense
Reimbursement and Break-Up Fee has
3
promoted and will promote more competitive bidding by inducing the Purchaser's
bid that otherwise would not have been made, and without which bidding would
have been and would continue to be limited. Further, because the Expense
Reimbursement and Break-Up Fee induced the Purchaser to research the value of
the Assets and submit a bid that will serve as a minimum or floor bid for all of
the Assets on which other bidders and the Debtors can rely, the Purchaser has
provided a benefit to the Debtors' bankruptcy estates by increasing the
likelihood that the price at which the Assets are sold will reflect their true
worth.
I. Absent authorization of the payment of the Expense
Reimbursement and Break-Up Fee, the Debtors may lose the opportunity to obtain
the highest and best available offer for the Assets and the downside protection
afforded by the Agreement. In light of the benefit to the Debtors' estates
realized by having a fully negotiated Agreement, an Agreement which will enable
the Debtors to preserve the value of their business, ample support exists for
the approval of the Expense Reimbursement and Break-Up Fee as contemplated in
the Agreement.
J. The entry of this Order is in the best interests of
the Debtors, their estates, their creditors and other parties-in-interest; and
it is therefore
ORDERED, ADJUDGED AND DECREED THAT:
1. The relief requested in the Motion is granted.
2. All objections to the entry of this Order that have
not been withdrawn, waived, resolved or settled, and all reservations of rights
included therein, are hereby denied and overruled on the merits with prejudice.
4
3. The Sale Procedures attached hereto as Exhibit A are
hereby approved and shall apply with respect to the Asset Sale.
4. The Expense Reimbursement and Break-Up Fee are each
hereby approved.
5. Subject to the conditions and limitations set forth
in the Agreement, in the event that the Agreement is terminated, the Debtors
shall pay the Expense Reimbursement and Break-Up Fee to the Purchaser pursuant
to the terms and conditions set forth in the Agreement.
6. The Debtors' obligation to pay the Expense
Reimbursement and Break-Up Fee shall constitute an administrative expense claim
in these cases under sections 503(b) and 507(a)(1) of the Bankruptcy Code, and
shall be payable in accordance with the terms of the Agreement without further
order of this Court.
7. The Debtors may sell the Assets by conducting an
Auction in accordance with the Sale Procedures.
8. The Auction shall take place at __:__ a.m./p.m.
(prevailing Eastern Time) on August __, 2003 or such later time as the Debtors
shall notify the Purchaser and all Qualified Bidders who have submitted a
Qualified Bid and expressed their intent to participate in the Auction (the
"Auction Date"), at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other place
as the Debtors shall notify Purchaser and all Qualified Bidders who have
submitted a Qualified Bid and expressed their intent to participate in the
Auction.
5
9. A Qualified Bidder that desires to make a bid shall
file such bid with this Court and deliver written copies of its bid to (a) the
Top-Flite Golf Company, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention:
▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel - With copies to: ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Stargatt & ▇▇▇▇▇▇ LLP, The Brandywine Building, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, counsel
for the Debtors, (b) ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, Jamboree Center, ▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel to
the Purchaser, (c) Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇,
▇.▇. ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., counsel for the Debtors'
prepetition bank group, and (d) counsel to any official committee of unsecured
creditors appointed in these cases, not later than 4:00 p.m. (prevailing Eastern
Time) on August __, 2003 (the "Bid Deadline") and shall comply with the
requirements set forth in the Sale Procedures for making such bid.
10. The Debtors shall have the right to reject any and
all bids that they believe in their reasonable discretion does not conform with
the Sale Procedures. The Purchaser's bid as embodied in the Agreement is deemed
to be a conforming bid.
11. The Sale Hearing shall be held before this Court on
August __, 2003 at __:__ a.m./p.m. (prevailing Eastern Time), or as soon
thereafter as counsel and interested parties may be heard.
6
12. Not later than three (3) business days after the
entry an Order approving this Motion, the Debtors will cause the Auction and
Sale Notice attached to the Order as Exhibit B to be sent by first-class mail
postage prepaid to all of the Debtors' creditors and equity interest holders of
record, the Environmental Protection Agency, all state/local environmental
agencies in any jurisdiction where the Seller owns or has owned or used real
property, all entities known to have expressed a bona fide interest in acquiring
the Assets, all taxing authorities or recording offices which have a reasonably
known interest in the relief requested, the Office of the United States Trustee,
counsel for any official committee of unsecured creditors appointed in these
cases, all federal, state and local regulatory authorities with jurisdiction
over the Debtors, the office of the United States Attorney, all insurers, all
non-debtor parties to contracts or leases (executory or other), and other known
parties-in-interest in these bankruptcy cases.
13. Not later than ten (10) business days after the entry
of an Order approving this Motion, the Debtors shall cause the Auction and Sale
Publication Notice, in a form substantially similar to the form attached to the
Order as Exhibit C, to be published in (a) the national editions of The Wall
Street Journal and The New York Times, and (b) The Chicopee Gazette, pursuant to
Bankruptcy Rule 2002(l). Such notice is good and proper notice to such
interested parties, including those whose identities are unknown to the Debtors.
14. Not later than three (3) business days after the
entry of an Order approving this Motion, the Debtors shall cause the Cure Amount
Notice, attached to the
7
Order as Exhibit D to be served on the non-debtor parties to all unexpired
leases, license agreements and executory contracts.
15. Unless the non-debtor party to an unexpired lease,
license agreement or executory contract files an objection (the "Cure Amount
Objection") to its scheduled Prepetition Cure Amount on or before 4:00 p.m.
(prevailing Eastern Time) on August __, 2003 (the "Cure Objection Deadline") and
serves a copy of the Cure Amount Objection so as to be received no later than
4:00 p.m. (prevailing Eastern Time) on the same day, upon (a) the Top-Flite Golf
Company, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇,
General Counsel - With copies to: ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Stargatt & ▇▇▇▇▇▇ LLP,
The Brandywine Building, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, counsel for the Debtors, (b)
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, Jamboree Center, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel to the Purchaser, (c)
the Office of the United States Trustee, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇, (d) Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇,
▇.▇. ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., counsel for the Debtors'
prepetition bank group, and (e) counsel to any official committee of unsecured
creditors appointed in these cases, such non-debtor party shall (i) be forever
barred from objecting to the Prepetition Cure Amount and from asserting any
additional cure or other amounts with respect to such unexpired lease, license
agreement or executory contract and the Debtors shall be entitled to rely solely
upon the Prepetition Cure Amount; and (ii) be
8
deemed to have consented to the assumption and assignment of such unexpired
lease, license agreement or executory contract and shall be forever barred and
estopped from asserting or claiming against the Debtors, Purchaser or such other
successful bidder or any other assignee of the relevant unexpired lease, license
agreement or executory contract that any additional amounts are due or defaults
exist, or conditions to assumption and assignment must be satisfied under such
unexpired lease, license agreement or executory contract.
16. In the event that a Cure Amount Objection is filed,
the Cure Amount Objection must set forth (i) the basis for the objection, and
(ii) the amount the party asserts as the Prepetition Cure Amount. In the event
that the Debtors and the non-debtor party to the unexpired lease, license
agreement or executory contract cannot consensually resolve the Cure Amount
Objection, the Debtors will segregate any disputed cure amounts pending the
resolution of any such disputes by this Court or mutual agreement of the
parties.
17. Objections, if any, to the relief requested in the
Sale Motion must: (a) be in writing; (b) comply with the Bankruptcy Rules and
the Local Bankruptcy Rules; (c) be filed with the clerk of the Bankruptcy Court
for the District of Delaware, Fifth Floor, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on or before 4:00 p.m. (prevailing Eastern Time) on August __,
2003 and (d) be served so as to be received no later than 4:00 p.m. (prevailing
Eastern Time) on the same day, upon (i) the Top-Flite Golf Company, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel - With
copies to: ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇
▇
▇▇▇▇▇▇ of the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Stargatt & ▇▇▇▇▇▇ LLP, The
Brandywine Building, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, counsel for the Debtors, (ii) ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, Jamboree Center, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, counsel to the Purchaser, (iii)
the Office of the United States Trustee, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇, (iv) Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇
▇▇▇▇, ▇.▇. ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., counsel for the Debtors'
prepetition bank group, and (v) counsel to any official committee of unsecured
creditors appointed in these cases.
18. Hearings on Cure Amount Objections may be held (a) at
the Sale Hearing, or (b) on such other date as this Court may designate upon
motion by the Debtors, provided that if the subject unexpired lease, license
agreement or executory contract is assumed and assigned, the cure amount
asserted by the objecting party (or such lower amount as may be fixed by this
Court) shall be deposited and held in a segregated account by the Debtors
pending further order of this Court or mutual agreement of the parties.
19. The Debtors' decision to assume and assign unexpired
leases, license agreements and executory contracts is subject to Court approval
and consummation of the Asset Sale. Absent consummation of the Asset Sale, each
of the unexpired leases, license agreements and executory contracts shall
neither be deemed
10
assumed nor assigned and shall in all respects be subject to further
administration under the Bankruptcy Code.
20. The notices to be issued in connection with the
proposed Asset Sale, in the form of the notices annexed to the Order as Exhibits
B, C and D are approved in all respects.
21. The Sale Hearing may be adjourned, from time to time,
without further notice to creditors or other parties-in-interest other than by
announcement of said adjournment before this Court or on this Court's calendar
on the date scheduled for said hearing.
22. As provided by Bankruptcy Rules 6004(g) and 6006(d),
this Order shall not be stayed for ten (10) days after the entry thereof and
shall be effective and enforceable immediately upon its entry on this Court's
docket.
23. This Court shall retain jurisdiction over any matters
related to or arising from the implementation of this Order.
Dated: Wilmington, Delaware
July __, 2003
______________________________
UNITED STATES BANKRUPTCY JUDGE
▇▇
▇▇▇▇▇▇▇ ▇
▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
SHC, INC., et al., ) Case No. 03-_____ (___)
)
) (Jointly Administered)
Debtors. )
ORDER AUTHORIZING (I) SALE OF CERTAIN OF THE
DEBTORS' ASSETS FREE AND CLEAR OF LIENS,
CLAIMS, ENCUMBRANCES AND INTERESTS, (II) ASSUMPTION AND
ASSIGNMENT OF CERTAIN EXECUTORY CONTRACTS AND
UNEXPIRED LEASES, AND (III) ASSUMPTION OF CERTAIN LIABILITIES
Upon the motion, dated June __, 2003 (the "Motion")(1) of the
above-captioned debtors and debtors-in-possession (the "Debtors"), for, inter
alia, entry of an order under sections 105(a), 363, 365, and 1146(c) of title 11
of the United States Code (the "Bankruptcy Code") and Fed. R. Bankr. P. 2002,
6004, 6006, and 9014 (the "Sale Order") authorizing (i) the sale (the "Sale") by
The Top-Flite Golf Company ("Top-Flite") and Lisco Sports, Inc. ("Lisco") of the
Assets pursuant to and as described in the Asset Purchase Agreement, dated as of
June __, 2003 (the "Agreement"),(2) between Top-Flite and Callaway Golf Company
(the "Purchaser"), (ii) the Debtors' assumption and assignment to the Purchaser
of the Assumed Contracts, pursuant to and as described in the Agreement, and
(iii) the assumption by the Purchaser of certain liabilities of Top-Flite (the
"Assumed Liabilities"), pursuant to and as described in the Agreement; and the
Court having entered an order on July __, 2003 (the "Procedures Order")
approving (i) the
------------------------
(1) Unless otherwise defined, capitalized terms used herein shall have the
meanings ascribed to them in the Motion or the Agreement, as the case may be; as
to any conflicts with respect to such terms, the meanings contained in the
Agreement shall control over the meanings contained in the Motion.
(2) A copy of the Agreement is annexed to this Order as Exhibit A.
Bidding Procedures, (ii) the form and manner of notice of the Auction, and (iii)
the form and manner of the notice of the assumption and assignment of Assumed
Contracts; and a hearing on the Motion having been held on August __, 2003 (the
"Sale Hearing"), at which time all interested parties were offered an
opportunity to be heard with respect to the Motion; and the Court having
reviewed and considered (i) the Motion, (ii) the objections thereto, if any, and
(iii) the arguments of counsel made, and the evidence proffered or adduced, at
the Sale Hearing; and it appearing that the relief requested in the Motion is in
the best interests of the Debtors, their estates and creditors and other parties
in interest; and upon the record of the Sale Hearing and these cases; and after
due deliberation thereon; and good cause appearing therefore, it is hereby
FOUND AND DETERMINED THAT:(3)
A. The findings and conclusions set forth herein
constitute the Court's findings of fact and conclusions of law pursuant to Fed.
R. Bankr. P. 7052, made applicable to this proceeding pursuant to Fed. R. Bankr.
P. 9014.
B. The Court has jurisdiction over this Motion and the
transactions contemplated by the Agreement pursuant to 28 U.S.C. Sections 157
and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. Section
157(b)(2)(A) and (N). Venue of these cases and the Motion in this district is
proper under 28 U.S.C. Sections 1408 and 1409.
