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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only (as
permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ESCALADE, INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
FOR THE SALE:
Aggregate Consideration: $74,500,000
Amount of Filing Fee: $14,900.00
(4) Proposed maximum aggregate value of transaction:
Aggregate Consideration: $74,500,000
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(5) Total fee paid: $14,900.00
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ESCALADE, INCORPORATED
817 MAXWELL AVENUE
EVANSVILLE, INDIANA 47717
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST __, 1998
To the Stockholders of Escalade, Incorporated:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of
ESCALADE, INCORPORATED (the "Company") will be held at the Company's principal
executive offices located at 817 Maxwell Avenue, Evansville, Indiana, on August
__, 1998 at 10:00 a.m., Evansville, Indiana time (the "Special" Meeting"). A
Proxy Statement, Proxy Card and related materials for the Special Meeting are
enclosed herewith. The Special Meeting is for the purpose of considering and
voting upon the following matters:
1. A proposal to sell substantially all of the assets of the Company's
sporting goods business (the "Asset Sale") pursuant to an Asset Purchase
Agreement, dated June 26, 1998, by and among Sportcraft, Ltd., its wholly-owned
subsidiary JEN Sports, Inc., the Company and certain of the Company's
subsidiaries named therein, as amended on July 2, 1998 (the "Purchase
Agreement"). A copy of the Purchase Agreement is attached as Appendix A to the
accompanying Proxy Statement.
2. A proposal to amend the Company's Amended Articles of Incorporation
to change the Company's name to Martin Yale Group, Inc. (the "Corporate Name
Change") immediately following the consummation of the Asset Sale. A copy of the
proposed amendment is attached as Appendix B to the accompanying Proxy
Statement.
3. Such other business as may properly come before the Special Meeting
or any adjournment or postponement thereof.
Only those persons who were holders of record of the Common Stock of
the Company at the close of business on July 10, 1998 are entitled to notice of
and to vote at the Special Meeting or any adjournment or postponement thereof.
Your attention is directed to the accompanying Proxy Statement and its
appendices for more complete information regarding the matters to be acted upon
at the Special Meeting.
THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE ISSUED AND
OUTSTANDING SHARES OF COMPANY COMMON STOCK ENTITLED TO VOTE IS REQUIRED TO
APPROVE THE ASSET SALE AND THE PURCHASE AGREEMENT AND TO APPROVE THE AMENDMENT
TO THE COMPANY'S AMENDED ARTICLES OF INCORPORATION TO EFFECT THE CORPORATE NAME
CHANGE.
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE ASSET SALE AND THE PURCHASE AGREEMENT AND FOR THE
AMENDMENT TO THE COMPANY'S AMENDED ARTICLES OF INCORPORATION TO EFFECT THE
CORPORATE NAME CHANGE. STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. EACH
STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE SPECIAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. ANY
SUCH PROXY GIVEN BY A STOCKHOLDER MAY BE REVOKED BEFORE IT IS EXERCISED BY
SUBMITTING A LATER DATED PROXY, BY ATTENDING THE SPECIAL MEETING AND VOTING IN
PERSON OR BY GIVING NOTICE OF REVOCATION TO THE COMPANY IN A WRITING ADDRESSED
TO AND RECEIVED BY THE COMPANY'S SECRETARY BEFORE THE SPECIAL MEETING.
By Order of the Board of Directors,
JOHN R. WILSON
Vice President and Chief Financial Officer
Evansville, Indiana
July ___, 1998
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ESCALADE, INCORPORATED
817 Maxwell Avenue
Evansville, Indiana 47717
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST __, 1998
This Proxy Statement, the accompanying notice, Proxy and related
materials are being sent to the holders of shares of no par common stock (the
"Stockholders") of ESCALADE, INCORPORATED ("Escalade" or the "Company") in
connection with the solicitation of proxies by Escalade's Board of Directors
(the "Board of Directors") to be voted at the Special Meeting of Stockholders to
be held on August ___, 1998 at 10:00 a.m., Evansville, Indiana time, at the
Company's principal executive offices located at 817 Maxwell Avenue, Evansville,
Indiana 47717, and at any adjournments or postponements thereof (the "Special
Meeting"). The Company's telephone number is (812) 467-1200. This Proxy
Statement and related materials are first being sent to Escalade's Stockholders
on or about July ___, 1998.
At the Special Meeting, Escalade's Stockholders will be asked to
consider and vote upon a proposal to sell substantially all of the assets of the
Company's sporting goods business (the "Asset Sale") to JEN Sports, Inc. ("JEN
Sports") pursuant to an Asset Purchase Agreement dated June 26, 1998, as amended
on July 2, 1998 (the "Purchase Agreement") by and among JEN Sports, its parent
company, Sportcraft, Ltd. ("Sportcraft"), the Company and its subsidiaries,
Indian Industries, Inc. ("Indian") and Harvard Sports, Inc. ("Harvard" and
together with Indian sometimes referred to herein as the "Selling Parties"). The
purchase price to be paid for the assets of Escalade's sporting goods business
is $74.5 million in cash, subject to certain upward or downward adjustments
based on closing net working capital of the sporting goods business that may be
made in accordance with the Purchase Agreement. A copy of the Purchase Agreement
is attached hereto as Appendix A, and the description of the Asset Sale
contained in this Proxy Statement is qualified in its entirety by reference to
Appendix A. See "PROPOSAL 1--THE ASSET SALE."
Escalade's Stockholders will also be asked to authorize an Amendment to
the Company's Amended Articles of Incorporation to change the Company's name to
Martin Yale Group, Inc. (the "Corporate Name Change"). This proposal, if
approved by the Stockholders, will be implemented only if the Asset Sale is
approved and consummated and will be effected by the filing of Articles of
Amendment to the Company's Amended Articles of Incorporation with the State of
Indiana. A copy of the proposed amendment is attached hereto as Appendix B. See
"PROPOSAL 2--THE CORPORATE NAME CHANGE."
Following the consummation of the Asset Sale, Escalade will continue in
existence and will continue to be actively engaged in its office and graphic
arts products business through its wholly-owned subsidiary, Martin Yale
Industries, Inc. ("Martin Yale"), and Martin Yale's wholly-owned subsidiary,
Master Products Manufacturing Company, Inc. ("Master Products"). Other than
retaining its 37.5% equity interest and other investments in Sweden Table Tennis
AB, Escalade will cease all of its current sporting goods operations. See
"PROPOSAL 1 -- THE ASSET SALE -- Background
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and Reasons for the Merger," " -- Use of Proceeds," "--Certain Effects of the
Asset Sale" and "--Operations of the Company Following the Asset Sale."
The Board knows of no business that will be presented for consideration
at the Special Meeting other than the matters described in this Proxy Statement.
If any other matters properly come before the Special Meeting, the persons named
in the enclosed form of proxy or their substitutes will vote in accordance with
their best judgment on such matters.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can also be obtained at prescribed rates
by writing to the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. The Company files its reports,
proxy statements and other information with the Commission electronically, and
the Commission maintains a web site located at http://www.sec.gov containing
such information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents accompanying this Proxy Statement, Notice of
Special Meeting and Proxy have been previously filed by the Company with the
Commission and are hereby incorporated into this Proxy Statement by reference:
(a) the Company's Annual Report on Form 10-K for its fiscal year
ended December 27, 1997;
(b) the Company's Quarterly Report on Form 10-Q for its fiscal
quarter ended March 21, 1998; and
(c) the Company's Current Report on Form 8-K dated June 26, 1998.
In addition, all subsequent documents filed with the Commission by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the Special Meeting are incorporated herein by reference. Any statement
contained in a document incorporated or deemed to be incorporated herein shall
be deemed to be modified or superseded for the purposes of this Proxy Statement
to the extent that a statement contained herein (or in any other subsequently
filed document which is also deemed to be incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Proxy Statement.
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TABLE OF CONTENTS
PAGE
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AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 2
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION 4
SUMMARY 5
Parties to the Asset Sale 5
The Special Meeting 6
Proposal 1 -- The Asset Sale 7
Proposal 2 -- The Corporate Name Change 10
Historical Financial Data 11
Unaudited Pro Forma Financial Information 11
THE SPECIAL MEETING 12
Date, Time and Place 12
Purpose of the Special Meeting 12
Record Date; Shares Outstanding and Entitled to Vote 12
Votes Required 13
Revocability of Proxies 13
Proxy Solicitation 14
PROPOSAL 1 -- THE ASSET SALE 14
Background of and Reasons for the Asset Sale 14
Opinion of Financial Advisor 21
Valuation of Escalade Sports 21
Summary of the Terms of the Purchase Agreement 22
Sale of Assets 22
Assumption of Liabilities 22
The Purchase Price 22
Closing 23
Representations and Warranties 23
Certain Covenants 24
No Solicitation 25
Non-Compete Obligations 25
Continued Existence 26
Conditions to Closing 26
Termination of the Purchase Agreement 27
Termination Fee 28
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Liquidated Damages 28
Indemnification; Survival of Representations and Warranties 28
Expenses 29
No Interest of Management and Directors in the Asset Sale 30
Accounting Treatment of the Asset Sale 30
Federal Income Tax Consequences of the Asset Sale 30
Use of Proceeds 30
Operations of the Company Following the Asset Sale 31
Certain Effects of the Asset Sale 31
Directors and Officers Irrevocable Proxies 31
Governmental and Regulatory Approvals 31
Arms' Length Transaction 32
No Dissenters' Rights 32
PROPOSAL 2 -- THE CORPORATE NAME CHANGE 32
SELECTED HISTORICAL FINANCIAL DATA 34
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA 35
UNAUDITED PRO FORMA FINANCIAL STATEMENTS 36
BUSINESS OF ESCALADE 40
MARKET FOR ESCALADE'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 41
INDEPENDENT AUDITORS 42
PROPOSALS FOR 1999 ANNUAL MEETING OF STOCKHOLDERS 43
ADDITIONAL INFORMATION 43
OTHER MATTERS 43
APPENDIX A -- Asset Purchase Agreement Dated June 26, 1998
APPENDIX B -- Amendment to Escalade's Amended Articles of Incorporation
APPENDIX C -- Opinion of CIBC Oppenheimer & Co., Inc.
</TABLE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Proxy Statement (including information included or incorporated by
reference herein) contains or may contain forward-looking statements that
involve risks and uncertainties. This Proxy Statement contains certain
forward-looking statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of Escalade (and
of Escalade on a pro forma basis following the consummation of the Asset Sale),
including statements preceded by, followed by or that include the words
"believes," "expects," "anticipates" or similar expressions.
These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the
following possibilities: (1) revenues following the Asset Sale are lower than
expected, or operating costs following the Asset Sale are greater than expected;
(2) contingencies relating to the consummation of the Asset Sale; (3)
competitive pressures in the office products industry increase significantly;
(4) general economic or business conditions are less favorable than expected;
(5) changes in the securities markets; and (6) other factors mentioned
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elsewhere in this Proxy Statement. The Company does not undertake any obligation
to update the information contained herein, which speaks only as of this date
with respect to this Proxy Statement.
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement and the documents incorporated herein by reference.
Reference is made to, and this summary is qualified in its entirety by, the more
detailed information and the financial statements, including the notes thereto,
appearing elsewhere herein and in the documents incorporated herein by
reference. Stockholders are urged to read this Proxy Statement, the documents
incorporated herein by reference and the appendices attached hereto carefully
and in their entirety. Capitalized terms used in this Proxy Statement shall have
the meaning ascribed to them herein.
PARTIES TO THE ASSET SALE:
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Escalade and its
Subsidiaries.............................. Escalade, Indian, Harvard, Harvard California S. DE RL C.V.
and Escalade International, Ltd. (collectively operating as
"Escalade Sports") are engaged in the manufacture and sale
of a variety of sporting goods such as table tennis tables and
accessories, archery equipment, home pool tables and
accessories, combination bumper pool and card tables, game
tables, basketball backboards, goals and poles, darts and dart
cabinets. Escalade, through its direct and indirect
subsidiaries, Martin Yale and Master Products, also
manufactures and sells office and graphic arts products such
as paper trimmers, paper folding machines, paper drills,
collators, decollators, bursting machines, letter openers,
automated paper joggers, check signers, stamp affixers, paper
shredders, paper punches, catalog rack systems, bindery carts,
plate makers, light tables, cameras and related accessories.
The term "Sporting Goods Business" refers to the Company's
sporting goods business conducted through Escalade Sports
and the term "Office Products Business" refers to the
Company's office and graphic arts business conducted
through Martin Yale and Master Products.
Sportcraft, Ltd........................... Sportcraft is a privately held company based in Mt. Olive,
New Jersey, engaged in the manufacture and sale of
indoor/outdoor sports products such as darts, dartboards, table
games, volleyball sets, badminton sets, billiard equipment and
table tennis equipment. Sportcraft's principal executive
offices are located at International Trade Center, 313
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Waterloo Valley Road, Mt. Olive, New Jersey 07828 and its
telephone number is (973) 347-3800.
The Buyer................................. JEN Sports is a wholly owned subsidiary of Sportcraft formed
specifically to consummate the Asset Sale and to operate the
Sporting Goods Business thereafter. JEN Sports' principal
executive offices are located at International Trade Center,
313 Waterloo Valley Road, Mt. Olive, New Jersey 07828 and
its telephone number is (973) 347-3800.
THE SPECIAL MEETING:
Date, Time and Place...................... August ___, 1998 at 10:00 a.m., Evansville, Indiana time, at
Escalade's principal executive offices located at 817 Maxwell
Avenue, Evansville, Indiana.
Purpose of the Special Meeting............ (1) To consider and vote upon a proposal to sell substantially
all of the assets of Escalade's Sporting Goods Business
pursuant to the Purchase Agreement. A copy of the Purchase
Agreement is attached as Appendix A to this Proxy
Statement.
(2) To consider and vote upon a proposal to amend the Company's
Amended Articles of Incorporation to change the Company's name to Martin
Yale Group, Inc., immediately following the consummation of the
Asset Sale. A copy of the proposed amendment is attached as Appendix B
to this Proxy Statement.
Record Date............................... The close of business on July 10, 1998.
Shares Outstanding and
Entitled to Vote.......................... On the Record Date, there were________________ shares of
Escalade Common Stock outstanding, with each share entitled
to cast one vote per share at the Special Meeting.
Required Votes............................ The affirmative vote entitled to be cast by holders of a
majority of all outstanding shares of Escalade Common Stock
entitled to vote thereon is required to approve the Asset Sale
and the Purchase Agreement, and to approve the amendment
to the Company's Amended Articles of Incorporation to effect
the Corporate Name Change.
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Irrevocable Proxies of Directors
and Executive Officers ................... The Company's executive officers, directors and their respective
affiliates collectively beneficially own approximately 1,030,000
outstanding shares of Escalade's Common Stock, representing in the
aggregate approximately 33% of the votes entitled to be cast by the
Stockholders. Such persons have each executed an irrevocable proxy
in the form of Exhibit B attached to the Purchase Agreement
granting JEN Sports the ability to vote all such shares "FOR" the
approval and adoption of the Asset Sale and the Purchase Agreement,
and "FOR" the Corporate Name Change.
PROPOSAL 1 -- THE ASSET SALE:
Reasons for the Asset Sale and
Recommendation of Escalade's
Board of Directors........................ The terms of the Asset Sale are the result of arms-length
negotiations between the Company and Sportcraft.
Escalade's Board of Directors has considered the terms of the
Purchase Agreement, including the consideration to be
received by the Company in the Asset Sale, in light of
economic, financial, legal and market factors and concluded
that the Asset Sale is advisable and in the best interests of the
Company and its Stockholders. ESCALADE'S BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE ASSET SALE AND THE PURCHASE
AGREEMENT AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO APPROVE THE ASSET SALE AND THE PURCHASE AGREEMENT.
Opinion of Financial Advisor.............. CIBC Oppenheimer & Co., Inc. ("CIBC Oppenheimer") was
retained by Escalade's Board of Directors to assist with and
to provide independent financial advice regarding the Asset
Sale. On June 26, 1998, the date Escalade's Board of
Directors unanimously approved the Asset Sale and the
Purchase Agreement, CIBC Oppenheimer delivered to the
Board of Directors its opinion to the effect that, as of the date
of its opinion and subject to the considerations set forth in
such opinion, the consideration to be received by Escalade
pursuant to the Purchase Agreement is fair from a financial
point of view. A copy of CIBC Oppenheimer's fairness
opinion is attached to this Proxy Statement as Appendix C.
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Purchase Price............................ Pursuant to the Purchase Agreement, JEN Sports will pay the
Company cash in the amount of $74.5 million, plus or minus
an amount based on the closing net working capital of the
Sporting Goods Business, in consideration for its purchase of
substantially all of the assets of the Sporting Goods Business.
Use of Proceeds from
the Asset Sale............................ The Company anticipates that the primary use of the after tax
proceeds to be obtained by the Company upon the Asset Sale
(the "Proceeds") will be to repay its outstanding indebtedness
under its credit facilities and to invest in the Office Products
Business for expansion, acquisitions and working capital.
The Company currently does not intend to make any
distribution of the Proceeds to Escalade's Stockholders.
Pending the Company's use of the Proceeds, such funds will
be temporarily invested in liquid, short-term securities.
Escalade's Anticipated Operations
Following the Asset Sale.................. Following the consummation of the Asset Sale, the Company
will continue in existence and will primarily focus on its
Office Products Business. Other than retaining its 37.5%
equity interest and other investments in Sweden Table Tennis
AB, the Company will cease all of its sporting goods
operations.
Conditions to Consummation
of the Asset Sale......................... The Purchase Agreement provides that the respective
obligations of the Company, the Selling Parties, JEN Sports
and Sportcraft to consummate the Asset Sale are conditioned
upon, among other things, the fulfillment of agreements and
covenants contained therein, the continued validity of the
representations and warranties made by the parties, the
approval of the Asset Sale and the Purchase Agreement by
Escalade's Stockholders, Escalade's obtaining the release of
all liens on the assets constituting the Sporting Goods
Business and the consents of certain third parties to the
assignment of the material contracts of Escalade Sports and
Sportcraft's obtaining the necessary financing to consummate
the Asset Sale.
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Closing Date ............................. If the Asset Sale and the Purchase Agreement are approved
and adopted at the Special Meeting, the Company anticipates
consummating the Asset Sale no later than September 15,
1998 (the "Closing Date").
Termination............................... The Purchase Agreement may be terminated prior to the
Closing Date upon the occurrence of certain events, including
(a) by mutual written consent of the parties; (b) by the
Company or JEN Sports if the Asset Sale shall not have been
consummated on or before September 30, 1998 due to the
failure of any condition precedent; (c) by JEN Sports if the
Company commences negotiations concerning an alternative
acquisition proposal; (d) by JEN Sports upon the
commencement of certain tender offers or change in control
of Escalade followed by the Escalade stockholders rejecting
the Asset Sale or the Special Meeting being delayed beyond
September 15, 1998; (e) by JEN Sports if Escalade's Board of
Directors withdraws its recommendation to Stockholders to
approve the Asset Sale or recommends an alternative
transaction to Stockholders; and (f) by either party if the other
party materially breaches its representations or warranties or
fails to perform its covenants or agreements and such breach
is continued without cure for a period of 30 days after the
breaching party's receipt of notice of breach.
Termination Fee........................... If the Purchase Agreement is terminated by JEN Sports upon
certain events, Escalade will be obligated to reimburse
Sportcraft for all of its reasonable out of pocket expenses
incurred in connection with the transaction prior to
termination and/or to pay to Sportcraft a termination fee of up
to $3.5 million.
Liquidated Damages........................ In the event the Company or the Selling Parties terminates the
Purchase Agreement in certain events, the Company will be
entitled to recover from Sportcraft and JEN Sports liquidated
damages of $3.5 million and to be reimbursed for all of its
reasonable out of pocket expenses incurred in connection with
the transaction prior to termination.
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Indemnification........................... Under the terms of the Purchase Agreement, a breach of a
representation or warranty, or a breach or nonfulfillment of
any agreement or covenant therein by any party may give rise
to indemnification obligations which, generally, will survive
the Closing Date and terminate and expire on the earlier of (a)
60 days following the receipt of audited financial statements
for the period ended December 31, 1999 of the Sporting
Goods business then conducted by JEN Sports and (b) June
30, 2000, provided however, that certain representations,
warranties, agreements, covenants and indemnities survive
and continue beyond the Closing for a longer period of time.
Although the Company's indemnification obligations are
limited in most cases to $8.0 million in the aggregate, under
certain circumstances the Company may be required to
indemnify JEN Sports in amounts in excess of $8.0 million.
Interests of Certain Persons
in the Asset Sale......................... The Company's executive officers and directors have no
interest in the Asset Sale beyond their interests as
Stockholders generally.
No Dissenters' Rights..................... Because Escalade Common Stock is traded on the Nasdaq
National Market, Escalade's Stockholders will not have any
appraisal rights as dissenting stockholders by reason of the
Asset Sale under Indiana law.
Tax Consequences.......................... The Proceeds from the Asset Sale will be subject to federal,
state and local taxes payable by Escalade and the Selling
Parties. Escalade's Stockholders will not have any tax
consequences from the Asset Sale because no portion of the
Proceeds will be distributed to the Escalade Stockholders.
PROPOSAL 2 -- THE CORPORATE NAME CHANGE:
Proposed Amendment to
Articles of Incorporation................. To authorize the amendment of the Company's Amended
Articles of Incorporation to change the name of the Company
to Martin Yale Group, Inc., but only if the Purchase
Agreement is approved and the Asset Sale is consummated.
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Reasons for the Corporate
Name Change and
Recommendation of Escalade's
Board of Directors........................ The terms of the Purchase Agreement require the Company to
change its corporate name as the rights to use the names
"Escalade," "Escalade Sports," "Indian Industries" and
"Harvard Sports" are to be sold to JEN Sports as part of the
Asset Sale. Escalade's Board of Directors believes that the
Martin Yale name is well established in the office products
industry and that aligning the Company's name with its major
brand name will help the Company attain greater name
recognition following the Asset Sale. ESCALADE'S
BOARD OF DIRECTORS HAS APPROVED THE
AMENDMENT TO THE COMPANY'S AMENDED
ARTICLES OF INCORPORATION AND
RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE AMENDMENT TO THE COMPANY'S
AMENDED ARTICLES OF INCORPORATION TO
EFFECT THE CORPORATE NAME CHANGE.
HISTORICAL FINANCIAL DATA................. See "SELECTED HISTORICAL FINANCIAL DATA."
UNAUDITED PRO FORMA FINANCIAL
INFORMATION............................... See "SELECTED UNAUDITED PRO FORMA FINANCIAL
DATA" and "UNAUDITED PRO FORMA FINANCIAL
STATEMENTS."
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THE SPECIAL MEETING
This Proxy Statement and accompanying form of proxy are being furnished
to the Escalade Stockholders in connection with the solicitation of proxies by
the Escalade Board of Directors for use at the Special Meeting and at any
adjournment or postponement thereof.
DATE, TIME AND PLACE
The Special Meeting will be held on August ___, 1998, at 10:00 a.m.,
Evansville, Indiana time, at the Company's principal executive offices located
at 817 Maxwell Avenue, Evansville, Indiana.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, Escalade's Stockholders will be asked to
consider and vote upon a proposal to approve the Asset Sale and the Purchase
Agreement, whereby Escalade and the Selling Parties would sell substantially all
of the assets of the Company's Sporting Goods Business to JEN Sports for $74.5
million in cash, subject to certain upward or downward adjustments that may be
made in accordance with the Purchase Agreement based on closing net working
capital of the Sporting Goods Business. A copy of the Purchase Agreement is
attached hereto as Appendix A, and the description of the Asset Sale contained
in this Proxy Statement is qualified in its entirety by reference to Appendix A.
See "PROPOSAL 1--THE ASSET SALE."
Escalade's Stockholders will also be asked to authorize an Amendment to
the Company's Amended Articles of Incorporation to change the Company's name to
Martin Yale Group, Inc. This proposal, if approved by the Stockholders, will be
implemented only if the Asset Sale is approved and consummated and will be
effected by the filing of Articles of Amendment to the Company's Amended
Articles of Incorporation with the State of Indiana. A copy of the proposed
amendment is attached hereto as Appendix B. See "PROPOSAL 2--THE CORPORATE NAME
CHANGE."
The Stockholders also may consider and vote upon such other matters as
are properly brought before the Special Meeting, including proposals to adjourn
the Special Meeting to permit further solicitation of proxies by the Board of
Directors in the event that there are not sufficient votes to approve the Asset
Sale and the Corporate Name Change at the time of the Special Meeting; provided,
however, that no Proxy which is voted against the Purchase Agreement will be
voted in favor of adjournment to solicit further proxies for such proposal. As
of the date hereof, the Board of Directors knows of no business that will be
presented for consideration at the Special Meeting, other than the matters
described in this Proxy Statement.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The Board of Directors has fixed the close of business on July 10, 1998
as the record date (the "Record Date") for the determination of Stockholders
entitled to notice of and to vote on each matter submitted to a vote at the
Special Meeting and any adjournment(s) or postponement(s)
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thereof. On the Record Date, the Company had outstanding _____________shares of
no par value common stock, entitled to one vote per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Escalade Common Stock entitled to vote is necessary to
constitute a quorum at the Special Meeting. Shares represented by proxies will
be counted as shares present for purposes of establishing a quorum. Shares
represented by proxies that are marked "abstain" also will be counted as shares
present for purposes of establishing a quorum. If a quorum is not present at the
Special Meeting, the Company may adjourn or postpone the Special Meeting with a
vote of Stockholders.
VOTES REQUIRED
If Stockholders specify in the accompanying proxy a choice with respect
to any matter to be acted upon, the shares represented by such proxies will be
voted as specified.
Under the Indiana Business Corporation Law and the Company's Bylaws,
approval of the Asset Sale and the Purchase Agreement and approval of the
Corporate Name Change requires the affirmative vote of the holders of a majority
of all outstanding shares of Common Stock entitled to vote thereon. Proxies
which indicate abstentions and broker non-votes will have the same effect as
votes against the Asset Sale and the Purchase Agreement, against the Corporate
Name Change and against any proposal to adjourn or postpone the Special Meeting.
IF NO INSTRUCTIONS ARE INDICATED IN THE PROXIES RETURNED TO THE COMPANY, SUCH
PROXIES WILL BE VOTED "FOR" APPROVAL OF THE ASSET SALE AND THE PURCHASE
AGREEMENT AND "FOR" THE AMENDMENT TO THE COMPANY'S AMENDED ARTICLES OF
INCORPORATION TO EFFECT THE CORPORATE NAME CHANGE.
As more fully described herein, the Company's directors, executive
officers and their respective affiliates beneficially own in the aggregate
approximately 1,030,000 of the outstanding shares of Escalade Common Stock
representing approximately 33% of the votes entitled to be cast. Each such
person has executed an irrevocable proxy pursuant to the Purchase Agreement
which will allow JEN Sports to vote their shares in favor of the approval of the
Asset Sale and the Purchase Agreement and the Corporate Name Change. See
"PROPOSAL 1 -- ASSET SALE -- Directors and Officers Irrevocable Proxy."
UNDER THE INDIANA BUSINESS CORPORATION LAW, THE HOLDERS OF THE
OUTSTANDING SHARES OF COMMON STOCK WILL NOT HAVE ANY APPRAISAL RIGHTS AS
DISSENTING STOCKHOLDERS BY REASON OF THE ASSET SALE.
REVOCABILITY OF PROXIES
A Stockholder who signs and returns a proxy in the form included with
this Proxy Statement may revoke it at any time before it is voted at the Special
Meeting by taking one of the following
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three actions: (i) giving written notice of revocation to John R. Wilson,
Secretary of the Company; (ii) executing and delivering a proxy with a later
date; or (iii) voting in person at the Special Meeting. Stockholders who grant
an irrevocable proxy to Sportcraft in connection with the Special Meeting may
not revoke such proxies pursuant to the terms thereof.
Votes cast by proxy or in person at the Special Meeting will be
tabulated by one or more inspectors of election appointed at the Special
Meeting, who also will determine whether a quorum is present for the transaction
of business. The expense of preparing, printing, and mailing proxy materials to
Escalade's Stockholders will be borne by the Company.
PROXY SOLICITATION
The Company will bear the costs of solicitation of proxies for the
Special Meeting. In addition to solicitation by mail, directors, officers and
regular employees of the Company may solicit proxies from Stockholders by
telephone, telegram, personal interview or otherwise. Such directors, officers
and employees will not receive additional compensation but may be reimbursed for
out-of-pocket expenses in connection with such solicitation.
Brokers, nominees, fiduciaries and other custodians have been requested
to forward soliciting material to the beneficial owners of Common Stock held of
record by them, and such custodians will be reimbursed for their reasonable
expense. The Proxy Statement and accompanying form of Proxy are being mailed to
Stockholders on or about July ___, 1998.
PROPOSAL 1--THE ASSET SALE
This section of the Proxy Statement describes certain aspects of the
proposed Asset Sale. To the extent that the description relates to the Purchase
Agreement, the following description does not purport to be complete and is
qualified in its entirety by reference to the Purchase Agreement, which is
attached as Appendix A to this Proxy Statement and is incorporated herein by
reference. All Stockholders are urged to read the Purchase Agreement, as well as
other appendices in their entirety.
BACKGROUND OF AND REASONS FOR THE ASSET SALE
Background. The Company is currently engaged in the manufacture and
sale of sporting goods and office and graphic arts products. The Company and its
predecessors have produced sporting goods for over 65 years and have produced
office machines for over 35 years. The Company currently manufactures sporting
goods in Evansville, Indiana, San Diego, California and Tijuana, Mexico. The
Company currently manufactures office and graphic arts products in Wabash,
Indiana, Los Angeles, California and Tijuana, Mexico. Other than for services
provided by the Company's executive officers and the ability to share financial
resources, the Company's Sporting Goods Business and Office Products Business
are operated autonomously and virtually no synergies exist between these two
diverse lines of business.
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For many years, Escalade's Board of Directors (the "Escalade Board")
has been concerned about the Company's lack of a clear identity in the financial
markets and the Board's belief that Escalade's Common Stock was significantly
undervalued in the markets. The Escalade Board concluded then, and continues to
believe, that the historical low trading volume in Escalade's Common Stock is
due in part to the lack of comparable companies engaged in the same divergent
businesses as the Company, which makes it more difficult for financial analysts
and investors to assess the Company's value and to take an active interest in
the Company. Beginning in 1993, the Escalade Board began to consider in detail
strategic alternatives to maximize shareholder value and to provide current
liquidity for Escalade's Stockholders.
In October 1994, the Escalade Board determined that separating the
Company's Sporting Goods Business and Office Products Business would be in the
best interests of Escalade's Stockholders and would enhance shareholder value.
At that time, the Escalade Board believed that this could best be accomplished
through a tax-free spinoff of the Company's shares of Martin Yale to Escalade's
Stockholders and the Company publicly announced its intention to proceed with a
spinoff of Martin Yale. However, by the second quarter of 1995, Escalade's
management informed the Escalade Board that based on discussions with the
Internal Revenue Service it did not appear likely that the proposed Martin Yale
spinoff would be granted tax-free treatment. In addition, anticipated
improvements in the performance of the Sporting Goods Business were not being
achieved as rapidly as desired. Upon consideration of these developments, the
Escalade Board concluded that Escalade's management should focus its efforts on
improving the performance of the Sporting Goods Business and that further
consideration of the proposed Martin Yale spinoff should be delayed until such
improvements were attained and tax issues resolved.
By the end of 1995, Escalade's management was progressing in improving
the performance of the Sporting Goods Business. Following Escalade's annual
meeting of stockholders in April 1996, the Escalade Board then began to again
consider strategic alternatives to enhance shareholder value. Although the
Escalade Board continued to remain interested in a spinoff of Martin Yale, the
Escalade Board concluded that additional improvements in the Sporting Goods
Business were desirable to improve the likelihood that each of the Sporting
Goods Business and the Office Products Business could succeed independently.
However, the Escalade Board also believed that it was important to provide
Escalade's Stockholders with liquidity for their shares of Escalade Common Stock
in light of the continued thin public trading market for Escalade Common Stock.
During the summer of 1996, the Escalade Board concluded that
shareholder value and liquidity could be enhanced through the Company's
repurchase of a portion of the outstanding shares of Escalade Common Stock. The
Escalade Board further determined that such repurchases could be best, and most
fairly, accomplished by conducting a partial self tender offer for Escalade
Common Stock so that all Escalade Stockholders who desired to sell shares would
have an opportunity to participate on a proportionate basis. The Escalade Board
also concluded that, because the then current market value of Escalade Common
Stock did not likely reflect its actual value, each Escalade Stockholder should
be given an opportunity to select his desired sale price within a range of
prices established by the Board in a process commonly known as a "Dutch Auction"
tender offer.
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Accordingly, in August 1996, the Company commenced a Dutch Auction partial self
tender offer for up to 1,000,000 shares of Escalade Common Stock at a price
between $6 and $10 per share. In response to this offer, Escalade's Stockholders
tendered more than 1,000,000 shares and the Company repurchased 1,016,682 shares
in September 1996 at a price of $8.875 per share. All tenders of shares of
Escalade Common Stock at prices greater than $8.875 per share were rejected by
Escalade and no such shares were purchased.
Based on the oversubscribed nature of the 1996 Dutch Auction, the
Escalade Board continued to focus on the need to enhance shareholder value and
to provide ongoing liquidity for Escalade Stockholders. Through the summer of
1997, the Escalade Board directed Escalade's management to identify strategic
alternatives including, without limitation, self-tender offers, potential
acquisitions, joint ventures, mergers, strategic alliances, spinoffs and the
sale of all or part of the Company. As part of this process, Escalade's
management undertook a review of the businesses, prospects and strategies of
each operating unit of the Company and its subsidiaries.
On September 18, 1997, at a regularly scheduled Board meeting, Robert
E. Griffin, Escalade's Chairman and Chief Executive Officer, and C.W. "Bill"
Reed, Escalade's President, reported that they had identified and preliminarily
explored a number of possible corporate actions to enhance shareholder value and
provide liquidity for holders of Escalade Common Stock. The proposed spin-off of
Martin Yale again was seriously considered, but was considered by management and
the Escalade Board to be infeasible due to uncertain tax consequences and
possible resulting limitations on future business operations. Messrs. Griffin
and Reed also discussed the possible sale of the Company, in whole or in part.
Based largely on the Board's belief that the Company's value has not been fully
recognized due to the dichotomy of the Sporting Goods Business and the Office
Products Business, the Escalade Board did not believe that a sale of the entire
company would likely provide full value to Escalade's Stockholders. The Escalade
Board also concluded that it would not be desirable to divest the Office
Products Business in light of its consistent and relatively profitable operating
results. However, because the performance of the Sporting Goods Business
historically has been more volatile than the Office Products Business and has
experienced increasing competition over recent years, the Escalade Board
determined that further exploration of a possible sale of the Sporting Goods
Business, in whole or in part, should be undertaken by Escalade's management.
The Escalade Board also determined at the September 18, 1997 meeting
that the Company should consider conducting a second Dutch Auction partial self
tender offer in an effort to meet the needs and desires of Escalade Stockholders
who desired additional liquidity on a current basis. The Escalade Board further
concluded that if a second Dutch Auction partial self tender was to proceed,
then it would be in the best interests of the Company and Escalade's
Stockholders to do so prior to reaching any definitive conclusions regarding a
possible sale of the Sporting Goods Business because of the relative certainty
that the Company could finance such repurchases under then existing conditions.
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Following the September 18, 1997 meeting of the Escalade Board,
Escalade's management investigated the Company's ability to obtain financing for
a possible Dutch Auction partial self tender offer and considered engaging a
financial advisor to assist the Company with any possible sale of the Sporting
Goods Business. On October 28, 1997, the Escalade Board met in a special meeting
and approved the commencement of a Dutch Auction partial self tender offer for
up to 1,000,000 shares at a price between $11 and $14 per share. The Escalade
Board also approved the engagement of CIBC Oppenheimer as the Company's
financial advisor to work with the Company in seeking to sell the Sporting Goods
Business. The Company then commenced the Dutch Auction partial self tender offer
in November 1997, at which time the Company also publicly announced its
engagement of CIBC Oppenheimer to explore the possible sale of the Sporting
Goods Business. In response to the 1997 Dutch Auction, Escalade's Stockholders
tendered 117,766 shares which the Company repurchased in December 1997 at a
price of $14 per share.
The Escalade Board believes that the relatively few number of shares
tendered in the 1997 Dutch Auction and the rising market price for Escalade
Common Stock following the Company's announcement of the possible sale of the
Sporting Goods Business supported the Board's view that Escalade Common Stock
has been undervalued in the market and that a separation of the Sporting Goods
Business and the Office Products Business would enhance shareholder value. Based
on these views, Escalade's management, through CIBC Oppenheimer, then proceeded
to actively seek out potential buyers for the Sporting Goods Business.
During January 1998, CIBC Oppenheimer and the Company developed a list
of 37 third parties who they believed would have a potential interest in
acquiring the Sporting Goods Business. CIBC Oppenheimer then initiated contact
with these prospective acquirors and provided preliminary information to 23
candidates who indicated interest. By March 1998, CIBC Oppenheimer and the
Company had narrowed the field of potential suitable candidates indicating a
substantial interest to six entities, who were then provided an opportunity to
commence limited due diligence on the Company's Sporting Goods Business prior to
submitting a definitive proposal to acquire the Sporting Goods Business.
At a regularly scheduled meeting of the Escalade Board on March 14,
1998, Mr. Griffin updated the Board as to the current status of a potential sale
of the Sporting Goods Business. Mr. Griffin also reported that all of the
potential buyers were interested in the acquisition of the entire Sporting Goods
Business and that both CIBC Oppenheimer and Escalade's management believed that
a sale of the entire Sporting Goods Business would provide better value to
Escalade's Stockholders rather than a sale of various pieces. The Escalade Board
then again discussed the rationale for exploring the sale of the Sporting Goods
Business and reaffirmed their previous conclusions that the Company's prospects
are better served by focusing on a single business segment. The Escalade Board
also reaffirmed that the volatility and risks associated with the Sporting Goods
Business, including seasonality, credit risks of major customers, increased
competition and greater capital requirements, make the sale of the Sporting
Goods Business more desirable than a sale of the Office Products Business which
has been a higher margin, less volatile business for the Company.
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During the four weeks between March 15 and April 15, four of the
invited six potential bidders conducted further due diligence on the Sporting
Goods Business. On April 22, 1998, two of those four potential acquirors,
including Sportcraft, submitted non-binding letters of intent to buy the
Sporting Goods Business. These two letters of intent were considered by the
Escalade Board at its regularly scheduled Board meeting on April 25, 1998. At
that meeting, the Escalade Board reviewed and discussed at length the two
letters of intent and directed Escalade's management to continue negotiations
with both potential acquirors to elicit the best possible terms. Mr. Griffin
also reported that the two potential bidders who elected not to submit bids were
financial buyers with no ties to the sporting goods industry.
During May 1998, CIBC Oppenheimer negotiated with Sportcraft and the
other interested bidder for the sale of the Sporting Goods Business. Both
parties increased their initial bids during this time period and other aspects
of the respective offers were clarified, including without limitation the terms
of Escalade's potential indemnification obligations following the sale and the
financial resources of each party necessary to consummate the transaction. By
mid-May 1998, Escalade's management concluded, with CIBC Oppenheimer's
assistance, that the Sportcraft bid of $74.5 million in cash represented a fair
price for the Sporting Goods Business. The other bidder informed CIBC
Oppenheimer that it would not submit a higher bid and neither the Company nor
CIBC Oppenheimer believed that any other third party would be likely to make a
higher offer. On May 12, 1998, Escalade and Sportcraft entered into a
non-binding letter of intent contemplating the sale of substantially all of the
assets of the Sporting Goods Business to Sportcraft. Immediately following the
execution of such letter of intent, Sportcraft commenced its detailed due
diligence of the Sporting Goods Business and the respective legal and financial
advisors for both the Company and Sportcraft began work on the terms of the
definitive asset purchase agreement.
The Sportcraft letter of intent initially provided that Sportcraft
would have the exclusive right to negotiate with Escalade for the purchase of
the Sporting Goods Business through June 10, 1998. Although both parties were
working diligently to reach agreement on the definitive terms of the asset
purchase agreement, the parties subsequently agreed to extend the exclusivity
period to June 26, 1998 to allow both parties sufficient time to reach agreement
on the specific terms of the definitive agreement. Escalade and Sportcraft
continued to engage in detailed, lengthy negotiations regarding the draft asset
purchase agreement through their officers, counsel and financial advisors until
the evening of June 25, 1998, at which time the parties believed that final
agreement had been reached on all issues.
