-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GE1ffw1Tj2fZlzaAOGWsmTmfSyrL2a+l9RPHzEYiH0KeA/xUwPy2QEjUqOkj30Ye NjzwreHzbNuSeNuLJYKR5Q== 0001116502-01-000118.txt : 20010205 0001116502-01-000118.hdr.sgml : 20010205 ACCESSION NUMBER: 0001116502-01-000118 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010118 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE OF CAROLINA INC CENTRAL INDEX KEY: 0000312840 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 132999480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07909 FILM NUMBER: 1524302 BUSINESS ADDRESS: STREET 1: 4731 WEST ATLANTIC AVENUE SUITE B 1 CITY: DELRAY BEACH STATE: FL ZIP: 33445 BUSINESS PHONE: 5614984000 MAIL ADDRESS: STREET 1: 4731 WEST ATLANTIC AVENUE SUITE B 1 CITY: DELRAY BEACH STATE: FL ZIP: 33445 8-K 1 0001.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported) January 18, 2001 ----------------- Empire of Carolina, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 1-7909 13-2999480 ----------------------- -------------------------------- (Commission File Number) (IRS Employer Identification No.) 4731 West Atlantic Avenue, Suite B-1, Delray Beach, FL 33445 - -------------------------------------------------------------------------------- (Address of principal executive offices, including Zip Code) Registrant's telephone number, including area code (561) 498-4000 ----------------------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets On January 18, 2001, the Company consummated the sale of all of the outstanding stock of three of its non-debtor subsidiaries, Dorson Sports, Inc., Apple Golf Shoes, Inc. and Apple Sports, Inc., for a purchase price totaling approximately $8 million, comprised of payment to the Company of approximately $2 million in cash and the repayment of approximately $6 million in bank loans. As a condition to the sale, the stock and assets of the subsidiaries were required to be free of all liens. The purchasers are Dorson Sports Acquisition, Inc., Apple Shoes Acquisition, Inc. and Apple Sports Acquisition, Inc. (the "Purchasers"). In connection with the sale, the Company assigned to the Purchasers all rights under an executory license agreement with Pacific Cycle, LLC, for the use of the Mongoose(R)trademark and all rights under a license agreement with Wilson Sporting Goods Co. for the use of the Wilson(R)trademark. Timothy Moran, former CEO of Empire of Carolina, is a principal of the Purchasers. The sale was preliminarily approved by the U.S. Bankruptcy Court on January 3, 2001, contingent upon receipt of higher bids. No higher bid was received and on January 17, 2001, the Court entered its Final Order approving the sale. In connection with the sale transaction, LaSalle National Bank, as agent for the Company's lenders, agreed to release each of Apple Golf Shoes, Inc., Apple Sports, Inc. and Dorson Sports, Inc. from its guaranty of Empire Industries, Inc.'s bank credit facility. LaSalle also agreed to release Empire Industries, Inc. from its guaranty of the bank credit facility extended to Apple Golf Shoes, Inc., Apple Sports, Inc. and Dorson Sports, Inc. As previously reported, the Company filed for reorganization under Chapter 11 on November 17, 2000 and has continued operations on a debtor-in-possession basis. Item 7. Financial Statements, Pro Forma Financials and Exhibits (c) Exhibits Exhibit Number Description 99.1 Final Order dated January 17, 2001 from U.S. Bankruptcy Court, approving Empire of Carolina, Inc.'s Motion (A) to sell all of the outstanding stock of Dorson Sports, Inc., Apple Golf Shoes, Inc. and Apple Sports, Inc. and (B) to assume and assign executory contract. 99.2 Stock Purchase Agreement dated January 18, 2001 Empire of Carolina, Inc. as Seller and Dorson Sports Acquisition, Inc., Apple Shoes Acquisition, Inc. and Apple Sports Acquisition, Inc. as Purchasers. 99.3 Press Release dated February 2, 2001. 99.4 Release of Guaranty (LaSalle National Bank, N.A. to Empire Industries, Inc.) 99.5 Release of Guaranty (LaSalle National Bank, N.A. to Apple Sports, Inc., Apple Golf Shoes, Inc. and Dorson Sports, Inc.) 99.6 Wilson Sporting Goods Co.'s Consent to sale transaction dated January 16, 2001 99.7 Pacific Cycle, LLC's Consent to assignment of Mongoose(R) License dated January 16, 2001. - ------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EMPIRE OF CAROLINA, INC. Dated: February 2, 2001. By:/s/Charles S. Holmes ------------------------------- Director and Member of Executive Committee EX-99.1 2 0002.txt FINAL ORDER EXHIBIT 99.1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF FLORIDA (WEST PALM