<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
================================================================================
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934.
Date of Report: December 29, 1999
-----------------------
(Date of earliest event reported)
GLOBAL SPORTS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-16611 04-2958132
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification Number)
1075 First Avenue, King of Prussia, PA 19406
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610) 265-3229
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
Item 2. Acquisition Or Disposition Of Assets
During the fourth quarter of 1998, Global Sports, Inc. (the "Company")
began to investigate whether it would be beneficial for the Company to expand
its business to include the sale of athletic footwear and sporting goods through
the internet. By the end of 1998, the Company had developed a business model in
which the Company would enter into exclusive contracts with large sporting goods
retailers to operate their e-Commerce businesses and pay the retailers a share
of sales made through the websites.
While marketing its business model, the Company realized that the
amount of management time necessary to launch and operate its e-Commerce
business would be substantial. The Company also realized that its capital
resources would not be sufficient to fund its rapidly growing e-Commerce
business while maintaining and growing its existing businesses and that its
existing businesses might create a conflict of interest with its e-Commerce
business. As a result, the Company concluded that it should focus exclusively on
its e-Commerce business and on April 20, 1999, the Company formalized a plan to
divest its non-internet businesses.
On December 29, 1999, the Company and it's subsidiaries RYKA Inc., KPR
Sports International, Inc., G.S.I., Inc. and Apex Sports International, Inc.
(the Company and it's subsidiaries are collectively referred to herein as the
"Company") entered into an Asset Purchase Agreement with American Sporting Goods
Corporation ("ASGC") whereby ASGC purchased from the Company certain assets
relating to the manufacturing, marketing, distribution and selling at wholesale
of footwear bearing the RYKA, Yukon and Apex brands (the "Branded Division") and
ASGC assumed from the Company certain liabilities and agreements of the Company
relating to the Branded Division.
The assets acquired by ASGC include: (i) substantially all inventory of
the Branded Division (other than inventory held for retail sale in connection
with the Company's e-Commerce business); (ii) the Branded Division's point of
purchase assets and equipment, including a trade show booth and certain other
personal property; (iii) certain prepaid items and deposits; (iv) the
copyrights, patent rights and trademarks used in the Branded Division; and (v)
certain specified agreements of the Branded Division. ASGC did not acquire any
real property of the Company or any of the Company's accounts receivable.
The purchase price for the assets acquired by ASGC consisted of a
closing payment of $10,317,322, subject to a final determination of the value of
the inventory acquired. The purchase price was determined through negotiations
between the Company and ASGC conducted on an arms' length basis.
Item 7. Financial Statements, Pro Forma Financial Information And Exhibits
Listed below are certain pro forma financial information and exhibits
filed as a part of this Report on Form 8-K:
(b) Pro Forma Financial Information:
- Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1999
(c) Exhibits:
2.1 Asset Purchase Agreement, dated December 29, 1999, among
American Sporting Goods Corporation and RYKA Inc., KPR
Sports International, Inc., G.S.I., Inc., Apex Sports
International, Inc. and Global Sports, Inc.
2
<PAGE>
GLOBAL SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BACKGROUND
On December 29, 1999, Global Sports, Inc. and its subsidiaries RYKA, Inc.,
KPR Sports International, Inc., G.S.I., Inc., and APEX Sports International,
Inc. (collectively referred to herein as the "Company") entered into an Asset
Purchase Agreement with American Sporting Goods Corporation ("ASGC") whereby
ASGC purchased from the Company certain assets relating to the manufacturing,
marketing, distribution and selling at wholesale of footwear bearing the RYKA,
Yukon and Apex brands (the "Branded Division") and ASGC assumed from the Company
certain liabilities and agreements of the Company relating to the Branded
Division.
The assets acquired include (i) all the inventory of the Branded Division;
(ii) the Branded Division's point of purchase displays not on site at customers'
premises, and equipment including a trade show booth and certain other personal
property; (iii) certain prepaid items and deposits; (iv) the copyrights, patent
rights and trademarks used in the Branded Division; and (v) certain specified
agreements of the Branded Division. ASGC did not acquire any real property of
the Company or any of the Company's accounts receivable.
The purchase price consisted of a closing payment of $10,317,322, subject
to a final determination of the value of the inventory of the inventory
acquired. For purposes of this pro forma presentation, the purchase price was
adjusted to reflect the value of the inventory sold less the negotiated reserves
for the periods presented.
PERIODS PRESENTED
A pro forma consolidated balance sheet has been presented as of September
30, 1999. Because the Branded Division of the Company has been classified as
discontinued operations in the Company's recent SEC filings, a presentation of
pro forma statements of operations has not been presented. Had pro forma
statements of operations been presented, the only adjustment to income from
continuing operations would have been a reduction in interest expense of
approximately $875,000 for the year ended December 31, 1998 and approximately
$650,000 for the nine-month period ending September 30, 1999 assuming receipt of
sale proceeds as of January 1, 1998 and 1999, respectively, and the Company's
average borrowing rate.
3
<PAGE>
GLOBAL SPORTS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1999
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $39,467,680 $9,887,654 (f) $49,355,334
Inventory 4,669,217 4,669,217
Prepaid expenses and other current assets 621,442 621,442
Refundable income taxes 2,220,878 2,220,878
Net assets of discontinued operations 43,012,442 (9,132,125) (a)
(60,313) (b)
(73,256) (c)
(5,190,453) (d)
273,040 (e) 28,829,335
------------ ----------- ------------
Total current assets 89,991,659 (4,295,453) 85,696,206
Property & equipment, net of accumulated
depreciation and amortization 16,219,279 16,219,279
Other assets 219,511 219,511
------------ ----------- ------------
Total assets $106,430,449 ($4,295,453) $102,134,996
============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion - notes payable, bank $ 3,699,207 $ 3,699,207
Current portion - capital lease obligation, related party 136,524 136,524
Accounts payable and accrued expenses 15,487,521 15,487,521
------------ ----------- ------------
Total current liabilities 19,323,252 19,323,252
Capital lease obligation, related party 2,077,906 2,077,906
Mandatorily redeemable preferred stock 100 100
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 194,766 194,766
Additional paid in capital 98,693,234 98,693,234
Accumulated deficit (13,644,992) ($4,295,453) (g) (17,940,445)
------------ ----------- ------------
85,243,008 (4,295,453) 80,947,555
Less: Treasury stock, at cost 213,817 213,817
------------ ----------- ------------
Total stockholders' equity 85,029,191 ($4,295,453) 80,733,738
------------ ----------- ------------
Total liabilities and stockholders' equity $106,430,449 ($4,295,453) $102,134,996
============ =========== ============
See notes to unaudited pro forma consolidated financial statements.
</TABLE>
4
<PAGE>
GLOBAL SPORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro forma balance sheet adjustments at September 30, 1999:
(a) To record book value of all RYKA, Yukon and Apex inventory sold. Assumes
that buyer purchases net book value of inventory less a negotiated reserve
of $830,000.
(b) To record sale of certain fixed assets at net book value.
(c) To record sale of point of purchase assets and equipment, prepaid items and
certain other deposits at net book value.
(d) To eliminate goodwill and intangible assets related to RYKA, Yukon and
Apex.
(e) To eliminate certain accounts payable and accrued expenses assumed by
buyer.
(f) To record proceeds of sale of Branded Division.
(g) To record loss on sale of Branded Division.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
GLOBAL SPORTS, INC.
DATE: January 13, 2000 By: /s/ Michael G. Rubin
----------------------------
Michael G. Rubin
Chairman of the Board &
Chief Executive Officer
DATE: January 13, 2000 By: /s/ Steven A. Wolf
----------------------------
Steven A. Wolf
Vice President &
Chief Financial Officer
6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
2.1 Asset Purchase Agreement, dated December 29, 1999, among American
Sporting Goods Corporation and RYKA Inc., KPR Sports
International, Inc., G.S.I., Inc., Apex Sports International,
Inc. and Global Sports, Inc.
7
<PAGE>
EXHIBIT 12.1
Execution Copy
ASSET PURCHASE AGREEMENT
Dated December 29, 1999
Among
American Sporting Goods Corporation
("Buyer")
and
RYKA Inc., KPR Sports International, Inc.,
G.S.I., Inc., and Apex Sports International, Inc.
(Collectively "Seller")
and
Global Sports, Inc.
("Global" or "Parent")
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1.
DEFINITIONS
-----------
1.1 Definitions................................................... -1-
-----------
1.2 Construction.................................................. -7-
------------
ARTICLE 2.
PURCHASE AND SALE
-----------------
2.1 Purchased Assets.............................................. -7-
----------------
2.2 Excluded Assets............................................... -9-
---------------
2.3 Assumed Liabilities........................................... -10-
-------------------
2.4 Excluded Liabilities.......................................... -12-
--------------------
ARTICLE 3.
PURCHASE PRICE
--------------
3.1 General....................................................... -14-
-------
3.2 Determination of Estimated Purchase Price..................... -14-
-----------------------------------------
3.3 Determination of Final Purchase Price......................... -15-
-------------------------------------
3.4 Adjustment.................................................... -16-
----------
3.5 Allocation of Purchase Price.................................. -16-
----------------------------
ARTICLE 4.
CLOSING
-------
4.1 Closing Date.................................................. -17-
------------
4.2 Deposit; Payment to Seller on Closing Date.................... -17-
------------------------------------------
4.3 Buyer's Additional Deliveries................................. -17-
-----------------------------
4.4 Seller's and Parent's Deliveries.............................. -18-
--------------------------------
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
---------------------------------------------------
5.1 Organization and Qualification................................ -19-
------------------------------
5.2 Capitalization and Ownership of Shares........................ -20-
--------------------------------------
5.3 Authority of Seller and Parent................................ -20-
------------------------------
5.4 Solvency...................................................... -21-
--------
5.5 Material Changes in Operations, Etc........................... -21-
-----------------------------------
5.6 Taxes......................................................... -22-
-----
5.7 Property...................................................... -22-
--------
5.8 Material Contracts............................................ -22-
------------------
5.9 Intentionally Omitted......................................... -23-
---------------------
5.10 Intellectual Property; Software............................... -23-
-------------------------------
5.11 Intentionally Omitted......................................... -24-
---------------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
5.12 No Violation, Litigation or Regulatory Action:............... -24-
----------------------------------------------
5.13 Governmental Permits......................................... -25-
--------------------
5.14 Apex Properties.............................................. -25-
---------------
5.15 Employees; Compensation...................................... -25-
-----------------------
5.16 Intentionally Omitted........................................ -25-
---------------------
5.17 Inventories.................................................. -25-
-----------
5.18 Status of Contracts.......................................... -26-
-------------------
5.19 Customers and Suppliers...................................... -26-
-----------------------
5.20 Warranties................................................... -26-
----------
5.21 No Finder.................................................... -26-
---------
5.22 Ownership.................................................... -27-
---------
5.23 Disclosure................................................... -27-
----------
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
6.1 Organization of Buyer........................................ -27-
---------------------
6.2 Authority of Buyer........................................... -27-
------------------
6.3 No Finder.................................................... -28-
---------
ARTICLE 7.
ADDITIONAL AGREEMENTS
---------------------
7.1 Discharge of Division's Liabilities.......................... -28-
-----------------------------------
7.2 Taxes........................................................ -28-
-----
7.3 Use of Name.................................................. -29-
-----------
7.4 Open Purchase Orders......................................... -29-
--------------------
7.5 Shipment of King of Prussia Inventory........................ -30-
-------------------------------------
7.6 Returned Goods............................................... -30-
--------------
7.7 Product Liability Insurance.................................. -30-
---------------------------
7.8 Additional Intellectual Property Assignments................. -30-
--------------------------------------------
7.9 Transitional Employees and Assistance........................ -31-
-------------------------------------
7.10 Access to Records after Closing.............................. -31-
-------------------------------
7.11 Further Assurances........................................... -31-
------------------
7.12 Employment of J. Murray...................................... -33-
-----------------------
7.13 Certain Inventory Costs...................................... -33-
-----------------------
ARTICLE 8.
INDEMNIFICATION
---------------
8.1 Indemnification by Seller Group.............................. -33-
--------------------------------
8.2 Indemnification by Buyer..................................... -34-
------------------------
8.3 Notice of Claims............................................. -35-
----------------
8.4 Third Person Claims.......................................... -35-
-------------------
8.5 Duty to Mitigate............................................. -36-
----------------
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE 9.
GENERAL PROVISIONS
------------------
9.1 Survival of Representations and Warranties.................... -36-
------------------------------------------
9.2 Confidential Nature of Information............................ -37-
----------------------------------
9.3 No Public Announcement........................................ -37-
----------------------
9.4 Notices....................................................... -37-
-------
9.5 Successors and Assigns........................................ -38-
----------------------
9.6 Intentionally Omitted
---------------------
9.7 Entire Agreement; Amendments.................................. -39-
----------------------------
9.8 Interpretation................................................ -39-
--------------
9.9 Waivers....................................................... -39-
-------
9.10 Expenses...................................................... -40-
--------
9.11 Partial Invalidity............................................ -40-
------------------
9.12 Execution in Counterparts..................................... -40-
-------------------------
9.13 Governing Law/Jurisdiction.................................... -40-
--------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
A Form of Bill of Sale for Each Seller
B Form of Instrument of Assignment and Assumption for Each Seller
C-1 Form of United States Trademark Assignment for GSI
C-2 Form of United States Trademark Assignment for RYKA
C-3 Form of United States Trademark Assignment for KPR
C-4 Form of Foreign Trademark Assignment for GSI
C-5 Form of United States Patent Assignments for GSI
D Form of Assignment of the RYKA Website
E Form of Import Authorization for Trademarked Goods
F Form of Deposit Payment Instruction
G Form of Blanket Drawback Entry
H Form of Assignment and Endorsement of Bills of Lading
I Form of Opinion of Counsel for Buyer
J Form of Opinion of Counsel for the Seller
Schedule Description
- -------- -----------
2.1(a) Certain Purchased Assets
2.1(d) Shoe Molds
2.3(c) Assumed Commitments or Contracts
5 Seller's Disclosure Schedule
7.4 Open Purchase Orders
</TABLE>
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated December 29, 1999, among
American Sporting Goods Corporation, a Delaware corporation ("Buyer"), and
-----
Global Sports, Inc., a Delaware corporation ("Global" or "Parent"), RYKA Inc., a
------ ------
Pennsylvania corporation ("RYKA"), KPR Sports International, Inc., a
----
Pennsylvania corporation ("KPR"), G.S.I., Inc., a Delaware corporation, formerly
---
known as Global Sports I.P. Inc. ("GSI") and Apex Sports International, Inc., a
---
Pennsylvania corporation ("Apex") (RYKA, KPR, GSI and Apex are referred to
----
herein collectively as the "Seller", and with Parent as the "Seller Group").
------ ------------
WHEREAS, Seller is, among other things, engaged in the business of
manufacturing, marketing, distributing and selling at wholesale footwear under
the brands RYKA, Yukon and Apex;
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, certain assets, and Buyer desires to assume certain
liabilities and agreements of the Seller relating to the manufacturing,
marketing, distribution and selling at wholesale footwear bearing the Purchased
Brands (the "Division"), all on the terms and subject to the conditions set
--------
forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed between Seller Group and
Buyer as follows:
ARTICLE 1.
DEFINITIONS
-----------
1.1 Definitions. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"Adjustment Report" has the meaning assigned in Section 3.3 hereof.
----------------- -----------
"Affiliate" means, with respect to any Person,(i) any other Person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person; (ii) any other Person that owns,
directly or indirectly, 10% or more of such specified person's Capital Stock or
any officer or director of such specified Person or other Person or, with
respect to any natural Person, any person having a relationship with such Person
by blood, marriage or adoption not more remote than second cousin; or (iii) any
other Person 10% or more of the voting stock of which is beneficially owned or
held directly or indirectly by such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities, by contract
<PAGE>
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreed Method" means components of inventory are valued at factory
-------------
purchase cost plus ocean freight, customs charges, duty, inland freight charges,
one percent of factory purchase cost to cover bank charges, and any applicable
agent commissions.
"Agreed Rate" means the "prime" or base rate published by Chase Bank,
-----------
as that rate may vary from time to time, or if that rate is no longer published,
a comparable rate.
"Agreement" means this Asset Purchase Agreement, including the
---------
Exhibits and Schedules annexed hereto.
"Allocation Schedule" has the meaning assigned in Section 3.5 hereof.
------------------- -----------
"Arbitrating Firm" has the meaning assigned in Section 3.3 hereof.
---------------- -----------
"Assigned Agreements" has the meaning assigned in Section 5.18 hereof.
------------------- ------------
"Assumed Liabilities" has the meaning assigned in Section 2.3 hereof.
------------------- -----------
"Bill of Sale" means the Bills of Sale, dated as of the Closing Date,
------------
of Seller in favor of Buyer in the form of Exhibit A attached hereto.
---------
"Buyer" has the meaning specified in the first paragraph of this
-----
Agreement.
"Buyer Ancillary Agreements" means all agreements, instruments and
--------------------------
documents being or to be executed and delivered by Buyer under this Agreement or
in connection herewith.
"Buyer Group Member" means Buyer and its Affiliates and their
------------------
respective successors and assigns.
"Claim" means (i) any complaint, claim or demand by any third party,
-----
(ii) any action, suit, proceeding, hearing, charges or investigation, by or
before any Governmental Body, arbitrator or arbitral panel, or (iii) any
injunction, decree, ruling or order of any Governmental Body.
"Claim Notice" has the meaning assigned in Section 8.3.
------------ -----------
"Closing" has the meaning assigned in Section 4.1.
------- -----------
"Closing Date" has the meaning assigned in Section 4.1.
------------ -----------
-2-
<PAGE>
"Closing Date Payment" means $10,317,322.
--------------------
"Closing Price Adjustment Amount" has the meaning assigned in
--------------------------------
Section 3.3.
- -----------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Copyrights" means United States and foreign copyrights, whether
----------
registered or unregistered, and pending applications to register the same.
"Court Order" means any judgment, order, award or decree of any
-----------
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"Deposit" has the meaning assigned in Section 4.2.
