================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 19, 1998
-----------------
THE HOCKEY COMPANY
---------------------------------------------
(Exact name of registrant specified in Charter)
Delaware 0-19596 13-36-32297
--------------- ---------- ------------------
(State or other (Commission (IRS Employee
jurisdiction of File Number) Identification No.)
incorporation)
c/o Maska U.S., Inc., 139 Harvest Lane
P.O. Box 1200, Williston, VT 05495
---------------------------------------- ------------
(Address of principal executive offices) Zip Code
Registrant's telephone, including area code: (802) 872-4226
SLM INTERNATIONAL, INC.
-------------------------------------------------------------
(Former name and former address, if changed since last report)
================================================================================
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On November 19, 1998, The Hockey Company (the "Registrant") completed its
acquisition of Sports Holdings Corp., a Delaware corporation ("SHC"), by (i) the
merger of SLM Acquisition Corp. ("SLM Sub"), a wholly owned subsidiary of the
Registrant, with and into SHC (the "Merger") and (ii) the acquisition by Sports
Maska, Inc. ("Maska"), a wholly owned subsidiary of the Registrant, of all of
the issued and outstanding equity of Tropsport Acquisitions Inc. ("Tropsport"),
a wholly owned subsidiary of SHC (the "Stock Purchase"), pursuant to the
Agreement and Plan of Reorganization dated as of October 6, 1998 (the
"Reorganization Agreement") by and among the Registrant, Maska, SLM Sub and SHC.
The amount of consideration, as set forth below, was determined by arms length
negotiations between the parties.
The Stock Purchase.
Maska acquired (i) 14,194,100 Common Shares of Tropsport, (ii) 22,162,370
Class A Preferred Shares of Tropsport and (iii) 7,512,280 Class B Preferred
Shares of Tropsport for a purchase price of $40,000,000 (the "Tropsport Share
Purchase Price"). The proceeds of the Tropsport Share Purchase Price were
applied to (i) the satisfaction of SHC debt obligations pursuant to the
Reorganization Agreement and (ii) to the redemption of certain SHC Preferred
Stock in accordance with the Reorganization Agreement.
The Merger.
The Merger was effective upon the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware on November 19, 1998 (the
"Effective Time"). As a result of the Merger, each issued and outstanding share
of the capital stock of SLM Sub was converted into and became one fully paid and
nonassessable share of Class A Common Stock, par value $.01 per share, of SHC.
All shares of capital stock of SHC that were owned by SHC as treasury stock were
canceled and retired and ceased to exist, with no other consideration delivered
in exchange therefor. The consideration payable in the Merger to the respective
holders of the SHC Preferred Stock and SHC Common Stock was as follows:
a) At the Effective Time, each share of 6.5% Cumulative Redeemable
Convertible Preferred Stock, par value $.01 per share, of SHC ("SHC Preferred
Stock") outstanding immediately prior to the Effective Time and after giving
effect to any redemption of SHC Preferred Stock required to be made pursuant to
the Reorganization Agreement was converted into the right to receive from the
Registrant an amount in cash equal to the sum of (i) $100 plus (ii) the Accrued
Dividend Amount (the "Preferred Cash Share Price") in accordance with the terms
set forth in the Reorganization Agreement. The product of (x) the Preferred Cash
<PAGE>
Share Price, multiplied by (y) the total number of shares of SHC Preferred Stock
outstanding immediately prior to the Effective Time, is the Preferred Stock
Merger Consideration. The total consideration paid to the holders of the SHC
Preferred Stock was $12,610,590.28.
b) At the Effective Time, each share of Class A Common Stock, par value
$.01 per share ("Class A Common"), or Class B Common Stock, par value $.01 per
share ("Class B Common" and together with the Class A Common, collectively, "SHC
Common Stock"), of SHC outstanding immediately prior to the Effective Time was
converted into the right to receive from Registrant an amount in cash, payable
at or about the Effective Time, equal to the quotient of (x) $58,750,000 (as
adjusted pursuant to the Reorganization Agreement) divided by (y) the total
number of shares of SHC Common Stock outstanding immediately prior to the
Effective Time, in accordance with the terms set forth in the Reorganization
Agreement.
General
There are no material relationships between any of the parties to the
Reorganization Agreement and the Registrant or any of its affiliates, any
director or officer of the Registrant, or any associate of any such director or
officer.
SHC owns and operates several manufacturing facilities throughout the
world. In addition, it owns facilities worldwide which are used as sales
offices, warehouses and a distribution center. SHC owns manufacturing equipment
as well. The Registrant currently intends to continue to utilize such facilities
and manufacturing equipment in their present capacity.
Of the total purchase price of approximately $100 million, $87,500,000 was
financed pursuant to a Credit Agreement dated November 19, 1998, among the
Registrant and Maska (as Borrowers) and Caisse de Depot et Placement du Quebec
(as Agent and Lender) and the issuance of (i) $12,500,000 Pay-In-Kind Preferred
Stock and (ii) warrants to purchase 159,127 shares of the Company's Common
Stock, par value $.01 per share, to Phoenix Home Life Mutual Insurance Company.
The Registrant's press release announcing the completion of the acquisition
dated November 20, 1998 is attached hereto as Exhibit 99.1 and is incorporated
herein by reference.
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
CONSOLIDATED
FINANCIAL STATEMENTS
SPORTS HOLDINGS CORP.
December 31, 1997
December 31, 1996
December 31, 1995
<PAGE>
AUDITORS' REPORT
To the Stockholders of
Sports Holdings Corp.
We have audited the consolidated balance sheets of Sports Holdings Corp. as at
December 31, 1997 and 1996 and the consolidated statements of income (loss),
stockholders' equity and cash flows for the years ended December 31, 1997, 1996
and 1995. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1997
and 1996 and the results of its operations and changes in its financial position
for the years ended December 31, 1997, 1996 and 1995 in accordance with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
-----------------------------
Montreal, Canada, Ernst & Young LLP
March 13, 1998 Chartered Accountants
<PAGE>
SPORTS HOLDINGS CORP.
[Incorporated under the laws of Delaware]
CONSOLIDATED BALANCE SHEET
As at December 31
1997 1996
$ $
[In thousands of U.S. dollars]
- --------------------------------------------------------------------------------
ASSETS
Current
Cash 7,388 6,901
Accounts receivable [note 3] 24,351 32,657
Inventories [note 4] 16,146 25,278
Deferred income taxes [note 7] 239 234
- --------------------------------------------------------------------------------
Total current assets 48,124 65,070
Fixed assets [note 5] 13,187 18,153
Deferred charges [note 6] 488 804
Deferred income taxes [note 7] 4,301 6,197
Goodwill [note 8] 18,026 20,488
- --------------------------------------------------------------------------------
84,126 110,712
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Bank indebtedness [note 9] 4,274 4,925
Accounts payable and accrued liabilities 11,261 15,815
Income taxes payable [note 7] 582 1,362
Current portion of long-term debt [note 10] 355 3,204
Current portion of capital lease obligations [note 11] 183 119
- --------------------------------------------------------------------------------
Total current liabilities 16,655 25,425
- --------------------------------------------------------------------------------
Long-term [note 10]
Senior secured term loan - 13,224
Subordinated notes 21,468 20,860
Capital lease obligations [note 11] 671 513
Other 1,469 2,481
- --------------------------------------------------------------------------------
Total long-term liabilities 23,608 37,078
- --------------------------------------------------------------------------------
Deferred income taxes [note 7] 2,213 3,041
- --------------------------------------------------------------------------------
Total liabilities 42,476 65,544
- --------------------------------------------------------------------------------
Contingent liabilities [notes 3 and 15]
Stockholders' equity
Capital stock [note 12] 54,725 54,725
Deficit (9,475) (10,435)
Cumulative translation gain (loss) [note 12] (3,600) 878
- --------------------------------------------------------------------------------
Total stockholders' equity 41,650 45,168
- --------------------------------------------------------------------------------
84,126 110,712
================================================================================
See accompanying notes
<PAGE>
SPORTS HOLDINGS CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Year ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
- ----------------------------------------------------------------------------------------------------------------
[In thousands of U.S. dollars]
<S> <C> <C> <C>
Common stock at par value
354,219 Class A Common Stock 4 4 4
48,330 Class B Common Stock - - -
Preferred stock at par value
125,000 Preferred Stock 1 1 1
Capital in excess of par value of stock
Class A Common Stock 39,358 39,358 39,358
Class B Common Stock 4,799 4,799 4,799
Preferred Stock 11,538 11,538 11,538
Predecessor cost adjustment [note 12] (975) (975) (975)
- ----------------------------------------------------------------------------------------------------------------
54,725 54,725 54,725
- ----------------------------------------------------------------------------------------------------------------
Retained earnings (deficit), beginning of year (10,435) 289 2,491
Net income (loss) 2,788 (10,724) (1,526)
Dividends on preferred stock (1,828) - (609)
Excess of redemption price of Class A common stock over capital - - (67)
- ----------------------------------------------------------------------------------------------------------------
Retained earnings (deficit), end of year (9,475) (10,435) 289
- ----------------------------------------------------------------------------------------------------------------
Cumulative translation gain (loss) [note 12] (3,600) 878 2,300
- ----------------------------------------------------------------------------------------------------------------
Total stockholder`s equity 41,650 45,168 57,314
=================================================================================================================
Common stock
Number issued
Class A 354,219 354,219 354,219
Class B 48,330 48,330 48,330
- ----------------------------------------------------------------------------------------------------------------
Total common stock 402,549 402,549 402,549
- ----------------------------------------------------------------------------------------------------------------
Preferred stock
Number issued 125,000 125,000 125,000
- ----------------------------------------------------------------------------------------------------------------
Common shares issuable through
Management Equity Ownership Program [note 12]
Outstanding relating to 1992 issue 6,578 13,494 13,494
Outstanding relating to 1994 issue 1,510 3,155 3,155
- ----------------------------------------------------------------------------------------------------------------
8,088 16,649 16,649
- ----------------------------------------------------------------------------------------------------------------
Common shares issued, issuable and outstanding 535,637 544,198 544,198
=================================================================================================================
</TABLE>
See accompanying notes
<PAGE>
SPORTS HOLDINGS CORP.
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------------------------------
[In thousands of U.S. dollars]
<S> <C> <C> <C>
SALES 83,371 85,999 87,316
COST OF SALES 46,160 47,485 49,308
- -----------------------------------------------------------------------------------------------------
GROSS PROFIT 37,211 38,514 38,008
OPERATING EXPENSES BEFORE
UNDERNOTED ITEMS 26,346 28,602 27,911
- -----------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST, DEPRECIATION, AMORTIZATION,
UNUSUAL ITEMS AND INCOME TAXES 10,865 9,912 10,097
- -----------------------------------------------------------------------------------------------------
EXPENSES
Interest on long-term debt and capital lease obligations 3,940 4,090 4,273
Other interest 209 368 986
Depreciation of fixed assets 1,853 1,928 1,827
Amortization of covenant not to compete - 560 560
Amortization of deferred charges 224 362 377
Amortization of goodwill 532 574 562
- -----------------------------------------------------------------------------------------------------
6,758 7,882 8,585
- -----------------------------------------------------------------------------------------------------
Income from continuing operations before
unusual items and income taxes 4,107 2,030 1,512
Unusual items [note 13] (646) - (2,637)
- -----------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
income taxes 3,461 2,030 (1,125)
Provision for income taxes (income taxes recovered) [note 7] 998 483 (359)
- -----------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 2,463 1,547 (766)
Gain (loss) on outdoor division discontinued operations,
net of applicable income taxes [note 18] 325 (12,271) (760)
- -----------------------------------------------------------------------------------------------------
Net income (loss) 2,788 (10,724) (1,526)
=====================================================================================================
</TABLE>
See accompanying notes
<PAGE>
SPORTS HOLDINGS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------------------------------------
[In thousands of U.S. dollars]
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) 2,788 (10,724) (1,526)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Loss (gain) on discontinued operations (31) 11,745 1,342
Amortization of long-term debt discount 608 519 442
Depreciation and amortization 2,608 3,424 3,326
Deferred income taxes (recovered) 133 (2,256) (1,716)
Change in assets and liabilities:
Decrease (increase) in accounts receivable (4,622) 2,913 1,172
Decrease (increase) in inventories (2,701) 8,319 2,948
Increase (decrease) in accounts payable and accrued liabilities 38 (1,246) (3,302)
Decrease in income taxes payable (620) (494) (321)
- -----------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (1,799) 12,200 2,365
- -----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness (85) (3,591) 5,884
Repayment of revolving term credit facility - - (6)
Repayment of senior secured term loan (15,709) (2,659) (2,641)
Proceeds of long-term debt and capital lease obligations 453 556 1,053
Repayment of long-term debt and capital lease obligations (1,144) (658) (470)
Redemption of capital stock - - (178)
Dividends paid (1,828) - (609)
- -----------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (18,313) (6,352) 3,033
- -----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Net proceeds from sale of discontinued operations 23,477 - -
Additions to fixed assets (2,739) (2,810) (3,450)
Additions to deferred charges - - (10)
- -----------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 20,738 (2,810) (3,460)
- -----------------------------------------------------------------------------------------------------------
Translation adjustment (139) (147) (82)
- -----------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 487 2,891 1,856
Cash, beginning of year 6,901 4,010 2,154
- -----------------------------------------------------------------------------------------------------------
CASH, END OF YEAR 7,388 6,901 4,010
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SPORTS HOLDINGS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
$ $ $
- -----------------------------------------------------------------------------------------------------------
[In thousands of U.S. dollars]
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
<S> <C> <C> <C>
Cash paid during the year for:
Interest 5,788 6,062 6,828
Income taxes 634 1,639 1,229
See accompanying notes
</TABLE>
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
1. NATURE OF FINANCIAL STATEMENTS
The Company was incorporated on September 17, 1992. On December 29, 1992, the
Company acquired through a series of transactions all of the shares of Karhu
Canada Inc. ("Karhu"), a manufacturer and wholesaler of sporting goods, having
subsidiaries in Canada, the United States, Finland, Sweden, Germany and the
United Kingdom. The Company also purchased the 50% interest in Solte GmbH
("Solte") not already owned by Karhu. The cost of these purchases (the "Purchase
Price") was $51.0 million.
The financial statements are prepared in U.S. funds and in accordance with
accounting principles generally accepted in the United States.
2. ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries. Upon consolidation, all intercompany accounts,
transactions and profits are eliminated.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the subsidiaries are translated into U.S. dollars at
the exchange rates in effect at the balance sheet date. Revenues and expenses
are translated at average exchange rates prevailing during the year. The
resulting gains and loses are reflected in the cumulative translation gain
(loss) section of stockholders' equity.
INVENTORY VALUATION
Raw materials and work-in-process are valued at the lower of cost and
replacement cost and finished goods at the lower of cost and net realizable
value, using the first-in, first-out (FIFO) method.
DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation and are
depreciated over their estimated useful lives as follows:
Buildings 5% straight-line
Machinery and equipment 10% diminishing balance and straight-line
Furniture and fixtures 10% straight-line
Computers 12.5% to 25% straight-line
Molds 20% to 33.33% straight-line
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
2. ACCOUNTING POLICIES [cont'd]
Leasehold improvements are amortized on the straight-line basis over the terms
of the related leases.
GOVERNMENT GRANTS
Government grants related to the acquisition of fixed assets are recorded as a
reduction of the cost of the related fixed assets.
Government grants related to operating expenses are deducted from the related
expenses.
DEFERRED CHARGES
Costs of obtaining long-term debt financing are deferred and amortized over the
term of the related financing.
GOODWILL
Goodwill, representing the excess of the cost of acquisition of subsidiaries
over the fair market value of the underlying net assets at the date of
acquisition, is amortized on the straight-line basis over forty years. On an
on-going basis, management reviews the valuation and amortization of goodwill,
taking into consideration any events or circumstances which might have impaired
fair value. The amount of goodwill impairment, if any, is measured based on
projected future cash flows.
ADVERTISING COSTS
Costs to produce and communicate advertising are expensed as incurred.
Advertising expenses amounted to $4,461,000 in 1997 (1996 - $4,150,000; 1995 -
$5,279,000).
INCOME TAXES
Deferred income taxes reflect the future tax consequences of differences between
the tax bases of assets and liabilities and their financial reporting amounts at
each year-end in accordance with FAS No. 109 "Accounting for Income Taxes".
These deferred taxes are measured by applying current tax rates. No deferred
income taxes have been provided for the income tax liability which would be
incurred on repatriation of the undistributed earnings of the Company's foreign
subsidiaries because the Company intends to reinvest these earnings indefinitely
outside the United States. Amortization of purchase accounting adjustments,
including goodwill, are not deductible for purposes of calculating income tax
provisions.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
2. ACCOUNTING POLICIES [cont'd]
RESEARCH COSTS
Research costs are expensed as incurred, and amounted to $762,000 in 1997 (1996
- - $468,000; 1995 - $993,000).
3. ACCOUNTS RECEIVABLE
1997 1996
$ $
- --------------------------------------------------------------------------------
Accounts receivable - trade 21,227 31,042
Duty drawbacks receivable 242 1,289
Prepaid expenses 1,086 1,092
Income taxes receivable 276 235
Allowance for doubtful accounts (468) (1,001)
Balances of sale receivable [note 18] 1,988 --
- --------------------------------------------------------------------------------
24,351 32,657
================================================================================
Included in the balances of sale receivable is an amount of $500,000 due May 1,
1998 from a purchaser of part of the outdoor division. The purchaser has advised
the Company of its intention to offset the amount due against amounts the
purchaser claims to be owed for a breach of the contract of sale. Further, the
purchaser has reserved the right to make additional claims against the Company
for an unspecified amount. In the opinion of management, the claim is without
merit and will be defended by the Company. The outcome of the claim is unknown.
4. INVENTORIES
1997 1996
$ $
- --------------------------------------------------------------------------------
Raw materials 3,667 4,778
Work-in-process 983 1,636
Finished goods 9,983 16,776
- --------------------------------------------------------------------------------
14,633 23,190
Goods-in-transit 1,513 2,088
- --------------------------------------------------------------------------------
16,146 25,278
================================================================================
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
5. FIXED ASSETS
Accumulated
Cost Depreciation Net
$ $ $
- --------------------------------------------------------------------------------
1997
Land 171 -- 171
Buildings 4,482 1,156 3,326
Leasehold improvements 146 87 59
Machinery and equipment 11,792 4,368 7,424
Furniture and fixtures 1,858 838 1,020
Computers 1,880 1,236 644
Molds 956 413 543
- --------------------------------------------------------------------------------
21,285 8,098 13,187
================================================================================
1996
Land 179 -- 179
Buildings 4,824 1,018 3,806
Leasehold improvements 753 415 338
Machinery and equipment 16,479 5,172 11,307
Furniture and fixtures 2,485 971 1,514
Computers 1,930 991 939
Molds 681 611 70
- --------------------------------------------------------------------------------
27,331 9,178 18,153
================================================================================
6. DEFERRED CHARGES
1997 1996
$ $
- --------------------------------------------------------------------------------
At cost 3,908 3,908
Accumulated amortization (3,228) (2,904)
Write-down of deferred charges, net of
amortization [note 18] (192) (200)
- --------------------------------------------------------------------------------
488 804
================================================================================
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
7. INCOME TAXES
The Company files U.S. Federal income tax returns as part of a consolidated
group (the "Group") with two subsidiary companies.
The deferred tax assets recorded on the balance sheet are comprised of the
following:
1997 1996
$ $
- --------------------------------------------------------------------------------
CURRENT
Allowance for doubtful accounts 86 142
Product warranty accrual 6 86
Other 147 6
- --------------------------------------------------------------------------------
239 234
================================================================================
LONG-TERM
Loss carryforwards 4,304 5,432
Deferred income taxes related to
discontinued operations [note 18] -- 775
Other (3) --
- --------------------------------------------------------------------------------
4,301 6,207
Deferred tax asset valuation allowance -- (10)
- --------------------------------------------------------------------------------
4,301 6,197
================================================================================
As at December 31, 1997, the Company has a tax loss carryforward for Federal
purposes of $12,731,000 (1996 - $14,585,000) which is available to offset
future taxable income. This carryforward is expected to be fully utilized,
expires beginning in the year 2008, and accordingly has been recognized as a
deferred tax asset.
The long-term deferred tax liabilities on the balance sheet result mainly from
the cumulative temporary differences on depreciation of fixed assets.
The provision for income taxes on earnings before income taxes differs from the
amount computed by applying the U.S. Federal income tax rate because of State of
Vermont taxes levied, net of the U.S. Federal income tax benefit, differences in
rates of foreign subsidiaries and non-deductible goodwill amortization.
Significant components of the provision for income taxes (recovered) are as
follows:
1997 1996 1995
$ $ $
- --------------------------------------------------------------------------------
CURRENT
US 95 -- (200)
Foreign 1,076 1,305 1,161
- --------------------------------------------------------------------------------
1,171 1,305 961
- --------------------------------------------------------------------------------
DEFERRED
US (143) (1,594) (1,252)
Foreign (30) 772 (68)
- --------------------------------------------------------------------------------
(173) (822) (1,320)
- --------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 998 483 (359)
================================================================================
Undistributed earnings of foreign subsidiaries considered to be reinvested
indefinitely amount to $11,607,000 (1996 - $11,645,000; 1995 - $8,942,000),
representing the net earnings attributable to foreign operations since
acquisition.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
8. GOODWILL
1997 1996
$ $
- --------------------------------------------------------------------------------
At cost 29,899 32,092
Accumulated amortization (3,401) (3,103)
Write-down of goodwill, net of amortization [note 18] (8,472) (8,501)
- --------------------------------------------------------------------------------
18,026 20,488
================================================================================
9. SECURITY TO BANK
For the year ended December 31, 1997, a subsidiary of the Company maintains a
demand revolving loan (the "Revolving Loan") under which it may borrow up to
$10,486,000 [Cdn. $15,000,000] (reduced to $3,495,000 [Cdn. $5,000,000] during
the months of December, January and February) at an interest rate of prime plus
0.75%, and a letter of credit facility (the "LC Facility") in the amount of
$1,713,000 [Cdn. $2,450,000]. A commitment fee on the unused Revolving Loan
equal to 0.25% per annum is charged.
The Revolving Loan, LC facility and capital lease obligations (see note 11) are
collateralized by accounts receivable and inventories of the Company's North
American subsidiaries.
Certain assets of the European subsidiaries have been pledged to collateralize
their bank borrowings and the loan described in Note 10 below.
10. LONG TERM DEBT
1997 1996
$ $
- --------------------------------------------------------------------------------
10.95% Senior secured term loan ("Term Loan"),
repaid in 1997 -- 15,869
12% Subordinated Notes ("Subordinated Notes"),
$24,000 face value, maturing December 2000 (less
unamortized discount based on imputed interest
rate of 16.6%, 1997 - $2,532; 1996 - $3,140) 21,468 20,860
Loan (11,138 Swedish Krona; 1996 - 11,198 Swedish
Krona) of a Swedish subsidiary bearing calculated
interest for 1997 of 3.9% per annum (1996 - 6.2%),
with no specific repayment date 1,401 1,641
Other 423 1,399
- --------------------------------------------------------------------------------
23,292 39,769
Less: Due within one year (355) (3,204)
- --------------------------------------------------------------------------------
22,937 36,565
================================================================================
The Term Loan is collateralized by certain assets of the Company, subject to
prior charges on certain inventory and accounts receivable to collateralize
working capital loans, and by a pledge of the shares of certain subsidiary
companies.
The Subordinated Notes are collateralized by a pledge of certain of the shares
of certain subsidiary companies.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
10. LONG TERM DEBT [Cont'd]
Other long term debt includes four unsecured term loans totalling
$350,000 (Cdn. $500,000) and $730,000 (Cdn $1,000,000) for 1997 and 1996,
respectively, bearing interest at 7%, maturing in August 1998, and repayable in
equal semi-annual instalments of principal of $175,000 (Cdn. $250,000) and
$182,000 (Cdn $250,000) for 1997 and 1996, respectively.
Certain loans require the Company to meet certain business and financial
covenants, including restrictions on the payment of dividends, redemption of
shares, maintenance of interest coverage ratios, the amount of capital
expenditures and change of control.
The Subordinated Notes require that excess cash flow of the Company, as defined,
be used to repay other debt, including the Revolving Loan and the Subordinated
Notes as of April 30 of each year. Management does not expect to be required to
make any such payment for the foreseeable future.
Principal repayments are due in the following fiscal years:
1997
$
- --------------------------------------------------------------------------------
1998 355
1999 9
2000 24,009
2001 8
2002 8
No specific repayment date 1,435
- --------------------------------------------------------------------------------
25,824
Less: Unamortized discount (2,532)
- --------------------------------------------------------------------------------
23,292
================================================================================
SFAS 107 requires the Company to disclose the fair value of certain financial
instruments. As at December 31, 1997 and 1996, management believes the fair
value of the Company's long term debt approximates its carrying value.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
11. CAPITAL LEASE OBLIGATIONS
The future minimum lease payments under the capital lease agreements are as
follows:
1997
$
- --------------------------------------------------------------------------------
1998 239
1999 239
2000 236
2001 180
2002 99
- --------------------------------------------------------------------------------
Total minimum lease payments 993
Amount representing interest at rates varying between 6.5% and 8.4% 139
- --------------------------------------------------------------------------------
854
Less: current portion (183)
- --------------------------------------------------------------------------------
671
================================================================================
The capital lease obligations are collateralized as described in note 9.
12. CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 1,000,000 shares of
Voting Class A Common Stock, 1,000,000 shares of Non-voting Class B Common
Stock and 125,000 shares of Preferred Stock, each having a par value of $0.01
per share.
All Common Stock participate equally in dividends and, upon liquidation, all
Common Stock are entitled to share equally in the assets of the Company
available for distribution to the holders of such shares after the prior claims
of the holders of the Preferred Stock.
The Preferred Stock are voting and provide for a cumulative dividend equal to
6.5% of their paid-in value, payable quarterly. After May 12, 1997, but prior to
May 12, 1998, the Company may require that all outstanding Preferred Stock be
converted into Class A Common Stock, subject to certain financial tests. On or
after May 12, 1998, the Preferred Stock are redeemable for $100 per share,
subject to lender approval. On May 12, 2001, the Company must redeem any shares
of Preferred Stock then outstanding at $100 per share. The Preferred Stock are
also convertible, at the option of the holder, at any time and based on a
conversion price of $180 per common share, subject to adjustment in certain
circumstances. The shares may also be convertible should the Company file a
registration statement under the Securities Act of 1933.
The Class A Common Stock are automatically converted to Class B Common Stock and
the Class B Common Stock are automatically converted to Class A Common Stock in
certain circumstances.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
12. CAPITAL STOCK [cont'd]
MANAGEMENT EQUITY OWNERSHIP PROGRAM
The Company established a MEOP in 1993 for the benefit of key members of the
management of the Company. For each share purchased under the MEOP, one option
to purchase one additional Class A share of the Common Stock of the Company was
granted, which vests with the holder evenly over a five-year period, or earlier
upon the occurrence of certain events. As at December 31, 1997, there are 6,578
options outstanding which have vested and are exercisable at an average price of
$242 per share. Further, there are 1,510 options outstanding for shares issued
in 1994, of which 1,208 are vested and are exercisable at an average price of
$265 per share. 302 options vest on December 31, 1998 and are exercisable at
$360 per share.
Under the terms of the MEOP, the maximum number of shares to be issued pursuant
to the MEOP cannot exceed 10% of the total number of issued and outstanding
Class A and Class B Common Stock.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its MEOP plan because, as discussed below, the alternative
fair value accounting provided for under FASB Statement No. 123, "Accounting
for Stock-Based Compensation" requires the use of option valuation models that
were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense was recognized at the time of issue.
Pro forma information regarding net income required by Statement 123, is
determined as if the Company had accounted for its employee stock options under
the fair value method of that Statement. The fair value for these options is
estimated at the date of grant using a Black-Scholes option pricing model.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's MEOP have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee options.
For purpose of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The required pro forma
information is effective for options granted in fiscal years that begin after
December 15, 1994. Because no options have been granted subsequent to this date
there would be no effect of Statement 123 on currently reported net income.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
12. CAPITAL STOCK [cont'd]
PREDECESSOR COST ADJUSTMENT
Two members of senior management (the "Senior Management") had an ownership
interest in the predecessor company, and had an ownership interest on December
29, 1992 in the Company which totalled 3%. The Purchase Price has been allocated
to assets acquired and liabilities assumed based on their estimated fair market
value as of December 29, 1992. To the extent of the continuing ownership
interest in the Company held by Senior Management, no step up in values over
historical predecessor cost has been recorded. In accordance with Emerging
Issues Task Force Abstract 88-16, the portion of the excess of the purchase
price paid over predecessor cost relating to Senior Management's continuing
ownership interest in the Company, amounting to $975,000, has been charged to
stockholders' equity.
CUMULATIVE TRANSLATION GAIN (LOSS)
The cumulative translation gain (loss) represents the net unrealized foreign
currency translation gain (loss) on the Company's net investment in
self-sustaining operations. The change in the balance for the years ended
December 31, 1997 and 1996 represents the unrealized gain (loss) for the year on
the translation of net assets of the foreign subsidiaries.
13. UNUSUAL ITEMS
1997 1996 1995
$ $ $
- --------------------------------------------------------------------------------
Write-down of inventory -- -- 209
Loss on close-out of inventory -- -- 1,283
Start-up costs related to new manufacturing
production method -- -- 335
Bad debts for major customers -- -- 664
Unfavourable factory labour variance 300 -- --
Restructuring severance costs 346 -- 146
- --------------------------------------------------------------------------------
646 -- 2,637
================================================================================
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
14. CONTRACTUAL OBLIGATIONS
The minimum rentals payable under long-term leases, exclusive of certain
operating costs for which the Company is responsible, are as follows:
1997
$
- --------------------------------------------------------------------------------
1998 1,629
1999 1,217
2000 558
2001 485
2002 287
2003-2087 568
- --------------------------------------------------------------------------------
4,744
================================================================================
Rental expenses for operating leases amounted to $1,903,000 in 1997 (1996 -
$1,828,000; 1995 - $2,750,000).
The minimum amounts payable under long-term marketing contracts are as follows:
1997
$
- --------------------------------------------------------------------------------
1998 1,290
1999 1,478
2000 1,320
2001 530
2002 486
2003 251
- --------------------------------------------------------------------------------
5,355
================================================================================
The Company has open letters of credit of $209,000 as at December 31, 1997,
payment of which is guaranteed by the Company's banks.
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
15. CONTINGENT LIABILITIES
As at December 31, 1997, a former supplier's agent of the Company's outdoor
division has made a claim against the purchaser of part of the outdoor division
in the amount of $500,000. The purchaser has in turn made a notice of the claim
to the Company under the terms of the contract of sale. In the opinion of
management, the claim is without merit and will be defended by the Company. The
outcome of the claim is unknown.
16. RELATED PARTY TRANSACTIONS
Operating expenses for the year ended December 31, 1997 include $150,000 (1996 -
$200,000; 1995 - $400,000) paid to an affiliate of the controlling stockholder.
17. CONCENTRATION OF CREDIT RISK
The Company manufactures and wholesales hockey products to customers throughout
the United States, Canada, Sweden, Finland and other countries. Concentration of
credit risk with respect to trade receivables is reduced due to the wide variety
of customers and markets into which the Company's products are sold as well as
their geographic dispersion. The Company establishes an allowance for doubtful
accounts based on factors surrounding the credit risk of specific customers.
Generally, the Company does not require collateral or other security to support
customer receivables. For the year ended December 31, 1997, the Company's five
largest customers accounted for 19% (1996 - 14%; 1995 - 15%) of sales. At
December 31, 1997, the total accounts receivable from these customers amounts to
18% (1996 - 12%) of total accounts receivable.
18. DISCONTINUED OPERATIONS
On December 2, 1996, management of the Company adopted a plan to dispose of its
outdoor division. The sale of the outdoor division was substantially completed
in October 1997. The operating results and losses of the outdoor division are as
follows:
<PAGE>
SPORTS HOLDINGS CORP.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
[Tabular figures are in thousands of U.S. dollars except where otherwise
indicated]
18. DISCONTINUED OPERATIONS [Cont'd]
1997 1996 1995
$ $ $
- --------------------------------------------------------------------------------
Sales 36,045 47,682 58,648
Results of operations for the year
ended December 31,
Loss before income taxes (188) (3,069) (1,220)
Net loss for the year (514) (1,823) (760)
================================================================================
The loss before income taxes includes interest of $1,346,000 (1996 - $1,912,000;
1995 - $2,412,000) allocated to discontinued operations based on the net assets
of the outdoor division as a percentage of the total net assets of the Company.
The loss before income taxes for the year ended December 31, 1997 includes a
prepayment penalty of $281,000 paid on the senior secured term loan described in
note 10.
The Company had estimated a net loss from December 31, 1996 to the expected
disposal date in the amount of $10,448,000 net of income tax recoveries of
$1,275,000. The earnings of $325,000 for the year ended December 31, 1997 for
the discontinued outdoor division includes the amounts realized on the sale of
this division net of disposal costs, resulting in earnings on disposal of
$839,000, net of income taxes recovered of $10,000. The Company does not expect
any material earnings or losses for the year ending December 31, 1998 from
discontinued operations.
The net operating assets of the discontinued operations included in the
financial statements are as follows:
1997 1996
$ $
- --------------------------------------------------------------------------------
Current assets 2,832 18,161
Long-term assets -- 3,947
Current liabilities 589 4,079
================================================================================
19. COMPARATIVE FIGURES
Certain 1996 and 1995 comparative figures have been reclassified to conform with
the presentation adopted for the current year.
<PAGE>
SPORTS HOLDINGS CORP.
[Incorporated under the laws of Delaware]
CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at September 26
1998 1997 [a]
$ $
- ----------------------------------------------------------------------------
[In thousands of U.S. dollars]
ASSETS
CURRENT
Cash 637 777
Accounts receivable 36,051 47,139
Inventories 17,159 28,130
Deferred income taxes 128 234
- -----------------------------------------------------------------------
TOTAL CURRENT ASSETS 53,975 76,280
Fixed assets 12,552 17,090
Deferred charges 514 539
Deferred income taxes 4,514 5,950
Goodwill 17,578 18,591
- -----------------------------------------------------------------------
89,133 118,449
- -----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Bank indebtedness 12,426 21,825
Accounts payable and accrued liabilities 8,573 13,152
Income taxes payable 641 310
Current portion of long-term debt 6 3,087
Current portion of capital lease obligations 180 180
- -----------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 21,826 38,554
- -----------------------------------------------------------------------
LONG-TERM
Subordinated notes 22,003 22,532
Capital lease obligations 674 743
Other 1,358 11,455
- -----------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 24,035 34,729
- -----------------------------------------------------------------------
Deferred income taxes 2,196 2,420
- -----------------------------------------------------------------------
TOTAL LIABILITIES 48,057 75,703
- -----------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock 54,725 54,725
Deficit - Opening balance (9,477) (10,435)
Profit for the period 748 581
Dividends (609) -
Cumulative translation loss (4,311) (2,125)
- -----------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 41,076 42,745
=======================================================================
89,133 118,449
- -----------------------------------------------------------------------
[a] On December 2, 1996, management of the Company (SHC) adopted a plan to
dispose of its outdoor division. The sale of the outdoor division was
substantially completed in October 1997. The balance sheet as of September 1997
and the statement of cash flows for the 9 months ended September 1997 included
the assets and liabilities of the outdoor division.
<PAGE>
SPORTS HOLDINGS CORP.
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 26,
1998 1997 [a]
$ $
- ----------------------------------------------------------------------------
In thousands of U.S. dollars]
Net sales 59,734 62,664
Cost of goods sold 34,684 36,157
- ----------------------------------------------------------------------------
Gross profit 25,050 26,507
Selling, general and administrative expense 20,319 20,902
- ----------------------------------------------------------------------------
Operating income 4,731 5,605
Other expense, net 347 874
Interest expense 2,986 3,111
- ----------------------------------------------------------------------------
Income before income tax and discontinued operations 1,398 1,620
Income taxes 650 1,177
- ----------------------------------------------------------------------------
Income before discontinued operations 748 443
Discontinued operations - 138
- ----------------------------------------------------------------------------
Net income 748 581
============================================================================
RECLASSIFICATIONS HAVE BEEN MADE TO THE SPORTS HOLDINGS CORP. HISTORICAL
UNAUDITED CONSOLIDATED FINANCIAL INFORMATION TO CONFORM TO SLM INTERNATIONAL,
INC'S BASIS OF PRESENTATION
[a] On December 2, 1996, management of the Company (SHC) adopted a plan to
dispose of its outdoor division. The sale of the outdoor division was
substantially completed in October 1997. Management subsequently reached an
agreement with the purchaser of the Merrell assets and decided to continue
distribution of the Merrell products in Finland and Sweden. The earnings from
these included in the gain on discontinued operations net of applicable taxes
are $112.
<PAGE>
SPORTS HOLDINGS CORP.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the nine Months Ended September 26
1998 1997 [a]
$ $
- -----------------------------------------------------------------------------------------
[In thousands of U.S. dollars]
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings 748 581
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Amortization of long-term debt discount 535 456
Depreciation and amortization 2,069 3,105
Deferred income taxes recovered (128) (107)
Change in assets and liabilities:
Increase in accounts receivable (11,967) (15,925)
Increase in inventories (1,352) (4,198)
Decrease in accounts payable and accrued liabilities (2,477) (1,491)
Decrease in income taxes payable (59) (1,052)
- -----------------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (12,631) (18,631)
- -----------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in bank indebtedness 8,152 16,900
Proceeds of long-term debt and capital lease obligations 50 50
Repayment of long-term debt and capital lease obligations (471) (2,610)
Dividends paid (609) --
- -----------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 7,122 14,340
- -----------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to fixed assets (1,262) (2,122)
- -----------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (1,262) (2,122)
- -----------------------------------------------------------------------------------------
Translation adjustment 20 289
- -----------------------------------------------------------------------------------------
NET DECREASE IN CASH (6,751) (6,124)
Cash, beginning of period 7,388 6,901
- -----------------------------------------------------------------------------------------
CASH, END OF PERIOD 637 777
- -----------------------------------------------------------------------------------------
</TABLE>
[a] On December 2, 1996, management of the Company (SHC) adopted a plan to
dispose of its outdoor division. The sale of the outdoor division was
substantially completed in October 1997. The balance sheet as of September 1997
and the statement of cash flows for the 9 months ended September 1997 included
the assets and liabilities of the outdoor division.
<PAGE>
(b) Pro forma Financial Information
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SLM INTERNATIONAL, INC.
SEPTEMBER 26, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
SLM Sports
International Holdings Purchase
Inc. Corp. Adjustments Pro Forma
------------- -------- ----------- ---------
$ $ $ $
<S> <C> <C> <C> <C>
ASSETS
CURRENT
Cash 386 637 - 1,023
Accounts receivable 33,477 36,051 (500)(b) 69,028
Inventories 29,632 17,159 - 46,791
Prepaid expenses and other assets 4,344 - - 4,344
-------- -------- ------- -------
TOTAL CURRENT ASSETS 67,839 53,847 (500) 121,186
Fixed assets 8,771 12,552 - (c) 21,323
Intangible and other assets 41,234 18,092 4,115 (d) 96,738
(514)(e)
33,811 (f)
Deferred income taxes - 4,642 - 4,642
-------- -------- ------- -------
TOTAL ASSETS 117,844 89,133 36,912 243,889
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Short-term debt 16,599 12,426 1,272 (g) 30,297
Accounts payable and accrued liabilities 15,481 8,573 10,029 (h) 34,083
Income taxes payable 937 641 - 1,578
Liabilities subject to compromise under
reorganization proceedings 1,130 - - 1,130
Long term debt, current portion 2,519 186 (2,700)(i) 5
-------- -------- ------- -------
TOTAL CURRENT LIABILITIES 36,666 21,826 8,601 67,093
Long term debt 11,250 24,035 93,259 (j) 93,340
(35,204)(i)
Deferred income taxes 1,402 2,196 - 3,598
-------- -------- ------- -------
TOTAL LIABILITIES 49,318 48,057 66,656 164,031
-------- -------- ------- -------
STOCKHOLDERS'EQUITY
Capital stock 65 54,725 (54,725)(a) 12,565
12,500 (k)
Additionnal paid-in capital 66,515 - 66,515
Retained earnings 4,815 (9,338) 9,338 (a) 3,647
(1,168)(d)
Foreign currency translation adjustments (2,869) (4,311) 4,311 (a) (2,869)
-------- -------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 68,526 41,076 (29,744) 79,858
======== ======== ======= =======
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 117,844 89,133 36,912 243,889
======== ======== ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
SLM INTERNATIONAL, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 26, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SLM Sports
International Holdings Purchase
Inc. Corp. Adjustments Pro Forma
--------------- -------- ----------- ---------
$ $ $ $
<S> <C> <C> <C> <C>
Net sales 76,074 59,734 135,808
Cost of goods sold 45,190 34,684 79,874
--------- ------- -------- ---------
Gross profit 30,884 25,050 -- 55,934
Selling, general and administrative expense 26,405 20,319 46,724
Amortization of excess reorganization value 1,829 -- 1,829
Amortization of goodwill -- 399 885 (l) 1,284
--------- ------- -------- ---------
Operating income (loss) 2,650 4,332 (885) 6,097
Other (income) expense, net (4,026) (52) 760 (m) (3,318)
Interest expense 2,369 2,986 4,609 (n) 9,964
--------- ------- -------- ---------
Income (loss) before income taxes 4,307 1,398 (6,254) (549)
Income taxes 2,351 650 (2,439)(o) 562
--------- ------- -------- ---------
Net income (loss) 1,956 748 (3,815) (1,111)
========= ======= ======== =========
Net income (loss) per share
Basic net income (loss) per share 0.30 (0.17)
========= =========
Diluted net income (loss) per share 0.27 (0.17)
========= =========
Average common shares 6,500,484 6,500,484
========= =========
Average common shares and
equivalent shares 7,120,642 7,120,642
========= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
"RECLASSIFICATIONS HAVE BEEN MADE TO THE SPORTS HOLDINGS CORP. HISTORICAL
UNAUDITED CONSOLIDATED FINANCIAL INFORMATION TO CONFORM TO
SLM INTERNATIONAL, INC'S PRESENTATION"
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
SLM INTERNATIONAL, INC.
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
New SLM Old SLM
April 12 January 1 Sports
through to Holdings Purchase
December 31 April 11 Corp. Adjustments Pro Forma
----------- ---------- ---------- ---------- ----------
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Net sales 98,215 25,539 85,650 209,404
Cost of goods sold 57,768 16,007 49,303 123,078
---------- ---------- ---------- --------- ---------
Gross profit 40,447 9,532 36,347 -- 86,326
Selling, general and administrative expense 26,916 11,321 27,572 65,809
Amortization of excess reorganization value 1,712 707 -- 2,419
Amortization of goodwill -- -- 532 1,181 (l) 1,713
---------- ---------- ---------- --------- ---------
Operating income (loss) 11,819 (2,496) 8,243 (1,181) 16,385
Other expense, net 519 403 633 1,027 (m) 2,582
Interest expense 3,808 1,578 4,149 6,145 (n) 15,680
---------- ---------- ---------- --------- ---------
Income (loss) before income taxes 7,492 (4,477) 3,461 (8,353) (1,877)
Income taxes 4,633 1,888 998 (3,258)(o) 4,261
---------- ---------- ---------- --------- ---------
Net income (loss) 2,859 (6,365) 2,463 (5,095) (6,138)
========== ========== ========== ========= =========
Net income (loss) per share
Basic net income (loss) per share 0.44 (0.94)
========== =========
Diluted net income (loss) per share 0.41 (0.94)
========== =========
Average common shares 6,500,000 6,500,000
========== =========
Average common shares and
equivalent shares 6,957,017 6,957,017
========== =========
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial statements.
"RECLASSIFICATIONS HAVE BEEN MADE TO THE SPORTS HOLDINGS CORP.
HISTORICAL UNAUDITED CONSOLIDATED FINANCIAL INFORMATION TO CONFORM TO
SLM INTERNATIONAL, INC'S PRESENTATION"
<PAGE>
SLM INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents the elimination of Sports Holdings Corp.'s historical equity
and SLM International Inc.'s acquisition costs capitalized at September 26,
1998. A reconciliation of the allocation of the excess of the purchase
price over the book value of the net assets acquired is provided below.