On June 26, 1998, the Escalade Board met in a special meeting called
earlier that week for the purpose of considering the Asset Sale, the terms of
the Purchase Agreement and other transactions contemplated in connection with
the Asset Sale, including the change in the Company's corporate name. In
connection with their consideration of the terms of the Asset Sale and the
Purchase Agreement, the Escalade Board received the opinion of CIBC Oppenheimer
that the consideration to be received by the Company in connection with the
Asset Sale was fair to the Company from a financial point of view. Upon
conclusion of its consideration of the Asset Sale and the Purchase Agreement,
the Escalade Board unanimously approved the Asset Sale and the Purchase
Agreement. The Purchase Agreement was then executed by officers of the Company,
the Selling
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Parties, JEN Sports and Sportcraft on the afternoon of June 26, 1998 and
Escalade immediately issued a press release announcing that it had agreed to
sell the Sporting Goods Business to JEN Sports for cash consideration of $74.5
million, subject to adjustment based on closing working capital of the Sporting
Goods Business in accordance with the terms of the Purchase Agreement.
Reasons for the Asset Sale. As indicated above, the Escalade Board has
devoted significant attention over the last several years to consideration of
ways to enhance shareholder value and to provide liquidity for the Common Stock
held by Escalade Stockholders. After consideration of various alternatives and
the potential impact on the Company and the Escalade Stockholders, the Escalade
Board has unanimously agreed that sale of the Sporting Goods Business to JEN
Sports as contemplated by the Purchase Agreement is in the best interests of the
Company and the Escalade Stockholders, consistent with the Escalade Board's
long-term objectives of enhancing shareholder value and providing ongoing
liquidity for Escalade Common Stock.
In deciding to approve the Asset Sale on the terms contained in the
Purchase Agreement, the Escalade Board considered the following factors at its
special meeting on June 26, 1998 (which factors had also been previously
considered in detail at the regular meetings of the Escalade Board held on
September 18, 1997, March 14, 1998 and April 25 1998):
(i) the anticipated benefits to Escalade's Stockholders by
focusing the Company's efforts on a single industry and by creating a
clear identity for the Company in the financial markets, which the
Escalade Board believes will enhance shareholder value by facilitating
the ability of analysts and investors to compare the Company's
performance to its direct competitors and to actively create a market
in Escalade Common Stock to improve liquidity;
(ii) the Company's demonstrated ability to operate its Office
Products Business in a consistent, profitable manner, and the
opportunity for the Company to use the Proceeds from the Asset Sale to
build the Office Products Business through expansion and/or
acquisitions and for working capital;
(iii) the uncertain future for the Company's Sporting Goods
Business arising from, among other factors, the seasonal nature of the
Company's Sporting Goods Business, the credit risks associated with
several large customers in the Sporting Goods Business, the emergence
and growth of strong competitors in the sporting goods business who
have made substantial investments in marketing and advertising, and the
ongoing capital expenditures that may be required to continue to
maintain the Company's current market share in the sporting goods
industry;
(iv) the ability of the Company in recent years to resolve
operational problems necessary to improve the performance of its
Sporting Goods Business, which the Escalade Board believes is a
significant contributing factor in the Company's ability to obtain a
desirable price for the Sporting Goods Business at this time;
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(v) the fact that Sportcraft's offer to pay $74.5 million in
cash for the Sporting Goods Business exceeded all other third party
offers and indications of interest, following a thorough search for
interested and qualified buyers conducted on the Company's behalf by
CIBC Oppenheimer;
(vi) CIBC Oppenheimer's presentation to the Escalade Board at
the June 26, 1998 special meeting of the Board and CIBC Oppenheimer's
verbal and written opinion as of that same date that the consideration
to be received by the Company pursuant to the Purchase Agreement is
fair to Escalade from a financial point of view;
(vii) the financial viability of Sportcraft and the
likelihood that the Asset Sale will be consummated on the terms set
forth in the Asset Purchase Agreement;
(viii) the condition that the closing of the Asset Sale is
subject to obtaining the approval of a majority of the outstanding
shares of Escalade Common Stock at the Special Meeting; and
(ix) the terms and conditions of the Purchase Agreement, which
were the result of substantial arm's length negotiations.
These factors were considered collectively by the Escalade Board,
without giving specific weight to any particular factor.
The Escalade Board also considered a number of potential negative
factors relating to the Asset Sale including, without limitation, the following:
(i) the fact that the Sporting Goods Business contributes
approximately 73% of the Company's total revenues and constitutes
approximately 65% of the Company's total assets, such that immediately
following the Asset Sale the Company's operations will be significantly
smaller;
(ii) the uncertainty that exists as to whether the Company
will be able to utilize the Proceeds from the Asset Sale to
successfully grow the Office Products Business in a profitable manner
that will ultimately increase shareholder value and provide ongoing
liquidity for Escalade Common Stock;
(iii) the significant increase in the market price for
Escalade Common Stock from approximately $11 per share in September
1997 to more than $21 per share immediately prior to the announcement
of the Asset Sale on June 26, 1998, which market price may be difficult
to sustain following the Asset Sale in light of the Company's smaller
size and expected lower earnings per share prior to realizing the
expected benefits from the planned expansion of the Office Products
Business;
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(iv) the taxable nature of the Asset Sale to the Company,
which is expected to result in after tax proceeds to the Company of
approximately $55.5 million prior to the payment of expenses relating
to the Asset Sale; and
(v) the fact that no portion of the Proceeds from the Asset
Sale is expected to be distributed to Escalade's Stockholders in light
of the Escalade Board's determination that the Escalade Stockholders
will obtain greater value for their shares in the long term as a result
of the Company reinvesting such Proceeds in the Office Products
Business rather than subjecting the Stockholders to additional taxes
that would be payable on any amounts distributed to them and thereby
diminishing the benefits expected to be obtained from the sale of the
Sporting Goods Business.
The Escalade Board discussed these issues at length and determined that
the strategic and economic advantages of proceeding with the Asset Sale
outweighed these potential negative factors. ACCORDINGLY, ESCALADE'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE ASSET SALE
AND THE PURCHASE AGREEMENT.
OPINION OF FINANCIAL ADVISOR
Escalade retained CIBC Oppenheimer in October 1997 to act as its
financial advisor and to identify potential acquirors in connection with its
consideration of a sale of Escalade Sports. Escalade also retained CIBC
Oppenheimer to render an opinion to Escalade's Board of Directors as to the
fairness, from a financial point of view, to Escalade of the consideration to be
received by Escalade pursuant to the Purchase Agreement. Escalade based its
decision to retain CIBC Oppenheimer upon Escalade's prior experiences with CIBC
Oppenheimer and CIBC Oppenheimer's qualifications, expertise and experience as
an investment banking and financial advisory firm. CIBC Oppenheimer, as part of
its investment banking business, is regularly engaged in the business of
providing valuations of businesses and securities in connection with mergers
and acquisitions, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
The Purchase Agreement provides that JEN Sports, Inc. a wholly owned
subsidiary of Sportcraft Limited, will acquire substantially all of the assets
of Escalade Sports. The purchase price for such assets is $74.5 million in cash,
subject to certain upward or downward adjustments that may be made in accordance
with the Purchase Agreement.
On June 26, 1998, CIBC Oppenheimer made a presentation to the Board of
Directors of Escalade stating that as of June 26, 1998, based on the terms of
the consideration to be received by Escalade as stated in the final Purchase
Agreement, dated June 26, 1998, such consideration was fair from a financial
point of view, to Escalade (the "Fairness Opinion"). CIBC Oppenheimer
subsequently delivered its written Fairness Opinion confirming the oral Fairness
Opinion that had been given to the Board of Directors of Escalade on June 26,
1998.
The full text of the Fairness Opinion, which sets forth certain
assumptions made, certain procedures followed and certain matters considered by
CIBC Oppenheimer, is attached as Appendix C to this Proxy Statement. As set
forth in the Fairness Opinion, CIBC Oppenheimer relied upon and assumed the
accuracy and completeness of all of the financial and other information
available to it from public sources and provided to it by Escalade and Escalade
Sports. Representatives of Escalade and Escalade Sports provided CIBC
Oppenheimer with financial forecasts for Escalade Sports for such purpose. With
respect to the financial forecasts and other data concerning Escalade and
Escalade Sports reviewed by CIBC Oppenheimer, the representatives of Escalade
and Escalade Sports advised CIBC Oppenheimer, and CIBC Oppenheimer has assumed,
that such forecasts and other data had been reasonably prepared on a basis
reflecting their best currently available estimates and judgment as to the
future financial performance of Escalade Sports.
In arriving at its opinion, CIBC Oppenheimer neither made nor obtained
any independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of Escalade Sports, nor was it furnished with any such evaluations
or appraisals. CIBC Oppenheimer also assumed, without independent evaluation,
the accuracy of the advice and conclusions of the parties' legal counsel and
accountants with respect to tax and accounting matters. The Fairness Opinion was
necessarily based on information available to CIBC Oppenheimer and on general
economic, financial and stock market conditions and circumstances as they
existed and could be evaluated by CIBC Oppenheimer as of June 26, 1998. No
limitations were imposed by Escalade on CIBC Oppenheimer with respect to the
investigations made or procedures followed by CIBC Oppenheimer.
This summary of the written Fairness Opinion set forth in this Proxy
Statement is qualified in its entirety by reference to the full text of the
opinion which is attached as Appendix C hereto and incorporated herein by
reference. Escalade's Stockholders are urged to, and should, read this opinion
carefully in its entirety in conjunction with this Proxy Statement for the
assumptions made, the matters considered and the limits of the review by CIBC
Oppenheimer. The Fairness Opinion is directed only to the fairness, from a
financial point of view, to Escalade of the consideration to be received by
Escalade pursuant to the Purchase Agreement and does not address any other
aspect of the Purchase Agreement. The Fairness Opinion does not constitute a
recommendation to Escalade's Stockholders as to how such Stockholders should
vote with respect to whether they should approve the Purchase Agreement and
transactions contemplated thereby.
In rendering the Fairness Opinion, CIBC Oppenheimer: (i) reviewed the
final Purchase Agreement, dated June 26, 1998; (ii) reviewed Escalade's audited
financial statements for the fiscal years ended December 1994, 1995, 1996 and
1997 and for the three months ended March 1997 and 1998; (iii) reviewed Escalade
Sports' audited financial statements for the fiscal years ended December 1994,
1995, 1996 and 1997 and for the three months ended March 1997 and 1998; (iv)
reviewed financial projections of Escalade Sports prepared by Escalade Sports'
and Escalade's management; (v) reviewed the historical market prices and trading
volume for Escalade's common stock; (vi) held discussions with senior management
of Escalade Sports and Escalade with respect to the business and prospects of
future growth of Escalade Sports; (vii) reviewed and analyzed certain publicly
available financial data for certain companies that CIBC Oppenheimer deemed
comparable to Escalade Sports; (viii) performed discounted cash flow analyses of
Escalade Sports using certain assumptions of future performance provided to CIBC
Oppenheimer by the management of Escalade Sports and Escalade; (ix) reviewed and
analyzed certain publicly available financial information for transactions that
CIBC Oppenheimer deemed comparable to the Acquisition; (x) reviewed public
information concerning Escalade Sports and Escalade; and (xi) performed such
other analyses and reviewed such other information as CIBC Oppenheimer deemed
appropriate for the purposes of such opinion.
VALUATION OF ESCALADE SPORTS
CIBC Oppenheimer performed three primary valuation analyses of Escalade
Sports: (i) a comparable public company analysis, which consisted of reviewing
and considering certain financial and stock market data for certain publicly
traded companies engaged in businesses deemed by CIBC Oppenheimer to be similar
to Escalade Sports; (ii) a comparable mergers and acquisitions transaction
analysis, which consisted of reviewing certain financial data of selected
comparable acquisitions involving companies engaged in businesses deemed by CIBC
Oppenheimer to be similar to Escalade Sports; and (iii) a discounted cash flow
analysis. In establishing the range of values resulting from the application of
each of these analyses, CIBC Oppenheimer made qualitative judgments as to the
meaningfulness of the valuation measurements. These judgments were based on a
comparable analysis of the financial performance and the growth prospects
between Escalade Sports and the comparable companies, the number and similarity
of comparable transactions, as well as the predictability and volatility of
future earnings when assessing the relative significance of the discounted cash
flow analysis. The comparable public company analysis formed the basis for the
selection of appropriate multiples for Escalade Sports and certain other
valuation measurements (such as operating cash flow and price per earnings
multiples), as used generally for comparative purposes, were also taken into
account in making such judgments.
CIBC Oppenheimer compared Escalade Sports to certain publicly traded
companies engaged in businesses similar to Escalade Sports, resulting in an
implied aggregate value range (equity value plus total debt minus cash) for
Escalade Sports of $55.0 to $65.0 million. Using publicly available information,
CIBC Oppenheimer analyzed the consideration paid in selected merger and
acquisition transactions involving certain publicly traded companies engaged in
businesses similar to Escalade Sports. CIBC Oppenheimer calculated the earnings
and cash flow multiples for the target companies based upon the respective
purchase prices, and then applied these multiples to Escalade Sports' most
recent twelve months operating results, resulting in an implied aggregate value
range for Escalade Sports of $50.0 to $60.0 million. CIBC Oppenheimer performed
a discounted cash flow analysis for the projected after-tax cash flow of
Escalade Sports for the years ending December 1998 through 2002, based on
forecasts and other data provided by the managements of Escalade and Escalade
Sports. A provision was made for the value of Escalade Sports at the end of the
forecast period (a "terminal value"), and the present value of the interim cash
flows and the terminal value was determined using a risk-adjusted rate of return
(a "discount rate"). This resulted in an implied aggregate value range of $55.0
to $65.0 million.
The summary set forth above does not purport to be a complete
description of the analysis performed by CIBC Oppenheimer in this regard. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relative methods of financial analysis and the application of
these methods to particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description.
CIBC Oppenheimer was selected to act as financial advisor based upon
its qualifications, expertise and reputation. CIBC Oppenheimer, as a customary
part of its investment banking business, is engaged in the evaluation of
businesses and their securities in connection with mergers and acquisitions,
private placements and valuations for estate, corporate and other purposes. CIBC
Oppenheimer has performed investment banking and other services for Escalade in
the past and has been compensated for such services. In addition, CIBC
Oppenheimer has been retained by Sportcraft to arrange a portion of the
financing necessary to fund the acquisition of Escalade Sports and was
compensated for such services. The Company acknowledged CIBC Oppenheimer's
involvement in such financing pursuant to an executed letter dated March 17,
1998.
In connection with the proposed sale of Escalade Sports, Escalade
entered into an engagement letter with CIBC Oppenheimer, pursuant to which
Escalade retained CIBC Oppenheimer to render certain financial advisory and
investment banking services to Escalade in connection with its desire to
explore a possible sale transaction involving Escalade Sports and to provide a
fairness opinion. Pursuant to such letter, Escalade agreed to pay CIBC
Oppenheimer a fee upon the closing of the sale of Escalade Sports equal to 1.0%
of the aggregate consideration received by Escalade up to $32.5 million, plus
3.0% of the aggregate consideration between $32.5 million and $42.5 million,
plus 5.0% of the aggregate consideration in excess of $42.5 million. In
addition, Escalade agreed to pay CIBC Oppenheimer a fee of $200,000 for
rendering its opinion at the request of Escalade's Board of Directors in
connection with the Draft Purchase Agreement. Escalade has also agreed to
reimburse CIBC Oppenheimer for its reasonable out-of-pocket expenses not to
exceed $25,000 unless otherwise agreed to by Escalade. Escalade also agreed to
indemnify CIBC Oppenheimer and certain related persons against certain
potential liabilities arising out of the engagement of CIBC Oppenheimer,
including liabilities under the federal securities laws.
In the ordinary course of its business, CIBC Oppenheimer may actively
trade the securities of Escalade for its own account or for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
The analyses were prepared by CIBC Oppenheimer solely for the purposes
of providing its opinion as to the fairness of the consideration under the
Purchase Agreement, from a financial point of view, to Escalade. Analyses based
on forecasts of future results are inherently subject to substantial
uncertainties and are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of the businesses do not purport
to be appraisals or to reflect the prices at which businesses may actually be
sold or combined. As described above, CIBC Oppenheimer's opinion and
presentation to Escalade's Board of Directors was one of the many factors taken
into consideration by Escalade's Board of Directors in making its determination
to approve the Purchase Agreement and should not be viewed as determinative of
the views of Escalade's Board of Directors or management with respect to the
consideration under the Purchase Agreement.
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SUMMARY OF THE TERMS OF THE PURCHASE AGREEMENT
Sale of Assets. Subject to the terms of the Purchase Agreement, at the
Closing, the Company and the Selling Parties will sell, assign, transfer, convey
and deliver to JEN Sports, in each case free and clear of any liens or other
encumbrances, all of the assets and property of the Sporting Goods Business (the
"Acquired Assets"), subject to certain assets specifically excluded in the
Purchase Agreement (the "Excluded Assets"). The Acquired Assets include, among
other things, the owned and leased real property used in the Sporting Goods
Business; all tangible personal property such as machinery, equipment,
inventories, raw materials, supplies, parts, works in progress, finished goods,
furniture, automobiles, trucks, tractors, trailers, tools, jigs and dies
wherever located; prepaid items; accounts receivable; securities, cash and cash
equivalents; all other current assets; rights under licenses, permits,
authorizations, approvals or consents; intellectual property; customer,
distributor, and supplier mailing lists; rights under all written or oral
contracts, agreements, guaranties, understandings, deeds, mortgages, indentures,
personal property leases, licenses, commitments, undertakings, arrangements or
other documents, including without limitation, all warranty, service,
non-compete or confidentiality contracts (collectively the "Contracts");
insurance policies; business and financial records; certain employee plans; and
shares of stock held by the Company and the Selling Parties in Harvard
California and Escalade International, which represent all of the outstanding
shares of stock for such subsidiaries.
Assumption of Liabilities. Under the terms of the Purchase Agreement,
JEN Sports has agreed to assume certain obligations of the Sporting Goods
Business (the "Assumed Liabilities") that include, among other things; accounts
payable incurred in the ordinary course of business (subject to certain
limitations); post-Closing obligations under leases, distribution and licensing
contracts, purchase orders and customer contracts, equipment service, warranty
and other contracts; and certain post-Closing obligations of the Company and the
Selling Parties, with respect to employee benefit plans assigned under the
Purchase Agreement.
The Purchase Price. The Purchase Agreement provides that the Purchase
Price, which will be paid in cash at Closing, will be $74.5 million plus or
minus an Estimated Purchase Price Adjustment. The Estimated Purchase Price
Adjustment shall be an estimate at Closing comprised of (i) a working
capital-based increase or reduction based on the comparison of the Closing Net
Working Capital with a Benchmark Net Working Capital of $20,344,871, and (ii) a
debt-based increase or reduction based on the amount of Indebtedness to be
assumed by, or refinanced by JEN Sports on behalf of the Selling Parties on the
Closing Date. Within ninety (90) days of the Closing Date, JEN Sports shall
cause Pricewaterhouse Coopers LLP to prepare and deliver to all parties a
balance sheet of the Selling Parties as of the Closing Date (the "Closing
Statement") prepared in accordance with generally accepted accounting principles
("GAAP"). This Closing Statement will be used to calculate the Actual Purchase
Price Adjustment (in the same manner as the Estimated Purchase Price Adjustment
was calculated), and a post-Closing payment will be made, by the Company or JEN
Sports accordingly, in such amount representing the difference between the
Actual Purchase Price Adjustment and the Estimated Purchase Price Adjustment
(the "Post-Closing Payment"). Within 20 days following the delivery of the
Closing Statement, the Company may object in writing to the
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<PAGE> 27
Actual Purchase Price Adjustment or the Post-Closing Payment. If Sportcraft and
the Company are unable to resolve any dispute regarding the Post-Closing Payment
within 20 days, such dispute will be submitted to Ernst & Young LLP as neutral
auditors for a final and binding determination. Fees and expenses of such
accounting firm shall be borne by the Company and JEN Sports, respectively, in
the proportion that the aggregate amount of disputed items submitted to such
accounting firm that is unsuccessfully disputed by such party bears to the total
amount of the remaining disputed items so submitted.
Closing. If the Purchase Agreement and Asset Sale are approved by the
affirmative vote entitled to be cast by holders of a majority of all outstanding
shares of Common Stock, the closing of the Asset Sale (the "Closing") will take
place on September 15, 1998 following the satisfaction or waiver of the
conditions to Closing set forth in the Purchase Agreement or at such other time
as the parties may mutually determine. The Company anticipates that all such
conditions will be satisfied either prior to, or promptly after, the Company
obtains the required Stockholder vote approving the Asset Sale and the Purchase
Agreement.
Representations and Warranties. The Purchase Agreement contains various
representations and warranties of the Company, the Selling Parties, JEN Sports
and Sportcraft. These include representations and warranties by the Company and
the Selling Parties relating to, among other things: (a) the valid organization
and existence, good standing and foreign qualification of the Company and the
Selling Parties and similar corporate matters; (b) valid Board of Directors'
authorization of the Purchase Agreement and the ancillary agreements thereto;
(c) the valid execution, delivery, performance and enforceability of the
Purchase Agreement and the ancillary agreements thereto; (d) the absence of
certain regulatory and third party consents or disqualifiers; (e) the accuracy
of certain corporate documents provided to Sportcraft, including corporate books
and records and documents filed with the Commission; (f) the preparation of
financial statements in accordance with GAAP and the absence of undisclosed
indebtedness and liabilities; (g) material contracts related to the Sporting
Goods Business; (h) title to the Acquired Assets; (i) inventories, accounts
receivable and accounts payable relating to the Sporting Goods Business; (j)
litigation; (k) compliance with laws; (l) employees and employee benefit plans;
(m) brokers fees; (n) environmental matters; (o) taxes; (p) insurance; (q)
intellectual property; (r) owned and leased real property used in the Sporting
Goods Business; (s) conduct of the Sporting Goods Business in the ordinary
course of business since fiscal year-end; (t) the valid execution, delivery and
enforceability of the irrevocable proxies of the Company's directors and
officers identified in the Purchase Agreement; and (u) the preparation of this
Proxy Statement.
Sportcraft's and JEN Sports' representations and warranties include
those relating to, among other things: (a) the valid organization and existence,
good standing and foreign qualification of Sportcraft and JEN Sports and similar
corporate matters; (b) the valid authorization, execution, delivery, performance
and enforceability of the Purchase Agreement and the ancillary agreements
thereto; (c) absence of certain regulatory and third party consents or
disqualifiers; (d) compliance with laws; (e) brokers fees; (f) commitment
letters for senior and subordinated financing in connection with the Asset Sale,
and; (g) the preparation of this Proxy Statement.
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<PAGE> 28
Certain Covenants. Pursuant to the terms of the Purchase Agreement, the
Company, the Selling Parties, JEN Sports and Sportcraft have made certain
covenants including, among others, that from the date of the Purchase Agreement
through the Closing, except as permitted by or contemplated in the Purchase
Agreement, the Company and the Selling Parties shall carry on its respective
businesses in the ordinary course and, to the extent consistent therewith: use
commercially reasonable efforts to preserve intact the Sporting Goods Business
and the Acquired Assets, including the present operations, physical facilities,
working conditions and relationships with lessors, licensors, licensees,
distributors, suppliers, customers and employees; use commercially reasonable
efforts to keep available the services of each of the officers, employees,
agents and independent contractors employed by or related to the Sporting Goods
Business and preserve for the benefit of JEN Sports the goodwill of customers,
suppliers, licensors, landlords, employees and others related to the Business;
use commercially reasonable efforts to obtain third party consents to the
assignment of material contracts and amendments to licenses; consult and
cooperate with JEN Sports and Sportcraft concerning purchase orders and the
termination of certain contracts; and cooperate in the transition of customers
of the Sporting Goods Business to JEN Sports. In addition, except (a) as
permitted by or contemplated in the Purchase Agreement and (b) as otherwise
consented to in writing by JEN Sports, the Company and the Selling Parties have
agreed, among other things, not to: (i) engage in any practice, take any action
or enter into any transaction outside the ordinary course of the Sporting Goods
Business; (ii) declare, set aside or pay any dividends or make any distributions
with respect to the capital stock of the Company or the Selling Parties; (iii)
enter into, modify or waive any material terms of any agreement, contract, lease
or license to be assigned to and assumed by JEN Sports; (iv) permit or allow any
Acquired Asset to become subject to any liens or sell, lease, transfer or assign
any of such assets, other than sales of inventory in the ordinary course of
business; (v) grant any increase, modification or change in the compensation of
the Company's and the Selling Parties' directors, officers and employees outside
of the ordinary course of business, or adopt, amend, modify or terminate of any
employee benefit plan for the benefit of any director, officer or employee of
the Selling Parties; (vi) make any material modification or change in accounting
practices and policies or in its application of GAAP; (vii) enter into any
transaction with certain affiliated persons or entities; (viii) issue, sell or
otherwise dispose of any capital stock of the Company or the Selling Parties or
grant any warrants or options to acquire such shares; (ix) make any loans or
advancements to any person outside of the ordinary course of business; (x) make
or agree to make any new capital expenditures in excess of $150,000 in the
aggregate; (xi) delay or postpone the payment of any accounts payable or other
liabilities outside the ordinary course of business; (xii) terminate any
material distributor, customer or supplier, and continue to do business with
such parties subject to current terms and conditions; or (xiii) commit to take
any of the foregoing actions.
Additionally, the Company, the Selling Parties, JEN Sports and
Sportcraft have entered into agreements addressing, among other things,
confidentiality, access to Sporting Goods' business records, notice of
developments, title insurance and surveys of owned and leased real property, tax
elections and other tax matters, employees and employee benefits, the
preparation of this Proxy Statement and other Closing matters.
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<PAGE> 29
No Solicitation. The Purchase Agreement provides that the Company and
the Selling Parties shall not, directly or indirectly, through any officer,
director, employee, representative or agent (a) solicit, initiate or encourage
the initiation of any inquiries or proposals regarding any merger,
recapitalization, sale of any of the Acquired Assets (other than sales of
inventory in the ordinary course of business) or sale or exchange of shares of
capital stock or similar transactions involving the Company or the Selling
Parties other than the Asset Sale (an "Acquisition Proposal"); (b) except as
permitted under the Purchase Agreement, engage in any negotiations or
discussions concerning, or provide any non-public information to any person
relating to any Acquisition Proposal; or (c) except as permitted under the
Purchase Agreement, agree to, approve or recommend any Acquisition Proposal.
Notwithstanding, the Board of Directors may respond to and negotiate, approve
and recommend to the Stockholders any bona fide Acquisition Proposal not
solicited in violation of the Purchase Agreement, provided, however, that the
Board of Directors determines in good faith, based upon the advice of outside
counsel, that both (i) the terms of the Acquisition Proposal presents a
materially more favorable financial alternative to the Stockholders than the
Asset Sale, and (ii) therefore that the Board of Directors is required under
Indiana law, in order to comply with its fiduciary duties to Stockholders, to
respond to and negotiate such Acquisition Proposal. In the event the Board of
Directors makes such determination, it may approve and recommend such
Acquisition Proposal to the Stockholders, provided, however, that the Company
(i) promptly discloses to JEN Sports and Sportcraft the identity of the party
making the Acquisition Proposal, (ii) gives JEN Sports and Sportcraft a
reasonable opportunity to match such offer, and (iii) promptly gives JEN Sports
and Sportcraft prompt written notice of the determination of the Board of
Directors to approve and recommend an alternative Acquisition Proposal.
In the event the Board of Directors makes such permitted determination
regarding an Acquisition Proposal, the Board of Directors may approve and
recommend such Acquisition Proposal and terminate the Company's obligations
under the Purchase Agreement, subject to the termination provisions of the
Purchase Agreement. No action by The Company's Board of Directors permitted by
the preceding sentence shall constitute a breach of the Purchase Agreement by
the Company; provided, however, that the Company shall be obligated to pay fees
as described under "PROPOSAL 1--THE ASSET SALE -- Summary of the Terms of the
Purchase Agreement --Termination Fees."
Non-Compete Obligations. Pursuant to the Purchase Agreement, the
Company and the Selling Parties agree, that for a period of five years following
the Closing Date, they (a) will not, directly or indirectly, run, own, manage,
operate, join, control, be employed by, provide consulting services to,
participate in, lend their name to, invest in or be connected in any manner with
the management, ownership, operation or control of any business, venture or
activity that competes, directly or indirectly, with the Sporting Goods
Business; or (b) will not, directly or indirectly, without prior written consent
of JEN Sports, recruit, offer employment, employ, engage as a consultant, lure
or entice away any Designated Employee of Sporting Goods, or any other employee
of JEN Sports to leave the employ of JEN Sports, provided, however, that the
Company may employ any person: (i) who is not offered employment by JEN Sports
at the Closing, (ii) who is subsequently terminated by JEN Sports, or (iii) who
initiates contact with the Company on his or her own
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<PAGE> 30
initiative without any direct or indirect encouragement of the Company,
provided, however, that the Company will refrain in such situation from making
any offer to hire such individual until at least six months after such person's
employment with JEN Sports is terminated.
Continued Existence. Pursuant to the Purchase Agreement, the Company
has agreed, that for a period of five years following the Closing Date it will
not take any action that will reasonably be likely to impair the Company's
ability to fulfill its obligations under the Purchase Agreement, including,
among other things, any extraordinary dividend, voluntary dissolution or
liquidation, merger or consolidation in which the Company is not the surviving
corporation or sale of all or substantially all of its stock or assets, unless,
prior to any such action, the Company delivers to Sportcraft an irrevocable
letter of credit in an amount of $8 million less any indemnification payments
made to date. Such letter of credit will be used to secure the Company's
indemnification obligations under the Purchase Agreement subsequent to the
consummation of any of the above described actions, and shall terminate upon the
latter of the fifth anniversary of the Closing Date or the resolution of any
indemnification claims pending at the fifth anniversary of the Closing Date.
Conditions to Closing. The respective obligations of the parties to
consummate the Asset Sale are subject to the satisfaction or waiver of the
Closing conditions as specifically set forth in the Purchase Agreement. Such
conditions to JEN Sports and Sportcraft's obligation to close include, among
others, (a) the representations and warranties of the Company and the Selling
Parties contained in the Purchase Agreement are true and correct as of the
Closing Date; (b) the Company and the Selling Parties shall have performed and
complied with all of their covenants, agreements and obligations required by the
Purchase Agreement through the Closing Date; (c) the absence of any litigation
which could reasonably be expected to prevent the consummation of the
transactions contemplated by the Purchase Agreement, cause any of such
transactions to be rescinded following consummation or adversely affect
Sportcraft's ability to own and operate the Sporting Goods Business after the
Closing; (d) the absence of any material adverse changes in the Sporting Goods
Business; (e) the Company and the Selling Parties shall have obtained any
necessary consents from its lenders under its Bank Facility and the release of
any and all liens relating to the Acquired Assets and the release of certain
guaranties; (f) JEN Sports receipt of financing on terms and conditions
consistent with its Commitment Letters; (g) JEN Sports receipt of title
insurance and surveys of the owned real property and title insurance for the
leased real property related to the Business in form reasonably acceptable to
JEN Sports within 30 days of the execution of the Purchase Agreement, and the
cure by the Selling Parties of any Title Objections, if any, within 30 days of
receipt of notice, provided, however, that the Selling Parties shall not be
obligated to spend more than $100,000 to cure such title matters; (h) the
Purchase Agreement and the Asset Sale shall have been approved and adopted by
the Stockholders as required; and (i) the Company and the Selling Parties shall
have obtained consents from third parties with respect to the assignment of
certain Contracts.
Conditions to the Company's and the Selling Parties' obligation to
close include, among others, (a) the representations and warranties of JEN
Sports and Sportcraft contained in the Purchase Agreement are true and correct
as of the Closing Date; (b) JEN Sports and Sportcraft shall have performed and
complied with all of their covenants, agreements and obligations required by the
Purchase Agreement through the Closing Date; (c) the absence of any litigation
which could reasonably be expected to prevent the consummation of the
transactions contemplated by the
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<PAGE> 31
Purchase Agreement or cause any of such transactions to be rescinded following
consummation; and (d) the Purchase Agreement and the Asset Sale shall have been
approved and adopted by the Stockholders as required.
The Purchase Agreement provides that both the Company and Sportcraft
may waive any conditions precedent to their respective obligations to close the
Asset Sale to the extent such waiver is permitted by law. This provision grants
the Board of Directors the contractual authority to waive a condition precedent
to closing in the discharge of its fiduciary duties to the Company and the
Stockholders. Any such determination will be made after consideration of the
nature of the condition and the facts and circumstances surrounding its
inability to be satisfied, as well as an evaluation of the alternatives
available to the Company if the condition is not waived. This provision would
permit the Board of Directors, after consultation with its advisors if the Board
of Directors deems appropriate, to waive, among other things, a breach by JEN
Sports or Sportcraft of any of its representations, warranties, covenants or
agreements contained in the Purchase Agreement if, in the exercise of the Board
of Directors' discretion, it is concluded that such waiver is in the best
interests of the Company and the Stockholders. Permitted waivers, if exercised,
do not require additional Stockholder approval. THE COMPANY DOES NOT INTEND TO
RESOLICIT PROXIES IN THE EVENT A MATERIAL CONDITION IS WAIVED.
Termination of the Purchase Agreement. The Purchase Agreement may be
terminated at any time prior to the Closing Date: (a) by mutual written consent
of the parties; (b) by the Company or Sportcraft if the Asset Sale shall not
have been consummated on or before September 30, 1998 by reason of the failure
of any condition precedent to Closing, including if Stockholder approval of the
Purchase Agreement as required therein shall not have been obtained; (c) by JEN
Sports if the Company or the Selling Parties commences any negotiations
concerning any alternative Acquisition Proposal; (d) by JEN Sports upon the
commencement of a tender or exchange offer for 35% or more of the Company's
outstanding voting stock and the Board of Directors does not recommend that the
Stockholders not tender their shares in such tender or exchange offer, subject
to certain limitations (a "Tender Offer"), followed by the Escalade Stockholders
rejecting the Asset Sale or the Special Meeting being delayed beyond September
15, 1998; (e) by JEN Sports if any person or group shall have acquired
beneficial ownership or right to acquire beneficial ownership of 35% or more of
the Company's outstanding voting stock, subject to certain limitations (a
"Control Acquisition"), followed by the Escalade Stockholders rejecting the
Asset Sale or the Special Meeting being delayed beyond September 15, 1998; (g)
by the Company or JEN Sports if the Board of Directors shall withdraw, modify or
change its approval or recommendation of the Purchase Agreement or the Asset
Sale or shall have approved an alternative Acquisition Proposal in accordance
with the solicitation provisions of the Purchase Agreement (as described above);
(h) by JEN Sports if the Company or the Selling Parties materially breaches
their representations or warranties or fails to perform their covenants or
agreements and such breach is continued without cure for a period of thirty (30)
days after the Company's receipt of notice of breach; (i) by the Company and the
Selling Parties if JEN Sports or Sportcraft materially breaches its
representations or warranties or fails to perform its covenants or agreements
and such breach is continued without cure for a period of thirty (30) days after
Sportcraft's receipt of notice of breach; and (j) by the Company or JEN Sports
upon receipt of certain governmental regulatory orders or determinations that
would prevent the Closing.
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<PAGE> 32
The Purchase Agreement provides that it will become void and have no
effect, except as to certain enumerated provisions, if terminated as set forth
above.
Termination Fee. If the Purchase Agreement is terminated by JEN Sports
by reason of the receipt of a Tender Offer or the occurrence of a Control
Acquisition, or is terminated by the Company or JEN Sports upon the Board of
Directors approval and recommendation of an alternative Acquisition Proposal in
accordance with the solicitation provisions of the Purchase Agreement, then the
Company shall pay to Sportcraft a termination fee of $3.5 million plus
reasonable out-of-pocket expenses. If the Purchase Agreement is terminated by
JEN Sports by reason of the Company's or the Selling Parties' commencement of
any negotiations concerning any alternative Acquisition Proposal (as described
above), then the Company shall pay Sportcraft for its reasonable out-of-pocket
expenses plus a termination fee of $3.0 million if the alternative Acquisition
Proposal that triggered the termination is accepted or consummated, or, if an
Acquisition Proposal, other than the alternative Acquisition Proposal that
triggered the termination, is accepted or consummated within one year, a
termination fee shall be paid to Sportcraft ranging from $3.0 million if such
Acquisition Proposal is accepted or consummated within the first 182 days
following termination to $2.0 million if such Acquisition Proposal is accepted
or consummated during the period commencing on the 183rd day and ending on the
274th day following termination to $1.0 million if such Acquisition Proposal is
accepted or consumated during the period commencing on the 275th day and ending
on the 365th day following termination. If the Purchase Agreement is terminated
by JEN Sports by reason of the Company's or the Selling Parties' material breach
of its representations, warranties, covenants and agreements, then a termination
fee plus reasonable out-of-pocket expenses shall be paid to Sportcraft if the
Company accepts or consummates any alternative Acquisition within one year of
termination. In such cases, the termination fee will range from $3.0 million to
$1.0 million according to the fee schedule described above.
Liquidated Damages. In event the Company or the Selling Parties
terminates the Purchase Agreement by reason of a breach of the Purchase
Agreement on the part of Sportcraft or JEN Sports, the Company shall be entitled
to recover from Sportcraft and JEN Sports, upon final order of a court of
competent jurisdiction, liquidated damages of $3.5 million plus reasonable
out-of-pocket expenses.
Indemnification; Survival of Representations and Warranties. From and
after the Closing, the Company and the Selling Parties, jointly and severally,
will indemnify and hold harmless JEN Sports and Sportcraft, and their respective
directors, officers, employees, agents and other affiliates against and in
respect of all liabilities, obligations, judgments, liens, injunctions, charges,
orders, decrees, rulings, damages, dues, assessments, taxes, losses, fines,
penalties, injuries, deficiencies, demands, expenses, fees, costs, amounts paid
in settlement (including reasonable attorneys' fees), arising out of any claim,
complaint, demand, cause of action, audit, investigation, hearing, action, suit
of other proceeding (collectively, "Losses") that results from: (a) the
inaccuracy of any representation or warranty made by the Company or the Selling
Parties, including any misrepresentations or omissions, provided, however, that
the Company and the Selling Parties shall be liable for such inaccuracies only
to the extent that the aggregate amount of Losses exceeds a
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<PAGE> 33
$750,000 threshold and does not exceed a maximum amount of $8 million, provided
further, that the $750,000 threshold does not apply to Losses related to
environmental or ERISA claims. Under certain circumstances, the Company's
indemnification obligations may exceed this $8 million amount, i.e. fraud,
defective corporate existence, failure to obtain proper corporate authorization,
tax deficiencies or undisclosed brokers fees among other circumstances; (b) the
breach or nonfulfillment of any agreement or covenant made by the Company or the
Selling Parties under the Purchase Agreement; and (c) any liability of the
Company or Selling Parties that is not an Assumed Liability under the Purchase
Agreement.
From and after the Closing, JEN Sports and Sportcraft will indemnify
and hold harmless the Company and the Selling Parties and their respective
directors, officers, employees, agents and other affiliates against and in
respect of all Losses that result from (a) the inaccuracy of any representation
or warranty made by Sportcraft, including any misrepresentations or omissions,
provided however, that Sportcraft shall be liable for such inaccuracies only to
the extent that the aggregate amount of Losses exceeds a $750,000 threshold and
does not exceed a maximum amount of $8 million. Under certain circumstances JEN
Sports' and Sportcraft's indemnification obligations may exceed this $8 million
amount, i.e. fraud, failure to obtain proper corporate authorization or
undisclosed brokers fees; (b) the breach or nonfulfillment of any agreement or
covenant made by JEN Sports or Sportcraft under the Purchase Agreement; and (c)
any liability of JEN Sports or Sportcraft that is an Assumed Liability under the
Purchase Agreement and relates to the ownership and use of the Acquired Assets
following the Closing Date.
The representations and warranties of the parties in the Purchase
Agreement have varying survival periods and survive the Closing and continue in
full force and effect until the date that is the earlier of 60 days following
the receipt of audited financial statements for the period ended December 31,
1999 for the Sporting Goods Business as then conducted by JEN Sports or June 30,
2000. The Company's and the Selling Parties' representations and warranties
relating to environmental matters shall continue in full force and effect for a
period of three years following the Closing. The Company's and the Selling
Parties' representations and warranties relating to, among other things,
organization, authorization of transaction, brokers fees, title to assets,
taxes, disclosure, employee benefits and ERISA shall continue in full force and
effect without limit as to time, but subject to any applicable statutes of
limitations. All covenants, agreements and indemnities of the Company, the
Selling Parties, JEN Sports and Sportcraft contained in the Purchase Agreement
or any document required thereunder shall, unless otherwise specifically
provided for, survive the Closing and remain in full force without limit as to
time, but subject to any applicable statutes of limitations.
Expenses. Except upon certain termination events or other conditions
specified in the Purchase Agreement, the terms of the Asset Sale generally
provide that the parties thereto shall bear their own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
the Purchase Agreement and the transactions contemplated therein, including,
without limitation, the preparation of this Proxy Statement.