C. The statutory predicates for the relief sought in the
Motion are sections 105, 363 and 365 and 1146(c) of the Bankruptcy Code, and
Fed. R. Bankr. P. 2002, 6004, 6006 and 9014.
------------------------
(3) Findings of fact shall be construed as conclusions of law and conclusions of
law shall be construed as findings of fact when appropriate. See Fed. R. Bankr.
P. 7052.
D. As evidenced by the affidavits of service and
publication previously filed with the Court, and based on the representations of
counsel at the Sale Hearing, (i) due, proper, timely, adequate and sufficient
notice of the Motion, the Sale Hearing, the Auction, the Sale, and the
assumption and assignment of the Assumed Contracts has been provided in
accordance with sections 102(1), 363 and 365 of the Bankruptcy Code and Fed. R.
Bankr. P. 2002, 6004 and 9014 and in compliance with the Procedures Order to
each party entitled thereto, (ii) such notice was good and sufficient, and
appropriate under the particular circumstances, and (iii) no other or further
notice of the Motion, the Sale Hearing, the Auction, or the assumption and
assignment of the Assumed Contracts is or shall be required.
E. As demonstrated by (i) the testimony and other
evidence proffered or adduced at the Sale Hearing and (ii) the representations
of counsel made on the record at the Sale Hearing, the Debtors have marketed the
Assets and conducted the sale process in compliance with the Procedures Order
and the Auction was duly noticed.
F. The Debtors (i) have full corporate power and
authority to execute the Agreement and all other documents contemplated thereby,
and the sale of the Assets by the Debtors has been duly and validly authorized
by all necessary corporate action, (ii) have all of the corporate power and
authority necessary to consummate the transactions contemplated by the
Agreement, (iii) have taken all corporate action necessary to authorize and
approve the Agreement and the consummation by the Debtors of the transactions
contemplated thereby, and (iv) no consents or approvals, other than those
expressly provided for in the Agreement, are required for the Debtors to
consummate such transactions.
G. Approval of the Agreement and consummation of the
Sale at this time are in the best interests of the Debtors, their creditors,
their estates, and other parties in interest.
H. The Debtors have demonstrated both (i) good,
sufficient, and sound business purposes and justifications and (ii) compelling
circumstances for the Sale pursuant to section 363(b) of the Bankruptcy Code
prior to, and outside of, a plan of reorganization in that, among other things,
absent the Sale the value of the Assets will be harmed.
I. A reasonable opportunity to object or be heard with
respect to the Motion and the relief requested therein has been afforded to all
interested persons and entities, including: (i) the Office of the United States
Trustee; (ii) counsel for the Purchaser; (iii) counsel any statutory committee
appointed in these cases; (iv) all entities known to have expressed a bona fide
interest in acquiring the Assets; (v) all entities (or counsel therefor) known
to have asserted any lien, claim, encumbrance, right of refusal or other
interest in or upon the Assets; (vi) all federal, state, and local regulatory or
taxing authorities or recording offices which have a reasonably known interest
in the relief requested by the Motion; (vii) all non-debtor parties to the
Assumed Contracts; (viii) the United States Attorney's office; (ix) the
Securities and Exchange Commission; (x) the Internal Revenue Service; (xi) the
Environmental Protection Agency; (xii) all state and local environmental
agencies in any jurisdiction where the Seller owns or has owned or used real
property; and (xiii) all entities who have filed a request for service of papers
in these cases.
J. The Agreement was negotiated, proposed and entered
into by the Debtors and the Purchaser without collusion, in good faith, and from
arm's-length bargaining positions. Neither Top-Flite, Lisco nor the Purchaser
have engaged in any conduct that would cause or permit the Agreement to be
avoided under section 363(n) of the Bankruptcy Code.
K. The Purchaser is a good faith purchaser under section
363(m) of the Bankruptcy Code and, as such, is entitled to all of the
protections afforded thereby.
L. The Purchaser is not an "insider" of any of the
Debtors, as that term is defined in section 101 of the Bankruptcy Code.
M. The consideration provided by the Purchaser for the
Assets pursuant to the Agreement (i) is fair and reasonable, (ii) is the highest
or otherwise best offer for the Assets, (iii) will provide a greater recovery
for the Debtors' creditors than would be provided by any other practical
available alternative, and (iv) constitutes reasonably equivalent value and fair
consideration under the Bankruptcy Code and under the laws of the United States,
any state, territory, possession, and the District of Columbia.
N. The Sale must be approved and consummated promptly in
order to preserve the value of the Assets.
O. As of the Closing and pursuant to the terms of the
Agreement, the transfer of the Assets to the Purchaser will be a legal, valid,
enforceable, and effective transfer of the Assets, and will vest the Purchaser
with all right, title, and interest of Top-Flite and Lisco in the Assets free
and clear of all liens, claims, encumbrances and interests, including, but not
limited to: (i) those that purport to give to any party a right or option to
effect any forfeiture, modification, right of first refusal, or termination of
the Debtors' or the Purchaser's interest in the Assets, or any similar rights;
(ii) those relating to taxes arising under or out of, in connection with, or in
any way relating to the operation of the Assets prior to the Closing, (iii) all
mortgages, deeds of trust, security interests, conditional sale or other title
retention agreements, pledges, liens, judgments, demands, encumbrances, options,
rights of first refusal or charges of any kind or nature, if any, including, but
not limited to, any restriction on the use, voting, transfer, receipt of income
or other exercise of any attributes of ownership and (iv) all debts arising in
any way in connection with any agreements, acts, or failures to act, of any of
the Debtors or any of the
Debtors' predecessors or affiliates, claims (as that term is defined in the
Bankruptcy Code), obligations, liabilities, demands, guaranties, options,
rights, contractual or other commitments, restrictions, interests and matters of
any kind and nature, whether known or unknown, contingent or otherwise, whether
arising prior to or subsequent to the commencement of these bankruptcy cases,
and whether imposed by agreement, understanding, law, equity or otherwise,
including but not limited to claims otherwise arising under doctrines of
successor liability (collectively, "Interests").
P. The Purchaser would not have entered into the
Agreement and would not consummate the transactions contemplated thereby, thus
adversely affecting the Debtors, their estates, and their creditors, if the sale
of the Assets to the Purchaser and the assignment of the Assumed Contracts and
Assumed Liabilities to the Purchaser was not free and clear of all Interests of
any kind or nature whatsoever, or if the Purchaser would, or in the future
could, be liable for any of the Interests, including, without limitation, the
Excluded Liabilities.
Q. The Debtors may sell the Assets free and clear of all
Interests of any kind or nature whatsoever because, in each case, one or more of
the standards set forth in section 363(f)(l)-(5) of the Bankruptcy Code has been
satisfied. Those (i) holders of Interests and (ii) non-debtor parties to Assumed
Contracts who did not object, or who withdrew their objections, to the Sale or
the Motion are deemed to have consented pursuant to section 363(f)(2) of the
Bankruptcy Code. Those (i) holders of Interests and (ii) non-debtor parties to
Assumed Contracts who did object fall within one or more of the other
subsections of section 363(f) of the Bankruptcy Code and are adequately
protected by having their Interests, if any, attach to the cash proceeds of the
Sale ultimately attributable to the property against or in which they claim an
Interest.
R. The Purchaser is not a successor to the Debtors or
their bankruptcy estates by reason of any theory of law or equity, and the
Purchasers shall not assume or in any way be responsible for any liability or
obligation of any of the Debtors and/or their bankruptcy estates, except as
otherwise expressly provided in the Agreement.
S. The sale of the Assets to the Purchaser is a
prerequisite to the Debtors' ability to confirm and consummate chapter 11 plans.
T. The Debtors have demonstrated that it is an exercise
of their sound business judgment to assume and assign the Assumed Contracts to
the Purchaser in connection with the consummation of the Sale, and the
assumption and assignment of the Assumed Contracts is in the best interests of
the Debtors, their estates, and their creditors. The Assumed Contracts being
assigned to the Purchaser, and the Assumed Liabilities are an integral part of
the Agreement and the Acquired Business and, accordingly, such assumption and
assignment of Assumed Contracts and the Assumed Liabilities are reasonable and
enhance the value of the Debtors' estates.
U. The Debtors have (i) cured, or provided adequate
assurance of cure, of any default existing prior to the date hereof under any of
the Assumed Contracts, within the meaning of section 365(b)(l)(A) of the
Bankruptcy Code and (ii) provided compensation or adequate assurance of
compensation to any party for any actual pecuniary loss to such party resulting
from a default prior to the date hereof under any of the Assumed Contracts,
within the meaning of section 365(b)(1)(B) of the Bankruptcy Code, and the
Purchaser has provided adequate assurance of their future performance of and
under the Assumed Contracts, within the meaning of sections 365(b)(1) and
365(f)(2) of the Bankruptcy Code.
V. Approval of the Agreement and assumption and
assignment of the Assumed Contracts and consummation of the Sale of the Assets
at this time are in the best interests of the Debtors, their creditors, their
estates and other parties in interest.
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
THAT:
1. The Motion is granted, as further described herein.
2. All objections to the Motion or the relief requested
therein that have not been withdrawn, waived, or settled, and all reservations
of rights included therein, hereby are overruled on the merits.
APPROVAL OF THE AGREEMENT
3. The Agreement, and all of the terms and conditions
thereof, is hereby approved.
4. Pursuant to sections 363(b) of the Bankruptcy Code,
the Debtors are authorized to perform their obligations under and comply with
the terms of the Agreement, and consummate the Sale, pursuant to and in
accordance with the terms and conditions of the Agreement.
5. The Debtors are authorized and directed to execute
and deliver, and empowered to perform under, consummate and implement, the
Agreement, together with all additional instruments, documents, and agreements
that may be reasonably necessary or desirable to implement the Agreement, and to
take all further actions as may be requested by the Purchaser for the purpose of
assigning, transferring, granting, conveying and conferring to the Purchaser or
reducing to possession, the Assets, or as may be necessary or appropriate to the
performance of the obligations as contemplated by the Agreement.
6. This Order and the Agreement shall be binding in all
respects upon all creditors (whether known or unknown) of any Debtor, all
non-debtor parties to the Assumed Contracts, all successors and assigns of the
Purchaser, the Debtors and their affiliates and subsidiaries, and any subsequent
trustees appointed in the Debtors' chapter 11 cases or upon a conversion to
chapter 7 under the Bankruptcy Code, and shall not be subject to rejection.
Nothing contained in any chapter 11 plan confirmed in these bankruptcy cases or
the confirmation order confirming any such chapter 11 plan shall conflict with
or derogate from the provisions of the Agreement or this Order.
7. The Agreement and any related agreements, documents,
or other instruments may be modified, amended or supplemented by the parties
thereto in a writing signed by both parties, and in accordance with the terms
thereof, without further order of the Court, provided that any such
modification, amendment, or supplement does not have a material adverse effect
on the Debtors' estates.
TRANSFER OF ASSETS
8. Except as expressly permitted or otherwise
specifically provided for in the Agreement or this Order, pursuant to sections
105(a) and 363(f) of the Bankruptcy Code, the Assets shall be transferred to the
Purchaser, and upon consummation of the Agreement (the "Closing"), shall be free
and clear of all Interests of any kind or nature whatsoever with all such
Interests of any kind or nature whatsoever to attach to the net proceeds of the
Sale in the order of their priority, with the same validity, force and effect
which they now have as against the Assets, subject to any claims and defenses
the Debtors may possess with respect thereto.
9. Except as expressly permitted or otherwise
specifically provided by the Agreement or this Order, all persons and entities,
including, but not limited to, all debt security
holders, equity security holders, governmental, tax, and regulatory authorities,
parties to executory contracts, customers, lenders, trade and other creditors,
holding Interests of any kind or nature whatsoever against or in the Debtors or
the Assets (whether legal or equitable, secured or unsecured, matured or
unmatured, contingent or non-contingent, senior or subordinated), arising under
or out of, in connection with, or in any way relating to, the Debtors, the
Assets, the operation of the Debtors' business prior to the Closing, or the
transfer of the Assets to the Purchaser, hereby are forever barred, estopped,
and permanently enjoined from asserting against the Purchaser, its successors or
assigns, its property, or the Assets, such persons' or entities' Interests.
10. The transfer of the Assets to the Purchaser pursuant
to the Agreement shall constitute a legal, valid, and effective transfer of the
Assets, and shall vest the Purchaser with all right, title, and interest of the
Debtors in and to the Assets free and clear of all Interests of any kind or
nature whatsoever.
11. If any person or entity that has filed financing
statements, mortgages, mechanic's liens, lis pendens, or other documents or
agreements evidencing Interests in the Debtors or the Assets shall not have
delivered to the Debtors prior to the Closing, in proper form for filing and
executed by the appropriate parties, termination statements, instruments of
satisfaction, releases of all Interests which the person or entity has with
respect to the Debtors or the Assets or otherwise, then (a) the Debtors are
hereby authorized and directed to execute and file such statements, instruments,
releases and other documents on behalf of the person or entity with respect to
the Assets and (b) the Purchaser is hereby authorized to file, register, or
otherwise record a certified copy of this Order, which, once filed, registered
or otherwise recorded, shall
constitute conclusive evidence of the release of all Interests in the Assets of
any kind or nature whatsoever.
