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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 15, 1996
CALIFORNIA PRO SPORTS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-25114 84-12117733
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(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
8102 WHITE HORSE ROAD
GREENVILLE, SC 29611
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (864) 294-5370
Not Applicable
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 15, 1996, California Pro Sports, Inc. (the "Registrant"), through
its majority owned subsidiary, USA Skate Corporation ("Skate Corp."),
completed the acquisition of all of the outstanding capital stock of USA
Skate Co., Inc., a New York corporation ("USA Skate"), from Warren Amendola,
Sr., Patricia Amendola, Three R Profit Sharing Retirement Plan, Warren
Amendola, Jr., Richard Amendola and Russell Amendola. USA Skate owns,
directly or indirectly, all of the capital stock of Les Equipements Sportifs
Davtec, Inc., a Canadian corporation ("Davtec"). The acquisition was
effective as of April 30, 1996 and was accounted for by Skate Corp. as a
purchase. Consideration for the purchase was $5.9 million in a combination
of cash, stock and notes, and assumption of approximately $5.5 million of
debt. The purchase price was paid with funds raised in private securities
offerings conducted by Skate Corp. and the debt assumption was financed in
part by a bank loan from LaSalle National Bank to USA Skate.
USA Skate is based in Long Island, New York, and markets and
distributes, ice and street/roller hockey skates, related gear and
accessories under the Victoriaville-TM- and Vic-Registered Trademark- and
McMartin brands as well as figure skates. USA Skate has an exclusive
worldwide license for use of the Vic-Registered Trademark- and
Victoriaville-TM- brands. For 1995, USA Skate had revenues of approximately
$14.3 million. Davtec, USA Skate's wholly-owned subsidiary, manufactures
hockey sticks, pants and gloves for USA Skate and is the Canadian distributor
for all of the hockey related Vic-Registered Trademark-and Victoriaville-TM-
product lines. Davtec also manufactures the Hespeler-Registered Trademark-
premium brand of hockey sticks which are marketed worldwide. The
Vic-Registered Trademark-, Victoriaville-TM- and Hespeler-Registered
Trademark- names enjoy strong brand recognition within the industry.
USA Skate sells its skates and related accessories through a network of
independent sales representative groups to over 1,000 accounts, including
Sports Authority, Big5, Modells and Dunhams. Internationally, USA Skate's
products are sold and distributed through independent distributors located in
Germany, Switzerland, Italy, Austria, Czechoslovakia, Sweden, Finland, France
and Brazil.
USA Skate will continue its present business.
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ITEM 5. OTHER EVENTS
Simultaneously with the closing of the bank loan related to the
acquisition discussed in Item 2 above, LaSalle National Bank extended the
term of its loan agreement with California Pro, Inc., the Registrant's
wholly-owned operating subsidiary, to May 31, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The Registrant will amend this Report to provide the financial
statements required by this item as soon as is practicable but not later than
July 29, 1996.
(b) PRO FORMA FINANCIAL INFORMATION.
The Registrant will amend this Report to provide the pro forma financial
information required by this item as soon as is practicable but not later
than July 29, 1996.
(c) EXHIBITS.
Exhibit
Number Description
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10.1 Stock Purchase Agreement effective as of April 30,
1996 by and among Warren Amendola, Sr., Patricia
Amendola, Three R Profit Sharing Retirement Plan,
Warren Amendola, Jr., Richard Amendola and Russell
Amendola, as sellers, and Skate Corp., as
purchaser, and the Registrant, including the
following exhibit agreements thereto:*
10.1(a) Exhibit A - Skate Corp.'s Promissory Note to
sellers in the principal amount of $1,050,000,
with related Guaranty.*
10.1(b) Exhibit B - License Agreement from Warren
Amendola, Sr. to USA Skate, with related
Guaranty.*
10.1(c) Exhibit C - Consulting and Non-Competition
Agreement among Warren Amendola, Sr., Skate Corp.
and the Registrant, with related Guaranty.*
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Exhibit
Number Description
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10.1(d) Exhibit D - Escrow Agreement by and among Warren
Amendola, Sr., Skate Corp., the Registrant and
Blau, Kramer, Wactlar & Lieberman, P.C.*
10.1(e)(1) Exhibit E1 - Employment Agreement between USA
Skate and Warren Amendola, Sr.*
10.1(e)(2) Exhibit E2 - Non-Disclosure and Non-Competition
Agreement by and among Warren Amendola, Jr., USA
Skate, Skate Corp. and the Registrant.*
10.1(e)(3) Exhibit E3 - Non-Disclosure and Non-Competition
Agreement by and among Richard Amendola, USA
Skate, Skate Corp. and the Registrant.*
10.1(f) Exhibit F - Registration Rights Agreement by and
among the sellers and Skate Corp., with related
Guaranty.*
10.1(g) Exhibit G - Guaranty for the benefit of Patricia
Amendola.*
10.1(h) Exhibit H - Davtec's Promissory Note to Warren
Amendola, Sr. in the principal amount of $125,000,
with related Guaranty.*
10.2 Loan and Security Agreement between USA Skate and
LaSalle National Bank (the "USA Skate Loan
Agreement) with the following related documents:*
10.2(a) Demand Note related to the USA Skate Loan
Agreement.*
10.2(b) Form of Guaranty of the USA Skate Loan by the
Registrant, California Pro, Inc., Skate Corp.,
Henry Fong and Michael Casazza.*
10.2(c) Letter from the Registrant, Skate Corp. and Three
R Sales, Inc. to LaSalle National Bank.*
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10.3(a) Letter Amendment, dated as of April 30, 1996, to
the Loan Agreement dated April 1, 1993 between
California Pro, Inc. and LaSalle National Bank, as
amended (the "CPI Loan").*
10.3(b) Guaranty of the CPI Loan by USA Skate.
__________
* Filed herewith, all omitted schedules will be supplied to
the Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CALIFORNIA PRO SPORTS, INC.
Date: May 29, 1996 By /s/ Barry Hollander
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Chief Financial Officer
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into effective as of the 30th day of
April, 1996, by and among WARREN AMENDOLA, SR., an individual residing in the
State of New York, PATRICIA AMENDOLA, an individual residing in the State of New
York, and THREE R PROFIT SHARING RETIREMENT PLAN (collectively, the "Corporate
Sellers"); WARREN AMENDOLA, SR., WARREN AMENDOLA, JR., RICHARD AMENDOLA and
RUSSELL AMENDOLA, all individuals residing in the State of New York
(collectively, the "Three R Sellers"); USA SKATE CORPORATION, a Delaware
corporation ("Buyer"); and CALIFORNIA PRO SPORTS, INC., a Delaware corporation
("California Pro"). The Sellers, Buyer and California Pro hereinafter
collectively are referred to as the "Parties."
WITNESSETH:
The Corporate Sellers own 58-1/3% of the outstanding common stock of
USA Skate Co., Inc. a New York corporation ("USA Skate"), and Three R Sales,
Inc., a New York corporation ("Three R") owns 41-2/3% of the outstanding common
stock of USA Skate.
A. The Three R Sellers own all of the outstanding common stock of Three
R.
B. USA Skate either directly or indirectly owns 100% of the issued and
outstanding capital stock of Les Equipements Sportifs Davtec, Inc., a
corporation incorporated under the law of the Province of Quebec, Canada
("Davtec").
C. California Pro is a majority shareholder of Buyer and has a vested
interest in the transactions referred to herein and is a Party to this
Agreement.
NOW, THEREFORE, for and in consideration of the representations, warranties
and covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby is acknowledged, the Parties agree as
follows:
1 DEFINITIONS.
1.1 "Adverse Consequences" means actual damages suffered, including all
expenses, costs of investigation and reasonable attorney's fees.
1.2 "Amendola" means Warren Amendola, Sr.
1.3 "Buyer Documents" means all agreements and instruments required hereby
to be executed and/or delivered by Buyer or California Pro.
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1.4 "CALP Common Stock" means the shares of common stock of California Pro
delivered to Amendola under the Consulting and Non-Competition Agreement entered
into among Amendola, Buyer and California Pro in connection with this Agreement.
1.5 "Casazza" means Michael S. Casazza, Sr.
1.6 "Closing Date" means the date on which the Parties close the
transactions provided for under this Agreement.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
1.8 "Confidential Information" means any information concerning the
businesses and affairs of any of the Corporation, Three R, the Buyer or
California Pro which is not generally known to the public or trade.
1.9 "Corporate Shares" means shares of the issued and outstanding common
stock, $.10 par value per share, of USA Skate.
1.10 "Corporation" means USA Skate and Davtec, unless indicated otherwise
herein.
1.11 "Employee Benefit Plan" means any: (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, as defined in Section 3(2) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"); (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan; (c)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan; (d) Employee Welfare Benefit Plan, as defined in Section
3(1) of ERISA, or other material fringe benefit plan or program; or (e) any plan
of similar tenor, scope, or effect under the laws of Canada or the Provinces of
Ontario or Quebec.
1.12 "Environmental Law or Laws" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, or requirements of any governmental authority regulating, relating to
or imposing liability or standards of conduct concerning environmental
protection matters, as they may now exist, including all requirements pertaining
to reporting, licensing, permitting, investigation, removal or remediation of
emissions, discharges, releases, or threatened releases of Hazardous Materials,
chemical substances, pollutants or contaminants or relating to the manufacture,
generation, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials, chemical substances, pollutants
or contaminants, including, without limitation, the Comprehensive Environmental
Response, Compensation
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and Liability Act of 1980, as amended ("CERCLA"), the Toxic Substance Control
Act, as amended, the Resource Conservation and Recovery Act, as amended
("RCRA"), the Clean Air Act, as amended, and the Clean Water Act, as amended.
This term also means any and all laws enacted by Canada or the Provinces of
Quebec or Ontario, and any and all regulations, rules, ordinances, or
interpretations thereof enacted, now in effect, which have a similar effect
as in the United States.
1.13 "Environmental Liabilities" means any and all Liabilities for the
violation of, or remediation under, any Environmental Laws. "Environmental
Liabilities" shall be deemed to exist regardless of any claim for insurance,
contribution, or reimbursement of the liability.
1.14 "EPA" means the United States Environmental Protection Agency.
1.15 "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
1.16 "Fong" means Henry Fong.
1.17 "GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the periods indicated.
1.18 "Governmental Body" means any domestic or foreign national, state or
municipal or other local government or multi-national body (including, but not
limited to, the European Economic Community), any subdivision, agency,
commission or authority thereof, or any quasi-governmental, quasi-judicial or
private body exercising any regulatory or taxing authority thereunder.
1.19 "Hazardous Materials" means any substance (a) the presence of which is
at, on, over, beneath, in or upon any real or personal property, building,
structure, container of any nature or description, subsurface strata, ambient
air or ambient water or requires investigation, removal or remediation under any
Environmental Law or common law, (b) which is now defined as a "hazardous
substance," "hazardous material," "hazardous waste," "pollutant" or
"contaminant" under any Environmental Law, and/or (c) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or
otherwise hazardous and is regulated by any Governmental Authority under any
Environmental Law.
1.20 "Intellectual Property" means all: (a) patents, patent applications,
patents pending, patent disclosures and improvements thereto; (b) trademarks,
service marks, trade dress, logos, trade names and corporate names and
registrations and applications for
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registration thereof, specifically including without limitation the names
"USA Skate," "Davtec," "Vic" and "Victoriaville;" (c) copyrights and
registrations and applications for registration thereof; (d) mask works and
registrations and applications for registration thereof; (e) operating and
application computer software, databases and documentation; (f) trade secrets
and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or
not reduced to practice), know-how, manufacturing and production processes
and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans, and customer and supplier lists and
information; (g) other proprietary rights; and (h) copies and tangible
embodiments thereof (in whatever form or medium).
1.21 "Knowledge" means actual knowledge without independent investigation.
1.22 "Liability" means any liability, whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due, including any liability for Taxes and
Environmental Liabilities.
1.23 "Material Adverse Effect" means any material and adverse effect,
whether individually or in the aggregate upon the assets, business, properties
or condition, financial or otherwise, of the Corporation taken as a whole.
1.24 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice of the Corporation, including with
respect to quantity and frequency.
1.25 "Person" means any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other entity or groups
of entities, or Governmental Body.
1.26 "Premises" means the following facilities:
USA SKATE
7 Brayton Court
Commack, NY 11725
DAVTEC
410 Third Rue 8051 Jarry Est
Daveluyville, Quebec Montreal, Quebec
Canada G02 1C0 Canada H1J 1H5
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238 Galaxy Boulevard 811300 (o/a McMartin
Etobicoke, Ontario Hockey Protection)
Canada M9W 5R8 Ontario, Inc.
157 King Street
London, Ontario
Canada N5W 2X9
1.27 "Products Liability" means any liability, including any losses,
including attorneys fees and costs of investigation, to which the Corporation
(or the Buyer or any affiliate of the Buyer, as successor to the Corporation)
may become subject insofar as such liability is (i) based upon, arises out of or
is otherwise in respect of any express or implied representation, warranty,
agreement or guaranty to a customer, user or purchaser, or due to, or asserted
to be arising out of or due to, any product involved in an occurrence before the
Closing Date, and (ii) is not covered by the Corporation's insurance.
1.28 "SEC" means the United States Securities and Exchange Commission.
1.29 "Securities Act" means the United States Securities Act of 1933, as
amended.
1.30 "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, claim, or other lien, other than: (a) mechanics',
materialmans' and similar liens; (b) liens for Taxes not yet due and payable, or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement and similar legislation; (d) liens on
goods in transit incurred pursuant to documentary letters of credit;
(e) purchase money liens and liens securing rental payments under capital lease
arrangements; and (f) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
1.31 "Seller Documents" means all agreements and instruments required
hereby to be executed and/or delivered by the Sellers.
1.32 "Sellers" means, collectively, the Corporate Sellers and the Three R
Sellers.
1.33 "Tax" means any federal, state, local or foreign income, gross
receipts, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, stamp, excise, occupation,
sales, use, transfer, value added, alternative minimum, estimated, net worth,
self-employment, Medicaid, or other tax, including any interest, penalty or
addition thereto, whether or not disputed.
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1.34 "Three R Shares" means shares of capital stock of Three R.
2 PURCHASE AND SALE OF CORPORATE SHARES.
2.1 THE TRANSACTION. On and subject to the terms and conditions of this
Agreement and for the consideration specified below in this Section 2:
(a) Buyer hereby purchases from Corporate Sellers, and each Corporate
Seller hereby sells to Buyer all of his Corporate Shares; and
(b) Buyer hereby purchases from the Three R Sellers and each Three R
Seller hereby sells to Buyer all of his Three R Shares.
2.2 CONSIDERATION. Buyer hereby delivers to the Sellers the following
consideration:
(a) $3,650,000 by bank check (the "Cash Payment");
(b) Buyer's promissory note in the form attached as EXHIBIT A (the
"Note") payable to Sellers in the aggregate principal amount of $1,050,000,
bearing interest at the rate of 8% per annum which is guaranteed jointly and
severally by California Pro, Fong and Casazza, and to the extent of $450,000
also by Carolyn Fong; and
(c) certificates representing 250,000 shares of the common stock of
Buyer, $.01 par value per share (the "Buyer Shares").
The consideration shall be allocated among Sellers in proportion to their
holdings of the Corporate Shares and/or the Three R Shares as specifically set
forth in Section 2.2 of the Sellers' Disclosure Schedule.
3 REPRESENTATIONS OF THE PARTIES CONCERNING THE TRANSACTION.
3.1 REPRESENTATIONS OF SELLERS. Each Seller, jointly and severally,
represents to the Buyer and California Pro that the representations contained in
this Section 3.1 are correct and complete, except as qualified in the disclosure
schedule delivered by Sellers hereunder (the "Sellers' Disclosure Schedule").
The Sellers' Disclosure Schedule is arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 3.1.
(a) AUTHORIZATION OF TRANSACTION. Each Seller has full power and
authority to execute and deliver this Agreement and the
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other Seller Documents and to perform his, her, or its obligations hereunder
or thereunder. This Agreement and the other Seller Documents constitute the
valid and legally binding obligation of such Seller, enforceable in
accordance with its terms and conditions. Said Seller is not required to
give any notice to, make any filing with, or obtain any authorization,
consent or approval of any Governmental Body in order to consummate the
transactions contemplated by this Agreement.
(b) NONCONTRAVENTION. Except as set forth in Section 3.1(b) of the
Sellers' Disclosure Schedule, neither the execution and delivery of this
Agreement or the other Seller Documents, nor consummation of the transactions
contemplated hereby or thereby: (a) violates any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge or other restriction of
any Governmental Body or court to which such Seller is subject; or (b) conflicts
with, results in a breach of, constitutes a default under, results in the
acceleration of, creates in any Person the right to accelerate, terminate,
modify or cancel, or requires any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which such Seller is a party or by which such Seller is bound or
to which any of such Seller's assets is subject, unless the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice, or Security Interest would not have a material adverse effect on
the ability of the Sellers to consummate the transactions contemplated by this
Agreement.
(c) OWNERSHIP OF CORPORATE SHARES AND THREE R SHARES.
(i) The Corporate Sellers represent and warrant that they own
58-1/3% of the issued and outstanding capital stock of USA Skate and that USA
Skate, either directly or indirectly, owns all of the issued and outstanding
capital stock of Davtec. Each Corporate Seller further represents and warrants
that he is the lawful owner of the Corporate Shares being sold, transferred and
delivered by him to Buyer hereunder, free and clear of any and all security
interests, liens or other encumbrances. Each Corporate Seller hereby warrants
that he is selling, transferring and delivering to Buyer hereunder all of his
Corporate Shares. Each Corporate Seller represents and warrants that his
Corporate Shares are not subject to any options, warrants or other rights
providing for the disposition or acquisition of his Corporate Shares.
(ii) The Three R Sellers represent and warrant that they own all
of the issued and outstanding capital stock of Three R and that Three R owns
41-2/3% of the Corporate Shares. Each Three R Seller hereby represents and
warrants that he is the lawful
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owner of the Three R Shares being sold, transferred and delivered by him to
Buyer hereunder, free and clear of any and all security interests, liens or
other encumbrances. Each Three R Seller hereby warrants that he is selling,
transferring and delivering to Buyer hereunder all of his Three R Shares.
Each Three R Seller represents and warrants that his Three R Shares are not
subject to any options, warrants or other rights providing for the
disposition or acquisition of his Three R Shares.
(d) BROKERS' FEES. Sellers have no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Corporation, Three R,
Buyer or California Pro could become liable or obligated.
(e) PATENTS AND TRADEMARKS. Amendola represents and warrants that
Section 3.1(e) of the Sellers' Disclosure Schedule sets forth all patents,
trademarks, service marks, trade names and franchises owned by him which are
used by the Corporation, all applications for any of the foregoing, and all
permits, grants and licenses or other rights running between him and the
Corporation relating to any of the foregoing (collectively, the "VIC Marks").
Except as set forth in Section 3.1(e) of the Sellers' Disclosure Schedule,
Amendola hereby represents that, and to the Knowledge of the Sellers (other than
Amendola), the Sellers other than Amendola hereby represent that the VIC Marks
are free and clear of any liens or security interests and there exist no
obligations with respect to the VIC Marks requiring Amendola or the Corporation
to make any payment to any third party in respect of its use or otherwise.
Neither Amendola nor the Corporation has agreed to indemnify any person for or
against any interference, infringement, misappropriation or other conflict with
respect to the VIC Marks.
Except as set forth in Section 3.1(e) of the Sellers' Disclosure
Schedule, none of the Sellers (including Amendola) or the Corporation has
received (i) any notice of any patent, invention, trademark, service mark or
trade name of any other person that infringes upon, or is infringed upon by, any
of the Intellectual Property (ii) any notice of any claim of any other Person
relating to any of the VIC Marks or any process or confidential information of
Amendola or the Corporation and (iii) none of the Sellers (including Amendola)
or the Corporation knows of any basis for any such charge or claim.
Notwithstanding anything to the contrary in this Section 3.1(e) or elsewhere
herein, no representation or warranty is made concerning the tradename and/or
trademark "Hespeler" or its use, value or importance to the Corporation.
(f) INVESTMENT. Sellers (i) understand that the Buyer Shares have
not been registered under the Securities Act and are being offered and sold in
reliance upon exemptions from the
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registration requirement under federal and state securities laws for
transactions not involving any public offering; (ii) are acquiring the Buyer
Shares solely for Sellers' own accounts for investment purposes and not with
a view to the distribution thereof; (iii) are sophisticated investors with
knowledge and experience in business and financial matters; and (iv) have
received certain information concerning the Buyer and has had the opportunity
to obtain additional information as desired in order to evaluate the merits
and risks inherent in holding the Buyer Shares.
(g) NOTE EXTENSIONS. The due date of the obligations owed by the
Corporation to Warren Amendola, Jr., Richard Amendola, Russell Amendola and
Three R Profit Sharing Retirement Plan as reflected in Attachment 1 to Section
4.1(l) of the Corporation Disclosure Schedule have been extended through
December 31, 1997.
3.2 REPRESENTATIONS OF BUYER AND CALIFORNIA PRO. Buyer and California
Pro, jointly and severally, represent and warrant to the Sellers that the
statements contained in this Section 3.2 are correct and complete.
(a) ORGANIZATION. The Buyer and California Pro each is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) AUTHORIZATION OF TRANSACTION. Each of Buyer and California Pro
has full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and its respective other Buyer Documents and
to perform its obligations hereunder or thereunder. This Agreement and the
other Buyer Documents constitute the valid and legally binding obligations of
Buyer and California Pro, respectively, enforceable in accordance with their
terms and conditions. Neither Buyer nor California Pro is required to give any
notice to, make any filing with or obtain any authorization, consent or approval
of any Governmental Body in order to consummate the transactions contemplated by
this Agreement.
(c) NONCONTRAVENTION. As to each of California Pro and Buyer,
neither the execution and delivery of this Agreement or its respective other
Buyer Documents, nor consummation of the transactions contemplated hereby or
thereby:(i) violates any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge or other restriction of any Governmental Body or
court to which it is subject or any provision of its charter or bylaws; or (ii)
conflicts with, results in a breach of, constitutes a default under, results in
the acceleration of, creates in any Person the right to accelerate, terminate,
modify or cancel, or requires any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or
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other arrangement to which it is a party or by which it is bound or to which
any of its assets is subject, except (x) that under its existing credit
facility, California Pro must obtain the consent of LaSalle National Bank or
(y) where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security Interest would
not have a material adverse effect on its financial condition or its ability to
consummate the transactions contemplated by this Agreement.
(d) LITIGATION. Neither California Pro nor Buyer (i) is subject to
any unsatisfied judgment, order, decree, stipulation, injunction or charge; or
(ii) is a party to or, to the Knowledge of California Pro or Buyer, has been
threatened with any charge, complaint, action, suit, proceeding, hearing or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction which, in the aggregate, would
not have a material adverse effect.
(e) LEGAL COMPLIANCE. To the Knowledge of California Pro and Buyer,
each has complied with all laws (including rules and regulations thereunder) of
each Governmental Body with jurisdiction, including SEC compliance and
regulatory compliance. Neither California Pro nor Buyer is currently in
violation of any rule or regulation of Nasdaq, although California Pro will be
required (and hereby agrees) to list the shares of its common stock issuable to
Amendola in connection with his Consulting and Non-Compete Agreement provided
for in Section 5.4, in an application for listing of additional shares to be
filed with Nasdaq as a result of the completion of the transactions contemplated
hereunder.
(f) BROKERS' FEES. All brokerage fees and expenses due Geneva
Capital Markets in connection with this Agreement shall be paid by the Buyer
and/or California Pro, which will indemnify and hold Sellers harmless therefrom.
Neither Buyer nor California Pro has any other liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Sellers could become
liable or obligated.
(g) INVESTMENT. Buyer: (i) understands that neither the Corporate
Shares nor the Three R Shares have been, and will not be, registered under the
Securities Act, or under any securities laws, and are being offered and sold in
reliance upon exemptions from the registration requirements under federal and
state securities laws for transactions not involving any public offering; (ii)
is acquiring the Corporate Shares and the Three R Shares solely for Buyer's own
account for investment purposes and not with a view to the distribution
thereof; (iii) is a sophisticated investor with knowledge and experience in
business and financial matters; and (iv) subject to the representations and
warranties contained
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herein, has received certain information concerning the Corporation and Three
R and has had the opportunity to obtain additional information as desired in
order to evaluate the merits and risks inherent in holding the Corporate
Shares and the Three R Shares.
(h) CERTAIN INFORMATION. California Pro has delivered to the Sellers
a copy of its Prospectus dated January 18, 1995 which was included in a
Registration Statement filed under the Securities Act, its financial statements
for the year ended December 31, 1994 filed under cover of Form 10-KSB, its
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 1995, June 30,
1995 and September 30, 1995 and its Annual Report on Form 10-KSB for the year
ended December 31, 1995, all as filed under the Exchange Act (collectively, the
"Exchange Act Reports").
(i) FINANCIAL STATEMENTS. The financial statements included or
incorporated by reference in the Exchange Act Reports present fairly the
financial condition of California Pro as of the dates indicated and the results
of its operations and changes in its financial position for the periods therein
specified and have been prepared in accordance with GAAP, subject in the case of
interim statements to normal changes resulting from year-end adjustments.
4 REPRESENTATIONS AND WARRANTIES CONCERNING THE CORPORATION AND THREE R.
4.1 REPRESENTATIONS AND WARRANTIES CONCERNING THE CORPORATION. The
Sellers, jointly and severally, represent and warrant to Buyer and California
Pro that the statements contained in this Section 4.1 are true and complete
except as qualified in the Corporation's disclosure schedule delivered by the
Sellers hereunder (the "Corporation Disclosure Schedule"). The Corporation
Disclosure Schedule is arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.1.
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. USA Skate and
Davtec each is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. USA Skate and
Davtec each is duly authorized to conduct business as a foreign corporation and
is in good standing under the laws of each jurisdiction where the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, except where the lack of such qualification would not have a
Material Adverse Effect. USA Skate and Davtec each has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Section 4.1(a) of the Corporation
Disclosure Schedule lists the directors and officers of each of USA Skate and
Davtec. Section 4.1(a) of the Corporation Disclosure Schedule also sets forth
USA Skate's ownership or similar interests, whether
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direct or indirect, in each of its subsidiaries, partnerships, joint venture
or other business enterprises or entities, none of which, other than Davtec,
has any business, assets or liabilities other than direct or indirect ownership
of capital stock of USA Skate or Davtec, or any subsidiaries. The Corporation,
except as shown in Section 4.1(a) of the Corporation Disclosure Schedule, has
no ownership or similar interest in any other Person.
(b) CAPITALIZATION OF USA SKATE. The authorized capital stock of USA
Skate consists of 100 shares of common stock having a par value of $.10 per
share, of which 60 shares are issued and outstanding. All of the issued and
outstanding shares of common stock of USA Skate have been duly authorized, are
validly issued, fully paid and nonassessable, and are held of record by the
respective Corporate Sellers and Three R. USA Skate has not granted or issued
any options, warrants or other rights providing for the issuance, disposition or
acquisition of any of USA Skate's or Davtec's capital stock.
(c) CAPITALIZATION OF DAVTEC. The authorized capital stock of Davtec
consists of an unlimited number of common shares and an unlimited number of
preference shares, all of which are without par value, and of which 1,890 common
shares are issued and outstanding. No preference shares have been issued. The
outstanding common shares of Davtec have been duly authorized, are validly
issued, fully paid and nonassessable, and are held of record, either directly or
indirectly, by USA Skate. There are no outstanding or authorized options,
warrants or other rights providing for the issuance, disposition or acquisition
of any of Davtec's capital stock.
(d) NONCONTRAVENTION. Neither the execution and delivery of any
document executed and delivered by USA Skate in connection with the
transaction contemplated hereunder, nor consummation of the transactions
contemplated hereby or thereby: (i) violates any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, charge or other restriction
of any Governmental Body or court to which the Corporation is subject or any
provision of the charter or bylaws of the Corporation; or (ii) conflicts
with, results in a breach of, constitutes a default under, results in the
acceleration of, creates in any Person the right to accelerate, terminate,
modify or cancel, or requires any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Corporation is a party or by which it is bound or to
which any of its assets is subject or which could result in the imposition of
any Security Interest upon any of its assets, except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse
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effect on the financial condition of the Corporation or on the ability of the
Corporation to consummate the transactions contemplated by this Agreement.
The Corporation is not required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any Governmental Body in
order for the Sellers to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect.
(e) CONSOLIDATED NET INCOME. The consolidated net income of the
Corporation for the twelve calendar months ended December 31, 1995 was not less
than $300,000 provided, however, Amendola may discharge without payment Davtec's
royalty liability owed to him in order to achieve this minimum level of
consolidated net income.
(f) EVENTS SUBSEQUENT TO DECEMBER 31, 1995. Since December 31, 1995,
except as otherwise contemplated by this Agreement or as disclosed on Section
4.1(f) of the Corporation Disclosure Schedule, there has not been, occurred or
arisen, with respect to the Corporation:
(i) any change or amendment in its Articles or Certificate of
Incorporation or Bylaws, or other governing instruments;
(ii) any damage, destruction or loss of any of its properties or
assets (whether or not covered by insurance), except as is normal and customary
in the operation of its business;
(iii) any sale, lease, transfer, or assignment of any of its
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(iv) the execution of, or any other commitment to any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) outside the Ordinary Course of Business;
(v) any acceleration, termination, modification, or cancellation
of any agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $37,500 to which it is a
party or by which it is bound;
(vi) any Security Interest imposed upon any of its assets,
tangible or intangible;
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(vii) any capital expenditure (or series of related capital
expenditures) either involving more than $37,500 or outside the Ordinary Course
of Business;
(viii) any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans, and acquisitions) either involving more than $37,500 or
outside the Ordinary Course of Business;
(ix) any issuance of any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $20,000 singly or
$37,500 in the aggregate;
(x) any intentional delay or postponement of the payment of its
accounts payable or other liabilities;
(xi) any grant of any license or sublicense of any rights under
or with respect to any Intellectual Property;
(xii) any loan to, or any entrance into any other transaction
with, any of its directors, officers, and employees either involving more than
$1,000 singly or $5,000 in the aggregate;
(xiii) any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such contract
or agreement;
(xiv) any increase in the base compensation of any of its
directors, officers, or employees;
(xv) the adoption, amendment, modification, or termination of any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, or employees (or
taken away any such action with respect to any other Employee Benefit Plan);
(xvi) any agreement or commitment, whether in writing or
otherwise, to do any of the foregoing;
(xvii) authorization for the payment of, or payment of any
dividend on the capital stock of, or any redemption of stock or other equity
securities of, the Corporation;
(xviii) any material adverse change from the Corporation's 1996
calendar plan as included as Section 4.1(f)(xviii) of the Corporation Disclosure
Schedule; or
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(xix) any other material adverse change.
(g) TAX MATTERS.
(i) The Corporation has filed all Tax returns required to be
filed, and has paid all Taxes due and owing for all periods prior to the
Closing.
(ii) None of the federal, state, provincial, local, and foreign
income Tax returns filed with respect to the Corporation for years open under
the applicable statute of limitations have been audited, nor are any such Tax
returns currently under audit except as set forth in Section 4.1(g)(ii) of the
Corporation Disclosure Schedule. The Sellers have made available to Buyer
correct and complete copies of all federal income Tax returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Corporation for all years since the year ending December 31, 1990, and have made
available to Buyer and California Pro copies of the foregoing, filed by the
Sellers or the Corporation.
(iii) The Corporation has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(h) PROPERTY.
(i) All leases to which the Corporation is a party, are in full
force and effect and neither the Corporation, nor to the Knowledge of the
Sellers, is any landlord or lessor in default under or with respect to any such
lease. No approvals or consents of any Person are required in order that any
lease remain enforceable as a result of the consummation of the transactions
contemplated by this Agreement. The Corporation enjoys the right of quiet
possession of the assets and properties covered by each of the leases as against
all other Persons. None of the Sellers, or the Corporation, has received any
notice of any claim or threatened claim with respect to the leases or the
Corporation's rights thereunder.
(ii) The Corporation does not own any interest in real property
other than the real property owned by Davtec as described in Section 4.1(h)(ii)
of the Corporation Disclosure Schedule.
(i) TANGIBLE PROPERTY. All of the machinery, equipment, furniture,
leasehold improvements, fixtures and vehicles owned by the Corporation are in
good operating condition and repair consistent with the age thereof, subject
only to normal wear and tear.
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(j) TITLE TO PROPERTIES. The Corporation has valid title to all
properties (real, personal and mixed, tangible and intangible) that it purports
to own, except for personal property sold in the Ordinary Course of Business;
and except as shown in Section 4.1(j) of the Corporation Disclosure Schedule,
all properties and assets are owned free and clear of any Security Interests.
(k) INTELLECTUAL PROPERTY. Except as disclosed in Section 4.1(k) of
the Sellers' Disclosure Schedule, prior to the date of this Agreement, the
Corporation has had the legal right, free of royalty or other payment
obligation, to use the VIC Marks owned by Amendola. There is no Intellectual
Property which is important to the business of the Corporation other than the
VIC Marks, the corporate names of USA Skate and Davtec and the "Hespeler" mark.
(l) CONTRACTS. Except as set forth in Section 4.1(l) of the
Corporation Disclosure Schedule, the Corporation is not a party to a contract or
agreement, oral or written, which (i) either was not entered into in the
Ordinary Course of Business or (ii) relates to:
(A) capital expenditures;
(B) the payment of more than $30,000;
(C) any loan or advance to or investment in any Person, any
guarantee, any management, consulting, employment, severance, union or similar
contract or agreement, any contract or agreement limiting its freedom from
engaging in any line of business or competing with any Person; or
(D) any arrangement involving any Seller, its officers,
employees or directors and the Corporation; or
(E) outstanding indebtedness and related obligations of the
Corporation to United Jersey Bank and Caisse Populaire de Daveluyville in
Quebec, Canada.
(m) NOTES AND ACCOUNTS RECEIVABLE. Section 4.1(m) of the Corporation
Disclosure Schedule sets forth a summary of all of the notes and accounts
receivable of USA Skate as of April 25, 1996 and Davtec as of March 31, 1996.
The notes and accounts receivable are reflected properly on the books and
records of the Corporation, as appropriate. The accounts receivable are valid
receivables arising in the Ordinary Course of Business in the aggregate recorded
amounts thereof (net of any balance sheet reserves therefor) and, to the
Knowledge of the Sellers, are not subject to any setoffs or counterclaims,
except as reflected in Section 4.1(m) of the Corporation Disclosure Schedule.
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(n) INVENTORY. Section 4.1(n) of the Corporation Disclosure Schedule
sets forth a summary description of the inventory of USA Skate at April 25, 1996
and Davtec at March 31, 1996 (the "Inventory"). Except as set forth in Section
4.1(n) of the Corporation Disclosure Schedule:
(i) The Inventory consists of goods and products of a type and
quality customarily offered for sale by the Corporation in the ordinary course
of business as presently conducted by the Corporation, as applicable.
(ii) To the Sellers' Knowledge, the levels of Inventory do not
materially exceed or fall below the levels of inventory customarily maintained
by the Corporation, as applicable, in the Ordinary Course of Business for the
next 12 months.
(o) LOCATION OF ASSETS. Except as set forth in Section 4.1(o) of the
Corporation Disclosure Schedule, all of the assets of USA Skate are located at 7
Brayton Court, Commack, New York 11725.
(p) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of the Corporation except powers of attorney given in the
Ordinary Course of Business to customs brokers and similar Persons.
(q) LITIGATION. Section 4.1(q) of the Corporation Disclosure
Schedule sets forth each instance in which the Corporation:(i) is subject to any
unsatisfied judgment, order, decree, stipulation, injunction or charge; or (ii)
is a party to or, to the Knowledge of the Sellers, has been threatened with, any
charge, complaint, action, suit, proceeding, hearing or investigation of or in
any court or Governmental Body.
(r) EMPLOYEE BENEFITS.
(i) All Employee Benefit Plans maintained by the Corporation
and/or Three R for the benefit of any current or former employees of the
Corporation or Three R, as applicable, comply in form and in operation in all
respects with the applicable requirements of ERISA and the Code and/or the laws
of Canada and the Provinces of Ontario or Quebec, except where the failure to
comply would not have a Material Adverse Effect.
(ii) All contributions (including all employer contributions and
employees salary reduction contributions) which are due have been paid to each
Employee Pension Benefit Plan.
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(iii) To the Knowledge of the Sellers, no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand with respect
to the administration or the investment of the assets of any Employee Benefit
Plan (other than routine claims for benefits) is pending or threatened.
(s) The Sellers have made available to Buyer correct and complete
copies of existing plan documents and summary plan descriptions, the most recent
Form 5500 Annual Report (and any report required by Canadian or Provincial
authorities), and all related trust agreements, insurance contracts, and other
funding agreements which implement each Employee Benefit Plan.
(t) BANKING RELATIONSHIPS. Section 4.1(t) of the Corporation
Disclosure Schedule sets forth the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which the Corporation maintains safe deposit boxes or accounts of any nature
and the names of all persons authorized to have access thereto, draw thereon or
make withdrawals therefrom.
(u) INSURANCE. To Sellers' Knowledge, the Corporation has in effect
fire, liability, worker's compensation and other forms of insurance of a nature
and in amounts sufficient to protect the assets and business of the Corporation.
(v) LABOR RELATIONS. To the Knowledge of the Sellers, there are no
other liabilities of the Corporation attributable to any of its employees for
compensation, benefits, vacation, sick leave, bonuses or other similar items
which are properly reflected in the books of account of the Corporation. Except
as set forth in Section 4.1(l) 11 of the Corporation Disclosure Schedule, no
employee of the Corporation is subject to any collective bargaining agreement,
and the Corporation has not received any notification that any employee or group
of employees intends to seek a vote to determine whether the employees should be
represented by a labor union or other entity.
(w) LEGAL COMPLIANCE. To the Knowledge of the Sellers, the
Corporation is not now in violation of any laws (including rules and regulations
thereunder) of any Governmental Body having jurisdiction, including any
requirements relating to antitrust, consumer protection, currency exchange,
equal opportunity, health, occupational safety, pension and securities matters.
To the Knowledge of the Sellers, the Corporation has all licenses, permits,
orders and approvals from Governmental Bodies required for the conduct of its
business, and are not in violation of any such license, permit, order or
approval.
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(x) ENVIRONMENTAL LAWS AND REGULATIONS. The Corporation is in
compliance with all Environmental Laws. There are no underground storage tanks
located at, in, on or under the surface of any of the Premises. The Corporation
has not received any written or oral requests for information, notice of claim
or violation, demand or other notification from any Governmental Body or any
third party, that it may be potentially responsible for any threatened or actual
release of Hazardous Materials, or violation of or noncompliance with any
Environmental Laws. The Corporation is not subject to any agreement, consent,
decree, administrative order, notice or enforcement action brought under any
Environmental Laws or any common law theory of liability. None of the Sellers
or the Corporation has any Knowledge of any Environmental Liabilities relating
to the business of the Corporation, the Premises or any contiguous realty.
(y) BROKERS' FEES. The Corporation has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Corporation, Three R,
Buyer or California Pro could become liable or obligated.
(z) LIABILITIES. The Corporation has no liability and, to the
Knowledge of the Sellers and the Corporation, there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Corporation giving rise to any liability, except
for (i) consolidated liabilities at December 31, 1995, determined in accordance
with GAAP and properly recorded or reflected on the Corporation's books and
records, which did not exceed $8,728,800, (ii)liabilities which have arisen
after December 31, 1995 in the Ordinary Course of Business; and (iii)
liabilities reflected or disclosed in the Corporation Disclosure Schedule.
4.2 REPRESENTATIONS AND WARRANTIES CONCERNING THREE R. The Sellers,
jointly and severally, represent and warrant to Buyer and California Pro that
the statements contained in this Section 4.2 are true and complete except as set
forth in the Three R disclosure schedule delivered by Sellers hereunder (the
"Three R Disclosure Schedule"). The Three R Disclosure Schedule is arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 4.2.
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Three R is a
corporation duly organized, validly existing and in good standing under the laws
of New York. Three R has no business activities, assets or liabilities, known
or unknown, other than its ownership of Corporate Shares. Three R has full
corporate power and authority to own the Corporate Shares it owns. Section
4.2(a) of the Three R Disclosure Schedule lists the directors and officers
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of Three R. Except as shown in Section 4.2(a) of the Three R Disclosure
Schedule, Three R has no interest in any other Person.
(b) CAPITALIZATION OF THREE R. The authorized capital stock of Three
R consists of 100 shares of common stock, no par value, of which 100 Three R
Shares are issued and outstanding. All of the issued and outstanding shares of
common stock of Three R have been duly authorized, are validly issued, fully
paid and nonassessable, and are held of record by the respective Three R
Sellers. Three R has not granted or issued any options, warrants or other
rights providing for the issuance, disposition or acquisition of any of Three
R's capital stock or the Corporate Shares owned by it.
(c) TAX MATTERS.
(i) Three R has filed all Tax returns required to be filed, and
has paid all Taxes due and owing.
(ii) None of the federal, state, provincial, local, and foreign
income Tax returns filed with respect to Three R for years open under the
applicable statute of limitations have been audited, nor are any such Tax
returns currently under audit except as set forth in Section 4.2(c)(ii) of the
Three R Disclosure Schedule. Sellers have made available to Buyer correct and
complete copies of all federal income Tax returns, examination reports, and
statements of deficiencies assessed against or agreed to by Three R for all
years since the year ending December 31, 1990, and have made available to Buyer
and California Pro copies of the foregoing filed by Sellers or Three R.
(iii) Three R has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(d) BANKING RELATIONSHIPS. Section 4.2(d) of the Three R Disclosure
Schedule sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which Three R
maintains safe deposit boxes or accounts of any nature and the names of all
persons authorized to have access thereto, draw thereon or make withdrawals
therefrom.
(e) LEGAL COMPLIANCE. To the Knowledge of Sellers, Three R is not
now in violation of any laws (including rules and regulations thereunder) of any
Governmental Body having jurisdiction, including any requirements relating to
antitrust, consumer protection, currency exchange, equal opportunity, health,
occupational safety, pension and securities matters. To the Knowledge of
Sellers, Three R has all licenses, permits, orders and approvals from
Governmental Bodies required for the conduct of its
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business, and are not in violation of any such license, permit, order or
approval.
(f) BROKERS' FEES. Three R has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Corporation, Three R,
Buyer or California Pro could become liable or obligated.
(g) UNDISCLOSED LIABILITIES. Three R has no Liabilities and, to the
Knowledge of the Sellers and Three R, there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against Three R or the Three R Sellers giving rise to any
Liability of Three R other than minimum franchise taxes not yet due or payable.
5 DELIVERIES ON THE CLOSING DATE. The Parties shall make the following
additional deliveries on the Closing Date, each of which shall be conditioned
upon delivery of all of the others and all of which shall be deemed to have been
delivered simultaneously:
5.1 SELLERS' SHARES. Each of the Corporate Sellers shall deliver stock
certificates representing all of his Corporate Shares, and each Three R Seller
shall deliver stock certificates representing all of his Three R Shares,
together with stock powers in form and properly executed to convey title to the
Corporate Shares and the Three R Shares to Buyer. Immediately upon presentation
of the proper documentation, USA Skate shall transfer the Corporate Shares and
Three R shall transfer the Three R Shares into the name of Buyer.
5.2 CONSIDERATION. Buyer shall deliver to Sellers the Cash Payment and
Note, and California Pro, Fong, Carolyn Fong and Casazza shall deliver their
respective Guaranties related to payment of the Note, in the forms of EXHIBIT A
and the attachment thereto.
5.3 LICENSE AGREEMENT. Amendola shall deliver to USA Skate a license
agreement related to the rights to the VIC Marks. Buyer, California Pro, Fong
and Casazza shall deliver their respective Guaranties related to payment of the
royalties due under the License Agreement, in the forms annexed as EXHIBIT B and
the attachments thereto.
5.4 CONSULTING AND NON-COMPETITION AGREEMENT. Amendola and the Buyer and
California Pro shall enter into a Consulting and Non-Competition Agreement and
Fong and Casazza shall deliver their respective Guaranties, in the forms annexed
as EXHIBIT C and the attachments thereto.
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5.5 ESCROW AGREEMENT. Amendola, Buyer, California Pro shall enter into an
Escrow Agreement with Blau, Kramer, Wactlar & Lieberman, P.C. in the form of
EXHIBIT D.
5.6 LEGAL OPINIONS.
(a) The Sellers, the Corporation and Three R shall deliver to Buyer,
California Pro and LaSalle National Bank, a legal opinion of their counsel,
Blau, Kramer, Wactlar & Lieberman, P.C., in form and content reasonably
acceptable to Buyer and California Pro.
(b) The Buyer and California Pro shall deliver to the Sellers, the
Corporation and Three R a legal opinion of their counsel, Friedlob Sanderson
Raskin Paulson & Tourtillott, LLC, in form and content reasonably acceptable to
the Sellers, the Corporation and Three R.
5.7 CORPORATE RECORDS. The Corporation, Three R and Sellers shall deliver
to Buyer copies of:(i) the Articles or Certificate of Incorporation, as amended,
and the Bylaws, as amended, of the Corporation and Three R; (ii) the minute
books of the Corporation and Three R covering all proceedings, consents, actions
and meetings of their shareholders and Board of Directors; and (iii) the stock
transfer ledgers of the Corporation and Three R and shareholder lists setting
forth all owners of the capital stock as they appear in the stock transfer
ledgers of the Corporation and Three R.
5.8 GUARANTY LETTER. On or following the Closing Date, Amendola shall
sign a guarantee letter for CAN $650,000 in favor of LA CAISSE POPULAIRE DE
Daveluyville for the benefit of Davtec, which such bank has agreed to substitute
for Amendola's existing guarantee letters of CAN $584,000 and CAN $750,000.
5.9 MATTERS RELATING TO CAISSE POPULAIRE.
(a) BUYER CONTRIBUTION. Buyer shall make a U.S. $500,000 capital
contribution to Davtec to be used to pay down its borrowings from LA CAISSE
POPULAIRE DE Daveluyville.
(b) AMENDOLA LOAN. Amendola shall make a payment to Davtec of U.S.