29
<PAGE> 34
NO INTEREST OF MANAGEMENT AND DIRECTORS IN THE ASSET SALE
The Company's management and members of the Board of Directors do not
have interests in the Asset Sale beyond their interests as Stockholders
generally.
ACCOUNTING TREATMENT OF THE ASSET SALE
The Asset Sale is to be reflected in the Company's financial statements
as a disposal of a segment of business within the meaning of Accounting
Principles Board Opinion No. 30.
FEDERAL INCOME TAX CONSEQUENCES OF THE ASSET SALE
The following summary of the federal income tax consequences of the
Asset Sale by the Company is included for general information purposes only.
This summary is not intended to be tax advice to any person, nor is it binding
upon the Internal Revenue Service. In addition, no information is provided
herein with respect to the tax consequences of the Asset Sale under applicable
foreign, state or local laws.
The Company will recognize a gain on the Asset Sale equal to the amount
realized by the Company from the sale less the Company's adjusted basis in the
assets sold. The amount realized will equal the sum of money received by the
Company in consideration for the assets. The amount realized will also include
the amount of liabilities from which the Company is discharged as a result of
the sale. The sale of the assets will not have any federal income tax
consequences to the Stockholders. The Stockholders will not have any taxable
income or loss until the Company makes a distribution to the Stockholders, if
any.
USE OF PROCEEDS
Proceeds received by the Company upon consummation of the Asset Sale
(the "Proceeds") will be temporarily invested in short-term securities, during
which time the Board of Directors will evaluate the Company's strategic
alternatives regarding the use of the Proceeds. The Stockholders of the Company
will not receive any distributions out of the Proceeds. A portion of the
Proceeds will be used to repay the Company's outstanding indebtedness under its
credit facilities with Bank One, Indianapolis, N.A. in the approximate amount of
$12.0 million. The Board of Directors also anticipates using the Proceeds to
build the Office Products business through expansion, acquisition or other means
to build shareholder value, and, to the extent permitted by Indiana law, the
Board of Directors in the future may consider some repurchases of Company Common
Stock to provide Stockholders with current liquidity. ESCALADE'S STOCKHOLDERS
WILL NOT RECEIVE ANY DISTRIBUTIONS FROM THE COMPANY IN CONNECTION WITH THE ASSET
SALE.
30
<PAGE> 35
OPERATIONS OF THE COMPANY FOLLOWING THE ASSET SALE
Following the consummation of the Asset Sale, the assets of the Company
will consist of Office Products and the cash proceeds of the Asset Sale received
from Sportcraft. Sporting Goods currently represents approximately 73% of the
Company's net sales. As a result, the Company will initially have significantly
reduced operations.
The Company will continue in existence and focus on strengthening its
Office Products business, but will cease all of its current Sporting Goods
operations other than retaining its 37.5% equity interest and other investments
in Sweden Tennis AB. The Board of Directors will evaluate opportunities for the
use of the Proceeds to build the Office Products business through expansion,
acquisition or other means in order to build shareholder value. The Company
initially will continue to maintain its principal executive offices in
Evansville, Indiana but will relocate those offices to a new location because
the real property containing the current offices is being sold to JEN Sports as
part of the Asset Sale.
CERTAIN EFFECTS OF THE ASSET SALE
The Asset Sale will not affect the Stockholders' equity interest in the
Company or their status as stockholders of the Company. Accordingly, the
Company's Common Stock will continue to be registered under the Exchange Act and
listed on the Nasdaq National Market, and the Company will continue to be
required to file periodic reports and other financial information with the
Commission, including the requirement of furnishing a proxy or information
statement in connection with meetings of its stockholders. The Company intends
to apply for a new Nasdaq trading symbol to reflect its new corporate name
assuming that the Corporate Name Change is approved by Stockholders.
DIRECTORS AND OFFICERS IRREVOCABLE PROXIES
On June 26, 1998 each director and executive officer of the Company,
and their respective affiliates, executed an irrevocable proxy pursuant to the
terms of the Purchase Agreement that allows JEN Sports to vote all Common Stock
held of record or beneficially by such individuals "FOR" approval of the Asset
Sale. These persons own beneficially or of record approximately 1,030,000 shares
of Escalade Common Stock, representing approximately 33% of the Common Stock
entitled to vote at the Special Meeting.
GOVERNMENTAL AND REGULATORY APPROVALS
No governmental or regulatory approvals of any federal, state or local
authority are required in order to consummate the Asset Sale.
31
<PAGE> 36
ARMS' LENGTH TRANSACTION
None of JEN Sports, Sportcraft or any of their affiliates is a party to
any contract, agreement, or other arrangement with, or has any ownership in, the
Company or the Selling Parties, other than the Purchase Agreement and the
related agreements. Escalade's Board of Directors and management believe that
the terms of the Purchase Agreement, the Asset Sale and the related transactions
contemplated thereby have been negotiated by the parties at arms' length.
Escalade's Board of Directors and management further believe that the arms'
length nature of the transaction has not been adversely effected by CIBC
Oppenheimer's retention by Sportcraft to arrange financing for Sportcraft as
discussed in "PROPOSAL 1--THE ASSET SALE--Valuation of Escalade Sports."
NO DISSENTERS' RIGHTS
Pursuant to the provisions of sections 23-1-44-8 of the Indiana
Business Corporation Law, because the Company's Common Stock is traded on the
Nasdaq National Market on the Record Date, Stockholders will not have any
appraisal rights as dissenting stockholders by reason of the Asset Sale.
ESCALADE'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE APPROVAL OF THE ASSET SALE AND THE PURCHASE
AGREEMENT.
PROPOSAL 2 -- THE CORPORATE NAME CHANGE
The Stockholders will also be asked at the Special Meeting to authorize
an Amendment to the Company's Amended Articles of Incorporation to effect the
Corporate Name Change. Such amendment is attached as Appendix B to this Proxy
Statement. This proposal, if approved by Escalade's Stockholders, will be
implemented only if the Asset Sale is approved and consummated and will be
effected by the filing of Articles of Amendment to the Company's Amended
Articles of Incorporation with the State of Indiana.
The terms of the Purchase Agreement require the Company to change its
corporate name as the rights to use the names "Escalade," "Escalade Sports,"
"Indian Industries" and "Harvard Sports" are to be sold to JEN Sports as part of
the Asset Sale. Escalade's Board of Directors believes that the Martin Yale name
is well established in the office products industry and that changing the
Company's name to "Martin Yale Group, Inc." will align the Company's name with
its major brand name for its office products. Accordingly, Escalade's Board of
Directors anticipates that the Corporate Name Change will help the Company
attain greater name recognition following the Asset Sale.
Additionally, upon consummation of the Asset Sale, the Board of
Directors will cause the Company's Indian and Harvard Sports subsidiaries to
amend their respective Articles of Incorporation to change their corporate names
to II, Inc. and HS, Inc., respectively.
ESCALADE'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE AMENDMENT TO THE COMPANY'S AMENDED ARTICLES OF
32
<PAGE> 37
INCORPORATION TO EFFECT THE CORPORATE NAME CHANGE UPON
CONSUMMATION OF THE ASSET SALE.
33
<PAGE> 38
SELECTED HISTORICAL FINANCIAL DATA
The selected consolidated financial data presented below as of and for
the years ended December 25, 1993, December 31, 1994, December 30, 1995,
December 28, 1996 and December 27, 1997 has been derived from audited
consolidated financial statements of the Company. The selected consolidated
income statement data presented below as of and for the periods ended March 22,
1997 and March 21, 1998 has been derived from the unaudited consolidated
financial statements of the Company. Results of interim periods are not
necessarily indicative of results to be expected for the year. The selected
consolidated financial data set forth below should be read in conjunction with
the financial statements of the Company contained in the accompanying Annual
Report on Form 10-K for the year ended December 27, 1997 and Quarterly Report on
Form 10-Q for the quarterly period ended March 21, 1998 and "Management's
Discussion And Analysis of Financial Condition And Results of Operations"
contained therein.
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Years Ended
-------------------- ----------------------------------------------------
3/21 3/22 12/27 12/28 12/30 12/31 12/25
1998 1997 1997 1996 1995 1994 1993 (1)
---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales
Sporting goods $8,201 $ 8,145 $66,666 $74,077 $73,858 $85,318 $80,397
Office & Graphic Arts Products 7,582 4,557 24,836 19,132 17,321 17,276 14,338
Total Net Sales 15,783 12,702 91,502 93,209 91,179 102,594 94,735
Net Income (Loss) 585 151 6,361 5,247 448 (2,403) 6,213
Weighted Average Shares 3,062 3,089 3,110 3,850 4,134 4,129 4,111
PER SHARE DATA (2)
Basic Earnings (Loss) Per Share $ .19 $ .05 $2.05 $1.36 $.11 $(.58) $1.51
Book Value Per Share 7.98 6.31 7.56 5.01 5.65 5.54 6.12
Cash Dividends Per Share 0 0 0 0 0 0 0
BALANCE SHEET DATA
Working Capital 14,432 13,423 15,478 13,309 17,069 16,387 22,289
Total Assets 48,893 39,884 66,145 54,430 57,767 75,883 66,142
Short-term Debt 4,100 2,650 14,075 13,675 16,732 31,215 16,640
Long-term Debt 8,200 5,000 10,700 5,500 6,266 9,148 11,563
Total Stockholders' Equity 24,422 19,499 23,501 19,305 23,338 22,889 25,163
</TABLE>
(1) Includes a cumulative effect adjustment of $3,089,893 relating to the
adoption of Statement of Financial Accounting Standard No. 109,
Accounting for Income Taxes.
(2) Basic earnings per common share are based on average shares outstanding
adjusted to reflect the Company's 15% stock dividend declared on
February 19, 1994.
34
<PAGE> 39
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The selected unaudited pro forma consolidated financial data presented
below as of and for the years ended December 25, 1993, December 31, 1994,
December 30, 1995, December 28, 1996 and December 27, 1997 and for the periods
ended March 22, 1997 and March 21, 1998 which are presented to reflect the
estimated input of the Asset Sale on the historical financial statements of the
Company. Results of interim periods are not necessarily indicative of results to
be expected for the year. The pro forma data may not be indicative of the
results of operations and financial position of the Company, as it may be in
the future or as it might have been had the transactions been consumated on the
respective dates assumed. The selected unaudited pro forma consolidated
financial data set forth below should be read in conjunction with the financial
statements of the Company contained in the accompanying Annual Report on Form
10-K for the year ended December 27, 1997 and Quarterly Report on Form 10-Q for
the quarterly period ended March 21, 1998 and "Management's Discussion and
Analysis of Financial Condition And Results of Operations" contained therein.
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Years Ended December 27, December 28,
March 21 and March 22 December 30, December 31, December 25
--------------------- --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993(1)
-------- -------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net Sales $7,582 $4,557 $24,836 $19,132 $17,321 $17,276 $14,338
Net Income 1,286 894 4,296 4,193 3,839 3,377 31,960
Weighted Average Shares 3,062 3,089 3,110 3,850 4,134 4,129 4,111
PER SHARE DATA(2)
Basic Earnings Per Share $ .42 $ .29 $1.38 $1.09 $.93 $.82 $7.77
Book Value Per Share 17.25 15.58 16.57 12.27 10.41 9.49 8.71
Cash Dividends Per Share 0 0 0 0 0 0 0
BALANCE SHEET DATA
Working Capital 40,280 38,103 40,786 38,609 42,369 41,687 47,589
Total Assets 64,518 52,635 64,313 52,430 55,767 73,883 64,142
Short-term Debt 300 300 300 300 200 200 200
Long-term Debt 2,700 3,000 2,700 3,000 3,300 3,500 3,700
Total Stockholders' Equity 52,818 48,130 51,532 47,236 43,043 39,204 35,827
</TABLE>
(1) Assumes sale of sporting goods at beginning of 1993 and interest earned
on proceeds after that with similar changes in working capital and
total assets due to the proposed Asset Sale. Excludes tax benefit of
$3,089,893 relating to the adoption of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
(2) Basic earnings per common share are based on average shares
outstanding adjusted to reflect the Company's 15% stock dividend
declared on February 19, 1994.
35
<PAGE> 40
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma balance sheet estimates the pro forma
effect of the Asset Sale to Sportcraft as if the Asset Sale and the transactions
contemplated in the Purchase Agreement had been consummated on March 21, 1998
and December 27, 1997. The following unaudited pro forma income statements
estimate the pro forma income statements based on the pro forma effects of the
Asset Sale as if such Asset Sale had occurred on December 28, 1997 and December
29, 1996. The pro forma adjustments are described in the following notes and are
based upon available information and certain assumptions that the Company
believes are reasonable. The pro forma data may not be indicative of the results
of operations and financial position of the Company, as it may be in the future
or as it might have been had the transactions been consummated on the respective
dates assumed. The information should be read in conjunction with the Company's
historical financial statements and accompanying notes incorporated by reference
in the Proxy Statement and the Company's unaudited interim financial data
appearing elsewhere in this Proxy Statement. The summary unaudited pro forma
consolidated financial information has been included herein as required by the
rules of the Commission and is for comparative purposes only.
The actual amount of the Purchase Price and net purchase proceeds may
differ materially from the amount of purchase proceeds reflected in the pro
forma consolidated balance sheet presented below. See "PROPOSAL 1--THE ASSET
SALE -- Summary of the Terms of the Purchase Agreement -- The Purchase Price"
for a description of the method of determining the Purchase Price under the
Purchase Agreement.
The unaudited pro forma financial statements included in this Proxy
Statement should be read in conjunction with the accompanying notes.
Certain statements made below relating to plans, conditions, objectives
and economic performance go beyond historical information and may provide an
indication of future results. To that extent, they are forward-looking
statements within the meaning of Section 21E of the Exchange Act, and each is
subject to factors that could cause actual results to differ from those in the
forward-looking statement.
36
<PAGE> 41
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 21, 1998
ADJUSTMENTS PRO FORMA
HISTORICAL FOR PROPOSED AFTER PROPOSED
UNAUDITED ASSET SALE ASSET SALE
--------- ---------- ----------
<S> <C> <C> <C>
INCOME STATEMENT(1):
Net Sales $15,783 $ (8,201) $ 7,582
Cost of Sales (10,866) 6,831 (4,035)
Selling and Administrative (3,533) 1,619 (1,914)
Other Income (expenses) (303) 858 555
Gain on Sale -- 48,000 48,000
------- ------- -------
Net Income Before taxes 1,081 49,107 50,188
Income Taxes (496) (19,781) (20,277)
------- ------- -------
Net Income $ 585 $29,326 $29,911
======= ======= =======
BALANCE SHEET(2):
Cash $ 735 $41,138 $41,873
Accounts Receivable 12,712 (8,377) 4,335
Inventories 14,386 (11,040) 3,346
Prepaid 1,314 (37) 1,277
Net Property, Plant, Equipment 11,123 (5,059) 6,064
Other Assets 2,560 -- 2,560
Goodwill 6,063 -- 6,063
------- ------- -------
Total Assets $48,893 $16,625 $65,518
======= ======= =======
Notes Payable $ 4,100 (3,800) $ 300
Accounts Payable 2,340 (1,904) 436
Accrued Liabilities 8,275 (2,460) 5,815
Long-Term Debt 8,200 (5,500) 2,700
Deferred 1,556 -- 1,556
Common Stock 6,158 -- 6,158
Retained Earnings 18,246 30,289 48,553
------- ------- -------
Total Liabilities and Shareholder's Equity $48,893 $16,625 $65,518
======= ======= =======
</TABLE>
37
<PAGE> 42
<TABLE>
<CAPTION>
YEAR ENDED
December 27, 1997
ADJUSTMENTS PRO FORMA
HISTORICAL FOR PROPOSED AFTER PROPOSED
UNAUDITED ASSET SALE ASSET SALE
--------- ---------- ----------
<S> <C> <C> <C>
INCOME STATEMENT(1):
Net Sales $ 91,502 $(66,666) $24,836
Cost of Sales (61,717) 48,794 (12,923)
Selling and Administrative (17,398) 9,817 (7,581)
Other Income (expenses) (1,337) 3,978 2,641
Gain on Sale -- 48,000 48,000
------- ------- -------
Net Income Before taxes 11,050 43,923 54,973
Income Taxes (4,689) (17,188) (21,877)
------- ------- -------
Net Income $ 6,361 $26,735 $33,096
======= ======= =======
BALANCE SHEET(2):
Cash $ 1,246 $39,387 $40,633
Accounts Receivable 30,602 (26,453) 4,149
Inventories 12,637 (8,480) 4,157
Prepaid 1,443 (1,010) 433
Net Property, Plant, Equipment 11,639 (5,277) 6,362
Other Assets 2,422 -- 2,422
Goodwill 6,157 -- 6,157
------- ------- -------
Total Assets $66,146 $(1,833) $64,313
======= ======= =======
Notes Payable $14,075 $(13,775) $ 300
Accounts Payable 2,697 (1,731) 966
Accrued Liabilities 13,678 (6,358) 7,320
Long-Term Debt 10,700 (8,000) 2,700
Deferred 1,495 -- 1,495
Common Stock 5,880 -- 5,880
Retained Earnings 17,621 28,031 45,652
------- ------- -------
Total Liabilities and Shareholder's Equity $66,146 $(1,833) $64,313
======= ======= =======
</TABLE>
See accompanying notes to Summary Unaudited Pro Forma Consolidated Financial
Information.
38
<PAGE> 43
NOTES TO SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Pro Forma Income Statement Adjustments
The pro forma income statements reflect adjustments as if the Asset
Sale had occurred on the first day of the fiscal year for both the year ended
December 27, 1997 and the quarter ended March 21, 1998. After the Asset Sale is
consummated, the Company will continue the operation of Martin Yale's office and
graphic products business.
A description of pro forma adjustments for the pro forma consolidated
income statement are as follows:
- Adjustments to remove income and expenses related to assets sold.
- Adjustment to reflect interest earned on cash invested.
- Adjustment to book gain on sale of assets.
The Company expects that its statutory tax rates for the periods
covered by these pro forma statements will be:
State Income Tax rate.................................... 8%
Federal Income Tax rate................................. 34%
Combined rate........................................... 39%
2. Pro Forma Balance Sheet Adjustments
The pro forma balance sheet reflects proceeds from the Asset Sale of
approximately $51,000,000 in cash
<TABLE>
<CAPTION>
<S> <C>
Estimated gross proceeds $74,500,000
Less: Estimated expenses relating to proposed sale 4,500,000
Estimated tax on sale 19,000,000
-----------
Estimated net cash proceeds from proposed sale $51,000,000
===========
</TABLE>
A description of pro forma adjustments for the pro forma consolidated
balance sheet are as follows:
- Adjustment for cash invested from sale after paying taxes, expenses
and debt.
- Adjustments to remove assets and liabilities assumed by buyer in
sale.
- Adjustment for payment of all bank debt leaving only debt from the
Company's Industrial Revenue Bonds.
- Equity adjustment for gain on sale and interest income.
39
<PAGE> 44
BUSINESS OF ESCALADE
Escalade is a diversified company engaged in the manufacture and sale
of sporting goods and office and graphic arts products. Escalade and its
predecessors have produced sporting goods for over 65 years and have produced
office machines for over 35 years. For more detailed information about Escalade,
see the accompanying Annual Report on Form 10-K for the year ended December 27,
1997 and the accompanying Quarterly Report on Form 10-Q for the quarter ended
March 21, 1998. See also "AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "ADDITIONAL INFORMATION."
MARKET FOR ESCALADE'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Escalade Common Stock is traded on the NASDAQ Stock Market's National
Market under the symbol "ESCA". As of July 10, 1998, there were approximately
800 record holders of Escalade Common Stock. On June 25, 1998, the last full
trading day prior to the public announcement of the Purchase Agreement and the
Asset Sale, the high, low and last reported sales price of Escalade Common Stock
on the Nasdaq National Market were $21.375, $21.125 and $21.125 per share,
respectively.
The following table sets forth the high and low closing sales prices of
shares of Escalade Common Stock on the Nasdaq National Market for the periods
indicated.
1996: HIGH LOW
---- ---
1st Quarter $5.13 $ 2.50
2nd Quarter $5.50 $ 4.75
3rd Quarter $9.13 $ 4.88
4th Quarter $9.25 $ 7.75
1997:
1st Quarter $12.63 $ 8.25
2nd Quarter $10.88 $ 9.38
3rd Quarter $12.25 $ 9.50
4th Quarter $14.75 $10.88
1998:
1st Quarter $19.75 $14.00
2nd Quarter (through June 30, 1998) $23.88 $19.38
The Company paid no cash dividends during the last two fiscal years.
The Company's existing bank indebtedness restricts the payment of cash
dividends.
40
<PAGE> 45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth the number of shares of Escalade Common
Stock held beneficially, directly or indirectly, as of the Record Date by (a)
any person who is known by the Company to be the beneficial owner of more than
five percent (5%) of the outstanding shares of Escalade Common Stock; (b) each
director of the Company, (c) the executive officers defined in Item 402(a)(3) of
Regulation S-K; and (d) all directors and executive officers of the Company as a
group.
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- - - ------------------------------------ ------ -------
Robert E. Griffin 549,814 (1) 17.7% (1)
817 Maxwell Avenue
Evansville, Indiana 47717
C. W. "Bill" Reed 117,923 (2) 3.8% (2)
Gerald J. Fox (3) 90,554 (4) 2.9% (4)
Blaine E. Matthews, Jr. 70,664 (5) 2.3% (5)
A. Graves Williams, Jr. (3) 81,819 (6) 2.6% (6)
Keith P. Williams (3) 68,712 (7) 2.2% (7)
Robert D. Orr 64,129 (8) 2.1% (8)
Yale A. Blanc 19,237 (9) .6% (9)
John R. Wilson 27,250 (10) .9% (10)
All directors and current executive
officers as a group (9 persons) 1,090,102 35.1%
Andrew and Charmenz Guagenti 244,902 (11) 7.9% (11)
216 Water Street
Newburgh, Indiana 47630
Athena Capital Management, Inc. 172,200 (12) 5.5% (12)
621 East Germantown Pike, Suite 105
Plymouth Valley, PA. 19401
Hillson Partners Limited Partnership 165,500 (13) 5.3% (13)
6900 Wisconsin Avenue, Suite 501
Bethesda, Maryland 20815
41
<PAGE> 46
(1) Includes 282,339 shares held in Griffin Grantor Retained Annuity Trusts. Mr.
Griffin disclaims beneficial ownership of those shares. Also, includes 157,386
shares held by a Family Limited Partnership. Also includes 1,063 shares issuable
upon the exercise of outstanding stock options.
(2) Includes 31,993 shares issuable upon the exercise of outstanding stock
options.
(3) Mr. A. Graves Williams, Jr., Mr. Keith P. Williams, and Karen Williams Fox
are first cousins. Mr. Gerald J. Fox is married to Karen Williams Fox. All such
persons disclaim beneficial ownership of shares held by any of the foregoing
persons of whom he or she is related.
(4) Includes 54,535 shares held by his spouse. Mr. Fox disclaims beneficial
ownership of those shares. Also includes 493 shares issuable upon the exercise
of outstanding stock options.
(5) Includes 531 shares issuable upon the exercise of outstanding stock options.
(6) Includes 81,802 shares held by his spouse. Mr. Williams disclaims beneficial
ownership of those shares.
(7) Includes 3,829 shares held by his spouse and 8,173 shares held by Good Earth
Tools, Inc. Mr. Williams disclaims beneficial ownership of those shares. Also
includes 493 shares issuable upon the exercise of outstanding stock options.
(8) Includes 10,034 shares held by his spouse. Mr. Orr disclaims beneficial
ownership of those shares.
(9) Includes 9,243 shares held by his spouse, Mr. Blanc disclaims beneficial
ownership of those shares. Also includes 246 shares issuable upon the exercise
of outstanding stock options.
(10) Includes 15,750 shares issuable upon exercise of outstanding stock options.
(11) Includes 123,355 shares owned by Mr. Guagenti directly and in his directed
IRA and 121,547 shares owned by Mrs. Guagenti directly in her directed IRA and
as Trustee. Mr. and Mrs. Guagenti each disclaims beneficial ownership of the
shares held by the other.
(12) Pursuant to a Schedule 13G filed with the Securities and Exchange
Commission, Athena Capital Management, Inc. last informed the Company that it is
an investment advisor registered under Section 203 of the Investment Advisors
Act of 1940 and has shared power to vote or to direct the vote of the 172,200
shares and shared power to dispose or to direct the disposition of the 172,200
shares.
(13) Pursuant to a Schedule 13D filed with the Securities and Exchange
Commission, Hillson Partners Limited Partnership is a limited partnership under
the laws of Maryland formed for the purpose, among other things, of investing
its assets in stocks, bonds and other financial investments.
INDEPENDENT AUDITORS
The Company has been advised that representatives of Olive LLP, the
Company's independent auditors for 1997 and 1998, will attend the Special
Meeting, make a statement if they have the desire to do so and will be available
to respond to appropriate questions.
42
<PAGE> 47
PROPOSALS FOR 1999 ANNUAL MEETING OF STOCKHOLDERS
Any stockholder proposal intended for inclusion in the proxy material
for the 1999 Annual Meeting must be received in writing by the Company on or
before January 15, 1999. The inclusion of any proposal will be subject to the
applicable rules of the Commission and the Indiana Business Corporation Law.
ADDITIONAL INFORMATION
This Proxy Statement incorporates by reference documents filed by the
Company with the Commission after the date hereof that are not presented herein
or delivered herewith. Copies of such documents (other than exhibits thereto
which are not specifically incorporated by reference herein) are available,
without charge, to any person, including any beneficial owner of shares of
Escalade Common Stock to whom this Proxy Statement is delivered, upon written or
oral request to John R. Wilson, Escalade's Secretary, 817 Maxwell Avenue,
Evansville, Indiana 47717, (812) 467-1200. In order to ensure timely delivery of
any such documents prior to the Special Meeting, any request therefor should be
made not later than August ____, 1998.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
to come before the meeting. If any other matters should come before the meeting,
the persons named in the enclosed proxy intend to vote the proxy according to
their best judgment.
You are urged to complete, sign, date and return the proxy card to make
certain your shares will be voted at the Special Meeting. For your convenience
in returning the proxy, an addressed envelope is enclosed, requiring no
additional postage if mailed in the United States.
For the Board of Directors
ROBERT E. GRIFFIN
Chairman and Chief Executive Officer
Evansville, Indiana
July __, 1998
43
<PAGE> 48
APPENDIX A
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- - - --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND AMONG
JEN SPORTS, INC.,
SPORTCRAFT, LTD.,
ESCALADE, INCORPORATED
AND
THE SELLING PARTIES (AS HEREIN DEFINED)
JUNE 26, 1998
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<PAGE> 49
TABLE OF CONTENTS:
<TABLE>
<S> <C> <C>
1. Definitions..............................................................................................1
2. Acquisition of Assets by the Buyer......................................................................11
2.1. Purchase and Sale of Assets....................................................................11
2.2. Excluded Assets................................................................................14
2.3. Assumption of Liabilities......................................................................15
2.4. Liabilities Not Assumed by the Buyer...........................................................16
2.5. The Closing; Payment of Purchase Price.........................................................20
2.6. Deliveries at the Closing......................................................................20
2.7. Preliminary Allocation of Purchase Price.......................................................20
2.8. Adjustments to Purchase Price..................................................................20
3. Representations and Warranties of the Selling Parties...................................................23
3.1. Organization of Escalade, the Selling Parties, Escalade International and
Harvard California.............................................................................23
3.2. Authorization of Transaction...................................................................24
3.3. No Conflict; Required Filings and Consents.....................................................25
3.4. Proxy Statement................................................................................25
3.5. Brokers' Fees..................................................................................26
3.6. Title to Assets................................................................................26
3.7. All Assets Necessary to Conduct Business.......................................................26
3.8. Subsidiaries...................................................................................26
3.9. Financial Statements...........................................................................27
3.10. Indebtedness; Guarantees.......................................................................27
3.11. Absence of Changes.............................................................................28
3.12. Absence of Undisclosed Liabilities.............................................................30
3.13. Legal and Other Compliance.....................................................................31
3.14. No Material Adverse Effect.....................................................................32
3.15. Taxes..........................................................................................32
3.16. Property, Plant and Equipment..................................................................34
3.17. Intellectual Property..........................................................................37
3.18. Inventories....................................................................................40
3.19. Contracts......................................................................................40
3.20. Notes, Accounts Receivable and Accounts Payable................................................42
3.21. Accounts, Open Letter of Credit, etc. ........................................................42
3.22. Insurance and Risk Management..................................................................42
3.23. Litigation.....................................................................................43
3.24. Product Warranties; Defects; Liability.........................................................43
3.25. Employees......................................................................................44
3.26. Employee Benefits..............................................................................45
</TABLE>
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<TABLE>
<S> <C> <C>
3.27. Environment....................................................................................47
3.28. Affiliated Transactions........................................................................48
3.29. Government Contracts...........................................................................49
3.30. Distributors, Customers and Suppliers..........................................................49
3.31. No Illegal Payments, Etc.......................................................................49
3.32. Books and Records..............................................................................49
3.33. Powers of Attorney.............................................................................50
3.34. SEC Reports....................................................................................50
3.35. Disclosure.....................................................................................50
4. Representations and Warranties of the Parent and the Buyer..............................................51
4.1. Organization of the Parent and the Buyer.......................................................51
4.2. Authorization of Transaction...................................................................51
4.3. No Conflict; Required Filings and Consents.....................................................51
4.4. Brokers' Fees..................................................................................52
4.5. Commitment Letters.............................................................................52
4.6. Legal Proceedings..............................................................................52
4.7. Acquisition Corporation........................................................................52
4.8. Certain Information............................................................................52
4.9. Certain Other Matters..........................................................................53
5. Covenants...............................................................................................53
5.1. General........................................................................................53
5.2. Notices and Consents...........................................................................53
5.3. Release of Liens; Interim Financial Statement Updates..........................................54
5.4. Operation of the Business......................................................................54
5.5. Confidentiality Obligations of Buyer...........................................................55
5.6. Audited Stand-Alone Financial Statements.......................................................55
5.7. Access.........................................................................................55
5.8. Notice of Developments.........................................................................56
5.9. No Solicitation................................................................................56
5.10. Title Insurance and Surveys....................................................................58
5.11. [Reserved.]....................................................................................60
5.12. Employment Matters; Benefits...................................................................60
5.13. [Reserved.]....................................................................................62
5.14. Change of Corporate Name.......................................................................62
5.15. Bulk Sales Compliance..........................................................................63
5.16. Sales and Use Taxes and Tax Clearance Certificates.............................................63
5.17. Section 338 Election and other Tax Matters.....................................................63
5.18. Further Assurances.............................................................................64
5.19. [Reserved......................................................................................64
5.20. [Reserved].....................................................................................64
</TABLE>
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<TABLE>
<S> <C> <C>
5.21. Continued Existence............................................................................64
5.22. Proxy Statement................................................................................65
5.23. Stockholders Meeting...........................................................................65
6. Conditions to Obligation to Close.......................................................................66
6.1. Conditions to Obligations of the Buyer and Parent..............................................66
6.2. Conditions to Obligations of Escalade and the Selling Parties..................................68
7. Confidentiality Obligation of Selling Parties...........................................................69
8. Noncompetition..........................................................................................70
9. Indemnification.........................................................................................70
9.1. Survival of Representations and Warranties.....................................................70
9.2. Indemnity by Escalade and the Selling Parties..................................................71
9.3. Indemnity by the Buyer and the Parent..........................................................72
9.4. Matters Involving Third Parties................................................................73
10. Termination.............................................................................................75
10.1. Termination of Agreement.......................................................................75
10.2. Effect of Termination..........................................................................77
11. Miscellaneous...........................................................................................77
11.1. Press Releases and Public Announcements........................................................77
11.2. No Third Party Beneficiaries...................................................................77
11.3. Entire Agreement...............................................................................77
11.4. Succession and Assignment......................................................................78
11.5. Counterparts...................................................................................78
11.6. Headings.......................................................................................78
11.7. Notices........................................................................................78
11.8. Governing Law..................................................................................80
11.9. Amendments and Waivers.........................................................................80
11.10. Severability...................................................................................80
11.11. Expenses.......................................................................................80
11.12. Construction...................................................................................82
11.13. Incorporation of Exhibits and Schedules........................................................83
11.14. Specific Performance...........................................................................83
12. Consent to Jurisdiction.................................................................................84
13. Waiver of Jury Trial....................................................................................84
</TABLE>
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LIST OF EXHIBITS
A-1 - Bill of Sale
A-2 - Assignment of Copyrights, Trademarks and Goodwill
A-3 - Buyer Assumption Agreement
B - Form of Irrevocable Proxy
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into on June
26, 1998, by and among (i) JEN Sports, Inc., a Delaware corporation (the
"Buyer"), (ii) Sportcraft, Ltd., a Delaware corporation (the "Parent"), (iii)
Escalade, Incorporated, an Indiana corporation ("Escalade"), (iv) Indian
Industries, Inc., an Indiana corporation ("Indian"), and (v) Harvard Sports,
Inc., a California corporation ("Harvard", and together with Indian,
collectively, the "Selling Parties"). The Parent, the Buyer, Escalade, Indian
and Harvard are collectively referred to herein as the "Parties."
WHEREAS, (a) the Parent owns all of the outstanding capital stock of
Buyer and (b) Escalade owns, directly or indirectly, (i) all of the outstanding
capital stock of Indian, Harvard, Harvard California (as defined herein),
Escalade FSC (as defined herein) and Escalade International (as defined herein)
and (ii) 37.5% of the outstanding capital stock of Sweden Table Tennis (as
defined herein); and
WHEREAS, this Agreement contemplates a transaction in which the Buyer
will purchase substantially all of the assets of the sporting goods business of
Escalade and the Selling Parties, including goodwill, in consideration of the
Buyer's payment of certain amounts and assumption of certain liabilities, all as
herein specified;
NOW THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"1995 Consolidated Financial Statements" means the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flow for Escalade and its Subsidiaries as of and for the year ended
December 30, 1995, a true and correct copy of which has been delivered by
Escalade to the Buyer.
"1995 Stand-Alone Financial Statements" means the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flows for the Business (including Indian, Harvard, Harvard California and
Escalade International) as of and for the year ended December 30, 1995, a true
and correct copy of which will be delivered by Escalade to the Buyer pursuant to
Section 5.6 hereof.
"1996 Consolidated Financial Statements" means the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flows for Escalade and its Subsidiaries as of and for the year ended
December 28, 1996, a true and correct copy of which has been delivered by
Escalade to the Buyer.
<PAGE> 54
"1996 Stand-Alone Financial Statements" means the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flows for the Business (including Indian, Harvard, Harvard California and
Escalade International)as of and for the year ended December 28, 1996, a true
and correct copy of which will be delivered by Escalade to the Buyer pursuant to
Section 5.6 hereof.
"1997 Consolidated Financial Statements" means the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flows for Escalade and its Subsidiaries as of and for the year ended
December 27, 1997, a true and correct copy of which has been delivered by
Escalade to the Buyer.
"1997 Stand-Alone Balance Sheet" means the December 27, 1997 balance
sheet contained in the 1997 Stand-Alone Financial Statements.
"1997 Stand-Alone Financial Statements" means the audited consolidated
balance sheets and statements of income, changes in shareholders' equity and
cash flows for the Business (including Indian, Harvard, Harvard California and
Escalade International) as of and for the year ended December 27, 1997, a true
and correct copy of which will be delivered by Escalade to the Buyer pursuant to
Section 5.6 hereof.
"Action" means any judicial or administrative action, claim, suit,
investigation, hearing, demand or proceeding by or before any Governmental
Authority.
"Actual Purchase Price Adjustment" has the meaning set forth in Section
2.8(c) hereof.
"Acquired Assets" has the meaning set forth in Section 2.1 hereof.
"Acquisition" shall mean the making and performance of this Agreement
and the transactions contemplated by this Agreement.
"Affiliate" means, with respect to any specified Person, a Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such specified Person; it being
understood that for purposes of this definition the term "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through ownership of voting
securities, by contract or otherwise.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504(a) of the Code or any similar group defined under a similar
provision of state, local or foreign law.
"Agreement" has the meaning set forth in the preamble above.
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"Assigned Plan" has the meaning set forth in Section 2.3(d) hereof.
"Assumed Liabilities" has the meaning set forth in Section 2.3 hereof.
"Bank Facility" means (i) the credit agreement dated as of May 31, 1996
between Escalade and Bank One, Indianapolis, N.A., as amended and (ii) the
letter of credit dated May 1, 1998 by and between Bank One and Martin Yale
Industries to which Escalade and the Selling Parties are guarantors.
"Benchmark Net Working Capital" shall mean $19,828,586, representing
the average net working capital of the Business for the thirteen 4-week
accounting periods ended March 21, 1998, as calculated in accordance with
Section 2.8 of the Escalade Disclosure Schedule.
"Business" means the business of developing, manufacturing,
distributing, licensing and selling sporting goods and related products,
including, but not limited to, table tennis tables and accessories, archery
equipment, home pool tables and accessories, combination bumper pool and card
tables, game tables, basketball backboards, goals and poles, darts and dart
cabinets and junior sporting goods in domestic and foreign markets, as conducted
by the Selling Parties.
"Buyer" has the meaning set forth in the preamble above.
"Closing" has the meaning set forth in Section 2.5 hereof.
"Closing Date" has the meaning set forth in Section 2.5 hereof.
"Closing Net Working Capital" means (x) current assets transferred to
the Buyer at Closing less (y) current liabilities assumed by the Buyer at
Closing (including for purposes of such calculation any obligations with respect
to check overdrafts, cash/book overdrafts or other negative cash balances of the
Business) determined in accordance with GAAP consistently applied. For purposes
of such calculation (which will be calculated, to the extent consistent with
GAAP, in the same method as used in the calculation of Benchmark Net Working
Capital), current assets and current liabilities shall include not only current
assets directly transferred to Buyer and current liabilities directly assumed by
the Buyer but also the current assets and current liabilities of Subsidiaries
transferred at Closing as stock transfers (i.e., Escalade International and
Harvard California).
"Closing Statement" has the meaning set forth in Section 2.8(c) hereof.
"COBRA" has the meaning set forth in Section 2.3(d) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Commission" has the meaning set forth in Section 5.18 hereof.
"Commitment Letters" has the meaning set forth in Section 4.5 hereof.
"Confidentiality Agreement" means that certain letter agreement dated
as of January 20, 1998 between Bain Capital, Inc. and Escalade (or its financial
advisor) with respect to confidentiality.
"Confidential Information" means any and all information concerning the
Acquired Assets and the Business other than that information which is already
generally available to or readily obtainable by the public or is publicly known
or becomes publicly known through no fault of the Selling Parties.
"Consolidated Financial Statements" has the meaning set forth in
Section 3.9 hereof.
"Contracts" has the meaning set forth in Section 2.1(f) hereof.
"Debt-Based Purchase Price Adjustment" has the meaning set forth in
Section 2.8(a) hereof.
"Designated Employees" has the meaning set forth in Section 5.12(a)
hereof.
"Employee Plan" has the meaning set forth in Section 3.26(a) hereof.
"Environment" means soil, land surface or subsurface strata, real
property, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwater, water body sediments,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural resource.
"Environmental Law" means any Law relating to (i) pollution or
protection of public health from the effects of pollution or the Environment,
(ii) Releases of Hazardous Substances, or (iii) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances.
"Environmental Liabilities and Costs" means all Losses incurred (i) to
comply with any Environmental Law, (ii) as a result of a Release of any
Hazardous Substance or (iii) as a result of any environmental conditions present
at, created by or arising out of the past or present operations through the
Closing Date.
"Environmental Permits" has the meaning set forth in Section 3.27.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escalade" has the meaning set forth in the preamble above.
"Escalade Disclosure Schedule" means the disclosure letter delivered by
Escalade to the Buyer and Parent at or prior to the execution of this Agreement.
"Escalade FSC" means Escalade FSC, a Virgin Islands corporation.
"Escalade International" means Escalade International Ltd., a U.K.
corporation.
"Estimated Adjustment Statement" has the meaning set forth in Section
2.8(b) hereof.
"Estimated Purchase Price Adjustment" has the meaning set forth in
Section 2.8(b) hereof.
"Exchange" has the meaning set forth in Section 5.17(b) hereof.
"Exchange Act" has the meaning set forth in Section 3.3(b) hereof.
"Exchange Assets" has the meaning set forth in Section 5.17(b) hereof.
"Excluded Assets" has the meaning set forth in Section 2.2 hereof.
"Expenses" has the meaning set forth in Section 11.11(b) hereof.
"Extraordinary Dividend" means a dividend declared with respect to any
fiscal quarter or fiscal year which, together with any and all other dividends
declared with respect to such fiscal period, exceeds the net income (determined
in accordance with GAAP) for such fiscal period.
"Fee" has the meaning set forth in Section 11.11(b) hereof.
"Final-Post Closing Payment" has the meaning set forth in Section
2.8(d) hereof.
