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): SEPTEMBER 12, 1997
CALIFORNIA PRO SPORTS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-25114 84-121773
---------------- --------- --------------
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
1221-B South Batesville Road
Greer, SC 29650
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 848-5160
Not Applicable
------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 12, 1997, California Pro Sports, Inc. (the "Registrant"),
through its majority owned subsidiary, USA Skate Corporation ("Skate Corp."),
completed the sale of substantially all of the assets of Skate Corp.'s direct
and indirect operating subsidiaries, USA Skate Co., Inc. ("USA Skate") and Les
Equipements Sportifs Davtec, Inc. ("Davtec"), to Rawlings Canada Inc. and
Rawlings Sporting Goods Company, Inc. (the "USA-Rawlings Transaction").
Consideration to Skate Corp. in the USA-Rawlings Transaction consisted of $14.5
million cash, inclusive of $1 million retained in escrow for purchase price
adjustments and proven claims by the purchasers, and assumption of trade
payables and accrued liabilities related to the assets purchased.
The assets sold in the USA-Rawlings Transaction included USA Skate's
hockey related business and assets, including the Victoriaville(TM), Vic(R) and
McMartin(R) names. USA Skate has an exclusive worldwide license for use of the
Vic(R) and Victoriaville(TM) brands. The Company is continuing its in-line
skating and snowboard businesses.
ITEM 5. OTHER EVENTS
Simultaneously with the closing of the USA-Rawlings Transaction, the
bank loans outstanding to the Registrant's operating subsidiaries, USA Skate and
California Pro, Inc., were repaid and terminated.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Included with this report are the following pro forma financial
statements:
(1) The Registrant's unaudited pro formal consolidated balance sheet as
of June 30, 1997, giving effect to the sale as if it had occurred on June 30,
1997.
(2) The Registrant's unaudited pro forma consolidated statements of
operations for the year ended December 31, 1996, and the six months ended June
30, 1997, giving effect to the sale as if it had occurred on January 1, 1996.
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<PAGE>
(c) EXHIBITS.
Exhibit
Number Description
------- -----------
10.1(a) Asset Purchase Agreement dated September 10,
1997 by and among Les Equipements Sportifs
Davtec, Inc., USA Skate Co., Inc., USA Skate
Corporation, the Registrant, Rawlings Canada
Inc. and Rawlings Sporting Goods Company, Inc.
(the "Rawlings Agreement")
10.1(b) Guaranty related to the Rawlings Agreement.
10.1(c) Escrow Agreement related to the Rawlings
Agreement.
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: September 29, 1997 By /s/ Barry S. Hollander
------------------------
Chief Financial Officer
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<PAGE>
CALIFORNIA PRO SPORTS, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 AND
SIX MONTHS ENDED JUNE 30, 1997
On September 12, 1997, California Pro Sports, Inc. ("Cal Pro", or the "Company")
and its subsidiary, USA Skate Corporation, sold certain assets of USA Skate Co.,
Inc. and Les Equipments Sportifs Davtec Inc. ("USA Skate" and the "Hockey
Business") to an unrelated third party for $14,500,000. The unrelated third
party also assumed certain liabilities. The Company received $13,500,000 cash
with an additional $1,000,000 being held in escrow for any purchase price
adjustments and for any proven claim by the purchaser. The accompanying
unaudited pro forma consolidated balance sheet as of June 30, 1997, gives effect
to the sale as if the transaction had been consummated on June 30, 1997. The
accompanying unaudited pro-forma consolidated statements of operations for the
year ended December 31, 1996, and the six months ended June 30, 1997, give
effect to the sale as if the transaction had been consummated January 1, 1996.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the historical financial statements of the Company. The
unaudited pro forma consolidated financial statements do not purport to be
indicative of the financial position of the Company had the sale occurred on
June 30, 1997. Nor do the unaudited pro forma financial statements purport to be
indicative of the results of operations that actually would have occurred had
the sale been consummated on January 1, 1996, or to project the Company's
financial position or results of operations for any future period.
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<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
ASSETS
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro forma Pro forma
subsidiaries adjustments consolidated
----------------- ------------------ ---------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 103,802 (1) $ 13,500,000 $ 435,784
(2) (13,168,018)
Accounts receivable 4,519,519 (1) (4,148,312) 371,207
Inventory 4,816,162 (1) (4,188,200) 627,962
Prepaid and other expenses 424,775 (1) (209,361) 215,414
Income tax receivable 35,533 35,533
Escrow receivable (1) 1,000,000 1,000,000
----------------- ------------------ ---------------
Total current assets 9,899,791 (7,213,891) 2,685,900
----------------- ------------------ ---------------
Property and equipment, net
of accumulated depreciation 1,863,334 (1) (1,626,419) 236,915
Licenses and trademarks, net of
accumulated amortization 8,412,773 (1) (7,498,436) 914,337
----------------- ------------------ ---------------
10,276,107 (9,124,855) 1,151,252
----------------- ------------------ ---------------
Total assets $ 20,175,898 $ (16,338,746) $ 3,837,152
================= ================== ===============
</TABLE>
(Continued)
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<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro forma Pro forma
subsidiaries adjustments consolidated
----------------- ------------------ ---------------
<S> <C> <C> <C>
Current liabilities:
Current portion:
Long-term debt $ 177,763 (2) $ (177,763)
License fee payable, seller 62,508 (2) (38,900) $ 23,608
Notes payable:
Banks 7,473,654 (1) (181,000)
(2) (7,292,654)
Seller 643,750 (2) (543,750) 100,000
Officers/shareholders 679,000 (1) (149,000) 25,000
(2) (505,000)
Convertible promissory notes 2,518,000 (2) (1,259,000) 1,259,000
Other 956,172 (2) (100,000) 856,172
Accounts payable and
accrued expenses 3,133,536 (1) (1,255,672) 857,932
(2) (365,932)
(3) (654,000)
Income taxes payable 152,201 (1) (152,201)
----------------- ------------------ ---------------
Total current liabilities 15,796,584 (12,674,872) 3,121,712
----------------- ------------------- ---------------
Long term debt, net of current portion 350,496 (2) (350,496)
Note payable seller,
net of current portion 225,000 (2) (225,000)
License fee payable seller, net of current
portion 2,309,523 (2) (2,309,523)
Deferred income taxes 60,150 60,150
----------------- ------------------ ---------------
Total long-term liabilities 2,945,169 (2,885,019) 60,150
----------------- ------------------ ---------------
Minority interest 339,169 (1) (339,169)
----------------- ------------------ ---------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $0.01; authorized
5,000,000 shares, no shares issued
Common stock, par value $0.01; authorized
10,000,000 shares, issued and
outstanding 5,759,212 shares 57,592 (3) 3,609 61,201
Warrants 394,200 394,200
Capital in excess of par 7,610,336 (3) 650,391 8,260,727
Deficit (6,974,330) (1) (1,093,686) (8,068,016)
Cumulative foreign currency
translation adjustment 7,178 7,178
----------------- ------------------ ---------------
Total shareholders' equity 1,094,976 (439,686) 655,290
----------------- ------------------- ---------------
Total liabilities and
shareholders' equity $ 20,175,898 $ (16,338,746) $ 3,837,152
================= ================== ===============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
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<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro forma Pro forma
subsidiaries adjustments consolidated
----------------- ------------------ ---------------
<S> <C> <C> <C>
Net sales $ 6,776,239 (4) $ (5,818,344) $ 957,895
----------------- ------------------ ---------------
Cost of sales:
Substantially from a related party 42,516 42,516
Other 4,929,631 (4) (4,070,887) 858,744
----------------- ------------------ ---------------
4,972,147 4,070,887 901,260
----------------- ------------------ ---------------
Gross profit (loss) 1,804,092 (1,747,457) 56,635
----------------- ------------------ ---------------
Operating expenses:
Sales and marketing expense 837,171 (4) (681,122) 156,049
General and administrative expense 1,989,640 (4) (1,169,004) 820,636
Depreciation and amortization 391,968 (4) (281,547) 110,421
Consulting fees, related party 120,000 (4) (60,000) 60,000
----------------- ------------------ ---------------
3,338,779 (2,191,673) 1,147,106
----------------- ------------------ ---------------
Loss from operations (1,534,687) 444,216 (1,090,471)
----------------- ------------------ ---------------
Other expenses (income):
Interest expense:
Related party 148,739 (4) (145,088) 3,651
Other 530,867 (4) (427,915) 102,952
Foreign currency gain (34,354) (4) (12,180) (46,534)
Royalty income and other (26,462) (4) 28,080 1,618
Gain on sale of investment
in subsidiary (87,593) (87,593)
Loss on sale of
marketable securities 62,392 62,392
----------------- ------------------ ---------------
593,589 (557,103) 36,486
----------------- ------------------ ---------------
Income (loss) before income taxes,
minority interest and extraordinary
items (2,128,276) 1,001,319 (1,126,957)
Income taxes
----------------- ------------------ ---------------
</TABLE>
(Continued)
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<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro forma Pro forma
subsidiaries adjustments consolidated
----------------- ------------------ ---------------
<S> <C> <C> <C>
Income (loss) before minority interest
and extraordinary items (2,128,276) 1,001,319 (1,126,957)
Minority interest (701,543) (4) 701,543
----------------- ------------------ ---------------
Income (loss) before extraordinary item (1,426,733) 299,776 (1,126,957)
Extraordinary item, debt forgiveness 197,901 197,901
----------------- ------------------ ---------------
Net income (loss) $ (1,228,832) $ 299,776 $ (929,056)
================= ================== ===============
Income (loss) per share
before extraordinary item $ (.29) $ (.23)
Extraordinary item .04 .04
----------------- ---------------
Net income (loss) per share $ (.25) $ (.19)
================= ================
Weighted average
number of common shares 4,986,747 4,986,747
================= ===============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
-8-
<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro forma Pro forma
subsidiaries adjustments consolidated
----------------- ------------------ ---------------
<S> <C> <C> <C>
Net sales $ 16,952,904 (5) $ (11,004,758) $ 5,948,146
----------------- ------------------ ---------------
Cost of sales:
Substantially from a related party 3,148,423 3,148,423
Others 9,852,861 (5) (7,520,136) 2,332,725
Inventory markdowns
and adjustments 1,059,750 (5) 1,059,750
----------------- ------------------ ---------------
14,061,034 (7,520,136) 6,540,898
----------------- ------------------ ---------------
Gross profit (loss) 2,891,870 (3,484,622) (592,752)
----------------- ------------------ ---------------
Operating expenses:
Sales and marketing expense 2,434,255 (5) (1,075,107) 1,359,148
General and administrative expense 3,014,417 (5) (759,887) 2,254,530
Depreciation and amortization 681,717 (5) (301,437) 380,280
Consulting fees, related party 120,000 120,000
Rent expense, seller 103,334 (5) (103,334)
Restructuring charges 1,229,000 1,229,000
----------------- ------------------ ---------------
7,582,723 (2,239,765) 5,342,958
----------------- ------------------ ---------------
Loss from operations (4,690,853) (1,244,857) (5,935,710)
----------------- ------------------ ---------------
Other expenses (income):
Interest expense:
Related parties 305,947 (5) (126,558) 179,389
Other 1,083,274 (5) (935,643) 147,631
Foreign currency gain 44,012 (5) (40,192) 3,820
Royalty income and other (51,376) (5) 67,085 15,709
Net unrealized holding loss 144,457 144,457
Gain on sale of investment in subsidiary (111,366) (111,366)
Gain from issuance of common stock
by subsidiary (479,100) (479,100)
----------------- ------------------ ---------------
935,848 (1,035,308) (99,460)
----------------- ------------------ ---------------
Loss before income taxes, minority
interest and extraordinary items (5,626,701) (209,549) (5,836,250)
Income tax benefit (244,500) (244,500)
----------------- ------------------ ---------------
</TABLE>
(Continued)
-9-
<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro forma Pro forma
subsidiaries adjustments consolidated
----------------- ------------------ ---------------
<S> <C> <C> <C>
Income (loss) before minority interest (5,382,201) (209,549) (5,591,750)
Minority interest 193,681 (5) (193,681)
----------------- ------------------ ---------------
Net loss $ (5,575,882) $ (15,868) $ (5,591,750)
================= ================== ===============
Net loss per share $ (1.37) $ (1.37)
================= ================
Weighted average
number of common shares 4,078,864 4,078,864
================= ===============
</TABLE>
See notes to unaudited pro forma consolidated financial statements.
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<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996 AND
SIX MONTHS ENDED JUNE 30, 1997
1. To record the cash received and cash held in escrow, assets and
liabilities disposed of, transaction costs, and the loss on sale of
certain assets, net of certain liabilities assumed, of USA Skate and
the Hockey Business.
2. To record payments of USA Skate and Hockey Business liabilities (not
assumed by the purchaser), made from the proceeds of the sale.
3. To record issuance of 360,828 shares of common stock in settlement of
$654,000 of USA Skate and Hockey Business liabilities that were not
assumed by the purchaser.
4. To eliminate the operations of USA Skate and the Hockey Business from
the consolidated statement of operations of the Company for the six
months ended June 30, 1997, assuming the sale had occurred at January
1, 1997.
5. To eliminate the operations of USA Skate and the Hockey Business from
the consolidated statement of operations of the Company for the year
ended December 31, 1996, assuming the sale had occurred January 1,
1996.
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________________________________________________________________
ASSET PURCHASE AGREEMENT
among
LES EQUIPEMENTS SPORTIFS DAVTEC INC.,
USA SKATE CO., INC.,
USA SKATE CORPORATION,
CALIFORNIA PRO SPORTS, INC.,
RAWLINGS CANADA INC.
and
RAWLINGS SPORTING GOODS COMPANY, INC.
September 10, 1997
________________________________________________________________
23063 v7
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES...................1
1.1 USA Skate Assets.......................................................1
1.2 Davtec Assets..........................................................4
1.3 Assumed Liabilities....................................................6
ARTICLE II - CLOSING...........................................................7
ARTICLE III - PURCHASE PRICES..................................................7
3.1 USA Skate Purchase Price; Adjustment...................................7
3.2 Davtec Purchase Price; Adjustment......................................9
3.3 Davtec Intellectual Property Purchase Price...........................10
3.4 Determination of Net Assets...........................................11
3.5 Allocation of Purchase Price..........................................12
3.6 Proration of Taxes....................................................12
3.7 Transfer Taxes........................................................13
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SELLERS
AND STOCKHOLDER............................................................13
4.1 Organization and Qualification........................................13
4.2 Authorization.........................................................13
4.3 Subsidiaries and Affiliates...........................................14
4.4 Financial Statements..................................................14
4.5 Absence of Certain Changes or Events..................................15
4.6 Title to Assets.......................................................16
4.7 Inventory.............................................................18
4.8 Accounts Receivable...................................................18
4.9 Contracts.............................................................18
4.10 Taxes.................................................................19
4.11 Adequate Facilities and Rights........................................20
4.12 Intellectual Property.................................................20
4.13 No Breach of Statute, Decree, or Order................................20
4.14 Litigation............................................................21
4.15 Employee Benefit Plans................................................21
4.16 Insurance Policies....................................................22
4.17 Product Warranties, Product Return Policies and Service Warranties....22
4.18 Operating Licenses and Permits........................................22
4.19 Assets in Good Repair.................................................23
4.20 Environmental Matters.................................................23
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<PAGE>
4.21 Labor Disputes........................................................27
4.22 Customers and Suppliers...............................................27
4.23 Workers' Compensation.................................................27
4.24 Employment Matters....................................................27
4.25 Unions and Labor Practices............................................28
4.26 Broker for Sellers....................................................29
4.27 Organization and Qualification of Guarantors..........................29
4.28 Authorization of Guarantors...........................................29
4.29 Accuracy of Statements................................................30
4.30 Survival..............................................................30
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYERS..........................30
5.1 Organization and Qualification........................................30
5.2 Authorization.........................................................30
5.3 Due Diligence.........................................................31
5.4 Broker for Buyers.....................................................31
5.5 Accuracy of Statements................................................31
5.6 Survival..............................................................31
ARTICLE VI - COVENANTS........................................................31
6.1 Buyers' Right to Inspect Assets.......................................31
6.2 Conduct of Sellers Before the Closing.................................32
6.3 Bulk Sales Compliance.................................................33
6.4 Confidential Information..............................................34
6.5 Agreement Not to Compete..............................................34
6.6 Remedy at Law Inadequate..............................................34
6.7 Non-Transferred Contracts.............................................34
6.8 Sellers' Right to Sell Remaining Assets...............................35
6.9 Buyers' Performance of Assumed Liabilities............................35
6.10 Access to Books, Records and Documents................................35
ARTICLE VII - TITLE AND SURVEYS...............................................35
7.1 Title Opinion.........................................................35
7.2 Survey................................................................36
ARTICLE VIII - BUYERS' CONDITIONS TO CLOSING..................................36
8.1 Continued Truth of Warranties.........................................36
8.2 Performance of Covenants..............................................36
8.3 Damages by Casualty or Otherwise......................................36
8.4 No Adverse Change.....................................................37
8.5 Permits...............................................................37
23063 v7
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<PAGE>
8.6 Litigation............................................................37
8.7 Security Interests Released...........................................37
8.8 Title to Names........................................................37
8.9 Insider Loans.........................................................37
8.10 No Legal Hypothecs....................................................37
8.11 Release of Payables Owing to Stockholders.............................37
8.12 Transfer of Assets to Davtec..........................................37
8.13 Anjou Sublease........................................................38
8.14 Due Diligence Investigation...........................................38
8.15 Tax Clearance Certificates............................................38
8.16 Section 116 Affidavit.................................................38
8.17 Key Employees.........................................................38
8.18 Estoppel Certificates.................................................38
8.19 Canadian Title Requirements...........................................38
8.20 Escrow Agreement......................................................38
8.21 Lock Box Agreement....................................................38
8.22 Legal Opinion.........................................................38
8.23 Guaranty..............................................................38
8.24 Certificate...........................................................39
ARTICLE IX - SELLERS' AND STOCKHOLDERS' CONDITIONS TO CLOSING.................39
9.1 Continued Truth of Warranties.........................................39
9.2 Performance of Covenants..............................................39
9.3 Permits...............................................................39
9.4 Litigation............................................................39
9.5 Escrow Agreement......................................................39
9.6 Legal Opinion.........................................................39
9.7 Termination of Hodgins Employment Agreement...........................39
9.8 Certificate...........................................................39
ARTICLE X - ACTIONS TO BE TAKEN AT CLOSING; POST-CLOSING COVENANTS............40
10.1 Actions to be taken at Closing by Sellers and Stockholders............40
10.2 Actions to be taken at Closing by Buyer...............................41
10.3 Post-Closing Cooperation..............................................42
ARTICLE XI - INDEMNIFICATION..................................................43
11.1 Indemnification.......................................................43
11.2 Notice of, and Procedures for, Collecting Indemnification.............46
ARTICLE XII - MISCELLANEOUS...................................................47
12.1 Notices...............................................................47
23063 v7
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<PAGE>
12.2 Amendment............................................................48
12.3 Counterparts.........................................................48
12.4 Binding on Successors and Assigns....................................48
12.5 Severability.........................................................48
12.6 Waivers..............................................................48
12.7 Publicity............................................................48
12.8 Headings.............................................................49
12.9 Expenses.............................................................49
12.10 Sellers Solidarily Liable............................................49
12.11 Entire Agreement; Law Governing......................................49
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Sellers' Opinion
Exhibit C Guaranty
Exhibit D Buyers' Opinion
Exhibit E Bill of Sale and Assignment
Exhibit F Deed of Transfer
Exhibit G Assumption Agreement
SCHEDULES
1.1(a)(i) Excluded USA Skate Inventory
1.1(a)(ii) Excluded USA Skate Accounts Receivable
1.1(a)(iii)USA Skate Property, Plant and Equipment
1.1(a)(iv) USA Skate Contracts
1.1(a)(v) USA Skate Software
1.1(a)(vi) USA Skate Intellectual Property
1.2(a)(i) Excluded Davtec Inventory
1.2(a)(ii) Excluded Davtec Accounts Receivable
1.2(a)(iii)Davtec Equipment
1.2(a)(iv) Davtec Vehicles
1.2(a)(v) Daveluyville Property
1.2(a)(vi) Davtec Contracts
1.2(a)(vii)Davtec Software
1.2(c) Davtec Intellectual Property
1.3(a) USA Skate Assumed Liabilities
1.3(b) Davtec Assumed Liabilities
4.1 Foreign Qualifications
4.2 Required Consents
4.4 Financial Statements
4.5 Significant Corporate Events
4.6 Leased Assets
4.6(b) Permitted Encumbrances
23063 v7
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<PAGE>
4.7 Inventory On Consignment
4.8 Accounts Receivable in Dispute
4.9 Labor Contracts
4.10 Exceptions to Taxes; Audits
4.13 Breach of Statute, Decree or Order
4.14 Litigation
4.15 Employee Benefits Plans
4.16 Insurance Policies
4.17 Product Warranties, Product Return Policies and Service Warranties
4.18 Operating Licenses and Permits
4.19 Assets Not in Good Repair
4.20 Environmental Matters
4.22 Material Customers and Suppliers
4.24 Employees
4.25 Unions and Labor Practices
23063 v7
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<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into this 10th day of September, 1997, by and among LES EQUIPEMENTS SPORTIFS
DAVTEC INC., a Canadian corporation ("DAVTEC"), USA SKATE CO., INC., a New York
corporation and a stockholder of Davtec ("USA SKATE;" hereinafter Davtec and USA
Skate are sometimes referred to individually as a "SELLER" and collectively as
"SELLERS"), USA SKATE CORPORATION, a Delaware corporation and the sole
stockholder of USA Skate ("SKATE CORP."), CALIFORNIA PRO SPORTS, INC., a
Delaware corporation and the majority stockholder of Skate Corp. ("CAL PRO;"
hereinafter Skate Corp. and Cal Pro are sometimes referred to individually as a
"STOCKHOLDER" and collectively as "STOCKHOLDERS"), RAWLINGS CANADA INC., a Nova
Scotia corporation ("RAWLINGS CANADA"), and RAWLINGS SPORTING GOODS COMPANY,
INC., a Delaware corporation and the sole stockholder of Rawlings Canada
("RAWLINGS;" hereinafter Rawlings Canada and Rawlings are sometimes referred to
individually as a "BUYER" and collectively as "BUYERS").
