SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): NOVEMBER 27, 1996
EMERSON RADIO CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 0-25226 22-3285224
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
NINE ENTIN ROAD, PARSIPPANY, NEW JERSEY 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 884-5800
NONE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On November 27, 1996 Emerson Radio Corp. ("Emerson") and Sport
Supply Group, Inc. ("SSG") entered into a Securities Purchase Agreement
(the "Agreement"), pursuant to which Emerson will purchase from SSG
1,600,000 shares of the common stock, $.01 par value per share (the "Common
Stock"), of SSG for aggregate consideration of $11.5 million, or
approximately $7.19 per share. In addition, Emerson will purchase, for an
aggregate consideration of $500,000, 5-year warrants (the "Warrants") to
acquire an additional 1,000,000 shares of Common Stock at an exercise price
of $7.50 per share, subject to standard anti-dilution adjustments, pursuant
to a Warrant Agreement (the "Warrant Agreement"). After the closing of the
transactions contemplated under the Agreement, but prior to the exercise of
any of the Warrants, Emerson will own approximately 27% of the outstanding
shares of the Common Stock, and assuming exercise of all such warrants,
will beneficially own approximately 34.9% of the Common Stock. The
$12,000,000 purchase price contemplated by the Agreement will be obtained
by Emerson from its United States senior secured lender under the terms of
its existing credit facility and in accordance with the terms of the
consent obtained from such lender. Pursuant to a Registration Rights
Agreement (the "Registration Rights Agreement"), Emerson will also be
granted certain demand and incidental registration rights on the resale of
the shares of Common Stock it will own, as well as on the exercise and
resale of the shares it may acquire under the Warrant Agreement. In
addition, Emerson will arrange for foreign trade credit financing of $2
million for the benefit of SSG to supplement SSG's existing credit
facilities.
Pursuant to the Agreement, SSG will cause a majority of the
members of its Board of Directors to consist of Emerson's designees until
SSG's next stockholders meeting. Emerson has designated Geoffrey P.
Jurick, its Chairman and Chief Executive Officer, Eugene I. Davis, its
President, John P. Walker, its Executive Vice President and Chief Financial
Officer, and Johnson C. Ko, an independent Hong Kong businessman, as its
designees to the SSG Board. SSG has indicated that Peter S. Blumenfeld and
William H. Watkins, Jr., currently Directors of SSG, will continue as
Directors, while Michael J. Blumenfeld and Robert W. Philip will resign as
Directors. In addition, for a period of at least 2 years after the
closing, neither SSG nor any of its subsidiaries shall be permitted to
enter into or be a party to any agreement or transaction with any Affiliate
(as such term is defined in the Securities Exchange Act of 1934, as
amended) of SSG or Emerson, except (i) in the ordinary course of SSG's or
its subsidiaries' business and on terms no less favorable to SSG or its
subsidiaries than would be obtained in a comparable arms' length
transaction with a person not an Affiliate of SSG or Emerson or (ii) unless
approved by a majority of SSG's directors who do not have a direct or
indirect material financial interest in the agreement or transaction and
which includes a majority of directors who are not officers or employees of
SSG or Emerson or directors of Emerson.
The parties expect that a closing of the transactions
contemplated by the Agreement will occur on or before December 12, 1996
(the "Closing Date"), subject to adjournments or postponements as agreed
upon by the parties, but in no event later than December 16, 1996. If the
transactions are not consummated due to (i) SSG's acceptance of an
Acquisition Proposal (as such term is defined in the Agreement) other than
with Emerson or (ii) the willful failure to close by SSG, and Emerson has
not in any way contributed to the failure to so close, the Company will pay
Emerson a termination fee of $750,000. If the transactions are not
consummated due solely to the financial inability or willful failure to
close by Emerson, and SSG has not in any way contributed to the failure to
so close, Emerson will pay SSG a termination fee of $3,000,000, which fee
is secured by an irrevocable standby letter of credit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
2(a). Securities Purchase Agreement dated as of November 27,
1996, by and between Sport Supply Group, Inc. and Emerson Radio Corp.
4(a). Form of Warrant Agreement by and between Sport Supply
Group, Inc. and Emerson Radio Corp.
4(b). Form of Registration Rights Agreement by and between
Sport Supply Group, Inc. and Emerson Radio Corp.
10(b). Consent No. 1 to Financing Agreements among Emerson
Radio Corp., certain of its subsidiaries, and Congress Financial
Corporation.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
EMERSON RADIO CORP.
Dated: December 2, 1996 By: /S/ EUGENE I. DAVIS
Eugene I. Davis,
President
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INDEX TO EXHIBITS
EXHIBIT PAGE
NO. EXHIBIT NUMBER
2. Securities Purchase Agreement dated November 27, 1996
by and between Sport Supply Group, Inc. and
Emerson Radio
Corp...................................................................
6
4(a) Form of Warrant Agreement by and between Sport Supply
Group, Inc. and Emerson Radio
Corp........................................ 39
4(b) Form of Registration Rights Agreement by and between Sport
Supply Group, Inc. and Emerson Radio
Corp............................. 51
10(b) Consent No. 1 to Financing Agreements among Emerson Radio
Corp., certain of its subsidiaries, and Congress Financial
Corporation...............................................................69
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SECURITIES PURCHASE AGREEMENT
Dated as of November 27, 1996
by and between
SPORT SUPPLY GROUP, INC.
and
EMERSON RADIO CORP.
336055-9
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TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASE AND SALE.................... 1
1.1 Purchase and Sale of Shares and Warrants .......... 1
ARTICLE II
PURCHASE PRICE...................... 1
2.1 Purchase Price .................................... 1
2.2 Closing Payments .................................. 2
2.3 Deposit of Purchase Price ......................... 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SSG.......... 2
3.1 Organization and Qualification; Subsidiaries ...... 2
3.2 Capitalization; Minute Book ....................... 3
3.3 Title to Shares ................................... 3
3.4 Authority ......................................... 3
3.5 No Violations ..................................... 4
3.6 Reports ........................................... 4
3.7 Absence of Certain Changes or Events .............. 5
3.8 Condition of Tangible Assets ...................... 6
3.9 Taxes, Tax Returns and Other Reports .............. 6
3.10 Employment Contracts and Compensation ............. 7
3.11 Patents, Trademarks, Etc .......................... 7
3.12 Litigation ........................................ 7
3.13 Insurance ......................................... 8
3.14 Compliance with Laws; Permits ..................... 8
3.15 Hazardous and Toxic Substances; Hazardous Wastes
and Pollutants..................................... 8
3.16 Debt Instruments .................................. 10
3.17 Employee Benefit Plans; Collective Bargaining
Agreements......................................... 10
3.18 Customs ........................................... 10
3.19 Full Disclosure ................................... 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EMERSON........ 11
4.1 Authority ......................................... 11
4.2 No Violations ..................................... 11
4.3 Investment Representations ........................ 11
4.4. Reports ........................................... 12
4.5. Opinion of Counsel ................................ 13
ARTICLE V
CONDUCT OF BUSINESS BY SSG PENDING CLOSING........ 13
5.1 Preservation of Existence ......................... 13
5.2 Compliance with Laws .............................. 13
5.3 Accounting Methods; Inspections; Cooperation ...... 13
5.4 Maintenance of Property ........................... 14
5.5 Payment of Taxes and Claims ....................... 14
5.6 Information Covenants ............................. 14
5.7. Action By Board of Directors ...................... 15
ARTICLE VI
ADDITIONAL AGREEMENTS OF SSG............... 15
6.1 Access to Information ............................. 15
6.2 Purchase or Sale of Assets ........................ 15
6.3 Acquisition Proposals ............................. 15
6.4 Indebtedness ...................................... 16
6.5 Compensation ...................................... 16
6.6 Agreements ........................................ 16
6.7 Issuance of Common Stock .......................... 16
6.8 Dividends ......................................... 16
6.9 Investments ....................................... 16
6.10 Merger, etc. ...................................... 16
6.11 Charter Amendment ................................. 17
ARTICLE VII ...................... 17
POST-CLOSING COVENANTS OF SSG ............. 17
ARTICLE VIII
CONDITIONS TO EMERSON'S OBLIGATION TO CLOSE....... 17
ARTICLE IX
CONDITIONS TO SSG'S OBLIGATIONS TO CLOSE......... 18
ARTICLE X
CLOSING......................... 19
10.1 Time and Place of Closing ......................... 19
10.2 Delivery by SSG ................................... 20
10.3 Delivery by Emerson ............................... 20
10.4 Transaction Documents ............................. 21
ARTICLE XI
TERMINATION AND EXTENSION................ 21
11.1 Termination ....................................... 21
11.2 Effect of Termination ............................. 22
11.3 Extension ......................................... 23
ARTICLE XII
MISCELLANEOUS...................... 23
12.1 No Broker ......................................... 23
12.2 Public Statements ................................. 23
12.3 Survival of Representations and Warranties ........ 23
12.4 Officers' and Directors' Indemnification and
Insurance.......................................... 24
12.5 No Waiver ......................................... 24
12.6 Entire Agreement; Written Modifications ........... 24
12.7 Assignment; Binding Effect ........................ 25
12.8 Expenses .......................................... 25
12.9 Notices ........................................... 25
12.10 Cooperation ....................................... 25
12.11 No Benefit to Others .............................. 26
12.12 Headings, Gender, and "Person" .................... 26
12.13 Schedules ......................................... 26
12.14 Severability ...................................... 26
12.15 Counterparts ...................................... 26
12.16 Governing Law ..................................... 26
12.17 Construction ...................................... 27
336055-9
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SECURITIES PURCHASE AGREEMENT dated as of November 27, 1996, by
and between SPORT SUPPLY GROUP, INC., a Delaware corporation having an
address at 1901 Diplomat Drive, Farmers Branch, Texas 75234 ("SSG") and
EMERSON RADIO CORP., a Delaware corporation having an address at Nine Entin
Road, Parsippany, New Jersey 07054-0430 ("Emerson").
W I T N E S S E T H:
WHEREAS, SSG has agreed to issue or grant, as the case may be,
and sell to Emerson, and Emerson has agreed to subscribe for and purchase
from SSG, (i) 1,600,000 newly-issued shares (the "Shares") of Common Stock,
$.01 par value, of SSG (the "Common Stock") and (ii) five-year warrants to
purchase up to 1,000,000 newly-issued shares of the Common Stock at an
exercise price of $7.50 per share, subject to adjustment (the "Warrants"),
subject to, and in accordance with, the terms and provisions set forth
herein.
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE OF SHARES AND WARRANTS. Subject to the
terms and provisions of this Agreement, and on the basis of and in reliance
upon the representations, warranties, covenants, and agreements set forth
herein and in the Transaction Documents (as hereinafter defined), on the
Closing Date (as defined in Section 10.1 hereof), SSG shall validly issue
or grant, as the case may be, and sell to Emerson, and Emerson shall
validly subscribe for and purchase from SSG, the Shares and the Warrants.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE.
(a) In consideration of the issuance and sale of the
Shares, Emerson shall pay to SSG the sum of ELEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($11,500,000) (the "Stock Purchase Price").
(b) In consideration of the issuance and sale of the
Warrants, Emerson shall pay to SSG the sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000) (the "Warrants Purchase Price," and together with the Stock
Purchase Price, the "Purchase Price").
2.2 CLOSING PAYMENTS. On the Closing Date, Emerson shall pay,
in immediately available funds by wire transfer to SSG's bank account
designated not later than two business days prior to the Closing Date, the
Purchase Price to SSG.
2.3 DEPOSIT OF PURCHASE PRICE. Concurrently herewith, Emerson
shall provide SSG with an irrevocable standby letter of credit in the
amount of $3,000,000 from a financial institution located in the United
States and reasonably satisfactory to SSG, on terms and conditions
reasonably satisfactory to Emerson and SSG, for purposes of satisfying
Emerson's obligations under Section 11.2 of this Agreement. Emerson shall
also provide evidence reasonably satisfactory to SSG of Emerson's
availability of funds in or from a financial institution located in the
United States for purposes of paying the Purchase Price at Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SSG
As a material inducement to Emerson to purchase the Shares and
the Warrants, SSG hereby represents and warrants to Emerson as follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of SSG and its sole subsidiary, Sport Supply Group
International Holdings, Inc. ("SSGI"), is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware, with full corporate power and authority to own its respective
properties and to carry on its respective businesses as now conducted.
Each of SSG and SSGI is duly qualified or licensed and has all permits
necessary to transact business, and is in good standing as a foreign
corporation, in each of the jurisdictions set forth in SCHEDULE 3.1 hereto,
which are the only jurisdictions wherein the nature of the respective
businesses conducted by SSG or SSGI or their respective leases of real
property require them to be so qualified or licensed or to hold such
permits, except where the failure to be so qualified or licensed or to hold
such permits would not have a material adverse effect on the financial
condition, results of operation, assets, liabilities, business, or
prospects of SSG and SSGI, taken as a whole (hereinafter, a "Material
Adverse Effect").
(b) SSG has no other direct or indirect subsidiaries and has no
ownership or equity interest, or right to acquire any ownership or equity
interest, whether by conversion, option exercise, or otherwise, in any
corporation, partnership, association, business trust, limited liability
company, or any other entity except for SSGI. The total authorized capital
stock of SSGI consists of 10,000 shares of its common stock, $.01 par value
per share, of which 1,000 shares are outstanding, all of which are owned by
SSG, free and clear of any adverse claims. There are no outstanding
subscriptions, options, warrants, rights, calls, contracts, commitments,
understandings, or agreements to purchase or otherwise acquire, or relating
to the issuance of (collectively, the "Rights"), any shares of capital
stock or other securities of SSGI, including without limitation, any Rights
of conversion or exchange under any outstanding securities or instruments.
3.2 CAPITALIZATION; MINUTE BOOK. The total authorized capital
stock of SSG consists of 20,000,000 shares of Common Stock, having a par
value of $0.01 per share, of which 6,764,834 shares are outstanding, and
100,000 shares of Preferred Stock, having a par value of $0.01 per share,
none of which are outstanding. Except as disclosed in the Reports (as
hereinafter defined) or in SCHEDULE 3.2 attached thereto, there are no
outstanding Rights to acquire any shares of Common Stock or other
securities of SSG, including, without limitation, any rights of conversion
or exchange under any outstanding securities or instruments. The minute
books of SSG and SSGI to be made available to Emerson are true and complete
in all material respects.
3.3 TITLE TO SHARES. The Shares upon issuance, and the shares
of Common Stock to be issued on exercise of the Warrants in accordance with
their terms, will be, and all other outstanding shares of Common Stock have
been, duly authorized and validly issued in full compliance with applicable
federal, state, and other securities and other laws, and without any
violation of any pre-emptive rights, and will be or are, as the case may
be, fully paid and non-assessable. Upon delivery by SSG to Emerson of the
Stock Certificates (as defined in Section 10.2) and upon exercise of the
Warrants in accordance with their terms, Emerson shall acquire the legal
and valid title to the Shares and shares of Common Stock underlying the
Warrants, free and clear of all adverse claims whatsoever not created by
Emerson, and shall become the lawful record and beneficial owner thereof.