"Final Purchase Price Adjustment" has the meaning set forth in Section
2.8(d) hereof.
"Financial Statements" has the meaning set forth in Section 3.9 hereof.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time.
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"Governmental Authority" shall mean any United States federal, state or
local, or any foreign government, governmental authority, regulatory or
administrative agency, governmental commission, court or tribunal (or any
department, bureau or division thereof).
"Harvard California" means Harvard California S. DE R.L. DE C.V., a
Mexican corporation.
"Hazardous Substances" means (i) substances defined in or regulated as
toxic or hazardous or which might give rise to any Environmental Liabilities and
Costs under any Environmental Law; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas, synthetic gas
and any mixtures thereof; (iv) PCBs; and (v) asbestos.
"Indebtedness" means, with respect to any Person, any and all
obligations of such Person (i) for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) under or relating to letters of
credit (including without limitation any obligation to reimburse the letter of
credit issuer with respect to amounts drawn on such instruments), (iv) for the
deferred purchase price of goods or services (other than trade payables or
accruals incurred and paid in the Ordinary Course of the Business), (v) with
respect to check overdrafts, cash/book overdrafts or otherwise reflected as
negative cash in financial statements of such Person, (vi) for deferred
compensation (other than liabilities in respect of vacation, sick leave, bonus
and commission accruals incurred after December 27, 1997, paid in the Ordinary
Course of the Business and accounted for in accordance with GAAP), (vii) to pay
any accrued dividends or dividends that have otherwise been declared and not yet
paid, (viii) constituting a stated amount or liquidation preference amount of
any equity security entitled to any preference over any other equity security or
general equity interest of such Person and (ix) in the nature of guarantees of
the obligations described in clauses (i) through (viii) above of any other
Person.
"Indemnified Party" has the meaning set forth in Section 9.4(a) hereof.
"Indemnifying Party" has the meaning set forth in Section 9.4(a)
hereof.
"Intellectual Property" means the entire right, title and interest in
and to all proprietary rights of every kind and nature, including patents,
copyrights, Trademarks, mask works, trade secrets and proprietary information,
all applications for any of the foregoing, and any license or agreements
granting rights related to the foregoing (i) subsisting in, covering, reading
on, directly applicable to or existing in the Products or the Technology,
including without limitation all Intellectual Property identified in Schedule
2.1(d) of the Escalade Disclosure Schedule, (ii) that are owned, licensed or
controlled in whole or in part by Escalade or any Selling Party and are Related
to the Business or (iii) that are used in the development, manufacture, sales,
marketing, testing or maintenance of the Products.
"Irrevocable Proxy" has the meaning set forth in Section 3.2(c) hereof.
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"Knowledge of the Buyer" shall be deemed to include: (i) the actual
knowledge of the officers, directors and any other senior management of the
Buyer or the Parent, (ii) such information as the individuals identified in
clause (i) of this definition would reasonably be expected to know by virtue of
their position and relationship with such corporation or other business entity,
and (iii) such information as the individuals identified in clause (i) above
would reasonably be expected to know after making an investigation that is
reasonable under the circumstances with respect to the matter or matters as to
which the phrase "Knowledge of the Buyer" is used in this Agreement.
"Knowledge of Selling Parties" shall be deemed to include: (i) the
actual knowledge of the individuals identified on Section 1.01 of the Escalade
Disclosure Schedule, (ii) such information as the individuals identified in
clause (i) of this definition would reasonably be expected to know by virtue of
their position and relationship with such corporation or other business entity,
and (iii) such information as the individuals identified in clause (i) above
would reasonably be expected to know after making an investigation that is
reasonable under the circumstances with respect to the matter or matters as to
which the phrase "Knowledge of the Selling Parties" is used in this Agreement.
"Laws" means all laws, statutes, rules, regulations, codes,
injunctions, judgments, orders, decrees, rulings, interpretations,
constitutions, ordinances, common law or treaties, of any federal, state, local
municipal and foreign, international or multinational Governmental Authority or
any license, franchise, consent, approval, permit or similar right granted under
any of the foregoing.
"Leased Real Property" has the meaning set forth in Section 3.16(b)
hereof.
"Leases" has the meaning set forth in Section 2.1(b) hereof.
"Liability" means any Indebtedness, liability or obligation (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether incurred directly or consequential and whether due or to become due),
including without limitation any Tax or other liability arising out of
applicable statutory, regulatory or common law, any contractual obligation and
any obligation arising out of tort.
"Lien" means any mortgage, pledge, lien, security interest, charge,
claim, equitable interest, encumbrance, restriction on transfer, conditional
sale or other title retention device or arrangement (including without
limitation a capital lease), transfer for the purpose of subjection to the
payment of any Indebtedness, or restriction on the creation of any of the
foregoing, whether relating to any property or right or the income or profits
therefrom; provided, however, that the term "Lien" shall not include (i)
statutory liens for Taxes to the extent that the payment thereof is not in
arrears or otherwise due, (ii) encumbrances in the nature of zoning
restrictions,
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easements, rights or restrictions of record on the uses of real property if the
same do not materially impair the use of such property in the Business as
currently conducted, (iii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the premises
rented to the extent that no payment or performance under any such lease or
rental agreement is in arrears or is otherwise due, (iv) deposits or pledges
made in connection with, or to secure payment of, worker's compensation,
unemployment insurance, old age pension programs mandated under applicable laws
or other social security regulations and (v) statutory or common law liens in
favor of carriers, warehousemen, mechanics and materialmen, statutory or common
law liens to secure claims for labor, materials or supplies and other like
liens, which secure obligations to the extent that payment thereof is not in
arrears or otherwise due; and in the case of all such liens and other matters
described in clauses (i) - (v), which have been incurred in the Ordinary Course
of the Business.
"Losses" has the meaning set forth in Section 9.2 hereof.
"Material Adverse Effect" means, when considered singly or in the
aggregate together with all such other changes or effects with respect to which
such phrase is used in this Agreement, a material adverse effect in the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Business or in the ability of the Business to be operated by
the Buyer after Closing in accordance with the financial projections provided by
Escalade (including without limitation any material increase or other material
adverse change in the nature of the Assumed Liabilities).
"Office Product Subsidiaries" means Martin Yale Industries, Inc. and
its direct or indirect Subsidiaries, and any successor or assign of any of the
foregoing entities.
"Office Products Business" means the business of manufacturing and
marketing office and graphic arts products, including, without limitation, paper
trimmers, paper folding machines, paper drills, collators, decollators, bursting
machines, letter openers, automated paper joggers, checksigners, stamp affixers,
paper shredders, bindery carts, platemakers, sinks, light tables, cameras and
related accessories, as conducted by Escalade and the Office Products
Subsidiaries as of the Closing Date.
"Ordinary Course of the Business" means the ordinary course of the
Business consistent with past custom and practice.
"Owned Real Property" has the meaning set forth in Section 3.16(a)
hereof.
"Parent" has the meaning set forth in the preamble above.
"Participants" has the meaning set forth in the preamble above.
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"Party" and "Parties" have the meanings set forth in the preamble
above.
"Person" means any individual, partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture,
unincorporated organization or Governmental Authority.
"Post-Audit Financial Statements" means the unaudited Financial
Statements of the Business for each completed four-week accounting period after
December 27, 1997, copies of which: (i) in the case of periods ending prior to
the date hereof, have previously been provided to Parent by Escalade and (ii) in
the case of periods ending after the date hereof but on or before the tenth
business day prior to the Closing Date, will be provided to Parent by Escalade
as provided in this Agreement.
"Post-Closing Payment" has the meaning set forth in Section 2.8(c)
hereof.
"Products" means all past, current and proposed products and services
manufactured, sold, leased, installed, maintained or otherwise provided by the
Selling Parties that are Related to the Business, any subsequent versions of
such products and services currently being developed, any products and services
currently being developed which are designed to supersede, replace or function
as a component of the foregoing, and any upgrades, enhancements, improvements
and modifications to the foregoing.
"Proxy Statement" has the meaning set forth in Section 3.4 hereof.
"Purchase Price" has the meaning set forth in Section 2.5 hereof.
"Purchase Price Adjustment" has the meaning set forth in Section 2.8(a)
hereof.
"Real Property" has the meaning set forth in Section 3.16(b) hereof.
"Related Entity" has the meaning set forth in Section 3.26(b) hereof.
"Related to the Business" means arising from, relating to, or owned,
used or held for use in, the operation of the Business.
"Release" means any actual, threatened or alleged spilling, leaking,
pumping, pouring, emitting, dispersing, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of any Hazardous Substance into the
Environment that may cause an Environmental Liability and Cost (including the
disposal or abandonment of barrels, containers, tanks or other receptacles
containing or previously containing any Hazardous Substance).
"Required Permits" has the meaning set forth in Section 3.13(b) hereof.
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"Retained Liabilities" has the meaning set forth in Section 2.4 hereof.
"Securities Act" means, collectively, the Securities Act of 1933, as
amended, together with all rules and regulations promulgated thereunder.
"SEC" has the meaning set forth in Section 3.34 hereof.
"Selling Parties" has the meaning set forth in the preamble above.
"Stand-Alone Financial Statements" means, collectively, the 1995
Stand-Alone Financial Statements, the 1996 Stand-Alone Financial Statements and
the 1997 Stand-Alone Financial Statements.
"Subsidiary" means with respect to any Person (i) any corporation at
least a majority of whose outstanding voting stock is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person, or by one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries
and (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such
Person other than shares, interests, participations or other equivalents having
such power only by reason of the occurrence of a contingency.
"Survey" has the meaning set forth in Section 5.10 hereof.
"Sweden Table Tennis" means Sweden Table Tennis AB, a Swedish company.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar, including FICA), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other tax
of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, required to be
maintained or filed with the Internal Revenue Service or any other federal,
foreign, state or local taxing authority.
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"Technology" means all inventions, copyrightable works, discoveries,
innovations, know-how, information (including without limitation ideas, research
and development, know-how, formulas, compositions, processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, business and marketing plans and proposals,
documentation and manuals), computer software, computer hardware, integrated
circuits and integrated circuit masks, electronic, electrical and mechanical
equipment and all other forms of technology, including without limitation
improvements, modifications, derivatives or changes, whether tangible or
intangible, embodied in any form, in each case Related to the Business, whether
or not protectible or protected by patent, copyright, mask work right, trade
secret law or otherwise.
"Third Party Claim" has the meaning set forth in Section 9.4(a) hereof.
"Trademarks" means any trademarks, service marks, trade dress and
logos, together with all translations, adaptations, derivations and combinations
thereof, and including all goodwill associated therewith.
"Transferred Foreign Subsidiaries" means, collectively, Harvard
California and Escalade International.
"Welfare Plan" has the meaning set forth in Section 3.26 hereof.
"Working Capital-Based Purchase Price Adjustment" has the meaning set
forth in Section 2.8(a) hereof.
2. Acquisition of Assets by the Buyer.
2.1. Purchase and Sale of Assets. Upon the terms and subject to the
conditions contained herein, at the Closing, Escalade and the Selling Parties
will sell, assign, transfer, convey and deliver or cause to be sold, assigned,
transferred, conveyed and delivered to the Buyer or its designee, and the Buyer
will purchase (or cause to be purchased) from Escalade and the Selling Parties,
the Acquired Assets (as hereinafter defined), in each case free and clear of any
Lien or other encumbrance of any kind whatsoever, in exchange for the Buyer's
payment to Escalade of the Purchase Price and assumption of the Assumed
Liabilities. As used in this Agreement, the term "Acquired Assets" means all of
the assets and property of Escalade and the Selling Parties Related to the
Business (other than the Excluded Assets set forth in Section 2.2 hereof),
including, without limitation:
(a) All such assets of Escalade and the Selling Parties
reflected on the 1997 Stand-Alone Balance Sheet and all such assets
Related to the Business that have been acquired since December 27, 1997
(other than assets reflected on the 1997 Balance Sheet
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or acquired subsequent to December 27, 1997 that have been disposed of
in the Ordinary Course of the Business since December 27, 1997),
including without limitation:
(i) The Owned Real Property, together with all
improvements, fixtures and fittings thereon, easements,
rights-of way and other appurtenant rights thereto (such as
appurtenant rights in and to public streets);
(ii) all tangible personal property Related to the
Business (such as machinery, equipment, inventories, raw
materials, supplies, manufactured and purchased parts, works
in progress, finished goods, furniture, automobiles, trucks,
tractors, trailers, tools, jigs and dies) wherever located,
including all of the Selling Parties' right, title and
interest in and to inventory in transit or in the possession
of a subcontractor (e.g., sale representatives or
manufacturers), consignee, agent or other Person that is used
or sold, intended to be used or sold, or held for use or sale
by or on behalf of the Selling Parties;
(iii) all rights to receive payment and all rights in
respect of prepaid items however evidenced, whether by notes,
instruments, chattel paper or otherwise, including without
limitation any and all accounts receivable of the Selling
Parties (other than any such rights constituting part of the
Excluded Assets);
(iv) all securities, cash and cash equivalents
constituting a part of or arising from the Business;
(v) all other current assets of the Selling Parties
Related to the Business; and
(b) All rights of the Selling Parties under the Leases and all
other leasehold interests of the Selling Parties in the Leased Real
Property;
(c) All rights of Escalade and the Selling Parties, to the
extent transferable, under all governmental licenses, permits,
authorizations, orders, registrations, certificates, variances,
approvals, consents and franchises Related to the Business or any
Acquired Assets or any pending applications relating to any of the
foregoing, including without limitation all governmental permits,
licenses, authorizations, approvals and consents described in Section
2.1(c) of the Escalade Disclosure Schedule;
(d) All rights of Escalade and the Selling Parties in and to
Intellectual Property, and the goodwill associated therewith, licenses
and sublicenses granted in respect thereto and rights thereunder,
remedies against infringements thereof and rights to protection of
interest therein, including without limitation any rights in and with
respect to the
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Intellectual Property and claims set forth in Section 2.1(d) of the
Escalade Disclosure Schedule;
(e) All customer, distributor, supplier and mailing lists of
Escalade and the Selling Parties Related to the Business, including all
copies thereof (in whatever media such copies may exist), and all
rights in and to the information contained therein;
(f) All rights of Escalade and the Selling Parties under all
written or oral contracts, agreements, guaranties, understandings,
deeds, mortgages, indentures, personal property leases, licenses,
commitments, undertakings, arrangements or other documents or
instruments Related to the Business, including without limitation (i)
any document or instrument evidencing or otherwise relating to any
Indebtedness owed to Escalade or any of the Selling Parties; (ii) any
obligations of third parties to provide warranties or service or
payment or reimbursement with respect to the foregoing to the Selling
Parties or to customers of the Business; (iii) any non-competition
agreement or other instrument containing a third party's covenant not
to compete with, or any restriction on competition with, the Business
and (iv) any and all rights under or in respect of any confidentiality
agreements entered into with employees or consultants or entered into
in connection with any sale or proposed sale by Escalade or any Selling
Party of the Business (or any material portion of the stock or assets
thereof), to which or by which Escalade or any Selling Party is a party
or otherwise subject or bound, to which or by which any property or
right of Escalade or any Selling Party is subject or bound or under or
with respect to which Escalade or any Selling Party has any other
rights (whether as party, third party beneficiary or otherwise),
including without limitation any of the foregoing listed and described
in Section 3.19 of the Escalade Disclosure Schedule (together with the
agreements described in Sections 2.1(b), 2.1(d), 2.1(g), 2.3(c)(i-vi)
and 3.16(b) of this Agreement, collectively, the "Contracts");
(g) All rights with respect to the insurance policies and
contracts included in or related to the Employee Plans listed in
Section 2.1(j) of the Escalade Disclosure Schedule;
(h) All claims, deposits, prepayments, refunds, causes of
action, chooses in action, rights of recovery, rights of set off and
rights of recoupment in each case Related to the Business;
(i) All business and financial records, books, ledgers, files,
plans, documents, correspondence, lists, plats, architectural plans,
drawings, notebooks, specifications, creative materials, advertising
and promotional materials, marketing materials, studies, reports,
equipment repair, maintenance or service records, whether written or
electronically stored or otherwise recorded in each case Related to the
Business (including legible photocopies or originals of corporate
records of the Selling Parties);
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(j) All rights in and with respect to the assets associated
with the Employee Plans listed in Section 2.1(j) of the Escalade
Disclosure Schedule (including, without limitation, underlying
insurance contracts, stop loss agreements and administrative
agreements);
(k) All of Escalade's and the Selling Parties' rights to the
use of the names listed in Section 2.1(k) of the Escalade Disclosure
Schedule and any variations or derivatives of any of the foregoing
names;
(l) All rights to and in respect of any telephone numbers,
websites, e-mail addresses and Internet domain names in each case
Related to the Business;
(m) All goodwill and other assets of Escalade and the Selling
Parties Related to the Business of every kind and description, tangible
or intangible;
(n) 2,500 shares of Escalade International, representing 100%
of the issued and outstanding capital stock of such entity;
(o) 1 share of Harvard California held by Harvard,
representing 90% (4,500 new pesos) of the capital of such entity; and
(p) 1 share of Harvard California held by Escalade,
representing 10% (500 new pesos) of the capital of such entity.
Notwithstanding the foregoing, the Acquired Assets shall not include
the Excluded Assets.
2.2. Excluded Assets. There shall be excluded from the Acquired Assets
to be sold, assigned, transferred, conveyed and delivered to the Buyer
hereunder, and to the extent in existence on the Closing Date, there shall be
retained by Escalade and the Selling Parties, the following assets, properties
and rights (collectively, the "Excluded Assets"):
(a) All assets, properties and rights of Escalade and the
Selling Parties not Related to the Business, including without
limitation any assets owned, used or held for use exclusively in
connection with the Office Products Business;
(b) All rights of Escalade and the Selling Parties under this
Agreement;
(c) Any and all Employee Benefit Plans not specifically listed
in Section 2.1(j) of the Escalade Disclosure Schedule;
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(d) Tax accounts reflected as assets on the books of Escalade
and the Selling Parties, all rights in and to any and all Tax refunds
and credits, and that portion of accounts receivables that constitute
sales Tax payments, all as attributable to any period through the
Closing Date, other than Tax accounts and Tax refunds and credits for
which the Buyer is assuming the corresponding Liability (if any);
(e) All of the capital stock of each of Indian, Harvard,
Sweden Table Tennis and Escalade FSC;
(f) All rights in, under and with respect to the insurance
policies, contracts and coverages owned by Escalade and the Selling
Parties set forth on Section 2.2(f) of the Escalade Disclosure
Schedule; and
(g) All other items listed on Section 2.2(g) of the Escalade
Disclosure Schedule.
2.3. Assumption of Liabilities. On the terms and subject to the
conditions set forth herein and except as contemplated by Section 2.4 hereof,
from and after the Closing, the Buyer will assume and satisfy or perform when
due only the following Liabilities of Escalade and the Selling Parties arising
out of, relating to, or incurred as a result of the Acquired Assets or the
operation of the Business, in each case to the extent not paid or discharged
prior to Closing (the "Assumed Liabilities"):
(a) Accounts payable (other than accounts payable in respect
of Liabilities not assumed by the Buyer under Section 2.4 hereof),
reflected on the 1997 Stand-Alone Balance Sheet or on the Balance
Sheets included in the Post-Audit Financial Statements and incurred in
the Ordinary Course of the Business and accounts payable incurred after
the date of the latest Post-Audit Financial Statements incurred in the
Ordinary Course of the Business;
(b) Post-Closing obligations under the Leases, to the extent
duly assigned to the Buyer at Closing, other than Liabilities arising
from any breach or default occurring prior to the Closing Date;
(c) Post-closing obligations arising after the Closing Date,
other than Liabilities arising from any breach or default by Escalade
or any Selling Party occurring prior to the Closing Date, under the
Contracts, including without limitation:
(i) the distribution Contracts listed in Section
2.3(c)(i) of the Escalade Disclosure Schedule;
(ii) the licensing Contracts listed in Section
2.3(c)(ii) of the Escalade Disclosure Schedule;
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(iii) the purchase orders and customer Contracts
entered into in the Ordinary Course of the Business and listed
in Section 2.3(c)(iii) of the Escalade Disclosure Schedule;
(iv) equipment, service and warranty Contracts
entered into in the Ordinary Course of the Business and either
(A) listed in Section 2.3(c)(iv)(A) of the Escalade Disclosure
Schedule, or (B) are not so listed but are entered into in
connection with ordinary course sale of inventory and contain
the standard forms of warranties set forth in Section
2.3(c)(iv)(B) of the Escalade Disclosure Schedule;
(v) Contracts with subcontractors entered into in the
Ordinary Course of the Business listed in Section 2.3(c)(v) of
the Escalade Disclosure Schedule;
(vi) the other Contracts identified in Section 2.3
(c)(vi) of the Escalade Disclosure Schedule; and
(vii) Contracts entered into in the Ordinary Course
of the Business between the date of this Agreement (or, where
applicable, the as of date indicated on the specific section
of the Escalade Disclosure Schedule with respect to which such
Contracts are listed) and the Closing Date which are either
(A) of the types identified in clauses (iii) and (iv) above or
(B) identified to the Buyer in advance of entry into such
Contract and are approved by the Buyer prior to Closing; and
(d) The following post-closing obligations of the Selling
Parties under the Employee Plans listed in Section 2.1(j) of the
Escalade Disclosure Schedule (the "Assigned Plans") with respect to the
participants in the Assigned Plans: (i) duties with respect to plan
administration after the Closing (including filing of forms 5500 in the
post-closing period, performance of discrimination testing, processing
of claims, etc.), (ii) payment of employer premiums due under welfare
plans for periods after the Closing, (iii) payment of contributions to
the 401(k) plan for periods after the Closing, (iv) payment of
distributions from the trust maintained under the 401(k) plan made
after the Closing, and (v) obligations to offer benefits under Sections
601, et. seq. of ERISA ("COBRA") with respect to participants and
qualified beneficiaries who experience a COBRA qualifying event under
any Assigned Plan that is subject to the requirements of COBRA.
2.4. Liabilities Not Assumed by the Buyer. Except as expressly set
forth in this Agreement, the Buyer will not assume or perform any Liabilities
not specifically contemplated by Section 2.3 hereof nor any of the following
Liabilities (collectively, the "Retained Liabilities") and Escalade will satisfy
or perform when due the Retained Liabilities (it being
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agreed that if there is a conflict between Section 2.3 and this Section 2.4,
this Section 2.4 shall govern and the Buyer will not assume or perform any of
the Liabilities set forth in this Section 2.4):
(a) any Liability of Escalade or any of the Selling Parties or
any of their Affiliates arising out of or resulting from obligations in
respect of Indebtedness;
(b) any and all Liabilities of Escalade or the Selling Parties
to any of their other Affiliates (including without limitation any
notes payable by Escalade, any of the Selling Parties or any of their
Affiliates to any of their officers or directors or to Escalade, any
Selling Party or any of their Affiliates);
(c) any and all Liabilities of Escalade, any of the Selling
Parties or any of their Affiliates arising out of any assets or
securities of which Escalade, any Selling Party or any of their
Affiliates has disposed or, excluding the transfer to the Buyer
contemplated by this Agreement, proposed to dispose;
(d) any and all Liabilities of Escalade, any of the Selling
Parties or any of their Affiliates with respect to non-competition or
other deferred payments associated with any prior acquisition of any of
their stock or assets;
(e) any and all Liabilities with respect to fees and expenses
incurred by Escalade, any of the Selling Parties or any of their
Affiliates in connection with the Acquisition (including without
limitation fees and expenses of any legal and financial advisors,
accountants or brokers as well as any travel or other expenses incurred
or payable in connection with, or contingent in whole or in part upon,
the Acquisition);
(f) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates to employees or independent contractors of
Escalade, any of the Selling Parties or any of their Affiliates arising
out of any change of control agreements, stay-pay agreements, special
retention bonus, sales bonus or other special compensation, severance
or golden parachute arrangements (including without limitation any such
Liability incurred in connection with the making and performance of
this Agreement and the transactions contemplated hereby);
(g) subject to clause (m) below, any other Liabilities of
Escalade, any of the Selling Parties or any of their Affiliates to
current or former employees not specifically assumed by the Buyer in
Section 2.3(d) hereof;
(h) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates in respect of Taxes (including without
limitation sales, use, personal property, withholding (including under
Code Section 4999 or any similar Law) or excise taxes or
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unpaid Taxes of any Person under Section 1.1502-6 of the regulations of
the U.S. Department of Treasury (or any similar Law) imposed on
Escalade, any of the Selling Parties or any of their Affiliates, as a
transferee or successor, by contract or otherwise), and transfer taxes,
except as provided in Section 5.16 hereof, incurred in connection with
the transfer of the Acquired Assets to the Buyer pursuant to this
Agreement (including any costs incurred in connection with the
preparation and filing of appropriate Tax Return and related filings);
(i) any and all Liabilities of Escalade, any of the Selling
Parties or any of their Affiliates in respect of personal injury or
property damage resulting from accidental occurrences (including
without limitation auto accidents and product liability claims),
arising out of pre-Closing acts or omissions;
(j) any and all Liabilities arising, directly or indirectly,
out of the failure of any party to comply with applicable bulk sales or
bulk transfer laws in any jurisdiction;
(k) any Liability pertaining to Escalade, any of the Selling
Parties or any of their Affiliates or the Business and arising out of
or resulting from noncompliance with any Laws;
(l) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates arising out of or resulting from any obligation
to indemnify any Person (including without limitation officers and
directors of Escalade, any of the Selling Parties or any of their
Affiliates) for Liabilities arising out of events occurring prior to
the Closing Date (other than customary warranty obligations set forth
in Section 2.3(c)(iv) of the Escalade Disclosure Schedule and
Liabilities in respect of those contracts specifically assumed by the
Buyer in Section 2.3(b) and (c) hereof);
(m) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates arising out of any Employee Plan established or
maintained by Escalade, any of the Selling Parties or any of their
Affiliates or to which Escalade, any of the Selling Parties or any of
their Affiliates contributes or any Liability under or in respect of,
or relating to any termination of, any such plan, including without
limitation any withdrawal liability under Title IV, Subtitle E of
ERISA, other than those obligations specifically assumed by the Buyer
in Section 2.3(d) hereof, including, without limitation, (i) any
obligations relating to the maintenance or funding of the VEBA Trust
under the Indian Industries Plan #501 prior to the Closing, (ii) any
obligations arising out of plan administration or compliance
obligations for any Assigned Plan arising out of an act or failure to
act prior to the Closing, (iii) payment of claims for participants and
qualified beneficiaries covered under Indian's Health Plan #501 (other
than those covered due to exercise of COBRA rights) for any covered
service rendered or prescription filled prior to the Closing to the
extent the aggregate of such claims exceeds the amount of available
assets under the VEBA trust
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associated with such plan as of the Closing, (iv) any obligation under
COBRA under Indian's Health Plan #501 relating to any "qualifying
event" within the meaning of such statute arising prior to the Closing
or as a result of a termination of employment by Indian in connection
with the Closing to the extent that the amount of claims payable under
such plan with respect to such individuals exceeds the sum of (A) the
premiums received by Buyer from such individuals, plus (B) the amount
of available assets remaining in the VEBA trust associated with such
plan after taking into account claims paid from such VEBA under clause
(m)(iii) above and (v) any severance obligations arising out of any
termination of employment by Escalade, any Selling Party or any of
their respective Affiliates;
(n) any other Liabilities of Escalade, any of the Selling
Parties or any of their Affiliates of any type not reflected on the
1997 Stand-Alone Balance Sheet, other than Liabilities incurred in the
Ordinary Course of the Business and either incurred after December 27,
1997 or of a type not required to be set forth on a balance sheet
prepared in accordance with GAAP;
(o) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates in respect of Environmental Liabilities and
Costs arising out of any condition existing at or prior to Closing
which constitutes a violation of or gives rise to a duty to remediate
under any Environmental Law and without limit as to point of time,
Knowledge or amount (including without limitation any Liability or
obligation to remediate any Hazardous Substance, generated, used,
stored, disposed of or Released in connection with such property or the
operations of the Business prior to the Closing Date);
(p) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates under this Agreement;
(q) any Liability of Escalade, any of the Selling Parties or
any of their Affiliates relating primarily to the issuance or ownership
of stock of Indian, Harvard, Sweden Table Tennis or Escalade FSC;
(r) any other Liability of Escalade, any of the Selling
Parties or any of their Affiliates which is not an Assumed Liability;
and
(s) any and all costs, expenses (including without limitation
negotiating and other administrative costs) or other Liabilities
relating, directly or indirectly, to Escalade's and the Selling
Parties' shut down and move from Harvard's Compton, California
facility, including, without limitation, any Liabilities arising out of
or relating to any union agreement or any applicable federal or state
employment Laws.
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2.5. The Closing; Payment of Purchase Price. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Ropes & Gray in Boston, Massachusetts, commencing at 10:00 a.m.
eastern time on September 15, 1998 or such other date as the Parties may
mutually determine (the date on which such Closing actually occurs being
referred to herein as the "Closing Date"). Except as provided in Section 5.17(b)
hereof, the Buyer will pay to Escalade at Closing, by wire transfer of
immediately available funds to account(s) specified in writing by Escalade not
later than three business days prior to Closing, an aggregate amount (the
"Purchase Price"), determined as provided in Section 2.8(b) hereof.
2.6. Deliveries at the Closing. At the Closing, Escalade and the
Selling Parties will deliver to the Buyer properly executed and acknowledged, if
appropriate: (i) the various certificates, instruments, and documents referred
to in Section 6.1 hereof; (ii) deeds transferring title to the Owned Real
Property properly endorsed, (iii) assignments of Leases, (iv) a Bill of Sale
substantially in the form attached as Exhibit A-1 hereto, (v) an Assignment of
Copyrights, Trademarks and Goodwill substantially in the form attached as
Exhibit A-2 hereto, (vi) stock certificates and instruments of transfer therefor
with respect to the shares of Escalade International and Harvard California to
be transferred hereunder, together with legal counsel opinions from local
counsel and in form satisfactory to the Buyer with respect to such transfers and
(vii) such other instruments of sale, transfer, conveyance and assignment as the
Buyer and its counsel may reasonably request. At the Closing, the Buyer will
deliver to Escalade properly executed and acknowledged, if appropriate (i) the
various certificates, instruments and documents referred to in Section 6.2
hereof, and (ii) such other instruments of sale, transfer, conveyance and
assignment as Escalade and the Selling Parties and their counsel may reasonably
request. At the Closing, the Parties will execute, acknowledge (if appropriate)
and deliver the Buyer Assumption Agreement substantially in the form attached as
Exhibit A-3 hereto and Escalade and the Selling Parties shall put the Buyer in
possession and operating control of the Acquired Assets, free and clear of all
Liens and other encumbrances of any kind.
2.7. Preliminary Allocation of Purchase Price. The Parties agree that
the preliminary allocation of the purchase price for the Acquired Assets shall
be as determined by an allocation to be agreed upon by the Parties prior to
Closing. The Parties agree that such allocation may thereafter be amended or
modified by mutual agreement to establish a final allocation prior to the filing
of the applicable Tax Returns of the Buyer and Escalade. Escalade and the Buyer
shall use such final allocation in all Tax Returns.
2.8. Adjustments to Purchase Price.
(a) The Purchase Price shall be increased by the amount, if
any, by which Closing Net Working Capital exceeds Benchmark Net Working
Capital. The Purchase Price shall be decreased by the amount, if any,
by which Benchmark Net Working Capital exceeds Closing Net Working
Capital. Such an increase or reduction, as the case may be, shall be
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referred to herein as the "Working Capital-Based Purchase Price
Adjustment" and shall be determined and paid as set forth below. In
addition, the Purchase Price shall be reduced by the amount, if any, of
any Indebtedness assumed by or refinanced by the Buyer on behalf of the
Selling Parties on the Closing Date. Such an increase or reduction, as
the case may be, shall be referred to herein as the "Debt-Based
Purchase Price Adjustment" and shall be determined and paid as set
forth below. The Working Capital-Based Purchase Price Adjustment and
the Debt-Based Purchase Price Adjustment are referred to herein
collectively as the "Purchase Price Adjustment".
(b) At least two business days prior to the Closing Date,
Escalade shall deliver to the Buyer a statement (the "Estimated
Adjustment Statement") reflecting the good faith best estimate of
Escalade, after consultation with the Buyer, of (i) Closing Net Working
Capital and (ii) the amount of Indebtedness to be assumed by, or
refinanced on behalf of Escalade and the Selling Parties by, the Buyer
on the Closing Date. The Estimated Adjustment Statement shall set forth
in reasonable detail the calculation of the estimates of the amounts
referred to in clauses (i) and (ii) above and, based thereon, a
calculation of the estimated Purchase Price Adjustment (the "Estimated
Purchase Price Adjustment"). The payment to be made pursuant to Section
2.5 hereof at the Closing shall be an amount equal to $74,500,000 plus
or minus the Estimated Purchase Price Adjustment.
(c) Within 90 days after the Closing Date, the Buyer shall
cause Price Waterhouse LLP or any successor to prepare and deliver to
all Parties a statement (the "Closing Statement") consisting of the
balance sheet of the Business as of the Closing Date, prepared in
accordance with GAAP. The Closing Statement shall set forth (i) the
Closing Net Working Capital on the Closing Date, and (ii) the amount of
Indebtedness assumed by or refinanced on the Closing Date. The Closing
Statement shall also set forth in reasonable detail the calculation of
the amounts referred to in clauses (i) and (ii) above and, based
thereon, (i) a calculation of the actual Purchase Price Adjustment (the
"Actual Purchase Price Adjustment") and (ii) a calculation of the
post-closing payment to be paid by Buyer to Escalade or Escalade to
Buyer, as the case may be, resulting from the foregoing calculations
after adjustment to reflect the Estimated Purchase Price Adjustment
made at the Closing (the "Post-Closing Payment"). Escalade will
cooperate with the Buyer to provide the Buyer and Price Waterhouse LLP
with information to be used to prepare the Closing Statement and
information relating thereto. The parties acknowledge that to the
extent a physical inventory count is conducted in connection with the
preparation of the Closing Statement, the Buyer will provide Escalade
notice thereof and a reasonable opportunity to observe such inventory
count.
(d) Within 20 days following the delivery of the Closing
Statement by the Buyer, Escalade may object in writing to the Actual
Purchase Price Adjustment or the Post-Closing Payment. If Escalade does
not so object, the Party owing the Post-Closing Payment shall deliver
the Post-Closing Payment in immediately available funds or in any
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other manner as reasonably acceptable to the other Party within 25 days
following the delivery of the Closing Statement by the Buyer. If
Escalade objects to the Actual Purchase Price Adjustment, the Parties
shall attempt to resolve such dispute by negotiation; provided,
however, that any portion of that Post-Closing Payment not in dispute
shall be paid in accordance with the preceding sentence. If the Parties
are unable to resolve any dispute within 20 days of the Selling Parties
objection, the Parties shall appoint Ernst & Young (or such other
certified public accountants of national recognition as may be mutually
satisfactory to Escalade and the Buyer), who shall review the Closing
Statement and information relating thereto and determine the amount of
the Post-Closing Payment, such amount being referred to herein as the
"Final Post-Closing Payment". Escalade and the Buyer shall use
commercially reasonable efforts to cause such accounting firm to
determine such amount as soon as is reasonably practicable, and the
fees and expenses of such accounting firm shall be borne by Escalade
and the Buyer, respectively, in the proportion that the aggregate
amount of disputed items submitted to such accounting firm that is
unsuccessfully disputed by such party (as determined by such accounting
firm) bears to the total amount of the remaining disputed items so
submitted. The finding of such accounting firm shall be binding on the
Parties hereto. The Party owing the Final Post-Closing Payment shall
deliver the Final Post-Closing Payment by wire transfer of immediately
available funds or in any other manner reasonably acceptable to the
other Party no later than 5 business days after the date on which
determination of the Final Post-Closing Payment is made.
(e) The Post-Closing Payment or Final Post-Closing Payment, or
unpaid portions thereof as the case may be, payable pursuant to clauses
(c) and (d) of this Section 2.8, shall be increased by an amount equal
to interest thereon at a rate equal to 8% per annum, compounded
annually, from the Closing Date until actually paid.
(f) In connection with the preparation of both the Estimated
Adjustment Statement and the Closing Statement, the preparing Party
shall provide the other Parties (and their respective advisors and
representatives) prior to the delivery of the relevant statement with
reasonable access (in each case subject to receipt of reasonable
advance notice and during normal business hours) to work papers related
to the calculation of Estimated Purchase Price Adjustment, the Closing
Net Working Capital and the preparation of the relevant statement, and
to all books and records that are required to verify the same and with
an opportunity to comment on the same prior to the finalization of the
statement. With respect to the Estimated Adjustment Statement, Escalade
will provide such access and opportunity to comment no later than four
Business Days prior to the Closing Date. With respect to the Closing
Statement, the Buyer will provide such access and opportunity to
comment no later than the 45th day after the Closing Date. At all times
prior to the final determination of the Post Closing Payment, each of
the Buyer, Escalade and the Selling Parties will otherwise cooperate
with each other in connection with matters contemplated by this Section
2.8.
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3. Representations and Warranties of the Selling Parties. In order to induce the
Buyer and Parent to enter into and perform this Agreement and to consummate the
transactions contemplated hereby, Escalade and each of the Selling Parties,
jointly and severally, represent and warrant to the Buyer and Parent as follows:
3.1. Organization of Escalade, the Selling Parties, Escalade
International and Harvard California.
(a) Each of Escalade and the Selling Parties is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation Copies of the charter and by-laws of
Escalade and each Selling Party, each as amended to date, have been
heretofore delivered to the Buyer and are accurate and complete.
Escalade and the Selling Parties are qualified to do business and are
individually in good standing as a foreign corporation in each
jurisdiction listed in Section 3.1(a) of the Escalade Disclosure
Schedule, which such jurisdictions are the only jurisdictions where in
each case, the nature of the activities conducted by it or the
character of the property owned, leased or operated by it make such
qualification necessary or appropriate except for those jurisdictions
where the failure to be so qualified has not had and could not
reasonably be expected to have a Material Adverse Effect. Escalade is
the beneficial owner and holder of 2,500 shares of Escalade
International (representing 100% of the issued and outstanding shares
of capital stock of such Subsidiary) and 1 share of Harvard California
(representing 10% of the issued and outstanding capital of such
Subsidiary), in each case free and clear of any Liens other than
restrictions on transfer imposed by applicable securities laws. Harvard
owns 1 share of Harvard California (representing 90% of the issued and
outstanding capital of such Subsidiary), free and clear of any Liens
other than restrictions on transfer imposed by applicable securities
laws. Neither Escalade International nor Harvard California has any
Subsidiaries.
(b) Each of the Transferred Foreign Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Copies of the charter and by-laws or
other governing documents of each of the Transferred Foreign
Subsidiaries, each as amended to date, have been heretofore delivered
to the Buyer and are accurate and complete. Each of the Transferred
Foreign Subsidiaries is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction listed in
Section 3.1(b) of the Escalade Disclosure Schedule, which such
jurisdictions are the only jurisdictions where in each case, the nature
of the activities conducted by it or the character of the property
owned, leased or operated by it make such qualification necessary or
appropriate except for those jurisdictions where the failure to be so
qualified has not had and could not reasonably be expected to have a
Material Adverse Effect.
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3.2. Authorization of Transaction.
(a) Each of Escalade and the Selling Parties has full power
and authority (corporate or otherwise) to execute and deliver this
Agreement and to perform their respective obligations hereunder. All
corporate and other actions or proceedings to be taken by or on the
part of Escalade or any of the Selling Parties to authorize and permit
the execution and delivery by each of Escalade and the Selling Parties
of this Agreement and the instruments required to be executed and
delivered by each of Escalade and the Selling Parties pursuant hereto,
the performance by each of Escalade and the Selling Parties of their
obligations hereunder and thereunder and the consummation by each of
Escalade and the Selling Parties of the transactions contemplated
herein (other than approval by vote of holders of at least a majority
of the outstanding common stock of Escalade voting as one class, which
is to be effected as contemplated by Sections 5.22 and 5.23 hereof),
have been duly and properly taken. This Agreement has been duly
executed and delivered by each of Escalade and the Selling Parties,
constitutes their legal, valid and binding obligation and is
enforceable in accordance with its terms, subject only to obtaining
such approval of Escalade's stockholders.
(b) The Board of Directors of Escalade has duly and validly
approved and taken all corporate action required to be taken by the
Board of Directors for the consummation of the transactions
contemplated by this Agreement. Under the applicable provisions of
Indiana law, no stockholder of Escalade is entitled to any appraisal
rights with respect to the transactions contemplated by this Agreement.
The Board of Directors of Escalade has determined that it is advisable
and in the best interests of Escalade stockholders for Escalade to sell
or transfer, or cause to be sold or transferred, the Acquired Assets to
the Buyer and to consummate the other transactions contemplated hereby,
upon the terms and subject to the conditions of this Agreement, and
will recommend, or has resolved to recommend in the Proxy Statement, in
each case subject to Section 5.9 hereof, that Escalade's stockholders
approve and adopt this Agreement and approve the Acquisition.