ASSUMPTION AND ASSIGNMENT
TO PURCHASER OF ASSUMED CONTRACTS
12. Pursuant to sections 105(a) and 365 of the Bankruptcy
Code, and subject to and conditioned upon the Closing, the Debtors' assumption
and assignment to the Purchaser, and the Purchaser's assumption on the terms set
forth in the Agreement, of the Assumed Contracts is hereby approved, and the
requirements of section 365(b)(l) of the Bankruptcy Code with respect thereto
are hereby deemed satisfied.
13. The Debtors are hereby authorized and directed in
accordance with sections 105(a) and 365 of the Bankruptcy Code to (a) assume and
assign to the Purchaser, effective upon the Closing, the Assumed Contracts free
and clear of all Interests of any kind or nature whatsoever and (b) execute and
deliver to the Purchaser such documents or other instruments as may be necessary
to assign and transfer the Assumed Contracts and Assumed Liabilities to the
Purchaser.
14. With respect to the Assumed Contracts: (a) the
Assumed Contracts shall be transferred and assigned to, and following the
Closing of the Sale remain in full force and effect for the benefit of, the
Purchaser in accordance with their respective terms, notwithstanding any
provision in any such Assumed Contract (including those of the type described in
sections 365(b)(2) and (f) of the Bankruptcy Code) that prohibits, restricts, or
conditions such assignment or transfer and, pursuant to section 365(k) of the
Bankruptcy Code, the Debtors shall be relieved from any further liability with
respect to the Assumed Contracts after such transfer and assignment to the
Purchaser; (b) which are executory contracts of the Debtors under Section 365 of
the Bankruptcy Code, the Debtors may assume such Assumed Contracts in accordance
with
section 365 of the Bankruptcy Code; (c) the Debtors may assign each Assumed
Contract in accordance with sections 363 and 365 of the Bankruptcy Code, and any
provisions in any Assumed Contract that prohibit or condition the assignment of
such Assumed Contract or allow the non-debtor party to such Assumed Contract to
terminate, recapture, impose any penalty, condition renewal or extension, or
modify any term or condition upon the assignment of such Assumed Contract, shall
constitute unenforceable anti-assignment provisions which are void and of no
force and effect; (d) all other requirements and conditions under sections 363
and 365 of the Bankruptcy Code for the assumption and assignment by the Debtors
to the Purchaser of each Assumed Contract have been satisfied; and (e) upon
Closing, in accordance with sections 363 and 365 of the Bankruptcy Code, the
Purchaser shall be fully and irrevocably vested in all right, title and interest
of each Assumed Contract. Any portion of any Assumed Contract which purports to
permit the landlord to cancel the remaining term of such Assumed Contract if the
Debtors discontinue their use or operation of the leased premises are void and
of no force and effect, and shall not be enforceable against Purchaser, its
assignees and sublessees; and the landlords under any such Assumed Contract
shall not have the right to cancel or otherwise modify the Assumed Contract or
increase the rent, assert any claim or impose any penalty by reason of such
discontinuation, the Debtors' cessation of operations, the assignment of such
Assumed Contract to Purchaser, or the interruption of business activities at any
of the leased premises.
15. All defaults or other obligations of the Debtors
under the Assumed Contracts arising or accruing prior to the Closing under the
Agreement (without giving effect to any acceleration clauses or any default
provisions of the kind specified in section 365(b)(2) of the Bankruptcy Code)
shall be cured by the Debtors at the Closing of the Sale or as soon
thereafter as practicable, and the Purchaser shall have no liability or
obligation arising or accruing prior to the date of the Closing, except as
otherwise expressly provided in the Agreement.
16. The Debtors are hereby authorized and directed to pay
all Cure Costs under the Assumed Contracts out of the proceeds of the Sale.
17. Each non-debtor party to an Assumed Contract hereby
is forever barred, estopped, and permanently enjoined from asserting against the
Purchaser, or its property, any default existing as of the Closing. The Debtors
shall be exclusively responsible for payment of all cure costs with respect to
the Assumed Contracts pursuant to section 365 of the Bankruptcy Code.
18. Except as provided in the Agreement or this Order,
after the Closing, the Debtors and their estates shall have no further
liabilities or obligations with respect to any Assumed Liabilities and all
holders of such claims are forever barred and estopped from asserting such
claims against the Debtors, their successors or assigns, their property or their
assets or estates.
ADDITIONAL PROVISIONS
19. The consideration provided by the Purchaser for the
Assets under the Agreement shall be deemed to constitute reasonably equivalent
value and fair consideration under the Bankruptcy Code and under the laws of the
United States, any state, territory, possession, and the District of Columbia.
20. The consideration provided by the Purchaser for the
Assets under the Agreement is fair and reasonable and may not be avoided under
section 363(n) of the Bankruptcy Code.
21. On the Closing, each of the Debtors' creditors is
authorized and directed to execute such documents and take all other actions as
may be necessary to release its Interests in the Assets, if any, as such
Interests may have been recorded or may otherwise exist.
22. This Order (a) shall be effective as a determination
that, on the Closing, all Interests of any kind or nature whatsoever existing as
to the Debtors or the Assets prior to the Closing have been unconditionally
released, discharged and terminated (other than the Assumed Liabilities), and
that the conveyances described herein have been effected and (b) shall be
binding upon and shall govern the acts of all entities including without
limitation, all filing agents, filing officers, title agents, title companies,
recorders of mortgages, recorders of deeds, registrars of deeds, administrative
agencies, governmental departments, secretaries of state, federal, state, and
local officials, and all other persons and entities who may be required by
operation of law, the duties of their office, or contract, to accept, file,
register or otherwise record or release any documents or instruments, or who may
be required to report or insure any title or state of title in or to any of the
Assets.
23. Except as otherwise expressly provided in the
Agreement, Purchaser shall have no obligation to pay wages, bonuses, severance
pay, benefits (including, without limitation, contributions or payments on
account of any under-funding with respect to any and all pension plans) or any
other payment to employees of the Debtors. Purchaser shall have no liability
with respect to any collective bargaining agreement, employee pension plan,
employee welfare or retention, benefit and/or incentive plan to which any
Debtors are a party (including, without limitation, arising from or related to
the rejection or other termination of any such agreement), and Purchaser shall
in no way be deemed a party to or assignee of any such agreement, and no
employee of Purchaser shall be deemed in any way covered by or a party to any
such agreement,
and all parties to any such agreement are hereby enjoined from asserting against
Purchaser any and all claims arising from or relating to such agreement. Any and
all notices required to be given to the Debtors' employees pursuant to The
Worker Adjustment and Retraining Notification Act (the "WARN Act"), or any
similar federal or state law, shall be the sole responsibility and obligation of
the Debtors and Purchaser shall have no responsibility or liability therefor.
24. Any amounts that become payable by the Debtors to
Purchaser pursuant to the Agreement (and related agreements executed in
connection therewith) (a) shall constitute administrative expenses of the
Debtors' estates under Section 503(b) and 507(a)(l) of the Bankruptcy Code and
(b) shall be paid by the Debtors in the time and manner provided for in the
Agreement (and such related agreements) without further Court order.
25. All entities who are presently, or on the Closing may
be, in possession of some or all of the Assets are hereby directed to surrender
possession of the Assets to the Purchaser on the Closing.
26. Except for the Assumed Liabilities or as expressly
permitted or otherwise specifically provided for in the Agreement or this Order,
the Purchaser shall have no liability or responsibility for any liability or
other obligation of the Debtors arising under or related to the Assets. Without
limiting the generality of the foregoing, and except as otherwise specifically
provided herein and in the Agreement, to the extent allowed by law, the
Purchaser shall not be liable for any claims against the Debtors or any of their
predecessors or affiliates, and the Purchaser shall have no successor or
vicarious liabilities of any kind or character including but not limited to any
theory of antitrust, environmental, successor or transferee liability, labor
law, de facto merger, or substantial continuity, whether known or unknown as of
the Closing, now existing or hereafter arising, whether fixed or contingent,
with respect to the Debtors or any
obligations of the Debtors arising prior to the Closing, including, but not
limited to, liabilities on account of any taxes arising, accruing, or payable
under, out of, in connection with, or in any way relating to the operation of
the Debtors' business prior to the Closing.
27. Following the Closing, no holder of an Interest in
the Debtors or the Assets shall interfere with the Purchaser's title to or use
and enjoyment of the Assets based on or related to such Interest, or any actions
that the Debtors may take in their chapter 11 cases.
28. This Court retains jurisdiction to enforce and
implement the terms and provisions of the Agreement, all amendments thereto, any
waivers and consents thereunder, and of each of the agreements executed in
connection therewith in all respects, including, but not limited to, retaining
jurisdiction to (a) compel delivery of the Assets to the Purchaser, (b) compel
delivery of the purchase price or performance of other obligations owed to the
Debtors, (c) resolve any disputes arising under or related to the Agreement,
except as otherwise provided therein, (d) interpret, implement, and enforce the
provisions of this Order, and (e) protect the Purchaser against (i) any of the
Excluded Liabilities or (ii) any Interests in the Debtors or the Assets, of any
kind or nature whatsoever.
29. Notwithstanding Fed. R. Bankr. P. 6004(g) and
6006(d), this Order shall be effective and enforceable immediately upon entry
and its provisions shall be self-executing. In the absence of any entity
obtaining a stay pending appeal, the Debtors and the Purchaser are free to close
under the Agreement at any time. The transactions contemplated by the Agreement
are undertaken by the Purchaser in good faith, as that term is used in section
363(m) of the Bankruptcy Code, and accordingly, the reversal or modification on
appeal of the authorization provided herein to consummate the Sale shall not
affect the validity of the Sale to the Purchaser (including the assumption and
assignment of any of the Assumed Contracts), unless such
authorization is duly stayed pending such appeal. The Purchaser is a purchaser
in good faith of the Assets, and is entitled to all of the protections afforded
by section 363(m) of the Bankruptcy Code.
30. The terms and provisions of the Agreement and this
Order shall be binding in all respects upon, and shall inure to the benefit of,
the Debtors, their estates, and their creditors, the Purchaser, and its
respective affiliates, successors and assigns, and any affected third parties
including, but not limited to, all persons asserting Interests in the Assets to
be sold to the Purchaser pursuant to the Agreement, notwithstanding any
subsequent appointment of any trustee(s) under any chapter of the Bankruptcy
Code, as to which trustee(s) such terms and provisions likewise shall be
binding.
31. The failure specifically to include any particular
provisions of the Agreement in this Order shall not diminish or impair the
effectiveness of such provision, it being the intent of the Court that the
Agreement be authorized and approved in its entirety.
32. Each and every federal, state and local government
agency or department is hereby authorized to accept any and all documents and
instruments necessary and appropriate to consummate the transfer of any of the
Assets, all without imposition or payment of any stamp tax, transfer tax, or
similar tax, pursuant to section 1146(c) of the Bankruptcy Code.
Dated: Wilmington, Delaware
August ____, 2003
___________________________________
UNITED STATES BANKRUPTCY JUDGE
Exhibit E
[FORM OF]
INDEMNITY ESCROW AGREEMENT
THIS INDEMNITY ESCROW AGREEMENT (this "Agreement"), is made as
of [______], 2003, by and among [U.S. Bank National Association] having an
office at [______], (the "Escrow Agent"), The Top-Flite Golf Company, a Delaware
corporation (the "Seller"), and Callaway Golf Company, a Delaware corporation
(the "Purchaser").
WHEREAS, the Purchaser and the Seller are parties to that
certain Asset Purchase Agreement, dated as of June 30, 2003 (as the same may be
amended from time to time, the "Purchase Agreement"), pursuant to which the
Purchaser is acquiring the Assets of the Business; and
WHEREAS, pursuant to Article VIII of the Purchase Agreement,
the Seller has agreed to indemnify, defend and hold harmless the Purchaser's
Indemnified Persons from and against Losses; and
WHEREAS, at the Closing the Purchaser shall have delivered to
the Escrow Agent the Indemnity Deposit. Such Indemnity Deposit is to be used as
security for Losses incurred by the Purchaser's Indemnified Persons in a manner
set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained herein, the parties hereby agree as
follows:
1. Definitions. Capitalized terms used and not defined
herein shall have the respective meanings ascribed to them in the Purchase
Agreement.
2. Escrow Agent and Escrow Account.
2.1 Escrow Agent. The Purchaser and the Seller
hereby appoint the Escrow Agent as the escrow agent to hold the Indemnity
Deposit in accordance with the terms, conditions and provisions of this
Agreement, and the Escrow Agent hereby accepts such appointment subject to the
terms, conditions and provisions of this Agreement.