Book value of tangible net assets acquired
Capital stock $ 54,725
Retained earnings (9,338)
Foreign currency translation adjustments (4,311)
Acquired intangibles (18,092)
--------
22,984
To adjust the book value of balance sheet items to
their estimated fair value :
Receivables (500)
Accrued liabilities (11,564)
--------
10,920
Net purchase price
Cash paid at closing 60,367
Acquisition costs including legal and
accounting fees 1,942
--------
62,309
--------
Excess of the purchase price recorded as goodwill 51,389
Carrying amount of goodwill in Sports
Holdings Corp.'s records (17,578)
--------
Additional goodwill arising from acquisition 33,811
========
(b) To provide for the potential uncollectibility of certain amounts.
(c) The fair market value of Sports Holdings Corp.'s fixed assets is considered
to approximate its net book value in Sports Holdings Corp.'s historical
financial statements.
(d) To adjust the value of the deferred financing costs as follows :
<TABLE>
<CAPTION>
<S> <C>
To write off the carrying amount of deferred financing costs by SLM
International, Inc. on credit facilities being refinanced. (1,168)
To record deferred financing costs related to the refinancing of
SLM International Inc.'s credit facilities and financing of the
acquisition of Sports Holdings Corp. 5,283
======
4,115
======
</TABLE>
(e) To write off the carrying amount of deferred charges by Sports Holdings
Corp.
<PAGE>
SLM INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(f) To record the additional goodwill arising from the acquisition totaling
$33.8 million, as noted in adjustment (a).
(g) Issuance of preferred stock $ 12,500
Proceeds of 11.25% Term Loan 93,259
Repayment of Sports Holdings Corp's long-term debt (24,135)
Repayment of SLM International, Inc.'s long-term debt (13,769)
Cash paid for acquisition, selling and financing costs (5,940)
Cash paid to acquire the shares of Sports Holdings Corp. (63,187)
========
(1,272)
========
(h) To record accrued liabilities related to certain acquisition and financing
costs that were not financed by the 11.25% Term Loan, for amounts paid to
retain certain key employees as well as for amounts related to certain
restructuring charges.
(i) To record the repayment of long-term debt by both companies prior to the
acquisition of the shares of Sports Holdings Corp. in accordance with the
terms of the refinancing agreement.
(j) To record the proceeds from the issuance of the 11.25% Term Loan issued to
finance the acquisition of the shares of Sports Holdings Corp.
(k) To record the proceeds from the issuance of preferred stock.
(l) To amortize goodwill on a straight-line basis.
(m) To reflect the increase in deferred financing amortization expense based on
a straight-line basis over 36 months.
(n) To record interest expense on the additionnal long-term debt.
(o) To record the tax effects of the pro forma adjustments.
<PAGE>
(c) Exhibits
2.1 Agreement and Plan of Reorganization , dated as of October 6,
1998, among SLM International, Inc., Sports Maska Inc., SLM
Acquisition Corp. and Sports Holding Corp.
10.1 Form of Voting Agreement, dated as of October __, 1998, among SLM
International, Inc., SLM Acquisition Corp. and the Stockholder whose
signature appears on the signature page thereto.
10.2 Preferred Stock and Warrant Purchase Agreement, dated as of
November 19, 1998, by and between Phoenix Home Life Mutual Insurance
Company and SLM International, Inc.
10.3 Credit Agreement, dated November 19, 1998 , among SLM
International, Inc. and Sports Maska Inc. (as Borrowers) and Caisse de
Depot et Placement du Quebec (as Agent and Lender)
23.1 Auditors' Consent
99.1 Press release of Registrant, dated November 20, 1998.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
THE HOCKEY COMPANY
February 9, 1999
By: /s/ RUSSELL J. DAVID
--------------------------------------
Name: Russell J. David
Title: Senior Vice President, Finance
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
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2.1 Agreement and Plan of Reorganization, dated as of October 6,
1998, among SLM International, Inc., Sports Maska Inc., SLM
Acquisition Corp. and Sports Holding Corp.
10.1 Form of Voting Agreement, dated as of October _, 1998, among
SLM International, Inc., SLM Acquisition Corp. and the
Stockholder whose signature appears on the signature page
thereto
10.2 Preferred Stock and Warrant Purchase Agreement, dated as of
November 19, 1998, by and between Phoenix Home Life Mutual
Insurance Company and SLM International, Inc.
10.3 Credit Agreement, dated November 19, 1998, among SLM
International, Inc. and Sports Maska Inc. (as Borrowers) and
Caisse de Depot et Placement du Quebec (as Agent and Lender)
23.1 Auditors' Consent
99.1 Press Release of Registrant, dated November 20, 1998.
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
SLM INTERNATIONAL, INC.
SPORT MASKA INC.
SLM ACQUISITION CORP. AND
SPORTS HOLDINGS CORP.
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AGREEMENT AND PLAN OF REORGANIZATION dated as of October 6, 1998 and
executed October 7, 1998, among SLM INTERNATIONAL, INC., a Delaware corporation
("Parent"), SPORT MASKA INC., a corporation continued under the laws of the
province of New Brunswick and a wholly-owned subsidiary of Parent ("Maska"), SLM
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"), and SPORTS HOLDINGS CORP., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Maska and the
Company have approved the acquisition (the "Tropsport Share Purchase") by Maska
of all of the issued and outstanding equity of Tropsport Acquisitions Inc., a
corporation organized under the Canada Business Corporations Act and a
wholly-owned subsidiary of the Company ("Tropsport"), pursuant and subject to
the terms and conditions of this Agreement; and
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub with and into the Company (the "Merger"),
pursuant and subject to the terms and conditions of this Agreement (the
Tropsport Share Purchase and the Merger, collectively, the "Reorganization");
and
WHEREAS, Parent, Sub, Maska and the Company desire to make certain
representations, warranties and agreements in connection with the Reorganization
and to prescribe various conditions to the Reorganization; and
WHEREAS, as a condition and inducement to Parent's, Maska's and Sub's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, certain
stockholders of the Company are entering into Voting Agreements with Parent,
pursuant to which agreements such stockholders agree, among other things, to
vote their Company Stock in favor of the Reorganization;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows
(with capitalized terms used herein without textual definition being defined in
Appendix I hereto):
1. THE REORGANIZATION
1.1. Tropsport Share Purchase. Subject to the provisions of this Agreement,
at the Closing, the Company shall sell, convey, assign, transfer and deliver to
Maska, and Maska will purchase, acquire and accept from the Company, (a)
14,194,100 Common Shares of Tropsport, (b) 22,162,370 Class A Preferred Shares
of Tropsport, and (c) 7,512,280 Class B Preferred Shares of Tropsport
(collectively, the "Tropsport Shares") for a purchase price of $40,000,000 (the
"Tropsport Share Purchase Price"). Such sale, conveyance, assignment, transfer
and
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delivery shall be effected by delivery by the Company of stock certificates
representing the Tropsport Shares to Maska endorsed in blank or accompanied by
duly executed stock powers.
1.2. Application of the Tropsport Share Purchase Price. Subject to the
provisions of this Agreement, at the Closing, the Company and Parent shall cause
the proceeds of the Tropsport Share Purchase Price to be applied, as follows:
(a) First, to the satisfaction of obligations in respect of Funded Debt to
be satisfied pursuant to the provisions of Sections 1.6(a), (b) and (d),
provided, however, that in connection with the satisfaction (or partial
satisfaction) of any such Funded Debt in respect of which one or more of the
Subsidiaries of the Company is an obligor, the Company shall be deemed,
immediately prior to such application, to have made a loan or capital
contribution, as applicable, to each such Subsidiary in an amount equal to the
respective amount of proceeds of the Tropsport Share Purchase Price applied to
the satisfaction (or partial satisfaction) of the obligation of such Subsidiary,
and
(b) Next, to the redemption, at a price per share equal to the redemption
price provided for in Section 5 of the Certificate of Designation filed by the
Company with the Secretary of State of the State of Delaware on May 12, 1994
which forms a part of the Company's Certificate of Incorporation which
redemption price shall be equivalent as of the Closing Date to the Preferred
Cash Share Price, of as many shares of Company Preferred Stock as can be
redeemed by payment of the balance, if any, remaining of the Tropsport Share
Purchase Price after application thereof in accordance with clause (a) hereof
(the dollar amount so applied, the "Preferred Stock Redemption Amount").
1.3. Effective Time of the Merger. Subject to the provisions of this
Agreement, and immediately following the consummation of the Tropsport Share
Purchase and the application of the Tropsport Share Purchase Price in accordance
with Section 1.2, a certificate of merger (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged by the Surviving Corporation and
thereafter delivered to the Secretary of State of the State of Delaware, for
filing, as provided in the General Corporation Law of the State of Delaware (the
"DGCL"), on the Closing Date. The Merger shall become effective upon the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time").
1.4. Closing. The closing of the Reorganization (the "Closing") will take
place at the offices of Jacobs Persinger & Parker, 77 Water Street, New York,
New York 10005 at 9:00 a.m. on October 28, 1998, or such other date or time as
the parties may mutually determine (the "Closing Date") provided that the
closing conditions set forth in Article 7 have been met or waived as provided in
Article 7 at or prior to the Closing, and if any of such conditions shall not
have been met or waived, then the Closing shall be adjourned until the third
Business Day following the date on which the last of such conditions has been
met or waived; provided, however, that the Closing Date shall in no event be
later than 11:59 p.m., November 30, 1998 (the "Termination Date").
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1.5. Effects of the Merger.
(a) At the Effective Time,
(i) the separate existence of Sub shall cease and Sub shall be merged
with and into the Company (Sub and the Company are sometimes referred to
herein as the "Constituent Corporations" and the Company is sometimes
referred to herein as the "Surviving Corporation"),
(ii) the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the DGCL,
(iii) the By-laws of the Company as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL,
(iv) the directors of Sub at and as of the Effective Time shall become
the initial directors of the Surviving Corporation, and
(v) the officers of the Company at and as of the Effective Time, shall be
the initial officers of the Surviving Corporation.
(b) At and after the Effective Time, the Merger shall have the effects
specified under the DGCL, and the Surviving Corporation shall possess all the
rights, privileges, powers and franchises as well of a public as of a private
nature, and be subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations; and all and singular the rights, privileges,
powers and franchises of each of the Constituent Corporations, and all property,
real, personal and mixed, and all debts due to either of the Constituent
Corporations on whatever account, as well as for stock subscriptions as all
other things in action or belonging to each of the Constituent Corporations
shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they were
of the Constituent Corporations, and the title to any real estate vested by deed
or otherwise, under the laws of Delaware, in either of the Constituent
Corporations shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
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1.6 Certain Concurrent Transactions.
(a) On the Closing Date, concurrent with and as a condition to the Closing,
all outstanding loans, principal, interest, penalties, premiums, fees and other
indebtedness (collectively, the "Funded Debt") then owing by any Acquired
Company under any of the following shall, subject to the provisions of Section
1.6(c), be paid in full on behalf of such Acquired Company:
(i) (A) the working capital facility of Tropsport under that certain
facility letter dated August 5, 1998 between Hongkong Bank of Canada and
Tropsport; (B) the working capital facility of Jofa AB under those certain
credit facilities dated February 16, 1998 and June 25, 1998 between
Nordbanken AB and Jofa AB; (C) the working capital facility of Jofa Norge
A/S under that certain credit facility dated September 14, 1994 between
Landsbanken A/S and Jofa Norge A/S; (D) the working capital facility of KHF
Sports Oy under that certain credit facility dated June 25, 1997 between
Merita Nordbanken (formerly Merita Pankki Oy) and KHF Sports Oy; (E) the
working capital facility of KHF Sports Oy under that certain credit
facility dated November 29, 1996 between Leonia Bank plc (formerly
Postipankki Oy ja) and KHF Sports Oy; and (F) the aggregate amount of all
overdrafts, if any, on any bank accounts maintained by any Acquired Company
(collectively and net of the aggregate amount of all cash or cash
equivalents in any bank accounts maintained by any Acquired Company, the
"Working Capital Borrowings");
(ii) the Company's 12.00% Subordinated Notes due 2000 in the aggregate
original principal amount of $24,000,000 (the "Subordinated Notes") and the
related Note and Stock Purchase Agreements dated as of December 29, 1992,
as amended, between the Company and Equitable Capital Private Income and
Equity Partnership II, L.P. and National Union Fire Insurance Company of
Pittsburgh, PA; and
(iii) (A) Master Lease Agreement No. 995113 PQ with Hongkong Bank
Leasing, Division of Hongkong Bank of Canada in the name of Tropsport
Acquisitions Inc.; (B) demand loan of KHF Sports Oy with Bank of Finland,
Valtionkonttori Account No. 800019-3337; (C) pension fund liability of Jofa
AB under the FPG/PRI-System established pursuant to Swedish law; (D)
pension liabilities of Jofa AB to former employees listed on Schedule
1.6(a)(iii)(D); (E) STP loan of Jofa AB to AMF Pension; (F) educational
fund liability of Jofa AB established in connection with the sale of the
share capital of Jofa AB by AB Catena; and (G) any other Funded Debt (not
included in clause (i) or (ii) above) of the Company in respect of
indebtedness for borrowed money or the deferred purchase price of assets or
other property (including all notes payable and drafts accepted
representing extensions of credit and all obligations evidenced by bonds,
debentures, notes or other similar instruments but excluding indebtedness
of any Acquired Company to any other Acquired Company and payables incurred
in the
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ordinary course of business payable and outstanding as of the Closing Date
(collectively, the "Other Debt").
(b) Subject to the provisions of Sections 1.2(a) and 1.6(c), Parent agrees
to provide or cause to be provided to the Company at Closing funds or substitute
financing and other undertakings and assurances sufficient for, and the Company
agrees to use such funds or substitute financing only for:
(i) the payment in full as aforesaid of all Funded Debt by wire
transfers of immediately available funds, in the currencies called for in
the applicable agreements, instruments or other documents evidencing or
providing therefor (the "Applicable Credit Documents"), and
(ii) the discharge or release of any liability or obligation of any
Acquired Company in respect of outstanding letters of credit (or similar
undertakings) issued under any Applicable Credit Documents,
in each case, against delivery to Parent of any agreement, instrument,
certification, statement or other document as Parent may reasonably request to
evidence or provide for the termination of the Applicable Credit Documents,
release or discharge of each Acquired Company's liabilities and obligations
thereunder (other than residual liabilities, such as indemnities and liabilities
for post-termination balance reconciliations, which customarily survive
termination) and the termination, release or discharge of all Liens securing any
Funded Debt.
(c) The provisions of Sections 1.6(a) and 1.6(b) to the contrary
notwithstanding, Parent shall have the right to elect to cause or permit any
obligation constituting Funded Debt, other than the Subordinated Notes, to
remain outstanding and in effect from and after the Effective Time by
designating such obligation in a notice given to the Company no later than ten
Business Days prior to the Closing Date (the obligations so designated, the
"Designated Funded Debt"). In the event Parent shall elect to give the Company a
notice pursuant to this Section 1.6(c), then any provision of this Agreement to
the contrary notwithstanding with respect to the Designated Fund Debt:
(i) no Acquired Company shall have any obligation (other than to
provide reasonable assistance, without cost or expense to any Acquired
Company) to obtain from the obligee any Consent required to permit the
Designated Funded Debt to remain so outstanding and in effect without
Violation; and
(ii) the absence of any such Consent or the existence of any such
Violation shall not relieve Parent, Maska or Sub from their obligations to
effect the Reorganization.
(d) Parent may at Closing (or may cause Maska to) (i) pay directly to the
holder(s) of any Funded Debt for the benefit of the Company any amount required
to be paid pursuant to this
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Section 1.6; any amounts so paid shall be deemed to have been paid at Closing to
the Company and simultaneously paid by the Company to the applicable holders,
and (ii) deposit or cause to be deposited with the Paying Agent for the benefit
of the holders of Company Stock, the amount, if any, by which the Tropsport
Share Purchase Price exceeds the aggregate amount of payments required to be
made pursuant to Section 1.2.
2. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; CONVERSION OF CERTIFICATES.
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of capital
stock of the Company, or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the capital
stock of Sub shall be converted into and become one (1) fully paid and
nonassessable share of Class A Common Stock, par value $.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock. All shares of capital stock of the
Company that are owned by the Company as treasury stock shall be canceled and
retired and shall cease to exist and no other consideration shall be delivered
in exchange therefor.
(c) Conversion of Company Preferred Stock. At the Effective Time, each
share of 6.5% Cumulative Redeemable Convertible Preferred Stock, par value $.01
per share, of the Company ("Company Preferred Stock") outstanding immediately
prior to the Effective Time and after giving effect to any redemption of Company
Preferred Stock required to be made pursuant to Section 1.2 (except Dissenting
Shares) shall be converted into the right to receive from Parent an amount in
cash equal to the sum of (i) $100 plus (ii) the Accrued Dividend Amount (the
"Preferred Cash Share Price") in accordance with the terms set forth in this
Agreement, the Letter of Transmittal and the Paying Agent Services Agreement.
The product of (x) the Preferred Cash Share Price, multiplied by (y) the total
number of shares (including Dissenting Shares) of Company Preferred Stock
outstanding immediately prior to the Effective Time (and after giving effect to
any redemption of Company Preferred Stock required to be made pursuant to
Section 1.2), is referred to in the Agreement as the "Preferred Stock Merger
Consideration". All such shares of Company Preferred Stock, other than
Dissenting Shares, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Preferred Stock shall cease to have any
rights with respect thereto, except the right to receive the Preferred Cash
Share Price per full and fractional share evidenced by such certificate (without
any interest payable thereon), upon the surrender of such certificate and
delivery of an executed Letter of Transmittal (the "Letter of Transmittal") in
the form of Exhibit 2.1(c) hereto.
(d) Conversion of Company Common Stock. At the Effective Time, each share
of Class A Common Stock, par value $.01 per share ("Class A Common"), or Class B
Common
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Stock, par value $.01 per share ("Class B Common" and together with the Class A
Common, collectively, "Company Common Stock"), of the Company outstanding
immediately prior to the Effective Time (except Dissenting Shares) shall be
converted into the right to receive from Parent (and, in the circumstances
described in Section 1.6(d)(ii), from the Company) an amount in cash, payable at
or about the Effective Time, equal to the quotient of (x) the Common Stock
Merger Consideration, divided by (y) the total number of shares (including
Dissenting Shares) of Company Common Stock outstanding immediately prior to the
Effective Time (the "Common Cash Share Price"), in accordance with the terms set
forth in this Agreement, the Letter of Transmittal and the Paying Agent Services
Agreement. All such shares of Company Common Stock, other than Dissenting
Shares, shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate representing
any such shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Common Cash Share Price per
full and fractional share evidenced by such certificate (without any interest
payable thereon), upon the surrender of such certificate and delivery of an
executed Letter of Transmittal. The Company Common Stock and Company Preferred
Stock are sometimes referred to herein collectively as the "Company Stock" and
the respective consideration payable in the Merger to the respective holders
(other than Dissenting Holders) of the Company Preferred Stock and Company
Common Stock, as set forth in Section 2.1(c) and this Section 2.1(d), is
sometimes referred to herein as the "Merger Consideration".
(e) Dissenting Shares. Any shares of Company Preferred Stock or Company
Common Stock held by a Person who validly objects, with respect to the shares of
Company Preferred Stock and/or Company Common Stock so held, to the Merger and
otherwise complies with all provisions of Section 262 of the DGCL concerning
appraisal rights with respect to such shares are referred to herein as
"Dissenting Shares" and such holder thereof is referred to herein as a
"Dissenting Holder". Dissenting Shares shall not be converted as described in
Section 2.1(c) or Section 2.1(d) but shall from and after the Effective Time
represent only the right to receive such consideration as may be determined to
be due to the Dissenting Holder in respect thereof pursuant to the DGCL;
provided, however, that Dissenting Shares as to which the Dissenting Holder
shall, after the Effective Time, withdraw his demand for appraisal or lose his
right of appraisal, in either case pursuant to the DGCL, shall be deemed to be
converted, as of the Effective Time, into the right to receive the Merger
Consideration applicable to such shares (without any interest payable thereon).
2.2 Schedules of Indebtedness; Preferred Cash Share Price; Reserve Amount.
(a) The Company will prepare and deliver to the Parent:
(i) five days prior to the Closing Date, a schedule, certified as true
and correct by the Chief Financial Officer of the Company, setting forth
estimates as of the Closing Date of the Subordinated Notes Discharge
Amount, the Working Capital Borrowings Discharge Amount, the Other Debt
Discharge Amount, and the Preferred Cash Share Price, and
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(ii) on the day prior to the Closing Date, a schedule, certified as
true and correct by the Chief Financial Officer of the Company, setting
forth estimates as of the Closing Date of the Subordinated Notes Discharge
Amount, the Working Capital Borrowings Discharge Amount, the Other Debt
Discharge Amount, and the Preferred Cash Share Price and in the case of any
estimates in respect of "Discharge Amounts" copies of supporting
documentation received from the holders thereof.
(b) The Company will prepare and deliver to the Parent:
(i) five days prior to the Closing Date a schedule, certified as true
and correct by the Chief Financial Officer of the Company, setting forth an
estimate of the fees and expenses and other matters (including, without
limitation, Retention Payments) payable by the Company pursuant to Section
6.7 and any other provision of this Agreement.
(ii) on the day prior to the Closing Date, a schedule, certified as
true and correct by the Chief Financial Officer of the Company, setting
forth as of the Closing Date the fees and expenses and other matters
(including, without limitation, Retention Payments) payable by the Company
pursuant to Section 6.7 and any other provision of this Agreement, together
with invoices, receipts, and bills or other statements detailing the
amounts thereof (the total of such amounts, the "Reserve Amount").
(c) The Company will afford representatives of the Parent a reasonable
opportunity to meet with the individuals responsible for the preparation of the
schedules and certificates described in this Section 2.2 prior to and following
the delivery thereof and to ask questions of such individuals concerning the
contents of such schedules and certificates.
2.3 Paying Agent. Parent and the Company have designated United States
Trust Company of New York (the "Paying Agent"), pursuant to the terms of a
Paying Agent Services Agreement (the "Paying Agent Services Agreement") in the
form of Exhibit 2.3(a) hereto, to act as agent for the holders of Company Stock
to receive Merger Consideration pursuant to Section 2.1(c) or Section 2.1(d). At
or immediately prior to the Closing, Parent (and, in the circumstances described
in Section 1.6(d)(ii), the Company) shall deposit or cause to be deposited with
the Paying Agent in trust for the benefit of such holders of Company Stock the
cash necessary to allow the Paying Agent to pay the aggregate Merger
Consideration which is payable immediately after the Effective Time to such
holders. Thereafter, Parent shall make such additional cash deposits with the
Paying Agent as shall be necessary to make payment of the Merger Consideration
in respect of the Dissenting Shares of any Dissenting Holder who shall become
entitled to payment pursuant Section 2.1(e) as a result of the withdrawal of
demand for or loss of the right of appraisal.
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2.4 Procedure for Payment.
(a) Payment Procedures. As soon as reasonably practicable, the Secretary of
Parent shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which represent outstanding shares of Company
Stock to be converted into the right to receive Merger Consideration, and to any
Person who becomes such a holder of record prior to the Effective Time,
(i) a Letter of Transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent), and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancellation to the Paying Agent or to
such other agent or agents as may be mutually appointed by Parent and the
Company, together with the Letter of Transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration pursuant to the provisions of this Agreement, the Letter of
Transmittal and the Paying Agent Services Agreement; and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Company Stock which is not registered in the transfer records of the Company,
the Merger Consideration may be issued to a transferee if the Certificate
representing such Company Stock is presented to the Paying Agent, accompanied by
all documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.4, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by and subject to the
conditions of this Section 2.4.
(b) No Further Stock Transfers. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article 2.
(c) Distribution of Merger Consideration. Immediately after the Effective
Time, the Paying Agent shall make payment of the Merger Consideration in
accordance with the terms of this Agreement, the Letter of Transmittal and the
Paying Agent Services Agreement, to such holders of Company Stock who are
entitled to the same pursuant to Sections 2.1(c), 2.1(d) and 2.4.
(d) Release of Funds held by Paying Agent. Any portion of the Merger
Consideration that has not been duly claimed by the former stockholders of the
Company in accordance with
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the terms hereof prior to the expiration of the 12 month period following the
date such portion of the Merger Consideration was deposited with the Paying
Agent shall be delivered to Parent at the end of such period. Any former
stockholder of the Company shall, subject to the other provisions of this
Agreement and to applicable escheat and abandoned property laws, thereafter look
only to Parent for delivery of the Merger Consideration (without interest) in
respect of the Company Stock previously held by such stockholder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Parent, Maska and Sub as follows:
3.1 Organization, Standing and Power.
(a) Schedule 3.1(a) hereto contains a complete and accurate list for each
Acquired Company of its name, its jurisdiction of incorporation or organization,
identification of the type of entity it is, other jurisdictions in which it is
authorized to do business, the names of its directors and officers (or
comparable executives) and, in the case of each Subsidiary of the Company, its
capitalization (including the identity of each equity holder and the number of
shares or other ownership interest ("Subsidiary Equity") held by each such
equity holder).
(b) The Company is a corporation and each other Acquired Company is a
corporation or other entity described in Schedule 3.1(a) hereto duly
incorporated or organized, validly existing, and in good standing under the laws
of its jurisdiction of incorporation or organization, with full corporate or
other entity power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use. Each Acquired Company is duly qualified to do business as a foreign
corporation or other entity and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification, except where the failure to be so qualified would not have a
Company Material Adverse Effect.
(c) The Company has delivered to Parent, Maska and Sub correct and complete
copies of the Organizational Documents of each Acquired Company, as currently in
effect.
3.2 Capital Structure.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 1,000,000 shares of Class A Common, 1,000,000 shares of Class B
Common and 125,000 shares of preferred stock, par value $.01 per share, all of
which preferred stock has been issued in one series constituting the Company
Preferred Stock.
(b) At the close of business on the last Business Day immediately preceding
the date hereof,
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(i) 125,000 shares of Company Preferred Stock were outstanding,
(ii) (A) 48,330 shares of Class B Common were outstanding, and (B)
354,219 shares of Class B Common were reserved for issuance upon conversion
of the outstanding shares of Class A Common,
(iii) (A) 354,219 shares of Class A Common were outstanding, (B)
48,330 shares of Class A Common were reserved for issuance upon conversion
of the outstanding shares of Class B Common, (C) 69,444 shares of Class A
Common were reserved for issuance upon conversion of the outstanding shares
of Company Preferred Stock, (D) 7,718 shares of Class A Common were
reserved for issuance upon exercise of outstanding stock options pursuant
to The Sports Holdings Corp. 1993 Management Equity Ownership Program and
The Sports Holdings Corp. 1994 Management Equity Ownership Program
(collectively, the "MEOP"), and (E) 1,590 shares of Class A Common were
held by the Company as treasury shares, and
(iv) no bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into securities having the right to vote) on
any matters on which stockholders may vote ("Voting Debt") of or pertaining
to the Company, were issued or outstanding.
(c) All outstanding shares of Company Stock are validly issued, fully paid
and nonassessable and none of them is subject to preemptive rights. To the best
of the Company's Knowledge, except as set forth in Schedule 3.2(c) hereto, there
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of the Company. Except for the
conversion features pertaining to the Company Preferred Stock and to the Class A
Common and Class B Common vis-a-vis each other, for and as contemplated by the
MEOP and outstanding options granted under the MEOP, and as set forth in
Schedule 3.2(c) hereto, as of the date hereof, there are no options, warrants,
calls, rights, agreements or other instruments or arrangements to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock, other equity, or any Voting Debt of the Company or obligating the
Company to grant, extend or enter into any such option, warrant, call, right,
agreement or other instrument or arrangement.
(d) All outstanding Subsidiary Equity of each Subsidiary of the Company is
validly issued, fully paid and nonassessable (or the fullest equivalent under
Applicable Laws of foreign jurisdictions) and none of it is subject to
preemptive rights. Except as set forth in Schedule 3.2(d) hereto, there are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of any Subsidiary Equity. There are no options, warrants, calls,
rights, agreements or other instruments or arrangements to which the Company or
any Subsidiary of the Company is a party or by which any of them is bound
obligating the Company or any Subsidiary
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of the Company to issue, deliver or sell, or cause to be issued, delivered or
sold, outstanding or additional Subsidiary Equity or any Voting Debt of or
pertaining to any Subsidiary of the Company or obligating the Company or any
Subsidiary of the Company to grant, extend or enter into any such option,
warrant, call, right, agreement or other instrument or arrangement. All of the
outstanding Subsidiary Equity of each Subsidiary of the Company is owned of
record and beneficially by one or more of the Acquired Companies free and clear
of all Liens other than Permitted Liens.
(e) Except as set forth on Schedule 3.2(e), none of the Acquired Companies
own, directly or indirectly, any capital stock or other ownership interests in
any corporation, partnership, business association, joint venture or other
entity (other than the Company's Subsidiaries) or is obligated to make any
capital contribution or advance to, or other investment in, any Person (other
than advances to employees, sales or other agents, made in the ordinary course
of business).
(f) The authorized capital stock of Tropsport consists of (i) an unlimited
number of Common Shares, (ii) an unlimited number of Class A Preferred Shares,
(iii) an unlimited number of Class B Preferred Shares, (iv) an unlimited number
of Class C Preferred Shares, and (v) an unlimited number of Class D Preferred
Shares. The Tropsport Shares constitute all of the issued and outstanding shares
in the capital of Tropsport. The delivery of certificates evidencing the
Tropsport Shares, endorsed in blank or accompanied by duly executed stock
powers, to Maska pursuant to the provisions of this Agreement, against delivery
of the Tropsport Share Purchase Price, will transfer to Maska the fullest
ownership interest therein provided for under Applicable Law, free and clear of
all Liens other than Permitted Liens.
3.3 Authority; No Conflict.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and, subject to approval of this Agreement by the
stockholders of the Company, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and, subject to the
approval of this Agreement by the stockholders of the Company, the consummation
by the Company of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of the Company. The
Board of Directors of the Company has approved this Agreement and determined
that the transactions contemplated by this Agreement are in the best interest of
its stockholders and to recommend to such stockholders that they vote in favor
thereof. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, except as such enforcement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to the enforcement of creditors' rights generally, and (ii) general
equitable principles.
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(b) Except as set forth in Schedule 3.3(b) hereto, the execution and
delivery of this Agreement by the Company does not, and the consummation by the
Company of the transactions contemplated hereby will not,
(i) conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of
a benefit under, or the creation of a Lien on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration,
loss or creation, a "Violation"), pursuant to any provision of the
Organizational Documents of any Acquired Company, or
(ii) except as contemplated by Section 3.3(c), result in any Violation
of any loan or credit agreement, note, mortgage, indenture, lease, or other
agreement, obligation or instrument, or of any Applicable Law, applicable
to any Acquired Company or its properties or assets which Violations in the
aggregate would have a Company Material Adverse Effect.
(c) Except as set forth in Schedule 3.3(c) hereto, no consent, approval,
waiver, order or authorization of, or registration, declaration, notification or
filing with or to, any Governmental Authority or other Person not a party to
this Agreement (other than as stockholders of the Company) (any such consent,
approval, waiver, order or authorization, a "Consent"; and any such
registration, declaration, notification or filing, a "Filing") is required by
any Acquired Company, or by any Affiliate of the Company with respect to any
Acquired Company, in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except for,
(i) any required Filing of a pre-merger notification report by the
Company under the HSR Act, any required Filing of a pre-notification of the
proposed merger under the Competition Act, and any required Consent of or
Filing with any Governmental Authority under any other applicable Antitrust
Law, or under the Investment Canada Act, and
(ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states and jurisdictions in which the Company is
qualified to do business.
(d) The affirmative vote of the holders of a majority of the votes
entitled to be cast by the holders of all outstanding shares of Class A Common
and Company Preferred Stock voting together as a single class is the only
shareholder vote required to approve the Reorganization.
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3.4 Employee Benefit Plans.
(a) For purposes of this Agreement:
(i) "Benefit Plan" means each and every employee benefit plan,
contract, program, policy or arrangement, including, without limitation,
any pension, retirement or deferred compensation plan, incentive
compensation plan, stock or other equity based plan, unemployment
compensation plan, vacation pay, retention pay, severance pay, notice of
termination, bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements for any current or former
employee, director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding under which or with respect
to which any Acquired Company (or any ERISA Affiliate of any Acquired
Company) has any direct or indirect, actual or contingent liability,
whether or not such arrangements constitute employee benefit plans as
defined in section 3(3) of ERISA;
(ii) "Business Benefit Plan" means any Benefit Plan which provides
benefits exclusively with respect to employees or former employees of the
Acquired Companies in the United States;
(iii) "Canadian Benefit Plan" means any Benefit Plan which provides
benefits exclusively with respect to employees or former employees of the
Acquired Companies in Canada;
(iv) "Group Benefit Plan" means any Benefit Plan, other than a
Business Benefit Plan, which provides benefits with respect to employees or
former employees of the Acquired Companies in the United States;
(v) "Welfare Plan" means any Benefit Plan which is a welfare plan
within the meaning of section 3(1) of ERISA and provides benefits with
respect to employees of the Acquired Companies in the United States;
(vi) "Retiree Welfare Plan" means any Welfare Plan which provides
benefits with respect to employees or former employees of the Acquired
Companies in the United States beyond their retirement or other termination
of service (other than coverage mandated by section 4980B of the Code, the
cost of which is fully paid by the former employee or his dependents); and
(vii) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder.
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(viii) "ERISA Affiliate" means, with respect to an Acquired Company,
any other Person that, together with the Company, would be treated as a
single employer under Section 414 of the Code.
All employees of the Acquired Companies are located in the United States,
Canada, Finland, Sweden or Norway. No employee of the Acquired Companies in any
of the foregoing countries other than the United States and Canada participates
in any Benefit Plan other than as listed pursuant to Section 3.4(i).
(b) Schedule 3.4 hereto sets forth a list of all Business Benefit Plans,
all Group Benefit Plans and all Canadian Benefit Plans. The Company has, with
respect to each such plan, delivered to Parent, Maska and Sub true and complete
copies of: (i) all plan texts and contracts and agreements relating thereto and
for each such plan that is not in writing a description thereof; (ii) all
existing summary plan descriptions; (iii) the most recent annual report
(including all schedules thereto); (iv) the most recent actuarial valuation; and
(v) if the plan is intended to qualify under section 401(a) or 403(a) of the
Code, the most recent determination letter received from the Internal Revenue
Service.
(c) Except as set forth in Schedule 3.4 hereto, with respect to each
Benefit Plan, no Acquired Company or ERISA Affiliate has any direct or indirect,
actual or contingent material liability for such plans, other than to make
payments for contributions, premiums or benefits when due, all of which payments
have been timely made. No assets of any Acquired Company or any ERISA Affiliate
are subject to any Lien under sections 302(f), 306(a), 307(a) or 4068 of ERISA,
or sections 401(a)(29) or 412(n) of the Code or any other Applicable Law
relating to employee benefit plans.
(d) Except as set forth in Schedule 3.4 hereto, with respect to each
Business Benefit Plan, Group Benefit Plan, or Canadian Benefit Plan: (i) each
such plan complies in all material respects in form and operation with
Applicable Law; (ii) each such plan which is intended to be qualified under
sections 401(a) or 403(a) of the Code is so qualified and each such plan which
is intended to be registered under Applicable Law, including the Income Tax Act
(Canada), is so registered; (iii) no payment is required under any such plan
that, by operation of section 280G of the Code, would not be deductible; (iv)
each such plan which is a "group health plan" (as defined in section 607(1) of
ERISA) has been operated in substantial compliance with the provisions of Part 6
of Title I of ERISA and section 4980B of the Code ("COBRA"); (v) there are no
material disputes, actions, suits or claims pending, nor to the Company's
Knowledge threatened, against any such plan; (vi) there have been no material
"prohibited transactions" (as described in section 406 of ERISA or section 4975
of the Code) with respect to any Benefit Plan and no Acquired Company has
engaged in any material prohibited transaction; and (vii) there have been no
acts or omissions by any Acquired Company which have given rise to or could
reasonably be expected to give rise to material fines, penalties, taxes or
related charges under section 502 of ERISA or Chapters 43, 47 or 68 of the Code
or any other Applicable Law relating to Benefit Plans for which any Acquired
Company would be liable (other than fines, penalties, taxes or related
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charges which have been paid or fully reserved against in the Financial
Statements or Interim Financials.)
(e) Schedule 3.4 hereto sets forth a list of all Retiree Welfare Plans.
Except as set forth in Schedule 3.4 hereto, no Business Benefit Plan, Group
Benefit Plan or Canadian Benefit Plan provides for severance pay, notice of
termination, unemployment compensation or any similar payment with respect to
any current or former employee, officer or director of or consultant to any
Acquired Company. Except as set forth in Schedule 3.4 hereto, the consummation
of the transactions contemplated by this Agreement, either separately or in
conjunction with a termination of employment, will not (i) entitle any current
or former employee of the Acquired Companies to severance pay, notice of
termination, unemployment compensation or any similar payment, (ii) accelerate
the time of payment or vesting of or increase the amount of compensation due to
any such current or former employee of the Acquired Companies, or (iii)
constitute or involve a "prohibited transaction" (as defined in section 406 of
ERISA or section 4975 of the Code).
(f) Schedule 3.4 hereto sets forth each Benefit Plan that is subject to
Title IV of ERISA. Except as set forth in Schedule 3.4 hereto, with respect to
such plans, (i) there has been no material reportable event (as described in
section 4043 of ERISA) which has not been waived; (ii) no steps have been taken
to terminate any such plan, (iii) there has been no withdrawal (within the
meaning of section 4063 of ERISA) of a "substantial employer" (as defined in
section 4001(a)(2) of ERISA); (iv) no event or condition has occurred which
could reasonably be expected to constitute grounds under section 4042 of ERISA
for the termination of or the appointment of a trustee to administer any such
plan; and (v) if each such plan were terminated immediately after the Effective
Time, there would be no material unfunded liabilities with respect to any such
plan, its participants or beneficiaries or the Pension Benefit Guaranty
Corporation.
(g) Except as set forth in Schedule 3.4 hereto, no Business Benefit Plan or
Group Benefit Plan is a "multiple employer plan" or a "multi-employer plan",
within the meaning of ERISA or the Code and none of the Acquired Companies has
any direct or indirect, actual or contingent liability with respect to any
partial or complete withdrawal (as such terms are defined in sections 4203 and
4205 of ERISA) from any such multi-employer plan. Except as set forth in
Schedule 3.4 hereto, with respect to any Business Benefit Plan or Group Benefit
Plan that is a multi-employer plan, (i) no such plan is, or to the Company's
Knowledge is expected to be, in the process of reorganization or termination,
(ii) none of the Acquired Companies has received any notice that (A) increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, (B) any such plan is or has been funded at a rate
less than required under section 412 of the Code, or (C) any such plan is or may
become insolvent, and (iii) the Acquired Companies have complied in all material
respects with their obligations to make contributions as required by the terms
of any such plan, the terms of any collective bargaining agreements, and
Applicable Law.
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(h) Except as set forth in Schedule 3.4 hereto, each Canadian Benefit Plan
which is a funded plan is fully funded.
(i) Schedule 3.4 hereto sets forth each pension, retirement, stock option,
stock purchase, savings, profit sharing, deferred compensation, bonus, group
insurance or other incentive or welfare contract, plan or arrangement relating
to or with respect to its business pursuant to which any Foreign Subsidiary is a
party, is bound or has any material liability.
3.5 Labor Relations. Except as set forth in Schedule 3.5 hereto, (a) there
is no pending or, to the Company's Knowledge, threatened strike, picketing, work
stoppage or work slowdown involving employees of the Acquired Companies and
during the past three years there has not been any such action, (b) no union is
certified by the National Labor Relations Board or other Governmental Authority
as collective bargaining agent for employees of any of the Acquired Companies,
(c) no written demand is pending for recognition, no election or campaign for
certification is pending, and, to the Company's Knowledge, no such demand,
election or campaign is scheduled, or was made or scheduled within the past
three years (d) none of the Acquired Companies is a member of an employers
association or a party to a collective bargaining agreement, (e) there is no
unfair labor practice charge or complaint against any of the Acquired Companies
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any similar state or foreign agency, (f) there are no written
grievances pending against any of the Acquired Companies arising out of any
collective bargaining agreement or other grievance procedure, (g) to the
Company's Knowledge, no charges with respect to or relating to any of the
Acquired Companies are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of unlawful
employment practices, (h) the Company has not received written notice of the
intent of any federal, state, local or foreign agency responsible for the
enforcement of any Applicable Laws relating to labor or employment to conduct an
investigation with respect to or relating to any of the Acquired Companies and,
to the Company's Knowledge, no such investigation is in progress, (i) since the
enactment of the Worker Adjustment and Retraining Notification Act (the "WARN
Act"), none of the Acquired Companies has effectuated a "plant closing" or "mass
layoff" (as defined in the WARN Act or any similar state, local or foreign law
or regulation) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of any of the Acquired
Companies, without complying with the WARN Act or similar state, local or
foreign law or regulation, (j) none of the Acquired Companies' employees has
suffered an "employment loss" (as defined in the WARN Act) during the ninety day
period prior to the date of this Agreement, and (k) the Acquired Companies are
in material compliance with their respective obligations, if any, arising under
Applicable Laws relating to the termination of employees, employment practices,
terms and conditions of employment, wages, hours of work and occupational safety
and health, and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other Applicable Law.
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3.6 Litigation. There are no judicial or administrative actions, claims,
suits, proceedings or investigations pending or, to the Company's Knowledge,
threatened against the Company that question the validity of this Agreement or
any action to be taken by the Company in connection with this Agreement. Except
as set forth in Schedule 3.6 hereto, there is no material litigation, action,
suit, arbitration, proceeding or governmental investigation pending or, to the
Company's Knowledge, threatened, or any order, injunction or decree outstanding,
against or relating to any of the Acquired Companies, or any of their respective
properties or assets.
3.7 Real Property.
(a) North American Owned Real Property.
(i) Schedule 3.7(a) hereto sets forth, by owner, a list of all of the
real or immoveable property located in the United States or Canada and
owned by any Acquired Company, including the legal descriptions and street
addresses thereof (the "North American Owned Real Property") and all
current leases or occupancy agreements pursuant to which any Person other
than an Acquired Company occupies any portion of the North American Owned
Real Property (the "North American Tenant Agreements").
(ii) Except as set forth on Schedule 3.7(a), no such Acquired Company
has received any notice of and the Company has no Knowledge of any material
violation, or claimed material violation, of any covenant, condition or
other restriction, mineral right, reservation or agreement, royalty
agreement, mortgage, security interest, right of way, license, easement, or
other agreement to which any of the North American Owned Real Property is
subject.
(iii) Except as set forth on Schedule 3.7(a), no such Acquired Company
has entered into any agreement with any Person relating to the North
American Owned Real Property, which imposes upon such Acquired Company an
obligation to make any contribution or dedication of money or land or to
construct, install or maintain any improvements of a public or private
nature, other than maintenance and like agreements entered into in the
ordinary course of business.
(iv) Except as set forth on Schedule 3.7(a), the Company has no
Knowledge of any special assessments or other assessments for public
improvements against any of the North American Owned Real Property the
current (or any prior) periodic payment of which is unpaid and for which
any such Acquired Company is liable, including without limitation, those
for construction of sewer, water, gas and electrical lines and mains,
streets, roads, sidewalks and curbs, and the Company has received no notice
that any such assessments are currently pending or proposed.
(v) Except as set forth on Schedule 3.7(a), each such Acquired Company
has, with respect to the North American Owned Real Property owned by it,
obtained all those
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certificates of occupancy, underwriters and building inspection
certificates relating to electrical, plumbing, HVAC or other licensed or
regulated work, zoning, building, housing, safety, health, fire,
environmental protection, and other permits, licenses and approvals which
such Acquired Company is required to obtain by Applicable Law, other than
those the absence of which would not materially adversely affect such
Acquired Company's ability to use and occupy such North American Owned Real
Property as currently used and occupied by such Acquired Company.