------- -----------
"Design Materials" has the meaning assigned in Section 2.1(e).
---------------- --------------
"Disclosure Schedule" means the Seller Group's Disclosure Schedule,
-------------------
attached hereto as Schedule 5, which contains certain information to be
----------
disclosed by Seller Group pursuant to Article 5 hereof. Each item of
---------
information disclosed on the Disclosure Schedule indicates to which section or
subsection of Article 5 the information pertains.
"Division" has the meaning specified in the second recital to this
--------
Agreement.
"Division Exclusive Property" means any tangible or intangible
---------------------------
property owned, leased or operated by the Seller Group and used exclusively by
the Division.
"Division Non-Exclusive Property" means any tangible or intangible
-------------------------------
property owned, leased or operated by the Seller Group the use of which is
material but not exclusive to the Division.
"Employee Plans" means employee plans, including, without limitation,
--------------
any employee benefit plan (as such term is described in Section 3(3) of ERISA or
any plan, practice or arrangement (whether or not reduced to writing) that
constitutes a "fringe benefit" plan, vacation plan or policy, sick leave
program, medical, disability or life insurance plan (including, without
limitation, those employment or other agreements that contain "golden parachute"
provisions) that applies to any employees of Seller.
"Encumbrance" means any lien, claim, charge, security interest,
-----------
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title or covenant affecting title.
-3-
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Estimated Closing Date Valuation" has the meaning assigned in
--------------------------------
Section 3.2.
- -----------
"Excluded Assets" has the meaning assigned in Section 2.2.
--------------- -----------
"Excluded Liabilities" has the meaning assigned in Section 2.4.
-------------------- -----------
"exclusive," "exclusively" or similar terms means solely in connection
--------- -----------
with the Division or the Purchased Brands except for de minimis or incidental
use by others.
"Expense" means any and all expenses incurred in connection with
-------
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).
"Final Closing Date Valuation" has the meaning assigned in
----------------------------
Section 3.3.
- -----------
"Final Purchase Price" has the meaning assigned in Section 3.3.
-------------------- -----------
"Foreign Sales" has the meaning assigned in Section 7.11.
------------- ------------
"Four Inventory Locations" means FARO Services, Inc. at 8190 Byron
------------------------
Road, Whittier CA 90606, Universal Warehouse Company at 2850 East Del Amo Blvd.,
Long Beach, CA 90807-0547, Global Sports, Inc at 555 South Henderson Road, King
of Prussia, PA 19406 and Axiom Logistics at 5 Paget Road, Bramptom, Ontario,
Canada.
"Global Sports Interactive" means Global Sports Interactive, Inc., a
-------------------------
Pennsylvania corporation.
"Governmental Body" any government or political subdivision thereof,
-----------------
whether federal, state, local or foreign, or any agency or instrumentality of
any such government or political subdivision, or any court or other tribunal.
"Governmental Permits" has the meaning assigned in Section 5.13.
-------------------- ------------
"Indemnified Party" has the meaning assigned in Section 8.3.
----------------- -----------
"Indemnitor" has the meaning assigned in Section 8.3.
---------- -----------
-4-
<PAGE>
"Instrument of Assignment and Assumption" means the Assignment and
---------------------------------------
Assumption Agreements, dated as of the Closing Date, between Buyer and Seller,
in the form of Exhibit B attached hereto.
---------
"Intellectual Property" means Copyrights, Patent Rights, Trademarks,
---------------------
Trade Secrets and the RYKA Domain Name, and the physical embodiments of the
foregoing.
"Intellectual Property Assignments" mean the assignments, dated as of
---------------------------------
the Closing Date, of Seller in favor of Buyer, pursuant to which all of Seller's
right, title and interest in all of its Intellectual Property described in the
Disclosure Schedule and all goodwill of the Sellers associated therewith shall
be assigned to Buyer, in the forms attached hereto as Exhibits C-1, C-2, C-3,
------------ --- ---
C-4 and C-5.
- --- ---
"IRS" means the Internal Revenue Service.
---
"knowledge of Seller" or phrase of similar import means the actual
--------------------
knowledge of the current executive officers of Seller or Parent, or any
information included in any written communication, computer e-mail or voice mail
addressed or copied to such persons.
"Leased Real Property" means the real property and the improvements
--------------------
thereon located at the following addresses: 8190 Byron Road, Whittier, Los
Angeles County, CA 90606, 2850 East Del Amo Blvd., Long Beach, Los Angeles
County, CA 90807-0547, 5 Paget Road, Bramptom, Ontario, Canada.
"Lender" has the meaning assigned in Section 9.5.
------ -----------
"Letter of Intent" means that certain Letter of Intent dated
----------------
December 15, 1999 between Buyer and the Seller Group.
"Loss" means any and all losses, costs, obligations, liabilities,
----
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges, but shall not include Expenses.
"Material Adverse Effect" means a material adverse effect on the
-----------------------
assets, liabilities, business or financial condition of Seller (or Buyer or the
Purchased Assets, as the context may require), taken as a whole.
"Open Purchase Orders" has the meaning assigned in Section 7.4.
-------------------- -----------
"Patent Rights" means United States and foreign patents, patent
-------------
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto.
-5-
<PAGE>
"Parent" has the meaning specified in the first paragraph of this
------
Agreement.
"Person" means any individual, corporation, partnership, joint
------
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Body.
"Purchased Assets" has the meaning assigned in Section 2.1.
---------------- -----------
"Purchased Brands" means the RYKA, Apex and Yukon brands and all
----------------
Intellectual Property and all goodwill associated therewith.
"QVC" means QVC Network Inc., a Delaware corporation, or an Affiliate
---
thereof.
"Requirements of Laws" means any foreign, federal, state and local
--------------------
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"Retained Employees" means Mary Taylor, Mark Fitzpatrick and
------------------
Charles Legassie.
"RYKA Domain Name" means the Internet domain name
----------------
"http://www.ryka.com/" together with the goodwill of the Seller symbolized
thereby.
"Seller" has the meaning specified in the first paragraph of this
------
Agreement.
"Seller Ancillary Agreements" means the Bill of Sale, IP Assignment,
---------------------------
the Instrument of Assignment and Assumption, the Intellectual Property
Assignments and all agreements, instruments and documents being or to be
executed and delivered by Seller under this Agreement or in connection herewith.
"Seller Group Member" means Seller and its Affiliates and their
-------------------
respective successors and assigns.
"Seller Transitional Employees" has the meaning assigned in
-----------------------------
Section 7.8.
- -----------
"Software" means computer software programs and software systems,
--------
including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, related documentation and
materials, whether in source code, object code or human readable form.
"Tax" means any federal, state, local or foreign net income,
---
alternative or add-on minimum, gross income, gross receipts, property, sales,
use, transfer, gains, license, excise,
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<PAGE>
employment, payroll, withholding or minimum tax, or any other tax custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Body.
"Tax Return" means any return, report or similar statement required to
----------
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"Trademarks" means United States, state and foreign trademarks,
----------
service marks, logos, trade dress and trade names, whether registered or
unregistered (including any rights to such trademarks, service marks, logos,
trade dress and trade names), pending applications to register the foregoing,
and all goodwill of the business associated therewith.
"Trade Secrets" means confidential ideas, trade secrets, know-how,
-------------
concepts, methods, processes, formulae, reports, data, supplier lists, customer
lists, mailing lists, business plans, or other proprietary information.
1.2 Construction. For all purposes of this Agreement, all defined
------------
terms include the plural as well as the singular; all accounting terms, unless
the context clearly indicates otherwise, have the meanings assigned to them in
accordance with generally accepted accounting principles in effect in the United
States of America on the date hereof; the term "including" shall mean "including
without limitation"; all references to a contract, agreement or instrument
herein shall mean such contract, agreement or instrument and all exhibits,
schedules and other attachments thereto, as any such contract, agreement or
instrument may be amended, supplemented or otherwise modified from time to time
in a manner that does not violate the provisions of this Agreement; the words
"herein", "hereof", and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular article, section or other
subdivision; all references to any article, section or other subdivision refer,
unless otherwise indicated, to the corresponding article, section or other
subdivision of this Agreement. Each reference to the term "Seller" herein shall
mean all members of Seller unless the context otherwise clearly requires. Each
reference to the term "Seller Group" herein shall mean all members of Seller
Group unless the context otherwise clearly requires.
ARTICLE 2.
PURCHASE AND SALE
-----------------
2.1 Purchased Assets. Upon the terms and subject to the conditions
----------------
of this Agreement, on the Closing Date, Seller shall sell, transfer, assign,
convey and deliver to Buyer, and Buyer shall purchase from Seller free and clear
of all Encumbrances (except for liabilities which Buyer assumes herein), the
following assets of Seller related to the Division (herein collectively called
the "Purchased Assets"):
----------------
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<PAGE>
(a) all of the assets listed on Schedule 2.1(a) attached hereto,
--------------
including;
(i) all inventory of the Division located at the Four
Inventory Locations and inventory in transit thereto which has been paid
for by Seller;
(ii) the Division's point of purchase assets (both new and
at the customers' store locations), equipment, the WSA main (two story)
trade show booth and other personal property as detailed and listed
separately on Schedule 2.1(a);
---------------
(iii) prepaid items and deposits listed separately on
Schedule 2.1(a);
---------------
(iv) the Copyrights, Patent Rights and Trademarks for the
Purchased Brands and all other Copyrights, Patent Rights and Trademarks
used exclusively in connection with the Purchased Brands (and all goodwill
associated therewith) all as listed in Section 5.10 of the Disclosure
Schedule, and the agreements, contracts, licenses, sublicenses, assignments
and indemnities related thereto which Buyer assumes herein or pursuant to
the Instrument of Assignment and Assumption;
(b) the Governmental Permits listed in Section 5.13 of the
Disclosure Schedule used exclusively by the Division to the extent
assignable and as assumed by Buyer pursuant to the Instrument of Assignment
and Assumption;
(c) those personal property leases, contracts, agreements or
understandings relating to or associated with the Division to the extent
assignable and assumed by the Buyer pursuant to the Instrument of
Assignment and Assumption;
(d) all of Seller's interest in and rights to shoe molds (and
all Copyrights, if any, associated therewith) used to produce footwear
bearing the Purchased Brands, whether amortized or not (Buyer acknowledges
it is familiar with the custom in the industry whereby contractors create
shoe molds as part of the manufacturing process and manufacturers "earn"
the molds through continued production orders and that Seller may not have
title to such molds and if Seller does have title, it may not be free and
clear of Encumbrances of the contractors). Seller agrees to use its
commercially reasonable efforts to produce a list of production orders and
a list of the locations of the shoe molds and to transfer its rights
thereto to Buyer). (The descriptions and locations of these molds, and to
the extent available to Seller, Seller's interest therein, are detailed on
Schedule 2.1(d) attached hereto);
---------------
(e) All of Seller's interest in footwear plans, designs,
analyses and prototypes ("Design Materials") relating to the Purchased
Brands; ----------------
-8-
<PAGE>
(f) The RYKA Website, including the RYKA Domain Name and, to the
extent assignable, all of Seller Group's interest in and to all telephone,
telex and telephone facsimile numbers, and other directory listings used
exclusively by the Division (including RYKA's toll-free telephone number);
(g) all Trade Secrets, marketing plans, projections, surveys and
studies, and other proprietary or confidential information exclusively used
in the Division;
(h) all of Seller's rights, claims or causes of action against
third parties (including all damages related thereto), whenever arising,
relating to (i) any warranties (implied or express) or indemnities
concerning the Purchased Assets and (ii) Intellectual Property included in
the Purchased Assets; provided however, that notwithstanding the foregoing,
----------------
Seller Group shall have the right to assert ownership of such warranties,
indemnities or Intellectual Property, as to the period ending on the
Closing Date, as a defense to any claim brought against Seller Group by a
third party;
(i) true, correct and materially complete copies of all books
and records (in electronic format where available) of Seller reasonably
requested by Buyer relating to the assets, properties, business and
operations of the Division (including customer lists, credit history,
ordering and payment information and contact persons, supplier lists, and
including copies of all such data and other information stored on discs,
tapes or other media), it being understood that except where original
documents are necessary to transfer title to the Purchased Assets to Buyer
and except for records relating to customers' open orders, production
specifications and Open Purchase Orders, Seller may provide copies to Buyer
and retain the originals; provided that whenever Seller has provided
original documents to Buyer, Seller shall be entitled to retain copies of
such documents and, provided further, that each of Seller and Buyer agrees
to provide the other with access to the original documents described above
if such party has a reasonable requirement therefore;
(j) Seller's interest in all goods in transit relating to the
Division (but not included in "paid for" inventory in transit), the payment
of which is assumed by Buyer as an Open Purchase Order pursuant to
Section 7.4; and
-----------
(k) the assets underlying the Assumed Liabilities.
2.2 Excluded Assets. The Purchased Assets shall not include any
---------------
assets not set forth in Section 2.1, including but not limited to the following
-----------
(herein collectively referred to as the "Excluded Assets"), and no such assets
---------------
shall be included in the Final Closing Valuation referred to in Article 3
hereof):
(a) all cash, bank deposits and cash equivalents;
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<PAGE>
(b) all inventory not bearing the RYKA, Apex or Yukon marks, and all
inventory bearing the RYKA, Apex or Yukon marks which is currently held by
Parent's Affiliate, Global Sports Interactive for retail sale (and Parent
represents that such inventory is currently being held by Global Sports
Interactive for retail sale in the ordinary course of its business);
(c) any real property of Seller Group;
(d) all of Seller Group's contracts of insurance;
(e) all corporate minute books, stock transfer books and corporate
seals of Seller Group;
(f) Seller Group's rights or obligations under any real property
leases other than those specifically to be assumed by Buyer;
(g) any of Seller Group's employees or employee benefit agreements,
plans or arrangements maintained by Seller Group on behalf of persons
employed by it other than those liabilities of the Retained Employees;
(h) all shares of capital stock of the subsidiaries of Parent;
(i) all accounts receivable of the Seller Group;
(j) all raw materials, supplies, work-in-process and other materials
not included in the inventory of the Division as reflected on
Schedule 2.1(a);
--------------
(k) all insurance and other similar claims for matters arising prior
to the Closing;
(l) all refunds of any Tax due Seller or Parent;
(m) all contracts of Seller Group not assumed by Buyer in the
Instrument of Assignment and Assumption; and
(n) all deposits not assumed by Buyer in the Instrument of Assignment
and Assumption.
For the sake of clarity, none of the Excluded Assets shall be included in the
Estimated Closing Valuation or the Final Closing Valuation.
2.3 Assumed Liabilities. On the Closing Date, Buyer shall deliver to
-------------------
Seller the Instrument of Assignment and Assumption pursuant to which Buyer shall
assume and agree to
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<PAGE>
discharge the following (and only the following) obligations and liabilities of
Seller in accordance with their respective terms and subject to the respective
conditions thereof:
(a) the following commitments and obligations concerning the
Purchased Brands and Division for which liabilities at the Closing Date
have been estimated but not paid (and the benefits of which are available
to Buyer after the Closing Date):
(i) the media planning and development of RYKA advertising
campaign, photo shoot, ad creation, etc. (in the Seller good faith
estimated amount of $54,001);
(ii) the Fall 2000 RYKA catalogue (in the Seller good faith
estimated amount of $13,841);
(iii) the corporate ID for the RYKA brand (in the Seller good
faith estimated amount of $25,000);
(iv) the QVC set design and construction for the current season
(in the Seller good faith estimated amount of $7,838);
(v) the accrual for Fall 2000 samples (in the Seller good faith
estimated amount of $50,168, including duty and freight charges); and
(vi) the Fall 2000 Yukon catalogue (in the Seller good faith
estimated amount of $47,000 (accrued)), and no others.
As to these estimated amounts, Seller shall provide Buyer with back up for
such amounts after the Closing and Buyer shall discharge or satisfy the
actual liability thereof. If such amounts were already paid by Seller,
Seller shall provide documentation thereof and Buyer shall reimburse Seller
for such amounts.
(b) the liabilities and obligations of Seller under the Open Purchase
Orders as provided in Section 7.4;
-----------
(c) all liabilities and obligations of Seller arising after the
Closing Date or with respect to periods following the Closing Date and to
be paid or performed after the Closing Date relating to:
(i) the rental and other charges payable with respect to the
Four Inventory Locations (except King of Prussia) from and after the
Closing Date, but not prior to the Closing Date (for the avoidance of
doubt, rent incurred or charged per item pre Closing shall be
allocated between Seller and Buyer as of the Closing Date based upon
the time period involved for time based rent or when the action
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<PAGE>
took place for per item charges, and Seller shall endeavor to have
separate invoices prepared covering the pre-and post-Closing periods);
and
(ii) the leases, contracts and other agreements designated by
Buyer and listed or described in the Instrument of Assignment and
Assumption and listed on Schedule 2.3(c) attached hereto, but not any
---------------
expenses or obligations incurred or arising thereunder prior to the
Closing Date (for the avoidance of doubt, salaries, appearance or
endorsement fees, rent, utilities, telephone and sales commissions or
incentives invoiced, incurred or charged over time shall be allocated
between Seller and Buyer as of the Closing Date, and sales commission
and incentive expenses shall be allocated based on whether goods were
shipped prior to or after the Closing Date);
(d) all costs and expenses, including freight and costs (whether in
the form of payments, discounts, allowances, reimbursements or credits)
arising from the return after the Closing by customers of goods sold by
Seller prior to the Closing in bona fide third party transactions (but in
no event including any liabilities arising from personal injury or product
liability claims);
(e) the accrued costs and expenses through the Closing Date of the
Retained Employees for accrued vacation and bonuses, who shall become
employees of Buyer after the Closing (in amount of $75,192.31) (or if
Seller is required to pay such amounts to the Retained Employees, Buyer
shall reimburse Seller for such amounts upon confirmation of Seller's
payment thereof);
(f) Buyer shall assume the employment contract of Mary Taylor, but
not the 1999 bonus or accrued vacation payable Ms. Taylor (which are dealt
with in Section 2.3(e) above) or any stock options, warrants or other
--------------
compensation which is unique to Seller Group; and
(g) all liabilities in respect of Taxes for which Buyer is liable
pursuant to Section 7.2.