2.2 Escrow Account. On the Closing Date, the
Purchaser shall deposit with the Escrow Agent, by wire transfer of the Indemnity
Deposit in immediately available funds to the escrow account set forth on
Schedule A attached hereto (the "Escrow Account"). The Escrow Agent hereby
acknowledges receipt of such sum.
3. Investment of the Indemnity Deposit.
3.1 Investment. The Escrow Agent, as directed in
writing by the Seller, shall invest any or all of the Indemnity Deposit, and any
undistributed income or interest earned or accrued with respect thereto, in any
of the following: (i) obligations issued or guaranteed by the United States of
America or any agency or instrumentality thereof with a maturity of not more
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than 30 days; (ii) certificates of deposit (including money market certificates
and similar instruments) of or accounts with national banks, holding companies
of national banks or corporations endowed with trust powers having, in any case,
capital and surplus in excess of $250,000,000 at the time of investment, with a
maturity in each case not to exceed 30 days; (iii) commercial paper at the time
of investment and any renewal rated A-1 by Standard & Poor's Corporation or
Prime-1 by Moody's Investor's Service, Inc.; and (iv) money market funds
substantially all of whose funds are invested in any of the foregoing.
3.2 Quarterly Statements. As soon as practicable
following each September 30th, December 31st, March 31st and June 30th
commencing after the Closing Date during the term of this Agreement, the Escrow
Agent shall deliver to the Purchaser and the Seller a statement (a "Quarterly
Statement") setting forth: (a) the value of the Escrow Account at such date; (b)
the amount of income or interest earned or accrued with respect thereto during
the period covered by such Quarterly Statement; and (c) the amounts owed or paid
to the Purchaser from the Escrow Account pursuant to Sections 8.1 and 8.2 of the
Purchase Agreement with respect to the period covered by such Quarterly
Statement.
3.3 Distribution of Income. Any income or
interest earned in respect of the Indemnity Deposit, if any, shall be
distributed to the Seller on a monthly basis.
3.4 Certificate of Incumbency. The Purchaser and
the Seller shall each execute and deliver to the Escrow Agent a certificate of
incumbency substantially in the form of Schedule C hereto for the purpose of
establishing the identity of the Representatives of the Purchaser and the Seller
entitled to issue instructions or directions to the Escrow Agent on behalf of
each such party. In the event of any change in the identity of such
Representatives, a new certificate of incumbency shall be executed and delivered
to the Escrow Agent by the appropriate party. Until such time as the Escrow
Agent shall receive a new incumbency certificate, the Escrow Agent shall be
fully protected in relying without inquiry on any then current incumbency
certificate on file with the Escrow Agent.
4. Assigned Inventory Adjustment. The Escrow Account
shall be used to pay all amounts due and owing to the Purchaser, if any,
pursuant to the terms and conditions of Section 1.6 of the Purchase Agreement.
Upon determination of the Final Closing Date Statement, the Seller and the
Purchaser shall deliver a notice, signed by both the Seller and the Purchaser,
to the Escrow Agent instructing the Escrow Agent to pay to the Purchaser the
appropriate amount, if any, from the Escrow Account.
5. Procedures with Respect to Indemnity Claims.
5.1 Claims by Purchaser. If, at any time and
from time to time on or prior to the one year anniversary of the date hereof,
the Purchaser incurs any Losses for which it is entitled to be indemnified in
accordance with Sections 8.1 and 8.2 of the Purchase Agreement, the Purchaser
shall deliver to the Seller and the Escrow Agent written notice (a "Loss
Notice") specifying the amount of any such Losses for which the Purchaser
believes in good faith it is entitled to indemnification (the "Claimed Amount").
Such Loss Notice shall be accompanied by a reasonably full description of the
basis for such claim and shall reference the provisions of the Purchase
Agreement pursuant to which liability is asserted.
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5.2 Response by Seller. Within 30 days after
receipt by the Seller of any Loss Notice, the Seller shall, with respect to such
Loss Notice, by notice to the Purchaser and the Escrow Agent (a "Response
Notice"), either (a) concede liability for the Claimed Amount in whole or (b)
deny liability for the Claimed Amount in whole or in part (it being understood
that any portion of the Claimed Amount for which the Seller has not denied
liability shall be deemed to have been conceded). If the Seller shall deny
liability in whole or in part, such Response Notice shall be accompanied by a
reasonably full description of the basis for such denial. The portion of the
Claimed Amount for which the Seller has conceded liability is referred to herein
as the "Conceded Amount." If the Seller shall fail to deliver the Response
Notice within the aforesaid 30-day period, the Seller shall be deemed to have
conceded the entire Claimed Amount.
5.3 Resolutions of Disputes. If the Seller has
denied liability for the Claimed Amount, in whole or in part, the parties shall
attempt to resolve such dispute as promptly as possible. If the Purchaser and
the Seller resolve such dispute, they shall deliver a notice to that effect to
the Escrow Agent (a "Settlement Notice") signed by each of them. Such Settlement
Notice shall permit the Escrow Agent to pay to the Purchaser the amount, if any,
agreed to by both the Purchaser and the Seller in settlement of such dispute
(the "Agreed Settlement Amount"). If the Purchaser and the Seller fail to
resolve such dispute within 60 days after receipt by the Purchaser of the
Response Notice corresponding to such dispute, the Purchaser may (i) commence
appropriate legal proceedings in order to obtain a final judgment of a court of
competent jurisdiction that is not subject to further appeal (a "Final Order").
In the event that the Final Order contains a finding of liability against the
Seller in a specified amount (the "Judgment Amount"), the Purchaser shall
promptly deliver written notice to the Escrow Agent and the Seller (which notice
shall be accompanied by such Final Order), advising the Escrow Agent and the
Seller to pay to the Purchaser such Judgment Amount to the extent available from
the Escrow Account. In the event that (a) the Purchaser shall fail to commence
such proceedings within 90 days after receipt by the Purchaser of the Response
Notice or (b) the Seller shall have obtained a Final Order dismissing such
proceeding or finding no liability on the part of Seller, the relevant Loss
Notice shall be deemed to have expired and the Purchaser shall have no recourse
against the Escrow Account with respect to such Loss; provided, however, that
clause (a) above shall not preclude the Purchaser from claiming the amount equal
to such Claimed Amount with respect to a completely distinct, other Loss.
5.4 Payment of Claims. As promptly as
practicable (and in any event no more than fifteen (15) days following the
resolution or settlement of a dispute pursuant to Section 5.2 and 5.3 hereof),
the Escrow Agent shall pay to the Purchaser from the Escrow Account by wire
transfer of immediately available funds the following amounts, as applicable:
(a) following any concession of liability by the Seller, in whole or in part,
the Conceded Amount; (b) following the receipt by the Escrow Agent of any
Settlement Notice, the Agreed Settlement Amount; or (c) following receipt by the
Seller of any Final Order, the Judgment Amount; provided, however, that the
payments made to the Purchaser's Indemnified Parties out of the Escrow Account
shall not exceed the Indemnity Deposit subject to Section 6.1 below in the
aggregate.
5.5 Outstanding Claims. Any Loss Notice that is
not resolved or disposed of pursuant to Section 5.2, 5.3 or 5.4 shall constitute
an "Outstanding Claim." Following the one year anniversary of the date hereof,
the Purchaser may not amend or otherwise modify any
4
Outstanding Claim or deliver a new Loss Notice. For the avoidance of doubt, any
claim of the Purchaser's Indemnified Persons pursuant to the Purchase Agreement
made after the expiration of the one year anniversary of the dated hereof shall
not be secured and may not be satisfied by the Escrow Account.
6. Distributions to the Seller from the Escrow Account.
6.1 On the six month anniversary of the Closing
Date, the Escrow Agent shall distribute to the Seller, by wire transfer of
immediately available funds as directed by the Seller from time to time, the
Released Amount, if any. The "Released Amount" shall be (i) the remaining
Indemnity Deposit on the six month anniversary of the Closing Date minus (ii)
the sum of (A) $6,250,000, plus (B) any amount then payable to the Purchaser's
Indemnified Persons, plus (C) any additional Third Party Claims or Indemnity
Claims claimed in good faith by the Purchaser's Indemnified Persons and disputed
in good faith by the Seller as the Indemnifying Party. If the result of the
foregoing calculation results in the Released Amount being zero or a negative
number, then no amount shall be released from the Indemnity Deposit on the six
month anniversary of the Closing Date.
6.2 On the one year anniversary of the date
hereof, the Escrow Agent shall distribute to the Seller, by wire transfer of
immediately available funds as directed by the Seller from time to time, the
entire Escrow Account less the aggregate amount of all Outstanding Claims and
(ii) any amount then payable to the Purchaser's Indemnified Persons.
7. Termination of this Escrow Agreement. This Agreement
shall terminate as to the Escrow Account, upon the full distribution of the
Escrow Account pursuant to Sections 4, 5 and 6.
8. Disputes. In the event of any dispute as to the
disposition of the Escrow Account, as the case may be or as to any other matters
under this Agreement, the Escrow Agent is hereby authorized to deposit, upon
five (5) Business Days' notice to the parties, the funds constituting the Escrow
Account, with a court of competent jurisdiction. In connection with any such
dispute, the Escrow Agent may elect, in its commercially reasonable discretion,
to commence an interpleader action relating thereto.
9. Sole Duties. The Escrow Agent's sole duties hereunder
are as indicated herein, and upon the disposition of the Escrow Account, as
herein provided, the Escrow Agent shall be deemed to have performed its duties
and shall be automatically discharged from any further obligation in connection
therewith.
10. Escrow Agent Not Liable. The Escrow Agent, in the
performance of its duties hereunder, shall not be liable or responsible for any
authorization or omitted to be taken hereunder in good faith as herein provided,
except for its own willful misconduct, recklessness, or gross negligence and
except as provided in Section 14.6 of this Agreement.
11. Resignation; Successor Escrow Agent. The Escrow Agent
or any successor escrow agent, as the case may be, may resign its duties and be
discharged from all further duties or obligations hereunder at any time upon
giving ten (10) Business Days' prior written notice to the parties hereto. The
Seller and the Purchaser will thereupon jointly designate a successor escrow
5
agent hereunder within said ten (10) Business Day period to whom the Escrow
Account shall be delivered. In default of such joint designation of a successor
escrow agent, the Escrow Agent shall retain the Escrow Account as custodian
thereof until otherwise directed by the Seller and the Purchaser, jointly,
without further liability or responsibility.
12. Notices. All notices, requests, consents and demands
to or upon the respective parties hereto shall be in writing, and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made (a) if delivered by hand (including by overnight courier), when delivered,
(b) on the day after delivery to a nationally recognized overnight carrier
service if sent by overnight delivery for next morning delivery, (c) in the case
of mail, three (3) Business Days after deposit in United States first class
mail, certified with return receipt requested and postage prepaid and (d) in the
case of facsimile transmission, upon receipt of a legible copy. In each case:
(x) if delivery is not made during normal business hours at the place of
receipt, receipt and due notice under this Agreement shall be deemed to have
been made on the immediately following Business Day, and (y) notice shall be
sent to the address of the party to be notified, as follows, or to such other
address as may be hereafter designated by the respective parties hereto in
accordance with these notice provisions:
If to the Purchaser, to:
Callaway Golf Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Jamboree Center
▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller, to:
The Top-Flite Golf Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
6
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Escrow Agent, to:
[U.S. Bank National Association]
___________________________
___________________________
Facsimile: ________________
Attention: ________________
The Escrow Agent shall promptly deliver a copy of any notice received by it in
its capacity as the Escrow Agent to the Purchaser and the Seller.
13. Indemnification of Escrow Agent.
13.1 From and at all times after the date of this
Escrow Agreement, the Seller and the Purchaser, jointly and severally, shall, to
the fullest extent permitted by law, indemnify and hold harmless the Escrow
Agent and each director, officer, employee, attorney, agent and affiliate of the
Escrow Agent (collectively, the "Indemnified Parties") against any and all
actions, claims, losses, damages, liabilities, costs and expenses of any kind or
nature whatsoever (including without limitation reasonable attorneys' fees,
costs and expenses) incurred by or asserted against any of the Indemnified
Parties from and after the date hereof as a result of or arising from any claim,
demand, suit, action or proceeding (including any inquiry or investigation) by
any person, including without limitation the Seller or the Purchaser, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or equitable
cause or otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this Agreement
or any transactions contemplated herein, whether or not any such Indemnified
Party is a party to any such action, proceeding, suit or the target of any such
inquiry or investigation; provided, however, that no Indemnified Party shall
have the right to be indemnified hereunder for any liability finally determined
by a court of competent jurisdiction, subject to no further appeal, to have
resulted solely from the gross negligence, recklessness, or willful misconduct
of such Indemnified Party. The obligations of the Seller and the Purchaser under
this Section 13 shall survive any termination of this Agreement.
13.2 The parties agree that neither the payment
by the Seller or the Purchaser of any claim by the Escrow Agent for
indemnification hereunder nor the disbursement of any amounts to the Escrow
Agent from the Escrow Account in respect of a claim by Escrow Agent for
indemnification shall impair, limit, modify, or affect, as between the Seller
and the
7
Purchaser, the respective rights and obligations of the Seller, on the one hand,
and the Purchaser, on the other hand, under the Purchase Agreement.