WITNESSETH:
WHEREAS, Sellers are in the business of manufacturing, sourcing and
distributing the Victoriaville, Vic and McMartin product lines of hockey sticks,
skates, protective equipment and other hockey equipment (the "BUSINESS"); and
WHEREAS, Sellers desire to sell to Buyers certain of their properties
and assets relating to the Business, and Buyers desire to purchase such
properties and assets, all upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the payments, mutual
promises, agreements, warranties and covenants herein contained, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES.
1.1 USA SKATE ASSETS.
(a) Subject to the terms and conditions hereof, including without
limitation SECTION 1.1(b) hereof, and subject to the representations and
warranties made herein, on the Closing Date, as hereinafter defined, USA Skate
shall validly sell, assign, transfer, grant, bargain, deliver and convey to
Rawlings its entire right, title and interest in and to the following assets
(the "USA SKATE ASSETS"):
(i) All of USA Skate's inventory, including all raw
materials, work in process, finished goods, packaging and shipping
23063 v7
<PAGE>
supplies, maintenance items, spare parts, and all other materials and
supplies on hand at or in transit to USA Skate's Commack, New York facility
(the "NEW YORK FACILITY"), relating to the Business, other than the
inventory set forth on SCHEDULE 1.1(a)(i) (the "USA SKATE INVENTORY");
(ii) All of USA Skate's accounts receivable, trade accounts
and other trade debts due Seller (and the benefit of all liens and
litigation relating thereto) relating to the Business, other than the
accounts receivable set forth on SCHEDULE 1.1(a)(ii) (the "USA SKATE
ACCOUNTS RECEIVABLE");
(iii) All of USA Skate's machinery, equipment, furniture,
furnishings, fixtures, accessories, computers and computing equipment
relating to the Business, including but not limited to the equipment set
forth on SCHEDULE 1.1(a)(iii) and all equipment located at the New York
Facility (the "USA SKATE PROPERTY, PLANT AND EQUIPMENT");
(iv) The full benefit of (i) all purchase orders to USA
Skate relating to the Business, (ii) the contracts, agreements and leases
set forth on SCHEDULE 1.1(a)(iv), and (iii) all of USA Skate's transferable
licenses, quotas, consents, permits and approvals relating to the Business
(the "USA SKATE CONTRACTS");
(v) All copies, both in machine-readable and (to the extent
they exist) in human-readable form, of all computer programs and software
(whether stored on hard or floppy disks or other media), and all interests
therein or rights thereto owned by USA Skate or to which it is entitled by
license or otherwise, together with the media on which such software and
programs are stored, and all documents and information relating to any of
the foregoing, relating to the Business, including but not limited to the
software and other items set forth on SCHEDULE 1.1(a)(v);
(vi) All of USA Skate's foreign and domestic patents, patent
applications, utility and design model registrations and applications
therefor, international priority rights, trademarks and service marks
(registered or unregistered), trademark and service mark applications,
trade names, service marks, trade dress, copyrights, copyright
applications, intellectual designs, formulas, know-how, trade secrets,
technical and manufacturing processes and information, operating techniques
and procedures, engineering data and plans including mold and manufacturing
drawings, assembly and installation drawings, blueprints, procurement
specifications, and engineering and performance specifications, as well as
any marketing materials and information including marketing plans, surveys
and strategies, promotional concepts, artwork, photographs, brochures,
print, television and radio advertising, product packaging and packaging
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design and other intellectual property, together with the benefit of all
licenses granted by or to USA Skate in respect of any of the foregoing and
all rights to sue for past infringement of any of the foregoing and all
goodwill associated with the foregoing, relating to the Business, including
but not limited to the patents, trademarks, trade names and other
intellectual property set forth on SCHEDULE 1.1(a)(vi) (the "USA SKATE
INTELLECTUAL PROPERTY");
(vii) All of USA Skate's books, records, books of account,
sales and purchase records, lists of customers and prospects, lists of
suppliers, product information, pricing information, operations
information, government inspection reports, waste monitoring reports, and
all other documents, files, records and other data and information of USA
Skate (whether stored on hard or floppy disks or other media), relating to
the Business, but excluding all of USA Skate's tax return files and working
papers relating thereto, corporate minutes, stock records and related
materials, and books and records relating to USA Skate's assets which are
not being purchased pursuant to this Agreement; and
(viii) Except as specifically excluded in this SECTION
1.1(a) or SECTION 1.1(b) hereof, all of USA Skate's other property, assets
and rights relating to the Business.
(b) Notwithstanding the provisions of SECTION 1.1(a) hereof, the
USA Skate Assets shall not include the following assets:
(i) Any and all of USA Skate's cash, cash-equivalents and
investment securities on hand and in banks and other depositories;
(ii) Any and all capital stock of Amskate Holding Ltd.;
(iii) Any and all of USA Skate's prepaid expenses;
(iv) Any and all real property to which USA Skate holds fee
simple title;
(v) Any and all of USA Skate's contracts, agreements and
leases not described in clauses (i) or (iii) of SECTION 1.1(a)(iv) or not
set forth on SCHEDULE 1.1(a)(iv) OR SCHEDULE 4.9;
(vi) Any and all United States federal or state income tax
refunds to USA Skate attributable to any period ending on or before the
Closing Date; and
(vii) Any and all of USA Skate's legal defenses, set-offs,
and insurance or similar claims attributable to any period ending on or
before the Closing Date or relating to USA Skate's assets which are not
being purchased pursuant to this Agreement.
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1.2 DAVTEC ASSETS
(a) Subject to the terms and conditions hereof, including without
limitation SECTION 1.2 (b) hereof, and subject to the representations and
warranties made herein, on the Closing Date Davtec shall validly sell, assign,
transfer, grant, bargain, deliver and convey to Rawlings Canada its entire
right, title and interest in and to the following assets (the "DAVTEC ASSETS"):
(i) All of Davtec's inventory, including all raw materials,
work in process, finished goods, packaging and shipping supplies,
maintenance items, spare parts, rework shafts and all other materials and
supplies on hand at or in transit to Davtec's Daveluyville, Quebec,
Kirkland, Quebec, Anjou, Quebec and London, Ontario facilities (the
"CANADIAN FACILITIES") relating to the Business, other than the inventory
set forth on SCHEDULE 1.2(a)(i) (the "DAVTEC INVENTORY.;" hereinafter the
USA Skate Inventory and the Davtec Inventory are referred to collectively
as the "INVENTORY");
(ii) All of Davtec's accounts receivable, trade accounts and
other trade debts due Seller (and the benefit of all liens and litigation
relating thereto) relating to the Business, other than the accounts
receivable set forth on SCHEDULE 1.2(a)(ii) (the "DAVTEC ACCOUNTS
RECEIVABLE;" hereinafter the USA Skate Accounts Receivable and the Davtec
Accounts Receivable are referred to collectively as the "ACCOUNTS
RECEIVABLE");
(iii) All of Davtec's machinery, equipment, molds, tools,
furniture, furnishings, fixtures, accessories, computers and computing
equipment relating to the Business, including but not limited to the
equipment set forth on SCHEDULE 1.2(a)(iii) and all equipment located at
the Canadian Facilities (the "DAVTEC EQUIPMENT;" hereinafter the USA Skate
Equipment and the Davtec Equipment are referred to collectively as the
"EQUIPMENT");
(iv) Davtec's automobiles, trucks, vans, trailers and other
vehicles and mobile equipment set forth on SCHEDULE 1.2(a)(iv) (the "DAVTEC
VEHICLES");
(v) The real property located in Daveluyville, Quebec and
more particularly described on SCHEDULE 1.2(a)(v) and all improvements
thereon (the "DAVELUYVILLE PROPERTY;" hereinafter the Davtec Equipment, the
Davtec Vehicles and Daveluyville Property are referred to collectively as
the "DAVTEC PROPERTY, PLANT AND EQUIPMENT," and the USA Skate Property,
Plant and Equipment and the Davtec Property, Plant and Equipment are
referred to collectively as the "PROPERTY, PLANT AND EQUIPMENT");
(vi) The full benefit of (i) all purchase orders to Davtec
relating to the Business, (ii) the contracts, agreements and leases set
forth on SCHEDULE 1.2(a)(vi), and (iii) all of Davtec's transferable
licenses, quotas, consents, permits and approvals relating to the Business
(the "DAVTEC CONTRACTS;" hereinafter the USA Skate Contracts and the Davtec
Contracts are referred to collectively as the "CONTRACTS");
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(vii) All copies, both in machine-readable and (to the
extent they exist) in human-readable form, of all computer programs and
software (whether stored on hard or floppy disk or other media) and all
interests therein or rights thereto owned by Davtec or to which it is
entitled by license or otherwise, together with the media on which such
software and programs are stored, and all documents and information
relating to any of the foregoing, relating to the Business, including but
not limited to the software and other items set forth on SCHEDULE
1.2(a)(vii);
(viii) All of Davtec's books, records, books of account,
sales and purchase records, lists of customers and prospects, lists of
suppliers, product information, pricing information, operations
information, government inspection reports, waste monitoring reports, and
all other documents, files, records and other data and information of
Davtec (whether stored on hard or floppy disks or other media), relating to
the Business, but excluding all of Davtec's tax return files and working
papers relating thereto, corporate minutes, stock records and related
materials, and books and records relating to Davtec's assets which are not
being purchased pursuant to this Agreement; and
(ix) Except for the Davtec Intellectual Property (as
hereinafter defined), all of Davtec's goodwill relating to the Business and
as specifically excluded in SECTION 1.2(a) OR SECTION 1.2(b) hereof all of
Davtec's other property, assets and rights relating to the Business.
(b) Notwithstanding the provisions of SECTION 1.2(a) hereof, the
Davtec Assets shall not include the following assets:
(i) Any and all of Davtec's cash, cash-equivalents and
investment securities on hand and in banks and other depositories;
(ii) Any and all of Davtec's prepaid expenses;
(iii) Any and all real property to which Davtec holds fee
simple title, other than the Daveluyville Property;
(iv) Any and all of Davtec's contracts, agreements and
leases not described in clauses (i) or (iii) of SECTION 1.2(a)(vi) or not
set forth on SCHEDULE 1.2(a)(vi) or SCHEDULE 4.9;
(v) Any and all Canadian federal or provincial research and
development refunds to Davtec attributable to any period ending on or
before the Closing Date;
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(vi) Any and all of Davtec's legal defenses, set-offs, and
insurance or similar claims attributable to any period ending on or before
the Closing Date or relating to Davtec's assets which are not being
purchased pursuant to this Agreement; and
(vii) Any and all capital stock of 811300 Ontario Inc.
(c) Subject to the terms and conditions hereof, and subject to
the representations and warranties made herein, on the Closing Date Davtec shall
validly sell, assign, transfer, grant, bargain, deliver and convey to Rawlings
its entire right, title and interest in and to all of (i) Davtec's foreign and
domestic patents, patent applications, utility and design model registrations
and applications therefor, international priority rights, trademarks and service
marks (registered or unregistered), trademark and service mark applications,
trade names, service marks, trade dress, copyrights, copyright applications,
intellectual designs, formulas, know-how, trade secrets, technical and
manufacturing processes and information, operating techniques and procedures,
engineering data and plans including mold and manufacturing drawings, assembly
and installation drawings, blueprints, procurement specifications, and
engineering and performance specifications, as well as any marketing materials
and information including marketing plans, surveys and strategies, promotional
concepts, artwork, photographs, brochures, print, television and radio
advertising, product packaging and packaging design, and other intellectual
property, together with the benefit of all licenses granted by or to Davtec in
respect of any of the foregoing and all rights to sue for past infringement of
any of the foregoing and all goodwill associated with the foregoing, relating to
the Business, including but not limited to the patents, trademarks, trade names
and other intellectual property set forth on SCHEDULE 1.2(c) and (ii) Davtec's
goodwill relating to the Business (the items described in clauses (i) and (ii)
of this SECTION 1.2(c) are collectively referred to in this Agreement as the
"DAVTEC INTELLECTUAL PROPERTY;" hereinafter the USA Skate Intellectual Property
and the Davtec Intellectual Property are referred to collectively as the
"INTELLECTUAL PROPERTY" and the USA Skate Assets, Davtec Assets and Intellectual
Property are referred to collectively as the "ASSETS").
1.3 ASSUMED LIABILITIES.
(a) Subject to the terms and conditions of this Agreement,
Rawlings shall, as of the Closing Date, assume and agree to discharge the trade
payables of USA Skate on hand at the Closing Date or received by Buyers within
40 days of the Closing Date relating to products received by or services
performed for USA Skate before the Closing Date (the "USA SKATE ACCOUNTS
PAYABLE"), the accrued liabilities of USA Skate set forth in SCHEDULE 1.3(a)
(the "USA SKATE ACCRUED LIABILITIES"), and the obligations and liabilities which
arise after the Closing Date and under the USA Skate Contracts which, but for
the assignment of the Contracts to Rawlings pursuant to this Agreement, would
have been obligations or liabilities of USA Skate. Notwithstanding the
foregoing, the USA Skate Accounts Payable and the USA Skate Accrued Liabilities
shall not include any trade payable or accrued liability to any affiliate or
related party of USA Skate or Davtec, accrued interest or any debit balance with
respect to a payable.
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(b) Subject to the terms and conditions of this Agreement,
Rawlings Canada shall, as of the Closing Date, assume and agree to discharge the
trade accounts payable of Davtec on hand at the Closing Date or received by
Buyers within 40 days of the Closing Date relating to products received by or
services performed for Davtec before the Closing Date (the "DAVTEC ACCOUNTS
PAYABLE;" hereinafter the USA Skate Accounts Payable and the Davtec Accounts
Payable are referred to collectively as the "ACCOUNTS PAYABLE"), the accrued
liabilities of Davtec set forth of SCHEDULE 1.3(b) (the "DAVTEC ACCRUED
LIABILITIES;" hereinafter the USA Skate Accrued Liabilities and Davtec Accrued
Liabilities are referred to collectively as the "ACCRUED LIABILITIES"), and the
obligations and liabilities which arise after the Closing Date under the Davtec
Contracts and which, but for the assignment of the Davtec Contracts to Rawlings
Canada pursuant to this Agreement, would have been obligations or liabilities of
Davtec. Notwithstanding the foregoing, the Davtec Accounts Payable and the
Davtec Accrued Liabilities shall not include any trade payable or accrued
liability to any affiliate or other related party of Davtec or USA Skate,
accrued interest or any debit balance with respect to a payable.
(c) Except for the liabilities and obligations assumed by Buyers
pursuant to SECTIONS 1.3(a) AND (b) (collectively, the "ASSUMED LIABILITIES"),
any and all obligations and liabilities of Sellers or Stockholders, whether
accrued or contingent or due or not due, shall be and remain the sole
obligations and liabilities of Sellers and Stockholders, respectively, to pay
and discharge, and Buyers shall not be obligated in any respect therefor.
ARTICLE II
CLOSING
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at 10:00 a.m. on September 11, 1997 (the "CLOSING
DATE"), at the office of Stinson, Mag & Fizzell, P.C., 100 South Fourth Street,
St. Louis, Missouri 63102, or at such other time and place as the parties shall
mutually agree upon.
ARTICLE III
PURCHASE PRICES
3.1 USA SKATE PURCHASE PRICE; ADJUSTMENT.
(a) USA SKATE PURCHASE PRICE. The total consideration for the USA
Skate Assets and the USA Skate Assumed Liabilities (the "USA SKATE PURCHASE
PRICE"), upon the terms and subject to the conditions of this Agreement, shall
be $10,140,922, plus or minus the difference between the USA Skate Net Assets
(as defined in SECTION 3.4) and $3,279,732. At Closing, as payment of an
estimated amount of the USA Skate Purchase Price, Rawlings shall (i) pay
$9,390,922 (the "USA SKATE CLOSING CONSIDERATION") to USA Skate by certified or
bank cashier's check payable to the order of USA Skate or by wire transfer to
the account designated in writing by USA Skate to Rawlings at least 48 hours
before the Closing, (ii) deposit $250,000 (the "USA SKATE ADJUSTMENT DEPOSIT")
in escrow pursuant to an escrow agreement in the form of EXHIBIT A attached
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hereto (the "ESCROW AGREEMENT") as a source for the payment of any adjustment to
the USA Skate Purchase Price and (iii) deposit $500,000 in escrow pursuant to
the Escrow Agreement as a source for the payment of any indemnification
hereunder. The balance of the USA Skate Purchase Price, or any refund of the USA
Skate Purchase Price, shall be paid in accordance with SECTION 3.1(b).
(b) ADJUSTMENT OF THE USA SKATE PURCHASE PRICE.
(i) As of the close of business on the day immediately
preceding the Closing Date, or at such other date and time as Rawlings and
USA Skate shall agree upon, Rawlings and USA Skate, or their
representatives, shall commence an accounts receivable verification, a
physical inventory, and such other audit procedures as they shall agree are
appropriate to determine the USA Skate Net Assets in accordance with
SECTION 3.4. Rawlings shall not remove any USA Skate tangible assets from
the New York Facility until the agreed upon audit procedures for such
tangible assets have been completed. Within forty-five (45) days of the
Closing Date, Rawlings or its representatives shall prepare and deliver to
USA Skate a statement, prepared in accordance with SECTION 3.4, setting
forth its determination of the USA Skate Net Assets, together with all of
Rawlings' related work papers. If USA Skate shall disagree in any respect
with Rawlings' determination of the USA Skate Net Assets, it shall notify
Rawlings of the items in dispute and the reasons therefor within twenty
(20) days of the giving by Rawlings to USA Skate of its determination of
the USA Skate Net Assets, and the parties shall meet promptly thereafter to
resolve any differences. If Rawlings and USA Skate are unable to resolve
any such dispute within fifteen (15) days of the giving by USA Skate to
Rawlings of notice of the dispute, the disputed items shall be referred to
Price Waterhouse LLP (the "THIRD PARTY ACCOUNTANTS") for an opinion with
respect to such dispute, which opinion shall be delivered to Rawlings and
USA Skate within thirty (30) days of the referral to the Third Party
Accountants and shall be final and binding on the parties hereto. Rawlings
and USA Skate shall each pay that proportion of the fees and expenses of
the Third Party Accountants as shall equal the proportion that the
aggregate amount in dispute awarded to it by the Third Party Accountants
bears to the aggregate amount in dispute.
(ii) If the USA Skate Net Assets equal $3,279,732, then
Rawlings and USA Skate shall instruct the escrow agent under the Escrow
Agreement (the "ESCROW AGENT") to, first, disburse $238,000 (or such other
amount as Rawlings and USA Skate shall agree to) to Cortina International
and, second, disburse the balance of the USA Skate Adjustment Deposit, if
any, to USA Skate.
If the USA Skate Net Assets exceed $3,279,732, then (i)
Rawlings and USA Skate shall instruct the Escrow Agent to, first, disburse
$238,000 (or such other amount as Rawlings and USA Skate shall agree to) to
Cortina International and, second, disburse the balance of the USA Skate
Adjustment, if any, to USA Skate, and (ii) Rawlings shall pay the
difference between the USA Skate Net Assets and $3,279,732 to USA Skate.
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If $3,279,732 exceeds the USA Skate Net Assets, (i) Rawlings
and USA Skate shall instruct the Escrow Agent to, first, disburse from the
USA Skate Adjustment Deposit the amount by which $3,279,732 exceeds the USA
Skate Net Assets to Rawlings and, second, disburse the balance of the USA
Skate Adjustment Deposit, if any, to USA Skate, and (ii) if $3,279,732
exceeds the USA Skate Net Assets by more than the USA Skate Adjustment
Deposit, USA Skate also shall pay to Rawlings the difference between (x)
the amount by which $3,279,732 exceeds the USA Skate Net Assets less (y)
the USA Skate Adjustment Deposit.
(iii) Any instructions to the Escrow Agent and any payment
made pursuant to this SECTION 3.1(b) shall be given or made within five (5)
days of the determination of the USA Skate Net Assets pursuant to this
SECTION 3.1(b). Any disbursement by the Escrow Agent pursuant to this
SECTION 3.1(b) shall include interest and all other earnings accrued on the
disbursement.
3.2 DAVTEC PURCHASE PRICE; ADJUSTMENT.
(a) DAVTEC PURCHASE PRICE. The total consideration for the Davtec
Assets and the Davtec Assumed Liabilities (the "DAVTEC PURCHASE PRICE"), upon
the terms and subject to the conditions of this Agreement, shall be C$5,793,363,
plus or minus the difference between the Davtec Net Assets (as defined in
SECTION 3.4) and C$5,793,363. At Closing, as payment of an estimated amount of
the Davtec Purchase Price, Rawlings Canada shall (i) pay C$5,446,767 (the
"DAVTEC CLOSING CONSIDERATION") to Davtec by certified or bank cashier's check
payable to the order of Davtec or by wire transfer to the account designated in
writing by Davtec to Rawlings Canada at least 48 hours before the Closing and
(ii) deposit C$346,596 (the "DAVTEC ADJUSTMENT DEPOSIT") in escrow pursuant to
the Escrow Agreement as a source for the payment of any adjustment to the Davtec
Purchase Price. The balance of the Davtec Purchase Price, or any refund of the
Davtec Purchase Price, shall be paid in accordance with SECTION 3.2(b).