(vi) Except as set forth on Schedule 3.7(a), (A) none of the North
American Owned Real Property is located, in whole or in part, within an
area identified by any Governmental Authority as a flood hazard area, and
(B) there does not exist any encroachment, fence dispute, boundary dispute,
boundary line question, water dispute, or drainage dispute concerning or
affecting any of the North American Owned Real Property which would
materially adversely affect the ability of the Acquired Company owning the
same to use and occupy such North American owned Real Property as currently
used and occupied by such Acquired Company.
(vii) Except as set forth on Schedule 3.7(a), no Acquired Company has
received notice of the existence of any violation or default (or claimed
violation or default) of any applicable wetlands or coastal, inland or
navigable waterways laws, rules, regulations, permits or orders relating to
the North American Owned Real Property owned by such Acquired Company and
which, if uncured or unremedied, could reasonably be expected to materially
adversely affect the ability of such Acquired Company to use and occupy
such North American Owned Real Property as currently used and occupied by
such Acquired Company.
(viii) Except as set forth on Schedule 3.7(a), each Acquired Company
is in material compliance with all applicable building, zoning, land use or
other similar statutes, laws, ordinances, regulations, permits or other
requirements in respect of the North American Owned Real Property owned by
it and such Acquired Company has not received any notice of any violation
(or claimed violation) of any of the foregoing, which, if uncured or
unremedied, would result in the imposition of a material fine or would
materially adversely affect the ability of such Acquired Company to use and
occupy such North American Owned Real Property as currently used and
occupied by such Acquired Company.
(ix) None of the North American Owned Real Property is leased to any
Person or to the Company's Knowledge subject to any Lien other than
Permitted Liens, nor does any Person other than the Acquired Company owning
the same occupy any of the North American Owned Real Property, except
pursuant to the North American Tenant Agreements. Except as set forth on
Schedule 3.7(a), no Acquired Company owning any North American Owned Real
Property has received notice of any, and to the Company's Knowledge there
exists no, dispute, claim, event of default or other event which
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constitutes or would constitute (with notice or lapse of time or both) a
default by such Acquired Company under any North American Tenant Agreement,
which would give the other party thereto the right to terminate such North
American Tenant Agreement and by reason to which such other party could
reasonably be expected to exercise such right to terminate.
(x) Except as set forth on Schedule 3.7(a), the Company has no
Knowledge of any structural defect in the buildings and improvements
located on any North American Owned Real Property or the electrical,
plumbing, HVAC systems thereof which could reasonably be expected to
materially adversely affect the ability of the Acquired Company owning the
same to use and occupy such North American Owned Real Property as currently
used and occupied by such Acquired Company. Except as set forth in Schedule
3.7(a), all such buildings and improvements have been maintained by the
Acquired Companies in reasonably good operating condition and repair,
normal wear and tear excepted.
(b) North American Leased Real Property.
(i) Schedule 3.7(b) hereto sets forth, by tenant, a list of all of the
real property located in the United States or Canada and leased (as tenant)
by any Acquired Company (the "North American Leased Real Property") and
identifies each lease or other occupancy agreement pursuant to which the
tenant occupies any portion of the North American Leased Real Property
(collectively, the "North American Real Property Leases"). A true, correct
and complete copy of each written North American Real Property Lease and a
true and correct summary of the principal terms of each oral North American
Real Property Lease has been made available to Parent, Maska and Sub. Each
of the North American Real Property Leases is valid, binding and in full
force and effect. Except as set forth on Schedule 3.7(b), with respect to
each North American Real Property Lease, (A) all rent and other amounts due
and payable by the tenant thereunder on or prior to the Closing Date will
have been paid prior to the Closing Date; (B) no consent of any lessor to
the consummation of the transactions contemplated by this Agreement is
required thereunder; and (C) the Acquired Company which is the tenant
thereof has neither given nor received notice of any, and to the Company's
Knowledge there exists no, dispute, claim, event of default or other event
which constitutes or would constitute (with notice or lapse of time or
both) a default by such Acquired Company or any other party thereunder
which would give the other party thereto the right to terminate such North
American Real Property Lease and by reason of which such other party could
reasonably be expected to exercise such right to terminate.
(ii) Except as set forth on Schedule 3.7(b), each Acquired Company
has, with respect to each North American Leased Real Property leased by it,
obtained all those certificates of occupancy, underwriters and building
inspection certificates relating to electrical, plumbing, HVAC or other
licensed or regulated work, zoning, building,
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housing, safety, health, fire, environmental protection, and other permits,
licenses and approvals which such Acquired Company is required to obtain
pursuant to the applicable North American Real Property Lease or by
Applicable Law, other than those the absence of which would not materially
adversely affect the ability of such Acquired Company to use and occupy
such North American Leased Real Property as currently used and occupied by
such Acquired Company.
(iii) Except as set forth on Schedule 3.7(b), each Acquired Company is
in material compliance with all applicable building, zoning, land use or
other similar statutes, laws, ordinances, regulations, permits or other
requirements in respect of each North American Leased Real Property leased
by it and such Acquired Company has not received any notice of any
violation (or claimed violation) of any of the foregoing, which, if uncured
or unremedied, would result in the imposition of a material fine or would
materially adversely affect the ability of such Acquired Company to use and
occupy such North American Leased Real Property as currently used and
occupied by such Acquired Company.
(c) Overseas Owned Real Property; Overseas Real Property Leases. Schedule
3.7(c) hereto sets forth a list of all of the real or immoveable property
located outside the United States and Canada and owned by any Acquired Company
(the "Overseas Owned Real Property"). Other than month to month tenancies,
leases, subleases or other leasehold interests which shall expire on or before
the Closing Date, Schedule 3.7(c) hereto sets forth a true, correct and complete
list of all leases, subleases or other leasehold interests with respect to real
property located outside the United States or Canada held by any Acquired
Company (collectively, the "Overseas Real Property Leases"). True, correct and
complete copies of the Overseas Real Property Leases have been made available to
Parent, Maska and Sub. Each Overseas Real Property Lease is valid, binding and
in full force and effect. All rent and other sums payable by tenants are
current, in all material respects, and to the Company's Knowledge, there is no
condition which, with the giving of notice or passage of time or both, would
constitute a material default under any Overseas Real Property Lease.
(d) As Is, Where Is. Except as otherwise specifically set forth in this
Agreement, Parent, Maska and Sub accept the condition of the North American
Owned Real Property and the Overseas Owned Real Property and all interests in
the North American Real Property Leases and the Overseas Real Property Leases
"AS IS, WHERE IS", without any warranty whatsoever legal or otherwise, as of the
Closing Date and the Company makes no representations, warranties or guarantees
as to the condition, size, extent, quantity, type or value of the North American
Owned Real Property or the Overseas Owned Real Property or any real or
immoveable property subject to any North American Real Property Lease or
Overseas Real Property Lease.
(e) No Other Real Property or Real Property Interests. Except for the North
American Owned Real Property, the Overseas Owned Real Property and the real or
immoveable property leased pursuant to the North American Real Property Leases
or the Overseas Real
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Property Leases, none of the Acquired Companies owns, leases, operates or
otherwise has any interest in any real or immoveable property.
3.8 Tangible Personal Property. All of the fixtures, machinery and
equipment material to the operation of the Business are owned, leased or
licensed by one or more of the Acquired Companies. Except as set forth in
Schedule 3.8 hereto and subject to routine maintenance and scheduled
replacement, such fixtures, machinery and equipment of the Acquired Companies
are in reasonably good operating condition and repair, normal wear and tear
excepted. All leases and licenses for such material fixtures, machinery and
equipment are identified in Schedule 3.8 hereto. Except as set forth in Schedule
3.8 hereto, the interests of the Acquired Companies in such property are free
and clear of all Liens other than Permitted Liens. Except as set forth in
Schedule 3.8 hereto, all of the material leases and licenses identified in
Schedule 3.8 hereto are in full force and effect and none of the Acquired
Companies is in material default thereunder.
3.9 Proprietary Rights. Schedule 3.9 hereto contains a complete and
accurate list of (a) all patents, patent applications, trademark registrations
and applications therefor, service mark registrations and applications therefor,
and copyright registrations and applications therefor (the "Intellectual
Property"), Internet domain names, trade names and material common law
trademarks and service marks owned or used under license by the Acquired
Companies in connection with the Business, and (b) all licenses or other
agreements giving to third parties rights to use any Intellectual Property
listed in Schedule 3.9. Except as set forth in Schedule 3.9 hereto, the Acquired
Companies (i) own all right and interest in and to all Intellectual Property,
free and clear of any Liens other than Permitted Liens, or possess licenses or
other rights to use all Intellectual Property, and the Company has no Knowledge
of any invalidity or breach in respect of such licenses or other rights, and
(ii) own or possess licenses or other rights to use all common law trademarks,
trade names, service marks, and copyrights, and all mainframe computer software,
inventions, drawings, designs, customer lists or proprietary know-how material
to the conduct of the Business as it is currently conducted (collectively, the
"Proprietary Rights"). Each item of Intellectual Property owned by the Acquired
Companies and listed in Schedule 3.9 hereto has been, to the extent indicated in
such Schedule 3.9, registered with, filed in or issued by the United States
Patent and Trademark Office, the United States Copyright Office or such other
domestic or foreign Governmental Authority for the territory indicated in such
Schedule 3.9, and, to the Company's Knowledge, such registrations, filings and
issuances are listed in the records of such United States or foreign
Governmental Authority as solely owned by the applicable Acquired Company, as
set forth in Schedule 3.9 hereto, and, to the Company's Knowledge, except to the
extent set forth in Schedule 3.9 hereto, such registrations, filings and
issuances remain in good standing. Except as set forth in Schedule 3.9 hereto,
no item of Intellectual Property owned by the Acquired Companies and listed in
Schedule 3.9 is the subject of any pending, or, to the Company's Knowledge,
threatened, opposition, interference, cancellation proceeding or other adverse
proceeding before any Governmental Authority. Except as set forth in Schedule
3.9 hereto, to the Company's Knowledge, there are no conflicts with or
infringements upon any proprietary rights of third parties caused by the current
operations of the
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Business, including but not limited to the use of trademarks, trade names,
service marks, patents, and copyrighted materials, that could, if adversely
determined, be reasonably expected to result in a material liability or a
material impairment of the Business as currently conducted. Schedule 3.9 hereto
contains a complete and accurate list of all licenses or other agreements giving
any of the Acquired Companies rights to intellectual property of third parties
included in the Intellectual Property or the Proprietary Rights in connection
with the current operations of the Business other than (i) implied licenses
arising from or in connection with the sale or lease of a product, (ii) licenses
for off-the-shelf software, or (iii) licenses granted in connection with the
sale or lease of business equipment. Except as set forth in Schedule 3.9 hereto,
all of the agreements set forth in Schedule 3.9 are in full force and effect and
none of the Acquired Companies is in material default under any of them and, to
the Company's Knowledge, no other party to any such agreement is in material
default thereunder and no royalties or other fees in lieu of royalties are
payable by the Acquired Companies for the use of or right to use any
intellectual property of third parties included in the Intellectual Property or
Proprietary Rights, except pursuant to the agreements set forth on Schedule 3.9.
Except as set forth in Schedule 3.9 hereto, to the Company's Knowledge, there is
no infringement by or claim of infringement against any third party of any
Intellectual Property or Proprietary Rights of the Acquired Companies that
could, if adversely determined, be reasonably expected to result in a material
liability or a material impairment of the Business as currently conducted.
3.10 Absence of Certain Changes or Events. Except as contemplated in this
Agreement or as set forth in Schedule 3.10 hereto, since December 31, 1997, (i)
the Acquired Companies have conducted the Business only in the ordinary course
and in a manner consistent with past practice, (ii) the Acquired Companies have
not taken any action which would be prohibited pursuant to Sections 5.1(b), (c),
(d), (f), (g), (h) or (o) if taken after the date hereof, and (iii) there has
not been any change in the results of operations, condition (financial or
otherwise), properties, assets or business of the Acquired Companies, which,
individually or in the aggregate, has had or could reasonably be expected to
have a Company Material Adverse Effect.
3.11 Environmental Matters.
(a) Except as set forth in Schedule 3.11:
(i) the Acquired Companies are, and have been at all times since
December 29, 1992, in compliance with all applicable Environmental Laws
(which compliance includes the possession by the Acquired Companies of all
Permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
(ii) the Acquired Companies have not received any written
communication, whether from a Governmental Authority, citizens group,
employee or other Person, alleging that the Acquired Companies are, or were
at any time since December 29, 1992,
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not in such compliance, nor, to the Company's Knowledge, has any such oral
communication been received from a Governmental Authority, and
(iii) there are no present, and since December 29, 1992 there have
been no, and, to the Company's Knowledge, prior to December 29, 1992 there
were no, actions, activities, circumstances, conditions, events or
incidents that may prevent or interfere with such compliance in the future,
except, in each case, where failure to be in compliance would not have a Company
Material Adverse Effect. All Permits currently held by the Acquired Companies
pursuant to applicable Environmental Laws are identified in Schedule 3.11.
(b) Except as set forth in Schedule 3.11, there is no Environmental Claim
pending or to the Company's Knowledge threatened against the Acquired Companies
or, to the Company's Knowledge pending or threatened against any Person whose
liability for any Environmental Claim the Acquired Companies have or may have
retained or assumed either contractually or by operation of law, which in each
case, would have a Company Material Adverse Effect.
(c) Except as set forth in Schedule 3.11, since December 29, 1992 there
have been, and prior to December 29, 1992 to the Company's Knowledge, there were
no actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the Release or presence of any Hazardous
Material, which could form the basis of any Environmental Claim against the
Acquired Companies, or to the Company's Knowledge, against any Person whose
liability for any Environmental Claim the Acquired Companies have or may have
retained or assumed either contractually or by operation of law, which, in each
case, would have a Company Material Adverse Effect.
(d) The Company has delivered or otherwise made available for inspection to
Parent true, complete and correct copies and results of any reports, studies,
analyses, tests or monitoring, copies of which are currently maintained by the
Company, it agents, or representatives pertaining to Hazardous Materials in, on,
beneath or adjacent to any property currently or formerly owned, operated or
leased by the Acquired Companies, or regarding the Acquired Companies'
compliance with applicable Environmental Laws.
3.12 Financial Statements. The audited consolidated balance sheets and the
audited consolidated statements of operations and cash flows for the Company and
its Subsidiaries as of and for the years ended December 31, 1997 and 1996
(collectively, the "Financial Statements"), and the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of June 27, 1998 and as of
August 28, 1998 and unaudited consolidated statement of operations and cash
flows of the Company and its Subsidiaries for the periods then ended
(collectively, the "Interim Financials"), copies of which are attached as an
Appendix to hereto, have, except as described in Schedule 3.12 hereto, been
prepared in accordance with generally accepted accounting principles
consistently applied with past practice and present fairly the consolidated
financial positions of
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the Company and its Subsidiaries as of the dates indicated, and the consolidated
related results of operations and cash flows of the Company and its
Subsidiaries, for the periods indicated, subject, in the case of the Interim
Financials, to normal year end adjustments. The Financial Statements and the
Interim Financials are or were in accordance with the books and records of the
Company and its Subsidiaries (it being understood that certain Subsidiaries and
business divisions were disposed of subsequent to the dates as of which certain
of the financial statements were presented) and such books and records in
reasonable detail accurately and fairly reflect or reflected the financial
transactions of the Company and its Subsidiaries. Since June 27, 1998, there has
been no change in any of the significant accounting policies, practices, or
procedures of any Acquired Company.
3.13 No Undisclosed Liabilities. Except as set forth in Schedule 3.13
hereto, as of the date of this Agreement there are no material liabilities or
obligations of any nature (whether absolute, accrued, contingent, unasserted,
determined, determinable, or otherwise) of the Acquired Companies which (a) are
not shown on the Financial Statements or the notes thereto, or in the Interim
Financials, or (b) which have not been incurred in the ordinary course of
business since December 31, 1997.
3.14 Taxes. Except as set forth in Schedule 3.14 hereto:
(a) Each of the Acquired Companies has timely filed, or been included in,
all federal, state, local and foreign Tax Returns required to be filed by them
and all such Tax Returns are true, complete and correct in all material
respects.
(b) Except to the extent adequately reserved for in accordance with
generally accepted accounting principles, all income and franchise Taxes and
other Taxes due and payable by each of the Acquired Companies have been timely
paid in full. The Financial Statements and the balance sheet included in the
Interim Financials reflect an adequate accrual or reserve for all Taxes payable
by the Acquired Companies for all taxable periods and portions thereof through
the date of such Financial Statements or Interim Financials, as the case may be.
(c) No deficiencies for any Taxes have been proposed, asserted or assessed
by any Governmental Authority against any of the Acquired Companies that have
not been fully paid or adequately provided for in the appropriate financial
statements of the Acquired Companies. No issues relating to Taxes have been
raised by any Governmental Authority during any presently pending audit or
examination.
(d) Each of the Acquired Companies have withheld all Taxes required to have
been withheld and paid by them or on their behalf in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder, or
other third party, and such withheld Taxes have either been duly paid to the
proper Governmental Authority or set aside in accounts for such purpose.
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(e) There are no Liens for Taxes upon the assets or properties of any of
the Acquired Companies except for statutory Liens for current Taxes not yet
delinquent.
(f) None of the Acquired Companies has requested any extension of time
within which to file any Tax Return in respect of any taxable year which has not
since been filed and no outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns has been given by or on behalf of any of the Acquired Companies.
(g) No power of attorney has been granted by or with respect to any of the
Acquired Companies with respect to any matter relating to Taxes.
(h) None of the Acquired Companies has filed a consent under Section 341(f)
of the Code concerning collapsible corporations.
(i) None of the Acquired Companies is or has been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(ii) of the Code.
(j) None of the Acquired Companies has made any payments, nor is any of
them obligated to make any payments, and is not a party to any agreement that
could obligate it to make any payments that will not be deductible under Section
280G of the Code or would constitute compensation in excess of the limitation
set forth in Section 162(m) of the Code.
(k) None of the Acquired Companies is a party to any Tax allocation or
sharing agreement or arrangement (whether or not in writing) that includes any
party other than an Acquired Company.
(l) None of the Acquired Companies has executed or entered into a closing
agreement that could affect its Tax liability for any period after the Closing
Date pursuant to Section 7121 of the Code or any similar provision of state,
local or foreign law.
(m) None of the Acquired Companies has agreed to or is making adjustments
pursuant to Section 481(a) of the Code or any other Applicable Laws relating to
Tax matters that could affect its Tax liability for any period after the Closing
Date by reason of change in accounting method initiated by any of the Acquired
Companies nor has the Internal Revenue Service or any equivalent Government
Authority proposed any such adjustment or change in accounting method, or has
any application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of any
of the Acquired Companies.
(n) Any provision of this Agreement to the contrary notwithstanding, the
Company makes no representation or warranty whatsoever concerning the Tax
consequences to Parent,
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Sub, Maska, or any Acquired Company of the Tropsport Share Purchase (the "Tax
Consequences"), and Parent shall and shall cause Maska and the Surviving
Corporation to indemnify and hold harmless the holders of Company Stock
outstanding immediately prior to the Closing from and against any and all Taxes
arising from or in connection with such Tax Consequences ("Tax Costs"). Parent
(i) shall have the sole right to represent the holders of the Company Stock
outstanding immediately prior to the Closing with respect to any notice of
deficiency, proposed adjustment, assessment, audit, examination or other
administrative or court proceeding, suit, dispute or other claim in respect of
which Parent, Maska or the Surviving Corporation would be liable for any
resulting Tax Costs pursuant to the preceding sentence, and (ii) may, in
connection therewith, employ counsel of its choice, at its expense.
3.15 Material Contracts. Schedule 3.15 hereto contains a list of the
following contracts (the "Material Contracts"), in effect as of the date hereof,
of the Acquired Companies:
(a) all commitments and agreements for the purchase or sale of any
equipment, materials or supplies that involve in excess of $50,000 for any one
contract, other than purchase orders (whether issued or received) in the
ordinary course of business;
(b) all agreements with customers that involve a payment to any of the
Acquired Companies of more than $50,000 for any one contract, other than
purchase orders (whether issued or received) in the ordinary course of business;
(c) all contracts for the employment or compensation of any employee of any
of the Acquired Companies individually in excess of $100,000 per year or which
contain a provision relating to a change of control of any of the Acquired
Companies;
(d) all partnership, joint venture contracts, or other agreements involving
a sharing of profits;
(e) all contracts (other than of the type described in clause (c) of this
Section 3.15) with sales representatives, manufacturer's representatives,
distributors, dealers, brokers, sales agents, advertising agencies or other
Persons engaged in sales, distribution or promotional activities, which
obligates any Acquired Company to pay an amount in the aggregate of $50,000 or
more, other than purchase orders (whether or issued or received) in the ordinary
course of business;
(f) all contracts pursuant to which the geographical area in which any of
the Acquired Companies or any other Person may conduct business or the type or
scope of business which may be conducted by any of them is restricted;
(g) all powers of attorney or agency agreements (other than of the type
described in clause (e) of this Section 3.15, without regard to the materiality
thereof) with any Persons (excepting employees of any of the Acquired Companies)
pursuant to which such Persons are
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granted the authority to act, in any material respect, for or on behalf of any
of the Acquired Companies, or any of the Acquired Companies is granted the
authority to act, in any material respect, for or on behalf of any other
Persons;
(h) all contracts between any of the Acquired Companies and any of their
Affiliates;
(i) all Tax sharing agreements or Tax assumption agreements;
(j) all contracts containing a right of first refusal with respect to any
assets with a fair market value in excess of $50,000;
(k) all agreements involving the acquisition or disposition, whether by
merger, consolidation, purchase of assets or otherwise, of a substantial equity
interest in or substantial portion of the assets of any business or any Person
or division thereof, pursuant to which there are executory obligations owing to
or by any Acquired Company;
(l) all agreements providing for the indemnification by any Acquired
Company of any officer, director, or employee of any Acquired Company or of
Mancuso/Equity Partnership No. 4, L.P. or any Affiliate thereof; and
(m) all other leases, commitments, agreements and instruments (including,
but not limited to, mortgages, indentures and other agreements and instruments
relating to indebtedness for borrowed money or guarantees or undertakings to
answer for the debts or defaults of another, but excluding purchase orders and
sales orders in the ordinary course of business not otherwise referred to
herein), that individually are material to the Acquired Companies as a whole or
involve an anticipated receipt or expenditure of $50,000 or more, to which any
of the Acquired Companies is a party or by which any of their respective
properties are bound that are not otherwise disclosed in this Agreement or in a
Schedule hereto.
The Company has made available to Parent, Maska and Sub true and complete
copies of all written contracts and summaries of all oral contracts set forth in
Schedule 3.15 hereto. Except as set forth in Schedule 3.15 hereto, all of the
contracts so set forth are in full force and effect and there has not occurred
under any of the Material Contracts any alleged or actual breach or default, or
event which would (with the passage of time, notice or both) constitute a breach
or default or would result in the termination of or acceleration of any
performance under, or the right to terminate or accelerate performance (with the
passage of time, notice or both) by the Acquired Companies, or to the Company's
Knowledge, by any other party to any Material Contract, which remains unremedied
as of the date of this Agreement, except for those which in the aggregate, would
not reasonably be expected to result in a Company Material Adverse Effect.
Except as set forth in Schedule 3.15 hereto, to the Company's Knowledge, as of
the date of this Agreement, no Significant Vendor or Significant Customer of any
Acquired Company has threatened to terminate or modify (in an manner adverse to
such Acquired Company) its business relationship for reasons not directly
related to the impending announcement of this Agreement.
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3.16 Compliance with Laws; Permits. The Acquired Companies are in
compliance in all material respects with Applicable Laws. To the Company's
Knowledge, Schedule 3.16 hereto identifies all licenses, permits, orders or
approvals or certifications of all Governmental Authorities, the Hockey
Equipment Certification Counsel, the Canadian Standards Association and the
European Community held by or in effect with respect to the Acquired Companies
(collectively, the "Permits") and the Permits constitute all licenses, permits,
orders or approvals or certifications of all Governmental Authorities, the
Hockey Equipment Certification Counsel, the Canadian Standards Association and
the European Community required to be held by or in effect with respect to the
Acquired Companies for the conduct of the Business, as presently conducted,
except such the absence of which could not reasonably be expected to result in a
Company Material Adverse Effect. Except as set forth on Schedule 3.16, to the
Company's Knowledge, no proceeding for the challenge, revocation, suspension,
cancellation or termination of any of the Permits is pending or threatened. Each
product model currently being manufactured and sold by the Acquired Companies
which requires certification by the Hockey Equipment Certification Counsel,
Canadian Standards Association or European Community in order for such model to
be sold in compliance with Applicable Laws in the jurisdictions in which the
Acquired Companies are currently selling such model has been so certified.
3.17 Insurance. Schedule 3.17 hereto sets forth a list of all policies or
binders of insurance held by or on behalf of any of the Acquired Companies
(specifying the insurer, the policy number or covering note number with respect
to binders, and describing each pending claim thereunder of more than $100,000).
The Acquired Companies are not in default (including with respect to the payment
of premiums) in any material respect under any policy or binder so set forth.
Except as set forth in Schedule 3.17 hereto, none of the Acquired Companies has
received a notice of cancellation or non-renewal of any such policy or binder.
The coverage afforded by such policies is sufficient to place the Acquired
Companies in material compliance with insurance under Applicable Laws or
pursuant to Material Contracts. Except as set forth in Schedule 3.17 hereto,
none of the Acquired Companies has been refused any insurance, been denied
coverage on any claim, nor has any coverage been limited by any insurance
carrier to which any of the Acquired Companies have applied for any such
insurance or with which they have carried insurance during the last five years
or such lesser period as such Acquired Company has been a Subsidiary of the
Company.
3.18 Certain Employees. Schedule 3.18 hereto sets forth the names, title or
job descriptions, and total compensation of each individual currently a
consultant or employee of any Acquired Company whose annual rate of compensation
for 1997 (including bonuses and commissions) exceeded $100,000. Except as set
forth in Schedule 3.18 hereto, during the six months prior to the date hereof
each of the employees listed therein has devoted his principal time and efforts
to the Business. Except as set forth in Schedule 3.18 hereto, the salaries and
bonuses of all officers and employees of the Acquired Companies are paid by one
or more of the Acquired Companies.
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3.19 Products Liability Experience. Schedule 3.19 hereto sets forth, to the
Company's Knowledge, a true and complete list, in all material respects, of all
Products Liability Claims to which any of the Acquired Companies has been a
party which respect to the Business, since January 1, 1996. Except as set forth
on Schedule 3.19 hereto, since January 1, 1993, none of the Acquired Companies
has been subject to any proceedings before the Consumer Products Safety
Commission or any foreign equivalent body.
3.20 Liens and Encumbrances. Except as set forth in Schedule 3.20 hereto
and except as provided in Sections 3.2, 3.7, 3.8 and 3.9 with respect to the
categories of properties or assets covered thereby, the Acquired Companies have
good and valid title to (or in the case of immoveable and real property, good
and marketable title to), or valid and subsisting rights in, all of their
properties and assets, free and clear of any Lien other than Permitted Liens.
3.21 Inventory. The inventory of the Acquired Companies was produced or
acquired by the Acquired Companies in the ordinary course of business and
consists of raw materials and supplies, manufactured and processed parts, work
in process, and finished goods (including any of the foregoing in transit). Such
finished goods (including finished goods in transit) are merchantable and are
not obsolete and are valued in accordance with the past custom and practice of
the Acquired Companies, subject to customary year-end adjustment.
3.22 Receivables. All notes and accounts receivable of the Acquired
Companies are valid receivables subject to no setoffs or counterclaims, subject
to the reserves for (a) doubtful accounts, (b) customer credit claims, (c)
volume rebates, and (d) co-op credits, reflected in the balance sheet included
in the Interim Financials, as adjusted for operations and transactions through
the Closing Date in accordance with the past custom and practice of the Acquired
Companies.
3.23 Product Warranty. Substantially all of the products manufactured,
sold, leased, and delivered by the Acquired Companies in connection with the
Business have conformed in all material respects with all applicable contractual
commitments and all express and implied warranties, and the Acquired Companies
do not have any material liability for replacement or repair thereof or other
damages in connection therewith, subject to the reserve for product warranty
claims reflected in the balance sheet included in the Interim Financials, as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of the Acquired Companies. Copies of the
standard terms and conditions of sale or lease for each of the Acquired
Companies (containing applicable guaranty, warranty, and indemnity provisions)
are attached as an Appendix to Schedule 3.23 hereto. Schedule 3.23 sets forth
the estimated aggregate annual cost to the Acquired Companies of warranty
obligations for customers for each of the three preceding fiscal years and the
current fiscal year to the date of the Interim Financials. Except as set forth
on Schedule 3.23, to the Company's Knowledge there are no defects in the design
or methods of manufacture of the products of the Business which would result in
a material adverse affect to the intended performance thereof or create an
unusual risk of injury to person or property, in each case, if used properly and
solely for the intended use thereof
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and strictly in accordance with appropriate safety precautions considering the
inherently dangerous nature of the activities in which such products are
employed.
3.24 Certain Payments. Except as set forth in Schedule 3.24 hereto, since
January 1, 1993, no Acquired Company or director, officer, agent, or employee of
any Acquired Company, or, to the Company's Knowledge, any other Person
associated with or acting for or on behalf of any Acquired Company, has directly
or indirectly (a) made any material contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Acquired Company or any
Affiliate of an Acquired Company, or (iv) in violation of any Applicable Law,
the effect of which in each case specified in this clause (a) could reasonably
be expected to subject any Acquired Company to a material fine, penalty, or
other liability or disability or, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Acquired
Companies.
3.25 Assets Complete. Except as set forth on Schedule 3.25 hereto, the
Acquired Companies own, hold, license, or otherwise possess such assets,
properties, licenses and rights necessary to the operation of the Business as
currently conducted.
3.26 Certain Interests. Except as set forth on Schedule 3.26, no Affiliate
of any Acquired Company or of Mancuso/Equity Partnership No. 4, L.P. has any
interest (other than as a stockholder of the Company) in any property used in or
pertaining to the Business or any customer or supplier (other than as a passive
investor in any securities of a corporation, partnership, trust, or other
entity) doing business with the Acquired Companies. Except with respect to those
interests listed on Schedule 3.26 and transactions solely between the Acquired
Companies, none of the Acquired Companies is a party to any transaction with any
Affiliate of any of the Acquired Companies or of Mancuso/Equity Partnership No.
4, L.P.
3.27 Full Disclosure. To the Company's Knowledge, there is no existing
event, occurrence, fact, condition, or anticipated change having specific
applicability to the Acquired Companies which has resulted in a Company Material
Adverse Effect since January 1, 1997, or could reasonably be expected to result
in a Company Material Adverse Effect and which is not disclosed in this
Agreement, the Schedules and the documents referred to herein and therein taken
as a whole. No representation or warranty of the Company in this Agreement, when
read in conjunction with the Schedule(s) applicable thereto and the documents
referred to in such Schedule(s), contains any untrue statement of material fact
or omits to state a material fact necessary to make such representations and
warranties, in light of the circumstances in which they were made, not
misleading.
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4. REPRESENTATIONS AND WARRANTIES OF PARENT, MASKA AND SUB.
Parent, Maska and Sub jointly and severally represent and warrant to the
Company as follows:
4.1 Organization, Standing and Power. Each of Parent, Maska and Sub is a
corporation duly incorporated, validly existing, and in good standing under the
laws of its jurisdiction of incorporation or organization, with full corporate
power and authority to conduct its business as it is now being conducted and to
own or use the properties and assets that it purports to own or use. Each of
Parent, Maska and Sub is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification, except
where the failure to be so qualified would not have a Parent Material Adverse
Effect. Parent, Maska and Sub have delivered to the Company correct and complete
copies of the Organizational Documents of each of Parent, Maska and Sub, as
currently in effect.
4.2 Capital Structure of Sub. As of the date hereof, the authorized capital
stock of Sub consists of 1,000 shares of Common Stock, par value $.01 per share,
all of which are validly issued, fully paid and nonassessable and are owned of
record and beneficially by Parent.
4.3 Authority; No Conflict.
(a) Each of Parent, Maska and Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent,
Maska and Sub and the consummation by Parent, Maska and Sub of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Parent, Maska and Sub. This Agreement has been duly executed and
delivered by Parent, Maska and Sub and constitutes a valid and binding
obligation of each of them enforceable in accordance with its terms, except as
such enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally, and (ii) general equitable principles.
(b) Except as set forth in Schedule 4.3(b) hereto, the execution and
delivery of this Agreement by Parent, Maska and Sub does not, and the
consummation by Parent, Maska and Sub of the transactions contemplated hereby
will not, (i) result in any Violation pursuant to any provision of the
Organization Documents of Parent, Maska or Sub or (ii) except as contemplated by
Section 4.3(c), result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, or other agreement, obligation or instrument, or of
any Applicable Law, applicable to Parent, Maska or Sub or their respective
properties or assets which Violations in the aggregate would have a Parent
Material Adverse Effect.
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(c) Except as set forth in Schedule 4.3(c) hereto, no Consent or Filing is
required by Parent, Maska or Sub, or by any Affiliate of Parent with respect to
Parent, Maska, Sub or any other Affiliate of Parent, in connection with the
execution and delivery of this Agreement by Parent, Maska and Sub or the
consummation by Parent, Maska and Sub of the transactions contemplated hereby,
except for (i) any required Filing of a pre-merger notification report by Parent
under the HSR Act, any required Filing of a pre-notification of the proposed
merger under the Competition Act, and any required Consent of or Filing with any
Governmental Authority under any other Antitrust Law, (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business, and (iii) any required filing under the
Investment Canada Act.
4.4 Litigation. There are no judicial or administrative actions, claims,
suits, proceedings or investigations pending or, to the Knowledge of Parent,
Maska or Sub, threatened against Parent, Maska or Sub that question the validity
of this Agreement or any action to be taken by Parent, Maska or Sub in
connection with this Agreement. There is no litigation, action, suit,
arbitration, proceeding or governmental investigation pending or, to the
Knowledge of Parent, Maska or Sub, threatened, or any order, injunction or
decree outstanding, against or relating to Parent, Maska or Sub that, if
adversely determined, could reasonably be expected, in the aggregate, to have a
Parent Material Adverse Effect.
4.5 Interim Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
4.6 Financing. Parent has furnished to the Company correct and complete
copies of written commitments from third parties (the "Financing Commitments")
committing to provide Parent or Maska, as the case may be, on the terms and
conditions set forth therein, with all of the financing as Parent will require
in order to enable Parent or Maska, as the case may be, to satisfy its
obligations to fund Tropsport Share Purchase Price or the aggregate Merger
Consideration, as called for in Section 1.1 and its obligations under Section
1.6 relative to the Funded Debt and to fund the working capital needs of the
Surviving Corporation and its Subsidiaries after the Effective Time.
4.7 Investment Canada Act. Each of Parent and Sub is a "WTO Investor", as
such term is defined in the Investment Canada Act.
5. COVENANTS RELATING TO CONDUCT OF BUSINESS.
5.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees that,
except as expressly contemplated or permitted by this Agreement or as expressly
provided in Schedule 5.1 hereto or in any other Schedule hereto, or to the
extent that Parent shall otherwise consent in writing,
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which consent, in the case of Sections (k) (i), (l), (m), (n), (o), (p), (q) and
(s), will not, subject to the exercise of the reasonable business judgment of
Parent, be withheld or delayed:
(a) Ordinary Course. The Company shall cause the Acquired Companies to
carry on the Business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and use all reasonable efforts to
preserve intact their present business organizations, keep available the
services of their present officers and employees and preserve their
relationships with customers, suppliers and others having business dealings with
them.
(b) Dividends; Changes in Stock. The Company shall not, nor shall the
Company propose to, (i) declare or pay any dividends or make other distributions
in respect of any of its capital stock (other than regular cash dividends
payable on the Company Preferred Stock), (ii) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) except pursuant to Section 3.6 of that certain
Stockholders Agreement, dated as of December 29, 1992, among the Company, the
"Principal Stockholder" and the "Management Stockholders" (as such terms are
defined in said agreement) in connection with the termination of employment of
Management Stockholders, repurchase or otherwise acquire any shares of its
capital stock. The Company shall not permit Tropsport to (x) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (y) repurchase or otherwise acquire any
shares of its capital stock.
(c) Issuance of Securities. The Company shall not, and it shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
additional Subsidiary Equity, any Voting Debt or any options, warrants,
conversion rights or other convertible securities, except upon conversion of any
outstanding shares of Company Stock which are convertible securities or upon
exercise of presently outstanding options under the MEOP which were granted.
(d) Governing Documents. The Company shall not amend or propose to amend
its Certificate of Incorporation or By-laws, or permit any of its Subsidiaries
(including, Tropsport) to amend or propose to amend its Organizational
Documents, at or prior to the Effective Time.
(e) No Solicitations.
(i) The Company shall not, directly or indirectly, nor shall it
authorize or permit any of its Subsidiaries, or its or such Subsidiary's
officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or
such Subsidiary to solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any Takeover Proposal, or agree to
endorse any Takeover Proposal. The Company shall not
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withdraw or modify, or propose to withdraw or modify, its position with
respect to this Agreement or the Reorganization or approve or recommend, or
propose to approve or recommend any Takeover Proposal, or enter into any
letter of intent, agreement in principle, acquisition agreement or similar
agreement with respect to any Takeover Proposal (a "Takeover Agreement").
Upon the execution of this Agreement, the Company will immediately cease
any existing activities, discussions or negotiations with any parties
heretofore conducted with respect to any of the foregoing.
(ii) Neither the Board of Directors of the Company nor any committee
thereof shall (A) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to Parent, the approval or recommendation by the Board of
Directors of the Company or any such committee of this Agreement or the
Reorganization, (B) approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (C) enter into any Takeover Agreement.
(f) No Acquisitions. The Company shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any Person or division
thereof or otherwise acquire or agree to acquire any assets involving a total
consideration in excess of $50,000, other than in the ordinary course of
business and consistent with past practices.
(g) No Dispositions. Other than dispositions (i) as may be required by
Applicable Law to consummate the transactions contemplated hereby or (ii) in the
ordinary course of business consistent with prior practice, the Company shall
not, and shall not permit any of its Subsidiaries to, sell, lease, encumber, or
otherwise dispose of, or agree to sell, lease, encumber or otherwise dispose of,
any of its assets, which are material, individually or in the aggregate, to the
Acquired Companies.
(h) Indebtedness. The Company shall not, and shall not permit any of it
Subsidiaries to, incur any indebtedness for borrowed money or leased equipment,
or guarantee any such indebtedness, or forgive any such indebtedness, or make
any loans, advances, or capital contributions to any other Person, or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or any of its Subsidiaries or guarantee any debt securities of
others, or indemnify or agree to indemnify any other Person, except for any such
action described in this Section 5.1(h) taken in the ordinary course of business
consistent with prior practices or permitted by any provision of this Agreement.
(i) Other Actions. Except as provided in this Agreement, the Company shall
not, and shall not permit any of its Subsidiaries to, take any action that would
or is reasonably likely to result in any of the conditions to the Reorganization
set forth in Article 7 not being satisfied.
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(j) Advice of Changes. The Company shall confer on a regular and frequent
basis with Parent, report on operational matters and promptly advise Parent in
writing of (i) any change or event having, or which, insofar as can reasonably
be foreseen, would probably have or result in, a Company Material Adverse
Effect, (ii) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any material respect, and (iii) the
failure by it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the Company
(or remedies with respect thereto) or the conditions to the obligations of the
Company under this Agreement.
(k) Material Contracts; Benefit Plans; Employment. The Company shall not,
and shall not permit any of its Subsidiaries to (i) enter into, assume,
terminate, renegotiate or amend any Material Contract (other than contracts for
the purchase, sale or lease of inventory, supplies or services in the ordinary
course of business) or waive any material rights or claims thereunder, (ii)
adopt, or amend to increase compensation or benefits payable under, any Benefit
Plan, (iii) enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of the Acquired Companies, (iv) enter
into or amend any employment, severance or special pay arrangement with respect
to the termination of employment or other similar contract with any director or
officer or other employee other than in the ordinary course of business
consistent with past practice, (v) deposit into any trust (including any "rabbi
trust") amounts in respect of any nonqualified employee benefit obligations or
obligations to employees or directors of the Acquired Companies, or (vi) enter
into any contract, agreement, commitment or arrangement to indemnify any
director, officer or other employee of any Acquired Company; except with respect
to clauses (ii) and (iii), for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a material increase in benefits or compensation expense to the Acquired
Companies.
(l) Compromise of Appraisal Rights. The Company shall not settle or
compromise any claim for appraisal rights in respect of the Merger prior to the
Effective Time.
(m) Insurance Policies. The Company shall continue to carry, and cause its
Subsidiaries to carry, existing insurance insuring its and their assets,
business and properties, subject only to variations in amounts required by the
ordinary operations of business, until the Effective Time.
(n) Affiliates. The Company shall not declare, issue, make or pay,
discharge or satisfy any claim, liability or obligation owing to any Acquired
Company or any Affiliate thereof, or enter into an agreement with any Affiliate
of the Acquired Companies, any family member of any Affiliate of the Acquired
Companies or any stockholder, officer or director of the Company.
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(o) Accounting Changes. The Company shall not change any method or period
of accounting, change any significant accounting policy, practice or procedure.
(p) Tax Elections. The Company shall not make, revoke or amend any Tax
election or settle or compromise any Tax liability.
(q) Non-Compete. The Company shall not enter into any contract limiting the
ability of the Acquired Companies to engage in any line of business, to compete
with any Person or to conduct business in any particular geographic area.
(r) Disclosure Schedules. Until the Closing Date, the Company shall have
the continuing obligation to promptly supplement the information contained in
its disclosure schedules attached herewith with respect to any matter hereafter
discovered which was in existence on the date hereof and, if Known at the date
of this Agreement, would have been required to be set forth or described in such
disclosure schedules.
(s) Litigation. The Company shall not and it shall not permit any of its
subsidiaries to, settle or compromise any material litigation, action, suit,
arbitration, proceeding or governmental investigation against or relating to any
of the Acquired Companies, or any of their respective properties or assets.
(t) Covenants. The Company shall not agree, or make any commitment, to take
any action that is or would be prohibited by this Section 5.1.
5.2 Covenants of Parent, Maska and Sub. Except as provided in this
Agreement, none of Parent, Maska or Sub shall take any action that would or is
reasonably likely to result in any of the conditions to the Reorganization set
forth in Article 7 not being satisfied.
6. ADDITIONAL AGREEMENTS.
6.1 Notice of Appraisal Rights. The Company shall, as soon as practicable
after the execution of this Agreement, prepare and mail to each its stockholders
a notice with respect to the Merger in conformity with the provisions of Section
262 of DGCL.
6.2 Access to Information. Upon reasonable notice, the Company shall, and
shall cause it Subsidiaries to, afford to the officers, employees, accountants,
counsel and other representatives of Parent, access, during normal business
hours during the period prior to the Effective Time, to all of the properties,
books, contracts, commitments and records (including its accountant's work
papers) of the Acquired Companies and during such period, the Company shall, and
shall cause its Subsidiaries to, furnish promptly to Parent all information
concerning the Business, properties and personnel of the Acquired Companies as
Parent may reasonably request. Parent, Maska and Sub shall hold, and cause its
counsel, accountants and other agents
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and representatives to hold, all such information and documents in accordance
with and subject to the terms of the Confidentiality Agreement.
6.3 Stockholder Consent; Notice. The Company will, as promptly as
practicable after the execution of this Agreement, take all steps necessary to
obtain the approval and adoption of the Reorganization by the affirmative vote
of a majority of the votes entitled to be cast by the holders of all outstanding
shares of Class A Common and Company Preferred Stock voting together as a single
class by their written consent pursuant to Section 228 of the DGCL, and shall,
as promptly as practicable after obtaining such written consent, cause notice
thereof to be mailed to those of its stockholders who have not so consented in
writing in accordance with Subsection (d) of such Section 228 of the DGCL.