-----------
All of the foregoing liabilities and obligations to be assumed by Buyer
hereunder are referred to herein as the "Assumed Liabilities."
-------------------
2.4 Excluded Liabilities. Buyer shall not assume or be obligated to
--------------------
pay, perform or otherwise discharge any liability or obligation of Seller or
Parent, direct or indirect, known or unknown, absolute or contingent, not
expressly and specifically assumed by Buyer as an Assumed Liability (all such
liabilities and obligations not being assumed being herein called the "Excluded
--------
Liabilities") and none of the following shall be Assumed Liabilities for
- -----------
purposes of this Agreement:
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<PAGE>
(a) any intercompany payables and other liabilities or obligations of
the Division to Seller Group or its Affiliate;
(b) any costs and expenses incurred by Seller and Parent incident to
their negotiation and preparation of this Agreement, the Letter of Intent
and their performance and compliance with the agreements and conditions
contained herein and therein (except as otherwise specifically provided
herein);
(c) any liabilities or obligations in respect of any Excluded Assets;
(d) any liabilities in respect of the claims or proceedings which are
otherwise described or should have been described in Section 5.12 of the
Disclosure Schedule, which claims or proceedings Seller Group shall have
the right to dispose of in its discretion;
(e) any accrued liabilities of any kind relating to the Division
arising prior to the Closing Date, except to the extent such liabilities
specifically constitute an Assumed Liability;
(f) any liabilities and obligations related to, associated with or
arising out of (i) the occupancy, operation, use or control of any of the
Purchased Assets or any Division property on or prior to the Closing Date
or (ii) the operation of the Division on or prior to the Closing Date, in
each case incurred or imposed by any statutory or common law;
(g) any product liability or claims for injury to person or property,
regardless of when made or asserted, relating to products sold by the
Division or services performed by the Division on or prior to the Closing
Date (and Buyer shall be responsible after the Closing Date for such
product liability claims or claims for injury to person or property
relating to products it sells after the Closing Date);
(h) any liabilities or obligations relating to or owed to employees
of Seller, including severance, COBRA, insurance or other obligations in
connection with the termination of their employment with Seller Group,
except as such liabilities or obligations concern the Retained Employees;
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<PAGE>
(i) any liabilities in respect of Taxes for which Seller or Parent is
liable pursuant to Section 7.2;
-----------
(j) any liabilities for rent payable with respect to the Four
Inventory Locations which concern the time period up to and including the
Closing Date;
(k) any recalls on or after the Closing Date mandated by any
governmental body of the products sold by the Division on or prior to the
Closing Date (and Buyer shall be responsible after the Closing Date for
such recalls of goods it sells after the Closing Date); or
(l) any liabilities for manufacturer's representative payments,
allowances, incentives payments, reimbursements, credits or other amounts
in respect of sales programs or agreements, incentive programs, cooperative
advertising, rebates or similar items with Seller customers committed to by
Seller with respect to sales made, or advertising placed, before the
Closing.
ARTICLE 3.
PURCHASE PRICE
--------------
3.1 General. The purchase price for the Purchased Assets shall be
-------
determined initially upon an estimate as set forth in Section 3.2 and finalized
-----------
based upon a revaluation of the Purchased Assets as set forth in Section 3.3.
-----------
3.2 Determination of Estimated Purchase Price. Prior to the Closing
-----------------------------------------
Date, Seller delivered to Buyer a calculation and accompanying back-up setting
forth in reasonable detail Seller's best estimate of the value of the Purchased
Assets comprising the categories in Schedule 2.1(a) which Seller reasonably
---------------
anticipates will be owned by Seller on the close of business on the day
immediately preceding the Closing Date based on the most recently available
financial information of Seller calculated in accordance with the Agreed Method
and assumptions as were used in preparing Exhibit A to the Letter of Intent (the
"Estimated Closing Date Valuation"). (In this regard, there shall be no changes
--------------------------------
in the accounting methods consistently applied by Seller, such as (but not by
way of limitation) changes in obsolescence methods, change in useful lives,
changes in estimates or changes in valuation techniques or methods.) On the
basis of the Estimated Closing Date Valuation, Seller and Buyer shall have
estimated the purchase price to Buyer (the "Closing Date Payment"), which equals
--------------------
the total of the inventory assets set forth on the Estimated Closing Date
Valuation (including inventory paid for and in transit), less the negotiated
reserve of $830,000, plus the Seller's net book value of the trade show booth
and unused point of purchase displays on the Closing Date, plus the actual
amount of the Seller deposits transferred to Buyer on the Closing Date (not
including a Supershow deposit), plus $1,725,000. The parties have agreed that
the Closing Date Payment is $10,317,322.
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<PAGE>
3.3 Determination of Final Purchase Price. (a) At least two
-------------------------------------
business days prior to the Closing Date representatives selected and compensated
separately by each of Buyer and Seller commenced a joint physical count to
determine the footwear inventory of Seller stored at the Four Inventory
Locations at the close of business immediately prior to the Closing Date. (To
the extent both Seller and Buyer request third parties to conduct such inventory
count for their joint benefit, such expenses shall shared equally. In this
regard, Seller and Buyer shall share the cost of the inventory count at
Universal Warehouse Company and Buyer and Seller agree to use the prior
inventory taken at Axiom Logistics on December 6, 1999, adjusted for sales and
receipt of new goods thereafter through the Closing Date.) Promptly after the
Closing Date (but not later than 30 days after the Closing Date and Buyer's
receipt of Seller's books and records or copies thereof), Buyer shall apply the
Agreed Method to the Closing Date physical inventory (adjusted for inventory
received by Seller at the Four Inventory Locations and sales by Seller, if any,
during and after the physical inventory and before the Closing Date) for the
inventory assets located at the Four Inventory Locations and the information
contained in Seller's books and records (true, correct and materially complete
copies of which are to be delivered by Seller to Buyer at the Closing) for the
value of the other assets (including paid for inventory in transit) and shall
prepare the final Closing Date valuation (the "Final Closing Date Valuation")
----------------------------
based on the book value of such Seller inventory as of the close of business on
the day preceding the Closing Date and the same accounting methods and
assumptions as were used in preparing Exhibit A to the Letter of Intent. (In
this regard, there shall be no changes in the accounting methods consistently
applied by Seller, such as (but not by way of limitation) changes in
obsolescence methods, change in useful lives, changes in estimates or changes in
valuation techniques or methods.) Based upon the Final Closing Date Valuation,
Buyer shall send to Seller (with accompanying detail in an "Adjustment Report")
-----------------
a revision of the Closing Date Payment calculated in accordance with the same
procedures as set forth above (the "Final Purchase Price"), and shall determine
--------------------
the amount, if any, by which the Closing Date Payment differs from its
determination of the Final Purchase Price (the "Closing Price Adjustment
------------------------
Amount").
(b) Promptly following receipt of the proposed Final Purchase Price
and Adjustment Report, Seller may review the same and, within 30 days after the
date of such receipt, may deliver to Buyer a certificate setting forth its
objections to the Final Purchase Price and Adjustment Report, together with a
summary of the reasons therefor and calculations which, in its view, are
necessary to eliminate such objections. In the event that Seller does not
object within such 30-day period, the Closing Price Adjustment Amount as set
forth in the Adjustment Report shall be final and binding on the parties for
purposes of this Agreement.
(c) In the event Seller objects within such 30-day period, Buyer and
Seller shall use their reasonable efforts to resolve by written agreement any
differences as to the Closing Price Adjustment Amount and, in the event Buyer
and Seller so resolve any such differences, the Final Purchase Price and the
Closing Price Adjustment Amount as so resolved shall be final and binding on the
parties for purposes of this Agreement.
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<PAGE>
(d) In the event any objections raised by the Seller are not resolved
between the parties within 45 days after the Seller's receipt of the Adjustment
Report, then the Seller shall submit the objections that are then unresolved to
a national accounting firm acceptable to both Buyer and the Seller (which shall
be one of the "big five" national accounting firms, but shall not be the
accounting firm retained to audit or review the books and records of either
Buyer or the Seller (the "Arbitrating Firm"). The Arbitrating Firm shall be
----------------
directed by Buyer and the Seller to resolve the unresolved objections (based
solely on the presentations by Buyer and the Seller as to whether any disputed
matter had been determined in a manner in accordance with the accounting methods
to be used herein and whether the physical inventory taken and applied was
materially correct) as promptly as reasonably practicable and to deliver written
notice to each of Buyer and the Seller setting forth its resolution of the
disputed matters. In resolving such dispute, absent fraud or misrepresentation,
the Arbitrating Firm must use the Agreed Method and the negotiated reserve of
$830,000 in calculating the value of the inventory sold to Buyer. The Final
Purchase Price and the Closing Price Adjustment Amount, after giving effect to
any agreed adjustments in Section 3.3(c) and to the resolution of disputed
--------------
matters by the Arbitrating Firm pursuant to this Section 3.3(d), shall be final
--------------
and binding on the parties for purposes of this Agreement.
(e) Buyer, Seller and Parent shall promptly make available to each
other and to the Arbitrating Firm, if applicable, such books, records and other
information (including work papers) as any of the foregoing may reasonably
request to prepare or review the respective determinations made by the parties.
The fees and expenses of the Arbitrating Firm shall be paid 50% by Buyer and 50%
by the Seller and each party shall bear its own expenses with respect to such
arbitration.
3.4 Adjustment. Promptly (but not later than five days) after the
----------
determination of the Closing Price Adjustment Amount pursuant to Section 3.3
-----------
that is final and binding as set forth herein:
(a) if the Final Purchase Price is more than the Closing Date
Payment, Buyer shall pay such difference, plus interest at the Agreed Rate
from the Closing Date, to Seller by wire transfer of immediately available
funds to such bank account of Seller as Seller shall designate in writing
to Buyer; and
(b) if the Final Purchase Price is less than the Closing Date
Payment, Seller and Parent jointly and severally agree promptly to pay such
difference, plus interest at the Agreed Rate from the Closing Date, to
Buyer by wire transfer of immediately available funds to such bank account
of Buyer as Buyer shall designate in writing to Seller.
3.5 Allocation of Purchase Price. Within 30 days following the
----------------------------
Closing Date, Buyer and Seller shall use reasonable efforts to agree on a
schedule (the "Allocation Schedule") of the relative fair market value of the
-------------------
Purchased Assets. The Allocation Schedule shall be reasonable and shall be
prepared in accordance with Section 1060 of the Code and the regulations
thereunder. Buyer and Seller each agrees to file Internal Revenue Service Form
8594, and all
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<PAGE>
federal, state, local and foreign Tax Returns, in accordance with the Allocation
Schedule to the extent agreed. Buyer and Seller each agrees to provide the other
promptly with any other information required to complete Form 8594.
ARTICLE 4.
CLOSING
-------
4.1 Closing Date. The closing of the transfer of the Purchased
------------
Assets from Seller to Buyer (the "Closing") shall be consummated by delivery of
-------
signed and initialed facsimile documents on December 29 1999 and each of Buyer,
Seller and Parent covenant and agree to deliver on the following business day
original signed and initialed counterparts to the other parties. The date on
which the Closing is actually held is sometimes referred to herein as the
"Closing Date."
------------
4.2 Deposit; Payment to Seller on Closing Date. Prior to the date
------------------------------------------
hereof, Buyer has deposited in escrow with Blank Rome Comisky & McCauley LLP,
counsel to Seller, the sum of $550,000 as evidence of Buyer's commitment to
close the transaction contemplated herein (the "Deposit"). At Closing;
-------
(a) the Deposit shall be released to Seller; and
(b) Buyer shall pay Seller an amount equal to the Closing Date
Payment minus the amount of the Deposit. Such payment shall be made by wire
-----
transfer of immediately available funds to the account in the United States
specified by Seller in writing to Buyer at least two business days prior to
the Closing.
4.3 Buyer's Additional Deliveries. At Closing, Buyer shall deliver
-----------------------------
to Seller all the following:
(a) copies of Buyer's Certificate of Incorporation certified as of a
recent date by the Secretary of State of the State of Delaware;
(b) certificate of good standing of Buyer issued as of a recent date
by the Secretary of State of the State of Delaware;
(c) certificate of the secretary or an assistant secretary of Buyer,
dated the Closing Date, in form and substance reasonably satisfactory to
Seller, as to (i) the resolutions of the Board of Directors of Buyer
authorizing the execution and performance of this Agreement and the
transactions contemplated hereby; and (ii) incumbency and signatures of the
officers of Buyer executing this Agreement and any Buyer Ancillary
Agreement;
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<PAGE>
(d) an opinion of counsel to Buyer substantially in the form
contained in Exhibit I;
---------
(e) the Instrument of Assignment and Assumption duly executed by
Buyer; and
(f) an instruction to Blank Rome Comisky & McCauley LLP to deliver
the Deposit to Seller and the interest thereon to Buyer, in the form of
Exhibit F attached hereto.
---------
4.4 Seller's and Parent's Deliveries. At Closing, Seller and Parent
--------------------------------
shall deliver to Buyer all the following:
(a) copies of the charter of each Seller and Parent certified as of a
recent date by the Secretary of State of the State of Delaware and the
Secretary of State of the State of Pennsylvania, where applicable;
(b) certificate of good standing of each Seller issued as of a recent
date by the Secretary of State of the State of Delaware and the Secretary
of State of the State of Pennsylvania, where applicable;
(c) certificate of the secretary or an assistant secretary of each of
Seller and Parent, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer, as to (i) the resolutions of the Board of Directors
of Seller and Parent (as the case may be) authorizing the execution and
performance of this Agreement and the transactions contemplated hereby and
(ii) incumbency and signatures of the officers of Seller and Parent (as the
case may be) executing this Agreement and any Seller Ancillary Agreement;
(d) an opinion of counsel to Seller and Parent substantially in the
form contained in Exhibit J attached hereto and addressed to Buyer and
---------
Lender;
(e) the Bill of Sale and the Instrument of Assignment and Assumption,
each duly executed by Seller;
(f) the Intellectual Property Assignments, in recordable form, duly
executed by Seller, with respect to Copyrights, Patent Rights, Trademarks
of Seller registered in the United States and other jurisdictions;
(g) all material required consents, waivers or approvals with respect
to the contracts listed in Schedule 2.3(c) hereof;
---------------
(h) Import authorization concerning trademarked goods, in the form of
Exhibit E attached hereto;
---------
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(i) Customs Form 7551 (Blanket Drawback Entry) concerning re-export
of goods, in the form of Exhibit G attached hereto;
---------
(j) Assignment and Endorsement of Bills of Lading or purchase orders
as may be required to put Buyer into possession of the inventory in transit
and open purchase orders, in the form of Exhibit H attached hereto;
---------
(k) UCC-3s, releases of security interests in Trademarks, Copyrights
and Patent Rights in recordable form or equivalent releases concerning all
security interests, liens or other interests in the Purchased Assets;
(l) Assignment of the RYKA Website, in the form attached hereto as
Exhibit D;
---------
(m) an instruction to Blank Rome Comisky & McCauley LLP to deliver
the Deposit to Seller and the interest thereon to Buyer, in the form of
Exhibit F attached hereto;
---------
(n) a copy of the legal opinion delivered by Potter Anderson &
Corroon LLP to Parent (which may be relied upon by Buyer); and
(o) such other bills of sale, assignments, including an, and other
instruments of transfer or conveyance as Buyer may reasonably request or as may
be otherwise necessary to evidence and effect the sale, assignment, transfer,
conveyance and delivery of the Purchased Assets to Buyer.
In addition to the above deliveries, Seller and Parent shall take all steps and
actions as Buyer may reasonably request or as may otherwise be necessary to put
Buyer in actual possession or control of the Purchased Assets.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
---------------------------------------------------
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, except as set forth on the
Disclosure Schedule referencing the sections of this Agreement to which it
applies, each Seller (as used herein, reference to a Seller or Seller Group
shall mean to each member thereof and to all of the members thereof, as the
context requires) and Parent, jointly and severally, represent and warrant to
Buyer and agree as follows:
5.1 Organization and Qualification. Each Seller is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, except that GSI is a corporation validly existing
and in good standing under the
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<PAGE>
laws of the State Delaware. Parent is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Seller has all
corporate power and authority to own or lease and to operate and use the
Purchased Assets. True and complete copies of the certificate or articles of
incorporation and all amendments thereto and of the By-laws, as amended to date,
of Seller have been delivered to Buyer.
5.2 Capitalization and Ownership of Shares. 100% of the outstanding
--------------------------------------
capital stock of each Seller is owned, of record and beneficially by Parent.
5.3 Authority of Seller and Parent. Seller has all corporate power
------------------------------
and authority necessary to execute, deliver and perform this Agreement and all
of the Seller Ancillary Agreements. The execution, delivery and performance of
this Agreement and the Seller Ancillary Agreements by Seller have been duly
authorized and approved by Seller's board of directors and its stockholder.
This Agreement has been duly authorized, executed and delivered by Seller and is
the legal, valid and binding obligation of Seller enforceable in accordance with
its terms, and each of the Seller Ancillary Agreements has been duly authorized
by Seller and upon execution and delivery by Seller will be a legal, valid and
binding obligation of Seller enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity.
Parent has all corporate power and authority necessary to execute,
deliver and perform this Agreement. The execution, delivery and performance of
this Agreement by Parent have been duly authorized and approved by Parent's
board of directors and do not require any further authorization or consent of
Parent or its stockholders. This Agreement has been duly authorized, executed
and delivered by Parent and is the legal, valid and binding obligation of Parent
enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement or any of the
Seller Ancillary Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will:
(a) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any Encumbrance
upon any of the Purchased Assets, in each case which would have a Material
Adverse Effect, under (i) the Certificate of Incorporation or By-laws of
Seller or Parent, (ii) any Assigned Agreement, (iii) any other material
note, instrument, agreement, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which Seller Group
is a party relating to the Purchased Assets or to which any of the
Purchased Assets is subject or by which Seller is bound relating to the
Purchased Assets, (iv) any Court Order to which Seller Group is a party
relating to the Purchased Assets or to which any of the Purchased Assets is
subject or by which Seller or
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<PAGE>
Parent is bound relating to the Purchased Assets, or (v) any Requirements
of Laws affecting Seller, Parent or the Purchased Assets; or
(b) except as contemplated herein (with respect to Patent Rights,
Trademark and Copyright filings, UCC-3, and consents of the landlords at
the Four Inventory Locations (except King of Prussia) and the counter
parties to the assumed contracts and Open Purchase Orders) require the
approval, consent, authorization or act of, or the making by Seller or the
Division of any declaration, filing or registration with, any Person, and
except for approvals, consents, authorizations or acts, the failure of
which to be obtained or to do would not have a Material Adverse Effect on
the Purchased Assets.