(b) ADJUSTMENT OF THE DAVTEC PURCHASE PRICE.
(i) As of the close of business on the day immediately
preceding the Closing Date, or at such other date and time as Rawlings
Canada and Davtec shall agree upon, Rawlings Canada and Davtec, or their
representatives, shall conduct an accounts receivable verification, a
physical inventory, and such other audit procedures as they shall agree are
appropriate to determine the Davtec Net Assets in accordance with SECTION
3.4. Within forty-five (45) days of the Closing Date, Rawlings Canada or
its representatives shall prepare and deliver to Davtec a statement,
prepared in accordance with SECTION 3.4, setting forth its determination of
the Davtec Net Assets, together with all of Rawlings Canada's related work
papers. If Davtec shall disagree in any respect with Rawlings Canada's
determination of the Davtec Net Assets, it shall notify Rawlings Canada of
the items in dispute and the reasons therefor within twenty (20) days of
the giving by Rawlings Canada to Davtec of its determination of the Davtec
Net Assets, and the parties shall meet promptly thereafter to resolve any
differences. If Rawlings Canada and Davtec are unable to resolve any such
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dispute within fifteen (15) days of the giving by Davtec to Rawlings Canada
of notice of the dispute, the disputed items shall be referred to the Third
Party Accountants for an opinion with respect to such dispute, which
opinion shall be delivered to Rawlings Canada and Davtec within thirty (30)
days of the referral to the Third Party Accountants and shall be final and
binding on the parties hereto. Rawlings Canada and Davtec shall each pay
that proportion of the fees and expenses of the Third Party Accountants as
shall equal the proportion that the aggregate amount in dispute awarded to
it by the Third Party Accountants bears to the aggregate amount in dispute.
(ii) If the Davtec Net Assets equal C$5,793,363, then
Rawlings Canada and Davtec shall instruct the Escrow Agent to, first,
disburse $238,000 (or such other amount as Rawlings Canada and Davtec shall
agree to) to Cortina International and, second, disburse the balance of the
Davtec Adjustment Deposit, if any, to Davtec.
If the Davtec Net Assets exceed C$5,793,363, then (i)
Rawlings Canada and Davtec shall instruct the Escrow Agent to, first,
disburse $238,000 (or such other amount as Rawlings Canada and Davtec shall
agree to) to Cortina International and, second, disburse the balance of the
Davtec Adjustment, if any, to Davtec, and (ii) Rawlings Canada shall pay
the difference between the Davtec Net Assets and C$5,793,363 to Davtec.
If C$5,793,363 exceeds the Davtec Net Assets, (i) Rawlings
Canada and Davtec shall instruct the Escrow Agent to, first, disburse from
the Davtec Adjustment Deposit the amount by which C$5,793,363 exceeds the
Davtec Net Assets to Rawlings Canada and, second, disburse the balance of
the Davtec Adjustment Deposit, if any, to Davtec, and (ii) if C$5,793,363
exceeds the Davtec Net Assets by more than the Davtec Adjustment Deposit,
Davtec also shall pay to Rawlings Canada the difference between (x) the
amount by which C$5,793,363 exceeds the Davtec Net Assets less (y) the
Davtec Adjustment Deposit.
(iii) Any instructions to the Escrow Agent and any payment
made pursuant to this SECTION 3.2(b) shall be given or made within five (5)
days of the determination of the Davtec Net Assets pursuant to this SECTION
3.2(b). Any disbursement by the Escrow Agent pursuant to this SECTION
3.2(b) shall include interest and all other earnings accrued on the
disbursement.
3.3 DAVTEC INTELLECTUAL PROPERTY PURCHASE PRICE. The total
consideration for the Davtec Intellectual Property, upon the terms and subject
to the conditions of this Agreement, shall be C$250,000 (the "DAVTEC
INTELLECTUAL PROPERTY PURCHASE PRICE"). At Closing, Rawlings shall pay the
Davtec Intellectual Property Purchase Price to Davtec by certified or bank
cashier's check payable to the order of Davtec or by wire transfer to the
account designated in writing by Davtec to Rawlings at least 48 hours before the
Closing.
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3.4 DETERMINATION OF NET ASSETS. As used in this Agreement,
(a) "USA SKATE NET ASSETS" shall mean the book value as of the
Closing Date of the USA Skate Accounts Receivable, plus the USA Skate Inventory,
plus the USA Skate Property, Plant and Equipment, less the USA Skate Accounts
Payable, less the USA Skate Accrued Liabilities, and
(b) "DAVTEC NET ASSETS" shall mean the book value as of the
Closing Date of the Davtec Accounts Receivable, plus the Davtec Inventory, plus
the Davtec Property, Plant and Equipment, less the Davtec Accounts Payable, less
the Davtec Accrued Liabilities,
all determined in accordance with United States generally accepted accounting
principles, except that:
(i) The value of the Accounts Receivable (other than
Accounts Receivable outstanding sixty or more days as of the Closing Date
which are not collected by Buyers within the forty days following the
Closing Date (the "UNCOLLECTED RECEIVABLES")) shall equal 95% of the book
value of such Accounts Receivable. The value of the Uncollected Receivables
shall be zero. Sellers and Stockholders shall promptly pay and, with
respect to any Account Receivable received by a lock box maintained on
behalf of Sellers or Stockholders, shall cause their lenders to promptly
pay to the appropriate Buyer any Account Receivable received by Sellers or
Stockholders (including any Account Receivable received by a lock box
maintained on behalf of Sellers or Stockholders) after the Closing. On the
date(s) the Escrow Agent distributes the USA Skate Adjustment Deposit and
the Davtec Adjustment Deposit pursuant to the Escrow Agreement, Buyers
shall assign the Uncollected Receivables to USA Skate and Davtec, as
applicable. Buyers shall promptly pay to the appropriate Seller (i) any
account receivable owing to Sellers collected by Buyers which is not
included in the Accounts Receivable and (ii) any Uncollected Receivable
assigned to Sellers pursuant to this SECTION 3.4(b)(i).
(ii) The quantity of the Inventory shall be determined by a
physical inventory conducted jointly by the appropriate Buyer and Seller or
their representatives as of the Closing Date. Inventory values shall be
based upon the lower of cost determined on the first-in-first-out method or
net realizable value. The net realizable value for rework shafts (which had
a book value of C$138,515 as of June 30, 1997) shall be zero. The net
realizable value for any inventory not in Sellers' current product line
will be cost determined on a first-in-first-out method, except that the net
realizable value of all lacrosse gloves, in-line skates and golf inventory
shall equal 50% of cost determined on a first-in-first-out method (which
values, as of June 30, 1997, were $7,565, $58,698 and $17,591
respectively).
(iii) The Property, Plant and Equipment shall be determined
by a physical inventory of the items listed in SCHEDULES 1.1(a)(iii),
1.1(a)(iv), 1.2(a)(iii) AND 1.2(a)(iv) conducted jointly by the appropriate
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Buyer and Seller or their representatives as of the Closing Date. Property,
Plant and Equipment values shall be adjusted from their book value for a
valuation reserve determined in accordance with SFAS #121.
(iv) The Accounts Payable shall equal the unpaid bills on
hand at the Closing Date or received by Buyers within 40 days of the
Closing Date relating to products received by or services performed for
Sellers before the Closing Date, and shall exclude all accounts payable to
any affiliate or related party of a Seller, all interest payable, all debit
balances with respect to any Account Payable and all other liabilities not
related to the Assets.
(v) The Accrued Liabilities shall equal the liability as of
the Closing Date for each of the liabilities outlined in SCHEDULE 1.3(a)
and SCHEDULE 1.3(b) determined in accordance with generally accepted
accounting principles, applied on a consistent basis. The Jon Hodgins
employment agreement liability shall be deemed to be $160,000.
3.5 ALLOCATION OF PURCHASE PRICE.
(a) The USA Skate Purchase Price shall be allocated among the USA
Skate Assets and USA Skate's agreement not to compete in accordance with an
appraisal to be obtained by Rawlings and Section 1060 of the Internal Revenue
Code of 1986, as amended (the "CODE"). USA Skate and Rawlings shall provide to
the other all information appropriate to permit any party to make, in a timely
manner, any filing appropriate under Section 1060 of the Code. USA Skate and
Rawlings each shall make all required filings under the Code with respect to the
allocation of the USA Skate Purchase Price.
(b) The Davtec Purchase Price shall be allocated among the Davtec
Assets and Davtec's agreement not to compete in accordance with an appraisal to
be obtained by Rawlings Canada. Rawlings Canada and Davtec shall each execute
and file a joint election under SECTION 22 of the Income Tax Act (Canada) and
the corresponding provisions of any other applicable taxing statute or
regulation, within the prescribed time periods, in respect of the Davtec
Accounts Receivable. Buyers and Davtec agree to prepare and file their
respective tax returns in a manner consistent with such elections and the
allocation of the Davtec Purchase Price determined pursuant to this SECTION
3.5(b). Sellers jointly and severally shall indemnify and save harmless Buyers,
and Buyers jointly and severally shall indemnify and save harmless Sellers, in
respect of any liability, loss, cost, expense, additional tax, interest, penalty
or legal or accounting fees paid or incurred by the indemnified party as a
result of the failure of Sellers or Buyers (as the case may be) to perform their
respective obligations pursuant to this SECTION.
3.6 PRORATION OF TAXES. Sellers shall pay when due all sales, use,
transfer and similar taxes arising out of the transactions contemplated
hereunder. All other taxes against or in respect of the Assets, including real
and personal property taxes, for the taxable period which includes the Closing
Date shall be prorated between Buyers and Sellers as of the Closing Date. In the
event the amount of such taxes or assessments cannot be ascertained as of the
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Closing Date, proration shall be made on the basis of the preceding year, and,
to the extent that such proration may be inaccurate, Sellers and Buyers agree to
make such payment to the appropriate party after the tax statements have been
received which are necessary to allocate such taxes properly between Sellers and
Buyers as of the Closing Date. Sellers agree to pay such taxes and assessments
when due, and Buyers' prorated portion thereof shall be paid by Buyers to
Sellers upon Sellers' request therefor.
3.7 TRANSFER TAXES. Davtec and Rawlings Canada shall jointly elect to
have Section 167(1) of the Goods and Service Tax levied under Part IX of the
Excise Tax Act, R.S.C., 1985, c.E-15 (together with the regulations promulgated
thereunder, as amended or supplemented from time to time, the "Excise Tax Act")
and Section 75.1 of the Act respecting the Quebec Sales Tax, R.S.Q., c.T-0.1
(together with the regulations promulgated thereunder, as amended or
supplemented from time to time, the "Quebec Sales Tax Act") apply to the
purchase and sale of the Davtec Assets pursuant to the provisions of this
Agreement. Rawlings Canada shall file the joint elections in the manner and
within the time prescribed by the Excise Tax Act and the Quebec Sales Tax Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS AND STOCKHOLDERS
Each of Sellers and Stockholders hereby jointly and severally
represent and warrant to Buyers as follows:
4.1 ORGANIZATION AND QUALIFICATION. USA Skate is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, Davtec is a corporation duly organized, validly existing and in good
standing under the laws of Canada, Skate Corp. is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and Cal Pro is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Sellers have all requisite
corporate power and authority to own, lease and operate their properties and to
carry on the Business as it is now being conducted and are qualified to do
business as a foreign corporation in the jurisdictions set forth on SCHEDULE
4.1, and there is no other jurisdiction where the nature of the Business or the
ownership or lease of the Assets requires such qualification, except for those
jurisdictions where the failure to so qualify would not have a material adverse
effect on the Business or the Assets.
4.2 AUTHORIZATION. Sellers and Stockholders have the full corporate
power to enter into this Agreement and to carry out their obligations hereunder.
The execution, delivery and performance of this Agreement by Sellers and
Stockholders have been duly and effectively authorized and approved by all
requisite corporate action and no other corporate acts or proceedings are
necessary to authorize this Agreement or the transactions contemplated hereby.
This Agreement constitutes the legal, valid and binding obligation of Sellers
and Stockholders, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to creditors' rights and by general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity). Assuming the consents set forth on SCHEDULE 4.2 have been obtained,
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neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) violate, or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under any of
the terms, conditions or provisions of the Certificate or Articles of
Incorporation, By-Laws or other constating document of Sellers or Stockholders,
any Contract, any other note, bond, mortgage, indenture, deed of trust, lease,
license, contract, agreement or other instrument or obligation by which the
Assets are bound or affected, or any other material note, bond, mortgage,
indenture, deed of trust, lease, license, contract, agreement or other
instrument or obligation by which Sellers or any of their other properties or
assets are bound or affected, (ii) violate any statute, rule or regulation or,
to the best of Seller's and Stockholders' knowledge, any order, writ, injunction
or decree applicable to Sellers or any of their properties or assets, (iii)
result in the creation of any lien, security interest, hypothec, prior claim,
charge or encumbrance upon the Assets or (iv) result in the modification,
termination or revocation of any license, permit or right material to the
Business. Except as set forth on SCHEDULE 4.2 hereto, no consent or approval by,
notice to or registration with any natural person, partnership, corporation,
limited liability company, firm, company, trust, estate, association, government
or governmental authority or other entity ("PERSON") is required on the part of
Sellers or Stockholders in connection with the execution and delivery of this
Agreement or the consummation by Sellers and Stockholders of the transactions
contemplated hereby.
4.3 SUBSIDIARIES AND AFFILIATES. Cal Pro owns 100% of the issued and
outstanding stock of Skate Corp. Skate Corp. owns 75% of the issued and
outstanding stock of USA Skate and 100% of the issued and outstanding stock of
Three R Sales, Inc. Three R Sales, Inc. owns 25% of the issued and outstanding
stock of USA Skate. USA Skate owns 100% of the issued and outstanding stock of
Amskate Holding Ltd. and one-third of the issued and outstanding stock of
Davtec. Amskate Holding Ltd. owns 100% of the issued and outstanding stock of
2984334 Canada Ltd., and 2984334 Canada Ltd. owns 38% of the issued and
outstanding stock of Gestion Davtec Inc. and one-third of the issued and
outstanding stock of Davtec. Gestion Pintade Inc., 3102-1983 Quebec Inc.,
3102-1991 Quebec Inc. and Gestion Camille Lainesse Inc. each own 15.5% of the
issued and outstanding stock of Gestion Davtec Inc. 2984334 Canada Ltd. owns
100% of the issued and outstanding stock of Gestion Pintade Inc., 3102-1983
Quebec Inc., 3102-1991 Quebec Inc. and Gestion Camille Lainesse Inc. Gestion
Davtec Inc. owns one-third of the issued and outstanding stock of Davtec, and
Davtec owns 100% of the issued and outstanding stock of 811300 Ontario Inc.
Hereinafter Three R Sales, Inc., Amskate Holding Ltd., 29843334 Canada Ltd.,
Gestion Pintade Inc., 3102-1983 Quebec Inc., 3102-1991 Quebec Inc., Gestion
Camille Lainesse Inc. and Gestion Davtec Inc. are referred to collectively as
the "GUARANTORS." Except as set forth in the preceding sentence, Sellers do not,
directly or indirectly, own any subsidiary and there is no Person who is
controlled by Sellers.
4.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyers true,
correct and complete copies of their financial statements identified on SCHEDULE
4.4 (the "FINANCIAL STATEMENTS"), each of which, except as noted on SCHEDULE
4.4, (i) is accurate and complete in all material respects and presents fairly
in all material respects the financial position and results of operations of the
Seller to which it refers for the period stated and (ii) has been prepared in
accordance with generally accepted accounting principles consistently applied.
The Financial Statements do not contain any untrue statement of a material fact
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or omit to state any material fact necessary to make the statements therein not
misleading. Except as set forth in the Financial Statements, Sellers have no
material liabilities, absolute or contingent which are required to be reflected
in the Financial Statements in accordance with generally accepted accounting
principles. Included in SCHEDULE 4.4 are true, correct and complete copies of
all reports and correspondence from Sellers' auditors to the officers, directors
or management of Sellers regarding the accounting procedures, financial controls
or management procedures of Sellers.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 4.5, since December 31, 1996, there has not been:
(a) any change in the financial condition, assets, operations,
properties, liabilities, earnings or business of Sellers which has been or will
be, individually or in the aggregate with other changes, materially adverse to
Sellers or the Business;
(b) any damage, destruction or casualty loss (whether or not
covered by insurance) materially and adversely affecting the financial
condition, assets, operations, properties, earnings of Sellers or the Business;
(c) any increase in the compensation payable or to become payable
by Sellers to any director, officer, employee or agent of Sellers other than
routine increases made in the ordinary course of business consistent with the
past practice of Sellers, or any bonus, incentive compensation, service award or
other like benefit, granted, made or accrued, contingently or otherwise, to or
to the credit of any of such officer, employee or agent, or any employee
welfare, pension, retirement or similar payment or arrangement made or agreed to
by Sellers with respect to any such officer, employee or agent, except pursuant
to the existing plans and arrangements described in SCHEDULE 4.15;
(d) any labor trouble, or any controversies or unsettled
grievances pending or, to be best of Sellers' and Stockholders' knowledge,
threatened, between Sellers and any of their employees or a collective
bargaining organization representing or seeking to represent such employees, or
any entrance into any collective bargaining agreement by Sellers with respect to
any such employees;
(e) any addition to, or modification of, any profit sharing,
bonus, deferred compensation, insurance, pension, retirement or other employee
benefit plans, arrangements and practices described on SCHEDULE 4.15, other than
accruals made for Sellers' fiscal years 1997 in accordance with the normal
practices of Sellers;
(f) any sale, assignment, license or transfer of any asset,
property or right of Sellers or any conduct of the business of Sellers other
than in the ordinary course of business;
(g) any capital expenditure or commitment to make a capital
expenditure (exclusive of expenditures for repair or maintenance of equipment in
the ordinary course of business) or the execution of any lease or similar
arrangement (except in the ordinary course of business) with respect to any
aspect of the Business, or any incurring of liability therefor;
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(h) any incurring of any extraordinary loss or the knowing waiver
of any right of substantial value by Sellers in connection with any aspect of
the Business;
(i) any cancellation, termination or amendment of any material
contract, agreement, license or other instrument relating to the Business;
(j) any change in Sellers' accounting practices;
(k) any failure on the part of Sellers to operate the Business in
the ordinary course so as to preserve their business organizations intact,
including the services of their present officers and employees and the goodwill
of Sellers' suppliers, customers and others having business relations with them;
(l) any transaction by Sellers relating to the Business not in
the ordinary course of business;
(m) any agreement by Sellers to do any of the foregoing; or
(n) any other event or condition of any character which, in any
one case or in the aggregate, has adversely and materially affected, or any
event or condition which might reasonably be expected, in any one case or in the
aggregate, to adversely and materially affect the financial condition, assets,
operations, properties, liabilities, earnings of Sellers or the Business.
4.6 TITLE TO ASSETS.
(a) Sellers have, and at the Closing will transfer to Buyers,
good and marketable title to all of the Assets, except for those Assets
identified on SCHEDULE 4.6 as leased by Davtec or USA Skate or on SCHEDULES
1.1(a)(vi) OR 1.2(c)(i) as licensed by Davtec or USA Skate. Except for the
assets and properties identified on SCHEDULE 4.6 as leased by USA Skate or
Davtec or on SCHEDULES 1.1(a)(vi) OR 1.2(c)(i) as licensed by USA Skate or
Davtec, all of the assets and properties used in the Business as it is currently
conducted are owned by Davtec or USA Skate. The leases identified on SCHEDULE
4.6 are the only leases with respect to the Assets and each such lease is in
full force and effect and constitutes a legal, valid and binding obligation of
the lessor thereunder, enforceable in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to creditors' rights generally and by general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). There is no default and no event or omission
has occurred which, but for the passing of time or the giving of notice or both,
would be a default on the part of Sellers or, to the best knowledge of Sellers
and Stockholders, any other Person under any of such leases. With the exception
of liens for taxes accrued but not yet payable, the leases set forth on SCHEDULE
4.6 and the security interests set forth on SCHEDULE 4.6 (all of which security
interests shall be released at the Closing), the Assets are not subject to any
mortgage, pledge, lien, security interest, claim, hypothec, prior claim, charge
or other encumbrance of any kind ("ENCUMBRANCE").
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(b) Except as set forth on SCHEDULE 4.6(b) (the exceptions set
forth on SCHEDULE 4.6(b) hereinafter are referred to as the "PERMITTED
ENCUMBRANCES"), the Daveluyville Property shall be conveyed to Rawlings Canada
at and by the Closing with legal warranty and a good and marketable title in and
to such property, free and clear of all encumbrances, including without
limitation prior claims, hypothecs, charges and servitudes, restrictive
covenants, encroachments, taxes and other title defects or charges of any nature
whatsoever.
(c) The Daveluyville Property, together with all immoveable and
real property leased by Sellers (the "PROPERTIES") and every improvement,
building or structure located thereon (the "IMPROVEMENTS") are in compliance in
all material respects with all applicable building, zoning, subdivision, and
other land use and similar laws (collectively, "REAL PROPERTY LAWS"), and
Sellers have not received any notice of violation or claimed violation of any
Real Property Law and such Properties and Improvements and their continued use,
occupancy and operation as currently used, occupied and operated do not
constitute a non-conforming use under any Real Property Law. No dispute
currently exists with any governmental authority having jurisdiction over any
such Properties or Improvement with respect to any Real Property Law or the
application thereof to any such Properties or Improvement.
(d) None of the Assets is subject to any right of first refusal,
option or other restriction of a similar nature, or subject to any pending or,
to the best of Sellers' and Stockholders' knowledge, threatened condemnation or
similar proceeding.