3.4 AUTHORITY. SSG has all requisite corporate power and
authority to execute and deliver this Agreement and the other Transaction
Documents (as defined in Section 10.4) to which it may be a party and
consummate the transactions contemplated herein and therein. Except as may
be required by the rules of the New York Stock Exchange, Inc. ("NYSE"),
SSG's execution, delivery, and performance of this Agreement and the other
Transaction Documents to which SSG may be a party, and the consummation of
the transactions contemplated herein and therein, have been duly authorized
by its Board of Directors and no other action is required by law, the
Certificate of Incorporation or Bylaws of SSG, or otherwise, for such
authorization. This Agreement and each of the other Transaction Documents
to which SSG may be a party constitute the legal, valid, and binding
obligations of, and are enforceable against, SSG in accordance with their
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
3.5 NO VIOLATIONS. Except as set forth in SCHEDULE 3.5 and
except for matters which would not have a Material Adverse Effect and which
could not prevent or delay the Closing, the authorization, execution, and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated herein and therein by SSG do
not and will not, with or without the giving of notice or passage of time
or both (a) violate, conflict with, or result in the breach of any term or
provision of, or require any notice, filing or consent under (i) the
Certificate of Incorporation or Bylaws of SSG or SSGI, (ii) any statutes,
laws, rules, regulations, ordinances, or Permits (as defined in Section
3.14 below) of any governmental body, authority, or agency applicable to
SSG or SSGI, or (iii) any judgment, decree, writ, injunction, order, or
award of any arbitrator, court, or governmental body, authority, or agency
binding upon SSG or SSGI or any of their respective properties or assets;
(b) conflict with or result in the breach of any term or provision of,
require any notice or consent under, give rise to a right of termination
of, constitute a default under, result in the acceleration of, or give rise
to a right to accelerate any obligation under any loan agreement, mortgage,
indenture, financing agreement, lease, or any agreement or instrument of
any kind to which SSG or SSGI may be a party or by which any of their
respective properties or assets are bound; or (c) result in any lien,
claim, encumbrance, or restriction on any of the properties or assets of
SSG or SSGI.
3.6 REPORTS. Since December 31, 1994, SSG has filed all
required forms, reports, statements, and documents (the "Reports") with the
Securities and Exchange Commission ("SEC") required to be filed by it
pursuant to the Federal securities laws and the SEC rules and regulations
promulgated thereunder, all of which have complied in all material respects
with all applicable requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations promulgated thereunder.
None of such Reports, including without limitation any financial statements
or schedules included therein, at the time filed, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The consolidated balance sheets and the related consolidated
statements of operations and cash flows (including the related notes
thereto) (the "Financial Statements") of SSG included in the Financial
Statements contained in SSG's Annual Report on Form 10-K for the fiscal
year ended October 31, 1995 (the "1995 10-K") and SSG's Quarterly Reports
on Form 10-Q for the fiscal quarters ended February 2, 1996, May 3, 1996,
and August 2, 1996 (the "Interim 10-Q's"), present fairly in all material
respects the consolidated financial position of SSG as of their respective
dates, and the results of consolidated operations and cash flows for the
periods presented therein, all in conformity with generally accepted
accounting principles applied on a consistent basis ("GAAP"), except as
otherwise noted therein and except that the Financial Statements included
in the Interim 10-Q's may not contain all footnotes required by GAAP and
are subject to year-end audit adjustments.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
specifically provided for herein or as set forth in SCHEDULE 3.7, since
August 2, 1996 (the "Balance Sheet Date"), neither SSG nor SSGI has:
(a) incurred any material obligation or liability except trade
or business obligations or liabilities incurred in the ordinary course of
business;
(b) other than pursuant to its existing lines of credit,
created, incurred, assumed, or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged, or subjected to any lien, pledge,
mortgage, charge, security interest, conditional sales contract, or other
encumbrance of any nature whatsoever any of its assets or properties,
except in the ordinary course of business consistent with past practices;
(c) sold or committed to sell or assigned, transferred, or
leased or subleased any of its material assets or properties, other than in
the ordinary course of business;
(d) canceled, compromised, modified, or waived any material debt
or claim owing to it, except for adjustments made in the ordinary course of
business consistent with past practices;
(e) declared, set aside, or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital stock;
or redeemed, purchased, or otherwise acquired or agreed to redeem,
purchase, or otherwise acquire any of its capital stock;
(f) transferred or granted any material rights under or with
respect to any Intellectual Property (as defined in Section 3.11 below);
(g) except as disclosed in SCHEDULE 3.2 hereto, issued or sold
any of its capital stock or any other securities or granted any options,
warrants, or other rights to subscribe therefor or entered into any other
commitments for the sale or purchase of any of its capital stock or other
securities;
(h) made, committed to make, or initiated any material capital
expenditure or capital addition or betterment or programs with respect
thereto, except such as may be involved in the replacement of its assets in
the ordinary course of business;
(i) made or granted any promotion in title or responsibility or
increase with respect to any wages, salaries, or other compensation (other
than increases in the ordinary course of its business consistent with past
practices) of any director or officer of SSG or SSGI; entered into any
employment contract or other compensation arrangement with any stockholder,
director, or officer of SSG or SSGI; made any advance (excluding advances
for ordinary and necessary business expenses) or loan to any stockholder,
director, or officer of SSG or SSGI; or made any increase in, or any
addition to, other benefits to which any stockholder, director, or officer
may be entitled;
(j) changed in any material respect any of the accounting
principles followed by it or the methods of applying such principles;
(k) entered into any transaction other than in the ordinary
course of business consistent with past practices; or
(l) experienced any Material Adverse Effect.
3.8 CONDITION OF TANGIBLE ASSETS. Neither SSG nor SSGI has
received notice that the Tangible Assets violate, and neither SSG nor SSGI
have any knowledge of any state of facts or the occurrence of any events
which might form a reasonable basis for a claim that the Tangible Assets
violate, any applicable laws, ordinances, codes, rules, or regulations
relating to the use and operation of the Tangible Assets, including,
without limitation, any local or municipal building, electrical, plumbing,
safety, engineering, environmental, or license or permit requirements in
any manner which would result in a Material Adverse Effect.
3.9 TAXES, TAX RETURNS AND OTHER REPORTS. All federal, state,
and local tax returns, reports, and statements required to be filed by SSG
or SSGI (collectively, the "Tax Returns") have been filed with the
appropriate governmental agencies in all jurisdictions in which the Tax
Returns are required to be filed, and all of the Tax Returns are complete
and correct in all material respects and properly reflect the tax
liabilities of SSG and SSGI for the periods, properties, or events covered
thereby. All federal, state, and local taxes, assessments, interest,
deficiencies, fees, and other governmental charges or impositions which are
called for by the Tax Returns (collectively, the "Taxes") have been
properly accrued or paid. The accruals for Taxes, if any, contained in the
Financial Statements are adequate in all material respects to cover the tax
liabilities of SSG and SSGI as of the dates thereof. Except for a sales
tax audit in the State of Florida, neither SSG nor SSGI has received any
notice of assessment or proposed assessment or been advised as to any tax
examination by any taxing authority in connection with any Tax Returns and
there are no pending tax examinations of, or tax claims asserted against,
SSG and SSGI or any of their respective assets or properties. There are no
tax liens on any of the assets or properties owned or used by SSG and SSGI.
Neither SSG nor SSGI is subject to any extension of a period for the
assessment of any Tax. Each of SSG and SSGI has made all deposits required
by law to be made by it with respect to employee withholding taxes. There
are no outstanding agreements or waivers extending the statute of
limitations with respect to, and neither SSG nor SSGI is now subject to any
extension of a period for the assessment of, any federal, state, or local
income tax or other tax.
3.10 EMPLOYMENT CONTRACTS AND COMPENSATION. Except as disclosed
in the Reports or on SCHEDULE 3.10, neither SSG nor SSGI is a party to any
written employment contracts or agreements with any stockholders, officers,
directors, or employees of SSG or SSGI or any contracts or agreements under
which individuals acting as independent contractors perform analogous
services for SSG or SSGI on a regular basis.
3.11 PATENTS, TRADEMARKS, ETC. SCHEDULE 3.11 contains a
complete and correct list of all material patents, trademarks, trademark
rights, trade names, trade name rights, service marks, copyrights, and
other similar proprietary rights, and material applications for any of the
foregoing, of SSG and SSGI and other material agreements pertaining to any
of the foregoing or to the transfer of technical information, know-how, or
technical assistance to which either SSG or SSGI is a party or which relate
to the business of SSG or SSGI (collectively, the "Intellectual Property").
Except as set forth in SCHEDULE 3.11, and except for matters which would
not have a Material Adverse Effect, (a) SSG or SSGI, as the case may be, is
the sole and exclusive owner of the Intellectual Property and has the sole
and exclusive right to use the same; (b) no proceedings have been
instituted or are pending or threatened which challenge the rights of
either SSG or SSGI in respect of any of the Intellectual Property or the
validity thereof; (c) to SSG's knowledge, none of the Intellectual Property
infringes upon or otherwise violates the rights of others or is being
infringed by others, and none is subject to any outstanding order, decree,
judgment, stipulation, or charge; (d) no licenses, sublicenses, or
agreements pertaining to any of the Intellectual Property have been granted
to or by either SSG or SSGI; (e) neither SSG nor SSGI has received any
charge of interference or infringement of any of the Intellectual Property;
(f) neither SSG nor SSGI has agreed to indemnify any person or entity for
or against any infringement of any patent, trademark, or copyright; and (g)
neither SSG nor SSGI has any knowledge of any trademarks or applications
therefor or similar property which infringe upon any of the Intellectual
Property or render obsolete or materially adversely affect the distribution
or sale of any of the products or services of the business of SSG or SSGI.
3.12 LITIGATION. Except as described in the Reports or SCHEDULE
3.12 hereto, there are no actions, suits, or legal, administrative,
arbitration, or other proceedings or governmental investigations pending
or, to SSG's knowledge, threatened against either SSG or SSGI before or by
any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, which, if adversely
determined, would result in a Material Adverse Effect.
3.13 INSURANCE. SSG has in full force and effect the insurance
policies listed on SCHEDULE 3.13 and all premiums due thereon have been
paid and SSG has complied in all material respects with the provisions of
such policies. SSG will use its best efforts to maintain or cause to be
maintained in full force and effect all such insurance policies or similar
insurance policies through the Closing Date.
3.14 COMPLIANCE WITH LAWS; PERMITS.
(a) Neither SSG nor SSGI has received notice of any violation by
SSG or SSGI of any federal, state, or local law, statute, rule, or
regulation applicable to SSG or SSGI, their respective assets or properties
or businesses as now conducted or any of the Permits (as defined in Section
3.14(b) below), which violation would have a Material Adverse Effect. Each
of SSG and SSGI has complied with, and is not in violation of, any
judgment, order, writ, injunction, or decree of any governmental authority,
court or administrative authority having jurisdiction over SSG or SSGI,
their respective assets or properties or businesses as now or heretofore
conducted, except where failure to comply would not have a Material Adverse
Effect.
(b) SSG has all licenses, permits, approvals, certificates of
occupancy, and other authorizations (collectively, the "Permits") which are
material to the conduct of its business as now conducted and has not failed
to adhere to the requirements thereof in any material respect. Each of SSG
and SSGI has taken all steps necessary to maintain all of the Permits, all
of which are valid, in good standing, and in full force and effect.
(c) No notice to, filing with, or consent from any governmental
body, authority, or agency is required as a result of, or as a condition to
the legality or validity of, the issuance or grant, as the case may be, and
sale of the Shares and Warrants (and the shares of Common Stock underlying
the Warrants) and the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents, nor will any Permit
otherwise be terminated, modified, or impaired or rendered invalid by
reason thereof.
3.15 HAZARDOUS AND TOXIC SUBSTANCES; HAZARDOUS WASTES AND
POLLUTANTS.
(a) SSG has complied in all material respects with, and is not
in material violation of, any material federal, state or local ordinance,
rule, regulation and statute governing the generation, transport, storage,
treatment, handling, release, emission, discharge, and disposal of solid or
hazardous wastes, hazardous substances, toxic substances or pollutants.
(b) Except as set forth in SCHEDULE 3.15, there are no locations
or premises currently or previously leased or operated by SSG or SSGI where
hazardous wastes, hazardous substances, toxic substances, or pollutants
have entered into the air, soil, surface water, groundwater, or other
bodies of water in violation of federal, state or local law, regulation or
ordinance, and neither SSG nor SSGI know of any on-site or off-site
locations to which SSG or SSGI has transported hazardous wastes, hazardous
substances, toxic substances or pollutants, which site is or may become the
subject of any federal, state, or local enforcement actions or other
investigations that may lead to claims against SSG or SSGI for remedial
investigation costs, clean-up costs, remedial work, damages to natural
resources, or personal injury or property damage, including, but not
limited to, claims under the Comprehensive Environmental Response
Compensation and Liability Act, as amended, the Resource Conservation and
Recovery Act, as amended, or any other federal, state, or local law, rule,
or regulation concerning the clean-up of the environment or discharges of
hazardous wastes, hazardous substances, toxic substances, or pollutants.
(c) As used in this Agreement, (i) the term "hazardous wastes"
shall have the meaning given to such term in the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, and
the regulations promulgated thereunder or under any similar federal, state,
or local law, rule, or regulation dealing with the generation, transport,
storage, treatment, handling, release, emission, discharge, or disposal of
hazardous wastes; (ii) the term "hazardous substances" shall have the
meaning given to such term in the Comprehensive Environmental Response,
Compensation, and Liability Act and the regulations promulgated thereunder
or under any similar federal, state, or local law, rule, or regulation
dealing with the generation, transport, storage, treatment, handling,
release, emission, discharge, or disposal of hazardous substances or the
presence of which requires investigation or remediation under any federal,
state, or local statute, rule, regulation, ordinance, order, action,
policy, or under common law, including all petroleum products; (iii) the
term "toxic substances" shall have the meaning given to such term in the
Toxic Substances Control Act or the regulations promulgated thereunder or
under any similar federal, state, or local law, rule, or regulation dealing
with the generation, transport, storage, treatment, handling, release,
emission, discharge, or disposal of toxic substances; (iv) the term
"pollutants" shall mean all substances the emission or discharge of which
is regulated pursuant to the Federal Water Pollution Control Act and the
regulations promulgated thereunder, the Federal Clean Air Act and the
regulations promulgated thereunder, or under any similar federal, state, or
local law, rule, or regulation dealing with the generation, transport,
storage, treatment, handling, release, emission, discharge, or disposal of
pollutants; and (v) the terms "hazardous wastes," "hazardous substances,"
"toxic substances," and "pollutants" shall also include all other
substances which are toxic, explosive, corrosive, flammable, infective,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and are or
become regulated by any federal, state, or local governmental authority,
department, commission, board, agency, or instrumentality, or the presence
of which causes or threatens to cause a nuisance or a hazard to health and
safety.