6.4 Reasonable Efforts. The Company, Parent, Maska and Sub shall each use
their reasonable efforts to (a) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under Applicable Laws or otherwise to consummate and make effective the
transactions contemplated by this Agreement, (b) obtain from any Governmental
Authorities or third parties any Consents required to be obtained or made by
Parent, Maska, Sub or the Company or any of their Affiliates in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated herein, and (c) make all necessary Filings, and
thereafter make any other required submissions, with respect to this Agreement
and the Reorganization, required under (i) any applicable securities laws, (ii)
the HSR Act, the Competition Act, if applicable, and any other applicable
Antitrust Laws and (iii) any other Applicable Laws; provided, however, that
Parent, Maska, Sub and the Company shall cooperate with each other in connection
with obtaining such Consents or making such Filings, including providing copies
of all such documents to the nonfiling party and its advisors prior to filing
and, if requested, accepting all reasonable additions, deletions or changes
suggested in connection therewith. The Company, Parent, Maska and Sub shall
furnish all information required for any Filing to be made pursuant to any
Applicable Law in connection with the transactions contemplated by this
Agreement.
6.5 Employee Benefit Plans. Parent, Maska, Sub and the Company agree that
the Benefit Plans of the Company or any of its Subsidiaries in effect at the
date of this Agreement (other than the MEOP and the outstanding employee stock
options granted under the MEOP contemplated to be purchased and canceled
pursuant to Section 6.6 of this Agreement) shall, to the extent reasonably
practicable, remain in effect until otherwise determined after the Effective
Time and, to the extent such Benefit Plans are not continued, it is the current
intent of Parent and the Constituent Corporations that benefit plans which are
not less favorable, in the aggregate, shall be provided to the employees
previously covered by such plans.
6.6 Stock Options. As soon as practicable after the execution of this
Agreement, the Company shall deliver a notice of a "Change of Control" (as such
term is defined in the MEOP) to each holder of an employee and/or director stock
option granted under the MEOP. The Company, at its sole cost and expense, shall
use its reasonable efforts to effect the cancellation
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and settlement, as of the Effective Time, of all options granted under the MEOP
(whether or not exerciseable) outstanding as of the date of this Agreement;
provided, however, that in no event shall the Company be required to pay to any
option holder a dollar amount for each share of Company Common Stock subject to
such holder's options greater than the amount by which the Common Cash Share
Price exceeds the applicable exercise price per share of such option.
6.7 Expenses.
(a) Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of agents, representatives,
counsel, and accountants.
(b) The Company shall be responsible for (i) the fees of the Paying Agent;
(ii) the payment of retention payments, payable by any of the Acquired
Companies, or any Affiliate thereof, including those due to any of (A) Marvin
Tafler pursuant to Memorandum dated April 9, 1997, (B) Ken Hall, Sylvain
Racicot, John Pagotto or Michael Liquornik pursuant to Memoranda dated May 28,
1997, (C) Joanne Aucoin, Alain Bellefleur, Bernard Harbec, Sylvain Maheu or
David Smallwood pursuant to Memoranda dated May 29, 1997, (D) Pierre Gauthier
pursuant to Memorandum dated March 18, 1998, (E) Johnny Martinsson or Harri Kolu
pursuant to Memoranda dated May 7, 1998, or (F) the individuals listed on
Schedule 6.7 (collectively, the "Retention Payments").
(c) Parent will be responsible for the payment of the HSR Act filing fee,
the Competition Act filing fee, as well as all other fees and expenses as may
become payable in connection with any and all Consents or Filings made or
obtained under all other Antitrust Laws irrespective of whose obligation it is
to make payment under any such Antitrust Law. The Surviving Corporation (or the
other applicable Acquired Company) shall be responsible for the payment of any
severance payments due to any employee of any Acquired Company which become
payable at or after the Closing.
(d) The Company and Parent shall bear equally any stock transfer Tax or
other similar Tax relative to the Company Stock and resulting from the Merger.
The Parent and Maska shall bear all stock transfer Tax or other similar Tax
relative to the Tropsport Shares and resulting from the Tropsport Share
Purchase.
6.8 Brokers or Finders. Parent, Maska and Sub, on the one hand, and the
Company, on the other, respectively agree to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations arising
through the indemnifying party or parties with respect to any investment
banking, broker or finder's fees, commissions or expenses asserted by any Person
employed or utilized as such by the indemnifying party or parties in connection
with any of the transactions contemplated by this Agreement.
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6.9 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, the Surviving Corporation will, and
Parent will cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
provisions under the Company's Certificate of Incorporation or By-laws as each
is in effect on the date hereof (the Persons to be indemnified pursuant to such
shall be referred to as, collectively, the "D/O Indemnified Parties"), in
respect of claims as to which the Surviving Corporation has received notice
prior to the expiration of 30 days following the sixth anniversary of the
Closing Date. The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Certificate of
Incorporation and By-laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years after
the Effective Time in any manner that would adversely affect the rights
thereunder of any D/O Indemnified Party. Without limiting the foregoing, after
the Effective Time the Surviving Corporation shall pay all reasonable
out-of-pocket fees and expenses, including reasonable legal fees, for the D/O
Indemnified Parties incurred with respect to the foregoing to the fullest extent
permitted under Applicable Law promptly after statements therefor are received
by the Surviving Corporation; provided, however, the Person on whose behalf the
expenses are paid provides an undertaking to repay such payments if it is
ultimately determined that such Person is not entitled to indemnification.
Parent will cause the Surviving Corporation to maintain for not less than six
years from the Effective Time, directors' and officers' liability insurance
covering the D/O Indemnified Parties who are presently covered by the Company's
directors' and officers' liability insurance or will be so covered at the
Effective Time with respect to actions and omissions occurring on or prior to
the Effective Time on terms no less favorable to the D/O Indemnified Parties
than such insurance maintained in effect by the Company on the date hereof. The
maximum of such coverage shall be $5,000,000 in the aggregate (including claims
and expenses) for the six-year notice period described in the first sentence of
this Section 6.9; provided, however, that to the extent such coverage is not
obtainable at less than per annum premiums in the amount of $180,000, Parent
shall cause the Surviving Corporation to purchase so much coverage as may then
be obtained for $180,000. The foregoing to the contrary notwithstanding, Parent
shall not be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld or delayed. The D/O
Indemnified Parties as a group may retain only one law firm with respect to each
related matter except to the extent there is, in the opinion of counsel to a D/O
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of any two or more D/O
Indemnified Parties.
(b) This Section 6.9 shall survive the consummation of the Merger at the
Effective Time, is intended to be for the benefit of, and enforceable by, the
Company, Parent, the Surviving Corporation and each D/O Indemnified Party and
such D/O Indemnified Party's heirs and representatives, and shall be binding on
all successors and assigns of Parent and the Surviving Corporation.
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6.10 Financing. Parent, Maska and Sub will use their best efforts to enter
into definitive agreements (the "Definitive Financing Agreements") on terms and
conditions substantially in accordance with the Financing Commitments, as soon
as practicable following the date of this Agreement, and in no event later the
Closing Date. Parent, Maska and Sub will furnish correct and complete copies of
the Definitive Financing Agreements to the Company forthwith upon their
execution and delivery. The Acquired Companies agree to expeditiously provide,
and to cause their respective officers and employees to expeditiously provide,
to the Parent, Maska and Sub all cooperation reasonably necessary in connection
with the arrangement of the Definitive Financing Agreements and any other
financing to be consummated contemporaneous with or at or after the Closing Date
in respect of the transactions contemplated by this Agreement, including,
without limitation, the execution and delivery of any pledge or security
documents, underwriting or placement agreements, other definitive financing
documents, or other requested certificates, consents, documents or financial
information as may be reasonably requested by Parent, Maska or Sub, provided,
however, that in connection with the foregoing, no Acquired Company shall be
obligated to incur or suffer the imposition of any liability, obligation, Lien
or other burden, the imposition of which is not contingent upon the consummation
of the Reorganization and the transactions contemplated by the Definitive
Financing Agreements.
6.11 Public Announcements. Parent, Maska, Sub and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Reorganization and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by Applicable Law.
6.12 Certain Notifications. Each party shall promptly notify the other
parties hereto in writing of the occurrence of any event which will or could
reasonably be expected to result in the failure to satisfy any of the conditions
specified in Article 7.
6.13 Voting Agreement. On or prior to the date hereof, Parent, Maska and
Sub have received from each Person listed on Schedule 6.13 hereto, an executed
copy of a Voting Agreement, substantially in the form of Exhibit 6.13
(collectively, the "Voting Agreements").
6.14 FIRPTA Affidavit. At the Closing, at the request of Parent and Sub
(which request Parent and Sub are deemed to have made hereby), the Company shall
provide to each of Parent, Sub and Paying Agent, an affidavit in compliance with
the provisions of Treasury Regulation Section 1.897-2(h), substantially in the
form of Exhibit 6.14, and Parent and Sub shall accept such affidavit in lieu of
requiring an individual affidavit from any Company shareholder setting forth
such shareholder's United States taxpayer identification number and that such
shareholder is not a foreign person within the meaning of Section 1445(b)(2) of
the Code, provided, however, that if the Company fails to provide such
affidavit, Parent may, at its option, withhold and pay over to the appropriate
Governmental Authority the amount required to be withheld under Section 1445 of
the Code.
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6.15 Canada Certificate; Quebec Certificate. As soon as practicable after
the execution of this Agreement, the Company shall, to the extent the following
have not theretofore been filed, make all necessary Filings, and thereafter make
any other required submissions, required in connection with the issuance of (a)
a certificate addressed to the Company, in the form contemplated by Section 116
of the Income Tax Act (Canada), referring to proceeds of disposition at least
equal to the Tropsport Share Purchase Price (the "Canada Certificate"), and (b)
a certificate addressed to the Company, in the form contemplated by Sections
1097 et seq. of the Taxation Act (Quebec), referring to proceeds of disposition
at least equal to the Tropsport Share Purchase Price (the "Quebec Certificate",
and collectively with the Canada Certificate, the "Clearance Certificates").
Parent, Maska and Sub shall cooperate with the Company in connection with
obtaining the Clearance Certificates and the making of any Filings in connection
therewith.
7. CONDITIONS PRECEDENT.
7.1 Conditions of Each Party's Obligation to Effect the Reorganization. The
respective obligation of each party to effect the Reorganization shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the votes
entitled to be cast by the holders of all outstanding shares of Class A Common
and Company Preferred Stock voting together as a single class.
(b) Antitrust Filings and Consents. In respect of the Filings of
notifications by Parent, the Company (or any of their respective Affiliates)
under the HSR Act and the Competition Act, if applicable, respectively, the
applicable waiting and review periods and any extensions thereof shall have
expired or been terminated and, in respect of all other Antitrust Laws, all
required or permissive Filings by Parent, the Company or any of their respective
Affiliates with applicable Governmental Authorities shall have been made, all
applicable waiting and review periods and any extensions thereof shall have
expired or been terminated and all required Consents of such Governmental
Authorities shall have been obtained, except for such Filings, waiting and
review periods and extensions thereof and Consents which if not made, expired or
terminated, or obtained, could not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect or Parent Material Adverse
Effect.
(c) Other Governmental Filings and Consents. In respect of all Applicable
Laws other than Antitrust Laws bearing upon the consummation of the transactions
contemplated by this Agreement and except as provided in Section 7.1(f), all
required or permissive Filings by Parent, the Company or any of their respective
Affiliates with applicable Governmental Authorities shall have been made, all
applicable waiting and review periods and any extensions thereof shall have
expired or been terminated and all required Consents of such Governmental
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Authorities shall have been obtained, except for such Filings, waiting and
review periods and extensions thereof and Consents, which if not made, expired
or terminated, or obtained could not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect or Parent
Material Adverse Effect.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Tropsport Share Purchase of the Merger shall
be in effect.
(e) Occurrence of Concurrent Transactions. The transactions respecting the
payment, discharge, release or termination of all Funded Debt (other than
Designated Funded Debt), Applicable Credit Documents, liabilities and
obligations and Liens specified in Section 1.6 shall have occurred to the
reasonable satisfaction of Parent and the Company, and there shall have been
delivered to Parent the termination, release and discharge documentation
referred to in Section 1.6(b).
(f) Delivery of Clearance Certificates. The Clearance Certificates shall
have been issued to the Company and true copies thereof shall have been
delivered to Maska.
7.2 Conditions of Obligations of Parent, Maska and Sub. The obligations of
Parent, Maska and Sub to effect the Reorganization are subject to the
satisfaction of the following conditions unless waived by Parent:
(a) Company Representations and Warranties. The representations and
warranties of the Company set forth in Article 3 shall be true in all respects
at and as of the Effective Time (except for those that speak as of a specific
date which shall be true at and as of such date) with the same effect as though
made as of the Effective Time, except for failures of such representations and
warranties to be true and correct which, when taken together, would not result
in a Company Material Adverse Effect.
(b) Performance of Company Obligations. The Company shall have performed
and complied in all material respects with all obligations and covenants
required by this Agreement to be performed or complied with by the Company prior
to or at the Closing.
(c) Company Compliance Certificate. Parent, Maska and Sub shall have been
furnished with a certificate dated the Closing Date executed by the Chairman of
the Board, President or any Vice President of the Company in his or her
representative capacity, and not individually, certifying to the fulfillment of
the conditions specified in Sections 7.2(a) and 7.2(b), except to the extent
such conditions have been waived by Parent in writing.
(d) Opinion of Company Counsel. Parent, Maska and Sub shall have been
furnished with opinions of (i) Jacobs Persinger & Parker, counsel to the
Company, (ii) Stikeman, Elliott,
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counsel to Tropsport, and (iii) Pratt Vreeland Kennelly & Zonay, counsel to SHC
Hockey, in substantially the forms of Exhibits 7.2(d)(i), (ii) and (iii) hereto.
(e) Consents Under Agreements. There shall have been obtained the Consent
of each Person (other than the Governmental Authorities referred to in Sections
7.1(b), 7.1(c), and 7.1(f)) whose Consent shall be required in order to permit
the succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or any other Acquired Company under
any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except for such Consents (i) which, if not obtained,
could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, or (ii) which are required in connection with
the consummation of the Tropsport Share Purchase and the Merger, but would not
be required in connection with the consummation of the Merger alone.
(f) Approval of Proceedings and Documentation. All proceedings to be taken
and all certificates, instruments, opinions and other documents to be delivered
to Parent, Maska and Sub in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in form and substance to Parent
and its counsel.
(g) Resignation Letters. The Company and Sub shall have received letters of
resignation, effective as of the Closing Date, from each director of the
Company.
(h) Dissenting Stockholders. None of the holders of the Company Preferred
Stock shall have exercised their right to dissent to the Merger as provided by
the DGCL and the holders of no more than ten percent (10%) of the outstanding
Company Common Stock shall have exercised their rights to so dissent.
(i) Voting Agreements. The Voting Agreements shall remain in full force and
effect.
(j) Company Capital Structure Certificate. Parent, Maska and Sub shall have
been furnished with a certificate dated the Closing Date executed by the
Chairman of the Board, President or any Vice President of the Company in his or
her representative capacity, and not individually, certifying, as of the Closing
Date the capital structure of the Company with the same detail as set forth in
Sections 3.2(a), (b) and (c).
(k) Tropsport Capital Structure Certificate. Parent, Maska and Sub shall
have been furnished with a certificate dated the Closing Date executed by the
Chairman of the Board, President or any Vice President of Tropsport in his or
her representative capacity, and not individually, certifying, as of the Closing
Date the capital structure of the Tropsport with the same detail as set forth in
Section 3.2(f).
(l) Certificate of Mancuso/Equity Partnership No. 4, L.P. Parent, Maska and
Sub shall have been furnished with a certificate dated the Closing Date executed
by Mancuso/Equity
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Partnership No. 4, L.P. ("MEP No. 4") certifying, as of the Closing Date, that
(i) MEP No. 4 has no assets or properties other than the shares of capital stock
of the Company owned by it, (ii) no limited partner of MEP No. 4 holds a
proportionate ownership interest therein (whether according to profit
participation or voting rights, or any other means of measuring ownership
interest in MEP No. 4 in accordance with Applicable Law) of more than 50% and
(iii) no Person controls, directly or indirectly, two or more of the limited
partners of MEP No. 4 holding in the aggregate a proportionate ownership
interest therein (whether according to profit participation or voting rights, or
any other means of measuring ownership interest in MEP No. 4 in accordance with
Applicable Law) of more than 50%.
(m) GECC Financing Commitment. GECC shall not have terminated its
commitment or failed to fund such commitment under the GECC Commitment Letter as
a result of the failure to satisfy the one or more of the conditions set forth
(i) in paragraphs 1, 5(i) or (iv) set forth under the section entitled "Other
Terms and Conditions" in the GECC Commitment Letter or (ii) in paragraph 5(ii)
set forth under said Section insofar as such failure in respect of paragraph
5(ii) is attributable to the occurrence of any event, occurrence, fact,
condition, effect or change in the results of operations, condition (financial
or otherwise), properties, assets or business of Parent, Maska, Sub or any of
their respective Subsidiaries, which, individually or in the aggregate, has had
or could reasonably be expected to have a material adverse effect on Parent and
its Subsidiaries, taken as a whole, or a Parent Material Adverse Effect.
7.3 Conditions of Obligation of the Company. The obligation of the Company
to effect the Reorganization is subject to the satisfaction of the following
conditions unless waived by the Company:
(a) Parent, Maska and Sub Representations and Warranties. The
representations and warranties of Parent, Maska and/or Sub set forth in Article
4 shall be true in all respects at and as of the Effective Time (except for
those that speak as of a specific date which shall be true at and as of such
date) with the same effect as though made as of the Effective Time, except for
failures of such representations and warranties to be true and correct which,
when taken together, would not result in a Parent Material Adverse Effect.
(b) Performance of Parent, Maska and Sub Obligations. Parent, Maska and/or
Sub shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by Parent, Maska and/or Sub prior to or at the Closing.
(c) Parent and Maska Compliance Certificates. The Company shall have been
furnished with a certificate dated the Closing Date executed by the Chairman of
the Board, President or any Vice President of each of Parent and Maska in his or
her representative capacity, and not individually, certifying to the fulfillment
of the conditions specified in Sections 7.3(a) and 7.3(b), except to the extent
such conditions have been waived by the Company in writing.
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(d) Opinions of Parent Counsel and Maska Counsel. The Company shall have
been furnished with opinions of (i) Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to Parent and (ii) Stewart McKelvey Sterling Scales, counsel to Maska,
in substantially the form of Exhibit 7.3(d) hereto.
(e) Consents Under Agreements. There shall have been obtained the Consent
of each Person (other than the Governmental Authorities referred to in Sections
7.1(b), 7.1(c), and 7.1(f)) whose Consent is listed in Schedule 4.3(c) as being
required in connection with the transactions contemplated hereby.
(f) Establishment of Paying Agent and Funding. The Paying Agent Services
Agreement shall be in the full force and effect and Parent shall have deposited
with the Paying Agent the aggregate funds necessary to pay the aggregate Merger
Consideration.
(g) Approval of Proceedings and Documentation. All proceedings to be taken
and all certificates, instruments, opinions and other documents to be delivered
to the Company in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to the Company
and its counsel.
8. TERMINATION AND AMENDMENT.
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Reorganization by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if
(i) there has been a material breach of any representation, warranty,
covenant or agreement on the part of the Company, on the one hand, or
Parent, Maska and/or Sub, on the other, set forth in this Agreement which
breach has not been cured within ten business days following receipt by the
breaching party of notice of such breach, or
(ii) any permanent injunction or other order of a court or other
competent authority preventing the consummation of Reorganization shall
have become final and non-appealable; provided, however, that prior to any
such termination pursuant to this clause (ii) Parent and the Company shall,
and shall cause their respective financial and legal advisors to, negotiate
in good faith and for a reasonable period of time to make such adjustments
in the terms and conditions of the Tropsport Share Purchase or the Merger
as would enable the party seeking termination to proceed with the
transaction;
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(c) by either Parent or the Company if, without fault of such terminating
party, the Reorganization shall not have been consummated on or before the
Termination Date; provided, however, that if the sole reason for the failure of
the Reorganization to be consummated is the failure of the condition set forth
in Section 7.2(m) the provisions of Section 8.1(d) shall govern the termination
of this Agreement; and
(d) by Parent, if at any time on or before the Termination Date GECC shall
have terminated its commitment under the GECC Commitment Letter, or by either
Parent or the Company effective as of the Termination Date, if as of the
Termination Date GECC shall have terminated such commitment or failed to fund
such commitment, in each case as a result of the failure of one or more of the
conditions specified in clauses (i) and (ii) of Section 7.2(m), and in each case
subject however to the joint and several obligation of Parent and Maska to
compensate the Company pursuant to Section 8.2(b).
8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided above, this
Agreement shall forthwith become void and there shall be no liability on the
part of any of Parent, Maska, Sub or the Company or their respective directors
and officers, except (a) as set forth in the last sentence of Section 6.2, in
Section 6.7, in Section 6.8 and in Section 8.2(b), and (b) for any breach of
this Agreement which allows for the termination of this Agreement under Section
8.1(b)(i). Parent's obligations under the Confidentiality Agreement shall
survive the termination of this Agreement.
(b) If after the date hereof and during the term of this Agreement, Parent
or the Company shall have terminated this Agreement pursuant to Section 8.1(d),
then Parent and Maska agree jointly and severally, if requested by the Company
to promptly, but in no event later than 30 days after the date of such request,
pay the Company a termination fee of $1,000,000, which amount shall be payable
in same day funds. The Company represents that without this agreement, it would
not enter into this Agreement. The agreement relating to the payment of such
termination fee is the sole and exclusive remedy of the Company for any
termination of this Agreement pursuant to Section 8.1(d).
8.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the
Reorganization by the stockholders of the Company, but, after any such approval,
no amendment shall be made which pursuant to the DGCL requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto. Notwithstanding the foregoing, Parent, Maska and Sub acknowledge
their understanding that the Company shall not agree to amend, in a manner
adverse to the holders of the Subordinated Notes, any provision of Section 1.6
dealing with the Subordinated Notes without the express concurrence of the
holders of the Subordinated Notes.
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<PAGE>
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other actions of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party. Notwithstanding the
foregoing, Parent, Maska and Sub acknowledge their understanding that the
Company shall not agree to waive, in a manner adverse to the holders of the
Subordinated Notes, any provision of Section 1.6 dealing with the Subordinated
Notes without the express concurrence of the holders of the Subordinated Notes.
9. GENERAL PROVISIONS.
9.1 Non-Survival of Representations and Warranties. None of the
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time and each of them
shall expire with, and be terminated and extinguished by, the Reorganization.
This Section 9.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time, including
Sections 3.14(n), 6.7, 6.8, and 6.9.
9.2 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (c) sent by next-day or overnight mail or
delivery, or (d) sent by telecopy or telegram:
(i) if to Parent, Maska or Sub, to:
SLM International, Inc.
2, Place Alexis Nihon
3500, Boul. de Maisonneuve Ouest, Suite 800
Westmount, Quebec H3Z 3C1
Fax No.: (514) 932-6043
with a copy to:
Wellspring Capital Management, LLC
620 Fifth Avenue, Suite 21B
New York, New York 10021-1579
Att'n: Greg S. Feldman
Fax No.: (212) 332-7575
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<PAGE>
with a further copy to
Skadden, Arps, Slate, Meagher
& Flom, LLP
919 Third Avenue
New York, New York 10022
Att'n: Howard L. Ellin
Fax No.: (212) 735-2000
(ii) if to the Company, to:
Sports Holdings Corp.
c/o Mancuso and Company
10 East 53rd Street
New York, New York 10022
Att'n: Arnold E. Spangler
Fax No.: (212) 308-0183
with a copy to:
Marc J. Adelsohn
Jacobs Persinger & Parker
77 Water Street, 17th Floor
New York, New York 10005
Fax No.: (212) 742-0938
with a further copy to:
Tropsport Acquisitions Inc.
1200 55th Avenue
Lachine, Quebec H8T 3J8
Att'n: Marvin Tafler
Fax No.: (514) 636-5751
(iii) if to the Process Agent, to:
CT Corporation System
Corporation Trust Center
1029 Orange Street
Wilmington, Delaware 19801
Fax No.: (302) 655-5049
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<PAGE>
with a copy to:
Marc J. Adelsohn
Jacobs Persinger & Parker
77 Water Street, 17th Floor
New York, New York 10005
Fax No.: (212) 742-0938
with a further copy to:
Skadden, Arps, Slate, Meagher
& Flom, LLP
919 Third Avenue
New York, New York 10022
Att'n: Howard L. Ellin
Fax No.: (212) 735-2000
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications shall
be deemed to have been received (A) if by personal delivery on the date of such
delivery, (B) if by certified or registered mail, on the seventh Business Day
after the mailing thereof, (C) if by next-day or overnight mail or delivery, on
the day delivered, or (D) if by telecopy or telegram, on the next day following
the day on which such telecopy or telegram was sent.
9.3 Interpretation. When a reference is made in this Agreement to an
Article, Section or Schedule, such reference shall be to an Article, Section or
Schedule of or to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. Whenever in this Agreement a
party is obligated to use "reasonable efforts" to achieve a result, such party
shall be deemed obligated to use the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible; provided, however, that an obligation
to use reasonable efforts under this Agreement shall not obligate any party
hereto to pay any costs or expenses or other consideration (except for customary
filing fees and other ordinary administrative charges) or incur any obligation
to any third party, in order to obtain any Consent from such third party.
Whenever from the context it appears appropriate, each term stated in either the
singular or the plural shall include the singular and the plural, and pronouns
stated in the masculine, the feminine or the neuter gender shall include the
masculine, the feminine and the neuter.
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<PAGE>
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
A facsimile, telecopy or other reproduction of this Agreement may be
executed by one or more parties hereto, and an executed copy of this Agreement
may be delivered by one or more parties hereto by facsimile or similar
instantaneous electronic transmission device pursuant to which the signature of
or on behalf of such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the request of any
party hereto, all parties hereto agree to execute an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.
9.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.
This Agreement (including the documents and instruments referred to herein,
whether or not annexed hereto as an Exhibit, Schedule or Appendix), (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.9, is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder. The parties hereby acknowledge that, except as otherwise
specifically provided in this Agreement or as hereinafter agreed to in writing,
no party shall have the right to acquire or shall be deemed to have acquired
shares of capital stock of the other party pursuant to the Merger until
consummation thereof.
9.6 SUBMISSION TO JURISDICTION. PARENT AND THE COMPANY EACH SUBMIT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN NEW YORK, NEW YORK, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AGREES THAT
ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT, AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT IN ANY OTHER COURT. PARENT AND THE COMPANY EACH
WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY, OR OTHER SECURITY THAT MIGHT
BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO. IN ANY SUCH ACTION OR
PROCEEDING, IF SERVICE OF PROCESS UPON ANY PARTY, BY DELIVERY IN PERSON OR BY
MAILING BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, HAS BEEN
ATTEMPTED WITHOUT SUCCESS ON AT LEAST TWO DIFFERENT OCCASIONS, AT LEAST SEVEN
DAYS APART, WITHIN A 20 DAY PERIOD, THEN SUCH PARTY MAY BE SERVED BY SENDING OR
DELIVERING A COPY OF THE PROCESS (A) TO THE PARTY TO BE SERVED AT THE ADDRESS
AND IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION 9.2 ABOVE OR (B)
TO THE PARTY TO BE SERVED IN CARE OF THE PROCESS AGENT (AS DEFINED BELOW) AT THE
ADDRESS AND IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION 9.2
ABOVE. IN THE EVENT THAT SUCH ALTERNATIVE METHODS OF SERVICE BECOME NECESSARY,
PARENT AND THE COMPANY HEREBY APPOINT CT CORPORATION SYSTEM, A DELAWARE
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CORPORATION (THE "PROCESS AGENT"), AS ITS AGENT TO RECEIVE ON ITS BEHALF SUCH
SERVICE OF PROCESS. NOTHING IN THIS SECTION 9.6, HOWEVER, SHALL AFFECT THE RIGHT
OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. PARENT
AND THE COMPANY EACH AGREES THAT A FINAL JUDGMENT IN ANY ACTION OR PROCEEDING SO
BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY SUIT ON THE JUDGMENT OR IN
ANY OTHER MANNER PROVIDED BY LAW.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in New York without regard to the principles thereof
regarding the choice of law, except to the extent that the laws of the State of
Delaware shall specifically and mandatorily apply to the Merger.
9.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties, except that each of Maska and Sub may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to Parent or to
any direct or indirect wholly-owned Subsidiary of Parent; provided, that the
assignee (a) is a corporation duly incorporated, organized and existing under
the DGCL and (b) is able to satisfy all representations, warranties, agreements
and covenants of or concerning Maska or Sub, as the case may be, set forth in
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by and against the
parties and their respective successors and permitted assigns.
9.9 Currency; Foreign Exchange. Unless otherwise indicated, all dollars
($'s) specified in this Agreement shall mean United States dollars. Where
necessary, all foreign currency shall be converted to U.S. dollar equivalents
determined on the basis of the spot exchange rate published in the Wall Street
Journal on the Business Day last preceding the date of determination.
9.10 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Applicable Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
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<PAGE>
IN WITNESS WHEREOF, Parent, Maska and Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
"PARENT"
SLM INTERNATIONAL, INC.
By:_________________________
Name:_______________________
Title:______________________
Attest:
- ----------------------------
Name:_______________________
Title: Secretary
"MASKA"
SPORT MASKA INC.
By:_________________________
Name:_______________________
Title:______________________
Attest:
- ----------------------------
Name:_______________________
Title: Secretary
"SUB"
SLM ACQUISITION CORP.
By:_________________________
Name:_______________________
Title:______________________
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Attest:
- ----------------------------
Name:_______________________
Title: Secretary
"COMPANY"
SPORTS HOLDINGS CORP.
By:_________________________
Name:_______________________
Title:______________________
Attest:
- ----------------------------
Name:_______________________
Title: Secretary
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APPENDIX I TO
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as
of October 6, 1998, among SLM INTERNATIONAL, INC., SPORT MASKA
INC., SLM ACQUISITION CORP., and SPORTS HOLDINGS CORP.
------------------------------------------------------------------
The terms defined in this Appendix I, whenever used in the Agreement
(including in the Schedules thereto), shall have the respective meanings
indicated below for all purposes of the Agreement. All references herein to a
Section, Article or Schedule are to a Section, Article or Schedule of or to the
Agreement, unless otherwise indicated.
"Accrued Dividend Amount" an amount per share equal to (a) $6.50,
multiplied by (b) a fraction having (i) as its numerator the number of days in
the period from the date through which a dividend was last paid to holders of
the Company Preferred Stock to the Closing Date (provided, however, that in
calculating the number of days in such period (A) each full calendar month in
such period shall be deemed to have 30 days, (B) the first day of the period
shall be included, and (C) the last day of the period shall be excluded), and
(ii) as its denominator 360.
"Acquired Companies" the Company and its Subsidiaries, collectively.
"Affiliate" of any Person, any partner, officer or director of such Person
or any Person that directly or indirectly controls, or is controlled by, or is
under common control with, such Person, including any Subsidiary of such Person.
"Antitrust Law" any Applicable Law respecting competition, monopolies or
restrictive trade practices pursuant to which one or more of the parties to the
Agreement, or one or more of their respective Affiliates, are required or
permitted to make one or more Filings with a Governmental Authority, required to
allow a waiting or review period to expire before proceeding or required to
Appendix I - 1
<PAGE>
obtain a Consent from a Governmental Authority, in connection with the
Reorganization, including the HSR Act and the Competition Act.
"Applicable Credit Documents" as defined in Section 1.6(b).
"Applicable Laws" all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (b) consents,
approvals or authorizations of, or designations, declarations or filings with,
or reports to, or permits, franchises or concessions from any Governmental
Authority and (c) orders, decisions, injunctions, judgments, awards and decrees
of or agreements with any Governmental Authority.
"Benefit Plan" as defined in Section 3.4(a).
"Business" the business conducted by the Acquired Companies with respect to
importing, sourcing, designing, manufacturing, marketing and distributing (a)
ice, in-line and street hockey equipment, including (i) sticks, (ii) protective
equipment, (iii) goalie equipment, (iv) ice and in-line skates, (v) helmets,
pants, bags, jerseys and other equipment used in or relating to ice, in-line or
street hockey, and (b) other incidental sporting goods.
"Business Benefit Plan" as defined in Section 3.4(a).
"Business Day" a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required to close.
"Canada Certificate", as defined in Section 6.15.
"Canadian Benefit Plan", as defined in Section 3.4(a).
"Certificate of Merger" as defined in Section 1.3.
"Certificates" as defined in Section 2.4.
Appendix I - 2
<PAGE>
"Class A Common" and "Class B Common" as defined in Section 2.1(d).
"Clearance Certificates" as defined in Section 6.15.
"Closing" as defined in Section 1.4.
"Closing Date" as defined in Section 1.4.
"COBRA" as defined in Section 3.4(d).
"Code" the Internal Revenue Code of 1986, as amended.
"Common Cash Share Price" as defined in Section 2.1(d).
"Common Stock Merger Adjustment Amount" an amount equal to the sum of: (i)
the Preferred Stock Merger Consideration, plus (ii) the Preferred Stock
Redemption Amount, plus (iii) the Subordinated Notes Discharge Amount, plus (iv)
$7,235,000, plus (v) the Other Debt Discharge Amount, plus (vi) the Other Debt
Assumption Amount, plus (vii) the Reserve Amount, plus (viii) payments made by
the Company for the repurchase of shares of its capital stock as permitted under
Section 5.1(b)(iii) between the date of this Agreement and the Closing Date.
"Common Stock Merger Consideration" an amount equal to the sum of:
(a) Fifty-Eight Million, Seven Hundred Fifty Thousand Dollars
($58,750,000),
(b) (i) if the Common Stock Merger Adjustment Amount exceeds the Tropsport
Share Purchase Price, then minus the amount by which the Common Stock Merger
Adjustment Amount exceeds the Tropsport Share Purchase Price, or (ii) if the
Tropsport Share Purchase Price exceeds the Common Stock Merger Adjustment
Amount, then plus the amount by which the Tropsport Share Purchase Price exceeds
the Common Stock Merger Adjustment Amount.
Appendix I - 3
<PAGE>
"Company" as defined in the first paragraph of the Agreement.
"Company Common Stock" as defined in Section 2.1(d).
"Company Material Adverse Effect" any event, occurrence, fact, condition,
change or effect that, individually or when taken together with all other such
events, occurrences, facts, conditions, changes or effects, is materially
adverse to (a) the business, operations, results of operations, condition
(financial or otherwise), properties, assets or liabilities of the Acquired
Companies as a whole (for the purposes of this clause (a), where it is indicated
in the Agreement that the determination is to be made with respect to any time
or period following the Effective Time, Surviving Corporation shall be
substituted for the Company), other than events, occurrences, facts, conditions,
changes or effects attributable to (i) occurrences in the economy in general or
the Acquired Companies' industry in general and not specifically relating to the
Acquired Companies or the Business or (ii) the delay or cancellation of orders
or business relationships by customers of or vendors to the Acquired Companies
directly attributable to the announcement of this Agreement, or (b) the
Company's ability to perform its obligations under the Agreement.
"Company Preferred Stock" as defined in Section 2.1(c).
"Company Stock" as defined in Section 2.1(d).
"Competition Act" the Competition Act (Canada), as amended, including the
regulations and rules issued pursuant thereto.
"Confidentiality Agreement" the confidentiality agreement dated February
12, 1998 between Wellspring Capital Management L.L.C. and Salomon Smith Barney
Inc., as financial advisor to and on behalf of the Company.
"Consent" as defined in Section 3.3(c).
"Constituent Corporations" as defined in Section 1.5(a).
Appendix I - 4
<PAGE>
"Definitive Financing Agreements" as defined in Section 6.10.
"Designated Funded Debt" as defined in Section 1.6(c).
"DGCL" as defined in Section 1.3.
"Dissenting Holder" as defined in Section 2.1(e).
"Dissenting Shares" as defined in Section 2.1(e).
"D/O Indemnified Parties" as defined in Section 6.9(a).
"Effective Time" as defined in Section 1.3.
"Environmental Claim" any claim action, cause of action, investigation or
written notice by any person or entity alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup or
remediation costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or Release of any Hazardous Materials at any
location, whether or not owned or operated by the Acquired Companies, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" all federal, state, provincial, local, and foreign
laws and regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials.
"ERISA" as defined in Section 3.4(a).
Appendix I - 5
<PAGE>
"ERISA Affiliate" as defined in Section 3.4(a)(viii).
"Filing" as defined in Section 3.3(c).
"Financial Statements" as defined in Section 3.12.
"Financing Commitments" as defined in Section 4.7.
"Foreign Subsidiary" any Subsidiary of the Company organized under the laws
of any jurisdiction other than the United States or any State or political
subdivision thereof, or Canada or any province or political subdivision thereof.
"Funded Debt" as defined in Section 1.6(a).
"GECC", collectively General Electric Capital Corporation and General
Electric Capital Canada Inc.
"GECC Commitment Letter", letter dated October 6, 1998 addressed from GECC
to Parent with respect to financing for the transactions contemplated by the
Agreement.
"Governmental Authority" any nation or government, any state or province or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission or instrumentality of the United States or Canada,
any State of the United States, any Province of Canada, any foreign country, or
any political subdivision of any of the foregoing, and any tribunal or
arbitrator(s) of competent jurisdiction, and any self-regulatory organization.
"Group Benefit Plan" as defined in Section 3.4(a).
Appendix I - 6
<PAGE>
"Hazardous Materials" means all substances defined as Hazardous Substances,
Oils, Pollutants, or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. ss.300.5, or defined as such by, or
regulated as such under, any Environmental Law.
"HSR Act" the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, including the regulations and rules issued pursuant thereto.
"Injunction" as defined in Section 7.1(d).
"Intellectual Property" as defined in Section 3.9.
"Interim Financials" as defined in Section 3.12.
"Karhu U.S.A., Inc." a Vermont corporation now known as SHC Hockey Inc.
"Knowledge" an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. A Person other than an individual (a "Subject Entity")
will be deemed to have "Knowledge" of a particular fact or other matter if (a)
any individual who is serving as the chief executive officer, chief operating
officer, chief financial officer, or chief accounting officer of such Subject
Entity, and (b) in the case of the Company, in addition to the persons holding
the offices described in clause (a), any of the following: John Pagotto, Johnny
Martinsson, or Michael Liquornik (any of the foregoing officers or, in the case
of the Company, named individuals, a "Relevant Individual") has Knowledge of
such fact or other matter, or if any Relevant Individual could be expected to
have discovered or otherwise become aware of such fact or other matter upon
having made due inquiry of those employees of such Subject Entity who report to
such Relevant Individual and who could reasonably be expected, in the ordinary
course of their duties as employees of such Subject Entity, to have information
relating to the subject of the representation or warranty to which such fact or
other matter relates.
"Letter of Transmittal" as defined in Section 2.1(c).
Appendix I - 7
<PAGE>
"Lien" any mortgage, pledge, hypothec, hypothecation, right of others,
claim, security interest, encumbrance, lease, sublease, license, occupancy
agreement, adverse claim or interest, easement, covenant, encroachment, burden,
title defect, title retention agreement, voting trust agreement, interest,
equity, option, lien, right of first refusal, charge or other restriction or
limitation of any nature whatsoever.
"Maska" as defined in the first paragraph of the Agreement.
"Material Contracts" as defined in Section 3.15.
"MEOP" as defined in Section 3.2(b).
"MEP No. 4" as defined in Section 7.2(l).
"Merger" as defined in the second recital of the Agreement.
"Merger Consideration" as defined in Section 2.1(d).
"1997 Balance Sheet" the latest balance sheet included in the Financial
Statements.
"North American Leased Real Property" as defined in Section 3.7(b)(i).
"North American Owned Real Property" as defined in Section 3.7(a)(i).
"North American Real Property Leases" as defined in Section 3.7(b)(i).
"North American Tenant Agreements" as defined in Section 3.7(a)(i).
"Organizational Documents" (a) the articles or certificate of incorporation
and bylaws of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
certificate of limited partnership of a limited partnership;
Appendix I - 8
<PAGE>
(d) any charter or similar document adopted or filed in connection with the
creation, formation, or organization of any other Person; and (e) any amendment
to any of the foregoing.
"Other Debt" as defined in Section 1.6(a)(iii).
"Other Debt Assumption Amount" the total amount of Designated Funded Debt
(including accrued and unpaid interest, if any, through the Closing Date) in
respect of the Other Debt, excluding any penalties, fees or other amounts which
have or will become outstanding in connection with or as a result of Parent's
election pursuant to Section 1.6(c) to have such Other Debt continue to remain
outstanding after the Effective Time or any actions taken in connection with
obtaining any Consent pursuant to Section 1.6(c) in relation thereto.
"Other Debt Discharge Amount" the total amount required to pay in full
pursuant to Section 1.6(a)(iii) the Funded Debt in respect of the Other Debt not
included in the Designated Funded Debt.
"Overseas Owned Real Property" as defined in Section 3.7(c).
"Overseas Real Property Leases" as defined in Section 3.7(c).
"Parent" as defined in the first paragraph of the Agreement.
"Parent Material Adverse Effect" any event, occurrence, fact, condition,
change or effect that, individually or when taken together with all other such
events, occurrences, facts, conditions, changes or effects, is materially
adverse to the ability of Parent or Sub to perform its or their obligations
under the Agreement.
"Paying Agent" as defined in Section 2.3
"Paying Agent Services Agreement" as defined in Section 2.3.
"Permits" as defined in Section 3.16.
Appendix I - 9
<PAGE>
"Permitted Liens" (a) Liens securing any of the Funded Debt but subject to
the provisions of Section 1.6 of the Agreement relating to the payment in full
of the Funded Debt and the provision for the termination, release or discharge
of such Liens, (b) Liens otherwise specifically disclosed in one or more
Sections of the Agreement or the Schedules hereto; (c) Liens reserved against in
the Financial Statements or the Interim Financials and identified in the
footnotes to the Financial Statements, to the extent so reserved, (d) Liens for
Taxes which are not delinquent as of the date of determination, or which can be
paid without material penalty, or which are being contested in good faith by
appropriate proceedings if adequate reserves with respect thereto are maintained
on an Acquired Company's books and records, or (e) Liens that, individually and
in the aggregate, do not and could not reasonably be expected to materially
detract from the value of any material item or portion of property or assets of
the Acquired Companies or materially interfere with the use thereof as used as
of the date of determination.
"Person" any natural person, firm, general or limited partnership,
association, corporation, company, trust, business trust, Governmental Authority
or other entity.
"Preferred Cash Share Price" as defined in Section 2.1(c).
"Preferred Stock Merger Consideration" as defined in Section 2.1(c).
"Preferred Stock Redemption Amount" as defined in Section 1.2(b).
"Process Agent" as defined in Section 10.6.
"Products Liability Claim" any claim for alleged damage or injury to person
or property (a) arising out of any express or implied representation, warranty,
agreement or guaranty made or claimed to have been made by or on behalf of an
Acquired Company, or (b) based upon any statute or common law theory of tort or
strict liability or civil law theory of delict, in each case in connection with
any products or services produced, prepared, created, sold or rendered by or on
behalf of such Acquired Company in connection with the Business.
Appendix I - 10
<PAGE>
"Proprietary Rights" as defined in Section 3.9.
"Quebec Certificate" as defined in Section 6.15.
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, dispersal, leaching or migration into the indoor
or outdoor environment (including, without limitation, ambient air, surface
water, groundwater and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Materials through or in the air,
soil, surface water, groundwater or property.
"Reorganization" as defined in the second recital to the Agreement.
"Reserve Amount" as defined in Section 2.2(b)(ii).
"Retention Payments" as defined in Section 6.7.
"Retiree Welfare Plan" as defined in Section 3.4(a).
"SHC Hockey" SHC Hockey, Inc. (formerly known as Karhu U.S.A., Inc.) a
Vermont corporation and a wholly-owned Subsidiary of the Company.
"Significant Customer" any customer of an Acquired Company that ordered
products and related services from such Acquired Company with an aggregate
purchase price of $50,000 or more during the eight-month period ended August 31,
1998.
"Significant Vendor" any supplier to an Acquired Company from which such
Acquired Company ordered raw materials, supplies, merchandise or other goods
with an aggregate purchase price of $50,000 or more during the eight-month
period ended August 31, 1998.
"Sub" as defined in the first paragraph of the Agreement.
Appendix I - 11
<PAGE>
"Subordinated Notes" as defined in Section 1.6(a)(ii).
"Subordinated Notes Discharge Amount" the total amount required to pay in
full the Funded Debt in respect of the Subordinated Notes pursuant to Section
1.6(a)(ii).
"Subsidiary" with respect to any Person (the "owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of such corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of such corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the owner or one or more of such owner's Subsidiaries.