(e) (i) Sellers are not a party to or bound by any leases of real
or immoveable property other than the leases described in SCHEDULE 4.6 (the
"LEASES"). Each of the Leases permits Sellers to carry on the Business as
presently carried on.
(ii) The rent and all other required payments under each
Lease which have become due have been duly paid and the covenants,
obligations and conditions contained in each Lease have been duly observed
and performed in all material respects by Sellers.
(iii) There are no work orders issued to or received by
Sellers which are outstanding against the premises contemplated by the
Leases (the "LEASED PREMISES") and Sellers have received no deficiency
notices, requests or written advice of any breach of any applicable law in
respect of the Leased Premises which could, if not corrected, become a work
order or could require performance of work or expenditure of money to
correct.
(iv) From the date hereof until the Closing, Sellers shall
use commercially reasonable efforts to obtain from each lessor of each
Lease which requires consent of the lessor to the assignment thereof to the
Buyers, a consent to the assignment of such Lease to the relevant Buyer
without any conditions attached to such consent and, after receipt of the
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necessary consent, to obtain an estoppel certificate from the lessor with
respect to such Lease, each of which shall be in form and substance
satisfactory to Buyers, acting reasonably.
(v) In respect of each Lease which does not require consent
of the lessor to the assignment thereof, Sellers shall use commercially
reasonable efforts to obtain, prior to Closing, an estoppel certificate in
respect of such Leases, each of which shall be in form and substance
satisfactory to Buyers, acting reasonably.
4.7 INVENTORY. All pieces of Inventory are carried on the Financial
Statements at the lower of cost (on a first-in-first-out basis) or market. All
pieces of Inventory consist of pieces purchased or manufactured in the ordinary
course of business. Except for Inventory whose cost, in the aggregate, is less
than $5,000, each piece of Inventory is merchantable in fact and fit for its
intended purpose. Except as set forth on SCHEDULE 4.7, Sellers do not hold any
piece of Inventory on consignment and no piece of Inventory is in the possession
or control of any Person other than the Sellers.
4.8 ACCOUNTS RECEIVABLE. The Accounts Receivable have been incurred in
the ordinary course of the Business, and to the best of Stockholders' knowledge,
constitute valid claims not subject to any offset or defense. Except as
disclosed in SCHEDULE 4.8, there is no dispute regarding the amounts billed to
customers in connection with goods delivered or services rendered by Sellers in
the course of its business
4.9 CONTRACTS. Except as disclosed on SCHEDULE 4.9, neither Seller is
a party to or bound by: (i) any employment contract or agreement, consulting,
independent contractor or other similar agreement or any collective bargaining
or labor agreement or any other agreement or arrangement with any officer,
employee, independent contractor, sales representative or consultant, advisor or
person serving in a similar capacity, relating to the Business; (ii) any
pension, retirement, stock option, stock purchase, savings, profit-sharing,
"401(k)" plan, deferred compensation, retainer, consultant, bonus, group
insurance, or any vacation pay or severance pay or other incentive or welfare,
contract, plan or so-called fringe benefit agreement, relating to the Business;
(iii) any contract for the purchase of any materials, supplies, equipment or
inventory relating to the Business, or for the sale of any inventory relating to
the Business, except contracts concluded in the ordinary course of business,
which do not (as to contracts for purchase by a Seller) either involve an
unperformed commitment in excess of $5,000 or terminate more than one year from
the date hereof; (iv) any lease, license or similar agreement to use any real or
personal property, including but not limited to intellectual property, relating
to the Business; (v) any contract, agreement or other commitment relating to the
Business requiring a payment by either Seller after the date hereof of more than
$5,000, or (vi) any contract, agreement or other commitment relating to the
Business which is not cancelable by Sellers on notice of not more than thirty
days without liability, penalty or premium. Sellers have made available for
inspection by Buyers a true, correct and complete copy of each written Contract.
Sellers' purchase commitments for materials, supplies, raw materials or other
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items are not, in the aggregate, materially in excess of the customary
requirements of its business or at a price materially in excess of current
market prices for similar items deliverable at the same time. Sellers have not
breached and are not in default of any Contract, and no event or omission has
occurred which, but for the passing of time or the giving of notice or both,
would constitute a breach of or default under any Contract on the part of
Sellers. To the best knowledge of Sellers and Stockholders, no other party has
breached or is in default under any Contract, and, to the best knowledge of
Sellers and Stockholders, no event or omission has occurred which, but for the
passing of time or the giving of notice or both, would constitute a breach of or
default under any Contract on the part of any other party. To the best of
Sellers' and Stockholders' knowledge, each of the Contracts is the legal, valid
and binding obligation of the other party thereto, enforceable in accordance
with its terms.
4.10 TAXES.
(a) Except as set forth on SCHEDULE 4.10, Sellers have timely
filed all United States and Canadian federal, state, provincial, foreign and
local tax returns and tax information returns required to be filed on or before
the date hereof, and have paid all taxes, interest, payments and penalties due
and payable on or before the date hereof, and Sellers are not delinquent in the
payment of any tax or government charge of any nature whatsoever, including all
sales and use taxes. Except as set forth on SCHEDULE 4.10, no tax return of
Sellers has been audited, and no audit, examination or investigation is
presently being conducted or, to the best of Sellers' and Stockholders'
knowledge, threatened by any taxing authority. No unpaid tax deficiency or
additional liability of any sort has been proposed to Sellers by any
governmental representative. Sellers have withheld (and timely paid to the
appropriate governmental entity) proper and accurate amounts from its payrolls
for all periods in compliance in all material respects with all tax withholding
provisions (including, without limitation, income, social security, Canada
Pension Plan, Quebec Pension Plan, and unemployment tax and withholding for all
forms of compensation) of applicable United States and Canadian federal,
foreign, state, provincial and local laws. Sellers are not liable for any taxes
due and unpaid which might result in a lien or other encumbrance affecting any
of the Assets.
(b) (i) Davtec has charged, collected and remitted on a timely
basis all amounts as required by applicable law on any sale, supply or
delivery whatsoever, made by Davtec in respect of the Business, including
without limitation sales and goods and services taxes.
(ii) Davtec is a registrant for the purposes of the goods
and services tax provided for under the Excise Tax Act and its registration
number is 103182481RT. Davtec is a registrant for the purposes of the taxes
provided for under the Quebec Sales Tax Act and its registration number is
1003258021.
(iii) Davtec has paid all taxes due under the Retail Sales
Tax Act (Ontario) on the acquisition of its tangible personal property (as
defined in the Retail Sales Tax Act (Ontario)) constituting Davtec Assets.
The foregoing is accurate, MUTATIS MUTANDIS, with respect to all sales or
transfer taxes imposed under comparable legislation of other provinces.
(iv) Davtec is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada).
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4.11 ADEQUATE FACILITIES AND RIGHTS. Upon their conveyance to Buyers,
the Assets will permit Buyers to operate the Business in substantially the same
manner as Sellers currently operate the Business, without violating the rights
of any third parties and without incurring any liability for license fees,
royalties or any claim of infringement of patent, trademark or similar rights.
4.12 INTELLECTUAL PROPERTY. SCHEDULES 1.1(a)(vi) AND 1.2(c)(i) hereto
set forth a list of all patents and applications therefor, utility and design
model registrations and applications therefor, trademarks, trademark
registrations and applications therefor, trade names, service marks and
applications therefor, copyrights, copyright registrations and applications
therefor, both foreign and domestic, owned, possessed, used or held by or
licensed to Sellers relating to the Business, and a list of all licenses to or
from Sellers respecting any of the Intellectual Property. Sellers own the entire
right, title and interest in and to the Intellectual Property, together with the
goodwill associated therewith. Sellers have the right to use and are
transferring to Buyers the unrestricted right to use trade secrets, know-how,
formulas, technical and manufacturing processes and information, testing and
operating techniques and procedures, all engineering data and plans, all
marketing materials and information and all other business data and information
used by Sellers in the Business or which is necessary for the Business as now
conducted. None of the items in the categories listed in this SECTION 4.12 are
subject to any pending or, to the best knowledge of Sellers and Stockholders,
threatened challenge or infringement, and no impediment exists as to Sellers'
exclusive ownership and use or validity of any such item. The Intellectual
Property comprises all patents and applications therefor, utility and design
model registrations and applications therefor, trademarks, trademark
registrations and applications therefor, trade names, service marks and
applications therefor, copyrights and copyright registrations and applications
therefor, both foreign and domestic, necessary to permit the conduct from and
after the Closing Date of the Business, as the Business is and has normally been
conducted. All acts necessary under all provisions of applicable law to protect
the Intellectual Property, including, without limitation, the filing of required
affidavits of use and incontestability, applications for renewals of
registrations, recordal of registered user, notice of registration and payment
of maintenance and annuity fees, have been taken by Sellers. All licenses
granted to Sellers by others which are essential or useful to any part of the
Business are assignable to Buyers without consent of or notice to any Person,
without change in the terms or provisions thereof and without premium. Sellers
have not infringed any unexpired patent, utility or design model registration,
trademark, trademark registration, trade name, copyright, copyright
registration, trade secret or any other proprietary or intellectual property
right of any Person.
4.13 NO BREACH OF STATUTE, DECREE, OR ORDER. Except as set forth on
SCHEDULE 4.13, Sellers have complied in all material respects, and currently are
in compliance in all material respects, with all applicable statutes, laws,
codes, ordinances, rules, regulations, orders, decrees and other laws of the
United States, Canada, and all state, provincial and local governments, agencies
and courts ("LAWS") to which any aspect of the Business or any part of the
Assets are subject. No claim, action or proceeding is pending or, to the best of
Sellers' or Stockholders' knowledge, threatened against Sellers with respect to
a default under or a violation in respect of any Law. Neither any of the Assets
nor their operation or maintenance as they are now operated and maintained
contravenes any applicable zoning, building or other law, ordinance, code, rule
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or other administrative regulation. No notice from any governmental body has
been served upon Sellers claiming any violation of any Law, or requiring or
calling attention to the need for any work, repairs, construction, alterations
or installation on or in connection with the Assets or any change in the
operations of Sellers.
4.14 LITIGATION. Except as disclosed on SCHEDULE 4.14, there is no
suit, claim, action, proceeding or, to the best of Sellers' and Stockholders'
knowledge, governmental investigation against the Sellers which is now pending
or, to the best of Sellers' and Stockholders' knowledge, threatened. There is no
basis (including any condition or set of facts) known to Sellers or Stockholders
for any suit, claim, action, proceeding or governmental investigation (i)
arising out of or relating to any aspect of the Business or any of the Assets,
or (ii) concerning the transactions contemplated by this Agreement. There is no
decree, injunction or order of any court or governmental department or agency
outstanding against the Sellers relating to any aspect of the Business or any
part of the Assets.
4.15 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 4.15 contains a list of all qualified and
nonqualified pension, profit-sharing and other employee benefit plans of Sellers
affecting employees of the United States domiciled or residing in the United
States (the "U.S. EMPLOYEE PLANS"). The U.S. Employee Plans have been authorized
by the Boards of Directors of Sellers and those U.S. Employee Plans which are
qualified plans are qualified in form and operation under Sections 401(a) and
501(a) of the Code. Except as disclosed on SCHEDULE 4.15, all reports, filings
and other documents with respect to the U.S. Employee Plans required to be filed
or distributed under the Employee Retirement Income Security Act of 1974
("ERISA"), and regulations promulgated thereunder, including without limitation
all returns and reports to be filed with the Department of Labor, Internal
Revenue Service and Pension Benefit Guaranty Corporation, and all distributions
to participants, beneficiaries and others, have been made on a proper and timely
basis. Sellers have not incurred any accumulated funding deficiency within the
meaning of Section 302 of ERISA with respect to any U.S. Employee Plan, or any
material liability to the Pension Benefit Guaranty Corporation with respect to
any U.S. Employee Plan, and there exists no event or condition which would
permit the institution of proceedings to terminate any U.S. Employee Plan under
Section 4042 of ERISA. With respect to each of the U.S. Employee Plans which is
a deferred compensation or pension plan and which is not subject to the periodic
reporting and disclosure requirements of ERISA, there is included on or attached
to SCHEDULE 4.15 a complete description or copy of the text of the plan, a list
of the individuals covered thereby, the amount of any current obligations under
the plan to each such individual, the amount of any contingent or deferred
obligations under the plan to each such individual, and the time at which such
obligation will, or is likely to, become payable. None of the U.S. Employee
Plans meet the definition of a "multi-employer plan" under ERISA as amended by
The Multiemployer Pension Plan Amendments Act of 1980, Pub.L.No. 96-364, as
amended. Sellers are not parties to any pending or threatened action, claim,
suit or proceeding by any person or governmental instrumentality concerning the
U.S. Employee Plans. All payments due from Sellers (on account of employment
contracts or otherwise) for U.S. Employee Plans and employee health and welfare
insurance have been paid.
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(b) SCHEDULE 4.15 contains an accurate and complete description
of, and sets forth the annual amount payable pursuant to, each of the pension,
profit sharing, retirement, death benefit, welfare, severance pay, vacation pay,
company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, stock purchase arrangements
or policies, life insurance, scholarship or other employee benefit plan,
program, policy or arrangement maintained by the Sellers or to which the Sellers
have any liability (contingent or otherwise) with respect to employees,
officers, directors or shareholders of the Sellers domiciled or residing in
Canada (the "CANADIAN EMPLOYEE PLANS"). The Financial Statements reflect in the
aggregate an accrual of all amounts accrued but unpaid under all the Canadian
Employee Plans as of the dates thereof. Sellers have no commitment, whether
formal or informal, and whether legally binding or not, to create any additional
Canadian Employee Plan. Each of the Canadian Employee Plans disclosed in
SCHEDULE 4.15 is in effect and Sellers are in compliance with all laws, rules
and regulations applicable thereto. All Canadian Employee Plans have been duly
registered where required by, and are in good standing under, all applicable
legislation and Sellers have fulfilled their funding obligations under all the
Canadian Employee Plans and no past service funding liabilities exist
thereunder. With respect to each current Canadian Employee Plan or plan under
which benefits may be due to, or liabilities may exist in respect of, current or
former Canadian employees, the Sellers have delivered to the Buyer accurate and
complete copies of (i) all currently applicable plan texts and agreements; (ii)
all summary plan descriptions and material employee communications; (iii) the
most recent annual report; (iv) the most recent annual and periodic accounting
of plan assets; (v) the most recent actuarial valuation. Each Canadian Employee
Plan has been administered materially in accordance with its terms. All material
reports, returns and similar documents with respect to the Canadian Employee
Plans required to be filed with any governmental body or distributed to any
Canadian Employee Plan participant has been duly and timely filed or
distributed. There are no pending investigations by any governmental body,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Canadian Employee Plans), suits or proceedings
against or involving any Canadian Employee Plan or asserting any rights or
claims to benefits under any Canadian Employee Plan that could give rise to any
material liability.
4.16 INSURANCE POLICIES. Set forth on SCHEDULE 4.16 is a list of all
insurance policies and bonds in force covering Sellers and their properties,
operations and personnel. Each of said policies, together with all records and
documents relating to insured losses and claims paid or made during the past two
years have been furnished to Buyers for their review. No notice has been
received from any insurance carrier that Sellers are, or will prior to the
Closing will be, liable, for any material, retroactive premium adjustments. All
policies are valid and enforceable and in full force and effect and Sellers have
not, since January 1, 1997, received any notice of premium increases or
cancellations with respect to any of its insurance policies and bonds.
4.17 PRODUCT WARRANTIES, PRODUCT RETURN POLICIES AND SERVICE
WARRANTIES. Except as set forth on SCHEDULE 4.17, Sellers do not utilize any
product warranty, guarantee, product return policy, service warranty or service
policy.
4.18 OPERATING LICENSES AND PERMITS. The lawful conduct of the
Business as presently conducted does not require any approval, license, consent,
permit, franchise or authorization from any Person material to Sellers or its
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business which has not been obtained. Set forth on SCHEDULE 4.18 are all such
approvals, licenses, consents, permits, franchises and authorizations. The
Business as presently conducted in any jurisdiction meets all applicable legal
requirements of each such jurisdiction, and, to the best of Sellers' and
Stockholders' knowledge, there is no basis for any governmental body to deny or
rescind any approval, license, consent, permit or authorization appropriate for
the conduct of the Business.
4.19 ASSETS IN GOOD REPAIR. Except as set forth on SCHEDULE 4.19, the
Assets are sufficient in all respects to carry on the Business as it is now
conducted.
4.20 ENVIRONMENTAL MATTERS.
(a) With respect to USA Skate:
(i) Except as set forth on SCHEDULE 4.20, the properties
(including leased properties), assets and operations of Sellers are in
compliance with all applicable United States federal, state or local and
foreign laws, rules and regulations, orders, decrees, judgments, permits
and licenses relating to public and worker health and safety and to the
protection and clean-up of the natural environment and activities or
conditions related thereto, including, without limitation, those relating
to the generation, handling, disposal, transportation or release of
hazardous materials (collectively, "ENVIRONMENTAL LAWS"). With respect to
such properties, assets and operations, including any previously owned,
leased or operated properties, assets or operations, to the best knowledge
of Sellers and Stockholders after due inquiry, there are no past, present
or reasonably anticipated future events, conditions, circumstances,
activities, practices, incidents, actions or plans of Sellers that may
interfere with or prevent compliance or continued compliance in all
respects with applicable Environmental Laws. The term "HAZARDOUS MATERIALS"
as used in this SECTION 4.20(a) shall mean those substances that are
regulated by or form the basis for liability under any applicable
Environmental Laws; and
(ii) Except as set forth on SCHEDULE 4.20, Sellers are not
the subject of any United States federal, state or local or foreign
(including Canadian) investigation and have not received any notice or
claim (and Sellers and the Stockholders are not aware of any facts that
would form a reasonable basis for any such claim), nor entered into any
negotiations or agreements with any third party, relating to any material
liability or remedial action or potential material liability or remedial
action under Environmental Laws, nor are there any pending, reasonably
anticipated or, to the best knowledge of Sellers and Stockholders,
threatened actions, suits or proceedings against or affecting Sellers or
its properties, assets or operations in connection with any such
Environmental Laws. Except as set forth on SCHEDULE 4.20, no underground
storage tanks are located at the New York Facility or the Canadian
Facilities.
(b) Sellers are in compliance with, and have not violated, all
Canadian Environmental Laws (as hereinafter defined) and all judgments,
injunctions, notices or demand letters issued pursuant thereto.
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Except as set forth in SCHEDULE 4.20, without restriction as to the
generality of the foregoing, Sellers and any Person whose liability for
Environmental Liabilities (as hereinafter defined) Sellers have or may have
retained or assumed either contractually or by operation of law:
(i) Have not caused or allowed the generation, use,
treatment, storage, or disposal of any Hazardous Substance (as hereinafter
defined) at, or transportation from, any site or facility owned, leased or
operated by Sellers except in accordance with all applicable Canadian
Environmental Laws;
(ii) Have not caused or allowed the release of any Hazardous
Substance onto, at, near or from any site or facility owned, leased or
operated by Sellers, including, without limitation, the Canadian
Facilities;
(iii) Have secured all Environmental Permits (as hereinafter
defined) necessary to the conduct of the Business and such Environmental
Permits are currently in effect and are listed in SCHEDULE 4.20, and
Sellers are in compliance with all terms and conditions of such
Environmental Permits and have not previously violated any of same;
(iv) Have not received any notice, nor are aware of any
proposal to amend, revoke or replace any Environmental Permit, or requiring
the issuance of any additional Environmental Permit;
(v) Have not received, nor has there been issued to or
against Sellers, any claim, notice, citation, summons or order, and no
investigation or review is pending or, to the best of Sellers' and
Stockholders' knowledge, threatened by any authority with respect to:
(A) any alleged violation by Sellers of any Canadian
Environmental Law;
(B) any alleged failure by Sellers to hold any
Environmental Permit; or
(C) any alleged violation by Sellers to comply with any
such Environmental Permit.
(vi) Have not received any request for information, notice
of claim, demand or other notification that it is or may be potentially
responsible with respect to any investigation or clean-up of any threatened
or actual release of any Hazardous Substance and has not received inquiry
or notice nor do they have any reason to suspect or believe they will
receive inquiry or notice of any actual or potential proceedings, claims,
lawsuits or losses related to or arising under any Environmental Laws;
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(vii) Do not own, operate or lease and did not at any
previous time own, operate or lease any real property, improvements or
related assets which have been subject to the release of any Hazardous
Substance;
(viii) Do not own, operate or lease and did not at any
previous time own, operate or lease any real property, improvements or
related assets wherein PCB's, asbestos or urea formaldehyde insulation is
or has been present whether above ground, underground or within any
structure thereon or contained in any equipment owned, operated or leased
by Sellers; nor are there any underground storage tanks, active or
abandoned, at any property now or previously owned, operated or leased by
Sellers;
(ix) Are not currently operating or required to be operating
under any compliance order, schedule, decree or agreement, any consent
decree, order or agreement and/or corrective action decree, order or
agreement issued or entered into under any Canadian federal, provincial,
state or municipal statute, regulation or ordinance regarding the
environment and/or health or safety in the work place;
(x) Have not transported any Hazardous Substance or arranged
for the transportation of any such substance to any location which is not
listed and duly authorized pursuant to the Environmental Laws or which is
the subject of Canadian federal, provincial, state or municipal enforcement
actions or other investigations which may lead to claims against Sellers
for clean-up cost, remedial work, damages to natural resources or for
personal injury claims under any applicable Environmental Law and all
Hazardous Substances transported by or on behalf of Sellers have been
transported in compliance with all applicable laws, and no Hazardous
Substance has been released, spilled, leaked, discharged, disposed of,
pumped, poured, ignited, emptied, injected, leached, dumped or allowed to
escape at, under or from any property now or formerly owned, operated or
leased by Sellers;
(xi) Are in compliance with all applicable limitations,
restrictions, conditions, standards, prohibitions, requirements and
obligations established under Environmental Laws and are not subject to any
Environmental Liabilities (as hereinafter defined);
(xii) Have not conducted or caused to be conducted any
environmental audit of any property operated, leased or owned by it, nor is
it aware of any such environmental audit conducted by any Person
(including, without restriction, any lender or potential purchaser) unless
in each such case a copy of every report, memorandum or summary prepared
with respect to such environmental audit has been delivered to Buyers; and
(xiii) Have not failed to report to the proper authorities
the occurrence of each event which is required to be so reported by the
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Environmental Laws, and have provided Buyers with true and complete copies
of all such reports and all correspondence relating thereto.