(c) Each of the officers and directors of Escalade and/or
their respective Affiliates listed in Section 3.2(c) of the Escalade
Disclosure Schedule has duly authorized, executed and delivered an
irrevocable proxy in the form of Exhibit B hereto (an "Irrevocable
Proxy") to vote all of the shares of capital stock of Escalade held by
such Person in favor of the adoption of this Agreement and consummation
of the Acquisition, and each such Irrevocable Proxy constitutes the
legal, valid and binding obligation of such Person, enforceable against
such Person in accordance with its terms. The Irrevocable Proxies have
been obtained by Escalade and provided by the Persons executing the
same without violation of any Laws or contractual obligations of any
kind. The Irrevocable Proxies represent in the aggregate approximately
35% of the outstanding capital stock of Escalade entitled to vote
generally.
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3.3. No Conflict; Required Filings and Consents.
(a) Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in Section 2 hereof), does
or will (i) conflict with or result in a breach of any provision of the
articles of organization or by-laws of Escalade or any of its
Subsidiaries, (ii) except as set forth on Section 3.3(a) of the
Escalade Disclosure Schedule, conflict with, result in a breach of,
constitute a default or right or cause of action under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice to any Person under
any agreement, contract, lease, license, instrument or other
arrangement to which Escalade, any of the Transferred Foreign
Subsidiaries or any of the Selling Parties is a party, by which any of
them is bound or to which any of their assets is subject (or result in
the imposition of any Lien upon any of their assets), except where such
conflict, breach, default, acceleration or other event has not had and
could not reasonably be expected to have a Material Adverse Effect, or
(iii) violate any Laws to which Escalade or any of its Subsidiaries, or
any of the Acquired Assets, is subject.
(b) Except as set forth on Section 3.3(b) of the Escalade
Disclosure Schedule and except for required consents of third parties
necessary for the valid assignment of the Contracts set forth in
Section 3.3(a) of the Escalade Disclosure Schedule, none of Escalade,
the Transferred Foreign Subsidiaries or the Selling Parties is required
by applicable Law or other obligation to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any
Governmental Authority or other Person in order for the Parties to
consummate the transactions contemplated by this Agreement (including
the assignments and assumptions referred to in Section 2 hereof) except
(i) for applicable requirements, if any, of the Securities Exchange Act
of 1934, as amended (such act together with all rules and regulations
promulgated thereunder being referred to herein, collectively, as the
"Exchange Act"), and in connection with the solicitation of proxies
contemplated by Section 5.22 hereof, and (ii) where the failure to
obtain such consents or approvals, and to make such filings or
notifications, would not prevent or delay consummation of the
Acquisition, or otherwise prevent or delay Escalade or any of the
Selling Parties from performing their obligations under this Agreement,
and would not constitute a Material Adverse Effect.
3.4. Proxy Statement. The proxy statement to be sent to the
stockholders of Escalade in connection with the meeting of the stockholders of
Escalade to consider the Acquisition (the "Escalade Stockholders Meeting") (such
proxy statement as amended or supplemented is referred to herein as the "Proxy
Statement"), will not, on the date the Proxy Statement is first mailed to
stockholders, at the time of the Escalade Stockholders Meeting or at the time of
the Closing, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any
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material fact necessary in order to make the statements made therein not false
or misleading or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Escalade Stockholders Meeting which has become false or
misleading. The Proxy Statement will comply with the provisions of the Exchange
Act and any other applicable Laws. If at any time prior to the Closing any event
relating to Escalade or any of its respective affiliates, officers or directors
should be discovered by Escalade which should be set forth in a supplement to
the Proxy Statement, Escalade shall promptly inform Parent and the Buyer of such
event.
3.5. Brokers' Fees. None of Escalade, any of the Selling Parties, any
of the Transferred Foreign Subsidiaries or any of their respective Affiliates
has any Liability or obligation to pay any fees or commissions to any broker,
finder, investment bank, financial advisor or other agent with respect to the
transactions contemplated by this Agreement for which Parent or the Buyer could
become liable or obligated, except for fees and expenses (if any) of CIBC
Oppenheimer, which shall be solely the responsibility of (and will be paid by)
Escalade or any of the Selling Parties after the Closing.
3.6. Title to Assets.
(a) Each of the Selling Parties and Escalade has good and
marketable title to, or a valid and subsisting leasehold interest in,
and the power to sell the Acquired Assets owned by such Person, free
and clear of all Liens (other than Liens securing obligations under the
Bank Facility, which Liens will be released and discharged at Closing).
(b) Each of the Selling Parties and Escalade has good and
marketable title to, and is the record and beneficial holder of the
securities listed opposite its name in Section 3.6(b) of the Escalade
Disclosure Schedule, free and clear of any Liens, other than
restrictions on transfer imposed by applicable securities laws and any
other Liens listed on Section 3.6(b) of the Escalade Disclosure
Schedule (which Liens will be released on or prior to Closing). Neither
Escalade nor any Selling Party has granted, directly or indirectly, to
any Person any option, warrant or other right to acquire such
securities.
3.7. All Assets Necessary to Conduct Business. The Acquired Assets
comprise all of the assets, properties and rights of every type and description,
real, personal, tangible and intangible used in, and, in the reasonable opinion
of the management of Escalade and the Selling Parties necessary to, the conduct
of the Business as currently conducted and as conducted since January 1, 1997.
3.8. Subsidiaries. Except as disclosed in Section 3.6(b) of the
Escalade Disclosure Schedule, none of Escalade or any of the Selling Parties has
any Subsidiaries or controls, directly or indirectly, or has any direct or
indirect equity participation or ownership interest in, any corporation,
partnership, trust or other Person.
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3.9. Financial Statements. Escalade has previously delivered to the
Buyer the following financial statements: (i) the 1995 Consolidated Financial
Statements, the 1996 Consolidated Financial Statements and the 1997 Consolidated
Financial Statements (collectively, the "Consolidated Financial Statements"),
(ii) the Details of Consolidation for the periods ending December 30, 1995,
December 28, 1996 and December 27, 1997 (the "Consolidating Financial
Statements" and, together with the Consolidated Financial Statements, the
"Financial Statements), and (iii) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity and cash flow for the
Business for each completed four-week accounting period after December 27, 1997
through the date hereof (the "Unaudited Consolidated Financial Statements", and
together with the Consolidating Financial Statements, the "Post-Audit Financial
Statements"). The Consolidated Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, are correct and complete in all
material respects, present fairly the financial condition of Escalade and its
Subsidiaries as of December 30, 1995, December 28, 1996 and December 27, 1997
and the results of operations of the Business for the fiscal years then ended,
and are consistent with the books and records of the Business. The Consolidating
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, are correct and
complete in all material respects (except that they do not include footnotes),
present fairly the financial condition of Escalade and each of its Subsidiaries,
respectively, as of December 30, 1995, December 28, 1996 and December 27, 1997
and the results of operations of the Business for the fiscal years then ended,
and are consistent with the books and records of the Business. The Post-Audit
Financial Statements were prepared by Escalade and the Selling Parties in good
faith and in conformity with past practice of Escalade and the Selling Parties,
present fairly the financial condition of the Business as of such dates and the
results of operations of the Business for such periods, subject to year-end
adjustments, which will not be material and are consistent with the books and
records of the Business. The Stand-Alone Financial Statements, when delivered by
Escalade pursuant to Section 5.6 hereof, (including the notes thereto) will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, will be correct and complete in all material respects,
and will present fairly the financial condition of the Business as of December
30, 1995, December 28, 1996 and December 27, 1997 and the results of operations
of the Business for the fiscal years then ended, and will be consistent with the
books and records of the Business.
3.10. Indebtedness; Guarantees. Except as set forth in the 1997
Consolidated Financial Statements or otherwise disclosed in Section 3.10 of the
Escalade Disclosure Schedule, none of Escalade, the Transferred Foreign
Subsidiaries or the Selling Parties has any Indebtedness, capital lease
obligations, conditional sale or other title retention agreements Related to the
Business or is a guarantor or otherwise liable for any Liability or obligation
of any other Person Related to the Business.
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3.11. Absence of Changes. Since December 27, 1997, Escalade, the
Transferred Foreign Subsidiaries and the Selling Parties have conducted the
Business only in the Ordinary Course of the Business, and in connection with the
Business there has not been:
(a) Any sale, lease, transfer or assignment of any of
Escalade's, any Transferred Foreign Subsidiary's or any Selling Party's
assets, tangible or intangible, other than sales of inventory for fair
consideration in the Ordinary Course of the Business;
(b) Except as disclosed in Section 3.11(b) of the Escalade
Disclosure Schedule, any entry into or amendment, modification or
waiver of any material terms of any agreement, contract, lease or
license (or series of related agreements, contracts, leases and
licenses);
(c) Any acceleration, early termination, modification or
cancellation of any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) to which Escalade,
any Transferred Foreign Subsidiary or any Selling Party is a party or
by which any of them is bound, the termination or cancellation of which
has had or could reasonably be expected to have a Material Adverse
Effect;
(d) Except as disclosed in Section 3.11(d) of the Escalade
Disclosure Schedule, any creation or imposition of any Lien upon any of
the assets, tangible or intangible of Escalade, any Transferred Foreign
Subsidiary or any Selling Party;
(e) Except as disclosed in Section 3.11(e) of the Escalade
Disclosure Schedule, any capital expenditure (or series of related
capital expenditures) involving more than $50,000 singly or $150,000 in
the aggregate;
(f) Any capital investment in, loan to, or any acquisition of
the securities or assets (other than the acquisition of assets in the
Ordinary Course of the Business) of, any other Person;
(g) Any delay or postponement of accounts payable or any other
Liabilities outside the Ordinary Course of the Business;
(h) Except as disclosed in Section 3.11(h) of the Disclosure
Schedule, any material change or modification, including without
limitation changes in duration and pricing, in the terms of or in
policies with respect to any form agreement generally used by the
Selling Parties and the Transferred Foreign Subsidiaries and any
agreements referred to in Sections 2.3(c)(i) through (vi) of the
Disclosure Schedule, including, without limitation, any change or
modification regarding (i) warranties and indemnities (or any
limitations thereon), (ii) term of such agreements or extension periods
thereunder or (iii) pricing or payment terms;
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(i) Except as disclosed in Section 3.11(i) of the Disclosure
Schedule, any increase in prompt payment or pre-payment rebates,
most-favored pricing or other price protections, or similar programs or
other material change in the sales, pricing, cash management, billing,
payment, collection or cancellation policies or practices of the
Selling Parties and the Transferred Foreign Subsidiaries;
(j) Except as disclosed in Section 3.11(j) of the Escalade
Disclosure Schedule, any cancellation, compromise, waiver or release of
any right or claim or Indebtedness in excess of $10,000, in each case
owed by or to Escalade, any of the Transferred Foreign Subsidiaries or
any of the Selling Parties;
(k) With the exception of licenses implied by law in the
Ordinary Course of Business, any grant of any license or sublicense of
any rights or material modification of any rights under or with respect
to, or settlement regarding any infringement or alleged infringement of
rights in, any Intellectual Property;
(l) Any issuance, sale or other disposition of any capital
stock, or grant of any options, warrants or other rights to purchase or
obtain (including upon conversion, exchange or exercise) any capital
stock or material property of Escalade, any of the Transferred Foreign
Subsidiaries or any of the Selling Parties;
(m) Except as disclosed in Section 3.11(m) of the Escalade
Disclosure Schedule, any dividend or distribution (whether in cash or
in kind) or repurchase, redemption or retirement of any capital stock
or material property of Escalade, any of the Transferred Foreign
Subsidiaries or any of the Selling Parties;
(n) Any termination or any oral or written threat or
indication of intent by one or more material distributors, customers or
suppliers of any Selling Party or any Transferred Foreign Subsidiary to
terminate its respective business relationships with any Selling Party
or any Transferred Foreign Subsidiary that will not (i) continue to do
business with any Selling Party or any Transferred Foreign Subsidiary
on such terms and subject to conditions at least as favorable to such
Selling Party or such Transferred Foreign Subsidiary as the terms and
conditions provided to any Selling Party or Transferred Foreign
Subsidiary in the fiscal year 1997 or (ii) agree to do business with
the Buyer on such terms and subject to conditions at least as favorable
to the Buyer as the terms and conditions provided to the Selling
Parties, the Transferred Foreign Subsidiaries and their Affiliates in
fiscal year 1997;
(o) Any damage, destruction, or loss (whether or not covered
by insurance) to any of the Acquired Assets, which damage, destruction
or loss singly or in the aggregate exceeds $100,000;
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(p) Any loan to any director, officer or employee of,
Escalade, any of the Selling Parties or any of the Transferred Foreign
Subsidiaries or any other transaction with any such Person outside the
Ordinary Course of the Business;
(q) Except as disclosed in Section 3.11(q) of the Escalade
Disclosure Schedule, any entry into or termination of employment
contract or collective bargaining agreement, written or oral, or
material modification of the terms of any existing such contract or
agreement;
(r) Any increase, modification or change in the compensation
of Escalade's or any Selling Party's or Transferred Foreign
Subsidiary's directors, officers or employees outside the Ordinary
Course of the Business;
(s) Any adoption, amendment, modification or termination of or
payment pursuant to any Employee Benefit Plan or other plan, contract
or commitment for the benefit of any director, officer or employee of
Escalade, any Selling Party or any Transferred Foreign Subsidiary;
(t) Any charitable or other contribution or gift by Escalade,
any Selling Party or any Transferred Foreign Subsidiary outside the
Ordinary Course of the Business;
(u) Any material modification or change in Escalade's
accounting practices and policies or in its application of GAAP from
the manner in which GAAP was applied in the preparation of the 1997
Consolidated Financial Statements;
(v) Except as disclosed in Section 3.11(v) of the Escalade
Disclosure Schedule, any transaction entered into or performed between
Escalade, any Selling Party or any Transferred Foreign Subsidiary, on
the one hand, and any stockholder or other Affiliate of Escalade, any
Selling Party or any Transferred Foreign Subsidiary on the other hand,
or between any of the foregoing; or
(w) Any commitment by Escalade, any Selling Party or any
Transferred Foreign Subsidiary to do any of the foregoing.
3.12. Absence of Undisclosed Liabilities. None of Escalade, the
Transferred Foreign Subsidiaries or the Selling Parties has any material
Liabilities, except: (a) Liabilities retained by Escalade and the Selling
Parties pursuant to Section 2.4 hereof, (b) Liabilities reflected on the 1997
Stand-Alone Balance Sheet; (c) Liabilities under the agreements or instruments
which are (i) described in Section 2.3 hereof and (ii) are not required in
accordance with GAAP to be reflected on the 1997 Stand-Alone Balance Sheet; and
(d) Liabilities which arise after the date hereof in the Ordinary Course of the
Business (none of which liabilities results from, arises out
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of, relates to, is in the nature of, or is caused by any breach of contract,
breach of warranty, tort, infringement or violation of law).
3.13. Legal and Other Compliance.
(a) Except as set forth in Section 3.13(a) of the Escalade
Disclosure Schedule, each of Escalade, the Transferred Foreign
Subsidiaries and the Selling Parties and any of their predecessors have
complied, and are in compliance, in all material respects with all
applicable Laws and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been
filed or commenced against any of them alleging any failure so to
comply. Neither the ownership nor use of the Acquired Assets in the
Business by Escalade, the Transferred Foreign Subsidiaries and the
Selling Parties nor the conduct of the Business conflicts with the
rights of any other Person or violates, or with the giving of notice or
the passage of time or both will violate, conflict with or result in a
default, right to accelerate or loss of rights under, (i) any terms or
provisions of any of the charter or by-laws of Escalade, any
Transferred Foreign Subsidiary or any Selling Party or (ii) any Lien,
lease, license, agreement, understanding to which such Person is a
party, or (iii) any Law or any order, judgment or decree to which
Escalade, any Transferred Foreign Subsidiary or any Selling Party may
be bound or affected, except in the case of clauses (ii) and (iii), for
any of the foregoing which have not had and could not reasonably be
expected to have a Material Adverse Effect on the Business or the
Acquired Assets. To the Knowledge of the Selling Parties, there are no
proposed Laws, governmental takings, condemnations or other proceedings
which would reasonably be expected to have a Material Adverse Effect on
the Business or the Acquired Assets.
(b) Escalade, the Transferred Foreign Subsidiaries and the
Selling Parties possess all governmental approvals, authorizations,
registrations, permits and licenses necessary to conduct the Business
as currently conducted and currently proposed to be conducted (the
"Required Permits"). All Required Permits are in full force and effect
and are being complied with in all material respects. Section 3.13(b)
of the Escalade Disclosure Schedule is a true and complete list of the
Required Permits necessary for or otherwise material to the conduct of
the Business.
(c) Escalade, the Transferred Foreign Subsidiaries and the
Selling Parties have made all filings with the Consumer Product Safety
Commission as are required in connection with the Business and with all
equivalent state regulators having jurisdiction over the Business.
Section 3.13(c) of the Escalade Disclosure Schedule is a true and
complete list of all filings with the Consumer Product Safety
Commission or equivalent state regulators made by Escalade, the
Transferred Foreign Subsidiaries and the Selling Parties. All such
filings (and similar filings) were correct and complete in all material
respects and are in full force and effect and are being complied with
in all material respects.
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3.14. No Material Adverse Effect. Since December 27, 1997 there has not
been any change or occurrence which constitutes or has resulted in a Material
Adverse Effect and no event has occurred or circumstance exists that could
reasonably be expected to result in such a Material Adverse Effect or materially
affect the ability of Escalade or any of the Selling Parties to transfer or
cause the transfer or the Buyer's ability to receive, hold and own the Acquired
Assets free and clear of Liens on terms and conditions at least as favorable as
such assets were held by Escalade and the Selling Parties, other than any
Material Adverse Effect that: (i) arises predominantly by reason of a general
deterioration in the economy or in the sporting goods industry after the date of
this Agreement or (ii) arises predominantly out of either the disclosure of the
fact that it is the Parent or the Buyer that is the prospective acquiror of the
Business or out of any action taken by the Parent or the Buyer after the date
hereof; and does not arise out of or relate to any act or omission by Escalade
or any of its Affiliates.
3.15. Taxes.
(a) Escalade, the Transferred Foreign Subsidiaries and the
Selling Parties have timely filed, including filings made upon
extensions, in accordance with all applicable Laws, all material Tax
Returns required to be filed. All such Tax Returns were correct and
complete in all material respects. Escalade, the Transferred Foreign
Subsidiaries and the Selling Parties have paid all Taxes shown on any
Tax Returns and all other assessments. Except as provided in Section
3.15(a) of the Escalade Disclosure Schedule, none of Escalade, any
Transferred Foreign Subsidiary or any Selling Party currently is the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where Escalade, any Transferred Foreign Subsidiary or any Selling Party
does not file Tax Returns that Escalade, any Transferred Foreign
Subsidiary or any Selling Party is or may be subject to taxation by
that jurisdiction. There are no liens or other encumbrances with
respect to Taxes upon any of the properties or assets of Escalade, any
of the Transferred Foreign Subsidiaries or any of the Selling Parties
other than customary liens for current Taxes not yet due and payable.
(b) To the Knowledge of the Selling Parties, Escalade and each
Selling Party has withheld and timely paid to the appropriate
Governmental Authority all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
Each Transferred Foreign Subsidiary has withheld and timely paid to the
appropriate Governmental Authority all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third
party.
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(c) To the Knowledge of the Selling Parties, no Governmental
Authority intends to assess, or is considering assessing, any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute, investigation or claim concerning any Tax
Liability of Escalade, any Transferred Foreign Subsidiary or any
Selling Party either (i) claimed or raised by an authority in writing
or (ii) to the Knowledge of the Selling Parties otherwise threatened or
pending. Section 3.15(c) of the Escalade Disclosure Schedule lists all
federal, state, local and foreign income Tax Returns filed with respect
to Escalade, the Transferred Foreign Subsidiaries and the Selling
Parties for taxable periods ending on or after December 31, 1994, and
indicates those Tax Returns that have been audited and those that
currently are the subject of audit. Escalade, the Selling Parties, and
the Transferred Foreign Subsidiaries have delivered to the Buyer
correct and complete copies of all income Tax Returns filed by Escalade
or any Selling Party, and all foreign income tax returns filed by any
Transferred Foreign Subsidiary, since December 31, 1994, as well as
examination reports and statements of deficiencies assessed against or
agreed to by Escalade, any Transferred Foreign Subsidiary or any of the
Selling Parties since December 31, 1992.
(d) None of Escalade, any Transferred Foreign Subsidiary or
any Selling Party has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The unpaid Taxes of the Transferred Foreign Subsidiaries
(i) did not as of December 27, 1997 exceed the reserve for such Taxes
(other than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) that will be reflected
on the 1997 Stand-Alone Balance Sheet and (ii) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Transferred Foreign
Subsidiaries in filing their Tax Returns.
(f) No Transferred Foreign Subsidiary has made any payments,
is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate such Person to make any
payments that will not be deductible under Section 280G of the Code or
that may be subject to an excise tax under Section 4999 of the Code. No
Transferred Foreign Subsidiary is a party to any Tax sharing or Tax
allocation agreement, arrangement or understanding. No Transferred
Foreign Subsidiary is liable (or will be liable as a transferee or
successor, by contract, or otherwise) for the Taxes of any other
Person. None of Escalade, any Transferred Foreign Subsidiary or any
Selling Party is party to any joint venture, partnership or other
arrangement that could be treated as a partnership for federal and
applicable state, local and foreign income Tax purposes.
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(g) No Transferred Foreign Subsidiary is or has been subject
to U.S. federal or any state or local tax. No Transferred Foreign
Subsidiary is or has been engaged in a U.S. trade or business within
the meaning of Code section 864(c).
(h) To the extent there is any inconsistency between the scope
of the representations and warranties contained in Section 3.13 (Legal
and Compliance with Law) and the scope of the representations and
warranties contained in this Section 3.15, with respect to compliance
with Laws related to Tax matters the Parties intend that such matter
will be covered by this Section 3.15. The Parties specifically
acknowledge, however, that nothing in this Section 3.15 is intended or
shall be construed to limit or modify the representations and
warranties contained in Sections 3.3, 3.6, 3.9, 3.11, 3.12, 3.14, 3.16,
3.22, 3.23, 3.28 and 3.35 in any respect.
3.16. Property, Plant and Equipment.
(a) Owned Real Property. Section 3.16(a) of the Escalade
Disclosure Schedule lists all real property that the Selling Parties
and the Transferred Foreign Subsidiaries own (the "Owned Real
Property"). Escalade and the Office Product Subsidiaries do not own any
real property that is Related to the Business. Except as set forth in
Section 3.16(a) of the Escalade Disclosure Schedule, with respect to
each such parcel of Owned Real Property:
(i) the Selling Parties and the Transferred Foreign
Subsidiaries have good and marketable title to the Owned Real
Property, free and clear of any Lien other than Liens related
to the Bank Facility which Liens shall be released at or prior
to Closing;
(ii) there are no pending or, to the Knowledge of the
Selling Parties, threatened condemnation proceedings,
lawsuits, or administrative actions relating to the property
or other matters which would materially and adversely affect
the use, occupancy or value thereof;
(iii) (A) to the Knowledge of the Selling
Parties, the legal description for each parcel of
Owned Real Property contained in the deed thereof
describes each such parcel fully and adequately, and
the buildings and improvements are located within the
boundary lines of the described parcels of land; and
(B) each of the parcels of Owned Real
Property is not in violation of applicable setback
requirements, zoning laws and ordinances (and none of
the properties or buildings or improvements thereon
is subject to"permitted non-conforming use" or
"permitted non-conforming
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structure" classifications) and do not encroach on
any easements, and the land does not serve any
adjoining property for any purpose, and the property
is not located within any flood plain or subject to
any similar type restriction for which any permits
necessary to the use thereof have not been obtained,
except to the extent to which any such matter
individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect;
(iv) each facility located on such parcel has
received all approvals of Governmental Authorities (including
licenses and permits) required in connection with the
ownership or operation thereof and have been operated and
maintained in accordance in all material respects with
applicable laws, rules and regulations;
(v) there are no leases, subleases, licenses,
concessions or other agreements, written or oral, granting to
any party or parties the right of use or occupancy of the
parcel or any portion thereof;
(vi) there are no outstanding options or rights of
first refusal to purchase such parcel, or any portion thereof
or interest therein;
(vii) there are no parties (other than the Selling
Parties and the Transferred Foreign Subsidiaries) in
possession of such parcel;
(viii) each facility located on such parcel is
supplied with utilities and other services necessary for the
current operation of such facility, including gas,
electricity, water, telephone, sanitary sewer and storm sewer,
all of which services are adequate in accordance with all
applicable laws, ordinances, rules and regulations and are
provided via public roads or via permanent, irrevocable,
appurtenant easements benefitting such parcel; and
(ix) each parcel abuts on and has direct vehicular
access to a public road, or has access to a public road via a
permanent, irrevocable, exclusive, unrestricted, appurtenant
easement benefitting such parcel, and access to the property
is provided by paved public right-of-way with adequate curb
cuts available.
(b) Section 3.16(b) of the Escalade Disclosure Schedule lists
all real property leased or subleased to the Selling Parties and the
Transferred Foreign Subsidiaries (the "Leased Real Property," and
together with the Owned Real Property, the "Real Property"). Escalade
and the Office Product Subsidiaries do not lease any real property that
is Related to the Business. The Selling Parties have delivered to the
Buyer correct and complete copies of the leases listed in Section
3.16(b) of the Escalade Disclosure
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Schedule (as amended to date) (the "Leases") which Leases have not been
amended or modified since the date thereof. Neither Escalade nor the
Selling Parties are party to any sublease relating to the Leased Real
Property. With respect to each Lease:
(i) the Lease is legal, valid, binding, enforceable
and in full force and effect;
(ii) if the relevant consent identified in Section
3.3(a) hereof is obtained (or if no such consent is required),
the Lease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to
in Section 2 hereof);
(iii) none of the Selling Parties, the Transferred
Foreign Subsidiaries or, to the Knowledge of the Selling
Parties, any other party to the Lease, is in breach or
default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the Lease has repudiated any
material provision thereof;
(v) there are no material disputes, oral or written
agreements, or forbearance programs in effect as to the Lease;
(vi) none of the Selling Parties or the Transferred
Foreign Subsidiaries has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the
leasehold, other than Liens relating to the Bank Facility
which Liens shall be released at or prior to Closing. To the
Knowledge of the Selling Parties, with respect to each parcel
of Real Property which is leased, there is either no mortgage
or deed of trust on the fee interest of such property which
predates such lease, or a non-disturbance agreement protecting
the tenant's leasehold interest has been obtained and a
current and complete copy provided to the Buyer;
(vii) all facilities leased thereunder have received
all approvals of Governmental Authorities (including licenses
and permits) required in connection with the operation thereof
and have been operated and maintained in accordance in all
material respects with applicable Laws; and
(viii) all facilities leased or subleased thereunder
are supplied with utilities and other services necessary for
the current operation of said facilities.
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(c) The Selling Parties and the Transferred Foreign
Subsidiaries own or lease all buildings, real property, improvements,
machinery, equipment and other tangible assets necessary for the
current and presently contemplated conduct of the Business. Such
tangible assets are free from material defects (patent and latent),
have been maintained in accordance with normal industry practice, are
in good satisfactory operating condition and repair (subject to normal
wear and tear), and are suitable, adequate and sufficient for the
purposes for which they are presently used.
3.17. Intellectual Property.
(a) Escalade, the Transferred Foreign Subsidiaries and the
Selling Parties own or have the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary
for the operation of the Business as presently conducted, as conducted
over the past five years. Subject to obtaining the consents disclosed
in Sections 3.3(a) and 5.2 of the Escalade Disclosure Schedule relating
to the Intellectual Property, each item of Intellectual Property owned
or used by Escalade, any of the Transferred Foreign Subsidiaries or any
of the Selling Parties and their Affiliates in the Business will be
transferred to or otherwise available for use by the Buyer on identical
terms and conditions upon and after the Closing. Except as disclosed in
Section 3.17(a) of the Escalade Disclosure Schedule, Escalade, the
Transferred Foreign Subsidiaries and the Selling Parties have taken all
actions reasonably necessary or, in the judgement of Escalade and the
Selling Parties, appropriate to maintain and protect their interests in
each item of Intellectual Property Related to the Business that
Escalade, the Transferred Foreign Subsidiaries or the Selling Parties
own or use.
(b) Except as disclosed in Section 3.17(b)(i) of the Escalade
Disclosure Schedule, none of Escalade, the Transferred Foreign
Subsidiaries or the Selling Parties has and, to the Knowledge of the
Selling Parties as a result of the continued operation of the Business
as presently conducted, the Buyer will not have, interfered with,
infringed upon, misappropriated or otherwise come into conflict with
any rights of third parties with respect to Intellectual Property
Related to the Business. Except as disclosed in Section 3.17(b)(ii) of
the Escalade Disclosure Schedule, there has not been in the past five
years any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation (including
any claim that Escalade, any Transferred Foreign Subsidiary or any
Selling Party must license or refrain from using any rights of any
third party with respect to Intellectual Property Related to the
Business), except for any of the foregoing which have not had and could
not reasonably be expected to have a Material Adverse Effect. Except as
disclosed in Section 3.17(b)(iii) of the Escalade Disclosure Schedule,
to the Knowledge of the Selling Parties, no third party has, within the
past five years, interfered with, infringed upon, misappropriated or
otherwise come into conflict with any rights of Escalade, any
Transferred Foreign Subsidiary or any Selling Party with respect to
Intellectual Property Related to the Business, except where
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such interference, infringement, misappropriation or conflict has not
had and could not reasonably be expected to have a Material Adverse
Effect.
(c) Section 3.17(c) of the Escalade Disclosure Schedule
identifies each patent or registration which has been issued to
Escalade, any Transferred Foreign Subsidiary or any Selling Party or
any of their Affiliates with respect to Intellectual Property owned or
used by Escalade, any of the Transferred Foreign Subsidiaries or any of
the Selling Parties in the Business, identifies each pending patent
application or application for registration which has been made by
Escalade, any of the Transferred Foreign Subsidiaries or any of the
Selling Parties or any of their Affiliates with respect to such
Intellectual Property, and identifies each license, agreement or other
permission which Escalade, any of the Transferred Foreign Subsidiaries
or any of the Selling Parties or any of their Affiliates have granted
to any third party with respect to any of such Intellectual Property
(together with any exceptions). Escalade and the Selling Parties have
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements and permissions (as
amended to date) and have made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item. Section 3.17(c) of
the Escalade Disclosure Schedule also identifies each trade name (other
than those set forth in Section 2.1(k) of the Escalade Disclosure
Schedule) or unregistered trademark or servicemark used by Escalade,
any of the Transferred Foreign Subsidiaries or any of the Selling
Parties in the Business. With respect to each item of Intellectual
Property required to be identified in Section 3.17(c) of the Escalade
Disclosure Schedule:
(i) except as disclosed in Section 3.17(c) of the
Escalade Disclosure Schedule, Escalade, the Transferred
Foreign Subsidiaries or the Selling Parties, as the case may
be, possess all right, title and interest in and to the item,
free and clear of any Lien, license or other restriction;
(ii) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending
or, to the Knowledge of the Selling Parties, is threatened,
which challenges the legality, validity, enforceability, use
or ownership of the item; and
(iv) none of Escalade, any Transferred Foreign
Subsidiary or any Selling Party has agreed to indemnify any
Person for or against any interference, infringement,
misappropriation or other conflict with respect to the item.
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(d) Section 3.17(d) of the Escalade Disclosure Schedule
identifies each item of Intellectual Property Related to the Business
that any third party owns and that Escalade, any of the Transferred
Foreign Subsidiaries or any of the Selling Parties use pursuant to
license, sublicense, agreement or permission (including without
limitation any group licenses for the use of commercial software).
Escalade and the Selling Parties have delivered to the Buyer correct
and complete copies of all such licenses, sublicenses, agreements and
permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 3.17(d) of
the Escalade Disclosure Schedule:
(i) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in
full force and effect;
(ii) subject to obtaining the relevant consents
disclosed in Section 3.3(a) of the Escalade Disclosure
Schedule, the license, sublicense, agreement or permission is
fully assignable and will continue to be legal, valid,
binding, enforceable by the Buyer and in full force and effect
on identical terms following the consummation of the
transactions contemplated hereby (including the assignments
and assumptions referred to in Section 2 hereof);
(iii) to the Knowledge of the Selling Parties, no
party to the license, sublicense, agreement or permission is
in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default
or permit termination, modification or acceleration
thereunder;
(iv) to the Knowledge of the Selling Parties, no
party to the license, sublicense, agreement or permission has
repudiated any provision thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i)
through (iv) above are, to the Knowledge of the Selling
Parties, true and correct with respect to the underlying
license;
(vi) to the Knowledge of the Selling Parties, the
underlying item of Intellectual Property is not subject to any
outstanding injunction, judgment, order, decree, ruling or
charge;
(vii) to the Knowledge of the Selling Parties, no
action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or is threatened, which
challenges the legality, validity or enforceability of the
underlying item of Intellectual Property; and
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(viii) none of Escalade, any Transferred Foreign
Subsidiary or any Selling Party has granted any sublicense or
similar right with respect to the license, sublicense,
agreement or permission other than such licenses as are
implied by law.
3.18. Inventories. The inventory of the Selling Parties and the
Transferred Foreign Subsidiaries Related to the Business consists of raw
materials and supplies, manufactured and purchased parts, goods in process and
finished goods, all of which are merchantable (or suitable and usable for the
production or completion of merchantable products for sale in the Ordinary
Course of the Business) and no material portion of which is slow-moving,
obsolete, below standard quality, damaged or defective, except to the extent
reflected in any reserve for inventory write-down reflected on the 1997
Stand-Alone Balance Sheet as adjusted for the passage of time through the
Closing Date in accordance with GAAP and the past custom and practice of the
Selling Parties and the Transferred Foreign Subsidiaries. Each item of such
inventory reflected in the 1997 Stand-Alone Balance Sheet and books and records
of the Selling Parties and the Transferred Foreign Subsidiaries is reflected on
the basis of a complete physical count conducted on December 29, 1997, as
adjusted in accordance with GAAP for purchases and sales of inventory since that
date and is valued at the lower of cost (on a first-in, first-out basis) or
market in accordance with GAAP, consistently applied. Since December 27, 1997,
no inventory has been sold or disposed of except through sales in the Ordinary
Course of the Business and there has been no material write-up or write-down in
the value of inventory.
3.19. Contracts. Section 3.19 of the Escalade Disclosure Schedule lists
the following Contracts:
(a) Any agreement for the lease of personal property to or
from any Person;
(b) Any agreement or purchase order requiring total payments
in excess of $50,000 for the purchase or sale of raw materials,
commodities, supplies, products or other personal property, or for the
furnishing or receipt of services;
(c) Any agreement concerning a partnership or joint venture;
(d) Any agreement under which Escalade, any of the Transferred
Foreign Subsidiaries or any of the Selling Parties created, incurred,
assumed, or guaranteed any Indebtedness or under which it has imposed a
Lien on any of the Acquired Assets;
(e) Any agreement concerning confidentiality or noncompetition
or otherwise creating or purporting to create any restrictions on the
ability of any of the Selling Parties or the Transferred Foreign
Subsidiaries to engage in any business or to operate in any geographic
area;
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(f) Any agreement between or among any of Escalade, any of the
Transferred Foreign Subsidiaries or any of the Selling Parties, on the
one hand, and any of their respective Affiliates, on the other hand;
(g) Any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other plan or
arrangement for the benefit of its current or former directors,
officers and employees;
(h) Any agreement providing for the employment or consultancy
with any individual on a full-time, part-time, consulting or other
basis or providing severance or retirement benefits;
(i) Any agreement under which Escalade, any of the Transferred
Foreign Subsidiaries or any of the Selling Parties has advanced or
loaned any amount to any of its stockholders, Affiliates, directors,
officers or employees or to any other Person;
(j) Any collective bargaining agreement;
(k) Any distribution, sales representative or equivalent
agreements;
(l) Any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Business or the
Acquired Assets; and
(m) Any other agreement (or group of related agreements) the
performance of which involves, or is likely to involve, consideration
in excess of $10,000.
Escalade and the Selling Parties have delivered to the Buyer a correct and
complete copy of each written agreement listed in Section 3.19 of the Escalade
Disclosure Schedule (as amended to date) and a written summary setting forth the
terms and conditions of each oral agreement referred to in Section 3.19 of the
Escalade Disclosure Schedule. Except as disclosed in Section 3.19 of the
Escalade Disclosure Schedule, with respect to each such agreement: (i) the
agreement is legal, valid, binding, enforceable and in full force and effect;
(ii) subject to the Buyer obtaining the necessary consents disclosed in Section
3.3(a) of the Escalade Disclosure Schedule, the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 hereof);
(iii) none of Escalade, any Transferred Foreign Subsidiary or any Selling Party,
or to the Knowledge of the Selling Parties, any other party, is in breach or
default, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification or
acceleration, under the agreement; and (iv) no party has repudiated any
provision of the agreement.
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3.20. Notes, Accounts Receivable and Accounts Payable.
(a) All notes and accounts receivable of the Selling Parties
and the Transferred Foreign Subsidiaries Related to the Business are
reflected properly on the Selling Parties' and the Transferred Foreign
Subsidiaries' books and records in accordance with GAAP, are valid
receivables, arose from bona fide transactions in the Ordinary Course
of the Business subject to no setoffs or counterclaims (except as and
to the extent recorded as accounts payable), are current and
collectible, except as will be reflected in the reserve or allowance
for bad debts on the 1997 Stand-Alone Balance Sheet as adjusted for the
passage of time in accordance with GAAP and past practice and custom of
the Selling Parties and the Transferred Foreign Subsidiaries. Section
3.20(a) of the Escalade Disclosure Schedule is a true and correct list
of all receivables as of June 19, 1998 that are more than 90 days past
due or have been deemed uncollectible. Escalade has previously
delivered to Parent a true and correct list of all receivables of the
Business as of June 19, 1998.
(b) All accounts payable of the Selling Parties and the
Transferred Foreign Subsidiaries Related to the Business are reflected
properly on the Selling Parties' and the Transferred Foreign
Subsidiaries' books and records in accordance with GAAP. Section
3.20(b)(i) of the Escalade Disclosure Schedule is a true and correct
list of all accounts payable as of June 19, 1998. Except as set forth
on Section 3.20(b) (ii) of the Escalade Disclosure Schedule, all
accounts payable of the Selling Parties and the Transferred Foreign
Subsidiaries are current.
3.21. Accounts, Open Letter of Credit, etc. All monies and accounts
arising out of, relating to or established for or in connection with the
Business shall be used only for the benefit of the Business (and at Closing will
be transferred to the Buyer, free and clear of all Liens). Section 3.21(a) of
the Escalade Disclosure Schedule identifies each bank account, lock box or
similar account for the deposit of cash or securities maintained by or on behalf
of Escalade, any of the Transferred Foreign Subsidiaries or any of the Selling
Parties in connection with the Business (indicating the name and address of the
bank or other financial institution, the account name and number and the
individuals with signing authority with respect to such account). Section
3.21(b) of the Escalade Disclosure Schedule identifies all open letters of
credit established or applied for in connection with the Business (indicating
for each such letter of credit the type (e.g., standby or documentary), maximum
amount, issuing bank, amount drawn to date and any other significant
information).
3.22. Insurance and Risk Management. Section 3.22 of the Escalade
Disclosure Schedule sets forth a list (indicating the type, name of the insurer,
coverage amounts, period of coverage, premiums, deductibles and material
nonstandard exclusions) of all insurance policies Related to the Business or the
Acquired Assets which are maintained by Escalade, any of the Transferred Foreign
Subsidiaries or any of the Selling Parties. With respect to each such
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insurance policy: (i) the policy is legal, valid, binding, enforceable and in
full force and effect; (ii) with respect to the insurance policies being assumed
as contemplated by Section 2.3 hereof, each such policy is assignable to the
Buyer; (iii) notwithstanding any liquidation, dissolution or any other
transaction involving Escalade, any of the Transferred Foreign Subsidiaries or
any of the Selling Parties, the policy will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby (including the
assignments and assumptions referred to in Section 2 hereof); (iv) none of
Escalade, any Transferred Foreign Subsidiary or any Selling Party, or any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification or acceleration, under the policy; (v) Escalade
and the Selling Parties have delivered true and complete copies of all policies
and related indemnity or premium payment agreements to the Buyer; (vi) the
policy has not been amended or modified and no riders have been issued in
respect of such policies referred to in clause (v) above without the consent of
the Buyer; and (vii) no party to the policy has repudiated any provision
thereof. Section 3.22 of the Escalade Disclosure Schedule sets forth a
description of any self-insurance arrangements maintained by Escalade, the
Transferred Foreign Subsidiaries and the Selling Parties. All such policies
provide adequate coverage for all normal risks incident to the Business and are
in character and amount at least equivalent to that carried by Persons engaged
in a business subject to the same or similar risks, perils or hazards.