For avoidance of doubt, the disclosure of consents to contracts listed in the
Disclosure Schedule (other than with respect to contracts assumed by Buyer
hereunder) shall not be deemed to limit Seller's obligations under Section 2.4.
-----------
5.4 Solvency. Seller is not insolvent, and will not be insolvent
--------
after the consummation of the transactions contemplated herein.
5.5 Material Changes in Operations, Etc. (a) Since November 18, 1999
-----------------------------------
there has not been any damage, destruction, loss or claim, whether or not
covered by insurance, or condemnation or other taking adversely affecting any of
the Purchased Assets or the Division which would have a Material Adverse Effect
on the Purchased Assets.
(b) Since November 18, 1999, Seller has conducted the Division only
in the ordinary course and in conformity with past practice, subject to the
restrictions placed on Seller in the Letter of Intent since the date thereof.
Without limiting the generality of the foregoing, since such date, Seller has
not, in respect of the Division:
(i) made any change in the accounting principles and practices
used by Seller Group from those applied in the preparation of the balance
sheet as of December 31, 1998 insofar as such principles were applied in
Seller's determination of the Closing Date Payment;
(ii) accelerated shipments of goods to customers;
(iii) deferred the acceptance of returns of goods sold; or
(iv) agreed to or entered into any agreement to do any of the
foregoing.
(c) Since January 1, 1999, Seller has not committed to any customer
or prospective customer concessions, guarantees or special trade terms relating
to the sale or purchase of goods after the Closing Date or requested its
customers to defer returning goods pending the Closing.
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<PAGE>
5.6 Taxes. (i) Seller Group has, in respect of the Division and the
-----
Purchased Assets, filed all material Tax Returns which are required to be filed
and has paid all material Taxes which have become due pursuant to such Tax
Returns or pursuant to any assessment which has become payable; (ii) all
material monies required to be withheld by Seller from the Retained Employees
for income Taxes and social security and other payroll Taxes have been collected
or withheld, and either paid to the respective taxing authorities, set aside in
accounts for such purpose, or accrued, reserved against and entered upon the
books of the Division; and (iii) no transaction contemplated by this Agreement
is subject to withholding under Section 1445 of the Code.
5.7 Property. (a) Seller does not own any real property. The
--------
Disclosure Schedule contains a complete and correct list as of the date hereof
of all real properties and interests therein leased as of the date hereof by
Seller.
(b) Intentionally Omitted.
(c) The Disclosure Schedule contains a complete and correct list as
of the date hereof of each material lease or other agreement or right, whether
written or oral, under which Seller Group is lessee of, or holds or operates,
any machinery, equipment, vehicle or other tangible personal property owned by a
third Person and exclusively used in the Division.
(d) Seller Group has good title to all of the Purchased Assets, free
and clear of all Encumbrances. Upon delivery of the instruments of transfer
contemplated by Section 4.4, Seller Group will thereby transfer to Buyer good
-----------
title to the Purchased Assets, subject to no Encumbrances. Notwithstanding the
foregoing sentences, Seller makes no representations or warranties in this
Section 5.7(d) with respect to any Intellectual Property; such representations
- --------------
and warranties are as provided in Section 5.10 below.
------------
(e) With respect to each lease of real and personal property assigned
to and assumed by Buyer pursuant to Sections 2.1 and 2.3, the Seller enjoys
------------ ---
peaceful and undisturbed possession under such lease and the leasehold or other
interest of the Seller in such property is not subject or subordinate to any
Encumbrances except as set forth in such lease. All such leases are valid and
subsisting, the Seller has paid all rent due and payable under all such leases
and there exists no material default on the part of the Seller.
5.8 Material Contracts. Seller is not, with respect to the Division,
------------------
a party to or bound by:
(a) any distributor, dealer, manufacturers representative, sales
agency, advertising representative or advertising or public relations
contract which will bind Buyer after the Closing;
(b) any consignment agreement with customers; or
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<PAGE>
(c) any other contract, agreement, commitment, understanding or
instrument which are materially necessary to Buyer's use of the Purchased
Assets in accordance with Seller's past practice, other than those which
are listed on Exhibit C-1 or C-2 of the Letter of Intent (and as to which
copies of which have been provide by Seller to Buyer).
5.9 Intentionally Omitted.
---------------------
5.10 Intellectual Property; Software. (a) Sections 5.10(a)(1) and
-------------------------------
5.10(a)(2) of the Disclosure Schedule together contain a list of all subsisting
registered Copyrights, Patent Rights, and Trademarks and all subsisting pending
applications for registration of such Copyrights, Patent Rights, and Trademarks
(including all assumed or fictitious names under which Seller is conducting the
Division or has within the previous five years conducted the Division) owned by,
licensed to or used by Seller exclusively in connection with the conduct of the
Division, and contains a breakdown by Copyright, Patent Right and Trademark and
pending application of the owner thereof and the registration or application
number thereof. Such Trademarks include all the material Trademarks under which
the RYKA and Yukon brands of footwear have been sold by the Seller.
(b) There exists no Software which is used exclusively by the
Division, other than commercially available Software.
(c) The Disclosure Schedule contains a list of all material
agreements, contracts, licenses and sublicenses which relate to any Copyrights,
Patent Rights or Trademarks listed in the Disclosure Schedule. Neither the
Seller nor its Affiliates have entered into any material agreements, whether
oral or written, by which any Person shall have the right to use, license,
sublicense or otherwise exploit for value any such Copyright, Patent Right or
Trademark.
(d) Seller owns the entire right, title and interest in and to the
Copyrights, Patent Rights and Trademarks listed in Section 5.10(a)(2) of the
Disclosure Schedule. Seller has not granted any Encumbrance to any Person with
respect to the Copyrights, Patent Rights and Trademarks listed in Sections
5.10(a)(1) and 5.10(a)(2) of the Disclosure Schedule which are outstanding as
of Closing. Seller has taken no action before the date hereof to actively
divest itself of any of the Copyrights, Patent Rights and Trademarks listed in
Sections 5.10(a)(1) and 5.10(a)(2) of the Disclosure Schedule.
(e) (i) all registrations for Copyrights, Patent Rights and
Trademarks identified in Section 5.10(a)(2) in the Disclosure Schedule as being
owned by the Seller are in good standing and in force, and all applications to
register any unregistered Copyrights, Patent Rights and Trademarks so identified
are pending and in good standing, to the knowledge of Seller, all without
material challenge of any kind; (ii) during the five year period before the
Closing Date, Seller has attempted in good faith to maintain the Copyrights,
Patent Rights and Trademarks listed in Section 5.10(a)(2) of the Disclosure
Schedule; (iii) the Seller has the sole and exclusive right to bring actions for
infringement or unauthorized use of the Copyrights, Patent Rights and
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<PAGE>
Trademarks listed in Section 5.10(a)(2) of the Disclosure Schedule; and (iv) to
the knowledge of the Seller, there exists no basis for any action by Seller for
infringement or unauthorized use by a third party of the Copyrights, Patent
Rights and Trademarks listed in Section 5.10(a)(2) of the Disclosure Schedule
which infringement or unauthorized use would have a Material Adverse Effect on
the Purchased Assets.
(f) To the knowledge of the Seller no material infringement of any
Intellectual Property right of any other Person has occurred or results in any
way from the opera tions of the Division and the use of the Purchased Brands,
and no claim of any material infringement of any Intellectual Property right of
any other Person has been made or asserted within the last five years in respect
of the operations of the Division and the use of the Purchased Brands. To the
knowledge of the Seller, there is no basis for any claim against the Seller that
the operations, activities, products, software, equipment, machinery or
processes of the Division infringe any Intellectual Property right of any other
Person, to the extent that such infringement would have a Material Adverse
Effect on the Purchased Assets.
(g) As of the Closing Date Seller hereby cancels without cost to
Buyer any and all licenses, assignments or other conveyances as may have been in
existence or effect between any two or more Sellers respecting the Intellectual
Property related to the Purchased Assets.
5.11 Intentionally Omitted.
---------------------
5.12 No Violation, Litigation or Regulatory Action:
----------------------------------------------
(a) the Purchased Assets and their uses comply with all applicable
Requirements of Laws and Court Orders, except where such non-compliance would
not have a Material Adverse Effect on the Purchased Assets;
(b) the Seller has complied with all Requirements of Laws and Court
Orders which are applicable to the Purchased Assets or the Division except where
such non-compliance would not have a Material Adverse Effect on the Purchased
Assets;
(c) there are no lawsuits, claims, suits, proceedings or
investigations pending or threatened against or affecting the Seller of which
Seller Group has received written notice in respect of the Purchased Assets, and
there are no lawsuits, suits or proceedings pending in which Seller Group is the
plaintiff or claimant and which relate to the Purchased Assets except where such
lawsuits or proceedings would not have a Material Adverse Effect on the
Purchased Assets; and
(d) there is no action, suit or proceeding pending against Seller
Group or any of its Affiliates or, to the knowledge of the Seller, threatened
which questions the legality or propriety of the transactions contemplated by
this Agreement.
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<PAGE>
5.13 Governmental Permits. (a) The Seller owns, holds or possesses
--------------------
all material licenses, franchises, permits, privileges, immunities, approvals
and other authorizations from a Governmental Body which are necessary to entitle
it to own or lease, operate and use the Purchased Assets (herein collectively
called "Governmental Permits", except where the failure to own, hold or possess
--------------------
the Governmental Permits would not have a Material Adverse Effect on the
Purchased Assets. The Disclosure Schedule sets forth a list of each such
Governmental Permit, except for such incidental licenses, permits and other
authorizations which would be readily obtainable by any qualified applicant
without undue burden in the event of any lapse, termination, cancellation or
forfeiture thereof. To the extent assignable, the Governmental Permits are
being assigned to the Buyer pursuant to the Instrument of Assignment and
Assumption.
(b) (i) the Seller has fulfilled and performed its obligations in all
material respects under each of the Governmental Permits, and to the Seller's
knowledge no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any such Governmental Permit or which permits or, after notice
or lapse of time or both, would permit revocation or termination of any such
Governmental Permit, or which might adversely affect the rights of the Seller
under any such Governmental Permit; (ii) no notice of cancellation, of default
or of any dispute concerning any Governmental Permit, or of any event, condition
or state of facts described in the preceding clause, has been received by, or is
known to, the Seller; and (iii) each of the Governmental Permits is valid,
subsisting and in full force and effect.
5.14 Apex Properties. Seller Group is not currently in possession of
---------------
any material amount of inventory bearing the Apex mark.
5.15 Employees; Compensation. The Disclosure Schedule contains the
-----------------------
current annual compensation of, and a description of the fringe benefits of, the
Retained Employees, and a list of their current employment agreements (copies of
which have been delivered to Buyer).
5.16 Intentionally Omitted.
---------------------
5.17 Inventories. The inventories included in the Purchased Assets
-----------
(including raw materials, supplies, work-in-process, finished goods and other
materials) (i) were ordered in the ordinary course from the Seller's customary
suppliers in arm's length third party transactions and (ii) are reflected in the
Closing Price at the lower of cost or market in accordance with the Agreed
Method. All inventories included in the Purchased Assets will be located on the
Closing Date at the Four Inventory Locations, or will be in transit thereto.
Seller has provided to Buyer a true, complete and accurate list of the paid for
goods in transit and accompanying costing detail as of the Closing Date. The
above inventory represents all of the inventory of the Seller Group bearing the
trademarks "RYKA" and "Yukon" except that which is held at Global Sports
Interactive for retail sale. Seller has sold no inventory bearing the Purchased
Brands' Trademarks on consignment arrangements now outstanding and has not
granted to any customer the right to
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<PAGE>
return non-defective goods (except to QVC, to which Seller has sold
approximately $223,955 of goods since October 1, 1999 and except as to open
purchase return authorizations disclosed to Buyer). Buyer acknowledges that it
is customary in the footwear industry for footwear manufacturers to accept
returns of goods from customers in order to maintain customer relationships,
whether or not an explicit right of return has been granted to the customer.
5.18 Status of Contracts. Each of the leases, contracts and other
-------------------
agreements assigned to and assumed by Buyer as part of the Purchased Assets
under Sections 2.1 and 2.3 and listed on Schedule 2.3(c) (collectively, the
------------ --- ---------------
"Assigned Agreements") constitutes a valid and binding obligation of the parties
-------------------
thereto and is in full force and effect and may be transferred to Buyer pursuant
to this Agreement and will continue in full force and effect thereafter in
accordance with the terms and conditions thereof, in each case (a) without the
consent, approval or act of, or the making of any filing with, any other party
and (b) without breaching the terms thereof, giving any party thereto the right
to accelerate the terms thereof or to terminate such Assigned Agreement, or
resulting in the forfeiture or impairment of any rights thereunder. Seller has
fulfilled and performed, in all material respects, its obligations under each of
the Assigned Agreements listed on Schedule 2.3(c), and Seller is not in, or
---------------
alleged to be in, material breach or default under, any of the Assigned
Agreements and, to Seller's knowledge, no other party to any of the Assigned
Agreements listed on Schedule 2.3(c) has breached or defaulted thereunder, and
---------------
no event has occurred and no condition or state of facts exists which, with the
passage of time or the giving of notice or both, would constitute such a default
or breach by Seller or by any such other party. Seller is not currently
renegotiating any of the Assigned Agreements listed on Schedule 2.3(c) or paying
---------------
liquidated damages in lieu of performance thereunder other than in accordance
with the terms and conditions thereof. Complete and correct copies of each of
the Assigned Agreements listed on Schedule 2.3(c) have heretofore been delivered
---------------
to Buyer by Seller Group.
5.19 Customers and Suppliers. The Purchased Assets include true and
-----------------------
materially complete records of the names and addresses of the customers and
suppliers of the Division, copies of the forms of purchase order for inventory
and other supplies and sales con tracts for finished goods used by Seller in
respect of the Division.
5.20 Warranties. There are no express warranties provided by Seller
----------
Group covering products sold by the Division.
5.21 No Finder. Neither Seller Group nor any Person acting on its
---------
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement, except for a fee to be paid to Deutsche Banc Alex Brown, which
fee shall be the sole responsibility of the Seller Group. Deutsche Banc Alex
Brown has advised Parent's board of directors that the transactions contemplated
by this Agreement are fair to the Parent from a financial point of view.
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<PAGE>
5.22 Ownership. Immediately prior to the Closing, all of the
---------
Purchased Assets and the Assumed Liabilities were owned exclusively by the
Sellers, except where such Purchased Assets were leased pursuant to leases
disclosed herein.
5.23 Disclosure. None of the representations or warranties of Seller
----------
Group contained herein, none of the information contained in the Schedules or
the Disclosure Schedule, taken as a whole, contains any misstatement of material
fact or omits to state a material fact herein or therein necessary to make the
statements herein or therein, in light of the circumstances in which made, not
misleading.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to Seller and Parent to enter into this Agreement and
to consummate the transactions contemplated hereby, Buyer hereby represents and
warrants to Seller and Parent and agrees as follows:
6.1 Organization of Buyer. Buyer is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own or lease and to operate and
use its properties and assets and to carry on its business as now conducted.
6.2 Authority of Buyer. Buyer has all corporate power and authority
------------------
to execute, deliver and perform this Agreement and all of the Buyer Ancillary
Agreements. The execution, delivery and performance of this Agreement and the
Buyer Ancillary Agreements by Buyer have been duly authorized and approved by
Buyer's board of directors and do not require any further authorization or
consent of Buyer or its stockholders. This Agreement has been duly authorized,
executed and delivered by Buyer and is the legal, valid and binding agreement of
Buyer enforceable in accordance with its terms, and each of the Buyer Ancillary
Agreements has been duly authorized by Buyer and upon execution and delivery by
Buyer will be a legal, valid and binding obligation of Buyer enforceable in
accordance with its terms.
Neither the execution and delivery of this Agreement or any of the
Buyer Ancillary Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment of the terms,
conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights, in each case which would have a Material Adverse Effect on Buyer,
under (1) the Certificate of Incorporation or By-laws of Buyer, (2) any
material note, instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation to which
Buyer is a party or any of its
-27-
<PAGE>
properties is subject or by which Buyer is bound, (3) any Court Order to
which Buyer is a party or by which it is bound or (4) any Requirements of
Laws affecting Buyer; or
(ii) require the approval, consent, authorization or act of, or the
making by Buyer of any declaration, filing or registration with, any
Person, except for approvals, consents, authorizations or acts, the failure
of which to be obtained or to do would not have a Material Adverse Effect
on Buyer.
6.3 No Finder. Neither Buyer nor any Person acting on its behalf has
---------
paid or become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
ARTICLE 7.
ADDITIONAL AGREEMENTS
---------------------
7.1 Discharge of Division's Liabilities. (a) Seller covenants and
-----------------------------------
agrees that it will pay and discharge all material liabilities and obligations
of Seller in respect of the Purchased Assets incurred or arising from events
occurring on or prior to the Closing Date (excepting only those liabilities and
obligations expressly assumed by Buyer at the Closing) to the extent that
Seller's failure to pay and discharge such liabilities would likely have a
Material Adverse Effect on Buyer after the Closing (such as may occur if Seller
does not pay a liability on a Buyer assumed contract), provided however that
nothing herein shall prevent Seller from contesting or negotiating such
liabilities in good faith.