3.16 DEBT INSTRUMENTS. The exhibit indexes to the 1995 10-K and
the Interim 10-Q's contain a complete and correct list of all material
outstanding indentures, mortgages, chattel mortgages, deeds of trust,
conditional sales agreements, bank loans, credit agreements, and guarantees
to which either SSG or SSGI is a party or by which either SSG or SSGI or
any of their respective properties is bound.
3.17 EMPLOYEE BENEFIT PLANS; COLLECTIVE BARGAINING AGREEMENTS.
Except as set forth in the Reports or in SCHEDULE 3.17, neither SSG nor
SSGI maintains or offers any retirement or similar benefit plan for their
respective employees. Each of SSG and SSGI has performed all material
obligations required to be performed under, and is not in default under or
in violation of, any retirement or similar benefit plan for their
respective employees which it maintains or offers (each a "Plan"). Each of
SSG and SSGI is in compliance in all material respects with the
requirements prescribed by all statutes, orders, or governmental rules or
regulations applicable to the Plans, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended, and the
Internal Revenue Code of 1986, as amended. Neither SSG nor SSGI maintains
or participates as an employer under any collective bargaining agreement,
nor has either been advised of any labor organizational activity or
proceedings which are pending or to their knowledge, threatened.
3.18 CUSTOMS. SSG and SSGI have at all times been in compliance
with all requirements administered and enforced by the U.S. Customs Service
and any foreign government customs service which has authority over the
respective businesses of SSG and SSGI, including, but not limited to, the
classification, valuation, and marketing of articles imported into or
exported from the United States or any such other country, except where the
failure to comply would not have a Material Adverse Effect.
3.19 FULL DISCLOSURE. The representations and warranties of SSG
in this Agreement and the other Transaction Documents are on the date
hereof true, correct and complete in all material respects. Except as
otherwise noted in the Schedules, SSG has provided to Emerson true, correct
and complete copies of all documents referred to or described in the
Schedules hereto. No representation or warranty by SSG in this Agreement,
any Schedule hereto, any Transaction Document, or in any closing
certificate furnished or to be furnished pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to
state any fact necessary to make any statement herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EMERSON
Emerson hereby represents and warrants to SSG as follows:
4.1 AUTHORITY. Emerson has all requisite power and authority to
execute and deliver this Agreement and the other Transaction Documents to
which it is a party and consummate the transactions contemplated herein and
therein. Emerson's execution, delivery, and performance of this Agreement
and the other Transaction Documents to which it is a party, and the
consummation of the transactions contemplated herein and therein, have been
duly authorized by its Board of Directors and no other action is required
by law, the Certificate of Incorporation, or Bylaws of Emerson, or
otherwise, for such authorization. This Agreement and each of the other
Transaction Documents to which Emerson is a party constitute the legal,
valid, and binding obligations of, and are enforceable against, Emerson in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors'
rights generally or the availability of equitable remedies.
4.2 NO VIOLATIONS. Except for matters which would not have a
material adverse effect on the financial condition, results of operation,
assets, liabilities, business, or prospects of Emerson and its
subsidiaries, taken as a whole and which would not prevent or delay the
Closing or the availability or providing of trade financing credit by
Emerson to SSG, the authorization, execution, and delivery of this
Agreement and the Transaction Documents and the consummation of the
transactions contemplated herein and therein by Emerson do not and will
not, with or without the giving of notice or passage of time or both, (a)
violate, conflict with, or result in the breach of any term or provision
of, or require any notice, filing, or consent under (i) any statutes, laws,
rules, regulations, ordinances, licenses, or permits of any governmental
body, authority, or agency applicable to Emerson or (ii) any judgment,
decree, writ, injunction, order, or award of any arbitrator, court, or
governmental body, authority, or agency binding upon Emerson or any of its
properties or assets; (b) conflict with or result in the breach of any term
or provision of, require any notice or consent under, give rise to a right
of termination of, constitute a default under, result in the acceleration
of, or give rise to a right to accelerate any obligation under any loan
agreement, mortgage, indenture, financing agreement, lease, or any
agreement or instrument of any kind to which Emerson is a party or by which
its properties or assets are bound; or (c) result in any lien, claim,
encumbrance, or restriction on any of the properties or assets of Emerson.
4.3 INVESTMENT REPRESENTATIONS. Emerson is acquiring the Shares
and the Warrants for its own account, for investment, and not with a view
toward the resale or distribution thereof. Emerson understands that it
must bear the economic risk of such investment for an indefinite period of
time because the sale and issuance of the Shares and the Warrants are not
registered under the Securities Act or any applicable state securities
laws, and may not be resold unless subsequently registered under the
Securities Act and such other laws, or unless an exemption from such
registration is available. Emerson also understands that, except as
provided in the Registration Rights Agreement, it is not contemplated that
any registration will be made under the Securities Act to permit resale of
the Shares and Warrants. Emerson agrees not to pledge, transfer, convey or
otherwise dispose of any of the Shares and the Warrants, except in a
transaction that is the subject of either (i) an effective Registration
Statement under the Securities Act and any applicable state securities
laws, or (ii) an exemption under the Securities Act or such state
securities laws. Emerson agrees that each certificate representing Shares
or Warrants will contain a restrictive legend restricting the sale,
transfer or other disposition of the Shares or Warrants unless the Shares
and/or Warrants are registered under the Securities Act or laws or
exemptions from registration are available. Emerson acknowledges that stop
transfer instructions will be given to SSG's transfer agent for the Shares.
Emerson further acknowledges that is has received copies of the Reports and
has had the opportunity to ask questions of, and receive answers from,
officers of SSG with respect to the business and financial condition of SSG
and to obtain any additional information necessary to verify such
information or can acquire it without unreasonable effort or expense.
Emerson further represents that it is an "accredited investor" as such term
is defined in Rule 501 of Regulation D of the SEC under the Securities Act
and that it has not been formed for the purpose of purchasing the Shares
and the Warrants.
4.4. REPORTS. Since December 31, 1994, Emerson has filed all
forms 10-K, 10-Q, 8-K and all proxy statements in connection with any
annual or special meeting of Emerson's stockholders (the "Emerson Reports")
with the SEC required to be filed by it pursuant to the Federal securities
laws and the SEC rules and regulations promulgated thereunder, all of which
have complied in all material respects with all applicable requirements of
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder. None of such Emerson Reports, including without
limitation any financial statements or schedules included therein, at the
time filed, nor any of the information contained in the section entitled
"Board of Directors and Executive Officers - Designation of Directors;
Emerson's Designees" and in the table, the first heading of which is
"Persons to be Designated Directors" and the information with respect to
Emerson in the table, the first heading of which is "Principal Stockholders
(in each case, including the footnotes thereto), in the section entitled
"Beneficial Ownership of Common Stock" (copies of which are attached as
EXHIBIT A) to be included in the Information Statement to be provided by
SSG to its shareholders pursuant to Section 14(f) of the Exchange Act
contained (or contains) any untrue statement of a material fact or omitted
(or omits) to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.5. OPINION OF COUNSEL. Concurrently herewith Emerson is
providing to SSG an opinion of Wolff & Samson, counsel to Emerson, in the
form attached as EXHIBIT B.
ARTICLE V
CONDUCT OF BUSINESS BY SSG PENDING CLOSING
As a material inducement to Emerson to purchase the Shares and
Warrants, SSG covenants and agrees that, until the Closing Date, SSG will
comply with the following covenants and agreements:
5.1 PRESERVATION OF EXISTENCE. SSG will do or cause to be done
all things necessary to preserve and maintain in full force and effect the
corporate existence and all material contracts, rights, licenses, permits,
franchises, patents, trademarks, and trade names necessary to the proper
conduct of its business and shall qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction in which the
character of the property owned or the nature of the business conducted by
it makes such qualification or authorization necessary, except such
jurisdictions in which the lack of qualification or authorization does not
result in a Material Adverse Effect.
5.2 COMPLIANCE WITH LAWS. SSG will, and will cause SSGI to,
comply with all laws, ordinances, and governmental rules and regulations to
which it or its respective properties or assets is subject, the
noncompliance with which would materially interfere with the performance of
SSG's obligations under this Agreement or the Transaction Documents or
would result in a Material Adverse Effect.
5.3 ACCOUNTING METHODS; INSPECTIONS; COOPERATION. SSG will, and
will cause SSGI to, keep adequate records and books of account in which
complete entries will be made in all material respects. SSG will, and will
cause SSGI to, consult with Emerson and its representatives on their
respective accounting practices. SSG will, and will cause SSGI to, permit
Emerson and its agents and representatives (including without limitation
Emerson's lenders or potential lenders to SSG, and their agents and
representatives) to visit and inspect any of the properties or assets of
SSG and SSGI and to examine and make extracts of the books of account of
SSG and SSGI at all reasonable times and to such extent as Emerson or such
lenders may reasonably request. SSG will cooperate with Emerson and use
its best efforts to arrange access by Emerson's representatives to
representatives of SSG's primary lender to discuss SSG's current defaults
and the nature of its current and future relationship with SSG.
5.4 MAINTENANCE OF PROPERTY. SSG will, and will cause SSGI to,
keep all of their respective properties in good working order and
condition, subject to ordinary wear and tear and routine maintenance.
5.5 PAYMENT OF TAXES AND CLAIMS. SSG will, and will cause SSGI
to, pay and discharge promptly all Taxes and all other claims, demands,
charges, or levies imposed by governmental authorities upon SSG or SSGI or
upon their respective income or profits or upon any of their respective
properties or assets before the same shall become delinquent; PROVIDED,
HOWEVER, that none of the foregoing need be paid while being contested in
good faith and by appropriate proceedings, so long as adequate book
reserves have been established in accordance with GAAP with respect thereto
and the title of SSG or SSGI to, and the right to use, their respective
properties are not materially adversely affected thereby.
5.6 INFORMATION COVENANTS. SSG will furnish the following
information to Emerson:
(a) REPORTS. Concurrently with their filing with the SEC, all
Reports of SSG filed from and after the date hereof.
(b) NOTICE OF LITIGATION AND OTHER MATTERS. Prompt notice of:
(i) the commencement of any material proceeding or
investigation by or before any governmental body and any material action
and proceeding in any court or before any arbitrator against or in any
other way relating adversely to SSG or any of its properties, assets, or
businesses;
(ii) any written notice received from any administrative
official or agency relating to any order or ruling which may result in, or
cause, a Material Adverse Effect;
(iii) any amendment of the Certificate of Incorporation or
Bylaws of SSG or SSGI;
(iv) any breach by SSG of any of its obligations hereunder
or under any of the Transaction Documents; and
(v) the receipt of any proposal for a merger,
consolidation, sale of all or substantially all of its assets, tender
offer, sale of an equity interest, or other business combination involving
SSG, SSGI, or any future direct or indirect subsidiary of SSG (an
"Acquisition Proposal") and its position with respect thereto.
(c) OTHER INFORMATION. From time to time, such other
information or documents as Emerson may reasonably request.
5.7. ACTION BY BOARD OF DIRECTORS. The Board of Directors of SSG
will not vote to approve or recommend or otherwise take any action with
respect to the matter which is the subject of the memorandum to the Board
of Directors referred to in item (h) of Schedule 3.7.
ARTICLE VI
ADDITIONAL AGREEMENTS OF SSG
As a material inducement to Emerson to purchase the Shares and
Warrants, SSG covenants and agrees that, until the Closing Date, SSG will
not take any of the following actions:
6.1 ACCESS TO INFORMATION. SSG shall afford to Emerson and its
accountants, counsel, and other representatives reasonable access during
normal business hours throughout the period prior to the Closing Date to
all of its properties, books, contracts, commitments and records
(including, but not limited to, tax returns) and to its officers,
consultants, and, subject to any applicable privilege rules, professional
advisors.
6.2 PURCHASE OR SALE OF ASSETS. SSG will not, and will cause
SSGI not to, purchase or acquire, or sell, lease, or otherwise dispose of,
any asset other than (i) in the ordinary course of their respective
businesses or (ii) assets having a price or value which does not exceed
$100,000 (the "Threshold Amount"). Notwithstanding any other provision of
this Agreement, SSG may proceed with its efforts to sell its golf business
in the manner previously disclosed to Emerson provided, further, that SSG
shall obtain the prior written consent of Emerson if such sale would be at
a price less than the book value of such business as reflected in SSG's
balance sheet filed with its Form 10-Q for the fiscal quarter ended August
2, 1996.
6.3 ACQUISITION PROPOSALS. Except for the proposed sale of its
golf business, SSG shall not, and shall cause SSGI not to, directly or
indirectly, through any officer, director, employee, representative, agent,
or otherwise, solicit, initiate, or encourage any Acquisition Proposal,
from any person (including, without limitation, a "person" as defined in
Section 13(d)(3) of the Exchange Act) or entity other than with respect to
the transactions contemplated by this Agreement (collectively, a "SSG
Acquisition Transaction"); PROVIDED, HOWEVER, that SSG or SSGI may take any
of the actions otherwise prohibited by this Section 6.3 if counsel to SSG
or its outside directors advises the Board of Directors of SSG or SSGI that
the failure to take such action or actions could subject the directors to
liability for breach of their fiduciary duties.
6.4 INDEBTEDNESS. Subject to fiduciary duties under applicable
law, SSG will not, and will cause SSGI not to, create, incur, assume,
guarantee, or in any way become liable or obligated in respect of any
indebtedness for borrowed money other than (i) in the ordinary course of
the business of SSG or SSGI or (ii) under its existing credit lines.
6.5 COMPENSATION. Except as reflected in the Reports and except
for fees owing to Arthur Andersen, LLP described in SCHEDULE 3.7, SSG will
not, and will cause SSGI not to, pay any salary or other compensation, or
enter into any agreement which obligates SSG or SSGI to pay any salary or
other compensation, to any officer, director, consultant, or independent
contractor in any amount which exceeds the Threshold Amount.
6.6 AGREEMENTS. Except as provided in Section 6.3, SSG will
not, and will cause SSGI not to, enter into any agreement, contract,
understanding, arrangement, or transaction other than (i) in the ordinary
course of business or (ii) which has a price or value, or imposes upon
either SSG or SSGI any obligation in an amount, which exceeds the Threshold
Amount.
6.7 ISSUANCE OF COMMON STOCK. Subject to fiduciary duties under
applicable law, SSG will not, and will cause SSGI not to, authorize, issue,
or enter into any agreement providing for the issuance (contingent or
otherwise) of (i) any notes or debt securities containing equity features,
including without limitation, any notes or debt securities convertible into
or exchangeable for equity securities or containing profit participation
features or (ii) any equity securities or capital stock, or any securities
convertible into or exchangeable for equity securities or capital stock,
except for the issuance of shares of Common Stock upon exercise of
currently outstanding options or warrants, in each case upon the terms and
conditions in effect on the date of this Agreement.
6.8 DIVIDENDS. SSG will not, and will cause SSGI not to,
directly or indirectly (i) declare or pay any dividends or make any
distributions upon any of its equity securities or (ii) redeem, purchase or
otherwise acquire any of their respective equity securities (including
without limitation, warrants, options, and other rights to acquire equity
securities).