For the purposes of this SECTION 4.20(b):
The expression "CANADIAN ENVIRONMENTAL LAWS" includes any Canadian
federal, provincial or municipal law, by-law, rule, regulation, decree, code,
guideline, standard, order or ordinance of any country or political subdivision
relating to the environment including those relating to (i) the control of any
potential pollutant or the protection of the air, water or land, (ii) solid,
gaseous or liquid waste generation, handling, treatment, storage, disposal or
transportation, and (iii) exposure to hazardous, toxic or other substances
considered to be harmful, or (iv) the release of any Hazardous Substance into
the environment;
The expression "ENVIRONMENTAL CONDITIONS" includes any pollution,
contamination, degradation, damage or injury caused by, related to, or arising
from or in connection with the generation, use, ownership, possession, handling,
treatment, storage, transportation, disposal, discharge, release or emission of
any pollutant, contaminant, or toxic or hazardous substance, material, or waste,
including mixtures thereof with other materials, and any toxic or hazardous
building materials, including, but not limited to, asbestos and urea
formaldehyde foam insulation;
The expression "ENVIRONMENTAL PERMIT" includes any permit, license,
approval or other authorization with respect to Sellers or their operations or
businesses under any applicable law, regulation or other requirement of Canada
or any other country or of any province, state, municipality or other
subdivision thereof relating to the control of any pollutant or protection of
health or the environment, including laws, regulations or other requirements
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic materials or wastes into ambient
air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of chemical substances, pollutants, contaminants or
hazardous or toxic materials or wastes;
The expression "Environmental Liabilities" includes any and all
liabilities, responsibilities, claims, suits, losses, costs (including remedial,
removal, response, abatement, clean-up, investigative and/or monitoring costs
and any other related costs and expenses), other causes of action recognized
now, damages, settlements, expenses, charges, assessments, liens, penalties,
fines, pre-judgment and post-judgment interest, legal fees and costs of court
which are incurred by, asserted against, or imposed upon Sellers or Buyers
arising out of or in connection with Sellers or their business operations
pursuant to any agreement, order, notice of responsibility, directive (including
directives and requirements embodied in Environmental Laws), injunction,
judgment or similar document (including settlements) issued by a court of
competent jurisdiction or any Canadian federal, provincial or local governmental
entity or agency, or pursuant to any claim by a governmental agency or any
person for personal injury, property damage, damage to natural resources,
remediation, or payment or reimbursement of response costs required to be
incurred or expended by said governmental agency or person pursuant to common
law or statute, arising out of or in connection with: (i) any violation of or
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non-compliance with Environmental Laws (including but not limited to failure to
procure or violation of Environmental Permits), and (ii) any actual or alleged
Environmental Condition (regardless of when discovered) existing on the Closing
Date; and
The expression "HAZARDOUS SUBSTANCE" includes any substance, waste,
solid, liquid or gaseous matter, petroleum or petroleum derived substance,
micro-organism, sound, vibration, ray, heat, odor, radiation, energy vector,
plasma, organic or inorganic matter, whether animate or inanimate, transient
reaction intermediate or any combination of the above deemed hazardous,
hazardous waste, solid waste, toxic or pollutant, a deleterious substance, a
contaminant or source of pollution or contamination under any Environmental Law,
or by official act of any Canadian federal, provincial, state or municipal
government, governmental agency, minister, deputy-minister, governor-in-council,
lieutenant governor-in-council, or any tribunal or board with proper
jurisdiction over the subject in question.
4.21 LABOR DISPUTES. There is not pending or, to the best knowledge of
Sellers and the Stockholders, threatened any labor dispute, strike or work
stoppage with respect to Sellers or the Business.
4.22 CUSTOMERS AND SUPPLIERS. The ten largest customers of each Seller
in the last fiscal year and the percentage of the gross revenue of each Seller
contributed by each is set forth on SCHEDULE 4.22 attached hereto (the "MATERIAL
CUSTOMERS"). Except as set forth on SCHEDULE 4.22, no single supplier
(singularly a "SUPPLIER" and collectively "SUPPLIERS") of raw materials to
Sellers is of material importance to Sellers. The relationships of Seller with
the Material Customers and the Suppliers are good commercial working
relationships. Except as set forth on SCHEDULE 4.22, no Material Customer or
Supplier (i) has canceled or threatened in writing to cancel or otherwise modify
its relationship with Sellers, or (ii) to the best knowledge of Sellers and
Stockholders intends to cancel or otherwise modify its relationship with
Sellers. The acquisition of the Business by Buyers will not, to the best
knowledge of Sellers and Stockholders, adversely affect the relationship of
Buyers (as successor to the operation of the Business) with any such Suppliers
or Material Customers. Buyers acknowledge that each customer of Sellers retains
the independent right to replace any vendor, including Sellers, at any time
(subject to contractual commitments).
4.23 WORKERS' COMPENSATION. There are no notices of assessment,
provisional assessment, reassessment, supplementary assessment, penalty
assessment or increased assessment (collectively, "ASSESSMENTS") or any other
communications related thereto which Davtec, in respect of the Business, has
received from any workers' compensation board or similar authorities in any
jurisdictions where the Business is carried on, and there are no Assessments
which are due and unpaid on the date hereof or which will be unpaid at the
Closing, and, to the best of Sellers' and Stockholders' knowledge, there are no
facts or circumstances which may result in a material increase in liability or
Assessments to Davtec relating to the Business from any applicable workers'
compensation legislation, regulations or rules after the Closing.
4.24 EMPLOYMENT MATTERS. As used in this Agreement, "EMPLOYEE" shall
mean those individuals who are employed by Sellers in the Business at the time
of Closing on a full-time or part-time basis (including any such individuals who
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are absent from work due to short-term disability, pregnancy, maternity or
parental leave, sick leave, vacation, or any other reasonable cause). SCHEDULE
4.24 contains:
(a) the names and titles of all existing Employees of the
Business together with the location of their employment;
(b) the date of hiring of each existing Employee;
(c) a list of all written employment contracts between Sellers
and their respective Employees in respect of the Business;
(d) the rate of annual remuneration or of hourly pay of each
existing Employee at the date hereof that is a full-time or part-time employee,
as the case may be, any bonuses paid since the end of the last completed
financial year and all other bonuses, incentive schemes and benefits to which
such employee is entitled;
(e) the vacation policy of Sellers relating to the Business and
the vacation entitlements of Employees if at variance to the policy;
(f) the names of any Employees who are absent from work due to
long- term or short-term disability, pregnancy, maternity or parental leave,
vacation, sick leave, workers' compensation leave, or any other reasonable
cause, whether they are expected to return to work and if so when they are
expected by Sellers to return to work and the nature of the benefits to which
such Employees are entitled from Sellers;
(g) particulars of all other material terms and conditions of
employment or engagement of the Employees and the positions held by them; and
(h) consulting agreements, confidentiality agreements and
restricted covenants, non-competition and non-solicitation agreements.
Except for Jon Hodgins, each of the Employees of Sellers is employed under a
contract of indeterminate term that can be terminated by Sellers with such
notice as is required by applicable law. Sellers are in compliance in all
material respects with all legislation, including without limitation pay equity,
employment standards, human rights, workers compensation, occupational health
and safety and labor relations legislation, applicable to the Business and its
Employees.
4.25 UNIONS AND LABOR PRACTICES. Except as set forth on SCHEDULE 4.25,
no trade union, counsel of trade unions, employee bargaining agency or
affiliated bargaining agent:
(a) holds bargaining rights with respect to any of the Employees
by way of certification, interim certification, voluntary recognition,
designation or successor rights;
(b) has applied to be certified as the bargaining agent of any of
the Employees; or
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(c) has applied to have either Seller declared a related employer
pursuant to the provisions of applicable law.
There is no unfair labor practice charge or complaint with respect to Employees
pending before any agency or board, there is no labor strike, picketing,
slowdown or work stoppage or lockout actually pending or, to the best knowledge
of Sellers or Stockholders, threatened against or affecting Sellers or any of
their operations, and Sellers have not experienced at any time during the last
five years any strike, slowdown or work stoppage, lockout or other collective
labor action by or with respect to its Employees. There are no charges with
respect to or relating to Sellers before any commission, agency or body
responsible for the prevention of unlawful employment practices. Sellers have
not received any notice from any United States or Canadian federal, state,
provincial, local or other agency responsible for the enforcement of labor or
employment laws of an intention to conduct an investigation of either Seller or
any of their business or employment practices and no such investigation is in
progress.
4.26 BROKER FOR SELLERS. No Person has acted in the capacity of broker
or finder on behalf of Sellers or Stockholders to bring about the negotiation or
consummation of this Agreement.
4.27 ORGANIZATION AND QUALIFICATION OF GUARANTORS. Each of the
Guarantors is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was organized.
4.28 AUTHORIZATION OF GUARANTORS. Guarantors have the full corporate
power to enter into the Guaranty and to carry out their obligations thereunder.
The execution, delivery and performance of the Guaranty by Guarantors have been
duly and effectively authorized and approved by all requisite corporate action
and no other corporate acts or proceedings are necessary to authorize the
Guaranty or the transactions contemplated thereby. The Guaranty constitutes the
legal, valid and binding obligation of Guarantors, enforceable in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to creditors' rights
and by general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). Assuming the consents set forth
on SCHEDULE 4.2 have been obtained, neither the execution and delivery of the
Guaranty nor the consummation of the transactions contemplated thereby will (i)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under any of the terms, conditions or provisions of
the Certificate or Articles of Incorporation, By-Laws or other constating
document of Guarantors, or any material note, bond, mortgage, indenture, deed of
trust, lease, license, contract, agreement or other instrument of obligation by
which Guarantors or any of their other properties or assets are bound or
affected, (ii) violate any statute, rule or regulation or, to the best of
Sellers' and Stockholders' knowledge, any order, writ, injunction or decree
applicable to Guarantors or any of their properties or assets, (iii) result in
the creation of any lien, security interest, hypothec, prior claim, charge or
encumbrance upon the Assets or (iv) result in the modification, termination or
revocation of any license, permit or right material to the Business. Except as
set forth on SCHEDULE 4.2 hereto, no consent or approval by, notice to or
registration with any Person is required on the part of Guarantors in connection
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with the execution and delivery of the Guaranty or the consummation by
Guarantors of the transactions contemplated thereby.
4.29 ACCURACY OF STATEMENTS. No representation or warranty of Sellers
or Stockholders in this Agreement, any SCHEDULE hereto or any other agreement,
document, instrument or certificate delivered by Sellers and/or Stockholders
pursuant to this Agreement (including any agreement, document, or other
instrument the form of which is attached hereto as an Exhibit) contains or will
contain any untrue statement of a material fact or omits or will omit a material
fact necessary to make the statements contained therein not misleading. To the
best knowledge of Sellers and Stockholders, there is no fact which Sellers or
Stockholders have not disclosed in writing to Buyers which materially adversely
affects, or may materially adversely affect, the Business, its operations or
prospects or the Assets.
4.30 SURVIVAL. The representations and warranties made by the Sellers
and Stockholders in this Agreement shall be true and correct in all respects,
and shall not have been violated in any respect, as of the Closing, except for
changes permitted or contemplated by the terms of this Agreement, with the same
effect as though such representations, warranties and covenants had been made or
given on and as of the Closing. The representations and warranties made by the
Sellers and Stockholders in (i) SECTIONS 4.1, 4.2, 4.6, 4.26, 4.27 AND 4.28
shall survive the Closing in perpetuity and (ii) SECTIONS 4.10, 4.14 AND 4.20
shall survive the Closing until the thirtieth (30th) day following the
expiration of the applicable statute of limitations for each matter referred to
in such SECTIONS. All other representations and warranties made by the Sellers
and Stockholders in this Agreement shall survive the Closing until the second
anniversary of the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers hereby jointly and severally represent and warrant to Sellers
and Stockholders as follows:
5.1 ORGANIZATION AND QUALIFICATION. Rawlings is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Rawlings Canada is a corporation duly organized, validly existing
and in good standing under the laws of the Province of Nova Scotia. Buyers have
all requisite corporate power and authority to own, lease and operate their
properties and to carry on their businesses as they are now being conducted.
5.2 AUTHORIZATION. Buyers have the full corporate power to enter into
this Agreement and to carry out their obligations hereunder. The execution,
delivery and performance of this Agreement by Buyers have been duly and
effectively authorized and approved by all requisite corporate action of Buyers
and no other corporate acts or proceedings on the part of Buyers are necessary
to authorize this Agreement or the transactions contemplated hereby. This
Agreement constitutes the legal, valid and binding obligation of Buyers
enforceable in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to creditors' rights generally and by general principles of equity
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(regardless of whether enforceability is considered in a proceeding at law or in
equity). Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under any of the terms, conditions or provisions of the
Certificate of Incorporation, By-Laws or other constating document of Buyers or
any note, bond, mortgage, indenture, deed of trust, lease, license, contract,
agreement or other instrument or obligation to which Buyers are bound, or by
which Buyers or any of their properties or assets may be bound or affected or
(ii) violate any statute, rule or regulation or, to the best of Buyers'
knowledge, any order, writ, injunction or decree applicable to Buyers or any of
their properties or assets. No consent or approval by, notice to or registration
with any Person is required on the part of Buyers in connection with the
execution and delivery of this Agreement or the consummation by Buyers of the
transactions contemplated hereby.
5.3 DUE DILIGENCE. Buyers have been afforded an opportunity to and
have asked questions, received answers to their satisfaction and otherwise
conducted their due diligence review relative to this transaction and are
sophisticated investors with knowledge and experience in business and financial
matters and able to assess and evaluate the risks inherent in this transaction.
5.4 BROKER FOR BUYERS. No Person other than Dillon, Read & Co. Inc.
has acted in the capacity of broker or finder on behalf of Buyers to bring about
the negotiation or consummation of this Agreement.
5.5 ACCURACY OF STATEMENTS. No representation or warranty of Buyers in
this Agreement or any other agreement, document, instrument or certificate
delivered by Buyers pursuant to this Agreement (including any agreement,
document or instrument the form of which is attached hereto as an Exhibit)
contains or will contain any untrue statement of a material fact or omits or
will omit a material fact necessary to make the statements contained therein not
misleading.
5.6 SURVIVAL. The representations and warranties made by Buyers in
this Agreement shall be true and correct in all respects, and shall not have
been violated in any respect as of the Closing, except for changes permitted or
contemplated by the terms of this Agreement, with the same effect as though such
representations, warranties and covenants had been made or given on and as of
the Closing. The representations and warranties made by Buyers in SECTIONS 5.1
AND 5.2 of this Agreement shall survive the Closing in perpetuity. All other
representations and warranties made by Buyers in the Agreement shall survive the
Closing until the second anniversary of the Closing Date.
ARTICLE VI
COVENANTS
6.1 BUYERS' RIGHT TO INSPECT ASSETS. During the period from the
execution of this Agreement to the Closing, Buyers' officers, employees,
consultants, accountants, attorneys, prospective lenders and other designated
agents shall have the right to inspect all of the Assets, including but not
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limited to the books, records, financial statements, contacts, tax returns,
customer and supplier lists and other documents and information pertaining to
the Business and the Assets.
6.2 CONDUCT OF SELLERS BEFORE THE CLOSING. Sellers covenant, warrant
and agree that from the date hereof to the Closing, except for transactions
expressly approved in writing by Buyers or provided for herein, Sellers shall:
(a) Not mortgage, pledge, hypothecate or subject to any lien,
charge or encumbrance of any kind any of the assets of Sellers relating to the
Business, tangible or intangible, exclusive of liens arising as a matter of law
in the ordinary course of business as to which there is no known default;
(b) Not sell or transfer any of the tangible assets of Sellers
relating to the Business other than inventory, which may be sold in the ordinary
course of business;
(c) Not cancel or discount any trade debt or claim in favor of
Sellers relating to the Business, except in the ordinary course of business;
(d) Not sell, assign, transfer or otherwise dispose of any
patent, trademark, trade name, copyright, license, customer list, trade secret,
purchase option, right of first refusal or any other similar intangible asset
relating to the Business;
(e) Not knowingly waive any right of value relating to the
Business;
(f) Not modify, amend, alter, or terminate (by written or oral
agreement, or any manner of action or inaction) any of the executory agreements
of Sellers relating to the Business, except in the ordinary course of business;
(g) Not enter into or amend, renew or extend any written
collective bargaining agreement or union contract relating to the Business;
(h) Not enter into any transaction material in nature or amount
relating to the Business;
(i) Not undertake any purchase commitment or sale commitment
extending beyond six months relating to the Business;
(j) Keep the properties and assets of Sellers relating to the
Business insured in amounts and with coverage at least as great as the amounts
and coverage in effect on the date of this Agreement;
(k) Use their best efforts to preserve the possession and control
of all of Seller's assets relating to the Business, keep in faithful service
Seller's present officers and key employees, preserve the goodwill of its
suppliers, customers and others having business relations with Seller, and do
nothing to impair Buyers' ability to keep and preserve after the Closing the
Business as existing on the date hereof;
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(l) Maintain the books, accounts and records of Sellers in a
manner consistent with past practice;
(m) Not change their accounting practices;
(n) Not extend credit in the sale of any product or services of
Sellers relating to the Business other than in accordance with credit practices
in effect on the date hereof, or discount any trade payable;
(o) Conduct the Business in such a manner so that as of the
Closing the representations and warranties contained in this Agreement shall be
true in all respects as though such representations and warranties were made on
and as of the Closing, except for changes permitted or contemplated by the terms
of this Agreement;
(p) Provide Buyers with prompt written notice of any change in
the condition (financial or other), assets, liabilities, earnings or prospects
of the Business which is material and adverse; and
(q) Cooperate fully, completely and promptly with Buyers in
connection with satisfying any condition precedent to the sale and purchase of
the Assets contemplated by this Agreement.
6.3 BULK SALES COMPLIANCE.
(a) Buyers hereby waive compliance by Sellers with the provisions
of Article 6 of the Uniform Commercial Code as in effect in New York and South
Carolina and the provisions of any statute of any other state or jurisdiction
regulating bulk sales or transfers. Sellers and Stockholders jointly and
severally shall indemnify, defend and hold Buyers harmless from and against any
loss, liability, cost, expense or damage resulting from the assertion of a claim
made against the Assets or Buyers by any creditor of Sellers pursuant to Article
6 of the Uniform Commercial Code as in effect in New York and South Carolina or
any other applicable law relating to bulk sales or transfers.
(b) Davtec shall use commercially reasonable efforts to obtain an
order under SECTION 3 of the Bulk Sales Act (Ontario) exempting the purchase and
sale of the Davtec Assets from the application of such Act. Such order is herein
called "BULK SALES ORDER." Should the Bulk Sales Order not be obtained by the
Closing and in the event Buyers decide in their sole discretion to waive the
relevant conditions precedent, Sellers and Stockholders shall jointly and
severally indemnify and save Buyers harmless in accordance with ARTICLE XI from
and against any claim made by a creditor of Sellers or a governmental agency
against either Buyers or the Assets which is wholly or partially based on the
premise that the sale did not conform in any particular to the requirements of
the Bulk Sales Act (Ontario).
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(c) In respect of the Canadian provinces other than Ontario,
Sellers and Stockholders shall jointly and severally indemnify and save Buyers
harmless in accordance with Article XI from and against any claim made by a
creditor of Sellers or a governmental agency against either Buyers or the Assets
which is wholly or partially based on the premise that the sale of the Assets
did not conform in any particular to the requirements of the Civil Code of
Quebec governing the sale of an enterprise or any similar legislation of any
other province or jurisdiction.
6.4 CONFIDENTIAL INFORMATION. Sellers and Stockholders shall not
communicate, divulge or use for the benefit of any Person any of the trade
secrets, business methods, business records and files, customer lists,
promotional materials, product specifications, drawings and prototypes, price
lists, instruction manuals, reports, or any other confidential or proprietary
information of any type or description being acquired by Buyers pursuant to this
Agreement.
6.5 AGREEMENT NOT TO COMPETE. From the Closing Date and for a period
of two (2) years thereafter Sellers and Stockholders shall not, directly or
indirectly: (i) own or have any interest in, or act as an employee, agent,
representative or consultant of, or assist in any way, any corporation,
partnership, firm or business enterprise which does business in the United
States or Canada and which is in direct or indirect competition with Buyers' ice
hockey equipment businesses; (ii) divert or attempt to divert customers of
Buyers' ice hockey equipment businesses; or (iii) entice or induce or in any
manner influence Jon Hodgins, Brad Jansen, Reid Brownell or Michel Ferland to
leave the employment of Buyers or any of their affiliates for the purpose of
engaging in a business which is owned or controlled, directly or indirectly, by
Sellers or Stockholders or which is in competition with Buyers' ice hockey
equipment businesses.