3.23. Litigation. Except as disclosed in Section 3.23 of the Escalade
Disclosure Schedule (which matters have not had and could not reasonably be
expected to have a Material Adverse Effect), there are no Actions pending or, to
the Knowledge of the Selling Parties, threatened, in connection with the
Business, or that question the validity of this Agreement or of any action taken
or to be taken pursuant to or in connection with the provisions of this
Agreement nor, to the Knowledge of the Selling Parties, is there any fact (past
or present), situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act or transaction that
could reasonably be expected to form the basis for any such Action or that
question the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement. There are no
judgments, orders, decrees, citations, fines or penalties heretofore assessed
against Escalade, any of the Transferred Foreign Subsidiaries or any of the
Selling Parties or any of their Affiliates affecting the Business, the Acquired
Assets or Assumed Liabilities.
3.24. Product Warranties; Defects; Liability. Except as disclosed in
Section 3.24(a) of the Escalade Disclosure Schedule (which matters have not had
and could not reasonably be expected to have a Material Adverse Effect), each
Product manufactured, sold, leased, delivered, installed or maintained by the
Selling Parties and the Transferred Foreign Subsidiaries has been in conformity
in all material respects with all applicable Laws, contractual commitments and
express and implied warranties and the Selling Parties and the Transferred
Foreign Subsidiaries have no Liability (and there is no basis for any present or
future Action giving rise to any
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Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for Product warranty claims reflected on
the 1997 Stand-Alone Balance Sheet which such reserve is adequate to address all
such Liabilities. No Product manufactured, sold, leased, delivered, installed or
maintained by any of the Selling Parties or any of the Transferred Foreign
Subsidiaries is subject to any guaranty, warranty or other indemnity beyond the
Selling Parties' and the Transferred Foreign Subsidiaries' applicable standard
terms and conditions. Section 3.24(b) of the Escalade Disclosure Schedule
includes copies of the standard terms and conditions of the Selling Parties and
the Transferred Foreign Subsidiaries (containing any and all applicable
guaranty, warranty and indemnity provisions with the exception of any of the
foregoing imposed or implied by law). Except as set forth in Section 3.24(c) of
the Escalade Disclosure Schedule, no claims have been asserted against any of
the Selling Parties or any of the Transferred Foreign Subsidiaries relating to,
and, to the Knowledge of the Selling Parties, there has been no Actions with
respect to, any injury to individuals or property as a result of the
manufacture, sale, lease, ownership, possession, installations, maintenance or
use of any Product.
3.25. Employees. To the Knowledge of the Selling Parties, except as
disclosed in Section 3.25(a) of the Escalade Disclosure Schedule, no executive,
key employee or group of employees Related to the Business has plans to accept
employment from any Person other than the Buyer. During the 90 days prior to the
date of this Agreement, 78 employees were laid off by Escalade and/or the
Selling Parties and, of those 78 employees, all have been recalled (or offered
and declined recall) as of the date of this Agreement. The Selling Parties and
the Transferred Foreign Subsidiaries have not experienced any labor disputes or
work stoppage due to labor disagreements, except for any of the foregoing which
have not had and could not reasonably be expected to have a Material Adverse
Effect. The Selling Parties and the Transferred Foreign Subsidiaries are in
compliance in all respects with all applicable Laws respecting employment and
employment practices and terms and conditions of employment, and wages and
hours, and have not been and are not currently engaged in any unfair labor
practice as defined in the National Labor Relations Act, as amended, except for
any of the foregoing which have not had and could not reasonably be expected to
have a Material Adverse Effect. There is no unfair labor practice charge or
complaint against any Selling Party or any Transferred Foreign Subsidiary
pending or, to the Knowledge of the Selling Parties, threatened before the
National Labor Relations Board or any comparable foreign Governmental Authority.
No grievance nor any arbitration proceeding which might have a Material Adverse
Effect arising out of or under any collective bargaining agreement is pending
and to the Knowledge of the Selling Parties, no pending claims therefor have
been made. Except as set forth in Section 3.25(b) of the Escalade Disclosure
Schedule, neither any Selling Party nor any Transferred Foreign Subsidiary is
now or has ever been a party to any collective bargaining agreement and to the
Knowledge of the Selling Parties, neither any Selling Party nor any Transferred
Foreign Subsidiary has been the subject of any organizational activity within
the past twelve months. Except as disclosed in Section 3.25(b) of the Escalade
Disclosure Schedule, no collective bargaining agreement with respect to the
Selling Parties restricts the Selling Parties or the Transferred Foreign
Subsidiaries from relocating, closing or subcontracting any of their operations.
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3.26. Employee Benefits.
(a) Selling Party and Transferred Foreign Subsidiary Plans.
Section 3.26(a) of the Escalade Disclosure Schedule sets forth all
Employee Plans covering or relating to any employees or former
employees of the Business (or any dependents of any thereof) to which
Escalade, any Transferred Foreign Subsidiary or any Selling Party
contributes or is obligated to contribute, or under which Escalade, any
Transferred Foreign Subsidiary or any Selling Party has or may have any
liability for premiums or benefits, or which benefits any current or
former employee, director, consultant, independent contractor, or any
beneficiary of Escalade, the Transferred Foreign Subsidiaries or the
Selling Parties. For purposes of this Agreement, the term "Employee
Plan" means any plan, program, agreement, policy or arrangement (a
"plan"), whether or not reduced to writing, other than any such plan
that is not maintained in the United States or for the benefit of
United States citizens or residents, that is: (i) a welfare benefit
plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan");
(ii) a pension benefit plan within the meaning of Section 3(2) of
ERISA; (iii) a stock bonus, stock purchase, stock option, restricted
stock, stock appreciation right or similar equity-based plan; or (iv)
any other deferred-compensation, retirement, welfare-benefit, bonus,
incentive or fringe-benefit plan whether for the benefit of a single
individual or a group of individuals. With respect to each Assigned
Plan listed in Section 2.1(j) or 2.3(d) of the Escalade Disclosure
Schedule, Escalade and the Selling Parties have provided to Buyer
accurate, current and complete copies of each of the following: (1) the
plan document together with all amendments; (2) where applicable,
copies of any trust agreements, custodial agreements, insurance
policies, administration agreements and similar agreements, and
investment management or investment advisory agreements; (3) copies of
any summary plan descriptions, employee handbooks or similar employee
communications and administrative forms; (4) in the case of any plan
that is intended to be qualified under Section 401(a) of the Code, a
copy of the most recent determination letter from the IRS and any
related correspondence, including a copy of the request for such
determination; and (5) in the case of any plan for which Forms 5500 are
required to be filed, a copy of the two most recently filed Forms 5500,
with schedules attached.
(b) Defined Benefit Pension Plans. Other than as specifically
set forth in Section 3.26(b) of the Escalade Disclosure Schedule, none
of Escalade, any Transferred Foreign Subsidiary or any Selling Party,
or any corporation, trust, partnership or other entity that would be
considered as a single employer with Escalade, any Transferred Foreign
Subsidiary or any Selling Party under Section 4001(b)(1) of ERISA or
Sections 414(b), (c), (m) or (o) of the Code (a "Related Entity") has
ever maintained or been required to contribute to any Employee Plan
subject to Title IV of ERISA.
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(c) Plan Qualification; Plan Administration; Certain Taxes and
Penalties. Each Assigned Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified. Each Trust associated with
an Assigned Plan intending to be qualified under Code section 501(c)(9)
is so qualified. Each Assigned Plan, including any associated trust or
fund, has been administered in accordance with its terms and with
applicable law, and nothing has occurred with respect to any Assigned
Plan that has subjected or could subject Escalade, any Transferred
Foreign Subsidiary or any Selling Party or a plan participant to a
penalty under Section 502 of ERISA or to an excise tax under the Code.
(d) All Contributions And Premiums Paid. All required
contributions to and premium payments on account of each Assigned Plan
have been made.
(e) Claims. Section 3.26(e) of the Escalade Disclosure
Schedule sets forth each and every pending or threatened lawsuit, claim
or other controversy relating to a Assigned Plan, other than claims for
benefits in the normal course. No Assigned Plan is the subject of an
IRS or DOL examination or a government sponsored amnesty, voluntary
compliance, self-correction or similar program.
(f) Retiree Benefits; Certain Welfare Plans. Other than as
required under Section 601 et seq. of ERISA, no Assigned Plan that is a
Welfare Plan provides benefits or coverage following retirement or
other termination of employment.
(g) No Buyer Liability. To the Knowledge of the Selling
Parties, no circumstance exists and no event (including any action or
the failure to do any act) has occurred with respect to any Plan
maintained or formerly maintained by Escalade, any Transferred Foreign
Subsidiary or any Selling Party or any Related Entity, or to which
Escalade, any Transferred Foreign Subsidiary or any Selling Party or
any Related Entity is or has been required to contribute (other than an
Assigned Plan), that could subject Buyer to liability, or the assets of
the Business to any lien, under ERISA or the Code (or any comparable
provision of any applicable state, foreign or local Laws), nor will the
transactions contemplated by this Agreement give rise to any such
liability or lien.
(h) Foreign Plans. With respect to any plan, agreement, policy
or arrangement that would be an Employee Plan but for the fact that it
is maintained by a Transferred Foreign Subsidiary outside of the United
States (the "foreign plans"), each such plan has been administered in
accordance with its terms and with applicable Laws in all material
respects. With respect to each foreign plan, Escalade has provided to
Buyer accurate, current and complete copies of each of the following:
(1) the plan document together with all amendments; (2) where
applicable, copies of any trust agreements, custodial agreements,
insurance policies, administration agreements and similar agreements,
and investment management or investment advisory agreements; (3) copies
of any summary plan descriptions, employee handbooks or similar
employee communications and
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administrative forms; (4) a copy of any material filings or
correspondence with Governmental Authorities with respect to such
foreign plan, with any and all schedules attached. All required
contributions to and premium payments on account of each foreign plan
required to be made as of the date hereof have been made and all
required contributions to and premium payments on account of each
foreign plan required to be made through the Closing Date shall be made
on or before the Closing Date. There are no material unfunded
liabilities under any foreign plan. There is no pending (or, to the
Knowledge of the Selling Parties, threatened) lawsuit, material claim
or other material controversy relating to any foreign plan, other than
claims of benefits in the Ordinary Course of the Business.
(i) To the extent there is any inconsistency between the scope
of the representations and warranties contained in Section 3.13 (Legal
and Compliance with Law) and the scope of the representations and
warranties contained in this Section 3.26, with respect to compliance
with Laws related to employee benefit matters the Parties intend that
such matters will be covered by this Section 3.26. The Parties
specifically acknowledge, however, that nothing in this Section 3.26 is
intended or shall be construed to limit or modify the representations
and warranties contained in Sections 3.3, 3.9, 3.10, 3.11, 3.12, 3.14,
3.15, 3.16, 3.22, 3.23, 3.25, 3.28 and 3.35 in any respect.
3.27. Environment.
(a) Except as disclosed in Section 3.27 of the Escalade
Disclosure Schedule, and except as has not had and could not reasonably
be expected to have a Material Adverse Effect, each of Escalade, the
Transferred Foreign Subsidiaries and the Selling Parties and their
Affiliates has with respect to the Acquired Assets complied and is in
compliance with all applicable Environmental Laws. Except as disclosed
in Section 3.27 of the Escalade Disclosure Schedule, there is no Action
pending or, to the Knowledge of the Selling Parties, threatened against
any of Escalade, the Transferred Foreign Subsidiaries or the Selling
Parties or their Affiliates with respect to the Acquired Assets in
respect of (i) noncompliance by any of Escalade, the Transferred
Foreign Subsidiaries or the Selling Parties with any Environmental Laws
or (ii) the release or threatened release into the environment of any
Hazardous Substance at the Real Property or by any of Escalade, the
Transferred Foreign Subsidiaries or the Selling Parties or their
Affiliates; or (iii) the handling, storage, use, transportation or
disposal of any Hazardous Substance by any of Escalade, the Transferred
Foreign Subsidiaries or the Selling Parties or their Affiliates; except
for Actions filed or threatened after the date hereof (it being
understood that Escalade and the Selling Parties shall promptly notify
the Buyer of any such Action before Closing). Except as disclosed in
Section 3.27 of the Escalade Disclosure Schedule, each of Escalade, the
Transferred Foreign Subsidiaries and the Selling Parties has obtained
and complied with, and is in compliance with, all permits, licenses and
other authorizations that are required pursuant to Environmental Laws
for the occupation of
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facilities included within the Acquired Assets or otherwise Related to
the Business (the "Environmental Permits"), except where such
noncompliance or the failure to obtain Environmental Permits has not
had and could not reasonably be expected to have a Material Adverse
Effect. Except as disclosed in Section 3.27 of the Escalade Disclosure
Schedule, none of Escalade, any of the Transferred Foreign Subsidiaries
or any of the Selling Parties has received any notice, report or other
written information regarding any actual or alleged violation of
Environmental Laws or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) thereunder,
including any investigatory, remedial or corrective obligations,
relating to the operation of the Business or the Acquired Assets
arising under Environmental Laws. Except as disclosed in Section 3.27
of the Escalade Disclosure Schedule, none of Escalade, the Transferred
Foreign Subsidiaries or the Selling Parties, has received notice that,
as a result of having treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any
Hazardous Substance, or owned or operated any property or facility it
is or may be liable for response costs, corrective action costs,
personal injury, property damage, natural resources damages or
attorneys fees, pursuant to any Environmental Laws. None of the
Acquired Assets is contaminated by any Hazardous Substance in violation
of or requiring a response action under Environmental Laws. None of
Escalade, the Transferred Foreign Subsidiaries or the Selling Parties
has, with respect to the Acquired Assets, either expressly assumed,
undertaken or otherwise become subject to any liability, including any
obligation for corrective or remedial action, of any other Person
relating to Environmental Laws.
(b) For purposes of this Section 3.27, all references to
"Escalade", the "Transferred Foreign Subsidiaries" and the "Selling
Parties" are intended to include any and all other entities to which
any such Person may be considered a successor under applicable
Environmental Laws.
(c) To the extent there is any inconsistency between the scope
of the representations and warranties contained in Section 3.13 (Legal
and Compliance with Law) and the scope of the representations and
warranties contained in this Section 3.27, with respect to
environmental matters the Parties intend that such matter will be
covered by this Section 3.27. The Parties specifically acknowledge,
however, that nothing in this Section 3.27 is intended or shall be
construed to limit or modify the representations and warranties
contained in Sections 3.3, 3.9, 3.12, 3.16, 3.22, 3.23, 3.24, 3.34 and
3.35 in any respect.
3.28. Affiliated Transactions. Except as set forth in Section 3.28 of
the Escalade Disclosure Schedule, none of Escalade, any of the Transferred
Foreign Subsidiaries or any of the Selling Parties is party to or bound by any
contract, commitment or understanding with any of its respective stockholders,
directors or officers, Escalade, any of the Transferred Foreign Subsidiaries or
any of the Selling Parties or other Affiliates and none of such stockholders,
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directors or officers or other Affiliates owns or otherwise has any rights to or
interests in any asset, tangible or intangible, which constitutes a part of the
Acquired Assets or is Related to the Business.
3.29. Government Contracts. None of Escalade, any of the Transferred
Foreign Subsidiaries or any of the Selling Parties has been or are party to any
contract or arrangement Related to the Business with any Governmental Authority.
3.30. Distributors, Customers and Suppliers. Section 3.30 of the
Escalade Disclosure Schedule sets forth a complete and accurate list of (i) all
the distributors for Products indicating the specific Product, existing
contractual arrangements, if any, with each such distributor and the volume of
Products distributed, (ii) the ten largest customers (by dollar volume) of the
Business during the most recent fiscal year, indicating the existing contractual
arrangements with each such customer by Product and (iii) all suppliers of
significant materials or services to the Selling Parties or the Transferred
Foreign Subsidiaries and their Affiliates Related to the Business, indicating
the contractual arrangements for continued supply from such Person. No
significant distributor, customer or supplier Related to the Business has
notified any Selling Party or any Transferred Foreign Subsidiary otherwise
indicated to any Selling Party or any Transferred Foreign Subsidiary that such
Person will cease to distribute, purchase or supply products from or to such
Selling Party or such Transferred Foreign Subsidiary, or reduce significantly or
otherwise materially change the terms of their agreement with such Selling Party
or such Transferred Foreign Subsidiary.
3.31. No Illegal Payments, Etc. To the Knowledge of the Selling
Parties, none of Escalade, any of the Transferred Foreign Subsidiaries or any of
the Selling Parties, or any of their respective Affiliates, directors, officers,
employees or agents has (a) directly or indirectly given or agreed to give any
illegal gift, contribution, payment or similar benefit to any supplier,
customer, governmental official or employee or other person who was, is or may
be in a position to help or hinder any of Escalade, the Transferred Foreign
Subsidiaries or the Selling Parties or assist in connection with any actual or
proposed transaction, or made or agreed to make any illegal contribution, or
reimbursed any illegal political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign public office (i) which
could reasonably be expected to subject Escalade, any of the Transferred Foreign
Subsidiaries or any of the Selling Parties to any damage or penalty in any
civil, criminal or governmental litigation or proceeding or (ii) the
non-continuation of which has had or could reasonably be expected to have a
Material Adverse Effect or (b) established or maintained any unrecorded fund or
asset or made any false entries on any books or records for any purpose.
3.32. Books and Records. The books and all corporate (including,
without limitation, minute books and stock record books) and financial records
of the Selling Parties, the Transferred Foreign Subsidiaries and Escalade are
complete and correct in all material respects
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and have been maintained in accordance in all material respects with sound
business practices, Laws and other requirements.
3.33. Powers of Attorney. Except as disclosed in Section 3.33 of the
Escalade Disclosure Schedule and pursuant to this Agreement and the Exhibits
hereto, there are no outstanding powers of attorney executed on behalf of the
Selling Parties, the Transferred Foreign Subsidiaries or Escalade in respect of
the Acquired Assets, the Assumed Liabilities or the Business.
3.34. SEC Reports. Escalade has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since January
1, 1996, each of which has complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act, each as in effect on
the date so filed. Escalade has heretofore delivered or upon request will
deliver to the Buyer, in the form filed with the SEC (including any amendments
thereto), its Annual Report on Form 10-K for the fiscal year ended December 31,
1998 and all interim reports on Forms 10-Q or 8-K and all definitive proxy
statements filed with the SEC at the time of or subsequent to such annual report
(such annual report and subsequent reports being referred to herein collectively
as the "SEC Reports"). As of the date of this Agreement, the SEC Report most
recently filed by Escalade was the report on Form 10-Q for the quarter ended
March 21, 1998. None of the SEC Reports, including, without limitation, any
financial statements or schedules included or incorporated by reference therein,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Without limiting the generality of the
foregoing, the exhibit index to Escalade's most recently filed Annual Report on
Form 10-K includes each agreement, contract or other instrument (including all
amendments thereto) to which Escalade, any of the Transferred Foreign
Subsidiaries or any of the Selling Parties are party or by which any of them is
bound and which would be required pursuant to the Exchange Act and the rules and
regulations thereunder to be filed as an exhibit to an Annual Report on Form
10-K, a Quarterly Report on Form 10-Q or a Current Report on Form 8-K. Escalade
has made available to the Parent on or prior to the date hereof true, correct
and complete copies of each such agreement, contract, instrument and amendment.
3.35. Disclosure. The representations and warranties contained in this
Section 3 (including the Escalade Disclosure Schedule and any other schedules
and exhibits required to be delivered by Escalade and the Selling Parties to the
Buyer pursuant to this Agreement) and any certificate, report or other
information furnished or to be furnished by Escalade and the Selling Parties to
the Buyer hereunder do not contain and will not contain any untrue statement of
a material fact or omit to state any fact necessary in order to make the
statements and information contained in this Section 3 not misleading.
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4. Representations and Warranties of the Parent and the Buyer. In order to
induce each of the Selling Parties and Escalade to enter into and perform this
Agreement and to consummate the transactions contemplated hereby, each of the
Parent and the Buyer represents and warrants to each of the Selling Parties and
Escalade as follows:
4.1. Organization of the Parent and the Buyer. Each of the Parent and
the Buyer is a Delaware corporation, duly organized, validly existing and in
good standing under the laws of Delaware. Each of the Parent and the Buyer is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the nature of the activities conducted by it or the
character of the property owned, leased or operated by it make such
qualification necessary or appropriate, except for those jurisdictions where the
failure to be so qualified has not had and could not reasonably be expected to
have a material adverse effect on the ability of the Parent or the Buyer, as the
case may be to fulfill its obligations under this Agreement.
4.2. Authorization of Transaction. Each of the Parent and the Buyer has
full power and authority (corporate or otherwise) to execute and deliver this
Agreement and to perform its obligations hereunder. All corporate and other
actions or proceedings to be taken by or on the part of the Parent and the Buyer
to authorize and permit the execution and delivery by the Parent and the Buyer
of this Agreement and the instruments required to be executed and delivered by
the Parent and the Buyer pursuant hereto, the performance by the Parent and the
Buyer of their obligations hereunder and the consummation by the Parent and the
Buyer of the transactions contemplated herein have been duly and properly taken.
This Agreement has been duly executed and delivered by the Parent and the Buyer
and constitutes the legal, valid and binding obligation of the Parent and the
Buyer, enforceable in accordance with its terms and conditions.
4.3. No Conflict; Required Filings and Consents. Neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to in
Section 2 hereof), does or will (i) conflict with or result in a breach of any
provision of the certificate of incorporation or by-laws of the Parent or the
Buyer, (ii) conflict with, result in a breach of, constitute a default or right
or cause of action under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice under
any agreement, contract, lease, license, instrument or other arrangement to
which or by which the Parent or the Buyer is bound or to which any of its assets
is subject (or result in the imposition of any Lien upon any of its assets),
except where such conflict, breach, default, acceleration or other event would
not individually or in the aggregate have a material adverse effect on the
ability of the Parent or the Buyer to fulfill its obligations under this
Agreement, or (iii) violate any Laws to which the Parent or the Buyer or any of
its property is subject. Neither the Parent nor the Buyer is required by
applicable law or other obligation to give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Governmental Authority
or other Person in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 hereof) except where the failure to obtain such
consents,
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approvals, authorizations or permits, or to make such filings or notifications
would not prevent or delay consummation of the Acquisition or otherwise prevent
Parent or Buyer from performing their respective obligations under this
Agreement.
4.4. Brokers' Fees. Neither the Parent nor the Buyer nor any of their
respective Affiliates has any Liability or obligation to pay any fees or
commissions to any broker, finder, investment bank, financial advisor or other
agent with respect to the transactions contemplated by this Agreement for which
the Selling Parties could become liable or obligated, except for fees and
expenses (if any) which shall be solely the responsibility of (and will be paid
by) the Buyer after the Closing.
4.5. Commitment Letters. Parent has previously provided to Escalade
true and correct copies of commitment letters for senior and subordinated
financing issued to the Buyer in connection with the transactions contemplated
hereby (the "Commitment Letters"). Upon obtaining such financing, Buyer and/or
Parent will have sufficient financing to pay the Purchase Price.
4.6. Legal Proceedings. There are no actions, suits or proceedings
instituted, pending or to the Knowledge of Buyer or Parent, threatened against
Buyer or Parent, or against any of their Affiliates or against any property,
asset, interest or right of any of them, either individually or in the
aggregate, that would prevent or delay consummation of the Acquisition or
otherwise prevent Parent or Buyer from performing their respective obligations
under this Agreement. Neither Buyer nor Parent is subject to any judgment,
order, writ, injunction or decree that would prevent or delay consummation of
the Acquisition or otherwise prevent Parent or Buyer from performing their
respective obligations under this Agreement.
4.7. Acquisition Corporation. Buyer was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement. Buyer is, and
shall be at the Closing, a wholly owned direct subsidiary of Parent. Except for
obligations or liabilities incurred in connection with its incorporation and the
transactions contemplated hereby, Buyer has not incurred any obligations or
liabilities or engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
4.8. Certain Information. All information furnished by Buyer or Parent
to Escalade for inclusion in the Proxy Statement relating to the Escalade
Stockholders Meeting will not, on the date the Proxy Statement is first mailed
to stockholders, at the time of the Escalade Stockholders Meeting or at the time
of the Closing, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading, with respect
to any material fact, or shall omit to state any material fact necessary in
order to make such information not false or misleading or omit to state any
material fact necessary to correct any statement regarding such information in
any earlier communication with respect to the solicitation of proxies for the
Escalade Stockholders Meeting which has become false or
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misleading. If at any time prior to the Closing any event relating to Buyer or
Parent or any of their respective affiliates, officers or directors should be
discovered by Buyer or Parent which is required by the Exchange Act to be set
forth in a supplement to the Proxy Statement, Buyer or Parent shall promptly
inform Escalade of such event.
4.9. Certain Other Matters. No stockholder of the Parent owns, directly
or indirectly, 50% or more of the outstanding voting securities of the Parent
within the meaning of the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended (the "HSR Act"). No person or entity has the power to designate
one-half or more of the directors of Parent within the meaning of the HSR Act.
No person or entity has a combination of ownership of voting securities or the
Parent and contractual rights which together allow such person or entity to
designate one-half or more of the directors of the Parent within the meaning of
the HSR Act. The Parent is not controlled, as defined by Section 801.1(b)(1)(i)
and (2) of the rules promulgated under the HSR Act, by any person or persons.
Neither the Parent's net sales for the year ended December 31, 1997 nor the
Parent's total assets as of December 31, 1997 exceeded $100 million.
5. Covenants. The Parties agree as follows:
5.1. General. Each of the Parties will use commercially reasonable
efforts to take all actions and to do all other things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 6 hereof). Without limiting the
generality of the foregoing, subject to the satisfaction or waiver of their
respective conditions to Closing (set forth in Sections 6.1 and 6.2,
respectively), the Parties will execute and deliver at Closing the agreements
and documents contemplated by Section 2.6 hereof.
5.2. Notices and Consents. The Selling Parties and Escalade will use
their best efforts to obtain any and all third party consents that are required
to transfer the Acquired Assets to the Buyer, including without limitation the
consents listed on Sections 3.3(a), 3.3(b) and 5.2 to the Escalade Disclosure
Schedule. The Selling Parties and Escalade will cooperate with and use
commercially reasonable efforts to assist the Buyer in obtaining any other third
party consents that are required to consummate the transactions contemplated
hereby, including without limitation the consents of all third parties necessary
to effect the replacement, renewal or transfer to the Buyer of the Required
Permits. The Selling Parties and Escalade will use their reasonable best efforts
to assist Buyer in obtaining amendments to the STIGA and Spalding licenses and
any other Contracts being assigned to Buyer hereunder which Buyer may reasonably
request. Each of the Buyer, the Selling Parties and Escalade will make any
further filings that may be necessary in connection therewith. From the date of
this Agreement through the Closing, Escalade and the Selling Parties will also
cooperate and use commercially reasonable efforts to assist the Buyer in
successfully transitioning customers of the Business to the Buyer. The Selling
Parties and Escalade will consult and cooperate with the Buyer and Parent
concerning all purchase orders for
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goods and materials to be delivered to Escalade and the Selling Parties after
August 1, 1998 in connection with the Business. The Selling Parties will allow
the Buyer and Parent to review related purchase orders in advance; and, where
feasible, Escalade and the Selling Parties will take such reasonable actions as
the Buyer and Parent may request to replace orders to the extent that such
actions would not involve any significant risk of adverse consequences to
Escalade or the Selling Parties. Escalade and the Selling Parties will also take
such reasonable actions as the Buyer and Parent may request to terminate, prior
to Closing if possible, those contracts which are indicated in Part III of
Section 5.2 of the Escalade Disclosure Schedule as being contracts that the
Parent would prefer to have terminated prior to Closing to the extent that such
actions would not involve any significant risk of adverse consequences to
Escalade or the Selling Parties.
5.3. Release of Liens; Interim Financial Statement Updates.
(a) The Selling Parties and Escalade will cause the relevant
lenders to release in full on the Closing Date any and all Liens on the
Acquired Assets and the Business securing Indebtedness under the Bank
Facility and to prepare and file with the appropriate governmental and
other offices on the Closing Date such instruments as may be required
to effect or evidence such release.
(b) Escalade will cause to be delivered to the Buyer at least
two business days prior to the Closing Date, (i) unaudited consolidated
balance sheets and statements of income, changes in stockholders'
equity and cash flows and (ii) consolidating financial statements, in
each case for the Business prepared in conformity with the past
practice of Escalade and the Selling Parties for each four-week
accounting period completed after May 16, 1998 through the tenth
business day prior to the Closing Date.
5.4. Operation of the Business. From the date of this Agreement through
the Closing, the Selling Parties and Escalade will use commercially reasonable
efforts to keep the Business and the Acquired Assets substantially intact,
including the present operations, physical facilities, working conditions and
relationships with lessors, licensors, licensees, distributors, suppliers,
customers and employees. Without limiting the generality of the foregoing,
during such time period Escalade and the Selling Parties (a) will not without
the written consent of the Buyer (i) engage in any practice, take any action or
enter into any transaction outside the Ordinary Course of the Business, (ii)
declare, set aside or pay any dividend or make any distribution with respect to
its capital stock or redeem, purchase or otherwise acquire any of its capital
stock (iii) otherwise engage in any practice, take any action or enter into any
transaction of the sort described in Section 3.11 or Section 3.28 hereof or
enter into any transaction other than on an arms-length basis or (iv) agree to
take any of the actions described in the preceding clauses (i) through (iii),
and (b) will use commercially reasonable efforts to (i) keep available to the
Buyer the services of each of the officers, employees, agents and independent
contractors employed in connection with or Related to the Business and (ii)
preserve for the benefit of the Buyer the
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goodwill of the customers, suppliers, licensors, landlords, employees and others
Related to the Business.
5.5. Confidentiality Obligations of Buyer. Any information regarding
the Selling Parties and/or Escalade heretofore obtained from or on behalf of the
Selling Parties and/or Escalade (other than as specifically excepted from the
definition of confidential information in the Confidentiality Agreement) shall
be subject to the terms of the Confidentiality Agreement; provided, however,
that (i) upon the effectiveness of the Closing, the obligations of the Buyer and
its affiliates and representatives under the Confidentiality Agreement shall
cease and be of no further effect except with respect to information that is not
Related to the Business and (ii) at or as soon as reasonably practicable after
the Closing, Escalade and the Selling Parties shall assign to the Buyer all of
their rights under any other confidentiality or similar agreements (but only if
and to the extent assignable) with third parties relating in whole or in part to
the sale or proposed sale (whether by asset sale, stock sale, merger or
otherwise) of the Business, and provided, further, that any such information
regarding the Selling Parties and/or Escalade and the transactions contemplated
hereby that is subject to the terms of the Confidentiality Agreement may be
disclosed by Buyer to its current and proposed lenders and other financing
sources, stockholders or investors, accountants, attorneys and other advisors,
and its Affiliates, provided in each case that such recipient agrees to keep
such information confidential to the extent required under the Confidentiality
Agreement.
5.6. Audited Stand-Alone Financial Statements. As soon as reasonably
practicable after the date hereof, and in any event not later than July 1, 1998,
Escalade will deliver to the Buyer copies of the Stand-Alone Financial
Statements, prepared in accordance with GAAP, consistently applied. The
reasonable out-of-pocket audit expense incurred by Escalade in connection with
the preparation of the Audited Stand-Alone Financial Statements will be
reimbursed by the Buyer at Closing.
5.7. Access.
(a) From the date of this Agreement through the Closing, the
Selling Parties and Escalade will permit representatives of the Buyer
and its financing sources to have reasonable access to all premises,
properties, personnel, books, records (including without limitation Tax
records), contracts and documents of or pertaining to the Acquired
Assets or the Business. Such access shall be afforded by the Selling
Parties and Escalade upon receipt of reasonable advance notice and
during normal business hours.
(b) For a period of five years after the Closing Date, the
Selling Parties and their representatives shall have reasonable access
to all of the books and records of the Selling Parties transferred to
the Buyer pursuant to this Agreement to the extent that (i) such access
may reasonably be required by the Selling Parties in connection with
compliance with applicable Tax return filing obligations and (ii) such
other matters as the Selling
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Parties and Escalade may reasonably request from time to time. Such
access shall be afforded by the Buyer upon receipt of reasonable
advance notice and during normal business hours.
5.8. Notice of Developments. Each Party will give prompt written notice
to the other Party of any development causing, or which creates a reasonable
likelihood of causing, a breach of any of its representations, warranties,
covenants or conditions set forth in this Agreement, or an inability of such
Party to deliver the bring-down certificate at Closing as required by Sections
6.1 and 6.2 hereof, as the case may be. No disclosure by any Party pursuant to
this Section 5.8, however, shall be deemed to amend or supplement the Escalade
Disclosure Schedule or to prevent or cure any misrepresentations, breach of
warranty or breach of covenant or to satisfy any closing condition.
5.9. No Solicitation.
(a) The Selling Parties and Escalade shall not, directly or
indirectly, through any officer, director, employee, representative or
agent of any of the Selling Parties, Escalade or any of their
respective Affiliates, (i) solicit, initiate or encourage the
initiation of any inquiries or proposals regarding any merger,
recapitalization, sale of any of the Acquired Assets (other than sales
of inventory in the Ordinary Course of the Business), sale or exchange
of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving Escalade or any of the
Selling Parties other than the Acquisition (any of the foregoing
inquiries or proposals being referred to herein as an "Acquisition
Proposal"), (ii) except as permitted herein, engage in negotiations or
discussions concerning, or provide any nonpublic information to any
person relating to, any Acquisition Proposal or (iii) except as
permitted herein, agree to, approve or recommend any Acquisition
Proposal. Nothing contained in this Section 5.9 shall prevent the Board
of Directors of Escalade from responding to and considering,
negotiating, discussing, approving and recommending to the stockholders
of Escalade a bona fide Acquisition Proposal not solicited in violation
of this Agreement, provided the Board of Directors of Escalade
determines in good faith (based upon the advice of outside counsel)
that both (i) the Acquisition Proposal presents a materially more
favorable financial alternative to Escalade's stockholders than the
Acquisition and (ii) therefore that they are required, by their duties
as fiduciaries to Escalade's stockholders under the corporate law of
the State of Indiana, to respond to and negotiate such alternative
Acquisition Proposal. In the event the Board of Directors makes such
determination, the Board of Directors may approve and recommend such
Acquisition Proposal and terminate Escalade's obligations hereunder
(other than the provisions identified in Section 10.2 hereof as
surviving any such termination) in accordance with the provisions of
Section 10.1(d) hereof; provided, however, that Escalade shall (x)
promptly disclose to the Buyer and Parent the identity of the Person
making the Acquisition Proposal, (y) give the Buyer and Parent a
reasonable opportunity to match the offer contemplated by such
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Acquisition Proposal before making any determination to approve and
recommend any such alternative Acquisition Proposal and (z) give the
Buyer and Parent prompt written notice of the determination of the
Board of Directors to approve and recommend such alternative
Acquisition Proposal. Nothing contained in this Section 5.9 shall
prohibit the Board of Directors of Escalade from complying with Rule
14d-9 and Rule 14e-2 promulgated under the Exchange Act with regard to
a tender or exchange offer.
(b) Escalade shall immediately notify Buyer after receipt of
any Acquisition Proposal, or any material modification of or amendment
to any Acquisition Proposal, or any request for nonpublic information
relating to any of the Selling Parties or any of their respective
subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of Escalade or any Selling Party or
any subsidiary by any person or entity that informs the Board of
Directors of Escalade or any Selling Party or subsidiary that it is
considering making, or has made, an Acquisition Proposal. Such notice
to Buyer shall be made as promptly as practicable, both orally and in
writing, and shall indicate the material terms and conditions of such
Acquisition Proposal or amendment, as well as whether Escalade is
providing or intends to provide the person making the Acquisition
Proposal with access to information as provided in this Section 5.9.
(c) If the Board of Directors of Escalade receives a request
for material nonpublic information by a person who makes, or indicates
that it is considering making, a bona fide Acquisition Proposal, and
the Board of Directors determines in good faith (based upon the advice
of outside counsel) that it is required to cause Escalade to act as
provided in this Section 5.9 in order to discharge properly the
directors' fiduciary duties, then, provided such person has executed a
confidentiality agreement substantially similar to the Confidentiality
Agreement, Escalade may provide such person with access to the
requested information.
(d) Escalade shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons
(other than Buyer and Parent) conducted heretofore with respect to any
of the foregoing. Escalade agrees not to (and further agrees to cause
each of its financial advisors and other agents not to) release any
third party from the confidentiality provisions of any confidentiality
agreement to which Escalade or any of its Affiliates is a party or with
respect to which any of them are third party beneficiaries.
(e) Escalade shall ensure that the officers, directors and
employees of Escalade and the Selling Parties and their respective
subsidiaries and any investment banker or other advisor or
representative retained by Escalade are aware of and abide by the
restrictions described in this Section 5.9.
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5.10. Title Insurance and Surveys. The Selling Parties (at no cost to
the Selling Parties) will cooperate with the Buyer to the extent Buyer elects to
obtain the following title insurance commitments, policies, riders, opinions and
surveys in preparation for the Closing, each to be obtained, if at all, within
thirty (30) days from the date hereof:
(a) With respect to each parcel of Owned Real Property Related
to the Business, an ALTA Owner's Policy of Title Insurance Form B-1987
(or equivalent policy acceptable to the Buyer if the real property is
located in a state in which an ALTA Owner's Policy of Title Insurance
Form B-1987 is not available) issued by a title insurer satisfactory to
the Buyer (and, if requested by the Buyer, reinsured in whole or in
part by one or more insurance companies and pursuant to a direct access
agreement acceptable to the Buyer), in such amount as the Buyer may
reasonably determine to be the fair market value of such real property
(including all improvements located thereon), insuring title to such
real property to be in the Buyer as of the Closing;
(b) With respect to each parcel of Owned Real Property Related
to the Business, the Buyer shall have the right to procure a current
survey of such parcel certified to the Buyer, prepared by a licensed
surveyor and conforming to current ALTA Minimum Detail Requirements for
Land Title Surveys, disclosing the location of all improvements,
easements, party walls, sidewalks, roadways, utility lines, and other
matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads, which survey shall be
reasonably satisfactory to the Buyer; and
(c) With respect to each parcel of Leased Real Property
Related to the Business and which is listed on Section 3.16(b) of the
Escalade Disclosure Schedule as a property for which a title insurance
policy is to be procured, an ALTA Leasehold Owner's Policy of Title
Insurance - 1987 (or equivalent policy acceptable to the Buyer if the
real property is located in a state in which an ALTA Leasehold Owner's
Policy of Title Insurance - 1987 is not available) issued by a title
insurer satisfactory to the Buyer (and, if requested by the Buyer,
reinsured in whole or in part by one or more insurance companies and
pursuant to a direct access agreement acceptable to the Buyer) in such
amount as the Buyer may reasonably determine (taking into account the
time cost of money using the Applicable Rate as the discount rate and
such other factors as whether the fair market rental value of the
premises exceeds the stipulated consideration in the lease or sublease,
whether the tenant or subtenant has any option to renew or extend,
whether the tenant or subtenant owns any improvements located on the
premises, whether the tenant or subtenant is permitted to sublease, and
whether the tenant or subtenant would owe any amount under the lease or
sublease if evicted), insuring title to the leasehold or subleasehold
estate to be in the Buyer as to the Closing.
Each title insurance policy delivered under Section 5.10(a) and Section 5.10(c)
above shall (i) insure title to the real property and all recorded easements
benefitting such real property,
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(ii) contain an "extended coverage endorsement" insuring over the general
exceptions contained customarily in such policies, (iii) contain an ALTA Zoning
Endorsement 3.1 (or equivalent), (iv) contain an endorsement insuring that each
street adjacent to the real property is a public street and that there is direct
and unencumbered pedestrian and vehicular access to such street from the real
property, (v) contain an inflation endorsement providing for annual adjustments
in the amount of coverage corresponding to the annual percentage increase, if
any, in the United States Department of Commerce Composite Construction Cost
Index, (vi) if the real property consists of more than one record parcel,
contain a "contiguity" endorsement insuring that all of the record parcels are
contiguous to one another and (vii) contain a "non-imputation" endorsement to
the effect that title defects known to the officers, directors and stockholders
of the owner prior to the Closing shall not be deemed "facts known to the
insured" for purposes of the policy and (viii) contain an endorsement insuring
that each parcel of owned real property described in each of the title insurance
policies is the same real estate as shown on each of the Surveys delivered under
Section 5.10(b) with respect to such property.