6.9 INVESTMENTS. SSG will not, and will cause SSGI not to, make
any loan or advance to, or purchase or acquire any equity interest in, any
corporation, partnership, association, business trust, limited liability
company, governmental agency, or any individual, except for (i) reasonable
advances to employees in the ordinary course of business, (ii) certificates
of deposit of U.S. commercial banks, or (iii) obligations of, or guaranteed
by, the U.S. government or any agency or instrumentality thereof.
6.10 MERGER, ETC. Subject to fiduciary duties under applicable
law, SSG will not, and will cause SSGI not to, enter into or effectuate any
merger, consolidation, or sale of all or substantially all of the assets of
SSG or SSGI, or liquidation, dissolution, reincorporation, reorganization,
or restructuring or assignment of all or substantially all of its assets
for the benefit of creditors, or file (or consent to the filing of) any
petition in bankruptcy.
6.11 CHARTER AMENDMENT. SSG will not, and will cause SSGI not
to, amend, modify, or restate their respective Certificates of
Incorporation or Bylaws or take any action which would increase the number
of authorized shares of Common Stock or create any new class of capital
stock or adversely affect or otherwise impair the rights or relative
priority of the holders of the Common Stock.
ARTICLE VII
POST-CLOSING COVENANTS OF SSG
The parties further agree as follows:For a period of at least two
(2) years after the Closing Date, the parties further agree that:
(a) for a period of at least two (2) years after the Closing
Date, unless approved by a majority of SSG's directors who do not have a
direct or indirect material financial interest in the agreement or
transaction (which shall include a majority of the Independent Directors,
as defined in clause (b) immediately below), SSG shall not, and shall not
permit any of its subsidiaries to, enter into or be a party to any
agreement or transaction with any Affiliate (as defined under the Exchange
Act) of SSG or Emerson, except in the ordinary course of SSG's or its
subsidiaries' business and on terms no less favorable to SSG or its
subsidiaries than would be obtained in a comparable arms' length
transaction with a person not an Affiliate of SSG or Emerson;
(b) for a period of at least two (2) years after the Closing
Date, SSG's Board of Directors shall be comprised of at least two persons
who are not officers or employees of SSG or Emerson or directors of Emerson
("Independent Directors"); and
(c) for so long as they shall be applicable, SSG shall comply
with the rules of the NYSE with respect to related party transactions.
ARTICLE VIII
CONDITIONS TO EMERSON'S OBLIGATION TO CLOSE
The obligation of Emerson to consummate the purchase of the
Shares and the Warrants is subject to the satisfaction on or prior to the
Closing Date of all of the following conditions (any of which may be waived
by Emerson):
(a) The representations and warranties of SSG contained in this
Agreement shall be true in all material respects (to the extent any such
representation and warranty is not already qualified by materiality) on and
as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date.
(b) There shall not have been issued any order of any court or
tribunal of competent jurisdiction restraining or enjoining the
transactions contemplated by this Agreement and the Transaction Documents
or prohibiting Emerson's ownership or operation of all or any portion of
the business of Emerson or SSG and SSGI and there shall be no proceeding
pending by or brought by any governmental agency or authority seeking any
of the foregoing.
(c) There shall not be pending before any court or tribunal of
competent jurisdiction any action relating to the transactions contemplated
by this Agreement and the Transaction Documents which, might reasonably be
expected to result in a Material Adverse Effect to SSG.
(d) Effective as of the Closing Date, SSG shall cause its Board
of Directors to consist of such of Emerson's designees listed on EXHIBIT A
hereto as Emerson shall specify on or prior to the Closing.
(e) All consents and approvals of third parties to this
Agreement, the Transaction Documents, and the transactions contemplated
hereby and thereby, the failure to receive which could have a Material
Adverse Effect, shall have been obtained by SSG.
(f) An exception to the Shareholder Approval Policy contained in
Section 312.04 of the NYSE rules shall have been obtained by SSG, and SSG
shall have complied with the requirements for such an exception contained
in such Section. SSG also shall have complied with its obligations under
Section 14(f) of the Exchange Act, it being understood that SSG shall rely
upon the accuracy of the representation and warranty of Emerson set forth
in Section 4.4 hereof in so far as such representation and warranty relates
to information to be included by SSG in the filing to be made pursuant to
such Section of the Exchange Act.
(g) SSG shall secure the listing upon official notice of
issuance of (i) the Shares upon the NYSE on or prior to the Closing Date
and (ii) the shares underlying the Warrants upon the NYSE as set forth in
the Warrant Agreement.
ARTICLE IX
CONDITIONS TO SSG'S OBLIGATIONS TO CLOSE
The obligation of SSG to consummate the sale of the Shares and
Warrants at the Closing is subject to the satisfaction on or prior to the
Closing Date of all of the following conditions (any of which may be waived
by SSG):
(a) The representations and warranties of Emerson contained in
this Agreement shall be true in all material respects (to the extent any
such representation and warranty is not already qualified by materiality)
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
(b) There shall not have been issued under any order of any
court or tribunal of competent jurisdiction restraining or enjoining the
transactions contemplated by this Agreement and the Transaction Documents
(including, without limitation, the sale of the Shares or Warrants) and
there shall be no proceeding pending by any governmental agency or
authority seeking to restrain or enjoin such sale.
(c) There shall not be pending before any court or tribunal of
competent jurisdiction any action relating to the transactions contemplated
by this Agreement and the Transaction Documents which, if adversely
determined, might reasonably be expected to result in a Material Adverse
Effect to SSG.
(d) All consents and approvals of third parties to this
Agreement, the Transaction Documents, and the transactions contemplated
hereby and thereby, the failure to receive which could have a material
adverse effect to Emerson, shall have been obtained by Emerson.
(e) Emerson shall have provided evidence, reasonably
satisfactory to SSG, of its ability to provide $2 million of available
trade finance credit to SSG for the purchase of goods sourced in the Far
East through a foreign subsidiary of Emerson.
(f) As a result of the application by SSG to the NYSE for (i) an
exception to the Shareholder Approval Policy contained in Section 312.04 of
the NYSE rules or (ii) the listing of the Shares upon the NYSE on or prior
to the Closing Date and the shares underlying the Warrants upon the NYSE as
set forth in the Warrant Agreement, SSG shall not have been notified by the
NYSE of its intention to delist other shares of common stock of SSG.
ARTICLE X
CLOSING
10.1 TIME AND PLACE OF CLOSING. Subject to Section 11.1, the
closing (the "Closing") of the issuance, sale or grant, and purchase of the
Shares and the Warrants shall take place at the corporate offices of SSG at
10:00 a.m. on December 12, 1996, or at such other place or on such other
date as shall be agreed to by the parties hereto (the "Closing Date").
10.2 DELIVERY BY SSG. On the Closing Date, SSG shall deliver,
or cause to be delivered, to Emerson the following:
(a) A Common Stock certificate or certificates evidencing the
Shares (the "Stock Certificates");
(b) A Warrant Agreement evidencing the Warrants (the "Warrant
Agreement"), to be executed substantially in the form attached hereto as
EXHIBIT C;
(c) A Registration Rights Agreement (the "Registration
Agreement") duly executed and delivered by SSG substantially in the form
attached hereto as EXHIBIT D; and
(d) A Certificate (the "SSG Secretary's Certificate") of the
Secretary of SSG dated the Closing Date to the effect that (i) the
Certificates of Incorporation of SSG and SSGI attached to the SSG
Secretary's Certificate are true, correct, and complete copies thereof and
the same have not been amended, restated, supplemented, or modified in any
respect and are in full force and effect on the Closing Date, (ii) the
Bylaws of SSG and SSGI attached to the SSG Secretary's Certificate are
true, correct, and complete copies thereof and the same have not been
amended, restated, supplemented, or modified in any respect and are in full
force and effect on the Closing Date, (iii) the resolutions of the Board of
Directors of SSG authorizing the issuance or grant, as the case may be, and
sale of the Shares and the Warrants and the consummation of the
transactions contemplated by the Transaction Documents attached to the SSG
Secretary's Certificate are true, correct, and complete copies thereof and
the same have not been amended, restated, supplemented, or modified in any
respect and are in full force and effect on the Closing Date, and (iv) the
specimen signatures of the officers of SSG executing this Agreement and the
other Transaction Documents are true and correct specimens thereof and such
officers are duly authorized to execute and deliver this Agreement and the
other Transaction Documents on behalf of SSG;
(e) A good standing certificate as of a recent date to the
Closing Date issued by the Secretary of State of Delaware that SSG is
validly existing and in good standing in such jurisdiction;
(f) All other Transaction Documents signed by authorized
officers of SSG; and
(g) All other documents, instruments, and writings required to
be delivered by SSG at or prior to the Closing pursuant to this Agreement,
including, without limitation, all other documents and agreements set forth
in Article VIII hereof.
10.3 DELIVERY BY EMERSON. On the Closing Date, Emerson shall
deliver, or cause to be delivered, to SSG the following:
(a) Payment of the Purchase Price by wire transfer to SSG's
designated account(s) as contemplated by Section 3.2;
(b) A Certificate (the "Emerson Secretary's Certificate") of the
Secretary of Emerson dated the Closing Date to the effect that (i) the
Certificate of Incorporation of Emerson attached to the Emerson Secretary's
Certificate is true, correct, and complete copy thereof and the same has
not been amended, restated, supplemented, or modified in any respect and is
in full force and effect on the Closing Date, (ii) the Bylaws of Emerson
attached to the Emerson Secretary's Certificate are true, correct, and
complete copies thereof and the same have not been amended, restated,
supplemented, or modified in any respect and are in full force and effect
on the Closing Date, (iii) the resolutions of the Board of Directors of
Emerson authorizing the purchase of the Shares and the Warrants and the
consummation of the transactions contemplated by the Transaction Documents
attached to the Emerson Secretary's Certificate are true, correct, and
complete copies thereof and the same have not been amended, restated,
supplemented, or modified in any respect and are in full force and effect
on the Closing Date, and (iv) the specimen signatures of the officers of
Emerson executing this Agreement and the other Transaction Documents are
true and correct specimens thereof and such officers are duly authorized to
execute and deliver this Agreement and the other Transaction Documents on
behalf of Emerson;
(c) A good standing certificate as of a recent date to the
Closing Date issued by the Secretary of State of Delaware evidencing that
Emerson is validly existing and in good standing in such jurisdiction;
(d) All other documents, instruments, and writings required to
be delivered by Emerson at or prior to the Closing pursuant to this
Agreement, including, without limitation, all other documents and
agreements set forth in Article IX hereof.
10.4 TRANSACTION DOCUMENTS. As used herein, the term
"Transaction Documents" shall mean collectively this Agreement, the Warrant
Agreement, and the Registration Agreement, as the same may be amended,
modified, supplemented, or waived from time to time.
ARTICLE XI
TERMINATION AND EXTENSION
11.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) By mutual written consent of SSG and Emerson;
(b) By either SSG or Emerson if there has been a material
misrepresentation or breach of warranty not qualified by materiality, or a
misrepresentation or breach of warranty qualified by materiality, on the
part of the other party in the representations and warranties set forth in
this Agreement, which breach is incapable of cure on or prior to the
Closing Date;
(c) By either Emerson or SSG if the purchase and sale of the
Shares and the Warrants shall not have been consummated on or before
December 16, 1996 (the "Termination Date");
(d) By SSG, if it accepts an Acquisition Proposal relating to an
SSG Acquisition Transaction, other than with Emerson.
11.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability under this Agreement on the part of SSG or
Emerson (except for a breach of this Agreement) or their respective
officers or directors; PROVIDED, HOWEVER, that in the event of termination
of this Agreement (x) under Section 11.1(d), or as a result of (y) the
failure of SSG to comply with its covenants contained in Article VI hereof
or satisfy the condition in clause (d) of Article VIII or (z) any other act
or failure to act on the part of SSG constituting the willful failure to
close by SSG and Emerson has not in any way contributed to the failure to
so close, SSG shall pay Emerson, as its exclusive remedy, a termination fee
of $750,000, to be paid on the Termination Date by SSG to Emerson by wire
transfer to a bank account designated by Emerson; PROVIDED, FURTHER, that
in the event of termination of this Agreement as a result of the failure of
SSG to satisfy the conditions in clauses (a), (f) and (g) of Article VIII
and Emerson has not in any way contributed to the failure to so close, SSG
shall pay to Emerson, as its exclusive remedy, a termination fee equal to
the actual out-of-pocket expenses paid or incurred by Emerson in connection
with the transactions contemplated by this Agreement but, in any event, not
in excess of $150,000, such amount to be paid immediately by SSG to
Emerson, by wire transfer to a bank account designated by Emerson, upon
presentation by Emerson to SSG of a certificate of the chief financial
officer of Emerson setting forth the amount of such out-of-pocket expenses;
and PROVIDED, FURTHER, in the event of the termination of this Agreement
solely as a result of the financial inability or willful failure to close
by Emerson and SSG has not in any way contributed to the failure to so
close, Emerson shall pay to SSG, as its exclusive remedy, a termination fee
of $3,000,000 to be paid from the irrevocable standby letter of credit
provided to SSG by Emerson pursuant to Section 2.3 of this Agreement; and
PROVIDED, FURTHER, in the event of the termination of this Agreement as a
result of the failure of Emerson to satisfy the conditions in clauses (a),
(d) and/or (e) of Article IX and SSG has not in any way contributed to the
failure to so close, Emerson shall pay to SSG, as its exclusive remedy, a
termination fee equal to the actual out-of-pocket expenses paid or incurred
by SSG in connection with the transactions contemplated by this Agreement,
but, in any event, not in excess of $150,000, such amount to be paid
immediately by Emerson to SSG, by wire transfer to a bank account
designated by SSG, upon presentation to Emerson of a certificate of the
chief executive officer or President of SSG setting forth the amount of
such out-of-pocket expenses. Notwithstanding the foregoing, the failure of
any party to waive any condition or grant any extension or enter into any
amendment shall not be deemed contributory to the failure to close.
11.3 EXTENSION. At any time prior to the Closing, the parties
hereto, by duly authorized action taken by their respective officers, may
extend the time for the performance of any of the obligations or other acts
of the other party hereto.
ARTICLE XII
MISCELLANEOUS
12.1 NO BROKER. Each party hereto represents and warrants to
the other that, except for the retention by SSG of Principal Financial
Securities, no broker or finder has been employed or retained in connection
with the transactions contemplated by this Agreement or is entitled to any
fee, commission or other compensation in connection herewith.
12.2 PUBLIC STATEMENTS. The parties shall release a press
release in a form to be mutually agreed upon between Emerson and SSG.
Neither party hereto shall issue any press release or make any other public
statements, in each case relating to or connected with or arising out of
this Agreement or the matters contemplated herein, without obtaining the
prior written approval of the other parties to the contents and the manner
of presentation and publication thereof, PROVIDED, HOWEVER, that nothing
herein shall prevent any party from making any disclosures required by
applicable law or regulation (including regulations of the SEC and the
NYSE).