"Subsidiary Equity" as defined in Section 3.1(a).
"Surviving Corporation" as defined in Section 1.5(a).
"Takeover Agreement" as defined in Section 5.1(e).
"Takeover Proposal" any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving any Acquired Company, or
any proposal or offer to acquire in any manner a substantial equity interest in,
or a substantial portion of the assets of any Acquired Company other than
pursuant to the transactions contemplated by this Agreement.
"Tax" or "Taxes" any federal, state, local or foreign net or gross income,
franchise, profits, gross receipts, license, payroll, employment, excise,
severance, stamp, capital stock, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax, governmental fee or assessment or charge of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not,
imposed by any governmental authority or arising under any tax law (including by
reason of several and/or transferee liability).
Appendix I - 12
<PAGE>
"Tax Consequences" as defined in Section 3.14(n).
"Tax Costs" as defined in Section 3.14(n).
"Tax Return" any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto and any amendment thereof.
"Termination Date" as defined in Section 1.4.
"Tropsport" as defined in the first recital of the Agreement.
"Tropsport Share Purchase" as defined in the first recital of the
Agreement.
"Tropsport Share Purchase Price" as defined in Section 1.1.
"Tropsport Shares" as defined in Section 1.1.
"Violation" as defined in Section 3.3(b).
"Voting Agreements" as defined in Section 6.13.
"Voting Debt" as defined in Section 3.2(b).
"WARN Act" as defined in Section 3.5.
"Welfare Plan" as defined in Section 3.4(a).
"Working Capital Borrowings" as defined in Section 1.6(a)(i).
"Working Capital Borrowings Assumption Amount" the total amount of
Designated Funded Debt (including accrued and unpaid interest, if any, through
the Closing Date) in respect of the
Appendix I - 13
<PAGE>
Working Capital Borrowings, excluding any penalties, fees or other amounts which
have or will become outstanding in connection with or as a result of Parent's
election pursuant to Section 1.6(c) to have such Working Capital Borrowings
continue to remain outstanding after the Effective Time or any actions taken in
connection with obtaining any Consent pursuant to Section 1.6(c) in relation
thereto.
"Working Capital Borrowings Discharge Amount" the total amount required to
pay in full pursuant to Section 1.6(a)(i) the Funded Debt in respect of those
Working Capital Borrowings not included in the Designated Funded Debt.
Appendix I - 14
VOTING AGREEMENT AND IRREVOCABLE PROXY
VOTING AGREEMENT (containing an irrevocable proxy) (the "Agreement") dated
as of October ___, 1998, among SLM International, Inc., a Delaware corporation
("Parent"), SLM ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), and the Stockholder whose name appears on the
signature page to the Agreement (the "Stockholder").
W I T N E S S E T H :
WHEREAS, concurrently herewith Parent, Sport Maska, Inc., a wholly-owned
subsidiary of Parent, Sub and SPORTS HOLDINGS CORP., a Delaware corporation (the
"Company"), are entering into an Agreement and Plan of Reorganization dated as
of even date herewith (the "Reorganization Agreement") pursuant to and subject
to the terms and conditions of which (a) Sport Maska Inc. will acquire of all of
the issued and outstanding equity of Tropsport Acquisitions Inc., a corporation
organized under the Canada Business Corporations Act and a wholly-owned
subsidiary of the Company (the "Tropsport Share Purchase") and (b) Sub will
merge with and into the Company (the "Merger", and collectively with the
Tropsport Share Purchase, the "Reorganization");
WHEREAS, as of the date hereof the Stockholder is the holder of record and
beneficial owner (as defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of shares of Company Stock (as such term and
each other capitalized term used herein without textual definition is defined in
Section 7.1 hereof) of the class and in the number set forth opposite the name
of the Stockholder on the signature page hereof (such shares together with all
other shares of Company Stock acquired by the Stockholder subsequent to the date
hereof, collectively the "Shares");
WHEREAS, Stockholder desires (a) to enter into an agreement whereby
Stockholder agrees to vote any and all Shares in favor of the Reorganization;
and (b) to grant to Sub an irrevocable proxy covering the Shares; and
WHEREAS, Parent, Sport Maska Inc. and Sub are entering into the
Reorganization Agreement, conditioned upon, and in reliance on the
representations, warranties and agreements of Stockholder contained in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and of
other good and valuable consideration, and intending to be legally bound hereby,
the parties hereto agree as follows:
<PAGE>
1. PROXY AND SUPPORT OF REORGANIZATION.
1.1 Proxy with respect to the Shares. Effective as of the date of this
Agreement Stockholder hereby irrevocably appoints Sub and any nominee thereof as
Stockholder's attorney and proxy, with full power of substitution, to represent
and vote, for and in the name place and stead of the Stockholder, all of the
Shares eligible to vote, in such manner as such attorney and proxy or its
substitute shall, in its sole discretion deem proper, at any regular, special or
other meeting of stockholders, at any adjournment of any of such meetings held
during the time this Proxy is in effect, and to act by consent in lieu of
meeting, or otherwise, with respect to the Shares at all times this Proxy is in
effect; provided, however, that the Proxy granted by Stockholder hereunder is
granted only with respect or relating to the following matters (the "Designated
Matters"):
(a) votes or consents with respect or relating to the Reorganization;
(b) votes or consents with respect or relating to any action or agreement
that would result in a breach of any covenant, representation, warranty,
obligation or agreement of the Company under the Reorganization Agreement;
(c) votes or consents with respect or relating to any action or agreement
that would impede, interfere with, delay, postpone or attempt to discourage the
Reorganization, including, but not limited to:
(i) any merger (other than the Merger), business combination,
reorganization, liquidation, or other extraordinary corporate transaction
involving the Company;
(ii) any sale, transfer or other disposition of a material amount of
assets of the Company, other than the Tropsport Share Purchase;
(iii) any change in the management or board of directors of the
Company without the prior written consent of Parent; or
(iv) any material change to the present capitalization of the Company;
and
(d) votes or consents with respect or relating to any other material change
in the corporate structure or business of the Company.
This Proxy is irrevocable, is coupled with an interest sufficient in law to
support an irrevocable proxy and is granted in consideration of and as an
inducement to cause Parent and Sub to enter into the transactions contemplated
by this Agreement and by the Reorganization Agreement. This Proxy revokes any
other proxy heretofore granted by Stockholder at any time with respect to the
Shares (or any of them) and Stockholder hereby agrees that no subsequent proxy
will be granted by Stockholder with respect to the Shares (or any of them)
during the time
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this Proxy is in effect, provided, however, that the provisions of this sentence
shall be operative only to the extent such heretofore-or-hereafter-granted proxy
is with respect or relates to Designated Matters. If during the time this Proxy
is intended to be in effect pursuant to the provisions of this Agreement, the
Stockholder becomes entitled to vote the Shares (or any of them) for any
purpose, the Stockholder shall with respect or relating to Designated Matters
take all actions necessary to vote the Shares pursuant to instructions received
from the Sub.
1.2 Support of Reorganization; Stock Legend.
(a) In the event and to the extent that (i) the Proxy is invalid, or (ii)
Stockholder receives a written request from Sub to vote in favor of the
Reorganization, then Stockholder agrees, subject to the provisions of Section
1.3 hereof, (A) to vote any and all of the Shares which Stockholder is then
entitled to vote in favor of the Reorganization pursuant to the terms of the
Reorganization Agreement, (B) to vote any and all of the Shares against any
action or agreement that would impede, interfere with or prevent the
Reorganization, including any other extraordinary corporate transaction, such as
a merger, reorganization, dissolution, recapitalization, or liquidation
involving the Company or any proposal by a third party to acquire the Company,
and (C) not to commit to take any action inconsistent with the foregoing.
(b) The Stockholder agrees to place the following legend on any and all
certificates evidencing the Shares:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER PURSUANT TO THAT CERTAIN VOTING AGREEMENT AND IRREVOCABLE PROXY,
DATED AS OF OCTOBER 6, 1998, BY AND AMONG SLM INTERNATIONAL, INC, [SUB] AND
[STOCKHOLDER]. ANY TRANSFER OF SUCH SHARES IN VIOLATION OF THE TERMS OF SUCH
AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER.
1.3 Condition Precedent to Obligations. The obligations of the parties to
perform under this Agreement (upon its execution and thereafter) shall be
subject to the continuing condition that there shall be in effect no temporary
restraining order, preliminary or permanent injunction or other like order
issued by any court of competent jurisdiction prohibiting performance pursuant
to this Agreement, exercise of the Proxy, or the Reorganization. Stockholder,
Parent and Sub agree (a) not to seek any such injunction or order, (b) to oppose
any application brought for any such injunction or order by any third party, and
(c) to seek the immediate lifting of any such injunction or order.
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<PAGE>
2. REPRESENTATIONS AND WARRANTIES.
2.1 Of Stockholder. Stockholder represents and warrants to Parent and Sub
as follows:
(a) Ownership of Shares. As of the date hereof, the Shares constitute all
of the shares of the Company Stock beneficially and of record owned by the
Stockholder. Other than pursuant the exercise of conversion rights pertaining to
the various classes of Company Stock and to The Sport Holdings Corp. 1993
Management Equity Ownership Plan and The Sports Holdings Corp. 1994 Management
Equity Ownership Plan, Stockholder does not have any rights to acquire any
additional shares of the Company Stock. Stockholder currently has, and at the
closing of the Merger, will have good, valid and marketable title to the Shares,
free and clear of all liens, encumbrances, restrictions, options, warrants,
rights to purchase and claims of every kind other than (i) the encumbrances
created by this Agreement, (ii) restrictions on transfer under applicable
Federal, State and Provincial securities law, and (iii) as set forth on Schedule
2.1(a).
(b) Authority; No Conflict. Stockholder has the full legal right, power and
authority to enter into and perform all Stockholder's obligations under this
Agreement. This Agreement has been duly executed and delivered by Stockholder
and constitutes a legal, valid and binding agreement of Stockholder, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws, now or
hereafter in effect affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity.
Neither the execution or delivery of this Agreement by Stockholder, nor the
consummation by Stockholder of the transactions contemplated hereby:
(i) requires any consent, approval or authorization of, or any
designation, declaration or filing with any Governmental Authority;
(ii) except as set forth in Schedule 2.1(b) hereto violates or
requires any consent under any voting agreement, stockholders agreement,
voting trust or proxy to which Stockholder is a party or by which
Stockholder is bound; or
(iii) conflicts with, or results in any violation of, or default (with
or without notice or lapse of time, or both) under, or gives rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under (any such conflict, violation, default, right of
termination, cancellation or acceleration or loss a "Violation"), under,
any contract, commitment, agreement, understanding, arrangement or other
restriction of any kind to which Stockholder is a party or by which
Stockholder is bound.
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<PAGE>
2.2 Of Parent and Sub. Parent and Sub jointly and severally represent and
warrant to Stockholder as follows:
(a) Authority; No Conflict. Each of Parent and Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement has been duly executed and
delivered by Parent and Sub and constitutes a valid and binding obligation of
each of them enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws, now or hereafter in effect affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity.
Neither the execution or delivery of this Agreement by Parent and Sub, nor
the consummation by Parent and Sub of the transactions contemplated hereby:
(i) requires any consent, approval or authorization of, or any
designation, declaration or filing with any Governmental Authority or,
(ii) results in any Violation of any contract, commitment, agreement,
understanding, arrangement or other restriction of any kind to which Parent
or Sub is a party or by which Parent or Sub is bound.
3. COVENANTS.
3.1 Of Stockholder.
(a) No Shop. Except in accordance with the provisions of this Agreement,
Stockholder agrees, while this Agreement is in effect, not to, directly or
indirectly:
(i) sell, transfer, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, pledge, encumbrance, assignment or
other disposition of, any of the Shares;
(ii) grant any proxies with respect to any Shares, deposit any Shares
into a voting trust or enter into a voting agreement with respect to any
Shares; or
(iii) take any action to encourage, solicit, initiate or participate
in any way in discussions or negotiations with, or furnish any information
to, or afford any access to the properties, books or records of the Company
or any of its subsidiaries to, or otherwise assist, facilitate or encourage
any person or entity (other than Parent and Sub, or their officers,
directors, representatives, agents, affiliates or associates) in connection
with any
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<PAGE>
possible or proposed merger, consolidation, business combination,
liquidation, reorganization, sale or other disposition of assets, sale of
shares of capital stock or similar transactions involving the Company or
any division of the Company.
(b) Notice Regarding Additional Shares. Stockholder agrees, while this
Agreement is in effect, to notify Parent promptly of the number of any shares of
Company Stock acquired by Stockholder after the date hereof.
(c) Confidentiality. Stockholder will not disclose or discuss this
Agreement, the Reorganization Agreement or the transactions contemplated hereby
or thereby with anyone (other than Stockholder's legal counsel and advisors, if
any) not a party to this Agreement, without prior written consent of Parent
except for disclosures which in the opinion of Stockholder's legal counsel are
necessary to fulfill an obligations imposed upon Stockholder by Applicable Law;
Stockholder shall given prompt written notice of such disclosure to Parent.
3.2 Of Parent and Sub. Parent and Sub agree to use their reasonable best
efforts to make and consummate the Reorganization pursuant to the terms, and
subject to the conditions, of the Reorganization Agreement.
4. TERMINATION; EFFECT.
4.1 Termination. This Agreement shall terminate on the earliest of:
(a) the date on which Parent, Sub and Stockholder mutually consent in
writing to terminate this Agreement;
(b) the date on which the Merger becomes effective in accordance with the
terms of the Reorganization Agreement;
(c) the date on which the Reorganization Agreement is terminated in
accordance with its terms; or
(d) 11:59 P.M., Eastern Standard Time, on November 28, 1998.
4.2 Effect of Termination. In the event of termination of this Agreement as
provided above, this Agreement shall forthwith become void and there shall be no
liability on the part of any of Parent, Sub or Stockholder, except as set forth
in Article 5 and Section 1.3 of this Agreement with regard to the payment of
expenses.
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<PAGE>
5. EXPENSES.
5.1 Expenses. Except and solely to the extent as otherwise set forth in
Section 1.3 of this Agreement, each party to this Agreement will bear its
respective expenses incurred in connection with the preparation, execution, and
performance of this Agreement and the transactions contemplated hereby,
including, without limitation, all fees and expenses of agents, representatives,
counsel, and advisors.
6. GENERAL PROVISIONS.
6.1 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, (c) sent by next-day or overnight mail or
delivery, or (d) sent by telecopy or telegram:
(i) if to Parent or Sub, to:
SLM International, Inc.
2, Place Alexis Nihon
3500, Boul. de Maisonneuve Ouest, Suite 800
Westmount, Quebec H3Z 3C1
Fax No.: (514) 932-6043
with a copy to:
Wellspring Capital Management, LLC
620 Fifth Avenue, Suite 21B
New York, New York 10021-1579
Att'n: Greg S. Feldman
Fax No.: (212) 332-7575
with a further copy to:
Skadden, Arps, Slate, Meagher
& Flom, LLP
919 Third Avenue
New York, New York 10022
Att'n: Howard L. Ellin
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<PAGE>
(ii) if to Stockholder, to:
__________________________
__________________________
__________________________
Fax No.: ________________
with a copy to:
__________________________
__________________________
__________________________
Fax No.: _________________
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications shall
be deemed to have been received (A) if by personal delivery on the date of such
delivery, (B) if by certified or registered mail, on the seventh Business Day
after the mailing thereof, (C) if by next-day or over-night mail or delivery, on
the day delivered, or (D) if by telecopy or telegram, on the next day following
the day on which such telecopy or telegram was sent.
6.2 Entire Agreement; Amendment. This Agreement (including the documents
and instruments referred to herein, whether or not annexed hereto as an Exhibit,
Schedule or Appendix) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
6.3 Counterparts. This Agreement may be executed in two (2) or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two (2) or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
A facsimile, telecopy or other reproduction of this Agreement may be
executed by one or more parties hereto, and an executed copy of this Agreement
may be delivered by one or more parties hereto by facsimile or similar
instantaneous electronic transmission device pursuant to which the signature of
or on behalf of such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the request of any
party hereto, all parties hereto agree to execute an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.
-8-
<PAGE>
6.4 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Sub may assign, in its sole discretion, any or all of its
rights, interests and obligations hereunder to Parent or to any direct or
indirect wholly-owned Subsidiary of Parent; provided, that the assignee (a) is a
corporation duly incorporated, organized and existing under the General
Corporation Law of the State of Delaware and (b) is able to satisfy all
representations, warranties, agreements and covenants of or concerning Sub set
forth in this Agreement. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
6.5 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Applicable Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
6.6 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". Whenever the word "Reorganization" is used in this Agreement, it
shall be deemed to refer to each of the Tropsport Share Purchase and the Merger.
6.7 GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN NEW YORK WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING THE CHOICE OF LAW, EXCEPT TO THE EXTENT THAT THE LAWS OF THE
STATE OF DELAWARE SHALL SPECIFICALLY AND MANDATORILY APPLY TO THE PROXY. EACH OF
THE PARTIES HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED
IN THE STATE, CITY AND COUNTY OF NEW YORK IN RESPECT OF THE INTERPRETATION AND
ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE DOCUMENTS REFERRED TO
IN THIS AGREEMENT, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN
ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR
OF ANY SUCH DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT
OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH
DOCUMENT MAY NOT BE ENFORCED IN OR
-9-
<PAGE>
BY SAID COURTS. EACH OF THE PARTIES HEREBY CONSENTS TO AND GRANT ANY SUCH COURT
JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF ANY
SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 6.1, OR IN
SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT
SERVICE THEREOF.
6.8 Injunctive Relief. The parties agree that in the event of a breach of
any provision of this Agreement, the aggrieved party may be without an adequate
remedy at law. The parties therefore agree that in the event of a breach of any
provision of this Agreement, the aggrieved party may elect to institute
prosecution proceedings in any court of competent jurisdiction to enforce
specific performance or to enjoin the continuing breach of such provision, as
well as to obtain damages for breach of this Agreement and such aggrieved party
may take any such actions without the necessity of posting a bond. By seeking or
obtaining such relief, the aggrieved party will not be precluded from seeking or
obtaining any other relief to which it may be entitled.
6.9 Further Assurances. Each party hereto shall execute and deliver such
additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
6.10 No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy or claim under or by reason of this Agreement
or any provision contained herein.
7. CERTAIN DEFINED TERMS.
7.1 Definitions. The terms defined in this Section 7.1, whenever used in
the Agreement (including in the Schedules thereto), shall have the respective
meanings indicated below for all purposes of the Agreement. Capitalized terms
used in this Agreement used but not defined herein are used herein as defined in
the Reorganization Agreement. All references herein to a Section, Article or
Schedule are to a Section, Article or Schedule of or to the Agreement, unless
otherwise indicated.
"Applicable Laws" all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including the common law), rules, regulations,
ordinances, codes or orders of any Governmental Authority, (b) consents,
approvals or authorizations of, or designations, declarations or filings with,
or reports to, or permits, franchises or concessions from any Governmental
Authority and (c) orders, decisions, injunctions, judgments, awards and decrees
of or agreements with any Governmental Authority.
"Company" as defined in the first recital of the Agreement.
"Company Stock" collectively (a) the 6.5% Cumulative Redeemable Convertible
Preferred Stock, par value $.01 per share, of the Company, (b) the Class A
Common Stock, par
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<PAGE>
value $.01 per share, of the Company, and (c) the Class B Common Stock, par
value $.01 per share, of the Company.
"Designated Matters" as defined in the Section 1.1 of the Agreement.
"Governmental Authority" any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including, without limitation, any government authority, agency, department,
board, commission or instrumentality of the United States, any State of the
United States, any foreign country, or any political subdivision of any of the
foregoing, and any tribunal or arbitrator(s) of competent jurisdiction, and any
self-regulatory organization.
"Merger" as defined in the first recital of the Agreement.
"Reorganization Agreement" as defined in the first recital of the
Agreement.
"Parent" as defined in the first paragraph of the Agreement.
"Proxy" the proxy granted by Stockholder pursuant to Section 1.1 of the
Agreement.
"Reorganization" as defined in the first recital of the Agreement.
"Shares" as defined in the second recital of the Agreement.
"Stockholder" as defined in the first paragraph of the Agreement.
"Sub" as defined in the first paragraph of the Agreement.
"Tropsport Share Purchase" as defined in the first recital of the
Agreement.
"Violation" as defined in the Section 2.1(b)(iii) of the Agreement.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Stockholder have caused this
Agreement to be duly executed, all as of the date first written above.
"PARENT"
SLM INTERNATIONAL, INC.
By:_________________________
Name:_______________________
Title:______________________
Attest:
- ----------------------------
Name:_______________________
Title: Secretary
"SUB"
SLM ACQUISITION CORP.
By:_________________________
Name:_______________________
Title:______________________
Attest:
- ----------------------------
Name:_______________________
Title: Secretary
-12-
<PAGE>
"STOCKHOLDER"
Number of Shares of
Company Common Stock
- --------------------
Class
(Check One Only)
Class A Common
Class B Common
Number of Shares of
Company Preferred Stock
- --------------------
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<PAGE>
SCHEDULE 2.1(a)
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<PAGE>
SCHEDULE 2.1(b)
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-------------------------------------------------------------
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
by and between
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
and
SLM INTERNATIONAL, INC.
Dated as of November 19, 1998
-------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Section 1.1 Definitions...................................................1
Section 1.2 Index of Other Defined Terms..................................3
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of Shares...................................4
Section 2.2 Closing.......................................................4
Section 2.3 Delivery and Payment..........................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization and Qualification................................6
Section 3.2 Capitalization................................................6
Section 3.3 Issuance, Sale and Delivery of Shares and Warrants............6
Section 3.4 Subsidiaries..................................................7
Section 3.5 Authority Relative to This Agreement..........................7
Section 3.6 No Violation; Consents and Approvals..........................7
Section 3.7 Reports and Financial Statements..............................8
Section 3.8 Absence of Undisclosed Liabilities............................9
Section 3.9 Absence of Certain Changes or Events..........................9
Section 3.10 Litigation....................................................9
Section 3.11 Employee Benefit Plans.......................................10
Section 3.12 Labor Matters................................................10
Section 3.13 ERISA........................................................10
Section 3.14 Compliance with Applicable Laws..............................11
Section 3.15 Taxes........................................................11
Section 3.16 Patents, Trademarks, Etc.....................................12
Section 3.17 Product Liability............................................12
Section 3.18 Environment..................................................12
Section 3.19 Use of Proceeds..............................................13
Section 3.20 Sale of Shares and Warrants..................................13
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Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR
Section 4.1 Organization. .................................................13
Section 4.2 Authority; Binding Effect......................................13
Section 4.3 No Violation; Consents and Approvals...........................14
Section 4.4 Restricted Securities..........................................14
Section 4.5 Legends........................................................14
Section 4.6 Accredited Investor............................................15
Section 4.7 Absence of Litigation..........................................15
Section 4.8 Financing......................................................15
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to Each Party's Obligations to Effect the
Transaction....................................................15
Section 5.2 Conditions to Obligation of the Investor.......................16
Section 5.3 Conditions to Obligations of the Company.......................17
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
Section 6.1 Termination....................................................18
Section 6.2 Effect of Termination..........................................18
Section 6.3 Amendment......................................................18
Section 6.4 Waiver.........................................................18
ARTICLE VII
GENERAL PROVISIONS
Section 7.1 Survival.......................................................19
Section 7.2 Notices........................................................19
Section 7.3 Fees and Expenses..............................................20
Section 7.4 Publicity......................................................20
Section 7.5 Specific Performance...........................................20
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Page
Section 7.6 Interpretation.................................................21
Section 7.7 Schedules and Exhibits.........................................21
Section 7.8 Severability...................................................21
Section 7.9 Miscellaneous..................................................21
Section 7.10 Consent to Jurisdiction; Waiver of Jury Trial..................22
Section 7.11 Counterparts...................................................22
iii
<PAGE>
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement"),
dated as of November 19, 1998, by and between PHOE NIX HOME LIFE MUTUAL
INSURANCE COMPANY, a New York Mutual Life Insurance Company (the "Investor"),
and SLM INTERNATIONAL, INC., a Dela ware corporation (the "Company").
W I T N E S S E T H
WHEREAS, the Investor desires to purchase from the Company and the Company
desires to issue to the Investor (the "Transaction"), in the aggregate, 12,500
shares (the "Shares") of the Company's 13% Pay-In-Kind Preferred Stock, par
value $.01 per share (the "Preferred Stock"), having the preferences and rights
set forth in the form of Certificate of Designation annexed hereto as Exhibit A
(the "Certificate of Designation") and warrants (the "Warrants") as provided in
the form of Warrant annexed hereto as Exhibit B to purchase 159,127 shares of
the Com pany's common stock par value .01 per share (the "Warrant Shares"), on
the terms provided herein.
WHEREAS, the Company desires to use the proceeds of the Transaction to
fund, in part, the acquisition (the "Acquisition") of Sports Holdings Corp.
("Sports Holdings") and Tropsport Acquisitions, Inc. as contemplated by the
Agreement and Plan of Reorganization among the Company, Sport Maska Inc., SLM
Acquisition Corp. and Sports Holdings (the "Acquisition Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
Section 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliates" shall mean, as to any person, any other person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such person. The term "control" (including, with correlative meaning, the
terms
<PAGE>
"controlled by" and "under common control with"), as applied to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities or other ownership interest, by
contract or otherwise.
"Amendment" means the Amendment to the certificate of incorporation of the
Company authorizing the issuance of the Preferred Stock.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means and includes the Common Stock, par value $.01 per
share, of the Company and any other securities of the Company or any other
Person that the holders of the Common Stock at any time shall have received, in
lieu of or in addition to Common Stock, or that at any time shall have been
issued in exchange for or in replacement of Common Stock or such additional
securities.
"Environmental Laws" means all federal, state, local or Foreign Laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemical, pollutants,
contaminants or industrial, toxic or hazardous substances or wastes into the
environment or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of chemicals,
pollutants, contaminants or industrial, toxic, or hazardous substances or
wastes, as well as all authorizations, codes, decrees, demands or demand
letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Laws" means other governmental approvals required under the
applicable laws of any foreign Governmental Authority.
"GAAP" means United States generally accepted accounting principles.
2
<PAGE>
"Governmental Authority" means all courts, administrative agencies or
commissions or other governmental authorities or instrumentalities, domestic or
foreign.
"Incidental Registration" has the meaning provided in Section 7.1 hereof.
"Institutional Shareholder" means the Investor for so long as it holds any
Warrants or any shares of Common Stock issued under this Agreement (for purposes
of this definition the "Original Institutional Securities;" any Common Stock
issued pursuant to the exercise of such Warrants and any transfers or exchanges
of any of the foregoing Common Stock or Warrants shall also be deemed to be
"Original Institutional Securities") and (b) any successors thereto or direct or
successive transferees of such Original Institutional Securities.
"Issuable Share" means and includes at any time,
(a) a share of issued and outstanding Common Stock, and
(b) a Right (including, without limitation, a Warrant), and (without
duplication) all shares of Common Stock issuable upon exercise of such Right, in
each case at such time.
For purposes of this definition of "Issuable Share," a Right to acquire one
share of Common Stock shall constitute one Issuable Share, and a Person shall be
deemed to own an Issuable Share if such Person has a Right to acquire such share
whether or not such Right is exercisable at such time. Any Right included within
the definition of Common Stock shall be included in this definition only as to
the number of shares of Common Stock or other equity securities into which such
Right would be convertible (whether or not at such time such Rights are so
convertible in accordance with their terms). Issuable Share shall take into
account in respect of a Right any adjustments in respect thereof to reflect any
stock dividend or split or reclassification, by subdivision, combination or
otherwise, of the Common Stock, any other issuances of additional Common Stock
or Rights, any dividends of assets and any merger or consolidation of the
Company.
"Material Adverse Effect" means, when used in connection with the Company
or any of its subsidiaries, any change, effect or circumstance that is
materially adverse to the business, assets, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
3
<PAGE>
"National Market System Security" has the meaning ascribed thereto in Rule
11 Aa2-1 under the Exchange Act.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the NASDAQ Stock Market, Inc., a subsidiary of the NASD.
"NASDAQ National Market" has the meaning ascribed thereto in Rule 4200(r)
of the NASDAQ.
"NASDAQ SmallCap Market" has the meaning ascribed thereto in Rule 4200(t)
of the NASDAQ.
"Public Offering" shall mean, with respect to any Issuable Share, any sale
in a transaction either registered under, or requiring registration under,
Section 5 of the Securities Act.
"Registrable Securities" means, at any time:
(a) any shares of Common Stock that have been issued upon the exercise of
any Warrant;
(b) any shares of Common Stock that are issuable upon the exercise of the
Warrants;
(c) all shares of Common Stock issued as a dividend or other distribution
with respect to, or in exchange for or in replacement of, the shares of Common
Stock referenced in clause (a) above.
For purposes of Article VII hereof and the definition of "Requisite Holders"
herein, holders of Warrants at any time shall be deemed to be holders of
Registrable Securi ties described in clause (b) of this definition that are at
such time issuable upon exercise in full of such Warrants, whether or not such
holders are then entitled so to exercise such Warrants pursuant to the terms
thereof.
As to any particular Registrable Securities once issued, such Securities
shall cease to be Registrable Securities:
4
<PAGE>
(i) when a registration statement with respect to the sale of such
Securities shall have become effective under the Securities Act and such
Securities shall have been disposed of in accordance with such registration
statement;
(ii) when they shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act;
(iii) when they shall have been otherwise transferred and subsequent
disposition of them shall not require registration or qualification under
the Securities Act or any similar state law then in force; or
(iv) when they shall have ceased to be outstanding or issuable upon
exercise of the Warrants or Rights.
"Registration" means each Incidental Registration.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with compliance with Section 7.1 through Section
7.3, inclusive, including, without limitation:
(a) all registration and filing fees;
(b) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities);
(c) expenses of printing certificates for the Registrable Securities in a
form eligible for deposit with the Depositary Trust Company;
(d) messenger and delivery expenses;
(e) internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties);
(f) fees and disbursements of counsel for the Company and its independent
certified public accountants (including the expenses of any management
5
<PAGE>
review, cold comfort letters or any special audits required by or incident to
such performance and compliance);
(g) the reasonable fees and expenses of any special experts retained by the
Company in connection with such registration;
(h) fees and expenses of other Persons retained by the Company; and
(i) fees and expenses of a single counsel for holders of Registrable
Securities, selected by the Requisite Holders;
but not including any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities or fees and expenses of more than one
counsel repre senting holders of Registrable Securities or any other selling
expenses, discounts or commissions incurred in connection with the sale of
Registrable Securities.
"Requisite Holders" means, with respect to any Registration or proposed
Registration of Registrable Securities pursuant to Article VII hereof, any
holder or holders (other than the Company or Subsidiary) holding more than 50%
of the shares of Registrable Securities (excluding any shares of Registrable
Securities directly or indirectly held by the Company or any Subsidiary) to be
so registered.
"Right" means and includes:
(a) any warrant (including, without limitation, any Warrant) or any option
(including, without limitation, employee stock options) to acquire Common Stock;
(b) any right issued to holders of the Common Stock, or any class thereof,
permitting the holders thereof to subscribe to shares of additional Common Stock
(pursuant to a rights offering or otherwise);
(c) any right to acquire Common Stock pursuant to the provisions of any
security convertible or exchangeable into Common Stock; and
(d) any similar right permitting the holder thereof to subscribe for or
purchase shares of Common Stock.
6
<PAGE>
"Sports Holdings Material Adverse Effect" means, when used in connection
with the Sports Holdings or any of its subsidiaries, any change, effect or
circumstances that is materially adverse to the business, assets, financial
condition or results of operations of Sports Holdings and its subsidiaries,
taken as a whole.
"Securities Act" means the Securities Act of 1933, as amended.
Section 1.2 Index of Other Defined Terms. In addition to the terms defined
above, the following terms shall have the respective meanings given thereto in
the sections indicated below:
Defined Term Section
------------ -------
Agreement..............................................................preamble
Benefit Plans..............................................................3.11
Closing.....................................................................2.2
Company................................................................preamble
Disclosure Documents........................................................6.7
Disclosure Schedule.................................................Article III
Investor...............................................................preamble
Litigation.................................................................3.10
Permits....................................................................3.16
Preferred Stock........................................................recitals
Purchase Price..............................................................2.1
SEC.........................................................................6.4
SEC Reports.................................................................3.7
Shares.................................................................recitals
Warrant Agreement......................................................recitals
Warrant Shares.........................................................recitals
Warrants...............................................................recitals
7
<PAGE>
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of Shares. Subject to the terms and
conditions of this Agreement, the Company agrees to sell to the Investor and the
Investor agrees to purchase from the Company the Shares and Warrants free and
clear of all claims, liens, charges and encumbrances of any nature whatsoever,
at the Closing referred to in Section 2.2 hereof. In consideration of the sale
of the Shares and the Warrants by the Company to the Investor, the Investor
agrees to pay an aggregate purchase price for all of the Shares and the Warrants
of Twelve Million Five Hundred Thousand Dollars ($12,500,000) (the "Purchase
Price").
Section 2.2 Closing. The Closing of the sale and purchase of the Shares and
the Warrants (the "Closing") shall take place at such place as the parties
hereto may mutually agree, simultaneously with the closing of the Acquisition,
or at such other time as the parties hereto may mutually agree. The date on
which the Closing occurs is called the "Closing Date."
Section 2.3 Delivery and Payment.
(a) At the Closing, the Company shall deliver or cause to be delivered to
the Investor the following documents, in a form reasonably acceptable to the
Investor:
(i) stock certificates evidencing the Shares and warrant certificates
evidencing the Warrants issued in the name of the Investor;
(ii) a receipt evidencing receipt of payment of the Purchase Price
from the Investor, as required by Section 2.1;
(b) At the Closing, the Investor shall deliver or cause to be delivered to
the Company:
(i) the Purchase Price, by wire transfer of immediately available
funds to the account of the Company to be designated by the Company in
writing not later than one business day prior to the Closing Date;
8
<PAGE>
(ii) a receipt evidencing receipt of the stock certificates evidencing
the Shares and the warrant certificates evidencing the Warrants, as
required by Section 2.3(a)(i).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants (which representations and warranties
are being made in light of, and after giving effect to, the consummation of the
Acquisition) to the Investor, except as set forth in a disclosure schedule
delivered by the Company concurrently herewith (the "Disclosure Schedule"), as
follows:
Section 3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as it is
now being conducted or currently proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary except
where the failure to be so qualified would not have a Material Adverse Effect.
Section 3.2 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Common Stock and, upon the approval and
adoption of the Amendment, 1,000,000 shares of Preferred Stock. As of October
21, 1998, 5,951,021 shares of Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable, and there have been no
material changes in such numbers of shares through the date hereof. The
Preferred Stock which is being purchased by the Investor hereunder, when issued,
delivered and paid for in accordance with the terms hereof for the consideration
expressed herein will be duly and validly issued, fully paid and non-assessable
and, based in part on the representations of the Investor in this Agreement,
will be issued in compliance with the Securities Act. Except as set forth in
Section 3.2 of the Disclosure Schedule, there are no options, warrants, calls or
other rights, agreements or commitments presently outstanding obligating the
Company to issue, deliver or sell shares of its capital stock or debt securities
or obligating the Company to grant, extend or enter into any such option,
warrant, call or other such right, agreement or commitment, and there have been
no material changes in such numbers through the date hereof. The
9
<PAGE>
Company does not hold any shares of its capital stock in its treasury. 159,127
shares of Common Stock of the Company have been duly and validly reserved for
issuance upon the exercise of the Warrants (and are in addition to any other
shares reserved for any other purpose).
Section 3.3 Issuance, Sale and Delivery of Shares and Warrants. The Shares,
when issued, will have been, and the Warrants have been, duly and validly
authorized and, when the Shares are issued and delivered against payment
therefor as provided herein at the Closing, and when the Warrant Shares are
issued and delivered upon exercise of the Warrants, all such Shares will be duly
and validly issued, fully paid and nonassessable, free and clear of all liens,
claims or encumbrances and not subject to preemptive rights of any third party.
Section 3.4 Subsidiaries. The only significant subsidiaries of the Company
are those set forth in the SEC Reports. Each subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power to carry on its
business as it is now being conducted or currently proposed to be conducted.
Each subsidiary is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary except where the failure to be so qualified will not
have a Material Adverse Effect. All the outstanding shares of capital stock of
each subsidiary are validly issued, fully paid and nonassessable and those owned
by the Company or by a subsidiary of the Company are owned free and clear of any
liens, claims or encumbrances. There are no existing options, warrants, calls or
other rights, agreements or commitments of any character relating to the issued
or unissued capital stock or other securities of any of the subsidiaries of the
Company. Except as set forth in the SEC Reports or Section 3.4 of the Disclosure
Schedule, the Company does not directly or indirectly own any material interests
in any other corporation, partnership, joint venture or other business
association or entity.
Section 3.5 Authority Relative to this Agreement. The Company has the
corporate power to enter into this Agreement and, subject to the approval of the
Amendment by the stockholders of the Company, to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Company's
Board of Directors. This Agreement constitutes a valid and binding obligation of
the Company enforceable in accordance with its terms except as enforcement may
be
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limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, may be subject to the
discretion of the court before which any proceeding therefor may be brought. No
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby.
Section 3.6 No Violation; Consents and Approvals.
(a) Except as set forth in Section 3.6 of the Disclosure Schedule, the
Company is not subject to or obligated under (i) any charter or by-law or
indenture or other loan document provision or (ii) any other contract, license,
franchise, permit order, decree, concession, lease, instrument, judgment,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its subsidiaries or their respective properties or assets, which would be
breached or violated or under which there would be a default (with or without
notice or lapse of time or both) or under which there would arise a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit, by reason of this Agreement or the transactions contemplated
hereby except for any of the foregoing as would not have a Material Adverse
Effect.
(b) Except as referred to herein or, in connection or in compliance with
the provisions of the Securities Act and the Exchange Act, the execution and
delivery of this Agreement by the Company does not, and the performance by the
Company of its obligations hereunder will not, require any filing or
registration with or authorization, consent or approval of, any Governmental
Authority.
Section 3.7 Reports and Financial Statements. The Company has previously
furnished the Investor with true and complete copies of its (i) Annual Report on
Form 10-K for the year ended December 31, 1997, as filed with the Commission,
(ii) Quarterly Reports on Form 10-Q for the quarters ended March 30 and June 30,
as filed with the Commission, and (iii) all other reports or registration
statements filed by the Company with the Commission since December 31, 1997 that
the Company was required to file with the Commission since that date (the
documents described in clauses (i) through (iii) being referred to herein
collectively as the "SEC Reports"). As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such SEC Reports. As of
their respective dates except to the extent, if any, subsequently
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amended, the SEC Reports did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included in the SEC
Reports comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto, and the financial statements included in the SEC Reports have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated therein or in the notes thereto) and fairly present the
financial position of the Company and its subsidiaries as at the dates thereof
and the results of their operations and changes in financial position for the
periods then ended subject, in the case of the unaudited interim financial
statements, to normal year-end audit adjustments and any other adjustments
described therein.
Section 3.8 Absence of Undisclosed Liabilities. Except as disclosed in the
SEC Reports, and except as to matters which, individually or in the aggregate,
would not have a Material Adverse Effect, neither the Company nor any of its
subsidiaries has any material liabilities or obligations (absolute, accrued,
contingent or otherwise, known or unknown), other than liabilities incurred in
the ordinary course of business subsequent to June 27, 1998.
Section 3.9 Absence of Certain Changes or Events. Except as disclosed in
the SEC Reports or to the Investor, since June 30, 1998, there has not been (i)
any event, condition, transaction, commitment, dispute or other circumstance
(financial or otherwise) of any character including but not limited to, the
Company's audited financial statements for the year ended December 31, 1997
(whether or not in the ordinary course of business), individually or in the
aggregate, having or likely to have a Material Adverse Effect, (ii) any damage,
destruction or loss, whether or not covered by insurance, having or likely to
have a Material Adverse Effect, (iii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) with
respect to the capital stock of the Company or (iv) except as contemplated by
this Agreement and the Acquisition Agreement, any entry into any commitment or
transaction material to the Company and its subsidiaries taken as a whole
(including, without limitation, any borrowing or sale of assets) except in the
ordinary course of business consistent with past practice.
Section 3.10 Litigation. There is no suit, action, administrative or
judicial proceeding or governmental investigation ("Litigation") pending or, to
the
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knowledge of the Company, threatened against or affecting the Company or any of
its subsidiaries that, alone or in the aggregate, is likely to result in a
preliminary or permanent injunction or other order which would prohibit or
prevent the consummation of the transactions contemplated by this Agreement or
which is likely to have a Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against the
Company or any of its subsidiaries having or likely to have, the effect of
prohibiting or preventing the consummation of the transactions contemplated by
this Agreement, or having or likely to have alone or in the aggregate, any
Material Adverse Effect.
Section 3.11 Employee Benefit Plans. Except as disclosed in the SEC
Reports, there are no material employee benefit or compensation plans,
agreements or arrangements, including "employee benefit plans," as defined in
Section 3(3) of ERISA, and including, but not limited to, plans, agreements or
arrangements relating to former employees, including, but not limited to,
retiree medical plans, maintained by the Company or any of its subsidiaries or
collective bargaining agreements to which the Company or any of its subsidiaries
is a party (together, the "Benefit Plans").
Section 3.12 Labor Matters. Since October 31, 1998, there have been no
disputes or grievances subject to any grievance procedure, unfair labor practice
proceedings, arbitration or litigation under such Benefit Plans, which have not
been finally resolved, settled or otherwise disposed of except for any of the
foregoing as would not have a Material Adverse Effect. Since October 31, 1998,
there have been no strikes, lockouts, work stoppages, slowdowns, jurisdictional
disputes or organizing activity occurring or, to the best knowledge of the
Company and its subsidiaries, threatened with respect to the business or
operations of the Company or its subsidiaries.
Section 3.13 ERISA. All Benefit Plans have been administered in accordance,
and are in compliance in all material respects, with the applicable provisions
of ERISA. Each of the Benefit Plans which is intended to meet the requirements
of Section 401 (a) of the Code has been determined by the Internal Revenue
Service to be "qualified," within the meaning of such section of the Code, and
the Company knows of no fact which is likely to have an adverse effect on the
qualified status of such plans. None of the Benefit Plans which are defined
benefit pension plans have incurred any unpaid "accumulated funding deficiency"
(whether or not waived) as that term is defined in Section 412 of the Code and
the fair market
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value of the assets of each such plan equals or exceeds the accrued or
accumulated liabilities of such plan for purposes of Title IV of ERISA or SFAS
87. To the best knowledge of the Company, there are not now nor have there been
any non-exempt "prohibited transactions," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, involving the Benefit Plans which
could subject the Company or its subsidiaries to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. No Benefit Plan
subject to Title IV of ERISA has been terminated; no proceedings to terminate
any Benefit Plan have been instituted by the Pension Benefit Guaranty
Corporation under Title IV of ERISA; and no reportable event, within the meaning
of Section 4043(c) of said Subtitle C for which the 30-day notice requirement of
ERISA has not been waived, has occurred with respect to any Benefit Plan.
Neither the Company nor any of its subsidiaries has made a complete or partial
withdrawal, within the meaning of Section 4201 of ERISA, from any multiemployer
plan which has resulted in or is reasonably expected to result in, any material
withdrawal liability to the Company or any of its subsidiaries. Neither the
Company nor any of its subsidiaries has engaged in any transaction described in
Section 4069 of ERISA within the last five years. There does not now exist, nor
do any circumstances exist that could result in, any material liability of the
Company or any of its subsidiaries (or any entity, trade or business that is or
was at any time required to be aggregated with the Company or any of its
subsidiaries under Section 414(b), (c), (m) or (o) of the Code) under Title IV
of ERISA, Section 302 of ERISA, Sections 412 and 4971 of the Code, (other than
the liability for normal benefit payments with respect to COBRA continuation
coverage) the continuation coverage requirements of Section 601 et seq. of ERISA
and Section 4980B of the Code, and similar provisions of foreign laws or
regulations.
