<PAGE> 1
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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
JUNE 4, 1996 (MAY 20, 1996)
------------------------------------------------
Date of Report (Date of earliest event reported)
SPORT SUPPLY GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-10704 75-2241783
- ------------------------------- ------------------------ -------------------
(State or other jurisdiction of (Commission file number) (IRS employer
incorporation or organization) identification no.)
</TABLE>
1901 DIPLOMAT DRIVE
FARMERS BRANCH, TEXAS 75234
(Address of principal executive offices, including zip code)
(214) 484-9484
-------------------------------
(Registrant's telephone number,
including area code)
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<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(A) GENERAL.
On May 20, 1996, Sport Supply Group, Inc., a Delaware corporation
("SSG" or the "Company") and Sport Supply Group International
Holdings, Inc., a Delaware corporation and wholly - owned subsidiary
of SSG ("SSGI"), disposed of substantially all of the assets and
liabilities of its Gold Eagle Professional Golf Products Division (the
"Gold Eagle Division") pursuant to the terms and provisions of an
Asset Purchase Agreement (the "Asset Purchase Agreement") dated May
20, 1996, by and among Morris Rosenbloom & Co., Inc., a Delware
corporation ("Rosenbloom"), SSG and SSGI.
Rosenbloom is a privately-held corporation headquartered in Rochester,
New York.
(B) DESCRIPTION OF PURCHASE PRICE.
Pursuant to the Asset Purchase Agreement, the total consideration paid
to SSG was (i) $5,078,190 in cash paid at closing and (ii)
$313,114 in cash payable within five (5) business days after the
termination of a Transition Agreement entered into between SSG and
Rosenbloom, subject to certain adjustments as provided in the Asset
Purchase Agreement. The Transition Agreement is scheduled to
terminate on June 20, 1996. In addition, Rosenbloom assumed certain
liabilities of the Gold Eagle Division, principally certain trade
payables, certain obligations under a real property lease and certain
obligations under executory contracts.
The consideration paid to SSG was determined by arms-length
negotiations between the officers of SSG and SSGI and the officers of
Rosenbloom based upon factors such as the Gold Eagle Division's
historical revenues, current value of inventory, current customer
base, and certain other financial and operational information.
Pursuant to the Asset Purchase Agreement, the Company retained certain
assets of the Gold Eagle Division, consisting principally of cash and
trade accounts receivable.
(C) INCORPORATION BY REFERENCE.
Set forth above is a brief description of certain terms of the Asset
Purchase Agreement. Any description or disclosure made in this
Current Report on Form 8-K with respect to the Asset Purchase
Agreement is qualified in its entirety by reference to the Asset
Purchase Agreement attached hereto as Exhibit 2.1. SSG will furnish
supplemental copies of the exhibits and schedules to the Asset
Purchase Agreement to the Securities and Exchange Commission upon
request.
On May 20, 1996, the Company issued a press release through media
sources describing, among other items, the consummation of the Asset
Purchase Agreement. Any disclosure made in the press release with
respect to the Asset Purchase Agreement is qualified in its entirety
by reference to the Asset Purchase Agreement attached hereto as
Exhibit 2.1.
2
<PAGE> 3
ITEM 5. OTHER EVENTS.
(a) Incorporated herein by reference is a press release attached
hereto as Exhibit 5.1 released by the Registrant through media
sources concerning the sale of certain assets of the
Registrant's Gold Eagle Division and the resignations of the
Registrant's Chief Executive Officer and Chief Financial
Officer.
(b) Incorporated herein by reference is a press release attached
hereto as Exhibit 5.2 released by the Registrant through media
sources concerning the Registrant's preliminary results of
operations for the quarterly period ended May 3, 1996 and the
planned disposition of the Company's remaining golf
operations.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
None
(b) Pro Forma Financial Information
Pro forma financial statements filed as part of this report
are listed on the "Index to Pro Forma Financial Information",
which index is incorporated in this Item 7(b) by reference.
(c) Exhibits.
The exhibits filed as part of this report are listed on the
"Index to Exhibits", which index is incorporated in this Item
7(c) by reference.
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 thereunto duly authorized.
Dated: June 4, 1996 SPORT SUPPLY GROUP, INC.
By: /s/ JAMES R. CRAWFORD
---------------------------------
James R. Crawford,
Principal Accounting Officer
3
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SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
INDEX TO PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
PRO FORMA FINANCIAL INFORMATION
Summary Information Related to the Unaudited Pro Forma Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Pro Forma Consolidated Statement of Operations of Sport Supply
Group, Inc. and Subsidiary for the three-month period ended
February 2, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Pro Forma Consolidated Statement of Operations of
Sport Supply Group, Inc. and Subsidiary for the three-month period
ended February 2, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Unaudited Pro Forma Consolidated Statement of Operations of Sport Supply
Group, Inc. and Subsidiary for the ten-month period ended
October 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Notes to Unaudited Pro Forma Consolidated Statement of Operations of
Sport Supply Group, Inc. and Subsidiary for the ten-month period
ended October 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Unaudited Pro Forma Consolidated Balance Sheet of Sport Supply Group, Inc.
and Subsidiary as of February 2, 1996 . . . . . . . . . . . . . . . . . . . . . 10
Notes to Unaudited Pro Forma Consolidated Balance Sheet of Sport Supply
Group, Inc. and Subsidiary as of February 2, 1996 . . . . . . . . . . . . . . . 11
</TABLE>
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<PAGE> 5
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
SUMMARY INFORMATION RELATED TO THE
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements consist of
the Unaudited Pro Forma Consolidated Statements of Operations of Sport Supply
Group, Inc. and Subsidiary ("SSG" or "Company") for the three-month period
ended February 2, 1996, and the ten-month period ended October 31, 1995, and
the Unaudited Pro Forma Consolidated Balance Sheet of SSG as of February 2,
1996 (collectively, the "Pro Forma Statements"). The Pro Forma Statements give
effect to the sale of substantially all the assets and disposition of certain
specified liabilities of the Gold Eagle Professional Golf Products Division of
SSG (the "Gold Eagle Division") on May 20, 1996. The Unaudited Pro Forma
Consolidated Statements of Operations for the three-month period ended February
2, 1996, and the ten-month period ended October 31, 1995, give effect to the
sale of the Gold Eagle Division as if such transaction had occurred as of the
beginning of those periods. The Unaudited Pro Forma Consolidated Balance Sheet
gives effect to such transaction as if the transaction had occurred on February
2, 1996.
The Pro Forma Statements do not purport to represent what the results of
operations of SSG would actually have been if the aforementioned transaction in
fact had occurred on January 1, 1995, or November 1, 1995, or to project the
results of operations for any future periods or at any future date.
Subsequent to the sale of the Gold Eagle Division, the Company's Board of
Directors adopted a formal plan of disposition for the remaining operations of
the Company's retail segment (which previously included the Gold Eagle
Division). Accordingly, the Company's Report on Form 10-Q for the quarterly
period ended May 3, 1996 (which will be filed with the Securities and Exchange
Commission on or prior to June 17, 1996) will present the Company's retail
segment as a discontinued operation. The accompanying Pro Forma Statements do
not reflect the remaining operations of the Company's retail segment on such
basis. Accordingly, future reported results of operations for the periods
presented in the accompanying Pro Forma Statements may be materially different.
5
<PAGE> 6
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three-month period ended February 2, 1996
<TABLE>
<CAPTION>
Sport Supply Gold Eagle Pro Forma Pro Forma
Group, Inc. Division Adjustments Consolidated
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
NET REVENUES $17,986,248 $2,172,621 $ - $15,813,627
COST OF SALES 11,832,130 1,805,318 - 10,026,812
----------- ---------- ------- -----------
GROSS PROFIT 6,154,118 367,303 - 5,786,815
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 7,212,455 741,400 - (a) 6,471,055
----------- ---------- ------- -----------
OPERATING LOSS (1,058,337) (374,097) - (684,240)
OTHER INCOME (EXPENSE):
Interest expense (665,971) - 99,000 (b) (566,971)
Other income, net 16,029 (1,657) - 17,686
----------- ---------- ------- -----------
LOSS BEFORE INCOME
TAX PROVISION (BENEFIT) (1,708,279) (375,754) 99,000 (1,233,525)
INCOME TAX PROVISION (BENEFIT) (624,115) (131,144) 36,000 (c) (456,971)
----------- ---------- ------- -----------
NET LOSS $(1,084,164) $ (244,610) $63,000 $ (776,554)
=========== ========== ======= ===========
Net loss per common and
common equivalent share:
Primary dilution $ (0.16) $ (0.12)
=========== ===========
Full dilution $ (0.16) $ (0.12)
=========== ===========
Weighted average number of
common and common
equivalent shares outstanding 6,736,983 6,736,983
=========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations.
6
<PAGE> 7
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
For the three-month period ended February 2, 1996
The unaudited pro forma consolidated statement of operations for the
three-month period ended February 2, 1996, consists of the following
information:
1. The unaudited historical consolidated statement of operations for
Sport Supply Group, Inc. and Subsidiary for the three-month period
ended February 2, 1996;
2. Elimination of the unaudited statement of operations of the Gold Eagle
Division for the three-month period ended February 2, 1996; and
3. Pro forma adjustments.
PRO FORMA ADJUSTMENTS:
(a) The pro forma adjustment to selling, general and administrative
expenses reflects the following items:
<TABLE>
<S> <C> <C>
(i) Minimum royalty payable for sales of new and
recycled golf balls by the Company to customers
of the Gold Eagle Division $ 38,000
(ii) Property taxes attributable to the inventories of
the Gold Eagle Division (38,000)
-----------
Net Pro Forma Adjustment $ -
===========
</TABLE>
(b) The pro forma adjustment to interest expense reflects the elimination
of interest expense associated with the reduction in the Company's
borrowings under its revolving credit facility from the total cash
proceeds of the sale of the Gold Eagle Division, net of related
transaction costs, based upon the Company's weighted average borrowing
rate during the period.
(c) To adjust the income tax benefit for the effect of the pro forma
adjustments based upon the Company's effective tax rate of
approximately 36% for the period.
7
<PAGE> 8
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the ten-month period ended October 31, 1995
<TABLE>
<CAPTION>
Sport Supply Gold Eagle Pro Forma Pro Forma
Group, Inc. Division Adjustments Consolidated
------------ ---------- ----------- ------------
<S> <C> <C> <C>
NET REVENUES $88,991,331 $9,189,698 $ - $79,801,633
COST OF SALES 59,121,934 6,448,788 - 52,673,146
----------- ---------- -------- -----------
GROSS PROFIT 29,869,397 2,740,910 - 27,128,487
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 26,096,431 3,280,306 155,000 (a) 22,971,125
----------- ---------- -------- -----------
OPERATING EARNINGS (LOSS) 3,772,966 (539,396) (155,000) 4,157,362
OTHER INCOME (EXPENSE):
Interest expense (1,700,660) - 329,000 (b) (1,371,660)
Other income, net 202,162 (4,818) - 206,980
----------- ---------- -------- -----------
EARNINGS (LOSS) BEFORE
INCOME TAX PROVISION (BENEFIT) 2,274,468 (544,214) 174,000 2,992,682
INCOME TAX PROVISION (BENEFIT) 884,247 (185,040) 68,000 (c) 1,137,287
----------- ---------- -------- -----------
NET EARNINGS (LOSS) $ 1,390,221 $ (359,174) $106,000 $ 1,855,395
=========== ========== ======== ===========
Net earnings per common
and common equivalent share:
Primary dilution $ 0.20 $ 0.27
=========== ===========
Full dilution $ 0.20 $ 0.27
=========== ===========
Weighted average number of common
and common
equivalent shares outstanding 6,949,984 6,949,984
=========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of
Operations.
8
<PAGE> 9
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
For the ten-month period ended October 31, 1995
The unaudited pro forma consolidated statement of operations for the ten-month
period ended October 31, 1995 consists of the following information:
1. The audited historical consolidated statement of operations of Sport
Supply Group, Inc. and Subsidiary for the ten-month period ended
October 31, 1995;
2. Elimination of the unaudited statement of operations of the Gold Eagle
Division for the ten-month period ended October 31, 1995; and
3. Pro forma adjustments.
PRO FORMA ADJUSTMENTS:
(a) The pro forma adjustment to selling, general and administrative
expenses reflects the following items:
<TABLE>
<S> <C>
(i) Minimum royalty payable for sales of new and
recycled golf balls by the Company to customers
of the Gold Eagle Division $ 125,000
(ii) Property taxes attributable to the inventories of
the Gold Eagle Division (125,000)
(iii) Operating expenses associated with the Company's
primary distribution facility included in the Gold
Eagle Division's unaudited statement of operations
which are expected to continue in future periods 155,000
-----------
Net Pro Forma Adjustment $ 155,000
===========
</TABLE>
(b) The pro forma adjustment to interest expense reflects the elimination
of interest expense associated with the reduction in the Company's
borrowings under its revolving credit facility from the total cash
proceeds of the sale of the Gold Eagle Division, net of related
transaction costs, based upon the Company's weighted average borrowing
rate during the period.