(b) Buyer covenants and agrees that it will pay and discharge
the Assumed Liabilities and all liabilities and obligations of Buyer arising
from events occurring on or after the Closing Date, it being understood and
agreed that Buyer is assuming no liabilities or obligations of Seller Group
other than the Assumed Liabilities; provided however, that nothing herein shall
----------------
prevent Buyer from negotiating such liabilities; provided further, that no such
----------------
negotiation shall relieve Buyer of its obligations to Seller under this
Agreement. For the sake of clarity, any liability asserted against Buyer
solely on the theory that Buyer is alleged to be a successor in interest to the
Seller shall not be deemed to be a liability or obligation arising from events
occurring on or after the Closing Date.
7.2 Taxes. (a) The Seller shall be liable for and shall pay all
-----
Taxes (whether assessed or unassessed) applicable to the Division and the
Purchased Assets, in each case attributable to periods (or portions thereof)
ending on or prior to the Closing Date. Buyer shall be liable for and shall pay
all Taxes (whether assessed or unassessed) applicable to the Division and the
Purchased Assets attributable to periods (or portions thereof) beginning after
the Closing Date.
(b) Notwithstanding Section 7.2(a), any sales Tax, use Tax, transfer
--------------
Tax, documentary stamp Tax or similar Tax attributable to the sale or transfer
of the Purchased Assets (but excluding income or capital gains tax) shall be
paid by Buyer. Buyer agrees to timely sign and deliver such certificates or
forms as may be necessary or appropriate to establish an exemption from (or
otherwise reduce), or make a report with respect to, such Taxes.
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<PAGE>
7.3 Use of Name. Seller and Parent recognize that the Purchased
-----------
Assets include the Trademark and trade names in the Purchased Brands, and Apex
and RYKA within 60 days of the Closing Date adopt an amendment to their
respective Certificates of Incorporation adopting new corporate names not
including the Purchased Brands, variations thereof or any names confusingly
similar thereto. Between the Closing Date and the day on which the such new
names are adopted, the Apex and RYKA may only use their existing names in order
to collect currently existing accounts receivable. Apex and RYKA may continue
to use their existing stock of company checks for a reasonable period of time
notwithstanding the fact that such checks bear the Purchased Brands' names.
7.4 Open Purchase Orders. Subject to Seller's compliance with
--------------------
Section 7(e) of the Letter of Intent, Buyer agrees to assume responsibility for
all Seller purchase orders of finished shoes not delivered prior to the Closing
and not included in inventory on the Closing Date (the "Open Purchase Orders"),
--------------------
and agrees to use its best efforts to cause its bank at the Closing to replace
any Seller letters of credit for such purchase orders. Buyer shall assume
responsibility for such letters of credit which cannot be replaced. Absent
Buyer's assumption of such purchase orders or replacement of such letters of
credit, Buyer agrees to purchase Seller's finished goods valued at FOB factory
cost (Buyer will assume responsibility for freight, commissions, duty and other
direct costs associated therewith) which are presently scheduled for manufacture
and which are not included in inventory at the Closing, and Seller agrees to
sell the same to Buyer. For such goods currently secured by Letters of Credit,
purchases will be paid for within 5 business days after receipt of such goods
and, if requested, Buyer will post a standby letter of credit or escrow deposit
up to a maximum of $1 million to support such payment. For goods not secured by
Letters of Credit, Buyer agrees to pay for such goods (similarly valued)
immediately upon presentation to Buyer of title documents properly endorsed to
Buyer. All such goods will be of customary quality and style and the product
quantities, factories and styles thereof reflected in the Open Purchase Orders
are listed and disclosed in Schedule 7.4 hereto. Seller represents that its good
------------
faith estimate of the amount of such open purchase orders on the date hereof is
not more than $5,300,000. For avoidance of doubt, it is acknowledged that all
goods the payment of which is assumed by Buyer shall not be included in
inventory on the Estimated Closing Valuation or the Final Purchase Price. In
the event that Seller has paid for goods which have cleared the factory but have
not been shipped based on Buyer's order, Buyer shall nonetheless reimburse the
Seller for such goods within 30 days of such clearance. Seller has provided to
Buyer a true and complete list of the open purchase orders listed on Schedule
--------
7.4, and accompanying costing detail.
- ---
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<PAGE>
Buyer shall also be responsible for the payment of purchase orders or the
reimbursement of Seller for purchase orders for finished goods paid for by
Seller and delivered prior to Closing but not included in inventory in the
calculation of the Closing Date Payment. Buyer shall not be responsible for the
payment of purchase orders of finished goods not delivered prior to Closing but
included in inventory and included in the calculation of the Closing Date
Payment, but Seller shall cause such goods to be shipped to Buyer without any
additional payment therefore; provided however, Buyer shall reimburse Seller in
----------------
full for Seller's shipping costs paid, to the extent that such costs are not
otherwise included it the inventory valuation.
It is the intention of the parties that to the extent practicable,
Open Purchase Orders delivered after the Closing will be imported by Buyer with
Seller's authorization, Open Purchase Orders delivered and in transit at the
Closing will be cleared by Buyer through customs with Seller's authorization,
and for goods delivered and cleared by Seller before or at the Closing, Buyer
will take delivery from Seller. In each such case, Buyer shall reimburse Seller
in full for any of the third party costs thereof, including customs duties and
ocean and inland freight charges paid by Seller.
7.5 Shipment of King of Prussia Inventory. Seller agrees that
-------------------------------------
promptly upon the Closing all inventory located at the King of Prussia facility
shall be prepared by Seller for shipment to such location as Buyer directs on
carriers designated and paid for by Buyer (Seller will not impose a handling or
packing charge for this service).
7.6 Returned Goods. Buyer shall not seek repayment or reimbursement
--------------
from Seller for any cash, allowance or credit paid or given to the purchaser by
Buyer for footwear sold by Seller prior to the Closing in bona fide third party
transactions and returned to Buyer, regardless of whether such returned footwear
was shipped or manufactured by or on the Seller's behalf prior to the Closing,
and Buyer shall bear all costs and expenses (whether in the form of payments,
discounts, allowances, reimbursements or credits) arising from the return after
the Closing by customers of goods sold by Seller prior to the Closing in bona
fide third party transactions (but in no event including any liabilities arising
from personal injury or product liability claims), provided, however, that
Seller has not prior to the Closing Date committed to such return authorizations
outside of the ordinary course of its business consistent with past practice.
7.7 Product Liability Insurance. The Seller and Buyer each agree
---------------------------
that, for a period of not less than two years after the Closing, each shall
maintain product liability insurance in an amount providing aggregate coverage
of not less than $1,000,000 covering personal injury and damage from footwear,
in the case of the Seller, from footwear sold by the Seller prior to the Closing
Date, and, in the case of Buyer, from footwear sold by Buyer after the Closing
Date.
7.8 Additional Intellectual Property Assignments. From time to time
--------------------------------------------
after the Closing, the Seller shall at Buyer's expense prepare all Intellectual
Property Assignments necessary to effect the sale and assignment of the
Copyrights, Patent Rights and Trademarks registered in the jurisdictions listed
in the Disclosure Schedule (except to the extent such Intellectual Property
Assignments are otherwise executed and delivered by the Seller to Buyer at
Closing). Such Intellectual Property Assignments shall be in recordable form
based on the local
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law requirements and shall be in form and substance reasonably satisfactory to
Buyer. Buyer assumes responsibility for and will bear the expenses of recording
the Intellectual Property Assignments in all jurisdictions. Following the
Closing, and subject to the foregoing and to the Seller's obligation under
Section 7.11, the Seller shall have no obligation or responsibility for
- ------------
maintaining or prosecuting any Intellectual Property assets assigned to Buyer
hereunder.
7.9 Transitional Employees and Assistance. Seller and Parent agree
-------------------------------------
not to discharge other than for cause any of those employees of Seller who are
engaged in the accounting, shipping, customer service, sourcing and management
information services functions of the Division and who are necessary for the
continuation and transition to Buyer of the Division (the "Seller Transitional
-------------------
Employees"). In addition, Seller Group will allow Buyer to use its back office
- ---------
software to assist in the transition of the Division and the data associated
therewith to Buyer for 30 days after the Closing and will provide for Buyer's
use all off-the-shelf software (i.e., design software) and other proprietary or
---
confidential information not used exclusively by the Division but which are
material to the Division.
7.10 Access to Records after Closing. For a period of six years after
-------------------------------
the Closing Date, Seller, Parent and their representatives shall have reasonable
access to all of the books and records of the Division transferred to Buyer
hereunder to the extent that such access may reasonably be required by Seller or
Parent in connection with matters relating to or affected by the operations of
the Division prior to the Closing Date. Such access shall be afforded by Buyer
upon receipt of reasonable advance notice and during normal business hours.
Seller and Parent shall be solely responsible for any costs or expenses incurred
by it pursuant to this Section 7.10. If Buyer shall desire to dispose of any of
------------
such books and records prior to the expiration of such six-year period, Buyer
shall, prior to such disposition, give Seller and Parent a reasonable
opportunity, at Seller's and Parent's expense, to segregate and remove such
books and records as Seller may select.
For a period of six years after the Closing Date, Buyer and its
representatives shall have reasonable access to all of the books and records
relating to the Division which Seller or any of its Affiliates may retain after
the Closing Date. Such access shall be afforded by Seller and its Affiliates
upon receipt of reasonable advance notice and during normal business hours.
Buyer shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 7.10. If Seller or any of its Affiliates shall desire
------------
to dispose of any of such books and records prior to the expiration of such six-
year period, Seller shall, prior to such disposition, give Buyer a reasonable
opportunity, at Buyer's expense, to segregate and remove such books and records
as Buyer may select.
7.11 Further Assurances. (a) On the Closing Date Seller and Parent
------------------
shall (i) deliver to Buyer such other bills of sale, deeds, endorsements,
assignments and other good and sufficient instruments of conveyance and
transfer, in form reasonably satisfactory to Buyer and its counsel, as Buyer may
reasonably request or as may be otherwise reasonably necessary to vest in Buyer
all the right, title and interest of Seller in, to or under any or all of the
Purchased Assets,
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and (ii) take all steps as may be reasonably necessary to put Buyer in actual
possession and control of all the Purchased Assets. From time to time following
the Closing, Seller and Parent shall execute and deliver, or cause to be
executed and delivered, to Buyer such other instruments of conveyance and
transfer as Buyer may reasonably request or as may be otherwise necessary to
more effectively convey and transfer to, and vest in, Buyer and put Buyer in
possession of, any part of the Purchased Assets (including import
authorizations, open purchase order assignments, assignments of manufacturing
agreements, assignments of duty drawback funds and assignments of trademarks,
copyrights and patents), and, in the case of licenses, certificates, approvals,
authorizations, agreements, contracts, leases, easements and other commitments
included in the Purchased Assets (a) which cannot be transferred or assigned
effectively without the consent of third parties which consent has not been
obtained prior to the Closing, to cooperate with Buyer at its request in
endeavoring to obtain such consent promptly, and if any such consent is
unobtainable, to use its best efforts to secure to Buyer the benefits thereof in
some other manner, or (b) which are otherwise not transferable or assignable, to
use its best efforts jointly with Buyer to secure to Buyer the benefits thereof
in some other manner (including the exercise of the rights of Seller or Parent
thereunder). In this regard, each party agrees to keep reasonably available and
notify the other of the name and business location of an officer authorized to
provide such assistance and to execute such documents. Notwithstanding anything
in this Agreement to the contrary, this Agreement shall not constitute an
agreement to assign any license, certificate, approval, authorization,
agreement, contract, lease, easement or other commitment included in the
Purchased Assets if an attempted assignment thereof without the consent of a
third party thereto would constitute a breach thereof.
Such further assurances shall also include, as to Buyer, assistance to
Seller in the collection of its retained accounts receivable, and as to Seller,
assistance to Buyer in the transfer of inventory to Buyer's possession and
control, and the transfer to Buyer of the Division's supplier and customer
relationships and sales orders and backlog. (Buyer agrees that, if asked for
returns, markdowns and/or allowances by Seller's customers with respect to
Seller retained accounts receivable (which Seller warrants it has not committed
in any material amounts to date), Buyer will not instruct such customers to seek
the same from Seller or enter into any agreement or understanding with any such
customer that would cause such customer to claim a reduction in the Seller
retained accounts receivable, although Buyer makes no commitment to grant any
markdowns or discounts to such customers to induce them to pay the seller
retained accounts receivable.) All such assistance shall be at no out-of-pocket
cost to the party providing the same.
(b) It is understood by Seller and Buyer that, pursuant hereto,
Seller is retaining accounts receivable and will collect the proceeds of sales
before the Closing Date and that Buyer is entitled to collect the proceeds of
sales on and after the Closing Date. Buyer and Seller shall cooperate in the
preparation and mailing of a letter to the customers of the Division instructing
such customers as to whom accounts receivable payments and customer complaints
and returns should be directed. In the event that Buyer receives a payment from
a third party that, pursuant to the terms hereof, should have been paid to
Seller, Buyer agrees to promptly remit such payment to Seller. In the event that
Seller Group receives a payment from a third party that,
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pursuant to the terms hereof, should have been paid to Buyer, Seller Group
agrees to promptly remit such payment to Buyer. In the event that either party
receives a payment from a customer that cannot be identified, the recipient
shall inquire of the customer as to the application thereof and, lacking a
response, the payment shall be applied to the oldest outstanding undisputed
invoice.
(c) Seller has entered into certain open sales orders where it
has agreed to sell goods bearing the Purchased Brands to non-United States
buyers (such sales are referred to herein as "Foreign Sales"). Such sales orders
-------------
are being sold to Buyer herein along with other sales orders. To the extent that
the Foreign Sales are or are to be backed by a letter of credit or letters of
credit in favor of Seller or an Affiliate of Seller, Seller agrees to use
commercially reasonable efforts to transfer such letters of credit to Buyer or,
if such transfer is not possible, Seller agrees to hold such letters of credit
and/or the proceeds thereof in trust for the benefit of Buyer.
(d) In order to effect the parties' intention of transitioning
certain customer service responsibilities from Seller to Buyer, for a period of
ninety (90) days after the Closing Date, Parent agrees to use commercially
reasonable efforts to include Buyer's toll-free customer service telephone
number (1-800-848-8698) (or such other number as Buyer shall designate in
writing) in Parent's outgoing toll-free customer service message, to the extent
that Parent otherwise maintains its toll-free customer service telephone number.
Notwithstanding the foregoing, Parent shall not be obligated to include any
reference to Buyer or Buyer's customer service telephone number(s) in the
outgoing customer service messages of Parent's or Parent's Affiliates' e-
commerce businesses.
7.12 Employment of J. Murray. Buyer shall determine within three
-----------------------
weeks after the Closing if it will assume Ms. Murray's employment agreement,
otherwise Ms. Murray's employment agreement will remain with Seller, and, if so,
Buyer agrees not to solicit the employment of or employ or engage Ms. Murray as
a consultant for twelve months after the Closing Date.
7.13 Certain Inventory Costs. Buyer agrees to reimburse Seller for
-----------------------
the per-item removal fees or similar fees imposed by FARO Services, Inc. or by
Universal Warehouse Company paid by Seller (which, in the absence of this
provision, would be required to be paid to such parties by Seller) in connection
with Buyer's removal of any inventory from such parties' warehouse facilities,
unless such costs are included in the cost of inventory.
ARTICLE 8.
INDEMNIFICATION
---------------
8.1 Indemnification by Seller Group. Each of Seller and Parent,
-------------------------------
jointly and severally, agrees to indemnify and hold harmless Buyer from and
against any and all Losses and Expenses incurred by Buyer in connection with or
arising from, and shall defend each Buyer Group Member against any claims which,
if true, would constitute:
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<PAGE>
(a) any breach by Seller or Parent of any of its or their
respective covenants in this Agreement or in any Seller Ancillary Agreement;
(b) any failure of Seller or Parent to perform any of its or
their respective obligations in this Agreement or in any Seller Ancillary
Agreement;
(c) any breach of any warranty or the inaccuracy of any
representation of Seller or Parent contained in this Agreement;
(d) the failure of Seller or Parent to comply with any
applicable bulk sales law (except that this clause shall not affect the
obligation of Buyer to pay and discharge the Assumed Liabilities); or
(e) the failure of Seller or Parent to perform or discharge any
Excluded Liability.
provided, however, that Seller and Parent shall be required to indemnify and
- -------- -------
hold harmless Buyer under clauses (a), (b) and (c) of this Section 8.1 with
-----------
respect to Losses and Expenses incurred by Buyer only if the aggregate amount of
such Losses and Expenses on a cumulative basis exceeds $100,000 (for the sake of
clarity, if the aggregate amount of Losses and Expenses exceeds $100,000, the
full amount of such Losses and Expenses from the first dollar shall be
recoverable). For the sake of clarification, Seller's and Parent's obligation
to indemnify Buyer against all Excluded Liabilities shall in no way be limited
in amount by virtue of the foregoing proviso. Seller's and Parent's maximum
liability under this Section 8.1 shall at no time exceed an amount equal to 50%
-----------
of the Final Purchase Price paid by Buyer to Seller under this Agreement (except
with respect to breaches of Seller Group's representations in Sections 5.3
------------
(first two paragraphs), 5.7(d) and 5.10(d) hereof as to which Seller Group's
------ -------
maximum liability with respect to such breaches together with all other
liabilities under this Section 8.1 shall at no time exceed an amount equal to
-----------
100% of the Final Purchase Price paid by Buyer and Seller under this Agreement).
8.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
------------------------
harmless Seller and Parent from and against any and all Losses and Expenses
incurred by Seller or Parent in connection with or arising from, and shall
defend each Seller Group Member against any claims which, if true, would
constitute:
(a) any breach by Buyer of any of its covenants or agreements in
this Agreement or in any Buyer Ancillary Agreement;
(b) any failure by Buyer to perform any of its obligations in
this Agreement or in any Buyer Ancillary Agreement;
(c) any breach of any warranty or the inaccuracy of any
representation of Buyer contained in this Agreement; or
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<PAGE>
(d) any Loss or Expense arising by reason of Buyer's ownership
or use of the Purchased Assets after the Closing Date, which Loss or Expense is
not attributable in whole or part to the failure of Seller Group to pay, perform
or discharge any Excluded Liability.
provided, however, that Buyer shall be required to indemnify and hold harmless
- -------- -------
Seller and Parent under clauses (a), (b) and (c) of this Section 8.2 with
-----------
respect to Losses and Expenses incurred by Seller or Parent only if the
aggregate amount of such Losses and Expenses on a cumulative basis exceeds
$100,000 (for the sake of clarity, if the aggregate amount of Losses and
Expenses exceeds $100,000, the full amount of such Losses and Expenses shall be
recoverable). For the sake of clarification, Buyer's obligation to indemnify
Seller and Parent against all Assumed Liabilities shall in no way be limited in
amount by virtue of the foregoing proviso.