Section 3.14 Compliance with Applicable Laws. Except for such matters as
would not, individually or in the aggregate, have a Material Adverse Effect: (i)
the Company and its subsidiaries hold all permits, licenses, variances,
exemptions orders and approvals (the "Permits") of all Governmental Entities
necessary for the operation of the businesses of the Company and its
subsidiaries, (ii) the Company and its subsidiaries are in compliance with the
terms of the Permits and, (ii) except as disclosed in the SEC Reports, the
businesses of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental Authority. To
the best knowledge of the Company, and except as set forth in Section 3.14 of
the Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to the Company or any of its subsidiaries is pending or
threatened, nor has any Governmental Authority indicated an intention to conduct
the same.
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Section 3.15 Taxes. Each of the Company and its subsidiaries has filed all
tax returns required to be filed by any of them and has paid (or the Company has
paid on its behalf) or has set up an adequate reserve for the payment of, all
taxes required to be paid in respect of the periods covered by such returns. The
information contained in such tax returns is true, complete and accurate in all
material respects. Neither the Company nor any of its subsidiaries is delinquent
in the payment of any tax, assessment or governmental charge except to the
extent of reserves established therefor. No deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its subsidiaries
that have not been finally settled or paid in full except to the extent of
reserves established therefor. Except as disclosed in Section 3.15 of the
Disclosure Schedule, no requests for waivers of the time to assess any such tax
are pending and there are no outstanding audit examinations, deficiency
litigations or refund litigations with respect to the Company or any of its
subsidiaries. Except as disclosed in Section 3.15 of the Disclosure Schedule,
the federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the Internal
Revenue Service for all years through December 31, 1995.
Section 3.16 Patents, Trademarks, Etc. The Company and its subsidiaries
have all patents, trademarks, trade names, service marks, trade secrets,
copyrights and licenses and other proprietary intellectual property rights and
licenses as are necessary in connection with the businesses of the Company and
its subsidiaries, and except as set forth in Section 3.16 of the Disclosure
Schedule, the Company does not have any knowledge of any conflict with the
rights of the Company and its subsidiaries therein or any knowledge of any
conflict by them with the rights of others therein.
Section 3.17 Product Liability. The Company is not aware of any claim or
the basis of any claim against the Company or any of its subsidiaries for injury
to person or property of employees or any third parties suffered as a result of
the sale of any product or performance of any service by the Company or any of
its subsidiaries, including claims arising out of the defective or unsafe nature
of its products or services, except such claims as will not, individually or in
the aggregate, have a Material Adverse Effect. The Company and its subsidiaries
have, and at the Closing will have, full and adequate insurance coverage for
potential product liability claims against it.
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Section 3.18 Environment. Except as set forth in the SEC Reports, and
except for such matters as will not, individually or in the aggregate, have a
Material Adverse Effect, the Company and each of its subsidiaries (i) have
obtained all applicable permits, licenses and other authorizations which are
required to be obtained under all applicable Environmental Laws, (ii) are in
compliance with all terms and conditions of such required permits, licenses and
authorizations and also are in compliance with all other applicable requirements
of Environmental Laws and (iii) are not aware of nor have received notice of any
past activity, practice, incident or action which will give rise to any common
law or statutory liability or otherwise form the basis of any claim, action,
suit or proceeding, against the Company or any of its subsidiaries based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous or toxic
material or waste.
Section 3.19 Use of Proceeds. The Company will apply the net proceeds of
the Transaction to fund the transactions contemplated by the Acquisition
Agreement.
Section 3.20 Sale of Shares and Warrants. Neither the Company nor anyone
acting on its behalf has, directly or indirectly, offered any of the Shares or
Warrants or any security similar to the Shares and Warrants for sale to, or
solicited any offers to buy any of the Shares and Warrants or any security
similar to the Shares or Warrants from, or otherwise approached or negotiated
with respect thereto with, any Persons other than the Investor and neither the
Company, nor any one acting on its behalf has taken or will take any action
which would subject the issuance or sale of the Shares or Warrants to the
provisions of Section 5 of the Securities Act of 1933, as amended, or violate
the provision of any securities or Blue Sky laws of any applicable jurisdiction.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE INVESTOR
The Investor, hereby represents and warrants, to the Company as follows:
Section 4.1 Organization. The Investor is a New York Mutual Life Insurance
Company duly organized, validly existing and in good standing under the laws of
its state of organization and has the requisite power to carry on its business
as it is now being conducted.
Section 4.2 Authority; Binding Effect. The Investor has all requisite power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Investor, and no other action on the part of the
Investor is required to authorize the execution, delivery and performance
hereof, and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Investor and constitutes
the valid and binding obligation of the Investor, enforceable against the
Investor in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, moratorium or other laws
now or hereafter in effect relating to or limiting creditors' rights generally
and the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought.
Section 4.3 No Violation; Consents and Approvals.
(a) The execution and delivery of this Agreement by the Investor does not,
and the performance of this Agreement by the Investor and the consummation of
the transactions contemplated hereby will not (i) conflict with or violate any
organizational document as currently in effect, of the Investor or (ii) conflict
with or violate in any material respect any Laws applicable to the Investor or
by or to which any of its properties or assets is bound or subject.
(b) Assuming the accuracy of the representations in Section 3.6, the
execution and delivery of this Agreement by the Investor does not, and the
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performance by the Investor of this Agreement and the consummation of the
transactions contemplated hereby will not, require the Investor to obtain any
consents from any Governmental Authority or any third party.
Section 4.4 Restricted Securities. The Investor understands that the Shares
and Warrants to be received by the Investor hereunder are "restricted
securities" under the federal securities laws inasmuch as such securities are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances.
Section 4.5 Legends. It is understood that the certificates evidencing the
Shares and Warrants to be received hereunder will bear a legend substantially
similar to the following:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGIS TRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED
UNDER SUCH ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECU-
RITIES LAWS. THESE SECURITIES ARE FURTHER SUBJECT TO CERTAIN CONTRACTUAL
RESTRICTIONS ON DISPOSITION PURSUANT TO THE PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT BY AND BETWEEN SLM INTERNATIONAL, INC. AND PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY, DATED AS OF NOVEMBER 19, 1998, A COPY OF WHICH WILL BE
PROVIDED TO THE HOLDER HEREOF UPON REQUEST TO SLM INTERNATIONAL, INC."
Section 4.6 Accredited Investor. The Investor is an accredited investor
within the definition set forth in Rule 501(a) under the Securities Act.
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ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to Each Party's Obligations to Effect the
Transaction. The respective obligations of each party to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing of the following conditions:
(a) No preliminary or permanent injunction or other order by any court or
other judicial or administrative body of competent jurisdiction which prohibits
or prevents the consummation of the transactions contemplated by this Agreement
shall have been issued and remain in effect (each party agreeing to use its best
efforts to have any such injunction lifted).
(b) The Acquisition Agreement shall not have been terminated and the
transactions contemplated thereby shall be consummated concurrently with the
Closing.
(c) The Amendment shall have been approved and adopted by the written
consent of the holders of a majority of the outstanding shares of Common Stock
and shall have been filed with the Secretary of State of Delaware.
Section 5.2 Conditions to Obligation of the Investor. The obligation of the
Investor to consummate the Transaction shall be subject to the fulfillment at or
prior to the Closing of the additional following conditions, unless waived:
(i) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing and the representations and warranties of the Company contained in
this Agreement shall be true in all material respects when made and on and as of
the Closing as if made on and as of such date, except (A) as contemplated or
permitted by this Agreement and (B) for representations and warranties which are
by their express provisions made as of a specific date or dates, which were or
will be true in all material respects at such time or times as stated therein.
(ii) The Company shall have obtained all consents and approvals from and
shall have made all filings and registrations with, any person, including but
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not limited to any Governmental Authority necessary to be obtained or made in
order to consummate the transactions contemplated by this Agreement.
(iii) The Company shall have issued certificates evidencing the Shares and
the Warrants in accordance with Section 2.3, and executed and delivered to the
Investor a receipt of payment of the Purchase Price.
(iv) Since June 30, 1998, no Sports Holdings Material Adverse Effect shall
have occurred.
(v) The Investor and its special counsel shall have received copies of such
documents and papers as it or they may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to the Investor and
its special counsel.
(vi) All costs and expenses of the Investor and its special counsel shall
have been paid (or will be paid at the Closing (as defined in the Acquisition
Agreement) in accordance with Section 8.3.
(vii) The Investor shall have received a legal opinion from counsel to the
Company in form and substance reasonably satisfactory to the Investor.
Section 5.3 Conditions to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment at or prior to the Closing of the additional
following conditions, unless waived by the Company:
(i) The Investor shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing and the representations and warranties of the Investor contained in
this Agreement shall be true in all material respects when made and on and as of
the Closing as if made on and as of such date, except (A) as contemplated or
permitted by this Agreement and (B) for representations and warranties which are
by their express provisions made as of a specific date or dates which were or
will be true in all material respects at such date or dates.
(ii) The Investor shall have obtained all consents and approvals from and
shall have made all filings and registrations to or with, any person,
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including but not limited to any Governmental Authority necessary to be obtained
or made in order to consummate the transactions contemplated by this Agreement.
(iii) The Investor shall have delivered to the Company the Purchase Price.
(iv) There is no litigation pending or, to the knowledge of the Investor,
threatened against or affecting the Investor that, alone or in the aggregate, is
likely to result in a preliminary or permanent injunction or other order which
would prohibit or prevent the consummation of the transactions contemplated by
this Agreement, nor is there any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Investor having or likely to have the effect
of prohibiting or preventing the consummation of the transactions contemplated
by this Agreement.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
Section 6.1 Termination. This Agreement may be terminated at any time prior
to the Closing, whether before or after approval by the shareholders of the
Company;
(i) by mutual consent of the Investor and the Board of Directors of the
Company;
(ii) by either the Investor or the Company if the transactions contemplated
by the Acquisition Agreement shall not have been consummated on or before
December 31, 1998; provided that the terminating party is not otherwise in
material breach of its representations, warranties or obligations under this
Agreement;
(iii) by the Company if any of the conditions specified in Sections 5.1 and
5.3 have not been met or waived by the Company at such time as such condition is
no longer capable of satisfaction;
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Section 6.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or the Investor, as provided above, this
Agreement shall forthwith become void and (except for the willful breach of this
Agreement by any party hereto) there shall be no liability on the part of either
the Company or the Investor or their respective officers or directors; provided
that Sections 8.3, 8.6, 8.7 and 8.10 shall survive the termination.
Section 6.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 6.4 Waiver. At any time prior to the Closing, any party hereto, may
(i) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (ii) waive any inaccuracies in the representations
and warranties of the other party contained herein or in any documents delivered
pursuant hereto and (iii) waive compliance by the other party hereto with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VII
REGISTRATION RIGHTS
Section 7.1 Incidental Registration.
(a) Filing of Registration Statement. It the Company at any time proposes
on its own behalf or on behalf of any other Person to register any of its Common
Stock (an "Incidental Registration") under the Securities Act (other than
pursuant to a registration statement on Form S-4 or Form S-8 or any successor
forms thereto, in connection with an offer made solely to existing holders of
securities of the Company or employees of the Company), for sale in a Public
Offering, it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so, which notice shall be given at
least 30 business days prior to the date that a registration statement relating
to such Incidental Registration is proposed to be filed with the SEC. Upon the
written request of any such holder to include its shares under such registration
statement (which request shall be made within 15 business days after the receipt
of any such notice and shall specify the Registrable Securities intended to be
disposed of by such Person), the Company will use its best efforts to effect the
registration of all Registrable Securities that the
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Company has been so requested to register by such holder; provided, however,
that if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register all such securities, the Company may, at its election,
give written notice of such determination to each such holder and, thereupon,
shall be relieved of its obligation to register any Registrable Securities of
such holders in connection with such Incidental Registration.
(b) Selection of Underwriters. Notice of the Company's intention to
register such securities shall designate the proposed underwriters of such
offering and shall contain the Company's agreement to use reasonable efforts, if
requested to do so, to arrange for such underwriters to include in such
underwriting the Registrable Securities that the Company has been so requested
to register pursuant to this Section 7.1, it being understood that the holders
of Registrable Securities shall have no right to select different underwriters
for the disposition of their Registrable Securities. No holder of Registrable
Securities may participate in any underwritten registration hereunder unless
such holder of Registrable Securities (A) agrees subject to Section 7.5(b) to
sell such holder's Registrable Securities on the basis provided in customary
underwriting arrangements entered into in connection therewith and (B) completes
and executes a customary underwriting agreement and all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
(c) Priority on Incidental Registrations. If the managing underwriter shall
advise the Company that, in such underwriter's opinion, the distribution of all
or any portion of the Registrable Securities would interfere with the successful
marketing of the securities involved in the Incidental Registration (with a
writing stating the basis of such opinion and the approximate number of shares
of securities that may be included in such offering without such effect), the
Company will include in such Incidental Registration, to the extent of the
number of shares of securities that the Company is so advised can be sold in
such offering:
(i) in the case of any registration initiated by the Company for the
purpose of selling securities for its own account:
(1) first, shares that the Company proposes to issue and sell for its
own account; and
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(2) second, Registrable Securities requested to be sold by the holders
thereof pursuant to this Section 7.1 and all securities proposed to be
registered by any other holders thereof entitled to participate in such
registration, pro rata among such holders on the basis of the number of
issuable Shares requested to be so registered by such holders; and
(ii) in the case of a registration initiated by any holder of securities
pursuant to demand or required registration rights in favor of such holder:
(1) first, Issuable Shares requested to be sold by such holder or
holders requesting such registration;
(2) second, Registrable Securities requested to be sold by the holders
thereof pursuant to this Section 7.1 and all securities proposed to be
registered by any other holders thereof entitled to participate in such
registration, pro rata among such holders on the basis of the number of
Issuable Shares requested to be so registered by such holders; and
(3) third, shares that the Company proposes to issue and sell for its
own a ccount.
Section 7.2 Registration Procedures. The Company will use reasonable
efforts to effect each Registration, and to cooperate with the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof as quickly as practicable, and the Company will as expeditiously as
possible:
(a) subject to the proviso to Section 7.1(a), prepare and file with the SEC
the registration statement and use reasonable efforts to cause the Registration
in respect thereof to become effective; provided, however, that before filing
any registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish to the holders of the Registrable Securities
participating in such Registration, their counsel, and the underwriters, if any,
and counsel to the underwriters, copies of all such documents proposed to be
filed at least 5 days prior thereto, which documents will be subject to the
reasonable review, within such 5 day period, of such holders, their counsel and
the underwriters;
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(b) subject to Section 7.1(a), prepare and file with the SEC such
amendments and post-effective amendments to any registration statement and any
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement; and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 of Regulation C under the Securities Act;
(c) furnish to each holder of Registrable Securities included in such
Registration and the underwriter or underwriters, if any, without charge, at
least one signed copy of the registration statement and any post-effective
amendment thereto, upon request, and such number of conformed copies thereof and
such number of copies of the prospectus (including each preliminary prospectus
and each prospectus filed under Rule 424 of Regulation C under the Securities
Act), any amendments or supplements thereto and any documents incorporated by
reference therein, as such holder or underwriter may reasonably request in order
to facilitate the disposition of the Registrable Securities being sold by such
holder;
(d) notify each holder of the Registrable Securities of any stop order or
other order suspending the effectiveness of any registration statement, issued
or threatened by the SEC in connection therewith, and take all reasonable
actions required to prevent the entry of such stop order or to remove it or
obtain withdrawal of it at the earliest possible moment if entered;
(e) If requested by the managing underwriter or underwriters, if any, or
any holder of Registrable Securities in connection with any sale pursuant to a
registration statement, promptly incorporate in a prospectus supplement or
post-effective amendment such information relating to such underwriting as the
managing underwriter or underwriters, if any, or such holder reasonably requests
to be included therein; and make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable after being
notified of the matters incorporated in such prospectus supplement or
post-effective amendment;
(f) on or prior to the date on which a Registration is declared effective,
use reasonable efforts to register or qualify, and cooperate with the holders of
Registrable Securities included in such Registration, the underwriter or
underwriters, if any, and their counsel, in connection with the registration or
qualification of the Registrable Securities covered by such Registration for
offer and
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sale under the securities or "blue sky" laws of each state and other
jurisdiction of the United States as any such holder or the managing
underwriter, if any, reasonably requests in writing; use reasonable efforts to
keep such registration or qualification effective, including through new
filings, or amendments or renewals, during the period such registration
statement is required to be kept effective; and do any and all other acts or
things necessary or advisable to enable the disposition in all such
jurisdictions reasonably requested of the Registrable Securities covered by such
Registration; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(g) in connection with any sale pursuant to a Registration, cooperate with
the holders of Registrable Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities to be
sold under such Registration, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or such holders may request;
(h) use reasonable efforts to cause Registrable Securities to be registered
with or approved by such other governmental agencies or authorities within the
United States and having jurisdiction over the Company or any Subsidiary as may
reasonably be necessary to enable the seller or sellers thereof or the
underwriter or underwriters, if any, to consummate the disposition of such
securities;
(i) use reasonable efforts to obtain:
(i) at the time of effectiveness of each Registration, a "comfort
letter" from the Company's independent certified public accountants
covering such matters of the type customarily covered by "cold comfort
letters" as the underwriters may reasonably request; and
(ii) at the time of any underwritten sale pursuant to a
Registration, a "bring-down comfort letter," dated as of the date of
such sale, from the Company's independent certified public
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<PAGE>
accountants covering such matters of the type customarily covered by
comfort letters as the underwriters may reasonably request;
(j) use reasonable efforts to obtain, at the time of effectiveness of each
Incidental Registration and at the time of any sale pursuant to each
Registration, an opinion or opinions, favorable in the opinion of the Requisite
Holders in form and scope, from counsel for the Company in customary form;
(k) notify each seller of Registrable Securities covered by such
Registration, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and promptly prepare, file with the SEC and furnish to
such seller or holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers or prospective purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which they
are made;
(l) otherwise comply with all applicable rules and regulations of the SEC,
and make generally available to its security holders (as contemplated by Section
11(a) under the Securities Act) an earnings statement satisfying the provisions
of Rule 158 under the Securities Act no later than 90 days after the end of the
12 month period beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the registration statement, which
statement shall cover said 12 month period;
(m) provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by each Registration from and after a date
not later than the effective date of such Registration; and
(n) use its best efforts to cause all Registrable Securities covered by
each Registration to be listed subject to notice of issuance, prior to the date
of first sale of such Registrable Securities pursuant to such Registration, on
each securities exchange on which the Common Stock is then listed; and, if the
Common Stock is not so listed, to use its best efforts to cause all Registrable
Securities covered by each
27
<PAGE>
Registration to be designated as National Market System Securities, if the
Common Stock is so designated (and, if the Common Stock is listed on the NASDAQ
National Market of the NASDAQ SmallCap Market, to cause all Registrable
Securities covered by each Registration to be so listed); and, if the Common
Stock is not so designated, to arrange for at least two market makers to
register with the NASD as such with respect to such Registrable Securities.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder and of Registrable Securities that will be included in
such Registration as the Company may reasonably request and as is required by
applicable laws or regulations. The holders of Registrable Securities to be
distributed in any underwritten public offering in respect of such Registration
shall be parties to the underwriting agreement with respect thereto. Such
holders that are Institutional Shareholders shall not be required to make any
representations or warranties to or agreements with the Company or its
underwriters other than representations, warranties or agreements regarding such
holder and such holder's intended method of distribution and other than such
other representations, warranties or agreements as such holder may expressly
agree to give or enter into and as required by law.
Section 7.3 Reasonable Investigation. The Company shall:
(i) give the holders of Registrable Securities, their underwriters, if any,
and their respective counsel and accountants the opportunity to participate in
the preparation of the registration statement, each prospectus included therein
or filed with the SEC and each amendment thereof or supplement thereto;
(ii) give each such holder and underwriter reasonable opportunities to
discuss the business of the Company with its officers, counsel and the
independent public accountants who have certified its financial statements; and
(iii) make available for inspection by any holder of Registrable Securities
included in any Registration, any underwriter participating in any disposition
pursuant to any Registration, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company; and
in each such case, as shall be reasonably necessary, to enable it to conduct a
"reasonable investigation" within the meaning of Section 11(b)(3) of the
Securities
28
<PAGE>
Act and to satisfy the requirement of reasonable belief imposed by Section 15 of
the Securities Act.
Section 7.4 Registration Expenses. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities,
including, without limitation, any such registration not effected by the
Company.
Section 7.5 Indemnification; Contribution.
(a) Indemnification by the Company. The Company shall indemnify, to the
fullest extent permitted by law, each holder of Registrable Securities
participating in any Registration, its officers, directors, employees and
agents, if any, and each Person, if any, who controls such holder within the
meaning of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act or common law or otherwise), resulting from any violation by the
Company of the provisions of the Securities Act or any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus (and as amended or supplemented if amended or
supplemented) or any preliminary prospectus or caused by any omission or alleged
omission to state therein a material fact required to be stated therein in light
of the circumstances under which they were made not misleading, except to the
extent that such losses, claims, damages, liabilities (or proceedings in respect
thereof) or expenses caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from, information concerning
any holder furnished in writing to the Company by such holder expressly for use
therein; provided, that the Company shall not be required to indemnify any such
underwriter, or any officer or director of such underwriter or any Person who
controls such underwriter within the meaning of Section 15 of the Securities
Act, to the extent that the loss, claim, damage, liability (or proceedings in
respect thereof) or expense for which indemnification is claimed results from
such underwriter's failure to send or give a copy of an amended or supplemented
final prospectus to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities and issuable Shares to such
Person if such statement or omission was corrected in such amended or
supplemented final prospectus prior to such written confirmation and the
underwriter was provided with such amended or supplemented final prospectus.
29
<PAGE>
(b) Indemnification by the Holders. In connection with any registration
statement in which a holder of Registrable Securities is participating, each
such holder, severally and not jointly, shall indemnify, to the fullest extent
permitted by law, the Company, each underwriter (if the underwriter so requires)
and their respective officers, directors, employees and agents, if any, and each
Person, if any, who controls the Company or such underwriter within the meaning
of Section 15 of the Securities Act, against any losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses resulting from any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the registration
statement or prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein in light of the
circumstances under which they were made not misleading, but only to the extent
that such untrue statement is contained in or such omission is from information
so concerning a holder furnished in writing by such holder expressly for use
therein provided; however that such holders' obligations hereunder shall be
limited to an amount equal to the proceeds to such holder of the Registrable
Securities sold pursuant to such registration statement.
(c) Control of Defense. Any Person entitled to indemnification under the
provisions of this Section 7.5 shall give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and unless in
counsel for the indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, permit such indemnifying party to assume the defense of such claim, with
counsel reasonably satisfactory to the indemnified party; and if such defense is
so assumed such indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement attributes liability to
the indemnified party and such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which shall not be
unreasonably withheld); and any underwriting agreement entered into with respect
to any registration statement provided for under this Article VII shall so
provide. In the event an indemnifying party shall not be entitled, or elects
not, to assume the defense of a claim, such indemnifying party shall not be
obligated to pay the fees and expenses of more than one counsel or firm of
counsel for all holders of registrable Securities indemnified by such
indemnifying party in respect of such claim, unless in the reasonable judgment
of any such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties in respect to such
claim.
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<PAGE>
(d) Contribution. If for any reason the foregoing indemnity is unavailable,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages, liabilities
or expenses:
(i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other; or
(ii) if the allocation provided by clause (i) above is not permitted
by applicable law or provides a lesser sum to the indemnified party than
the amount hereinafter provided, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party
on the one hand and the indemnified party on the other but also the
relative fault of the indemnifying party and the indemnified party as well
as any other relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities shall be
required to contribute any amount in excess of the amount such holder would have
been required to pay to an indemnified party if the indemnity under Section
7.5(b) hereof was available. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The obligation of any Person to contribute pursuant to this
Section 7.5 shall be several and not joint.
(e) Timing of Payments. An indemnifying party shall make payments of all
amounts required to be made pursuant to the foregoing provisions of this Section
7.5 to or for the account of the indemnified party from time to time promptly
upon receipt of bills or invoices relating thereto or when otherwise due or
payable.
(f) Survival. The indemnity and contribution agreements contained in this
Section 7.5 shall remain in full force and effect regardless of any
investigation made by or on behalf of a participating holder of Registrable
Securities,
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<PAGE>
its officers, directors, employees, agents or any Person, if any, who controls
such holder as aforesaid, and shall survive the transfer of such securities by
such holder.
Section 7.6 Holdback Agreements.
In connection with each underwritten sale of Registrable Securities, the
Company agrees, and each holder of Registrable Securities by acquisition of such
Registrable Securities agrees, to enter into customary holdback agreements
concerning sale or distribution of Registrable Securities and other equity
securities of the Company, except, in the case of any holder of Registrable
Securities, to the extent that such holder is prohibited by applicable law or
exercise of fiduciary duties from agreeing to withhold Registrable Securities
from sale or is acting in its capacity as a fiduciary or investment adviser.
Without limiting the scope of the term "fiduciary," a holder shall be deemed to
be acting as a fiduciary or an investment adviser if its actions or the
Registrable Securities proposed to be sold are subject to the Employee
Retirement Income Security Act of 1974, as amended; or the Investment Company
Act of 1940, as amended, or if such Registrable Securities are held in a
separate account under applicable insurance law or regulation. No holder of
Registrable Securities shall cause the same to be transferred to another holder
that is prohibited by applicable law or by its fiduciary duties from agreeing to
withhold Registrable Securities from sale or that is otherwise acting in a
capacity as a fiduciary or investment adviser, in each case, with the explicit
intention of causing such holder to he disqualified from the application of this
Section 7.6.
Section 7.7 Other Registration of Common Stock. If any shares of Common
Stock required to be reserved for purposes of exercise of Warrants require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Survival. The representations, warranties and agreements in
this Agreement shall survive the Closing.
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<PAGE>
Section 8.2 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telegram, telex,
telecopy or other standard form of telecommunications or by registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
If to the Company:
SLM International, Inc.
2, Place Alexis Nihon
3500, Boul de Maisonneure Ouest, Suite 800
Westmount, Quebec H3Z 3C1
Attention: Russell J. David, Senior Vice President, Finance
Telecopy No.: (514) 932-6020
With a copy to:
Wellspring Capital Management, LLC
620 Fifth Avenue, Suite 216
New York, New York 10020
Attention: Greg Feldman
Telecopy: (212) 332-7575
With a further copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Howard L. Ellin, Esq.
Telecopy No.: (212) 735-2000
If to the Investor:
Phoenix Home Life Mutual Insurance Company
56 Prospect Street
P.O. Box 150486
Hartford, Connecticut 06115-0480
Attention: Paul Chute
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<PAGE>
Telecopy: (860) 403-5451
With a copy to:
Hebb & Gitlin
One State Street
Hartford, Connecticut 06103
Attention: Jeffery Kuperstock
Telecopy: (860) 278-8968
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 8.2.
Section 8.3 Fees and Expenses. Whether or not the transactions contemplated
by this Agreement are consummated, provided that the Investor is not in material
breach of any representation, warranty or covenant of this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the Company, including
documented out-of-pocket expenses of the Investor not in excess of $20,000.
Section 8.4 Publicity. So long as this Agreement is in effect, the Investor
and the Company agree to consult with the other parties in issuing any press
release or otherwise making any public statement with respect to the
transactions contemplated by this Agreement, and none of them shall issue any
press release or make any public statement prior to such consultation, except as
may be required by law or by obligations pursuant to any listing agreement with
any national securities exchange.
Section 8.5 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
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Section 8.6 Interpretation.
(i) When a reference is made in this Agreement to subsidiaries of the
Company the word "subsidiaries" means corporations more than 50% of whose
outstanding voting securities are directly or indirectly owned by the Company,
as the case may be. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(ii) The inclusion of an item on any schedule to this Agreement shall not
be deemed to be indicative of the materiality of such item.
Section 8.7 Schedules and Exhibits. Disclosure of any fact or item in any
Schedule or Exhibit hereto referenced by a particular paragraph or Section of
this Agreement or the Disclosure Schedule shall, should the existence of the
fact or item or its contents be reasonably relevant to any other paragraph or
Section of this Agreement or the Disclosure Schedule, be deemed to be disclosed
with respect to that other paragraph or Section whether or not an explicit
cross-reference appears.
Section 8.8 Severability. If any one or more of the provisions of this
Agreement is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement will
not be affected thereby, and the Company and the Investor will use their
reasonable efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
Section 8.9 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (i) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them, with respect to the subject matter hereof
(other than as provided in the Confidentiality Agreement, as the same may be
amended), (ii) is not intended to confer upon any other person any rights or
remedies hereunder, (iii) shall not be assigned by operation of law or
otherwise, and (iv) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware (without giving
effect to the provisions thereof relating to conflicts of law). This Agreement
may be executed in two or more counterparts which together shall constitute a
single agreement.
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<PAGE>
Section 8.10 Consent to Jurisdiction; Waiver of Jury Trial. Each of the
parties hereto irrevocably and unconditionally submits to the non-exclusive
jurisdiction of The United States District Court for the Southern District of
New York. In any action, suit or other proceeding, each of the parties hereto
irrevocably and unconditionally waives and agrees not to assert by way of
motion, as a defense or otherwise any claims that it is not subject to the
jurisdiction of the above courts, that such action or suit is brought in an
inconvenient forum or that the venue of such action, suit or other proceeding is
improper. Each of the parties hereto also agrees that any final and unappealable
judgment against a party hereto in connection with any action, suit or other
proceeding shall be conclusive and binding on such party and that such award or
judgment may be enforced in any court of competent jurisdiction, either within
or outside of the United States. A certified or exemplified copy of such award
or judgment shall be conclusive evidence of the fact and amount of such award or
judgment. THE PARTIES HERETO, HAVING CAREFULLY CONSIDERED THE ISSUE, AND HAVING
SOUGHT AND OBTAINED THE ADVICE OF COUNSEL, KNOWINGLY, INTENTIONALLY AND
IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR
PROCEEDING RELATED TO OR ARISING OUT OF THIS AGREEMENT AND ANY OTHER AGREEMENT
DELIVERED IN CONNECTION HEREWITH.
Section 8.11 Counterparts. This Agreement may be signed 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.
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<PAGE>
IN WITNESS WHEREOF the Company and the Investor have caused this Agreement
to be executed as of the date just above written by their respective officer
thereunto duly authorized.
SLM INTERNATIONAL, INC.
By:______________________
Name:
Title:
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
By:______________________
Name:
Title:
CREDIT AGREEMENT
among
SLM INTERNATIONAL, INC.
and
SPORT MASKA INC.
(as Borrowers)
and
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
(as Agent)
and
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
(as Lender)
November 19 , 1998
<PAGE>
CREDIT AGREEMENT entered into on the 19th of November, 1998
AMONG SLM INTERNATIONAL, INC., a corporation incorporated under the
laws of Delaware and SPORT MASKA INC., a corporation incorporated
under the laws of New Brunswick (individually a "Borrower" and
collectively the "Borrowers");
AND CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, a corporation
incorporated under the laws of Quebec, acting as agent for the
Lenders (in such capacity, the "Agent");
AND CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, a corporation
incorporated under the laws of Quebec, acting as a Lender
("Caisse").
WHEREAS the Borrowers have requested the Lenders to make available to the
Borrowers a credit facility of $135,800,000;
WHEREAS the Lenders have agreed to make such credit facility available to
the Borrowers subject to the terms and conditions of this Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. INTERPRETATION
1.1 Definitions
In this Agreement and the Schedules, as well as in all notices pursuant to
this Agreement, unless the context otherwise requires,
1.1.1 "Acceptance" means, either a depository bill, as defined in
the Depository Bills and Notes Act (Canada) or a bill of
exchange, as defined in the Bills of Exchange Act (Canada)
drawn by a Borrower on a Lender and accepted by such Lender;
1.1.2 "Affiliate" has the meaning ascribed to such term in the
Canada Business Corporations Act, as amended;
1.1.3 "Agent" means Caisse de depot et placement du Quebec and any
successor agent appointed pursuant to Section 15.14;
<PAGE>
-2-
1.1.4 "Agent's Branch of Account" means the office of the Agent
located at the address opposite its name on the signature
pages hereto or the banking branch as may be designated by
the Agent from time to time by notice to the Borrowers;
1.1.5 "Agreement" or "Credit Agreement" means this credit
agreement and the schedules attached hereto, as the same may
be amended or supplemented from time to time;
1.1.6 "Agreement and Plan of Reorganization" means the agreement
dated as of October 6, 1998 among SLM, Sport Maska Inc., SLM
Acquisition Corp., and Sports Holdings Corp. providing for
the purchase by Sport Maska Inc. of the shares of Tropsport
Acquisitions Inc. and the reorganization by way of merger of
Sports Holdings Corp. and SLM Acquisition Corp.;
1.1.7 "BA Loan" means a Borrowing in Dollars with respect to which
interest is calculated on the basis of the BA Loan Rate;
1.1.8 "BA Loan Rate" means, for each BA Loan, an interest rate per
annum equal to the average discount rate of bankers'
acceptances in Dollars having periods identical to the
period of such BA Loan as quoted on Reuters Service page
CDOR as of approximately 10:00 a.m. (Montreal time) on the
date such BA Loan is made;
1.1.9 "Borrowers" means SLM International, Inc. and Sport Maska
Inc. and "Borrower" means either of them;
1.1.10 "Borrowings" means the Loans and the Acceptances which are
made available to the Borrowers pursuant to this Agreement
and includes any conversion or renewal thereof in accordance
with the terms of this Agreement;
1.1.11 "Business Day" means a day on which banks are open for
normal business over the counter in the City of Montreal,
Province of Quebec, excluding Saturday and Sunday and any
other day which is a statutory holiday in such city;
1.1.12 "Caisse" means Caisse de depot et placement du Quebec;
<PAGE>
-3-
1.1.13 "Canadian Operating Credit" means the credit agreement
entered into on November 19, 1998 among Sport Maska Inc. and
Tropsport Acquisitions Inc., as borrowers, General Electric
Capital Canada Inc., as agent and the lenders and credit
parties referred to therein;
1.1.14 "Capital Expenditures" means, with respect to any Person,
all expenditures (by the expenditure of cash or the
incurrence of Indebtedness) by such Person for any fixed
assets or improvements or for replacements, substitutions or
additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP,
less any amount of proceeds from any disposition of assets
or from property insurance to the extent that such amount is
used to make any such expenditure;
1.1.15 "Commitment" means, with respect to each Lender, its
obligation to make Borrowings available to the Borrowers in
an aggregate principal amount in Dollars not exceeding its
Lender's Proportion of the Total Commitment;
1.1.16 "Credit" means the facility provided by the Lenders to the
Borrowers pursuant to Section 2.1;
1.1.17 "Default" means any event or circumstance which constitutes
an Event of Default or which, upon lapse of time or the
giving of a notice or both, would constitute an Event of
Default;
1.1.18 "Discount" means, with respect to any Acceptance, the amount
equal to the face value of the Acceptance, multiplied by the
Discount Rate and by the actual number of days in the period
of such Acceptance and divided by 365;
1.1.19 "Discount Rate" means, with respect to any Acceptance being
issued hereunder on any date, the average discount rate of
bankers' acceptances in Dollars having periods identical to
the period of such Acceptance as quoted on Reuters Service
page CDOR as of approximately 10:00 a.m. Montreal time on
such day;
1.1.20 "Dollar" and the symbol "$" mean lawful money of Canada;
1.1.21 "Dollar Loan" means a loan denominated in Dollars and
bearing interest at the Prime Rate, plus the margin provided
for in this Agreement;
<PAGE>
-4-
1.1.22 "EBITDA" means for any fiscal period of SLM:
(a) the consolidated net income (or net loss) of SLM and its
Subsidiaries for such period, computed and calculated in
accordance with GAAP without giving effect to any
extraordinary or unusual gains or losses, any gains or
losses from the sale or disposition of assets other than in
the ordinary course of business, or any extraordinary,
unusual or non-recurring expenses or charges, including,
without limitation, restructuring charges and Transaction
Expenses; plus (or minus),
(b) to the extent that any of the items referred to in any of
clauses (i) through (iii) below were deducted (or added) in
calculating such net income:
i) consolidated interest expense (including, without
limitation, amortization or charges of deferred
financing fees, premiums or interest rate protection
agreements and original issue discounts (including,
without limitation, discounts or Acceptances), letter
of credit fees, the portion of any capital lease
payments which are allocated to interest expense and
interest paid in kind) of SLM and its Subsidiaries for
such period;
ii) income, capital or large corporation tax expense or
benefit of SLM and its Subsidiaries for such period;
iii) the consolidated amount of all depreciation and
amortization and all non-cash charges of SLM and its
Subsidiaries for such period, plus;
(c) all fixed and all calculable dividend payments on preferred
stock;
1.1.23 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder;
1.1.24 "ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043(c) of ERISA, with
respect to any Plan unless the 30-day notice requirement
with respect to such event has been waived by the PBGC or
(ii) the requirements of Section 4043 (b) of ERISA apply
<PAGE>
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with respect to a contributing sponsor, as defined in
Section 4001 (a) (13) of ERISA, of a Plan, and an event
described in paragraph (9), (10), (11) or (13) of Section
4043 (c) of ERISA is reasonably expected to occur with
respect to such Plan within the following 30 days; (b) the
application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of
a notice of intent to terminate such Plan, pursuant to
Section 4041 (a) (2) of ERISA (including any such notice
with respect to a plan amendment referred to in Section 4041
(e) of ERISA); (d) the cessation of operations at a facility
of any Borrower or any Material Subsidiary in the
circumstances described in Section 4062 (e) of ERISA; (e)
the withdrawal by any Borrower or any Material Subsidiary
from a Multiple Employer Plan during a plan year for which
it was a substantial employer, as defined in Section 4001
(a) (2) of ERISA; (f) the conditions for imposition of a
lien under Section 302 (f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a
Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by
the PBGC of proceedings to terminate a Plan pursuant to
Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that
constitutes grounds for the termination of, or the
appointment of a trustee to administer, such Plan, which in
any such case could reasonably be expected to have a
Material Adverse Effect;
1.1.25 "Event of Default" means any of the events or circumstances
set out in Section 13.1;
1.1.26 "GAAP" means generally accepted accounting principles in the
United States of America;
1.1.27 "Grace Period" shall have the meaning assigned to such term
in Section 2.9;
1.1.28 "Guarantee" means, with respect to any Person, without
duplication, any obligation, contingent or otherwise (other
than an endorsement for collection or deposit in the
ordinary course of business or a guarantee of the
obligations of a Subsidiary of such Person in respect of
trade payables incurred in the ordinary course of business
or resulting from banking cash management systems) directly
or indirectly guaranteeing the payment or other performance
of any indebtedness or obligation of any other Person
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or protecting a creditor of such Person from a loss
resulting from the failure by such Person to pay or perform
such indebtedness or obligation;
1.1.29 "Indebtedness" means, with respect to any Person, without
duplication: (i) indebtedness for monies borrowed or raised,
or for the purchase price of property, goods or services
more than 90 days past due (but excluding such past due
payables being diligently contested in good faith or the
non-payment of which is being tolerated and for so long as
such tolerance lasts), and including obligations under
agreements relating to the issuance of letters of credit or
acceptance financing, (ii) obligations as lessee under
leases which shall have been or should be recorded as
capital leases in accordance with GAAP, and (iii)
obligations under Guarantees by such Person in respect of,
and obligations (contingent or otherwise) with respect to
(i) and (ii) above; for greater certainty, Indebtedness
shall not include trade debt incurred in the ordinary course
of business (except to the extent included in (i) above) or
monies borrowed or raised to the extent of the amount of any
letter of credit or guarantee of any other Person which
secures the repayment of such monies and which is included
in (i) above;
1.1.30 "Intercreditor Agreement" means, the agreement dated the
date hereof and made among the Agent, General Electric
Capital Canada Inc., General Electric Capital Corporation,
the Borrowers and the other parties named herein;
1.1.31 "Interest Coverage Ratio" means, at any date of
determination, the ratio of (a) EBITDA minus capital
expenditures of SLM and its Subsidiaries to (b) net cash
interest expense of SLM and its Subsidiaries during the four
consecutive fiscal quarters most recently ended for which
financial statements are required to be delivered to the
Agent;
1.1.32 "Lenders" means Caisse, and the other lenders which become
parties hereto by way of an assignment made pursuant to
Section 17, in each case together with their successors and
permitted assigns, and "Lender" means any of them;
1.1.33 "Lender's Proportion" means, with respect to each Lender,
its proportion of the Total Commitment as set out opposite
its name in Schedule "A", as may be adjusted from time to
time as a result of a reduction made pursuant to this
Agreement or an assignment made pursuant to Section 17.1;
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1.1.34 "Loans" means the aggregate of the Dollar Loans and the BA
Loans;
1.1.35 "Majority Lenders" means any group of Lenders whose
Commitments amount in the aggregate to at least 60% of the
Total Commitments;
1.1.36 "Material Adverse Effect" shall mean a material adverse
effect on the business, assets, property or condition
(financial or otherwise, including without limitation any
material adverse effect by virtue of any environmental
liability or occurrence, or the receipt from any
governmental authority of any notice, compliant or order to
that effect) of (a) SLM and its Subsidiaries taken as a
whole, (b) Sport Maska Inc., (c) Tropsport Acquisitions
Inc., (d) SHC Hockey Inc., (e)KHF Sports Oy (or its
successor), or (f) Jofa AB (or its successor) or on the
ability of the Borrowers to perform their obligations
hereunder;
1.1.37 "Material Subsidiaries" means the following corporations:
Maska U.S., Inc., Sports Holdings Corp., Tropsport
Acquisitions Inc., SLM Trademark Acquisition Corp., SLM
Trademark Acquisition Canada Corporation, SHC Hockey Inc.,
KHF Sports Oy, WAP Holdings Inc., Jofa Holding AB, Jofa AB,
KHF Sports Oy, and any other Subsidiary of the Borrower
having assets or gross annual income (on a four quarter
basis) in excess of $1,000,000, provided, however, that any
Subsidiary which ceases to possess such assets or have such
gross annual income shall nonetheless remain a Material
Subsidiary;
1.1.38 "Maturity Date" shall mean the second anniversary of this
Agreement or such later date to which the Maturity Date has
been extended pursuant to the terms of Section 2.9;
1.1.39 "Multiple Employer Plan" means a Plan which is a
"multiemployer plan" as defined in Section 4001(a)(3) of
ERISA;
1.1.40 "PBGC" shall mean the Pension Benefit Guarantee Corporation
established under ERISA, or any successor thereto;
1.1.41 "Permitted Encumbrances" means:
(i) deficiencies or defects in title, liens, mortgages,
hypothecs, charges, priorities, charges and encumbrances,
whether arising by law or by contract, existing on the date
of this Agreement or
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created, discovered or arising subsequently and which do not
result (except as otherwise permitted under this Agreement)
from a voluntary act or the consent of SLM or of a
Subsidiary,
(ii) PMO's,
(iii) pledges or deposits made in the ordinary course of business
in connection with bids, tenders, performance bonds, surety,
appeal or custom bonds, contracts (other than to raise money
or for the repayment of money borrowed) or leases or to
secure statutory obligations,
(iv) liens or priorities arising by operation of law and which
have not become enforceable or relate to obligations not due
or delinquent or are being contested diligently and in good
faith,
(v) minor encumbrances, including, without limitation,
easements, rights of way, servitudes or other similar rights
in land granted to or reserved by other Persons, or zoning
or other restrictions as to the use of real or immoveable
properties, which encumbrances do not, in the aggregate,
materially affect the value of the said properties or
materially impair their use in the operation of the business
of the Borrower or of its Subsidiaries,
(vi) liens, mortgages, hypothecs, charges, priorities and
encumbrances, ranking junior to the Security, whether by
express subordination or by operation of law, incurred,
created or assumed by the Borrower or a Subsidiary and
relating to the leasing of any property, movable or
immovable,
(vii) the right reserved to or vested in any municipality or
governmental or other public authority by the terms of any
lease, license, franchise, grant or permit or by any
statutory provision, to terminate any such lease, license,
franchise, grant or permit, or to require annual or other
periodic payments as a condition of the continuance thereof,
(viii) security given by SLM or a Subsidiary in the ordinary
course of its business to a public utility or any
municipality or governmental or
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other public authority when required by such utility or
municipality or other authority in connection with its
operations,
(ix) the reservations, limitations, provisos and conditions, if
any, expressed in any original grants from the Crown,
(x) the Security,
(xi) security granted by the Borrowers and their Affiliates named
in the Intercreditor Agreement to secure the indebtedness
and other obligations under the Canadian Operating Credit or
the US Operating Credit and the guarantees thereof, but, as
to the principal amount so secured or guaranteed, only to
the extent contemplated by Section 2.14 of the Intercreditor
Agreement, and any renewal thereof, provided that the
principal amount secured by any such renewal does not exceed
the unpaid principal amount of the indebtedness which was
secured by such security or guarantees immediately before
its renewal;
(xii) carriers', wharehousemen's, suppliers' or other similar
possessory liens arising in the ordinary course of business
that are unregistered and secure amounts that are not yet
due and payable;
(xiii) any attachment or judgment lien not constituting an Event
of Default under Section 13.1.11 and which has not become
enforceable or is being contested diligently and in good
faith;
provided that, at the time when any Permitted Encumbrance is created
or granted, the maximum aggregate amount of the indebtedness or
obligations secured by Permitted Encumbrances (exclusive of the
pledges and deposits referred to in paragraph (iii), the liens or
priorities referred to in paragraph (iv), PMO's, the Security, the
security referred to in paragraph (xi), and liens or priorities
arising by operation of law and which have not become enforceable or
relate to obligations not due or delinquent or are being contested
diligently and in good faith) shall not exceed US $5,000,000;
1.1.42 "Person" means and includes an individual, a partnership, a
corporation, a joint stock company, a trust, an
unincorporated association, a joint venture or other entity
or a government or any agency or political subdivision
thereof;
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1.1.43 "Plan" means any "employee benefit plan" as defined in
Section 3(3) of ERISA covered by Title IV of ERISA;
1.1.44 "PMO's" means Purchase Money Obligations;
1.1.45 "Prime Rate" means, on any day, the rate of interest per
annum that is equal to the greater of:
(i) the rate of interest publicly announced by Royal Bank of
Canada from time to time as being its reference rate then in
effect for determining interest rates for commercial loans
in Dollars made by it in Canada; and
(ii) the annual rate of interest equal to the average of the "BA
1 month" rates applicable to bankers' acceptances in Dollars
displayed and identified as such on the "Reuters Screen CDOR
Page" (as defined in the International Swap and Derivatives
Association, Inc. definitions, as modified and amended from
time to time) (the "CDOR Rate") as at approximately 10:00
a.m. on such day, or if such day is not a Business Day then
on the immediately preceding Business Day, plus 1.0% per
annum; provided that if such rates do not appear on the
Reuters Screen CDOR Page as contemplated, then the CDOR Rate
on any day shall be calculated as the arithmetic average of
the 30-day discount rates applicable to bankers' acceptances
in Dollars quoted by three major Canadian Schedule 1
chartered banks chosen by the Agent as of approximately
10:00 a.m. on such day, or if such day is not a Business
Day, then on the immediately preceding Business Day;
1.1.46 "Purchase Money Obligations" means:
(i) any security interest, lien, mortgage, hypothec, charge,
encumbrances (collectively, "Security Interest") created,
incurred or assumed by the Borrower or a Subsidiary for
indebtedness incurred in connection with, or created to
provide the Borrower or a Subsidiary with funds to pay, the
purchase price of any immoveable or moveable property
(including pursuant to a lease which is capitalized in
accordance with GAAP), provided that such Security Interest
is limited to the property so acquired and is
<PAGE>
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created, incurred or assumed substantially concurrently with
the acquisition of such property, and
(ii) any renewal or extension of any such Security Interest and
any new Security Interest created on the same property in
replacement of any such Security Interest provided that the
principal amount secured by any such renewal, extension or
new Security Interest does not exceed the unpaid principal
amount of the indebtedness which was secured by such
Security Interest immediately before its extension, renewal
or replacement,
up to a maximum aggregate outstanding amount at any time of such
secured debt of US$5,000,000;
1.1.47 "Security" means any and all security and guarantees to be
provided to the Lenders pursuant to Article 12;
1.1.48 "SLM" means SLM International, Inc.;
1.1.49 "Subsidiary" means, with respect to a Person, any
corporation of which at least a majority of the outstanding
shares to which there is attached voting power under
ordinary circumstances to elect a majority of the board of
directors of said corporation, shall at the relevant time be
owned directly or indirectly by such Person, one or more
Subsidiaries of such Person, or any combination thereof; for
greater certainty the Subsidiaries of SLM shall be deemed to
include Sports Holdings Corp. and its Subsidiaries;
1.1.50 "Total Commitment" means, the aggregate amount of the
Credit, as may be adjusted from time to time as a result of
a reduction made pursuant to this Agreement;
1.1.51 "Transaction Expenses" means the expenses listed in Schedule
B to this Agreement;
1.1.52 "US Operating Credit" means the credit agreement entered
into on November 19, 1998 among SHC Hockey, Inc. and Maska
U.S., Inc., as borrowers, General Electric Capital
Corporation, as agent, and the lenders and credit parties
referred to therein;
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- 12 -
1.1.53 "Withdrawal Liability" means withdrawal liability as
determined in accordance with Title IV of ERISA.