(c) To adjust the income tax benefit for the effect of the pro forma
adjustments based upon the Company's effective tax rate of
approximately 39% for the period.
9
<PAGE> 10
SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of February 2, 1996
<TABLE>
<CAPTION>
Sport Supply Gold Eagle Pro Forma Pro Forma
Group, Inc. Division Adjustments Consolidated
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 204,533 $ - $ - $ 204,533
Accounts receivable, net 13,392,898 - - (a) 13,392,898
Income taxes receivable 852,668 - - 852,668
Inventories 36,146,451 4,416,912 - 31,729,539
Other current assets 4,943,658 293,324 - 4,650,334
----------- ---------- ----------- -----------
Total current assets 55,540,208 4,710,236 - 50,829,972
DEFERRED CATALOG EXPENSES 2,038,048 13,465 - 2,024,583
PROPERTY, PLANT, AND EQUIPMENT, net 8,131,264 14,758 - 8,116,506
OTHER ASSETS:
Goodwill, net 17,333,357 667,446 - 16,665,911
Trademarks, net 4,836,842 119,942 - 4,716,900
Other, net 1,760,334 433,203 - 1,327,131
----------- ---------- ----------- -----------
Total other assets 23,930,533 1,220,591 - 22,709,942
----------- ---------- ----------- -----------
Total assets $89,640,053 $5,959,050 $ - $83,681,003
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,777,985 $ 293,605 $ - $ 8,484,380
Accrued liabilities 1,571,552 - (270,000)(b) 1,301,552
Notes payable and capital lease
obligation, current portion 2,873,511 - - 2,873,511
----------- ---------- ----------- -----------
Total current liabilities 13,223,048 293,605 (270,000) 12,659,443
DEFERRED GAIN 13,135 - - 13,135
DEFERRED INCOME TAXES 250,765 - - 250,765
NOTES PAYABLE AND CAPITAL
LEASE OBLIGATION, net of
current portion 29,647,223 - (4,915,445)(c) 24,731,778
----------- ---------- ----------- -----------
Total liabilities 43,134,171 293,605 (5,185,445) 37,655,121
STOCKHOLDERS' EQUITY:
Preferred stock - - - -
Common stock 75,520 - - 75,520
Paid in capital 46,652,966 - - 46,652,966
Retained earnings 7,940,939 - (480,000)(d) 7,460,939
----------- ---------- ----------- -----------
54,669,425 - (480,000) 54,189,425
Less-treasury stock (8,163,543) - - (8,163,543)
----------- ---------- ----------- -----------
Total stockholders' equity 46,505,882 - (480,000) 46,025,882
----------- ---------- ----------- -----------
Total liabilities and stock $89,640,053 $ 293,605 $(5,665,445) $83,681,003
holder's equity =========== ========== =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
10
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SPORT SUPPLY GROUP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
As of February 2, 1996
The unaudited pro forma consolidated balance sheet as of February 2, 1996,
consists of the following information:
1. The unaudited historical consolidated balance sheet of Sport Supply
Group, Inc. and Subsidiary as of February 2, 1996;
2. Elimination of the unaudited balance sheet of the Gold Eagle Division
as of February 2, 1996; and
3. Pro forma adjustments.
PRO FORMA ADJUSTMENTS:
(a) The historical accounts receivable as of February 2, 1996 includes
approximately $2.2 million attributable to products sold by the Gold
Eagle Division. Such receivables were retained by the Company and are
not expected to be regenerated in future periods.
(b) The pro forma adjustment to accrued liabilities reflects the estimated
income tax benefit from the estimated loss on disposal of the Gold
Eagle Division.
(c) The pro forma adjustment to notes payable and capital lease obligation
reflects the reduction of borrowings under the Company's revolving
credit facility from the total cash proceeds of the sale of the Gold
Eagle Division, net of related transaction costs.
(d) The pro forma adjustment to retained earnings reflects the estimated
loss on disposal of the Gold Eagle Division, net of the related
estimated tax benefit.
11
<PAGE> 12
INDEX TO EXHIBITS
Exhibit 2.1 Asset Purchase Agreement (without exhibits or schedules)
Exhibit 5.1 Press Release dated May 20, 1996
Exhibit 5.2 Press Release dated May 24, 1996
<PAGE> 1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement") dated May 20, 1996, is
by and among MORRIS ROSENBLOOM & CO., INC., a Delaware corporation ("Buyer"),
SPORT SUPPLY GROUP, INC., a Delaware corporation ("SSG") and SPORT SUPPLY GROUP
INTERNATIONAL HOLDINGS, INC., a Delaware corporation and wholly-owned
subsidiary of SSG ("SSGI"; SSG and SSGI are collectively referred to herein as
the "Company").
RECITAL
Buyer desires to purchase from Company and Company desires to
sell to Buyer certain property and assets (the "Acquired Assets") of Company's
Gold Eagle Professional Golf Products Division (the "Division").
THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows.
1. PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and conditions
of this Agreement, on the Closing Date (as hereinafter defined) Company shall
sell, transfer, convey, assign, and deliver to Buyer (or to an entity
designated by Buyer pursuant to Section 13.4.(a), below), and Buyer shall
purchase and accept the Acquired Assets, together with all rights and
privileges associated with such assets. The Acquired Assets shall include the
following:
1.1.(a) Leased Real Property. The lease of real property
(the "Real Property Lease") described on Schedule 1.1.(a) with respect
to the real property described therein (the "Leased Real Property").
1.1.(b) Personal Property. The machinery, equipment,
vehicles, tools, supplies, spare parts, furniture and the other
personal property (other than personal property leased pursuant to
Personal Property Leases as hereinafter defined) described in Schedule
1.1.(b).
1.1.(c) Inventory. All inventories of raw materials,
work-in-process and finished goods (including all such in transit),
and service and repair parts, supplies and components held for resale
by the Division, together with related packaging materials, all as
described in Schedule 1.1.(c) (collectively, the "Inventory").
<PAGE> 2
1.1.(d) Personal Property Leases. All leases of
machinery, equipment, vehicles, furniture and other personal property
leased by the Division (the "Personal Property Leases") and described
in Schedule 1.1.(d).
1.1.(e) Trade Rights. All the Division's interest in any
Trade Rights. As used herein, the term "Trade Rights" shall mean and
include: (i) all trademark rights, business identifiers, trade dress,
service marks, trade names, and brand names; (ii) all copyrights and
all other rights associated therewith and the underlying works of
authorship; (iii) all patents and all proprietary rights associated
therewith; (iv) all contracts or agreements granting any right, title,
license or privilege under the intellectual property rights of any
third party; (v) all inventions, mask works and mask work
registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants and agreements
respecting intellectual property and non-competition and all other
types of intellectual property; and (vi) all registrations of or
pertaining to any of the foregoing, all applications therefor, all
goodwill associated with any of the foregoing, and all claims for
infringement or breach thereof. All Trade Rights of the type
described in clauses (i), (ii), (iii) and (iv) of this Section are set
forth in Schedule 1.1.(e).
1.1.(f) Contracts. All Company's rights and obligations
in, to and under all contracts (whether written or oral), purchase
orders, letters of credit and sales orders (hereinafter "Contracts")
of the Division listed on Schedule 1.1.(f). To the extent that any
material Contract for which assignment to Buyer is provided herein is
not assignable without the consent of another party, this Agreement
shall not constitute an assignment or an attempted assignment thereof
if such assignment or attempted assignment would constitute a breach
thereof. Company and Buyer agree to use their best efforts (without
any requirement on the part of Buyer or Company to pay any money or
agree to any change in the material terms of any such Contract) to
obtain the consent of such other party to the assignment of any such
Contract to Buyer in all cases in which such consent is or may be
required for such assignment. If any such consent shall not be
obtained, Company agrees to cooperate with Buyer in any reasonable
arrangement designed to provide for Buyer the benefits intended to be
assigned to Buyer under the relevant Contract. If and to the extent
that such arrangement cannot be made, Buyer, upon notice to Company,
shall have no obligation pursuant to Section 2.1 or otherwise with
respect to any such Contract and any such Contract shall not be deemed
to be an Acquired Asset hereunder.
1.1.(g) Computer Software. All computer source codes,
programs and other software used in the business of the Division and
not otherwise used by Company, including all machine readable code,
printed listings of code, documentation and related property and
information of Company.
-2-
<PAGE> 3
1.1.(h) Literature. All sales literature, promotional
literature, catalogs and similar materials of the Division unless such
materials are Excluded Intellectual Property (as defined in Section
1.2.(e) below).
1.1.(i) Records and Files. All records and files
material to the business of the Division that are reasonably required
to operate the Division in the manner in which it heretofore has been
operated, including, without limitation, customer and vendor lists,
phone lists, mailing lists, blueprints, specifications, designs,
drawings, and operating and marketing plans, and all other documents,
tapes, discs, programs or other embodiments of information of Company
used in the business of the Division.
1.1.(j) Licenses; Permits. All licenses, permits,
approvals, certifications and listings of the Division, to the extent
assignable.
1.1.(k) Trade Name. The name "Gold Eagle," and all
rights to use or allow others to use such name; provided, however,
that Buyer shall not acquire hereby any right to the Excluded
Intellectual Property (as defined in Section 1.2.(e) below).
1.1.(l) General Intangibles. All prepaid items, if any,
all causes of action arising out of occurrences after the Closing, and
other intangible rights and assets that relate solely to the Division.
1.2. Excluded Assets. Company shall not sell, transfer, assign,
convey or deliver to Buyer, and Buyer will not purchase or accept any assets
other than the Acquired Assets, including the following assets of the Division
(collectively the "Excluded Assets"):
1.2.(a) Cash and Cash Equivalents. All cash and cash
equivalents, including any petty cash balances at the Division's
various places of business.
1.2.(b) Accounts Receivable. All notes, drafts and
accounts receivable of the Division and rights to refunds, if any,
from suppliers.
1.2.(c) Consideration. The consideration delivered by
Buyer to Company pursuant to this Agreement.
1.2.(d) Tax Credits and Records. Federal, state, local
or other income and franchise tax credits and tax refund claims and
associated returns and records. Buyer shall have reasonable access to
such returns and records and may make excerpts therefrom and copies
thereof.
1.2.(e) Excluded Intellectual Property. The names "Sport
Supply Group, Inc.", "International Golf", "Second Chance" and all
derivative and variations thereof and all tradenames, trademarks and
registrations relating to such names (collectively, the
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<PAGE> 4
"Excluded Intellectual Property"). All stationery, forms, packaging
and other written materials that contain or otherwise use the Excluded
Intellectual Property shall be included in the Excluded Assets;
provided, however, notwithstanding anything herein to the contrary,
Buyer shall be permitted to use, hold and sell in the ordinary course
of business, any acquired Inventory which has been packaged in a
manner containing Excluded Intellectual Property.
2. ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this Agreement, the term
"Liability" or "Liabilities" shall mean and include any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, liquidated or unliquidated, secured or unsecured.
Subject to the terms and conditions of this Agreement, on the Closing Date,
Buyer shall assume and agree to perform and discharge the following, and only
the following Liabilities (collectively the "Assumed Liabilities"):
(i) those leases of real and personal property
specifically set forth in Schedule 2.1 and all obligations arising on
or after the Closing Date relating thereto;
(ii) those executory contracts specifically set forth
in Schedule 2.1;
(iii) those trade accounts payable and other accrued
expenses specifically set forth in Schedule 2.1;
(iv) all Liabilities arising out of or in any way
relating to or resulting from any golf accessory product distributed
or sold by the Division on, prior to or after the Closing Date
(including any Liability for claims made for injury to person, damage
to property or other damage, whether made in product liability, tort,
breach of warranty or otherwise); provided, however, such assumed
Liabilities shall not include any Liability with respect to pending or
threatened claims known by the Company on the Closing Date; and
(v) with respect to the Acquired Assets owned or
leased by SSGI and located in Canada, Buyer shall be liable for and
shall pay all applicable federal and provincial sales taxes, land
transfer taxes, goods and services taxes, excise taxes and all other
taxes (other than income taxes of SSGI), duties and other like charges
properly payable upon and in connection with the conveyance and
transfer of such Acquired Assets to Buyer.
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Buyer is not assuming any Liabilities of
the Company and all such Liabilities shall
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be and remain the responsibility of Company. Such unassumed Liabilities
include, but are not limited to, the following:
2.2.(a) Taxes Arising from Transaction. Except as set
forth in Sections 2.1.(v) and 6.8, any taxes applicable to, imposed
upon or arising out of the sale or transfer of the Acquired Assets to
Buyer and the other transactions contemplated by this Agreement,
including but not limited to any income, transfer, sales, use, gross
receipts or documentary stamp taxes.