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations, warranties, and agreements made by the parties in this
Agreement or in any agreement, document, statement, list, certificate, or
instrument furnished hereunder or in connection with the negotiation,
execution, and performance of this Agreement shall survive the Closing for
a period to and including January 31, 1998. Notwithstanding the foregoing,
in the event that, prior to the Closing, either party has knowledge that
any representation, warranty or covenant made by the other party is
incorrect or is breached in any material respect as of the date hereof or
will be incorrect or breached in any material respect as of the Closing
Date, the party with such knowledge shall have as its sole remedy hereunder
the option (a) to terminate this Agreement and enforce its remedies herein
provided as a result thereof or (b) to proceed with the Closing and, upon
the Closing, such party shall be conclusively deemed to have waived all
claims hereunder relating to such misrepresentation, breach of warranty or
covenant.
12.4 OFFICERS' AND DIRECTORS' INDEMNIFICATION AND INSURANCE. The
parties to this Agreement agree that all rights to indemnification now
existing in favor of the directors or officers of SSG and SSGI as provided
in their respective Certificate of Incorporation or bylaws or in any
indemnification agreement, will survive the Closing and stay in effect in
accordance with their respective terms as presently in effect. For a
period of three years after the Closing Date, SSG will provide officers'
and directors' liability insurance from a sound and reputable insurer in
respect of acts or omissions occurring up to and including the Closing Date
covering each such person currently covered by SSG's officers' and
directors' liability insurance policy on terms with respect to coverage and
in an amount (including deductibles) no less favorable than those of such
policy in effect on the date hereof. For purposes of this Section, the
officers and directors of SSG and SSGI shall be deemed to be third party
beneficiaries of this Agreement and each such person shall be entitled to
enforce the terms of this Section against SSG to its full extent and seek
and obtain remedies from SSG for non-performance of this Section as if such
person was a named party to this Agreement.
12.5 NO WAIVER. No failure on the part of any party hereto at
any time to require the performance by the other party of any term of this
Agreement shall be taken or held to be a waiver of such term or in any way
affect such party's right to enforce such term, and no waiver on the part
of any party hereto of any term of this Agreement shall be taken or held to
be a waiver of any other term hereof or the breach thereof.
12.6 ENTIRE AGREEMENT; WRITTEN MODIFICATIONS. This instrument
(and the Confidentiality Agreement between Emerson and SSG, to the extent
the transactions contemplated by this Agreement are not consummated for any
reason) and any and all documents executed by the parties hereto on or as
of the date hereof contains the entire agreement among the parties hereto
with respect to the subject matter hereof; all representations, promises,
and prior or contemporaneous understandings among the parties with respect
to the subject matter hereof are merged into and expressed in this
instrument and such documents; and any and all prior agreements among the
parties with respect to the subject matter hereof (other than the
Confidentiality Agreement as described above) are hereby canceled. This
Agreement shall not be amended, modified, or supplemented without the
written agreement of Emerson and SSG at the time of such amendment,
modification or supplement.
12.7 ASSIGNMENT; BINDING EFFECT.
(a) This Agreement and the rights and obligations of the parties
hereto may not be assigned or transferred by either party hereto.
(b) All of the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
successors and assigns of each of the parties thereto.
12.8 EXPENSES. Each of the parties hereto shall bear the costs
and expenses attributable to such party under this Agreement and the
transactions contemplated hereby.
12.9 NOTICES. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted hereunder
shall be in writing and shall be sent by hand delivery, overnight courier,
or by registered or certified mail, and shall be deemed given when received
at the address set forth below:
If to Emerson: Nine Entin Road
Parsippany, New Jersey 07054-0430
Attn: President
- with copy to -
Wolff & Samson, P.A.
5 Becker Farm Road
Roseland, New Jersey 07068
Attn: Jeffrey M. Davis, Esq.
If to SSG 1901 Diplomat Drive
Dallas, Texas 75234
Attn: Corporate Secretary
- with a copy to -
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Alan J. Bogdanow, Esq.
or such other party or address as may be expressly designated by either
party by notice given in accordance with the foregoing provisions.
12.10 COOPERATION. Subject to the terms and conditions herein
provided, the parties hereto shall use their best efforts to take, or cause
to be taken, such action to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or
cause to be done, all things reasonably necessary, proper or advisable
under the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by this
Agreement.
12.11 NO BENEFIT TO OTHERS. Except as provided in Section 12.4,
the representations, warranties, covenants, and agreements contained in
this Agreement are for the sole benefit of the parties hereto, and their
permitted successors and assigns, and they shall not be construed as
conferring any rights on any other persons.
12.12 HEADINGS, GENDER, AND "PERSON". All section headings
contained in this Agreement are for convenience of reference only, do not
form a part of this Agreement, and shall not affect in any way the meaning
or interpretation of this Agreement. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires. Any reference to
a "person" herein shall include an individual, firm, corporation,
partnership, trust, governmental authority or body, association,
unincorporated organization, or other entity.
12.13 SCHEDULES. All Schedules referred to herein are intended
to be and hereby are specifically made a part of this Agreement.
12.14 SEVERABILITY. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
12.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and any party hereto may execute any such
counterpart, each of which when executed and delivered shall be deemed to
be an original and all of which counterparts taken together shall
constitute but one and the same instrument. This Agreement shall become
binding when one or more counterparts taken together shall have been
executed and delivered by the parties. It shall not be necessary in making
proof of this Agreement or any counterpart hereof to produce or account for
any of the other counterparts.
12.16 GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of
Delaware, without regard to the conflicts of law principles thereof.
12.17 CONSTRUCTION. The parties hereto agree that each party
and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation hereof or thereof or any amendments, exhibits, or schedules
hereto.
- 1 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date above written.
EMERSON RADIO CORP.
By:/S/ EUGENE I. DAVIS
Eugene I. Davis, President
SPORT SUPPLY GROUP, INC.
By:/S/ PETER S. BLUMENFELD
Peter S. Blumenfeld
President
- 2 -
THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT AND THE LAWS OF
THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION AND ITS COUNSEL, TO THE
EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT AND SUCH STATE STATUTES.
WARRANT AGREEMENT
For the Purchase of Common Stock, $0.01 Par Value Per Share,
of SPORT SUPPLY GROUP, INC.
(Incorporated Under the Laws of the State of Delaware)
Void After 5:00 P.M., Dallas, Texas,
time on December , 2001
No. 001 Warrant to Purchase
1,000,000 Shares
THIS IS TO CERTIFY, that, for value received, Emerson Radio Corp., or
registered assigns (the "Holder"), is entitled, subject to the terms and
conditions hereinafter set forth, on the date hereof and at any time prior
to 5:00 P.M., Dallas, Texas, time, on December , 2001, but not
thereafter, to purchase the number of shares set forth above (the "Shares")
of Common Stock, $0.01 par value per share ("Common Stock"), of Sport
Supply Group, Inc., a Delaware corporation (the "Corporation"), from the
Corporation upon payment to the Corporation of $7.50 per share (the
"Purchase Price") if and to the extent this Warrant Agreement ("Warrant")
is exercised, in whole or in part, during the period this Warrant remains
in force, subject in all cases to adjustment as provided in Article II
hereof, and to receive a certificate or certificates representing the
Shares so purchased, upon presentation and surrender to the Corporation of
this Warrant, with the form of subscription attached hereto duly executed,
and accompanied by payment of the Purchase Price of each Share purchased as
provided herein.
336301-5
<PAGE>
ARTICLE 1 - TERMS OF THE WARRANT
SECTION 1.1 Subject to the provisions of Section 3.1 hereof, this
Warrant may be exercised at any time and from time to time after 9:00 A.M.,
Dallas, Texas, time, on the date hereof (the "Exercise Commencement Date"),
but no later than 5:00 P.M., Dallas, Texas, time, December , 2001 (the
"Expiration Time"). If this Warrant is not exercised on or before the
Expiration Time it shall become void, and all rights hereunder shall
thereupon cease.
SECTION 1.2
(a) The Holder may exercise this Warrant, in whole or in part,
upon surrender of this Warrant with the form of subscription attached
hereto duly executed, to the Corporation at its corporate office in Dallas,
Texas, together with the full Purchase Price for each Share to be purchased
in lawful money of the United States, or by wire transfer, check, bank
draft, or postal or express money order payable in United States dollars to
the order of the Corporation, and upon compliance with and subject to the
conditions set forth herein.
(b) Upon receipt of this Warrant with the form of subscription
duly executed and accompanied by payment of the aggregate Purchase Price
for the Shares for which this Warrant is then being exercised, the
Corporation shall cause to be issued certificates for the total number of
whole Shares as to which this Warrant is being exercised in such
denominations as are required for delivery to the Holder, and the
Corporation shall thereupon deliver such certificates to the Holder or its
nominee.
(c) In case the Holder shall exercise this Warrant with respect
to less than all of the Shares that may be purchased under this Warrant,
the Corporation shall execute a new Warrant for the balance of the Shares
that may be purchased upon exercise of this Warrant and deliver such new
Warrant to the Holder.
(d) The Corporation covenants and agrees it will pay when due
and payable any and all taxes (other than any income taxes) that may be
payable in respect of the issue of this Warrant, or the issue of any Shares
upon the exercise of this Warrant. The Corporation shall not, however, be
required to pay any such tax that may be payable in respect of any transfer
involved in the issuance or delivery of this Warrant or of the Shares in a
name other than that of the Holder at the time of surrender, and until the
payment of such tax the Corporation shall not be required to issue such
Shares.
SECTION 1.3 This Warrant may be split-up, combined, or exchanged for
another Warrant or Warrants of like tenor to purchase a like aggregate
number of Shares. If the Holder desires to split- up, combine, or exchange
this Warrant, it shall make such request in writing delivered to the
Corporation at its corporate office and shall surrender this Warrant and
any other Warrants to be so split- up, combined, or exchanged at such
office. Upon any such surrender for a split-up, combination, or exchange,
the Corporation shall execute and deliver to the person entitled thereto a
Warrant or Warrants, as the case may be, as so requested. The Corporation
shall not be required to effect any split-up, combination, or exchange that
will result in the issuance of a Warrant entitling the Holder to purchase
upon exercise a fraction of a Share.
SECTION 1.4 Prior to due presentment for registration or transfer of
this Warrant, the Corporation may deem and treat the Holder, as registered
on the books of the Corporation maintained for that purpose, as the
absolute owner of this Warrant (notwithstanding any endorsement or notation
of ownership or other writing hereon) for the purpose of any exercise
hereof and for all other purposes and the Corporation shall not be affected
by any notice to the contrary.
SECTION 1.5 Any assignment permitted hereunder shall be made by
surrender of this Warrant to the Corporation at its principal office with
the form of assignment attached hereto duly executed and funds sufficient
to pay any transfer tax. In such event, the Corporation shall, without
charge, execute, and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
cancelled. This Warrant may be divided or combined with other Warrants
that carry the same rights upon presentation thereof at the corporate
office of the Corporation together with a written notice signed by the
Holder, specifying the names and denominations in which such new Warrants
are to be issued.
SECTION 1.6 Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent or to receive
notice as a stockholder in respect of any meetings of stockholders for the
election of directors or any other matter, or as having any rights
whatsoever as a stockholder of the Corporation. If, however, at any time
prior to the expiration of this Warrant and prior to its exercise, any of
the following shall occur:
(a) the Corporation shall declare any dividend payable in stock
to the holders of its Common Stock or make any other distribution in
property other than cash to the holders of its Common Stock; or
(b) the Corporation shall offer to the holders of its Common
Stock rights to subscribe for or purchase any shares of any class of
stock or any other rights or options or securities exchangeable for or
convertible into shares of any class of stock; or
(c) the Corporation shall effect any reclassification of its
Common Stock (other than a reclassification involving merely the
subdivision or combination of outstanding shares of Common Stock) or
any capital reorganization, or any consolidation or merger (other than
a merger in which no distribution of securities or other property is
made to holders of Common Stock), or any sale, transfer, or other
disposition of its property, assets, and business substantially as an
entirety, or the liquidation, dissolution, or winding up of the
Corporation;
then, in each such case, the Corporation shall cause notice of such
proposed action to be mailed to the Holder. Such notice shall specify (i)
the date on which the books of the Corporation shall close, or a record be
taken, for determining holders of Common Stock entitled to receive such
stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, dissolution, winding up,
shall take place or commence, as the case may be, (ii) the date as of which
it is expected that holders of record of Common Stock shall be entitled to
receive securities or other property deliverable upon such action, if any
such date has been fixed (on which date in the event of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
right to exercise this Warrant shall terminate), and (iii) such facts as
shall indicate the effect of such action (to the extent such effect may be
known at the date of such notice) on the Purchase Price and the kind and
amount of the Common Stock and other securities and property deliverable
upon exercise of this Warrant. Such notice shall be mailed in the case of
any action covered by Subsection 1.6(a) and 1.6(b) above, at least ten (10)
days prior to the record date of determining holders of the Common Stock
for purposes of receiving such payment or offer, and in the case of any
action covered by Subsection 1.6(c), at least ten (10) days prior to the
earlier of the date upon which such action is to take place or any record
date to determine holders of Common Stock entitled to receive such
securities or other property.
Without limiting the obligation of the Corporation to provide notice
to the Holder of actions hereunder, it is agreed that failure of the
Corporation to give notice shall not invalidate such action of the
Corporation.
SECTION 1.7 If this Warrant is lost, stolen, mutilated, or destroyed,
the Corporation shall, on such reasonable terms as to indemnity or
otherwise as it may impose (which shall, in the case of a mutilated
Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as, and in substitution for, this Warrant, which
shall thereupon become void. Any such new Warrant shall constitute an
independent contractual obligation of the Corporation, whether or not the
Warrant so lost, stolen, destroyed, or mutilated shall be at any time
enforceable by anyone.
SECTION 1.8
(a) The Corporation covenants and agrees that at all times it
shall reserve and keep available for the exercise of this Warrant such
number of authorized Shares as are sufficient to permit the exercise in
full of this Warrant.
(b) Prior to the issuance of any Shares upon exercise of this
Warrant, the Corporation shall secure the listing of such Shares upon any
securities exchange upon which the shares of the Corporation's Common Stock
may at the time be listed for trading.
(c) The Corporation covenants that all Shares when issued upon
the exercise of this Warrant in accordance with the terms hereof will be
validly issued, fully paid, nonassessable, and free of preemptive rights.
ARTICLE 2 -- ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES PURCHASABLE UPON EXERCISE
SECTION 2.1 Subject to the provisions of this Article II, the
Purchase Price in effect from time to time shall be subject to adjustment
as follows:
(a) In case the Corporation shall (i) declare a dividend or make
a distribution on the outstanding shares of its Common Stock in shares
of its Common Stock, (ii) subdivide the outstanding shares of its
Common Stock into a greater number of shares, (iii) combine the
outstanding shares of its Common Stock into a smaller number of
shares, (iv) issue any shares of its Common Stock by reclassification
of the Common Stock, then in each case the Purchase Price in effect
immediately after the record date for such dividend or distribution or
the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Purchase Price in effect immediately
prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately prior to such
dividend, distribution, subdivision, combination, or reclassification,
and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such dividend, distribution,
subdivision, combination, or reclassification. Any shares of Common
Stock of the Corporation issuable in payment of a dividend shall be
deemed to have been issued immediately prior to the record date for
such dividend.