$165,000 to be used to pay down its borrowings from LA CAISSE POPULAIRE DE
Daveluyville. Of this amount, U.S. $125,000 will be a loan and evidenced by a
promissory note payable to Amendola which note will be guaranteed by California
Pro in the form of EXHIBIT H and the attachment thereto; and the remaining U.S.
$40,000 will be used to satisfy the net U.S. $40,000 receivable owed to USA
Skate or Davtec by Amendola, Patricia Amendola and Three R as reflected in
Attachment 1 to Section 4.1(l) of the Corporation Disclosure Schedule.
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(c) CREDIT LINE EXTENSION. LA CAISSE POPULAIRE DE Daveluyville shall
agree to extend the current credit line of Davtec through July 31, 1997 unless
there is a material adverse change in the financial condition of Davtec. In no
event shall Fong, Carolyn Fong or Casazza be required to guaranty more than CAN
$650,000 in connection with the renewal of the credit line.
5.10 REPAYMENT OF INDEBTEDNESS. Buyer shall pay off all outstanding
indebtedness of USA Skate owed to United Jersey Bank as of the Closing Date and
post cash collateral (not to exceed $1,442,000) for outstanding letters of
credit and bankers acceptances, and the Corporation shall receive from said
bank, termination statements terminating all security interests related to this
indebtedness; and, further, Amendola shall be released from his guaranties and
his collateral related to this indebtedness.
5.11 NEW BANK CREDIT FACILITY. Buyer shall have obtained a new bank credit
facility for USA Skate from LaSalle National Bank ("LaSalle") and the
subordination agreements between LaSalle and each of the Sellers shall be
reasonably acceptable to Sellers. Further, Amendola shall cause the treasury
bill in the face amount of $300,000 held in the name of Patricia Amendola in an
account at United Jersey Bank to be pledged as collateral under USA Skate's bank
credit facility with LaSalle. California Pro, Fong and Casazza shall guaranty,
pursuant to a separate Guaranty in the form of EXHIBIT G, the return to Patricia
Amendola of the $300,000 plus any interest thereon on the earlier of (i)
completion of an initial public offering by Buyer or (ii) December 31, 1996.
5.12 EMPLOYMENT/NON-COMPETE AGREEMENTS. USA Skate shall enter into an
employment agreement with Amendola in the form of EXHIBIT E1, and non-compete
agreements with each of Warren Amendola, Jr. and Richard Amendola in the forms
of EXHIBITS E2 AND E3.
5.13 REGISTRATION RIGHTS AGREEMENT. The Buyer and Sellers shall have
entered into the Registration Rights Agreement with respect to the Buyer Shares,
in the form of EXHIBIT F and Fong and Casazza shall have delivered their
guaranties with respect to the Valuation Guaranty contained therein.
5.14 INSURANCE CERTIFICATES. Sellers shall deliver to Buyer and California
Pro insurance certificates for each insurance policy in effect for USA Skate
and/or Davtec.
5.15 RESIGNATION. Sellers shall deliver letters from all of the directors
and officers of USA Skate and Three R resigning their positions with said
corporations effective as of the Closing and, further, Amendola shall resign as
President and director of Davtec.
5.16 LEASE AMENDMENT. Amendola and USA Skate shall have entered into an
amendment to the lease agreement with respect to USA Skate's operating facility
located at 7 Brayton Court, Commack, New York 11725 reducing the term from ten
years to five years.
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6 POST-CLOSING COVENANTS.
6.1 GENERAL. After the Closing Date if any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the Parties will
take such further action, including the execution and delivery of such further
instruments and documents, as any other Party reasonably may request, at the
sole cost and expense of the requesting Party.
6.2 LITIGATION SUPPORT. If, and for so long as any Party actively is
contesting or defending against any charge, complaint, action, suit, proceeding,
hearing, investigation, claim or demand by third parties in connection with (i)
any transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Corporation, each of the other Parties shall cooperate with him,
and his counsel in the defense or contest, make available their personnel, and
provide such testimony and access to his books and records as shall be necessary
in connection with the defense or contest, all at the sole cost and expense of
the contesting or defending Party.
6.3 ACCESS TO BOOKS AND RECORDS. For five years after the Closing Date,
Sellers shall have reasonable access to the Corporation's and Three R's books
and records for the purpose of preparing each Seller's individual, the
Corporation's and Three R's income tax returns.
7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
7.1 SURVIVAL.
(a) SELLERS. All of the representations and warranties of the
Sellers contained in this Agreement shall survive and continue in full force and
effect for a period of one year from the Closing Date, except those with regard
to (i) the ownership and title to the Corporate Shares, which shall survive for
the longer of six years or the applicable statute of limitations; and (ii) Taxes
and fraud, which shall survive for the period of the applicable statute of
limitations.
(b) BUYER/CALIFORNIA PRO. All of the representations and warranties
of the Buyer and California Pro contained in this Agreement shall survive and
continue in full force and effect for a period of one year from the Closing
Date.
7.2 SELLERS LIABILITY TO BUYER AND CALIFORNIA PRO.
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(a) The Sellers jointly and severally agree to indemnify Buyer and/or
California Pro from and against or otherwise be liable for any and all Adverse
Consequences Buyer and/or California Pro may suffer directly resulting from,
arising out of or caused by any breach by the Sellers of any of their
representations, warranties, covenants or other agreements contained in this
Agreement; provided, that Buyer and/or California Pro makes a written claim
therefor (given in accordance with the notice provisions of Section 8.6) within
the applicable survival period; provided further that (i)Sellers shall not have
any obligation to indemnify Buyer from and against, or otherwise be liable to
Buyer for, any Adverse Consequences resulting from, arising out of or caused by
the breach of any representation, warranty or covenant of Sellers contained in
this Agreement, until Buyer has suffered aggregate losses by reason of all such
breaches in excess of a $50,000 threshold (at which point Sellers will be
obligated to indemnify Buyer from and against, and be liable for, all such
aggregate losses in excess of $50,000), and (ii) in calculating the foregoing
$50,000 threshold, all losses suffered by Buyer by reason of such breaches shall
be cumulated.
(b) The Sellers agree to indemnify Buyer and California Pro from and
against or otherwise be liable for all Adverse Consequences Buyer or California
Pro may suffer as a result of (i) a breach of the representations regarding the
ownership and title to Three R Shares, which indemnity shall survive for the
longer of six years or the applicable statute of limitations,(ii) the operation
of the Three R Profit Sharing Plan, and/or (iii) Taxes (except as specified in
Section 4.2(c)) and fraud for which Three R may become liable, each of which
shall survive for the period of the applicable statute of limitations. This
obligation shall survive indefinitely and not be subject to the Sellers
Liability Cap.
(c) The Sellers agree to indemnify Buyer from and against or otherwise
be liable for all Adverse Consequences Buyer may suffer as a result of an
agreement between certain employees and former shareholders of Davtec relating
to the payment of compensation to them if Davtec were to achieve certain
earnings levels. This obligation shall not be subject to the Sellers Liability
Cap.
(d) Buyer and/or California Pro, in their sole discretion, shall be
entitled to collect and receive damages for any Adverse Consequences to which it
or they are entitled under this Section 7.2 from any one or all of Sellers, each
of whom shall be entitled to seek contribution from the other Sellers.
(e) The Sellers' aggregate liability to Buyer and California Pro, by
way of indemnification or otherwise hereunder, shall not exceed $1,200,000 (the
"Sellers Liability Cap");
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provided, however, that the items set forth in subsections (i) and (ii) of
Section 7.1(a) above shall not be limited by the Sellers Liability Cap nor
shall Amendola's liability under the license agreement entered into in
connection with this Agreement; and provided, further, that to the extent
Sellers may be liable to Buyer hereunder, Sellers, at their option, may
satisfy up to $675,000 of their obligations therefor by delivering to Buyer
shares of CALP Common Stock (valued at $2.25 per share).
7.3 CANSTAR CLAIM. Sellers jointly and severally agree to pay Davtec's
liability to Canstar Sports, Inc. up to a two percent royalty on the net
wholesale price (as defined in the license agreement) for hockey sticks with
fiberglass shafts sold by Davtec in Canada for the period from June 1, 1995
through April 30, 1996 as required under a license agreement to be entered into
between Davtec and Canstar in connection with the settlement of a patent
infringement claim made by Canstar related to the fiberglass hockey stick shaft
purchased by Davtec from a third party.
7.4 BUYER AND CALIFORNIA PRO LIABILITY TO SELLERS. Buyer and California
Pro jointly and severally agree to indemnify the Sellers from and against, or
otherwise be liable to Sellers for, Adverse Consequences Sellers may suffer
directly resulting from, arising out of or caused by any breach by the Buyer or
California Pro of any of their representations, warranties, or covenants or
other agreements contained in this Agreement; provided, that Sellers make a
written claim therefor (in accordance with the notice provisions of Section 8.6)
within the applicable survival period; provided, further:(i) that Buyer and
California Pro shall not have any obligation to indemnify Sellers from and
against any Adverse Consequences resulting from, arising out of or caused by the
breach of any representation, warranty or covenant of Buyer and California Pro
contained in this Agreement, until Sellers have suffered aggregate losses by
reason of all such breaches in excess of a $50,000 threshold (at which point
Buyer and California Pro will be obligated to indemnify Sellers from and
against, and be liable for, all such aggregate losses in excess of $50,000, and
(ii) that in calculating the foregoing $50,000 threshold, all losses suffered by
Sellers by reason of such breaches shall be cumulated; provided, that this
$50,000 threshold shall not apply to any direct payment obligations under this
Agreement or any of the other Buyer Documents.
7.5 MATTERS INVOLVING THIRD PARTIES. If any third party shall notify any
Party (the "Indemnified Party") with respect to any matter which may give rise
to a claim for indemnification against the other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall notify each
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any
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liability or obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is damaged.
If the Indemnifying Party notifies the Indemnified Party within 15 days
after the Indemnified Party has given notice of the matter that the Indemnifying
Party is assuming the defense thereof: (1) the Indemnifying Party will defend
the Indemnified Party against the matter with counsel of its choice reasonably
satisfactory to the Indemnified Party; (2) the Indemnified Party may retain
separate co-counsel at its sole cost and expense (except that the Indemnifying
Party will be responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party concludes reasonably that the counsel the
Indemnifying Party has selected has a conflict of interest); (3) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the matter without the written consent of the Indemnifying Party
(which consent will not be unreasonably withheld); and (4) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party (which consent will not be unreasonably withheld).
If the Indemnifying Party fails to notify the Indemnified Party within 15
days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, the Indemnified Party may
defend against, or enter into any settlement with respect to, the matter in any
manner it reasonably may deem appropriate.
8 MISCELLANEOUS.
8.1 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
8.2 ENTIRE AGREEMENT. This Agreement, the Seller Documents and the Buyer
Documents (and the other agreements referred to herein or therein) constitute
the entire agreement among the Parties and supersedes any prior understandings,
agreements or representations by or between the Parties, written or oral, that
may relate in any way to the subject matter hereof.
8.3 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written consent of
Buyer, California Pro and the Sellers. Notwithstanding the foregoing,
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Buyer and California Pro may assign their rights and obligations under this
Agreement for the benefit of their lenders, or the lenders to their
subsidiaries, or pursuant to any agreement or plan of merger, or to Buyer or
another subsidiary of California Pro in which California Pro is a substantial
shareholder. No assignment shall relieve the Parties hereto of their
respective liabilities and obligations hereunder.
8.4 COUNTERPARTS. This Agreement may be executed and delivered in one or
more counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
8.5 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.6 NOTICES. Any and all notices or service of process required or
permitted hereunder shall be in writing given as follows:
If to any of the Sellers, to the particular Seller:
c/o Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
With a copy to:
Edward I. Kramer, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, NY 11753
TEL: (516) 822-4820
FAX: (516) 822-4824
If to Buyer or California Pro, to the applicable Party at:
8102 White Horse Road
Greenville, SC 29611
ATTN: Michael S. Casazza, President
TEL: (864) 294-5370
FAX: (864) 294-5235
With a copy to:
Gerald Raskin, Esq.
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
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TEL: (303) 571-1400
FAX: (303) 595-3970
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any Party may give any notice or other communication hereunder
by personal delivery or using a nationally recognized overnight courier service,
telecopy or telex. Any Party may change the address to which notices, service
of process, requests, demands, claims or other communications hereunder are to
be delivered by giving the other Parties notice in the manner set forth herein.
8.7 GOVERNING LAW. This Agreement shall in all respects be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of New York.
8.8 JURISDICTION. The Parties hereby irrevocably and unconditionally (i)
consent to the exclusive jurisdiction of the United States District Court for
the Eastern District of New York or, if jurisdiction is not proper in such
court, the Supreme Court of the State of New York, Suffolk County, over any
action, suit or proceeding arising out of or relating to this Agreement,(ii)
agree not to commence any action, suit or proceeding arising out of or relating
to this Agreement except in such courts,(iii) agree that service of any process,
summons, notice or document sent by U.S. certified mail, return receipt
requested, or by nationally recognized overnight courier service to any other
Party's address shall be effective service or process for any such action, suit
or proceeding brought against any other Party in any such court, and (iv)waive
any objection to proceeding in such court, including objections relating to
FORUM NON-CONVENIENS.
8.9 LITIGATION. If litigation arises out of or in connection with the
transactions contemplated by this Agreement, the prevailing Parties in any such
action shall be entitled to recover from the other Parties all costs of court,
including reasonable attorneys' fees and court costs at the trial level.
8.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless it is in writing and signed by all of the
Parties. No waiver by any Party of any default, misrepresentation or breach
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach hereunder or in any way affect
any rights arising by virtue of any prior or subsequent such occurrence.
8.11 SEVERABILITY. If the final judgment of a court having jurisdiction
declares that any term or provision hereof is invalid or unenforceable, the
Parties agree that the court making the
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determination of invalidity or unenforceability shall have the power to
reduce the scope, duration or area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified
after the expiration of time within which the judgment may be appealed.
8.12 EXPENSES. Each of the Parties will bear his, her or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby, except $50,000 may be
expended by the Corporation in connection with this transaction.
8.13 CONSTRUCTION. If an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. Any reference to the neuter gender shall
also denote the masculine and feminine, and the masculine gender shall also
denote the neuter and feminine gender where the context so permits. Terms
defined in the singular shall have a comparable meaning when used in the plural
and visa versa. The parties intend that the each representation, warranty and
covenant contained herein shall have independent significance.
8.14 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
8.15 CONFIDENTIALITY. Each of Sellers will treat and hold as such all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible embodiments
(and all copies) of the Confidential Information in his possession. If any of
Sellers is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand or similar process) to disclose any Confidential Information, Seller will
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 8.15. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of Sellers is, on the advice of counsel, compelled to
disclose any
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Confidential Information to any Governmental Body or else stand liable for
contempt, that Seller may disclose the Confidential Information to the
Governmental Body; provided, however, that, at the reasonable request of
Buyer, the disclosing Seller shall use his best efforts to obtain an order or
other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals as
of the date first above written.
"CORPORATE SELLERS"
_______________________________
Warren Amendola, Sr.
_______________________________
Patricia Amendola
THREE R PROFIT SHARING
RETIREMENT PLAN
By_____________________________
_____________________________
"THREE R SELLERS"
_______________________________
Warren Amendola, Sr.
_____________________________
Warren Amendola, Jr.
_____________________________
Richard Amendola
_____________________________
Russell Amendola
"BUYER"
USA SKATE CORPORATION
By_____________________________
Michael S. Casazza, Sr.
President
"CALIFORNIA PRO"
CALIFORNIA PRO SPORTS, INC.
By_____________________________
Michael S. Casazza, Sr.
President
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LIST OF EXHIBITS
Exhibit A Buyer's Promissory Note with Guaranty
Exhibit B License Agreement with Guaranty
Exhibit C Consulting and Non-Compete Agreement with Guaranty
Exhibit D Escrow Agreement
Exhibit E1 Employment Agreement
Exhibit E2 Non-Compete Agreement - Warren Amendola, Jr.
Exhibit E3 Non-Compete Agreement - Richard Amendola
Exhibit F Registration Rights Agreement with Guaranty
Exhibit G Guaranty Re: Release/Cash Out of Collateral
Exhibit H Davtec Promissory Note with Guaranty
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LIST OF SCHEDULES
Sellers' Disclosure Schedule
Corporation Disclosure Schedule
Three R Disclosure Schedule
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Exhibit A
PROMISSORY NOTE
$1,050,000 April 30, 1996
FOR VALUE RECEIVED, the undersigned, USA SKATE CORPORATION, a Delaware
corporation ("Maker"), promises to pay to the order of WARREN AMENDOLA, SR.,
PATRICIA AMENDOLA, WARREN AMENDOLA, JR., RICHARD AMENDOLA and RUSSELL AMENDOLA
and THREE R PROFIT SHARING RETIREMENT PLAN (collectively, the "Holder"), at 22
Mallard Cove, Centerport, New York 11721 (or at such other place as Holder
shall designate in writing), in lawful money of the United States of America,
the principal sum of ONE MILLION-FIFTY THOUSAND DOLLARS ($1,050,000), with
interest on the outstanding principal from time to time, at such times and on
such terms and conditions as are set forth herein.
This Note arises out of the provisions of that certain Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of even date herewith,
among Maker, California Pro Sports, Inc. ("California Pro") and Holder, under
which Maker, directly or indirectly, acquired all of the outstanding shares of
capital stock of each of U S A Skate Co., Inc. and Three R Sales, Inc., and
Maker agreed to incur the indebtedness represented hereby.
1. MATURITY DATES. Principal and interest due under this Note shall
mature and be payable as follows:
August 1, 1996 $450,000 plus all accrued interest on the outstanding
principal
November 1, 1996 $125,000 plus all accrued interest on the outstanding
principal
April 1, 1997 $125,000 plus all accrued interest on the outstanding
principal
November 1, 1997 $125,000 plus all accrued interest on the outstanding
principal
May 1, 1998 $125,000 plus all accrued interest on the outstanding
principal
November 1, 1998 $100,000 plus all accrued interest on the outstanding
principal
2. INTEREST. Interest on the outstanding principal balance shall accrue
at the rate of eight percent (8%) per annum. Simple interest shall be computed
on the outstanding principal amount on the basis of a 365-day year.
3. DEFAULT. Notwithstanding any other provision of this Note, during any
period in which there exists an uncured Event of Default (as hereinafter
defined), all amounts then outstanding hereunder shall, at the option of the
Holder, bear interest at a
<PAGE>
rate of ten percent (10%) per annum (the "Default Rate"). Failure of the
Holder to demand or collect the full amount of interest at the Default Rate
shall not constitute a waiver of the Holder's right to the payment in full of
all interest accruing at the Default Rate.
4. PAYMENT PROCEDURES. All payments made hereunder shall be applied
first to unpaid costs hereunder, then to accrued, unpaid interest, and then to
principal. All amounts due hereunder shall be payable by Maker to Holder on
the respective maturity dates. If either payment hereunder is due on a day
other than a Business Day (as defined below), such payment shall be made on the
next Business Day following the day on which such payment otherwise would have
been due. For purposes of this Note, a "Business Day" means any day on which
commercial banks are generally open for regular banking business in the State
of New York.
5. REDUCTION OF PRINCIPAL. During the term of this Note, if Warren
Amendola, Sr. ("Amendola") realizes more than $1,200,000 from the sale of the
400,000 shares of California Pro common stock he received as compensation under
the Consulting and Non-Competition Agreement dated of even date herewith which
he entered into with Maker and California Pro in connection with the Stock
Purchase Agreement, then the unpaid principal installments shall be reduced
accordingly in inverse order of their maturity by an amount equal to the Excess
(as defined below) up to a maximum of $600,000. For purposes of this
provision, "Excess" means amounts over $1,200,000 received from such stock sale
proceeds, less all applicable income taxes Amendola is required to pay related
to his sales of California Pro common stock.
6. PREPAYMENTS. Maker may prepay the entire outstanding indebtedness of
Maker to Holder at any time, or may from time to time make partial prepayments
on the outstanding principal balance of this Note. All prepayments may be made
without penalty. No partial prepayments shall excuse, delay or reduce any
other payments due under this Note thereafter.
7. APPLICABLE LAW. The provisions of this Note will be construed in
accordance with the laws of the State of New York.
8. REIMBURSEMENT OF COLLECTION COSTS. Maker agrees to reimburse Holder
for all reasonable costs, including reasonable attorneys' fees, incurred to
collect this Note if not paid when due.
9. EVENT OF DEFAULT. The occurrence of any one of the events enumerated
below shall constitute an Event of Default under this Note. Upon the
occurrence of any Event of Default, Maker's rights under Section 5 above shall
terminate automatically without notice to Maker and Holder, at its option,
shall have the right to
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declare all amounts then remaining unpaid on this Note to be immediately due
and payable without presentment, demand, protest or other notice of any kind.
(a) If Maker shall fail to pay any amount due hereunder when due for
more than five days; or
(b) If Maker or California Pro shall (i) institute proceedings to be
adjudicated a voluntary bankrupt or insolvent, or (ii) consent to the filing of
a bankruptcy proceeding against it, or (iii) file a petition or answer seeking
reorganization or arrangement under any bankruptcy act or any other similar
applicable law of any country, or (iv) consent to the appointment of a receiver
or liquidator or trustee or assignee in bankruptcy or insolvency of itself, or
any of its property, or (v) make an assignment for the benefit of creditors, or
(vi) cease doing business as a going concern, or (vii) take any corporate
action in furtherance of any of the foregoing purposes; or
(c) If an order, judgment or decree of a court having jurisdiction
shall have been entered adjudicating the Maker or California Pro a bankrupt or
insolvent, or approving, as properly filed, a petition seeking reorganization
of Maker or California Pro or of all or a substantial part of its properties or
assets under any bankruptcy act or other similar applicable law, as from time
to time amended, or appointing a receiver, trustee or liquidator of Maker or
California Pro, and such order, judgment or decree shall remain in force,
undischarged and unstayed for a period of 30 days, or a judgment or lien for
the payment of money in excess of $250,000 shall be rendered or entered against
Maker or California Pro and the same shall remain undischarged or unbonded for
a period of 30 days or any writ or warrant or attachment shall be issued or
levied against a substantial part of the property of Maker or California Pro
and the same shall not be released, vacated or bonded within 30 days after
issue or levy; or
(d) If Maker or California Pro shall, without the prior written
consent of Holder, (i) transfer (regardless of how designated) all or
substantially all of its assets, (ii) merge or consolidate with another
corporation or entity in which it is not the surviving corporation, or (iii) in
the case of the Maker, if more than fifty percent (50%) of the issued and
outstanding shares of voting stock of Maker shall be sold or transferred,
directly or indirectly, whether in a single transaction or as the aggregate
result of a series of transactions other than as a result of the public
offering of the Maker's equity securities, and in the case of California Pro,
if more than a majority of the members of the Board of Directors of California
Pro or any successor entity, including either Henry Fong or Michael S. Casazza,
changes other than by a shareholder vote.
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10. GUARANTY. Payment of amounts due under this Note are fully
guaranteed by California Pro, Henry Fong and Michael S. Casazza, and by Carolyn
Fong up to a maximum of $300,000 in accordance with the guaranty attached
hereto as Attachment 1 and incorporated herein by this reference.
11. SUBORDINATION. The Holder, by its acceptance of this Note,
understands and agrees that the payments due hereunder from Maker shall be
subordinated to LaSalle National Bank (the "Bank") to the extent prescribed in
a separate agreement between the Holder and the Bank.
12. WAIVERS; OTHER MATTERS.
(a) The Maker and all endorsers hereof hereby waive presentment,
demand, protest, notice of protest, notice of dishonor and all other forms of
demand and notice concerning this Note and consent to each and every extension
or postponement of the time of payment or other indulgence with respect to this
Note, and to each and every substitution, addition, exchange or release of
collateral and to the addition, substitution or release of any person primarily
or secondarily liable hereunder. No delay or omission by the Holder or other
holder hereof in exercising any right or power hereunder shall operate as a
waiver of such right or power, and a waiver on one occasion shall not be
construed as a waiver or a bar to the exercise of any right on any other
occasion. Any provision in this Note which is prohibited by law shall be
ineffective to the extent of such prohibition without invalidating any other
provision hereof.
(b) The rights and remedies of the Holder of this Note as provided in
this Note, and any other agreements, mortgages, pledges and instruments given
as security for this Note shall be cumulative and concurrent, and may be
pursued singly, successively, or together against the property described in
such instruments and agreements and any other refunds, property or security
held by the Payee for the payment hereof or otherwise at the sole discretion of
the Payee. The failure to exercise any such right or remedy shall in no event
be construed as a waiver or release of said rights or remedies or of the right
to exercise them at any time later.
(c) The Maker irrevocably and unconditionally (i) consents to the
exclusive jurisdiction of the United States District Court for the Eastern
District of New York or, if jurisdiction is not proper in such court, the
Supreme Court of the State of New York, Suffolk County, over any action, suit
or proceeding arising out of or relating to this Note,(ii) agrees not to
commence any action, suit or proceeding arising out of or relating to this Note
except in such courts,(iii) agrees that service of any process, summons, notice
or document sent by U.S. certified mail, return receipt requested, or by
nationally
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recognized overnight courier service to Maker's address shall be effective
service or process for any such action, suit or proceeding brought against
Maker in any such court, and (iv) waive any objection to proceeding in such
court, including objections relating to FORUM NON-CONVENIENS.
13. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be in writing given as follows:
If to a Holder, to the particular Holder at:
c/o Warren Amendola
22 Mallard Cove
Centerport, NY 11721
If to Maker at:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
ATTN: Michael S. Casazza, President
FAX: (864) 294-5235
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Maker or Holder may give any notice or other communication
hereunder by personal delivery or using a nationally recognized overnight
courier service, telecopy or telex. Maker or Holder may change the address to
which notices, service of process, requests, demands, claims or other
communications hereunder are to be delivered by giving the other notice in the
manner set forth herein.
USA SKATE CORPORATION
By_____________________________
Michael S. Casazza, President
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Michael S. Casazza
to me known, who, being by me duly sworn, did depose and say that he is the
President of USA Skate Corporation, a Delaware corporation with its principal
office located at 8102 White Horse Road, Greenville, South Carolina, the
corporation described in and which executed the foregoing instrument and that
he is authorized by the board of directors of said corporation to sign on
behalf of said corporation.
______________________________
Notary Public
-5-
<PAGE>
ATTACHMENT 1
to EXHIBIT A
GUARANTY
THIS GUARANTY is dated and delivered effective as of April 30, 1996, by
California Pro Sports, Inc., Henry Fong, Michael S. Casazza and Carolyn Fong
(collectively, the "Guarantors"), for the benefit of Warren Amendola, Sr.,
Patricia Amendola, Warren Amendola, Jr., Richard Amendola, Russell Amendola,
and Three R Profit Sharing Retirement Plan (collectively the "Holders").
A. Pursuant to a Stock Purchase Agreement of even date herewith (the
"Stock Purchase Agreement"), USA Skate Corporation ("Maker") has purchased
shares of the capital stock of USA Skate Co., Inc. and Three R Sales, Inc.
owned by the Holders in exchange for certain consideration including Maker's
promissory note in the principal amount of $1,050,000 dated the date hereof
(the "Note").
B. A condition to the closing under the Stock Purchase Agreement was that
the Guarantors enter into this Guaranty.
C. Capitalized terms used but not defined herein shall have the meanings
ascribed in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the completion of the transactions
under the Stock Purchase Agreement, the compliance by the Holders with the
provisions of the Stock Purchase Agreement and various agreements related
thereto, and for other good and valuable consideration, the adequacy and
receipt of which hereby are acknowledged, and intending to be legally bound,
the Guarantors hereby covenant and agree as follows:
1. THE GUARANTY. The Guarantors hereby absolutely, unconditionally and
jointly and severally guarantee to the Holders the timely payment of all
principal, interest and other amounts due under the Note, as and when the same
are due (the "Guaranteed Obligations"), provided, however, that the liability
of Carolyn Fong to the Holders hereunder is limited to, and shall not exceed,
$450,000.
2. APPLICATION OF PAYMENTS. Any payment made by Guarantors, or any of
them, under this Guaranty shall be effective to reduce or discharge the
liability of the Guarantors hereunder without further notice of any kind.
3. CONTINUING GUARANTY. The rights of the Holders under this Guaranty are
in addition to, and not mutually exclusive of, any and all other rights and
remedies Holders may have under the Note, the Stock Purchase Agreement and/or
any other agreements or guaranties related to, or arising out of, the
transaction, as well as by reason of any law or in equity. Without limiting
the foregoing, the Holders shall be entitled to demand and receive payment and
performance
Attachment 1 - Page 1
<PAGE>
from the Guarantors under this Guaranty, notwithstanding the availability of,
or the Holders' failure to pursue or enforce any right or remedy they may have
against the Maker and notwithstanding the failure of the Holders to avail
themselves or realize the benefit of any other right or remedy afforded to them
under any other agreement, guaranty or policy of insurance.
Except as otherwise provided herein, this Guaranty shall continue in force
and be binding upon the Guarantors until the Guaranteed Obligations have been
paid in full. If the Maker and/or any of its successors and assigns fail to
pay any of the Guaranteed Obligations when such amounts become due, then
Holders may enforce this Guaranty against any one or more of the Guarantors,
subject only to the agreement described in Section 6(e) of this Guaranty.
4. NO IMPAIRMENT. This Guaranty shall not be affected or impaired by any
extension of time, forbearance, waiver or concession given to Maker, any
assertion of, or delay in asserting, any right, power or remedy against Maker,
any modification or amendment to the provisions of the Note; the dissolution,
liquidation, reorganization or winding up of Maker; the release or limitation
of liability of any other guarantor of Maker's obligations, covenants and
agreements or any other circumstances which might otherwise constitute a legal
or equitable discharge or defense of a guarantor.
5. TERMINATION. This Guaranty shall terminate when the Guaranteed
Obligations have been paid in full. Thereafter, Holders will furnish the
Guarantors' written cancellation of this Guaranty and will return the original
of this Guaranty to the Guarantors.
6. GENERAL PROVISIONS.
(a) No delay on the part of Holders in the exercise of any power or
right shall operate as a waiver thereof, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof or
the exercise of any other power or right.
(b) This Guaranty may not be assigned and may not be modified except
by a writing signed by all of the parties hereto and the Holders.
(c) This Guaranty is made under and shall be governed by the laws of
the State of New York.
(d) JURISDICTION AND FORUM SELECTION. The guarantors hereby
irrevocably and unconditionally (i) consent to the exclusive jurisdiction of
the United States District Court for the Eastern District of New York (or if
there is no subject matter jurisdiction, the Supreme Court of New York for the
County of Suffolk) over any action, suit or proceeding arising out of or
relating to this Guaranty, (ii) agree not to commence any action, suit or
proceeding arising out of or relating to this Guaranty except in such court,
(ii) agree that service of any process, summons, notice or document sent by
U.S. certified mail, return receipt requested, or by nationally recognized
overnight courier service to any other Party's address shall be effective
against any other party in any such court, and (iv) waive any objection to
proceeding in such
Attachment 1 - Page 2
<PAGE>
court, including, but not limited to, objections as to personal jurisdiction
and for forum non-conveniens.
(e) Holders agree that their rights under this Guaranty are
subordinate to rights of LaSalle National Bank ("Bank") to the extent
prescribed in a separate agreement with the Bank.
7. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be given in writing as follows:
If to Holders:
c/o Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
If to California Pro Sports, Inc.:
8102 White Horse Road
Greenville, SC 29611
Attention: Michael S. Casazza, President
TEL: (864) 294-5370
FAX: (864) 294-5235
If to Michael S. Casazza:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
TEL: (864) 294-5370
FAX: (864) 294-5235
If to Henry Fong and/or Carolyn Fong:
2401 PGA Blvd., Suite 280F
Palm Beach Gardens, FL 33410
TEL: (407) 624-0885
FAX: (407) 624-9507
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication hereunder
by personal delivery or by using a nationally recognized overnight courier
service, telecopy or telex.
Attachment 1 - Page 3
<PAGE>
Any party may change the address to which such notices and communications
shall be sent by written notice to the other parties, provided that any notice
of change of address shall be effective only upon receipt.
IN WITNESS WHEREOF, Guarantors have each caused this Guaranty to be
executed as of the date first above written.
CALIFORNIA PRO SPORTS, INC.
By______________________________
Michael S. Casazza, President
________________________________
Henry Fong, Individually
________________________________
Michael S. Casazza, Individually
________________________________
Carolyn Fong, Individually
Attachment 1 - Page 4
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known, who being by me duly sworn, did depose and say that he
resides in __________________ County; that he is the President of CALIFORNIA
PRO SPORTS, INC., the corporation described in, and which executed the
foregoing instrument; that he knows the seal of said corporation, that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation and that he signed his name
thereby by like order.
____________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Henry Fong, to
me known to be the individual described in, and who executed, the foregoing
instrument, and acknowledged that he executed the same.
___________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
Attachment 1 - Page 5
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Carolyn Fong, to
me known to be the individual described in, and who executed, the foregoing
instrument, and acknowledged that he executed the same.
___________________________
Notary Public
Attachment 1 - Page 6
<PAGE>
Exhibit B
LICENSE AGREEMENT
LICENSE AGREEMENT ("Agreement"), dated as of the 30th day of April, 1996,
by and between WARREN AMENDOLA, Sr., residing at 22 Mallard Cove, Centerport,
New York ll721 ("Licensor"), and USA SKATE CO., INC., a corporation organized
and existing under the laws of New York ("Licensee"), with principal executive
offices at 7 Brayton Court, Commack, New York 11725.
A. Licensor is the owner of certain trademarks and intellectual property
described herein.
B. Licensee is a manufacturer, importer and distributor of certain
products, including certain items of Merchandise, and is desirous of continuing
to associate certain items of Merchandise produced by or for it with the
Licensed Marks so as to obtain the benefits associated therewith.
C. There exists currently between Licensor and Les Equipements Sportifs
Davtec, Inc. ("Davtec"), a certain License Agreement dated September 28, 1994 in
connection with the use of certain trademarks, including the trademarks "VIC"
and "VICTORIAVILLE", on Canadian Merchandise manufactured, sold or distributed
(the "Davtec License Agreement").
D. Pursuant to a certain agreement (the "Stock Purchase Agreement"), dated
of even date herewith, by and among USA Skate Corporation ("Skate Corp."), as
Buyer, the Licensor, Patricia Amendola and Three R Profit Sharing Retirement
Plan as "Corporate Sellers," and the Licensor, Warren Amendola, Jr., Richard
Amendola and Russell Amendola as "Three R Sellers", Skate Corp. has acquired
from the Corporate Sellers all of their shares of the Capital Stock of USA Skate
Co., Inc. ("USA Skate") and from the Three R Sellers, all of their shares of
Capital Stock of Three R Sales, Inc. (the "Transaction").
E. In connection with the Transaction, and as a condition to the
consummation thereof, the Licensor shall terminate any and all agreements
providing for the licensing of the Licensed Marks, including the Davtec License
Agreement, and shall grant to Licensee the exclusive license to use the Licensed
Marks in connection with the manufacture and sale of Merchandise within the
Territory, all on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, the mutual promises set
forth below and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Licensor and Licensee hereby agree
as follows:
1. DEFINITIONS. The following definitions shall be applicable throughout
this Agreement:
1.1 The term "Territory" shall mean worldwide.
<PAGE>
1.2 The term "Licensed Mark" or "Licensed Marks" shall mean the
registered trademarks in the United States and Canada "VIC" and "VICTORIAVILLE",
registration particulars of which are set out in Schedule "A", pending
applications, and wheresoever used all associated marks using the words "VIC" or
VICTORIAVILLE", and all logos, including the stylized "VIC" logo, together with
all future trademarks or service marks adopted or used by Licensor, whether
registered or unregistered, which the Licensor may authorize the Licensee to use
in writing under authority of this Agreement.
1.3 The term "Merchandise" shall mean hockey sticks, street/roller
hockey sporting equipment, in-line skates and related equipment, ice hockey
equipment and ice skates, snow boards, sport bags, golf equipment and other
comparable and non-comparable sporting equipment and products as the Licensor
may approve in writing from time to time.
1.4 The term "Licensed Merchandise" shall mean Merchandise sold or
promoted, or intended to be sold or promoted, in connection with the Licensed
Marks, as to which Licensor shall be entitled to receive and shall receive the
benefits of the insurance coverages and indemnities herein provided; the term
"Approved Licensed Merchandise" shall mean Licensed Merchandise approved by
Licensor in accordance with the provisions of Paragraph 3.1 and 3.2 hereof, as
to which Licensor shall be entitled to receive and shall receive the benefits of
the insurance coverages and indemnities herein provided and shall include all
Merchandise being manufactured and/or distributed by Licensee on the date hereof
and any other Merchandise which is not timely disapproved by Licensor pursuant
to Section 3.
1.5 The term "Sample" shall mean any and all models, or actual
samples, or prototypes, of Licensed Merchandise, except that "Final Sample"
shall mean the actual final Sample of an item of Licensed Merchandise from which
commercial production thereof will be made, and which has been approved or
deemed approved by Licensor pursuant to the provisions of Articles 3 and 4
hereof.
1.6 An "affiliate" of any person or entity shall mean and include any
person, corporation or other entity controlling, controlled by or under common
control with, such person or entity.
1.7 The term "First Year" shall mean the period commencing on the
date of this Agreement, and expiring on the first anniversary of such date.
1.8 The term "Contract Year" shall mean the First Year, and each
period of twelve months commencing on the first anniversary of such date, and on
each such anniversary thereof thereafter.
1.9 The term "Current USA Skate Merchandise" shall mean such items of
Merchandise as are presently manufactured, sold or distributed by Licensee or
Davtec in connection with the Licensed Marks.
2
<PAGE>
1.10 The term "Acceptable Insurance Carrier" shall mean Licensee's
current carrier or a reputable, recognized and responsible insurance carrier
licensed to do business in the State of New York and having a financial
condition which is at all times rated the same or superior to that of the
Licensee's current carrier, as determined by Best's Insurance Ratings.
1.11 "License Guarantee" shall mean the Guarantee described in Section
9.1 hereof.
2. GRANT OF LICENSE; TERM.
2.1 Licensor hereby grants to Licensee, and Licensee accepts, the
exclusive right, license and privilege to use the Licensed Marks as a trademark
and trade name in connection with the manufacture, advertising, merchandising,
promotion, sale and distribution to the trade throughout the Territory during
the term of this agreement of Approved Licensed Merchandise, all in accordance
with the terms and subject to the conditions set forth in this Agreement.
2.2 The term of this Agreement shall commence as of the date hereof
and shall continue through February 28, 2003 ("Original Term"), unless sooner
terminated or extended as provided herein ("Term").
2.3 (a) The license granted herein is strictly personal to Licensee.
Neither this Agreement nor any of the rights granted to Licensee hereunder may
be transferred, assigned, pledged, sold, mortgaged, sublicensed or otherwise
hypothecated or disposed of (collectively, "transferred") by Licensee, in whole
or in part, by operation of law or otherwise, to any person, firm, corporation,
or entity without the express prior written consent of Licensor; PROVIDED, that
Licensor's consent to any sublicense hereunder shall not be unreasonably
withheld; and PROVIDED, further, that any such sublicense or transfer shall be
made only pursuant to a written agreement which by reference or actually
incorporates the material terms and conditions hereof and obligates the
sublicensee to be bound thereby, and otherwise is satisfactory to Licensor, it
being understood that, without limiting the foregoing, no such transfer shall be
approved unless, notwithstanding such transfer, Licensee shall continue to
remain primarily liable, as a guarantor of payment and performance, for all
obligations of any assignee or sublicensee, and the License Guarantee (as herein
defined) shall continue in full force and effect. Notwithstanding the
foregoing, Licensee shall have the right (i) to assign collaterally this
Agreement to LaSalle National Bank or any subsequent primary bank lender to
Licensee, and (ii) to sublicense to Davtec its rights to use the Licensed Marks
in connection with the manufacture of certain Approved Licensed Merchandise in
Canada, but only pursuant to, and in conformance with, the terms and conditions
of this Section 2.3(a). As used herein, the term "Licensee" shall include any
assignee or sublicensee of Licensee so approved by Licensor as hereinabove
provided.
(b) Notwithstanding the foregoing, Licensee may employ
subcontractors solely for the manufacture of Approved Licensed Merchandise, it
being understood that (a) all such subcontractors shall comply with the quality
requirements of this
3
<PAGE>
Agreement, (b) Licensee's obligations hereunder shall not be diminished by
its use of any subcontractor and Licensee shall continue to remain liable
hereunder for all obligations of Licensee herein, as shall the License
Guarantors under the License Guaranty, and (c) Licensor shall be entitled
directly to enforce the provisions hereof against any such subcontractor and
Licensee shall cooperate in good faith in any such effort by Licensor.
2.4 Licensee shall use the Licensed Marks only in the form approved
in writing by Licensor for use by Licensee and shall use the Licensed Marks only
in connection with the manufacture, advertising, merchandising, promotion, sale
and distribution to the trade of Approved Licensed Merchandise, subject to the
limitations herein set forth. No license is granted hereunder for the use of
any of the Licensed Marks for any purpose other than upon or in connection with
the manufacture, advertising, merchandising, promotion, sale and distribution of
Approved Licensed Merchandise within the Territory.
3. SAMPLES; MERCHANDISE.
3.1 (a) It is the express intention of the parties hereto and a
material provision of this Agreement that notwithstanding references throughout
this Agreement to the advertising, promotion, manufacture, sale and/or
distribution of "Licensed Merchandise," no Licensed Merchandise is to be
manufactured, sold or distributed by Licensee unless either it has been actually
approved by the Licensor or deemed to be approved in accordance with the terms
of this Agreement.
(b) Accordingly, to further the intention of the parties as
expressed in Section 3.1(a), at such times as Licensor may request reasonably,
and not less than thirty (30) days prior to commencement of commercial
production of a new model or item of Licensed Merchandise, Licensee shall
prepare and present to Licensor, or its designee, at such place as Licensor may
in its discretion reasonably designate, at Licensee's sole cost and expense, a
Sample in respect of each model or item of Licensed Merchandise proposed to be
sold by Licensee, which shall embody all of the specifications (the
"Specifications"), including, without limitation, the workmanship, quality,
design, dimensions, styling, detail, materials, colors and the like, as are to
be used in the actual production of each model or item of Approved Licensed
Merchandise to be based on said Sample. In the event that Licensor rejects a
particular Sample or Samples, Licensor shall specify in writing to the Licensee
its reasons for such rejection and shall provide Licensee with suggestions for
modifying the particular Sample or Samples which Licensor is rejecting.
Licensee shall, as promptly as practicable, modify said Sample or Samples,
resubmit said Sample or Samples to Licensor and seek Licensor's approval under
the same terms and conditions as set forth with respect to the first submission
of Samples.
(c) If the Licensor rejects or disapproves of any Sample or
Samples upon such resubmission, the Licensee shall not be entitled under any
circumstances to commence or continue to manufacture, sell and distribute the
models or items of Licensed Merchandise which the rejected Sample or Samples
were intended to reflect and Licensee's only recourse if it disputes the
Licensor's determination in this regard, is to arbitrate the issue in accordance
with Section 16 of this Agreement.
4
<PAGE>
3.2 (a) The approval of Licensor of any submission of Samples shall
be evidenced by a written list, duly signed by a representative of Licensor,
setting forth those Samples which have been approved as Final Samples for
production by Licensor. Licensor shall respond as promptly as reasonably
practicable to any request for approval of Samples; any such request shall be
addressed to the attention of such person, at such address, as Licensor may from
time to time designate (any change in the person and/or address so designated to
be effective in accordance with the provisions of Section 18 hereof) and shall
refer to this paragraph of the Agreement. If neither approval nor disapproval
shall have been given within fifteen (15) days after Licensor's actual receipt
of Licensee's written request as aforesaid, Licensor's approval of the Samples
as shall have been specified in such notice shall be deemed to have been given,
and such Samples or shall thereupon be deemed Final Samples hereunder.
(b) Based on the representations and warranties contained
herein, Licensor hereby approves, as Final Samples hereunder, those items of
Current USA Skate Merchandise which have been manufactured or sold by Licensee
during the three (3) years preceding this Agreement.
3.3 The Approved Licensed Merchandise manufactured and sold by
Licensee shall be of high quality and shall strictly adhere, in all respects,
including, without limitation, with respect to the Specifications therefor, to
the Final Samples therefor approved by Licensor ("Quality Standards"). The
present quality of the Licensed Merchandise is hereby deemed to be acceptable
quality under this paragraph. Future compliance with the standards set forth in
Section 3.5 and adherence to present quality standards shall be deemed
acceptable by Licensee.
3.4 Licensee hereby represents, warrants and covenants that Licensee
shall own or obtain, prior to any use thereof, any and all rights in or to any
designs, logos or the like necessary to enable Licensee to manufacture and sell
Approved Licensed Merchandise based on or embodying any of same.
3.5 Licensee hereby represents, warrants and covenants further that
all Licensed Merchandise manufactured by or on behalf of Licensee shall equal or
exceed all applicable industry and governmental standards established in respect
of safety, including, without limitation, such standards as have been and in the
future may be promulgated by the Acceptable Insurance Carrier then providing
coverage pursuant to Section 14 hereof in respect of Licensed Merchandise
("Safety Standards"). Licensee represents and warrants that it will comply
with, and observe strictly all laws, statutes, rules, regulations, and
industrial or governmental standards and requirements, now in force or hereafter
adopted, which may be applicable to the manufacture, distribution, sale or
promotion of Licensed Merchandise anywhere in the Territory. Licensee shall
supply to Licensor, as reasonably requested from time to time, copies of all
certifications provided by all manufacturers or importers of Licensed
Merchandise or components thereof.
5
<PAGE>
4. QUALITY OF MERCHANDISE; MARKETING.
4.1 Licensor shall have the continuing right to approve all items of
Licensed Merchandise, including without limitation, the Specifications therefor,
to satisfy itself that all Licensed Merchandise manufactured, sold or
distributed complies with the Quality Standards and Safety Standards and is
consistent with the reputation and established prestige and goodwill connected
with the names "VIC" and 'VICTORIAVILLE."