2.2.(b) Income and Other Taxes. Except as set forth in
Sections 2.1.(v) and 6.8, any Liability of Company for Federal income
taxes and any state or local income, profit, franchise, payroll,
employment or other taxes (and any penalties or interest due on
account thereof).
2.2.(c) Product Liability. Any Liability of Company
arising out of or in any way relating to or resulting from any product
other than a golf accessory product distributed or sold by the
Division prior to the Closing Date (including any Liability for claims
made for injury to person, damage to property or other damage, whether
made in product liability, tort, breach of warranty or otherwise);
provided, however, Company shall retain all Liabilities arising from
golf accessory products as such Liabilities relate to pending or
threatened claims known by Company on the Closing Date.
2.2.(d) Litigation Matters. Any Liability of Company
with respect to any pending or threatened action, suit, proceeding,
arbitration, investigation or inquiry, whether civil, criminal or
administrative ("Litigation").
2.2.(e) Infringements. Any Liability to a third party
for infringement or alleged infringement of such third party's Trade
Rights by Company.
2.2.(f) Transaction Expenses. All Liabilities incurred
by Company in connection with this Agreement and the transactions
contemplated herein.
2.2.(g) Liability For Breach. Liabilities of Company for
any breach or failure to perform any of Company's covenants and
agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing, any other contract, whether or not assumed
hereunder.
2.2.(h) Liabilities to Affiliates. Liabilities of
Company to present or former Affiliates or of the Division to Company.
For purposes of this Agreement, the term "Affiliate" as it relates to
Company shall mean and include all shareholders, directors and
officers of Company; and any entity in which any of the foregoing has
a direct or indirect interest (except through ownership of less than
5% of the outstanding shares of any entity
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whose securities are listed on a national securities exchange or
traded in the national over-the-counter market).
2.2.(i) Violation of Laws or Orders. Liabilities of
Company for any violation or alleged violation by Company of, or
failure to comply with, any statute, law, ordinance, rule or
regulation (collectively, "Laws") or any order, writ, injunction,
judgment, plan or decree (collectively, "Orders") of any court,
arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, municipal,
foreign or other (collectively, "Government Entities").
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. Subject to any adjustment as provided in
Section 3.2.(i), the purchase price (the "Purchase Price") for the Acquired
Assets shall be (a) the sum of (i) U.S. $2,070,000 plus (ii) the Inventory
listed on the inventory reports of the Division as of the close of business on
the business day immediately preceding the Closing Date, valued in accordance
with the terms of Schedule 3.1 hereto (the "Agreed Value"), plus (iii) the
value of the Inventory in transit based upon the Agreed Value, (iv) plus the
amount of outstanding letters of credit issued to secure performance of open
orders of the Division as of the Closing Date, if and to the extent that the
benefit of such letter of credit inures to Buyer, (v) less the amount of trade
accounts payable or other accrued expenses assumed by Buyer at Closing
(collectively, the "Cash Purchase Price"); and (b) the assumption of the
Assumed Liabilities.
3.2. Payment of Purchase Price. The Purchase Price shall be paid by
Buyer as follows:
3.2.(a) Assumption of Liabilities. At the Closing, Buyer
shall deliver to Company such documents and instruments as are
reasonably required to evidence the assumption of the Assumed
Liabilities.
3.2.(b) Cash to Escrow Agent. At the Closing, Buyer
shall deliver to Harris Trust and Savings Bank, Chicago, Illinois, as
escrow agent (the "Escrow Agent") under the Escrow Agreement (as
defined in Section 8.7), an amount equal to 10% of the Agreed Value of
the Inventory listed on the inventory reports of the Division as of
the close of business on the business day immediately preceding the
Closing Date.
3.2.(c) Cash to Company. At the Closing, Buyer shall
deliver to Company the Cash Purchase Price, less the amount paid to
the Escrow Agent pursuant to Subsection 3.2.(b) above, by wire
transfer of immediately available funds to an account designated by
Company.
3.2.(d) SSGI Physical Inventory. Immediately following
the Closing Date, representatives of Buyer and Company will jointly
conduct a physical inventory of the
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Inventory included in the Acquired Assets that is located at SSGI's
warehouse in British Columbia, Canada. A representative of each party
shall sign his or her name to the results of the physical inventory
indicating his or her acknowledgment to the results of such inventory.
The results of such physical inventory shall be final and binding on
the parties hereto.
3.2.(e) SSG Physical Inventory. For a period of thirty
(30) days beginning on the Closing Date (the "Transition Period"), SSG
will be packing, loading and shipping Inventory from its location in
Texas to one or more locations designated by the Buyer in accordance
with the terms of the Transition Agreement. Representatives of Buyer
and SSG will jointly conduct a physical inventory of each shipment of
Inventory from SSG's warehouse in Farmers Branch, Texas to Buyer as
such Inventory is loaded onto shipping trucks. A representative of
each party shall sign his or her name to the results of each such
inventory. The results of each such physical inventory shall be final
and binding on the parties hereto.
3.2.(f) Inventory in Transit. All Inventory acquired
pursuant to this Agreement that is in transit and that is delivered to
a destination directed by Buyer (other than SSG's warehouse in Texas)
shall be deemed to be as set forth on the invoice/packing slip
accompanying such shipment and such invoice/packing slip shall be
final and binding on the parties hereto. Buyer will promptly forward
a copy of each such invoice/packing slip to SSG upon Buyer's receipt
of same.
3.2.(g) Inventory Shipped During Transition Period. SSG
will submit reports to Buyer indicating the type and amount of
Inventory sold during the Transition Period and shipped from Company's
warehouse in Texas solely for the benefit and account of Buyer (the
"Sales Reports"). For purposes of calculating the "Final Agreed
Value," the Sales Reports (excepting clerical or ministerial errors on
such Sales Reports) will be rebuttably presumed to be true and
correct.
3.2.(h) Letters of Credit; Trade Accounts Payable and
Other Accrued Expenses. Promptly following the Closing, Company and
Buyer shall agree in writing to any final adjustment in amounts
attributable to the items described in clauses (iv) and (v) of Section
3.1.(a) as a result of any errors in initially calculating said
amounts at the Closing.
3.2.(i) Adjustment of Cash Purchase Price. On or
before the fifth business day following the termination of the
Transition Agreement (as defined in Section 8.6), either (i) Company
shall pay to Buyer the amount, if any, by which the Cash Purchase
Price exceeds the Final Cash Purchase Price (as hereinafter defined),
together with the interest attributable to such amount which has
accrued from the Closing Date to the date of payment as, or as if,
invested in accordance with the terms of the Escrow Agreement, or (ii)
Buyer shall pay to Company the amount, if any, by which the Final Cash
Purchase
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Price exceeds the Cash Purchase Price, together with the interest
attributable to such amount for the period from the Closing Date to
the date of payment as if such amount had been invested in accordance
with the terms of the Escrow Agreement.
For purposes of this Section 3.2.(i), (x) "Final Cash
Purchase Price" shall mean the sum of the Final Agreed Value (as
hereinafter defined) plus or minus the amounts, as finally adjusted,
attributable to the items described in clauses (iv) and (v) of Section
3.1.(a) hereof and (y) "Final Agreed Value" shall mean the aggregate
value of the Inventory (calculated in the same manner as set forth in
Section 3.1) (i) located at SSGI's warehouse in British Columbia,
Canada on the Closing Date, (ii) actually loaded and shipped from
SSG's warehouse in Texas (or redirected in transit, as the case may
be) to, or to the order of, Buyer in accordance with the terms of the
Transition Agreement, and (iii) sold after the Closing Date and
shipped from Company's warehouse in Texas solely for the benefit and
account of Buyer, all as determined upon the termination of the
Transition Agreement.
3.2.(j) Arbitration With Respect to Final Cash Purchase
Price. In the event the parties hereto disagree as to the Final Cash
Purchase Price, the parties shall resolve such disagreement by binding
arbitration. Any amounts not in disagreement shall promptly be paid
in accordance with the terms of this Agreement. For illustrative
purposes only, if Company indicates Buyer owes Company $300,000 and
Buyer believes it owes Company $250,000, Buyer will pay Company
$250,000 (plus interest as contemplated by the Escrow Agreement) and
submit the $50,000 in dispute to binding arbitration. In no event
shall set-offs, holdbacks or other charges be made against the funds
deposited in escrow unless such holdback, set-off or other charge
relates solely to the calculation of the Final Cash Purchase Price.
A party may initiate arbitration by sending written notice
of its intention to arbitrate to the other party and to the American
Arbitration Association ("AAA") office located in Dallas, Texas (the
"Arbitration Notice"). The Arbitration Notice shall contain a
description of the dispute, and the remedy sought, in accordance with
the procedures set forth below. The arbitration shall be conducted at
the offices of the AAA in Dallas, Texas before one independent and
impartial arbitrator. The parties may agree on one arbitrator. If
the parties cannot agree on an arbitrator within 30 days after the
date of the Arbitration Notice, then each side shall, within 40 days
after the date of the Arbitration Notice, prepare and simultaneously
exchange a list of five retired judges. Any judge who appears on both
lists shall be designated the arbitrator. If more than one judge
appears on both lists then the name of one of such judges shall be
selected by lot. In the event that no name appears on both lists,
then each side shall, within 45 days after the date of the Arbitration
Notice, simultaneously submit a new list of three retired judges (not
including any names appearing on the previous list) and the arbitrator
shall be selected by lot (by drawing the name of one judge) from among
the six.
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The arbitration and any discovery conducted in connection
therewith shall be conducted in accordance with the Commercial Rules
of Arbitration and Procedures established by AAA in effect at the time
of the arbitration, including without limitation, the expedited
procedures set forth therein (the "AAA Rules"). The decision of the
arbitrator shall be final and binding upon all parties and their
successors and permitted assignees. The judgment upon the award
rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The fee of the arbitrator shall be paid
one-half by Company and one-half by Buyer.
The arbitrator shall be selected no later than 45 days
after the date of the Arbitration Notice. The arbitration hearing
shall commence no later than three months after the arbitrator is
selected. The arbitrator shall render his or her decision no later
than 30 days after the close of the hearing in accordance with AAA
Rules.
3.2.(k) Method of Payment. All payments under this
Section 3.2 shall be made in the form of certified or bank cashier's
check payable to the order of the recipient or, at the recipient's
option, by wire transfer of immediately available funds to an account
designated by the recipient not less than 48 hours prior to the time
for payment specified herein.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company makes the following representations and warranties to Buyer,
each of which is true and correct on the date hereof and shall remain true and
correct to and including the Closing Date. To the extent a representation or
warranty herein is limited to the "knowledge" of Company, such qualification
shall mean that reasonable inquiry had been made of appropriate persons.
4.1. Corporate.
4.1.(a) Organization. Each of SSG and SSGI is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
4.1.(b) Corporate Power. Each of SSG and SSGI has all
requisite corporate power and authority to own, operate and lease the
Division's properties attributable to it, to carry on its business as
and where such is now being conducted, to enter into this Agreement
and the other documents and instruments to be executed and delivered
by each of them pursuant hereto and to carry out the transactions
contemplated hereby and thereby.
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<PAGE> 10
4.1.(c) Qualification. Each of SSG and SSGI is duly
licensed or qualified to do business as a foreign corporation, and is
in good standing, in each jurisdiction wherein the character of the
Division's properties owned or leased by it, or the nature of the
Division's business, makes such licensing or qualification necessary
except where the failure to so qualify would not have a material
adverse effect on Company. The states and provinces in which each of
SSG and SSGI is licensed or qualified to do business are listed in
Schedule 4.1.(c).
4.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by each of SSG
and SSGI pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of each
of SSG and SSGI. No other corporate act or proceeding on the part of each of
SSG and SSGI is necessary to authorize this Agreement or the other documents
and instruments to be executed and delivered thereby pursuant hereto or the
consummation of the transactions contemplated hereby and thereby. This
Agreement constitutes, and when executed and delivered, the other documents and
instruments to be executed and delivered by each of SSG and SSGI pursuant
hereto will constitute, valid and binding agreements of each of SSG and SSGI,
respectively, enforceable in accordance with their respective terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
4.3. No Violation. Except as set forth on Schedule 4.3, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by each of SSG and SSGI pursuant hereto, nor the
consummation by Company of the transactions contemplated hereby and thereby (a)
will violate any applicable Law or Order, will require any authorization,
consent, approval, exemption or other action by or notice to any Government
Entity (including, without limitation, under any "plant-closing" or similar
law) or (b) subject to obtaining the consents set forth on Schedule 4.3, will
violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien (as defined hereafter) on any of the
Acquired Assets under, any term or provision of the Certificate of
Incorporation or By-laws of either SSG or SSGI or of any material contract,
commitment, understanding, arrangement, agreement or restriction of any kind or
character to which the Division is a party or by which the Division or any of
its assets or properties may be bound or affected.