(d) If the title insurance policies and surveys obtained under
this Section 5.10 contain any matters which the Buyer, in its sole
discretion reasonably exercised, finds objectionable ("Title
Objections"), the Buyer shall notify the Selling Parties of its Title
Objections in one or more written notices ("Objection Notices") within
thirty-five (35) days of the date of this Agreement. Upon receiving
(each of) the Buyer's Objection Notices, the Selling Parties shall have
a period of thirty (30) days to make all reasonable efforts to cure
Buyer's Title Objections to the Buyer's satisfaction, spending all
necessary funds, instituting and prosecuting any action or proceeding,
and otherwise taking any and all measures to cure or remove the Buyer's
Title Objections. In no event, however, shall the Selling Parties be
obligated to spend more than $100,000 to cure such matters. If the
Selling Parties are unable to cure the Buyer's Title Objections after
having used all reasonable efforts to do so, then the Selling Parties
shall promptly notify the Buyer in writing of such inability to cure,
and the Buyer shall then have ten (10) days after receipt of such
written notice from the Selling Parties to elect, at the Buyer's sole
option, between the following alternatives:
(i) accept title to the Owned Real Property or Leased Real
Property, as the case may be, subject to the Title Objections
without any diminution in consideration paid therefor to the
Selling Parties; or
(ii) terminate this Agreement by written notice to the Selling
Parties.
If the Buyer does not provide timely notice to the Selling Parties of
its Title Objections or elects to accept title notwithstanding any Title
Objections which it may have, then all matters shown on the title commitments
and surveys shall be and become "Permitted Exceptions."
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Notwithstanding the foregoing, the Selling Parties shall on or before
the Closing Date remove and discharge from the title to all of the Owned Real
Property any mortgage, deed of trust, financing statement, lien, or judgment or
other encumbrance or title exception of a monetary nature (collectively,
"Monetary Liens").
(e) With respect to each parcel of Real Property located
outside the United States and included in the Acquired Assets or owned
by any Transferred Foreign Subsidiary, Escalade shall provide to the
Buyer prior to Closing local counsel opinions with respect to title and
other matters in form and substance satisfactory to the Buyer and as
are customary in such jurisdictions.
(f) The out-of-pocket costs and expenses incurred in
connection with the title insurance policies, surveys and legal
opinions obtained pursuant to this Section 5.10 shall be paid by the
Buyer at Closing.
5.11. [Reserved.]
5.12. Employment Matters; Benefits.
(a) General. Buyer intends to offer employment to
substantially all employees of the Selling Parties who are actively at
work on the Closing Date and, at least five business days prior to
Closing, the Buyer will provide to Escalade a list of all of the
employees of the Selling Parties to whom the Buyer intends to offer
employment at Closing (the "Designated Employees"). As of the
commencement of any Designated Employee's employment with the Buyer,
such Designated Employee's employment with any Selling Party shall
cease. Employment of certain of the Designated Employees may be
contingent on such Designated Employee entering into an Employment and
Noncompetition Agreement mutually satisfactory to the Buyer and such
Designated Employees. Except as otherwise expressly provided in the
Agreement, each Selling Party shall be responsible for all Liabilities
with respect to any employees of such Selling Party who (i) are not
Designated Employees or (ii) do not accept employment with the Buyer,
including without limitation Liabilities with respect to termination of
employment. Buyer intends to provide to those Designated Employees who
accept employment as contemplated hereby base salary and medical,
welfare and retirement benefits which in the aggregate are
substantially similar to those currently offered by the Selling Parties
for a period lasting at least through December 31, 1998; provided,
however, that nothing contained herein is intended or shall be
construed to provide to any Designated Employee any right to employment
or continued employment for any specified period, or to limit the
ability of the Buyer to amend, merge or terminate any one or more of
the Assigned Plans at any time.
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(b) 401(k)/125 Elections. In connection with the assumption
of the Indian Industries/Harvard Sports 401(k) Plan and the Indian
Industries Employee Benefit Redirection Plan, all elections made under
such plans by Designated Employees prior to the Closing shall remain in
effect after Closing unless and until changed in accordance
with such plans.
(c) WARN Compliance, etc. Escalade and/or the Selling Parties
shall be responsible for providing any notice to the employees of
Escalade and/or the Selling Parties and their authorized
representatives required by the Workers Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN"), or any state
plant closing or notification law, as a result of any employment
actions taken at any time prior to Closing and Buyer shall be
responsible for providing any notice to employees of Escalade and/or
the Selling Parties and their authorized representatives required by
WARN or any state plant closing or notification law, as a result of any
employment actions taken at any time after Closing. Escalade and the
Selling Parties will not furlough, layoff or terminate the employment
of any employees of Escalade and/or the Selling Parties employed in the
Business, other than "for cause", as set forth at 29 U.S.C. Section
2101(a)(6), at any time prior to Closing without the prior consent of
Buyer. Escalade shall indemnify the Buyer from and against, any Losses
which may be incurred by Buyer as a result of Escalade's and/or the
Selling Parties' failure to provide any notice required by this Section
5.12(c) and the Buyer shall indemnify Escalade and the Selling Parties
from and against any Losses which may be incurred by any of them as a
result of Buyer's failure to provide any notice required by this
Section 5.12(c). Upon request, Escalade will promptly provide to the
Buyer complete information regarding all layoffs, terminations,
furloughs and firings that have occurred since January 1, 1998 and any
other information that the Buyer may reasonably request to permit the
Buyer to comply with WARN or any state plant closing or notification
law.
(d) Prior Service Credits. Buyer shall recognize service with
the Selling Parties for all purposes where service is relevant under
any Assigned Plan or under any other fringe benefit plan offered to
Designated Employees by the Buyer, including without limitation,
eligibility for benefits, vesting, computation of vacation accruals and
sick leave and calculation of waiting periods under a disability plan).
In addition, Buyer shall use its reasonable best efforts to recognize
and provide credit for any deductibles paid by participants and
dependents for the current plan year in any Assigned Plan.
(e) Vacation. Buyer shall recognize and credit for the benefit
of each Designated Employee who accepts employment with the Buyer his
or her vacation time that is accrued under the policies of the Selling
Parties in effect on the date of this Agreement but unused as of the
Closing Date.
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(f) Certain Medical Expenses. Buyer shall cause to be paid
under the Assigned Plan Indian Health Insurance Plan #501 claims
described under (A) or (B) below, where (A) is the claims properly
payable under such plan that were incurred prior to Closing but not
paid as of the Closing with respect to participants and beneficiaries
other than those described in (B) below; and (B) is claims properly
payable with respect to participants and beneficiaries under such plan
who are covered pursuant to their exercise of rights under COBRA with
respect to a qualifying event occurring prior to or in connection with
the Closing which have not been paid as of the Closing; provided,
however, that Escalade shall reimburse the Buyer within 60 days of
request for payment for: (x) claims paid under (A) above which exceed
the amount of assets available to Buyer for payment under the VEBA
Trust associated with such plan as of the Closing, (y) claims paid
under (B) above to the extent they exceed the sum of the premiums
received by Buyer with respect to such participants plus any assets
remaining in the VEBA Trust available to Buyer for payment after all
claims described in (A) above are paid, and (z) any additional
reasonable administrative costs incurred by Buyer that would not have
been incurred but for its agreement to undertake payment under this
paragraph, including, without limitation, employee expenses and
additional service charges. In addition, at Closing, Escalade will
cause the VEBA Trust associated with the Indian Industries Plan #501 to
be funded in a manner sufficient to cover estimated claims payable
under (A) and (B) above, as determined by the Buyer and Escalade after
consultation with the independent plan administrator for such Plan. An
amount equal to the excess, if any, of (1) the amount in such VEBA
Trust at Closing over (2) the amount of claims payable under (A) and
(B) above shall be promptly returned to Escalade after final
determination of such claims payable; provided, that such returnable
amount shall be reduced by any amount owed to the Buyer under (z)
above.
5.13. [Reserved.]
5.14. Change of Corporate Name. The parties intend that from and after
the Closing Date, each of Escalade and the Selling Parties shall change its
corporate name. Escalade shall change its name to Martin Yale Group, Inc. or
such name as is acceptable to Buyer and each Selling Party shall change its name
to a name acceptable to Buyer. Accordingly, at Closing, each of the Selling
Parties and Escalade shall deliver to the Buyer a duly executed and acknowledged
certificate of amendment to its charter or other appropriate document which is
required to change Escalade's corporate name (from and after the Closing Date).
Following Escalade's receipt of the Purchase Price, Escalade will immediately
cause to be filed such certificates or other documents in order to effectuate
such changes of names. Each Selling Party and Escalade will execute and deliver,
from time to time promptly upon request, such additional documents as may be
required to give effect to such name change and to permit the Buyer to use fully
the names listed in Section 2.1(k) of the Escalade Disclosure Schedule and any
variations or derivatives that Buyer may elect.
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5.15. Bulk Sales Compliance. All Parties hereby waive compliance with
the provisions of the bulk transfer laws in any jurisdiction. No Party shall be
under any obligation to comply with any such bulk transfer law.
5.16. Sales and Use Taxes and Tax Clearance Certificates. Each of
Escalade and the Buyer agrees to pay one-half of all sales and use Taxes on the
transfer of the Acquired Assets hereunder. Escalade and the Selling Parties will
apply for sales and use tax clearance certificates from the relevant
Governmental Authorities. Escalade and the Selling Parties will use their
commercially reasonable efforts to obtain each such certificates on or prior to
the Closing Date.
5.17. Section 338 Election and other Tax Matters. (a) Escalade, the
Transferred Foreign Subsidiaries, and the Selling Parties recognize that the
Buyer may make an election under Code section 338 with respect to the sale of
the stock of either or both of the Transferred Foreign Subsidiaries hereunder.
(b) If Escalade or a Selling Party desires to transfer certain Acquired
Assets (the "Exchange Assets") in a like-kind exchange under section 1031 of the
Code (the "Exchange"), Buyer will, upon written notification by Escalade or a
Selling Party not later than four business days prior to the Closing, pay that
portion of the Purchase Price allocable to the Exchange Assets to a Person
designated by Escalade or a Selling Party, which Person in the opinion of
Escalade constitutes a "qualified intermediary" (as defined in Treasury
Regulation section 1.1031(k)-1(g)(4)), which payment shall satisfy the Buyer's
obligation to make payment for the Exchange Assets, and will otherwise use
commercially reasonable efforts to cooperate with Escalade and the Selling
Parties in the effectuation of the Exchange, provided that (i) Buyer incurs no
additional costs, expenses, liabilities, obligations or other financial exposure
with respect to the Exchange Assets or the Exchange; (ii) neither the Exchange
nor the assignment of the portion of the Purchase Price allocable to the
Exchange Assets, as discussed above, relieves Escalade or any Selling Party of
any of its duties or obligations herein and Buyer's rights, including, without
limitation, Buyer's rights as a result of the representations, warranties,
covenants or agreements made under this Agreement, and Buyer's rights under any
noncompetition agreement, are preserved to the satisfaction of Buyer; and (iii)
except for the obligation of Buyer set forth in this subsection upon timely
written notification to by Escalade or a Selling Party to pay a portion of the
Purchase Price to the Person designated by Escalade or a Selling Party, Buyer
has no liability or obligation to Escalade or any Selling Party for the failure
of the contemplated exchange to qualify as a like-kind exchange under Section
1031 of the Code.
(c) The Buyer, Escalade, the Transferred Foreign Subsidiaries, and each
of the Selling Parties will cooperate with each other, including by providing
such information and records as may be reasonably requested, in connection with
the preparation of any Tax Return or any Tax audit or proceeding.
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(d) Escalade and the Selling Parties shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the Transferred
Foreign Subsidiaries for all periods ending on or prior to the Closing Date
which are filed after the Closing Date. Escalade and the Selling Parties shall,
at the request of Buyer, permit Buyer to review and comment on each such Tax
Return described in the preceding sentence prior to filing.
5.18. Further Assurances. At any time and from time to time, at the
request of the Buyer and without further consideration, the Selling Parties and
Escalade will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as the Buyer may
reasonably determine is appropriate to transfer, convey and assign to the Buyer,
and to confirm the Buyer's title to or interest in the Acquired Assets and to
put the Buyer in actual possession and operating control thereof free and clear
of all Liens. At any time and from time to time, at the request of the Buyer and
without further consideration, Escalade and the Selling Parties will fully
cooperate with the Buyer in connection with preparation of any audited financial
statements in accordance with Regulation S-X promulgated under the Securities
Act with respect to the Business which might be required for any filings of the
Buyer or its Affiliates with the Securities and Exchange Commission (the
"Commission").
5.19. [Reserved.]
5.20. [Reserved.]
5.21. Continued Existence. Escalade agrees not to take any action prior
to the fifth anniversary of the Closing Date which would be reasonably likely to
impair its ability to fulfill its obligations under this Agreement, including
without limitation undertaking any Extraordinary Dividend, voluntary dissolution
or liquidation, any merger or consolidation (in which it is not the surviving
entity) or any sale of all or substantially all of its stock or assets, unless
prior to the consummation of such action Escalade delivers or causes to be
delivered to a mutually acceptable bank, which will serve as a letter of credit
escrow agent on terms mutually acceptable to Escalade, the Buyer and such bank,
an irrevocable letter of credit in an amount equal to $8.0 million minus any
indemnification payments made by Escalade pursuant to Section 9.2(a) prior to
the date thereof and having drawing and other terms and conditions reasonably
satisfactory to Escalade and the Buyer. Such letter of credit shall be issued by
a financial institution of national reputation which in the aggregate owns and
invests on a discretionary basis at least $1 billion in securities and which has
a net worth of at least $100 million, and shall be drawn from time to time in
payment of any future indemnification payments determined to be payable by
Escalade pursuant to Section 9.2. The letter of credit shall terminate upon the
later of the fifth anniversary of the Closing Date or the final resolution of
any demands for indemnification pending as of such fifth anniversary, provided
that on the fifth anniversary if any claims are pending, the amount of the
letter of credit may be reduced to the maximum amount that could be payable upon
such claims.
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5.22. Proxy Statement.
(a) Within seven business days following the date of this
Agreement, Escalade shall prepare and file the Proxy Statement and
shall use all reasonable efforts to have the Proxy Statement cleared by
the Commission as promptly as practicable, and, in addition, shall also
take any action required to be taken under applicable law in connection
with the consummation of the transactions contemplated by this
Agreement. Escalade will provide the Buyer with a draft of the Proxy
Statement and a reasonable opportunity to comment thereon prior to such
filing. The Proxy Statement will conform to all applicable Laws.
Escalade and the Selling Parties shall promptly take such other
actions, as may reasonably be requested by the Buyer in connection with
the provisions of this Section 5.22.
(b) Prior to the date of approval of the Acquisition by
Escalade's stockholders, Escalade shall correct promptly any
information in the Proxy Statement that shall have become false or
misleading in any material respect and shall take all steps necessary
to file with the Commission and have cleared by the Commission any
amendment or supplement to the Proxy Statement as so corrected to be
disseminated to the stockholders of Escalade to the extent required by
applicable law. Without limiting the generality of the foregoing,
Escalade shall notify the Buyer and Parent promptly of the receipt of
the comments of the Commission and of any request by the Commission for
amendments or supplements to the Proxy Statement, or for additional
information, and shall supply the Buyer and Parent with copies of all
correspondence between Escalade or its representatives, on the one
hand, and the Commission or members of its staff, on the other hand,
with respect to the Proxy Statement. If at any time prior to Escalade
Stockholders Meeting (as defined in Section 3.4 hereof) any event
should occur relating to Escalade, Buyer or Parent or their respective
officers or directors which is required to be described in an amendment
or supplement to the Proxy Statement, the parties shall promptly inform
each other. Whenever any event occurs which is required to be described
in an amendment or a supplement to the Proxy Statement, Escalade, Buyer
and Parent shall, upon learning of such event, cooperate in promptly
preparing, filing and clearing with the Commission and mailing to the
stockholders of Escalade such amendment or supplement; provided,
however, that, prior to such mailing, (i) Escalade and Parent shall
consult with each other with respect to such amendment or supplement,
(ii) shall afford each other reasonable opportunity to comment thereon
and (iii) each such amendment or supplement shall be reasonably
satisfactory to the other.
5.23. Stockholders Meeting. Escalade shall call and hold the Escalade
Stockholders Meeting as promptly as practicable and in accordance with
applicable laws for the purpose of voting upon the approval of the Acquisition,
the adoption of this Agreement, the change of corporate name of Escalade
contemplated by Section 5.14 and such other matters as may be required. Unless
otherwise required under the standards set forth in Section 5.9 as determined by
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Escalade's Board of Directors in good faith, the Board of Directors of Escalade
shall (i) recommend approval of the transactions contemplated by this Agreement
by the stockholders of Escalade and include in the Proxy Statement such
recommendation and (ii) use all reasonable efforts to solicit from stockholders
of Escalade proxies in favor of adoption of this Agreement and approval of the
transactions contemplated hereby, and shall take all other action necessary or
advisable to secure the vote or consent of stockholders to obtain such
approvals.
6. Conditions to Obligation to Close.
6.1. Conditions to Obligations of the Buyer and Parent. The obligations
of the Buyer and Parent to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction or waiver at or prior to
the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 3 hereof shall be true and correct when
made and shall be true and correct as of the Closing Date (except for
representations and warranties as are expressly made only as of another
specified date, which shall be true and correct as of such other date);
(b) Performance by Escalade and the Selling Parties. Each of
Escalade and the Selling Parties shall have performed and complied with
all of its covenants, agreements and obligations hereunder through the
Closing;
(c) Absence of Litigation. No action, suit or proceeding shall
be pending or threatened before any Governmental Authority wherein an
unfavorable injunction, judgment, order, decree, ruling or charge could
reasonably be expected to (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own
the Acquired Assets or to operate the Business (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect);
(d) No Material Adverse Change. Since December 27, 1997, there
shall not have been any change, circumstance or event which constitutes
or has resulted in, or that is reasonably likely to result in, a
Material Adverse Effect other than any Material Adverse Effect that:
(i) arises predominantly by reason of a general deterioration in the
economy or in the sporting goods industry after the date of this
Agreement or (ii) arises predominantly out of either the disclosure of
the fact that it is the Parent or the Buyer that is the prospective
acquiror of the Business or out of any action taken by the Parent or
the Buyer after the date hereof and does not arise out of or relate to
any act or omission by Escalade or any of its Affiliates;
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(e) Certificates. Escalade and the Selling Parties shall have
delivered to the Buyer a certificate, executed by the chief executive
officer or chief financial officer of each of Escalade and the Selling
Parties, to the effect that each of the conditions specified above in
Section 6.1(a)-(d) is satisfied in all respects;
(f) Consents. Escalade and the Selling Parties shall have
procured all of the governmental approvals, consents or authorizations
and third party consents specified in Section 3.3(a) and 3.3(b) to the
Escalade Disclosure Schedule;
(g) Bank Facility. Escalade and the Selling Parties shall have
obtained any required consent of any lenders, including without
limitation Bank One, Indianapolis, N.A. ("Bank One") and the other
lenders under the Bank Facility. Bank One and the other lenders under
the Bank Facility and any other financing sources shall have terminated
any and all liens and security interests relating to the Acquired
Assets and the Business relating to obligations under the Bank Facility
or other agreements and the release of the Transferred Foreign
Subsidiaries from any claims and the discharge of any of their
respective obligations relating to the Bank Facility or such other
agreements;
(h) Financing. The Buyer shall have obtained on terms and
conditions consistent with the Commitment Letters and otherwise
satisfactory to it all of the financing it needs in order to consummate
the transactions contemplated hereby and the lenders shall have
provided the funds contemplated thereby;
(i) Opinion. The Buyer shall have received from counsel to
Escalade and the Selling Parties opinions (including opinions of local
and foreign counsel) substantially in the forms previously provided by
Buyer to Escalade and the Selling Parties, addressed to the Buyer and
dated as of the Closing Date;
(j) Stockholder Approval. This Agreement and the Acquisition
shall have been approved and adopted by the requisite vote of the
stockholders of Escalade;
(k) [Reserved];
(l) [Reserved];
(m) Stand-Alone Audited Financial Statements The Stand-Alone
Financial Statements shall be substantially consistent with the
unaudited stand-alone financial information regarding the Business
previously provided by Escalade to the Parent (provided, however, that
unless the Buyer has stated its objection to the Stand-Alone Financial
Statements in writing within 10 business days following receipt thereof
pursuant to Section 5.6 hereof the condition to closing set forth in
this Section 6.1(m) shall be deemed to have been satisfied);
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(n) FIRPTA Certificate. Escalade and each of the Selling
Parties shall have delivered to the Buyer, in form and manner
satisfactory to the Buyer, a statement certifying, respectively,
Escalade's or the Selling Party's status as a U.S. person and
providing, respectively, Escalade's or the Selling Party's U.S.
taxpayer identification number, as contemplated by Section 1445(b)(2)
of the Code; and
(o) All Necessary Actions. All actions to be taken by Escalade
and the Selling Parties in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer.
The Parent and the Buyer may waive any condition specified in this Section 6.1
if they execute a writing so stating at or prior to the Closing and such waiver
shall not be considered a waiver of any other provision in this Agreement unless
the writing specifically so states.
6.2. Conditions to Obligations of Escalade and the Selling Parties. The
obligation of Escalade and each of the Selling Parties to consummate the
transactions to be performed by it in connection with the Closing is subject to
satisfaction or waiver at or prior to the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 4 hereof shall be true and correct when
made and shall be true and correct as of the Closing Date (except for
representations and warranties as are hereunder expressly made only as
of another specified date, which shall be true and correct as of such
other date);
(b) Performance by the Parent and the Buyer. Each of the
Parent and the Buyer shall have performed and complied with all of its
covenants, agreements and obligations hereunder through the Closing;
(c) Absence of Litigation. No action, suit or proceeding shall
be pending or threatened before any Governmental Authority wherein an
unfavorable injunction, judgment, order, decree, ruling or charge could
reasonably be expected to (i) prevent consummation of any of the
transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect);
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(d) Certificates. Each of the Parent and the Buyer shall have
delivered to Escalade a certificate of its chief executive officer or
chief financial officer, to the effect that each of the conditions
specified above in Section 6.2(a)-(c) is satisfied in all respects;
(e) Opinion. Escalade shall have received from counsel to the
Parent and the Buyer an opinion substantially in the form previously
provided by Escalade to the Parent and the Buyer, addressed to Escalade
and dated as of the Closing Date;
(f) Stockholder Approval. This Agreement and the Acquisition
and the change of Escalade's corporate name as contemplated by Section
5.14 hereof shall have been approved and adopted by vote of holders of
a majority of the outstanding common stock of Escalade; and
(g) All Necessary Actions. All actions to be taken by the
Buyer and the Parent in connection with the consummation of the
transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Escalade and the Selling Parties.
Escalade may waive, on behalf of the Selling Parties, any condition specified in
this Section 6.2 if it executes a writing so stating at or prior to the Closing
and such waiver shall not be considered a waiver of any other provision in this
Agreement unless the writing specifically so states.
7. Confidentiality Obligation of Selling Parties. For a period of three years
from and after the Closing, each of Escalade and the Selling Parties will treat
and hold as such all of the Confidential Information, refrain from using or
disclosing any of the Confidential Information, except to their counsel,
accountants and representatives in connection with this Agreement, and upon
termination of this Agreement pursuant to Section 10 hereof, deliver promptly to
the Buyer (or at the request and option of the Buyer destroy) all tangible
embodiments (and all copies) of the Confidential Information which are in their
possession. In the event that any of Escalade and the Selling Parties is
requested or required by any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process to disclose any Confidential
Information, such Person will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 7. If, in the absence of a
protective order or the receipt of a waiver hereunder, Escalade or any of the
Selling Parties is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, such
Person may disclose the Confidential Information to the tribunal; provided,
however, that such Person shall use commercially reasonable efforts to obtain,
at the request of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate.
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8. Noncompetition.
(a) Each of Escalade and the Selling Parties agree that, in
consideration of the purchase by the Buyer hereunder, it and they shall not, on
or prior to the date which is five years after the Closing Date, directly or
indirectly, run, own, manage, operate, control, be employed by, provide
consulting services to, participate in, lend their name to, invest in or be
connected in any manner with the management, ownership, operation or control of
any business, venture or activity which competes, directly or indirectly, in
whole or in part, with the Business as conducted at the Closing Date by
Escalade, The Transferred Foreign Subsidiaries and the Selling Parties or
otherwise design, manufacture, sell or distribute products or provide services
similar to those of the Products.
(b) Each of Escalade and the Selling Parties further agree that for a
period of five years after the Closing Date such Person will not directly or
indirectly without the prior written consent of the Buyer, recruit, offer
employment, employ, engage as a consultant, lure or entice away or in any other
manner persuade or attempt to persuade any Designated Employee, or any other
employee of the Buyer (including the Business sold to the Buyer hereunder) or
any Subsidiary, group or division of the Buyer or any Affiliate thereof
(including the Buyer), to leave the employ of the Buyer, provided, however, that
Escalade and the Selling Parties may employ or engage as a consultant any such
Person: (i) who is not offered employment by the Buyer as of the Closing Date or
who is hired by the Buyer the employment of whom is subsequently terminated by
the Buyer thereafter or (ii) who initiates contact with Escalade or any Selling
Party regarding potential employment on his or her own initiative without any
direct or indirect solicitation by or encouragement from Escalade or any Selling
Party or who responds to an advertisement Escalade or any Selling Party has
placed in a newspaper, trade journal or other publication with respect to
employment opportunities without any direct or indirect encouragement from
Escalade or any Selling Party, provided, however, that in the case of any hiring
of the type contemplated by clauses (ii) above, Escalade or the Selling Party,
as the case may be, will refrain from making any offer to hire until at least
six months after such Person's employment with the Buyer is terminated.
9. Indemnification.
9.1. Survival of Representations and Warranties. All of the
representations and warranties of each of Escalade and the Selling Parties
(except for those contained in Sections 3.1 (Organization of the Selling
Parties), 3.2 (Authorization of Transaction), 3.5 (Brokers' Fees), 3.6 (Title to
Assets), 3.15 (Taxes), 3.26 (Employee Benefits), 3.27 (Environment), and 3.35
(Disclosure) hereof) contained in this Agreement or in any document, certificate
or other instrument required to be delivered hereunder shall survive the Closing
and continue in full force and effect until the date which is the earlier of (x)
60 days following the availability of audited financial statements for the
fiscal period ended December 31, 1999 for the Business as then
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conducted by the Buyer and (y) June 30, 2000. The representations and warranties
of each of Escalade and the Selling Parties contained in Section 3.27 hereof
shall survive the Closing and shall continue in full force and effect for a
period of three years thereafter. The representations and warranties of each of
Escalade and the Selling Parties contained in Sections 3.1, 3.2, 3.5, 3.6, 3.15,
3.26 and 3.35 hereof shall survive the Closing and shall continue in full force
and effect without limit as to time (subject to any applicable statutes of
limitations and any extensions or waivers thereof). All of the representations
and warranties of the Buyer (except for those contained in Sections 4.1
(Organization of the Buyer), 4.2 (Authorization of Transaction) and 4.4
(Brokers' Fees) hereof) contained in this Agreement or in any document,
certificate or other instrument required to be delivered hereunder shall survive
the Closing and continue in full force and effect until the date which is which
is 60 days following the availability of audited financial statements for the
fiscal period ended December 31, 1999 for the Business as then conducted by the
Buyer. The representations and warranties of the Buyer contained in Sections
4.1, 4.2 and 4.4 hereof shall survive the Closing and shall continue in full
force and effect without limit as to time (subject to any applicable statutes of
limitations and any extensions or waivers thereof). The termination of any such
representation and warranty of Escalade or any of the Selling Parties or the
Buyer, as the case may be, however, shall not affect any claim for breaches of
representations or warranties if written notice thereof is given to the
breaching party or parties prior to the relevant termination date. All
covenants, agreements and indemnities of Escalade, any of the Selling Parties
and the Buyer contained in this Agreement or in any document, certificate or
other instrument required to be delivered hereunder shall, unless otherwise
specifically provided herein or therein, survive the Closing and continue in
full force forever.
9.2. Indemnity by Escalade and the Selling Parties. Each of Escalade
and the Selling Parties hereby jointly and severally indemnify and agree to
defend and hold harmless the Buyer, the Parent, and their respective directors,
officers and Affiliates from, against and in respect of all Liabilities,
obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings,
damages, dues, assessments, Taxes, losses, fines, penalties, injuries,
deficiencies, demands, expenses, fees, costs, amounts paid in settlement
(including reasonable attorneys' and expert witness fees and disbursements in
connection with investigating, defending or settling any action or threatened
action), arising out of any claim, complaint, demand, cause of action, audit,
investigation, hearing, action, suit or other proceeding asserted or initiated
or otherwise existing in respect of any matter (collectively, "Losses") that
result from:
(a) (x) The inaccuracy of any representation or warranty made
by Escalade or any of the Selling Parties herein, including as a result
of any misrepresentation in or omission from any schedule, document,
certificate or other instrument required to be furnished by Escalade or
any of the Selling Parties hereunder (in each case, as such
representations and warranties would read if all references to
materiality and Material Adverse Effect were deleted therefrom) or (y)
any Liability retained by Escalade and the Selling Parties pursuant to
Section 2.4(o) hereof; provided, however, that (i) each of Escalade and
the Selling Parties shall be liable under this Section 9.2(a) in
respect of Losses only to the
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extent that the aggregate amount of such Losses exceeds $750,000 and
(ii) the liability of Escalade and the Selling Parties under this
Section 9.2(a) in respect of Losses shall not exceed $8,000,000;
provided, further, that the $750,000 threshold set forth in clause (i)
above shall not apply to any Losses that result from the inaccuracy of
any representation or warranty made by Escalade or any of the Selling
Parties contained in Sections 3.1, 3.2, 3.5, 3.15, 3.26 and 3.27
hereof, or any claim based on fraud or any Liability retained by
Escalade and the Selling Parties pursuant to Section 2.4(o) hereof and
the $8,000,000 limit set forth in clause (ii) above shall not apply to
any Losses that result from the inaccuracy of any representation or
warranty made by Escalade or any of the Selling Parties contained in
Sections 3.1, 3.2, 3.5 and 3.15 hereof, or any claim based on fraud;
(b) The breach or nonfulfillment of any agreement or covenant
of Escalade or any of the Selling Parties contained herein or in any
agreement or instrument entered into by Escalade or any of the Selling
Parties in connection herewith; and
(c) Any Liability of Escalade or any of the Selling Parties
which is not an Assumed Liability (including, without limitation, any
such Liability of Escalade or any of the Selling Parties that becomes a
Liability of the Buyer under any bulk transfer law of any jurisdiction,
under any common law doctrine of de facto merger or successor
liability, or otherwise by operation of Law) and any Taxes of the
Transferred Foreign Subsidiaries attributable to any tax period or
portion thereof through the Closing Date, but excepting therefrom any
Liabilities retained by Escalade and the Selling Parties pursuant to
Section 2.4(o) hereof (which Liabilities are covered by clause 9.2(a)
above).
In the event that Escalade or any of the Selling Parties may be obliged to
indemnify the same Party under both subsection (a) and subsection (b) or (c) of
this Section 9.2, their obligation under subsection (b) or (c) shall be
controlling and the time and dollar limitations (if any) provided in Sections
9.1 and 9.2(a) hereof relating to their obligations in respect of Losses
resulting from the inaccuracy of any representation and warranty, or any
misrepresentation or breach of warranty as described in Section 9.2(a) hereof
shall not apply. Any claim for indemnification brought pursuant to Section
9.2(b) or (c) must be brought within the applicable statute of limitations and
any extensions or waivers thereof. Notwithstanding any provision of this
Agreement to the contrary, any claim with respect to Environmental Liabilities
and Costs retained by Escalade and the Selling Parties pursuant to Section
2.4(o) must be brought within three years of the Closing Date. The Buyer on
behalf of Parent or itself shall provide Escalade and the Selling Parties with
written notice of any claim made in respect of the indemnification provided in
this Section 9.2, whether or not arising out of a claim by a third party.
9.3. Indemnity by the Buyer and the Parent. Each of the Buyer and
Parent hereby indemnifies and agrees to defend and hold harmless each of
Escalade and the Selling Parties and their respective directors, officers and
Affiliates from, against and in respect of all Losses that result from:
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(a) The inaccuracy of any representation or warranty made by
the Buyer or Parent herein, including as a result of any
misrepresentation in or omission from any schedule, document,
certificate or other instrument required to be furnished by the Buyer
or Parent hereunder (in each case, as such representations and
warranties would read if all references to materiality and Material
Adverse Effect were deleted therefrom); provided, however, that (i) the
Buyer and Parent shall be liable under this Section 9.3(a) in respect
of Losses only to the extent that the aggregate amount of such Losses
exceeds $750,000 and (ii) the Buyer's and Parent's liability under this
Section 9.3(a) in respect of Losses shall not exceed $8,000,000;
provided, further, that the $750,000 threshold set forth in clause (i)
above and the $8,000,000 limit set forth in clause (ii) above shall not
apply to any Losses that result from the inaccuracy of any
representation or warranty made by the Buyer contained in Sections 4.1,
4.2 and 4.4 hereof or any claim based on fraud;
(b) The breach or nonfulfillment of any agreement or covenant
of the Buyer or Parent contained herein or in any agreement or
instrument entered into by the Buyer or Parent in connection herewith;
and
(c) Any Liability of the Buyer or Parent which is an Assumed
Liability and any Liability relating to the ownership and use of the
Acquired Assets by the Buyer or Parent following the Closing Date.
In the event that the Buyer may be obliged to indemnify the same Party under
both subsection (a) and subsection (b) or (c) of this Section 9.3, its
obligation under subsection (b) or (c) shall be controlling and the time and
dollar limitations (if any) provided in Sections 9.1 and 9.3(a) hereof relating
to its obligations in respect of Losses resulting from the inaccuracy of any
representation and warranty, or any misrepresentation or breach of warranty as
described in Section 9.3(a) hereof shall not apply. Any claim for
indemnification brought pursuant to Section 9.2(b) or (c) must be brought within
the applicable statute of limitations and any extensions or waivers thereof.
Escalade shall provide, on behalf of itself and the Selling Parties, the Buyer
and the Parent with written notice of any claim made in respect of the
indemnification provided in this Section 9.3, whether or not arising out of a
claim by a third party. Any payment made by Escalade or any of the Selling
Parties hereunder to Buyer or Parent shall not affect the Buyer's and the
Parent's obligation pursuant to Section 2.5 hereof to pay the Purchase Price.
9.4. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 9, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any
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Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party is thereby prejudiced by such delay.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within
five days after the Indemnified Party has given notice of the Third
Party Claim that, subject to the limitations set forth in Sections 9.1,
9.2 or 9.3, the Indemnifying Party will indemnify the Indemnified Party
from and against the entirety of any Losses the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably satisfactory to
the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, if any, (iii) the Third
Party Claim involves only money damages or otherwise does not seek an
injunction or other equitable relief that could reasonably be expected
to have a material adverse effect on the continuing business interests
of the Indemnified Party, (iv) settlement of, or an adverse judgment
with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential
custom or practice that could reasonably be expected to have a material
adverse effect on the continuing business interests of the Indemnified
Party and (v) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 9.4(b)
hereof, (i) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party
Claim, (ii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party
(which consent shall not unreasonably be withheld) and (iii) the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim unless
written agreement is obtained releasing the Indemnified Party from all
Liability thereunder.
(d) In the event any of the conditions in Section 9.4(b)
hereof is or becomes unsatisfied, or the Indemnifying Party fails to
undertake such defense or opposition, or the Indemnified Party has
determined in its reasonable judgement that having common counsel with
the Indemnifying Party would present such counsel with a conflict of
interest or that there may be legal defenses available to such
Indemnified Party which are different from or in addition to those
available to the Indemnifying Party, (i) the Indemnified Party may, at
the Indemnifying Party's cost and expense, retain its own counsel and
defend against, and with the consent of the Indemnifying Party (which
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consent will not be unreasonably withheld or delayed) may consent to
the entry of judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it may deem appropriate, (ii) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses incurred on and
after the date the Indemnified Party gives notice that it is assuming
the defense of the Third Party Claim) and (iii) the Indemnifying Party
will be responsible for any Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the extent provided in this Section
9.
(e) Notwithstanding anything in this Section 9.4 to the
contrary, no undertaking of defense or opposition to a Third Party
Claim shall be construed as an acknowledgment by such party that it is
liable to the party claiming indemnification with respect to the Third
Party Claim at issue or similar Third Party Claims.
10. Termination.
10.1. Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(a) The Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) The Buyer may terminate this Agreement by giving written
notice to Escalade at any time prior to the Closing (i) in the event
any of the Selling Parties or Escalade has breached any representation,
warranty or covenant contained in this Agreement in any material
respect (except to the extent that the aggregate effect of such
breach(es) would not materially adversely affect the benefits that the
Buyer is to receive under this Agreement), the Buyer has notified
Escalade, on behalf of each of the Selling Parties of the breach in
writing, and the breach has continued without cure for a period of 30
days after Escalade's receipt of notice of breach; or (ii) if the
Closing shall not have occurred on or before September 30, 1998 by
reason of the failure of any condition precedent under Section 6.1
hereof (unless the failure results primarily from the Buyer breaching
any representation, warranty or covenant contained in this Agreement);
or (iii) if Escalade or any of its Subsidiaries commences any
negotiations or discussions concerning any alternative Acquisition
Proposal, or (iv) if a tender offer or exchange offer for outstanding
shares of capital stock of Escalade then representing 35% or more of
the combined power to vote generally for the election of directors is
commenced, and the Board of Directors of Escalade does not recommend
that stockholders not tender their shares into such tender or exchange
offer; or (v) if any Person shall have acquired beneficial ownership or
right to acquire beneficial ownership of, or any "group" (as such term
is defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder), shall
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have been formed that beneficially owns, or has the right to acquire
beneficial ownership of, outstanding shares of capital stock of
Escalade then representing 35% or more of the combined power to vote
generally for the election of directors; provided, however, that the
Buyer shall not be entitled to terminate by reason of the circumstances
described in clauses (b)(iv) and/or (b)(v) unless (A) the shareholders
of Escalade have failed to approve the transactions contemplated hereby
at the Escalade Stockholders Meeting (on the first date held) or (B)
the shareholders of Escalade shall have been asked to consider an
alternative Acquisition Proposal or (C) the Escalade Shareholder
Meeting is not held on or before the earlier of (x) the 30th business
day after Escalade is legally permitted to mail the Proxy Statement to
its shareholders or (y) September 15, 1998).
(c) The Selling Parties or Escalade may terminate this
Agreement by giving written notice to the Buyer and the Parent at any
time prior to the Closing (i) in the event the Buyer or the Parent has
breached any representation, warranty or covenant contained in this
Agreement in any material respect, Escalade has, on behalf of the
Selling Parties, notified the Buyer and the Parent of the breach, and
the breach has continued without cure for a period of 30 days after the
Buyer's receipt of notice of breach or (ii) if the Closing shall not
have occurred on or before September 30, 1998 by reason of the failure
of any condition precedent under Section 6.2 hereof (unless the failure
results primarily from any of the Selling Parties breaching any
representation, warranty or covenant contained in this Agreement); and
(d) The Buyer or Escalade may terminate this Agreement, if (i)
the Board of Directors of Escalade shall withdraw, modify or change its
approval or recommendation of this Agreement or the Acquisition or
shall have resolved to do so in accordance with Section 5.9 hereof or
(ii) the Board of Directors of Escalade shall have approved and
recommended to the stockholders of Escalade an alternative Acquisition
Proposal or determined to pursue an alternative Acquisition Proposal;
provided, that, Escalade shall not be entitled to exercise any
termination rights under this Section 10.1(d) unless any action of the
Board of Directors of Escalade is taken by the Board of Directors in
accordance with the standards set forth in Section 5.9 hereof.
(e) The Buyer or Escalade may terminate this Agreement, upon
written notice to the other Party, if a Governmental Authority of
competent jurisdiction shall have made a final and non-appealable
determination that any required regulatory authorization would not be
forthcoming (unless the Buyer waives such authorization as a condition
to closing and closing absent such authorization would not be
materially adverse to Escalade); provided, however, that the party
seeking to terminate this Agreement pursuant to this Section 10.1(e)
has used all commercially reasonable efforts to obtain such required
regulatory authorization.
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Notwithstanding the foregoing provisions of this Section 10.1,
no party may effect a termination hereof if such party is in material
default or breach of this Agreement.
10.2. Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10.1 hereof, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(other than pursuant to Sections 11, 12 and 13 hereof, including without
limitation all subsections thereof); provided, however, that no termination
shall relieve any Party from any Liability arising from or relating to such
Party's breach at or prior to termination.