4.2 In the event that any Licensed Merchandise is, in the reasonable
judgment of Licensor, not being manufactured or sold in accordance with the
Quality Standards or Safety Standards as set forth in Sections 3.3 and 3.5
hereof or in a manner that adversely affects materially the reputation, prestige
and goodwill connected with the names "VIC" and "VICTORIAVILLE," Licensor shall
notify Licensee thereof in writing and Licensee shall, as promptly as
practicable, repair or change all items of the type or style of Licensed
Merchandise which are the subject of any such notification to conform with such
provisions. If in the judgment of Licensor the Licensed Merchandise, as
repaired or changed, still does not comply with the Quality Standards and Safety
Standards, and such compliance cannot be obtained after at least one
resubmission, then, Licensee shall discontinue manufacturing, selling and
distributing such items, types or styles of Licensed Merchandise. If Licensee
disputes the Licensor's determination regarding the compliance of Licensed
Merchandise with Quality Standards or Safety Standards, Licensee's only recourse
is to arbitrate the issue in accordance with Section 16 hereof. Any recall of
Licensed Merchandise required by any governmental agency or instituted
voluntarily by Licensee shall be conducted solely at the Licensee's expense.
4.3 The duly authorized representatives of Licensor shall have the
right, upon reasonable advance written notice to Licensee and during normal
business hours, to inspect all facilities utilized by Licensee, its contractors
and suppliers, in connection with the manufacture, sale, storage or distribution
of Licensed Merchandise pursuant hereto and to examine Licensed Merchandise in
process of manufacture and when offered for sale within Licensee's operations.
Licensee consents to Licensor's examination of Licensed Merchandise held by its
customers for resale. To the extent such manufacturing and selling facilities
are not owned or controlled by Licensee, Licensee shall use its best efforts to
permit the representatives of Licensor to make such inspections. Licensee also
shall use its best efforts and shall take all steps reasonably requested by
Licensor to prevent or avoid any misuse of the Licensed Marks by any of its
contractors, suppliers or customers.
5. USE OF LICENSED MARKS: ADVERTISING AND PROMOTION.
5.1 In all of its advertising, business and promotional materials and
all packaging and packaging materials for all items of Licensed Merchandise
(including, without limitation, signs, phone listings, order forms, invoices,
letterhead, labels, package inserts, boxes, receptacles, adornments, tags,
brochures, user manuals or instruction sheets) Licensee shall not employ or
otherwise release any of same, including, without limiting the foregoing, any
advertisement relating to any Licensed Merchandise, unless and until Licensee
shall have made a request, in writing, for approval, and Licensor shall have
consented to or approved
6
<PAGE>
the same in writing. Licensor shall not unreasonably withhold its consent or
approval to the use of the Licensed Marks on, or in connection with,
advertising, business and promotional materials and all packaging materials
for items of Licensed Merchandise, and Licensor hereby approves Licensee's
continued use of the advertising, business and packaging materials which are
currently used in connection with Merchandise bearing the Licensed Marks.
Approval or disapproval of any proposed use of the Licensed Marks in
connection with the advertising, promotion, packaging and marketing of the
Licensed Merchandise shall be given by Licensor as promptly as reasonably
practicable after receipt of Licensee's request in connection therewith, but
in all cases within five (5) business days after actual receipt by Licensor
of Licensee's request; if neither approval nor disapproval has been given
within such time, approval shall be deemed to have been given. It shall not
be necessary to obtain prior approval for each separate, substantially
similar use of the Licensed Marks containing immaterial changes from the use
of the Licensed Marks so approved.
5.2 If and to the extent that Licensee shall desire to modify,
enhance or otherwise alter the Licensed Marks as to be used in the future in
connection with Licensed Merchandise, through, for example, the adoption of a
new logo typeface or type style or the addition of a new word or phrase to
accompany the trademarks "VIC" or "VICTORIAVILLE" (each, a "Mark Modification"),
Licensee shall give written notice of same to Licensor, specifying the proposed
modification, enhancement or alteration (accompanied by drawings, if
appropriate) and its proposed date of first use thereof, which shall not be less
than thirty (30) days after the date of the notice specifying same. Approval or
disapproval of any proposed Mark Modification shall be given by Licensor as
promptly as reasonably practicable after receipt of Licensee's request in
connection therewith, but in all cases within fifteen (15) business days after
actual receipt by Licensor of Licensee's request; if neither approval nor
disapproval has been given within such time, approval shall be deemed to have
been given. From and after any such approval or deemed approval, the term
Licensed Marks shall be deemed to include the Mark Modification so approved. In
no event shall the Licensee utilize for any purpose a Mark Modification which
has not been approved by the Licensor.
5.3 Whenever Licensor disapproves a request by the Licensee to use
the Licensed Mark on advertising, business, promotion or packaging materials
pursuant to Paragraph 5.1 or to modify, enhance or alter the Licensed Marks
pursuant to Paragraph 5.2, Licensor shall specify its objections thereto in
writing. If the Licensee disputes the Licensor's determination pursuant to
either Sections 5.1 or 5.2, its only recourse shall be to arbitrate the issue in
accordance with Section 16 of this Agreement.
6. TRADEMARK AND RELATED RIGHTS.
6.1 Licensee acknowledges that the Licensed Marks have acquired a
valuable secondary meaning and goodwill in the minds of the trade and the
public. Licensee shall comply with all laws or regulations applicable or
necessary for the protection of the Licensed Marks, or which Licensor, in its
discretion, may deem appropriate for that purpose. Sales by Licensee of
Licensed Merchandise shall be deemed for the purposes of trademarks registration
to have been made by and for the benefit of Licensor. Licensee shall never do
7
<PAGE>
or suffer to be done any act or thing which may, in any material way, impair the
rights of Licensor in and to the Licensed Marks or which may affect the validity
of the Licensed Marks or which may derogate, depreciate or detract from the
value of the Licensed Marks or their repute and goodwill. In this regard,
Licensee shall use all markings and legends in connection with its use of the
Licensed Marks as may be reasonably requested by the Licensor to protect the
Licensed Marks under any and all applicable laws relating to the same.
6.2 Licensee acknowledges that only Licensor may file and prosecute a
trademarks application or applications or other actions with respect to the
Licensed Marks for any items or services, including Licensed Merchandise.
Licensee shall fully cooperate with Licensor in connection with any such
application or prosecution or action; without limiting the foregoing, Licensee
shall, at its sole cost and expense, execute and deliver any and all documents
and instruments requested by Licensor which Licensor may deem necessary, proper
or appropriate in such regard.
6.3 To the extent any rights in and to the Licensed Marks are deemed
to accrue to Licensee during the Term of this Agreement prior to the license
becoming a Fully Paid Up License as provided in Section 11 pursuant to this
Agreement or otherwise, Licensee hereby assigns any and all such rights, at such
time as they may be deemed to accrue, to Licensor. Licensee shall execute and
deliver any and all documents and instruments requested by Licensor which
Licensor may deem necessary, proper or appropriate to accomplish or confirm the
foregoing. Any such assignment, transfer or conveyance shall be without
consideration other than the mutual agreements contained herein.
6.4 Licensee agrees that neither it nor any of its affiliates ever
will (i) challenge the validity or ownership by Licensor of the Licensed Marks
or any application for registration thereof by Licensor, or any trademarks
registrations thereof by Licensor in any jurisdiction, or any actions taken by
Licensor with respect thereto, nor (ii) contest the fact that Licensee's rights
under this Agreement (a) are solely those of a manufacturer and distributor, and
(b) subject solely to the provisions of Section 11 hereof, terminate upon
termination of this Agreement.
6.5 In the event that any designs of Licensor of Licensed
Merchandise, or for any packaging, tag, label or other item or material used in
connection therewith shall be entitled to, or become the subject of, patent,
trademarks or copyright protection, Licensor shall have the right, at its own
expense, to file applications therefor and shall be the exclusive owner of such
rights, subject to the provisions of Section 11. Licensee shall fully cooperate
with Licensor in connection with any such activities.
6.6 The provisions of this Article 6 shall survive any termination or
expiration of this Agreement, subject to the provisions of Section 11.
7. ROYALTY PAYMENTS AND STATEMENTS.
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7.1 Subject to a Subordination Agreement with LaSalle National Bank,
and except as otherwise provided in Section 7.2(d) hereof, Licensee shall pay to
Licensor, on the dates provided below, the Guaranteed Minimum Royalty
hereinafter set forth, as a non-refundable advance against Percentage Royalties
(defined below) payable to Licensor hereunder in respect of the Contract Year
specified.
(a) No credit shall be permitted against the Guaranteed Minimum
Royalty paid in respect of any Contract Year on account of the Guaranteed
Minimum Royalty or Percentage Royalties paid or payable in respect of any other
Contract Year.
(b) If the aggregate of all Guaranteed Minimum Royalties and
Percentage Royalties paid by Licensee to Licensor hereunder in respect of a
Contract Year shall equal or exceed the Guaranteed Minimum Royalty for such
Contract Year, then, and in such event, Licensee shall not be obliged to make
payment of any further installment of Guaranteed Minimum Royalty otherwise
payable hereunder in respect of such Contract Year.
7.2 (a) Subject to the Prepayment Option in Section 7.2(c), the
Guaranteed Minimum Royalty shall be Three Million ($3,000,000.00) Dollars to be
paid in installments (the "Installment Payments"):
(i) $150,000 on or before February 15, 1997
(ii) $150,000 on or before June 1, 1997
(iii) $300,000 on or before December 1, 1997
(iv) $300,000 on or before June 1, 1998
(v) $300,000 on or before December 1, 1998
(vi) $300,000 on or before June 1, 1999
(vii) $300,000 on or before December 1, 1999
(viii) $300,000 on or before June 1, 2000
(ix) $300,000 on or before December 1, 2000
(x) $300,000 on or before June 1, 2001
(xi) $300,000 on or before December 1, 2001
(b) Notwithstanding any prepayment thereof pursuant to Section
7.2(c) or 7.2(d) hereof, each of the Installment Payments (viii) through (xi)
that now are due to be paid respectively, on or before June 1, 2000, December 1,
2000, June 1, 2001, and December 1, 2001 (the "Escrow Installment Payments"),
shall be paid to Blau, Kramer, Wactlar & Lieberman, P.C. as Escrow Agent to be
held and disposed of in accordance with the terms and conditions of a certain
Escrow Agreement dated as of even date herewith by and among Licensor, Skate
Corp. and California Pro Sports, Inc. ("California Pro"); provided, however,
that if an Event of Default (as defined) pursuant to Sections 10.1(a) or
10.1(f), shall have occurred, all of the Escrow Payments to be made subsequent
thereto shall be paid directly to the Licensor and shall not be subject to the
Escrow Agreement.
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(c) Provided there is no existing default by Licensee under this
Agreement as more fully described in Section 10 of this Agreement, the Licensee
shall have the right on at least thirty (30) days notice to Licensor (the
"Prepayment Notice") to prepay the whole, but not less than the whole of the
then remaining balance of the Guaranteed Minimum Royalty (the "Prepayment
Option"), in which event each of the remaining installments of $150,000 to be
prepaid shall be reduced accordingly for that purpose to $125,000, and the
installments of $300,000 to be prepaid shall be reduced accordingly for that
purpose to $250,000. The Prepayment Option shall expire on May 31, 2001, with
the Prepayment Notice to be given by Licensee no later than May 2, 2001.
(d) Notwithstanding the foregoing, in the event that Skate Corp.
shall consummate prior to May 31, 2001, a "Public Offering" of its common stock
(as that term is defined in a certain Registration Rights Agreement dated even
date herewith by and among Skate Corp., California Pro and the Corporate Sellers
and Three R Sellers [the "Registration Rights Agreement"] from which Skate Corp.
and/or its affiliates shall derive proceeds (the "Proceeds"), then Licensee must
prepay the outstanding balance of the Guaranteed Minimum Royalty by applying
against the unpaid Installment Payments (which shall be reduced accordingly to
the same extent provided in Section 7.2[c] for that purpose) in the inverse
order of their maturity, the following amounts:
PROCEEDS PREPAYMENT
-------- ----------
(i) up to $3,000,000 $1,000,000
(ii) $3,000,001 - $4,000,000 $1,200,000
(iii) $4,000,001 - $5,000,000 $1,400,000
(iv) $5,000,001 - $6,000,000 $1,900,000
(v) $6,000,001 - $7,000,000 $2,500,000
In no event shall this "Mandatory Prepayment Obligation" require the
Licensee to use the Proceeds to make such prepayment or to pay more than the
Licensee otherwise would be required to pay if it exercised the Prepayment
Option in accordance with Section 7.2(c).
7.3 (a) Licensee shall pay to Licensor a percentage royalty of
Licensee's Net Sales (defined below) of Licensed Merchandise (the "Percentage
Royalty") during each Contract Year hereof equal to one percent (1%) of Net
Sales during such Contract Year in excess of the applicable Sales Threshold
(defined below). As used in this Agreement, the term "Sales Threshold" shall
mean (i) for the First Year, the sum of Fifty Million Dollars ($50,000,000) and
(ii) for each Contract Year thereafter, Seventy-Five Million Dollars
($75,000,000).
(b) As used in this Agreement, the term "Gross Sales" for any
period shall mean the gross invoice price of all Licensed Merchandise sold or
shipped by or on behalf of Licensee during such period. As used in this
Agreement, the term "Net Sales" for any period shall mean Gross Sales for such
period less (i) freight charges and taxes shown on
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the face of the invoice, (ii) ordinary and customary trade and prompt payment
discounts shown on the face of the invoice (if any) and (iii) cash credits
actually paid or credits that are given for the return of defective Licensed
Merchandise and are taken and applied actually to reduce payment obligations
when due from such customer. Gross Sales and Net Sales figures shall be
computed without regard to whether payment therefor has been received by
Licensee.
(c) The gross invoice price of any Licensed Merchandise sold
by Licensee to any affiliate of Licensee shall, for the purposes of this
Agreement, be deemed to be the higher of (i) the actual gross invoice price
therefor, or (ii) in the particular circumstances, Licensee's regular,
special or sales price for such Licensed Merchandise sold to unaffiliated
parties at wholesale and shall be deemed sold at the earlier of the invoice
date and delivery date. Licensed Merchandise shipped on consignment shall be
deemed sold when shipped. Merchandise returns, if any, shall be credited in
the quarterly period in which the returns are actually made.
7.4 Licensee shall prepare, and at all times maintain at its
principal executive offices, separate, true, correct and complete books of
account and records reflecting all transactions and operations within the
scope of this Agreement, in accordance with generally accepted accounting
principles consistently applied. Licensee shall prepare and furnish to
Licensor a statement of operations, in form and scope satisfactory to
Licensor, for each Contract Year hereunder, which shall be furnished to
Licensor within ninety (90) days after the end of each such Year. Such
statements shall include all aggregate Gross Sales, freight charges and
taxes, trade and prompt payment discounts, Merchandise returns and Net Sales
for the Contract Year, a computation of the Percentage Royalty due to
Licensor in respect thereof, if any, and such other information as Licensor
may reasonably request. Each such statement shall be accompanied by payment
in full to Licensor of all Percentage Royalties due Licensor in respect of
the Contract Year covered by such statement.
7.5 If the payment of any Guaranteed Minimum Royalty or Percentage
Royalties hereunder is not timely made for any reason, interest shall accrue
on the unpaid principal amount of such payment, at the rate of ten percent
(10%) per annum, from and after the date on which the same became due
hereunder.
7.6 Licensee's books and records of account containing all of the
information reasonably necessary to compute and verify Gross Sales and Net
Sales shall be available for inspection and copying (at Licensor's expense)
by Licensor or its agents at all reasonable times during business hours, upon
reasonable prior notice of not less than five (5) days, for the duration of
this Agreement and for four (4) years thereafter. Such books shall be
available for audit by Licensor or its agents once in each Contract Year and
shall be made by Licensor at its own expense, PROVIDED, HOWEVER, that if any
examination by Licensor shall result in an increase in Percentage Royalties
payable to Licensor for any Contract Year in an amount equal to or greater
than five percent (5%) of the amount originally paid by Licensee
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in respect of such period, Licensee shall forthwith pay (i) any such
deficiency (plus interest thereon from the due date thereof in accordance
with the terms of Section 7.5 hereof); and (ii) all costs and expenses
incurred by Licensor in connection with such examination.
7.7 All payments required hereunder shall be made in United States
dollars.
8. INFRINGEMENT.
8.1 Licensee and Licensor shall promptly notify each other of any
infringement of the Licensed Marks or Licensed Merchandise, or any act of
unfair competition by third parties relating to the Licensed Marks or
Licensed Merchandise, whenever such infringement or act shall come to their
attention (the "Infringement Notice").
8.2 (a) Upon Licensor becoming aware of potential infringement,
either through receipt of an Infringement Notice from Licensee or on its own,
Licensor shall take such action to stop such infringement as Licensor may
deem necessary in which event (i) Licensee shall cooperate fully with
Licensor in connection therewith, and, if so requested by Licensor, shall
join with Licensor as a party to any action brought by Licensor for such
purpose, (ii) Licensor shall have full control over any action taken,
including, without limitation, the right to select counsel, the right to
settle with prior notice to Licensee on any terms Licensor deems advisable in
its discretion, provided such settlement does not materially prejudice the
Licensee's rights hereunder in which event the Licensee's consent, not to be
unreasonably withheld, shall be required, or to appeal any adverse decision
rendered in any court, to discontinue any action taken by it, and otherwise
to make any decision in respect thereto as it, in its discretion, deems
advisable, and (iii) Licensor shall bear all expenses connected with the
foregoing, subject to Paragraph (b) below, and the provisions of Section 14
hereof, which shall remain absolute. Licensee shall have the right to elect
to participate at its own cost and expense in any action instituted or
defended by Licensor with respect to the Licensed Marks.
(b) Any recovery as a result of any such action shall belong
solely to Licensor, except to the extent that such recovery represents damage
suffered by, and specifically allocated to, Licensee, in which event after
deduction of the Licensee's allocable share of the costs and expenses of such
action, including, without limitation, attorneys fees and expert fees, (if
the Licensee did not participate at its own cost in the action), such
specified recovery shall be credited against the Licensee's obligation to pay
to the Licensor the Guaranteed Minimum Royalty and the Percentage Royalties.
9. ADDITIONAL COVENANTS AND AGREEMENTS OF LICENSEE.
9.1 Contemporaneously herewith, California Pro, Skate Corp., Henry
Fong and Michael S. Casazza (collectively referred to herein as the "License
Guarantors"), are entering into a certain Guaranty Agreement (the "License
Guaranty"), dated as of the date
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hereof, substantially in the form of Exhibit B annexed hereto, for the
benefit of Licensor and others, pursuant to which, among other things, the
License Guarantors jointly and severally guarantee unconditionally and
continuously to Licensor the Licensee's full and prompt payment when due of
the Guaranteed Minimum Royalties.
9.2 (a) Notwithstanding anything to the contrary contained
herein, Licensee's obligation to make all payments of Guaranteed Minimum
Royalties and Percentage Royalties hereunder (collectively, the "Royalty
Payments") as and when the same shall become due and payable in accordance
with the terms of this Agreement, whether accelerated or otherwise, shall be
absolute and unconditional and unless and until determined judicially as
hereinafter set forth shall not be subject to any abatement, diminution by
set-off, deduction, recoupment, suspension, deferment, interruption or
otherwise.
(b) Until such time as Licensor shall have received payments
under this Agreement aggregating at least (i) the Guaranteed Minimum Royalty
in accordance with Article 7 or (ii) to the extent that the provisions of
Section 10.4 hereof apply, the amount called for by said section, Licensee
shall have no right to terminate this Agreement or to be released, relieved,
or discharged, in whole or in part, from its obligation to make the Royalty
Payments hereunder for any reason whatsoever, including, but not limited to,
any default, breach or other action or inaction of any kind by Licensor or
Licensee or the failure of the Licensor to perform in accordance with the
terms of this Agreement, any law now or in force hereafter, or any other
cause or circumstance; provided, however, that the Licensee shall have the
right (A) to elect to terminate this Agreement and, accordingly, to
discontinue its obligation to make further Royalty Payments hereunder if
there is a final, judicial determination, not appealable, that the Licensor
is not the lawful owner of the Licensed Marks by reason of which the Licensee
is precluded totally from further use of the Licensed Marks in the Territory;
and (B) to elect to reduce the Royalty Payments correspondingly and
commensurately, in the event and only to the extent that it is determined
judicially that by reason of any defect in the Licensor's title to the
Licensed Marks or the existence or imposition of any lien, encumbrance or
similar restriction on the Licensor's interests in and to the Licensed Marks,
the Licensor's right to use the Licensed Marks in the Territory as
contemplated by this Agreement shall be enjoined or has been curtailed,
limited, prevented or interfered with.
(c) It is expressly agreed and understood that notwithstanding
the right of the Licensee to terminate this Agreement or reduce the Royalty
Payments in accordance with Section 9.2(b)(A) and (B), respectively above,
each of the Installment Payments of the Guaranteed Minimum Royalty, as well
as the whole thereof are final and non-refundable, and the Licensee may not
seek to recover from Licensor (or offset against future payments) all or any
part of the Guaranteed Minimum Royalty already paid for any reason
whatsoever; provided, however, that Skate Corp. and California Pro shall have
the right under the Escrow Agreement to recover the whole or any portion of
the Escrow Installment Payments in respect of Sellers' Liability Obligations
(as defined in the Escrow Agreement). Except as set forth in this Section 9,
Licensee hereby waives, and hereby agrees to waive at any future
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time at the request of Licensor any and all rights which Licensee may have,
or which at any time hereafter may be conferred upon it, by statute,
regulation or otherwise, to terminate, cancel, quit, or surrender this
Agreement. Nothing in this section shall be deemed to limit the
Indemnification described in Section 14.4 of this Agreement.
(d) If prior to the expiration of the Original Term this
Agreement shall terminate by operation of law or for any reason other than at
the election of the Licensor pursuant to Section 10.3 due to an Event of
Default by Licensee, Licensee shall pay to Licensor nevertheless an amount
equal to the Guaranteed Minimum Royalty at the times and in the manner the
installment payments thereof would have become due and payable in accordance
with the terms hereof had this Agreement not been terminated in whole or in
part. Nothing in this section shall be deemed to limit the Indemnification
described in Section 14.4 of this Agreement.
(e) For purposes of this Agreement, payments to the Licensor
in respect of the Guaranteed Minimum Royalty shall be deemed to have been
made only when (i) actually paid to Licensor directly or (ii) with regard to
Escrow Installment Payments, when paid to the Escrow Agent pursuant to
Section 7.2(b).
10. EVENTS OF DEFAULT; TERMINATION.
10.1 Each of the following shall constitute an "Event of Default"
by Licensee under this Agreement:
(a) If Licensee shall fail to perform or observe any material
term, condition, agreement or covenant in this Agreement on its part to be
performed or observed, and such default is not remedied within thirty (30)
days after written notice thereof from Licensor, unless such default is not
for the payment of money and is not capable of being cured through Licensee's
diligent and continuous effort within such thirty (30) days after written
notice thereof, and Licensee immediately commences to cure such default, and
thereafter applies its diligent and continuous best efforts to cure such
default, and does in fact cure such default within sixty (60) days of the
initial notice of default; or
(b) If Licensee or California Pro shall (i) institute
proceedings to be adjudicated a voluntary bankrupt or insolvent, or (ii)
consent to the filing of a bankruptcy proceeding against it, or (iii) file a
petition or answer seeking reorganization or arrangement under any bankruptcy
act or any other similar applicable law of any country, or (iv) consent to
the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of itself, or any of its property, or (v) make an
assignment for the benefit of creditors, or (vi) cease doing business as a
going concern, or (vii) take any corporate action in furtherance of any of
the foregoing purposes; or
(c) If an order, judgment or decree of a court having
jurisdiction shall have been entered adjudicating the Licensee or California
Pro a bankrupt or insolvent, or
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approving, as properly filed, a petition seeking reorganization of Licensee
or California Pro or of all or a substantial part of their respective
properties or assets under any bankruptcy act or other similar applicable
law, as from time to time amended, or appointing a receiver, trustee or
liquidator of Licensee or California Pro, and such order, judgment or decree
shall remain in force, undischarged and unstayed for a period of thirty (30)
days, or a judgment or lien for the payment of money in excess of $250,000
shall be rendered or entered against Licensee or California Pro and the same
shall remain undischarged or unbonded for a period of thirty (30) days or any
writ or warrant or attachment shall be issued or levied against a substantial
part of the property of Licensee or California Pro and the same shall not be
released, vacated or bonded within thirty (30) days after issue or levy; or
(d) If Licensee shall for any reason discontinue the sale of
substantially all of the Approved Licensed Merchandise, or shall liquidate or
dissolve; or
(e) If Licensee or California Pro shall, without the prior
written consent of Licensor (i) transfer (regardless of how designated) all
or substantially all of its assets, (ii) merge or consolidate with another
corporation or entity where Licensee or California Pro is not the survivor,
or (iii) in the case of the Licensee, if more than fifty (50%) percent of the
issued and outstanding shares of voting stock of Licensee shall be sold or
transferred, directly or indirectly, whether in a single transaction or as
the aggregate result of a series of transactions other than as a result of a
public offering of the Licensee's equity securities, and in the case of
California Pro, if there has been a "change of control", which, for the
purposes of this agreement, shall mean an event by which more than a majority
of the members of the Board of Directors of California Pro or any successor
entity including at least Michael Casazza or Henry Fong, changes other than
by a shareholder vote.
(f) If there is a default under, a breach or a failure to
observe or perform any of the monetary terms, conditions, agreements or
covenants in any of the following agreements or instruments:
(1) by Skate Corp. under the promissory note dated of even
date herewith in the principal amount of One Million Fifty
Thousand ($1,050,000.00) Dollars made and delivered by Skate
Corp. to the Corporate Sellers and Three R Sellers (the "Note");
(2) by Skate Corp. or California Pro under the Consulting and
Non-Competition Agreement dated of even date herewith (the
"Consulting Agreement") by and among Skate Corp., California
Pro and Licensor; and
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(3) the stock guaranty dated of even date herewith of Henry
Fong and Michael S. Casazza issued in connection with the
Consulting Agreement.
(4) the Valuation Guarantee set forth in Section 6 of the
Registration Rights Agreement.
10.2 As used in this Agreement, the term "default" shall mean any
condition, event or state of facts which, after notice or lapse of time, or
both, would be an Event of Default.
10.3 If any Event of Default shall occur and be uncured, Licensor,
at its sole discretion, may, by written notice to Licensee, forthwith
terminate this Agreement.
10.4 Licensee acknowledges that in the event that this Agreement
shall be terminated by reason of the Licensee's Event of Default prior to
Licensor's receipt of all of the Royalty Payments provided herein, Licensor
will suffer substantial monetary damages. Therefore, inasmuch as such
damages may be difficult to compute, Licensor and Licensee hereby agree that
if this Agreement shall be terminated by Licensor pursuant to Section 10.3 in
the event of a default by the Licensee, as herein prescribed, Licensee shall
immediately pay to Licensor as and for liquidated damages an amount equal to
Three Million Dollars ($3,000,000) less all Royalty Payments paid to Licensor
prior to such termination (the "Liquidated Amount"). The payment of the
Liquidated Amount shall be in respect only of Licensee's obligations to make
Royalty Payments hereunder (but not in respect of any other obligation of
Licensee hereunder and without limiting or superseding Licensor's rights
under the remaining provisions hereof, all of which may continue to be
enforced by Licensor notwithstanding the payment by Licensee of the
Liquidated Amount. Provided that no Event of Default (defined above) on
Licensee's part exists other than its failure to make Royalty Payments, upon
Licensor's receipt and acceptance of the Liquidated Amount, Licensee shall be
deemed to have fully discharged its obligation to make Royalty Payments
hereunder, and shall be deemed to have a "fully paid up license."
11. EFFECT OF FULLY PAID-UP LICENSE.
Upon the payment of Royalty Payments in the amount of at least Three
Million ($3,000,000) Dollars by the Licensee to the Licensor at any time
during the Term of this Agreement (or such lesser amount as may be
appropriate if the Prepayment Option is exercised) or the payment of the
Liquidated Amount in the circumstances described in Section 10.4 of this
Agreement, this License shall become a "Fully Paid Up License" in which event
all right, title and interest in and to the Licensed Marks and any related
patents, trademarks or copyrights acquired by Licensor during the Term of
this Agreement shall vest in Licensee, and Licensor no later than ten (10)
business days thereafter, shall execute and deliver to Licensee all documents
necessary to accomplish said assignment. Licensor shall
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have no right thereafter to receive any Royalty Payments and shall thereafter
have no further rights to the Licensed Marks or otherwise under this
Agreement except as specifically provided.
12. EFFECT OF EXPIRATION OR TERMINATION.
12.1 Upon expiration of the Original Term or termination of this
agreement other than by reason of this License becoming a Fully Paid Up
License,
(a) except to the extent specifically otherwise provided in
Section 12.2 hereof, all rights of Licensee hereunder shall terminate and
revert automatically to Licensor, and neither Licensee nor any of its
receivers, representatives, trustees, agents, successors or assigns (by
operation of law or otherwise) shall have any right to manufacture, exploit,
advertise, merchandise, promote, sell, distribute or deal in or with Licensed
Merchandise, Licensee and all of its receivers, representatives, trustees,
agents, successors or assigns (by operation of law or otherwise) shall
forthwith discontinue all use of the Licensed Marks and any variation or
simulation thereof, or any mark confusingly similar or likely to create
confusion therewith, and all references thereto or hereto, and all designs,
Samples and labels provided or employed hereunder, including any
modifications or improvements thereof and any patents, trademarks,
copyrights, trade names and other proprietary rights in connection therewith,
and Licensee hereby irrevocably releases and disclaims any right or interest
in or to any and all of the foregoing, and
(b) Licensor shall forthwith have the unrestricted right to
manufacture, advertise, merchandise, promote, sell and distribute Licensed
Merchandise, directly or through others, and to grant licenses with respect
to Merchandise and the Licensed Marks.
12.2 Upon the expiration or termination of this Agreement, Licensee
may complete (but only in accordance with the terms and conditions of this
Agreement) production of Licensed Merchandise which is in process, or for
which written orders have been received from customers, all as of the date of
termination or expiration of this Agreement (whether by reason of the
expiration of the Original Term of this Agreement, by earlier termination of
this Agreement pursuant to Article 10 hereof or otherwise). Also, if
Licensee shall have on hand any finished inventory of Approved Licensed
Merchandise, Licensee and its permitted successors and assigns may use the
Licensed Marks in connection with the sale and disposal of such Approved
Licensed Merchandise, for twelve (12) months immediately following the
expiration of the Original Term or the prior termination of the Agreement
("Post Termination Period"), provided Licensee fully complies with the
provisions hereof, including, without limitation, the provisions of Articles
4 and 5 hereof, in connection with such disposal. Licensee shall still be
obligated to pay to Licensor the Guaranteed Minimum Royalty as well as the
Percentage Royalty provided for herein in respect of all of its sales of
Licensed Merchandise and if the Licensee shall be in Default at the
termination of this Agreement by reason of its failure to pay any Royalty
Payments when due, then subject only to a certain subordination agreement
among the Licensor, Licensee
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and LaSalle National Bank, all proceeds collected from such sales shall be
held in trust constructively for the benefit of, and paid over to, the
Licensor in respect of such outstanding obligation at the end of the Post
Termination Period. The sales by Licensee in these circumstances shall not
affect any of the rights of Licensor hereunder including, without
limitation, those referred to in clause (b) of Section 12.1 hereof. Upon the
expiration of the Post Termination Period, Licensee shall deliver to Licensor
all remaining material and other products in its possession or under its
control incorporating the Licensed Marks including, without limitation, all
labels, tags, packaging, containers, advertising and promotional material.
12.3 Upon the termination or expiration of this Agreement other
than by reason of this License becoming a Fully Paid Up License, Licensor
shall have, and hereby reserves on a non-mutually exclusive basis, all the
rights and remedies which it may have, at law or in equity, with respect to
the collection of royalties or other funds payable by Licensee pursuant to
this Agreement and the enforcement of all rights hereunder, including without
limitation, those relating to the establishment, maintenance and protection
of the Licensed Marks.
13. EQUITABLE RELIEF.
Licensee acknowledges that Licensor will suffer great and
irreparable harm as a result of the breach by Licensee of any material
covenant or agreement to be performed or observed by Licensee under this
Agreement other than the covenants to make monetary payments, and, whether
such breach occurs before or after the termination of this Agreement other
than if such termination occurs by reason of the License becoming a Fully
Paid Up License, Licensee acknowledges that Licensor shall be entitled to
apply for and receive from any court of competent jurisdiction a temporary
restraining order, preliminary injunction and permanent injunction, without
any necessity of proving damages or any requirement for the posting of a bond
or other security, enjoining Licensee from further breach or this Agreement
or further infringement or impairment of Licensor's rights in and to the
Licensed Marks. Such relief shall be in addition to, and not in substitution
of, any other remedies available to Licensor pursuant to this Agreement or
otherwise.
14. INDEMNITY; INSURANCE.
14.1 Licensee does hereby indemnify and agree to save and hold
Licensor, each affiliate of Licensor, and their respective employees, agents,
officers, directors and controlling persons, harmless of and from any and all
liability, claims, causes of action, suits, damages, costs and expenses
(including reasonable attorneys' fees and expenses), which any such entity or
person may become liable for, or may incur, or be compelled to pay, by reason
of any acts, whether of omission or commission, or set of circumstances that
may arise under or in connection with this Agreement, in connection with
Licensed Merchandise manufactured by or on behalf of Licensee or otherwise in
connection with Licensee's business or sale of Licensed Merchandise or
Licensor's ownership of the Licensed
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Marks, and shall reimburse any such indemnified party, on demand, therefor.
The indemnities herein provided shall be absolute, and shall be applicable
and enforceable notwithstanding the fact that Licensor may have explicitly or
implicitly approved any item or conduct which gave rise to any claim or loss
for which indemnity is sought.
14.2 Licensee has obtained, and shall maintain at its own expense
in full force and effect at all times during which the Licensed Merchandise
is being sold and used, with an Acceptable Insurance Carrier, products
liability insurance policy with limits of liability at least equal to, but in
no event less than, the limits maintained by the Licensee as of December 31,
1995 and in the aggregate with respect to Licensed Merchandise and a
deductible (self insurance) provision not exceeding that in effect as of
December 31, 1995. To the extent the current coverage does not so provide,
Licensee will use its best efforts to insure that such insurance policy shall
provide for at least thirty (30) days' prior written notice by the carrier
thereof (each an "Insurance Notice") to Licensor and Licensee of the
cancellation or modification thereof. Upon request, Licensee will deliver to
Licensor a certificate of such insurance from each insurance carrier which
sets forth the scope of coverage and the limits of product liability. In the
event that the Licensee fails to obtain, arrange for or maintain the
Insurance Coverage required hereunder for any reason, at any time during the
term of this Agreement, or thereafter as may be required, Licensor may itself
arrange to obtain insurance coverage complying with the terms hereof.
Licensee shall reimburse Licensor, immediately upon Licensor's request, for
all expenses and premium payments associated with Licensor's seeking and
obtaining such coverage. Licensee's maintenance of the insurance coverage as
provided herein shall not limit, excuse or replace any of Licensee's
obligations under the provisions of Section 14.1 hereof, which shall remain
absolute.
14.3 Notwithstanding anything to the contrary contained herein, the
provisions of this Article 14 shall survive any termination or expiration of
this Agreement.
14.4 Licensor hereby agrees to indemnify and save and hold
Licensee, each Affiliate of Licensee, and their respective employees, agents,
officers, directors and controlling persons, harmless of and from any and all
liability, claims, causes of action, suits, damages, costs and expenses
(including reasonable attorneys' fees and expenses), which any such entity or
person may become liable for, or may incur, or be compelled to pay, by reason
of any successful claim by any person that the Licensed Marks infringe upon
the registered trademarks in the United States and Canada "VIC" or
"VICTORIAVILLE" owned or claimed by any other party, and Licensor shall
reimburse any such indemnified party, on demand, therefor.
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15. REPRESENTATION AND WARRANTIES.
15.1 Licensee hereby represents and warrants to Licensor as follows:
(a) Licensee is a corporation duly organized, validly
existing and in good standing under the laws of New York.
(b) Neither the execution, delivery nor performance of this
Agreement by Licensee will, with or without the giving notice or passage of
time, or both, conflict with, or result in a default or loss of rights under,
any provision of the Certificate of Incorporation or By-Laws of Licensee is a
party or by which it or any of its properties may be bound.
(c) Licensee has full power and authority to enter into this
Agreement and to carry out the transactions contemplated thereby in
accordance with its terms; the execution, delivery, and performance of this
Agreement by Licensee have been duly and properly authorized by all necessary
corporate actions; and this Agreement constitutes the valid and binding
obligation of Licensee enforceable in accordance with its terms.
15.2 Licensor hereby represents and warrants to Licensee as follows:
(a) Licensor has full power and authority to enter into this
Agreement and to carry out the transactions contemplated thereby in
accordance with its terms; and this Agreement constitutes the valid and
binding obligation of Licensor enforceable in accordance with its terms.
(b) Licensor is the owner of the registered trademarks "VIC"
and "VICTORIAVILLE" in the United States and Canada free and clear of any
lien, encumbrance or claim of any other party, and other than this Agreement
and as set forth in the Stock Purchase Agreement, there exist no obligations
with respect to the Licensed Marks requiring the Licensor or the Licensee to
make any payments in respect of their use or otherwise. To the best
knowledge of the Licensor, the Licensed Marks do not infringe on the rights
of or trademarks or service marks claimed by any other person and no person
has given Licensor notice in any form that such person claims any such
infringement.
(c) Licensor will not subject the Licensed Marks to any lien,
encumbrance or claim of any party during the Term of this Agreement without
the prior consent of the Licensee nor, without such consent, which will not
be withheld unreasonably, will Licensor transfer or convey title to the
Licensed Marks to any other party; provided, however, that without the
consent of the Licensee the Licensor may assign or transfer the right to
receive the Royalty Payments to be paid hereunder to any one or more other
parties and may assign, convey or transfer title to the Licensed Marks to any
one or more of the Corporate Sellers and/or Three R Sellers, provided that
any Corporate Seller and/or Three R
20
<PAGE>
Seller to whom title is assigned shall as a condition of such assignment agree
to be bound by the terms of this Agreement and Licensor transferor shall not
be relieved of his obligations hereunder by reason of such assignment. Except
as expressly permitted herein, any attempted conveyance to a third party in
contravention of this provision without Licensee's prior written consent will
be void ab initio and of no force or effect.
16. ARBITRATION.
16.1 The disputes or controversies identified in Sections 3.1(c), 4.2
and 5.3 of this Agreement (the "Arbitrable Disputes") and only the Arbitrable
Disputes shall be decided by arbitration by the American Arbitration Association
(the "Association") in accordance with the rules and regulations of the
Association for Commercial Disputes. Licensor shall have the right in
accordance with Section 13 hereof to seek equitable relief independently,
including, but not limited to, provisional and/or permanent injunctive relief,
specific performance or other equitable remedy as may be appropriate to enforce
or prevent the violation of any of the terms and conditions of this Agreement
including with regard to the Arbitrable Disputes, and subject to Sections 23 and
24, either party may commence and prosecute an action at law to recover damages
or obtain other relief for claims or causes arising out of, or relating to, this
Agreement.
16.2 In the event an Arbitrable Dispute exists, either party may
submit the dispute to the Association in Garden City, New York for arbitration
in accordance with an subject to the rules of the Association then in effect.
The parties agree that the arbitration shall be conducted before one (1)
disinterested, industry arbitrator.
16.3 The decision of the arbitrator shall be binding and conclusive
upon the parties, and judgment upon any decision so rendered by the arbitrator
may be entered in any court of competent jurisdiction. The arbitrator may not
award damages to either party and is delegated hereby with the authority only to
determine the Arbitrable Dispute submitted. Each party shall be responsible for
its or his fees and costs of arbitration.
16.4 Subject to the availability of the arbitrator, hearings in the
arbitration proceeding shall commence within thirty (30) days after the
selection of the arbitrator and the decision of the arbitrator shall be rendered
within thirty (30) days after the final submission of the parties.
17. BROKERS. Each of Licensor and Licensee hereby represents and warrants
to the other that it has not employed or dealt with any broker or finder in
connection with this Agreement or the transactions contemplated hereby, and
agrees to indemnify the other and hold it harmless from any and all liabilities
(including, without limitation, reasonable attorneys' fees and disbursements
paid or incurred in connection with any such liabilities) for any brokerage
commissions or finders fees in connection with this agreement or the
transactions contemplated hereby insofar as such liabilities shall be based on
the arrangements or agreements made by it or on its behalf. Notwithstanding the
foregoing,
21
<PAGE>
Licensee hereby agrees to pay all broker's or finder's compensation to Geneva
Capital Markets by reason of this Agreement, and to indemnify and hold
Licensor harmless therefrom.
18. NOTICES. All reports, communications, requests, notices or service of
process required by or permitted under this Agreement shall be in writing to
the party concerned at the following address:
If to Licensor: WARREN AMENDOLA, Sr.
22 Mallard Cove
Centerport, New York ll721
with a copy to: Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle, Suite 225
Jericho, New York 11753
Attention: Edward I. Kramer, Esq.
Tel: (516) 822-4820
Fax: (516) 822-4824
If to Licensee: USA SKATE COMPANY, INC.
c/o USA Skate Corporation
8102 White Horse Road
Greenville, South Carolina 29611
Attention: Michael S. Casazza, President
Tel: (864) 294-5370
Fax: (864) 294-5235
with a copy to: Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC
1400 Glenarm Place, Third Floor
Denver, Colorado 80202
Attention: Gerald Raskin, Esq.
Tel: (303) 571-1400
Fax: (303) 595-3970
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication hereunder
by personal delivery or by using a nationally recognized overnight courier
service, telecopy or telex.
Any party may change the address to which such notices and communications
shall be sent by written notice to the other parties, provided that any notice
of change of address shall be effective only upon receipt.
22
<PAGE>
19. INTEGRATION. This Agreement (including the Exhibits hereto),
together with the Stock Purchase Agreement and the agreements and documents
referred to therein, sets forth the entire agreement and understanding between
the parties relating in any way to the use of the Licensed Marks, or to any
other subject matter contained herein and merges all prior discussions,
arrangements and agreements between them.
20. AMENDMENTS. This Agreement may not be amended or modified except by
written instrument signed by each of the parties thereto.
21. RELATIONSHIP OF PARTIES. Nothing herein contained shall be construed
to constitute the parties hereto as partners or as joint venturers, or either as
agent of the of the other. Neither party hereto by virtue hereof shall have the
right or authority to act for or to bind the other in any way or to sign the
name of the other or to represent that the other is in any way responsible for
the acts or omissions of the other.
22. INTERPRETATION. This Agreement has been entered into in the State of
New York and shall be construed by and interpreted in accordance with the laws
of that State without regard to principles or conflict of laws. The headings
given to the paragraphs of this Agreement are for the convenience of the parties
only and are not to be used in any interpretation of this Agreement.
23. JURISDICTION AND FORUM SELECTION. For all actions and proceedings,
the parties hereby irrevocably and unconditionally (i) consent to the exclusive
jurisdiction of the United States District Court for the Eastern District of New
York (or if there is no subject matter jurisdiction, the Supreme Court of New
York for the County of Suffolk) over any action, suit or proceeding arising out
of or relating to this Agreement, (ii) agree not to commence any action, suit or
proceeding arising out of or relating to this Agreement except in such court,
(iii) agree that service of any process, summons, notice or document sent by
U.S. certified mail, return receipt requested, or by nationally recognized
overnight courier service to any other Party's address shall be effective
against any other party in any such court, and (iv) waive any defense or
objection in such action or proceeding based on alleged lack of personal
jurisdiction, improper venue, forum non-conveniens, or any similar basis.
24. GOVERNING LAW. This Agreement shall be governed by, and construed
under, and in accordance with, the law of the State of New York, without regard
to any principles of conflict of laws which otherwise might mandate the
application of the law of another jurisdiction.
25. SEVERABILITY. In the event that any one or more provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
23
<PAGE>
26. WAIVER. No failure or delay on the part of either party in exercising
any power or right under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right to preclude any
other or further exercise thereof or the exercise of any other power or right.
No waiver by either party of any provision of this Agreement, or of any breach
or default, shall be effective unless in writing and signed by the party against
whom such waiver is to be enforced. All rights and remedies provided for herein
shall be cumulative and in addition to any other rights or remedies such parties
may have at law or in equity.
27. DELEGATION BY LICENSOR. Notwithstanding any provision to the contrary
herein contained, Licensor's rights and obligations in connection with the
review and approval of Licensed Merchandise hereunder (thereby rendering the
same Approved Licensed Merchandise), may be delegated by Licensor to any third
party to which Licensee shall consent (such consent not to unreasonably
withheld or delayed), and Licensee shall accept the performance of such
designee, for all purposes hereunder, as the performance of Licensor hereunder.
28. SUCCESSORS AND ASSIGNS. This agreement, and all of the terms and
conditions hereunder, and all remedies arising therefrom, shall inure to the
benefit of, and be binding upon the respective heirs, successors and assigns of
the parties hereto. Except as otherwise provided expressly herein, the rights
and obligations of the parties hereto may not be assigned or transferred by
either party without the express written consent of the other party.
29. Licensor agrees that his rights to receive Royalty Payments under this
License Agreement are subordinate to the rights of LaSalle Bank (the "Bank") to
the extent prescribed in a separate agreement with the Bank.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
LICENSOR:
______________________________________
WARREN AMENDOLA, SR.
LICENSEE:
USA SKATE CO., INC.
By___________________________________
Michael S. Casazza
President
24
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of April, 1996, before me personally came Warren Amendola,
Sr., to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known, who being by me duly sworn, did depose and say that he
resides in __________________ County; that he is the President of USA SKATE CO.,
INC, the corporation described in, and which executed the foregoing instrument;
that he knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation and that he signed his name thereby by like
order.
____________________________
Notary Public
25
<PAGE>
GUARANTY
THIS GUARANTY is dated and delivered effective as of April 30, 1996, by USA
Skate Corporation ("Skate Corp.") and California Pro Sports, Inc. ("California
Pro"), Henry Fong and Michael S. Casazza (collectively, the "Guarantors"), for
the benefit of Warren Amendola, Sr. (the "Licensor").