4.4. Financial Information. Included as Schedule 4.4 is a list of
certain financial information with respect to the Division's operations
furnished by Company to Buyer. The financial information set forth therein is
unaudited, has been prepared from Company's book and records and is true and
correct in all material respects.
4.5. Inventory. Except as set forth in Schedule 4.5, all Inventory
consists of quality usable and saleable in the ordinary course of the
Division's business and the cost per item of
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Inventory set forth in Schedule 3.1 is at least equal to the value shown on the
Division's books and records calculated on a weighted average basis. The
Inventory is located at the premises set forth in Schedule 4.5.
4.6. Absence of Certain Changes. Except as and to the extent set
forth in Schedule 4.6, since April 30, 1996 there has not been:
4.6.(a) Adverse Change. Any material adverse change in
the financial condition, assets, Liabilities, business, prospects or
operations of the Division;
4.6.(b) Commitments. Any commitments or transactions by
the Division other than in the ordinary course of business consistent
with past practice;
4.6.(c) Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of the Division,
except for the sale of inventory items in the ordinary course of
business;
4.6.(d) Amendment of Contracts. Any entering into,
amendments or termination by the Division of any material contract, or
any waiver of material rights thereunder, other than in the ordinary
course of business;
4.6.(e) Credit. Any grants of credit to any customer or
distributor on terms or in amounts that are not in the ordinary course
of business consistent with past practice; or
4.6.(f) Unusual Events. Any other event or condition not
in the ordinary course of business of the Division that has had a
material adverse effect on the Division.
4.7. Litigation. Except as set forth in Schedule 4.7 there is no
Litigation pending or, to Company's knowledge, threatened against the Division,
its business or any of its assets, nor does Company know of any basis for any
Litigation. Schedule 4.7 also identifies all Litigation to which either SSG or
SSGI has been a party within the last five (5) years relating, directly or
indirectly, to the assets or business of the Division. Except as set forth in
Schedule 4.7, neither SSG nor SSGI is subject to any Order relating, directly
or indirectly, to the assets or business of the Division.
4.8. Compliance With Laws and Orders.
4.8.(a) Compliance. Except as set forth in Schedule
4.8.(a), each of SSG and SSGI (including each and all of their
respective operations, practices, properties and assets) is in
material compliance with all Laws and Orders applicable to the
Division, including, without limitation, those applicable to pollution
or protection of the environment, employment, occupational safety and
health, trade practices, competition
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<PAGE> 12
and pricing, product warranties, zoning, building and sanitation,
employment, retirement and labor relations, and product advertising.
Without limiting the generality of the foregoing, the sale and
transfer of the Acquired Assets by Company will not result in any
violations of or imposition of any Liabilities under any plant
closing, reduction in force or similar law of any jurisdiction.
Except as set forth in Schedule 4.8.(a), neither SSG nor SSGI has
received notice of any violation or alleged violation of, and to the
Company's knowledge the Division is not subject to any Liability for
past or continuing violation of, any Laws or Orders applicable to the
Division. All reports and returns required to be filed by the
Division with any Government Entity have been filed, and were accurate
and complete when filed.
4.8.(b) Licenses and Permits. Except as set forth in
Schedule 4.8.(b), each of SSG and SSGI has all licenses, permits,
approvals, authorizations and consents of all Government Entities and
all certification organizations required for the conduct of the
business of the Division attributable to it (as presently conducted
and as proposed to be conducted) and operation of properties owned or
leased by the Division, except where the failure to have such license,
permit, approval, authorization or consent would not have a material
adverse effect on the Division. All such licenses, permits,
approvals, authorizations and consents are described in Schedule
4.8.(b), are in full force and effect and, except as set forth in
Schedule 4.8.(b), are assignable to Buyer in accordance with the terms
hereof. Except as set forth in Schedule 4.8.(b), each of SSG and SSGI
is and has been in material compliance with all such permits and
licenses, approvals, authorizations and consents.
4.9. Title to and Condition of Acquired Assets.
4.9.(a) Marketable Title. Company has good and marketable
title to all the Acquired Assets, free and clear of all mortgages,
liens (statutory or otherwise), security interests, claims, pledges,
licenses, equities, options, conditional sales contracts, assessments,
levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges or encumbrances of any
nature whatsoever (collectively, "Liens") except those described in
Schedule 4.9.(a). Except for the Liens and certain third party
consents described in Schedule 4.9.(a), none of the Acquired Assets
are subject to any restrictions with respect to the transferability
thereof. Except as set forth in Schedule 4.9.(a), Company has
complete and unrestricted power and right to sell, assign, convey and
deliver the Acquired Assets to Buyer as contemplated hereby. At
Closing and upon the filing and recording in the appropriate offices
of one or more UCC-3 termination statements (by Company's lender,
Centre Development Co., Inc. and by APT Cabot, Inc.), a partial
release of assignment of trademarks and a partial release of
assignment of patent terminating the Lien held by Company's lender in
the Acquired Assets, Buyer will receive good and marketable title to
all the Acquired Assets, free and clear of all Liens of any nature
whatsoever other than Liens described in paragraphs B and D of
Schedule 4.9.(a).
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4.9.(b) Condition. All tangible assets constituting
Acquired Assets hereunder are in good operating condition and repair
(normal wear and tear excepted), free from any defects (except such
minor defects as do not interfere with the use thereof in the conduct
of the normal operations of the Division), have been maintained
consistent with the standards generally followed in the industry and
are sufficient to carry on the business of the Division as conducted
during the preceding 12 months. The Leased Real Property is in good
condition and repair in all material respects (normal wear and tear
excepted) and, to Company's knowledge, has no structural defects or
material defects affecting the plumbing, electrical, sewerage, or
heating, ventilating or air conditioning systems.
4.10. Contracts and Commitments.
4.10.(a) Personal Property Leases. Except as set forth in
Schedule 1.1.(e), neither SSG nor SSGI has any leases of personal
property applicable, directly or indirectly, to the assets or business
of the Division.
4.10.(b) Purchase Commitments. Except as set forth in
Schedule 4.10.(b), neither SSG nor SSGI has any purchase commitments
applicable, directly or indirectly, to the business of the Division
for inventory items or supplies.
4.10.(c) Sales Commitments. All unfilled sales orders of
the Division are listed on Appendix C to Schedule 1.1.(f). Neither
SSG nor SSGI has any sales contracts or commitments applicable,
directly or indirectly, to the assets or business of the Division
except those made in the ordinary course of business, at arm's length.
4.10.(d) Contracts for Services. Except as set forth in
Schedule 4.10.(d), neither SSG nor SSGI has any agreement,
understanding, contract or commitment (written or oral) applicable,
directly or indirectly, to the assets or business of the Division with
any officer, employee, agent, consultant, sales representative,
distributor, dealer or franchisee that is not cancelable by SSG or
SSGI, as the case may be, on notice of not longer than 30 days without
liability, penalty or premium of any nature or kind whatsoever.
4.10.(e) Powers of Attorney. Except as set forth in
Schedule 4.10.(e), neither SSG nor SSGI has given a power of attorney,
which is currently in effect, to any person, firm or corporation for
any purpose whatsoever which affects the Division.
4.10.(f) Contracts Subject to Renegotiation. Neither SSG
nor SSGI is a party to any contract with any governmental body
applicable, directly or indirectly, to the assets or business of the
Division which is subject to renegotiation.
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4.10.(g) Burdensome or Restrictive Agreements. Neither
SSG nor SSGI is a party to nor is it bound by any agreement, deed,
lease or other instrument applicable, directly or indirectly, to the
assets or business of the Division which is so burdensome as to
materially affect or impair the operation of the Division. Without
limiting the generality of the foregoing and except as set forth on
Schedule 4.10.(g), the Division is not a party to nor is it bound by
any agreement requiring the Division to assign any interest in any
trade secret or proprietary information, or prohibiting or restricting
the Division from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world.
4.10.(h) Other Material Contracts. Neither SSG nor SSGI
has any lease, license, contract or commitment of any nature
applicable, directly or indirectly, to the assets or business of the
Division which is individually or collectively material to the
operations of either SSG or SSGI, as the case may be, except as
explicitly described in Schedule 4.10.(h) or in any other Schedule.
4.10.(i) Default. To Company's knowledge, neither SSG nor
SSGI is in default under any lease, contract or commitment, nor, to
Company's knowledge, has any event or omission occurred, applicable,
directly or indirectly, to the assets or business of the Division
which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder. To Company's knowledge, no
third party is in default under any material lease, contract or
commitment to which the Division is a party, nor, to Company's
knowledge, has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or give rise to an automatic termination, or the
right of discretionary termination, thereof.
4.11. Trade Rights. Schedule 1.1.(e) lists all Trade Rights of the
type described in clauses (i), (ii), (iii) or (iv) of Section 1.1.(e) in which
the Division now has any interest. Except as set forth on Schedule 1.1.(e),
all Trade Rights shown as registered in Schedule 1.1.(e) have been properly
registered, all pending registrations and applications have been properly made
and filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current, and, except as identified on
Schedule 1.1.(e), there are none due within ninety (90) days of the Closing
Date. In order to conduct the business of the Division, as such is currently
being conducted, the Division does not require any Trade Rights that it does
not already have (other than Excluded Intellectual Property). Except as set
forth on Schedule 4.11, to Company's knowledge, neither SSG nor SSGI is
infringing and neither of them has infringed any Trade Rights of another in the
operation of the business of the Division, nor, to Company's knowledge, is any
other person infringing the Trade Rights of the Division. Neither SSG nor SSGI
has granted any license or made any assignment of any Trade Right or part
thereof listed on Schedule 1.1.(e), and, to Company's knowledge, no other
person has any right to use any Trade Right or part thereof owned, held or used
by the Division in the ordinary course of its business. Except as set forth on
Schedule 4.11, Company does not pay any royalties or other consideration for
the right to use any Trade Rights of others. There is no Litigation pending
or, to Company's
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<PAGE> 15
knowledge, threatened to challenge the Division's right, title and interest
with respect to its continued use and right to preclude others from using any
Trade Rights of the Division. All Trade Rights of the Division are valid,
enforceable and in good standing, and, to Company's knowledge, there are no
equitable defenses to enforcement based on any act or omission of the Division.
4.12. Major Customers and Suppliers.
4.12.(a) Major Customers. Schedule 4.12.(a) contains a
list of the ten largest customers, including distributors, of the
Division for the ten-month period ending October 31, 1995 and the two
preceding twelve-month periods ending December 31, 1994 and December
31, 1993, respectively (determined on the basis of the total dollar
amount of gross sales), showing the total dollar amount of gross sales
to each such customer during each such period.
4.12.(b) Major Suppliers. Schedule 4.12.(b) contains a
list of the ten largest suppliers to the Division for the ten month
period ended October 31, 1995 and the five month period ended March
31, 1996 (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such
supplier during each such period.
4.12.(c) Dealers and Distributors. Schedule 4.12.(c)
contains a list of all sales representatives, dealers, distributors
and franchisees of the Division, together with representative copies
of all sales representative, dealer, distributor and franchise
contracts and policy statements.
4.13. Product Warranty and Product Liability. Schedule 4.13
contains a true, correct and complete copy of the Division's standard warranty
or warranties for sales of Products (as defined below) and, except as stated
therein, Company has not made any warranties, commitments or obligations with
respect to the return, repair or replacement of Products. Except as set forth
in Schedule 4.13, there have been no product liability claims or similar
Litigation relating to Products sold, or services rendered, which are presently
pending or which, to Company's knowledge, are threatened, or which have been
asserted or commenced against the Division within the last three years, in
which a party thereto either requests injunctive relief or alleges damages
(whether or not covered by insurance). None of the Products has been the
subject of any recall campaign and, to Company's knowledge, no facts or
conditions exist which could reasonably be expected to result in such a recall
campaign. No Product has been the subject of any replacement campaign which
had a material adverse effect on the Division. The Products meet and comply
with all governmental standards and specifications currently in effect, and
have received all governmental approvals necessary to allow their sale and use.
As used in this Section 4.13, the term "Products" means any and all products
currently or at any time previously distributed or sold by the Division under
any brand name or mark under which products are or have been distributed or
sold by the Division.
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4.14. Affiliates' Relationships to the Division.
4.14.(a) Contracts With Affiliates. All leases,
contracts, agreements or other arrangements between the Division and
SSG or SSGI or any Affiliate of SSG or SSGI are described on Schedule
4.14.(a).
4.14.(b) No Adverse Interests. Neither SSG, SSGI nor any
Affiliate of SSG or SSGI has any direct or indirect interest in (i)
any entity which does business with the Division or is competitive
with the Division's business, or (ii) any property, asset or right
which is used by the Division in the conduct of its business, except
as listed on Schedule 4.14.(b).
4.14.(c) Obligations. All obligations of SSG or SSGI or
any Affiliate of SSG or SSGI to the Division, and all obligations of
the Division to SSG or SSGI or any Affiliate of SSG or SSGI, are
listed on Schedule 4.14.(c).