14. Miscellaneous Matters Concerning Escrow Agent.
14.1 The Escrow Agent shall be entitled to
refrain from taking any action contemplated by this Agreement in the event that
it becomes aware of any disagreement between the parties hereto as to any facts
or as to the happening of any contemplated event precedent to such action.
14.2 The Escrow Agent shall have no
responsibility or liability for any diminution in value of any assets held
hereunder which may result from any investments or reinvestment made in
accordance with any provision which may be contained herein.
14.3 The Escrow Agent shall be entitled to
compensation for its services hereunder as per Schedule B attached hereto, which
is made a part hereof, and for reimbursement of its reasonable and documented
out-of-pocket expenses including, but not by way of limitation, the fees and
costs of attorneys or agents which it may find necessary to engage in the
performance of its duties hereunder, all to be paid one half (1/2) by the
Purchaser and one half (1/2) by the Seller, and the Escrow Agent shall have, and
is hereby granted, a prior lien upon any property, cash, or assets of the Escrow
Account, as the case may be, with respect to its unpaid fees and nonreimbursed
expenses, superior to the interests of any other persons or entities. In the
event any such compensation, expenses, fees or costs are drawn by the Escrow
Agent from the Escrow Account, as the case may be, the Seller and the Purchaser
each agree to make appropriate payment to the other party such that each party
ultimately receives the amount of the Indemnity Deposit that it is entitled to
receive without reduction or deduction for the other party's one half (1/2)
share of such compensation, expenses, fees or costs.
14.4 The Escrow Agent shall be entitled and is
hereby granted the right to set off and deduct any unpaid fees and/or
nonreimbursed expenses from amounts in the Escrow Account.
14.5 The Escrow Agent shall be under no
obligation to invest the deposited funds or the income generated thereby until
it has received a Form W-9 or W-8, as applicable, from the Purchaser and the
Seller, regardless of whether such party is exempt from reporting or withholding
requirements under the Internal Revenue Code of 1986, as amended.
14.6 The Escrow Agent shall have only those
duties as are specifically provided herein, which shall be deemed purely
ministerial in nature, and shall under no circumstance be deemed a fiduciary for
any of the parties to this Agreement. The Escrow Agent shall neither be
responsible for, nor chargeable with, knowledge of the terms and conditions of
any other agreement, instrument or document between the other parties hereto, in
connection herewith, including, without limitation, the Purchase Agreement. This
Agreement sets forth all matters pertinent to the escrow contemplated hereunder,
and no additional obligations of the Escrow Agent shall be inferred from the
terms of this Agreement or any other agreement.
14.7 The Escrow Agent shall have the right, but
not the obligation, to consult with counsel of choice and shall not be liable
for action taken or omitted to be taken by the
8
Escrow Agent in accordance with the advice of such counsel. If the Escrow Agent
becomes involved in litigation on account of this Agreement, it shall have the
right to retain counsel and shall have a first lien on the property deposited
hereunder for any and all reasonable and documented out-of-pocket costs,
attorneys' fees, charges, disbursements, and expenses in connection with such
litigation; and shall be entitled to reimburse itself therefor out of the
property deposited hereunder, and if it shall be unable to reimburse itself from
the property deposited hereunder, the Purchaser and the Seller jointly and
severally agree to pay to the Escrow Agent on demand its reasonable and
documented out-of-pocket charges, counsel and attorneys' fees, disbursements,
and expenses in connection with such litigation.
14.8 Any entity into which the Escrow Agent may
be merged, converted or with which the Escrow Agent may be consolidated, or any
entity resulting from any merger, conversion or consolidation to which the
Escrow Agent shall be a party, or any entity to which all or substantially all
of the business of the Escrow Agent shall be transferred, shall succeed to all
the Escrow Agent's rights, obligations and immunities hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
14.9 In the event that any escrow property shall
be attached, garnished or levied upon by any court order (including, by
bankruptcy), or the delivery thereof shall be stayed or enjoined by an order of
a court, or any order, judgment or decree shall be made or entered by any court
order affecting the property deposited under this Agreement, the Escrow Agent is
hereby expressly authorized, in its sole discretion, to obey and comply with all
writs, orders or decrees so entered or issued, which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or complies with any
such writ, order or decree it shall not be liable to any of the parties hereto
or to any other person, firm or entity, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
14.10 The Escrow Agent shall report to the
Internal Revenue Service, as of each calendar year-end, all income earned from
the investment of the Escrow Account against the Purchaser or the Seller,
whether or not said income has been distributed during such year, as and to the
extent required by law. The Escrow Agent agrees, to the extent permitted by law,
to make any such report as near as possible to the filing deadline therefor in
order that it may report any income earned to the party which actually received
the same. If the filing deadline for any calendar year shall occur prior to the
distribution of such income, the Escrow Agent may report such income as earned
by the Purchaser. Any tax returns required to be prepared and filed will be
prepared and filed by the party which is reported to have received such income
with the Internal Revenue Service in all years income is earned, whether or not
income is received or distributed in any particular tax year, and Escrow Agent
shall have no responsibility for the preparation and/or filing or any tax return
with respect to any income earned by the Escrow Account. Any taxes payable on
income earned from the investment of the Escrow Account shall be paid by the
party which is reported to have received such income, whether or not the income
was distributed by the Escrow Agent during any particular year. The Escrow Agent
shall have no obligation to pay any taxes or estimated taxes. After the Escrow
Account and the income earned thereon has been distributed by the Escrow Agent,
the parties agree to cooperate and to file any amended reports
9
which may be necessary in order to correct any filings with the Internal Revenue
Service which reported income as having been earned by a party which did not
actually receive such income.
15. Entire Agreement. This Agreement and the Purchase
Agreement contain the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede all prior agreements, written or
oral, with respect thereto.
16. Amendment; Waiver. This Agreement may not be amended
or modified except by an instrument in writing signed by the Seller, the
Purchaser and the Escrow Agent. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
17. Governing Law. This Agreement and all Claims with
respect thereto shall be governed by and construed in accordance with federal
bankruptcy law, to the extent applicable, and, where state law is implicated,
the laws of the State of New York without regard to any conflict of laws rules
thereof that might indicate the application of the laws of any other
jurisdiction.
18. Consent to Jurisdiction; Service of Process.
18.1 Consent of Jurisdiction. The Purchaser and
the Seller irrevocably and unconditionally consent to submit to the jurisdiction
of the Bankruptcy Court for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agree not to commence
any litigation relating hereto except in the Bankruptcy Court).
18.2 Service of Process. Any and all service of
process and any other notice in any such Claim shall be effective against any
party if given personally or by registered or certified mail, return receipt
requested, or by any other means of mail that requires a signed receipt, postage
prepaid, mailed to such party as herein provided. Nothing herein contained shall
be deemed to affect the right of any party to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party in any other jurisdiction.
19. WAIVER OF JURY TRIAL.
19.1 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER OR IN CONNECTION WITH THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY.
19.2 EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE WAIVER IN SECTION 19.1, (ii) SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY
MAKES SUCH WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG
10
OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS IN SECTION 19.1
AND THIS SECTION 19.2.
20. Assignment. This Agreement shall not be assigned
without the express written consent of the Seller and the Purchaser (which
consent may be granted or withheld in the sole discretion of the Seller and the
Purchaser). Notwithstanding the foregoing, no assignment of the interest of any
of the parties hereto shall be binding upon the Escrow Agent unless and until
reasonable written evidence of such assignment shall be delivered to the Escrow
Agent.
21. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
22. Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
[Remainder of Page Intentionally Left Blank]
11
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
PURCHASER:
CALLAWAY GOLF COMPANY
By:_____________________________________
Name:
Title:
SELLER:
THE TOP-FLITE GOLF COMPANY
By:_____________________________________
Name:
Title:
ESCROW AGENT:
[U.S. BANK NATIONAL ASSOCIATION]
By:_____________________________________
Name:
Title:
SCHEDULE A
ESCROW ACCOUNT INFORMATION
[U.S. Bank National Association]
ABA# [_____________________]
Account #[_________________]
ATTN: [____________________________]
Re: [Account Name, NCS #]
SCHEDULE B
FEE SCHEDULE
Annual Charge(1) [________]
----------------------
(1) The annual charge shall be paid only for any year in which the Escrow Agent
shall hold funds in escrow in respect of the Escrow Account.
SCHEDULE C
CERTIFICATE OF INCUMBENCY
The undersigned, (i) the duly elected, qualified and acting
___________________ of Callaway Golf Company, a Delaware corporation (the
"Purchaser"), and [(ii) the duly elected, qualified and acting ________ of The
Top-Flite Golf Company, a Delaware corporation (the "Seller")], each hereby
certifies that he/she is authorized to execute this Certificate and further
certifies that, as of the date hereof, each is authorized to sign and deliver
all notices, agreements, documents, instruments and certificates to be executed
and delivered by the Purchaser and the Seller, as the case may be, required or
permitted to be delivered pursuant to that certain Indemnity Agreement, dated as
of _____, 2003, by and among the Purchaser, the Seller and [U.S. Bank National
Association ] or in connection therewith, and that the signature appearing above
his/her name is his/her true and genuine signature.
IN WITNESS WHEREOF, the undersigned have signed this
Certificate this ___- day of __________, 200_.
CALLAWAY GOLF COMPANY
____________________________________
Name:
Title:
THE TOP-FLITE GOLF COMPANY
____________________________________
Name:
Title:
Exhibit F
[FORM OF]
CURRENT RECEIVABLES ESCROW AGREEMENT
THIS CURRENT RECEIVABLES ESCROW AGREEMENT (this "Agreement"),
is made as of [______], 2003, by and among [U.S. Bank National Association]
having an office at [______], (the "Escrow Agent"), The Top-Flite Golf Company,
a Delaware corporation (the "Seller"), and Callaway Golf Company, a Delaware
corporation (the "Purchaser").
WHEREAS, the Purchaser and the Seller are parties to that
certain Asset Purchase Agreement, dated as of June 30, 2003 (as the same may be
amended from time to time, the "Purchase Agreement"), pursuant to which the
Purchaser is acquiring the Assets of the Business; and
WHEREAS, pursuant to Section 1.7 of the Purchase Agreement,
the Seller has agreed to reimburse the Purchaser, at the Purchaser's election,
for any Assigned Current Receivable which remains uncollected on the 181st day
after the Closing Date; and
WHEREAS, at the Closing the Purchaser shall have delivered to
the Escrow Agent the Current Receivables Deposit. Such Current Receivables
Deposit is to be used as security for any Assigned Current Receivables which
remain uncollected on the 181st day after the Closing Date.
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained herein, the parties hereby agree as
follows:
1. Definitions. Capitalized terms used and not defined
herein shall have the respective meanings ascribed to them in the Purchase
Agreement.
2. Escrow Agent and Escrow Account.
2.1 Escrow Agent. The Purchaser and the Seller
hereby appoint the Escrow Agent as the escrow agent to hold the Current
Receivables Deposit in accordance with the terms, conditions and provisions of
this Agreement, and the Escrow Agent hereby accepts such appointment subject to
the terms, conditions and provisions of this Agreement.
2.2 Escrow Account. On the Closing Date the
Purchaser shall deposit with the Escrow Agent, by wire transfer of the Current
Receivables Deposit in immediately available funds to the escrow account set
forth on Schedule A attached hereto (the "Escrow Account"). The Escrow Agent
hereby acknowledges receipt of such sum.
3. Investment of the Current Receivables Deposit.
3.1 Investment. The Escrow Agent, as directed in
writing by the Seller, shall invest any or all of the Current Receivables
Deposit, and any undistributed income
2
or interest earned or accrued with respect thereto, in any of the following: (i)
obligations issued or guaranteed by the United States of America or any agency
or instrumentality thereof with a maturity of not more than 30 days; (ii)
certificates of deposit (including money market certificates and similar
instruments) of or accounts with national banks, holding companies of national
banks or corporations endowed with trust powers having, in any case, capital and
surplus in excess of $250,000,000 at the time of investment, with a maturity in
each case not to exceed 30 days; (iii) commercial paper at the time of
investment and any renewal rated A-1 by Standard & Poor's Corporation or Prime-1
by Moody's Investor's Service, Inc.; and (iv) money market funds substantially
all of whose funds are invested in any of the foregoing.
3.2 Quarterly Statements. As soon as practicable
following each September 30th, December 31st, March 31st and June 30th
commencing after the Closing Date during the term of this Agreement, the Escrow
Agent shall deliver to the Purchaser and the Seller a statement (a "Quarterly
Statement") setting forth: (a) the value of the Escrow Account at such date and
(b) the amount of income or interest earned or accrued with respect thereto
during the period covered by such Quarterly Statement.
3.3 Distribution of Income. Any income or
interest earned in respect of the Current Receivables Deposit, if any, shall be
distributed to the Seller on a monthly basis.