A. Pursuant to a certain agreement (the "Stock Purchase Agreement"), dated
of even date herewith, among USA Skate Corporation ("Skate Corp."), as Buyer,
the Licensor, Patricia Amendola and Three R Profit Sharing Retirement Plan as
"Corporate Sellers," and Licensor, Warren Amendola, Jr., Richard Amendola and
Russell Amendola as "Three R Sellers", Skate Corp. has acquired from the
Corporate Sellers all of their shares of the Capital Stock of the Licensee and
from the Three R Sellers, all of their shares of Capital Stock of Three R Sales,
Inc. (the "Transaction").
B. Contemporaneously with the Transaction, USA Skate Co., Inc. as
"Licensee" has entered into a License Agreement with Licensor (the "License
Agreement").
C. A condition of the License Agreement is that the Guarantors jointly
and severally guarantee the payment of certain royalties under the License
Agreement.
NOW, THEREFORE, in consideration of the completion of the Transaction, the
compliance by the Corporate Sellers and the Three R Sellers (collectively, the
"Sellers") with the provisions of the various agreements by which the
Transaction was completed, and for other good and valuable consideration, the
adequacy and receipt of which hereby are acknowledged, and intending to be
legally bound, the Guarantors hereby covenant and agree as follows:
1. THE GUARANTY. The Guarantors hereby absolutely, unconditionally and
jointly and severally guarantee to the Licensor the payment of the Guaranteed
Minimum Royalty (as defined in the License Agreement), as and when the same is
due under the License Agreement, including pursuant to the Mandatory Prepayment
Obligation (the "Guaranteed Obligations").
2. APPLICATION OF PAYMENTS. Any payment made by Guarantors, or any of
them, under this Guaranty shall be effective to reduce or discharge the
liability of the Guarantors hereunder without further notice of any kind.
3. CONTINUING GUARANTY. The rights of the Licensor under this Guaranty
are in addition to, and not mutually exclusive of, any and all other rights and
remedies Licensor may have under the License Agreement, the Stock Purchase
Agreement and/or any other agreements or guaranties related to, or arising out
of, the Transaction, as well as by reason of any law or in equity. Without
limiting the foregoing, the Licensor shall be entitled to
1
<PAGE>
demand and receive payment and performance from the Guarantors under this
Guaranty, notwithstanding the availability of, or the Licensor's failure to
pursue or enforce, any right or remedy he may have against the Licensee, and
notwithstanding the failure of the Licensor to avail himself or realize the
benefit of any other right or remedy afforded to him under any other
agreement, guaranty or policy of insurance.
Except as otherwise provided herein, this Guaranty shall continue in force
and be binding upon the Guarantors until the Guaranteed Obligations have been
paid in full. If Licensee and/or any of its successors and assigns fail to pay
any of the Guaranteed Obligations when such amounts become due, Licensor may
enforce this Guaranty against the Guarantors subject only to the agreement
described in Section 6(e) of this Guaranty.
4. This Guaranty shall not be affected or impaired by any extension of
time, forbearance, waiver or concession given to Licensee, any assertion of, or
delay in asserting, any right, power or remedy against Licensee, any
modification or amendment to the provisions of the License Agreement; the
dissolution, liquidation, reorganization or winding up of Licensee; the release
or limitation of liability of any other guarantor of Licensee's obligations,
covenants and agreements or any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
5. TERMINATION. This Guaranty shall terminate when the Guaranteed
Obligations have been paid in full. Thereafter, Licensor will furnish the
Guarantors' written cancellation of this Guaranty and will return the original
of this Guaranty to the Guarantors.
6. GENERAL PROVISIONS.
(a) No delay on the part of Licensor in the exercise of any power or
right shall operate as a waiver thereof, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof or the
exercise of any other power or right.
(b) This Guaranty may not be assigned and may not be modified except
by a writing signed by the parties hereto and the Licensor.
(c) This Guaranty is made under and shall be governed by the laws of
the State of New York.
(d) JURISDICTION AND FORUM SELECTION. The Guarantors hereby
irrevocably and unconditionally (i) consent to the exclusive jurisdiction of the
United States District Court for the Eastern District of New York (or if there
is no subject matter jurisdiction, the Supreme Court of New York for the County
of Suffolk) over any action, suite or proceeding arising out of or relating to
this Guaranty, (ii) agree not to commence any action, suit or proceeding arising
out of or relating to this Guaranty except in such court, (iii) agree that
service of any process, summons, notice or documents sent by U.S. certified
mail, return receipt requested,
2
<PAGE>
or by nationally recognized overnight courier service to any other Party's
address shall be effective against any other party in any such court, and
(iv) waive any objection to proceeding in such court, including, but not
limited to, objections as to venue or for forum non-conveniens.
(e) Licensor agrees that his rights under this Guaranty against the
Guarantors are subordinate to the rights of LaSalle National Bank (the "Bank")
to the extent prescribed in a separate agreement with the Bank.
7. NOTICES. Any and all notices required or permitted hereunder shall be
given in writing as follows:
If to Licensor:
Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
With a copy to:
Edward I. Kramer, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Suite 225
Jericho, New York 11753
TEL: (516) 822-4820
FAX: (516) 822-4824
If to the Corporate Guarantors:
c/o 8102 White Horse Road
Greenville, SC 29611
Attention: Michael S. Casazza, President
TEL: (864) 294-5370
FAX: (864) 294-5235
3
<PAGE>
With a copy to:
Gerald Raskin, Esq.
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
TEL: (303) 571-1400
FAX: (303) 595-3970
If to Michael S. Casazza:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
TEL: (864) 294-5370
FAX: (864) 294-5235
If to Henry Fong:
c/o 2401 PGA Blvd., Suite 280F
Palm Beach Gardens, FL 33410
TEL: (407) 624-0885
FAX: (407) 624-9507
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication hereunder
by personal delivery or by using a nationally recognized overnight courier
service, telecopy or telex.
Any party may change the address to which such notices and communications
shall be sent by written notice to the other parties, provided that any notice
of change of address shall be effective only upon receipt.
4
<PAGE>
IN WITNESS WHEREOF, Guarantors have each caused this Guaranty to be
executed as of the date first above written.
USA SKATE CORPORATION
By_____________________________
Michael S. Casazza, President
CALIFORNIA PRO SPORTS, INC.
By______________________________
Michael S. Casazza, President
________________________________
Henry Fong, Individually
_______________________________
Michael S. Casazza, Individually
Accepted and agreed to this ____ day of April, 1996.
"LICENSOR"
_______________________________
Warren Amendola, Sr.
5
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of ___________________, 19___, before me personally came
________________________, to me known, who being by me duly sworn, did depose
and say that he resides in ____________________ County; that he is the President
of USA SKATE CORPORATION, the corporation described in, and which executed the
foregoing instrument; that he knows the seal of said corporation, that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation and that he signed his name
thereby by like order.
____________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of ___________________, 19___, before me personally came
Michael S. Casazza, to me known, who being by me duly sworn, did depose and say
that he resides in ____________________ County; that he is the President of
CALIFORNIA PRO SPORTS, INC., the corporation described in, and which executed
the foregoing instrument; that he knows the seal of said corporation, that the
seal affixed to said instrument is such corporate seal; that it was so affixed
by order of the Board of Directors of said corporation and that he signed his
name thereby by like order.
____________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of __________________, 19___, before me personally came
Henry Fong, to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
6
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of __________________, 19___, before me personally came
Michael S. Casazza, to me known to be the individual described in, and who
executed, the foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of __________________, 19___, before me personally came
Warren Amendola, Sr., to me known to be the individual described in, and who
executed, the foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
7
<PAGE>
Exhibit C
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement ("Agreement") is made and
entered into effective as of April 30, 1996 by and among USA SKATE
CORPORATION, a Delaware corporation ("Skate Corp."), CALIFORNIA PRO SPORTS,
INC., a Delaware corporation ("California Pro"), and WARREN AMENDOLA, SR.
("Amendola").
WHEREAS, pursuant to a certain agreement (the "Stock Purchase
Agreement"), dated of even date herewith, by and among Amendola, Patricia
Amendola and Three R Profit Sharing Retirement Plan ("Corporate Sellers"),
and Amendola, Warren Amendola, Jr., Richard Amendola and Russell Amendola
("Three R Sellers"), and California Pro and Skate Corp., Skate Corp. has
acquired from the Corporate Sellers all of their shares of the capital stock
of USA Skate Co., Inc. ("USA Skate") and from the Three R Sellers, all of
their shares of capital stock of Three R Sales, Inc. (the "Transaction").
WHEREAS, for a substantial period of time prior to the Transaction,
Amendola has served as an executive officer and director of USA Skate and was
a significant shareholder of USA Skate.
WHEREAS, California Pro is a majority shareholder of Skate Corp. and is
an integral party to the Transaction.
WHEREAS, Skate Corp. and California Pro desire to engage Amendola to
perform certain consulting services for them and Amendola desires to perform
consulting services for Skate Corp. and California Pro.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt,
sufficiency and adequacy of which hereby are acknowledged, the parties agree
as follows:
1. ENGAGEMENT. Skate Corp. and California Pro engage Amendola and
Amendola agrees to perform consulting services on the terms and conditions
provided in this Agreement.
2. TERM. The consulting term shall be for five years, commencing on
the date of this Agreement, unless sooner terminated by mutual agreement (the
"Consulting Term").
<PAGE>
3. COMPENSATION.
(a) COMPENSATION SHARES. As consideration for substantial
consulting services rendered to date and as incentive for Amendola to enter
into this Agreement:(i) upon execution and delivery of this Agreement,
California Pro shall deliver to Amendola one or more certificates, registered
in his name, representing 400,000 shares of California Pro common stock, par
value $.01 per share (the "Compensation Shares") with an agreed value of
$2.25 per share (the "Agreed Value").
(b) REGISTRATION OF COMPENSATION SHARES. Prior to the execution of
this Agreement and the delivery of the Compensation Shares to Amendola,
California Pro shall have registered the Compensation Shares under the
Securities Act of 1933, as amended (the "Securities Act"), by a Registration
Statement ("Registration Statement") on such form or forms as are most
appropriate, which Registration Statement shall be in effect on the date of
this Agreement so that the Compensation Shares are fully registered upon
issuance and delivery to Amendola.
(c) RESTRICTIONS ON SALE OF THE COMPENSATION SHARES. Amendola will
not sell any of the Compensation Shares for before August 1, 1996. Between
August 1, 1996 and February 1, 1997, he may but shall not be required to sell
up to 200,000 of the Compensation Shares. At any time after February 1, 1997
Amendola may but shall not be required to sell the remainder of the
Compensation Shares.
(d) DESIGNATION OF SELLING BROKER. During the period ending 14
months after the date of this Agreement (the "Guaranty Period"), Amendola
will sell the Compensation Shares only through a reputable national brokerage
firm chosen by Skate Corp. and/or California Pro ("Designated Broker"). All
proceeds generated from such sales and all cash dividends payable with
respect to the Compensation Shares, less any commissions payable to the
Designated Broker shall be defined collectively as the "Net Compensation
Share Proceeds." The parties shall instruct the Designated Broker to provide
California Pro and Skate Corp. copies of all confirmations and statements for
Amendola's account with the Designated Broker at the same time as such
confirmations and statements are sent to Amendola.
(e) GUARANTY OF PROCEEDS. It is agreed and understood by the
parties hereto that the Net Compensation Share Proceeds to Amendola shall be
at least Six Hundred Thousand Dollars ($600,000) (the "Guaranteed Amount").
Accordingly, to that end,
(i) If the Net Compensation Share Proceeds derived from the
sale of all of the Compensation Shares is less than the Guaranteed Amount,
then, at the end of the Guaranty Period or when
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<PAGE>
all of the Compensation Shares have been sold, whichever is sooner,
California Pro shall pay to Amendola the difference between the Net
Compensation Share Proceeds and the Guaranteed Amount within five business
days after demand is made therefor. Any shares returned to Skate Corp. under
Section 7.2(e) of the Stock Purchase Agreement shall be deemed to have been
sold by Amendola at the Agreed Value for purposes of calculating the Net
Compensation Share Proceeds related thereto.
(ii) If at the end of the Guaranty Period, Amendola shall not
have sold all of the Compensation Shares and the Net Compensation Share
Proceeds derived from the sale of such of the Compensation Shares that were
sold within the Guaranty Period is less than the Guaranteed Amount, Amendola
may elect either to:
(A) sell all of the remaining Compensation Shares
("Remainder Shares") to California Pro, and California Pro, correspondingly,
shall be obligated to purchase the same for an amount equal to the difference
between the Guaranteed Amount and the Net Compensation Share Proceeds derived
from the sale of the Compensation Shares during the Guaranty Period. This
purchase price for the Remainder Shares shall be payable by California Pro to
Amendola within five business days after California Pro receives a
certificate(s) representing the Remainder Shares together with properly
executed stock powers with a medallion signature guarantee, or
(B) retain the Remainder Shares, in which event Skate
Corp., California Pro and the Share Guarantors shall be released from all
further liability either to purchase the Remainder Shares from, or to pay the
Guaranteed Amount to, Amendola.
(f) Amendola, by his acceptance of this Agreement, understands and
agrees that his rights against California Pro's obligations to him under
Subsection 3(e) above is subordinate to LaSalle National Bank (the "Bank") to
the extent prescribed in a separate agreement between the Holder and the Bank.
(g) Concurrently herewith, Henry Fong and Michael S. Casazza (the
"Share Guarantors") are entering into a certain Guaranty Agreement (the
"Share Guaranty") for the benefit of Amendola, dated of even date herewith,
and substantially in the form annexed hereto as Attachment 1, pursuant to
which, among other things, the Share Guarantors will jointly and severally
guarantee, unconditionally and continuously, to Amendola the prompt
performance of the obligations of California Pro under Section 3 of this
Agreement, including the payment of the Guaranteed Amount to Amendola.
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<PAGE>
4. DUTIES. Amendola's duties hereunder shall consist of the following:
(a) To provide Skate Corp. and/or California Pro with oral or
written business advice and counsel which they may reasonably request from
time to time. Such advice and counsel shall not require Amendola to devote
more than ten hours in any one month and shall be provided in such manner as
Amendola may determine, in his reasonable discretion, and need not be
provided sooner than ten days after such advice or counsel is requested.
(b) To provide Skate Corp. and California Pro from time to time
with information about potential acquisitions.
Amendola shall not be required to perform his services hereunder outside
of Nassau and Suffolk Counties, New York and he shall not be restricted or
interfered with as to his full-time employment by other companies or entities
or business ventures of his own, subject, however, to the Non-Disclosure and
Non-Competition Covenant provisions in Sections 7 and 8 hereof. Amendola
will not be an officer of Skate Corp. or California Pro or otherwise engage
in the day-to-day management or operations of Skate Corp. or California Pro,
nor will he have authority to bind Skate Corp. or California Pro to any
contract or other arrangement.
5. EXPENSES. Amendola shall be entitled to prompt reimbursement for
all reasonable and allocable expenses incurred by him in the performance of
his services hereunder; provided, however, that Amendola obtains the prior
approval of Skate Corp. or California Pro, as appropriate, to incur unusual
or extraordinary expenses (including, without limitation, travel requested by
Skate Corp. or California Pro outside of New York, Ontario, and Quebec), and
that all expenses are accounted for and substantiated in accordance with the
policies and procedures established or practiced by Skate Corp. or California
Pro, as applicable.
6. INDEPENDENT CONTRACTOR. Amendola is acting exclusively as an
independent contractor and not as an employee of either Skate Corp. or
California Pro in performing consulting services hereunder.
7. NON-DISCLOSURE COVENANT.
(a) Amendola recognizes and acknowledges that all of the
information, product information, prospects, and business of Skate Corp.,
California Pro and USA Skate and each of their existing and future
subsidiaries (collectively, the "Company") that is not generally known or
available to the public or trade, and all trade secrets or other secret or
confidential information relating to the Company's businesses as such
businesses may exist from time to time (collectively, the "Confidential
Information") are valuable,
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<PAGE>
special and unique assets of the Company. Therefore, Amendola will:
(i) Hold in strictest confidence and not disclose, reproduce,
publish or use in any manner, without the express authorization of the
appropriate Board of Directors, any Confidential Information, except as such
disclosure or use may be required in connection with the consulting services
he is to provide under this Agreement.
(ii) Upon request and, in any event, upon termination of
Amendola's engagement under this Agreement, Amendola will deliver to the
Company and not keep or deliver to anyone else, any and all Confidential
Information including, without limitation, all notes, memoranda, documents
and, in general, any and all material relating to the Company's businesses,
without retaining any copies thereof.
(b) In the event of a breach or threatened breach by Amendola of
the provisions of this Section 7 (the "Non-Disclosure Covenant"), the Company
shall be entitled to a restraining order or an injunction restraining
Amendola from disclosing, in whole or in part, any Confidential Information
or from rendering any services to any person, firm, corporation, association
or other entity to whom such Confidential Information, in whole or in part,
has been disclosed or is threatened to be disclosed; and/or requiring that
Amendola deliver to the Company all copies of all Confidential Information,
documents, notes, memoranda or other material upon termination of his
engagement hereunder. Nothing herein shall be construed as prohibiting the
Company from pursuing other remedies available to the Company for any breach
or threatened breach of this provision by Amendola, including, without
limitation the recovery of monetary damages, but, except as otherwise
provided in Section 9 with respect to the Non-Disclosure and/or Non-Compete
Covenants, not by way of delay, offset, deduction from, or credit against,
any of the obligations to be paid or performed by Skate Corp. or California
Pro to or for the benefit of Amendola under Section 3 hereof, the Stock
Guaranty, the Stock Purchase Agreement or any agreements, notes or documents
executed in connection therewith.
8. NON-COMPETITION COVENANT.
(a) The parties acknowledge that Amendola's anticipated consulting
services to Skate Corp. and California Pro hereunder will be important to the
success of the Company. Amendola further acknowledges that the following
non-competition covenant is an important part of the consideration to Skate
Corp. resulting in Skate Corp.'s and California Pro's willingness to enter
into this Agreement and Skate Corp.'s purchase of the capital stock of USA
Skate and Three R.
-5-
<PAGE>
(b) During the term of this Agreement and for five years thereafter,
Amendola, directly or indirectly, on his own behalf, or on behalf of any
party other than the Company, shall not engage in, supervise or assist in, or
own an interest in, any entity engaged in the manufacture, production, sale,
marketing, promotion or distribution of Products (as defined below) which
compete with the Company's business (the "Non-Competition Covenant"). The
Non-Competition Covenant shall be binding upon Amendola world-wide to the
extent the Company has had customers or negotiations with prospective
customers in any particular territory. For purposes of this Agreement,
"Products" shall mean ice skates, hockey sticks, hockey pucks, ice hockey
equipment, in-line skates and accessories, snowboards, snowboard clothing and
related accessories, sports bags, golf equipment and other similar types of
other products currently being sold or which may be marketed by the Company
world-wide during the Consulting Term.
(c) An ownership interest of not more than five percent of the
outstanding stock of any publicly-traded company shall not constitute a
violation of the Non-Competition Covenant.
(d) The parties agree that a breach or threatened breach of the
Non-Competition Covenant by Amendola is likely to result in substantial
irreparable harm to the Company and, therefore, the Company is entitled to
enforce the Covenant in any court of law or equity by seeking a temporary
restraining order or injunction.
9. EARLY TERMINATION OF NON-DISCLOSURE AND NON-COMPETITION COVENANTS.
Notwithstanding anything herein to the contrary, if an Event of Default shall
occur under and pursuant to Sections 10.1(a) and 10.1(f) of the License
Agreement dated of even date herewith, between Amendola, as Licensor, and USA
Skate, as Licensee, the Non-Disclosure and Non-Competition covenants shall
terminate and be of no further force and effect.
10. UNCONDITIONAL OBLIGATION. The obligations of California Pro to pay
and perform their obligations hereunder, including those set forth in Section
3 hereof, shall be irrevocable, unconditional and absolute and shall in no
way or manner be affected, impaired or excused because Amendola fails or is
unable to fulfill any of his obligations under this Agreement, whether due to
death, disability or otherwise, including without limitation, a breach or
alleged breach of any covenant, agreement, representation or warranty
contained in an agreement made with, or affecting the Company, except with
respect to an intentional, continuing, material breach by Amendola of the
Non-Disclosure and/or Non-Competition Covenants.
11. SEVERABILITY. If any portion of a provision contained in this
Agreement is found to be unenforceable by a court having jurisdiction, said
court shall enforce the provision to the extent the enforceable portion is
divisible therefrom, to provide Skate
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<PAGE>
Corp. or California Pro or, in the case of the Non-Disclosure Covenant and
the Non-Competition Covenant, the Company, with the maximum protection
consistent with purposes of this Agreement.
12. GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. The
parties (a) irrevocably consent that any legal action or proceeding brought
by any of them under, arising out of or in any manner relating to this
Agreement, shall be brought in the United State District Court for the
Eastern District of New York (or if there is no subject matter jurisdiction,
in the Supreme Court of the State of New York in and for the County of
Suffolk);(b) expressly and irrevocably consent and submit to the personal
jurisdiction of such court in any such action or proceeding;(c) irrevocably
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to them by
hand, nationally recognized overnight courier service or by certified mail,
return receipt requested, delivered or addressed as set forth below; and (d)
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, FORUM
NON-CONVENIENS or any similar basis.
13. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, first class mail, telex
or telecopy, addressed as follows:
PARTY ADDRESS
- ----- -------
Skate Corp. or California Pro Michael S. Casazza, President
California Pro Sports, Inc.
USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
TEL (864) 294-5370
FAX (864) 294-5235
With copies to Gerald Raskin, Esq.
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Pl., Suite 300
Denver, Colorado 80202
TEL (303) 571-1400
FAX (303) 595-3970
Amendola Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
TEL (516) 261-9056
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<PAGE>
With copies to Edward I. Kramer, Esq.
Blau, Kramer, Wactlar &
Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
TEL (516) 822-4820
FAX (516) 822-4824
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered five business days
after deposit in any United States Post Office in the continental United
States, postage prepaid, if mailed; when receipt is acknowledged or
confirmed, if sent by facsimile transmission.
14. ATTORNEY'S FEES. If a dispute arises with respect to this
Agreement, the party prevailing in any action or proceeding brought to
resolve such dispute either by way of an adjudication or settlement, shall be
entitled to recover all expenses, including without limitation, reasonable
attorney's fees and expenses incurred in ascertaining such party's rights, or
in enforcing such party's rights under this Agreement.
15. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, oral or in writing, among the parties with respect to the
engagement of Amendola hereunder by Skate Corp. and California Pro.
16. AMENDMENTS. This Agreement may be amended only by written agreement
signed by all parties.
17. COUNTERPARTS. This Agreement may be executed in several
counterparts and when so executed shall constitute one agreement.
18. SECTION HEADINGS. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of
this Agreement.
19. SUCCESSORS. This Agreement, all terms and conditions hereunder, and
all remedies arising herefrom, shall inure to the benefit of, and be binding
upon, the heirs, successors and assigns of the parties hereto provided,
however, that the rights and obligations of the parties hereto may not be
assigned or transferred by either party without the prior written consent of
the other party.
20. SURVIVAL OF OBLIGATIONS. Termination of Amendola's engagement
hereunder for any reason shall not relieve any party of any obligation
accruing or arising prior to, or after such termination.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"SKATE CORP."
USA Skate Corporation
By _____________________________
Michael S. Casazza, President
"CALIFORNIA PRO"
California Pro Sports, Inc.
By _____________________________
Michael S. Casazza, President
"AMENDOLA"
________________________________
Warren Amendola, Sr.
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Michael S. Casazza
to me known, who, being by me duly sworn, did depose and say that he is the
President of California Pro Sports, Inc. and USA Skate Corporation, each of
which is a Delaware corporation with its principal office located at 8102
White Horse Road, Greenville, South Carolina, the corporations described in
and which executed the foregoing instrument and that he is authorized by the
board of directors of each said corporation to sign on behalf of said
corporation.
______________________________
Notary Public
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<PAGE>
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Warren Amendola,
Jr., to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
______________________________
Notary Public
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<PAGE>
ATTACHMENT 1
EXHIBIT C
GUARANTY
This Guaranty is made, executed and delivered this 30th day of April,
1996, by Henry Fong and Michael S. Casazza (collectively, the "Guarantors")
for the benefit of Warren Amendola, Sr. ("Amendola") in connection with that
certain Consulting and Non-Competition Agreement (the "Consulting Agreement")
dated of even date herewith by and among USA Skate Corporation ("Skate
Corp."), California Pro Sports, Inc. ("California Pro") and Amendola.
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed in the Consulting Agreement.
WHEREAS, Guarantors are executive officers and directors of Skate Corp.
and California Pro and, as an inducement to Amendola to enter into the
Consulting Agreement, have agreed to guaranty Skate Corp.'s and California
Pro's respective obligations to pay to Amendola the Guaranteed Amount.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the Guarantors, intending to be legally bound, covenant and
agree as follows:
1. THE GUARANTY. The Guarantors hereby absolutely and unconditionally
and jointly and severally, guarantee to Amendola the payment of the
Guaranteed Amount, if any, as and when the same are due under the Consulting
Agreement.
2. APPLICATION OF PAYMENTS. Any payment made by either Guarantor under
this Guaranty shall be effective to reduce or discharge the liability of the
Guarantors hereunder without further notice of any kind.
3. CONTINUING GUARANTY. Except as provided herein, the rights of
Amendola under this Guaranty are in addition to, and not mutually exclusive
of, any and all other rights and remedies Amendola may have under the
Consulting Agreement, the Stock Purchase Agreement and/or any other
agreements or guaranties related to, or arising out of, the transaction, as
well as by reason of any law or in equity. Without limiting the foregoing,
Amendola shall be entitled to demand and receive payment and performance from
the Guarantors under this Guaranty, notwithstanding the availability of, or
Amendola's failure to pursue or enforce any rights or remedies he may have
against California Pro and/or Skate Corp. and notwithstanding the failure of
Amendola to avail himself or realize the benefit of any other right or remedy
afforded to him under any other agreement, guaranty or policy of insurance.
Except as otherwise provided herein, this Guaranty shall continue in
force and be binding upon the Guarantors until the Guaranteed Obligations
have been paid in full. If California Pro
<PAGE>
and/or Skate Corp. or any of their successors and assigns fail to perform or
pay any of the Guaranteed Obligations when such payment is due, then Amendola
may enforce this guaranty against the Guarantors subject only to the
agreement described in Section 6(e) of this Guaranty.
4. NO IMPAIRMENT. This Guaranty shall not be affected or impaired by
any extension of time, forbearance, waiver or concession given to California
Pro or Skate Corp., any modification or amendment to the provisions of the
Consulting Agreement; the dissolution, liquidation, reorganization or winding
up of California Pro or Skate Corp., the release or limitation of liability
of any other guarantor of the obligations, covenants and agreements of
California Pro or Skate Corp. or any other circumstances which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
5. TERMINATION. This Guaranty shall terminate when the Guaranteed
Obligations have been paid in full. Thereafter, Amendola will furnish the
Guarantors written cancellation of this Guaranty and will return the original
of this Guaranty to the Guarantors.
6. GENERAL PROVISIONS.
(a) No delay on the part of Amendola in the exercise of any power or
right shall operate as a waiver thereof, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof or
the exercise of any other power or right.
(b) This Guaranty may not be assigned and may not be modified except
by a writing signed by the parties hereto and Amendola.
(c) This Guaranty is made under and shall be governed by the laws of
the State of New York.
(d) The Guarantors hereby irrevocably and unconditionally (i)
consent to the exclusive jurisdiction of the United States District Court for
the Eastern District of New York (or if there is no subject matter
jurisdiction, the Supreme Court of New York for the County of Suffolk) over
any action, suit or proceeding arising out of or relating to this Guaranty,
(ii) agree not to commence any action, suit or proceeding arising out of or
relating to this Guaranty except in such court, (iii) agree that service of
any process, summons, notice or document sent by U.S. certified mail, return
receipt requested, or by nationally recognized overnight courier service to
any other Party's address shall be effective against any other party in any
such court, and (iv) waive any objection to proceeding in such court,
including, but not limited to, objections as to personal jurisdiction or for
forum non-conveniens.
(e) Amendola agrees that his rights under this Guaranty are
subordinate to rights of LaSalle National Bank ("Bank") to the extent
prescribed in a separate agreement with the Bank.
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<PAGE>
7. NOTICES. Any and all notices required or permitted hereunder shall
be given in writing as follows:
If to Amendola:
Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
With a copy to:
Edward I. Kramer, Esq.
Blau, Kramer, Wactlar & Lieberman
100 Jericho Quadrangle
Suite 225
Jericho, NY 11753
TEL: (516) 822-4820
FAX: (516) 822-4824
If to Henry Fong:
2401 PGA Blvd., Suite 280F
Palm Beach Gardens, FL 33410
TEL: (407) 624-0885
FAX: (407) 624-9507
With a copy to:
Gerald Raskin, Esq.
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
TEL: (303) 571-1400
FAX: (303) 595-3970
If to Michael S. Casazza:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
TEL: (864) 294-5370
FAX: (864) 294-5235
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<PAGE>
With a copy to:
Gerald Raskin, Esq.
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
TEL: (303) 571-1400
FAX: (303) 595-3970
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication
hereunder by personal delivery or using a nationally recognized overnight
courier service, telecopy or telex. Any party may change the address to which
notices, service of process, requests, demands, claims or other
communications hereunder are to be delivered by giving the other parties
notice in the manner set forth herein.
IN WITNESS WHEREOF, Guarantors each have executed and delivered this
Guaranty as of the date first above written.
___________________________
Henry Fong
___________________________
Michael S. Casazza
Accepted and agreed to ____ day of April, 1996.
___________________________
Warren Amendola, Sr.
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<PAGE>
STATE OF ____________________)
).ss:
COUNTY OF ___________________)
On this ____ day of April, 1996, before me personally came Henry Fong, to
me known to be the individual described in, and who executed, the foregoing
instrument, and acknowledged that he executed the same.
__________________________
Notary Public
STATE OF ____________________)
).ss:
COUNTY OF ___________________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
__________________________
Notary Public
STATE OF ____________________)
).ss:
COUNTY OF ___________________)
On this ____ day of April, 1996, before me personally came Warren
Amendola, Sr. to me known to be the individual described in, and who
executed, the foregoing instrument, and acknowledged that he executed the
same.
__________________________
Notary Public
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<PAGE>
Exhibit D
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made and entered into
effectively as of this 30th day of April, 1996, by and among Warren Amendola,
Sr. ("Amendola"), USA Skate Corporation, a Delaware Corporation ("Skate
Corp."), California Pro Sports, Inc. ("California Pro") and Blau, Kramer,
Wactlar & Lieberman, P.C. ("Escrow Agent").
A. By a certain agreement (the "Stock Purchase Agreement"), dated of
even date herewith, by and among Skate Corp., California Pro, Amendola,
Patricia Amendola and Three R Profit Sharing Retirement Plan as "Corporate
Sellers," and Amendola, Warren Amendola, Jr., Richard Amendola and Russell
Amendola as "Three R Sellers," Skate Corp. has acquired from the Corporate
Sellers all of their shares of the Capital Stock of USA Skate Co., Inc. ("USA
Skate") and from the Three R Sellers, all of their shares of Capital Stock of
Three R Sales, Inc. (the "Transaction").
B. Pursuant to the Stock Purchase Agreement, the Corporate Sellers and
the Three R Sellers ("Sellers") have made certain representations and
warranties to Skate Corp. and California Pro and have agreed, INTER ALIA,
pursuant to Section 7.2 of the Stock Purchase Agreement to indemnify Skate
Corp. and/or California Pro (collectively referred to herein as the "Buyer")
from and against, and otherwise be liable for, Adverse Consequences resulting
from, arising out of, or caused by, any breach by the Sellers of any of their
representations, warranties, covenants or other agreements contained in the
Stock Purchase Agreement in an aggregate amount not exceeding the Sellers
Liability Cap except as otherwise provided therein (the "Sellers Liability
Obligations").
C. In connection with the Transaction and as a condition to the
consummation thereof, Amendola as Licensor and USA Skate as Licensee have
entered into a certain License Agreement dated as of even date herewith (the
"License Agreement") pursuant to which, INTER ALIA, the Licensee is to pay
Royalty Payments, including the Guaranteed Minimum Royalty, to the Licensor
for the use of the Licensed Marks (as defined therein) in connection with the
manufacture and sale of certain merchandise.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS.
a. ADVERSE CONSEQUENCES: shall have the meaning ascribed in Section
1.1 of the Stock Purchase Agreement.
1
<PAGE>
b. GUARANTEED MINIMUM ROYALTY: shall have the meaning ascribed in
Section 7.2(a) of the License Agreement.
c. ESCROW INSTALLMENT PAYMENTS: shall have the meaning ascribed in
Section 7.2(b) of the License Agreement.
d. ESCROW CASH. shall mean the Escrow Installment Payments,
together with all interest earned on all of the foregoing.
e. SELLERS' LIABILITY CAP: shall have the meaning ascribed in
Section 7.2(e) of the Stock Purchase Agreement.
2. PURPOSES.
The sole purpose of the Escrow Fund is to provide a source of funds
from which the Sellers' Liability Obligations may be satisfied wholly or
partially.
3. APPOINTMENT OF ESCROW AGENT.
The parties hereto hereby appoint Blau, Kramer, Wactlar & Lieberman,
P.C. to act as Escrow Agent to act in accordance with the terms and
conditions of this Agreement.
4. ESCROW FUND.
The "Escrow Fund" shall include and be comprised of the Escrow Cash,
which, whenever received as hereinafter provided, shall be deposited into a
Money Market Account that is to be opened and maintained by the Escrow Agent
in Amendola's name (the Money Market Account), and released, disbursed or
distributed therefrom in accordance with the terms of this Agreement.
5. ESCROW PERIOD.
Subject to the provisions of Section 12 hereof, the Escrow Fund
shall remain in existence and be controlled by the Escrow Agent in accordance
with the terms of this Agreement for a period of twenty four (24) months from
the date on which the first of the Escrow Installment Payments is made (the
"Escrow Period").
6. CLAIMS BY BUYER AGAINST THE ESCROW FUND.
a. ASSERTION OF CLAIMS. Upon receipt by the Escrow Agent at any
time after the effective date of this Agreement and on or before the
termination of the Escrow Period of a certificate signed by an officer of
California Pro, (an "Officer's Certificate") (i) stating that the Buyer has
suffered Adverse Consequences in a specified amount which exceeds the
threshold of $50,000 ("Threshold") but does not exceed, in the aggregate,
the Sellers' Liability Cap, and
2
<PAGE>
(ii) specifying, in reasonable detail, each of the individual items of actual
damages alleged to have been suffered that are included in, or comprise the
amount of Adverse Consequences stated, and the pertinent section or sections
of the Stock Purchase Agreement and nature of the misrepresentation, breach
of warranty, covenant or agreement to which each such item relates (the
"Claim[s]"), the Escrow Agent shall pay to Buyer from the Money Market
Account (or if the Money Market Account is insufficient at that time for such
purpose, if and when received) that amount of Escrow Cash equal to the stated
amount of the Claim above the Threshold but not exceeding the Sellers'
Liability Cap. Nothing herein shall be construed to extend the time within
which the Buyer is permitted to make a claim under the Stock Purchase
Agreement in respect of Seller's Liability Obligations.
b. OBJECTION BY AMENDOLA. At the time of delivery of any Officer's
Certificate to the Escrow Agent (a "Delivery"), a duplicate copy of such
Officer's Certificate shall be delivered to Amendola. Amendola shall have a
period of thirty (30) calendar days following each such Delivery (the
"Waiting Period") within which to object in a written statement (an
"Objection") to the Claim or Claims made in the Officer's Certificate. The
Objection shall state in reasonable detail the factual and/or legal basis for
such Objection and shall have been delivered to the Escrow Agent, with a copy
of such Objection to the Buyer prior to the expiration of the Waiting Period.
Upon reasonable notice by Amendola, the Buyer shall make available to
Amendola and/or his designated representatives, the offices and the books and
records of USA Skate and the documents and information as may be material and
necessary to enable Amendola and/or such representatives to investigate the
Claim or Claims in the Officer's Certificate.
If Amendola makes an Objection within the Waiting Period, the
Escrow Agent shall not make any payments from the Escrow Fund in respect of
such Claim in the manner or to the extent contemplated in Section 6(a) unless
and until the Claim is resolved finally pursuant to Sections 6(c) and/or 6(d)
hereof. Conversely, absent a timely Objection by Amendola, after the
expiration of the Waiting Period, the Escrow Agent shall make payment of the
Escrow Fund to the Buyer in the manner and to the extent described in Section
6(a) hereof.
Nothing herein shall be construed to permit the Escrow Agent to
determine the sufficiency of either an Officer's Certificate or an Objection.
c. RESOLUTION OF CONFLICTS. If Amendola shall object to any Claim
or Claims made in any Officer's Certificate in accordance with Section 6(b)
above, Amendola and the Buyer shall attempt in good faith for a period of
thirty (30) days thereafter (the "Negotiation Period") to agree upon the
respective rights of the parties with respect to each of such Claims or with
respect to the Escrow Fund, as the case may be. If Amendola and the Buyer
should so agree, a memorandum setting forth such accord shall be prepared and
signed by each of the parties and furnished to the Escrow Agent. The Escrow
Agent shall be entitled to rely on any such memorandum and distribute the
Escrow Fund in accordance with the terms thereof.
3
<PAGE>
d. LITIGATION. In the event the Buyer and Amendola are unable to
reach an accord with regard to all of the Claims asserted in the Officer's
Certificate by the end of the Negotiation Period, then either party may
institute such actions or proceedings as they deem appropriate in the United
States District Court for the Eastern District of New York or the Supreme
Court of New York, Suffolk County as provided in Section 8.8 of the Stock
Purchase Agreement to resolve the dispute. The Escrow Agent shall be
entitled to act in accordance with any judgment made and entered by such
courts and to authorize the making or withholding of the Escrow Fund in
accordance therewith.
e. SATISFACTION BY COMPENSATION SHARES. Notwithstanding anything
to the contrary herein, in accordance with Section 7.2(e) of the Stock
Purchase Agreement, Amendola shall have the right to elect at any time to
apply in full or partial satisfaction of any of Sellers Liability Obligations
and/or in lieu of any payment of Escrow Cash to be made by the Escrow Agent
to the Buyer hereunder in respect of any Claim, shares of the common stock of
California Pro ("Compensation Shares"), valued at $2.25 per share, which
Amendola received as compensation pursuant to a certain Consulting and
Non-Competition Agreement dated as of even date herewith among Amendola,
Buyer and California Pro.
7. DISTRIBUTIONS OUT OF THE ESCROW FUND.
a. DISTRIBUTION OF ESCROW CASH. In the event the Buyer has not
delivered to the Escrow Agent and to Amendola an Officer's Certificate
stating a Claim or Claims for Adverse Consequences allegedly suffered, then
upon the earlier elapse of the Escrow Period or the time within which the
Buyer is permitted to assert a claim under the Stock Purchase Agreement, the
Escrow Agent shall release and return promptly to Amendola the Escrow Fund.
In the event the Escrow Agent has received one or more Officer's
Certificate(s) as provided in Section 6(a) hereof upon elapse of the Escrow
Period, the Escrow Agent shall pay promptly to Amendola that amount of the
Escrow Fund in excess of any amount sufficient to satisfy all of the such
Claims specified in such Officer's Certificate (subject to the objection of
Amendola and the ultimate adjudication of the matter as provided in Section
6(d) hereof). As soon as all such Claims have been resolved, the Escrow
Agent shall pay to Amendola the remainder of the Escrow Fund not required to
satisfy such claims.
8. DUTIES OF THE ESCROW AGENT. The Escrow Agent shall maintain,
control and safeguard the Escrow Fund during the term of this Agreement, and
shall cause the Escrow Fund to be held and disposed of only in accordance
with the terms hereof. The Escrow Agent shall be obligated to perform solely
such duties as are specifically set forth herein or are necessary and
appropriate to carry out such duties. The Escrow Agent may rely and shall be
protected in relying on any instrument reasonably believed to be genuine and
to have been signed or presented by the appropriate party or parties, as the
case may be.
9. INDEMNIFICATION OF ESCROW AGENT. The Buyer and Amendola agree,
jointly and severally, to indemnify and hold the Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees and
4
<PAGE>
disbursements that may be imposed on or incurred by the Escrow Agent in
connection with the performance of the Escrow Agent's duties under this
Agreement, including, but not limited to, any litigation arising from this
Agreement or involving its subject matter.
10. RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign at any
time upon giving at least thirty (30) days written notice to the other
parties hereto; provided, however, that no such resignation shall become
effective until the appointment of a successor Escrow Agent in accordance
with this Section. The parties shall use their best efforts to mutually
agree on a successor escrow agent within thirty (30) days after receiving
such notice. If the parties fail to agree upon a successor escrow agent
within such time, the Escrow Agent shall have the right to appoint a
successor escrow agent. The successor escrow agent shall execute and deliver
an instrument accepting such appointment, and such successor escrow agent
shall, without further acts, be vested with all the rights, powers, and
duties of the predecessor Escrow Agent as if originally named as escrow
agent. The Escrow Agent shall thereafter be discharged from any further
duties and liability under this Agreement.
11. ESCROW AGENT FEES AND EXPENSES. Out-of-pocket expenses of the
Escrow Agent for performance of its duties hereunder shall be paid equally by
Amendola and the Buyer.
12. TERMINATION OF THE ESCROW. The Escrow shall terminate upon the
sooner occurrence of any of the following events ("Termination Event"):
a. the expiration of the Escrow Period,
b. the disbursement or distribution of the entire Escrow Fund in
accordance with the terms of this Agreement,
c. by written agreement of the parties.
13. GENERAL PROVISIONS.
a. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be in writing given as follows:
If to Amendola:
c/o WARREN AMENDOLA, Sr.
22 Mallard Cove
Centerport, New York ll721
5
<PAGE>
with a copy to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle, Suite 225
Jericho, New York 11753
Attention: Edward I. Kramer, Esq.
Tel: (516) 822-4820
Fax: (516) 822-4824
If to Skate Corp. or California Pro, to the applicable Party at:
8102 White Horse Road
Greenville, South Carolina 29611
Attention: Michael S. Casazza, President
Tel: (864) 294-5370
Fax: (864) 294-5235
with a copy to:
Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC
1400 Glenarm Place, Third Floor
Denver, Colorado 80202
Attention: Gerald Raskin, Esq.
Tel: (303) 571-1400
Fax: (303) 595-3970
if to Escrow Agent:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle, Suite 225
Jericho, New York 11753
Attention: Edward I. Kramer, Esq.
Tel: (516) 822-4820
Fax: (516) 822-4824
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any Party may give any notice or other communication
hereunder by personal delivery or using a nationally recognized overnight
courier service, telecopy or telex. Any Party may change the address to
which notices, service of process, requests, demands, claims or other
communications hereunder are to be delivered by giving the other Parties
notice in the manner set forth herein.
b. INTERPRETATION. 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.
6
<PAGE>
c. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
d. ENTIRE AGREEMENT. This Agreement among the parties hereto
together with the Stock Purchase Agreement and the Consulting and
Non-Competition Agreement: (a) constitutes the entire agreement among the
Parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) except as expressly provided
herein, is not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided in writing by the parties
hereto.
e. SEVERABILITY. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null,
void, or unenforceable, said par shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.
f. AMENDMENT; WAIVERS. This Agreement may not be amended or
modified, and any of the terms, covenants, representations, warranties, or
conditions hereof may not be waived, except by a written instrument executed
by all of the parties hereto, or in the case of a waiver, by the party
waiving compliance. Any waiver by any party of any condition, or of the
breach of any provision, term, covenant, representation, or warranty
contained in this Agreement, in any one or more instances, shall not be
deemed to be nor construed as further or continuing waiver of any such
condition, or the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
g. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof. For all actions and proceedings, the
parties hereby irrevocably and unconditionally (i) consent to the exclusive
jurisdiction of the United States District Court for the Eastern District of
New York (or if there is no subject matter jurisdiction, the Supreme Court of
New York for the County of Suffolk) over any action, suit or proceeding
arising out of or relating to this Agreement, (ii) agree not to commence any
action, suit or proceeding arising out of or relating to this Agreement
except in such court, (iii) agree that service of any process, summons,
notice or document sent by U.S. certified mail, return receipt requested, or
by nationally recognized overnight courier service to any other Party's
address shall be effective against any other party in any such court, and
(iv) waive any defense or objection to the proceeding in such court,
including those objections and defenses based on alleged lack of personal
jurisdiction, venue and forum non-conveniens.
7
<PAGE>
h. RULES OF CONSTRUCTION. The parties hereto agree that they each
have been represented by counsel during the negotiation and execution of this
Agreement and acknowledge that they each understand all provisions of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
i. AUTOMATIC SUCCESSION. Notwithstanding anything this Agreement
to the contrary, any company which the Escrow Agent may be merged or with
which it may be consolidated,
j. TIME OF ESSENCE. Time is of the essence for this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
______________________________________
WARREN AMENDOLA, SR.
USA SKATE CORPORATION
By ___________________________________
Michael S. Casazza
President
CALIFORNIA PRO SPORTS, INC.
By ___________________________________
BLAU, KRAMER, WACTLAR & LIEBERMAN, P.C.
By ___________________________________
8
<PAGE>
Exhibit E1
EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is made and entered into this
30th day of April, 1996, by and among U S A Skate Co., Inc., a New York
corporation ("Employer"), and Warren Amendola, Sr., an individual residing in
the State of New York ("Employee").
A. Employee has acted as one of the principals of the Employer, and
possesses intimate knowledge and expertise about all aspects of the business
and operations of the Employer.
B. The Employer desires to enter into an employment agreement with
Employee in order to assure access to his unique expertise and experience,
and Employee is willing to enter into such an employment agreement, all on
the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT. The Employer hereby agrees to employ Employee as
Executive Vice President of the Employer, and Employee hereby accepts
employment from the Employer, for a period of one year, commencing on the
date hereof and terminating on April ___, 1997, to perform such duties as may
be assigned to him by the Employer or as the Board of Directors or the
President of the Employer may designate; provided, however, that such duties
will be performed from the Employer's offices in Long Island, New York, and
shall not be inconsistent with those previously performed by him. Employee
represents and warrants to the Employer that he is free to enter into and
fully perform this Agreement.