1.2 Headings and table of contents
The headings and the Table of Contents are inserted for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.3 Accounting terms
Unless otherwise provided, (i) accounting terms and expressions used
herein shall have the meaning assigned to them under GAAP in effect from time to
time, provided that all calculations shall be made according to the same
principles utilized in the preparation of the financial statements referred to
in Section 8.12, and (ii) compliance with covenants shall be determined on a
consolidated basis.
1.4 Conversion to or from US Dollars
Where a Dollar amount has to be converted or expressed in US
dollars, or where its US dollar equivalent has to be determined (or vice-versa),
the calculation is made at the relevant date at the Bank of Canada rate as
displayed and identified as such on the Reuters Screen BOFC Page for US dollars
against Dollars (or vice-versa) at or around noon on such date.
1.5 Time
Except where otherwise indicated in this Agreement, any reference to a
time shall mean local time in the City of Montreal, Province of Quebec.
1.6 Governing law
This Agreement shall be governed by and construed in accordance with
laws of the Province of Quebec and the laws of Canada applicable therein.
2. THE CREDIT
2.1 Obligation of Lenders and Total Commitment
Relying on each of the representations and warranties set out herein
and subject to the terms and conditions of this Agreement, the Lenders,
individually, and not solidarily (that is to say, not jointly and severally),
agree to make a credit facility (the "Credit") available to the
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Borrowers by way of their respective Commitments. The Total Commitment for the
Credit shall be $135,800,000.
2.2 Availability of the credit
The Credit shall not revolve and shall be fully utilized within three
Business Days of the date hereof and shall be repaid in full on the Maturity
Date. Any portion of the Credit not utilized within three Business Days of the
date hereof shall cease to be available.
2.3 Commitments of each Lender
The Credit shall be made available to the Borrowers by each Lender in
the same proportion as the Commitment of each Lender is to the Total Commitment.
2.4 Utilizations proportional to Commitments
Any utilization of the Credit shall be made through the Agent and, to
the extent reasonably possible, utilizations shall be, as to each Lender, in the
same proportion as its Commitment is to the Total Commitment. If it is not
practicable to allocate a Borrowing in such manner, or to allocate a Borrowing
by way of Acceptances so that the aggregate amount of Acceptances required to be
accepted by a Lender is a whole multiple of $100,000, the Agent is authorized by
the Borrowers and the Lenders to make such allocations with respect to such
Borrowings without amendment of the Commitment of each Lender as the Agent, in
its sole discretion, determines to be equitable in the circumstances.
2.5 Borrowings under the Credit
The Borrowers may utilize the Credit (and re-utilize same as provided
herein) pursuant to the following forms of Borrowings or a combination thereof:
2.5.1 Dollar Loans,
2.5.2 BA Loans, and
2.5.3 Acceptances.
2.6 Notices of utilization to the Agent
Prior to each utilization of the Credit by a Borrower, such Borrower
shall give to the Agent a notice of utilization specifying:
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2.6.1 the selected form of Borrowing;
2.6.2 the amount of the Borrowing, which shall be in a minimum
amount of $10,000,000;
2.6.3 the date of the Borrowing, which shall be a Business Day;
and
2.6.4 to the extent applicable, the period of the Borrowing, which
shall comply with the provisions of Article 3, in the case
of a Borrowing by way of Acceptances or BA Loans;
and the notice shall be given in writing in the form attached as Schedule "C" by
12:00 (noon) on the second Business Day prior to an issue of Acceptances or a BA
Loan, and the first Business Day prior to a Dollar Loan.
2.7 Conversions and renewals
2.7.1 The Borrower may convert from Loans to Acceptances (and vice
versa) and renew Acceptances, provided a notice of
conversion or renewal is given to the Agent;
2.7.2 Section 2.6 shall apply to a conversion or a renewal;
2.7.3 Notwithstanding Section 2.7.1, Acceptances and BA Loans may
not be converted prior to the maturity of their respective
periods. In addition, unless they converted or renewed, as
the case may be, at the maturity date of their respective
periods, Acceptances and BA Loans shall then become Dollar
Loans.
2.8 Use of proceeds
The proceeds of the utilizations shall be used to finance, directly or
indirectly, the completion of the transactions and the payment of related fees
provided in the Agreement and Plan of Reorganization.
2.9 Extension of Maturity Date
SLM may request (but only once) that the Maturity Date be extended for
a twelve-month period by sending to the Agent an extension request substantially
in the form of Schedule D to this Agreement, together with documentation
evidencing compliance with the financial tests
<PAGE>
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therein, 60 days prior to the second anniversary of this Agreement. If SLM
satisfies such financial tests and pays to the Agent for distribution to the
Lenders in proportion to their respective Commitments an extension fee of
$1,358,000, 30 days prior to the second anniversary of this Agreement, the
Maturity Date shall be extended as requested. In the event that SLM does not
make such request or that the Maturity Date has been extended to the third
anniversary of this Agreement as provided above, SLM may in addition and at its
option extend the Maturity Date for a period (or additional period, if the
Maturity Date has already been extended to the third anniversary of this
Agreement) of three months (the "Grace Period") by providing the Agent with a
notice of its intent to so extend the Maturity Date and paying an extension fee
of $ 2,701,600, 45 days prior to the Maturity Date.
3. PROVISIONS APPLICABLE TO ACCEPTANCES AND BA LOANS
3.1 Periods and amounts
Acceptances
3.1.1 shall be for periods of one, two, three or six months and
shall mature on a Business Day;
3.1.2 shall be denominated in Dollars, in amounts of $100,000 per
Lender or multiples thereof;
3.1.3 shall be issued in whole multiples of $1,000,000, with a
minimum amount of $5,000,000 per issue;
3.1.4 shall form part of the Borrowings for their face amount
(whether they have been accepted by a Lender or by a
financial institution which is not a Lender);
3.1.5 do not carry any days of grace; and
3.1.6 may be held by the Lenders for their own account or may be
sold to third parties.
3.2 Discount and acceptance fee
3.2.1 The amount that shall be disbursed to a Borrower upon an
issue of Acceptances is the aggregate face amount of the
Acceptances so issued, less the Discount and the acceptance
fee applicable to such Acceptances.
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3.2.2 In the case of a conversion into Acceptances or renewal of
Acceptances, the Borrower concerned shall concurrently with
the conversion or renewal pay to the Agent an amount equal
to the aggregate face amount of the Acceptances issued upon
such conversion or renewal; the amount so paid to the Agent
shall be applied on the portion of the Borrowings having
been so converted, or, as the case may be, on the
Acceptances so renewed.
3.2.3 Except for Acceptances renewed or converted under Section
3.2.2, and subject to Section 2.7.3, the Borrower concerned
shall pay to the Agent the face amount of each Acceptance
issued by it on the maturity date thereof.
3.3 Selection of periods
3.3.1 Periods of Acceptances shall be selected in order that no
mandatory repayments to be made under Section 6.1 shall
result in a payment of Acceptances prior to their maturity
dates.
3.3.2 Periods of Acceptances shall be selected so that no more
than 10 different issues of Acceptances shall be outstanding
at the same time.
3.4 Acceptance forms
No notice of utilization, conversion or renewal in respect of
Acceptances shall be effective if a Lender which is a bank notifies the Agent,
on or before the expiry of the notice period referred to in Section 2.6, that
the Borrower concerned has not provided such Lender with the Acceptances to be
then issued by such Lender.
3.5 Authority to complete Acceptances
In accordance with the instructions given from time to time by the
Borrowers to the Agent for onward conveyance to the Lenders, each Lender is
authorized to complete Acceptance forms in the form generally used by such
Lender and to provide its acceptance thereon for the purposes of giving effect
to notices of utilizations by way of Acceptances. Acceptances so completed,
signed, endorsed and negotiated on behalf of a Borrower by any Lender shall bind
such Borrower as fully and effectively as if those acts were performed by an
authorized officer of such Borrower. Any executed Acceptances which are held by
any Lender need only be held in safekeeping with the same degree of care as if
they were that Lender's own property and that Lender was keeping them at the
place at which they are to be held. Neither the Agent nor any Lender nor any of
their respective directors, officers, employees or representatives
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shall be liable for any action taken or omitted to be taken by any of them under
this Section 3.5 except for its own negligence or willful misconduct.
3.6 Records respecting Acceptances
Each Lender shall maintain a record with respect to Acceptances
accepted by it hereunder, cancelled at their respective maturities or voided by
it for any reason. Each Lender further agrees to retain the foregoing records in
the manner and for the statutory periods provided in the various provincial or
federal statutes and regulations which apply to such Lender.
3.7 BA Loans
Notwithstanding anything contained in this Agreement or any other
document, if a Lender is not a bank and accordingly is unable to issue
Acceptances pursuant to any notice of utilization, such Lender shall make
available to the Borrower prior to 12:00 (noon) on the applicable borrowing
date, a BA Loan in the principal amount equal to such Lender's Proportion of the
aggregate amount of Borrowings requested from the Lenders by way of Acceptances
pursuant to such notice of utilization. Such BA Loan shall have the same term as
the Acceptances for which it is a substitute and, for greater certainty, shall
permit such Lender to obtain the same effective yield as if such Lender had
accepted and purchased an Acceptance, the Borrower agreeing to pay to such
Lender an amount equal to the applicable acceptance fee and to prepay, on the
date the BA Loan is made, interest on such BA Loan at the rate provided in
Section 5.5, such interest payment to be made by such Lender deducting the
amount of such interest from the principal amount of such BA Loan. The net
amount to be made available by each Lender to the Borrower for a BA Loan shall
be the same as the amount that such Lender would have been required to make
available to the Borrower on such date had such Lender been a Lender that
provided Borrowings through Acceptances.
4. CONDITIONS PRECEDENT TO BORROWINGS
4.1 Conditions precedent to the initial Borrowing
The obligation of the Lenders to make available the initial Borrowing
hereunder is conditional upon the delivery of the following to the Agent, in
form and substance reasonably satisfactory to all Lenders, and in sufficient
copies for distribution to each Lender:
4.1.1 a duly executed copy of this Agreement together with a
promissory note stated to be payable in accordance with and
subject to this Agreement in favour of any Lender which so
requests in the amount of its aggregate Commitment
hereunder;
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4.1.2 a certified copy of the constating documents of the
Borrowers and each Material Subsidiary;
4.1.3 a duly certified copy of the resolution or resolutions of
the board of directors of each Borrower relating to the
authority of such Borrower to execute and deliver, and to
perform its obligations under this Agreement and the
instruments, agreements, certificates and papers and other
documents provided for or contemplated herein, and relating
to the manner in which the foregoing documents are to be
executed and delivered and in which such Borrower shall
avail itself of its rights thereunder;
4.1.4 a duly certified copy of the resolution or resolutions of
the board of directors of each Material Subsidiary relating
to the authority of each Material Subsidiary to execute and
deliver the instruments, agreements, certificates and papers
and other documents provided for or contemplated herein, and
the manner in which the foregoing documents are to be
executed and delivered;
4.1.5 a certificate of the secretary of each Borrower setting
forth specimen signatures of the individuals authorized to
sign on its behalf this Agreement and the instruments,
agreements, certificates, papers and other documents
provided for or contemplated herein;
4.1.6 a certificate of the secretary of each Material Subsidiary
setting forth specimen signatures of the individuals
authorized to sign on its behalf the instruments,
agreements, certificates, papers and other documents
provided for or contemplated herein;
4.1.7 a certificate of each Borrower to the effect that the
representations and warranties contained herein are still
true and accurate and that there is no Default or Event of
Default, such certificate to include, in the case of SLM,
calculations showing compliance, on a consolidated basis,
with the financial tests set forth in this Agreement;
4.1.8 evidence that the Security shall have been provided in
respect of all assets intended to be subject thereto at such
time;
4.1.9 a satisfactory report from KPMG with respect to the
business, operations and affairs of SLM and its Subsidiaries
and a report from SLM providing
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details of Permitted Encumbrances referred to in paragraphs
(ii) and (viii) of Section 1.1.41;
4.1.10 a copy of the executed Agreement and Plan of Reorganization
and evidence that the transactions contemplated therein have
occurred or shall occur substantially concurrently with the
initial Borrowing;
4.1.11 copies of all regulatory approvals and consents which are
required to be obtained from any governmental authority in
order to complete the transactions contemplated by the
Agreement and Plan of Reorganization;
4.1.12 a copy of the Canadian Operating Credit and the US Operating
Credit;
4.1.13 a certificate of the Chief Financial Officer of SLM that the
consolidated EBITDA of SLM (prior to giving effect to the
transaction contemplated by the Agreement and Plan of
Reorganization) for the month ended September 26, 1998 was
not less than US $2,700,000;
4.1.14 a copy of the consolidated financial results of SLM for the
nine months ended September 26, 1998 and for the month ended
September 26, 1998;
4.1.15 a copy of share certificates of SLM evidencing that Phoenix
Home Life Mutual Insurance Company shall have become a
preferred shareholder of SLM and a certificate of the Chief
Financial Officer of SLM stating that Phoenix Home Life
Mutual Insurance Company has thereby made an equity
investment in SLM of an amount not less than US $12,500,000;
4.1.16 the favourable opinion of counsel to the Borrowers and the
Material Subsidiaries as to corporate status and capacity,
their authority and legal right to enter into and perform
their respective obligations under this Agreement and the
Agreement and Plan of Reorganization, and as to the
validity, binding effect and enforceability of this
Agreement, the Security provided on or prior to the date of
the initial Borrowing and the Agreement and Plan of
Reorganization;
4.1.17 confirmation that no material adverse change has occurred in
the business or financial condition of SLM and its
Subsidiaries, taken as a whole, or Sports Holding Corp. and
its Subsidiaries, taken as a whole, since December 31, 1997;
and
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4.1.18 the favourable opinion of counsel to the Lenders as to the
validity, binding effect and enforceability of this
Agreement and of the Security provided on or prior to the
date of the initial Borrowing.
4.2 Conditions precedent to all Borrowings
The Lenders shall not have any obligation to make any Borrowings
available to the Borrowers or to permit the Borrowers to convert existing
Borrowings into, or to renew, Acceptances if:
4.2.1 the Agent shall not have received the timely notice of
utilization (or conversion or renewal) required pursuant to
Section 2.6, or
4.2.2 if a Default shall have occurred and be continuing,
provided that Acceptances and BA Loans may become Dollar Loans pursuant to
Section 2.7.3 even after the occurrence of a Default.
4.3 Waiver of conditions precedent
The terms and conditions of Sections 4.1 and 4.2 are inserted for the
sole benefit of the Lenders and may be waived by the Agent in conformity with
Article 16 in whole or in part, with or without terms or conditions, in respect
of any Borrowings without affecting the rights of the Lenders against the
Borrowers and the Material Subsidiaries and without prejudicing the right of the
Agent to assert such terms and conditions in whole or in part in respect of any
other Borrowing.
4.4 Restatement of representations and warranties
Any request for Borrowings (including through a conversion or a
renewal) and any notice of utilization (or conversion or renewal) shall be
deemed to include a representation and warranty that the representations and
warranties contained herein, other than the representations made in Sections
8.6, 8.12 and the first and last sentences of Section 8.17, are still true and
accurate in all material respects as at the date of the request or notice.
4.5 Early Termination
The obligations of the Lenders to make Borrowings shall terminate if
all of the conditions precedent set forth in Section 4.1 have not been satisfied
prior to December 1, 1998
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(or such later date as may be agreed to prior to such date by all Lenders),
except for those, if any, which have been waived with the consent of the Agent
prior to such date pursuant to Section 4.3.
5. FEES AND INTEREST
5.1 Upfront fee
The Borrowers shall pay to the Caisse for its own account an upfront
fee for the amount and payable in such manner as SLM and the Caisse have agreed
prior to the execution of this Agreement.
5.2 Agency fee
The Borrowers shall pay to the Agent, for its own account, an agency
fee in the amount previously agreed to in writing between the Borrowers, the
Caisse and the Agent. Such agency fee shall be paid on the date of execution of
this Agreement and on each anniversary date thereof, provided, that Borrowings
remain outstanding on any such anniversary date.
5.3 Acceptance fees
The Borrowers shall pay concurrently with the issue of each Acceptance
an acceptance fee at the annual rate determined in accordance with Schedule F
calculated on the face amount of such Acceptance and for the number of days
included in the period of same. The applicable acceptance fee for Acceptances
issued during a Grace Period shall be increased by 4%. Such acceptance fees may
be deducted from the proceeds of the issue of any such Acceptance, as provided
in Section 3.2.1.
5.4 Dollar Loans
Any Dollar Loan shall bear interest at an annual rate equal to the
Prime Rate in effect from time to time, plus the applicable margin determined in
accordance with Schedule F. The applicable margin shall be increased by 4% in
respect of any Dollar Loan outstanding during a Grace Period. The interest shall
be payable monthly in arrears on the first Business Day after the end of each
month.
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5.5 BA Loans
Any BA Loan shall bear interest at an annual rate equal to the BA Loan
Rate in effect from time to time plus the applicable margin determined in
accordance with Schedule F. The applicable margin shall be increased by 4% in
respect of any BA Loan outstanding during a Grace Period. The interest shall be
calculated on the amount of such BA Loan and for the number of days included in
the period of same. Such interest shall be payable in advance and may be
deducted from the amount of such BA Loan as provided in Section 3.7.
5.6 Calculation of rates
5.6.1 Annual rates are calculated daily on the basis of a 365-day
year.
5.6.2 For the purposes of the Interest Act (Canada), the yearly
rate to which a rate calculated as specified in Section
5.6.1 is equivalent, is equal to the rate so calculated
multiplied by the actual number of days included in that
year and divided by 365 days.
5.7 Interest on arrears
Any amount (other than an amount in principal or interest due under a
Loan) which is not paid when due shall bear interest at the rate (including the
applicable margin) which would be applicable to a Dollar Loan made on the date
on which such payment became due, or, in the case of a payment becoming due
after the Maturity Date, on the Maturity Date. Any amount in principal or
interest payable under a Loan and which is not paid when due shall bear interest
at the annual rate which was applicable to the principal on the date such
payment became due. Interest on arrears is compounded monthly.
6. REPAYMENTS
6.1 Mandatory repayments
The Borrower shall make a repayment in the minimum amount of US
$5,000,000 on the second anniversary of this Agreement, in the event that the
Maturity Date is the third anniversary of the date hereof, pursuant to an
extension in accordance with Section 2.9. The outstanding Borrowings under the
Credit shall also be repaid upon the maturity thereof, as set forth in Section
2.9.
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6.2 Optional repayments
6.2.1 The Borrowers may at any time, without penalty and upon
three Business Days' notice, make repayments in principal
additional to the mandatory payments provided in Section
6.1. However,
6.2.1.1 such repayments shall be made in minimum amounts
of $10,000,000 increased by whole multiples of
$1,000,000;
6.2.1.2 a written notice of repayment shall be given to
the Agent prior to any such repayment specifying
the amount of the repayment and the Borrowings to
be repaid; and
6.2.1.3 notwithstanding Section 6.2.1 no such optional
repayment can be made on Acceptances or BA Loans
before the maturity date of their respective
periods unless the Lenders are indemnified in
accordance with Section 18.10.2 concurrently with
the repayment.
7. PLACE, MANNER, CURRENCY AND APPLICATION OF PAYMENTS
7.1 Payment to Lenders
Unless otherwise specified, all payments to be made by the Borrowers
hereunder shall be made to the Agent.
7.2 Place
Any payments to be made by the Borrowers to the Agent shall be made
for value on the day such payment is due and at the Agent's Branch of Account.
7.3 Time
If a payment is due on a day which is not a Business Day, this payment
may be made on the following Business Day.
7.4 Currency of payments
Unless otherwise provided herein, all amounts payable under this
Agreement shall be paid in Dollars.
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7.5 Payments net of taxes
7.5.1 All payments made by each Borrower will be made without
setoff, counterclaim or other defence. Any payment to the
Agent shall be made free and clear of, and without deduction
or withholding for, any present or future taxes or other
charges of whatever nature now or hereafter imposed by any
taxing authority in any jurisdiction with respect to such
payments (but excluding any tax or other governmental charge
imposed on or measured by the net income or net profits of a
Lender pursuant to the laws of the jurisdiction in which it
is organized or the jurisdiction in which the principal
office or applicable lending office of such Lender is
located) and all interest, penalties or similar liabilities
with respect to such non-excluded taxes or other
governmental charge (collectively referred to herein as
"Taxes"). If any Taxes are so levied or imposed, the
relevant Borrower shall pay the full amount of such Taxes to
the relevant taxing authority in accordance with applicable
law and shall pay to the Agent such additional amounts as
may be necessary so that every payment actually received by
the Agent or relevant Lender will not be less than the
amount which would otherwise have been received in the
absence of such levy or imposition of Taxes. Each Borrower
will furnish to the Agent within 45 days after the date the
payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts, if any, or other evidence
reasonably acceptable to the Agent evidencing such payment
by such Borrower. Each Borrower agrees to indemnify and hold
harmless each Lender, and reimburse such Lender upon its
written request, for the amount of any Taxes so levied or
imposed and paid by such Lender, and for any taxes, levies,
imposts, duties or charges paid by such Lender in respect of
amounts paid to or on behalf of such Lender pursuant to this
Section 7.5.1, other than penalties, additions to tax,
interest and expenses arising as a result of the willful
misconduct or gross negligence of such Lender, within 30
days after the date upon which such Lender makes written
demand therefor supported by a copy of any written
assessment thereof. Notwithstanding the foregoing provisions
of this Section 7.5.1, the Borrower's obligations under this
Section 7.5.1 shall not apply in respect of a Lender to the
extent that such Lender has not complied with the provisions
of Section 7.5.2 to the extent it is legally able to do so.
7.5.2 Each Lender that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended)
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and that is entitled to an exemption from or reduction of
withholding tax under the law of the United States or under
a treaty to which the United States is a party, with respect
to payments under this Agreement shall, to the extent it is
legally able to do so, on or prior to the date hereof, or in
the case of a Lender that is an assignee or transferee of an
interest under this Agreement pursuant to Section 17.1, on
the date of such assignment or transfer to such Lender, and
from time to time upon request from SLM, deliver to SLM,
accurate, properly completed and properly executed
documentation either prescribed by applicable law or
reasonably requested by SLM (to the extent that such
documentation reasonably requested by SLM will not, in the
reasonable judgment of such Lender, be disadvantageous to
such Lender), if the delivery of such documentation will
permit such payments to be made without withholding or with
withholding at a reduced rate, as the case may beo. SLM
agrees to reimburse each Lender for any expense incurred by
reason of complying with this Section 7.5.2.
7.5.3 If a Borrower pays any additional amount under Section 7.5.1
to a Lender and such Lender determines in its sole
discretion that it has actually received or realized in
connection therewith any refund and, in the case of a Lender
that is not exempt from tax, any reduction of or credit
against its tax liabilities, with respect to the taxable
year in which the additional amount is paid, such Lender
shall pay to the Borrower an amount that such Lender shall,
in its sole discretion, determine is equal to the net
benefit, after tax, which was obtained by the Lender in such
year as a consequence of such refund. Such amount shall be
paid as soon as practicable after receipt or realization by
such Lender of such refund. Nothing in this Section 7.5.3
shall require any Lender to disclose or detail the basis of
its calculation of the amount of any refund or any other
information to any Borrower or any other Person.
7.6 Payments to Agent on behalf of Lenders
Unless otherwise provided herein, all payments to be made to the Agent
shall be for the account of the Lenders and any payment received by the Agent
shall be deemed to have been received by the Lenders.
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7.7 Application of payments
7.7.1 All payments made to the Agent prior to a demand for payment
pursuant to Section 13.2 shall be applied in the following
order:
7.7.1.1 to amounts due pursuant to Section 5.2, as and by
way of agency fee;
7.7.1.2 to amounts due pursuant to Section 6.2, as and by
way of upfront fee;
7.7.1.3 to amounts due pursuant to Section 18.6, as and by
way of expenses;
7.7.1.4 to amounts due pursuant to Section 18.10, as and
by way of indemnity;
7.7.1.5 to amounts due pursuant to Section 5.7, as and by
way of default interest;
7.7.1.6 to amounts due pursuant to Sections 3.2.1, 5.3,
5.4 and 5.5, as and by way of interest, acceptance
fees and Discount;
7.7.1.7 to amounts due, as and by way of principal; and
7.7.1.8 in payment of any other amounts then due and
payable by the Borrower hereunder.
7.7.2 After a demand for payment made pursuant to Section 13.2,
all payments made by the Borrowers pursuant to this
Agreement and all sums received or realized on account of
amounts owing hereunder, shall be appropriated and applied
by the Agent towards the obligations of the Borrowers
hereunder as the Agent may decide or the Majority Lenders
may direct, and any such appropriation and application shall
override any appropriations or applications made or
requested by the Borrowers. For greater certainty, any such
decision shall be consistent with the provisions of Article
14.
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7.8 Judgment currency
If a judgment is rendered against a Borrower for an amount owed
hereunder and if the judgment is rendered in a currency ("Other Currency") other
than Dollars, the Borrower shall pay, if applicable, at the date of payment of
the judgment, an additional amount equal to the excess of (i) the said amount
owed under this Agreement, expressed into the Other Currency as at the date of
payment of the judgment, over (ii) the amount of the judgment. For the purposes
of obtaining the judgment and making the calculation referred to in (i), the
exchange rate shall be 12:00 noon rate quoted on the Reuters Monitor Screen
(Page BOFC or such other page, as may replace such page for the purposes of
displaying exchanges rates). Any additional amount owed under this Section shall
constitute a cause of action distinct from the cause of action which gave rise
to the judgment, and said judgment shall not constitute res judicata in that
respect.
8. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to each of the Lenders that, as at
the date hereof:
8.1 Corporate existence
Each of the Borrowers and the Material Subsidiaries is a duly
organized, and validly subsisting corporation, it has filed all annual returns
and financial statements which it is required to file under applicable law and
is duly qualified to do business in the jurisdictions in which the nature of the
business transacted by it or the character of the properties owned or leased by
it requires such qualifications, except to the extent that the failure to be so
organized, subsisting or qualified, or to have made such filings, could not
reasonably be expected to have a Material Adverse Effect.
8.2 Corporate power
Each of the Borrowers and the Material Subsidiaries has the corporate
power and authority to own its assets and to carry on its business as presently
conducted.
8.3 Corporate action
Each of the Borrowers and the Material Subsidiaries has full power and
authority to enter into and perform its obligations provided for under this
Agreement, and this Agreement has been duly authorized by all necessary
corporate action.
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8.4 Compliance with laws
Subject to Section 8.5, each of the Borrowers and their Subsidiaries
is not in violation of any law, regulation, or order applicable to it within any
jurisdiction in which it does business, the effect of which could reasonably be
expected to have a Material Adverse Effect.
8.5 Environmental matters
Except as disclosed to the Lenders in writing prior to the execution
of this Agreement and except to the extent that a Material Adverse Effect could
not reasonably be expected to result therefrom.
8.5.1 the assets and business of the Borrowers and their
Subsidiaries continue to be owned, possessed and operated in
compliance with all applicable environmental laws and
regulations;
8.5.2 to the best of the Borrowers' knowledge, there are no
apprehended, pending or threatened complaints, inquiries or
enforcement action with respect to any alleged violation by
the Borrowers and their Subsidiaries of any applicable
environmental law or regulation;
8.5.3 the Borrowers and their Subsidiaries have been issued, and
are in compliance with, all permits, authorizations and
approvals relating to environmental matters and necessary
for their assets, businesses and operations ; and
8.5.4 the Borrowers are not aware of any condition or circumstance
which could give rise to any liability by the Borrowers and
their Subsidiaries under any applicable environmental law or
regulation.
8.6 Accuracy of information
All written information delivered by the Borrowers to the Lenders in
connection with this Agreement is accurate in all material respects and contains
no material misstatement of fact nor does it omit a material fact the omission
of which would make such information misleading in light of the circumstances in
which the statements contained therein were made; the financial forecasts
contained in such information have been prepared on the basis of reasonable
assumptions and procedures and represent a good faith estimate of the results
contained therein, it being recognized by the Lenders that such financial
information as it relates to future events is not to be viewed as facts or an
assurance of performance and that actual results
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during the period or periods covered by such financial information may differ
from the forecasted or projected results set forth therein.
8.7 Material adverse change
No material adverse change has occurred in the business and financial
condition of SLM and its Material Subsidiaries since the date of the most recent
annual audited consolidated financial statements of SLM.
8.8 Effect of this Agreement
Neither the execution and delivery of this Agreement nor compliance
with the terms and provisions hereof or with the terms and provisions of the
documents evidencing the Security will:
8.8.1 conflict with, violate, or result in a breach of any of the
terms, conditions or provisions of any law or regulation
applicable to each of the Borrowers and the Material
Subsidiaries, or any order of any court, or administrative
agency or tribunal applicable to it, except to the extent
such conflict, violation, breach or default could not
reasonably be expected to have a Material Adverse Effect, or
8.8.2 conflict with, violate, result in a breach of, or constitute
a default under the articles or by-laws of the Borrowers or
the Material Subsidiaries or of any agreement or instrument
to which the Borrowers or the Material Subsidiaries is a
party or by which they are bound, except to the extent such
conflict, violation, breach or default could not reasonably
be expected to have a Material Adverse Effect.
8.9 Validity of this Agreement
This Agreement constitutes a legal, valid and binding obligation
of the Borrowers.
8.10 Litigation
There is no litigation and there are no legal proceedings pending, or,
to the best of its knowledge, threatened, before any court or administrative
agency or tribunal which could reasonably be expected to have a Material Adverse
Effect.
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8.11 Default
No Event of Default has occurred and is continuing.
8.12 Financial statements
The audited consolidated financial statements of SLM and Sports
Holding Corp. for the fiscal year ended December 31, 1997 have been prepared in
accordance with GAAP and present fairly, in all material respects, the
respective financial positions of SLM and Sports Holding Corp. and the results
of their respective operations for the fiscal years reported on.
8.13 Defects of title and liens
There is no deficiency or defect in the title of the Borrowers and the
Material Subsidiaries to any of their principal plants, properties or assets
which would reasonably be expected to have a Material Adverse Effect, and,
except for Permitted Encumbrances, the assets of the Borrowers and their
Subsidiaries are free and clear of any lien, priority, or security.
8.14 Tax returns
Each of the Borrowers and the Material Subsidiaries has filed all
material tax returns which were required to be filed and paid or made provision
for payment of all taxes which are due and payable, except to the extent that
adequate accounting reserves have been established in accordance with GAAP for
the payment of any tax the payment of which is being contested.
8.15 Pensions plans
Any Borrower or any Material Subsidiary that maintains or contributes
to a plan that provides retirement or health benefits for its employees, has
performed any material obligation provided in such plan in accordance with the
terms thereunder and in accordance with any statute, order, rule or regulation
applicable to such plan. In addition:
(i) set forth on Schedule E hereto is a complete and accurate list of all
Plans and Multiple Employer Plans;
(ii) no ERISA Event has occurred or is reasonably expected to occur with
respect to any Plan that has resulted in or is reasonably expected to
result in a Material Adverse Effect;
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(iii) Schedule B (Actuarial Information) to the most recent annual report
(Form 5500 Series) for each Plan, copies of which have been filed with
the United States Internal Revenue Service and furnished to the Agent,
is complete and accurate and fairly presents the funding status of
such Plan, and since the date of such Schedule B there has been no
material adverse change in such funding status;
(iv) neither the Borrowers nor any Subsidiary has incurred or is reasonably
expected to incur any Withdrawal Liability to any Multiple Employer
Plan; and
(v) neither the Borrowers nor any Subsidiary has been notified by the
sponsor of a Multiple Employer Plan that such Multiple Employer Plan
is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no such Multiple Employer Plan is reasonably
expected to be in reorganization or to be terminated, within the
meaning of Title IV of ERISA.
8.16 Year 2000 Compliance
Each of the Borrowers has (i) initiated a review and assessment of all
areas within its and each of its Material Subsidiaries' business and operations
that could be adversely affected by the risk that computer applications used by
such Borrower or any of its Material Subsidiaries may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a
plan and timetable for addressing the Year 2000 Problem on a timely basis and
(iii) to date, implemented that plan in accordance with such timetable. Based on
the foregoing, each of the Borrowers believes that all computer applications
that it owns or licenses and that are material to its or any of its Material
Subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 2000 ("Year 2000 Compliant"), except to the extent that a failure
to do so could not reasonably be expected to have a Material Adverse Effect.
8.17 Intellectual Property
Set forth on Schedule G hereto is a complete and accurate list of all
patents, trademarks, industrial designs, integrated circuit topographies, plant
breeder rights, trade names, service marks and copyrights, and all applications
therefor and licenses thereof (collectively, the "Intellectual Property"), of
the Borrowers or their Subsidiaries, showing, as applicable, as of the date
hereof the jurisdiction in which registered, the registration number, the date
of registration and the expiration date. None of such Intellectual Property is
subject to any pending or (to the best of the Borrowers' knowledge) threatened
claim or litigation or any licensing agreement or similar arrangement except as
set forth therein. Each of the Borrowers and its Subsidiaries owns
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or is licensed or otherwise has the right to use all of the Intellectual
Property that are reasonably necessary for the operation of its business and, to
the best of the Borrowers' knowledge, none of such Intellectual Property
infringes on or conflicts with any material Intellectual Property of any other
Person in any material respect, and no other Person's property infringes on or
conflicts with any material Intellectual Property of the Borrower and their
Subsidiaries. The Intellectual Property described on Schedule G constitutes all
of the property of such type necessary to the current and reasonably anticipated
future conduct of the business of the Borrowers and its Subsidiaries.
8.18 Assets of Jofa Holding AB
The only asset of Jofa Holding AB consists of shares in the capital
stock of Jofa AB.
9. AFFIRMATIVE COVENANTS
Each of the Borrowers solidarily covenants and agrees that:
9.1 Payment of principal and interest
The Borrowers will duly and punctually pay the principal and interest
(including any interest on amounts in default) on the outstanding Borrowings, as
well as fees and other amounts due hereunder, on the dates, at the places and in
the manner mentioned herein.
9.2 Good standing
Each of the Borrowers and its Subsidiaries will do all things
necessary to preserve and keep in full force and effect its corporate existence
except as expressly permitted by Section 10.4, will file all annual returns and
financial statements as may be required pursuant to applicable law and will
remain duly qualified to do business in the jurisdictions in which the nature of
the business transacted by it or the character of the material properties owned
or leased by it will require such qualifications.
9.3 Conduct of business
Each of the Borrowers and its Material Subsidiaries will carry on and
conduct its business in a prudent manner and will diligently maintain its
property and premises and corporate assets in good condition and use, reasonable
wear and tear excepted, where failure to so maintain would, in any material
respect, affect the conduct or carrying on of its business.
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9.4 Payment of taxes
Each of the Borrowers and its Subsidiaries will pay all taxes, levies
and assessments, government fees, dues and other obligations to pay money to the
proper authorities which have been validly levied, assessed or imposed upon it,
or upon its assets or any part thereof, as and when the same become due and
payable, except to the extent and for so long as it shall contest in good faith,
diligently and by appropriate measures its obligation to do so, provided that in
such case, it shall reasonably satisfy the Agent that no such contestation will
involve forfeiture of any material part of the assets of the Borrowers and its
Subsidiaries or could reasonably be expected to have a Material Adverse Effect.
9.5 Insurance
Each of the Borrowers and its Material Subsidiaries will insure and
keep insured its assets which are of an insurable nature, against loss or damage
by fire and against such other hazards, in such amount and in such manner, to
the extent available on commercially reasonable terms, as a prudent
administrator would do in the case of assets similarly situated and of companies
operating generally similar businesses and with reputable insurance companies,
will duly and punctually pay the premiums and other sums of money payable for
that purpose, will provide the Agent with evidence of the renewal of any
insurance policy prior to the expiry of same, and will, at the request of the
Agent, furnish to the Agent certificates of insurance relating to such insurance
carried by it.
9.6 Obligations under contracts
During the term of any lease, operating agreement, license, concession
or other contract or agreement in which the each of the Borrowers or its
Material Subsidiaries have an interest or to which it is a party, each of the
Borrowers and its Material Subsidiaries will faithfully observe, perform and
discharge the covenants, conditions and obligations relating to non-financial
aspects imposed on it thereby, except to the extent that failure to so observe,
perform and discharge, could not reasonably be expected to have a Material
Adverse Effect.
9.7 Transactions with Affiliates
Each of the Borrowers shall conduct, and cause each of its
Subsidiaries to conduct, all transactions with any Subsidiary on terms that are
fair and reasonable and no less favourable to the Borrowers or the Subsidiaries
than would be obtained in a comparable arm's- length transaction with a Person
not a Subsidiary; provided, however, that (i) the Borrowers may make loans and
advances to their officers and employees in an amount not to exceed US $250,000
for any one officer or employee and in the aggregate amount outstanding at any
time of
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US $1,000,000, (ii) the Borrowers and its Material Subsidiaries may reimburse
their respective directors and any shareholders of SLM for all out-of-pocket
expenses, including expenses of travel and lodging, incurred by such directors
or shareholders in regard to their participation in the management, business and
affaires of the Borrowers and their Subsidiaries, (iii) SLM, directly or
indirectly through any Subsidiary, may provide indemnification to the directors,
officers and employees of SLM and its Subsidiaries against all costs, charges
and expenses incurred by them by reason of any action taken in their capacity as
such, and (iv) notwithstanding any other provision of this Agreement or the
Security, SLM and Sport Maska Inc. may each transfer (by way of loan or capital
contribution) all or any other portion of the proceeds of the Loans to
Subsidiaries of SLM, and such Subsidiaries may further transfer (by way of loan
or capital contribution) any portion of such proceeds to other Subsidiaries of
SLM, for the purpose of consummating the transactions contemplated by the
Agreement and Plan of Reorganization, including, without limitation, the
intercompany loans referred to in Schedule I attached hereto.
9.8 Books and accounts
Each of the Borrowers and its Subsidiaries will keep and maintain
proper books of account and other accounting records in accordance with the
applicable generally accepted accounting principles.
9.9 Reporting requirements
The Borrowers or SLM, as the case may be, will furnish to the Agent in
a sufficient number of copies for distribution to each of the Lenders:
9.9.1 within 45 days after the end of each fiscal quarter, and
within 30 days after the end of each month (other than a
month during which a fiscal quarter ends) of each fiscal
year of SLM or when made public by SLM, whichever is
earlier, interim unaudited consolidated financial statements
of SLM for such quarter or such month, subject to year-end
audit adjustments, certified by the chief financial officer
of the Borrower;
9.9.2 within 120 days after the end of each fiscal year of SLM or
when made public by SLM, whichever is earlier, annual
audited consolidated financial statements of SLM and
unaudited consolidating financial statements of SLM and each
of its Subsidiaries for such year, prepared in accordance
with GAAP, consistently applied, and accompanied by the
external auditors' report therein;
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9.9.3 within 90 days after the end of each fiscal year of SLM, an
annual budget and business plan for SLM's current fiscal
year, presented on a consolidated and consolidating basis;
such annual budget shall include balance sheets, income
statements and cash flow statements for SLM together with
the underlying principal assumptions; and such annual budget
will include proposed capital expenditures and dividends;
9.9.4 from time to time, any other report or information on the
financial condition, the operations and the assets of the
Borrower and its Subsidiaries as may reasonably be required
by the Agent;
9.9.5 within 45 days after the end of each fiscal quarter and
within 120 days of each fiscal year end, a compliance
certificate of the chief financial officer of SLM that he
has reviewed this Agreement, and that he has no knowledge of
any Default or, if he has such knowledge, specifying such
Default, such certificate to be substantially in the form
and substance of Schedule "H";
9.9.6 promptly upon transmission thereof, copies of all
statements, annual information forms, prospectuses, offering
circulars or similar materials filed by it with any stock
exchange, securities commission, or similar entity;
9.9.7 a notice, upon knowledge of the occurrence of any Material
Adverse Effect or upon knowledge of a Subsidiary becoming a
Material Subsidiary;
9.9.8 any other information reasonably requested by the Agent.