6.6 REMEDY AT LAW INADEQUATE. Sellers and Stockholders hereby
acknowledge and agree that Buyers' remedy at law for any breach by any of them
of the provisions of SECTIONS 6.4 and 6.5 hereof will be inadequate, and that
Buyers, their successors and assigns shall be entitled to injunctive or other
equitable relief in addition to any other remedy they may have for a breach of
such provisions. If a final judicial determination is made that any provision of
SECTIONS 6.4 AND 6.5 hereof constitutes an unreasonable or otherwise
unenforceable restriction against either Seller or Stockholders, such provision
shall be void only to the extent that such judicial determination finds such
provision to be unreasonable or otherwise unenforceable.
6.7 NON-TRANSFERRED CONTRACTS. Notwithstanding anything to the
contrary in this Agreement, Sellers shall not assign or transfer any interest in
any Contract, and Buyers shall not assume any liability, obligation or
commitment arising thereunder or resulting therefrom, if an assignment or
transfer or an attempt to make an assignment or transfer of such Contract
without the consent of a third party would constitute a breach or violation
thereof or a violation of law, or affect adversely the rights of Buyers or
Sellers thereunder, until such consent has been obtained. If any consent
necessary to effect the transfer and assignment of any Contract is not obtained
on or prior to the Closing, each of the parties will, for a period of one year
following the Closing Date, (i) use its reasonable efforts and take such
reasonable actions and cooperate with the others as may be necessary to effect
the transfer and assignment by the appropriate Seller to the appropriate Buyer
of the Contract, and (ii) cooperate with each other in any lawful and reasonable
arrangement to provide that the appropriate Buyer shall receive the benefits
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under any Contract not assigned and transferred at the Closing by reason of the
failure to obtain such consent (a "NON-TRANSFERRED CONTRACT"), including, if
necessary, at the request and expense of the appropriate Buyer, enforcing
performance by any third party of its obligations in respect of such
Non-Transferred Contract. If the consent is received from the third party within
one year following the Closing Date, then such Non-Transferred Contract shall
immediately be assigned by the appropriate Seller to the appropriate Buyer.
6.8 SELLERS' RIGHT TO SELL REMAINING ASSETS. Buyers hereby waive all
claims against Sellers for infringement of any intellectual property right
resulting from any sale by Sellers of any assets owned by Sellers immediately
before the Closing and not sold to Buyers pursuant to this Agreement.
6.9 BUYERS' PERFORMANCE OF ASSUMED LIABILITIES. After the Closing,
Buyers shall pay and otherwise perform all of the Assumed Liabilities in
accordance with their terms, except for those Assumed Liabilities for which the
failure to pay or otherwise perform is excused by law.
6.10 ACCESS TO BOOKS, RECORDS AND DOCUMENTS. After the Closing,
Sellers and Stockholders, upon reasonable notice and during normal business
hours, shall have the right to inspect and copy the books, records and other
documents (including designs, catalogues, product descriptions, business records
and transactional documents) purchased by Buyers pursuant to this Agreement for
the purposes of preparing tax returns and defending any third party claim.
Buyers shall use reasonable efforts to preserve all books, records and documents
purchased from Sellers and, prior to the destruction or disposal thereof, offer
the books, records and documents to Sellers, giving Sellers a reasonable time to
take possession thereof. If Sellers do not take possession thereof within a
reasonable time, Buyers may destroy or dispose of such books, records and
documents.
ARTICLE VII
TITLE AND SURVEYS
7.1 TITLE OPINION. Rawlings Canada shall obtain an opinion of title
from a notary acceptable to it in its discretion, with respect to the condition
of title to the Daveluyville Property, which opinion shall later be updated to
the Closing Date (said opinion, as updated, is herein the "TITLE OPINION"). The
Title Opinion shall be in form and substance reasonably satisfactory to Rawlings
Canada and shall show, INTER ALIA, that title to the Daveluyville Property is
held by Davtec, free from all Encumbrances other than (i) the Permitted
Encumbrances and (ii) those Encumbrances in respect of which Rawlings Canada
has, on the Closing Date, received discharges or undertakings to discharge (in
form satisfactory to it) executed by the creditors thereof. The parties agree
that all documents executed in connection with the Closing shall be held in
escrow and the Davtec Closing Consideration shall be paid in trust to Rawlings'
counsel until the notary or other legal counsel providing the Title Opinion
confirms, by updated Title Opinion, that title to the Daveluyville Property has
been transferred and the deed of sale effecting such transfer has been
registered in all appropriate land registries without adverse or conflicting
entries from those set forth in the Title Opinion. No title searches or opinions
rendered, nor the failure of Rawlings Canada to send any notice to Davtec of any
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defect, shall have the effect of waiving, limiting, reducing or otherwise
affecting, in any manner whatsoever, any of Sellers' representations or
warranties given or made hereunder or in connection herewith.
7.2 SURVEY. At least two (2) days prior to Closing, Davtec shall
furnish to Rawlings Canada:
(a) an up-to-date surveyor's plan and technical description of
the Daveluyville Property. Any such survey shall show the Daveluyville Property
and its current condition, stating that it is in conformity with all applicable
laws and regulations, that there are no physical encumbrances onto the
Daveluyville Property or from the Daveluyville Property or any illegal views
onto or from the Daveluyville Property and that the Daveluyville Property is not
charged with any servitudes. The survey shall show the boundaries of the
Daveluyville Property, separate legal descriptions and boundaries for the tracts
and the location of all streets, highways, alleys and public ways crossing or
abutting said Daveluyville Property, all servitudes, all building lines and all
buildings and structures as are situated thereon as of said date;
(b) all design, engineering or construction drawings concerning
the Daveluyville Property that Sellers have in their possession;
(c) all title documents such as deeds of purchase with all title
searches and opinions or other information relating to title to the Daveluyville
Property that Sellers have in their possession; and
(d) copies of all realty tax statements covering the Daveluyville
Property for the current year and the three (3) prior years.
ARTICLE VIII
BUYERS' CONDITIONS TO CLOSING
The obligations of Buyers to consummate the transactions contemplated
by this Agreement shall be subject to each of the following express conditions
precedent:
8.1 CONTINUED TRUTH OF WARRANTIES. The representations and warranties
of the Sellers herein contained shall be true in all respects as of the Closing
with the same force and effect as though made as of the Closing, except for any
variations permitted by this Agreement.
8.2 PERFORMANCE OF COVENANTS. Sellers shall have performed, in all
respects, all covenants and obligations and complied with all conditions
required by this Agreement to be performed or complied with by it on or prior to
the Closing.
8.3 DAMAGES BY CASUALTY OR OTHERWISE. The Assets and the financial
condition, operations, properties, earnings and prospects of the Business shall
not have been adversely affected on or prior to the Closing in any way as a
result of any material accident or other casualty (whether or not covered by
insurance), any labor disturbance, or any Act of God or the public enemy,
occurring after the date hereof.
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8.4 NO ADVERSE CHANGE. There shall have been no material adverse
change in the condition (financial or otherwise), operations, properties,
earnings, or prospects of the Business since December 31, 1996.
8.5 PERMITS. Any and all permits, consents, orders, approvals,
licenses and clearances from any Person appropriate to the lawful consummation
of the transactions contemplated hereby and the use by Buyers of the Assets in
substantially the same manner as currently used by Sellers, including the
consents of The First National Bank of Chicago and the lessors under the Leases,
shall have been obtained in form and substance satisfactory to Buyers.
8.6 LITIGATION. No suit, action, investigation, inquiry or proceeding
shall be pending or, to the best of Sellers' and Stockholders' knowledge,
threatened which (i) might result in any material adverse change in the
condition (financial or otherwise), operations, properties, earnings or
prospects of the Business, or (ii) questions the validity of any action taken or
to be taken by Sellers or Stockholders in connection with the provisions of this
Agreement.
8.7 SECURITY INTERESTS RELEASED. The Assets shall not be subject to
any mortgage, pledge, lien, security interest, claim, charge, encumbrance or
other adverse interest of any kind other than the Permitted Encumbrances.
8.8 TITLE TO NAMES. USA Skate shall have good and marketable title to
the trademarks "Victoriaville," "Vic" and "McMartin," and Buyers shall have
received from Warren Amendola an affidavit, reasonably satisfactory to Buyers,
regarding first use of the trademarks "Vic" and "Victoriaville."
8.9 INSIDER LOANS. Buyers shall have received evidence satisfactory,
to Buyers, full satisfaction of USA Skate's loans to Cortina, Scott Martin and
Kevin Marsh.
8.10 NO LEGAL HYPOTHECS. All delays to register legal hypothecs
against the Daveluyville Property arising out of construction or renovation
shall have expired prior to the Closing Date and on the Closing Date no such
legal hypothecs shall have been registered or remain unradiated.
8.11 RELEASE OF PAYABLES OWING TO STOCKHOLDERS. Stockholders and their
affiliates shall have released Sellers in full from all trade payables owing by
Sellers to Stockholders or their affiliates.
8.12 TRANSFER OF ASSETS TO DAVTEC. 811300 Ontario Inc. shall have
transferred to Davtec, pursuant to such documents of transfer as shall be
satisfactory to Buyers, all of its right, title and interest in and to (i) the
name "McMartin Hockey Protection" and (ii) the Indenture, dated November 16,
1994, between it and Cinnamon Investments Ltd. All other assets and properties
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owned by any Stockholder or Guarantor and used in the Business shall have been
transferred to Davtec or USA Skate, pursuant to such documents of transfer as
shall be satisfactory to Buyers.
8.13 ANJOU SUBLEASE. Davtec shall have subleased its facility in
Anjou, Quebec to Rawlings Canada pursuant to a sublease containing such terms
and in such form as shall be satisfactory to Buyers.
8.14 DUE DILIGENCE INVESTIGATION. The results of Buyers' due diligence
investigation, including the results of its Phase I environmental audits of the
Facilities, shall be reasonably satisfactory to Buyers in their sole discretion.
8.15 TAX CLEARANCE CERTIFICATES. USA Skate shall have delivered to
Buyers tax clearance letters from the States of New York and South Carolina (the
"TAX CLEARANCE CERTIFICATES") stating that no taxes, penalties or interest are
due from USA Skate.
8.16 SECTION 116 AFFIDAVIT. Davtec shall have delivered to Buyers an
affidavit attesting that Davtec is not a non-resident of Canada within the
meaning of Section 116 of the Income Tax Act (Canada) (the "SECTION 116
CERTIFICATE").
8.17 KEY EMPLOYEES. Rawlings shall have entered into employment
arrangements with Jon Hodgins, Brad Jansen, Reid Brownell and Michel Ferland
satisfactory to Rawlings.
8.18 ESTOPPEL CERTIFICATES. Buyers shall have obtained an estoppel
certificate from each lessor of each Lease in form and substance satisfactory to
Buyers.
8.19 CANADIAN TITLE REQUIREMENTS. Buyers shall have obtained (i) the
survey in the form and within the time contemplated by SECTION 7.2 hereof, and
(ii) the Title Opinion in form and substance satisfactory to Buyers, and (iii)
the discharges and undertakings to discharge contemplated by SECTION 7.2 hereof.
8.20 ESCROW AGREEMENT. Sellers and the Escrow Agent shall have duly
executed and delivered the Escrow Agreement.
8.21 LOCK BOX AGREEMENT. Buyers, Sellers and all of Sellers' lenders
who require or maintain a lock box for the benefit of Sellers shall have entered
into an agreement, satisfactory to Buyers, providing for the prompt payment by
such lenders to Buyers of all Accounts Receivable collected by the lock boxes.
8.22 LEGAL OPINION. Buyer shall have received the favorable legal
opinion of Ross & Hardies, counsel for Sellers and Stockholders, dated as of the
Closing Date and in the form of EXHIBIT B attached hereto (the "SELLERS'
OPINION").
8.23 GUARANTY. Guarantors shall have duly executed and delivered a
Guaranty in the form of EXHIBIT C attached hereto (the "GUARANTY").
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8.24 CERTIFICATE. Unless Sellers shall have executed and delivered to
Buyers a certificate dated the Closing, certifying that one or more of the
conditions set forth in SECTIONS 8.1 THROUGH 8.12 of this Agreement has not been
fulfilled, the Closing shall constitute the joint and several representation and
warranty by Sellers and Stockholders that each of such conditions has been
fulfilled or satisfied.
Any of the foregoing conditions may be waived, in writing, in whole or
in part, by Buyers.
ARTICLE IX
SELLERS' AND STOCKHOLDERS' CONDITIONS TO CLOSING
The obligation of Sellers and Stockholders to consummate the
transactions contemplated by this Agreement shall be subject to the following
express conditions precedent:
9.1 CONTINUED TRUTH OF WARRANTIES. The representations and warranties
of Buyers herein contained shall be true in all respects as of the Closing with
the same force and effect as though made as of the Closing, except for any
variations permitted by this Agreement.
9.2 PERFORMANCE OF COVENANTS. Buyers shall have performed, in all
respects, all covenants and obligations and complied with all conditions
required by this Agreement to be performed or complied with by them on or prior
to the Closing.
9.3 PERMITS. Any and all permits, consents, orders, approvals,
licenses and clearances from any Person appropriate to the lawful consummation
of the transactions contemplated hereby shall have been obtained in form and
substance satisfactory to Sellers and Stockholders.
9.4 LITIGATION. No suit, action, investigation, inquiry or proceeding
shall be pending or, to the best of Buyers' knowledge, threatened which
questions the validity of any action taken or to be taken by Buyers in
connection with the provisions of this Agreement.
9.5 ESCROW AGREEMENT. Buyers and the Escrow Agent named therein shall
have duly executed and delivered the Escrow Agreement.
9.6 LEGAL OPINION. Sellers shall have received the favorable legal
opinion of Stinson, Mag & Fizzell, P.C., counsel for Buyers, dated as of the
Closing Date and in the form of EXHIBIT D attached hereto (the "BUYERS'
OPINION").
9.7 TERMINATION OF HODGINS EMPLOYMENT AGREEMENT. The Employment
Agreement, dated September 6, 1996, between Jon Hodgins and USA Skate shall have
been terminated upon such terms as shall be satisfactory to Sellers and
Stockholders.
9.8 CERTIFICATE. Unless the Buyers shall have executed and delivered
to Sellers a certificate dated the Closing, certifying that one or more of the
conditions set forth in SECTIONS 9.1 THROUGH 9.4 hereto has not been fulfilled,
the Closing shall constitute a representation and warranty by Buyers that each
of such conditions has been fulfilled or satisfied.
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Any of the foregoing conditions may be waived, in whole or in part, by
Sellers and Stockholders.
ARTICLE X
ACTIONS TO BE TAKEN AT CLOSING; POST-CLOSING COVENANTS
10.1 ACTIONS TO BE TAKEN AT CLOSING BY SELLERS AND STOCKHOLDERS.
(a) At Closing, each Seller and each Stockholder shall:
(i) Deliver to Buyers a good standing certificate or its
equivalent issued by its jurisdiction of incorporation, dated not less than
ten business days immediately preceding the Closing.
(ii) Deliver to Buyers copies of the following documents,
certified as to accuracy and completeness as of the Closing by its
Secretary or Assistant Secretary:
(A) Its Articles or Certificate of Incorporation or
other constating document and all amendments thereto;
(B) Its By-Laws and all amendments thereto;
(C) The resolutions of its Board of Directors and, in
the case of USA Skate and Davtec, stockholders authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein.
(iii) Deliver to Buyers a certificate of its Secretary or
Assistant Secretary, dated as of the Closing, (i) setting forth the
identity of its directors and officers and the offices held by such
officers, and (ii) certifying the genuineness of the signatures of its
officers executing this Agreement and all instruments and certificates
delivered on its behalf to Buyers pursuant hereto.
(iv) Deliver to Buyers the duly executed Escrow Agreement.
(v) Cause to be delivered to Buyers the Sellers' Opinion.
(b) At Closing:
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(i) USA Skate shall deliver to Rawlings a Bill of Sale and
Assignment in the form of EXHIBIT E attached hereto and such other
documents and instruments of sale, assignment, conveyance and transfer as
Rawlings or its counsel may deem appropriate to sell, assign, convey and
transfer to, and to vest, perfect and confirm in Rawlings all right, title
and interest of USA Skate in and to the USA Skate Assets.
(ii) Davtec shall deliver to Rawlings Canada a Bill of Sale
and Assignment in the form of EXHIBIT E attached hereto and such other
documents and instruments of sale, assignment, conveyance and transfer as
Rawlings Canada or its counsel may deem appropriate to sell, assign, convey
and transfer to, and to vest, perfect and confirm in Rawlings Canada all
right, title and interest of Davtec in and to the Davtec Assets.
(iii) Davtec shall deliver to Rawlings such documents and
instruments of sale, assignment, conveyance and transfer, as Rawlings or
its counsel may deem appropriate to sell, assign, convey and transfer to,
and to vest, perfect and confirm in Rawlings all right, title and interest
of Davtec in and to the Davtec Intellectual Property.
(iv) USA Skate shall deliver to Buyers the Tax Clearance
Certificates.
(v) Davtec shall deliver to Buyers the SECTION 116
Certificate.
(vi) Davtec shall deliver the Title Opinion.
(vii) Davtec shall deliver to Rawlings Canada a Deed of
Transfer in respect of the Daveluyville Property in the form of EXHIBIT F
attached hereto.
(viii) The Guarantors shall deliver the Guaranty.
10.2 ACTIONS TO BE TAKEN AT CLOSING BY BUYERS.
(a) At the Closing, each Buyer shall:
(i) Deliver to Sellers and Stockholders a good standing
certificate or its equivalent issued by its jurisdiction of incorporation,
dated not less than ten business days immediately preceding the Closing.
(ii) Deliver to Sellers and Stockholders copies of the
following documents, certified as to accuracy and completeness as of the
Closing by its Secretary or Assistant Secretary:
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(A) Its Certificate or Articles of Incorporation or
other constating document and all amendments thereto;
(B) Its By-Laws and all amendments thereto;
(C) The resolutions of its Board of Directors
authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein.
(iii) Deliver to Sellers a certificate of its Secretary or
Assistant Secretary, dated as of the Closing (i) setting forth the identity
of its directors and officers, and the offices held by such officers, and
(ii) certifying the genuineness of the signatures of its officers executing
this Agreement and all instruments and certificates delivered on its behalf
to Sellers or Stockholders pursuant hereto.
(iv) Cause to be delivered to Sellers and Stockholders the
Buyers' Opinion.
(b) At Closing,
(i) Rawlings shall pay the USA Skate Closing Consideration
and the Davtec Intellectual Property Purchase Price in accordance with
ARTICLE III.
(ii) Rawlings Canada shall pay the Davtec Closing
Consideration in accordance with ARTICLE III.
(iii) Rawlings and Rawlings Canada shall deliver to Sellers
and Stockholders the duly executed Escrow Agreement.
(iv) Rawlings shall deliver to USA Skate an Assumption
Agreement in the form of EXHIBIT G attached hereto, pursuant to which
Rawlings will assume the USA Skate Accounts Payable and the USA Skate
Accrued Liabilities.
(v) Rawlings Canada shall deliver to Davtec an Assumption
Agreement in the form of EXHIBIT G attached hereto, pursuant to which
Rawlings Canada will assume the Davtec Accounts Payable and the Davtec
Accrued Liabilities.
10.3 POST-CLOSING COOPERATION. The parties shall, on request, at or
after the Closing, cooperate with one another by furnishing any additional
information and executing and delivering any additional documents as may be
reasonably requested by any party hereto (or their respective counsel) to
further perfect or evidence the consummation of, or otherwise implement, any
transaction contemplated by this Agreement.
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ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION.
(a) INDEMNITY BY SELLERS AND STOCKHOLDERS. In addition to all
other indemnification obligations of Sellers or Stockholders set forth in this
Agreement, Sellers and Stockholders jointly and severally shall indemnify,
defend and hold harmless Buyers from and against:
(i) any and all losses, liabilities, costs, expenses or
damages (including judgments and settlement payments) incident to, arising
in connection with or resulting from any misrepresentation, breach,
non-performance or inaccuracy of any representation, indemnity, warranty,
covenant or agreement by Sellers or Stockholders made or contained in this
Agreement or in any Exhibit, Schedule, certificate or document executed and
delivered by or on behalf of Sellers or Stockholders pursuant to or in
connection with this Agreement or the transactions contemplated herein;
(ii) all deficiencies, underpayments of tax, penalties,
additions to tax, interest payments, payments of any taxes including,
without limitation, income, employment, payroll, F.I.C.A., F.U.T.A., sales,
use, goods and services, trust fund taxes and tax payments to be withheld,
and any and all other costs and expenses relative to examinations, proposed
or final adjustments arising from such examinations and any assessments
relating thereto, contests, claims, suits or proceedings respecting the
determination of loss, liability or damage resulting from deficiencies in
United States or Canadian federal, state, provincial or local taxes, with
respect to (A) the Assets, for any period ended on or prior to the Closing,
or (B) Sellers or Stockholders;
(iii) any and all losses, liabilities, costs, expenses or
damages (including judgments and settlement payments) incident to, arising
in connection with or resulting from (A) the termination of any employee of
Sellers, including but not limited to any obligation or liability arising
under the Consolidated Omnibus Budget Reconciliation Act of 1985, or (B)
any qualified or nonqualified pension, profit-sharing or other employee
benefit plan of Sellers, including but not limited to any accumulated
funding deficiency within the meaning of Section 302 of the Employee
Retirement Income Security Act of 1974, any liability to the Pension
Benefit Guaranty Corporation, or any liability resulting from the
termination of such benefit plans;
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(iv) to the extent not described in clauses (i) through
(iii) above, any liability or obligation not included in the Accounts
Payable or the Accrued Liabilities;
(v) any and all losses, liabilities, costs, expenses or
damages (including judgments and settlement payments) incident to, arising
in connection with or resulting from the litigation set forth on SCHEDULE
4.14; and
(vi) any and all costs, expenses and other damages incurred
by Buyers in claiming, contesting or remedying any misrepresentation,
breach, non-performance, inaccuracy or other matter described in clauses
(i) through (iv) above or any other indemnification obligation of Sellers
or the Stockholders set forth in this Agreement, including, by way of
illustration and not limitation, all legal and accounting fees, other
professional expenses and all filing fees, and collection costs incident
thereto and all such fees, costs and expenses incurred in defending claims
which, if successfully prosecuted, would have been indemnifiable hereunder.