2. AMOUNT OF TIME SPENT ON DUTIES. During the term of this Agreement,
Employee shall devote substantially all of his business time and effort to
the fulfillment of his employment duties hereunder. Employee shall not,
during the term of this Agreement, engage in any other business activity
without the prior written consent of the Employer.
3. SALARY; BENEFITS. Employee shall be paid an annual salary of
$90,000.00, payable in accordance with the customary payroll practices of the
Employer, and shall be entitled to such benefits as may be offered to
comparable employees of the Employer or its subsidiaries. Employee shall be
furnished with an automobile of his choosing for his business use and lease
payments and insurance shall be paid by the Employer. Employer shall furnish
health insurance benefits at least equal to those previously received by
Employee from Employer. Such salary and
<PAGE>
other benefits shall be prorated with respect to any month during which the
Employee is employed by the Employer for less than a full month.
4. NON-DISCLOSURE.
(a) Employee recognizes and acknowledges that the information,
product information, prospects, and business of the Employer and its
subsidiary, Les Equipements Sportifs Davtec, Inc. ("Davtec"), USA Skate
Corporation ("USA Skate") and all future subsidiaries of the Employer, Davtec
and USA Skate (collectively, the "Company") which are not generally known to
the public or trade and all trade secrets or other secret or confidential
information relating to the Company's businesses as they may exist from time
to time (collectively, the "Confidential Information") are valuable, special
and unique assets of the Company. Therefore, Employee will:
(i) Hold in strictest confidence and not disclose, reproduce,
publish or use in any manner, without the express authorization of the
appropriate Board of Directors, any Confidential Information, except as such
disclosure or use may be required in connection with his services provided
under this Agreement.
(ii) Upon request and, in any event, upon termination of
Employee's engagement under this Agreement, Employee will deliver to the
Company, and not keep or deliver to anyone else, any and all Confidential
Information and all notes, memoranda, documents and, in general, any and all
material relating to the Company's businesses, without retaining any copies
thereof.
(iii) In the event of a breach or threatened breach by Employee
of the provisions of this Section 4, the Company shall be entitled to a
restraining order or an injunction restraining Employee from disclosing, in
whole or in part, any Confidential Information or from rendering any services
to any person, firm, corporation, association or other entity to whom such
Confidential Information, in whole or in part, has been disclosed or is
threatened to be disclosed; and/or requiring that Employee deliver to the
Company all Confidential Information, documents, notes, memoranda and any and
all discoveries or other material upon termination of his engagement
hereunder. Nothing herein shall be construed as prohibiting the Company from
pursuing other remedies available to the Company for any breach or threatened
breach of this provision by Employee, including without limitation the
recovery of monetary damages, but not by way of delay, offset or credit
against any of the obligations to be paid or performed by the Company for the
benefit of Employee under Section 3 hereof.
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<PAGE>
(b) Notwithstanding anything herein to the contrary, if an Event of
Default shall occur under and pursuant to Sections 10.1(a) or 10.1(f) of the
License Agreement dated of even date herewith, between Amendola, as Licensor,
and USA Skate, as Licensee, all of the covenants and agreements in Section
4(a) shall terminate and be of no further force and effect.
5. TERMINATION.
(a) Employee's employment hereunder will terminate automatically
(i) upon Employee's death or (ii) upon Employee becoming physically or
mentally disabled, whether totally or partially, so that he is prevented from
performing the duties assigned to him pursuant to this Agreement at the time
of the disability for a period of three consecutive months or for shorter
periods resulting from the same disability aggregating three months in any
twelve-month period.
(b) Employer may terminate Employee's employment hereunder for
"cause." Termination for "cause" means termination by the Employer because
of Employee's gross negligence, proven dishonesty, willful breach of this
Agreement or violation of any reasonable rule or regulation of the Employer,
the violation of which results in significant damage to the Employer and with
respect to which, except in the case of dishonesty, the Employee fails to
make reasonable efforts to correct in a reasonable time after written notice
of such violation.
(c) Upon termination of this Agreement, Employee shall not be
entitled to any further compensation.
6. SURVIVABILITY. The provisions of Section 4 shall survive expiration
or any termination of this Agreement.
7. WAIVER. The waiver by the Employer of a breach of any provision of
this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee.
8. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be in writing given as follows:
IF TO THE EMPLOYEE:
Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
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<PAGE>
IF TO THE EMPLOYER:
U S A Skate Co., Inc.
c/o USA Skate Corporation
8102 White Horse Road
Greenville, South Carolina 29611
Attn: President
Tel: (864) 294-5370/Fax: (864) 294-5235
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any Party may give any notice or other communication
hereunder by personal delivery or using a nationally recognized overnight
courier service, telecopy or telex. Any Party may change the address to
which notices, service of process, requests, demands, claims or other
communications hereunder are to be delivered by giving the other Parties
notice in the manner set forth herein.
9. GOVERNING LAW. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of New York.
10. ENTIRE AGREEMENT; AMENDMENT.
(a) This Agreement contains the entire Agreement of the parties
with regard to the subject matter hereof and supersedes any and all prior
oral or written understandings and agreements between them. This Agreement
may be amended or modified only by an agreement in writing signed by both
parties.
(b) The parties acknowledge that the Employee has entered into a
separate Consulting and Non-Competition Agreement with California Pro Sports,
Inc. and USA Skate Corporation. Nothing in this Agreement shall modify or
prejudice the rights of Employee under such Consulting and Non-Competition
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
U S A SKATE CO., INC.
By _____________________________
Michael S. Casazza, President
________________________________
Warren Amendola, Sr., Employee
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<PAGE>
Exhibit E2
AGREEMENT
This Agreement is entered into as of April 30, 1996 by and among U.S.A.
SKATE CO., INC., a New York corporation ("USA Skate") USA SKATE CORPORATION,
a Delaware corporation ("Skate Corp."), CALIFORNIA PRO SPORTS, INC., a
Delaware corporation ("California Pro"), and WARREN AMENDOLA, JR.
("Covenantor").
WHEREAS:
A. Pursuant to a stock purchase agreement (the "Purchase Agreement"),
dated of even date herewith among Skate Corp. as Buyer, Warren Amendola, Sr.
("Amendola"), Patricia Amendola and Three R Profit Sharing Retirement Plan
(the "Corporate Sellers"), Amendola, Covenantor, Richard Amendola and Russell
Amendola (the "Three R Sellers"), Skate Corp. has acquired from the Corporate
Sellers all of their shares of the capital Stock of USA Skate and from the
Three R Sellers all of their shares of capital stock of Three R Sales, Inc.
("Three R;" the "Transaction").
B. Prior to the consummation of the Transaction, Covenantor, through
his ownership of shares of capital stock of Three R, was a significant
shareholder of USA Skate, as well as an executive officer and knowledgeable
and valuable employee of USA Skate.
C. California Pro is a majority shareholder of Skate Corp. and is an
integral party to the Transaction.
D. A condition to USA Skate's and California Pro's obligations to
consummate the Transaction is that, as incentive and consideration for Skate
Corp.'s purchase of the USA Skate and Three R capital stock, Covenantor enter
into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt,
sufficiency and adequacy of which hereby are acknowledged, the parties
mutually agree as follows:
1. NON-DISCLOSURE COVENANT. Covenantor recognizes and acknowledges
that all of the information, product information, prospects and business of
Skate Corp., California Pro, and USA Skate and each of their existing and
future subsidiaries (collectively, the "Company") that is not generally known
or available to the public or trade, and all trade secrets or other secret or
confidential information relating to the Company's businesses as they exist
from time to time (collectively, the "Confidential Information") are
valuable, special and unique assets of the Company. Therefore, Amendola will:
<PAGE>
(a) Hold in strictest confidence and not disclose, reproduce,
publish or use in any manner, without the express authorization of the
appropriate Board of Directors, any Confidential Information, except as such
disclosure or use may be required in connection with the services he is to
provide to the Company.
(b) Upon request and, in any event, upon termination of
Covenantor's employment with the Company, Covenantor will deliver to the
Company and not keep or deliver to anyone else, any and all Confidential
Information including, without limitation, all notes, memoranda, documents
and, in general, any and all material relating to the Company's businesses,
without retaining any copies thereof.
2. NON-COMPETITION COVENANT.
(a) Covenantor acknowledges that the following non-competition
covenant is an important part of the consideration to Skate Corp. and
California Pro resulting in Skate Corp.'s and California Pro's willingness to
enter into the Purchase Agreement related to the Transaction.
(b) For two years from the date of this Agreement or, if USA Skate
terminates Covenantor's employment, one year from the date of termination,
whichever is earlier, Covenantor, directly or indirectly, on his own behalf,
or on behalf of any party other than USA Skate, shall not engage in,
supervise or assist in, or own an interest in, any entity engaged in the
manufacture, production, sale, marketing, promotion or distribution of
Products (as defined below) which compete with USA Skate's business (the
"Non-Competition Covenant"). The Non-Competition Covenant shall be binding
upon Amendola world-wide to the extent USA Skate has had customers or has had
negotiations with prospective customers in any particular territory. For
purposes of this Agreement, "Products" shall mean ice skates, hockey sticks,
hockey pucks, ice hockey equipment, in-line skates and accessories,
snowboards, snowboard clothing and related accessories, sports bags, golf
equipment and other similar types of other products currently being sold or
which may be marketed by USA Skate during the term of this Agreement.
(c) An ownership interest of not more than five percent of the
outstanding stock of any publicly-traded company shall not constitute a
violation of the Non-Competition Covenant.
3. TERMINATION OF COVENANTS. Notwithstanding anything herein to the
contrary, if an Event of Default (as defined in the License Agreement) shall
occur under and pursuant to Sections 10.1(a) or 10.1(f) of the License
Agreement dated of even date herewith, between Warren Amendola, Sr., as
Licensor, and USA Skate, as Licensee, the Non-Disclosure and Non-Competition
covenants shall terminate and be of no further force and effect.
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<PAGE>
4. REMEDIES. Covenantor agrees that the Company shall be entitled to
restraining orders or injunctions to prevent breaches of the Non-Disclosure
Covenant in Section 1 and the Non-Competition Covenant contained in Section 2
and to enforce specifically the terms and provisions thereof, in addition to
any other remedy to which the Company may be entitled at law or in equity.
Covenantor further agrees that the provisions of this Section 3 may be
enforced by the Company without proof that it has sustained monetary damage
and that the Company shall be entitled to a temporary or permanent
restraining order and temporary and permanent injunctive relief.
5. RIGHTS OF THE COMPANY UNDER APPLICABLE LAWS. Nothing contained
herein shall be construed as limiting or abridging in any manner any of the
existing rights or remedies of the Company available under applicable state
or federal law or in equity.
6. SEVERABILITY. If any portion of a provision contained in this
Agreement is found to be unenforceable by a court having jurisdiction, said
court shall enforce the provision to the extent the enforceable portion is
divisible therefrom, to provide the Company with the maximum protection
consistent with purposes of this Agreement.
7. GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. The
parties (a) irrevocably consent that any legal action or proceeding brought
by any of them under, arising out of or in any manner relating to this
Agreement, shall be brought in the United State District Court for the
Eastern District of New York (or if there is no subject matter jurisdiction,
in the Supreme Court of the State of New York in and for the County of
Suffolk); (b) expressly and irrevocably consent and submit to the personal
jurisdiction of such court in any such action or proceeding; (c) irrevocably
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to them by
hand, nationally recognized overnight courier service or by certified mail,
return receipt requested, delivered or addressed as set forth below; and (d)
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, FORUM NON
CONVENIENS or any similar basis.
8. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, first class mail, telex
or telecopy, addressed as follows:
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<PAGE>
PARTY ADDRESS
- ----- -------
The Company Michael S. Casazza, President
California Pro Sports, Inc.
8102 White Horse Road
Greenville, SC 29611
TEL (864) 294-5370
FAX (864) 294-5235
With copies to Gerald Raskin, Esq.
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Pl., Suite 300
Denver, Colorado 80202
TEL (303) 571-1400
FAX (303) 595-3970
Covenantor Warren Amendola, Jr.
96 Greenlawn Road
Huntington, NY 11743
TEL (516) 427-4166
With copies to Edward I. Kramer, Esq.
Blau, Kramer, Wactlar &
Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
TEL (516) 822-4820
FAX (516) 822-4824
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered five business days
after deposit in any United States post office in the continental United
States, postage prepaid, if mailed; when receipt is acknowledged or
confirmed, if sent by facsimile transmission.
9. ATTORNEY'S FEES. If a dispute arises with respect to this
Agreement, the party prevailing in any action or proceeding brought to
resolve such dispute either by way of an adjudication or settlement, shall be
entitled to recover all expenses, including without limitation, reasonable
attorney's fees and expenses incurred in ascertaining such party's rights, or
in enforcing such party's rights under this Agreement.
10. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, oral or in writing, among the parties with respect to the subject
matter of this Agreement.
11. WAIVER. The failure or delay of any party to insist upon compliance
of any provision hereof will not operate as and is not
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<PAGE>
to be construed to be a waiver or amendment of the provision or of the right
of the aggrieved party to insist upon compliance with such provision or to
take remedial steps to recover damages or other relief for noncompliance.
Any express waiver of a breach of any provision of this Agreement will not
operate and is not to be construed as a waiver of any subsequent breach,
irrespective of whether occurring under similar or dissimilar circumstances.
12. AMENDMENTS. This Agreement may be amended only by written agreement
signed by all parties.
13. ASSIGNMENT. This Agreement and the rights and obligations of the
parties hereto may not be assigned or transferred by any party without the
prior written consent of the other parties.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts and when so executed shall constitute one agreement.
15. SECTION HEADINGS. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U S A SKATE CO., INC.
By _____________________________
__________________, _________
USA SKATE CORPORATION
By _____________________________
Michael S. Casazza, President
CALIFORNIA PRO SPORTS, INC.
By _____________________________
Michael S. Casazza, President
______________________________
Warren Amendola, Jr.
-5-
<PAGE>
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared _______ __________
to me known, who, being by me duly sworn, did depose and say that he is the
__________ of U S A Skate Co., Inc., a New York corporation with its
principal office located at 7 Brayton Court, Commack, New York, the
corporation described in and which executed the foregoing instrument and that
he is authorized by the board of directors of said corporation to sign on
behalf of said corporation.
______________________________
Notary Public
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Michael S. Casazza
to me known, who, being by me duly sworn, did depose and say that he is the
President of California Pro Sports, Inc. and USA Skate Corporation, each of
which is a Delaware corporation with its principal office located at 8102
White Horse Road, Greenville, South Carolina, the corporations described in
and which executed the foregoing instrument and that he is authorized by the
board of directors of each said corporation to sign on behalf of said
corporation.
______________________________
Notary Public
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Warren Amendola,
Jr., to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
______________________________
Notary Public
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<PAGE>
Exhibit E3
AGREEMENT
This Agreement is entered into as of April 30, 1996 by and among U.S.A.
SKATE CO., INC., a New York corporation ("USA Skate") USA SKATE CORPORATION,
a Delaware corporation ("Skate Corp."), CALIFORNIA PRO SPORTS, INC., a
Delaware corporation ("California Pro"), and RICHARD AMENDOLA ("Covenantor").
WHEREAS:
A. Pursuant to a stock purchase agreement (the "Purchase Agreement"),
dated of even date herewith among Skate Corp. as Buyer, Warren Amendola, Sr.
("Amendola"), Patricia Amendola and Three R Profit Sharing Retirement Plan
(the "Corporate Sellers"), Amendola, Warren Amendola Jr., Covenantor and
Russell Amendola (the "Three R Sellers"), Skate Corp. has acquired from the
Corporate Sellers all of their shares of the capital Stock of USA Skate and
from the Three R Sellers all of their shares of capital stock of Three R
Sales, Inc. ("Three R;" the "Transaction").
B. Prior to the consummation of the Transaction, Covenantor, through
his ownership of shares of capital stock of Three R, was a significant
shareholder of USA Skate, as well as a knowledgeable and valuable officer and
employee of USA Skate.
C. California Pro is a majority shareholder of Skate Corp. and is an
integral party to the Transaction.
D. A condition to USA Skate's and California Pro's obligations to
consummate the Transaction is that, as incentive and consideration for Skate
Corp.'s purchase of the USA Skate and Three R capital stock, Covenantor enter
into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt,
sufficiency and adequacy of which hereby are acknowledged, the parties
mutually agree as follows:
1. NON-DISCLOSURE COVENANT. Covenantor recognizes and acknowledges
that all of the information, product information, prospects and business of
Skate Corp., California Pro, and USA Skate and each of their existing and
future subsidiaries (collectively, the "Company") that is not generally known
or available to the public or trade, and all trade secrets or other secret or
confidential information relating to the Company's businesses as they exist
from time to time (collectively, the "Confidential Information") are
valuable, special and unique assets of the Company. Therefore, Amendola will:
<PAGE>
(a) Hold in strictest confidence and not disclose, reproduce,
publish or use in any manner, without the express authorization of the
appropriate Board of Directors, any Confidential Information, except as such
disclosure or use may be required in connection with the services he is to
provide to the Company.
(b) Upon request and, in any event, upon termination of
Covenantor's employment with the Company, Covenantor will deliver to the
Company and not keep or deliver to anyone else, any and all Confidential
Information including, without limitation, all notes, memoranda, documents
and, in general, any and all material relating to the Company's businesses,
without retaining any copies thereof.
2. NON-COMPETITION COVENANT.
(a) Covenantor acknowledges that the following non-competition
covenant is an important part of the consideration to Skate Corp. and
California Pro resulting in Skate Corp.'s and California Pro's willingness to
enter into the Purchase Agreement related to the Transaction.
(b) For two years from the date of this Agreement or, if USA Skate
terminates Covenantor's employment, one year from the date of termination,
whichever is earlier, Covenantor, directly or indirectly, on his own behalf,
or on behalf of any party other than USA Skate, shall not engage in,
supervise or assist in, or own an interest in, any entity engaged in the
manufacture, production, sale, marketing, promotion or distribution of
Products (as defined below) which compete with USA Skate's business (the
"Non-Competition Covenant"). The Non-Competition Covenant shall be binding
upon Amendola world-wide to the extent USA Skate has had customers or has had
negotiations with prospective customers in any particular territory. For
purposes of this Agreement, "Products" shall mean ice skates, hockey sticks,
hockey pucks, ice hockey equipment, in-line skates and accessories,
snowboards, snowboard clothing and related accessories, sports bags, golf
equipment and other similar types of other products currently being sold or
which may be marketed by USA Skate during the term of this Agreement.
(c) An ownership interest of not more than five percent of the
outstanding stock of any publicly-traded company shall not constitute a
violation of the Non-Competition Covenant.
3. TERMINATION OF COVENANTS. Notwithstanding anything herein to the
contrary, if an Event of Default (as defined in the License Agreement) shall
occur under and pursuant to Sections 10.1(a) or 10.1(f) of the License
Agreement dated of even date herewith, between Warren Amendola, Sr., as
Licensor, and USA Skate, as Licensee, the Non-Disclosure and Non-Competition
covenants shall terminate and be of no further force and effect.
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<PAGE>
4. REMEDIES. Covenantor agrees that the Company shall be entitled to
restraining orders or injunctions to prevent breaches of the Non-Disclosure
Covenant in Section 1 and the Non-Competition Covenant contained in Section 2
and to enforce specifically the terms and provisions thereof, in addition to
any other remedy to which the Company may be entitled at law or in equity.
Covenantor further agrees that the provisions of this Section 3 may be
enforced by the Company without proof that it has sustained monetary damage
and that the Company shall be entitled to a temporary or permanent
restraining order and temporary and permanent injunctive relief.
5. RIGHTS OF THE COMPANY UNDER APPLICABLE LAWS. Nothing contained
herein shall be construed as limiting or abridging in any manner any of the
existing rights or remedies of the Company available under applicable state
or federal law or in equity.
6. SEVERABILITY. If any portion of a provision contained in this
Agreement is found to be unenforceable by a court having jurisdiction, said
court shall enforce the provision to the extent the enforceable portion is
divisible therefrom, to provide the Company with the maximum protection
consistent with purposes of this Agreement.
7. GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New York. The
parties (a) irrevocably consent that any legal action or proceeding brought
by any of them under, arising out of or in any manner relating to this
Agreement, shall be brought in the United State District Court for the
Eastern District of New York (or if there is no subject matter jurisdiction,
in the Supreme Court of the State of New York in and for the County of
Suffolk);(b) expressly and irrevocably consent and submit to the personal
jurisdiction of such court in any such action or proceeding;(c) irrevocably
consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to them by
hand, nationally recognized overnight courier service or by certified mail,
return receipt requested, delivered or addressed as set forth below; and (d)
expressly and irrevocably waive any claim or defense in any such action or
proceeding based on any alleged lack of personal jurisdiction, improper
venue, FORUM NON-CONVENIENS or any similar basis.
8. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, first class mail, telex
or telecopy, addressed as follows:
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<PAGE>
PARTY ADDRESS
- ----- -------
The Company Michael S. Casazza, President
California Pro Sports, Inc.
8102 White Horse Road
Greenville, SC 29611
TEL (864) 294-5370
FAX (864) 294-5235
With copies to Gerald Raskin, Esq.
Friedlob Sanderson Raskin
Paulson & Tourtillott, LLC
1400 Glenarm Pl., Suite 300
Denver, Colorado 80202
TEL (303) 571-1400
FAX (303) 595-3970
Covenantor Richard Amendola
7 Woodruff
Huntington, NY 11743
TEL (516) 547-8057
With copies to Edward I. Kramer, Esq.
Blau, Kramer, Wactlar &
Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
TEL (516) 822-4820
FAX (516) 822-4824
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered five business days
after deposit in any United States post office in the continental United
States, postage prepaid, if mailed; when receipt is acknowledged or
confirmed, if sent by facsimile transmission.
9. ATTORNEY'S FEES. If a dispute arises with respect to this
Agreement, the party prevailing in any action or proceeding brought to
resolve such dispute either by way of an adjudication or settlement, shall be
entitled to recover all expenses, including without limitation, reasonable
attorney's fees and expenses incurred in ascertaining such party's rights, or
in enforcing such party's rights under this Agreement.
10. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, oral or in writing, among the parties with respect to the subject
matter of this Agreement.
11. WAIVER. The failure or delay of any party to insist upon compliance
of any provision hereof will not operate as and is not
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<PAGE>
to be construed to be a waiver or amendment of the provision or of the right
of the aggrieved party to insist upon compliance with such provision or to
take remedial steps to recover damages or other relief for noncompliance.
Any express waiver of a breach of any provision of this Agreement will not
operate and is not to be construed as a waiver of any subsequent breach,
irrespective of whether occurring under similar or dissimilar circumstances.
12. AMENDMENTS. This Agreement may be amended only by written agreement
signed by all parties.
13. ASSIGNMENT. This Agreement and the rights and obligations of the
parties hereto may not be assigned or transferred by any party without the
prior written consent of the other parties.
14. COUNTERPARTS. This Agreement may be executed in several
counterparts and when so executed shall constitute one agreement.
15. SECTION HEADINGS. The section headings used in this Agreement are
for convenience only and shall not affect the construction of any terms of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U S A SKATE CO., INC.
By _____________________________
__________________, _________
USA SKATE CORPORATION
By _____________________________
Michael S. Casazza, President
CALIFORNIA PRO SPORTS, INC.
By _____________________________
Michael S. Casazza, President
______________________________
Richard Amendola
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<PAGE>
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared _______ __________
to me known, who, being by me duly sworn, did depose and say that he is the
__________ of U S A Skate Co., Inc., a New York corporation with its
principal office located at 7 Brayton Court, Commack, New York, the
corporation described in and which executed the foregoing instrument and that
he is authorized by the board of directors of said corporation to sign on
behalf of said corporation.
______________________________
Notary Public
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Michael S. Casazza
to me known, who, being by me duly sworn, did depose and say that he is the
President of California Pro Sports, Inc. and USA Skate Corporation, each of
which is a Delaware corporation with its principal office located at 8102
White Horse Road, Greenville, South Carolina, the corporations described in
and which executed the foregoing instrument and that he is authorized by the
board of directors of each said corporation to sign on behalf of said
corporation.
______________________________
Notary Public
STATE OF NEW YORK)
SS.:
COUNTY OF NASSAU)
On this ____ day of ________, 1996, before me appeared Richard Amendola,
to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
______________________________
Notary Public
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<PAGE>
Exhibit F
REGISTRATION RIGHTS AGREEMENT
This Agreement (this "Agreement") is made and entered into as of April 30,
1996, by and among Warren Amendola, Sr., Patricia Amendola, Three R Profit
Sharing Retirement Plan Warren Amendola, Jr., Richard Amendola and Russell
Amendola (collectively, the"Amendola Group"), and USA Skate Corporation, a
Delaware corporation ("Buyer").
This Agreement is made pursuant to the Stock Purchase Agreement of even
date herewith (the "Stock Purchase Agreement") by and among the Buyer,
California Pro Sports, Inc., a Delaware corporation ("California Pro") and the
Amendola Group. In connection with the Stock Purchase Agreement, the Buyer has
agreed to provide the registration rights and other rights set forth in this
Agreement to the Amendola Group.
The parties hereby agree as follows:
1. DEFINITIONS.
(a) REGISTERABLE SECURITIES. The terms "Registerable Securities" and
"Restricted Securities" shall mean the two hundred fifty thousand (250,000)
shares of the Buyer's common stock, par value $.01 per share (the "Common
Stock"), which was acquired by the Amendola Group pursuant to the Stock
Purchase Agreement, including in each case any shares received in connection
with any stock split, stock dividend, recapitalization, reclassification or
other distribution payable or issuable in shares of Common Stock (the "Amendola
Common Stock").
(b) RESTRICTED SECURITIES. For the purposes of this Agreement, the
Common Stock will cease to be Restricted Securities when (i) a registration
statement covering such Restricted Securities has been declared effective and
they have been disposed of pursuant to such effective registration statement,
or (ii) they are eligible for public resale under Rule 144 promulgated under
the Securites Act of 1933, as amended (the "Securities Act").
(c) REGISTERABLE SECURITIES. As to any particular shares, such
shares will cease to be Registerable Securities when they cease to be
Restricted Securities.
(d) STOCKHOLDERS. The term "Stockholders" shall mean California Pro,
Henry Fong and Michael S. Casazza.
2. PIGGY-BACK REGISTRATION.
At any time, if the Buyer proposes to file a registration statement
under the Securities Act with respect to an offering by the Buyer of any class
of equity security similar to the Registerable Securities (other than a
registration statement on Form S-4 or S-8 or any
<PAGE>
successor form or a registration statement filed solely in connection with an
exchange offer, a business combination transaction or an offering of securities
solely to the existing stockholders or employees of the Buyer), then the Buyer
shall give written notice of such proposed filing to the holders of
Registerable Securities at least 30 days before the anticipated filing date,
and such notice shall offer such holders the opportunity to register such
number of Registerable Securities amounting, in the aggregate, to not less than
one hundred thousand (100,000) shares of Amendola Common Stock. The Buyer shall
use reasonable efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the holders of Registerable Securities
requested to be included in the registration to include such securities in such
underwritten offering on the same terms and conditions as any similar
securities of the Buyer included therein. Notwithstanding anything to the
contrary in the foregoing, if the managing underwriter or underwriters of such
offering (or, in the case of an offering not being underwritten, the Buyer)
delivers a written opinion (or, in the case of the Buyer, a resolution of its
Board of Directors certified by the President of the Buyer) to the holders of
Registerable Securities that the total amount and kind of securities which
they, the Buyer and any other person intend to include in such offering is such
as to materially and adversely affect the success of such offering, then the
amount of securities to be offered for the accounts of holders of Registerable
Securities and persons other than the Buyer shall be eliminated or reduced pro
rata (based on the amount of securities owned which carry registration rights)
to the extent necessary to reduce the total amount of securities to be included
in such offering to the amount recommended by such managing underwriter or
underwriters in its written opinion (or the Board of Directors in its
resolution).
3. REGISTRATION PROCEDURES.
The Buyer will, in connection with any registration pursuant to
Section 2 in which sellers of Registerable Securities are included, as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement on any appropriate form under the
Securities Act, which form shall be available for the sale of Registerable
Securities in accordance with the intended method or methods of distribution
thereof, and use its best efforts to cause such registration statement to
become effective; PROVIDED that at least five business days before filing with
the Commission a registration statement or prospectus or any amendments or
supplements thereto, including documents incorporated by reference after the
initial filing of any registration statement, the Buyer will furnish to each
seller of Registerable Securities draft copies of such registration statement,
and, upon the request of any seller of Registerable Securities, shall continue
to provide drafts of such registration statement until filed, and thereafter
such number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registerable Securities owned by such seller and to change the registration
statement as it relates to such seller as requested by such seller on a timely
basis, and to reasonably consider other changes to the registration statement
(but not including any document incorporated therein by
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<PAGE>
reference) reasonably requested by such seller on a timely basis, in light of
the requirements of the Securities Act and any other applicable laws and
regulations; and PROVIDED, FURTHER, that as to documents incorporated by
reference, the Buyer shall provide documents incorporated by reference promptly
upon request after the filing of such documents;
(b) prepare and file with the Commission such amendments and
post-effective amendments to a registration statement as may be necessary to
keep such registration statement effective for up to ninety (90) days or such
longer period of time Buyer has committed to keep such registration effective
for others, or such lesser time if the Amendola Group sellers have effected all
their sales therein (the "Effective Period"); and cause the related prospectus
to be supplemented by any required prospectus supplement, and as so
supplemented to be filed to the extent required pursuant to Rule 424 under the
Securities Act, during the Effective Period; and otherwise comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during the Effective Period
in accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement or supplement to such prospectus;
(c) notify the sellers of Registerable Securities and the managing
underwriters, if any, promptly, and confirm such advice in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (2) of any request by the
Commission for amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the Commission
of any stop order suspending the effectiveness of a registration statement or
the initiation of any proceedings for that purpose, (4) of the receipt by the
Buyer of any notification with respect to the suspension of the qualification
of any of the Registerable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, and (5) of the
happening of any event which makes any statement made in any registration
statement, the prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in any registration
statement or prospectus so that they will not contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(d) make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement at the earliest
possible time and to prevent the entry of such an order;
(e) use reasonable efforts to register or qualify such Registerable
Securities under such other securities or blue sky laws of such jurisdictions
as any seller reasonably requests and do any and all other acts and things
which may be necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registerable Securities owned by such
seller; PROVIDED that the Buyer will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this
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<PAGE>
paragraph (e), (ii) subject itself to taxation in any such jurisdiction or
(iii) take any action which would subject it to general service of process in
any such jurisdiction;
(f) make available for inspection by a representative of each seller
of Registerable Securities and any attorney or accountant retained by any such
seller or underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Buyer
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility (or establish a due diligence
defense), and cause the officers, directors and employees of the Buyer to
supply all information reasonably requested by any such Inspector in connection
with such registration statement. Records which the Buyer determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (ii) the disclosure of such Records is required by any
applicable law or regulation or any governmental regulatory body with
jurisdiction over any holder of Registerable Securities. The seller of
Registerable Securities agrees that it will, upon learning the disclosure of
such Records is sought in a court of competent jurisdiction, give notice to the
Buyer and allow the Buyer, at its expense, to undertake appropriate action to
prevent disclosure of the Records deemed confidential;
(g) cooperate with the selling holders of Registerable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registerable Securities to be sold and
not bearing any restrictive legends and enable such Registerable Securities to
be in such denominations and registered in such names as the selling holders of
Registerable Securities or any managing underwriters may request at least two
business days prior to any sale of Registerable Securities;
(h) comply with all applicable rules and regulations of the
Commission and promptly make generally available to its security holders an
earnings statement covering a period of twelve months, (1) in an underwritten
offering, commencing at the end of any fiscal quarter in which Registerable
Securities are sold to underwriters, or (2) in a non-underwritten offering,
beginning with the first month of the Buyer's first fiscal quarter commencing
after the effective date of the registration statement, which earnings
statement in each case shall satisfy the provisions of Section 11(a) of the
Securities Act;
(i) provide a CUSIP number for all Registerable Securities, not later
than the effective date of the registration statement relating to the first
public offering of Registerable Securities of the Buyer pursuant hereto;
(j) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions reasonably
requested by the holders of a majority of the Registerable Securities being
sold or the managing underwriter or underwriters in order to expedite or
facilitate the disposition of such Registerable Securities and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration (1) make such
representations and warranties, if any,
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<PAGE>
to the holders of such Registerable Securities and any underwriters with
respect to the registration statement, prospectus and documents incorporated by
reference, if any, in form, substance and scope as are customarily made by
issuers to underwriters in underwritten offerings and confirm the same if and
when requested, (2) obtain opinions of counsel to the Buyer and updates thereof
addressed to each selling holder and the underwriters, if any, with respect to
the registration statement, prospectus and documents incorporated by reference,
if any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such holders and underwriters, (3) obtain a "cold comfort" letter and updates
thereof from the Buyer's independent certified public accountants addressed to
the sellers of the Registerable Securities and to the underwriters, if any,
which letters shall be in customary form and cover matters of the type
customarily covered in "cold comfort" letters by accountants in connection with
underwritten offerings, and (4) the Buyer shall deliver such documents and
certificates as may be reasonably requested by the holders of a majority of the
Registerable Securities being sold and the managing underwriters, if any, to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Buyer. The above shall be
done at each closing under such underwriting or similar agreement or as and to
the extent required thereunder; and
(k) if requested by the holders of a majority of the Registerable
Securities being registered, use its best efforts to cause all Registerable
Securities which are included in such registration statement to be listed,
subject to notice of issuance, by the date of the first sale of Registerable
Securities pursuant to such registration statement, on each securities
exchange, if any, on which the Buyer's Common Stock is then listed.
The Buyer may require each seller of Registerable Securities as to
which any registration is being effected to furnish to the Buyer such
information regarding the distribution of such securities as the Buyer may from
time to time reasonably request in writing.
Each member of the Amendola Group agrees, and each other holder of
Registerable Securities will be required, in its request to register securities
pursuant to this Agreement, to agree, that, upon receipt of any notice from the
Buyer of the happening of any event of the kind described in Section 3(c)(2),
3(c)(3), 3(c)(4) or 3(c)(5) hereof, such holder will forthwith discontinue
disposition of Registerable Securities pursuant to the registration statement
covering such Registerable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(c)(1)
hereof, or until it is advised in writing (the "Advice") by the Buyer that the
use of the applicable prospectus may be resumed, and until it has received
copies of any additional or supplemental filings which are incorporated by
reference in such prospectus, and, if so directed by the Buyer, such holder
will deliver to the Buyer (at the expense of the Buyer) all copies, other than
permanent file copies then in such holder's possession, of the prospectus
covering such Registerable Securities current at the time of receipt of such
notice.
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<PAGE>
4. REGISTRATION EXPENSES.
All expenses incident to the performance of or compliance with this
Agreement by the Buyer, including, without limitation, all registration and
filing fees of the Commission, the National Association of Securities Dealers
Inc. and other agencies, 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 Registerable Securities), rating
agency fees, printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the fees and
expenses incurred in connection with the listing, if any, of the securities to
be registered on any securities exchange and fees and disbursements of counsel
for the Buyer and the Buyer's independent certified public accountants
(including the expenses of any special audit or "cold comfort" letters required
by or incident to such performance), securities acts liability insurance (if
the Buyer elects to obtain such insurance), the fees and expenses of any
special experts retained by the Buyer in connection with such registration, and
the fees and expenses of any other person retained by the Buyer (but not
including any underwriting discounts or commissions attributable to the sale of
Registerable Securities or other out-of-pocket expenses of the holders of
Registerable Securities (or the agents who act on their behalf) unless
reimbursement is specifically approved by the Buyer) will be borne by the
Buyer. All such expenses are herein called "Registration Expenses".
5. COME-ALONG RIGHTS.
(a) If one or more Stockholders proposes to sell, convey or otherwise
transfer, in a single transaction or a series of related transactions, a number
of shares of Common Stock which at the time of such transfer represents
beneficial ownership of three percent (3%) or more of the Common Stock then
outstanding, then such transferor(s) shall offer all of the Amendola Group an
opportunity, as provided below, to sell their shares of Common Stock on the
same terms and conditions as those received by such transferor(s). Any
transfer under this Section 5(a) is herein referred to as a "COME-ALONG
TRANSFER" and any Stockholder proposing to be a transferor under this Section
5(a) is herein referred to as an "OFFEROR STOCKHOLDER".
(b) Any Offeror Stockholder shall give not less than thirty (30)
days' prior written notice of the proposed Come-Along Transfer and its terms to
all of the Amendola Group. If any Amendola Group member elects to participate
in such Come-Along Transfer, such election shall be made by written notice to
the Buyer and to the Offeror Stockholder within twenty (20) days after notice
of the Come-Along Transfer is given. Then such electing Amendola Group member
(each an "ELECTING STOCKHOLDER") shall have the opportunity and right (i) to
sell in such Come-Along Transfer up to all of such Electing Stockholder's
shares of Common Stock (upon the same terms and conditions as the Offeror
Stockholder), if the offer proposed in such Come-Along Transfer extends to all
outstanding shares of Common Stock owned by the Amendola Group or (ii) in the
event the offer is for less than all outstanding shares of Common Stock of the
Amendola Group, each Electing Stockholder shall have the opportunity and right
to sell in such Come-Along Transfer (upon the same terms and conditions as the
Offeror
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<PAGE>
Stockholder) up to that number of shares of Common Stock owned by such Electing
Stockholder as shall equal the product of (x) a fraction, the numerator of
which is the number of shares of Common Stock beneficially owned by such
Electing Stockholder as of the date of such Come-Along Transfer and the
denominator of which is the aggregate number of shares of Common Stock
beneficially owned as of the date of such Come-Along Transfer by the Offeror
Stockholder and by all Electing Stockholders, multiplied by (y) the number of
shares of Common Stock which the transferee(s) has (have) offered to acquire
(by the purchase of shares of Common Stock) in such Come-Along Transfer. The
number of shares of Common Stock to be sold by any Offeror Stockholder shall be
reduced to the extent necessary to provide for such sales of shares of Common
Stock by Electing Stockholders.
(c) This Section 5 shall not apply to a transfer of all or part of a
Stockholder's shares of Common Stock to another Stockholder which beneficially
owned at least 5% of the Common Stock of the Buyer as of the date hereof after
giving effect to all transactions on the date hereof; PROVIDED, that such
shares of Common Stock shall remain subject to this Agreement.
(d) At any time within ninety (90) days after the expiration of the
twenty (20) day election period under Section 5(b) hereof regarding a
Come-Along Transfer, the Offeror Stockholder shall be free to sell shares of
Common Stock pursuant to such Come-Along Transfer, subject to rights of
participation exercised by Electing Stockholders pursuant to Section 5(b), and
such sales by an Offeror Stockholder shall be free of any further right of
participation pursuant to (or on no more favorable terms than) the bona fide
purchase offer from the proposed transferee(s) as specified in the notice
concerning the Come-Along Transfer which was given pursuant to Section 5(b)
hereof. Shares proposed to be sold by an Offeror Stockholder pursuant to the
Come-Along Transfer but which are not so sold within such ninety (90) days
shall be subject to the restrictions of this Section 5.
6. VALUATION GUARANTY.
Notwithstanding anything herein contained to the contrary, the Buyer
covenants and agrees that the aggregate value of the Amendola Common Stock as
of March 31, 1997 (the "Revaluation Date") shall equal or exceed the sum of
THREE HUNDRED THOUSAND ($300,000.00) DOLLARS (the "Guaranteed Value"). If the
Common Stock is not publicly traded, the value of the Amendola Common Stock
shall be deemed to be zero (0), and, simultaneously with the Buyer's payment to
the Amendola Group of the Guaranteed Value, the Amendola Group shall return to
the Buyer the Amendola Common Stock. If the Common Stock is publicly traded,
the value of the Amendola Common Stock shall be determined on the basis of the
average closing bid price per share of the Common Stock for the twenty (20)
trading days immediately prior to the Revaluation Date (the "Revaluation
Amount"). If the Revaluation Amount of the Amendola Common Stock is less than
the Guaranteed Value as of the Revaluation Date, the Buyer, shall promptly pay
to the Amendola Group, or its successors and/or assigns, U.S. Dollars in the
amount equal to the deficiency between the Revaluation Amount and the
Guaranteed Value.
-7-
<PAGE>
The Amendola Group understands and agrees that the cash payments that
may be due under this Section 6 shall be subordinate to LaSalle National Bank
to the extent prescribed in a separate agreement between the Amendola Group and
LaSalle National Bank.
7 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE BUYER. The Buyer agrees to indemnify and
hold harmless, to the full extent permitted by law, each holder of Registerable
Securities, its officers and directors and each person who controls such holder
(within the meaning of the Securities Act), and any agent thereof against all
losses, claims, damages, liabilities and expenses incurred by such party
pursuant to any actual or threatened suit, action, proceeding or investigation
(including reasonable expenses of investigation) arising out of or based upon
any untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading,
except insofar as the same arise out of or are based upon, any such untrue
statement or omission based upon information with respect to such holder
furnished in writing to the Buyer by such holder expressly for use therein.
(b) INDEMNIFICATION BY HOLDER OF REGISTERABLE SECURITIES. In
connection with any registration statement in which a holder of Registerable
Securities is participating, each such holder will be required to furnish to
the Buyer in writing such information with respect to such holder as the Buyer
reasonably requests for use in connection with any such registration statement
or prospectus, and each member of the Amendola Group agrees to the extent it
is such a holder, and each other such holder will be required to agree, to
indemnify, to the full extent permitted by law, the Buyer, the directors and
officers of the Buyer and each person who controls the Buyer (within the
meaning of the Securities Act) and any agent thereof, against any losses,
claims, damages, liabilities and expenses (including reasonable attorney's fees
and expenses of investigation) incurred by such party pursuant to any actual or
threatened suit, action, proceeding or investigation arising out of or based
upon any untrue or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact necessary to make the statements
therein,in the light of the circumstances under which they are made, not
misleading, to the extent, but only to the extent, that such untrue statement
or omission is based upon information relating to such holder furnished in
writing to the Buyer expressly for use therein.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt
by an indemnified party under this Section 7 of written notice of the
commencement of any action, proceeding, suit or investigation or threat thereof
made in writing for which such indemnified party may claim indemnification or
contribution pursuant to this Agreement, such indemnified party shall notify in
writing the indemnifying party of such commencement or threat; but the omission
so to notify the indemnifying party shall not relieve it from any liability
which it may have to any indemnified party (x) hereunder, unless the
indemnifying party is actually prejudiced
-8-
<PAGE>
thereby or (y) otherwise than under this Section 7. In case any such action,
suit or proceeding shall be brought against any indemnified party, and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and the indemnifying party shall
assume the defense thereof, with counsel reasonably satisfactory to the
indemnified party and the payment of all expenses. The indemnified party shall
have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
the indemnifying party has agreed to pay such fees and expenses, (ii) the
indemnifying party shall have failed to assume the defense of such action, suit
or proceeding or to employ counsel reasonably satisfactory to the indemnified
party therein or to pay all expenses or (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to the indemnified party which are different from or additional to
those available to the indemnifying party and which may result in a conflict
between the indemnifying party and such indemnified party (in which case, if
the indemnified party notifies the indemnifying party in writing that the
indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action or proceeding on behalf of the indemnified party, it
being understood, however, that the indemnifying party shall not, in connection
with any one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
the indemnified party, which firm shall be designated in writing by the
indemnified party).
(d) LIMITATION. Anything to the contrary contained in this Section 7
or in Section 8 hereof notwithstanding, no holder of Registerable Securities
shall be liable for indemnification and contribution payments aggregating an
amount in excess of the maximum amount received by such holder in connection
with any sale of Registerable Securities as contemplated herein.
8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No holder of Registerable Securities may participate in any
underwritten registration hereunder unless such holder (a) agrees to sell such
holder's securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and to
comply with Rules 10b-6 and 10b-7 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (b) completes and executes all
questionnaires, appropriate and limited powers of attorney, escrow agreements,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangement; PROVIDED that all such
documents shall be consistent with the provisions of Section 3 hereof.
-9-
<PAGE>
9. RULE 144.
Following a Public Offering, if any, the Buyer covenants that it will
timely file the reports required to be filed by it under the Securities Act and
the Exchange Act and the rules and regulations adopted by the Commission
thereunder. So long as the Buyer is not required to file such reports
following a Public Offering, it will, upon the request of any holder of
Registerable Securities, make publicly available other information to the
extent, and so long as, necessary to permit sales pursuant to Rule 144 under
the Securities Act, and it will take such further action as any holder of
Registerable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registerable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission, in each case to the extent such rules may otherwise be available to
such holder. Upon the reasonable request of any holder of Registerable
Securities, the Buyer will deliver to such holder a written statement as to
whether it has complied with such requirements.
10. ADDITIONAL PROVISIONS.
(a) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of the Buyer and those members of the Amendola
Group holding not less than fifty (50%) percent of the Registerable Securities.
(b) NOTICES. All communications under this Agreement shall be
sufficiently given if delivered by hand or by overnight courier or mailed by
registered or certified mail, postage prepaid, addressed,
(1) if to the Buyer, to:
USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
Attention: Michael S. Casazza, President
with a copy to:
Friedlob Sanderson Raskin Paulson & Tourtillott, LLC
1400 Glenarm Place, Suite 300
Denver, Colorado 80202
Attention: Gerald Raskin, Esq.
(2) if to the Amendola Group,
-10-
<PAGE>
to:
c/o Warren Amendola, Sr.
22 Mallard Cove
Centerport, New York 11721
with a copy to:
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
Attention: Edward I. Kramer, Esq.
or, in the case of the Amendola Group, at such other address as such Amendola
Group shall have furnished in writing to the Buyer; or, in the case of the
Buyer, at such other address as the Buyer or California Pro shall have
furnished in writing to each of the Amendola Group.