3.4 Certificate of Incumbency. The Purchaser and
the Seller shall each execute and deliver to the Escrow Agent a certificate of
incumbency substantially in the form of Schedule C hereto for the purpose of
establishing the identity of the Representatives of the Purchaser and the Seller
entitled to issue instructions or directions to the Escrow Agent on behalf of
each such party. In the event of any change in the identity of such
Representatives, a new certificate of incumbency shall be executed and delivered
to the Escrow Agent by the appropriate party. Until such time as the Escrow
Agent shall receive a new incumbency certificate, the Escrow Agent shall be
fully protected in relying without inquiry on any then current incumbency
certificate on file with the Escrow Agent.
4. Assigned Current Receivables Deficiency.
4.1 If the Purchaser (i) elects, in its sole
discretion on an account-by-account basis, within (5) Business Days after the
181st day after the Closing Date to assign any uncollected Assigned Current
Receivables to the Seller and deduct an amount from the Current Receivables
Deposit equal to the Deemed Closing Date A/R Value of such uncollected Assigned
Current Receivables and/or (ii) is entitled to receive an amount calculated in
accordance with Section 1.7(d) of the Purchase Agreement on account of Returned
Goods (the sum of (i) and (ii) being referred to as the "A/R Claim Amount"), the
Purchaser shall deliver to the Seller and to the Escrow Agent (i) a notice (the
"A/R Claim Notice") setting forth the A/R Claim Amount and (ii) a certificate
signed by the chief financial officer of the Purchaser certifying that such
uncollected Assigned Current Receivables have been assigned to the Seller free
and clear of all Liens (except for those uncollected Assigned Current
Receivables which relate to Returned Goods, which, by their nature, cannot be
assigned).
4.2 If the Seller agrees with the A/R Claim
Amount set forth on the A/R Claim Notice, then a notice signed by both the
Seller and the Purchaser shall be delivered to
3
the Escrow Agent instructing the Escrow Agent to promptly pay to the Purchaser
the A/R Claim Amount, if any, from the Escrow Account.
4.3 If the Seller in good faith disagrees with
the A/R Claim Amount set forth on the A/R Claim Notice, the Seller shall inform
the Purchaser and the Escrow Agent in writing (the "Objection") no later than
five (5) Business Days after receipt of the A/R Claim Notice, setting forth a
description in reasonable detail of the basis of its objection(s) and the
adjustments to the A/R Claim Notice and the A/R Claim Amount reflected thereon
which the Seller believes should be made. The parties shall cooperate and seek
in good faith to resolve any differences which they may have with respect to the
Objection and to agree upon an adjusted amount, if any, to be paid to the
Purchaser from the Current Receivables Deposit (the "Adjusted A/R Claim
Amount"). Upon such resolution, a notice signed by both the Seller and the
Purchaser shall be delivered to the Escrow Agent instructing the Escrow Agent to
promptly pay to the Purchaser the Adjusted A/R Claim Amount from the Escrow
Account.
4.4 If the Seller fails to provide a notice of
Objection to the Purchaser and the Escrow Agent within five (5) Business Days
after its receipt of the A/R Claim Notice, then the Escrow Agent shall promptly
pay to the Purchaser the A/R Claim Amount.
4.5 The "Final A/R Claim Amount" shall be either
(i) the A/R Claim Amount or (ii) the Adjusted A/R Claim Amount.
5. Distributions to the Seller from the Escrow Account.
On the sixth Business Day after the 181st day after the Closing Date, the Escrow
Agent shall distribute to the Seller, by wire transfer of immediately available
funds as directed by the Seller from time to time, the entire Escrow Account
less the Final A/R Claim Amount; provided, however, that the Escrow Agent shall
not distribute any funds from the Escrow Account if it has not received an A/R
Claim Notice from the Purchaser. If the Purchaser fails to provide an A/R Claim
Notice within (5) Business Days after the 181st day after the Closing Date it
will be deemed to have elected to assign any uncollected Assigned Current
Receivables to the seller and deduct an amount from the Current Receivables
Deposit equal to the A/R Claim Amount. In such event, the Purchaser and Seller
shall work closely and cooperatively to agree upon the A/R Claim Amount, and
shall, upon reaching such agreement, deliver to the Escrow Agent instructions
regarding the amount to be disbursed to the Purchaser and the Seller. The Escrow
Agent, upon receipt of such joint writing, shall promptly disburse to the
parties the amounts set forth on such notice.
6. Termination of this Escrow Agreement. This Agreement
shall terminate as to the Escrow Account, upon the full distribution of the
Escrow Account pursuant to Sections 4 and 5.
7. Disputes. In the event of any dispute as to the
disposition of the Escrow Account, as the case may be or as to any other matters
under this Agreement, the Escrow Agent is hereby authorized to deposit, upon
five (5) Business Days' notice to the parties, the funds constituting the Escrow
Account, with a court of competent jurisdiction. In connection with any such
dispute, the Escrow Agent may elect, in its commercially reasonable discretion,
to commence an interpleader action relating thereto.
4
8. Sole Duties. The Escrow Agent's sole duties hereunder
are as indicated herein, and upon the disposition of the Escrow Account, as
herein provided, the Escrow Agent shall be deemed to have performed its duties
and shall be automatically discharged from any further obligation in connection
therewith.
9. Escrow Agent Not Liable. The Escrow Agent, in the
performance of its duties hereunder, shall not be liable or responsible for any
authorization or omitted to be taken hereunder in good faith as herein provided,
except for its own willful misconduct, recklessness, or gross negligence and
except as provided in Section 13.6 of this Agreement.
10. Resignation; Successor Escrow Agent. The Escrow Agent
or any successor escrow agent, as the case may be, may resign its duties and be
discharged from all further duties or obligations hereunder at any time upon
giving ten (10) Business Days' prior written notice to the parties hereto. The
Seller and the Purchaser will thereupon jointly designate a successor escrow
agent hereunder within said ten (10) Business Day period to whom the Escrow
Account shall be delivered. In default of such joint designation of a successor
escrow agent, the Escrow Agent shall retain the Escrow Account as custodian
thereof until otherwise directed by the Seller and the Purchaser, jointly,
without further liability or responsibility.
11. Notices. All notices, requests, consents and demands
to or upon the respective parties hereto shall be in writing, and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made (a) if delivered by hand (including by overnight courier), when delivered,
(b) on the day after delivery to a nationally recognized overnight carrier
service if sent by overnight delivery for next morning delivery, (c) in the case
of mail, three (3) Business Days after deposit in United States first class
mail, certified with return receipt requested and postage prepaid and (d) in the
case of facsimile transmission, upon receipt of a legible copy. In each case:
(x) if delivery is not made during normal business hours at the place of
receipt, receipt and due notice under this Agreement shall be deemed to have
been made on the immediately following Business Day, and (y) notice shall be
sent to the address of the party to be notified, as follows, or to such other
address as may be hereafter designated by the respective parties hereto in
accordance with these notice provisions:
If to the Purchaser, to:
Callaway Golf Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
5
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Jamboree Center
▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Seller, to:
The Top-Flite Golf Company
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
If to the Escrow Agent, to:
[U.S. Bank National Association]
___________________________
___________________________
Facsimile: ________________
Attention: ________________
The Escrow Agent shall promptly deliver a copy of any notice received by it in
its capacity as the Escrow Agent to the Purchaser and the Seller.
12. Indemnification of Escrow Agent.
12.1 From and at all times after the date of this
Escrow Agreement, the Seller and the Purchaser, jointly and severally, shall, to
the fullest extent permitted by law, indemnify and hold harmless the Escrow
Agent and each director, officer, employee, attorney, agent and affiliate of the
Escrow Agent (collectively, the "Indemnified Parties") against any and all
actions, claims, losses, damages, liabilities, costs and expenses of any kind or
nature whatsoever (including without limitation reasonable attorneys' fees,
costs and expenses) incurred by or asserted against any of the Indemnified
Parties from and after the date hereof as a result of or arising from any claim,
demand, suit, action or proceeding (including any inquiry or investigation) by
any person, including without limitation the Seller or the Purchaser, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
against any person
6
under any statute or regulation, including, but not limited to, any federal or
state securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Agreement or any transactions
contemplated herein, whether or not any such Indemnified Party is a party to any
such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the right
to be indemnified hereunder for any liability finally determined by a court of
competent jurisdiction, subject to no further appeal, to have resulted solely
from the gross negligence, recklessness or willful misconduct of such
Indemnified Party. The obligations of the Seller and the Purchaser under this
Section 12 shall survive any termination of this Agreement.
12.2 The parties agree that neither the payment
by the Seller or the Purchaser of any claim by the Escrow Agent for
indemnification hereunder nor the disbursement of any amounts to the Escrow
Agent from the Escrow Account in respect of a claim by Escrow Agent for
indemnification shall impair, limit, modify, or affect, as between the Seller
and the Purchaser, the respective rights and obligations of the Seller, on the
one hand, and the Purchaser, on the other hand, under the Purchase Agreement.
13. Miscellaneous Matters Concerning Escrow Agent.
13.1 The Escrow Agent shall be entitled to
refrain from taking any action contemplated by this Agreement in the event that
it becomes aware of any disagreement between the parties hereto as to any facts
or as to the happening of any contemplated event precedent to such action.
13.2 The Escrow Agent shall have no
responsibility or liability for any diminution in value of any assets held
hereunder which may result from any investments or reinvestment made in
accordance with any provision which may be contained herein.
13.3 The Escrow Agent shall be entitled to
compensation for its services hereunder as per Schedule B attached hereto, which
is made a part hereof, and for reimbursement of its reasonable and documented
out-of-pocket expenses including, but not by way of limitation, the fees and
costs of attorneys or agents which it may find necessary to engage in the
performance of its duties hereunder, all to be paid one half (1/2) by the
Purchaser and one half (1/2) by the Seller, and the Escrow Agent shall have, and
is hereby granted, a prior lien upon any property, cash, or assets of the Escrow
Account, as the case may be, with respect to its unpaid fees and nonreimbursed
expenses, superior to the interests of any other persons or entities. In the
event any such compensation, expenses, fees or costs are drawn by the Escrow
Agent from the Escrow Account, as the case may be, the Seller and the Purchaser
each agree to make appropriate payment to the other party such that each party
ultimately receives the amount of the Current Receivables Deposit that is
entitled to receive without reduction or deduction for the other party's one
half (1/2) share of such compensation, expenses, fees or costs.
13.4 The Escrow Agent shall be entitled and is
hereby granted the right to set off and deduct any unpaid fees and/or
nonreimbursed expenses from amounts in the Escrow Account.
7
13.5 The Escrow Agent shall be under no
obligation to invest the deposited funds or the income generated thereby until
it has received a Form W-9 or W-8, as applicable, from the Purchaser and the
Seller, regardless of whether such party is exempt from reporting or withholding
requirements under the Internal Revenue Code of 1986, as amended.
13.6 The Escrow Agent shall have only those
duties as are specifically provided herein, which shall be deemed purely
ministerial in nature, and shall under no circumstance be deemed a fiduciary for
any of the parties to this Agreement. The Escrow Agent shall neither be
responsible for, nor chargeable with, knowledge of the terms and conditions of
any other agreement, instrument or document between the other parties hereto, in
connection herewith, including, without limitation, the Purchase Agreement. This
Agreement sets forth all matters pertinent to the escrow contemplated hereunder,
and no additional obligations of the Escrow Agent shall be inferred from the
terms of this Agreement or any other agreement.
13.7 The Escrow Agent shall have the right, but
not the obligation, to consult with counsel of choice and shall not be liable
for action taken or omitted to be taken by the Escrow Agent in accordance with
the advice of such counsel. If the Escrow Agent becomes involved in litigation
on account of this Agreement, it shall have the right to retain counsel and
shall have a first lien on the property deposited hereunder for any and all
reasonable and documented out-of-pocket costs, attorneys' fees, charges,
disbursements, and expenses in connection with such litigation; and shall be
entitled to reimburse itself therefor out of the property deposited hereunder,
and if it shall be unable to reimburse itself from the property deposited
hereunder, the Purchaser and the Seller jointly and severally agree to pay to
the Escrow Agent on demand its reasonable and documented out-of-pocket charges,
counsel and attorneys' fees, disbursements, and expenses in connection with such
litigation.