4.15. Assets Necessary to Business. The Acquired Assets include all
property and assets (except for the Excluded Assets, personnel and warehouse
space), tangible and intangible, and all leases, licenses and other agreements,
which are necessary to permit Buyer to carry on the business of the Division as
presently conducted.
4.16. Bulk Sales. The consummation of the transactions contemplated
hereby do not give rise to any obligations or liabilities on the part of Buyer
with respect to any bulk sales laws.
4.17. Disclosure. No representation or warranty by Company in this
Agreement, nor any written statement, certificate, schedule, document or
exhibit furnished or to be furnished by or on behalf of Company pursuant to
this Agreement or in connection with transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained therein not
misleading. All statements and information contained in any certificate,
instrument, Disclosure Schedule or document delivered by or on behalf of
Company as part of this Agreement shall be deemed representations and
warranties by Company or exceptions thereto, as appropriate.
4.18. GST Legislation. SSGI hereby represents and warrants to Buyer
that:
(i) SSGI is registered for purposes of Part IX of the
Excise Tax Act (Canada) (hereinafter called the "GST
Legislation");
(ii) The Acquired Assets being purchased from SSGI
comprise all or substantially all of the property
in SSGI's business; and
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<PAGE> 17
(iii) SSGI's business is a "commercial activity" for
purposes of the GST Legislation.
4.19. Employee Matters. Schedule 4.19 attached hereto sets forth the
name, job title, duration of employment, employee benefit entitlement and the
rate of remuneration (including bonus and commission entitlement) of each
employee of SSGI and certain employees of SSG. None of the employees set forth
on Schedule 4.19 is on disability, maternity or other authorized leave or is
receiving workers' compensation or short-term or long-term disability benefits.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company,
each of which is true and correct on the date hereof, and shall remain true and
correct to and including the Closing Date.
5.1. Corporate.
5.1.(a) Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
5.1.(b) Corporate Power. Buyer has all requisite
corporate power to enter into this Agreement and the other documents
and instruments to be executed and delivered by Buyer and to carry out
the transactions contemplated hereby and thereby.
5.2. Authority. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of Buyer. No
other act or proceeding on the part of Buyer is necessary to authorize this
Agreement or the other documents and instruments to be executed and delivered
by Buyer pursuant hereto or the consummation of the transactions contemplated
hereby and thereby. This Agreement constitutes, and when executed and
delivered, the other documents and instruments to be executed and delivered by
Buyer pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
5.3. Brokers. Buyer has not retained or incurred any fee
obligations to a broker, finder or other intermediary in connection with the
transactions contemplated hereby.
5.4. Excise Tax Act. Buyer is a registrant under the Excise Tax Act
of Canada under registration number 896796034.
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5.5. British Columbia Company Act. Buyer is in the process of
obtaining registration as an extra provincial company under the Company Act in
the province of British Columbia.
5.6. Disclosure. No representation or warranty by Buyer in this
Agreement, nor any written statement, certificate, schedule, document or
exhibit furnished as part of this Agreement or to be furnished by or on behalf
of Buyer pursuant to this Agreement or in connection with transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact or omits or shall omit a material fact necessary to make the statements
contained therein not misleading.
6. OTHER MATTERS
6.1. Noncompetition.
6.1.(a) Covenant Not to Compete. Subject to the Closing
and the exceptions set forth below, and as an inducement to Buyer to
execute this Agreement and complete the transactions contemplated
hereby, and in order to preserve the goodwill associated with the
worldwide business of the Division being acquired pursuant to this
Agreement, Company hereby covenants and agrees that for a period of
two years from the Closing Date anywhere in the world, it will not,
directly or indirectly:
(i) engage in, continue in or
carry on any business which competes with manufacturing,
marketing, selling or distributing golf accessory products
to the retail market (the "Business"), including owning or
controlling any financial interest in any corporation,
partnership, firm or other form of business organization
which is so engaged;
(ii) consult with, advise or
assist in any way, whether or not for consideration, any
corporation, partnership, firm or other business
organization which is now or becomes a competitor of Buyer
in any material aspect with respect to the Business,
including, but not limited to, advertising or otherwise
endorsing the golf accessory products of any such
competitor; soliciting customers that purchase golf
accessory products or otherwise serving as an intermediary
for any such competitor; loaning money or rendering any
other form of financial assistance to or engaging in any
form of business transaction on other than an arm's length
basis with any such competitor; or
(iii) engage in any practice the
purpose of which is to evade the provisions of this
covenant not to compete;
provided, however, that the foregoing shall not prohibit the ownership
of securities of corporations which are listed on a national
securities exchange or traded in the national
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over-the-counter market or otherwise publicly traded in an amount
which shall not exceed five percent (5%) of the outstanding shares of
any such corporation; and, provided further that, notwithstanding the
foregoing, Company and its Affiliates will not be restricted from (x)
manufacturing, marketing, distributing and/or selling (A) golf
accessory products directly to the end-user or to green grass
(on-course) pro shops and/or (B) new and used golf balls and/or cores
for golf balls and/or (y) marketing, distributing and/or selling any
of Company's "Nitro" branded golf accessory products of the type
currently in Company's inventory or in transit or on order, all on a
worldwide basis.
6.1.(b) Assignment. The parties agree that Buyer may
sell, assign or otherwise transfer this covenant not to compete, in
whole or in part, to any person, corporation, firm or entity that
purchases all or part of the Business or the Acquired Assets being
acquired by Buyer hereunder; provided, however, that if Buyer
discontinues the Business other than incident to a sale or assignment
of all or substantially all of the Business, the restrictions of
Section 6.1.(a) shall lapse and be of no further force or effect.
6.1.(c) Construction. In the event a court of competent
jurisdiction determines that the provisions of Section 6.1.(a) are
excessively broad as to duration, geographical scope, activity or
business necessity, it is expressly agreed that the covenant not to
compete contained therein shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any provisions so determined to be overly broad shall be
deemed, without further action on the part of any person, to be
modified, amended and/or limited, but only to the extent necessary to
render the same valid and enforceable in such jurisdiction.
6.2. Confidential Information. Company shall not at any time
subsequent to the Closing, except as explicitly requested in writing by Buyer
or as otherwise required by law or a national securities exchange, use for any
purpose, disclose to any person, or keep or make copies of documents, tapes,
discs, programs or other information storage media ("Records") containing, any
confidential information concerning the Business, the Acquired Assets, or the
Assumed Liabilities, all such confidential information being deemed to be
transferred to Buyer hereunder. For purposes hereof, "Confidential
Information" shall mean and include, without limitation, all Trade Rights in
which Company has an interest, all customer and vendor lists and related
information, all information concerning Company's processes, products, costs,
prices, sales, marketing and distribution methods, properties and assets,
liabilities, employees, all privileged communications and work product, and any
other information not previously disclosed to the public directly by Company or
otherwise in the public domain. The foregoing provisions shall not apply to
any of Company's financial statements relating to the Division or any
information which is an "Excluded Asset" as defined in Section 1.2, or which
relates solely to one or more Excluded Assets. If at any time after Closing
Company should discover that it is in possession of any Records containing the
Confidential Information of Buyer, Company shall immediately turn such Records
over to Buyer, which shall upon request make available to Company any
information contained therein which is not Confidential Information. Company
agrees that it
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<PAGE> 20
will not assert a waiver or loss of confidential or privileged status of the
information based upon such possession or discovery. Company hereby consents
to Buyer's consultation with legal, accounting and other professional advisors
to Company concerning advice rendered to Company prior to the Closing regarding
the business of the Division, the Acquired Assets or the Assumed Liabilities,
excluding, however, the negotiation and drafting of this Agreement and the
transactions entered into pursuant hereto. If Company or any of its
representatives or Affiliates are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any information or formal investigation by any government
or governmental agency or authority or other process) to disclose any
Confidential Information, Company will provide Buyer with written notice of any
such request or requirement so that Buyer may seek an appropriate protective
order or other appropriate remedy and/or waive compliance with this Section.
If such order or other remedy is not obtained, or Buyer waives compliance with
the provisions of this Section, the party subject to such request may disclose
that portion of the Confidential Information that it is advised by counsel is
legally required to be disclosed. It is further agreed that if a protective
order is not obtained, or a waiver is not granted hereunder, and Company or any
of its representatives or Affiliates is, in the opinion of counsel, compelled
to disclose Confidential Information to any tribunal or else stand liable for
contempt or suffer other censure or penalty, such person or entity may disclose
the Confidential Information to such tribunal without liability hereunder.
6.3. Post-Closing Access of Companies to Certain Records. Buyer
will maintain the records received pursuant to this Agreement for a period of
three years and will, during regular business hours and upon reasonable notice,
furnish reasonable access thereto to Company for audit, tax, accounting or
legal purposes. Company shall be entitled to make copies, at Company's cost,
of any such records. If Buyer proposes to destroy any such records within such
three- year period, Buyer will notify Company and deliver to Company, at
Company's cost, any such records as Company requests.
6.4. Returns. Company will promptly notify Buyer of all returns of
golf accessory products that are received by Company and that are not
defective. Company will offer to sell each of such returned golf accessory
products to Buyer at the per unit price set forth in Schedule 3.1 attached
hereto. If Buyer accepts such offer, Buyer will promptly pay Company the
purchase price for such products and Company will deliver the products to Buyer
F.O.B. destination. If, however, Buyer does not exercise its right to purchase
such goods within ten days of Company's offer to sell such products to Buyer,
Company may sell such products to any third party and the restrictions of
Section 6.1.(a) shall not apply to such sale(s).
6.5. Collection of Accounts Receivable.
6.5.(a) Collection for Company. Buyer agrees to use
commercially reasonable efforts to assist Company in collecting
Company's accounts receivable generated from sales by the Division
prior to the Closing, with the understanding that Buyer is under no
obligation to retain or pay for collection agencies or other third
parties
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to collect or enforce any such accounts. In the event Buyer collects
or receives any such accounts receivable outstanding on the Closing
Date, Buyer agrees to promptly forward to Company all such sums
collected or received on behalf of Company. Buyer agrees not to
set-off or hold back any such sums collected unless the set-off or
holdback is directly related to the issue of whether such sum
collected was a receivable generated by Company.
6.5.(b) Collection for Buyer. Company agrees to use
commercially reasonable efforts to assist Buyer in collecting Buyer's
accounts receivable generated from sales of Inventory after the
Closing Date, with the understanding that Company is under no
obligation to retain or pay for collection agencies or other third
parties to collect or enforce any such accounts. In the event Company
collects or receives any such accounts receivable generated from the
sale of Inventory after the Closing Date, Company agrees to promptly
forward to Buyer all such sums collected or received on behalf of
Buyer. Company agrees not to set-off or hold back any such sums
collected unless the set-off or holdback is directly related to the
issue of whether such sum collected was a receivable generated by
Buyer.
6.6. Use of Division's Name. Following the Closing, neither Company
nor any Affiliate of Company shall, without the prior written consent of Buyer,
make any use of the name "Gold Eagle" or any other name confusingly similar
thereto, except as may be necessary for Company to pay its liabilities, collect
its accounts receivable, prepare tax returns and other reports (including a
Report on Form 8-K), and to otherwise wind up and conclude its business. In
addition, Company may continue to use Company's letterhead and stationery that
includes the Division's name until such stock is completely used.
6.7. Election under GST Legislation. SSGI and Buyer will jointly
execute in prescribed form, and Buyer will file within the required time, an
election under Section 167(1) of the GST Legislation that no tax be payable
pursuant to the GST Legislation with respect to the purchase and sale of the
Acquired Assets from SSGI hereunder. Buyer hereby agrees to indemnify and hold
harmless SSGI and its Affiliates against any tax, interest or penalties arising
from a determination that the conditions for filing the election pursuant to
Section 167(1) of the GST Legislation have not been satisfied for any reason
other than the inaccuracy of any of the representations and warranties made by
SSGI pursuant to Section 4.18 of this Agreement.
6.8. ST Legislation Tax Matters. Within thirty (30) days after the
Closing Date, SSGI will deliver to Buyer a duplicate copy of a certificate
issued pursuant to Section 3(4) of the Social Services Tax Act (British
Columbia) (the "ST Legislation"). Buyer will pay to SSGI coincident with
payment of the balance of the Cash Purchase Price all tax payable under the ST
Legislation on the purchase price of the tangible personal property located in
Canada and included in the Acquired Assets. The parties shall cooperate in
completing and filing the appropriate return of tax payable on tangible
personal property on the sale of a business required under the ST Legislation.
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6.9. Offer of Employment. At or before the Closing Date, Buyer will
offer employment to those employees of SSG and SSGI listed in Schedule 4.19
and, with respect to those employees of SSGI, on terms not less favorable than
those provided to, and on which, such employees were employed by SSGI on the
date hereof and which are described in Schedule 4.19 attached hereto.