(c) SUCCESSORS AND ASSIGNS; HOLDERS AS BENEFICIARIES. This Agreement
shall inure to the benefit of and be binding upon the parties and their
respective successors and assigns, and the agreements of the Buyer herein shall
inure to the benefit of all holders of Registerable Securities and their
respective successors and assigns. Nothing in this Agreement shall be deemed
to impose on any of the Amendola Group any obligations to or in respect of any
other holder of Registerable Securities.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
(g) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal, or unenforceable in any respect of any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the Amendola Group, the Buyer and the holders of Registerable Securities
shall be enforceable to the fullest extent permitted by law.
-11-
<PAGE>
(h) ENTIRE AGREEMENT; SURVIVAL; TERMINATION. This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein and
therein. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This Agreement
and the Stock Purchase Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(i) JURISDICTION AND FORUM SELECTION. For all actions and
proceedings, the parties hereby irrevocably and unconditionally (i) consent to
the exclusive jurisdiction of the United States District Court for the Eastern
District of New York (or if there is no subject matter jurisdiction, the
Supreme Court of New York for the County of Suffolk) over any action, suit or
proceeding arising out of or relating to this Agreement, (ii) agree not to
commence any action, suit or proceeding arising out of or relating to this
Agreement except in such court, (iii) agree that service of any process,
summons, notice or document sent by U.S. certified mail, return receipt
requested, or by nationally recognized overnight courier service to any other
party's address shall be effective against any other party in any such court,
and (iv) waive any objection to the proceeding in such court, including
objections based on forum non-conveniens.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The Buyer
USA SKATE CORPORATION
By:___________________________________________________
Name:
Title:
______________________________________________________
Warren Amendola, Sr.
______________________________
Patricia Amendola
THREE R SALES, INC.
By:___________________________________________________
Name:
Title:
______________________________
Russell Amendola
______________________________
Richard Amendola
______________________________
Warren Amendola, Jr.
-12-
<PAGE>
Attachment 1
to Exhibit F
GUARANTY
THIS GUARANTY is dated and delivered effective as of April 30, 1996, by
Henry Fong and Michael S. Casazza (collectively, the "Guarantors"), for the
benefit of Warren Amendola, Sr., Patricia Amendola, Warren Amendola, Jr.,
Richard Amendola, Russell Amendola and Three R Profit Sharing Retirement Plan
(collectively the "Amendola Group").
A. Pursuant to a certain agreement (the "Stock Purchase Agreement"), dated
of even date herewith, among USA Skate Corporation ("Skate Corp."), as Buyer,
Warren Amendola, Sr., Patricia Amendola and Three R Profit Sharing Retirement
Plan as "Corporate Sellers," and Warren Amendola, Sr., Warren Amendola, Jr.,
Richard Amendola and Russell Amendola as "Three R Sellers", Skate Corp. has
acquired from the Corporate Sellers all of their shares of the Capital Stock of
the USA Skate Co., Inc. and from the Three R Sellers, all of their shares of
Capital Stock of Three R Sales, Inc. (the "Transaction").
B. Pursuant to the Stock Purchase Agreement and as a condition to the
Closing thereof, Skate Corp. and the Amendola Group have entered into a certain
Registration Rights Agreement ("Registration Rights Agreement") which were to
provide, inter alia, for a "Valuation Guarantee" in favor of the Amendola Group
as more fully described in Section 6 thereof.
C. Guarantors are executive officers and directors of Skate Corp. and are
guaranteeing Skate Corp.'s Valuation Guarantee to the Amendola Group to induce
the Amendola Group to enter into the Stock Purchase Agreement and to consummate
all of the transactions contemplated thereby.
NOW, THEREFORE, in consideration of the completion of the transactions
under the Stock Purchase Agreement, and for other good and valuable
consideration, the adequacy and receipt of which hereby are acknowledged, and
intending to be legally bound, the Guarantors hereby covenant and agree as
follows:
1. THE GUARANTY. The Guarantors hereby absolutely, unconditionally and
jointly and severally guarantee to the Amendola Group the timely performance of
the Valuation Guarantee (the "Guaranteed Obligation").
2. APPLICATION OF PAYMENTS. Any payment made by Guarantors, or any of
them, under this Guaranty shall be effective to reduce or discharge the
liability of the Guarantors hereunder without further notice of any kind.
3. CONTINUING GUARANTY. The rights of the Amendola Group under this
Guaranty are in addition to, and not mutually exclusive of, any and all other
rights and remedies the Amendola Group may have under the Stock Purchase
Agreement and/or any other agreements or guaranties related to, or arising out
of, the Transaction, as well as by reason of any law or in equity. Without
limiting the foregoing, the Amendola Group shall be entitled to demand and
receive payment and performance from the Guarantors under this Guaranty,
notwithstanding the availability of, or the Amendola Group's failure to pursue
or enforce any right or remedy they
<PAGE>
may have against Skate Corp. and notwithstanding the failure of the Amendola
Group to avail themselves or realize the benefit of any other right or remedy
afforded to them under any other agreement, guaranty or policy of insurance.
Except as otherwise provided herein, this Guaranty shall continue in force
and be binding upon the Guarantors until the Guaranteed Obligation has been
performed or paid in full. If Skate Corp. and/or any of its successors and
assigns fail to pay any of the Guaranteed Obligation when such amounts become
due, then the Amendola Group may enforce this Guaranty against any one or more
of the Guarantors subject only to the agreement described in Section 6(e) of
this Guaranty.
4. NO IMPAIRMENT. This Guaranty shall not be affected or impaired by any
extension of time, forbearance, waiver or concession given to Skate Corp., any
assertion of, or delay in asserting, any right, power or remedy against Skate
Corp., any modification or amendment to the provisions of the Registration
Rights Agreement; the dissolution, liquidation, reorganization or winding up of
Skate Corp; the release or limitation of liability of any other guarantor of
Skate Corp.'s obligations, covenants and agreements or any other circumstances
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor.
5. TERMINATION. This Guaranty shall terminate when the Guaranteed
Obligation has been paid or performed in full. Thereafter, the Amendola Group
will furnish to the Guarantors written cancellation of this Guaranty and will
return the original of this Guaranty to the Guarantors.
6. GENERAL PROVISIONS.
(a) No delay on the part of the Amendola Group in the exercise of any
power or right shall operate as a waiver thereof, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right.
(b) This Guaranty may not be assigned and may not be modified except
by a writing signed by all of the parties hereto and the Amendola Group.
(c) This Guaranty is made under and shall be governed by the laws of
the State of New York.
(d) JURISDICTION AND FORUM SELECTION. The guarantors hereby
irrevocably and unconditionally (i) consent to the exclusive jurisdiction of
the United States District Court for the Eastern District of New York (or if
there is no subject matter jurisdiction, the Supreme Court of New York for the
County of Suffolk) over any action, suit or proceeding arising out of or
relating to this Guaranty, (ii) agree not to commence any action, suit or
proceeding arising out of or relating to this Guaranty except in such court,
(iii) agree that service of any process, summons, notice or document sent by
U.S. certified mail, return receipt requested, or by nationally recognized
overnight courier service to any other Party's address shall be effective
against any other party in any such court, and (iv) waive any objection to
proceeding in such court, including, but not limited to, objections as to venue
and for forum non-conveniens.
-2-
<PAGE>
(e) The Amendola Group agrees that their rights under this Guaranty
are subordinate to rights of LaSalle National Bank ("Bank") to the extent
prescribed in a separate agreement with the Bank.
7. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be given in writing as follows:
If to the Amendola Group:
c/o Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
If to Michael S. Casazza:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
TEL: (864) 294-5370
FAX: (864) 294-5235
If to Henry Fong:
c/o 2401 PGA Blvd., Suite 280F
Palm Beach Gardens, FL 33410
TEL: (407) 624-0885
FAX: (407) 624-9507
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication hereunder
by personal delivery or by using a nationally recognized overnight courier
service, telecopy or telex.
Any party may change the address to which such notices and communications
shall be sent by written notice to the other parties, provided that any notice
of change of address shall be effective only upon receipt.
-3-
<PAGE>
IN WITNESS WHEREOF, Guarantors have each caused this Guaranty to be
executed as of the date first above written.
________________________________
Henry Fong, Individually
________________________________
Michael S. Casazza, Individually
-4-
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of April, 1996, before me personally came Henry Fong, to
me known to be the individual described in, and who executed, the foregoing
instrument, and acknowledged that he executed the same.
___________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
-5-
<PAGE>
GUARANTY
THIS GUARANTY is dated and delivered effective as of April 30, 1996, by
Henry Fong, Michael S. Casazza and California ProSports, Inc. (collectively,
the "Guarantors"), for the benefit of Patricia Amendola.
A. Pursuant to a certain agreement (the "Stock Purchase Agreement"),
dated of even date herewith, among USA Skate Corporation ("Skate Corp."), as
Buyer, Warren Amendola, Sr., Patricia Amendola and Three R Profit Sharing
Retirement Plan as "Corporate Sellers," and Warren Amendola, Sr., Warren
Amendola, Jr., Richard Amendola and Russell Amendola as "Three R Sellers",
Skate Corp. has acquired from the Corporate Sellers all of their shares of
the Capital Stock of the USA Skate Co., Inc. ("USA Skate") and from the Three
R Sellers, all of their shares of Capital Stock of Three R Sales, Inc. (the
"Transaction").
B. In connection with Transaction, USA Skate Co., Inc. ("USA Skate") is
entering into a certain Loan and Security Agreement ("Loan Agreement") with
LaSalle National Bank (the "Bank") pursuant to which the Bank may make loans
and certain other financial accommodations to or for the benefit of USA Skate.
C. As a condition to the execution and delivery of the Loan Agreement
and all other Loan Documents, Patricia Amendola is required to pledge as
collateral to the Bank pursuant to a Collateral Assignment of Account
Agreement a certain U.S. Treasury Bill, CUSIP 912794Y99, in the principal
amount of Three Hundred Thousand ($300,000.00) Dollars or the proceeds
therefrom and any accrued interest thereon (the "Collateral") to secure the
obligations of USA Skate to the Bank.
D. Guarantors are executive officers and directors of Skate Corp. and
are entering into this guarantee to induce the Corporate Sellers and Three R
Sellers to enter into the Stock Purchase Agreement and to consummate all of
the transactions contemplated thereby.
NOW, THEREFORE, in consideration of the completion of the transactions
under the Stock Purchase Agreement, and for other good and valuable
consideration, the adequacy and receipt of which hereby are acknowledged, and
intending to be legally bound, the Guarantors hereby covenant and agree as
follows:
1. THE GUARANTY. The Guarantors hereby absolutely, unconditionally and
jointly and severally guarantee to Patricia Amendola that the Collateral will
be released by the Bank and returned or that USA Skate will pay the same
amount to Patricia Amendola in lieu thereof on the earlier of (i) completion
of an initial public offering by Skate Corp. or (ii) December 31, 1996 (the
"Guaranteed Obligation").
<PAGE>
2. APPLICATION OF PAYMENTS. Any payment made by Guarantors, or any of
them, under this Guaranty shall be effective to reduce or discharge the
liability of the Guarantors hereunder without further notice of any kind.
3. CONTINUING GUARANTY. The rights of Patricia Amendola under this
Guaranty are in addition to, and not mutually exclusive of, any and all other
rights and remedies Patricia Amendola may have under the Stock Purchase
Agreement and/or any other agreements or guaranties related to, or arising
out of, the Transaction, as well as by reason of any law or in equity.
Without limiting the foregoing, Patricia Amendola shall be entitled to demand
and receive payment and performance from the Guarantors under this Guaranty,
notwithstanding the availability of, or Patricia Amendola's failure to pursue
or enforce any right or remedy she may have against USA Skate and
notwithstanding the failure of Patricia Amendola to avail herself or realize
the benefit of any other right or remedy afforded to her under any other
agreement, guaranty or policy of insurance.
Except as otherwise provided herein, this Guaranty shall continue in
force and be binding upon the Guarantors until the Collateral has been
released and returned to Patricia Amendola in full, or she shall have
received from USA Skate the same amount in lieu thereof. If USA Skate and/or
any of its successors and assigns fail to pay any of the Guaranteed
Obligation when due, then Patricia Amendola may enforce this Guaranty against
any one or more of the Guarantors without notice to any of the Guarantors.
4. NO IMPAIRMENT. This Guaranty shall not be affected or impaired by
any extension of time, forbearance, waiver or concession given to USA Skate,
any assertion of, or delay in asserting, any right, power or remedy against
USA Skate, any modification or amendment to the provisions of the Loan
Documents; the dissolution, liquidation, reorganization or winding up of USA
Skate; the release or limitation of liability of any other guarantor of USA
Skate's obligations, covenants and agreements or any other circumstances
which might otherwise constitute a legal or equitable discharge or defense of
a guarantor.
5. TERMINATION. This Guaranty shall terminate when the Guaranteed
Obligation has been paid or performed in full. Thereafter, Patricia Amendola
will furnish to the Guarantors written cancellation of this Guaranty and will
return the original of this Guaranty to the Guarantors.
6. GENERAL PROVISIONS.
(a) No delay on the part of Patricia Amendola in the exercise of any
power or right shall operate as a waiver thereof, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right.
(b) This Guaranty may not be assigned and may not be modified except
by a writing signed by all of the parties hereto and Patricia Amendola.
2
<PAGE>
(c) This Guaranty is made under and shall be governed by the laws of
the State of New York.
(d) JURISDICTION AND FORUM SELECTION. For all actions and
proceedings, the guarantors hereby irrevocably and unconditionally (i)
consent to the exclusive jurisdiction of the United States District Court for
the Eastern District of New York (or if there is no subject matter
jurisdiction, the Supreme Court of New York for the County of Suffolk) over
any action, suit or proceeding arising out of or relating to this Guaranty,
(ii) agree not to commence any action, suit or proceeding arising out of or
relating to this Guaranty except in such court, (iii) agree that service of
any process, summons, notice or document sent by U.S. certified mail, return
receipt requested, or by nationally recognized overnight courier service to
any other Party's address shall be effective against any other party in any
such court, and (iv) waive any objection to proceeding in such court,
including, but not limited to, objections as to venue and for forum
non-conveniens.
(e) Patricia Amendola agrees that her rights under this Guaranty are
subordinate to rights of the Bank to the extent prescribed in a separate
agreement with the Bank.
7. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be given in writing as follows:
If to Patricia Amendola:
c/o Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
If to California Pro Sports, Inc.:
8102 White Horse Road
Greenville, SC 29611
Attention: Michael S. Casazza, President
TEL: (864) 294-5370
FAX: (864) 294-5235
If to Michael S. Casazza:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
TEL: (864) 294-5370
FAX: (864) 294-5235
3
<PAGE>
If to Henry Fong:
c/o 2401 PGA Blvd., Suite 280F
Palm Beach Gardens, FL 33410
TEL: (407) 624-0885
FAX: (407) 624-9507
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication
hereunder by personal delivery or by using a nationally recognized overnight
courier service, telecopy or telex.
Any party may change the address to which such notices and communications
shall be sent by written notice to the other parties, provided that any
notice of change of address shall be effective only upon receipt.
IN WITNESS WHEREOF, Guarantors have each caused this Guaranty to be
executed as of the date first above written.
CALIFORNIA PRO SPORTS, INC.
By______________________________
Michael S. Casazza, President
________________________________
Henry Fong, Individually
________________________________
Michael S. Casazza, Individually
4
<PAGE>
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known, who being by me duly sworn, did depose and say that he
resides in __________________ County; that he is the President of CALIFORNIA
PRO SPORTS, INC., the corporation described in, and which executed the
foregoing instrument; that he knows the seal of said corporation, that the
seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation and that he
signed his name thereby by like order.
____________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Henry Fong, to
me known to be the individual described in, and who executed, the foregoing
instrument, and acknowledged that he executed the same.
___________________________
Notary Public
STATE OF ______________)
).ss:
COUNTY OF _____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known to be the individual described in, and who executed, the
foregoing instrument, and acknowledged that he executed the same.
___________________________
Notary Public
5
<PAGE>
Exhibit H
PROMISSORY NOTE
$125,000 April 30, 1996
FOR VALUE RECEIVED, the undersigned, LES EQUIPEMENTS SPORTIFS DAVTEC,
INC. ("Maker"), promises to pay to the order of WARREN AMENDOLA, SR. (the
"Holder"), at 22 Mallard Cove, Centerport, New York 11721 (or at such other
place as Holder shall designate in writing), in lawful money of the United
States of America, the principal sum of ONE HUNDRED TWENTY FIVE THOUSAND
DOLLARS ($125,000), from time to time, at such times and on such terms and
conditions as are set forth herein.
This Note arises out of the provisions of that certain Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of even date herewith,
among California Pro Sports, Inc. ("California Pro"), USA Skate Corporation
("Skate Corp."), Holder and others, under which Skate Corp. acquired all of
the outstanding shares of capital stock of each of U S A Skate Co., Inc. and
Three R Sales, Inc.
1. TERM. The principal and all accrued interest under this Note shall
mature and be payable on the earlier of the following dates: (a) December 31,
1996, (b) the completion of an initial public offering by Skate Corp., or (c)
completion of an equipment lease financing by Maker for not less than CAN
$1,000,000.
2. INTEREST. Interest on the outstanding principal balance shall
accrue at the rate of eight percent (8%) per annum. Simple interest shall be
computed on the outstanding principal amount on the basis of a 365-day year.
3. DEFAULT. Notwithstanding any other provision of this Note, during
any period in which there exists an uncured Event of Default (as hereinafter
defined), all amounts then outstanding hereunder shall, at the option of the
Holder, bear interest at a rate of ten percent (10%) per annum (the "Default
Rate"). Failure of the Holder to demand or collect the full amount of
interest at the Default Rate shall not constitute a waiver of the Holder's
right to the payment in full of all interest accruing at the Default Rate.
4. PAYMENT PROCEDURES. All payments made hereunder shall be applied
first to unpaid costs hereunder, then to accrued, unpaid interest, and then
to principal. All amounts due hereunder shall be payable by Maker to Holder
on the due date. If any payment hereunder is due on a day other than a
Business Day (as defined below), such payment shall be made on the next
Business Day following the day on which such payment otherwise would have
been due. For purposes of this Note, a "Business Day" means any day on which
commercial banks are generally open for regular banking business in the State
of New York.
<PAGE>
5. PREPAYMENTS. Maker may prepay the entire outstanding indebtedness
of Maker to Holder at any time, or may from time to time make partial
prepayments on the outstanding principal balance of this Note. All
prepayments may be made without penalty. No partial prepayments shall
excuse, delay or reduce any other payments due under this Note thereafter.
6. APPLICABLE LAW. The provisions of this Note will be governed by and
construed in accordance with the laws of the State of New York.
7. REIMBURSEMENT OF COLLECTION COSTS. Maker agrees to reimburse Holder
for all reasonable costs, including reasonable attorneys' fees, incurred to
collect this Note if not paid when due.
8. EVENT OF DEFAULT. The occurrence of any one of the events
enumerated below shall constitute an Event of Default under this Note. Upon
the occurrence of any Event of Default, Holder at is option shall have the
right to declare all amounts then remaining unpaid on this Note to be
immediately due and payable without presentment, demand, protest or other
notice of any kind.
(a) If Maker shall fail to pay any amount due hereunder when due
for more than five days; or
(b) If Maker or California Pro shall (i) institute proceedings to
be adjudicated a voluntary bankrupt or insolvent, or (ii) consent to the
filing of a bankruptcy proceeding against it, or (iii) file a petition or
answer seeking reorganization or arrangement under any bankruptcy act or any
other similar applicable law of any country, or (iv) consent to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy
or insolvency of itself, or any of its property, or (v) make an assignment
for the benefit of creditors, or (vi) cease doing business as a going
concern, or (vii) take any corporate action in furtherance of any of the
foregoing purposes; or
(c) If an order, judgment or decree of a court having jurisdiction
shall have been entered adjudicating the Maker or California Pro a bankrupt
or insolvent, or approving, as properly filed, a petition seeking
reorganization of Maker or California Pro or of all or a substantial part of
its properties or assets under any bankruptcy act or other similar applicable
law, as from time to time amended, or appointing a receiver, trustee or
liquidator of Maker or California Pro, and such order, judgment or decree
shall remain in force, undischarged and unstayed for a period of 30 days, or
a judgment or lien for the payment of money in excess of $250,000 shall be
rendered or entered against Maker or California Pro and the same shall remain
undischarged or unbonded for a period of 30 days or any writ or warrant or
attachment shall be issued or levied against a substantial part of the
property of Maker or California Pro and the same shall not be released,
vacated or bonded within 30 days after issue or levy; or
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<PAGE>
(d) If Maker, Skate Corp. or California Pro shall, without the
prior written consent of Holder, (i) transfer (regardless of how designated)
all or substantially all of its assets, (ii) merge or consolidate with
another corporation or entity in which it is not the surviving corporation,
or (iii) in the case of the Maker, if more than fifty percent (50%) of the
issued and outstanding shares of voting stock of Maker shall be sold or
transferred, directly or indirectly, whether in a single transaction or as
the aggregate result of a series of transactions other than as a result of
the public offering of the Maker's equity securities; and in the case of
California Pro, if more than a majority of the members of the Board of
Directors of California Pro or any successor entity, including either Henry
Fong or Michael S. Casazza, changes other than by a shareholder vote.
9. GUARANTY. Payment of amounts due under this Note are guaranteed by
California Pro ("Guarantor") in accordance with the guaranty attached hereto
as Attachment 1 and incorporated herein by this reference.
10. SUBORDINATION. The Holder, by its acceptance of this Note,
understands and agrees that the payments due hereunder from Maker shall be
subordinated to LaSalle National Bank (the "Bank") to the extent prescribed
in a separate agreement between the Holder and the Bank.
11. WAIVERS; OTHER MATTERS.
(a) The Maker and all endorsers hereof hereby waive presentment,
demand, protest, notice of protest, notice of dishonor and all other forms of
demand and notice concerning this Note and consent to each and every
extension or postponement of the time of payment or other indulgence with
respect to this Note, and to each and every substitution, addition, exchange
or release of collateral and to the addition, substitution or release of any
person primarily or secondarily liable hereunder. No delay or omission by
the Holder or other holder hereof in exercising any right or power hereunder
shall operate as a waiver of such right or power, and a waiver on one
occasion shall not be construed as a waiver or a bar to the exercise of any
right on any other occasion. Any provision in this Note which is prohibited
by law shall be ineffective to the extent of such prohibition without
invalidating any other provision hereof.
(b) The rights and remedies of the Holder of this Note as provided
in this Note, and any other agreements, mortgages, pledges and instruments
given as security for this Note shall be cumulative and concurrent, and may
be pursued singly, successively, or together against the property described
in such instruments and agreements and any other refunds, property or
security held by the Payee for the payment hereof or otherwise at the sole
discretion of the Payee. The failure to exercise any such right or remedy
shall in no event be construed as a waiver or release of said rights or
remedies or of the right to exercise them at any time later.
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<PAGE>
(c) The Maker irrevocably and unconditionally (i) consents to the
exclusive jurisdiction of the United States District Court for the Eastern
District of New York or, if jurisdiction is not proper in such court, the
Supreme Court of the State of New York, Suffolk County over any action, suit
or proceeding arising out of or relating to this Note, (ii) agrees not to
commence any action, suit or proceeding arising out of or relating to this
Note except in such courts, (iii) agrees that service of process, summons,
notice or document sent by U.S. certified mail, return receipt requested, or
by nationally recognized overnight courier service to Maker's address shall
be effective service of process for any such action, suit or proceeding
brought against Maker in any such court, and (iv) waive any objection to
proceeding in such court, including objections relating to FORUM
NON-CONVENIENS.
12. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be in writing, given as follows:
If to a Holder, to the particular Holder at:
c/o Warren Amendola
22 Mallard Cove
Centerport, NY 11721
If to Maker at:
c/o USA Skate Corporation
8102 White Horse Road
Greenville, SC 29611
ATTN: Michael S. Casazza, President
FAX: (864) 294-5235
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Maker or Holder may give any notice or other communication
hereunder by personal delivery or using a nationally recognized overnight
courier service, telecopy or telex. Maker or Holder may change the address
to which notices, service of process, requests, demands, claims or other
communications hereunder are to be delivered by giving the other notice in
the manner set forth herein.
"MAKER"
LES EQUIPEMENTS SPORTIFS
DAVTEC, INC.
By _____________________________
___________________,_________
(Name) (Title)
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<PAGE>
STATE OF NEW YORK )
) SS
COUNTY OF NASSAU )
On this ____ day of ________, 1996, before me appeared ______
_____________ to me known, who, being by me duly sworn, did depose and say
that he is the _________ of Les Equipements Sportifs Davtec, Inc., a
corporation organized under the laws of the Province of Quebec, Canada, with
an office located at _______________________________________________, the
corporation described in and which executed the foregoing instrument and that
he is authorized by the board of directors of said corporation to sign on
behalf of said corporation.
______________________________
Notary Public
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<PAGE>
Attachment 1
to Exhibit H
GUARANTY
THIS GUARANTY is dated and delivered effective as of April 30, 1996, by
California Pro Sports, Inc., (the "Guarantor"), for the benefit of Warren
Amendola, Sr. (the "Holder").
A. Pursuant to a Stock Purchase Agreement of even date herewith (the
"Stock Purchase Agreement"), Holder has advanced U.S. $165,000 Dollars to Les
Equipements Sportifs de Davtec, Inc., a corporation incorporated under the
laws of the Province of Quebec, Canada ("Maker") in exchange for certain
consideration including Maker's promissory note in the principal amount of
$125,000 dated the date hereof (the "Note").
B. A condition to the closing under the Stock Purchase Agreement was
that the Guarantor enter into this Guaranty.
C. Capitalized terms used but not defined herein shall have the
meanings ascribed in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the completion of the transactions
under the Stock Purchase Agreement, the compliance by the Holder with the
provisions of the Stock Purchase Agreement and various agreements related
thereto, and for other good and valuable consideration, the adequacy and
receipt of which hereby are acknowledged, and intending to be legally bound,
the Guarantor hereby covenants and agrees as follows:
1. THE GUARANTY. The Guarantor hereby absolutely, unconditionally
guarantees to the Holder the timely payment of all principal, interest and
other amounts due under the Note, as and when the same are due (the
"Guaranteed Obligations").
2. APPLICATION OF PAYMENTS. Any payment made by Guarantor, or any of
them, under this Guaranty shall be effective to reduce or discharge the
liability of the Guarantor hereunder without further notice of any kind.
3. CONTINUING GUARANTY. The rights of the Holder under this Guaranty
are in addition to, and not mutually exclusive of, any and all other rights
and remedies Holder may have under the Note, the Stock Purchase Agreement
and/or any other agreements or guaranties related to, or arising out of, the
transaction, as well as by reason of any law or in equity. Without limiting
the foregoing, the Holder shall be entitled to demand and receive payment and
performance from the Guarantor under this Guaranty, notwithstanding the
availability of, or the Holder's failure to pursue or enforce any right or
remedy they may have against the Maker and notwithstanding the failure of the
Holders to avail themselves or realize the benefit of any other right or
remedy afforded to them under any other agreement, guaranty or policy of
insurance.
<PAGE>
Except as otherwise provided herein, this Guaranty shall continue in
force and be binding upon the Guarantor until the Guaranteed Obligations have
been paid in full. If the Maker and/or any of its successors and assigns
fail to pay any of the Guaranteed Obligations when such amounts become due,
then Holders may enforce this Guaranty against the Guarantor, subject only to
the Agreement described in Section 6(e) of this Guaranty.
4. NO IMPAIRMENT. This Guaranty shall not be affected or impaired by
any extension of time, forbearance, waiver or concession given to Maker, any
assertion of, or delay in asserting, any right, power or remedy against
Maker, any modification or amendment to the provisions of the Note; the
dissolution, liquidation, reorganization or winding up of Maker; the release
or limitation of liability of any other guarantor of Maker's obligations,
covenants and agreements or any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
5. TERMINATION. This Guaranty shall terminate when the Guaranteed
Obligations have been paid in full. Thereafter, Holder will furnish the
Guarantor's written cancellation of this Guaranty and will return the
original of this Guaranty to the Guarantor.
6. GENERAL PROVISIONS.
(a) No delay on the part of the Holder in the exercise of any power
or right shall operate as a waiver thereof, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof or
the exercise of any other power or right.
(b) This Guaranty may not be assigned and may not be modified except
by a writing signed by all of the parties hereto and the Holder.
(c) This Guaranty is made under and shall be governed by the laws of
the State of New York.
(d) The Guarantor hereby irrevocably and unconditionally (i)
consents to the exclusive jurisdiction of the United States District Court
for the Eastern District of New York (or if there is no subject matter
jurisdiction, the Supreme Court of New York for the County of Suffolk) over
any action, suit or proceeding arising out of or relating to this Guaranty,
(ii) agrees not to commence any action, suit or proceeding arising out of or
relating to this Guaranty except in such court, (ii) agrees that service of
any process, summons, notice or document sent by U.S. certified mail, return
receipt requested, or by nationally recognized overnight courier service to
any other Party's address shall be effective against any other party in any
such court, and (iv) waives any objection to proceeding in such court,
including, but not limited to, objections as to personal jurisdiction and for
forum non-conveniens.
(e) Holder agrees that his rights under this Guaranty are
subordinate to rights of LaSalle National Bank ("Bank") to the extent
prescribed in a separate agreement with the Bank.
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<PAGE>
7. NOTICES. Any and all notices or service of process required or
permitted hereunder shall be given in writing as follows:
If to Holder:
c/o Warren Amendola, Sr.
22 Mallard Cove
Centerport, NY 11721
If to California Pro Sports, Inc.:
8102 White Horse Road
Greenville, SC 29611
Attention: Michael S. Casazza, President
TEL: (864) 294-5370
FAX: (864) 294-5235
Any notice required to be made within a stated period of time shall be
considered timely made if deposited before midnight of the last day of the
stated period. Any party may give any notice or other communication
hereunder by personal delivery or by using a nationally recognized overnight
courier service, telecopy or telex.
Any party may change the address to which such notices and communications
shall be sent by written notice to the other parties, provided that any
notice of change of address shall be effective only upon receipt.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as
of the date first above written.
CALIFORNIA PRO SPORTS, INC.
By _____________________________
Michael S. Casazza, President
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<PAGE>
STATE OF ______________)
).ss:
COUNTY OF ____________)
On this ____ day of April, 1996, before me personally came Michael S.
Casazza, to me known, who being by me duly sworn, did depose and say that he
resides in __________________ County; that he is the President of CALIFORNIA
PRO SPORTS, INC., the corporation described in, and which executed the
foregoing instrument; that he knows the seal of said corporation, that the
seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation and that he
signed his name thereby by like order.
____________________________
Notary Public
-4-
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") made this 30th day of
April, 1996 by and between LASALLE NATIONAL BANK, a national banking association
("BANK"), 135 S. LaSalle St., Chicago, IL 60674, and USA Skate Co., Inc., a New
York corporation, having its principal place of business at 7 Brayton Court,
Commack, New York 11725 ("BORROWER") [INSERT ENTITY DESIGNATION(S) AND
ADDRESS(ES) OF PRINCIPAL PLACE OF BUSINESS].
WITNESSETH:
WHEREAS, Borrower may, from time to time, request Loans from Bank, and the
parties wish to provide for the terms and conditions upon which such Loans, if
made by Bank, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal
or extension) hereafter made to Borrower by Bank, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Borrower, the parties agree as follows:
1. DEFINITIONS
(a) "ACCOUNT," "ACCOUNT DEBTOR," "CHATTEL PAPER," "DOCUMENTS,"
"EQUIPMENT," "GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS," "INVENTORY," AND
"INVESTMENT PROPERTY" shall have the respective meanings assigned to such terms,
as of the date of this Agreement, in the Illinois Uniform Commercial Code.
(b) "AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by or under common control with Borrower.
(c) "COLLATERAL" shall mean all of the property of Borrower described in
paragraph 4 hereof, together with all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Bank to secure, either
directly or indirectly, repayment of any of the Liabilities.
(d) "ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without
limiting Bank's discretion, Bank shall, in general, consider an Account to be an
Eligible Account if it meets, and so long as it continues to meet, the following
requirements:
(i) it is genuine and in all respects what it purports to be;
(ii) it is owned by Borrower and Borrower has the right to subject
it to a security interest in favor of Bank or assign it to Bank;
(iii) it arises from (A) the performance of services by Borrower
and such services have been fully performed and acknowledged and accepted
by the Account Debtor thereunder; or (B) the sale or lease of Goods by
Borrower, and such Goods have been completed in accordance with the Account
Debtor's specifications (if any) and delivered to and accepted by the
Account Debtor, such Account Debtor has not refused to accept and has not
returned or offered to return any of the Goods, or has not refused to
accept any of the services, which are the subject of such Account, and
Borrower has possession of, or has delivered to Bank at Bank's request,
shipping and delivery receipts evidencing delivery of such Goods.
(iv) [intentionally omitted];
(v) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens
and the security interest granted to Bank hereunder;
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<PAGE>
(vi) it is a valid, legally enforceable and unconditional obligation
of the Account Debtor thereunder, and is not subject to setoff,
counterclaim, credit, allowance or adjustment by such Account Debtor, or to
any claim by such Account Debtor denying liability thereunder in whole or
in part;
(vii) it does not arise out of a contract or order which fails in
any material respect to comply with the requirements of applicable law;
(viii) the Account Debtor thereunder is not a director, officer,
employee or agent of Borrower, or a Subsidiary, Parent or Affiliate, unless
the Account arises out of a transaction permitted by paragraph 10(l) hereof
and is otherwise an Eligible Account;
(ix) it is not an Account with respect to which the Account Debtor
is the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to payment of
such Account to Bank pursuant to, and in full compliance with, the
Assignment of Claims Act of 1940, as amended;
(x) it is not an account with respect to which the Account Debtor
is located in a state which requires Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either
to (A) receive a certificate of authority to do business and be in good
standing in such state, or (B) file a notice of business activities report
or similar report with such state's taxing authority, unless (x) Borrower
has taken one of the actions described in clauses (A) or (B), (y) the
failure to take one of the actions described in either clause (A) or (B)
may be cured retroactively by Borrower at its election or (z) Borrower
has proven, to Bank's satisfaction, that it is exempt from any such
requirements under any such state's laws;
(xi) it is Account which arises out of a sale made in the ordinary
course of Borrower's business;
(xii) the Account Debtor is a resident or citizen of, and is
located within, the United State of America, unless the Accounts owing by
such Account Debtor are the subject of foreign credit insurance which is in
an amount satisfactory to Bank and has been assigned to Bank in a manner
satisfactory to Bank;
(xiii) it is not an Account with respect to which the Account Debtor's
obligation to pay is conditional upon the Account Debtor's approval of the
Goods or services or is otherwise subject to any repurchase obligation or
return right, as with sales made on a bill-and-hold, guaranteed sale, sale
on approval, sale or return or consignment basis;
(xiv) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue or (B)
which violates any of the covenants of Borrower contained in this
Agreement;
(xv) it is not an Account which, when added to a particular Account
Debtor's other indebtedness to Borrower, exceeds a credit limit determined
by Bank in its sole discretion for that Account Debtor (except that
Accounts excluded from Eligible Accounts solely by reason of this paragraph
1(d)(xv) hereof shall be Eligible Accounts to the extent of such credit
limit); and
(xvi) it is not an Account with respect to which the prospect of
payment or performance by the Account Debtor is or will be impaired, as
determined by Bank in its sole discretion.
(e) "ELIGIBLE INVENTORY" shall mean Inventory of Borrower which is
acceptable to Bank in its sole discretion for lending purposes. Without
limiting Bank's discretion, Bank shall, in general, consider Inventory to be
Eligible Inventory if it meets, and so long as it continues to meet, the
following requirements:
(i) it is owned by Borrower and Borrower has the right to subject
it to a security interest in favor of Bank;
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<PAGE>
(ii) it is located on the premises listed on Exhibit B and is not in
transit;
(iii) it is not subject to any prior assignment, claim, lien,
security interest or encumbrance whatsoever, other than Permitted Liens and
the security interest granted to Bank hereunder;
(iv) if held for sale or lease or furnishing under contracts of
service, it is (except as Bank may otherwise consent in writing) new and
unused and free from defects which would, in Bank's sole determination,
affect its market value;
(v) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Bank has given its prior written approval
and Borrower has caused any such bailee, consignee, warehouseman, processor
or similar party to issue and deliver to Bank, in form and substance
acceptable to Bank, such UCC financing statements, warehouse receipts,
waivers and other documents as Bank shall require;
(vi) Bank has determined in accordance with Bank's customary
business practices that it is not unacceptable due to age, type, category
or quantity; and
(vii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue or
(B) which violates any of the covenants of Borrower contained in this
Agreement.
(f) "EVENT OF DEFAULT" shall have the meaning specified in paragraph 12
hereof.
(g) "EXHIBIT A" shall mean the exhibit entitled Exhibit A - Special
Provisions which is attached hereto and made a part hereof.
(h) "EXHIBIT B" shall mean the exhibit entitled Exhibit B - Business and
Collateral Locations which is attached hereto and made a part hereof.
(i) "INDEMNIFIED PARTY" shall have the meaning specified in paragraph 14
hereof.
(j) "LIABILITIES" shall mean any and all obligations, liabilities and
indebtedness of Borrower to bank or to any parent, affiliate or subsidiary of
Bank of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of
performance), whether several, joint or joint and several, and whether arising
or existing under written or oral agreement or by operation of law.
(k) "LOAN" or "LOANS" shall mean all advances made by Bank to Borrower
pursuant to paragraph 2 hereof and all other loans, advances and financial
accommodations made by Bank to or on behalf of Borrower hereunder.
(l) "LOAN LIMIT" shall have the meaning specified in paragraph 1 of
Exhibit A.
(m) "LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings specified in
paragraph 7 hereof.
(n) "OBLIGOR" shall mean Borrower and each Person who is or shall become
primarily or secondarily liable for any of the Liabilities.
(o) "ORIGINAL TERM" shall have the meaning specified in paragraph 9
hereof.
(p) "OTHER AGREEMENTS" shall mean all agreements, instruments and
documents, including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or
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<PAGE>
any other Person and delivered to Bank or to any parent, affiliate or
subsidiary of Bank in connection with the Liabilities or the transactions
contemplated hereby.
(q) "PARENT" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding stock of Borrower or any Subsidiary.
(r) "PERMITTED LIENS" shall mean (i) statutory liens of landlord's,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder, (ii) liens or security interests in favor of
Bank, (iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on Borrower's ability to use such
real property for its intended purpose in connection with Borrower's business,
and (iv) liens specifically permitted by Bank in writing.
(s) "PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity, party or foreign or United States government (whether
federal, state, county, city, municipal or otherwise), including, without
limitation, any instrumentality, division, agency, body or department thereof.
(t) "RENEWAL TERM" shall have the meaning specified in paragraph 9 hereof.
(u) "SUBSIDIARY" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by Borrower or by any partnership or joint venture
of which more than fifty percent (50%) of the outstanding equity interests are
at the time, directly or indirectly, owned by Borrower.
(v) "TANGIBLE NET WORTH" shall have the meaning specified in paragraph
11(o) hereof.
2. LOANS.
Subject to the terms and conditions of this Agreement (including Exhibit A)
and the Other Agreements, during the Original Term and any Renewal Term, Bank
may, in its sole discretion, make such Loans to Borrower as Borrower shall from
time to time request. The aggregate unpaid principal of all Loans outstanding
at any one time shall not exceed the Loan Limit set forth in Exhibit A and shall
bear interest at the rates set forth in Exhibit A. ALL LOANS SHALL BE REPAID BY
BORROWER UPON DEMAND BY BANK. Prior to Bank making such demand, Loans shall be
repaid as provided elsewhere in this Agreement. If at any time the outstanding
principal balance of the Loans exceeds the Loan Limit, or any portion of the
Loan exceeds any applicable sublimit set forth in Exhibit A, Borrower shall
immediately, and without the necessity of a demand by Bank, pay to Bank such
amount as may be necessary to eliminate such excess and Bank shall apply such
payment to the Liabilities in such order as Bank shall determine in its sole
discretion. Borrower hereby authorizes Bank, in its sole discretion, to charge
any of Borrower's accounts to make any payments of principal or interest
required by this Agreement. All Loans shall, in Bank's sole discretion, be
evidenced by one or more promissory notes in form and substance satisfactory to
Bank. However, if such Loans are not so evidenced, such Loans may be evidenced
solely by entries upon the books and records maintained by Bank.
3. FEES AND CHARGES.
Borrower shall pay to Bank, in addition to all other amounts payable
hereunder, the fees and charges set forth in Exhibit A. It is the intent of the
parties that the rate of interest and the other charges to Borrower under this
Agreement shall be lawful; therefore, if for any reason the interest or other
charges payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Bank may
lawfully charge Borrower, then the obligation to pay interest and other charges
shall automatically be reduced to such limit and, if any amount in excess of
such limit shall have been paid, then such amount shall be refunded to Borrower.
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4. GRANT OF SECURITY INTEREST TO BANK.
As security for the payment of all Loans now or in the future made by Bank
to Borrower hereunder and for the payment or other satisfaction of all other
Liabilities, Borrower hereby assigns to Bank and grants to Bank a continuing
security interest in the following property of Borrower, whether now or
hereafter owned, existing, acquired or arising and wherever now or hereafter
located: (a) all Accounts (whether or not Eligible Accounts) and all Goods
whose sales, lease or other disposition by Borrower has given rise to Accounts
and have been returned to or repossessed or stopped in transit by Borrower; (b)
all Chattel Paper, Instruments, Investment Property, Documents and General
Intangibles (including, without limitation, all patents, patent applications,
trademarks, trademark applications, tradenames, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, claims against carriers and shippers, guarantee claims, contracts
rights, security interests, security deposits and any rights to indemnification;
(c) all Inventory (whether or not Eligible Inventory); (d) all Goods (other than
Inventory), including, without limitation, Equipment, vehicles and fixtures; (e)
all deposits and cash and any other property of Borrower now or hereafter in the
possession, custody or control of Bank or any agent or any parent, affiliate or
subsidiary of Bank or any participant with Bank in the Loans for any purpose
(whether for safekeeping, deposit, collection, custody, pledge, transmission or
otherwise); and (f) all additions and accessions to substitutions for, and
replacements, products and proceeds of the foregoing property, including,
without limitation, proceeds of all insurance policies insuring the foregoing
property, and all of Borrower's books and records relating to any of the
foregoing and to Borrower's business.
5. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
Borrower shall, at Bank's request, at any time and from time to time,
execute and deliver to Bank such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed necessary or desirable by Bank) and do such other acts
and things as Bank may deem necessary or desirable in order to establish and
maintain a valid, attached and perfected security interest in the Collateral in
favor of Bank (free and clear of all other liens, claims and rights of third
parties whatsoever, whether voluntarily or involuntarily created, except
Permitted Liens) to secure payment of the Liabilities, and in order to
facilitate the collection of the Collateral. Borrower irrevocably hereby makes,
constitutes and appoints Bank (and all Persons designated by Bank for that
purpose) as Borrower's true and lawful attorney and agent-in-fact to execute
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect Bank's
security interest in the Collateral. Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement.
6. POSSESSION OF COLLATERAL AND RELATED MATTERS.
Until an "Event of Default" (as hereinafter defined) has occurred, Borrower
shall have the right, except as otherwise provided in this Agreement, in the
ordinary course of Borrower's business to (a) sell, lease or furnish under
contracts of service any of Borrower's Inventory normally held by Borrower for
any such purpose, and (b) use and consume any raw materials, work in process or
other materials normally held by Borrower for such purpose; provided, however,
that a sale in the ordinary course of business shall not include any transfer or
sale in satisfaction, partial or complete, of a debt owed by Borrower.
7. COLLECTIONS.
(a) Borrower shall direct all of its Account Debtors to make all payments
on the Accounts directly to a post office box (the "LOCK BOX") designated by,
and under the exclusive control of, Bank or another financial institution
acceptable to Bank. Borrower shall establish an account (the "LOCK BOX
ACCOUNT") in Borrower's name with Bank or such other financial institution
acceptable to Bank, into which all payments received in the Lock Box shall be
deposited, and into which Borrower will immediately deposit all payments made
for Inventory or services and received by Borrower in the identical form in
which such payments were made, whether by cash or check. If Borrower, any
Affiliate or Subsidiary, or any shareholder, officer, director, employee or
agent of Borrower or any Affiliate or Subsidiary, or any other Person acting for
or in concert with Borrower shall receive any monies, checks, notes,
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drafts or other payments relating to or as proceeds of Accounts or other
Collateral, Borrower and each such Person shall receive all such items in
trust for, and as the sole and exclusive property of, Bank and, immediately
upon receipt thereof, shall remit the same (or cause the same to be remitted)
in kind to the Lock Box Account. If the Lock Box Account is not established
with Bank, the financial institution with which the Lock Box Account is
established shall acknowledge and agree, in a manner satisfactory to Bank,
that the amounts on deposit in such Lock Box Account are the sole and
exclusive property of Bank, that such financial institution has no right to
setoff against the Lock Box Account or against any other account maintained
by such financial institution into which the contents of the Lock Box Account
are transferred, and that such financial institution shall wire, or otherwise
transfer in immediately available funds in a manner satisfactory to Bank,
funds deposited in the Lock Box Account on a daily basis as such funds are
collected. Borrower agrees that all payments made to such Lock Box Account
or otherwise received by Bank, whether in respect of the Accounts or as
proceeds of other Collateral or otherwise, will be applied on account of the
Liabilities in accordance with the terms of this Agreement. If the Lock Box
Account is established with Bank, Borrower agrees to pay all fees, costs and
expenses which Bank incurs in connection with opening and maintaining the
Lock Box Account and depositing for collection by Bank any check or other
item of payment received by Bank on account of the Liabilities. All of such
fees, costs and expenses shall constitute Loans hereunder, shall be payable
to Bank by Borrower upon demand, and, until paid, shall bear interest at the
highest rate then applicable to Loans hereunder. All checks, drafts,
instruments and other items of payment or proceeds of Collateral shall be
endorsed by Borrower to Bank, and, if that endorsement of any such item shall
not be made for any reason, Bank is hereby irrevocably authorized to endorse
the same on Borrower's behalf. For the purpose of this paragraph, Borrower
irrevocably hereby makes, constitutes and appoints Bank (and all Persons
designated by Bank for that purpose) as Borrower's true and lawful attorney
and agent-in-fact (i) to endorse Borrower's name upon said items of payment
and/or proceeds of Collateral and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account
of Borrower or goods pertaining thereto; (ii) to take control in any manner
of any item of payment or proceeds thereof; and (iii) to have access to any
lock box or postal box into which any of Borrower's mail is deposited, and
open and process all mail addressed to Borrower and deposited therein.