13.8 Any entity into which the Escrow Agent may
be merged, converted or with which the Escrow Agent may be consolidated, or any
entity resulting from any merger, conversion or consolidation to which the
Escrow Agent shall be a party, or any entity to which all or substantially all
of the business of the Escrow Agent shall be transferred, shall succeed to all
the Escrow Agent's rights, obligations and immunities hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
13.9 In the event that any escrow property shall
be attached, garnished or levied upon by any court order (including, by
bankruptcy), or the delivery thereof shall be stayed or enjoined by an order of
a court, or any order, judgment or decree shall be made or entered by any court
order affecting the property deposited under this Agreement, the Escrow Agent is
hereby expressly authorized, in its sole discretion, to obey and comply with all
writs, orders or decrees so entered or issued, which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or complies with any
such writ, order or decree it shall not be liable to any of the parties hereto
or to any other person, firm or entity, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
13.10 The Escrow Agent shall report to the
Internal Revenue Service, as of each calendar year-end, all income earned from
the investment of the Escrow Account against
8
the Purchaser or the Seller, whether or not said income has been distributed
during such year, as and to the extent required by law. The Escrow Agent agrees,
to the extent permitted by law, to make any such report as near as possible to
the filing deadline therefor in order that it may report any income earned to
the party which actually received the same. If the filing deadline for any
calendar year shall occur prior to the distribution of such income, the Escrow
Agent may report such income as earned by the Purchaser. Any tax returns
required to be prepared and filed will be prepared and filed by the party which
is reported to have received such income with the Internal Revenue Service in
all years income is earned, whether or not income is received or distributed in
any particular tax year, and Escrow Agent shall have no responsibility for the
preparation and/or filing or any tax return with respect to any income earned by
the Escrow Account. Any taxes payable on income earned from the investment of
the Escrow Account shall be paid by the party which is reported to have received
such income, whether or not the income was distributed by the Escrow Agent
during any particular year. The Escrow Agent shall have no obligation to pay any
taxes or estimated taxes. After the Escrow Account and the income earned thereon
has been distributed by the Escrow Agent, the parties agree to cooperate and to
file any amended reports which may be necessary in order to correct any filings
with the Internal Revenue Service which reported income as having been earned by
a party which did not actually receive such income.
14. Entire Agreement. This Agreement and the Purchase
Agreement contain the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede all prior agreements, written or
oral, with respect thereto.
15. Amendment; Waiver. This Agreement may not be amended
or modified except by an instrument in writing signed by the Seller, the
Purchaser and the Escrow Agent. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
16. Governing Law. This Agreement and all Claims with
respect thereto shall be governed by and construed in accordance with federal
bankruptcy law, to the extent applicable, and, where state law is implicated,
the laws of the State of New York without regard to any conflict of laws rules
thereof that might indicate the application of the laws of any other
jurisdiction.
17. Consent to Jurisdiction; Service of Process.
17.1 Consent of Jurisdiction. The Purchaser and
the Seller irrevocably and unconditionally consent to submit to the jurisdiction
of the Bankruptcy Court for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agree not to commence
any litigation relating hereto except in the Bankruptcy Court).
17.2 Service of Process. Any and all service of
process and any other notice in any such Claim shall be effective against any
party if given personally or by registered or certified mail, return receipt
requested, or by any other means of mail that requires a signed receipt, postage
prepaid, mailed to such party as herein provided. Nothing herein contained shall
be deemed to affect the right of any party to serve process in any manner
permitted by law
9
or to commence legal proceedings or otherwise proceed against any other party in
any other jurisdiction.
18. WAIVER OF JURY TRIAL.
18.1 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER OR IN CONNECTION WITH THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY.
18.2 EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE WAIVER IN SECTION 18.1, (ii) SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY
MAKES SUCH WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND
CERTIFICATIONS IN SECTION 18.1 AND THIS SECTION 18.2.
19. Assignment. This Agreement shall not be assigned
without the express written consent of the Seller and the Purchaser (which
consent may be granted or withheld in the sole discretion of the Seller and the
Purchaser). Notwithstanding the foregoing, no assignment of the interest of any
of the parties hereto shall be binding upon the Escrow Agent unless and until
reasonable written evidence of such assignment shall be delivered to the Escrow
Agent.
20. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
21. Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
[Remainder of Page Intentionally Left Blank]
10
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
PURCHASER:
CALLAWAY GOLF COMPANY
By:__________________________________
Name:
Title:
SELLER:
THE TOP-FLITE GOLF COMPANY
By:__________________________________
Name:
Title:
ESCROW AGENT:
[U.S. BANK NATIONAL ASSOCIATION]
By:__________________________________
Name:
Title:
SCHEDULE A
ESCROW ACCOUNT INFORMATION
[U.S. Bank National Association]
ABA# [_____________________]
Account #[_________________]
ATTN: [______________________]
Re: [Account Name, NCS #]
SCHEDULE B
FEE SCHEDULE
Annual Charge(1) [_________]
---------------------------
(1) The annual charge shall be paid only for any year in which the Escrow Agent
shall hold funds in escrow in respect of the Escrow Account.
SCHEDULE C
CERTIFICATE OF INCUMBENCY
The undersigned, (i) the duly elected, qualified and acting
___________________ of Callaway Golf Company, a Delaware corporation (the
"Purchaser"), and [(ii) the duly elected, qualified and acting ________ of The
Top-Flite Golf Company, a Delaware corporation (the "Seller")], each hereby
certifies that he/she is authorized to execute this Certificate and further
certifies that, as of the date hereof, each is authorized to sign and deliver
all notices, agreements, documents, instruments and certificates to be executed
and delivered by the Purchaser and the Seller, as the case may be, required or
permitted to be delivered pursuant to that certain Indemnity Agreement, dated as
of _____, 2003, by and among the Purchaser, the Seller and [U.S. Bank National
Association ] or in connection therewith, and that the signature appearing above
his/her name is his/her true and genuine signature.
IN WITNESS WHEREOF, the undersigned have signed this
Certificate this ___- day of __________, 200_.
CALLAWAY GOLF COMPANY
_____________________________________
Name:
Title:
THE TOP-FLITE GOLF COMPANY
_____________________________________
Name:
Title:
Exhibit G-1
[FORM OF]
DOMAIN NAME ASSIGNMENT
This Domain Name Assignment (this "Assignment") is made as of ____,
2003 by and among The Top-Flite Golf Company (f/k/a Spalding Sports Worldwide,
Inc.), a Delaware corporation a Delaware corporation and LISCO Sports, Inc. a
Delaware corporation, (collectively "Assignors"), and Callaway Golf Company, a
Delaware corporation ("Assignee").
RECITALS
A. The Top-Flite Company (f/k/a Spalding Sports Worldwide, Inc.)
and Callaway Golf Company have entered into the Asset Purchase Agreement dated
as of June 30, 2003 (the "Purchase Agreement").
B. Pursuant to Section 1.1 of the Purchase Agreement, Assignors
desire to assign to Assignee, and Assignee desires to acquire all of Assignors'
right, title, and interest in and to all of the domain name registrations listed
on Exhibit A attached hereto and incorporated herein, (ii) any intellectual
property rights in such domain names, including the goodwill of the business
symbolized thereby and (iii) any associated numerical internet protocol address
related thereto (collectively, the "Assigned Domain Names").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the
covenants and agreements contained in the Purchase Agreement and in this
Assignment, and for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and to implement the assignment of Intellectual
Property required by the Purchase Agreement, Assignors hereby agree as follows:
1. Capitalized terms used but not defined in this Assignment
shall have the meanings ascribed to such terms in the Purchase Agreement.
2. Assignors do hereby sell, transfer, convey, assign, grant, set
over and deliver to Assignee, and Assignee hereby accepts, all of Assignors'
right, title, and interest in and to the Assigned Domain Names, free and clear
of all liens, mortgages, options, charges, title defects, security interests and
similar encumbrances, the same to be held by Assignee for Assignee's own use and
enjoyment, and for the use and enjoyment of Assignee's successors, assigns,
designees, nominees and other legal representatives, as fully and entirely as
the same would have been held and enjoyed by Assignors if this Assignment and
sale had not been made, together with all causes of action (in law or equity),
claims, demands and any other rights for, or arising from any past, present or
future infringement, of the Assigned Domain Names, along with the right to ▇▇▇
for and collect any damages for the use and benefit of Assignee and Assignee's
successors, assigns, designees, nominees and other legal representatives.
3. Assignors represent, warrant, and covenant that the execution
and delivery of this Assignment does not breach any agreement to which an
Assignor is a party, and Assignors have
not entered into, and will not enter into, any oral or written agreement in
conflict with this Assignment.
4. As may be requested by Assignee or its designees or other
legal representatives from time to time after the date hereof, Assignors agree
to assist Assignee, or Assignee's successors, assigns, designees, nominees or
other legal representatives, in a commercially reasonable manner, without
further consideration, to (i) evidence, record, and perfect the assignment of
the Assigned Domain Names and (ii) secure Assignee's rights in the Assigned
Domain Names, including, but not limited to, the execution, delivery and filing
of all applications, specifications, oaths, assignments, powers-of-attorney, and
similar instruments that Assignee deems reasonably necessary to assign and
convey to Assignee, or Assignee's successors, assignees, designees, nominees or
other legal representatives, all right, title and interest in and to the
Assigned Domain Names.
IN WITNESS WHEREOF, this Assignment has been executed as of the day and
year first written above.
ASSIGNORS:
THE TOP-FLITE GOLF COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
LISCO SPORTS COMPANY, Inc.
By:__________________________________
Name:________________________________
Title:_______________________________
ASSIGNEE:
CALLAWAY GOLF COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
ACKNOWLEDGEMENT BY NOTARY PUBLIC
State of _______________
County of _____________
On this ____________ day of _________, 2003, before me, the undersigned
Notary Public, personally appeared ________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument, and acknowledged to me that
he executed the same.
Seal: Signature:___________________________________
Name: , Notary Public
EXHIBIT A
Exhibit G-2
[FORM OF]
PATENT ASSIGNMENT
This Patent Assignment (this "Assignment") is made as of _____, 2003 by
and between The Top-Flite Golf Company (f/k/a Spalding Sports Worldwide, Inc.),
a Delaware corporation, ("Assignor"), and Callaway Golf Company, a Delaware
corporation ("Assignee").
RECITALS
A. Assignor and Assignee have entered into the Asset Purchase
Agreement dated as of June 30, 2003 (the "Purchase Agreement").
B. Pursuant to Section 1.1 of the Purchase Agreement, Assignor
desires to assign to Assignee, and Assignee desires to acquire all of Assignor's
right, title, and interest in and to all of the issued patents and pending
patent applications listed on Exhibit A hereto (collectively, the "Assigned
Patents").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the
covenants and agreements contained in the Purchase Agreement and in this
Assignment, and for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and to implement the assignment of Intellectual
Property required by the Purchase Agreement, Assignor hereby agrees as follows:
1. Capitalized terms used but not defined in this Assignment
shall have the meanings ascribed to such terms in the Purchase Agreement.
2. Assignor does hereby sell, transfer, convey, assign, grant,
set over and deliver to Assignee, and Assignee hereby accepts, all of Assignor's
right, title, and interest in and to the Assigned Patents, free and clear of all
liens, mortgages, options, charges, title defects, security interests and
similar encumbrances, the same to be held by Assignee for Assignee's own use and
enjoyment, and for the use and enjoyment of Assignee's successors, assigns,
designees, nominees and other legal representatives, as fully and entirely as
the same would have been held and enjoyed by Assignor if this Assignment and
sale had not been made, together with all causes of action (in law or equity),
claims, demands and any other rights for, or arising from any past, present or
future infringement, of the Assigned Patents, along with the right to ▇▇▇ for
and collect any damages for the use and benefit of Assignee and Assignee's
successors, assigns, designees, nominees and other legal representatives.
3. Assignor represents, warrants, and covenants that the
execution and delivery of this Assignment does not breach any agreement to which
Assignor is a party, and Assignor has not entered into, and will not enter into,
any oral or written agreement in conflict with this Assignment.
4. As may be requested by Assignee or its designees or other
legal representatives from time to time after the date hereof, Assignor agrees
to assist Assignee, or Assignee's successors, assigns, designees, nominees or
other legal representatives, in a commercially reasonable manner, without
further consideration, to (i) evidence, record, and perfect the assignment of
the Assigned Patents and (ii) secure Assignee's rights in the Assigned Patents,
including, but not limited to, the execution, delivery and filing of all
applications, specifications, oaths, assignments, powers-of-attorney, and
similar instruments that Assignee deems reasonably necessary to assign and
convey to Assignee, or Assignee's successors, assignees, designees, nominees or
other legal representatives, all right, title and interest in and to the
Assigned Patents.
5. Assignor hereby authorizes and requests the United States
Patent and Trademark Office and any corresponding foreign office whose duty it
is to issue, certify, or assign registrations or applications for patents to
issue, certify or assign as appropriate, the same to Assignee and Assignee's
successors, assigns, designees, nominees and other legal representatives in
accordance with the terms of this Assignment.
IN WITNESS WHEREOF, this Assignment has been executed as of the day and
year first written above.
ASSIGNOR:
THE TOP-FLITE GOLF COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
ASSIGNEE:
CALLAWAY GOLF COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
ACKNOWLEDGEMENT BY NOTARY PUBLIC
State of _______________
County of _____________
On this ____________ day of _________, 2003, before me, the undersigned
Notary Public, personally appeared ________________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument, and acknowledged to me that
he executed the same.