8.3 Notice of Claims. Any Buyer Group Member or Seller Group Member
----------------
(the "Indemnified Party") seeking indemnification hereunder with respect to a
-----------------
Claim, or with respect to a Loss or Expense, shall give to the party obligated
to provide indemnification to such Indemnified Party (the "Indemnitor") a notice
----------
(a "Claim Notice") describing in reasonable detail the Claim or the facts giving
------------
rise to the Loss or Expense or other entitlement for indemnification hereunder
and shall include in such Claim Notice (if then known) the amount or the method
of computation of the amount of such Loss or Expense, and a reference to the
provision of this Agreement or any other agreement, document or instrument
executed hereunder or in connection herewith upon which such right to
indemnification is based; provided, however, that a Claim Notice in respect of
-------- -------
any Claim as to which indemnification will be sought shall be given promptly
after any action or suit is commenced; provided further that failure to give
-------- -------
such notice shall not relieve the Indemnitor of its obligations hereunder except
to the extent it shall have been prejudiced by such failure.
After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnified Party shall be entitled under this
Article 8 shall be determined: (i) by the written agreement between the
- ---------
Indemnified Party and the Indemnitor; (ii) by a final, binding and non-
appealable order of a court of competent jurisdiction; or (iii) by any other
means to which the Indemnified Party and the Indemnitor shall agree. The
Indemnified Party shall have the burden of proof in establishing the amount of
Loss and Expense suffered by it.
8.4 Third Person Claims. The Indemnitor shall have the right to
-------------------
conduct and control, through counsel of its choosing, the defense, compromise or
settlement of any Claim against such Indemnified Party as to which
indemnification will be sought by any Indemnified Party from any Indemnitor
hereunder if the Indemnitor has acknowledged and agreed in writing that, if the
same is adversely determined, the Indemnitor has an obligation to provide
indemnification to the Indemnified Party in respect thereof, and in any such
case, the Indemnified Party shall cooperate in connection therewith and shall
furnish such records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnitor in connection therewith; provided, however, that the
-------- -------
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<PAGE>
Indemnified Party may participate (but not control), through counsel chosen by
it and at its own expense, in the defense of any such claim, action or suit. If
the Indemnitor has assumed the defense of the Claim, the Indemnified Party shall
not have the right to settle or compromise any such Claim without the
Indemnitor's prior written consent. The Indemnitor shall not settle or
compromise any such Claim without the Indemnified Party's prior written consent
unless Indemnitor obtains a complete and unconditional release of the
Indemnified Party in connection therewith; provided that if the Indemnified
Party withholds its consent to any monetary settlement that is acceptable to the
Indemnitor and is to be paid by Indemnitor, then (a) the Indemnitor's liability
with respect to such Claim shall be limited to such monetary amount and (b) the
Indemnified Party shall be responsible for any additional costs reasonably
incurred by the Indemnitor in connection therewith. If the Indemnitor does not
assume the defense of the Claim, the Indemnified Party may assume the defense at
the Indemnitor's expense; provided, however, that the Indemnified Party shall
-----------------
not, without the written consent of the Indemnitor (which consent shall not be
unreasonably withheld), pay, compromise or settle any such Claim, except that no
such consent shall be required if, following a written request from the
Indemnified Party, the Indemnitor shall fail, within seven (7) days after the
making of such request, to acknowledge and agree in writing that, if such Claim
shall be adversely determined, such Indemnitor has an obligation to provide full
indemnification hereunder to such Indemnified Party.
8.5 Duty to Mitigate. (a) Buyer agrees at all times to use its
----------------
reasonable efforts to minimize, in a commercially reasonable manner, the cost to
Seller and Parent of the obligation to indemnify the Buyer (and the Buyer Group
Members) for any damages in accordance with the terms and conditions of Section
-------
8.1.
- ---
(b) Seller and Parent agree at all times to use their reasonable
efforts to minimize, in a commercially reasonable manner, the cost to the Buyer
of the obligation to indemnify Seller and Parent (and the Seller Group Member)
for any damages in accordance with the terms and conditions of Section 8.2.
-----------
(c) The rights of Buyer and Buyer Group Members under this Article 8
---------
shall be the exclusive remedy of Buyer and Buyer Group Members with respect to
any breach or alleged breach by Seller and Parent of this Agreement.
ARTICLE 9.
GENERAL PROVISIONS
------------------
9.1 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties contained in Articles 5 and 6 shall terminate twenty-four (24)
---------- -
months after the Closing Date (except for (i) the representations and warranties
or Seller and Parent set forth in Section 5.6 which shall remain in effect for
------------
the period of the applicable statutes of limitations, (ii) the representations
and warranties or Seller and Parent set forth in Section 5.17 which shall
------------
terminate twelve (12) months after the Closing Date, an (iii) the
representations and warranties or Seller and Parent set forth in Sections 5.3
------------
(first two paragraphs), 5.7(d) and 5.10(d) and the representations
------ -------
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<PAGE>
and warranties of Buyer set forth in Section 6.2, which shall terminate thirty
-----------
(30) months after the Closing Date). No claim shall be made for the breach of
any representation or warranty contained in Article 5 or 6 or under any
--------- -
certificate delivered with respect thereto under this Agreement after the date
on which such representations and warranties terminate as set forth in this
Section, unless such claim is made in writing prior to such date.
9.2 Confidential Nature of Information. Each party agrees that it
----------------------------------
will treat in confidence all documents, materials and other information which it
shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, each party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection therewith. Such
documents, materials and information shall not be communicated to any third
Person (other than, in the case of Buyer, to its counsel, accountants, financial
advisors or lenders, and in the case of Seller Group, to its counsel,
accountants or financial advisors). No other party shall use any confidential
information in any manner whatsoever except solely for the purpose of evaluating
the proposed purchase and sale of the Purchased Assets; provided, however, that
-------- -------
after the Closing, Buyer may use or disclose any confidential information
included in the Purchased Assets or otherwise reasonably related to the Division
or the Purchased Assets (except that Buyer shall not disclose any confidential
or proprietary information described in the last sentence of Section 7.9). The
-----------
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) is or
becomes lawfully available to such party from a source other than such party,
(ii) is or becomes available to the public other than as a result of disclosure
by such party or its agents, (iii) is required to be disclosed under applicable
law or judicial process, but only to the extent it must be disclosed, or (iv)
such party reasonably deems necessary to disclose to obtain any of the consents
or approvals contemplated hereby and the parties hereto mutually agree.
9.3 No Public Announcement. Neither Buyer, Seller nor Parent shall,
----------------------
without the approval of the other, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such party shall be so obligated by law or the
rules of any stock exchange, in which case the other party shall be advised and
the parties shall use their best efforts to cause a mutually agreeable release
or announcement to be issued; provided, however, that the foregoing shall not
-------- -------
preclude communications or disclosures necessary to implement the provisions of
this Agreement or to comply with any Securities and Exchange Commission
disclosure obligations.
9.4 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or when sent by facsimile, registered or certified
mail or private courier addressed as follows:
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<PAGE>
If to Buyer:
American Sporting Goods Corporation
2323 Main Street
Irvine, CA 92614
Attention: Jerry Turner
(949) 752-6688 x868 (direct dial)
(949) 756-8606 (facsimile)
With a copy to:
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Attention: Gary Cohen, Esq.
(213) 893-6013 (direct dial)
(213) 896-6600 (facsimile)
If to Seller or Parent:
Global Sports, Inc.
1075 First Avenue
King of Prussia, PA 19406
Attention: General Counsel
(610) 491-7005 (direct dial)
(610) 265-2866 (facsimile)
With a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Francis E. Dehel
(215) 569-5532 (direct dial)
(215) 569-5628 (facsimile)
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
9.5 Successors and Assigns. The rights of either party under this
----------------------
Agreement shall not be assignable by such party hereto prior to the Closing
without the written consent of the other. Following the Closing, either party
may assign any of its rights hereunder, but no such assignment shall relieve it
of its obligations hereunder.
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<PAGE>
(a) As collateral security for the prompt and punctual payment
and performance of each and every present and future obligation of Buyer to
Congress Financial ("Lender") pursuant to that certain Loan and Security
------
Agreement, dated as of May 31, 1996, between Buyer and Lender (as the same may
be amended from time to time (the "Loan Agreement")), and the loan documents
--------------
related thereto, Buyer assigns, grants, and transfers a security interest to
Lender in any and all rights, claims, demands and causes of action that Buyer
may have against Seller and Parent whether now or hereafter arising, due or to
become due, matured or unmatured, liquidated or unliquidated, contingent or non-
contingent, arising out of or in any way related to the representations an
warranties of Seller and Parent contained in this Agreement, subject to all
Claims, defenses and set off of Seller, and Seller and Parent hereby consent to
this assignment and grant. Notwithstanding the foregoing assignment, Seller
shall not be required to provide any notice to Lender which may otherwise be
given to Buyer until such time, if ever, that Lender notifies Seller in writing
that a default under the Loan Agreement has occurred and is continuing and
Lender requests that all future notices to Buyer also be provided to it.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted assigns.
Subject to Section 9.5(a), the successors and permitted assigns hereunder shall
--------------
include without limitation, in the case of Buyer, any permitted assignee as well
as the successors in interest to such permitted assignee (whether by merger,
liquidation (including successive mergers or liquidations) or otherwise).
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Person other than the parties and successors and
assigns permitted by this Section 9.5 any right, remedy or claim under or by
-----------
reason of this Agreement.
9.6 Intentionally Omitted.
----------------------
9.7 Entire Agreement; Amendments. This Agreement and the Exhibits
----------------------------
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or letters of intent between or among any of the parties hereto.
This Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the parties
hereto.
9.8 Interpretation. Article titles and headings to sections herein
--------------
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement. The Schedules
and Exhibits referred to herein shall be construed with and as an integral part
of this Agreement to the same extent as if they were set forth verbatim herein.
9.9 Waivers. Any term or provision of this Agreement may be waived,
-------
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if,
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<PAGE>
as to any party, it is authorized in writing by an authorized representative of
such party. The failure of any party hereto to enforce at any time any provision
of this Agreement shall not be construed to be a waiver of such provision, nor
in any way to affect the validity of this Agreement or any part hereof or the
right of any party thereafter to enforce each and every such provision. No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
9.10 Expenses. Each party hereto will pay all costs and expenses
--------
incident to its negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions contained herein
on its part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and accountants.
9.11 Partial Invalidity. Wherever possible, each provision hereof
------------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
9.12 Execution in Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same agreement, and shall
become binding when one or more counterparts have been signed by each of the
parties hereto and delivered to each of Seller Group and Buyer.
9.13 Governing Law/Jurisdiction. This Agreement shall be governed by
--------------------------
and construed in accordance with the internal laws (as opposed to the conflicts
of law provisions) of the State of Delaware and all actions relating to the
enforcement or interpretation of this Agreement shall be resolved exclusively
before the state or federal courts in the State of Delaware. The parties hereto
irrevocably consent to service of process by first class certified mail, return
receipt requested, postage prepaid, to the address at which such party is to
receive notice in accordance with the notice provisions herein.
* * *
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed the day and year first above written.
BUYER: PARENT:
American Sporting Goods Corporation, Global Sports, Inc.,
a Delaware corporation a Delaware corporation
By: /s/ Jerome Turner By: /s/ Michael G. Rubin
---------------------- ------------------------
Name: Jerome Turner Name: Michael G. Rubin
Title: Pres. Title: President
SELLERS:
RYKA Inc., KPR Sports International, Inc.,
a Pennsylvania corporation a Pennsylvania corporation
By: /s/ Michael G. Rubin By: /s/ Michael G. Rubin
---------------------- ------------------------
Name: Michael G. Rubin Name: Michael G. Rubin
Title: President Title: President
G.S.I., Inc., Apex Sports International, Inc.,
a Delaware corporation a Pennsylvania corporation
By: /s/ Michael G. Rubin By: /s/ Michael G. Rubin
---------------------- ----------------------
Name: Michael G. Rubin Name: Michael G. Rubin
Title: President Title: President
<PAGE>
Exhibit A
---------
BILL OF SALE AND ASSIGNMENT
---------------------------
THIS BILL OF SALE AND ASSIGNMENT (this "Bill of Sale and Assignment")
is entered into as of December 29, 1999 by RYKA Inc., a Pennsylvania corporation
("RYKA"), KPR Sports International, Inc., a Pennsylvania corporation ("KPR"),
G.S.I., Inc., a Delaware corporation, formerly known as Global Sports I.P. Inc.
("GSI") and Apex Sports International, Inc., a Pennsylvania corporation ("Apex"
and together with RYKA, KPR, GSI, the "Seller"), in favor of American Sporting
Goods Corporation, a Delaware corporation ("Buyer").
RECITALS
A. Buyer, Seller and Global Sports, Inc., a Delaware corporation have
entered into that certain Asset Purchase Agreement, dated as of December 29,
1999 (the "Purchase Agreement"), pursuant to which Seller has agreed to sell,
assign, transfer, convey and deliver to Buyer all of the right, title and
interest of the Seller in and to the Purchased Assets as set forth in Section
2.1 of the Purchase Agreement for the amount of the purchase price determined
and paid in accordance with the Purchase Agreement. Capitalized terms used but
not otherwise defined herein and the term "exclusively" shall have the meanings
set forth in the Purchase Agreement.
B. Pursuant to Section 4.4(e) of the Purchase Agreement, Seller is
required to execute and deliver this Bill of Sale and Assignment as a condition
to Closing. This Bill of Sale and Assignment is subject to the terms of the
Purchase Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, Seller hereby agrees
as follows:
1. Seller hereby sells, transfers, assigns, conveys and delivers to
Buyer, its successors and assigns, all of such Seller's right, title and
interest in and to the Purchased Assets.
The Purchased Assets consist of the following assets of the
Seller related to the Division, and Seller hereby grants, sells and assigns to
Buyer and its successors and assigns, Seller's right, title and interest in the
following:
(a) all inventory of the Division located at the Four Inventory
Locations and inventory in transit thereto which has been paid for by Seller;
(b) the Division's point of purchase assets (both new and at the
customers' store locations), equipment, the WSA main (two story) trade show
booth and other personal property as detailed and listed separately on Schedule
2.1(a) to the Purchase Agreement;
(c) prepaid items and deposits listed separately on Schedule
2.1(a) to the Purchase Agreement;
<PAGE>
(d) the Copyrights, Patent Rights and Trademarks for the
Purchased Brands and all other Copyrights, Patent Rights and Trademarks used
exclusively in connection with the Purchased Brands (and all goodwill associated
therewith) all as listed on Schedule A attached hereto;
----------
(e) all of Seller's interest in and rights to shoe molds (and
all Copyrights, if any, associated therewith) used to produce footwear bearing
the Purchased Brands, whether amortized or not (Buyer acknowledges it is
familiar with the custom in the industry whereby contractors create shoe molds
as part of the manufacturing process and manufacturers "earn" the molds through
continued production orders and that Seller may not have title to such molds and
if Seller does have title, it may not be free and clear of Encumbrances of the
contractors). Seller agrees to use its commercially reasonable efforts to
produce a list of production orders and a list of the locations of the shoe
molds and to transfer its rights thereto to Buyer). (The descriptions and
locations of these molds, and to the extent available to Seller, Seller's
interest therein, are detailed on Schedule 2.1(d) to the Purchase Agreement);
(f) All of Seller's interest in footwear plans, designs,
analyses and prototypes relating to the Purchased Brands;
(g) The RYKA Website and, to the extent assignable, all of
Seller Group's interest in and to all telephone, telex and telephone facsimile
numbers, and other directory listings used exclusively by the Division;
(h) all Trade Secrets, marketing plans, projections, surveys and
studies, and other proprietary or confidential information exclusively used in
the Division;
(i) all of Seller's rights, claims or causes of action against
third parties, whenever arising, relating to (i) any warranties (implied or
express) or indemnities concerning the Purchased Assets and (ii) Intellectual
Property included in the Purchased Assets; provided however, that
----------------
notwithstanding the foregoing, Seller Group shall have the right to assert
ownership as to the period ending on the Closing Date of such warranties,
indemnities or Intellectual Property as a defense to any claim brought against
Seller Group by a third party;
(j) true, correct and materially complete copies of all books
and records (in electronic format where available) of Seller reasonably
requested by Buyer relating to the assets, properties, business and operations
of the Division (including customer lists, credit history, ordering and payment
information and contact persons, supplier lists, and including copies of all
such data and other information stored on discs, tapes or other media), it being
understood that except where original documents are necessary to transfer title
to the Purchased Assets to Buyer and except for records relating to customers'
open orders, production specifications and Open Purchase Orders, Seller may
provide copies to Buyer and retain the originals; provided that whenever Seller
has provided original documents to Buyer, Seller shall be entitled to retain
copies of such documents and, provided further, that each of Seller and Buyer
agrees to provide the other with access to the original documents described
above if such party has a reasonable requirement therefor;
(k) Seller's interest in all goods in transit relating to the
Division (but not included in "paid for" inventory in transit), the payment of
which is assumed by Buyer as an Open Purchase Order pursuant to Section 7.4 of
the Purchase Agreement; and
<PAGE>
(l) the assets underlying the Assumed Liabilities.
2. As provided in the Purchase Agreement, the Purchased Assets do
not include the Excluded Assets (including, without limitation, the assets
listed in clauses (a) through (n) in Section 2.2 thereof), and Seller does not
give, bargain, sell, assign, transfer, convey or deliver any of the Excluded
Assets to Buyer.