(b) INDEMNITY BY BUYERS. In addition to all other indemnification
obligations of Buyers set forth in this Agreement, Buyers jointly and severally
shall indemnify, defend and hold Sellers and Stockholders harmless from and
against:
(i) any and all losses, liabilities, costs, expenses or
damages (including judgments and settlement payments) incident to, arising
in connection with or resulting from any misrepresentation, breach,
non-performance or inaccuracy of any representation, indemnity, warranty,
or any covenant or agreement by Buyers made or contained in this Agreement
or in any Exhibit, Schedule, certificate or document executed and delivered
by or on behalf of Buyers pursuant to or in connection with this Agreement
or the transactions contemplated herein; and
(ii) any and all costs, expenses and other damages incurred
by Sellers or Stockholders in claiming, contesting or remedying any
misrepresentation, breach, non-performance, inaccuracy or other matter
described in clause (i) above or any other indemnification obligation of
Buyers set forth in this Agreement, including, by way of illustration and
not limitation, all legal and accounting fees, other professional expenses
and all filing fees, and collection costs incident thereto and all such
fees, costs and expenses incurred in defending claims which, if
successfully prosecuted would have been indemnifiable hereunder.
(c) DAMAGES. Any and all of the items for which Buyers or Sellers
may be entitled to indemnity pursuant to this Agreement, including but not
limited to subsections (a) or (b) of this SECTION 11.1, hereinafter are called
"DAMAGES".
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(d) LIMITATIONS ON OBLIGATION TO INDEMNIFY.
(i) TIME PERIOD. No party to this Agreement shall have any
claim for indemnification pursuant to SECTIONS 11.1(a)(i) OR 11.1(b)(i)
unless such party submits its Initial Claim Notice (as hereinafter defined)
for such claim within the applicable survival period specified in SECTIONS
4.28 or 5.6.
(ii) AMOUNT OF INDEMNIFIED DAMAGES. The maximum aggregate
amount which Buyers shall be entitled to receive as indemnity for Damages
described in SECTION 11.1(a)(i) (the "SELLERS' CAPPED DAMAGES"), shall be
the sum of the USA Skate Purchase Price and the Davtec Purchase Price (the
"Indemnity Cap"); provided, however, that Cal Pro shall not be obligated to
indemnify Buyers for Sellers' Capped Damages in excess of 62% of the
Indemnity Cap. Except for Damages resulting from a breach of the
representations and warranties set forth in SECTIONS 4.1, 4.2, 4.6, 4.26,
4.27 AND 4.28, Buyers shall not be entitled to receive any indemnity for
the Damages described in SECTION 11.1(a) unless and to the extent the
aggregate amount of such Damages exceeds $50,000. The maximum aggregate
amount which Sellers and Stockholders shall be entitled to receive as
indemnity for Damages described in SECTION 11.1(b)(i) (the "BUYERS' CAPPED
DAMAGES"), shall be the Indemnity Cap. Except for Damages resulting from a
breach of the representations and warranties set forth in SECTIONS 5.1, 5.2
AND 5.4, Sellers and Stockholders shall not be entitled to receive any
indemnity for the Damages described in SECTION 11.1(b)(i), unless and to
the extent the aggregate amount of such Damages exceeds $50,000.
(iii) INDEMNITY LIMITATIONS. Anything to the contrary in
this Agreement notwithstanding, Buyers shall not be entitled to
indemnification for any costs, claims and expenses for which
indemnification is available hereunder:
(A) To the extent it arises out of an action by a Buyer
in bad faith or the failure of a Buyer or its successors or assigns to
exercise its or their duty to mitigate damages;
(B) For breach of any representation or warranty only,
if the fact, event or circumstances giving rise to the breach or claim or
otherwise relevant thereto is reasonably disclosed in this Agreement
(including the Schedules and Exhibits hereto) or in the Financial
Statements or is otherwise within the actual knowledge of a Buyer on the
date hereof;
(C) To the extent a Buyer is entitled to and actually
receives indemnity for any loss or damage suffered by it arising out of the
breach or claim under the terms of any insurance policy then in force; or
(D) Which would not have arisen but for (or to the
extent the same is increased by reason of) a breach by a Buyer, or its
successors or assigns, of its or their obligations under this Agreement.
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Buyers agree that, absent fraud on the part of Sellers or Stockholders,
indemnification pursuant to this Article XI shall be their sole and exclusive
monetary remedy for any claim by Buyers against Sellers or Stockholders alleging
any breach by Sellers or Stockholders of their obligations, representations,
warranties and/or agreements set forth in, or contemplated by, this Agreement or
any document or instrument delivered pursuant to this Agreement, and no party
hereto shall be entitled to duplicate monetary damages for the same occurrence.
11.2 NOTICE OF, AND PROCEDURES FOR, COLLECTING INDEMNIFICATION.
(a) INITIAL CLAIM NOTICE. When a party becomes aware of a
situation which may result in Damages for which it would be entitled to be
indemnified hereunder, such party (the "INDEMNITEE") shall submit a written
notice (the "INITIAL CLAIM NOTICE") to the other party (the "INDEMNITOR") to
such effect with reasonable promptness after it first becomes aware of such
matter and shall furnish the Indemnitor with such information as it has
available demonstrating its right or possible right to receive indemnity. If the
potential claim is predicated on the filing by a third party of any action at
law or in equity (a "THIRD PARTY CLAIM"), the Indemnitee shall provide the
Indemnitor with an Initial Claim Notice not later than ten (10) days prior to
the date on which a responsive pleading must be filed, and shall also furnish a
copy of such claim (if made in writing) and of all documents received from the
third party in support of such claim. Every Initial Claim Notice shall, if
feasible, contain a reasonable estimate by the Indemnitee of the losses, costs,
liabilities and expenses (including, but not limited to, costs and expenses of
litigation and attorneys' fees) which the Indemnitee may incur. In addition,
each Initial Claim Notice shall name, when known, the Person or Persons making
the assertions which are the basis for such claim. Failure by the Indemnitee to
deliver an Initial Claim Notice or an update thereof in a timely manner shall
not relieve the Indemnitor of any of its obligations under this Agreement except
to the extent that actual monetary prejudice to the Indemnitor can be
demonstrated.
(b) RIGHTS OF INDEMNITOR. If, prior to the expiration of thirty
(30) days from the mailing of an Initial Claim Notice (the "CLAIM ANSWER
PERIOD"), the Indemnitor shall request in writing that such claim not be paid,
the same shall not be paid, and the Indemnitor shall settle, compromise or
litigate in good faith such claim, and employ attorneys of its choice to do so;
provided, however, that Indemnitee shall not be required to refrain from paying
any claim which has matured by court judgment or decree, unless appeal is taken
therefrom and proper appeal bond posted by the Indemnitor, nor shall it be
required to refrain from paying any claim where such action would result in the
foreclosure of a lien upon any of its assets or a default in a lease or other
contract except a lease or other contract which is the subject of the dispute.
If the Indemnitor elects to settle, compromise or litigate such claim, all
reasonable expenses, including but not limited to all amounts paid in settlement
or to satisfy judgments or awards and reasonable attorney's fees and costs,
incurred by the Indemnitor in settling, compromising or litigating such claim
shall be secured to the reasonable satisfaction of Indemnitee. Indemnitee shall
cooperate fully to make available to the Indemnitor and its attorneys,
representatives and agents, all pertinent information under its control.
Indemnitee shall have the right to elect to settle or compromise all other
contested claims with respect to which the Indemnitor has not, within the Claim
Answer Period, acknowledged in writing (i) liability therefor (should such claim
ultimately be resolved against Indemnitee), and (ii) its election to assume full
responsibility for the settlement, compromise, litigation and payment of such
claim. Indemnitor shall not settle or compromise any claim for damages or
remedies other than money damages without the prior written consent of
Indemnitee.
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(c) FINAL CLAIMS STATEMENT. At such time as Damages for which the
Indemnitor is liable hereunder are incurred by Indemnitee by actual payment
thereof or by entry of a final judgment, Indemnitee shall forward a Final Claims
Statement to the Indemnitor setting forth the amount of such Damages in
reasonable detail on an itemized basis. Indemnitee shall supplement the Final
Claims Statement with such supporting proof of loss (e.g. vouchers, canceled
checks, accounting summaries, judgments, settlement agreements, etc.) as the
Indemnitor may reasonably request in writing within thirty (30) days after
receipt of a Final Claims Statement. All amounts reflected on Final Claims
Statements shall be paid promptly by Indemnitor to Indemnitee.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. Any notice or other communication required or permitted
hereunder (including, by way of illustration and not limitation, any notice
permitted or required under ARTICLE XI hereof) to Buyers, Sellers or
Stockholders shall be effective only if it is in writing and (i) delivered in
person, (ii) sent by registered or certified mail, return receipt requested,
postage prepaid, (iii) sent by a nationally recognized overnight delivery
service, with delivery confirmed, or (iv) sent by facsimile, with receipt
confirmed, addressed as follows:
In the case of Buyers:
Rawlings Sporting Goods Company, Inc.
1859 Intertech Drive
Fenton, Missouri 63026
Attn: Paul E. Martin
Fax: (314) 349-3598
and
Stinson, Mag & Fizzell, P.C.
100 South Fourth Street
St. Louis, Missouri 63102
Attn: John W. Finger, Esq.
Fax: (314) 259-4599
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In the case of the Sellers and the Stockholders:
California Pro Sports, Inc.
1221-B South Batesville Road
Greer, South Carolina 29650
Attn: Barry Hollander
Fax: (864) 848-5167
and
Ross & Hardies
150 North Michigan Avenue
Chicago, IL 60601-7567
Attn: C. Frederick LeBaron, Jr., Esq.
Fax: (312) 750-8600
or such substituted address as any party shall have given notice to the other
parties hereto in writing. Any such notice or communication shall be deemed to
have been given (i) as of the date when delivered in person, (ii) three days
after when so deposited in the mail properly addressed, (iii) the next day when
delivered during business hours to such overnight delivery service properly
addressed, or (iv) when receipt of a facsimile is confirmed, unless (in each
case) the sending party has actual knowledge that such notice was not received
by the intended recipient.
12.2 AMENDMENT. This Agreement may be amended or modified in whole or
in part by an agreement in writing executed in the same manner as this Agreement
and making specific reference thereto.
12.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
12.4 BINDING ON SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by and against the
parties hereto and their successors and assigns and shall be assignable only
with the prior written consent of the other parties hereto.
12.5 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions of this Agreement and any other application thereof shall
not in any way be affected or impaired thereby; provided, however, that to the
extent permitted by applicable law, any invalid, illegal, or unenforceable
provision may be considered for the purpose of determining the intent of the
parties in connection with the other provisions of this Agreement.
12.6 WAIVERS. The parties may, by written agreement, (i) extend the
time for the performance of any of the obligations or other acts of the parties
hereof, (ii) waive any inaccuracies in the representations and warranties
23063 v7
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<PAGE>
contained in this Agreement or in any document delivered pursuant to this
Agreement, (iii) waive compliance with or modify any of the covenants or
conditions contained in this Agreement and (iv) waive or modify performance of
any of the obligations of any of the parties hereto; provided, that neither such
an extension or waiver nor any failure to insist upon strict compliance with any
obligation, covenant, agreement or condition herein shall operate as a waiver
of, or an estoppel with respect to, any subsequent insistence upon strict
compliance.
12.7 PUBLICITY. Except as may be required by law, no party hereto
shall issue any press release or make any public statement regarding the
transactions contemplated by this Agreement or otherwise disclose any of the
terms and conditions of the transactions contemplated by this Agreement without
the prior written consent of the other parties.
12.8 HEADINGS. The headings in the SECTIONS of this Agreement are
inserted for convenience only and in no way alter, amend, modify, limit or
restrict the contractual obligations of the parties.
12.9 EXPENSES.
(a) Sellers and Stockholders shall be responsible for and pay all
of the liabilities, obligations, costs, expenses and fees (including, without
limitation, any and all legal, accounting and other professional fees and
expenses) incurred by them in connection with the negotiation, execution or
performance of this Agreement, and shall jointly and severally indemnify and
hold Buyers harmless from and against all such liabilities, obligations, costs,
expenses and fees.
(b) Buyers shall be responsible for and pay all of the
liabilities, obligations, costs, expenses and fees (including, without
limitation, any and all legal, accounting and other professional fees and
expenses) incurred by Buyers in connection with the negotiation, execution or
performance of this Agreement, and shall jointly and severally indemnify and
hold Sellers and Stockholders harmless from and against all such liabilities,
obligations, costs, expenses and fees.
12.10 SELLERS SOLIDARILY LIABLE. Each of the Sellers hereby covenant
and agree that, for purposes of the law of the Province of Quebec, each of them
is solidarily liable with the other for all obligations and liabilities of any
of them under this Agreement and the agreements contemplated hereby, each of
them hereby waiving the benefits of division of discussion.
12.11 ENTIRE AGREEMENT; Law Governing. All prior negotiations and
agreements between the parties hereto are superseded by this Agreement, and
there are no representations, warranties, understandings or agreements other
than those expressly set forth herein or in an Exhibit, Schedule, certificate,
agreement or other instrument delivered pursuant hereto, except as may be
modified in writing concurrently herewith or subsequent hereto. This Agreement
shall be governed and construed and interpreted according to the laws of the
State of Missouri.
23063 v7
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<PAGE>
LES EQUIPEMENTS SPORTIFS DAVTEC INC.
By /S/ BARRY HOLLANDER
-------------------------------------------
Name: Barry Hollander
----------------------------------------
Title: Authorized Officer
---------------------------------------
USA SKATE CO., INC.
By /S/ BARRY HOLLANDER
-------------------------------------------
Name: Barry Hollander
----------------------------------------
Title: Chief Financial Officer
---------------------------------------
USA SKATE CORPORATION
By /S/ BARRY HOLLANDER
-------------------------------------------
Name: Barry Hollander
----------------------------------------
Title: Chief Financial Officer
---------------------------------------
CALIFORNIA PRO SPORTS, INC.
By /S/ BARRY HOLLANDER
-------------------------------------------
Name: Barry Hollander
----------------------------------------
Title: Chief Financial Officer
---------------------------------------
RAWLINGS CANADA INC.
By /S/ PAUL MARTIN
-------------------------------------------
Name: Paul Martin
----------------------------------------
Title: Chief Financial Officer
---------------------------------------
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<PAGE>
RAWLINGS SPORTING GOODS COMPANY, INC.
By /S/ PAUL MARTIN
-------------------------------------------
Name: Paul Martin
----------------------------------------
Title: Chief Financial Officer
---------------------------------------
23063 v7
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Exhibit A
---------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT ("ESCROW AGREEMENT") is made and entered into
this 12th day of September, 1997, by and among LES EQUIPEMENTS SPORTIFS DAVTEC
INC., a Canadian corporation ("DAVTEC"), USA SKATE CO., INC., a New York
corporation and the sole stockholder of Davtec ("USA SKATE;" hereinafter Davtec
and USA Skate are sometimes referred to individually as a "SELLER" and
collectively as "SELLERS"), RAWLINGS CANADA INC., a Nova Scotia corporation
("RAWLINGS CANADA"), RAWLINGS SPORTING GOODS COMPANY, INC., a Delaware
corporation and the sole stockholder of Rawlings Canada ("RAWLINGS;" hereinafter
Rawlings Canada and Rawlings are sometimes referred to individually as a "BUYER"
and collectively as "BUYERS"), and THE BANK OF NEW YORK ("ESCROW AGENT").
WITNESSETH:
-----------
WHEREAS, Buyers, Sellers, USA Skate Corporation and California Pro
Sports, Inc. have entered into an Asset Purchase Agreement, dated September 10,
1997 (the "ASSET PURCHASE AGREEMENT"); and
WHEREAS, the parties hereto desire that a portion of the USA Skate
Purchase Price and the Davtec Purchase Price (as those terms are defined in the
Asset Purchase Agreement) be deposited in escrow subject to the terms of this
Escrow Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto covenant and
agree as follows:
1. DEFINITIONS. All words and phrases used in this Escrow Agreement,
unless otherwise defined herein, shall have the same meanings as in the Asset
Purchase Agreement.
2. RECEIPT OF ESCROW DEPOSITS. Escrow Agent acknowledges receipt of
(i) an executed original of the Asset Purchase Agreement, (ii) the USA Skate
Adjustment Deposit (which equals $250,000) and the Davtec Adjustment Deposit
(which equals $250,000), and (iii) $500,000 as a source of indemnification for
Sellers' payment of their indemnity obligations under the Asset Purchase
Agreement (the "INDEMNITY DEPOSIT;" hereinafter the USA Skate Adjustment
Deposit, the Davtec Adjustment Deposit and the Indemnity Deposit are referred to
collectively as the "ESCROW DEPOSITS").
3. DISTRIBUTION OF ADJUSTMENT DEPOSITS. Subject to SECTION 5 hereof:
(a) If the USA Skate Net Assets equal or exceed $3,279,732, then
Rawlings and USA Skate shall instruct the Escrow Agent to distribute the USA
Skate Adjustment Deposit to USA Skate, and upon its receipt of such notice,
Escrow Agent shall promptly comply with such instructions from Rawlings and USA
<PAGE>
Skate. If $3,279,732 exceeds the USA Skate Net Assets, then Rawlings and USA
Skate shall instruct the Escrow Agent to, first, distribute from the USA Skate
Adjustment Deposit the amount of such excess (together with all interest and
other earnings accrued on such amount) to Rawlings and, second, distribute the
balance of the USA Skate Adjustment Deposit, if any, to USA Skate, and Escrow
Agent shall promptly comply with such instructions.
(b) If the Davtec Net Assets equal or exceed C$5,793,363, then
Rawlings Canada and Davtec shall instruct the Escrow Agent to distribute the
Davtec Adjustment Deposit to Davtec, and upon its receipt of such notice, Escrow
Agent shall promptly comply with such instructions from Rawlings Canada and
Davtec. If C$5,793,363 exceeds the Davtec Net Assets, then Rawlings Canada and
Davtec shall instruct the Escrow Agent to, first, distribute from the Davtec
Adjustment Deposit the amount of such excess (together with all interest and
other earnings accrued on such amount) to Rawlings Canada and, second,
distribute the balance of the Davtec Adjustment Deposit, if any, to Davtec, and
Escrow Agent shall promptly comply with such instructions.
(c) All instructions to Escrow Agent pursuant to this SECTION 3
shall be given within five (5) days of the determination of the USA Skate Net
Assets or the Davtec Net Assets, as applicable, pursuant to Sections 3.1(b) or
3.2(b) of the Asset Purchase Agreement.
4. DISTRIBUTION OF INDEMNITY DEPOSIT. Subject to SECTION 5 hereof:
(a) Each Buyer shall promptly deliver to Escrow Agent a copy of
each Initial Claim Notice and Final Claims Statement which it gives to either
Seller. Upon its receipt of a Final Claims Statement relating to an Initial
Claim Notice previously received by it, Escrow Agent shall distribute from the
Indemnity Deposit to the appropriate Buyer an amount equal to the Damages set
forth in the Final Claims Statement.
(b) Notwithstanding the provisions of SECTION 4(a) hereof, on the
date six months from the date of this Escrow Agreement, Escrow Agent shall
distribute from the Indemnity Deposit to USA Skate the amount, if any, by which
$250,000 exceeds the aggregate amount of Damages claimed in all Initial Claim
Notices received by Escrow Agent for which Escrow Agent has not made a
distribution pursuant to SECTION 4(a) hereof.
(c) Notwithstanding the provisions of SECTIONS 4(a) AND 4(b)
hereof, on the date nine (9) months from the date of this Escrow Agreement,
Escrow Agent shall distribute from the Indemnity Deposit to USA Skate the
difference between (i) the amount then remaining in the Indemnity Deposit, less
(ii) the aggregate amount of Damages claimed in all Initial Claim Notices
received by Escrow Agent for which Escrow Agent has not made a distribution
pursuant to Section 4(a) hereof.
(d) Notwithstanding the provisions of SECTIONS 4(a) THROUGH 4(c)
hereof, if, after the date nine (9) months from the date of this Escrow
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<PAGE>
Agreement, Buyers do not have any right under the Asset Purchase Agreement to
receive Damages set forth in an Initial Claim Notice previously delivered to
Escrow Agent, then they shall promptly give notice to such effect to Escrow
Agent, and Escrow Agent, upon receipt of such notice, shall promptly distribute
from the Indemnity Deposit to USA Skate the Damages identified in such notice as
Damages which Buyers do not have a right to receive.
5. PAYMENT TO CORTINA. Sellers hereby direct Escrow Agent to pay all
distributions to either Seller under this Escrow Agreement to Cortina
International Corp. ("CORTINA"), Suite 901, 9th Floor, 131 Sung Chiang Road,
Taipei, Republic of China, or such other address as Buyers and Sellers shall
specify in writing to Escrow Agent, until the aggregate amount of such payments
to Cortina equals $476,000 or such other amount as Buyers and Sellers shall
specify in writing to Escrow Agent.
6. DISTRIBUTION OF ESCROW DEPOSITS PURSUANT TO INSTRUCTIONS.
Notwithstanding any provision of this Escrow Agreement to the contrary, Escrow
Agent shall distribute the Escrow Deposits, or any portion thereof, in
accordance with written instructions signed by Buyers and Sellers or their
respective successors and assigns.