(b) Bank may, at any time and from time to time, whether before or after
notification to any Account Debtor and whether before or after the maturity of
any of the Liabilities, (i) enforce collection of any of Borrower's Accounts or
contract rights by suit or otherwise; (ii) exercise all of Borrower's rights and
remedies with respect to proceedings brought to collect any Accounts; (iii)
surrender, release or exchange all or any part of any Accounts, or compromise or
extend or renew for any period (whether or not longer than the original period)
any indebtedness thereunder; (iv) sell or assign any Account of Borrower upon
such terms, for such amount and at such time or times as Bank deems advisable;
(v) prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against any Account Debtor; and (vi) do all other acts
and things which are necessary, in Bank's sole discretion, to fulfill Borrower's
obligations under this Agreement and to allow Bank to collect the Accounts. In
addition to any other provision hereof, Bank may at any time, after the
occurrence of an Event of Default, at Borrower's expense, notify any parties
obligated on any of the Accounts to make payment directly to Bank of any amounts
due or to become due thereunder.
(c) Bank shall, within two (2) business days after receipt by Bank at its
office in Chicago, Illinois of cash or other immediately available funds from
collections of items of payment and proceeds of any Collateral, apply the whole
or any part of such collections or proceeds against the Liabilities in such
order as Bank shall determine in its sole discretion.
(d) Bank, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrower under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Bank in respect thereof and all costs, fees
and expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Bank shall constitute
Loans, payable by Borrower to Bank on demand and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(e) Immediately upon Borrower's receipt of any portion of the Collateral
evidenced by an agreement, Instrument or Document, including, without
limitation, any Chattel Paper, Borrower shall deliver the original thereof to
Bank together with an appropriate endorsement or other specific evidence of
assignment thereof to Bank (in form and substance acceptable to Bank). If an
endorsement or assignment of any such items shall not be made for any reason,
Bank is hereby irrevocably authorized, as Borrower's attorney and agent-in-fact,
to endorse or assign the same on Borrower's behalf.
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8. SCHEDULES AND REPORTS.
(a) Within ten (10) days after the close of each calendar month, and at
such other times as may be requested by Bank from time to time hereafter,
Borrower shall deliver to Bank (i) a schedule identifying each Eligible Account
together with copies of the invoices when requested by Bank (with evidence of
shipment attached) pertaining to each such Eligible Account, for the month (or
other applicable period) immediately preceding; (ii) such additional schedules,
certificates, reports and information with respect to the Collateral as Bank may
from time to time require; and (iii) an assignment of any or all items of
Collateral to Bank. Bank, through its officers, employees or agents, shall have
the right, at any time and from time to time in Bank's name, in the name of a
nominee of Bank or in Borrower's name, to verify the validity, amount or any
other matter relating to any of Borrower's Accounts, by mail, telephone,
telegraph or otherwise. Borrower shall reimburse Bank, on demand, for all
costs, fees and expenses incurred by Bank in this regard.
(b) Without limiting the generality of the foregoing, Borrower shall
deliver to Bank, at least once a month (or more frequently when requested by
Bank), a report with respect to Borrower's Inventory. Borrower shall
immediately notify Bank of any event causing loss or depreciation in value of
Borrower's Inventory (other than normal depreciation occurring in the ordinary
course of business).
(c) All schedules, certificates, reports, and assignments and other items
delivered by Borrower to Bank hereunder shall be executed by an authorized
representative of Borrower and shall be in such form and contain such
information as Bank shall specify.
9. TERMINATION.
This Agreement shall be in effect from the date hereof until May 31, 1999
(the "ORIGINAL TERM") and shall automatically renew itself from year to year
thereafter (each such one-year renewal being referred to herein as a "RENEWAL
TERM") unless (a) Bank makes demand for repayment prior to the end of the
Original Term or the then current Renewal Term; (b) the due date of the
Liabilities is accelerated pursuant to paragraph 13 hereof; or (c) Borrower
elects to terminate this Agreement at the end of the Original Term or at the end
of any Renewal Term by giving Bank written notice of such election at least
ninety (90) days prior to the end of the Original Term or the then current
Renewal Term and by paying all of the Liabilities in full on the last day of
such term. If one or more of the events specified in clauses (a), (b) and (c)
occurs, this Agreement shall terminate on the date thereafter that the
Liabilities are paid in full, provided, however, that the security interests and
liens created under this Agreement and the Other Agreements shall survive such
termination until the payment of the Liabilities has become indefeasible. At
such time as Borrower has repaid all of the Liabilities and this Agreement has
terminated, Borrower shall deliver to Bank a release, in form and substance
satisfactory to Bank, of all obligations and liabilities of Bank and its
officers, directors, employees, agents, parents, subsidiaries and affiliates to
Borrower, and if Borrower is obtaining new financing from another lender,
Borrower shall deliver such lender's indemnification of Bank, in form and
substance satisfactory to Bank, for checks which Bank has credited to Borrower's
account, but which subsequently are dishonored for any reason. If, during the
term of this Agreement, Borrower prepays all or any portion of the Liabilities,
and in connection therewith, either (a) permits any security agreement,
financing statement or analogous instrument to be executed or filed with respect
to the Collateral for the benefit of someone other than Bank, or (b) creates,
incurs or assumes any liability for borrowed money (except for borrowings from
Bank and borrowings permitted pursuant to paragraph 10(q) hereof), Borrower
agrees to pay to Bank, as a prepayment fee, in addition to the payment of all
other Liabilities, an amount equal to the product of (i) fifty percent (50%) of
the average monthly interest earned by Bank on the Loans made hereunder
preceding the date of prepayment, multiplied by (ii) the number of full and
partial months remaining from the date of prepayment to the end of the Original
Term or the then current Renewal Term. At such time as Borrower has repaid all
of the Liabilities and this Agreement has terminated, Bank shall deliver to
Borrower such releases and termination statements as Borrower may reasonably
request in order to terminate the perfected status of Bank's liens and security
interests upon the Collateral.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Borrower hereby represents, warrants and covenants that:
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(a) the financial statements delivered or to be delivered by Borrower to
Bank at or prior to the date of this Agreement and at all times subsequent
thereto accurately reflect the financial condition of Borrower, and there has
been no adverse change in the financial condition, the operations or any other
status of Borrower since the date of the financial statements delivered to Bank
most recently prior to the date of this Agreement;
(b) the office where Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of Collateral
and post office boxes are as set forth in Exhibit B; Borrower shall promptly
(but in no event less than ten (10) days prior thereto) advise Bank in writing
of the proposed opening of any new place of business, the closing of any
existing place of business, any change in the location of Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Borrower.
(c) the Collateral, including, without limitation, the Equipment (except
any part thereof which prior to the date of this Agreement Borrower shall have
advised Bank in writing consists of Collateral normally used in more than one
state) is and shall be kept, or, in the case of vehicles, based, only at the
addresses set forth on the first page of this Agreement or on Exhibit B, and at
other locations within the continental United States of which Bank has been
advised by Borrower in writing;
(d) if any of the Collateral consists of Goods of a type normally used in
more than one state, whether or not actually so used, Borrower shall immediately
give written notice to Bank of any use of any such Goods in any state other than
a state in which Borrower has previously advised Bank such Goods shall be used,
and such Goods shall not, unless Bank shall otherwise consent in writing, be
used outside of the continental United States;
(e) no security agreement, financing statement or analogous instrument
exists or shall exist with respect to any of the Collateral other than any
security agreement, financing statement or analogous instrument evidencing
security interests in favor of Bank or evidencing Permitted Liens;
(f) each Account or item of Inventory which Borrower shall, expressly or
by implication, request Bank to classify as an Eligible Account or an Eligible
Inventory, respectively, shall, as of the time when such request is made,
conform in all respects to the requirements of such classification as set forth
in the respective definitions of "Eligible Account" and "Eligible Inventory" as
set forth herein and as otherwise established by Bank from time to time, and
Borrower shall promptly notify Bank in writing if any such Eligible Account or
Eligible Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Original Term or any
Renewal Term be the lawful owner of all Collateral now purportedly owned or
hereafter purportedly acquired by Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens;
(h) Borrower has the right and power and is duly authorized and empowered
to enter into, execute and deliver this Agreement and the Other Agreements and
perform its obligations hereunder and thereunder; Borrower's execution, delivery
and performance of this Agreement and the Other Agreements does not and shall
not conflict with the provisions of any statute, regulation, ordinance or rule
of law, or any agreement, contract or other document which may now or hereafter
be binding on Borrower, and Borrower's execution, delivery and performance of
this Agreement and the Other Agreements shall not result in the imposition of
any lien or other encumbrance upon any of Borrower's property under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other agreement
or instrument by which Borrower or any of its property may be bound or affected;
(i) there are no actions or proceedings which are pending or threatened
against Borrower which might result in any material adverse change in its
financial condition or materially adversely affect the Collateral and Borrower
shall, promptly upon becoming aware of any such pending or threatened action or
proceeding, give written notice thereof to Bank;
(j) Borrower has obtained all licenses, authorizations, approvals and
permits, the lack of which would have a material adverse effect on the operation
of its business, and Borrower is and shall remain in compliance in all material
respects with all applicable federal, state, local and foreign statutes, orders,
regulations, rules and ordinances (including, without limitation, statues,
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<PAGE>
orders, regulations, rules and ordinances relating to taxes, employer and
employee contributions and similar items, securities, employee retirement and
welfare benefits, employee health and safety or environmental matters), the
failure to comply with which would have a material adverse effect on its
business, property, assets, operations or condition, financial or otherwise;
(k) all written information now, heretofore or hereafter furnished by
Borrower to Bank is and shall be true and correct as of the date with respect to
which such information was or is furnished;
(l) Borrower is not conducting, permitting or suffering to be conducted,
nor shall it conduct, permit or suffer to be conducted, any activities pursuant
to or in connection with which any of the Collateral is now, or will (while any
Liabilities remain outstanding) be owned by any Affiliate; provided, however,
that Borrower may enter into transactions with Affiliates in the ordinary course
of business pursuant to terms that are no less favorable to Borrower than the
terms upon which such transfers or transactions would have been made had they
been made to or with a Person that is not an Affiliate and, in connection
therewith, may transfer cash or property to Affiliates for fair value;
(m) Borrower's name has always been as set forth on the first page of this
Agreement and Borrower uses no tradenames or division names in the operation of
its business, except as otherwise disclosed in writing to Bank; Borrower shall
notify Bank in writing within ten (10) days of the change of its name or the use
of any tradenames or division names not previously disclosed to Bank in writing;
(n) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and merchantable title to and ownership of all Equipment,
including, without limitation, the Equipment described or listed on the schedule
of Equipment delivered to Bank concurrently with this Agreement; (ii) Borrower
shall keep and maintain the Equipment in good operating condition and repair and
shall make all necessary replacements thereof and renewals thereto so that the
value and operating efficiency thereof shall at all times be preserved and
maintained; (iii) Borrower shall not permit any such items to become a fixture
to real estate or an accession to other personal property; and (iv) Borrower,
immediately on demand by Bank, shall deliver to Bank any and all evidence of
ownership of including, without limitation, certificates of title and
applications of title to, any of the Equipment;
(o) this Agreement and the Other Agreements to which Borrower is a party
are the legal, valid and binding obligations of Borrower and are enforceable
against Borrower in accordance with their respective terms;
(p) Borrower is solvent, is able to pay its debts as they become due and
has capital sufficient to carry on its business, now owns property having a
value both at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or by
completion of the transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, nor shall it create, incur, assume or
become obligated (directly or indirectly), for any loans or other indebtedness
for borrowed money other than the Loans, except that Borrower may (i) borrow
money from a Person other than Bank on an unsecured and subordinated basis if a
subordination agreement in favor of Bank and in form and substance satisfactory
to Bank is executed and delivered to Bank relative thereto; (ii) maintain any
present indebtedness to any Person which has been disclosed to Bank in writing
and consented to in writing by Bank; and (iii) incur unsecured indebtedness to
trade creditors in the ordinary course of Borrower's business;
(r) Borrower does not own any margin securities, and none of the proceeds
of the Loans hereunder shall be used for the purpose of purchasing or carrying
any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation G or Regulation U of the Board
of Governors of the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed in writing to Bank, Borrower has no
Parents, Subsidiaries or divisions, nor is the Borrower engaged in any joint
venture or partnership with any other Person;
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(t) if Borrower is a corporation or partnership, Borrower is duly
organized and in good standing in its state of organization and Borrower is duly
qualified and in good standing in all states where the nature and extent of the
business transacted by it or the ownership of its assets makes such
qualification necessary;
(u) Borrower is not in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does Borrower
know of any dispute regarding any contract, lease or commitment which is
material to the continued financial success of Borrower;
(v) there are no controversies pending or threatened between Borrower and
any of its employees, other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success of Borrower, and Borrower is in compliance in all material
respects with all federal and state laws respecting employment and employment
terms, conditions and practices; and
(w) Borrower possesses, and shall continue to possess, adequate licensees,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, tradestyles and tradenames to continue to conduct its business as
heretofore conducted by it.
Borrower represents, warrants and covenants to Bank that all
representations, warranties and covenants of Borrower contained in this
Agreement (whether appearing in paragraphs 10 or 11 hereof or elsewhere) shall
be true at the time of Borrower's execution of this Agreement, shall survive the
execution, delivery and acceptance hereof by the parties hereto and the closing
of the transactions described herein or related hereto, shall remain true until
the repayment in full of all of the Liabilities and termination of this
Agreement, and shall be remade by Borrower at the time each Loan is made
pursuant to this Agreement.
11. ADDITIONAL COVENANTS OF BORROWER.
Until payment or satisfaction in full of all Liabilities and termination of
this Agreement, unless Borrower obtains Bank's prior written consent waiving or
modifying any of Borrower's covenants hereunder in any specific instance,
Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books, records
and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on Exhibit B;
(b) Borrower agrees to deliver to Bank the following financial
information, all of which shall be prepared in accordance with generally
accepted accounting principles consistently applied: (i) no later than twenty
(20) days after each calendar month, copies of internally prepared financial
statements, including, without limitation, balance sheets and statements of
income, retained earnings and cash flow of Borrower, certified by the Chief
Financial Officer of Borrower; (ii) no later than forty-five (45) days after the
end of each of the first three quarters of Borrower's fiscal year a balance
sheet, operating statement and reconciliation of surplus of Borrower, which
quarterly financial statements may be unaudited but shall be certified by the
Chief Financial Officer of Borrower; and (iii) no later than ninety (90) days
after the end of each of Borrower's fiscal years, annual financial statements
certified by independent certified public accountants selected by Borrower and
reasonably satisfactory to Bank, which financial statements shall be accompanied
by a letter from such accountants acknowledging that they are aware that a
primary intent of Borrower in obtaining such financial statements is to
influence Bank and that Bank is relying upon such financial statements in
connection with the exercise of its right hereunder;
(c) Borrower shall promptly advise Bank in writing of any material adverse
change in the business, assets or condition, financial or otherwise, of
Borrower, the occurrence of any Event of Default hereunder or the occurrence of
any event which, if uncured, will become an Event of Default hereunder after
notice of lapse of time (or both);
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(d) Bank, or any Persons designated by it, shall have the right, at any
time, to call at Borrower's places of business at any reasonable times, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from Borrower's books, records, journals, orders,
receipts and any correspondence and other data relating to Borrower's business,
the Collateral or any transactions between the parties hereto, and shall have
the right to make such verification concerning Borrower's business as Bank may
consider reasonable under the circumstances. Borrower shall furnish to Bank
such information relevant to Bank's rights under this Agreement as Bank shall at
any time and from time to time request. Borrower authorizes Bank to discuss the
affairs, finances and business of Borrower with any officers, employees or
directors of Borrower or with any Affiliates or the officers, employees or
directors of any Affiliate, and to discuss the financial condition of Borrower
with Borrower's independent public accountants. Any such discussions shall be
without liability to Bank or to Borrower's independent public accountants.
Borrower shall pay to Bank all customary fees and out-of-pocket expenses
incurred by Bank in the exercise of its rights hereunder, and all of such fees
and expenses shall constitute Loans hereunder, payable on demand and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(e) Borrower shall:
(i) keep the Collateral properly housed and shall keep the Collateral
insured for the full insurable value thereof against loss or damage by
fire, theft, explosion, sprinklers, collision (in the case of motor
vehicles) and such other risks as are customarily insured against by
Persons engaged in businesses similar to that of Borrower with such
companies, in such amounts and under policies in such form as shall be
satisfactory to Bank. Original (or certified) copies of such policies of
insurance have been or shall be delivered to Bank within fifteen (15) days
after the date hereof, together with evidence of payment of all premiums
therefor, and shall contain an endorsement, in form and substance
acceptable to Bank, showing loss under such insurance policies payable to
Bank. Such endorsement, or an independent instrument furnished to Bank,
shall provide that the insurance company shall give Bank at least thirty
(30) days written notice before any such policy of insurance is altered or
cancelled and that no act, whether willful or negligent, or default of
Borrower or any other Person shall affect the right of Bank to recover
under such policy of insurance in case of loss or damage. Borrower hereby
directs all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to Bank, Borrower irrevocably, makes,
constitutes and appoints Bank (and all officers, employees or agents
designated by Bank) as Borrower's true and lawful attorney (and agent-in-
fact) for the purpose of making, settling and adjusting claims under such
policies of insurance, endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance; and
(ii) maintain, at its expense, such public liability and third party
property damage insurance as is customary for Persons engaged in businesses
similar to that of Borrower with such companies and in such amounts, with
such deductibles and under policies in such form as shall be satisfactory
to Bank and original (or certified) copies of such policies have been or
shall be delivered to Bank within fifteen (15) days after the date hereof,
together with evidence of payment of all premiums therefor; each such
policy shall contain an endorsement showing Bank as additional insured
thereunder and providing that the insurance company shall give Bank at
least thirty (30) days written notice before any such policy shall be
altered or cancelled.
If Borrower at any time or times hereafter shall fail to obtain or maintain
any of the policies of insurance required above or to pay any premium in whole
or in part relating thereto, then Bank, without waiving or releasing any
obligation or default by Borrower hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and pay such
premiums and take such other actions with respect thereto as Bank deems
advisable. All sums disbursed by Bank in connection with any such actions,
including, without limitation, court costs, expenses, other charges relating
thereto and reasonable attorneys' fees, shall constitute Loans hereunder and
shall be payable on demand by Borrower to Bank and, until paid, shall bear
interest at the highest rate then applicable to Loans hereunder.
(f) Borrower shall not use the Collateral, or any part thereof, in any
unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could result in material damage to the
environment or a violation of any applicable environmental laws, rules or
regulations; shall keep the Collateral in good condition, repair and order;
shall permit
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Bank to examine any of the Collateral at any time and wherever the Collateral
may be located; shall not permit the Collateral, or any part thereof, to be
levied upon under execution, attachment, distraint or other legal process;
shall not sell, lease, grant a security interest in or otherwise dispose of
any of the Collateral except as expressly permitted by this Agreement; and
shall not secrete or abandon any of the Collateral, or remove or permit
removal of any of the Collateral from any of the locations listed on Exhibit
B or in any written notice to Bank pursuant to paragraph 10(b) hereof, except
for the removal of Inventory sold in the ordinary course of Borrower's
business as permitted herein;
(g) All monies and other property obtained by Borrower from Bank pursuant
to this Agreement will be used solely for business purposes of Borrower;
(h) Borrower shall, at the request of Bank, indicate on its records
concerning the Collateral a notation, in form satisfactory to Bank, of the
security interest of Bank hereunder, and Borrower shall not maintain duplicates
or copies of such records at any address other than Borrower's principal place
of business set forth on the first page of this Agreement;
(i) Borrower shall file all required tax returns and pay all of its taxes
when due, including, without limitation, taxes imposed by federal, state or
municipal agencies and shall cause any liens for taxes to be promptly released;
provided, that Borrower shall have the right to contest the payment of such
taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) Borrower keeps on
deposit with Bank (such deposit to be held without interest) an amount of money
which, in the sole judgment of Bank, is sufficient to pay such taxes and any
interest or penalties that may accrue thereon, and (iv) if Borrower fails to
prosecute such contest with reasonable diligence, Bank may apply the money so
deposited in payment of such taxes. If Borrower fails to pay any such taxes and
in the absence of any such contest by Borrower, Bank may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by Bank shall
constitute Loans hereunder, shall be payable by Borrower to Bank on demand, and,
until paid, shall bear interest at the highest rate then applicable to Loans
hereunder;
(j) Borrower shall not assume, guarantee or endorse, or otherwise become
liable in connection with, the obligations of any Person, except by endorsement
of instruments for deposit or collection or similar transactions in the ordinary
course of business;
(k) Borrower shall not enter into any merger or consolidation, or sell,
lease or otherwise dispose of all or substantially all of its assets, or enter
into any transaction outside the ordinary course of Borrower's business,
including, without limitation, any purchase, redemption or retirement of any
shares of any class of its stock, and any issuance of any shares of, or warrants
or other rights to receive or purchase any shares of, any class of its stock;
(l) Borrower shall not declare or pay any dividend or other distribution
(whether in cash or in kind) on any class of its stock (if Borrower is a
corporation) or on account of any equity interest in Borrower (if Borrower is a
partnership or other type of entity);
(m) Borrower shall not purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States;
(n) Borrower shall not amend its organizational documents or change its
fiscal year;
(o) Borrower's tangible net worth shall not at any time be less than that
shown on the financial statement most recently presented to Bank prior to the
date hereof; "TANGIBLE NET WORTH" being defined for purposes of this paragraph
as Borrower's shareholders' equity (including retained earnings) less the book
value of all intangible assets plus the amount of any LIFO reserve, all as
determined under generally accepted accounting principles applied on a basis
consistent with the aforesaid financial statement; and
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(p) Borrower shall reimburse Bank for all costs and expenses, including,
without limitation, legal expenses and reasonable attorneys' fees, incurred by
Bank in connection with documentation and consummation of this transaction and
any other transactions between Borrower and Bank, including, without limitation,
Uniform Commercial Code and other public record searches, lien filings, Federal
Express or similar express or messenger delivery, appraisal costs, surveys,
title insurance and environmental audit or review costs, and in seeking to
collect, protect or enforce any rights in or to the Collateral or incurred by
Bank in seeking to collect any Liabilities and to administer and enforce any of
Bank's rights under this Agreement. Borrower shall also pay all normal service
charges with respect to all accounts maintained by Borrower with Bank and for
any additional services requested by Borrower from Bank. All such costs,
expenses and charges shall constitute Loans hereunder, shall be payable by
Borrower to Bank on demand, and, until paid, shall bear interest at the highest
rate then applicable to Loans hereunder.
12. DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "EVENT OF DEFAULT" by Borrower hereunder:
(a) the failure of any Obligor to pay when due, declared due, or demanded
by Bank, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements; provided that any such failure by
Borrower under this Agreement shall not constitute an Event of Default hereunder
until the fifth (5th) day following written notice thereof from Bank to
Borrower;
(c) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
any other agreement with any Person if such failure may have a material adverse
effect on such Obligor's business property, assets, operations or condition,
financial or otherwise;
(d) the making or furnishing by any Obligor to Bank of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the Other Agreements or in connection with any
other agreement between such Obligor and Bank, which is untrue or misleading in
any respect;
(e) the loss, theft, damage or destruction of, or (except as permitted
hereby) sale, lease or furnishing under a contract of service of, any of the
Collateral;
(f) the creation (whether voluntary or involuntary) of, or any attempt to
create, any lien or other encumbrance upon any of the Collateral, other than the
Permitted Liens, or the making or any attempt to make any levy, seizure or
attachment thereof;
(g) the commencement of any proceedings in bankruptcy by or against any
Obligor or for the liquidation or reorganization of any Obligor, or alleging
that such Obligor is insolvent or unable to pay its debts as they mature, or for
the readjustment or arrangement of any Obligor's debts, whether under the United
States Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary, such action shall not constitute an Event of Default unless such
proceedings are not dismissed within thirty (30) days after the commencement of
such proceedings;
(h) the appointment of a receiver or trustee for any Obligor, for any of
the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within thirty (30) days after the
commencement of such proceedings;
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(i) the entry of any judgment or order against any Obligor which remains
unsatisfied or undischarged and in effect for thirty (30) days after such entry
without a stay of enforcement or execution;
(j) the death of any Obligor who is a natural Person, or of any partner of
any Obligor which is a partnership, or of any natural Person who owns a material
interest in a corporate Obligor, or the dissolution of any Obligor which is a
partnership or corporation;
(k) the occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Bank pursuant to which such Person has guaranteed to Bank the
payment of all or any of the Liabilities or has granted Bank a security interest
in or lien upon some or all of such Person's real and/or personal property to
secure the payment of all or any of the Liabilities;
(l) the institution in any court of a criminal proceeding against any
Obligor, or the indictment of any Obligor for any crime, other than any
misdemeanor not punishable by incarceration; and
(m) Bank shall reasonably feel insecure for any material reason
whatsoever, including, without limitation, fear of removal or waste of the
Collateral, or any part thereof.
13. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in paragraph
12(g) hereof, all of Borrower's Liabilities shall immediately and automatically
become due and payable, without notice of any kind. Upon the occurrence of any
other Event of Default, all Liabilities may, at the option of Bank, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.
(b) Upon the occurrence of an Event of Default, Bank may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of Bank's rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In particular, but not by way of
limitation of the foregoing, Bank may, without notice, demand or legal process
of any kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
into any of Borrower's premises where any of the Collateral may be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Bank shall have the right to
store the same at any of Borrower's premises without cost to Bank. At Bank's
request, Borrower shall, at Borrower's expense, assemble the Collateral and make
it available to Bank at one or more places to be designated by Bank and
reasonably convenient to Bank and Borrower. Borrower recognizes that if
Borrower fails to perform, observe or discharge any of its Liabilities under
this Agreement or the Other Agreements, no remedy at law will provide adequate
relief to Bank, and agrees that Bank shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages. Any notification of intended disposition of any of the
Collateral required by law will be deemed reasonably and properly given if given
at least five (5) calendar days before such disposition. Any proceeds of any
disposition by Bank of any of the Collateral may be applied by Bank to the
payment of expenses in connection with the Collateral, including, without
limitation, legal expenses and reasonable attorneys' fees, and any balance of
such proceeds may be applied by Bank toward the payment of such of the
Liabilities, and in such order of application, as Bank may from time to time
elect.
14. INDEMNIFICATION.
Borrower agrees to defend (with counsel satisfactory to bank), protect,
indemnify and hold harmless Bank, each affiliate or subsidiary of Bank, and each
of their respective officers, directors, employees, attorneys and agents (each
an "INDEMNIFIED PARTY") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each
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Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated
a party thereto), which may be imposed on, incurred by, or asserted against,
any Indemnified Party (whether direct, indirect or consequential and whether
based on any federal, state or local laws and regulations, including, without
limitation, securities, environmental and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any
manner relating to or arising out of this Agreement or any Other Agreement,
or any act, event or transaction related or attendant thereto, the making and
the management of the Loans or any letters of credit or the use or intended
use of the proceeds of the Loans or any letters of credit; provided, however,
that Borrower shall not have any obligation hereunder to any Indemnified
Party with respect to matters caused by or resulting from the willful
misconduct or gross negligence of such Indemnified Party. To the extent that
the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense
covered by this Indemnity shall be paid to each Indemnified Party on demand,
and, failing prompt payment, shall, together with interest thereon at the
highest rate then applicable to Loans hereunder from the date incurred by
each Indemnified Party until paid by Borrower, be added to the Liabilities of
Borrower and be secured by the Collateral. The provisions of this paragraph
14 shall survive the satisfaction and payment of the Other Liabilities and
the termination of this Agreement.
15. NOTICE.
All written notices and other written communications with respect to this
Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or
delivered in person, and in the case of Bank shall be sent to it at LaSalle and
Monroe Streets, Chicago, Illinois 60603, Attention: Asset Based Lending
Division, and in the case of Borrower shall be sent to it at its principal place
of business set forth on the first page of this Agreement.
16. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
This Agreement and the Other Agreements are submitted by Borrower to Bank
for Bank;s acceptance or rejection at Bank's principal place of business as an
offer by Borrower to borrow monies from Bank now and from time to time
hereafter, and shall not be binding upon Bank or become effective until accepted
by Bank, in writing, at said place of business. If so accepted by Bank, this
Agreement and the Other Agreements shall be deemed to have been made at said
place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED
AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN THE
COLLATERAL, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT
JURISDICTION. If any provision of this Agreement shall be held to be prohibited
by or invalid under applicable law, such provisions shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or remaining provisions of this Agreement.
To induce Bank to accept this Agreement, Borrower irrevocably agrees that,
subject to Bank's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE
OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Borrower hereby irrevocably appoints and designates the
Secretary of State of Illinois, whose address is Springfield, Illinois (or any
other person having and maintaining a place of business in such state whom
Borrower may from time to time hereafter designate upon ten (10) days written
notice to Bank and who Bank has agreed in its sole discretion in writing is
satisfactory and who has executed an agreement in form and substance
satisfactory to Bank agreeing to act as such attorney and agent), as Borrower's
true and lawful attorney and duly authorized agent for acceptance of service of
legal process. Borrower agrees that service of such process upon such person
shall constitute personal service of such process upon Borrower. BORROWER
HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
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<PAGE>
17. MODIFICATION AND BENEFIT OF AGREEMENT.
This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Bank. Borrower
may not sell, assign or transfer this Agreement, or the Other Agreements or any
portion thereof, including, without limitation, Borrower's rights, titles,
interest, remedies, powers or duties thereunder. Borrower hereby consents to
Bank's sale, assignment, transfer or other disposition, at any time and from
time to time hereafter, of this Agreement, or the Other Agreements, or of any
portion thereof, or participations therein, including, without limitation,
Bank's rights, titles, interest, remedies, powers and/or duties and agrees that
it shall execute and deliver such documents as Bank may request in connection
with any such sale, assignment, transfer or other disposition.
18. HEADINGS OF SUBDIVISIONS.
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
19. POWER OF ATTORNEY.
Borrower acknowledges and agrees that its appointment of Bank as its
attorney and agent-in-fact for the purposes specified in this Agreement is an
appointment coupled with an interest and shall be irrevocable until all of the
Liabilities are paid in full and this Agreement is terminated.
20. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) BORROWER HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE
OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT
BY BORROWER OR BANK OR WHICH, IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISES OUT OF
OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND BANK. IN NO EVENT SHALL
BANK BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY BANK OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(d) Bank's failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the Other
Agreements shall not waive, affect or diminish any right of Bank thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Bank of an Event of Default under this Agreement or any default under any of the
Other Agreements shall not suspend, waive or affect any other Event of Default
under this Agreement or any other default under any of the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of Bank in the exercise of
any right or remedy under this Agreement or any Other Agreement shall preclude
other or further exercise thereof or the exercise of any right or remedy. None
of the undertakings, agreements, warranties, covenants and representations of
Borrower contained in this Agreement or any of the Other Agreements and no Event
of Default under this Agreement or default under any of the Other Agreements
shall be deemed to have been suspended or waived by Bank unless such suspension
or waiver is in writing, signed by a duly authorized officer of Bank and
directed to Borrower specifying such suspension or waiver.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the 30th day of April, 1996.
USA Skate Co., Inc. LASALLE NATIONAL BANK
By By
------------------------------- ----------------------------------
Title Title
------------------------------- ----------------------------------
and
By
-------------------------------
Title
-------------------------------
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EXHIBIT A - SPECIAL PROVISIONS
Attached to and made a part of that certain Loan and Security Agreement of even
date herewith between USA SKATE CO., INC., A NEW YORK CORPORATION ("Borrower")
and LASALLE NATIONAL BANK ("Bank").
CREDIT TERMS
LOAN LIMIT:
Bank may, in its sole discretion, advance an amount up to the sum of the
following sublimits (the "Loan Limit"):
(a) Up to seventy-five percent (75%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted to
Account Debtors in connection therewith) of Borrower's Eligible
Accounts; PLUS
(B) Up to fifty percent (50%) of the lower of the cost or market value of
Borrower's Eligible Inventory, provided that the advance rate for
Inventory which is over one year old and which is otherwise Eligible
Inventory shall be twenty-five percent (25%) less one percent (1%) for
each month over twelve (12) that such Eligible Inventory remains part
of Inventory; PLUS
(C) Up to fifty percent (50%) against the face amount of Commercial
Letters of Credit issued by Bank for the purpose of purchasing
Inventory, provided that such Commercial Letters of Credit are in form
and substance satisfactory to Bank; MINUS
(D) Such reserves as Bank elects, in its sole discretion, to establish
from time to time;
provided, that the availability described in Paragraphs (1)(b) and (1)(c)
above shall in no event exceed Two Million and No/100 Dollars
($2,000,000.00). However, the aggregate Loan Limit shall in no event
exceed Five Million Dollars ($5,000,000), except as such amount may be
increased or decreased by Bank, in its sole discretion, from time to time.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
<PAGE>
(2) INTEREST RATE:
Each Loan shall bear interest at the rate of one percent (1%) per annum in
excess of Bank's publicly announced prime rate (which is not intended to be
Bank's lowest or most favorable rate in effect at any time) (the "Prime
Rate") in effect from time to time, payable on the last business day of
each month in arrears. Said rate of interest shall increase or decrease by
an amount equal to each increase or decrease in the Prime Rate effective on
the effective date of each such change in the Prime Rate. Upon the
occurrence of an Event of Default each Loan shall bear interest at the rate
of two percent (2%) per annum in excess of the interest rate otherwise
payable thereon, which interest shall be payable on demand. All interest
shall be calculated on the basis of a 360-day year.
(3) FEES AND CHARGES:
Facilities Fees: For the first year of the Original Term, Borrower shall
pay to Bank a facilities fee of One Hundred Thousand and No/100 Dollars
($100,000.00), which fee shall be fully earned by Bank and payable on the
date that Bank makes its initial disbursement under this Agreement.
Thereafter, Borrower shall pay to Bank an annual facilities fee equal to
Fifty Thousand Dollars ($50,000), which fee shall be fully earned by Bank
and payable on each anniversary of the date of this Agreement during the
Original Term and any Renewal Term.
(4) LETTERS OF CREDIT:
Subject to the terms and conditions of this Agreement, including Exhibit A,
and the Other Agreements, during the Original Term or any Renewal Term,
Bank may, in its sole discretion from time to time issue, upon Borrower's
request, Commercial and/or Standby Letters of Credit, provided that the
aggregate undrawn face amount of all such Letters of Credit shall at no
time exceed Two Million and No/100 Dollars ($2,000,000.00). Bank's
contingent liability under the Letters of Credit shall automatically
reduce, dollar for dollar, the amount which Borrower may borrow based upon
the Loan Limit. Payments made by Bank to any Person on account of any
Letter of Credit shall constitute Loans hereunder. At no time shall the
aggregate of direct Loans by Bank to Borrower plus the contingent liability
of Bank under the outstanding Letters of Credit be in excess of the Loan
Limit. Borrower shall remit to Bank a Letter of Credit fee equal to one-
quarter of one percent (1/4 of 1%) per month on the aggregate undrawn face
amount of all Letters of Credit outstanding, which fee shall be payable
monthly in arrears on each day that interest is payable hereunder.
Borrower shall also pay on demand Bank's normal and customary
administrative charges for issuance of any Letter of Credit.
ELIGIBLE ACCOUNTS:
The following is inserted in lieu of clause (iv) of the definition of the
term "Eligible Account" which is contained in Paragraph 1(d) of the
Agreement:
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
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(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable within ninety (90) days after the date
of the invoice and does not remain unpaid past the due date thereof,
or it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable more than ninety (90) but no more than
one hundred eighty (180) days after the date of the invoice and does
not remain unpaid past the due date thereof; provided, however, that
if more than twenty-five percent (25%) of the aggregate dollar amount
of invoices owing by a particular Account Debtor remain unpaid after
the respective due dates thereof, then all Accounts owing by that
Account Debtor shall be deemed ineligible;
(6) ELIGIBLE INVENTORY:
In addition to the criteria set forth in the term "Eligible Inventory",
which are set forth in Paragraph 1(e) of the Agreement, and without
limiting Bank's discretion under paragraph 1(e)(vi), work-in-process shall
not be Eligible Inventory.
ADDITIONS AND CHANGES TO COVENANTS
PERMITTED BORROWINGS:
Notwithstanding the provisions of Paragraph 10(q) of the Agreement,
Borrower may (a) finance or refinance the acquisition of Equipment and/or
real estate in an aggregate amount not to exceed One Hundred Thousand and
No/100 Dollars ($100,000.00), whether by purchase money financing, lease or
otherwise; (b) borrow money from a Person other than Bank, provided that
any such borrowing is on an unsecured and subordinated basis, and further
provided that a Subordination Agreement in favor of Bank and in form and
substance satisfactory to Bank shall have been executed and delivered
relative thereto; (c) maintain the present indebtedness to Warren Amendola,
Sr. as evidenced by that certain License Agreement dated ____________, 1996
between Borrower and Warren Amendola, Sr. (the "License Agreement"); (d)
maintain existing indebtedness of Six Hundred Seventy-Seven and no/100
Canadian Dollars (CDN $677,000.00) owing to Peter Wu; (e) maintain existing
indebtedness of approximately Three Hundred Forty-Four Thousand and no/100
Dollars ($344,000.00) owing to Warren Amendola, Jr., Russell Amendola,
Richard Amendola and the Three R Profit Sharing Retirement Plan; and (f)
incur unsecured indebtedness to trade creditors of Borrower in the ordinary
course of Borrower's business.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
-3-
<PAGE>
(8) ENVIRONMENTAL AUDITS:
Bank's rights under Paragraph 11(d) of the Agreement shall include, without
limitation, the right to cause environmental audits of Borrower's owned and
leased properties to be conducted from time to time by environmental
auditors satisfactory to Bank in its sole discretion; provided that Bank
shall endeavor, for such purposes, to retain environmental auditors
charging reasonable fees to perform such audits.
(9) RESTRICTION ON MANAGEMENT FEES AND OTHER COMPENSATION; PERMITTED DIVIDENDS:
In addition to the restrictions contained in Paragraph 11(l) of the
Agreement, Borrower shall not (a) pay any management or consulting fees to
any Person (other than Twelve Thousand and No/100 Dollars ($12,000.00) per
month, payable to CPS) or make any loan to any Person (except travel
advances made to employees in the ordinary course of business), or (b) pay
any compensation, whether as salary, bonus or otherwise, to any of
Borrower's officers other than Ninety Thousand and No/100 Dollars
($90,000.00) payable to Warren Amendola, Sr. Notwithstanding the
restrictions contained in Paragraph 11(1) of the Agreement, in the absence
of an Event of Default and if after giving effect thereto the outstanding
Liabilities do not exceed the Loan Limit, Borrower may pay dividends to USA
Skate to permit USA Skate to pay regularly scheduled interest on all debt
instruments of USA Skate existing on the date hereof.
(10) CHECKING ACCOUNT PROVISIONS:
Borrower shall maintain its general checking account with Bank. Normal
charges shall be assessed thereon. Although no compensating balance is
required, Borrower must keep monthly balances in order to merit earnings
credits which will cover Bank's service charges for demand deposit account
activities.
(11) OWNERSHIP:
Henry Fong ("Fong") and Michael S. Casazza ("Casazza") shall at all times
own, on a fully diluted basis, not less than twenty percent (20%) of the
outstanding capital stock of California Pro Sports, Inc., a Delaware
corporation ("CPS"), which, together with Fong and Casazza shall at all
times own, on a fully diluted basis, not less than thirty-five percent
(35%) of the outstanding equity securities of USA Skate Corporation, a
Delaware corporation ("USA Skate"), which shall at all times own, on a
fully diluted basis, not less than fifty-eight and one-third percent
(58 1/3%) of the outstanding equity securities of Borrower and not less one
hundred percent (100%) of the outstanding equity securities of Three R
Sales, Inc., a New York corporation ("Three R Sales"). Three R Sales shall
at all times own, on a fully diluted basis, not less than forty-one and
two-thirds percent (41 2/3%) of the outstanding equity securities of
Borrower.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
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<PAGE>
(12) PERMITTED GUARANTIES:
Notwithstanding the provisions of Paragraph 11(j) of the Agreement,
Borrower may execute a Continuing Unconditional Guaranty of any and all
indebtedness of California Pro, Inc. ("California Pro") to Bank.
(13) PROHIBITED LOANS:
In addition to the restrictions contained in the Agreement, Borrower shall
not make any loans to, or other investments in, any other Person, including
without limitation loans to direct or indirect stockholders of Borrower and
loans to, or other investments in, direct or indirect subsidiaries of
Borrower. Borrower may, however, make loans to USA Skate to permit USA
Skate to satisfy the costs associated with its contemplated initial public
offering and other financing arrangements, provided that such loans are
repaid with the proceeds derived therefrom.
ADDITIONS AND CHANGES TO DEFAULT PROVISIONS
LOSS OF COLLATERAL:
Notwithstanding the provisions of Paragraph 12(e) of the Agreement, no
Event of Default shall arise under such paragraph as the result of any
loss, theft, damage or destruction of Collateral, unless the Collateral
which is the subject thereof has a value, determined by Bank in its sole
discretion, in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00).
(15) ADDITIONAL LIENS:
Notwithstanding the provisions of Paragraph 12(f) of the Agreement, no
Event of Default shall arise under such paragraph as the result of any
levy, seizure or attachment of Collateral, unless the Collateral which is
the subject thereof has a value, determined by Bank in its sole discretion,
in excess of One Hundred Thousand and No/100 Dollars ($100,000.00).
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
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<PAGE>
(16) CROSS DEFAULTS:
In addition to the Events of Default contained in Paragraph 12 of the
Agreement, the occurrence of any of the following shall constitute an Event
of Default by Borrower hereunder:
(a) The occurrence of an Event of Default under, or the revocation or
termination of, that certain Loan and Security Agreement dated April
1, 1993, as amended, by and between Bank and California Pro;
(B) The occurrence of an event of default under, or the revocation or
termination of, the License Agreement as it exists on the date hereof;
and
(C) The occurrence of an event of default under, or the revocation or
termination of, that certain Consulting and Non-Competition Agreement
dated _________, 1996, by and between Warren Amendola, Sr., and USA
Skate (the "Consulting Agreement") as it exists on the date hereof.
CONDITIONS TO CLOSING
(17) ADDITIONAL CONDITIONS TO CLOSING:
Bank shall be under no obligation to consummate the transactions
contemplated by this Agreement until each of the conditions listed in this
Paragraph 17 has been satisfied. Whenever a condition contained herein
requires delivery of an agreement or other document to Bank, each such
agreement or other document shall be in form and substance satisfactory to
Bank in its sole discretion.
(A) Additional Rights as Collateral: Each of USA Skate and CPS shall
assign to Bank all of USA Skate's and CPS's rights and remedies, but
none of USA Skate's or CPS's duties or obligations, under that certain
Stock Purchase Agreement dated ____________, 1996, as amended (the
"Stock Purchase Agreement"), by and among CPS, USA Skate, the Three R
Profit Sharing Retirement Plan, Warren Amendola, Sr., Patricia
Amendola, Warren Amendola, Jr., Richard Amendola and Russell Amendola
(the members of the Amendola family and Three R Plan are collectively
referred to herein as the "Sellers").
(B) GUARANTIES: Borrower shall cause to be executed in favor of Bank and
delivered to Bank the Continuing Unconditional Guaranty of each of
CPS, USA Skate, California Pro, Three R Sales, Fong and Casazza of any
and all indebtedness of Borrower to Bank. Additionally, Borrower
shall execute in favor of Bank and deliver to Bank a Continuing
Unconditional Guaranty of any and all indebtedness of California Pro
to Bank.
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
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<PAGE>
(C) SUBORDINATION AGREEMENTS: Borrower shall cause its indebtedness to
Warren Amendola, Sr. under the License Agreement and USA Skate's
indebtedness to the Sellers under the Consulting Agreement, that
certain Registration Rights Agreement dated _____________, 1996, among
USA Skate and the Sellers (the "Registration Agreement") and that
certain $1,050,000 Promissory Note dated ___________, 1996, executed
by USA Skate in favor of the Sellers (the "Promissory Note") to be
subordinated to the indebtedness of Borrower to Bank on terms
acceptable to Bank in its sole discretion and shall cause Warren
Amendola, Sr. and the other Sellers to execute and deliver to Bank
appropriate Subordination Agreements. Borrower shall further cause
Warren Amendola, Sr. and the other Sellers to execute and deliver to
Bank a Subordination Agreement with respect to (i) the Guaranties of
CPS, Fong and Casazza under the Promissory Note, the License Agreement
and with respect to the return of a treasury bill to Patricia
Amendola; (ii) the Guaranties of Fong and Casazza under the
Registration Agreement and the Consulting Agreement; (iii) the
obligations of CPS under the Consulting Agreement; (iv) the Guaranty
of USA Skate under the License Agreement; and (v) the Guaranty of CPS
under that certain $125,000 Promissory Note dated __________, 1996,
executed by Les Equipments Sportifs Davtec, Inc. in favor of Warren
Amendola, Sr.
(D) RELATED TRANSACTIONS: Borrower and USA Skate shall have consummated
the transactions set forth in the Stock Purchase Agreement. Borrower
shall provide Bank with copies of said Stock Purchase Agreement and
all related documentation, and evidence satisfactory to Bank that any
and all approvals of the transactions contemplated therein have been
obtained.
(E) ATTORNEY'S OPINION LETTER: Borrower shall cause to be executed and
delivered to Bank an Attorney's Opinion Letter.
(F) LANDLORD'S AGREEMENT: Borrower shall provide Bank with a Landlord's
Agreement from the lessor of property commonly known as 7 Brayton
Court, Commack, New York 11725 which Landlord's Agreement shall
include a copy of the relevant lease.