6.10. Other Action. Buyer shall use its reasonable efforts to cause
the fulfillment at the earliest practicable date of all of the conditions to
Company's obligations to consummate the transactions contemplated in this
Agreement. Company shall use reasonable efforts to cause the fulfillment at
the earliest practicable date of all of the conditions to Buyer's obligations
to consummate the transactions contemplated in this Agreement.
6.11. Reimbursement of Costs of Letters of Credit. Buyer agrees to
promptly reimburse Company for reasonable direct costs incurred on or after the
Closing Date that relate exclusively to the Letters of Credit issued to secure
performance of open orders of the Division as of the Closing Date and that
inure to the benefit of Buyer hereunder.
6.12. Reimbursement for Inventory Rerouting Costs. Buyer agrees to
promptly reimburse Company for reasonable direct costs incurred by Company as a
result of rerouting the shipment of any Inventory in transit in accordance with
Buyer's instructions.
6.13. Golf Ball Agreement. SSG shall promptly pay Buyer a
commission in an amount equal to 6% of the net proceeds generated and received
by SSG (or its successors, assigns or Affiliates) from the sale of any used or
reconditioned golf balls or new "Nitro" branded golf balls (collectively, the
"Golf Balls") so long as such sales (i) relate to orders presented to SSG by
Buyer and are accepted and filled by SSG and (ii) are presented to SSG within
one year after the Closing Date (the "Sales"). Subject to the terms and
provisions of this Section, SSG will prepay the first $150,000 of such Sales by
paying Buyer $12,500 per month for a period of 12 consecutive months. Such
payments will be due and payable on the last day of each such month, with the
first such payment being due and payable on or before June 30, 1996. Buyer
will be entitled to retain the full $150,000 even if the Sales do not equal or
exceed $2,500,000. In exchange for such consideration, all purchases and/or
sales of new and used golf balls (and commitments relating thereto) during such
one-year period by Buyer and its Affiliates shall be made by or through SSG or
its Affiliates (including SSG's golf ball division, whether or not such
division is owned by SSG or otherwise). Buyer will not sell, or act as an
agent with respect to the sale, of any golf balls throughout the world during
the one-year period except as permitted in this Section. In the event a court
of competent jurisdiction determines that the provisions of this Section 6.13
are excessively broad as to duration, geographical scope, activity or business
necessity, it is expressly agreed that the covenant not to compete contained
therein shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any provisions so
determined to be overly broad shall be deemed, without further action on the
part of any person, to be modified, amended and/or limited, but only to the
extent
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necessary to render the same valid and enforceable in such jurisdiction. Buyer
agrees that any breach of any noncompetition obligation imposed by this Section
6.13 will result in irreparable injury to Company for which a remedy at law
would be inadequate; and that, in addition to any relief at law which may be
available to Company for such breach and regardless of any other provision
contained in this Agreement, Company shall be entitled to injunctive and other
equitable relief as a court may grant. This provision shall not be construed
to limit Company's right to obtain equitable relief for other breaches of this
Agreement under general equitable standards.
7. FURTHER COVENANTS OF COMPANY
Company covenants and agree as follows:
7.1. Access to Information and Records. During the period prior to
the Closing:
7.1.(a) Company shall, and shall cause its officers,
employees, agents, independent accountants and advisors to, furnish to
Buyer, its officers, employees, agents, independent accountants and
advisors, at reasonable times and places, all information in their
possession concerning the Division as may be requested, and give such
persons access to all of the properties, books, records, contracts and
other documents of or pertaining to the Division that Company or its
officers, employees, agents, independent accountants or advisors shall
have in their custody or control.
7.1.(b) Subject to the express prior consent of Company
in each instance (which consent shall not be unreasonably withheld or
delayed), Buyer and its officers, employees, agents, independent
accountants and advisors, shall have access to suppliers, trade
creditors, customers, and other third parties having business dealings
with Company as to the Division for the purpose of performing Buyer's
due diligence investigation.
7.2. Conduct of Business Pending the Closing. From the date hereof
until the Closing or the date this Agreement is terminated, whichever is
earlier, except as otherwise approved in writing by Buyer:
7.2.(a) No Changes. The Division will carry on its
business diligently and in the same manner as heretofore and will not
make or institute any material changes in its methods of purchase,
sale, management, accounting or operation.
7.2.(b) Maintain Organization. Company will take such
action as reasonably may be necessary to maintain, preserve, renew and
keep in force and effect the existence, rights and franchises of the
Division and will use commercially reasonable efforts to preserve for
Buyer its present relationships with suppliers and customers and
others having business relationships with the Division.
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7.2.(c) No Breach. Company will not do or omit any act,
or permit any omission to act, which may cause a breach of any
material contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by Company
herein, or which would have been required to be disclosed in the
Disclosure Schedule had they been in existence on the date of this
Agreement.
7.2.(d) No Material Contracts. No material contract or
commitment will be entered into (including any union contract or new
pension, benefit or severance plan for employees of the Division) and
no purchase of raw materials or supplies and no sale of goods or
services (real, personal or mixed, tangible or intangible) will be
made, by or on behalf of the Division without the prior written
consent of Buyer, except contracts, commitments, purchases or sales
which are in the ordinary course of business and consistent with past
practice.
7.2.(e) Maintenance of Insurance. Company shall maintain
all of the insurance in effect as to the assets and business of the
Division as of the date hereof.
7.2.(f) Maintenance of Property. Company shall use,
operate, maintain and repair all property of the Division in a normal
business manner.
7.2.(g) No Negotiations. Neither Company nor Company's
employees, officers, directors, agents or Affiliates will directly or
indirectly (through a representative or otherwise) solicit or provide
any information to any prospective buyer, commence, or conduct
presently ongoing, negotiations with any other party or enter into any
agreement with any other party concerning the sale of all or a
material part of the Division, the Acquired Assets or the Division's
business (an "acquisition proposal") other than a sale of inventory in
the ordinary course of business.
7.3. Consents. Company will use reasonable efforts prior to Closing
to obtain all material consents necessary for the consummation of the
transactions contemplated hereby, other than those consents that have been
expressly waived by Buyer.
7.4. Disclosure. Company shall have a continuing obligation to
promptly notify Buyer in writing with respect to any matter hereafter arising
or discovered which, if existing or known at the date of this Agreement, would
have been required to be set forth or described in the Disclosure Schedule.
Notwithstanding the foregoing, if Company notifies Buyer in writing of such
event(s) prior to the Closing Date and, notwithstanding such disclosure, Buyer
agrees to consummate the transactions contemplated hereby, Buyer and its
Affiliates will be precluded from asserting a claim for indemnification or
otherwise from the result of such event.
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8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
8.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by Company in this Agreement, and
the statements contained in the Disclosure Schedule or in any certificate or
writing delivered by Company pursuant to this Agreement, shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date, except for any
changes permitted by the terms of this Agreement or consented to in writing by
Buyer and except for any representation or warranty expressly stated to have
been made or given as of a specified date, which, at the Closing Date, shall be
true and correct in all material respects as of the date expressly stated.
8.2. Compliance With Agreement. Company shall have in all material
respects performed and complied with all of their agreements and obligations
under this Agreement which are to be performed or complied with by them prior
to or on the Closing Date, including the delivery of the closing documents
specified in Section 11.1.
8.3. Absence of Litigation. No Litigation shall have been commenced
or threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Company or any of the Affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
8.4. Consents and Approvals. All approvals, consents and waivers
that are required to effect the transactions contemplated hereby shall have
been received, unless the failure to serve such consent, approval or waiver
does not and will not have a material adverse effect on the Division.
8.5. Estoppel Certificates. Company shall have delivered to Buyer
on or prior to the Closing Date an estoppel certificate from each landlord
under the Real Property Lease, which estoppel certificate will certify (i) the
Real Property Lease is valid and in full force and effect; (ii) the amounts
payable by Company under the Real Property Lease and the date to which the same
have been paid; (iii) whether there are, to the knowledge of said landlord, any
defaults thereunder, and, if so, specifying the nature thereof; and (iv) that
the transactions contemplated by this Agreement will not constitute default
under the Real Property Lease and that each landlord consents to the assignment
of the Real Property Lease to Buyer.
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8.6. Transition Agreement. SSG shall have executed and delivered to
Buyer the Transition Agreement (the "Transition Agreement") substantially in
the form of Exhibit A attached hereto.
8.7. Escrow Agreement. SSG and the Escrow Agent shall have executed
and delivered to Buyer the Escrow Agreement (the "Escrow Agreement")
substantially in the form of Exhibit B attached hereto.
8.8. Completion of Due Diligence. Prior to 5:00 P.M., C.D.T., on
May 17, 1996, Buyer shall have completed its due diligence review of the
Division, the results of which shall be satisfactory to Buyer in its sole
judgment.
8.9. Confidentiality and Noncompetition Agreement. Buyer shall have
entered into a confidentiality and noncompetition agreement with Mitchell
Lombard in form and substance satisfactory to Buyer.
8.10. No Material Adverse Change. There shall have been no material
adverse change to the Acquired Assets or the business of the Division between
the date of execution of this Agreement and the Closing Date.
8.11. Termination of Existing Noncompetition Agreement. Company
shall have delivered to Buyer evidence of the termination of any and all
noncompetition agreements between Company or any Affiliate of Company and
Mitchell Lombard in form and substance satisfactory to Buyer.
9. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of Company to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
9.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by Buyer in this Agreement and the
statements contained in any certificate or writing delivered by Buyer pursuant
to this Agreement shall be true and correct in all material respects when made
and shall be true and correct in all material respects at and as of the Closing
Date as though such representations and warranties were made or given on and as
of the Closing Date.
9.2. Compliance With Agreement. Buyer shall have performed and
complied in all material respects with all of Buyer's agreements and
obligations under this Agreement which are to be performed or complied with by
Buyer prior to or on the Closing Date, including the delivery of the closing
documents specified in Section 11.2.
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9.3. Absence of Litigation. No Litigation shall have been commenced
or threatened, and no investigation by any Government Entity shall have been
commenced, against Buyer, Company or any of the Affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
9.4. Transition Agreement. Buyer shall have executed and delivered
to Company the Transition Agreement.
9.5. Escrow Agreement. Buyer and the Escrow Agent shall have
executed and delivered to Company the Escrow Agreement.
9.6. Completion of Due Diligence. Prior to 5:00 p.m. C.D.T., on May
17, 1996, Buyer shall have completed its due diligence review of the Division,
the results of which shall be satisfactory to Buyer in its sole judgment.
9.7. Resale Certificate. Buyer shall have provided Company with a
Resale Exemption Certificate from the State of New York which shall be
satisfactory to Company in its reasonable judgment.
9.8. GST Election. Buyer will provide to SSGI a fully executed copy
of its election under Section 167(1) of the GST Legislation as contemplated by
Section 6.7 hereof.
9.9. Representation Letter/Release from Mitchell Lombard. Company
shall receive a representation letter and a release from Mitchell Lombard in
form and substance satisfactory to Company.
10. INDEMNIFICATION
10.1. By Company. Subject to the terms and conditions of this
Article 10, Company hereby agrees to indemnify, defend and hold harmless Buyer
and its officers, directors, shareholders, and controlling persons, from and
against all Claims asserted against, resulting to, imposed upon, or incurred by
Buyer, Buyer's Affiliates or the business and assets transferred to Buyer
pursuant to this Agreement, directly or indirectly, by reason of, arising out
of or resulting from
(a) the inaccuracy or breach of any representation or
warranty of Company contained in or made pursuant to this Agreement
regardless of whether such breach is deemed "material";
(b) the breach of any covenant of Company contained in
this Agreement regardless of whether such breach is deemed "material";
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(c) any Claim brought by or on behalf of any broker or
finder retained, employed or used by Company or any of its directors,
officers, employees, stockholders or agents in connection with the
transactions provided for herein or the negotiation thereof, whether
or not disclosed herein; or
(d) any Claim of or against the Division, the Acquired
Assets or the business of the Division not specifically assumed by
Buyer pursuant hereto.
As used in this Article 10, (i) the term "Claim" shall include (w) all
Liabilities; (x) all losses, damages, judgments, awards, penalties and
settlements; (y) all third-party demands, claims, suits, actions, causes of
action, proceedings and assessments, whether or not ultimately determined to be
valid; and (z) all reasonable costs and expenses, including court costs and
fees and reasonable expenses of attorneys and expert witnesses, of
investigating, defending or asserting any of the foregoing or of enforcing this
Agreement, and (ii) the term "Affiliate" as it relates to Buyer shall mean and
include all shareholders, directors and officers of Buyer, and any entity in
which any of the foregoing has a direct or indirect interest (except through
ownership of less than 5% of the outstanding shares of any entity whose
securities are listed on a national securities exchange or traded in the
national over-the-counter market).