7. INVESTMENT OF ESCROW DEPOSITS. To the fullest extent possible,
Escrow Agent shall promptly invest and reinvest the Escrow Deposits in United
States Treasury Bills, Certificates of Deposit of banks organized either under
the laws of the United States or of a State of the United States having capital
and surplus in excess of $50,000,000, securities issued or guaranteed by the
United States Government, prime commercial paper of United States issuers, or
money market funds investing in U.S. Government obligations, as directed by
Sellers' written instruction. At the time of any distribution from the Escrow
Deposits, Escrow Agent shall pay to any party receiving a distribution from the
Escrow Deposits all interest and other earnings accrued on the amount
distributed.
8. FEES AND EXPENSES. For its services hereunder, the Escrow Agent
shall be paid $1,900.00 annually, plus its reasonable expenses in performing
such services. The first year's fees shall be payable upon the funding of the
Escrow Deposits. If this Escrow Agreement terminates within one year from the
date hereof, the first year's fees shall not be prorated. Except as otherwise
provided in SECTION 9, each Buyer and each Seller shall pay one-fourth (1/4) of
Escrow Agent's fees and expenses.
9. ESCROW AGENT.
(a) Escrow Agent hereby accepts its appointment and agrees to act
as Escrow Agent under the terms and conditions of this Escrow Agreement.
(b) The duties, responsibilities and obligations of Escrow Agent
shall be limited to those expressly set forth herein and no duties,
responsibilities or obligations shall be inferred or implied. Escrow Agent shall
3
<PAGE>
not be subject to, nor required to comply with any other agreement between or
among any of Sellers and/or Buyers, even though reference thereto may be made
herein, or to comply with any direction or instruction (other than those
contained herein or delivered in accordance with this Escrow Agreement) from any
Seller or Buyer or any entity acting on their behalf. Escrow Agent shall not be
required to, and shall not, expend or risk any of its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder.
(c) This Escrow Agreement is for the exclusive benefit of the
parties hereto and their respective successors hereunder, and shall not be
deemed to give, either express or implied, any legal or equitable right, remedy,
or claim to any other entity or person whatsoever.
(d) If at any time Escrow Agent is served with any judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process which in any way affects the Escrow Deposits (including
but not limited to orders of attachment or garnishment or other forms of levies
or injunctions or stays relating to the transfer the Escrow Deposits), Escrow
Agent is authorized to comply therewith in any manner as it or its legal counsel
of its own choosing deems appropriate; and if Escrow Agent complies with any
such judicial or administrative order, judgment, decree, writ or other form of
judicial or administrative process, Escrow Agent shall not be liable to any of
the parties hereto or to any other person or entity even though such order,
judgment, decree, writ or process may be subsequently modified or vacated or
otherwise determined to have been without legal force or effect.
(e) (i) Escrow Agent shall not be liable for any action taken or
omitted or for any loss or injury resulting from its actions or its performance
or lack of performance of its duties hereunder in the absence of gross
negligence or willful misconduct on its part. In no event shall Escrow Agent be
liable (A) for acting in accordance with or relying upon any instruction,
notice, demand, certificate or document from any Seller or Buyer or any entity
acting on behalf of any Seller or Buyer, (B) for any consequential, punitive or
special damages, (C) for the acts or omissions of its nominees, correspondents,
designees, subagents or subcustodians, or (D) for an amount in excess of the
value of the Escrow Deposits, valued as of the date of deposit.
(ii) If any fees, expenses or costs incurred by, or any
obligations owed to, Escrow Agent hereunder are not promptly paid when due,
Escrow Agent may reimburse itself therefor from the Escrow Deposits and may
sell, convey or otherwise dispose of any Escrow Deposits for such purpose.
(iii) As security for the due and punctual performance of
any and all of Buyers' and Sellers' obligations to Escrow Agent hereunder, now
or hereafter arising, Buyers and Sellers, individually and collectively, hereby
pledge, assign and grant to Escrow Agent a continuing security interest in, and
a lien on, the Escrow Deposits and all distributions thereon or additions
thereto (whether such additions are the result of deposits by Buyers and Sellers
or the investment of Escrow Deposits). The security interest of Escrow Agent
shall at all times be valid, perfected and enforceable by Escrow Agent against
Buyers and Sellers and all third parties in accordance with the terms of this
Escrow Agreement.
4
<PAGE>
(iv) Escrow Agent may consult with legal counsel at the
expense of the Buyers and Sellers as to any matter relating to this Escrow
Agreement, and Escrow Agent shall not incur any liability in acting in good
faith in accordance with any advice from such counsel.
(v) Escrow Agent shall not incur any liability for not
performing any act or fulfilling any duty, obligation or responsibility
hereunder by reason of any occurrence beyond the control of Escrow Agent
(including but not limited to any act or provision of any present or future law
or regulation or governmental authority, any act of God or war, or the
unavailability of the Federal Reserve Bank wire or telex or other wire or
communication facility).
(f) Unless otherwise specifically set forth herein, Escrow Agent
shall proceed as soon as practicable to collect any checks or other collection
items at any time deposited hereunder. All such collections shall be subject to
Escrow Agent's usual collection practices or terms regarding items received by
Escrow Agent for deposit or collection. Escrow Agent shall not be required, or
have any duty, to notify anyone of any payment or maturity under the terms of
any instrument deposited hereunder, nor to take any legal action to enforce
payment of any check, note or security deposited hereunder or to exercise any
right or privilege which may be afforded to the holder of any such security.
(g) Escrow Agent shall provide to Buyers and Sellers monthly
statements identifying transactions, transfers or holdings of Escrow Deposits
and each such statement shall be deemed to be correct and final upon receipt
thereof by the Buyers and Sellers unless Escrow Agent is notified in writing to
the contrary within thirty (30) business days of the date of such statement.
(h) Escrow Agent shall not be responsible in any respect for the
form, execution, validity, value or genuineness of documents or securities
deposited hereunder, or for any description therein, or for the identity,
authority or rights of persons executing or delivering or purporting to execute
or deliver any such document, security or endorsement.
(i) Notices, instructions or other communications shall be in
writing and shall be given to the address set forth in SECTION 12 hereof (or to
such other address as may be substituted therefor by written notification to
Escrow Agent or Buyers and Sellers). Notices to Escrow Agent shall be deemed to
be given when actually received by Escrow Agent's Corporate Trust Department.
Escrow Agent is authorized to comply with and rely upon any notices,
instructions or other communications believed by it to have been sent or given
by Buyers or Sellers or by a person or persons authorized by Buyers or Sellers.
Whenever under the terms hereof the time for giving a notice or performing an
act falls upon a Saturday, Sunday, or banking holiday, such time shall be
extended to the next day on which Escrow Agent is open for business.
(j) Buyers and Sellers, jointly and severally, shall be liable
for and shall reimburse and indemnify Escrow Agent and hold Escrow Agent
harmless from and against any and all claims, losses, liabilities, costs,
damages, or expenses (including reasonable attorneys' fees and expenses)
(collectively, "LOSSES") arising from or in connection with or related to this
5
<PAGE>
Escrow Agreement or being Escrow Agent hereunder (including but not limited to
Losses incurred by Escrow Agent in connection with its successful defense, in
whole or in part, of any claim of gross negligence or willful misconduct on its
part), provided, however, that nothing contained herein shall require Escrow
Agent to be indemnified for Losses caused by its gross negligence or willful
misconduct.
(k) (i) Buyers and Sellers may remove Escrow Agent at any time by
giving to Escrow Agent thirty (30) calendar days' prior notice in writing signed
by all Buyers and Sellers. Escrow Agent may resign at any time by giving to
Buyers and Sellers fifteen (15) calendar days, prior written notice thereof.
(ii) Within ten (10) calendar days after giving the
foregoing notice of removal to Escrow Agent or receiving the foregoing notice of
resignation from Escrow Agent, all Buyers and Sellers shall jointly agree on and
appoint a successor Escrow Agent. If a successor Escrow Agent has not accepted
such appointment by the end of such 10-day period, Escrow Agent may, in its sole
discretion, deliver the Escrow Deposits to any of the Buyers and Sellers at the
address provided herein or may apply to a court of competent jurisdiction for
the appointment of a successor Escrow Agent or for other appropriate relief. The
costs and expenses (including reasonable attorneys, fees and expenses) incurred
by Escrow Agent in connection with such proceeding shall be paid by, and be
deemed a joint and several obligation of, the Buyers and Sellers.
(iii) Upon receipt of the identity of the successor Escrow
Agent, Escrow Agent shall either deliver the Escrow Deposits then held hereunder
to the successor Escrow Agent, less Escrow Agent's fees, costs and expenses or
other obligations owed to Escrow Agent, or hold such Escrow Deposits (or any
portion thereof), pending distribution, until all such fees, costs and expenses
or other obligations are paid.
(iv) Upon delivery of the Escrow Deposits to a successor
Escrow Agent, Escrow Agent shall have no further duties, responsibilities or
obligations hereunder.
(l) (i) In the event of any ambiguity or uncertainty hereunder or
in any notice, instruction or other communication received by Escrow Agent
hereunder, Escrow Agent may, in its sole discretion, refrain from taking any
action other than retain possession of the Escrow Deposits, unless Escrow Agent
receives written instructions, signed by all Buyers and Sellers, which
eliminates such ambiguity or uncertainty.
(ii) In the event of any dispute between or conflicting
claims by or among the Buyers and Sellers and/or any other person or entity with
respect to any of the Escrow Deposits, Escrow Agent shall be entitled, in its
sole discretion, to refuse to comply with any and all claims, demands or
instructions with respect to such Escrow Deposits so long as such dispute or
conflict shall continue, and Escrow Agent shall not be or become liable in any
way to the Buyers and Sellers for failure or refusal to comply with such
conflicting claims, demands or instructions. Escrow Agent shall be entitled to
refuse to act until, in its sole discretion, either (A) such conflicting or
6
<PAGE>
adverse claims or demands shall have been determined by a final order, judgment
or decree of a court of competent jurisdiction, which order, judgment or decree
is not subject to appeal, or settled by agreement between the conflicting
parties as evidenced in a writing satisfactory to Escrow Agent or (B) Escrow
Agent shall have received security or an indemnity satisfactory to it sufficient
to hold it harmless from and against any and all Losses which it may incur by
reason of so acting. Escrow Agent may, in addition, elect, in its sole
discretion, to commence an interpleader action or seek other judicial relief or
orders as it may deem, in its sole discretion, necessary. The costs and expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
such proceeding shall be paid by, and shall be deemed a joint and several
obligation of, the Buyers and Sellers.
(m) The Escrow Agent does not have any interest in the Escrow
Deposits deposited hereunder but is serving as escrow holder only, and having
only possession thereof. Each party shall pay or reimburse the Escrow Agent upon
request for any transfer taxes or other taxes relating to the Escrow Deposits
incurred in connection herewith and shall indemnify and hold harmless the Escrow
Agent from any amounts that it is obligated to pay in the way of such taxes. Any
payments of income from this Escrow Account shall be subject to withholding
regulations then in force with respect to United States taxes. The parties
hereto will provide the Escrow Agent with appropriate W-9 forms for tax I.D.,
number certifications, or W-8 forms for non-resident alien certifications. It is
understood that the Escrow Agent shall be responsible for income reporting only
with respect to income earned on investment of funds which are a part of the
Escrow Deposits and is not responsible for any other reporting.
10. INSPECTION. All money or other property held as a part of the
Escrow Deposits shall at all times be clearly identified as being held by the
Escrow Agent hereunder. Any party hereto may inspect the Escrow Deposits at any
time during the Escrow Agent's business hours.
11. NO RIGHT OF OFFSET. Notwithstanding any provision of the Amended
and Restated Credit Agreement, dated the date hereof, among Rawlings, the
financial institutions signatory thereto, and The First National Bank of
Chicago, as agent, or any other agreement by which Rawlings or Escrow Agent is
bound, whether now existing or hereafter entered into, Escrow Agent shall have
no right of offset against the Escrow Deposits except for amounts due to Escrow
Agent pursuant to this Escrow Agreement.
12. NOTICES. Any instruction, notice or other communication required
or permitted hereunder to Buyers or Sellers shall be given in writing and shall
be (i) delivered in person, (ii) sent by registered or certified mail, return
receipt requested, postage prepaid, (iii) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (iv) sent by facsimile,
with receipt confirmed, addressed as follows:
7
<PAGE>
In the case of Buyers:
Rawlings Sporting Goods Company, Inc.
1859 Intertech Drive
Fenton, Missouri 63026
Attn: Paul E. Martin
Fax: (314) 349-3598
and
Stinson, Mag & Fizzell, P.C.
100 South Fourth Street
St. Louis, Missouri 63102
Attn: John W. Finger, Esq.
Fax: (314) 259-4599
In the case of the Sellers:
California Pro Sports, Inc.
1221-B South Batesville Road
Greer, South Carolina 29650
Attn: Barry Hollander
Fax: (864) 848-5167
and
Ross & Hardies
150 North Michigan Avenue
Chicago, Illinois 60601-7567
Attn: C. Frederick LeBaron, Jr., Esq.
Fax: (312) 750-8600
In the case of Escrow Agent:
The Bank of New York
The Lammert Building
911 Washington Avenue, Third Floor
St. Louis, Missouri 63101
Fax: (314) 613-8227
or to such substituted address as any party shall have given to the other
parties hereto in writing. Except as otherwise provided in SECTION 9, any such
instruction, notice or communication shall be deemed to have been given (i) if
delivered in person, on the date so delivered, (ii) if sent by registered or
certified mail, three days after the date when so deposited in the mail properly
addressed, (iii) if sent by overnight delivery service, the day after the date
when delivered during business hours to the overnight delivery service properly
addressed, or (iv) if sent by facsimile, the date when receipt of the facsimile
is confirmed, unless (in each case) the sending party has actual knowledge that
such notice was not received by the intended recipient.
8
<PAGE>
13. MISCELLANEOUS.
(a) This Escrow Agreement shall be binding upon and inure to the
benefit of each party hereto and its successors and assign.
(b) This Escrow Agreement shall be interpreted, construed,
enforced and administered in accordance with the internal substantive laws (and
not the choice of law rules) of the State of New York. Each of the Buyers and
Sellers hereby submits to the non-exclusive personal jurisdiction of and each
agrees that all proceedings relating hereto may be brought in courts located
within the City and State of New York or elsewhere (including but not limited to
the Circuit Court of St. Louis County, Missouri and the United States District
Court for the Eastern District of Missouri, Eastern Division) as Escrow Agent
may select. Each of the Buyers and Sellers hereby waives the right to trial by
jury in any such proceedings. To the extent that in any jurisdiction any Buyer
or Seller may be entitled to claim, for itself or its assets, immunity from
suit, execution, attachment (whether before or after judgment) or other legal
process, each hereby irrevocably agrees not to claim, and hereby waives, such
immunity. Each Buyer and Seller waives personal service of process and consents
to service of process by certified or registered mail, return receipt requested,
directed to it at the address last specified for notices hereunder, and such
service shall be deemed completed ten (10) calendar days after the same is so
mailed.
(c) Except as otherwise permitted herein, this Escrow Agreement
may he modified only by a written amendment signed by all the parties hereto,
and no waiver of any provision, hereof shall be effective unless expressed in a
writing signed by the party to be charged.
(d) The rights and remedies conferred upon the parties hereto
shall be cumulative, and the exercise or waiver of any such right or remedy
shall not preclude or inhibit the exercise of any additional rights or remedies.
The waiver of any right or remedy hereunder shall not preclude the subsequent
exercise of such right or remedy.
(e) Each Buyer and Seller hereby represents and warrants (a) that
this Escrow Agreement has been duly authorized, executed and delivered on its
behalf and constitutes its legal, valid and binding obligation and (b) that the
execution, delivery and performance of this Escrow Agreement by it does not and
will not violate any applicable law or regulation.
(f) The invalidity, illegality or unenforceability of any
provision of this Escrow Agreement shall in no way affect the validity, legality
or enforceability of any other provision; and if any provision is held to be
enforceable as a matter of law, the other provisions shall not be affected
thereby and shall remain in full force and effect.
9
<PAGE>
(g) This Escrow Agreement shall constitute the entire agreement
of the parties with respect to the subject matter and supersedes all prior oral
or written agreements in regard thereto.
(h) This Escrow Agreement shall terminate upon the distribution
of all Escrow Deposits from the Account. The provisions of SECTION 9 of this
Escrow Agreement shall survive termination of this Escrow Agreement and/or the
resignation or removal of the Escrow Agent.
(i) No printed or other material in any language, including
prospectuses, notices, reports, and promotional material which mentions "The
Bank of New York" by name or the rights, powers, or duties of the Escrow Agent
under this Escrow Agreement shall be issued by any other parties hereto, or on
such party's behalf, without the prior written consent of Escrow Agent.
(j) The headings contained in this Escrow Agreement are for
convenience of reference only and shall have no effect on the interpretation or
operation hereof.
(k) This Escrow Agreement may be executed by each of the parties
hereto in any number of counterparts, each of which counterpart, when so
executed and delivered, shall be deemed to be an original and all such
counterparts shall together constitute one and the same agreement.
(l) This Escrow Agreement expressly sets forth all the duties of
the Escrow Agent with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement on the day and year first above written.
LES EQUIPEMENTS SPORTIFS DAVTEC INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
10
<PAGE>
USA SKATE CO., INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Chief Financial Officer
----------------------------------------
RAWLINGS CANADA INC.
By /S/ PAUL MARTIN
-------------------------------------------
Name: Paul Martin
----------------------------------------
Title: Chief Financial Officer
----------------------------------------
RAWLINGS SPORTING GOODS COMPANY, INC.
By /S/ PAUL MARTIN
-------------------------------------------
Name: Paul Martin
----------------------------------------
Title: Chief Financial Officer
----------------------------------------
THE BANK OF NEW YORK
By /S/ NICOLAS S. SIGNORETTA
--------------------------------------------
Name: Nicolas S. Signoretta
-----------------------------------------
Title: Vice President
----------------------------------------
11
Exhibit C
---------
GUARANTY
--------
WHEREAS, the undersigned directly or indirectly own capital stock of Les
Equipements Sportifs Davtec Inc., a Canadian corporation ("Davtec"); and
WHEREAS, to induce Rawlings Sporting Goods Company, Inc., a Delaware
corporation, and Rawlings Canada Inc., a Nova Scotia corporation (collectively,
the "Buyers"), to enter into an Asset Purchase Agreement, dated September 10,
1997, among Davtec, Buyers, and the other parties signatory thereto (the "Asset
Purchase Agreement"), providing for the purchase by Buyers of substantially all
of the assets of Davtec, the undersigned have agreed to guarantee all of the
obligations of Davtec under the Agreement pursuant to this Guaranty;
NOW, THEREFORE, FOR VALUE RECEIVED, the undersigned hereby jointly and
severally, absolutely and unconditionally guarantee to Buyers the performance
when due of all of the obligations of Davtec under the Asset Purchase Agreement,
including but not limited to Davtec's indemnification obligations under Article
XI of the Asset Purchase Agreement (collectively, the "Obligations"). In
addition, the undersigned shall be liable to Buyers for all costs and expenses
incurred by Buyers in attempting or effecting collection hereunder (whether or
not litigation shall be commenced in aid thereof) and in connection with the
representation of Buyers in any bankruptcy or insolvency proceedings of Davtec
or the undersigned, including without limitation reasonable attorneys' fees and
expenses.
Notice of the acceptance of this Guaranty and presentment, demand for
payment, notice of dishonor, protest, and notice of protest are hereby waived by
the undersigned who agree that: (i) the obligations of the undersigned hereunder
are primary and may be enforced directly against the undersigned independently
of and without proceeding against Davtec or any other guarantor, (ii) Buyers in
their sole and absolute discretion may extend the time of payment, and renew or
change the manner, place, time and terms of payment of and make any other
changes with respect to any or all of the Obligations, (iii) Buyers may in their
sole and absolute discretion release and otherwise deal with any other guarantor
or guarantors, and (iv) Buyers may exercise or refrain from exercising any
rights against Davtec or any guarantor or guarantors and otherwise act or
refrain from acting, and may settle or compromise any or all of the Obligations
with Davtec, all without releasing the undersigned and waiving any rights
hereunder.
No delay by Buyers in exercising any of their options, powers or rights or
any partial or single exercise thereof shall constitute a waiver thereof. No
waiver of any of Buyers' rights hereunder and no modification or amendment of
this Guaranty shall be deemed to be made by Buyers unless the same shall be in
writing, duly signed on Buyers' behalf, and each such waiver (if any) shall
apply only with respect to the specific instance involved and shall in no way
impair Buyers' rights or the obligations of the undersigned to Buyers in any
other respect at any other time. In case any one or more of the provisions
hereof should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions hereof shall not be
affected or impaired thereby.
23681 v2
<PAGE>
This Guaranty shall remain in full force and effect and shall not be
terminable without the consent of Buyers so long as any of the Obligations
remains unpaid.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of Missouri, shall be binding on the successors and assigns of
the undersigned, and shall inure to the benefit of Buyers' successors and
assigns.
Dated at St. Louis, Missouri this 12th day of September, 1997.
AMSKATE HOLDING LTD.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
2984334 CANADA LTD.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
GESTION PINTADE INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
3102-1983 QUEBEC INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
23681 v2
- 2 -
<PAGE>
3102-1991 QUEBEC INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
GESTION CAMILLE LAINESSE INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
GESTION DAVTEC INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
THREE R SALES, INC.
By /S/ BARRY HOLLANDER
--------------------------------------------
Name: Barry Hollander
-----------------------------------------
Title: Authorized Officer
----------------------------------------
23681 v2
- 3 -