(G) PLEDGE OF TREASURY BILL: Borrower shall cause Patricia Amendola to
pledge, as additional collateral for the Liabilities, a treasury bill
having a face value of not less than Three Hundred Thousand and No/100
Dollars ($300,000.00)
Borrower: USA Skate Co., Inc.
Initialed for Borrower by: _____
Date: ____________, 1996 Initialed for Bank by: ________
-7-
<PAGE>
EXHIBIT B-BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement
(Standard Form) of even date herewith between USA Skate Co., Inc. ("BORROWER")
and LASALLE NATIONAL BANK ("BANK").
A. Borrower's Business Locations (please indicate which location is the
principal place of business and at which locations originals and all copies
of Borrower's books, records and accounts are kept).
1. 7 Brayton Court Sole place of business and sole
Commack, New York, 11725 location of books, records and
accounts
2.
3.
B. Other locations of Collateral (including, without limitation, warehouse
locations, processing locations, consignment locations) and all post office
boxes of Borrower. Please indicate the relationship of such location to
Borrower (i.e. public warehouse, processor, etc.)
1.
2.
3.
<PAGE>
DEMAND NOTE
Executed as of the 30th day of April, 1996 at
Chicago, Illinois. No.
Amount $5,000,000
FOR VALUE RECEIVED, the Undersigned (jointly and severally, if more than
one) promises to pay to the order of LASALLE NATIONAL BANK (hereinafter,
together with any holder hereof, called "Bank"), at the main office of the Bank,
the principal sum of FIVE MILLION AND 00/100 Dollars ($5,000,000) plus the
aggregate unpaid principal amount of all advances made by Bank to the
Undersigned (or any one of them, if more than one) pursuant to and in accordance
with paragraph 2 of the Loan Agreement (as hereinafter defined) in excess of
such amount, or, if less, the aggregate unpaid principal amount of all advances
made by Bank to the Undersigned (or any one of them, if more than one) pursuant
to and in accordance with paragraph 2 of the Loan Agreement. The Undersigned
(jointly and severally, if more than one) further promises to pay interest on
the outstanding principal amount hereof on the dates and at the rates provided
in the Loan Agreement from the date hereof until payment in full hereof.
This Demand Note is referred to in and was delivered pursuant to that
certain Loan and Security Agreement, as it may be amended from time to time,
together with all exhibits thereto, dated , 1996, between
Bank and the Undersigned (the "Loan Agreement"). All terms which are
capitalized and used herein (which are not otherwise defined herein) shall have
the meaning ascribed to such term in the Loan Agreement.
THE OUTSTANDING PRINCIPAL BALANCE OF THE UNDERSIGNED'S LIABILITIES TO BANK
UNDER THIS DEMAND NOTE SHALL BE PAYABLE UPON DEMAND. Prior to demand, principal
hereunder shall be payable pursuant to the terms of the Loan Agreement.
The Undersigned (and each one of them, if more than one) hereby authorizes
the Bank to charge any account of the Undersigned (and each one of them, if more
than one) for all sums due hereunder. If payment hereunder becomes due and
payable on a Saturday, Sunday or legal holiday under the laws of the United
States or the State of Illinois, the due date thereof shall be extended to the
next succeeding business day, and interest shall be payable thereon at the rate
specified during such extension. Credit shall be given for payments made in the
manner and at the times provided in the Loan Agreement. It is the intent of the
parties that the rate of interest and other charges to the Undersigned under
this Agreement shall be lawful; therefore, if for any reason the interest or
other charges payable hereunder are found by a court of competent jurisdiction,
in a final determination, to exceed the limit which Bank may lawfully charge the
Undersigned, then the obligation to pay interest or other charges shall
automatically be reduced to such limit and, if any amount in excess of such
limit shall have been paid, then such amount shall be refunded to the
Undersigned.
The principal and all accrued interest hereunder may be prepaid by the
Undersigned, in part or in full, at any time; provided, however, that if
Undersigned prepays all of the liabilities prior to the end of the Original Term
or any Renewal Term, the Undersigned shall pay a prepayment fee as provided in
the Loan Agreement.
The Undersigned (and each one of them, if more than) waives the benefit of
any law that would otherwise restrict or limit Bank in the exercise of its
right, which is hereby acknowledged, to set-off against the Liabilities, without
notice and at any time hereafter, any indebtedness matured or unmatured owing
from Bank to the Undersigned (or any one of them). The Undersigned (and each
one of them, if more than one) waives every defense, counterclaim or setoff
which the Undersigned (or any one of them) may now have or hereafter may have to
any action by Bank in enforcing this Note and/or any of the other Liabilities,
or in enforcing Bank's rights in the Collateral and ratifies and confirms
whatever Bank may do pursuant to the terms hereof and of the Loan Agreement and
with respect to the Collateral and agrees that Bank shall not be liable for any
error in judgment or mistakes of fact or law.
The Undersigned, any other party liable with respect to the Liabilities and
any and all endorsers and accommodation parties, and each one of them, if more
than one, waive any and all presentment, demand, notice of dishonor, protest,
and all other notices and demands in connection with the enforcement of Bank's
rights hereunder.
The loan evidenced hereby has been made and this Note has been delivered at
Chicago, Illinois. THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL
LAWS OF THE STATE OF ILLINOIS AS TO INTERPRETATION, ENFORCEMENT, VALIDITY,
CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING WITHOUT LIMITATION,
THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, and shall be binding upon
the Undersigned (and each one of them,
<PAGE>
if more than one) and the Undersigned's heirs, legal representative,
successors and assigns (and each of them, if more than one). If this Note
contains any blanks when executed by the Undersigned (or any one of them, if
more than one), the Bank is hereby authorized, without notice to the
Undersigned (or any one of them, if more than one) to complete any such
blanks according to the terms upon which the loan or loans were granted.
Wherever possible, each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or be invalid under such law,
such provision shall be severable, and be ineffective to the extent of such
prohibition or invalidity, without invalidating the remaining provisions of
this Note. If more than one party shall execute this Note, the term
"Undersigned" as used herein shall mean all parties signing this note, and
each one of them, and all such parties, their respective heirs, executors,
administrators, successors and assigns, shall be jointly and severally
obligated hereunder.
To induce the bank to make the loan evidenced by this Note, the Undersigned
(and each one of them, if more than one) (i) irrevocably agrees that, subject to
Bank's sole and absolute election, all actions arising directly or indirectly as
a result or in consequence of this Note or any other agreement with the Bank, or
the Collateral, shall be instituted and litigated only in courts having situs in
the City of Chicago, Illinois, (ii) hereby consents to the exclusive
jurisdiction and venue of any State or Federal Court located and having its
situs in said city, and (iii) waives any objection based on forum non-
conveniens. IN ADDITION, THE UNDERSIGNED (OR ANY ONE OF THEM, IF MORE THAN ONE)
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY
OR INDIRECTLY TO THIS NOTE, THE LIABILITIES, THE COLLATERAL, ANY ALLEGED
TORTIOUS CONDUCT BY THE UNDERSIGNED OR BANK OR WHICH IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN THE UNDERSIGNED
AND BANK, waives personal service of any and all process, and consents that all
such service of process may be made by certified mail, return receipt requested,
directed to the Undersigned at the address indicated in the Bank's records; and
service so made shall be complete five (5) days after the same has been
deposited in the U.S. mails as aforesaid.
As used herein, all provisions shall include the masculine, feminine,
neuter, singular and plural thereof, wherever the context and facts require such
construction and in particular the word "Undersigned" shall be so construed.
IN WITNESS WHEREOF, each of the Undersigned, if more than one, has executed
this Note on the date above set forth.
(INDIVIDUAL(S) SIGN BELOW) (CORPORATIONS OR PARTNERSHIP SIGN BELOW)
USA SKATE CO., INC.
- ----------------------------------- ------------------------------------
Name Name of Corporation or Partnership
By:
- ----------------------------------- ------------------------------------
Address Name and Title
- ----------------------------------- ------------------------------------
Address
By:
- ----------------------------------- ------------------------------------
Name Name and Title
- ----------------------------------- ------------------------------------
Address Address
- ----------------------------------- ------------------------------------
FOR BANK USE ONLY
Officer's Initials:
--------
Approval:
--------
<PAGE>
CONTINUING UNCONDITIONAL GUARANTY
WHEREAS, USA Skate Co., Inc., a New York corporation ("Borrower") has
entered into a Loan and Security Agreement dated April 30, 1996 (the "Loan
Agreement") with LaSalle National Bank ("Bank") pursuant to which Bank has made
or may, in its sole discretion, from time to time hereafter, make loans and
advances to or extend other financial accommodations to Borrower;
WHEREAS, the undersigned is desirous of having Bank extend and/or continue
the extension of credit to Borrower and Bank has required that Guarantor (as
hereinafter defined) execute and deliver this Guaranty to Bank as a condition to
the extension and continuation of credit by Bank; and
WHEREAS, the extension and/or continued extension of credit, as aforesaid,
by Bank is necessary and desirable to the conduct and operation of the business
of Borrower and will inure to the personal and financial benefit of Guarantor;
NOW, THEREFORE, for value received and in consideration of any loan,
advance, or financial accommodation of any kind whatsoever heretofore, now or
hereafter made, given or granted to Borrower by Bank (including, without
limitation, the Loans as defined in, and made or to be made by Bank to Borrower
pursuant to, the Loan Agreement), the undersigned, and each of them, if there be
more than one (collectively, the "Guarantor"), unconditionally guaranties (i)
the full and prompt payment when due, whether at maturity or earlier, by reason
of acceleration or otherwise, and at all times thereafter, of all of the
indebtedness, liabilities and obligations of every kind and nature of Borrower
to Bank or any parent, affiliate or subsidiary of Bank (the term "Bank" as used
hereafter shall include such parents, affiliates and subsidiaries), howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, joint or several, now or hereafter existing, or due or to become
due, and howsoever owned, held or acquired by Bank, whether through discount,
overdraft, purchase, direct loan or as collateral or otherwise, including
without limitation all obligations and liabilities of Borrower to Bank under the
Loan Agreement and (ii) the prompt, full and faithful discharge by Borrower of
each and every term, condition, agreement, representation and warranty now or
hereafter made by Borrower to Bank (all such indebtedness, liabilities and
obligations being hereinafter referred to as the "Borrower's Liabilities").
Guarantor further agrees to pay all costs and expenses, including, without
limitation, all court costs and reasonable attorneys' and paralegals' fees paid
or incurred by Bank in endeavoring to collect all or any part of Borrower's
Liabilities from, or in prosecuting any action against, Guarantor or any other
guarantor of all or any part of Borrower's Liabilities. All amounts payable by
Guarantor under this Guaranty shall be payable upon demand by Bank.
Notwithstanding any provision of this Guaranty to the contrary, it is
intended that this Guaranty, and any liens and security interests granted by
Guarantor to secure this Guaranty, not constitute a "Fraudulent Conveyance" (as
defined below). Consequently, Guarantor agrees that if the Guaranty, or any
liens or security interests securing this Guaranty, would, but for the
application of this sentence, constitute a Fraudulent Conveyance, this Guaranty
and each such lien and security interest shall be valid and enforceable only to
the maximum extent that would not cause this Guaranty or such lien or security
interest to constitute a Fraudulent Conveyance, and this Guaranty shall
automatically be deemed to have been amended accordingly at all relevant times.
For purposes hereof, "Fraudulent Conveyance" means a fraudulent conveyance under
Section 548 of the "Bankruptcy Code" (as hereinafter defined) or a fraudulent
conveyance or fraudulent transfer under the provisions of any applicable
fraudulent conveyance or fraudulent transfer law or similar law of any state,
nation or other governmental unit, as in effect from time to time.
Guarantor hereby agrees that, except as hereinafter provided, its
obligations under this Guaranty shall be unconditional, irrespective of (i) the
validity or enforceability of Borrower's Liabilities or any part thereof, or of
any promissory note or other document evidencing all or any part of Borrower's
Liabilities, (ii) the absence of any attempt to collect Borrower's Liabilities
from Borrower or any other guarantor or other action to enforce the same, (iii)
the waiver or consent by Bank with respect to any provision of any instrument
evidencing Borrower's Liabilities, or any part thereof, or any other agreement
heretofore, now or hereafter executed by Borrower and delivered to Bank, (iv)
failure by Bank to take any steps to perfect and maintain its security interest
in, or to preserve its rights to, any security or collateral for Borrower's
Liabilities, (v) the institution of any proceeding under Chapter 11 of Title 11
of the United States Code (11 U.S.C. Section 101 et seq.), as amended (the
"Bankruptcy Code"), or any similar proceeding, by or against Borrower, or Bank's
election in any such proceeding of the application of Section 1111(b)(2) of the
Bankruptcy Code, (vi) any borrowing or grant of a security interest by Borrower
as debtor-in-possession, under Section 364 of the Bankruptcy Code, (vii) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Bank's claim(s) for repayment of Borrower's Liabilities, or (viii) any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of receivership or bankruptcy of Borrower,
protest or notice with respect to Borrower's Liabilities and all demands
whatsoever, and covenants that this Guaranty will not be discharged, except by
complete performance of the obligations and liabilities contained herein.
<PAGE>
Upon any default by Borrower as provided in any instrument or document
evidencing all or any part of Borrower's Liabilities, including without
limitation the Loan Agreement, Bank may, at its sole election, proceed
directly and at once, without notice, against Guarantor to collect and
recover the full amount or any portion of Borrower's Liabilities, without
first proceeding against Borrower, or any other person, firm, or corporation,
or against any security or collateral for Borrower's Liabilities.
Bank is hereby authorized, without notice or demand and without affecting
the liability of Guarantor hereunder, to at any time and from time to time (i)
renew, extend, accelerate or otherwise change the time for payment of, or other
terms relating to, Borrower's Liabilities or otherwise modify, amend or change
the terms of any promissory note or other agreement, document or instrument now
or hereafter executed by Borrower and delivered to Bank; (ii) accept partial
payments on Borrower's Liabilities; (iii) take and hold security or collateral
for the payment of Borrower's Liabilities guaranteed hereby, or for the payment
of this Guaranty, or for the payment of any other guaranties of Borrower's
Liabilities or other liabilities of Borrower, and exchange, enforce, waive and
release any such security or collateral; (iv) apply such security or collateral
and direct the order or manner of sale thereof as in its sole discretion it may
determine; and (v) settle, release, compromise, collect or otherwise liquidate
Borrower's Liabilities and any security or collateral therefor in any manner,
without affecting or impairing the obligations of Guarantor hereunder. Bank
shall have the exclusive right to determine the time and manner of application
of any payments or credits, whether received from Borrower or any other source,
and such determination shall be binding on Guarantor. All such payments and
credits may be applied, reversed and reapplied, in whole or in part, to any of
Borrower's Liabilities as Bank shall determine in its sole discretion without
affecting the validity or enforceability of this Guaranty.
To secure the payment and performance of Guarantor's obligations and
liabilities contained herein, Guarantor grants to Bank a security interest in
all property of Guarantor delivered concurrently herewith or which is now, or at
any time hereafter in transit to, or in the possession, custody or control of
Bank, and all proceeds of all such property. Guarantor agrees that Bank shall
have the rights and remedies of a secured party under this Uniform Commercial
Code of Illinois, as now existing or hereafter amended, with respect to all of
the aforesaid property, including without limitation thereof, the right to sell
or otherwise dispose of any or all of such property and apply the proceeds of
such sale to the payment of Borrower's Liabilities. In addition, at any time
after maturity of Borrower's Liabilities by reason of acceleration or otherwise,
Bank may, in its sole discretion, without notice to Guarantor and regardless of
the acceptance of any security or collateral for the payment hereof, appropriate
and apply toward the payment of Borrower's Liabilities (i) any indebtedness due
or to become due from Bank to Guarantor, and (ii) any moneys, credits or other
property belonging to Guarantor, at any time held by or coming into the
possession of Bank whether for deposit or otherwise.
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of
Borrower's Liabilities and of all other circumstances bearing upon the risk of
nonpayment of Borrower's Liabilities or any part thereof that diligent inquiry
would reveal and Guarantor hereby agrees that Bank shall have no duty to advise
Guarantor of information known to Bank regarding such condition or any such
circumstances or to undertake any investigation not a part of its regular
business routine. If Bank, in its sole discretion, undertakes at any time or
from time to time to provide any such information to any Guarantor, Bank shall
be under no obligation to update any such information or to provide any such
information to Guarantor on any subsequent occasion.
Guarantor consents and agrees that Bank shall be under no obligation to
marshall any assets in favor of Guarantor or against or in payment of any or all
of Borrower's Liabilities. Guarantor further agrees that, to the extent that
Borrower makes a payment or payments to Bank, or Bank receives any proceeds of
collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, its estate, trustee, receiver or any other
party, including, without limitation, Guarantor, under any bankruptcy law, state
or federal law, common law or equitable theory, then to the extent of such
payment or repayment, Borrower's Liabilities or the part thereof which has been
paid, reduced or satisfied by such amount, and Guarantor's obligations hereunder
with respect to such portion of Borrower's Liabilities, shall be reinstated and
continued in full force and effect as of the date such initial payment,
reduction or satisfaction occurred.
Guarantor agrees that any and all claims of Guarantor against Borrower, any
endorser or any other guarantor of all or any part of Borrower's Liabilities, or
against any of Borrower's properties, whether arising by reason of any payment
by Guarantor to Bank pursuant to the provisions hereof, or otherwise, shall be
subordinate and subject in right of payment to the prior payment, in full, of
all of Borrower's Liabilities.
Bank may, without notice to anyone, sell or assign Borrower's Liabilities
or any part thereof, or grant participations therein, and in any such event each
and every immediate or remote assignee or holder of, or participant in, all or
any of Borrower's Liabilities shall have the right to enforce this Guaranty, by
suit or otherwise for the benefit of such assignee, holder, or participant, as
fully as if herein by name specifically given such right, but Bank shall have an
unimpaired right, prior and superior to that of any such
-2-
<PAGE>
assignee, holder or participant, to enforce this Guaranty for the benefit of
Bank, as to any part of Borrower's Liabilities retained by Bank.
This Guaranty shall be binding upon Guarantor and upon the successors
(including without limitation, any receiver, trustee or debtor in possession of
or for Guarantor) of Guarantor and shall inure to the benefit of Bank and its
successors and assigns. If there is more than one signatory hereto, all
references to Guarantor herein shall include each and every Guarantor and each
and every obligation of Guarantor hereunder shall be the joint and several
obligation of each Guarantor. Each Guarantor that is a corporation or a
partnership hereby represents and warrants that it has all necessary corporate
or partnership authority, as the case may be, to execute and deliver this
Guaranty and to perform its obligations hereunder.
This Guaranty shall continue in full force and effect, and Bank shall be
entitled to make loans and advances and extend financial accommodations to
Borrower on the faith hereof until such time as Bank has, in writing, notified
Guarantor that all of Borrower's Liabilities have been paid in full and
discharged and the Loan Agreement has been terminated or until Bank has actually
received written notice from any Guarantor of the discontinuance of this
Guaranty as to that Guarantor, or written notice of the death, incompetency or
dissolution of any Guarantor. In case of any discontinuance by, or death,
incompetency or dissolution of, any Guarantor (collectively, a "Termination
Event"), this Guaranty and the obligations of such Guarantor and his or its
heirs, legal representatives, successors or assigns, as the case may be, shall
remain in full force and effect with respect to all of Borrower's Liabilities
incurred prior to the receipt by Bank of written notice of the Terminating
Event. The occurrence of a Terminating Event with respect to one Guarantor
shall not affect or impair the obligations of any other Guarantor hereunder.
Wherever possible each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
Guarantor irrevocably agrees that, subject to Bank's sole and absolute
election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Guarantor hereby irrevocably appoints and designates the
Secretary of State of Illinois whose address is Springfield, Illinois (or any
other person having and maintaining a place of business in such state whom
Guarantor may from time to time hereafter designate upon ten (10) days written
notice to Bank and who Bank has agreed in its sole discretion in writing is
satisfactory and who has executed an agreement in form and substance
satisfactory to Bank agreeing to act as such attorney and agent), as Guarantor's
true and lawful attorney and duly authorized agent for acceptance of service of
legal process. Guarantor agrees that service of such process upon such person
shall constitute personal service of such process upon Guarantor. GUARANTOR
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST GUARANTOR BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS GUARANTY.
If there is attached to this Guaranty a RIDER A-SPECIAL PROVISIONS, such
Rider is by this reference incorporated into and made a part of this Guaranty.
-3-
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned
as of this ____ day of ________________, 1996.
FOR CORPORATE OR PARTNERSHIP GUARANTOR:
FOR INDIVIDUAL GUARANTOR: CALIFORNIA PRO SPORTS, INC.
______________________________ By______________________________________
______________________________ Its_____________________________________
Address
______________________________ By______________________________________
Its_____________________________________
8102 White Horse Road
Greenville, South Carolina 29611
USA SKATE CORPORATION
By_____________________________________
Its_____________________________________
By_____________________________________
Its_____________________________________
8102 White Horse Road
Greenville, South Carolina 29611
THREE R SALES, INC.
By_____________________________________
Its_____________________________________
By_____________________________________
Its_____________________________________
_______________________________________
Address
_______________________________________
CALIFORNIA PRO, INC.
By_____________________________________
Its_____________________________________
By_____________________________________
Its_____________________________________
8102 White Horse Road
Greenville, South Carolina 29611
-4-
<PAGE>
RIDER A - SPECIAL PROVISIONS
This RIDER A- SPECIAL PROVISIONS is attached to and made a part of that
certain Continuing Unconditional Guaranty (the "Guaranty") of even date
herewith executed by Michael S. Casazza ("Guarantor") in favor of LaSalle
National Bank ("Bank").
No payment made by or for the account of Guarantor including, without
limitation, (i) a payment made by Guarantor in respect of Borrower's
Liabilities or (ii) a payment made by any other person under any other
guaranty, shall entitle the Guarantor by subrogation or otherwise, to any
payment from Borrower or from or out of any property of Borrower and
Guarantor shall not exercise any right or remedy against Borrower or any
property of Borrower by reason of any performance by Guarantor under the
Guaranty.
------------------------------------
Michael S. Casazza
Address:
------------------------------------
------------------------------------
------------------------------------
<PAGE>
RIDER A - SPECIAL PROVISIONS
This RIDER A- SPECIAL PROVISIONS is attached to and made a part of that
certain Continuing Unconditional Guaranty (the "Guaranty") of even date
herewith executed by Henry Fong ("Guarantor") in favor of LaSalle National
Bank ("Bank").
No payment made by or for the account of Guarantor including, without
limitation, (i) a payment made by Guarantor in respect of Borrower's
Liabilities or (ii) a payment made by any other person under any other
guaranty, shall entitle the Guarantor by subrogation or otherwise, to any
payment from Borrower or from or out of any property of Borrower and
Guarantor shall not exercise any right or remedy against Borrower or any
property of Borrower by reason of any performance by Guarantor under the
Guaranty.
------------------------------------
Henry Fong
Address:
------------------------------------
------------------------------------
------------------------------------
<PAGE>
RIDER A - SPECIAL PROVISIONS
This RIDER A- SPECIAL PROVISIONS is attached to and made a part of that
certain Continuing Unconditional Guaranty (the "Guaranty") of even date
herewith executed by each of California Pro Sports, Inc., USA Skate
Corporation, Three R Sales, Inc. and California Pro, Inc. (collectively, the
"Guarantor") in favor of LaSalle National Bank ("Bank").
No payment made by or for the account of Guarantor including, without
limitation, (i) a payment made by Guarantor in respect of Borrower's
Liabilities or (ii) a payment made by any other person under any other
guaranty, shall entitle the Guarantor by subrogation or otherwise, to any
payment from Borrower or from or out of any property of Borrower and
Guarantor shall not exercise any right or remedy against Borrower or any
property of Borrower by reason of any performance by Guarantor under the
Guaranty.
CALIFORNIA PRO SPORTS, INC.
By
---------------------------------
Its
---------------------------------
By
---------------------------------
Its
---------------------------------
Address:
8102 White Horse Road
Greenville, South Carolina 29611
USA SKATE CORPORATION
By
---------------------------------
Its
---------------------------------
By
---------------------------------
Its
---------------------------------
Address:
8102 White Horse Road
Greenville, South Carolina 29611
<PAGE>
THREE R SALES, INC.
By
---------------------------------
Its
---------------------------------
By
---------------------------------
Its
---------------------------------
Address:
8102 White Horse Road
Greenville, South Carolina 29611
CALIFORNIA PRO, INC.
By
---------------------------------
Its
---------------------------------
By
---------------------------------
Its
---------------------------------
Address:
8102 White Horse Road
Greenville, South Carolina 29611
-8-
<PAGE>
California Pro Sports, Inc.
USA Skate Corporation
Three R Sales, Inc.
8102 White Horse Road
Greenville, South Carolina 29611
April 30, 1996
LaSalle National Bank
135 South LaSalle Street
Chicago, Illinois 60674
RE: USA SKATE CO., INC.
Ladies and Gentlemen:
Reference is made to that certain Loan and Security Agreement of even
date herewith (the "Loan Agreement") between USA Skate Co., Inc., a New York
corporation ("Borrower") and LaSalle National Bank ("Lender"). Lender has
required that each of California Pro Sports, Inc. ("California Pro"), USA Skate
Corporation ("USA Skate") and Three R Sales, Inc. ("Three R") (California Pro,
USA Skate and Three R are sometimes collectively referred to herein as the
"Parents" or individually as a "Parent") agree to certain terms in order to
induce Lender to execute and deliver the Loan Agreement and make loans
thereunder. Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each of California Pro, USA Skate
and Three R hereby agrees as follows:
1. Except as permitted by the Loan Agreement, each Parent agrees not to
accept any loans, dividends or other amounts from Borrower without the prior
written consent of Lender. To the extent that any Parent receives, either
directly or indirectly, any such loans, dividends or other amounts, the proceeds
of such loans, dividends and other amounts shall be held in trust by said Parent
for the benefit of Lender and promptly turned over to Lender for application to
the "Liabilities" (as defined in the Loan Agreement).
2. USA Skate will not conduct any business other than the ownership of
all or a portion of the issued and outstanding capital stock of Borrower and
Three R. USA Skate will not incur any indebtedness, other than (i) indebtedness
represented by the convertible promissory notes issued by USA Skate on or prior
to the date hereof in an aggregate principal amount of $4,600,000 and (ii)
indebtedness represented by that certain $450,000 Promissory Note dated
April 30, 1996, (the "Note") issued by USA Skate in favor of Warren Amendola,
Patricia Amendola, Warren Amendola, Jr., Richard Amendola, Russell Amendola and
Three R Profit Sharing Retirement Plan (collectively, the "Sellers"). USA Skate
will not amend or otherwise modify the terms of any of such convertible
promissory notes or the Note. USA Skate will not
<PAGE>
pledge or otherwise encumber, except in favor of Lender, all or any portion
of the issued and outstanding capital stock of Borrower or Three R Sales.
3. California Pro will not conduct any business other than the ownership
of the issued and outstanding capital stock of USA Skate and California Pro,
Inc., a Delaware corporation ("CP"). California Pro will not incur any
indebtedness, other than the indebtedness represented by those debt instruments
more fully described in Section 10 of Exhibit A to the Loan and Security
Agreement dated April 1, 1993, as amended, by and between Lender and CP (the
"Debt Instruments"). California Pro will not amend or otherwise modify the
terms of any of such Debt Instruments. California Pro will not pledge or
otherwise encumber, except in favor of Lender, all or any portion of the issued
and outstanding capital stock of USA Skate.
4. Three R will not conduct any business other than the ownership of a
portion of the issued and outstanding capital stock of Borrower. Three R will
not incur any indebtedness. Three R will not pledge or otherwise encumber,
except in favor of Lender, all or any portion of the issued and outstanding
capital stock of Borrower.
5. This letter shall be governed by and controlled by the internal laws
of the State of Illinois as to interpretation, enforcement, validity,
construction, effect and in all other respects.
6. All actions or proceedings in any way, manner or respect, arising out
of or from or related to this letter, the Loan Agreement or the financing
arrangements between Borrower and Lender shall be litigated in courts having
situs within the City of Chicago, State of Illinois. Each Parent hereby consents
and submits to the jurisdiction of any local, state or federal court located
within said city and state. Each Parent hereby irrevocably appoints and
designates the Secretary of State of Illinois, whose address is Springfield,
Illinois (or any other person having and maintaining a place of business in such
state whom any Parent may from time to time hereafter designate upon ten days
written notice to Lender and who Lender has agreed in its sole discretion in
writing is satisfactory and who has executed an agreement in form and substance
satisfactory to Lender agreeing to act as such attorney and agent), as said
Parent's true and lawful attorney and duly authorized agent for acceptance of
service of legal process. Each Parent agrees that service of such process upon
such person shall constitute personal service of such process upon said Parent.
Each Parent hereby waives any right it may have to transfer or change the venue
of any litigation brought against either Parent by Lender in accordance with
this paragraph.
7. Each Parent hereby waives all right to trial by jury in any action or
proceeding which pertains directly or indirectly to this letter, the Loan
Agreement or the financing arrangements between Borrower and Lender, any alleged
tortious conduct by a Parent or Lender or which, in any way, directly or
indirectly arises out of or relates to the relationship between the Parents and
Borrower and Lender. In no event shall Lender be liable for lost profits or
other special or consequential damages.
-2-
<PAGE>
CALIFORNIA PRO SPORTS, INC.
By
---------------------------------
Its
---------------------------------
USA SKATE CORPORATION
By
---------------------------------
Its
---------------------------------
THREE R SALES, INC.
By
---------------------------------
Its
---------------------------------
-3-
<PAGE>
LASALLE NATIONAL BANK
135 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60674
April 30, 1996
California Pro, Inc.
8102 White Horse Road
Greenville, South Carolina 29611
Ladies and Gentlemen:
California Pro, Inc., a Delaware corporation ("Borrower") and LaSalle
National Bank, a national banking association ("Bank") have entered into that
certain Loan and Security Agreement dated April 1, 1993 (the "Security
Agreement"). From time to time thereafter, Borrower and Bank may have executed
various amendments (each an "Amendment" and collectively the "Amendments") to
the Security Agreement (the Security Agreement and the Amendments hereinafter
are referred to collectively as the "Agreement"). Borrower and Bank now desire
to further amend the Agreement as provided herein, subject to the terms and
conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The Agreement hereby is amended as follows:
(a) The address of Bank as set forth in the initial introductory
paragraph to the Agreement is deleted and replaced with the following:
135 South LaSalle Street, Chicago, Illinois 60674.
(b) The date of termination of the Original Term of the
Agreement as set forth in the first sentence of Paragraph 9 of the
Agreement is amended and replaced with the following: May 31, 1999.
(c) Exhibit A of the Agreement is amended to add the following
paragraph
<PAGE>
California Pro, Inc.
April 30, 1996
Page 2
(10).(1) PERMITTED GUARANTIES:
Notwithstanding the provisions of Paragraph 11(j) of the Agreement,
Borrower may execute a Continuing Unconditional Guaranty of any and
all indebtedness of USA Skate Co., Inc. ("USA Skate") to Bank.
(d) Exhibit A of the Agreement is amended to add the following
paragraph
(12).(1) CROSS DEFAULT:
In addition to the Events of Default contained in Paragraph 12 of the
Agreement, the occurrence of an event of default under, or the
revocation or termination of, that certain Loan and Security Agreement
dated April 30, 1996, by and between Bank and USA Skate shall
constitute an Event of Default by Borrower hereunder:
2. This amendment shall not become effective until fully executed by
all parties hereto.
3. Except as expressly amended hereby and by any other supplemental
documents or instruments executed by either party hereto in order to effectuate
the transactions contemplated hereby, the Agreement and Exhibit A thereto hereby
are ratified and confirmed by the parties hereto and remain in full force and
effect in accordance with the terms hereof.
LASALLE NATIONAL BANK, a national
banking association
By
---------------------------------
Its
---------------------------------
-2-
<PAGE>
California Pro, Inc.
April 30, 1996
Page 3
ACKNOWLEDGED AND AGREED TO
this ________ day of ___________, 19__:
California Pro, Inc.
By
---------------------------------
Its
---------------------------------
CONSENTED AND AGREED TO BY the
following guarantors of the obligations of
California Pro, Inc. to LaSalle National Bank
- ------------------------------------
Henry Fong
Date:
-------------------------------
- ------------------------------------
Michael Casazza
Date:
-------------------------------
California Pro Sports, Inc.
By
---------------------------------
Its
---------------------------------
Date:
-------------------------------
-3-
<PAGE>
CONTINUING UNCONDITIONAL GUARANTY
WHEREAS, California Pro, Inc., a Delaware corporation ("Borrower") has
entered into a Loan and Security Agreement dated APRIL 1, 1993 (the "Loan
Agreement") with LaSalle National Bank ("Bank") pursuant to which Bank has made
or may, in its sole discretion, from time to time hereafter, make loans and
advances to or extend other financial accommodations to Borrower;
WHEREAS, the undersigned is desirous of having Bank extend and/or continue
the extension of credit to Borrower and Bank has required that Guarantor (as
hereinafter defined) execute and deliver this Guaranty to Bank as a condition to
the extension and continuation of credit by Bank; and
WHEREAS, the extension and/or continued extension of credit, as aforesaid,
by Bank is necessary and desirable to the conduct and operation of the business
of Borrower and will inure to the personal and financial benefit of Guarantor;
NOW, THEREFORE, for value received and in consideration of any loan,
advance, or financial accommodation of any kind whatsoever heretofore, now or
hereafter made, given or granted to Borrower by Bank (including, without
limitation, the Loans as defined in, and made or to be made by Bank to Borrower
pursuant to, the Loan Agreement), the undersigned, and each of them, if there be
more than one (collectively, the "Guarantor"), unconditionally guaranties (i)
the full and prompt payment when due, whether at maturity or earlier, by reason
of acceleration or otherwise, and at all times thereafter, of all of the
indebtedness, liabilities and obligations of every kind and nature of Borrower
to Bank or any parent, affiliate or subsidiary of Bank (the term "Bank" as used
hereafter shall include such parents, affiliates and subsidiaries), howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, joint or several, now or hereafter existing, or due or to become
due, and howsoever owned, held or acquired by Bank, whether through discount,
overdraft, purchase, direct loan or as collateral or otherwise, including
without limitation all obligations and liabilities of Borrower to Bank under the
Loan Agreement and (ii) the prompt, full and faithful discharge by Borrower of
each and every term, condition, agreement, representation and warranty now or
hereafter made by Borrower to Bank (all such indebtedness, liabilities and
obligations being hereinafter referred to as the "Borrower's Liabilities").
Guarantor further agrees to pay all costs and expenses, including, without
limitation, all court costs and reasonable attorneys' and paralegals' fees paid
or incurred by Bank in endeavoring to collect all or any part of Borrower's
Liabilities from, or in prosecuting any action against, Guarantor or any other
guarantor of all or any part of Borrower's Liabilities. All amounts payable by
Guarantor under this Guaranty shall be payable upon demand by Bank.
Notwithstanding any provision of this Guaranty to the contrary, it is
intended that this Guaranty, and any liens and security interests granted by
Guarantor to secure this Guaranty, not constitute a "Fraudulent Conveyance" (as
defined below). Consequently, Guarantor agrees that if the Guaranty, or any
liens or security interests securing this Guaranty, would, but for the
application of this sentence, constitute a Fraudulent Conveyance, this Guaranty
and each such lien and security interest shall be valid and enforceable only to
the maximum extent that would not cause this Guaranty or such lien or security
interest to constitute a Fraudulent Conveyance, and this Guaranty shall
automatically be deemed to have been amended accordingly at all relevant times.
For purposes hereof, "Fraudulent Conveyance" means a fraudulent conveyance under
Section 548 of the "Bankruptcy Code" (as hereinafter defined) or a fraudulent
conveyance or fraudulent transfer under the provisions of any applicable
fraudulent conveyance or fraudulent transfer law or similar law of any state,
nation or other governmental unit, as in effect from time to time.
Guarantor hereby agrees that, except as hereinafter provided, its
obligations under this Guaranty shall be unconditional, irrespective of (i) the
validity or enforceability of Borrower's Liabilities or any part thereof, or of
any promissory note or other document evidencing all or any part of Borrower's
Liabilities, (ii) the absence of any attempt to collect Borrower's Liabilities
from Borrower or any other guarantor or other action to enforce the same, (iii)
the waiver or consent by Bank with respect to any provision of any instrument
evidencing Borrower's Liabilities, or any part thereof, or any other agreement
heretofore, now or hereafter executed by Borrower and delivered to Bank, (iv)
failure by Bank to take any steps to perfect and maintain its security interest
in, or to preserve its rights to, any security or collateral for Borrower's
Liabilities, (v) the institution of any proceeding under Chapter 11 of Title 11
of the United States Code (11 U.S.C. Section 101 et seq.), as amended (the
"Bankruptcy Code"), or any similar proceeding, by or against Borrower, or Bank's
election in any such proceeding of the application of Section 1111(b)(2) of the
Bankruptcy Code, (vi) any borrowing or grant of a security interest by Borrower
as debtor-in-possession, under Section 364 of the Bankruptcy Code, (vii) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Bank's claim(s) for repayment of Borrower's Liabilities, or (viii) any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of receivership or bankruptcy of Borrower,
protest or notice with respect to Borrower's Liabilities and all demands
whatsoever, and covenants that this Guaranty will not be discharged, except by
complete performance of the obligations and liabilities contained herein.
<PAGE>
Upon any default by Borrower as provided in any instrument or document
evidencing all or any part of Borrower's Liabilities, including without
limitation the Loan Agreement, Bank may, at its sole election, proceed
directly and at once, without notice, against Guarantor to collect and
recover the full amount or any portion of Borrower's Liabilities, without
first proceeding against Borrower, or any other person, firm, or corporation,
or against any security or collateral for Borrower's Liabilities.
Bank is hereby authorized, without notice or demand and without affecting
the liability of Guarantor hereunder, to at any time and from time to time (i)
renew, extend, accelerate or otherwise change the time for payment of, or other
terms relating to, Borrower's Liabilities or otherwise modify, amend or change
the terms of any promissory note or other agreement, document or instrument now
or hereafter executed by Borrower and delivered to Bank; (ii) accept partial
payments on Borrower's Liabilities; (iii) take and hold security or collateral
for the payment of Borrower's Liabilities guaranteed hereby, or for the payment
of this Guaranty, or for the payment of any other guaranties of Borrower's
Liabilities or other liabilities of Borrower, and exchange, enforce, waive and
release any such security or collateral; (iv) apply such security or collateral
and direct the order or manner of sale thereof as in its sole discretion it may
determine; and (v) settle, release, compromise, collect or otherwise liquidate
Borrower's Liabilities and any security or collateral therefor in any manner,
without affecting or impairing the obligations of Guarantor hereunder. Bank
shall have the exclusive right to determine the time and manner of application
of any payments or credits, whether received from Borrower or any other source,
and such determination shall be binding on Guarantor. All such payments and
credits may be applied, reversed and reapplied, in whole or in part, to any of
Borrower's Liabilities as Bank shall determine in its sole discretion without
affecting the validity or enforceability of this Guaranty.
To secure the payment and performance of Guarantor's obligations and
liabilities contained herein, Guarantor grants to Bank a security interest in
all property of Guarantor delivered concurrently herewith or which is now, or at
any time hereafter in transit to, or in the possession, custody or control of
Bank, and all proceeds of all such property. Guarantor agrees that Bank shall
have the rights and remedies of a secured party under this Uniform Commercial
Code of Illinois, as now existing or hereafter amended, with respect to all of
the aforesaid property, including without limitation thereof, the right to sell
or otherwise dispose of any or all of such property and apply the proceeds of
such sale to the payment of Borrower's Liabilities. In addition, at any time
after maturity of Borrower's Liabilities by reason of acceleration or otherwise,
Bank may, in its sole discretion, without notice to Guarantor and regardless of
the acceptance of any security or collateral for the payment hereof, appropriate
and apply toward the payment of Borrower's Liabilities (i) any indebtedness due
or to become due from Bank to Guarantor, and (ii) any moneys, credits or other
property belonging to Guarantor, at any time held by or coming into the
possession of Bank whether for deposit or otherwise.
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of
Borrower's Liabilities and of all other circumstances bearing upon the risk of
nonpayment of Borrower's Liabilities or any part thereof that diligent inquiry
would reveal and Guarantor hereby agrees that Bank shall have no duty to advise
Guarantor of information known to Bank regarding such condition or any such
circumstances or to undertake any investigation not a part of its regular
business routine. If Bank, in its sole discretion, undertakes at any time or
from time to time to provide any such information to any Guarantor, Bank shall
be under no obligation to update any such information or to provide any such
information to Guarantor on any subsequent occasion.
Guarantor consents and agrees that Bank shall be under no obligation to
marshall any assets in favor of Guarantor or against or in payment of any or all
of Borrower's Liabilities. Guarantor further agrees that, to the extent that
Borrower makes a payment or payments to Bank, or Bank receives any proceeds of
collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, its estate, trustee, receiver or any other
party, including, without limitation, Guarantor, under any bankruptcy law, state
or federal law, common law or equitable theory, then to the extent of such
payment or repayment, Borrower's Liabilities or the part thereof which has been
paid, reduced or satisfied by such amount, and Guarantor's obligations hereunder
with respect to such portion of Borrower's Liabilities, shall be reinstated and
continued in full force and effect as of the date such initial payment,
reduction or satisfaction occurred.
Guarantor agrees that any and all claims of Guarantor against Borrower, any
endorser or any other guarantor of all or any part of Borrower's Liabilities, or
against any of Borrower's properties, whether arising by reason of any payment
by Guarantor to Bank pursuant to the provisions hereof, or otherwise, shall be
subordinate and subject in right of payment to the prior payment, in full, of
all of Borrower's Liabilities.
Bank may, without notice to anyone, sell or assign Borrower's Liabilities
or any part thereof, or grant participations therein, and in any such event each
and every immediate or remote assignee or holder of, or participant in, all or
any of Borrower's Liabilities shall have the right to enforce this Guaranty, by
suit or otherwise for the benefit of such assignee, holder, or participant, as
fully as if herein by name specifically given such right, but Bank shall have an
unimpaired right, prior and superior to that of any such
-2-
<PAGE>
assignee, holder or participant, to enforce this Guaranty for the benefit of
Bank, as to any part of Borrower's Liabilities retained by Bank.
This Guaranty shall be binding upon Guarantor and upon the successors
(including without limitation, any receiver, trustee or debtor in possession of
or for Guarantor) of Guarantor and shall inure to the benefit of Bank and its
successors and assigns. If there is more than one signatory hereto, all
references to Guarantor herein shall include each and every Guarantor and each
and every obligation of Guarantor hereunder shall be the joint and several
obligation of each Guarantor. Each Guarantor that is a corporation or a
partnership hereby represents and warrants that it has all necessary corporate
or partnership authority, as the case may be, to execute and deliver this
Guaranty and to perform its obligations hereunder.
This Guaranty shall continue in full force and effect, and Bank shall be
entitled to make loans and advances and extend financial accommodations to
Borrower on the faith hereof until such time as Bank has, in writing, notified
Guarantor that all of Borrower's Liabilities have been paid in full and
discharged and the Loan Agreement has been terminated or until Bank has actually
received written notice from any Guarantor of the discontinuance of this
Guaranty as to that Guarantor, or written notice of the death, incompetency or
dissolution of any Guarantor. In case of any discontinuance by, or death,
incompetency or dissolution of, any Guarantor (collectively, a "Termination
Event"), this Guaranty and the obligations of such Guarantor and his or its
heirs, legal representatives, successors or assigns, as the case may be, shall
remain in full force and effect with respect to all of Borrower's Liabilities
incurred prior to the receipt by Bank of written notice of the Terminating
Event. The occurrence of a Terminating Event with respect to one Guarantor
shall not affect or impair the obligations of any other Guarantor hereunder.
Wherever possible each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
THIS GUARANTY SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
Guarantor irrevocably agrees that, subject to Bank's sole and absolute
election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS GUARANTY SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. GUARANTOR HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Guarantor hereby irrevocably appoints and designates the
Secretary of State of Illinois whose address is Springfield, Illinois (or any
other person having and maintaining a place of business in such state whom
Guarantor may from time to time hereafter designate upon ten (10) days written
notice to Bank and who Bank has agreed in its sole discretion in writing is
satisfactory and who has executed an agreement in form and substance
satisfactory to Bank agreeing to act as such attorney and agent), as Guarantor's
true and lawful attorney and duly authorized agent for acceptance of service of
legal process. Guarantor agrees that service of such process upon such person
shall constitute personal service of such process upon Guarantor. GUARANTOR
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST GUARANTOR BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
GUARANTOR HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS GUARANTY.
If there is attached to this Guaranty a RIDER A-SPECIAL PROVISIONS, such
Rider is by this reference incorporated into and made a part of this Guaranty.
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<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned
as of this ____ day of ________________, 1996.
FOR CORPORATE OR PARTNERSHIP GUARANTOR:
FOR INDIVIDUAL GUARANTOR: USA SKATE CO., INC.
By
- ------------------------------ ------------------------------------
Its
- ------------------------------ ------------------------------------
Address
By
- ------------------------------ ------------------------------------
Its
------------------------------------
7 Brayton Court
Commack, New York 11725
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<PAGE>
RIDER A - SPECIAL PROVISIONS
This RIDER A- SPECIAL PROVISIONS is attached to and made a part of that
certain Continuing Unconditional Guaranty (the "Guaranty") of even date
herewith executed by USA Skate Co., Inc. ("Guarantor") in favor of LaSalle
National Bank ("Bank").
No payment made by or for the account of Guarantor including, without
limitation, (i) a payment made by Guarantor in respect of Borrower's
Liabilities or (ii) a payment made by any other person under any other
guaranty, shall entitle the Guarantor by subrogation or otherwise, to any
payment from Borrower or from or out of any property of Borrower and
Guarantor shall not exercise any right or remedy against Borrower or any
property of Borrower by reason of any performance by Guarantor under the
Guaranty.
USA SKATE CO., INC.
By
---------------------------------
Its
-----------------------------
By
---------------------------------
Its
-----------------------------
Address:
7 Brayton Court
Commack, New York 11725