9.10 Inspections
The Borrowers and the Material Subsidiaries shall allow Caisse and any
Person designated in writing by Caisse, on reasonable notice and at such
reasonable time or times as will not interfere with the normal operations of the
Borrowers and the Material Subsidiaries, to visit and inspect any of the
properties of the Borrowers and the Material Subsidiaries and to discuss the
affairs, finances and accounts of the Borrowers and the Material Subsidiaries
with its chief financial officer and its auditors, provided that any such
meeting with its auditors is scheduled by such chief financial officer.
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9.11 Compliance with laws and regulations
Each of the Borrowers and its Subsidiaries shall own, possess and
operate its assets and business in compliance with applicable laws and
regulations (including environmental laws and regulations), except to the extent
that failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
9.12 Approvals
Each of the Borrowers and its Subsidiaries will obtain, maintain and
renew all permits, authorizations and approvals required under applicable laws
and regulations (including environmental laws and regulations) required for
their operations, businesses and assets, except to the extent that failure to so
obtain, maintain and renew could not reasonably be expected to have a Material
Adverse Effect.
9.13 Representations and warranties
Each of the Borrower and the Material Subsidiaries will do all things
necessary to ensure that all representations and warranties made in Article 8,
other than in Sections 8.6, 8.12 and in the first and last sentences of Section
8.17, shall remain true and accurate during the whole term of this Agreement and
shall promptly notify the Agent of any event or circumstances which would result
in such representations ceasing to be true and accurate in any respect which is
material to a Borrower or any Material Subsidiary and of the steps taken to
remedy same.
9.14 Perfection of Security
Each of the Borrowers and the Material Subsidiaries will do all things
required in order that any Security granted pursuant to Article 12 be constantly
perfected on all property intended to be covered by the Security, as reasonably
requested by the Agent.
9.15 Notification of Default
Each of the Borrowers shall promptly notify the Agent of the
occurrence of any Default known to it and of the steps being taken to remedy the
same.
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9.16 Hedging transactions
The Borrowers will not undertake derivative hedging transactions of
any nature except for normal business related and not speculative purposes and
the Borrowers may, as they deem appropriate, hedge against currency and exchange
risks resulting from the Borrowings.
9.17 Pension Plans and ERISA
Any Borrower or any Material Subsidiary that maintains or contributes
to a plan that provides retirement or health benefits for its employees, will
perform any material obligation provided in such plan in accordance with the
terms thereunder and in accordance with any statute, order, rule or regulation
applicable to such plan, and, without limiting the generality of the foregoing,
shall comply with any material obligations to which it may be subject under
ERISA, or any plan governed thereby.
9.18 Board Representation
For so long as the Borrowings have not been repaid in full, the Caisse
shall be entitled to receive notice of and have its representative attend as
observer at all meetings of the board of directors of SLM.
10. NEGATIVE COVENANTS
Each of the Borrowers covenants and agrees that:
10.1 Negative pledge
Each of the Borrowers and its Subsidiaries shall not grant, create,
assume or suffer to exist any security, mortgage, hypothec, charge, security
interest, lien or priority of any kind on their properties, assets or other
rights, other than Permitted Encumbrances.
10.2 Disposition of assets
The Borrowers and their Subsidiaries shall not sell, transfer, lease,
convey or otherwise dispose of any of their property or assets other than (a) to
the Borrowers or Material Subsidiaries in the ordinary course of business, (b)
the sale of inventory to third parties in the ordinary course of business, (c)
the sale, transfer, conveyance or other disposition of property or assets that
are obsolete or no longer used or useful in the Borrower's Material Subsidiary's
business for an aggregate amount not to exceed Cdn$400,000 in any fiscal year,
or (d) other dispositions of assets (other than inventory) in the ordinary
course of business for an aggregate
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amount not to exceed US $500,000 in any fiscal year. With respect to any sale,
transfer, conveyance or other disposition permitted pursuant to this Section,
Agent and Lenders agree to release their Liens or such assets or property in
order to permit such sale, transfer, conveyance or disposition to be effected
and shall execute and deliver to such Borrower or Subsidiary, at the Borrower's
or Subsidiary's expense, appropriate releases as reasonably requested.
10.3 Guarantees
The outstanding liabilities (contingent or not) of the Borrower and
its Subsidiaries under Guarantees shall not at any time exceed the aggregate
amount of US$3,000,000 calculated on a consolidated basis, excluding Guarantees
required or contemplated by Article 12 and Guarantees of Indebtedness permitted
by Section 10.6.
10.4 Subsidiaries and amalgamations
Except as provided in the Agreement and Plan of Reorganization, each
of the Borrowers and its Subsidiaries shall not merge or amalgamate with or
liquidate or wind up into any other Person (a "Transaction"), save (a) for
Transactions among wholly-owned Subsidiaries of the Borrowers or between the
Borrowers and any wholly-owned Subsidiaries of the Borrowers, and (b) with the
consent of the Agent, not to be unreasonably withheld, only if at the time
thereof and immediately thereafter no Default or Event of Default shall have
occurred and be continuing, and if there shall not result therefrom any actual
or potential environmental liability, litigation or other contingent liability
having a material adverse effect on the affected Borrower or the affected
Subsidiary or Subsidiaries, and if, immediately prior to any such Transaction,
the Agent is provided with an opinion of legal counsel to SLM in form and
substance satisfactory to the Agent acting reasonably, as to the effect, if any,
of any such Transaction upon the continuing validity and enforceability of the
Agreement and Security upon each of the Borrowers and the parties thereto.If a
Transaction permitted under the foregoing provisions involves a Material
Subsidiary, any Subsidiary issued from such Transaction or into which assets
have been transferred further to such Transaction shall be deemed to be a
Material Subsidiary.
10.5 Fiscal Year
Each of the Borrowers and the Material Subsidiaries shall not change
the date of its fiscal year end without the prior consent of the Agent, not to
be unreasonably withheld.
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10.6 Incurrence of Indebtedness
Each of the Borrowers and its Subsidiaries shall not incur, assume, or
suffer to exist any Indebtedness for money borrowed or raised, or guarantee any
such Indebtedness, other than Indebtedness to the Lenders hereunder;
Indebtedness under the Canadian Operating Credit or the U.S. Operating Credit;
Indebtedness under permitted interest rate and currency hedging arrangements;
Indebtedness in the amount of US $ 49,054,012.08 and payable on demand resulting
from an intercompany advance made by SLM to Sports Holdings Corp. with the
proceeds of Borrowings for the purpose of consummating the transactions
contemplated by the Agreement and Plan of Reorganization; Indebtedness in the
form of loans made by Sport Maska Inc. and Maska U.S., Inc. to SLM that are
payable on demand and do not exceed, individually or in the aggregate for all
such loans, in any fiscal year, US $ 900,000 for the purpose of paying all
general and administrative fees, all regulatory fees, the necessary fees and
expenses to maintain SLM's corporate existence, the reasonable costs of its
directors' and officers' insurance and their legal and accounting fees to the
extent such fees relate to legal and accounting services provided directly to it
by entities that are not its Affiliates; Indebtedness in the form of loans made
by Sport Maska Inc. to Maska U.S., Inc. that are payable on demand and the
proceeds of which are used for the purpose of paying trade creditors of Maska
U.S., Inc. in an amount outstanding not to exceed, at any time, C$1,000,000;
Indebtedness in the form of loans made by Sport Maska Inc. and Maska U.S., Inc.
to SLM to the extent required to pay regularly scheduled interest payments and
prepayments of principal on the Borrowings; other existing Indebtedness not
exceeding US $150,000, or as otherwise permitted or contemplated by Permitted
Encumbrances.
11. FINANCIAL COVENANTS OF THE BORROWER
SLM covenants in favour of the Agent and the Lenders that it:
11.1 Capital expenditures
Shall not incur Capital Expenditures in any fiscal year on a
consolidated basis which in the aggregate exceed the following amounts:
Year Amount
---- ------
1998 US $6,800,000
1999 US $4,000,000
2000 US $4,500,000
2001 US $5,000,000
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provided, however, that for fiscal year 1999 Capital Expenditures may be
increased by an amount equal to the lesser of (i) US $1,500,000 and (ii) 50% of
the difference between the amount permitted for the 1998 fiscal year and the
amount of Capital Expenditures actually incurred in such fiscal year.
11.2 Dividends
Shall not pay dividends (other than stock dividends) on common shares
or preferred shares or undertake common share repurchase programs.
11.3 Indebtedness to EBITDA
Shall maintain on a consolidated basis, calculated as of the last day
of each fiscal quarter, a ratio of Indebtedness to EBITDA not greater than,
11.3.1 6.30 to 1.00 from Closing until December 30, 1998;
11.3.2 6.00 to 1.00 from December 31, 1998 to December 30, 1999;
11.3.3 5.00 to 1.00 from December 31, 1999 to December 30, 2000;
and
11.3.4 4.00 to 1.00 from and after December 31, 2000.
11.4 Interest Coverage Ratio
Shall maintain on a consolidated basis, calculated on the last day of
each fiscal quarter, an Interest Coverage Ratio of not less than,
11.4.1 0.90 to 1.00 from December 31, 1998 to March 31, 1999;
11.4.2 1.10 to 1.00 from April 1 to December 30, 1999;
11.4.3 1.35 to 1.00 from December 31, 1999 to December 30, 2000;
and
11.4.4 1.70 to 1.00 from and after December 31, 2000;
provided, however, that compliance with the ratio set forth in Section 11.4.1
shall be calculated on a cumulative quarterly basis and not on an annual basis.
11.5 Intercompany Dividends
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Shall cause the Material Subsidiaries, from time to time, to pay such
dividends or make such inter-corporate payments, subject to applicable laws, as
to ensure the ability of the Borrowers to service their debt;
11.6 Minimum EBITDA
Shall achieve a minimum EBITDA on a pro forma consolidated basis,
after giving effect to the completion of the transactions contemplated by the
Agreement and Plan of Reorganization (and excluding any unusual revenues and
charges), for the fiscal year ending December 31, 1998, of US $ 22,000,000, or
should such test not be met as of December 31, 1998, obtain from its
shareholders on or before April 30, 1999 new capital contributions of US
$5,000,000 for each US$1,000,000 deficiency.
12. SECURITY
12.1 Granting of Security
Subject to Section 12.6, each of the Borrowers and the Material
Subsidiaries shall (i) provide security on all of their present and future,
tangible and intangible, assets (ii) guarantee the performance of all
obligations and liabilities hereunder (collectively, the "Security"). The
Lenders shall be named loss payees, as their respective interests may appear, on
all insurance policies relating to the assets covered by the Security and such
policies shall include mortgage clauses.
12.2 Purpose of the Security
The Security shall secure the indebtedness and obligations of the
Borrowers under this Agreement and the obligations of the Material Subsidiaries
under their respective guarantees.
12.3 Ranking of the Security
The Security shall be perfected in all jurisdictions where material
property intended to be covered thereby is located and shall be first ranking on
the property covered thereby, subject to Permitted Encumbrances and the terms of
the Intercreditor Agreement.
12.4 Evidence of the Security
The Security, including all agreements and documents evidencing same
(including its perfection) and legal opinions in respect thereof, shall be
satisfactory to all Lenders
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at the time such Security is granted. Each Lender hereby appoints the Agent
hereunder as its mandatary to execute on its behalf said agreements and
documents together with all releases and discharges in respect of the Security.
12.5 Time limit to provide the Security
Subject to Section 12.6, those of the requirements of this Article 12
which are not fulfilled prior to the date of the initial Borrowing, shall be
fulfilled before December 31, 1998 in respect of the Borrowers and all Material
Subsidiaries in existence at the date hereof. Security by a future Material
Subsidiary shall be provided 45 days after the date the Person concerned shall
have become a Material Subsidiary.
12.6 Exceptions for KHF and JOFA
12.6.1 Notwithstanding the other provisions of Article 12, KHF
Sports Oy, Jofa Holding AB and Jofa AB shall not be required
to provide (although they may decide to do so) the Security
and legal opinions contemplated in this Article 12. However,
on the first day of each quarter from the quarter beginning
July 1, 1999, each margin and fee rate referred to in
Schedule F shall be increased by 0.5% (except on July 1,
1999, where the rate shall be 1.5%) if such Security and
legal opinions have not been provided prior to the relevant
quarter, unless SLM has previously exercised the option of
Section 12.6.2.
12.6.2 At SLM's option, the Security and legal opinions to be
provided by KHF Sports Oy, Jofa Holding AB and Jofa AB may
be replaced by the following:
(i) a transfer to new Subsidiaries of SLM ("Newcos")
of all the assets and properties (other than
intellectual property and related rights) owned or
possessed by KHF Sports Oy and Jofa AB;
(ii) Jofa Holding AB and Jofa AB shall merge by way of
amalgamation or winding up or other similar
procedure to form a single surviving corporation
("Jofa");
(iii) the implementation of appropriate measures to
ensure that KHF Sports Oy and Jofa shall have no
activity other than the ownership and management
of such intellectual property and
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related rights and the holding of the shares of
Newcos and shall maintain liability insurance
reasonably satisfactory to the Lenders with
respect to its activities conducted prior to the
transaction contemplated in Section (i) above;
(iv) a first ranking pledge in favour of the Lenders of
the shares of KHF Sports Oy and Jofa; and
(v) reasonably satisfactory legal opinion and
financial or audit reports with respect to the
foregoing.
13. EVENTS OF DEFAULT
13.1 Events of Default
Each of the following events or circumstance shall constitute an Event
of Default:
13.1.1 if the Borrowers fail to pay when due the whole or any part
of the outstanding Borrowings or of any interest, fee or
other amount payable under this Agreement;
13.1.2 if either Borrower or any Material Subsidiary has
acknowledged its insolvency or has been declared insolvent
or bankrupt or becomes voluntarily subject to any law
relating to bankruptcy, insolvency or relief of debtors;
13.1.3 if all or a substantial portion of the assets of either
Borrower or any Material Subsidiary, are seized in
connection with any judgment and such seizure is not
released or stayed within 30 days or are subject to a taking
of possession by a creditor, or are placed under
sequestration, receivership or guardianship, or if a
liquidator is appointed in respect of any of the Borrower
and the Subsidiaries, unless such proceedings are being
actively and diligently contested in good faith by the
Borrower or such Subsidiary and are dismissed or stayed
within 60 days;
13.1.4 subject to Section 10.4, if any proceedings for the
dissolution, liquidation or winding-up of either Borrower or
any Material Subsidiary or for the suspension of its
operations are commenced, unless such proceedings are being
diligently contested in good faith
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by such Borrower or such Material Subsidiary and are
dismissed or stayed within 60 days;
13.1.5 if any proceedings under any law relating to bankruptcy,
insolvency or relief of debtors is commenced against any
Borrower or any Material Subsidiary and is not actively and
diligently contested in good faith and dismissed or stayed
within 60 days;
13.1.6 if any of the representations and warranties made by the
Borrowers in this Agreement or if a document supplied by a
Borrower or a Material Subsidiary in connection with this
Agreement shall prove to have been erroneous or inaccurate
in any material respect concerning any matter material to
the Lenders as at the date made or deemed to be made;
13.1.7 if any Borrower or any Material Subsidiary otherwise fails
to fulfill, in any material respect, any of its obligations
or covenants under this Agreement, or any other agreement
evidencing or related to the Security and if such failure is
not remedied within 25 days of the earlier of (i) the
Borrower's becoming aware of such failure and (ii) notice of
such failure being given to the Borrower by the Agent;
13.1.8 if any Borrower or any Material Subsidiary is in default to
pay amounts when due (after the expiry of any applicable
grace periods) under any Indebtedness (other than amounts
due under this Agreement) owed by it or them and exceeding
US $1,500,000 in the aggregate;
13.1.9 if any Borrower or any Subsidiary fails to perform any
obligation in respect of any Indebtedness (other than
amounts due under this Agreement) owed by it or them and, as
a result of such failure, the payment of amounts exceeding
US $1,500,000 are accelerated;
13.1.10 if WS Acquisition, LLC ("Wellspring") and its Associates,
collectively,(i) no longer hold the largest percentage
interest of the outstanding capital stock of SLM on a fully
diluted basis, (ii) no longer control (either directly or
indirectly) not less than 50% of the number of seats on the
board of directors of SLM (excluding the board seat occupied
by the chief executive officer of SLM), or (iii) if the
chief executive officer of SLM is no longer a member of the
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board of directors of SLM, do not control (either directly
or indirectly) a majority of the seats on the board of
directors of SLM. For the purpose of this Section 13.1.10,
an "Associate" of Wellspring means any Person which,
directly or indirectly, is in control of, is controlled by,
or is under common control with, Wellspring. In the
preceding sentence, "control" means the power, directly or
indirectly, either to (a) vote securities having 10% or more
of the ordinary voting power for the election of directors
(or Persons performing similar functions) of a Person or (b)
direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise;
13.1.11 if any judgment or order is rendered against any Borrower or
any Material Subsidiary which requires the payment of monies
in excess of US $2,000,000, net of any proceeds of insurance
policies payable to such Borrower in relation thereto, and
such judgement or order shall remain undischarged or
unsatisfied and either:
(i) an enforcement proceeding shall have been
commenced by a creditor upon such judgment or
order if such judgement or order is final and not
appealable, or
(ii) there shall have been a period of 30 consecutive
days during which a stay of enforcement of such
judgment or order, by reason of pending appeal or
otherwise, was not in effect; and
13.1.12 if there is a material adverse change in the financial
condition, business or operations of a Borrower or a
Material Subsidiary.
13.2 Remedies
If an Event of Default occurrs and is continuing, the Agent may, and
if required by the Majority Lenders, shall:
13.2.1 terminate the Total Commitments and the right of the
Borrowers to make utilizations, conversions and renewals;
13.2.2 declare all indebtedness of the Borrowers hereunder to be
immediately payable and demand immediate payment of the
whole or part of same; and
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13.2.3 exercise all of the rights and remedies of the Lenders,
including realization on the Security.
13.3 Notice of default
The Borrowers shall be in default hereunder by the mere lapse of time
without the requirement of any notice or delay other than as expressly provided
herein.
14. SHARING AND EQUALITY AMONG LENDERS
14.1 Distribution among Lenders
Any payment received by the Agent to be applied to indebtedness of the
Borrowers hereunder, including any amount received through the exercise of a
right of set-off by any Lender and the realization of the Security, shall be
distributed among the Lenders proportionate to their pro rata share of the
indebtedness to which such payment is to be applied. Such distribution shall be
made forthwith but no later than two Business Days after receipt of such payment
by the Agent.
14.2 Equality among the Lenders
All rights of the Lenders hereunder or under the Security shall rank
pari passu, pro rata to their respective share of the indebtedness of the
Borrowers to the Lenders hereunder.
14.3 Other security
No Lender shall obtain any additional security for the payment of the
indebtedness of the Borrowers hereunder, unless such security forms part of the
Security.
14.4 Direct payment to a Lender
If a Lender receives otherwise than through the Agent a payment which
must be applied to the indebtedness of the Borrowers hereunder (including any
payment received through the exercise of a right of set-off or the realization
of the Security), such Lender shall remit to the Agent the payment so received,
in order that such payment be applied by the Agent to the indebtedness of the
Borrowers hereunder in accordance with the provisions of this Agreement.
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14.5 Adjustments among Lenders
If, at any time after the Agent has made a demand for payment pursuant
to Section 13.2, the ratio of the aggregate indebtedness of the Borrowers to any
Lender under the Credit to the aggregate indebtedness of the Borrowers to the
Lenders is not equal to its Lender's Proportion, all Lenders shall make payments
among themselves as may be necessary or appropriate in order that the amounts
due to each Lender shall be proportional to their respective Lender's
Proportion.
15. THE AGENT AND THE LENDERS
15.1 Appointment of the Agent
Each Lender irrevocably appoints the Agent to exercise on its behalf
such rights and powers as are delegated to the Agent by the terms of this
Agreement and as are reasonably incidental thereto. Whenever acting in such
capacity, the Agent shall represent and bind all Lenders as herein provided. No
Lender shall exercise individually any of the rights and powers delegated to the
Agent hereunder.
15.2 Action by Agent
Except as expressly required by this Agreement, the Agent shall not be
required to take or refrain from taking any action which it is empowered to take
under this Agreement or the Security documents, unless the Agent has been
required by the Majority Lenders to take or refrain from taking any such action.
Notwithstanding the foregoing, the Agent shall in no event be required to take
or refrain from taking any action which it would be required to take or refrain
from taking by the Majority Lenders if in its judgment, such action or omission
is contrary hereto or to applicable law or exposes it to personal liability in
circumstances in which it determines that indemnity under Section 15.9 may not
be available or adequate.
15.3 Liability of the Agent
The Agent shall not be liable for any action taken or omitted to be
taken by it in the absence of gross negligence or wilful misconduct, provided it
has acted in accordance with the provisions of this Agreement. In addition, but
without limiting the generality of the foregoing, the Agent:
15.3.1 shall not be liable for any action it takes or omits to take
in good faith in accordance with the advice of legal
counsel, experts or professional advisors;
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15.3.2 shall incur no liability by acting upon any communication or
document believed by it to be genuine and to have been
signed, sent or given by the proper Person or Persons;
15.3.3 shall have no duty to investigate whether a Default has
occurred or is continuing;
15.3.4 shall have no duty to examine or comment on the validity,
genuineness, sufficiency or accuracy of any document or
information supplied by the Borrowers or the Material
Subsidiaries to the Lenders through the Agent.
15.4 Notices by Agent to Lenders
Whenever a notice of utilization, conversion or renewal is given by a
Borrower to the Agent, the Agent shall promptly provide the Lenders with the
details of the Borrowing which is the subject matter of the notice, in order
that the Lenders may make available to the Borrower concerned, through the
Agent, or as the case may be, may fund, their respective proportions of such
Borrowing.
15.5 Manner of disbursement
15.5.1 Any amount to be disbursed by a Lender pursuant to a
Borrowing under the Credit shall be made available to the
Agent by such Lender at the Agent's Branch of Account, by
2:00 p.m. on the date the Borrowing is to be effected.
15.5.2 Any amount so received by the Agent shall be made available
to the Borrower concerned at places to be agreed to from
time to time between the Borrowers and the Agent.
15.6 Non-Contribution of a Lender
Unless previously notified in writing by a Lender no less than two
Business Day before a Borrowing is to be effected that such Lender does not
intend to make available to the Agent its proportion of such Borrowing, the
Agent may assume that such Lender will be making its proportion of such
Borrowing available to the Agent on such date and the Agent may, in reliance
upon such assumption, make available to the Borrower concerned an amount
corresponding to such Lender's proportion of the Borrowing. If such Lender fails
to make its proportion of the relevant Borrowing available to the Agent on the
relevant date, the Agent shall be entitled to recover on demand the amount of
such Lender's proportion of the Borrowing, from
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such Lender or, failing recovery from such Lender, from the Borrower concerned
on one day's notice. Interest shall accrue on such amount during the period
prior to such recovery at a rate per annum equal to the rate applicable to a
Dollar Loan and shall be paid to the Agent for its own account.
15.7 Notices of Default
The Agent shall be entitled to assume that no Default has occurred and
is continuing, unless the Agent has been notified by the Borrowers or any of the
Material Subsidiaries of any such Default, or has been notified by a Lender that
such Lender considers that a Default has occurred and is continuing. In such a
case, the Agent shall promptly notify the Lenders of the Default, but the Agent
shall incur no liability for its failure to do so if such Default has been
remedied.
15.8 Liability of Lenders
No Lender (including the Agent) shall have any liability whatsoever:
15.8.1 as a consequence of the failure of any other Lender to
perform its obligations under this Agreement;
15.8.2 as a consequence of the failure of any Borrower or any
Material Subsidiary to perform its obligations under this
Agreement or any of the Security documents;
15.8.3 for the accuracy or completeness of any information,
representations or warranties contained herein or made in
connection herewith or provided pursuant to this Agreement,
or for the legality, validity, enforceability, sufficiency
or value of this Agreement, the Security documents or any
other document or instrument contemplated thereby.
15.9 Indemnification
Each Lender shall indemnify the Agent in the proportion its Commitment
bears to the Total Commitment, to the extent not reimbursed by the Borrowers or
the Material Subsidiaries, from and against all liabilities, losses, expenses,
claims or disbursements of any kind or nature whatsoever which may be incurred
or imposed on them, relating to or arising out of this Agreement, the Security
or any action taken or omitted to be taken by the Agent, except for any portion
of such liabilities, losses, expenses, claims or disbursements resulting from
its negligence or wilful misconduct.
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15.10 Credit decision
Each Lender acknowledges that it has been and will continue to be
solely responsible for making its own independent appraisal and investigation of
the financial condition, credit-worthiness, affairs and viability of the
Borrowers and the Material Subsidiaries and that it has not relied on the Agent
or any other Lender in the making of its decision to enter into this Agreement.
15.11 Legal proceedings and enforcement measures
Any legal proceedings and enforcement measures on behalf of all
Lenders shall be taken by the Agent, and upon the request of the Agent, all
Lenders shall join the Agent in such proceedings or enforcement measures.
15.12 Sharing of information
The Borrowers authorize the Agent and the Lenders to share with each
other and with prospective assignees of and participants in the Borrowings, any
information held by them regarding each of the Borrowers and its Subsidiaries or
relating to this Agreement, provided however that any information held by the
Lenders subject to a confidentiality agreement shall only be shared on the
condition that the recipient thereof agrees to be bound by such confidentiality
agreement.
15.13 No association among Lenders
Nothing contained in this Agreement and no action taken pursuant to it
shall, or shall be deemed to, constitute the Lenders a partnership, association,
joint venture or other similar entity.
15.14 Successor Agent
Subject to the appointment and acceptance of a successor agent as
provided in Section 1 and this Section 15.14, the Agent may resign at any time
by giving written notice thereof to the Lenders and SLM. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor
agent with the approval of SLM (such approval not to be unreasonably withheld).
Any successor agent appointed under this Section 15.14 shall be a financial
institution which has an office in Montreal, Province of Quebec. If no successor
agent shall have been appointed by the Majority Lenders within 90 days after the
retiring agent's giving of notice of resignation, then the retiring agent may,
on behalf of the Lenders and with the
<PAGE>
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approval of SLM (such approval not to be unreasonably withheld), appoint a
successor agent. Upon the appointment as Agent of a successor agent, such
successor agent shall thereupon succeed to and become vested with all the
rights, powers, obligations and duties of the retiring agent and shall be deemed
for the purposes of this Agreement to be the Agent and the retiring agent shall
be discharged from its duties and obligations under this Agreement. After any
retiring agent's resignation hereunder as the Agent, the provisions of this
Agreement shall continue in effect for its benefit, for the benefit of the
Lenders and for the benefit of SLM in respect of any actions taken or omitted to
be taken by the retiring agent while it was acting as the Agent.
15.15 Option of Lenders to replace a Lender
In the event that any Lender does not consent to any amendment or
waiver requiring the unanimous consent of the Lenders, the consenting Lenders
shall have the option, but not the obligation, to purchase the dissenting
Lender's interest in this Agreement. If the consenting Lenders do not exercise
such option for the total amount of such interest, the dissenting Lender shall
have the option of locating a new Lender to assume the dissenting Lender's
interest in this Agreement, such new lender to be acceptable to the Borrowers
and the Agent acting reasonably. The Borrowers shall reimburse the Agent for any
cost or expense incurred in respect of such assignment or proposed assignment.
16. WAIVERS AND AMENDMENTS
16.1 Amendments and waivers with the approval of the Majority Lenders
Subject to the other Sections of this Article 16, the provisions of
this Agreement or of any of the Security documents may only be amended or waived
by an instrument in writing signed by the Agent, with the approval of the
Majority Lenders.
16.2 Amendments by unanimous approval
The provisions of this Agreement relating to any of the following
matters may only be amended by an instrument in writing signed by the Agent,
with the prior consent of all the Lenders:
16.2.1 Any lengthening or shortening of the term of this credit
facility;
16.2.2 Any change in the amount of any principal amount payable
hereunder or in the time within which principal must be
repaid;
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16.2.3 Any change in the interest rates, fees and Discounts payable
hereunder and in the manner in which they are calculated or
in the time within which they must be paid;
16.2.4 Any subordination of the Security or of any amount payable
hereunder;
16.2.5 Any modification, amendment or release of the Security;
16.2.6 Any change in the conditions precedent provided in Section
4.2, in Articles 13, 14, or 16, in the definition of
Majority Lenders, or in any matter requiring the approval or
consent of all Lenders.
16.3 Amendments with the approval of the Agent
No amendment to the provisions of this Agreement respecting the
duties, obligations and liabilities of the Agent shall be made without the
approval of the Agent.
16.4 Binding effects upon Lenders
Any extension, indulgence, amendment or waiver granted or made in
accordance with the provisions of this Article 16 shall be binding upon all the
Lenders.
16.5 Failure to act
No waiver and no failure or delay in the exercise of any right or
remedy shall preclude the further exercise of any of the rights and remedies of
the Agent and the Lenders hereunder. In addition no such failure or delay shall
be construed as a waiver of any of the provisions of this Agreement or the
Security documents.
17. ASSIGNMENTS
17.1 Assignments
17.1.1 Each Lender may assign, in whole or in part, its rights and
obligations in respect of the Credit to any other financial
institution with the prior written consent of the Agent
(which consent shall not be unreasonably withheld), provided
that, when no Event of Default has occurred and is
continuing, (i) no such assignment (other than an assignment
by Caisse as Lender) shall have the effect of increasing the
Borrowers' cost of Borrowings hereunder without the prior
consent of SLM and (ii) if Caisse as Lender wishes to
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make any such assignment, Caisse shall use its best efforts
in order that the assignment shall not have the effect of
increasing the Borrowers' cost of Borrowings hereunder. For
greater certainty, the expression "Borrowers' cost of
Borrowings" shall incude the cost to the Borrowers of making
additional payments as contemplated in Section 7.5.
17.1.2 No such assignment may be made if the aggregate amount of
the assigning Lender's Commitment following such assignment,
or the portion thereof which is assigned, is not at least
$10,000,000 and in integral multiples of $1,000,000.
17.1.3 Any financial institution becoming an assignee of the whole
or part of the rights of a Lender and of its obligations
towards the Borrowers in accordance with Section 17.1.1
shall become a Lender hereunder and this Agreement and the
Commitment of the assignor shall be amended automatically.
17.1.4 A Lender which, in accordance with Section 17.1.1, assigns
all or any part of its rights or obligations hereunder shall
pay to the Agent on demand an assignment fee of $2,500 and
all expenses, including but not limited to legal fees,
incurred by the Agent in connection with such transfer. If
as a result of such transfer, the Agent incurs any increased
costs or additional expenses in connection with the
performance of its duties hereunder, the assignee shall upon
demand from time to time pay to the Agent such amount as
shall compensate the Agent for any such reasonable increased
costs or additional expenses (and the certificate of the
Agent specifying the amount of such compensation shall be
conclusive in the absence of manifest error).
17.1.5 For the purposes of this Article 17, Caisse, a pension fund
and organizations performing similar functions shall be
deemed to be financial institutions to the extent that such
entities are authorized to make loans or purchase
participations of the nature contemplated in this Section 17
in the ordinary course of business.
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18. MISCELLANEOUS
18.1 Books and accounts
The Agent shall keep books and accounts evidencing the indebtedness of
the Borrowers under the Credit and the transactions made in respect thereof
pursuant to this Agreement. Such books and accounts shall, in the absence of
manifest error, be deemed to represent accurately that indebtedness and those
transactions. The Borrowers acknowledge that the actual recording of the amount
of any Borrowing or repayment thereof under this Agreement, and interest, fees,
and other amounts due in connection with this Agreement, in the accounts of the
Borrowers maintained by the Agent shall constitute prima facie evidence of the
Borrowers' indebtedness and liability from time to time under this Agreement;
provided that the obligation of the Borrowers to pay or repay any indebtedness
and liability in accordance with this Agreement shall not be affected by the
failure of the Agent to make such recording.
18.2 Determination
In the absence of manifest error, any determination of fact (other
than the determination of Material Adverse Effect) made by the Agent in
accordance with this Agreement shall be final and binding upon the Borrowers,
the Material Subsidiaries and the Lenders.
18.3 Notes
The Borrowings may, but need not be, evidenced by notes or other
instruments of indebtedness that the Borrowers undertake to execute upon request
from the Agent. Payment of those notes and instruments may only be demanded in
accordance with the provisions of this Agreement.
18.4 Oral notices or instructions
If any Borrower or any of its agents or employees makes an oral
request or gives an oral notice to the Agent, the Agent shall be entitled to
rely upon such oral instructions. The Agent shall not incur any liability to the
Borrowers or the Material Subsidiaries or to the Lenders in acting upon oral
instructions which the Agent believes in good faith to have been given by a
Person authorized by a Borrower to give such instructions or to effect any
applicable transaction. In the event of a discrepancy between oral instructions
and any written confirmation in respect thereof, or in the absence of receiving
confirmation, the oral instructions as understood by the Agent shall be deemed
to be the controlling instructions.
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18.5 Unassignability by Borrower
No Borrower may assign its rights or the amounts to be received by it
under this Agreement.
18.6 Expenses
The Borrowers shall pay the reasonable out-of-pocket expenses incurred
by Caisse or the Agent in connection with the preparation, negotiation,
execution, and administration of this Agreement and the Security, due diligence
investigations, environmental audits or other studies made in connection with or
pursuant to this Agreement, the syndication and pre-approved public announcement
of the credit facility provided hereunder and the exercise of the rights and
remedies of Caisse or the Agent and the Lenders under this Agreement and the
Security, including fees and expenses of legal counsel, professional advisors
and experts of the Agent or Caisse.
18.7 Compensation
Subject to their respective obligations under Section 14.4, each
Lender is authorized (but not obligated) at any time or from time to time after
the occurrence of an Event of Default which is continuing, without notice to the
Borrowers or to the Material Subsidiaries to compensate and to apply any and all
deposits held for or in the name of any of the Borrowers or of any Material
Subsidiaries and any indebtedness at any time owing or payable by such Lender to
or for the credit of or the account of any of the Borrowers or of any Material
Subsidiaries against and on account of the obligations of the Borrowers or the
Material Subsidiaries payable to such Lender under this Agreement, irrespective
of currency and of whether or not such Lender has made any demand under this
Agreement and whether or not these obligations of the Borrowers have matured.
The provisions of this Section 18.7 shall not restrict such rights as the
Lenders may be entitled to without relying upon the provisions of this Section
18.7.
18.8 Irrevocability of notices of utilization, conversion, renewal or
repayment
A Borrower may not cancel a notice of utilization, conversion, renewal
or repayment and shall indemnify the Lenders through the Agent for any damage
resulting from its failure to act in accordance with such a notice.
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18.9 Irregular notice of utilization, conversion, renewal or repayment
The Agent may consider of no effect any notice of utilization,
conversion, renewal or repayment if such notice or the proposed utilization,
conversion or renewal is not in compliance with the provisions of this
Agreement.
18.10 Indemnification
18.10.1 If any future law, regulation, administrative decision or
guideline or decision of any Court increases the cost for
any Lender of its Commitments or the cost for any Lender of,
or reduces the income receivable by any Lender from, the
Borrowings (including, without limitation, by reason of the
imposition of reserves, taxes or requirements as to the
capital adequacy of such Lender but excluding any costs
incurred as a result of tax increases of general
application), such Lender may send to the Borrowers a
statement indicating the amount of such additional cost or
reduction of income and its method of calculation; in the
absence of manifest error, this statement shall be
conclusive evidence of the amount of such additional cost or
reduction of income and the Borrowers shall pay forthwith
this amount to such Lender. Each Lender agrees that, as
promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any
such increased cost or reduction in income, the affected
Lender shall, to the extent not inconsistent with such
Lender's internal policies of general application, use
reasonable commercial efforts to minimize such costs or
reductions.
18.10.2 The Borrowers shall pay to any Lender the amount of any and
all losses suffered by the latter and resulting from
Acceptances having been converted or repaid before the
maturity dates of their respective periods, whatever the
cause for such conversion or repayment may be. The affected
Lender may send to the Borrowers a statement indicating the
amount of any such loss suffered by it and its method of
calculation; in the absence of manifest error, this
statement shall be conclusive evidence of the amount of such
loss and the Borrowers shall pay forthwith this amount to
the affected Lender.
18.10.3 Each of the Borrowers and the Material Subsidiaries permits
the Agent, acting reasonably, to conduct inspections and
appraisals of all or any of its records, business and assets
at any time and from time to time, upon one (1) Business
Days' prior notice, to verify compliance with applicable
environmental laws and, if the Agent
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has a reasonable basis to believe that there may be a
violation of environmental law by any Borrower or Material
Subsidiary which could reasonably be expected to have a
Material Adverse Effect, the Agent may also appoint experts
or consultants to make any inspection or appraisal and
prepare reports on same. Any costs and expenses incurred by
the Agent as a result of the foregoing shall be reimbursed
by the Borrowers on demand. If the Agent is required to
expend any funds in compliance with applicable environmental
laws, regulations, administrative or court order in respect
thereof or in connection with any recourse for damages, the
Borrowers shall indemnify the Agent in respect of such
expenditures.
18.10.4 The Borrowers shall, to the extent permitted by applicable
laws, indemnify the Lenders and the Agent, and their
respective directors, officers, employees, and agents and
shall hold each of them harmless from and against any and
all losses, liabilities damages, costs, penalties, fines,
expenses and claims (including reasonable legal fees and
costs) which at any time or from time to time may be paid or
incurred by, or asserted against, any of them for, with
respect to or as a direct or indirect result of (i) any
environmental activity by the Borrowers or any of their
Subsidiaries or (ii) any failure on the part of the
Borrowers or any of their Subsidiaries to comply with any
environmental laws, and (iii) any misrepresentation, breach
of warranty or breach of covenant on the part of the
Borrowers or any of their Subsidiaries with respect to
environmental matters.
18.10.5 The Borrowers shall indemnify the Lenders and the Agent and
their respective directors, officers, employees and agents
and hold each of them harmless from and against all losses,
costs, expenses (including reasonable fees, charges and
disbursements of counsel) and liabilities including those
arising from any litigation or other proceedings relating to
or arising out of the transactions contemplated by this
Agreement, provided that no Person indemnified under this
Section 18.10.5 shall be indemnified for its own negligence
or wilful misconduct.
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18.11 Liability of Borrowers
18.11.1 Each Borrower shall be solidarily (that is, jointly and
severally) liable for the aggregate amount of Borrowings and
for all the obligations and liabilities of the Borrowers
hereunder. Each Borrower hereby renounces to the benefits of
division and discussion. The liability of a Borrower
hereunder shall not be released, reduced or affected by
reason of any waiver or extension granted by the Lenders
without the consent of such Borrower or by reason of any
release of or stay of proceedings against the other Borrower
pursuant to any law or by reason of any circumstance which
might constitute a defence available to a guarantor.
18.11.2 Each of the Borrowers irrevocably appoints the other to act
as its attorney for the purposes of exercising the rights
and performing the obligations of the Borrowers hereunder
and the Borrowers shall be bound by all things done and
documents executed by any Borrower.
18.12 Previous agreements
This Agreement supersedes any previous agreement in connection with
the credit facility provided for herein.
18.13 Language
This Agreement has been drawn up in English at the express request of
the parties. Cette convention a ete redigee en anglais a la demande expresse des
parties.
18.14 Severability
If any provision of this Agreement is determined to be void, voidable,
illegal or unenforceable, in whole or in part, all other provisions of this
Agreement shall nevertheless remain in full force and effect, and all provisions
hereof are hereby declared and shall be deemed, unless otherwise expressly
provided, to be separate, severable and distinct.
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19. NOTICES
19.1 Sending of notices
Any demand, notice or other communication (hereinafter referred to as
a "Communication") to be given to a party in connection with this Agreement
shall be given in writing and shall be given by personal delivery, by registered
mail or by transmittal by facsimile addressed to the recipient at the address
indicated opposite its name on the signature pages hereto, or at such other
address as may be notified by such party to the others pursuant to this Section
19.1.
19.2 Receipt of notices
Any Communication given by personal delivery shall be conclusively
deemed to have been given on the day of actual delivery thereof and, if given by
registered mail, on the fifth Business Day following the mailing thereof and, if
given by facsimile on the day of transmittal thereof if given during normal
business hours of the recipient or on the next Business Day if given after
normal business hours on any day. If the party giving any Communication knows or
ought to know of any difficulties with the postal system or facsimile
transmission system which might affect the delivery of mail or facsimile
transmission, any such Communication shall be given by personal delivery or by
other methods of communication not affected by the said difficulties.
20. COUNTERPARTS
This Agreement may be executed in any number or counterparts, each of
which shall be deemed to be an original and all of which taken together shall be
deemed to constitute one and the same instrument, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed as of the date and year first above written.
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CAISSE DE DEPOT ET DE PLACEMENT DU
QUEBEC
1981 McGill College Avenue By:____________________________
Montreal, Quebec
H3A 3C7 Name:__________________________
Attention: Diane Favreau Title: ________________________
Telecopier No.:(514) 847-5488
Telephone No.: (514) 847-2493
By:____________________________
Name:__________________________
Title: ________________________
139 Harvest Lane SLM INTERNATIONAL, INC.
P.O. Box 1200
Williston, Vermont By:____________________________
05495, U.S.A.
Name:__________________________
Attention: President
Telecopier No.:(802) 872-4226 Title: ________________________
Telephone No.: (802) 872-4256
3500 De Maisonneuve Blvd. West SPORT MASKA INC.
Suite 800
Westmount, Quebec By:____________________________
H3Z 3C1
Name:__________________________
Attention: President
Telecopier No.:(514) 932-1118 Title: ________________________
Telephone No.: (514) 932-6020
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated March 13, 1998, with respect to the
consolidated financial statements of Sports Holdings Corp. as at December 31,
1997 and 1996 and for each of the years in the three year period ended December
31, 1997, included in this report on Form 8-K of The Hockey Company to be
filed with the Securities and Exchange Commission on February 9, 1999.
/s/ Ernst & Young LLP
Montreal, Canada -----------------------------
February 9, 1999 Chartered Accountants
Exhibit 99.1
NEWS RELEASE
SLM INTERNATIONAL, INC. COMPLETES ACQUISITION OF
SPORTS HOLDING CORP.
Montreal, Quebec, November 20, 1998 - SLM International, Inc. ("SLM"), a
leading manufacturer and marketer of ice and roller hockey equipment under the
CCM(R) and TACKS(R) brand names, today announced that it has completed its
acquisition of Sports Holding Corp. ("SHC") and its subsidiaries thereby
creating the largest hockey company in the world with sales in excess of
US$200,000,000. The majority shareholder of SLM is an affiliate of Wellspring
Capital Management LLC ("Wellspring"), a New York-based private investment firm.
The acquisition was financed with a US$87,500,000 credit facility from
Caisse de depot et Placement du Quebec and the issuance of US$12,500,000
Pay-In-Kind Preferred Stock to Phoenix Home Life Mutual Insurance Company. In
addition, SLM refinanced its existing indebtedness with two working capital
facilities in an aggregate amount of US$70,000,000 provided by General Electric
Capital Corporation and General Electric Capital Canada, Inc.
SHC markets ice and roller hockey products under the JOFA(R), KOHO(R),
TITAN(R), CANADIEN(TM) and HEATON(R) brand names. SHC is the leading hockey
equipment marketer in Scandinavia and Central Europe. It is the world leader in
the manufacture and distribution of hockey sticks and a large number of
professional hockey players use its protective equipment sold under the JOFA(R)
and KOHO(R) brand names.
SLM manufactures and sells ice and roller hockey skates, and protective
equipment as well as sports apparel directly and under license with the National
Hockey League. SLM, rapidly nearing its centennial, is world-renowned for the
reputation and quality of its products.
All inquiries should be addressed to Mr. Gerald B. Wasserman CEO of SLM, at
(514) 932-1118 or Mr. Greg Feldman, Managing Partner of Wellspring at (212)
332-7571.