(b) All calculations under this Section 2. 1 shall be made to
the nearest whole cent.
SECTION 2.2 No adjustment in the Purchase Price in accordance with
the provisions of Subsection 2.1(a) hereof need be made if such adjustment
would amount to a change of less than 1% in such Purchase Price; provided
that the amount by which any adjustment is not made by reason of the
provisions of this Section 2.2 shall be carried forward and taken into
account at the time of any subsequent adjustment in the Purchase Price.
SECTION 2.3 Upon each adjustment of the Purchase Price pursuant to
Subsection 2.1(a) hereof, each Warrant shall thereupon evidence the right
to purchase that number of shares of Common Stock (calculated to the
nearest hundredth of a share) obtained by multiplying the number of shares
of Common Stock purchasable immediately prior to such adjustment upon
exercise of the Warrant by the Purchase Price in effect immediately prior
to such adjustment and dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment.
SECTION 2.4 In case of any capital reorganization, other than in the
cases referred to in Section 2.1 hereof, or the consolidation or merger of
the Corporation with or into another corporation (other than a merger or
consolidation in which the Corporation is the continuing corporation and
which does not result in any reclassification of the outstanding shares of
Common Stock or the conversion of such outstanding shares of Common Stock
into shares of other stock or other securities or cash or other property),
or the sale of the property of the Corporation as an entirety or
substantially as an entirety, or the conversion, however effected, of the
Corporation into another form of entity (collectively such actions being
hereinafter referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of any Warrant (in lieu of the number of shares
of Common Stock theretofore deliverable) the number of shares of stock or
other securities or cash or other property to which a holder of the number
of shares of Common Stock that would otherwise have been deliverable upon
the exercise of such Warrant would have been entitled to have received upon
such Reorganization if such Warrant had been exercised in full immediately
prior to such Reorganization. In case of any Reorganization, appropriate
adjustment, as determined in good faith by the Board of Directors of the
Corporation, shall be made in the application of the provisions herein set
forth with respect to the rights and interests of Warrant holders so that
the provisions set forth herein shall thereafter be applicable, as nearly
as possible, in relation to any shares or other securities or cash or other
property thereafter deliverable upon exercise of Warrants. The Corporation
shall not effect any such Reorganization, unless upon or prior to the
consummation thereof the successor entity, or if the Corporation shall be
the surviving entity in any such Reorganization and is not the issuer of
the shares of stock or other securities or property to be delivered to
holders of shares of the Common Stock outstanding at the effective time
thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, cash,
or other property as the Holder shall be entitled to purchase in accordance
with the foregoing provisions. In the event of a sale or conveyance or
other transfer of all or substantially all of the assets of the Corporation
as a part of a plan for liquidation of the Corporation, all rights to
exercise any Warrant shall terminate on the date such sale or conveyance or
other transfer is to be consummated.
SECTION 2.5 The Corporation may select a firm of independent
certified public accountants, which selection may be changed from time to
time, to verify the computations made in accordance with this Article II.
The certificate, report or other written statement of any such firm shall
be conclusive evidence of the correctness of any computation made under
this Article II.
SECTION 2.6 Irrespective of any adjustments pursuant to this Article
II, Warrants theretofore or thereafter issued need not be amended or
replaced, but certificates thereafter issued shall bear an appropriate
legend or other notice of any adjustments.
SECTION 2.7 The Corporation shall not be required upon the exercise
of any Warrant to issue fractional shares of Common Stock that may result
from adjustments in accordance with this Article II to the Purchase Price
or number of shares of Common Stock purchasable under each Warrant. If
more than one Warrant is exercised at one time by the same Holder, the
number of full shares of Common Stock that shall be deliverable shall be
computed based on the number of shares deliverable in exchange for the
aggregate number of Warrants exercised. With respect to any final fraction
of a share called for upon the exercise of any Warrant or Warrants, the
Corporation shall pay a cash adjustment in respect of such final fraction
in an amount equal to the same fraction of the market value of a share of
Common Stock on the business day next preceding the date of such exercise.
The Holder, by his acceptance of the Warrant, shall expressly waive any
right to receive any fractional share of Common Stock upon exercise of the
Warrants. For the purposes of this Section 2.7, the market price per share
of Common Stock at any date shall mean the last reported sale price regular
way or, in case no such reported sale takes place on such date, the average
of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is
admitted to trading or listed if that is the principal market for the
Common Stock or if not listed or admitted to trading on any national
securities exchange or if such national securities exchange is not the
principal market for the Common Stock, the closing bid price (or closing
sales price, if reported) as reported by the NASDAQ or its successor, if
any. If the price of the Common Stock is not so reported, then such market
price shall mean the last known price paid per share by a purchaser of such
stock in an arms'-length transaction. All calculations under this Section
2.7 shall be made to the nearest 1/100th of a share.
SECTION 2.8 In no event shall the Exercise Price be adjusted below
the par value per share of the Common Stock.
ARTICLE 3
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
SECTION 3.1 The Holder of this Warrant, by acceptance hereof, both
with respect to this Warrant and the Shares to be issuable upon exercise
of this Warrant, represents and warrants:
(a) The Warrants and the Shares are being acquired for the
Holder's own account to be held for investment purposes only and not
with a view to, or for, resale in connection with any distribution of
such Warrant or Shares or any interest therein without registration or
other compliance under the Act, and the Holder hereof has no direct or
indirect participation in any such undertaking or in underwriting such
an undertaking.
(b) The Holder hereof has been advised and understands that the
Warrant and the Shares have not been registered under the Act and the
Warrant and/or the Shares must be held and may not be sold,
transferred, or otherwise disposed of for value unless they are
subsequently registered under the Act or an exemption from such
registration is available; except as contemplated herein, the
Corporation is under no obligation to register the offer and sale of
the Warrant and/or the Shares under the Act; in the absence of such
registration, the Holder may be unable to sell the Warrant or Shares;
the Corporation's registrar and transfer agent will maintain stop
transfer orders against registration of transfer of the Warrant and
the Shares; and the certificates to be issued for any Shares will bear
on their face a legend in substantially the following form:
THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER
COMPLIANCE UNDER THE ACT AND THE LAWS OF THE APPLICABLE STATE OR A "NO
ACTION" OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT AND SUCH STATE STATUTES.
(c) The Corporation may refuse to issue the Shares to a person
other than the Holder upon exercise of the Warrant or transfer the
Warrant and/or the Shares unless the Holder thereof provides
reasonable assurances to the Corporation or a "no action" or
interpretive response from the Securities and Exchange Commission and
any applicable state securities commission to the effect that the
transfer is proper; further, unless such assurances indicate or the
letter states that the Warrants and/or Shares are free of any
restrictions under the Act and any applicable state securities laws,
the Corporation may refuse to transfer the Warrant and/or the Shares
to any transferee who does not furnish in writing to the Corporation
the same representations and agrees to the same conditions with
respect to such Warrant and Shares as are set forth herein. The
Corporation may also refuse to transfer the Warrant or Shares if any
circumstances are present reasonably indicating that the transferee's
representations are not accurate.
SECTION 3.2 Except as provided in that certain Registration Rights
Agreement dated as of even date herewith among the Corporation, Emerson
Radio Corp., and Emerson Radio (Hong Kong) Limited, the Corporation has no
obligation to register the offer and sale of the shares issuable upon
exercise of the Warrant or the Warrants under the Act or any applicable
state law.
SECTION 3.3 The agreements in this Article III shall continue in
effect regardless of the exercise and surrender of this Warrant.
ARTICLE 4 -- OTHER MATTERS
SECTION 4.1 All the covenants and provisions of this Warrant by or
for the benefit of the Corporation shall bind and inure to the benefit of
its successors and assigns hereunder.
SECTION 4.2 Notices or demands pursuant to this Warrant to be given
or made shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed,
as follows:
To the Corporation:
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
Attention: Corporate Secretary
To the Holder:
Emerson Radio Corp.
Nine Entin Road
Parsippany, New Jersey 07054-0430
Attention: President
or to such other address as the Corporation or the Holder, as the case may
be, shall designate in writing.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the day of December, 1996.
SPORT SUPPLY GROUP, INC.
By:
Name:
Title:
336301-5
<PAGE>
SPORT SUPPLY GROUP, INC.
Subscription Form
(To be executed by the registered holder to exercise the right to
purchase Common Stock evidenced by the foregoing Warrant)
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
The undersigned hereby irrevocably subscribes for the purchase of
shares of your Common Stock pursuant to and in accordance with the terms
and conditions of this Warrant, and herewith makes payment, covering the
purchase of such shares of Common Stock, certificates for which should be
delivered to the undersigned at the address stated below. If such number
of shares shall not be all of the shares purchasable hereunder, please
deliver a new Warrant of like tenor for the balance of the remaining shares
purchasable hereunder to the undersigned at the address stated below.
The undersigned agrees that: (1) the undersigned will not offer, sell,
transfer, or otherwise dispose of any such shares of Common Stock except in
compliance with the requirements set forth in the legend described in
Section 3.1 of this Warrant; (2) the Corporation may notify the transfer
agent for its Common Stock that the certificates for the Common Stock
acquired by the undersigned pursuant hereto are not to be transferred
unless the transfer agent receives advice from the Corporation that one or
both of the conditions referred to in (1)(a) and (1)(b) above have been
satisfied; and (3) the Corporation may affix the legend set forth in
Section 3.1 of this Warrant to the certificates for shares of Common Stock
hereby subscribed for, if such legend is applicable.
Dated: Name:
By:
Name:
Title:
Tax Identification
Number:_____________________
Address:
Signature Guaranteed:
336301-5
<PAGE>
SPORT SUPPLY GROUP, INC.
Assignment Form
(To be executed by the registered holder to effect assignment of the
foregoing Warrant)
[CAPTION]
FOR VALUE RECEIVED hereby sells, assigns and transfers
unto the right to purchase shares of Common Stock,
$0.01 par value per share, of the Corporation purchasable pursuant to the
within Warrant, on the terms and conditions set forth therein, and does
hereby irrevocably constitute and appoint
Attorney, to transfer on the books of the Corporation Warrants representing
such rights, with full power of substitution.
Dated:
Name:
By:
Name:
Title:
Signature guaranteed:
336301-5
REGISTRATION RIGHTS AGREEMENT
Among
SPORT SUPPLY GROUP, INC.
EMERSON RADIO CORP.
and
EMERSON RADIO (HONG KONG) LIMITED
Dated as of December ____, 1996
336302-6
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. CERTAIN DEFINITIONS AND TERMS .................... 1
1.1 Definitions ................................... 1
1.2 Number and Gender of Words; Other References .. 2
SECTION 2. REGISTRATION RIGHTS .............................. 2
2.1 Required Registration and Notice;
Transfer of Registrable Securities............. 2
2.2 Conditions to Required Registration ........... 3
2.3 Incidental Registration ....................... 4
2.4 Registration Procedures ....................... 5
2.5 Furnish Information ........................... 9
2.6 Expenses of Registration ...................... 10
2.7 Indemnification ............................... 10
2.8 Reports Under the Exchange Act ................ 12
2.9 Lockup Agreement .............................. 13
2.10 Preparation; Investigation .................. 13
SECTION 3. MISCELLANEOUS .................................... 13
3.1 Relationships and Rights of the Holders ....... 13
3.2 Headings ...................................... 14
3.3 Communications ................................ 14
3.4 Governing Law ................................. 14
3.5 Invalid Provisions ............................ 14
3.6 Successors and Assigns ........................ 15
3.7 Amendments .................................... 15
3.8 Multiple Counterparts ......................... 15
336302-6
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of December ___,
1996 between Sport Supply Group, Inc., a Delaware corporation (the
"Company"), Emerson Radio Corp., a Delaware corporation ("Emerson"), and
Emerson Radio (Hong Kong) Limited, an entity organized under the laws of
Hong Kong ("Emerson (HK)").
WHEREAS, Emerson and Emerson (HK) own common stock of the Company and
warrants to purchase common stock of the Company; and
WHEREAS, such holders desire that the limitations on further
distributions of such securities be reduced and the Company is willing to
offer certain registration rights to such holders to reduce such
limitations, all as more specifically set forth herein;
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants herein contained, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used herein, the following terms have the
meanings indicated:
"COMMON STOCK" means the Common Stock, par value $0.01 per share, of
the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"HOLDER" or "HOLDER" means the holder of any Registrable Securities as
shown on the stock ownership and transfer records maintained by or on
behalf of the Company.
"PERSON" means any individual, firm, corporation, trust, association,
partnership, joint venture or other entity.
"REGISTER," "REGISTERED, " and "REGISTRATION" refer to a registration
of securities effected by preparing and filing a registration statement in
compliance with the Securities Act and/or state securities laws and the
declaration or ordering of effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means (a) any of the shares of Common Stock
outstanding on the date hereof which are held by Emerson and Emerson (HK),
(b) any share or shares of Common Stock issued upon exercise of any
Warrants outstanding on the date hereof, and (c) any share or shares of
Common Stock issued hereafter in respect of either of the foregoing, in
each case to the extent that such shares are, at the time in question,
"restricted securities" or shares held by an "affiliate" as such terms are
defined in Rule 144 promulgated under the Securities Act.
"RIGHTS" means rights, remedies, powers, benefits, and privileges.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"WARRANTS" means the warrants to purchase up to an aggregate of
1,000,000 shares of Common Stock at an initial exercise price of $7.50 per
share, subject to adjustment, represented by a Warrant Agreement dated as
of even date herewith, which are owned and held by Emerson.
1.2 NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Whenever in this
Agreement the singular is used, the same shall include the plural where
appropriate, and vice versa; and words of any gender herein shall include
each other gender where appropriate. References herein to "sections" are,
unless specified otherwise, references to sections of this Agreement. The
words "herein," "hereof," and "hereunder," and other words of similar
import refer to this Agreement as a whole and not to any particular part or
subdivision hereof.
SECTION 2. REGISTRATION RIGHTS.
2.1 REQUIRED REGISTRATION AND NOTICE; TRANSFER OF REGISTRABLE
SECURITIES. (a) At the request of any holders of Registrable Securities,
setting forth such holders' intent to transfer not less than 200,000 shares
of Registrable Securities describing briefly the manner and circumstances
of such transfer, and requesting that the Company effect the registration
or qualification or filing for exemption under applicable Federal or State
law of such Registrable Securities, the Company shall promptly give written
notice to all holders of Registrable Securities of a proposed registration
or qualification or filing for exemption and shall, subject to the
conditions of Section 2.2, as expeditiously as practicable, use its best
efforts to effect any such registration or qualification or filing for
exemption of:
(i) such Registrable Securities specified by the holder or holders
giving the initial notice, and
(ii) any other Registrable Securities the holders of which (or
prospective holders thereof upon exercise) shall have requested the
Company in writing, within 20 days after the giving of such written
notice by the Company, to register or qualify or file for exemption,
with any governmental authority under any Federal or State law, and any
listing with any securities exchange, which may be required to permit the
offering and sale or other disposition of any such Registrable Securities
which the holders (or prospective holders thereof upon exercise) propose to
make upon the effectiveness of such registration, qualification, or filing
for exemption, and the Company shall keep effective such registration,
qualification, or exemption for at least 150 days; PROVIDED, that the
Company shall only be required initially to file a registration statement
or qualification application no later than 145 days after any final year
end of the Company and at such reasonable time as it has available for
utilization therein the audited consolidated financial statements of the
Company as of the preceding fiscal year end.