3. The transfer pursuant to this Bill of Sale and Assignment is
absolute. Buyer shall have all rights of Seller in and to the personal property
assigned, transferred and conveyed hereunder, including, without limitation, the
right to enforce any and all of the provisions of warranties, guarantees and
indemnities of every kind or nature that Seller may hold from any manufacturer,
contractor, subcontractor, builder, architect, materialman, supplier, or vendor
that relate to or affect such personal property assigned, whenever dated, which
are transferable.
4. Nothing contained herein is intended to or shall be construed to
modify, alter, amend, expand, interpret, supersede or otherwise change any of
the terms, conditions, covenants, agreements, warranties, representations or any
other provisions of the Purchase Agreement and in the event of any conflict
between the terms of this Bill of Sale and Assignment and the terms of the
Purchase Agreement, the terms of the Purchase Agreement shall control.
5. This Bill of Sale and Assignment shall be construed and enforced
in accordance with, the laws of the State of Delaware without reference to
principles of conflicts of law, and shall be binding upon and shall inure to the
benefit of the respective successors and assigns of the parties hereto. All
actions relating to the enforcement or interpretation of this Agreement shall be
resolved exclusively before the state or federal courts in the State of
Delaware. The parties hereto irrevocably consent to service of process by first
class certified mail, return receipt requested, postage prepaid, to the address
at which such party is to receive notice in accordance with the notice
provisions set forth in the Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, Seller has executed this Bill of Sale and
Assignment as of the date first above written.
RYKA Inc.,
a Pennsylvania corporation
By: ____________________________
Name:
Title:
KPR Sports International, Inc.,
a Pennsylvania corporation
By: ____________________________
Name:
Title:
G.S.I., Inc.,
a Delaware corporation
By: ____________________________
Name:
Title:
Apex Sports International, Inc.,
a Pennsylvania corporation
By: ____________________________
Name:
Title:
<PAGE>
Exhibit B
---------
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment and Assumption
Agreement") is entered into as of December 29, 1999 between American Sporting
Goods Corporation, a Delaware corporation ("Buyer"), and RYKA Inc., a
Pennsylvania corporation ("RYKA"), KPR Sports International, Inc., a
Pennsylvania corporation ("KPR"), G.S.I., Inc., a Delaware corporation, formerly
known as Global Sports I.P. Inc. ("GSI") and Apex Sports International, Inc., a
Pennsylvania corporation ("Apex" and together with RYKA, KPR, GSI, the "Seller")
RECITALS
A. Buyer, Seller and Global Sports, Inc., a Delaware corporation,
("Global Sports") have entered into that certain Asset Purchase Agreement, dated
as of December 29, 1999 (the "Purchase Agreement"), pursuant to which Seller has
agreed, among other things, to sell and assign to Buyer certain rights and
interests, and Buyer has agreed to assume certain liabilities and obligations of
Seller, all as more particularly described therein. Capitalized and other terms
used in this Assignment and Assumption Agreement but not defined herein shall
have the respective meanings assigned to such terms in the Purchase Agreement.
This Assignment and Assumption Agreement is subject to the terms of the Purchase
Agreement.
B. Pursuant to Sections 4.3(e) and 4.4 (e) of the Purchase Agreement,
Buyer and Seller are obligated to execute and deliver this Assignment and
Assumption Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Seller hereby assigns to Buyer and Buyer hereby assumes and
agrees faithfully to perform and discharge when due, all of the following
liabilities and obligations of Seller with respect to:
(a) the agreements, contracts, licenses, sublicenses,
assignments and indemnities related to the Copyrights, Patent Rights and
Trademarks for the Purchased Brands and all other Copyrights, Patent Rights and
Trademarks used exclusively in connection with the Purchased Brands (and all
goodwill associated therewith) all as listed in Section 5.10 of the Disclosure
Schedule;
(b) Pursuant to clause (b) of Section 2.1 of the Purchase
Agreement, the Governmental Permits used exclusively by the Division, to the
extent assignable and as listed in Section 5.13 of the Disclosure Schedule;
(c) Pursuant to clause (c) of Section 2.1 of the Purchase
Agreement, those personal property leases, contracts, agreements or
understandings relating to or associated with the Division to the extent
assignable, as listed on Schedule A attached hereto;
----------
<PAGE>
(d) pursuant to clause (a) of Section 2.3 of the Purchase
Agreement, the following commitments and obligations concerning the Purchased
Brands and Division for which liabilities at the Closing Date have been
estimated but not paid (and the benefits of which are available to Buyer after
the Closing Date):
(i) the media planning and development of RYKA advertising
campaign, photo shoot, ad creation, etc. (in the Seller good
faith estimated amount of $54,001);
(ii) the Fall 2000 RYKA catalogue (in the Seller good faith
estimated amount of $13,841);
(iii) the corporate ID for the RYKA brand (in the Seller
good faith estimated amount of $25,000);
(iv) the QVC set design and construction for the current
season (in the Seller good faith estimated amount of $7,838);
(v) the accrual for Fall 2000 samples (in the Seller good
faith estimated amount of $50,168, including duty and freight
charges); and
(vi) the Fall 2000 Yukon catalogue (in the Seller good
faith estimated amount of $47,000 (accrued)), and no others.
As to these estimated amounts, Seller shall provide Buyer with back up for such
amounts after the Closing and Buyer shall discharge or satisfy the actual
liability thereof. If such amounts were already paid by Seller, Seller shall
provide documentation thereof and Buyer shall reimburse Seller for such amounts.
(e) pursuant to clause (b) of Section 2.3 of the Purchase
Agreement, the liabilities and obligations of Seller under the Open Purchase
Orders as provided in Section 7.4 of the Purchase Agreement;
(f) all liabilities and obligations of Seller arising after the
Closing Date or with respect to periods following the Closing Date and to be
paid or performed after the Closing Date relating to:
(i) the rental and other charges payable with respect to
the Four Inventory Locations (except King of Prussia) from and
after the Closing Date, but not prior to the Closing Date, and
(ii) the leases, contracts and other agreements designated
by Buyer and listed on Schedule A attached hereto, but not any
----------
expenses, liabilities or obligations incurred or arising
thereunder prior to the Closing Date (for the avoidance of doubt,
salaries, appearances or endorsement fees, rent, utilities,
telephone and sales commissions or incentives, invoiced, incurred
or charged over time shall be allocated between Seller and Buyer
as of the Closing Date, and sales commission and incentive
<PAGE>
expenses shall be allocated based on whether goods were shipped
prior to or after the Closing Date);
(g) all costs and expenses, including freight and costs (whether
in the form of payments, discounts, allowances, reimbursements or credits)
arising from the return after the Closing by customers of goods sold by Seller
prior to the Closing in bona fide third party transactions (but in no event
including any liabilities arising from personal injury or product liability
claims);
(h) the accrued costs and expenses through the Closing Date of
the Retained Employees for accrued vacation and bonuses, who shall become
employees of Buyer after the Closing (in amount of $75,192.31) (or if Seller is
required to pay such amounts to the Retained Employees, Buyer shall reimburse
Seller for such amounts upon confirmation of Seller's payment thereof); and
(i) all liabilities in respect of Taxes for which Buyer is
liable pursuant to Section 7.2 of the Purchase Agreement;
2. It is expressly understood and agreed that Buyer is not assuming,
and shall not in any way become or be liable for, any claim, liability or
obligation of Seller whether known or unknown to Seller, whether fixed or
contingent, accrued or unaccrued, except for the Assumed Liabilities.
3. This Assignment and Assumption Agreement shall inure to the
benefit of and be binding upon Buyer and Seller and their respective successors
and assigns.
4. This Assignment and Assumption Agreement may not be amended,
waived, terminated, assigned or transferred, except by written agreement.
5. This Assignment and Assumption Agreement may be executed in any
number of counterparts, and each such executed counterpart shall be deemed to be
an original instrument, but all such executed counterparts together shall
constitute one and the same Assignment and Assumption Agreement, and each
Assignment and Assumption Agreement shall be deemed to have been made, executed,
and delivered on the date written above, irrespective of the time or times when
the same or any counterparts thereof may have actually been executed and
delivered.
6. Nothing contained herein is intended to or shall be construed to
modify, alter, amend, expand, interpret, supersede or otherwise change any of
the terms, conditions, covenants, agreements, warranties, representations or any
other provisions of the Purchase Agreement and in the event of any conflict
between the terms of this Assignment and Assumption Agreement and the terms of
the Purchase Agreement, the terms of the Purchase Agreement shall control.
7. This Assignment and Assumption Agreement shall be construed and
enforced in accordance with, the laws of the State of Delaware without reference
to principles of conflicts of law, and shall be binding upon and shall inure to
the benefit of the respective successors and assigns of the parties hereto. All
actions relating to the enforcement or interpretation of this Agreement shall be
resolved exclusively before the state or federal courts in the State of
Delaware. The parties hereto irrevocably consent to service of process by first
class certified mail, return receipt requested, postage prepaid, to the address
at which such party is to receive notice in accordance with the notice
provisions set forth in the Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and
Assumption Agreement to be executed and delivered as of the date first above
written.
American Sporting Goods Corporation
a Delaware corporation
By: _________________________
Jerome A. Turner
President
RYKA Inc.,
a Pennsylvania corporation
By: _________________________
Name:
Title:
KPR Sports International, Inc.,
a Pennsylvania corporation
By: _________________________
Name:
Title:
G.S.I., Inc.,
a Delaware corporation
By: _________________________
Name:
Title:
Apex Sports International, Inc.,
a Pennsylvania corporation
By: _________________________
Name:
Title:
<PAGE>
Exhibit C-1
-----------
U. S. TRADEMARK ASSIGNMENT
WHEREAS, G.S.I., Inc., a Delaware corporation, formerly known as Global
Sports I.P. Inc. ("GSI"), having its principal place of business at 1075 First
Avenue, King of Prussia, Pennsylvania, 19406 is the owner of and has good title
to the trademarks and respective registrations and pending applications thereof
in the United States Patent and Trademark Office listed in Schedule A attached
----------
hereto, and the goodwill of the business associated therewith;
WHEREAS, American Sporting Goods Corporation (hereinafter "ASG"), a
Delaware corporation, having its principal place of business at 2323 Main
Street, Irvine, California 92614 is desirous of acquiring all of GSI's rights,
title and interest in and to the trademarks listed on Schedule A in the United
----------
States including but not limited to any registrations, pending applications, and
any common law or other unregistered rights in the trademarks, together with the
goodwill of the business associated therewith;
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, GSI hereby assigns unto ASG all its right, title and
interest in and to the trademarks listed on Schedule A, including any trademark
----------
registrations, pending applications, and any common law or other unregistered
rights in such trademarks, and the goodwill of the business associated
therewith, together with any existing rights of action for infringement of said
trademarks.
Date: December 29, 1999 G.S.I., INC.
a Delaware corporation
________________________________
Name:
Title:
Attested By:
_________________________
Notary
<PAGE>
Exhibit C-2
-----------
U. S. TRADEMARK ASSIGNMENT
WHEREAS, RYKA Inc., (hereinafter "RYKA"), a Pennsylvania corporation,
having its principal place of business at 1075 First Avenue, King of Prussia,
Pennsylvania, 19406 is the owner of and has good title to the trademarks and
respective registrations and pending applications thereof in the United States
Patent and Trademark Office listed in Schedule A attached hereto, and the
goodwill of the business associated therewith;
WHEREAS, American Sporting Goods Corporation (hereinafter "ASG"), a
Delaware corporation, having its principal place of business at 2323 Main
Street, Irvine, California 92614 is desirous of acquiring all of RYKA's rights,
title and interest in and to the trademarks listed on Schedule A in the United
----------
States including but not limited to any registrations, pending applications, and
any common law or other unregistered rights in the trademarks, together with the
goodwill of the business associated therewith;
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, RYKA hereby assigns unto ASG all its right, title and
interest in and to the trademarks listed on Schedule A, including any trademark
----------
registrations, pending applications, and any common law or other unregistered
rights in the trademarks, and the goodwill of the business associated therewith,
together with any existing rights of action for infringement of said trademarks.
Date: December 29, 1999 RYKA INC.
a Pennsylvania corporation
____________________________________
Name:
Title:
Attested By:
_______________________
Notary
<PAGE>
Exhibit C-3
-----------
U. S. TRADEMARK ASSIGNMENT
WHEREAS, KPR Sports International, Inc., (hereinafter "KPR"), a
Pennsylvania corporation, having its principal place of business at 1075 First
Avenue, King of Prussia, Pennsylvania, 19406 is the owner of and has good title
to the trademarks and respective registrations and pending applications thereof
in the United States Patent and Trademark Office listed in Schedule A attached
----------
hereto, and the goodwill of the business associated therewith;
WHEREAS, American Sporting Goods Corporation (hereinafter "ASG"), a
Delaware corporation, having its principal place of business at 2323 Main
Street, Irvine, California 92614 is desirous of acquiring all of KPR's rights,
title and interest in and to the trademarks listed on Schedule A in the United
----------
States including but not limited to any registrations, pending applications, and
any common law or other unregistered rights in the trademarks, together with the
goodwill of the business associated therewith;
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, KPR hereby assigns unto ASG all its right, title and
interest in and to the trademarks listed on Schedule A, including any trademark
----------
registrations, pending applications, and any common law or other unregistered
rights in the trademarks, and the goodwill of the business associated therewith,
together with any existing rights of action for infringement of said trademarks.
Date: December 29, 1999 KPR SPORTS INTERNATIONAL, INC.
a Pennsylvania corporation
____________________________________
Name:
Title:
Attested By:
_________________________
Notary
<PAGE>
Exhibit C-4
-----------
FOREIGN TRADEMARK ASSIGNMENT
WHEREAS, G.S.I., Inc., (hereinafter "GSI"), a Delaware corporation, having
its principal place of business at 1075 First Avenue, King of Prussia,
Pennsylvania, 19406, is, to the best of its knowledge, the owner of and has good
title to the trademarks and respective registrations and pending applications
thereof, listed in Schedule A attached hereto, and the goodwill of the business
----------
associated therewith in the countries in which they are registered;
WHEREAS, American Sporting Goods Corporation (hereinafter "ASG"), a
Delaware corporation, having its principal place of business at 2323 Main
Street, Irvine, California 92614 is desirous of acquiring all of GSI's right,
title and interest in and to the trademarks including the respective
registrations and pending applications therefor as listed in Schedule A,
----------
together with the goodwill of the business associated therewith in the
respective countries;
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, GSI hereby assigns unto ASG all its rights, title and
interest in and to the trademarks, and registrations and pending applications
therefor, listed in Schedule A, and the goodwill of the business associated
----------
therewith, together with any existing rights of action for infringement of said
trademarks..
Date: December 29, 1999 G.S.I., INC.
a Delaware corporation
____________________________________
Name:
Title:
Attested By:
_________________________
Notary
<PAGE>
Exhibit C-5
-----------
PATENT ASSIGNMENT
In consideration of good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, G.S.I., Inc. (the "Assignor"), a
Delaware corporation, having as its principal place of business at 1075 First
Avenue, King of Prussia, Pennsylvania, 19406, hereby sells and assigns to
American Sporting Goods Corporation (the "Assignee"), a Delaware corporation,
having its principal place of business at 2323 Main Street, Irvine, California,
92614, its entire right, title and interest for the United States of America and
throughout the world in patents and patent applications listed on Schedule A
----------
attached hereto, the inventions described and/or claimed therein, continuing
and/or divisional applications therefor, patents issuing therefrom, and
reissues, extensions, renewals and reexaminations of such patents to the full
end of the term or terms for which such patents issue, and all rights, claims or
causes of action against third parties, whenever arising, relating to the same,
such entire right, title and interest to be held and enjoyed by the Assignee to
the same extent as they would have been held and enjoyed by the Assignor had
this assignment and sale not been made.
IN WITNESS WHEREOF, executed by the Assignor on the date set forth below.
Date: December 29, 1999 G.S.I. Inc. a Delaware corporation
__________________________
Name:
Title:
Attested By:
_______________________
Notary
<PAGE>
Exhibit D
---------
ASSIGNMENT OF DOMAIN NAME RIGHTS
--------------------------------
This Agreement is by and between RYKA Inc., (hereinafter "Assignor"), a
Pennsylvania corporation, having its principal place of business at 1075 First
Avenue, King of Prussia, PA 19406, and American Sporting Goods Corporation
(hereinafter "ASG"), a Delaware corporation having its principal place of
business at 2323 Main Street, Irvine, California 92614.
WHEREAS Assignor is the registrant for the Internet domain name "RYKA.COM",
and owns the goodwill associated therewith, if any.
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, Assignor by these presents, assigns and transfers unto
Assignee and its successors, assigns and legal representatives, all right, title
and interest in and to the Internet domain name "RYKA.COM" and sells, assigns
and transfers unto Assignee and its successors, assigns and legal
representatives, all Assignor's right, title and interest in and to the goodwill
associated therewith, if any, in each case, to be held and enjoyed by Assignee
for its own use and benefit and for the use and benefit of its successors,
assigns and legal representatives.
In order to give full force and effect to the assignment granted herein,
Assignor further agrees to promptly execute the Registrant Name Change Agreement
(version 3.0) required by InterNIC (as provided by ASG) to assign the
above-identified Internet domain name.
Signed at 1075 First Avenue, King of Prussia, Pennsylvania this 29th day of
December, 1999.
RYKA INC.
By: ______________________
Name:
Title:
<PAGE>
Exhibit E
---------
IMPORT AUTHORIZATION FOR TRADEMARKED GOODS
------------------------------------------
December 29, 1999
Department of Treasury
United States Customs Service
Attn: ________________
Re: Entry no. _____________
Dear ___________:
American Sporting Goods Corp. has acquired certain assets from Global Sports,
Inc. including the trademarks of RYKA, Yukon and Apex as of December 29, 1999.
Enclosed please find copies of the applicable Trademark Assignments. American
Sporting Goods Corp. is the owner of the trademarks of RYKA, Yukon and Apex
listed thereon and has the right to import merchandise under such trademarks of
RYKA, Yukon and Apex.