10.2. By Buyer. Subject to the terms and conditions of this Article
10, Buyer hereby agrees to indemnify, defend and hold harmless Company and its
directors, officers, employees, shareholders, and controlling persons from and
against all Claims asserted against, resulting to, imposed upon or incurred by
any such person, directly or indirectly, by reason of or resulting from (a) the
inaccuracy or breach of any representation or warranty of Buyer contained in or
made pursuant to this Agreement (regardless of whether such breach is deemed
"material"), (b) the breach of any covenant of Buyer contained in this
Agreement (regardless of whether such breach is deemed "material"), (c) any
Claim brought by or on behalf of any broker or finder retained, employed or
used by Buyer or any of its directors, officers, employees, stockholders or
agents in connection with the transactions provided for herein or the
negotiation thereof, whether or not disclosed herein, or (d) any Claim arising
out of any Assumed Liability.
10.3. Indemnification of Third-Party Claims. The following
provisions shall apply to any Claim subject to indemnification which is (i) a
suit, action or arbitration proceeding filed or instituted by any third party,
or (ii) any other form of proceeding or assessment instituted by any Government
Entity:
10.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give
the party from whom indemnification is sought (the "Indemnifying
Party") prompt written notice of any such Claim, and the Indemnifying
Party will undertake the defense thereof by representatives chosen by
it. Failure to give such notice shall not affect the Indemnifying
Party's duty or obligations under this Article 10, except to the
extent the Indemnifying Party is prejudiced thereby. So long as the
Indemnifying Party is defending any such Claim in good faith, the
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Indemnified Party shall not settle such Claim. If, following
assumption of the defense of a Claim by an Indemnifying Party, the
Indemnifying Party forms a good faith belief that it is not
responsible for indemnification with respect to the Claim, it shall
promptly so inform the Indemnified Party, and shall tender the defense
of the Claim back to the Indemnified Party and shall thereafter have
all rights to contest its responsibility for indemnification with
respect to such Claim. The Indemnified Party shall make available to
the Indemnifying Party or its representatives all records and other
materials required by them and in the possession or under the control
of the Indemnified Party, for the use of the Indemnifying Party and
its representatives in defending any such Claim, and shall in other
respects give reasonable cooperation in such defense. No Indemnified
Party shall have the right to settle or compromise any money claim
without the consent of any Indemnifying Party. Any Indemnifying Party
shall have the right to settle or compromise any money claim against
the Indemnified Party without the consent of the Indemnified Party,
provided that the terms of such settlement or compromise provide for
the unconditional release of the Indemnified Party in exchange for a
payment by the Indemnifying Party and require the payment of monetary
damages only.
10.3.(b) Failure to Defend. If the Indemnifying Party,
within a reasonable time after notice of any such Claim, fails to
defend such Claim in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of
the Indemnifying Party, and the Indemnifying Party shall thereafter
have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment; provided, however, the
Indemnifying Party shall have the right to contest its responsibility
for indemnification with respect to such Claim.
10.3.(c) Indemnified Party's Rights. Anything in this
Article 10 to the contrary notwithstanding, if there is a reasonable
probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other
money payments (i.e., the Claim is seeking equitable relief), (i) the
Indemnified Party shall have the right to defend, compromise or settle
the non-monetary portion of such Claim, and (ii) the Indemnifying
Party shall not, without the written consent of the Indemnified Party,
settle or compromise any Claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release
from all Liability in respect of such Claim. If an Indemnified Party
settles an equitable claim, the Indemnifying Party shall not forfeit
its right to contest its indemnification obligation for such Claim
unless it consents to the settlement in advance and acknowledges its
responsibility therefor.
10.3.(d) Limits on Indemnification of Buyer. No Claim may
be made against Company for indemnification pursuant to this Article
10 unless the aggregate of all Claims exceed $175,000, in which event
Company shall only be liable for the amount of
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such Claims in excess of $175,000. Company shall not be required to
indemnify Buyer for any losses that in the aggregate exceed the Cash
Purchase Price (plus trade payables and accrued expenses set forth in
Schedule 2.1) unless such loss arises under Section 10.1.(d) hereof.
In no event shall Company be liable for any special, consequential or
incidental damages, whether or not foreseeable, incurred by Buyer in
connection with any Claim.
10.3.(e) Survival of Representations and Warranties. The
representations and warranties of Company and Buyer shall survive the
Closing until the fifteenth monthly anniversary thereof, and
thereafter no Claim may be brought in respect of any misrepresentation
or breach of warranty; provided, however, that the representations and
warranties contained in Sections 4.2, 4.9.(a) and 5.2 hereof shall
survive the Closing and shall have no expiration date and Claims with
respect thereto may be brought after the fifteenth monthly anniversary
of the Closing. If written notice of a Claim has been given prior to
the expiration of the applicable representations and warranties by a
party in whose favor such representations and warranties have been
made to the party that made such representations and warranties, then
the relevant representations and warranties shall survive as to such
Claim until the Claim has been finally resolved. Notwithstanding the
foregoing, in the event that, prior to the Closing, either party has
actual knowledge that any representation or warranty made by the other
party is incorrect as of the date hereof or will be incorrect as of
the Closing, the party with such knowledge shall have as its sole
remedy hereunder the option (a) to terminate this Agreement, or (b) to
proceed with the Closing and, upon the Closing, such party shall be
conclusively deemed to have waived all Claims hereunder relating to
such misrepresentation or breach of warranty.
11. CLOSING
The closing of this transaction ("the Closing") shall take place at
the offices of Foley & Lardner, One IBM Plaza, 330 N. Wabash Avenue, Chicago,
Illinois, at 9:00 A.M. on May 20, 1996, or at such other time and place as the
parties hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date".
11.1. Documents to be Delivered by Company. At the Closing, Company
shall deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
11.1.(a) Bills of Sale. Bills of sale and such other
instruments of assignment, transfer, conveyance and endorsement as
will be sufficient in the opinion of Buyer to transfer, assign, convey
and deliver to Buyer the Acquired Assets as contemplated hereby.
11.1.(b) Opinion of Counsel. A written opinion of
Terrence M. Babilla, Esq., General Counsel of Company, dated as of the
Closing Date, addressed to Buyer, substantially in the form of Exhibit
C hereto.
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11.1.(c) Transition Agreement. The Transition Agreement
referred to in Section 8.6, duly executed by SSG.
11.1.(d) Escrow Agreement. The Escrow Agreement referred
to in Section 8.7, duly executed by SSG and Escrow Agent.
11.1.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of each of SSG and SSGI
authorizing and approving this Agreement and the consummation of the
transactions contemplated by this Agreement.
11.1.(f) Certificate of Incorporation; By-laws. A copy of
the By-laws of each of SSG and SSGI certified by the secretary or
assistant secretary of each of SSG and SSGI, respectively, and a copy
of the Certificate of Incorporation of each of SSG and SSGI certified
by the Secretary of State of Delaware.
11.1.(g) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to Buyer pursuant to the terms hereof.
11.1.(h) Other Documents. All other documents,
instruments or writings required to be delivered to Buyer at or prior
to the Closing pursuant to this Agreement and such other certificates
of authority and documents as Buyer may reasonably request.
11.1.(i) Release of Liens. (a) Letter addressed to
Buyer and SSG from LaSalle Business Credit, Inc. committing to
release its Liens on the Acquired Assets upon delivery of the funds as
contemplated in Sections 3.2.(b) and 3.2.(c) accompanied by copies of
UCC-3 forms and appropriate releases of patent and trademark
assignments that are satisfactory to Buyer, (b) a form UCC-3 executed
by Centre Development Co., Inc. satisfactory to Buyer, and (c) a copy
of a form UCC-3 executed by APT Cabot, Inc. satisfactory to Buyer.
11.2. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver to Company the following documents, in each case duly executed or
otherwise in proper form:
11.2.(a) Cash Purchase Price. To Company a wire transfer
as required by Section 3.2.(c) hereof, and to the Escrow Agent, a
certified or bank cashier's check (or wire transfer) as required by
Section 3.2.(b) hereof.
11.2.(b) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of Company to evidence the assumption of the Assumed
Liabilities pursuant to Article 2.
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11.2.(c) Opinion of Counsel. A written opinion of Foley &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed to
Company, in substantially the form of Exhibit D hereto.
11.2.(d) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
11.2.(e) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to Company by Buyer pursuant to the terms hereof.
11.2.(f) Other Documents. All other documents,
instruments or writings required to be delivered to Company at or
prior to the Closing pursuant to this Agreement and such other
certificates of authority and documents as Company may reasonably
request.
11.2.(g) Transition Agreement. The Transition Agreement
referred to in Section 8.6 duly executed by Buyer.
11.2.(h) Escrow Agreement. The Escrow Agreement referred
to in Section 8.7 duly executed by Buyer and Escrow Agent.
11.2.(i) Resale Certificate. Resale Exemption
Certificate from the State of New York satisfactory to Company in its
reasonable discretion.
11.2.(j) Letter to Employees. Copy of letter to employees
of SSGI set forth in Schedule 4.19 hereof offering employment pursuant
to Section 6.9 hereof.
11.2.(k) GST Legislation. Buyer's registration referred
to in Section 5.4 hereof and an election by Buyer under Section
167(i) of the GST Legislation pursuant to Section 6.7 hereof.
12. TERMINATION
12.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
12.1.(a) by mutual written agreement of Buyer and Company,
or
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12.1.(b) by either Buyer or Company if the Closing shall
not have occurred on or before May 20, 1996, provided the terminating
party has not, through willful breach of a representation, warranty or
covenant, prevented the Closing from occurring on or before such date.
12.2. Termination for Breach.
12.2.(a) Termination by Buyer. If (i) there has been a
material violation or willful breach by Company of any of the
agreements, representations or warranties contained in this Agreement
which has not been waived in writing by Buyer or promptly cured by
Company upon notice from Buyer, or (ii) there has been a willful
failure to satisfy a condition to the obligations of Buyer which has
not been so waived, or (iii) Company shall have attempted to terminate
this Agreement under this Article 12 or otherwise without grounds to
do so, then Buyer may, by written notice to Company at any time prior
to the Closing that such violation, breach, failure or wrongful
termination attempt is continuing, terminate this Agreement with the
effect set forth in Section 12.2.(c) hereof.
12.2.(b) Termination by Company. If (i) there has been a
material violation or willful breach by Buyer of any of the
agreements, representations or warranties contained in this Agreement
which has not been waived in writing by Company or promptly cured by
Buyer upon notice from Company, or (ii) there has been a willful
failure of satisfaction of a condition to the obligations of Company
which has not been so waived, or (iii) Buyer shall have attempted to
terminate this Agreement under this Article 12 or otherwise without
grounds to do so, then Company may, by written notice to Buyer at any
time prior to the Closing that such violation, breach, failure or
wrongful termination attempt is continuing, terminate this Agreement
with the effect set forth in Section 12.2.(c) hereof.
12.2.(c) Effect of Termination. Termination of this
Agreement pursuant to this Section 12.2 shall not in any way
terminate, limit or restrict the rights and remedies of any party
hereto against any other party which has violated, willfully breached
or willfully failed to satisfy any of the representations, warranties,
covenants, agreements, conditions or other provisions of this
Agreement prior to termination hereof. In addition to the right of
any party under common law to redress for any such willful breach or
violation, each party whose willful breach or violation has occurred
prior to termination shall jointly and severally indemnify each other
party for whose benefit such representation, warranty, covenant,
agreement or other provision was made ("indemnified party") from and
against all losses, damages, costs and expenses, penalties, court
costs, and reasonable attorneys' fees and expenses) asserted against,
resulting to, imposed upon, or actually incurred by the indemnified
party, directly or indirectly, by reason of, arising out of or
resulting from such willful breach or violation. In no event shall
either party be liable for any special, consequential or incidental
damages, whether or not foreseeable.
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Subject to the foregoing, the parties' obligations under Section 13.9
of this Agreement shall survive termination.
13. MISCELLANEOUS
13.1. Disclosure Schedule. Information set forth in any portion of
the Disclosure Schedule shall be deemed disclosed for purposes of any
representation or warranty to which it clearly relates. The Disclosure
Schedule shall not vary, change or alter the language of the representations
and warranties contained in this Agreement.
13.2. Further Assurance. Each party agrees, at any time and from
time to time to honor after the date hereof, upon the reasonable request of the
other party and without further consideration, to execute and deliver such
other documents and instruments and to take such other action as the other
party may reasonably request in order to carry out the purposes and intent of
this Agreement; provided, however, that any party required to take any actions
pursuant to this Section shall be reimbursed for all reasonable out-of-pocket
expenses incurred by such party in connection therewith.
13.3. Disclosures and Announcements. Both the timing and the content
of all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Company or Buyer shall be
subject to the approval of the other in all essential respects, except that
approval shall not be required as to any statements and other information which
either party may submit to the Securities and Exchange Commission or be
required to make pursuant to any rule or regulation of the Securities and
Exchange Commission, the New York Stock Exchange, any other national securities
exchange, or otherwise required by law.