(b) The managing underwriter or underwriters, if any, for any
offering of Registrable Securities to be registered pursuant to this
Section shall be selected by the holders of a majority of the shares of
Registrable Securities being registered and must be acceptable to the
Company in its reasonable judgment. If requested by the underwriters for
any underwritten offering of Registrable Securities registered pursuant to
a registration requested under Section 2.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by the Company and
such other terms and provisions as are customarily contained in agreements
with respect to secondary distributions, including, without limitation,
indemnity and contribution as described in Section 2.7. The Holders of
Registrable Securities who have requested that Registrable Securities held
by them be distributed by such underwriters shall be parties to such
underwriting agreement and the representations and warranties by, and the
other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holders of
Registrable Securities and the conditions precedent to the obligations of
such Holders of Registrable Securities under such underwriting agreement
shall be satisfactory to such Holders of Registrable Securities.
(c) A registration requested pursuant to this Section 2.1 will not be
deemed to have been effected unless it has become effective and does not
become subject to any stop order.
2.2 CONDITIONS TO REQUIRED REGISTRATION. (a) The Company's
obligation to make any filing under Section 2.1 may be deferred by the
Company for an appropriate period (not to exceed 90 days) if the Company
shall in good faith determine that the registration, qualification, or
filing for exemption would have a material adverse affect on an offering or
contemplated offering or a material acquisition, merger, or other corporate
transaction to which the Company or any of its subsidiaries is, or is
expected to be, a party or any other pending material corporate
development. The Company shall have no obligation to register, qualify, or
file for exemption with respect to shares of Registrable Securities in
accordance with this Section 2 if counsel to the Company provides a written
opinion to the Company and the requesting holders that the shares of
Registrable Securities requested to be registered may be sold in one or
more public transactions within a period of 90 days pursuant to Rule 144
under the Securities Act, or any successor rule thereto.
(b) In addition, the Company shall not be required to take any action
under Section 2.1:
(i) more than once during any period of 12 consecutive calendar
months;
(ii) for any holder of Registrable Securities, within 90 days
after the effective date of a registration referred to in
Section 2.1 or Section 2.3 pursuant to which such holder was
afforded the opportunity to register Registrable Securities
under the Securities Act but declined so to do;
(iii) within 90 days following the execution of an underwriting
agreement with respect to any underwritten public offering
of securities by the Company if the managing underwriter
with respect to such proposed public offering by the Company
advises the Company and the holder or holders requesting
registration in writing that such proposed public offering
by such holder or holders would impair the public offering
by the Company; PROVIDED THAT if such managing underwriter
shall have advised the Company that a portion of the
Registrable Securities as to which registration shall have
been requested could be registered, then such shares shall
be registered in proportion to the total number of shares of
Registrable Securities which each holder shall have
requested to have registered hereunder;
(iv) if such action would require the Company to qualify as a
foreign corporation to do business or file a general consent
to service of process in any state or jurisdiction in which
it is not then qualified or as to which it has not
previously filed a general consent to service of process; or
(v) if filing the registration statement would require
a special audit.
2.3 INCIDENTAL REGISTRATION. The Company agrees that at any time it
proposes to register any of its securities, whether held by third parties
or to be issued by the Company, under the Securities Act on Form S-1 or any
other form of registration statement then available for the registration
under the Securities Act of securities of the Company (other than a
registration statement on Form S-4 or Form S-8 or any form of registration
statement not available for general registration of securities) it shall
give written notice to all holders of outstanding shares of Registrable
Securities of its intention so to do, and upon the written request of the
holder of any such shares of Registrable Securities, given within 20 days
after receipt of any such notice from the Company, the Company shall in
each instance use its best efforts, subject to the next sentence, to cause
all Registrable Securities held by any such requesting holder of
Registrable Securities to be registered under the Securities Act and
registered or qualified under any State securities law, all to the extent
necessary to permit the offering and sale or other disposition thereof in
the manner stated in such request by the prospective seller of the
securities so registered. If the managing underwriter of a proposed public
offering by the Company shall advise the Company in writing that, in its
opinion, the distribution of some or all of the shares of Registrable
Securities requested to be included in the registration concurrently with
the securities to be offered by the Company would materially impair the
distribution of securities by the Company, then the Company need not
include in such registration any shares which such underwriter believes
would cause such impairment and each holder of Registrable Securities
requesting registration shall reduce, on a pro rata basis (or such other
basis as shall be agreed upon by the holders requesting registration), the
amount of securities as to which such holder requested registration in such
manner that the aggregate number of shares being registered for holders
does not exceed that number recommended by such underwriter. Any holder of
shares of Registrable Securities requesting registration of such
Registrable Securities shall in its request describe briefly the manner of
any proposed transfer of such Registrable Securities. Nothing in this
Section 2.3 shall be deemed to require the Company to proceed with any
registration of its securities after giving the notice herein provided.
2.4 REGISTRATION PROCEDURES. In connection with the obligations of
the Company with respect to the Registration Statements contemplated by
Sections 2.1 and 2.3, the Company shall use its best efforts to effect each
such registration to permit the sale of the Registrable Securities covered
thereby in accordance with the intended method or methods of disposition
thereof, and pursuant thereto it will, as expeditiously as possible:
(i) at least five days prior to filing a Registration Statement
or any amendments or supplements thereto, furnish to the Holders of
the Registrable Securities covered by such Registration Statement and
the underwriter(s), if any, copies of all such documents proposed to
be filed, and the Company will consider any comments thereon by any of
the foregoing and will not file any Registration Statement or
amendment thereto to which any of the Holders of the Registrable
Securities covered by such Registration Statement or the managing
underwriter(s), if any, shall reasonably object in writing;
(ii) in accordance with (i) above, promptly thereafter prepare
and file with the SEC, any such Registration Statement, which
Registration Statement (a) shall be available for the sale of the
Registrable Securities covered thereby in accordance with the intended
method or methods of distribution by the selling Holders thereof and
(b) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith;
(iii) (a) prepare and file with the SEC such amendments to such
Registration Statement as may be reasonably requested by any Holder of
Registrable Securities or the managing underwriter(s), if any, or as
may be required by the Securities Act, the Exchange Act, or by the
rules, regulations, or instructions applicable to the registration
form utilized by the Company or as may otherwise be necessary to keep
such Registration Statement effective; (b) cause the prospectus
contained in any such Registration Statement to be amended or
supplemented as may be reasonably requested by any of the Holders or
the managing underwriter(s), if any, or as may be required by the
Securities Act, the Exchange Act, or by the rules, regulations, or
instructions applicable to the registration form utilized by the
Company or as may otherwise be necessary to keep such Registration
Statement effective; (c) cause such prospectus as so amended or
supplemented to be filed pursuant to Rule 424 (or any successor rule)
under the Securities Act; (d) respond as promptly as practicable to
any comments received from the SEC with respect to the Registration
Statement or any amendment thereto; and (e) comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the selling Holders thereof;
(iv) promptly notify the selling Holders of Registrable
Securities and the managing underwriter(s), if any, and if requested
by any such Person, confirm such advice in writing:
(a) of the filing of a prospectus or any supplement to such
prospectus and of the effectiveness of the Registration Statement
and/or any post-effective amendment,
(b) of any request by the SEC for amendments or supplements
to the Registration Statement or such prospectus or for additional
information,
(c) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, and
(d) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threat of
any proceeding for such purpose.
(v) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement or any
qualification referred to in paragraph (iv)(d) at the earliest
possible moment;
(vi) if requested by the managing underwriter(s) or any of the
Holders of Registrable Securities being sold in connection with an
underwritten offering, promptly incorporate in a supplement to a
prospectus or post-effective amendment to the Registration Statement
such information as the managing underwriter(s) or any such Holder of
the Registrable Securities being sold reasonably request to have
included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable Securities being
sold to such underwriters, the purchase price being paid therefor by
such underwriters, and any other terms of the underwritten (or best-
efforts underwritten) offering of the Registrable Securities to be
sold in such offering; and make all required filings of such
supplement to such prospectus or post-effective amendment to the
Registration Statement promptly after being notified of the matters to
be incorporated in such supplement to such prospectus or post-
effective amendment to the Registration Statement;
(vii) promptly furnish to each selling Holder of Registrable
Securities and each managing underwriter, if any, at least one signed
copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);
(viii) promptly deliver to each Holder of Registrable Securities
and the managing underwriter(s), if any, as many copies of the
Registration Statement, each prospectus, and any amendment or
supplement thereto (in each case including all exhibits), as such
Persons may reasonably request, and such other documents as such
selling Holder may reasonably request to facilitate the disposition of
its Registrable Securities; and, in connection therewith, the Company
confirms that it consents to the use of such prospectus and any
amendment or supplement thereto by each such Holder of Registrable
Securities and the underwriter(s), if any, in connection with the
offering and sale of the Registrable Securities covered by such
prospectus or amendment or supplement thereto;
(ix) prior to the time the Registration Statement is declared
effective by the SEC, register or qualify the Registrable Securities
covered thereby or cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in connection
with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such
jurisdictions as any selling Holder or managing underwriter(s), if
any, reasonably request(s), keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts or
things necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by the Registration Statement;
(x) cooperate with the selling Holders of Registrable Securities
and the managing underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any legends restricting the
transfer thereof; and enable such Registrable Securities to be in such
denominations and registered in such names as the selling Holders or
the managing underwriters may reasonably request at least two business
days prior to any sale of Registrable Securities;
(xi) upon execution and delivery of such mutually acceptable
confidentiality agreements as the Company may reasonably request, make
available to any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant
retained by such underwriter, all financial and other records,
pertinent corporate documents, and properties of the Company, and
cause the Company's officers, directors, and employees to supply all
information requested by any such underwriter, attorney, or accountant
in connection with the registration, at such time or times as the
Person requesting such information shall determine;
(xii) otherwise use its best efforts to comply with the Securities
Act, the Exchange Act, all applicable rules and regulations of the SEC
and all applicable state blue sky and other securities laws, rules,
and regulations, and make generally available to its security holders,
as soon as practicable after the end of its first fiscal quarter in
which the first anniversary of the effective date of such Registration
Statement occurs, an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act;
(xiii) cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc.; and
(xiv) enter into such customary agreements (including, if such
Registration Statement relates to an underwritten offering, an
underwriting agreement) and take all such other customary actions in
connection therewith to expedite or facilitate the disposition of such
Registrable Securities and, in such connection, if the registration is
in connection with an underwritten offering, (a) make such
representations and warranties to the underwriters in such form,
substance, and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and
when requested; (b) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions in form, scope, and
substance shall be satisfactory to the underwriters) addressed to the
underwriters covering the matters of the type customarily covered in
opinions requested in underwritten offerings and such other matters as
may be requested by such underwriters; (c) obtain "comfort" letters
and updates thereof from the Company's accountants addressed to the
underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "comfort" letters by
underwriters in connection with underwritten offerings; (d) set forth
in full in any underwriting agreement entered into the indemnification
provisions and procedures of Section 2.7 hereof with respect to all
parties to be indemnified pursuant to said Section; and (e) deliver
such documents and certificates as may be requested by the
underwriters to evidence compliance with clause (a) above and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company; the above shall be done at each
closing under such underwriting or similar agreement or as and to the
extent required hereunder.
2.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 2
that the holders of Registrable Securities shall furnish to the Company
such information regarding them, the Registrable Securities held by them,
and the intended method of disposition of such securities as the Company
shall reasonably request and as shall reasonably be required in connection
with the action to be taken by the Company. If a holder of Registrable
Securities refuses to provide the Company with any of such information on
the grounds that it is not necessary to include such information in the
registration statement, the Company may exclude such holder's Registrable
Securities from the registration statement, unless such holder provides the
Company with an opinion of counsel, such opinion to be reasonably
satisfactory to the Company, to the effect that such information need not
be included in the registration statement. The exclusion of such holder's
Registrable Securities from a registration shall not affect the
registration of the other Registrable Securities to be included in such
registration, except that each other holder proposing to include
Registrable Securities in such registration may, if Registrable Securities
have been excluded from such registration on the advice of a managing
underwriter as provided in Section 2.2(d) or Section 2.3, increase the
number of shares of such holder's Registrable Securities being registered
by his or its pro rata (or such other proportion as shall be agreed upon by
holders wishing to increase their number of shares being registered) amount
of such excluded Registrable Securities.
2.6 EXPENSES OF REGISTRATION. All expenses incurred in connection
with all registrations pursuant to Section 2.1 or Section 2.3 (in each case
excluding underwriters' discounts and commissions applicable to the shares
of Registrable Securities being registered), including without limitation
all registration, filing, and qualification fees (except that the Company
shall not be obligated to pay any registration, filing, or qualification
fees payable by any holder to the extent that such payment is prohibited by
the laws or regulations of any state), printers' and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the
Company. Each holder of Registrable Securities shall pay the underwriters'
discounts and commissions applicable to the securities sold by such holder
and fees and disbursements of such holder and fees and disbursements of
such holder's counsel, if any. No holder of Registrable Securities shall
have the right to cause the Company to employ any expert or professional to
act on behalf of the Company. Notwithstanding the foregoing, if a
registration is withdrawn at the request of the holder requesting such
registration and if such requesting holder elects not have such
registration counted as a registration requested under Section 2.1, then
the requesting holder (the "Withdrawing Holder") shall promptly pay all of
the reasonable registration expenses of such registration; PROVIDED,
HOWEVER, that the Withdrawing Holder shall not be responsible for any such
registration expenses if the Company or any other holder of securities of
the Company do not concurrently withdraw the registration or the transfer
of securities of the Company proposed to be issued or held by them.
2.7 INDEMNIFICATION. (a) In connection with any registration,
qualification, or filing for exemption of Registrable Securities under
Section 2.1 or Section 2.3, the Company will agree to indemnify the holder
of such Registrable Securities, and each underwriter thereof, including
each Person, if any, who controls such holder of Registrable Securities or
such underwriter within the meaning of Section 15 of the Securities Act,
against all losses, claims, damages, and liabilities caused by any untrue,
or alleged untrue, statement of a material fact contained in any
registration statement or prospectus or offering circular (and as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by any
omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that the Company shall have no liability
insofar as such losses, claims, damages, or liabilities are caused by any
untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished in writing to the Company by such
holder, or any such underwriter, expressly for use therein, and the Company
and each officer, director, and controlling Person of the Company shall be
indemnified by such holder of the Registrable Securities, or such
underwriter, for all such losses, claims, damages, and liabilities caused
by any untrue, or alleged untrue, statement or omission, or alleged
omission, based upon information furnished in writing to the Company by
such holder or such underwriter, as the case may be, for any such use;
PROVIDED, FURTHER, that the liability of each such holder shall be limited
to the proceeds net of discounts and commissions received by such holder
from the sale of Registrable Securities covered by such registration
statement.