11. Miscellaneous.
11.1. Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior approval of the Buyer and
Escalade (on behalf of itself and the Selling Parties); except as may be
required by applicable law, rule or regulation as determined in good faith after
consideration of the advice of counsel to the party seeking to make a public
statement, in which case the language of any such statement shall, to the extent
practicable under the circumstances, be mutually agreed to by the parties in
advance, which agreement shall not be unreasonably withheld. Notwithstanding the
foregoing, Escalade shall, in accordance with its legal obligation, including
but not limited to filings permitted or required by the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended, the rules of
the Nasdaq National Market and other similar regulatory bodies, (i) make press
releases as Escalade deems necessary and appropriate in connection with the
transactions contemplated by this Agreement, (ii) prepare and file with the
Securities and Exchange Commission ("SEC") the Proxy Statement and any and all
amendments thereto, and (iii) prepare and file with the SEC a Current Report on
Form 8-K relating to this release or filing prior to any publication of same.
Escalade will use reasonable efforts to provide Buyer with advance drafts of
such documents and an opportunity to comment thereon. Buyer and Parent may
comment on same, provided, however, that Escalade shall not be required to
incorporate any such comments into such releases or filings as determined
appropriate by Escalade in good faith.
11.2. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.3. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements or representations by or between
the Parties (or their respective Affiliates), written or oral, to the extent
they relate in any way to the subject matter hereof, except for the
Confidentiality Agreement which shall remain in effect as set forth in Section
5.5.
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11.4. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its or his rights, interests or obligations hereunder without the prior
written approval of the other Parties; provided, however, that (i) the Buyer may
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and designate one or more of its Affiliates to perform its
obligations hereunder and (ii) the Buyer and its Affiliates may assign all or
any portion of its rights hereunder to any of their lenders.
11.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) one business day following the date sent when
sent by overnight delivery via a reputable courier or (iii) on the date received
when mailed by registered or certified mail return receipt requested and postage
prepaid as shown on the U.S. Postal Service receipt evidencing such delivery, at
the following addresses:
If to any Selling Party, to it at:
Escalade, Incorporated
817 Maxwell Avenue
Evansville, Indiana 47717
Fax: (812) 467-1300
Attn: Mr. John Wilson, CFO
With a copy to:
Graydon, Head & Ritchey
1900 Fifth Third Center
Cincinnati, Ohio 45202-3157
Fax: (513) 651-3836
Attn: Richard Schmalzl, Esq.
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If to the Buyer or Parent, to it c/o:
Sportcraft, Ltd.
313 Waterloo Valley Road
Mt. Olive, NJ 07828
Fax: (973) 347-7043
Attn: Messrs. Michael Nally and Frank Ginolfi
With copies to:
Bain Capital, Inc.
Two Copley Place, 7th Floor
Boston, MA 02116
Facsimile: (617) 572-3274
Attention: Messrs. Geoffrey S. Rehnert and Stephen Zide
and to:
Nichols, Wolfe, Stamper, Nally,
Fallis & Robertson, Inc.
400 Old City Hall Building
124 East Fourth Street
Tulsa, Oklahoma 74103-5010
Fax: (918) 582-9321
Attn: Thomas P. Nally, Esq.
and to:
Ropes & Gray
One International Place
Boston, MA 02110-2624
Facsimile: (617) 951-7050
Attention: Patrick Diaz, Esq.
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
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11.8. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware. Each of the Parties
hereto acknowledges that it or he has been informed by each other Party that the
provisions of this Section 11.8 constitute a material inducement upon which such
Party is relying and will rely in entering into this Agreement and the
transactions contemplated hereby.
11.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and Escalade. Any amendment or waiver signed by Escalade shall be binding
on each Selling Party and may be relied upon by the Buyer. No waiver by any
Party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
11.10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.11. Expenses.
(a) Except as set forth in Sections 5.6, 5.16, 11.11(b),
11.11(c) and 11.11(d), the Buyer and each of the Selling Parties will
bear their own costs and expenses (including legal and accounting fees
and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(b) Upon any termination of this Agreement:
(i) pursuant to Section 10.1(b)(ii) for reasons of
the failure of the condition specified in Section 6.1(g) to
have been satisfied; or
(ii) pursuant to Section 10.1(b)(iv) or (v); or
(iii) pursuant to Section 10.1(d),
Escalade shall: (A) pay Parent a fee of $3,500,000 (the "Fee")
and (B) reimburse Parent's and Buyer's reasonable
out-of-pocket expenses relating to the transactions
contemplated by this Agreement and to the enforcement of any
rights of the Buyer or Parent hereunder, including, but not
limited to, reasonable fees and expenses of
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Parent's and Buyer's counsel, accountants and financing
sources (all of the foregoing being referred to herein as the
"Expenses").
(c) In the event that this Agreement is terminated pursuant to
Section 10.1(b)(iii), Escalade shall:
(i) reimburse Parent for all expenses as provided in
clause (B) of Section 11.11(b) above; and
(ii) if, and only if, an Acquisition Proposal made
prior to termination by the Buyer pursuant to Section
10.1(b)(iii) (including any substantially similar Acquisition
Proposal by the maker thereof and/or any of its Affiliates,
successors or assigns) is accepted or consummated, pay to
Parent a portion of the Fee in an amount equal to $3.0
million; and
(iii) if, and only if, an Acquisition Proposal other
than an Acquisition Proposal of the type described in clause
(ii) of this Section 11.11(c) is accepted or consummated, pay
to Parent a portion of the Fee in an amount equal to:
(A) if such other Acquisition Proposal is
accepted or consummated in the first 182 days
following termination of this Agreement pursuant to
Section 10.1(b)(iii), $3.0 million;
(B) if such other Acquisition Proposal is
accepted or consummated at any time during the period
commencing on the 183rd day and ending on the 274th
day following such termination of this Agreement
pursuant to Section 10.1(b)(iii), $2.0 million; and
(C) if such other Acquisition Proposal is
accepted or consummated any time during the period
commencing on the 275th day and ending on the 365th
day following such termination of this Agreement
pursuant to Section 10.1(b)(iii), $1.0 million.
(d) In the event that this Agreement is terminated:
(i) pursuant to Section 10.1(b)(i); or
(ii) pursuant to Section 10.1(b)(ii) for reason of
the failure of the condition specified in Section 6.1(f) to
have been satisfied;
Escalade shall reimburse Parent for all Expenses as provided
in clause (B) of Section 11.11(b) above and further if, but
only if, an Acquisition Proposal is
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accepted or consummated within one year following such
termination, shall pay to Parent a portion of the Fee in an
amount equal to:
(A) if such Acquisition Proposal is accepted
or consummated in the first 182 days following such
termination of this Agreement, $3.0 million;
(B) if such Acquisition Proposal is accepted
or consummated at any time during the period
commencing on the 183rd day and ending on the 274th
day following such termination of this Agreement,
$2.0 million; and
(C) if such Acquisition Proposal is accepted
or consummated any time during the period commencing
on the 275th day and ending on the 365th day
following such termination, $1.0 million.
(e) The Expenses payable pursuant to Sections 11.11(b),
11.11(c) and 11.11(d) above shall be paid within two business days
after the first to occur of any of the termination events described in
Section 11.11(b), 11.11(c) or 11.11(d) (as the case may be), except to
the extent that Expenses incurred or payable after such event shall
continue to be reimbursable in future periods. The Fee (or applicable
portion thereof) shall be payable either (i) within two business days
after the first to occur of any of the termination events described in
Section 11.11(b) or (ii) within two business days after the acceptance
or consummation of the Acquisition Proposal (in the case of the Fee, or
portion thereof, payable pursuant to Section 11.11(c) or Section
11.11(d)).
11.12. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any Laws shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Neither the listing nor description of any item, matter or document
in any Section of the Escalade Disclosure Schedule nor the furnishing or
availability for review of any document shall be construed to modify, qualify or
disclose an exception to any representation or warranty of any Party made herein
or in connection herewith, except to the extent that such representation or
warranty (i) specifically refers to such Section of the Escalade Disclosure
Schedule and such modification, qualification or exception is described in such
Section or (ii) specifically refers to another Section of the Escalade
Disclosure Schedule which specifically cross references such Section of the
Escalade Disclosure Schedule and such modification, qualification or exception
is described in such cross-referenced Section. The Parties intend that each
representation, warranty, and covenant contained herein shall have
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independent significance. Subject to the interpretational provisions of Sections
3.15(h), 3.26(i) 3.27(c) (relating to the interpretation of Sections 3.13, 3.15,
3.16 and 3.27), if any Party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant. All covenants, agreements,
representations and warranties of a Party made herein and in the certificates,
exhibits and schedules hereto shall be deemed material and to have been relied
on by the other Parties hereto, notwithstanding any investigation made by or on
behalf of any of the Parties or any opportunity therefor or any constructive
knowledge thereby obtained.
11.13. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement constitute a part of this Agreement and
any references herein to this Agreement shall include all Exhibits and
Schedules.
11.14. Specific Performance. Each of the Parties acknowledges and
agrees that each of the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that, in addition to any other relief which may be available, the other
Parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties and the
matter in addition to any other remedy (subject to the provisions set forth in
Sections 12 and 13 hereof) to which it may be entitled, at law or in equity,
including but not limited to the monetary damages contemplated by Sections 11.11
and 11.15 hereof.
11.15. Liquidated Damages. The Parties acknowledge that in the event
this Agreement is terminated by Escalade or the Selling Parties by reason of a
breach of this Agreement by the Buyer or the Parent or the Acquisition fails to
be consummated by reason of a breach of this Agreement by the Buyer or the
Parent, Escalade and the Selling Parties will incur substantial damages which
will be difficult or impossible to quantify. Accordingly, the Parties agree that
in the event that it is determined in a final, non-appealable order of a court
of competent jurisdiction that the termination of this Agreement and/or the
failure of the Acquisition to be consummated is primarily the result of a breach
of this Agreement by the Buyer or the Parent, Escalade and the Selling Parties
shall be entitled to recover from the Buyer and the Parent as liquidated damages
the amount of $3,500,000, plus Escalade's and the Selling Parties' reasonable
out-of-pocket expenses relating to the transactions contemplated by this
Agreement and to the enforcement of any rights of Escalade or the Selling
Parties hereunder, including, but not limited to, reasonable fees and expenses
of Escalade's counsel, accountants and financing sources.
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12. Consent to Jurisdiction. Each of the Parties agrees that all actions, suits
or proceedings arising out of or based upon this Agreement or the subject matter
hereof shall be brought and maintained exclusively in the state or federal
courts located in the State of Delaware. Each of the parties by execution hereof
(i) hereby irrevocably submits to the jurisdiction of the state and federal
courts located in the State of Delaware for the purpose of any action, suit or
proceeding arising out of or based upon this Agreement or the subject matter
hereof and (ii) hereby waives to the extent not prohibited by applicable law,
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such action, suit or proceeding, any claim that it is not subject personally to
the jurisdiction of the above-named court, that it is immune from
extraterritorial injunctive relief, that his or its property is exempt or immune
from attachment or execution, that any such action, suit or proceeding may not
be brought or maintained in the above-named court should be dismissed on the
grounds of forum non conveniens, should be transferred to any court other than
the above-named court, should be stayed by virtue of the pendency of any other
action, suit or proceeding in any court other than the above-named court, or
that this Agreement or the subject matter hereof may not be enforced in or by
the above-named court. Each of the parties hereto hereby consents to service of
process in any such suit, action or proceeding in any manner permitted by the
laws of the State of Delaware, agrees that service of process by registered or
certified mail, return receipt requested, at the address specified in or
pursuant to Section 11.7 hereof is reasonably calculated to give actual notice
and waives and agrees not to assert by way of motion, as a defense or otherwise,
in any such action suit or proceeding any claim that service of process made in
accordance with Section 11.7 hereof does not constitute good and sufficient
service of process. The provisions of this Section 12 shall not restrict the
ability of any party to enforce in any court any judgment obtained in the state
or federal courts located in the State of Delaware.
13. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES, AND COVENANTS THAT
IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND ACTION OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT
MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN
TORT OR CONTRACT OR OTHERWISE. ANY OF THE PARTIES HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 13 WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF HIS OR ITS RIGHT TO
TRIAL BY JURY.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER: JEN SPORTS, INC.
By: /s/ FRANK GINOLFI
------------------------------------
Name: Frank Ginolfi
Title: Chief Financial Officer
PARENT: SPORTCRAFT, LTD.
By: /s/ FRANK GINOLFI
------------------------------------
Name: Frank Ginolfi
Title: Chief Financial Officer
ESCALADE: ESCALADE, INCORPORATED
By: /s/ JOHN R. WILSON
------------------------------------
Name: John R. Wilson
Title: Vice President & CFO
THE SELLING PARTIES: INDIAN INDUSTRIES, INC.
By: /s/ JOHN R. WILSON
------------------------------------
Name: John R. Wilson
Title: Secretary
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HARVARD SPORTS, INC.
By: /s/ JOHN R. WILSON
------------------------------------
Name: John R. Wilson
Title: Secretary
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Exhibit A-1
Form of Bill of Sale
BILL OF SALE AND ASSIGNMENT
BILL OF SALE AND ASSIGNMENT, made, executed and delivered on ________,
1998, by Escalade, Incorporated, an Indiana corporation ("Escalade"), Indian
Industries, Inc., an Indiana corporation ("Indian"), and Harvard Sports, Inc., a
California corporation ("Harvard"), collectively with Indian and Harvard, the
"Selling Parties") to JEN Sports, Inc., a Delaware
corporation (the "Buyer").
W I T N E S E T H:
WHEREAS, the Buyer, Sportcraft, Ltd., a Delaware corporation, Escalade
and the Selling Parties are parties to an Asset Purchase Agreement dated as of
June __, 1998 (the "Agreement") providing for, among other things, the sale to
the Buyer of the assets of the sporting goods business of Escalade and the
Selling Parties (capitalized terms used and not otherwise defined in this
instrument being used herein as defined in the Agreement); and
WHEREAS, the execution and delivery of this Bill of Sale and Assignment
by Escalade and the Selling Parties is a condition to the obligations of the
Buyer to consummate the transactions contemplated by the Agreement and the Buyer
and Escalade and the Selling Parties now desire to carry out the intent and
purpose of the Agreement, in part by Escalade's and the Selling Parties'
execution and delivery to the Buyer of this instrument evidencing the sale,
conveyance, assignment, transfer and delivery to the Buyer of the Acquired
Assets;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Escalade and the Selling Parties do hereby sell, convey, assign,
transfer and deliver or cause to be sold, assigned, transferred, conveyed and
delivered unto the Buyer and its successors and assigns, forever, the Acquired
Assets, free and clear of any Lien or other encumbrance of any kind whatsoever.
Escalade and the Selling Parties hereby constitute and appoint the
Buyer and its successors and assigns as their true and lawful attorneys in fact
in connection with the transactions contemplated by this instrument, with full
power of substitution to demand and receive, in the name and stead of Escalade
and the Selling Parties but on behalf of and for the benefit of the Buyer and
its successors and assigns, any and all of the assets, properties, rights and
business hereby conveyed, assigned, and transferred or intended so to be, and to
give receipt and releases for and in respect of the same and any part thereof,
and from time to time to institute and prosecute, in the name of Escalade and
the Selling Parties or otherwise, for the benefit of the Buyer or its successors
and assigns, proceedings at law, in equity, or otherwise, which the Buyer or its
successors or assigns deem proper in order to collect or reduce to possession or
endorse any
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of the Acquired Assets and to do all acts and things in relation to such assets
which the Buyer or its successors or assigns reasonably deem desirable.
Escalade and the Selling Parties, for themselves and their respective
successors and assigns, hereby covenant and agree that at any time and from time
to time forthwith upon the request of the Buyer, Escalade and the Selling
Parties will, at their expense, do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
instruments, transfers and assurances as may be reasonably required by the Buyer
in order to assign, transfer, set over and convey unto, and vest in, the Buyer,
its respective successors and assigns, any or all of the Acquired Assets and to
put Buyer in actual possession and operating control thereof, free and clear of
all Liens, to assist Buyer in exercising all rights with respect thereto and to
assure Buyer of the full benefits thereof.
In the event that any provision of this Bill of Sale and Assignment
would, under applicable law, be invalid or unenforceable in any respect, such
provision shall be construed by modifying or limiting it so as to be valid and
enforceable to the maximum extent compatible with, and possible under,
applicable law. Any term or provision of this Bill of Sale and Assignment that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
In the event that any provision of this Bill of Sale and Assignment be
construed to conflict with a provision in the Agreement, the provision in the
Agreement shall be deemed to be controlling.
This instrument shall be binding upon and shall inure to the benefit of
the respective successors and permitted assigns of Escalade and the Selling
Parties and the Buyer. This Bill of Sale and Assignment shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
This Bill of Sale and Assignment shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law
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provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this
instrument under seal of Escalade and the Selling Parties on the date first
above written.
ESCALADE, INCORPORATED
By:_____________________________
Name:
Title:
INDIAN INDUSTRIES, INC.
By:_____________________________
Name:
Title:
HARVARD SPORTS, INC.
By:_____________________________
Name:
Title:
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EXHIBIT A-2
ASSIGNMENT OF PATENTS, PATENT APPLICATIONS,
COPYRIGHTS, TRADEMARKS, TRADEMARK
APPLICATIONS AND GOODWILL
THIS ASSIGNMENT OF PATENTS, PATENT APPLICATIONS, COPYRIGHTS,
TRADEMARKS, TRADEMARK APPLICATIONS AND GOODWILL (the "Intellectual Property
Assignment Agreement") is entered into on June ___, 1998, by and among (i) JEN
Sports, Inc.., a Delaware corporation (the "Buyer"), (ii) Escalade,
Incorporated, an Indiana corporation ("Escalade"), (iii) Indian Industries,
Inc., an Indiana corporation ("Indian"), and (iv) Harvard Sports, Inc., a
California corporation ("Harvard", and together with Indian, collectively, the
"Selling Parties").
R E C I T A L S:
WHEREAS, Sportcraft, Ltd., Escalade, the Selling Parties and the Buyer
are parties to a certain Asset Purchase Agreement dated as of June ___, 1998
(the "Asset Purchase Agreement"), under the terms of which Escalade and the
Selling Parties agree to sell and transfer, and the Buyer agrees to purchase,
the Acquired Assets (as such term is defined in the Asset Purchase Agreement);
WHEREAS, Escalade and the Selling Parties own (a) the United States and
foreign trademarks, service marks, trademark and service mark registrations and
trademark and service mark applications listed on Schedule 1 hereto (the
"Trademarks"), (b) the United States Letters Patent and patent applications and
foreign patents and patent applications listed on Schedule 2 hereto (the
"Patents"), and (c) various copyrights (the "Copyrights"), which together with
the products and goodwill associated with the Trademarks, Patents and
Copyrights, constitute part of the Acquired Assets; and
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer desires to
obtain all of Escalade's and the Selling Parties' right, title and interest in,
to and under said Trademarks, Patents and Copyrights and the goodwill associated
therewith;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Escalade and the Selling
Parties, Escalade and the Selling Parties hereby sell, convey, assign, transfer
and deliver to Buyer, its successors and assigns, all of Escalade's and the
Selling Parties' right, title and interest throughout the world in, to and under
(a) the Trademarks and Copyrights, all goodwill associated therewith, all common
law rights thereto, and all registrations that have been or may be granted
thereon and
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(b) the Patents, and the underlying inventions described therein, and all
divisions, renewals, reissues, continuations and continuations-in-part thereof,
and all United States and foreign patents which have been or may be granted
thereon, together with the right to sue and recover damages for future or past
infringements of the Trademarks, Patents and Copyrights and to fully and
entirely stand in the place of Escalade and/or the Selling Parties in all
matters related thereto.
Escalade and the Selling Parties hereby request the United States
Commissioner of Patents and Trademarks (the "Commissioner"), as well as his or
her foreign counterparts in the foreign jurisdictions which exercise authority
over any of the Patents, Trademarks or Copyrights, to record this Intellectual
Property Assignment Agreement to Buyer. Escalade and the Selling Parties hereby
further request the Commissioner and his or her foreign counterparts to issue
(a) any and all registrations resulting from applications among the Trademarks
or derived therefrom and (b) any and all patents resulting from applications
among the patents or derived therefrom to Buyer as assignee of the entire
interest.
Escalade and the Selling Parties hereby covenant that they have full
right to convey the entire interest herein assigned, and that neither Escalade
nor the Selling Parties have executed, nor will they execute, any agreements
inconsistent herewith.
Escalade and the Selling Parties, for themselves and their respective
successors and assigns, hereby covenant and agree that at any time and from time
to time forthwith upon the request of the Buyer, Escalade and the Selling
Parties will, at their expense, do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged and delivered, all such further acts, deeds,
instruments, transfers and assurances as may be reasonably required by the Buyer
in order to assign, transfer, set over and convey unto, and vest in, the Buyer,
its respective successors and assigns, any or all of the Patents, Trademarks and
Copyrights, and to put the Buyer in actual possession and operating control
thereof, free and clear of all Liens, to assist the Buyer in exercising all
rights with respect thereto and to assure the Buyer of the full benefits
thereof.
Escalade and the Selling Parties hereby constitute and appoint the
Buyer and its successors and assigns as their true and lawful attorneys in fact
in connection with the transactions contemplated by this instrument, with full
power of substitution to demand and receive, in the name and stead of Escalade
and the Selling Parties but on behalf of and for the benefit of the Buyer and
its successors and assigns, any and all of the assets, properties, rights and
business hereby conveyed, assigned, and transferred or intended so to be, and to
give receipt and releases for and in respect of the same and any part thereof,
and from time to time to institute and prosecute, in the name of Escalade and
the Selling Parties or otherwise, for the benefit of the Buyer or its successors
and assigns, proceedings at law, in equity, or otherwise, which the Buyer or its
successors or assigns deem proper in order to collect or reduce to possession or
endorse any of the Patents, Trademarks and Copyrights, and to do all acts and
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things in relation to such assets which the Buyer or its successors or assigns
reasonably deem desirable.
In the event that any provision of this Intellectual Property
Assignment Agreement would, under applicable law, be invalid or unenforceable in
any respect, such provision shall be construed by modifying or limiting it so as
to be valid and enforceable to the maximum extent compatible with, and possible
under, applicable law. Any term or provision of this Intellectual Property
Assignment Agreement that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
In the event that any provision of this Intellectual Property
Assignment Agreement is construed to conflict with a provision in the Asset
Purchase Agreement, the provision in the Asset Purchase Agreement shall be
deemed to be controlling.
This instrument shall be binding upon and shall inure to the benefit of
the respective successors and permitted assigns of Escalade and the Selling
Parties and the Buyer. This Intellectual Property Assignment Agreement shall not
confer any rights or remedies upon any person other than the parties hereto, and
their respective successors and permitted assigns.
This Intellectual Property Assignment Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law.
IN WITNESS WHEREOF, the parties hereto have caused this Intellectual
Property Assignment Agreement to be executed as of the day and year first
written above.
ESCALADE, INC.
By: ________________________________
Name:
Title:
STATE OF )
) ss.
COUNTY OF )
On this ____ day of June, 1998, before me personally appeared
___________________________________, personally known to me or proved to me on
the basis of satisfactory evidence to be the person who executed the within
instrument, and being by me duly sworn, did depose and say that the statements
therein contained are true.
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<PAGE> 145
WITNESS my hand and official seal.
---------------------------------------
[SEAL] Notary
My Commission Expires:
INDIAN INDUSTRIES, INC.
By: _________________________________
Name:
Title:
STATE OF )
) ss.
COUNTY OF )
On this ____ day of June, 1998, before me personally appeared
___________________________________, personally known to me or proved to me on
the basis of satisfactory evidence to be the person who executed the within
instrument, and being by me duly sworn, did depose and say that the statements
therein contained are true.
WITNESS my hand and official seal.
---------------------------------------
[SEAL] Notary
My Commission Expires:
HARVARD SPORTS, INC.
By: _________________________________
Name:
Title:
-93-
<PAGE> 146
STATE OF )
) ss.
COUNTY OF )
On this ____ day of June, 1998, before me personally appeared
___________________________________, personally known to me or proved to me on
the basis of satisfactory evidence to be the person who executed the within
instrument, and being by me duly sworn, did depose and say that the statements
therein contained are true.
WITNESS my hand and official seal.
---------------------------------------
[SEAL] Notary
My Commission Expires:
JEN SPORTS, INC.
By: _________________________________
Name:
Title:
STATE OF )
) ss.
COUNTY OF )
On this ____ day of June, 1998, before me personally appeared
___________________________________, personally known to me or proved to me on
the basis of satisfactory evidence to be the person who executed the within
instrument, and being by me duly sworn, did depose and say that the statements
therein contained are true.
WITNESS my hand and official seal.
---------------------------------------
[SEAL] Notary
My Commission Expires:
-94-
<PAGE> 147
SCHEDULE 1
TRADEMARKS
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<PAGE> 148
SCHEDULE 2
PATENTS AND PATENT APPLICATIONS
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<PAGE> 149
EXHIBIT A-3
Form of Assumption Agreement
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated as of _______, 1998 (the "Assumption
Agreement") by and between Escalade, Incorporated, an Indiana corporation
("Escalade"), Indian Industries, Inc., an Indiana corporation ("Indian"), and
Harvard Sports, Inc., a California corporation ("Harvard", and collectively with
Indian, the "Selling Parties") and JEN Sports, Inc., a Delaware corporation (the
"Buyer").
W I T N E S S E T H :
WHEREAS, the Buyer, Sportcraft, Ltd., a Delaware corporation, Escalade
and the Selling Parties are parties to an Asset Purchase Agreement dated as of
June __, 1998 (the "Agreement") (capitalized terms used and not otherwise
defined in this instrument being used herein as defined in the Agreement); and
WHEREAS, pursuant to the Agreement, the Buyer agreed to assume certain
Liabilities and obligations of Escalade and the Selling Parties expressly
described as being Assumed Liabilities in Section 2.3 of the Agreement, and
Escalade and the Selling Parties agreed to retain all other Liabilities of
Escalade and the Selling Parties, including without limitation those described
in Section 2.4 of the Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Buyer, Escalade and the Selling Parties hereby agree as
follows:
1. The Buyer hereby assumes and agrees to pay, perform and discharge when due
all of the Assumed Liabilities. Notwithstanding anything to the contrary herein,
or in any other writing delivered in connection herewith, the Buyer will not
assume or have any obligation to perform any liabilities or obligations not
specifically assumed by the Buyer pursuant to the Agreement and, in particular,
will not assume or have any obligation to perform any of the Liabilities set
forth in Section 2.4 of the Agreement.
2. Escalade and the Selling Parties shall retain and agree to pay, perform and
discharge when due all Liabilities and obligations not assumed by the Buyer.
3. This Assumption Agreement shall not confer any rights or remedies upon any
Person other than the Parties and their respective successors and permitted
transferees and assigns.
4. Nothing contained herein shall limit the ability of the Buyer to contest as
to third parties any obligation to pay, perform or discharge any liabilities or
obligations expressly assumed
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<PAGE> 150
hereunder. Nothing in this paragraph 4 is intended or shall be construed to
modify, amend, derogate from, or in any way limit the assumption of the Assumed
Liabilities by the Buyer.
5. In the event that any provision hereof would, under applicable law, be
invalid or unenforceable in any respect, such provision shall be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. Any term or provision of
this Assumption Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.
6. In the event that any provision of this Assumption Agreement be construed to
conflict with a provision of the Agreement, the provision in the Agreement shall
be deemed controlling.
7. This Assumption Agreement shall bind and shall inure to the benefit of the
Parties and their respective successors and permitted transferees and assigns.
8. This Assumption Agreement shall be governed by and construed in accordance
with the domestic laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
9. This Assumption Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
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<PAGE> 151
IN WITNESS WHEREOF, the undersigned have executed this instrument under
seal as of the date first above written.
JEN SPORTS, INC.
By: _____________________________
Name:
Title:
ESCALADE, INCORPORATED
By:_____________________________
Name:
Title:
INDIAN INDUSTRIES, INC.
By:_____________________________
Name:
Title:
HARVARD SPORTS, INC.
By:_____________________________
Name:
Title:
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<PAGE> 152
Exhibit B
June __, 1998
JEN Sports, Inc.
313 Waterloo Valley Road
Mt. Olive, NJ 07828
Attention: Michael Nally
Chief Executive Officer
Ladies & Gentlemen:
The undersigned (the "Stockholder") owns and has sole voting power with
respect to the number of shares of the common stock, no par value (the
"Shares"), of Escalade, Incorporated, an Indiana corporation ("Escalade"),
indicated opposite the Stockholder's name on Schedule I attached hereto.
Immediately after the execution of this letter agreement, JEN Sports,
Inc., a Delaware corporation (the "Buyer"), Escalade and certain of their
affiliates are entering into an Asset Purchase Agreement (as amended and in
effect from time to time, the "Asset Purchase Agreement") providing, among other
things, for the purchase of certain assets of Escalade and assets of certain of
Escalade's subsidiaries by the Buyer (the "Asset Purchase").
In consideration of, and as a condition to, the Buyer's entering into
the Asset Purchase, the Stockholder and the Buyer agree as follows:
1. The Stockholder shall vote or cause to be voted all of the Shares,
as well as any other shares of common stock of Escalade of which the Stockholder
acquires beneficial ownership and sole voting power, whether pursuant to the
exercise of stock options or otherwise, as long as such shares are owned by the
Stockholder as of the record date for the special meeting of Escalade's
stockholders to be called and held following the date hereof, for the approval
of the Asset Purchase Agreement, the Asset Purchase and the other transactions
(including the corporate name change) contemplated by the Asset Purchase
Agreement and shall vote or cause to be voted all such shares, at such special
meeting or any other meeting of Escalade's stockholders following the date
hereof, against the approval of any other agreement providing for a merger,
acquisition, consolidation, sale of a material amount of assets or other
business combination of Escalade or any of its subsidiaries with any person or
entity other than the Buyer or any subsidiary of the Buyer, except to the extent
that such alternative transaction could not reasonably be expected to interfere,
directly or indirectly, with the consummation of the transactions contemplated
by the Asset Purchase Agreement.
2. IRREVOCABLE PROXY. THE STOCKHOLDER HEREBY GRANTS TO, AND
APPOINTS JEN SPORTS, INC. AND THE PRESIDENT OF JEN SPORTS, INC. AND THE
TREASURER OF JEN SPORTS, INC., IN THEIR RESPECTIVE CAPACITIES AS OFFICERS OF JEN
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<PAGE> 153
SPORTS, INC., AND ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY SUCH OFFICE
OF JEN SPORTS, INC., AND ANY OTHER OFFICER OF JEN SPORTS, INC., EACH OF THEM
INDIVIDUALLY, SUCH STOCKHOLDER'S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE OR ACT BY WRITTEN CONSENT WITH RESPECT TO SUCH
STOCKHOLDER'S SHARES IN ACCORDANCE WITH SECTION 1 HEREOF. THIS PROXY IS COUPLED
WITH AN INTEREST AND SHALL BE IRREVOCABLE, AND THE STOCKHOLDER WILL TAKE SUCH
FURTHER ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO
EFFECTUATE THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY
GRANTED BY HIM/HER WITH RESPECT TO THE SHARES.
3. The agreements contained herein are intended to relate to
restrictions on voting and to continue only for such time as may reasonably be
necessary to obtain all necessary approvals, including shareholder approval and
all necessary governmental approvals, of the Asset Purchase and all other
transactions contemplated by the Asset Purchase Agreement.
4. Notwithstanding anything herein to the contrary, the agreements
contained herein shall remain in full force and effect until the earlier of (a)
the consummation of the Asset Purchase or (b) the termination of the Asset
Purchase Agreement in accordance with Section 10.1 thereof.
5. The Stockholder has signed this letter agreement intending to be
bound hereby. The Stockholder expressly agrees that this letter agreement shall
be specifically enforceable in any court of competent jurisdiction in accordance
with its terms against the Stockholder. All of the covenants and agreements
contained in this letter agreement shall be binding upon, and inure to the
benefit of, the respective parties and their permitted successors, assigns,
heirs, executors, administrators and other legal representatives, as the case
may be.
6. This letter agreement may be executed in one or more counterparts,
each of which will be deemed an original but all of which together shall
constitute one and the same instrument.
7. This letter agreement is deemed to be signed as a sealed instrument
and is to be governed by the laws of the State of Indiana, without giving effect
to the principles of conflicts of laws thereof. If any provision hereof is
deemed unenforceable, the enforceability of the other provisions hereof shall
not be affected.
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<PAGE> 154
If the foregoing accurately reflects your understanding of the subject
matter intended to be contained herein, please confirm our agreement by signing
this letter where indicated below.
Very truly yours,
----------------------------------------
AGREED TO AND ACCEPTED AS
OF THE DATE FIRST ABOVE WRITTEN
JEN SPORTS, INC.
By: ______________________________
Name:
Title:
-102-
<PAGE> 155
SCHEDULE 1
NUMBER OF SHARES
NAME OF STOCKHOLDER OWNED WITH SOLE VOTING POWER
- - - ---------------------------- ---------------------------------------
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<PAGE> 156
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
Dated July 2, 1998
This Amendment No. 1 (this "Amendment") to the Asset Purchase
Agreement, dated June 26, 1998 (the "Agreement"), by and among JEN Sports, Inc.,
a Delaware corporation, Sportcraft, Ltd., a Delaware corporation, Escalade,
Incorporated, an Indiana corporation, Indian Industries, Inc., an Indiana
corporation, and Harvard Sports, Inc., a California corporation is made and
entered into as of July 2, 1998. Capitalized terms used and not otherwise
defined in this Amendment are used herein as defined in the Agreement.
A. Change in Benchmark Net Working Capital. The Agreement is hereby
amended as follows: The definition of Benchmark Working Capital, which appears
in Section 1 of the Agreement, is hereby amended as by deleting the number
"$19,828,586" and replacing it with the number "$20,344,871."
B. Change in Schedule Setting Forth Calculation of Benchmark Net
Working Capital. Section 2.8 of the Escalade Disclosure Schedule is hereby
amended by deleting Attachment 2 referred to and made a part thereof and
replacing such attachment with the Replacement Attachment 2 that has been
delivered and acknowledged on the date hereof.
This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the Buyer and Escalade have executed this Amendment
on the date first above written.
ESCALADE, INCORPORATED JEN SPORTS, INC.
By /s/ John R. Wilson By /s/ Frank Ginolfi
---------------------------------- --------------------------------
Name: John R. Wilson Name: Frank Ginolfi
Title: Vice President and Chief Title: Chief Financial Officer
Financial Officer
<PAGE> 157
APPENDIX B
PROPOSED AMENDMENT
TO
ESCALADE, INCORPORATED AMENDED ARTICLES OF INCORPORATION
TO
EFFECT THE CORPORATE NAME CHANGE
RESOLVED, that Article First of the Company's Amended Articles of
Incorporation be deleted in its entirety and replaced with the following new
Article First:
"FIRST: The name of the Corporation is MARTIN YALE GROUP, INC."
<PAGE> 158
APPENDIX C
CIBC CIBC OPPENHEIMER CORP.
OPPENHEIMER CIBC Oppenheimer Tower
A CIBC World Markets Company World Financial Center
New York, NY 10281
Tel: 212-667-7000
Tel: 800-999-6726
June 26, 1998
Personal and Confidential
- - - -------------------------
The Board of Directors
Escalade, Incorporated
817 Maxwell Avenue
Evansville, Indiana 47706
Gentlemen:
You have asked CIBC Oppenheimer Corp. ("CIBC Oppenheimer") to render a
written opinion ("Fairness Opinion") to the Board of Directors as to the
fairness to Escalade, Incorporated ("Escalade" or the "Company"), from a
financial point of view, of the consideration to be received pursuant to the
Asset Purchase Agreement (the "Purchase Agreement") by and among Sportcraft,
Ltd. ("Sportcraft"), JEN Sports, Inc., a wholly owned subsidiary of Sportcraft,
Escalade, and Indian Industries, Inc., Harvard Sports, Inc., Harvard California,
Escalade FSC and Escalade International, all wholly owned subsidiaries of
Escalade, and collectively referred to herein as Escalade Sports. The Purchase
Agreement provides for, among other things, a transaction whereby JEN Sports
will purchase substantially all of the assets of Escalade Sports (the
"Acquisition"). The purchase price shall be $74,500,000 in cash, minus the
amount of debt, if any, assumed at closing ("Purchase Consideration").
In arriving at our Fairness Opinion we:
(a) reviewed the final Purchase Agreement, dated 6/26/98;
(b) reviewed Escalade's audited financial statements for the fiscal years
ended December 1994, 1995, 1996 and 1997 and for the three months ended
March 1997 and 1998;
<PAGE> 159
The Board of Directors
Escalade, Incorporated
June 26, 1998
Page 2
(c) reviewed Escalade Sports' audited financial statements for the fiscal
years ended December 1994, 1995, 1996 and 1997 and for the three months
ended March 1997 and 1998;
(d) reviewed financial projections of Escalade Sports prepared by Escalade
Sports' and Escalade's management;
(e) reviewed the historical market prices and trading volume for Escalade
common stock;
(f) held discussions with senior management of Escalade Sports and Escalade
with respect to the business and prospects for future growth of
Escalade Sports;
(g) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to Escalade Sports;
(h) performed discounted cash flow analyses of Escalade Sports using
certain assumptions of future performance provided to us by the
management of Escalade Sports and Escalade;
(i) reviewed and analyzed certain publicly available financial information
for transactions that we deemed comparable to the Acquisition;
(j) reviewed public information concerning Escalade Sports and Escalade;
and
(k) performed such other analyses and reviewed such other information as we
deemed appropriate.
In rendering our Fairness Opinion we relied upon and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information provided to us by the Company and
Escalade Sports and their respective employees, representatives and affiliates.
With respect to forecasts of future financial condition and operating results of
Escalade Sports provided to us, we assumed at the direction of Escalade's
management, without independent verification or investigation, that such
forecasts were reasonably prepared on bases reflecting the best available
information, estimates and judgment of Escalade Sports' and Escalade's
respective management. We have neither made nor obtained any independent
evaluations or appraisals of the assets or the liabilities of Escalade, Escalade
Sports or such other affiliated entities. We are not expressing any opinion as
to the underlying valuation, future performance or long term viability of
Escalade following the Acquisition, or the price at which Escalade common stock
will trade subsequent to the Acquisition. Our opinion is necessarily based on
the information available to us and general economic, financial and stock market
conditions and circumstances as they exist and can be evaluated by us on the
date hereof. It should be understood that, although
<PAGE> 160
The Board of Directors
Escalade, Incorporated
June 26, 1998
Page 3
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm the opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We acted as financial advisor to Escalade in connection with the
Acquisition and to the Board of Directors of Escalade in rendering this opinion
and will receive a fee for our services. CIBC Oppenheimer has performed
investment banking and other services for Escalade in the past and has been
compensated for such services. In the ordinary course of its business, CIBC
Oppenheimer and its affiliates may actively trade securities of Escalade for
their own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, CIBC
Oppenheimer has been retained by Sportcraft to arrange the financing necessary
to fund the Acquisition. The Company acknowledged CIBC Oppenheimer's involvement
with respect to the financing pursuant to an executed letter dated March 17,
1998.
Based upon and subject to the foregoing, and such other factors as we
deem relevant, it is our opinion that, as of the date hereof, the Purchase
Consideration to be received by the Company pursuant to the Purchase Agreement
is fair to Escalade from a financial point of view. This Fairness Opinion is for
the exclusive use of the Board of Directors of Escalade and may not be relied
upon by any other person, entity or affiliates of the Company. Neither the
Fairness Opinion nor the services provided by CIBC Oppenheimer in connection
herewith may be publicly disclosed or referred to in any manner by Escalade
without the prior written approval by CIBC Oppenheimer.
Very truly yours,
/s/ CIBC Oppenheimer Corp.
CIBC Oppenheimer Corp.
<PAGE> 161
<TABLE>
<S> <C>
ESCALADE, INCORPORATED PROXY CARD
817 Maxwell Avenue, Evansville, Indiana 47717 THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
</TABLE>
The undersigned hereby appoints Robert E. Griffin, Yale A. Blanc, and
A. Graves William, Jr. as Proxies, each with the power to appoint his or her
substitute, and hereby authorizes them to represent and to vote, as designed
below, all the shares of common stock of Escalade, Incorporated, held of record
by the undersigned on July 10, 1998, at the special meeting of shareholders to
be held on August ___, 1998 or any adjournment thereof.
1. Proposal to sell substantially all of the assets of the Company's
Sporting Goods Business pursuant to an Asset Purchase Agreement dated
June 26, 1998, by and among Sportcraft Ltd., its wholly-owned
subsidiary, JEN Sports, Inc., the Company and certain of the Company's
subsidiaries named therein.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to amend the Company's Amended Articles of Incorporation to
change the Company's name to Martin Yale Group, Inc. immediately
following the consummation of the Asset Sale.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name
appears below. When shares
are held by joint tenants,
both should sign. When
signing as an attorney, as
executor, administrator,
trustee or guardian, please
give full title as such. If
a corporation, please sing
in full corporate name by
President or other
authorized officer. If a
partnership, please sign in
the partnership name by
authorized person.
DATED: _____________, 1998 __________________________
Signature
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. ___________________________
Signature if held jointly