13.4. Assignment; Parties in Interest.
13.4.(a) Assignment. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other parties. Notwithstanding the foregoing, Buyer may, without
consent of Company, cause one or more Affiliates of Buyer to carry out
all or part of the transactions contemplated hereby; provided,
however, that Buyer shall, nevertheless, remain liable for all of its
obligations to Company hereunder.
13.4.(b) Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successors and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other
person any right or remedy under or by reason of this Agreement.
13.5. Equitable Relief. Company agrees that any willful breach of
Company's obligation to consummate the sale of the Acquired Assets on the
Closing Date, any breach of any
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noncompetition obligation imposed by Section 6.1, or any breach by Company of
its obligations imposed by Section 6.2 hereof, will result in irreparable
injury to Buyer for which a remedy at law would be inadequate; and that, in
addition to any relief at law which may be available to Buyer for such breach
and regardless of any other provision contained in this Agreement, Buyer shall
be entitled to injunctive and other equitable relief as a court may grant.
This Section 13.5 shall not be construed to limit Buyer's right to obtain
equitable relief for other breaches of this Agreement under general equitable
standards.
13.6. Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal laws of the State of Delaware, excluding
any choice of law rules that may direct the application of the laws of another
jurisdiction.
13.7. Amendment and Modification. Buyer and Company may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing.
13.8. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by telecopier, facsimile transmission or other
electronic means of transmitting written documents; or (c) sent to the parties
at their respective addresses indicated herein by registered or certified U.S.
mail, return receipt requested and postage prepaid, or by private overnight
mail courier service. The respective addresses to be used for all such
notices, demands or requests are as follows:
(a) If to Buyer, to:
Morris Rosenbloom & Co., Inc.
228 South Avenue
Rochester, New York 14604
Attention: Bruce Dan
Facsimile: (716) 232-6572
(with a copy, which copy shall not constitute notice, to)
Foley & Lardner
330 N. Wabash, Suite 3300
Chicago, Illinois 60611
Attention: Stephen M. Slavin
Facsimile: (312) 755-1925
or to such other person or address as Buyer shall furnish to Company in
writing.
(b) If to Company, to:
Sport Supply Group, Inc.
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1901 Diplomat Drive
Farmers Branch, Texas 75234
Attention: Chief Executive Officer
Facsimile: (214) 406-3430
(with a copy, which copy shall not constitute notice, to)
Sport Supply Group, Inc.
1901 Diplomat Drive
Farmers Branch, Texas 75234
Attention: General Counsel
Facsimile: (214) 406-3476
or to such other person or address as Company shall furnish to Buyer in
writing.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent
by overnight courier pursuant to this paragraph, such communication shall be
deemed delivered upon receipt; and if sent by U.S. mail pursuant to this
paragraph, such communication shall be deemed delivered as of the date of
delivery indicated on the receipt issued by the relevant postal service, or, if
the addressee fails or refuses to accept delivery, as of the date of such
failure or refusal. Any party to this Agreement may change its address for the
purposes of this Agreement by giving notice thereof in accordance with this
Section.
13.9. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
13.9.(a) Expenses to be Paid by Company. Company shall
pay, and shall indemnify, defend and hold Buyer harmless from and
against, all fees and expenses of Geneva Corporate Finance, Inc. and
any other broker or finder employed by Company in connection with this
transaction.
13.9.(b) Other. Except as otherwise provided herein, each
of the parties shall bear its own expenses and the expenses of its
counsel and other agents in connection with the transactions
contemplated hereby.
13.9.(c) Costs of Litigation. The parties agree that the
prevailing party in any action brought with respect to or to enforce
any right or remedy under this Agreement shall be entitled to recover
from the other party or parties all reasonable costs and expenses of
any nature whatsoever incurred by the prevailing party in connection
with such action, including without limitation reasonable attorneys'
fees and prejudgment interest.
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13.10. Entire Agreement. This instrument, the Transition Agreement
and the Escrow Agreement embody the entire agreement among the parties hereto
with respect to the transactions contemplated herein, and there have been and
are no agreements, representations or warranties (whether written or oral)
between the parties other than those set forth herein.
13.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.12. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
13.13. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Affiliate"as it relates to Company - Section 2.2.(h)
"Affiliate" as it relates to Buyer - Section 10.1
"Agreed Value" - Section 3.1
"Acquired Assets" - Recital
"Assumed Liabilities" - Section 2.1
"Business" - Section 6.1.(a)
"Cash Purchase Price" - Section 3.1
"Claim" - Section 10.1
"Closing" - Preamble to Article 11
"Closing Date" - Preamble to Article 11
"Confidential Information" - Section 6.2
"Contracts" - Section 1.1.(f)
"Disclosure Schedule" - Preamble to Article 4
"Division" - Recital
"Escrow Agent" - Section 3.2.(b)
"Escrow Agreement" - Section 8.7
"Excluded Assets" - Section 1.2
"Excluded Intellectual Property" - Section 1.2.(e)
"Final Agreed Value" - Section 3.2.(i)
"Final Cash Purchase Price" - Section 3.2.(i)
"Government Entities" - Section 2.2.(i)
"Indemnified Party" - Section 10.3.(a)
"Indemnifying Party" - Section 10.3.(a)
"Inventory" - Section 1.1.(c)
"Knowledge" - Preamble to Article IV
"Laws" - Section 2.2.(i)
"Leased Real Property" - Section 1.1.(a)
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"Liability" - Section 2.1
"Lien" - Section 4.9.(a)
"Litigation" - Section 2.2.(d)
"Orders" - Section 2.2.(i)
"Personal Property Leases" - Section 1.1.(d)
"Products" - Section 4.13
"Purchase Price" - Section 3.1
"Real Property Lease" - Section 1.1.(a)
"Records" - Section 6.2
"Trade Rights" - Section 1.1.(e)
"Transition Agreement" - Section 8.6
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
MORRIS ROSENBLOOM & CO., INC.
By:
------------------------------------
Its:
-----------------------------------
SPORT SUPPLY GROUP, INC.
By:
------------------------------------
Its:
-----------------------------------
SPORT SUPPLY GROUP INTERNATIONAL
HOLDINGS, INC.
By:
------------------------------------
Its:
-----------------------------------
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Exhibit 5.1
FOR IMMEDIATE RELEASE
MAY 20, 1996
SPORT SUPPLY COMPLETES SALE OF DIVISION
SPORT SUPPLY GROUP (NYSE - GYM) TODAY COMPLETED THE SALE OF ITS GOLD
EAGLE GOLF ACCESSORY DIVISION TO THE FIRM OF MORRIS ROSENBLOOM & CO., INC. OF
ROCHESTER, NY. THE COMPANY STATED THAT THE SALE WAS COMPLETED IN A CASH
TRANSACTION VALUED AT APPROXIMATELY BOOK VALUE BEFORE EXPENSES. IN CONJUNCTION
WITH THE SALE, SPORT SUPPLY RETAINED AND WILL COLLECT FOR ITS OWN ACCOUNT ABOUT
$2 MILLION IN ACCOUNTS RECEIVABLE. MICHAEL BLUMENFELD, SPORT SUPPLY'S
CHAIRMAN, STATED "WE CONSIDER THE SALE OF GOLD EAGLE THE SINGLE MOST CRITICAL
STEP IN THE RESTRUCTURING PROCESS OF SPORT SUPPLY GROUP. WE CAN NOW FOCUS 100%
OF OUR EFFORTS IN RETURNING THE COMPANY TO ITS HISTORIC LEVEL OF PROFITABILITY
AND IN COMPLETING THE RECENTLY ANNOUNCED EQUITY OFFERING OF ITS REMAINING GOLF
OPERATIONS."
SPORT SUPPLY ANNOUNCES MANAGEMENT CHANGES
SPORT SUPPLY ANNOUNCED TODAY THAT ITS CFO AND CEO HAVE RESIGNED THEIR
RESPECTIVE POSITIONS AND BOARD MEMBERSHIPS. THE COMPANY STATED IT HAS PROMOTED
JAMES CRAWFORD, ITS CORPORATE CONTROLLER, TO PRINCIPAL ACCOUNTING OFFICER AND
THAT THE COMPANY'S FOUNDER, CHAIRMAN AND LARGEST SHAREHOLDER, MICHAEL
BLUMENFELD, WILL ASSUME THE POSITION OF CEO. R. THOMAS RUSSELL, A FORMER
OFFICER AND DIRECTOR, HAS BEEN REHIRED AS CHIEF OPERATING OFFICER OF THE
COMPANY'S GOLF OPERATIONS. WILLIAM WATKINS, A FOUNDER AND PARTNER OF WATKINS,
WATKINS & KEENAN OF MEMPHIS, TN HAS BEEN ELECTED TO THE COMPANY'S BOARD OF
DIRECTORS.
SPORT SUPPLY DENIES HERMAN'S SPORTING GOODS RUMOR
SPORT SUPPLY SAID THAT RUMORS SUGGESTING IT WAS A LARGE VENDOR OR
SUBSTANTIAL CREDITOR TO HERMAN'S, WHO RECENTLY FILED FOR BANKRUPTCY, ARE
ABSOLUTELY FALSE. THE COMPANY STATED IT HAS $18,000 OUTSTANDING IN UNPAID
INVOICES FROM HERMAN'S. TO THE CONTRARY, THE COMPANY STATED "THE BANKRUPTCY OF
HERMAN'S WILL END A LONG PERIOD OF PRODUCT DISCOUNTING IN THE NORTHEAST
CORRIDOR WHERE SPORT SUPPLY OPERATES AND INTENDS TO EXPAND. SEVERAL FORMER
HERMAN'S SALESMEN HAVE BEEN HIRED BY THE COMPANY AND ARE EXPECTED TO SERVE AN
IMPORTANT ROLE IN THIS EXPANSION.
EXPANDING CORPORATE RELATIONSHIPS
AS RECENTLY ANNOUNCED, SPORT SUPPLY ENTERED INTO A FIVE YEAR
DISTRIBUTION AGREEMENT WITH HERSHEY CHOCOLATE, N.A., INC. THE COMPANY SAID IT
WAS EXPLORING A VARIETY OF ADDITIONAL RELATIONSHIPS WITH OTHER DOMESTIC AND
INTERNATIONAL BRANDED COMPANIES IN THE BEVERAGE, FOOD AND ATHLETIC FOOTWEAR
BUSINESSES. MICHAEL BLUMENFELD, SPORT SUPPLY'S CHAIRMAN, STATED "WE BELIEVE
SPORT SUPPLY RETAINS THE WORLD'S LARGEST DATA BASE OF EXISTING AND POTENTIAL
CUSTOMERS FOR THE YOUTH LEAGUE AND INSTITUTIONAL MARKETS REPRESENTING LITERALLY
MILLIONS OF PARTICIPANTS IN ALL SPORTS. WE BELIEVE SPORT SUPPLY REPRESENTS THE
MOST ECONOMICAL MODE FOR MARKET PENETRATION FOR EACH OF THESE HIGHLY VISIBLE
AREAS."
FOR FURTHER INFORMATION, CONTACT MICHAEL J. BLUMENFELD AT (214)
484-9484.
<PAGE> 1
Exhibit 5.2
FOR IMMEDIATE RELEASE
MAY 24, 1996
SPORT SUPPLY GROUP, INC. (NYSE - GYM) STATED TODAY THAT ITS BOARD OF
DIRECTORS HAS APPROVED A FORMAL PLAN TO DISPOSE OF THE COMPANY'S GOLF
OPERATIONS AND TO REPORT SUCH OPERATIONS AS DISCONTINUED. MICHAEL J.
BLUMENFELD, SPORT SUPPLY'S CHAIRMAN STATED, "SPORT SUPPLY GROUP IS COMPOSED OF
TWO DYNAMIC BUSINESS SEGMENTS THAT NO LONGER COMPLEMENT EACH OTHER FINANCIALLY
OR OPERATIONALLY. THIS SEPARATION WILL ALLOW SHAREHOLDERS AND INVESTORS TO
REVIEW AND EVALUATE EACH OPERATION ON ITS OWN MERITS. WHILE WE DO NOT EXPECT
TO REPORT 2ND QUARTER EARNINGS UNTIL MID-JUNE, A PRELIMINARY REVIEW OF
CONTINUING OPERATIONS INDICATES THAT REVENUES INCREASED BY APPROXIMATELY 30%,
GENERATING EARNINGS PER SHARE ONLY SLIGHTLY BELOW THE RESULTS IN THE COMPARABLE
PERIOD FOR THE PRIOR YEAR. ON A SEQUENTIAL BASIS, THE 2ND QUARTER RESULTS FROM
CONTINUING OPERATIONS MET THE COMPANY'S GOAL OF SEQUENTIAL IMPROVEMENT FROM THE
FIRST QUARTER AND WE EXPECT THE CURRENT 3RD QUARTER TO CONTINUE THIS
PROGRESSION."
FOR ADDITIONAL INFORMATION, CONTACT MICHAEL J. BLUMENFELD AT (214)
484-9484.