Should you have any questions please feel free to contact me at
(949) 752-6688 x811.
Sincerely,
____________________________________
Jennifer Lin
Controller
American Sporting Goods Corp.
and
RYKA Inc., G.S.I., Inc.,
a Pennsylvania corporation a Delaware corporation
By: ________________________________ By: _____________________________
Name: Name:
Title: Title:
KPR Sports International, Inc.,
a Pennsylvania corporation Apex Sports International, Inc.,
a Pennsylvania corporation
By: ________________________________
Name: By: _____________________________
Title: Name:
Title:
<PAGE>
Exhibit F
---------
American Sporting Goods Corporation
2323 Main Street
Irvine, CA 92614
Global Sports, Inc.
1075 First Avenue
King of Prussia, PA 19406
December 29, 1999
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Dear Ladies and Gentlemen:
Please refer to that certain Escrow Agreement dated as of
December 15, 1999 (the "Escrow Agreement") by and among Global Sports, Inc., a
Delaware corporation ("Global Sports"), American Sporting Goods Corporation, a
Delaware corporation ("ASG"), and Blank Rome Comisky & McCauley LLP, a
Pennsylvania limited liability partnership. Pursuant to Section 4 of the Escrow
Agreement, you are hereby instructed by the undersigned to pay the amount of the
Deposit, as defined in the Escrow Agreement, to Global Sports. You are further
instructed by the undersigned to pay any accrued interest on the Deposit to ASG.
Sincerely,
AMERICAN SPORTING GOODS CORPORATION
a Delaware corporation
By: __________________________
Jerome A. Turner
President
GLOBAL SPORTS, INC.
a Delaware corporation
By: __________________________
Name:
Title:
<PAGE>
Exhibit G
---------
BLANKET DRAWBACK ENTRY
----------------------
<PAGE>
Exhibit H
---------
ASSIGNMENT AND ENDORSEMENT
--------------------------
For good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, ______________________________________ ("Assignor")
hereby grants, sells, assigns, transfers and endorses to American Sporting Goods
Corporation, its successors, lenders and assigns, with full power of
substitution, all right, title and interest in of Assignor in and to the
following:
Bill of Lading No. _______________________________, Document No.
_____________________________________.
IN WITNESS WHEREOF, this Assignment is executed as of this 29th day of
December, 1999.
______________________________________
By: ______________________________________
Name
Title
<PAGE>
Exhibit I
---------
FORM OF OPINION OF COUNSEL FOR BUYER
------------------------------------
December 29, 1999
Global Sports, Inc.
RYKA Inc.
KPR Sports International, Inc.
G.S.I., Inc.
Apex Sports International, Inc.
555 S. Henderson Road
King of Prussia, PA 19406
Ladies and Gentlemen:
We refer to the Asset Purchase Agreement dated as of December 29, 1999
(the "Agreement"), among American Sporting Goods Corporation, a Delaware
corporation ("Buyer"), RYKA Inc., a Delaware corporation, KPR Sports
International, Inc., a Delaware corporation, G.S.I., Inc., a Delaware
corporation, and Apex Sports International, Inc., a Delaware corporation (each a
"Seller and collectively, "Sellers"), and Global Sports, Inc., a Delaware
corporation ("Parent"), providing for, among other things, the acquisition by
Buyer of certain assets and the assumption of certain liabilities and agreements
of Sellers' footwear divisions. We have served as special counsel to Buyer in
connection with the Agreement and the transactions contemplated thereby. Terms
used herein which are defined in the Agreement shall have the respective
meanings set forth therein, unless otherwise defined herein.
This opinion is being rendered pursuant to Section 4.3(d) of the
Agreement by the Los Angeles office of Sidley & Austin. This opinion is limited
solely to the laws of the State of California and the General Corporation Law of
the State of Delaware as those laws were in effect as of the date hereof, and we
express no opinion as to the laws of any other state or jurisdiction (including
any local jurisdictions within the State of California), notwithstanding that
there may be attorneys in the Los Angeles office of Sidley & Austin admitted to
practice in other jurisdictions.
In connection with our opinions in Paragraph 3 below, we note that the
Agreement and the Assumption Agreement (referenced in clause (b) below) are
governed by Delaware law. Our opinions expressed in Paragraph 3 do not
constitute an opinion under Delaware law, but rather, are opinions under
California law given on the assumption that the governing law is California law
and not Delaware law and that a court enforcing such agreements applies
California law (other than California conflicts of laws principles).
<PAGE>
In our capacity as counsel to Buyer, we have examined, among other
things, originals or copies identified to our satisfaction as being true copies,
of the following:
(a) the Agreement; and
(b) the Assignment and Assumption of Contracts Agreement dated
December 29, 1999 (the "Assumption Agreement"), between Seller and Buyer.
In addition, we have obtained from public officials and from officers
and other representatives of Buyer such other certificates and assurances as we
consider necessary for purposes of rendering this opinion. With respect to the
opinions set forth in Paragraph 1 regarding due incorporation, valid existence
and good standing, we are relying exclusively on a review of the charter
documents and certificates or verbal confirmation from public officials from the
States of Delaware and California. We also have relied on and assumed the truth
and accuracy of the representations made by Buyer in the Agreement. As to any
facts material to the opinions hereinafter expressed that we did not
independently establish or verify, we have relied without investigation upon
certificates, statements and representations of representatives of Buyer,
including without limitation, the Officers' Certificate of Jerome A. Turner and
Jack Wong, President and Secretary of Buyer, respectively.
As used herein, unless otherwise expressly stated, the term "to the
best of our knowledge" or "to our knowledge" or other phrases to the same or
similar effect with reference to matters of fact, means that to the actual
knowledge of those attorneys in our firm who have devoted substantial attention
to this engagement, but not including any constructive or imputed notice of any
information, we find no reason to believe that the opinions expressed herein are
factually incorrect. Beyond that we have made no independent factual
investigation for the purpose of rendering an opinion with respect to such
matters.
Subject to the assumptions, limitations and qualifications herein set
forth, we are of the opinion that:
1. Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware. Buyer is duly qualified
to conduct business as a foreign corporation under the laws of the State of
California.
<PAGE>
2. Buyer has the corporate power and authority to execute, deliver
and perform the Agreement and the Assumption Agreement and to consummate the
transactions contemplated thereby.
3. The Agreement and the Assumption Agreement have each been duly
authorized, executed and delivered by Buyer and, if they were to be governed by
California law, would constitute the legal, valid and binding agreement of Buyer
enforceable against Buyer in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4. No consent, approval or authorization of, or declaration, filing
or registration with, any federal or state governmental authority or regulatory
body, is required on the part of Buyer (i) for the valid execution and delivery
by Buyer of the Agreement, the Assumption Agreement, or (ii) the consummation by
Buyer of the transactions contemplated by the Agreement and the Assumption
Agreement.
For purposes of rendering the foregoing opinions, we have made, with
your consent, and without further inquiry as to their accuracy or completeness,
the following assumptions:
(a) We have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with the original documents of any copies
thereof submitted to us for our examination.
(b) We have assumed the due authorization, execution and delivery of
the Agreement and the Assumption Agreement and all of the other instruments and
agreements contemplated thereby by the parties thereto (other than Buyer) and
that the Agreement and the Assumption Agreement and all of the other instruments
and agreements contemplated thereby constitute the legally valid and binding
obligations of the parties thereto (other than Buyer), enforceable against such
parties in accordance with their respective terms.
<PAGE>
(c) We have assumed compliance by you with any and all applicable laws
with which you are required to comply relating to or affecting the matters and
actions contemplated by the Agreement and the Assumption Agreement and all of
the other instruments and agreements contemplated thereby.
This opinion is given as of the date hereof and we disclaim any
obligation to advise you of any changes or developments in law that may occur
after the date hereof which may affect the conclusions reached herein.
This opinion is being delivered solely for the benefit of the persons
to whom it is addressed and may not be quoted, filed with any governmental
authority or other regulatory agency or otherwise circulated or utilized for any
other purpose without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT J
---------
FORM OF OPINION OF COUNSEL FOR SELLER
-------------------------------------
December 29, 1999
American Sporting Goods Corporation
17021 Von Karman Avenue
Irvine, California 97214
Congress Financial Corporation (Western)
225 South Lake Avenue, Suite 1000
Pasadena, California 91101
Gentlemen:
This opinion is being furnished pursuant to Section 4.4(d) of the
Asset Purchase Agreement dated as of December 28, 1999 (the "Agreement"), among
American Sporting Goods Corporation, a Delaware corporation ("Buyer"), RYKA,
Inc., a Pennsylvania corporation ("RYKA"), KPR Sports International, Inc., a
Pennsylvania corporation ("KPR"), GSI Inc., a Delaware corporation ("GSI"), and
Apex Sports International, Inc., a Pennsylvania corporation ("Apex") (each a
"Seller and collectively, "Sellers"), and Global Sports, Inc., a Delaware
corporation ("Parent"), providing for, among other things, the acquisition by
Buyer of certain assets and the assumption of certain liabilities and agreements
of Sellers' branded division. We have served as counsel to Sellers and Parent
in connection with the Agreement and the transactions contemplated thereby.
Terms used herein which are defined in the Agreement shall have the respective
meanings set forth therein, unless otherwise defined herein.
Although as counsel to Sellers and Parent, we have advised them in
connection with certain matters referred to us by them, our services are limited
to specific matters so referred. Consequently, we do not have knowledge of many
transactions in which Sellers and Parent engaged or their day-to-day operations.
In rendering this opinion, we have examined only the documents listed below
and in Exhibit "1" hereto:
(a) the Agreement;
(b) the Bill of Sale and Assignment, dated as of the date hereof, of
Sellers in favor of Buyer;
(c) the Instrument of Assignment and Assumption, dated as of the date
hereof, between Buyer and Sellers;
(d) the United States Trademark Assignments, dated as of the date
hereof, of each of GSI, RYKA and KPR in favor of Buyer;
<PAGE>
(d) the Foreign Trademark Assignment, dated as of the date hereof, of
GSI in favor of Buyer;
(e) the United States Patent Assignment, dated as of the date hereof,
of GSI in favor of Buyer; and
(f) the Assignment of the RYKA Website, dated as of the hereof, of
RYKA in favor of Buyer (items (b) through (f), inclusive, are referred to
collectively as the "Seller Ancillary Agreements").
We have also assumed and relied, as to matters of fact and mixed questions
of fact and laws, upon the truth, completeness, authenticity and due
authorization (except as to the Agreement and the Seller Ancillary Agreements)
of all certificates, documents and records examined and the genuineness of all
signatures, including, but not limited to, the Certificate attached hereto as
Exhibit "2", the representations, warranties, covenants and agreements of the
Company given pursuant to or in connection with the Agreement, and the other
documents listed in Exhibit "1.
We have not made any independent investigation in rendering this opinion
other than the document examination described above. Our opinion is therefore
qualified in all respects by the scope of that document examination. We make no
representation as to the sufficiency of our investigation for your purposes. In
rendering this opinion, we have assumed and relied upon the truth, completeness,
authenticity and due authorization of all documents and certificates examined
and of all the signatures thereon. We have also assumed that the Agreements and
the Seller Ancillary Agreements are valid and legally binding upon and
enforceable against you in accordance with their terms.
This opinion is limited to the laws of the Commonwealth of Pennsylvania,
the Delaware General Corporation Law (the "DGCL") and no opinion is expressed as
to the effect of the laws of any other jurisdiction. In connection with our
opinions in Paragraphs 5 and 6 below, we note that the Agreement and the
Assumption Agreement (referenced in clause (b) above) are governed by Delaware
law. Our opinions expressed in Paragraphs 5 and 6 do not constitute an opinion
under Delaware law, but rather, are opinions under Pennsylvania law given on the
assumption that the governing law is Pennsylvania law and not Delaware law and
that a court enforcing such agreements applies Pennsylvania a law (other than
Pennsylvania conflicts of laws principles). In connection with our opinions in
Paragraphs 4 and 6 below, we express no opinion as to whether the approval of
the stockholders of Parent is required. We understand that you have been
provided with a copy of the opinion of Potter Anderson & Corroon LLP, special
Delaware counsel to Parent, that the sale of the branded division assets does
not require the approval of the Corporation's stockholders under the DGCL. In
rendering this opinion, we have assumed compliance with all other laws,
including federal laws, and compliance with all Pennsylvania and Delaware
antitrust laws.
Based upon and subject to the qualifications, exceptions and limitations
heretofore and hereafter set forth, it is our opinion that:
<PAGE>
1. Parent and GSI each is a corporation duly organized, validly existing
and in good standing under DGCL.
2. RYKA, KPR and Apex each is a corporation incorporated and subsisting
under the Pennsylvania Business Corporation Law of 1988, as amended ("BCL").
3. Each Seller has the corporate power and authority under the DGCL or
BCL, as applicable to execute, deliver and perform the Agreement and each of the
Seller Ancillary Agreements to which it is a party, and consummate the
transactions contemplated thereby.
4. Parent has the corporate power and authority under the DGCL to
execute, deliver and perform the Agreement, and consummate the transactions
contemplated thereby; provided, however, that we express no opinion as to
whether the approval of the stockholders of Parent is required..
5. The Agreement and the Seller Ancillary Agreements have each been duly
authorized, executed and delivered by Sellers and each constitutes the legal,
valid and binding agreement of Sellers enforceable against Sellers in accordance
with its respective terms.
6. The Agreement has been duly authorized, executed and delivered by
Parent and constitutes the legal, valid and binding agreement of Parent
enforceable against Parent in accordance with its terms; provided, however, that
we express no opinion as to whether the approval of the stockholders of Parent
is required.
7. No consent, approval or authorization of, or declaration, filing or
registration with, any state governmental authority or regulatory body, is
required on the part of Sellers or Parent for the valid execution and delivery
by Sellers or Parent of the Agreement or the Seller Ancillary Agreements or the
consummation by Sellers and Parent of the transactions contemplated thereby.
The opinions expressed herein are subject in all respects to the following
qualifications: no opinion is rendered as to: (i) the availability of equitable
remedies including, but not limited to, specific performance, self-help,
injunctive relief and the ability of a party to institute judicial or non-
judicial proceedings, or to exercise any other rights, without notice to the
other party; (ii) the effect of bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium and other similar laws or equitable principles
affecting creditors' rights or remedies; (iii) the effect of applicable laws and
court decisions which hereafter limit or render unenforceable certain of your
rights and remedies; (iv) provisions relating to court costs or legal or other
fees and charges which may be properly chargeable, reimbursable, or recoverable;
(v) provisions which a court of law renders unenforceable due to a standard of
reasonableness or other standard imposed by such court; and (vi) the
enforceability of any consent to jurisdiction or venue of courts which otherwise
would lack personal or subject matter jurisdiction.
The validity, binding effect and enforceability of the obligations of the
parties under the Agreement are subject to general principles of equity (whether
such enforceability is considered in a proceeding in equity or at law),
conscionability, reasonableness, good faith and fair dealing.
<PAGE>
This opinion is governed by, and shall be interpreted in accordance with
the Legal Opinion Accord (the "Accord") of the American Bar Association Section
of Business Law (1991) as supplemented or modified by the Pennsylvania Third
Party Legal Opinion Supplement (the "Supplement") of the Corporation, Banking
and Business Law Section of the Pennsylvania Bar Association (1992). As a
consequence, it is subject to a number of qualifications, exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the and Supplement, in addition to the qualifications,
exceptions and limitations specifically set forth herein and this opinion should
be read in conjunction therewith. In the event of any inconsistency between the
qualifications, exceptions and limitations of the Accord and those specifically
set forth herein, the more restrictive qualifications, exceptions and
limitations shall control.
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
This opinion is not intended to be relied upon by any individual or entity
other than you, or to be distributed or disclosed except to your directors,
officers and counsel, without the prior written consent of a partner of this law
firm.
This opinion is strictly limited to the matters stated herein and no other
or more extensive opinion is intended, implied or to be inferred beyond the
matters expressly stated herein. This opinion is not a guarantee and should not
be construed or relied on as such.
Very truly yours,
BLANK ROME COMISKY & McCAULEY LLP
<PAGE>
EXHIBIT "1"
1. Certificate or Articles of Incorporation and all amendments thereto of
Parent and each Seller.
2. Good standing certificates from the Secretary of State of the State of
Delaware for Parent and GSI.
3. Certificate of the Secretary of the Commonwealth of Pennsylvania as to
the present subsistence of the RYKA, KPR and Apex.
4. Bylaws of Parent and each Seller.
5. Resolutions adopted by the Board of Directors of Parent and each
Seller.
6. Resolutions adopted by the shareholders of each Seller.
7. Certificate of officers of each of Parent and Sellers more fully set
forth in Exhibit "2" attached hereto.
8. Certificates of Parent and Sellers delivered pursuant to the Agreement.
<PAGE>
EXHIBIT "2"
The undersigned officers of Global Sports, Inc. ("Parent"), RYKA, Inc., KPR
Sports International, Inc., GSI Inc. and Apex Sports International, Inc.
(collectively, "Sellers"), hereby certify to Blank Rome Comisky & McCauley LLP
that:
1. We are familiar with all the terms and provisions of the Agreement.
All capitalized terms used and not defined herein shall have the meanings
ascribed to them in the Agreement.
2. As to the matters hereinbelow set forth, we either have personal
knowledge or have obtained information from officers and employees of Parent or
Sellers in whom we have confidence and whose duties require them to have
personal knowledge thereof.
3. The representations and warranties contained in the Agreement are true
on and as of the date hereof with the same effect as though such representations
and warranties had been made on and as of the date hereof.
4. The undersigned has read and is familiar with the opinion (in the form
attached) to be rendered by Blank Rome Comisky & McCauley LLP in connection with
the Agreement. The undersigned are executing this Certificate to induce Blank
Rome Comisky & McCauley LLP to render that opinion and understands that Blank
Rome Comisky & McCauley LLP will rely upon the foregoing as well as other
certificates, papers and investigations in rendering that opinion. The
undersigned knows of no reason why the opinion should not be issued.
Dated: December , 1999
_________________________
Michael G. Rubin
_________________________
Steven Wolf