Seal: Signature:____________________________________
Name: , Notary Public
EXHIBIT A
Exhibit G-3
[FORM OF]
TRADEMARK ASSIGNMENT
This Trademark Assignment (this "Assignment") is made as of _____, 2003
by and among The Top-Flite Golf Company (f/k/a Spalding Sports Worldwide, Inc.),
a Delaware corporation and LISCO Sports, Inc. a Delaware corporation,
(collectively "Assignors"), and Callaway Golf Company, a Delaware corporation
("Assignee").
RECITALS
A. The Top-Flite Company (f/k/a Spalding Sports Worldwide, Inc.)
and Callaway Golf Company have entered into the Asset Purchase Agreement dated
as of June 30, 2003 (the "Purchase Agreement").
B. Pursuant to Section 1.1 of the Purchase Agreement, Assignors
desire to assign to Assignee, and Assignee desires to acquire all of Assignors'
right, title, and interest in and to all of the trademark registrations and
applications listed on Exhibit A, including all goodwill associated therewith,
(collectively, the "Assigned Trademarks").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the
covenants and agreements contained in the Purchase Agreement and in this
Assignment, and for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and to implement the assignment of Intellectual
Property required by the Purchase Agreement, Assignors hereby agree as follows:
1. Capitalized terms used but not defined in this Assignment
shall have the meanings ascribed to such terms in the Purchase Agreement.
2. Assignors do hereby sell, transfer, convey, assign, grant, set
over and deliver to Assignee, and Assignee hereby accepts, all of Assignors'
right, title, and interest in and to the Assigned Trademarks, free and clear of
all liens, mortgages, options, charges, title defects, security interests and
similar encumbrances, the same to be held by Assignee for Assignee's own use and
enjoyment, and for the use and enjoyment of Assignee's successors, assigns,
designees, nominees and other legal representatives, as fully and entirely as
the same would have been held and enjoyed by Assignor if this Assignment and
sale had not been made, together with all causes of action (in law or equity),
claims, demands and any other rights for, or arising from any past, present or
future infringement, of the Assigned Trademarks, along with the right to ▇▇▇ for
and collect any damages for the use and benefit of Assignee and Assignee's
successors, assigns, designees, nominees and other legal representatives.
3. Assignors represent, warrant, and covenant that the execution
and delivery of this Assignment does not breach any agreement to which Assignors
are a party, and Assignors have not entered into, and will not enter into, any
oral or written agreement in conflict with this Assignment.
4. As may be requested by Assignee or its designees or other
legal representatives from time to time after the date hereof, Assignors agree
to assist Assignee, or Assignee's successors, assigns, designees, nominees or
other legal representatives, in a commercially reasonable manner, without
further consideration, to (i) evidence, record, and perfect the assignment of
the Assigned Trademarks and (ii) secure Assignee's rights in the Assigned
Trademarks, including, but not limited to, the execution, delivery and filing of
all applications, specifications, oaths, assignments, powers-of-attorney, and
similar instruments that Assignee deems reasonably necessary to assign and
convey to Assignee, or Assignee's successors, assignees, designees, nominees or
other legal representatives, all right, title and interest in and to the
Assigned Trademarks.
5. Assignors hereby authorize and request the United States
Patent and Trademark Office and any corresponding foreign office whose duty it
is to issue, certify, or assign registrations or applications for trademarks or
service marks to issue, certify or assign as appropriate, the same to Assignee
and Assignee's successors, assigns, designees, nominees and other legal
representatives in accordance with the terms of this Assignment.
[THE REMAINDER OF THIS PAGE INTENTIONAL LEFT BLANK]
IN WITNESS WHEREOF, this Assignment has been executed as of the day and
year first written above.
ASSIGNORS:
THE TOP-FLITE GOLF COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
LISCO SPORTS COMPANY, Inc.
By:__________________________________
Name:________________________________
Title:_______________________________
ASSIGNEE:
CALLAWAY GOLF COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
ACKNOWLEDGEMENT BY NOTARY PUBLIC
State of _______________
County of _____________
On this ____________ day of _________, 2003, before me, the undersigned
Notary Public, personally appeared ________________________, personally known to
me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument, and acknowledged to me that he executed the
same.
Seal: Signature:_____________________________________
Name: , Notary Public
EXHIBIT A
EXHIBIT H-1
CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT - THIS
INSTRUMENT SHOULD BE USED BY LAWYERS ONLY
THIS INDENTURE, made on
BETWEEN
The Top-Flite Golf Company, Inc. (formerly known as Spalding &
Evenflow Companies, Inc.), a Delaware corporation having an address
at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
PARTY OF THE FIRST PART, AND
PARTY OF THE SECOND PART,
WITNESSTH, that the party of the first part, in consideration of
Ten Dollars and other valuable consideration paid by the party of
the second part, does hereby grant and release unto the party
of the second part, the heirs or successors and assigns of the
party of the second part forever.
ALL that certain plot, piece or parcel of land, with the buildings
and improvements thereon erected, situate, lying and being in the
County of ▇▇▇▇▇▇, City of Gloversville, State of New York and being
more particularly described in Exhibit A attached hereto.
TOGETHER with all right, title and interest, if any, of the party
of the first part in and to any streets and roads abutting the
above described premises to the center lines thereof; TOGETHER with
the appurtenances and all the estate and rights of the party of the
first part in and to said premises; TO HAVE AND TO HOLD the
premises herein granted unto the party of the second part, the
heirs or successors and assigns of the party of the second part
forever.
AND the party of the first part convenants that the party of the
first part has not done or suffered anything whereby the said
premises have been encumbered in any way whatever, except as
aforesaid.
AND the party of the first part, in compliance with Section 13 of
the Lien Law, covenants that the party of the first part will
receive the consideration for this conveyance and will hold the
right to receive such consideration as a trust fund to be applied
first for the purpose of paying the cost of the improvement and
will apply the same first to the payment of the cost of the
improvement before using any part of the total of the same for any
other purpose. The word "party" shall be construed as if it read
"parties" whenever the sense of this indenture so requires.
IN WITNESS WHEREOF, the party of the first part has duly executed
this deed the day and year first above written.
IN PRESENCE OF:
ACKNOWLEDGMENT IN ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (▇▇▇ ▇▇▇-▇)
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ OF SS.:
On before me, the undersigned, personally appeared
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument.
__________________________________________________________
(Signature and office of individual taking acknowledgment)
ACKNOWLEDGMENT OUTSIDE NEW YORK STATE (RPL 309-D)
STATE OF COUNTY OF SS.:
On before me, the undersigned, personally appeared
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s), or the person upon behalf of which the individual(s) acted,
executed the instrument, and that such individual made such appearance before
the undersigned in
(insert city or political subdivision and state or county or other place
acknowledgment taken)
_________________________________________________________
(signature and office of individual taking acknowledgment)
BARGAIN AND SALE DEED
WITH COVENANT AGAINST GRANTOR'S ACTS
TITLE NO.__________________
TO
ACKNOWLEDGMENT BY SUBSCRIBING WITNESS(ES)
STATE OF SS.:
COUNTY OF
On before me, the undersigned, personally appeared
the subscribing witness(es) to the foregoing instrument, with whom I am
personally acquainted, who, being by me duly sworn, did depose and say that
he/she/they reside(s) in (if the place of residence is in a city, include the
street and street number, if any, thereof);
that he/she/they know(s)
to be the individual(s) described in and who executed the foregoing instrument;
that said subscribing witness(es) was(were) present and saw said
execute the same; and that said witness(es) at the same time subscribed
his/her/their name(s) as a witness(es) thereto.
([ ] If taken outside New York State insert city or political subdivision and
state or country or other place acknowledgment taken. And that said subscribing
witness(es) made such appearance before the undersigned in
________________________________________________________________________________
_______________________________________________________________________________)
__________________________________________________________
(signature and office of individual taking acknowledgment)
SECTION
BLOCK
LOT
COUNTY OR TOWN
RETURN BY MAIL TO:
Zip No.
Reserve this space for use of Recording Office.
EXHIBIT A
PARCEL ONE: All that piece or parcel of land situate, lying and being in the
City of Gloversville, County of ▇▇▇▇▇▇ and State of New York.
Beginning at a point said point lies N 8 degrees 05'10" E. 762.17 feet and S 62
degrees 13'55" E 299.26 feet from a reference point being an iron pipe marking
the most southeast corner of lands now or formerly of Potter (Book 564 Page 981)
said point of beginning also lies N 82 degrees 13'55" W 146.79 feet from the
curved margin of Corporate Drive; thence N 7 degrees 46'05" E 542.11 feet to a
point; thence S 82 degrees 13'55" E 600.00 feet along the south line of lands
now or formerly of Asset Investment Services Co. (Book 601 page 96) to an iron
pipe; thence S 7 degrees 46'05" W 430.00 feet to an iron pipe; thence N 82
degrees 13'55" W. 171.50 feet along the northerly margin of Corporate Drive to
an iron pipe; thence along the margin of Corporate Drive on a curve to the left
having a radius of 410.00 feet, a length of 310.27 feet and a chord of S.76
degrees 04'00" W. to a point; thence N. 82 degrees 13'55" W. 146.79 feet to the
point or place of beginning. Containing 6.53 acres, more or less.
PARCEL TWO: Beginning at the southwesterly corner of Parcel One above; running
thence N 82 degrees 13'55"W. 299.26' to other lands of the ▇▇▇▇▇▇ County
Industrial Development Agency (conveyed by Gates ▇▇▇▇▇, Inc.); thence N 08
degrees 05'10" E. 542.12' to a point; thence S 82 degrees 13'55" E. 296.14' to
the northwesterly point of Parcel One; thence S 07 degrees 46'05" W 542.11'
along the west line of Parcel One to the point and place of beginning.
Containing 3.70 acres, more or less.
EXHIBIT H-2
TRANSFER OF LAND Approved Form T1
Section 45 Transfer of Land ▇▇▇ ▇▇▇▇ Victorian Land Titles Office
Lodged by:
Name: Allens ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ -----------------------------
Phone: (▇▇) ▇▇▇▇ ▇▇▇▇ MADE AVAILABLE/CHANGE CONTROL
Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
Ref: BTSM:▇▇-▇▇▇-▇▇▇▇ Land Titles Office Use Only
Customer Code: 0951R -----------------------------
The transferor at the direction of the directing party (if any) transfers to the
transferee the estate and interest specified in the land described for the
consideration expressed and subject to the encumbrances affecting the land
including any created by dealings lodged for registration before the lodging of
this transfer.
--------------------------------------------------------------------------------
Land: (volume and folio reference)
Volume XXXX Folio XXXX
--------------------------------------------------------------------------------
Estate and Interest: (e.g. "all my estate in fee simple")
All its estate in fee simple
--------------------------------------------------------------------------------
Consideration:
The Transferee being entitled to the land under XXXX ▇▇▇▇ of Sale between the
Transferor and the Transferee dated XXXX.
--------------------------------------------------------------------------------
Transferor: (full name)
Top-Flite Australia Pty Ltd (ACN 004 114 407)
--------------------------------------------------------------------------------
Transferee: (full name and address including postcode)
Callaway XXXX [(ACN XXXX)] of XXXX
--------------------------------------------------------------------------------
Directing Party: (full name)
Nil
--------------------------------------------------------------------------------
Dated:
Execution and attestation:
--------------------------------------------------------------------------------
Approval No. 550026A ORDER TO REGISTER STAMP DUTY USE ONLY
Please Register and issue title to
T1
[OFFICE OF TITLES Signed Cust. Code:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇]
THE BACK OF THIS FORM MUST NOT BE USED
ANNEXURE PAGE Approved Form A1
Transfer of Land Act 1958 Victorian Land Titles Office
This is page 2 of Approved Form T1 dated between
Top-Flite Australia (ACN 004 114 407) as Transferor and and ▇▇▇▇▇▇▇▇ (ACN XXXX)
as Transferee
Signatures of the parties
--------------------------------------------------------------------------------
PANEL HEADING
THE COMMON SEAL of TOP-FLITE
AUSTRALIA PTY LTD was affixed in the
presence of:
_______________________________________ ______________________________
Director Signature Director/Secretary Signature
_______________________________________ ______________________________
Print Name Print Name
THE COMMON SEAL of ▇▇▇▇▇▇▇▇ PTY
LTD was affixed in the presence of:
_______________________________________ ______________________________
Director Signature Director/Secretary Signature
_______________________________________ ______________________________
Print Name Print Name
--------------------------------------------------------------------------------
Approval No. 550026A
A1
[OFFICE OF TITLES ▇▇▇▇▇▇▇▇ ▇▇▇▇▇]
1. If there is insufficient space to accommodate the required information in a
panel of the Approved Form insert the words "See Annexure Page 2" (or as
the case may be) and enter all the information on the Annexure Page under
the appropriate panel heading. THE BACK OF THE ANNEXURE PAGE IS NOT TO BE
USED.
2. If multiple copies of a mortgage are lodged, original Annexure Pages must
be attached to each.
3. The Annexure Pages must be properly identified and signed by the parties to
the Approved Form to which it is annexed.
4. All pages must be attached together by being stapled in the top left
corner.