(b) The indemnification provisions shall provide that, promptly upon
receipt by a party indemnified pursuant to this Section 2.6 of notice of
the commencement of any action against such indemnified party in respect of
which indemnity or reimbursement may be sought against any indemnifying
party pursuant to this Section 2.6, such indemnified party shall notify the
indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying the party shall not relieve it of any
liability which it may have to any indemnified party otherwise than
pursuant to the indemnification agreement provided for by this Section 2.6.
In case notice of commencement of any such action shall be given to the
indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by such indemnifying party
and satisfactory to such indemnified party in its reasonable judgment. The
indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and
expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party
agrees to pay the same, (ii) the indemnifying party fails to assume the
defense of such action with counsel satisfactory to the indemnified party
in its reasonable judgment, or (iii) the indemnified party has been advised
by counsel that one or more legal defenses may be available to the
indemnified party which are different from those available to the
indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such action on behalf of the indemnified
party notwithstanding its obligation to bear the fees and expenses of such
counsel. No indemnifying party shall be liable for any settlement entered
into without its consent.
(c) (i) If the indemnification provided for in this Section 2.7 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities,
or expenses, in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with
the actions which resulted in such losses, claims, damages, liabilities, or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact, has been made by, or related to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities, and expenses referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this subsection 2.7(c) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. No person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
2.8 REPORTS UNDER THE EXCHANGE ACT. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without
registration, the Company agrees to:
(a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(b) furnish to any Holder so long as such Holder owns any of the
Registrable Securities forthwith upon written request a written statement
by the Company to the effect that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC permitting the
selling of any such securities without registration, PROVIDED THAT nothing
herein shall impose upon the Company any obligation to prepare or file any
reports under the Securities Act, the Exchange Act, or any other federal
securities law or regulation if, by virtue of the number of Persons owning
its outstanding securities or any other applicable circumstances, the
Company is not so required to prepare or file any such reports or other
documents.
2.9 LOCKUP AGREEMENT. In consideration of the performance by the
Company of its obligations under this Section 2, each holder of Registrable
Securities agrees in connection with a registration of the Company's
securities that, upon the written request of the Company or the
underwriters managing any underwritten offering of the Company's
securities, such holder will not sell, make any short sale of, lend, grant
any option for the purchase of, or otherwise dispose of, any Warrants or
shares of Common Stock (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as
the case may be, for such period of time (not to exceed 120 days) from the
effective date of such registration as the Company or the underwriters may
specify.
2.10 PREPARATION; INVESTIGATION. In connection with the preparation
and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of
any such Registrable Securities or to whom any such Registrable Securities
are issuable and their counsel the opportunity to participate in the
preparation of such registration statement, each prospectus contained
therein or filed with the Securities and Exchange Commission, and each
amendment thereof or supplement thereto, and will give each of them
reasonable access to its books and records and the officers of the Company
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' counsel,
to conduct an investigation within the meaning of the Securities Act.
SECTION 3. MISCELLANEOUS.
3.1 RELATIONSHIPS AND RIGHTS OF THE HOLDERS. Notwithstanding that
certain Rights of each holder of Registrable Securities herein may be
affected by similar Rights of other holders, the holders shall, in respect
of the ownership of the Registrable Securities, not be related as, or
deemed to be, a partnership, joint venture, or other "group" for the
purpose of acquiring, holding, voting, or disposing of capital stock of the
Company.
3.2 HEADINGS. The headings, captions, and arrangements used herein
are, unless specified otherwise, for convenience only and shall not be
deemed to limit, amplify, or modify the terms hereof, nor affect the
meaning thereof.
3.3 COMMUNICATIONS. Unless otherwise specifically provided, whenever
this Agreement requires or permits any consent, approval, notice, request,
or demand from one party to another, such communication must be in writing
(which may be tested cable, tested telefacsimile, or tested telex) to be
effective and shall be deemed to have been given on the day actually
delivered, cabled, sent by telefacsimile, or telexed, or, if sent by
nationally recognized delivery service providing for overnight delivery, on
the next commercial banking business day in the State of Texas after it is
delivered to such delivery service with all delivery charges prepaid, or,
if mailed, on the third commercial banking business day in the State of
Texas after it is enclosed in an envelope, addressed to the party to be
notified at the address stated below, properly stamped, sealed, and
deposited in the appropriate official postal service. For purposes hereof,
until changed by written notice pursuant hereto, the Company, Emerson and
Emerson (HK) are set forth below:
If to the Company:
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
Attn: Corporate Secretary
If to Emerson or Emerson (HK):
c/o Emerson Radio Corp.
Nine Entin Road
Parsippany, New Jersey 07054-0430
3.4 GOVERNING LAW. This Agreement is being executed and delivered
and is intended to be performed in the State of Texas, and the substantive
laws of such state and of the United States of America shall govern the
rights and duties of the parties hereto and the validity, construction,
enforcement, and interpretation hereof.
3.5 INVALID PROVISIONS. If any provision of this Agreement is deemed
or held to be illegal, invalid, or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it
is deemed to be illegal, invalid, or unenforceable, and in all other
respects this Agreement shall remain in full force and effect; PROVIDED,
HOWEVER, that if any provision of this Agreement is deemed or held to be
illegal, invalid, or unenforceable, there shall be added hereto
automatically a provision as similar as possible to such illegal, invalid,
or unenforceable provision while still being legal, valid, and enforceable.
Further, should any provision contained in this Agreement ever be reformed
or rewritten by any judicial body of competent jurisdiction, such provision
as so reformed or rewritten shall be binding upon all parties hereto.
3.6 SUCCESSORS AND ASSIGNS. All of the terms and provisions of this
Agreement shall inure to the benefit of an be binding upon the parties
hereto and their respective successors and assigns.
3.7 AMENDMENTS. This Agreement may be amended only by an instrument
in writing executed by the holders of a majority of then outstanding
Registrable Securities and by the Company (or their respective successors
or assigns); PROVIDED, HOWEVER, that no amendment providing one or more
holders of Registrable Securities with priority over other holders of
Registrable Securities in registering Registrable Securities, or providing
for the elimination of registration rights as to any holders, shall be made
without the consent of all holders adversely affected.
3.8 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or
more identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but,
in making proof of this Agreement, it shall not be necessary to produce or
account for more than one such counterpart. This Agreement shall become
effective when counterparts hereof shall have been executed and delivered
to the Company by all of the holders of Registrable Securities and to all
of the holders of Registrable Securities by the Company.
- 1 -
<PAGE>
EXECUTED as of the day and year first mentioned in this
agreement.
SPORT SUPPLY GROUP, INC.
By:
Name:
Title:
EMERSON RADIO CORP.
By:
Name:
Title:
EMERSON RADIO (HONG KONG) LIMITED
By:
Name:
Title:
- 2 -
CONSENT NO. 1 UNDER FINANCING AGREEMENTS
November 27, 1996
Emerson Radio Corp.
Majexco Imports, Inc.
9 Entin Road
Parsippany, New Jersey 07054
Gentlemen:
Congress Financial Corporation ("Lender"), Emerson Radio Corp.
("Emerson") and Majexco Imports, Inc. ("Majexco; together with Emerson,
individually and collectively, the "Borrower") have entered into certain
financing arrangements pursuant to the Loan and Security Agreement, dated
March 31, 1994, currently between Lender and Borrower, as amended by
Amendment No. 1 to Financing Agreements, dated August 24, 1995, Amendment
No. 2 to Financing Agreements, dated February 13, 1996, Amendment No. 3 to
Financing Agreements, dated August 20, 1996 and Amendment No. 4 to
Financing Agreements, dated November 14, 1996 (the "Loan Agreement"),
together with various other agreements, documents and instruments at any
time executed and/or delivered in connection therewith or related thereto
(as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, collectively, the "Financing
Agreements"). All capitalized terms used herein and not herein defined
shall have the meanings given to them in the Loan Agreement.
Reference is made to the Securities Purchase Agreement, dated as of
the date hereof, between Sport Supply Group, Inc. ("SSG") and Emerson (the
"Securities Purchase Agreement"), together with the documents, agreements
and instruments to be entered into in connection therewith, including,
without limitation: (a) the Warrant Agreement by SSG in favor of Emerson or
registered assigns (the "Warrant Agreement") and (b) the Registration
Rights Agreement by and among SSG, Emerson and Emerson Radio (Hong Kong)
Limited (the "Registration Rights Agreement"; and together with the
Securities Purchase Agreement and the Warrant Agreement, collectively, the
"Purchase Agreements"), providing for, inter alia, the sale by SSG to
Emerson of certain capital stock and warrants of SSG (the "Stock and
Warrants").
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties
hereto agree as follows:
1. CONSENT. Subject to the terms and conditions set forth herein,
Lender hereby consents to the purchase by Emerson of the Stock and Warrants
pursuant to the Securities Purchase Agreement (as in effect on the date
hereof), but not any exercise of Emerson's rights under the Warrant
Agreement or the subsequent purchase of capital stock of SSG pursuant to
the Warrant Agreement; PROVIDED, THAT:
(a) the closing of the purchase of the Stock and Warrants
contemplated by the Securities Purchase Agreement shall occur by no later
than December 16, 1996;
(b) no indebtedness has been incurred by Borrower in connection
with the funds used for the purchase of the Stock and Warrants, except for
Revolving Loans borrowed within all applicable lending formulas and subject
to all applicable sublimits under the Loan Agreement;
(c) immediately prior to the purchase of the Stock and Warrants,
and the payment of any portion of the purchase price therefor, Borrower's
Excess Availability, determined after the issuance of the SSG Purchase L/C
(as defined below), and while the same is outstanding and after taking into
account the $3,000,000 of Availability Reserves or cash collateral
established by Lender in connection with the SSG Purchase L/C, shall be at
least $13,000,000;
(d) after giving effect to the purchase of the Stock and
Warrants, and the payment in full of the purchase price thereof, Excess
Availability shall be at least $4,000,000; and
(e) the proceeds of Revolving Loans borrowed in connection with
the Securities Purchase Agreement shall not be used in any manner, directly
or indirectly, that would violate the provisions of Regulations G or X of
the Board of Governors of the Federal Reserve System ("Regulations G or
X").
2. LETTER OF CREDIT. By separate application, Emerson has requested
the issuance of a Letter of Credit Accommodation in the form of an
irrevocable standby letter of credit (the "SSG Purchase L/C") in the face
amount of $3,000,000 in favor of SSG to be used by Emerson as a deposit
against the purchase price of the Stock and Warrants or as payment of a
termination fee under Sections 2.3 and 11.2 of the Securities Purchase
Agreement. Borrower hereby represents, warrants and covenants that the SSG
Purchase L/C will be drawn upon on the date of the closing of the
acquisition of the Stock and Warrants pursuant to the Securities Purchase
Agreement and the amounts drawn applied to the purchase price for the Stock
and Warrants. Lender agrees to submit an application signed by Borrower
and co-signed by Lender to CoreStates Bank N.A. as issuer, requesting the
issuance of the SSG Purchase L/C.
3. CONDITIONS PRECEDENT. The effectiveness of the consent by Lender
contained herein shall be subject to the receipt by Lender of each of the
following, in form and substance as satisfactory to Lender:
(a) an original of this Consent, duly authorized, executed and
delivered by the parties hereto; and
(b) a true, correct and complete copy of the Securities Purchase
Agreement, with all exhibits and schedules thereto, duly authorized,
executed and delivered by the parties hereto.
4. ADDITIONAL COVENANTS. In addition to the continuing
representations, warranties and covenants heretofore or hereafter made by
Borrower pursuant to the Loan Agreement and other Financing Agreements,
Borrower hereby covenants with and to Lender that, prior to or
contemporaneously with the closing of the transactions contemplated by the
Purchase Agreements, Emerson shall deliver, or cause to be delivered, to
Lender each of the following, in form and substance satisfactory to Lender:
(a) a true, correct and complete copy of the Warrant Agreement,
duly authorized, executed and delivered by SSG;
(b) a true, correct and complete copy of the Registration Rights
Agreement, duly authorized, executed and delivered by the parties thereto;
(c) an original Pledge and Security Agreement pursuant to which
Emerson shall pledge to Lender, as additional Collateral for payment and
performance of the Obligations of Emerson, the Stock and Warrants together
with all proceeds thereof and all dividends and other income and
distributions thereon or with respect thereto and all rights of Emerson to
have the Stock (and any capital stock of SSG acquired through the exercise
of the Warrants (as may hereafter be permitted by Lender) registered under
the Registration Rights Agreement, together with associated original stock
power(s) (executed undated and in blank), original stock certificate(s),
original warrant Assignment Form(s) (executed undated and in blank) and
original warrant(s), each duly authorized, executed and delivered by the
parties thereto;
(d) an original of a Statement of Purpose for an Extension of
Credit Secured by Margin Stock by a Person Subject to Registration under
Regulation G (Federal Reserve Form G-3), duly authorized, executed and
delivered by Borrower; and
(e) an original of an opinion letter of counsel to Emerson
addressed to Lender, in form and substance satisfactory to Lender, with
respect to the transactions contemplated by this Consent, including,
without limitation, an opinion:
(i) with respect to the corporate power, due
authorization, execution and delivery by Emerson of the Purchase
Agreements, the Consent and the agreements and instruments executed and
delivered by Emerson hereunder;
(ii) that the execution, delivery and performance of the
Purchase Agreements and the transactions contemplated by this Consent do
not violate the terms of any existing agreements to which Borrower is a
party; and
(iii) that the proceeds of the Revolving Loans, to the
extent used to purchase the Stock and Warrants, have not been used in any
manner, directly or indirectly, which violates the provisions of
Regulations G or X, assuming the accuracy of the factual statements
contained in the Federal Reserve Form G-3 delivered hereunder.
5. MISCELLANEOUS.
(a) EFFECT OF THE CONSENT. Except as modified pursuant hereto,
no other changes or modifications to the Financing Agreements are intended
or implied.
(b) GOVERNING LAW. This Consent and the rights and obligations
hereunder of each of the parties hereto shall be governed by and
interpreted and determined in accordance with the laws of the State of New
York.
(c) BINDING EFFECT. This Consent shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) COUNTERPARTS. This Consent may be executed in any number of
counterparts, but all of such counterparts shall together constitute but
one and the same agreement. In making proof of this Consent it shall not
be necessary to produce or account for more than one counterpart thereof
signed by each of the parties hereto.
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
By the signature hereto of each of their duly authorized officers, all
of the parties hereto mutually covenant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: /S/ KENNETH G. DONAHUE
Title: ASSISTANT VICE PRESIDENT
AGREED AND ACCEPTED:
EMERSON RADIO CORP.
By: /S/ JOHN P. WALKER
Title: EXECUTIVE VICE PRESIDENT & CFO
MAJEXCO IMPORTS, INC.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
CONSENTED TO AND AGREED:
H.H. SCOTT, INC.
EMERSON COMPUTER CORP.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
EMERSON RADIO CANADA LTD.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
EMERSON RADIO & TECHNOLOGIES N.V.
By: /S/ JOHN P. WALKER
Title: SVP FINANCE AND TREASURER