BEACH DIVISION) In re ) ) Chapter 11 EMPIRE OF CAROLINA, INC. and ) Case Nos.00-35179 and EMPIRE INDUSTRIES, INC., ) 00-35180-BKC-PGH ) Jointly Administered Debtors. ) - ---------------------------------------------------------- FINAL ORDER APPROVING EMPIRE OF CAROLINA, INC.'S MOTION (A) TO SELL ALL OF THE OUTSTANDING STOCK OF DORSON SPORTS, INC., APPLE GOLF SHOES, INC. AND APPLE SPORTS, INC., AND (B) TO ASSUME AND ASSIGN EXECUTORY CONTRACT THIS CAUSE came before the Court for hearing (the "Final Sale Hearing") in West Palm Beach on Wednesday, January 17, 2001 at 11:00 a.m. upon the Motion (the "Sale Motion") of Debtor Empire of Carolina, Inc. ("Empire") To: (A) Sell All of The Outstanding Stock of Dorson Sports, Inc. ("DSI"), Apple Golf Shoes, Inc. ("AGSI") and Apple Sports, Inc. ("ASI," together with "DSI" and "AGSI", the "Acquired Companies" or the "Apple Subsidiaries"); (B) To Assume and Assign Executory Contract; (C) To Establish Bidding and Sale Procedures; and (D) To Approve Break-Up Fee. The Sale Motion was filed with the Court on December 29, 2000. As requested by Empire in the Sale Motion, on January 3, 2001, the Court entered an Order (the "Bidding Procedures Order") establishing bidding procedures, approving the proposed break-up fee and fixing the date for this Final Sale Hearing. On January 4, 2001, Empire filed a Certificate of Service certifying that, among other things, the Bidding Procedures Order and notice of the Final Sale Hearing was served on that date upon all parties entitled to such notice as set forth on the Master Service List. The Court, having considered and reviewed the Sale Motion, the Stock Purchase Agreement dated January 17, 2001 to be entered into by and between Empire and Apple Sports Acquisition, Inc. ("ASpA"), Dorson Sports Acquisition, Inc. ("DSA") and Apple Shoes Acquisition, Inc. ("AShA," together with "AspA" and "DSA", the "Purchaser") (the "Stock Purchase Agreement"), and upon the proffers of evidence and testimony presented in support of the Sale Motion at the Final Sale Hearing, including the representations of counsel for Empire, the Purchaser, LaSalle National Bank, as agent for the Debtors' Secured Lenders (the "Banks") and the Official Committee of Unsecured Creditors (the "Committee"), and it appearing that proper and sufficient notice of the Final Sale Hearing has been provided as required by Rule 2002(a)(1) and the other applicable Federal and Local Bankruptcy Rules, the Court: FINDS and CONCLUDES as follows: A. This Court has jurisdiction over the Sale Motion pursuant to 28 U.S.C. ss.ss. 157 and 1334 and authority to allow the relief sought therein pursuant to Sections 102(1), 105, 363, and 365 of the Bankruptcy Code, Federal Bankruptcy Rules 2002, 6004, and 6006, and Local Rules 6004-1 and 9013-1. B. The sale and assignment by Empire of the Assets as set forth in the Purchase Agreement is supported by an immediate and substantial business justification and is in the best interests of the Debtors, their estates and their creditors. Empire justifiably believed that Wilson Sporting Goods Co. ("Wilson") would have exercised its option to terminate as of June 30, 2002, the Wilson License, and that Wilson would not consent to or approve of any transaction(s) involving the sale of the stock of the Apple Subsidiaries to any person other than the Purchaser. Because the manufacturing and distribution of golf shoes and accessories bearing the Wilson(R) trademark is virtually the sole business of ASI and AGSI, the Court finds that without maintaining the viability of the Wilson License, the stock and assets of ASI and AGSI would have little or no value or benefit to the Debtors or their estates. Empire has engaged in an appropriate effort to find a purchaser for the Assets under the circumstances presented. If a sale of the Assets on the terms and conditions substantially similar to those contained in the Stock Purchase Agreement is not promptly consummated, Empire's estate will, in all likelihood, realize substantially less value for the Assets. C. All notice requirements necessary to granting the relief herein that are set forth in Rules 2002, 6004, 9014 and other applicable rules of the Federal Rules of Bankruptcy Procedure, Local Rules 6004-1 and 9013-1 and other applicable Local Rules, this Court's November 22, 2000 Order Establishing Notice and Motion Procedures, and in the Bidding Procedures Order have been fully satisfied. All creditors, all parties in interest and all parties that have an interest in the Assets have been duly notified of the sale of the Assets and the Final Sale Hearing and have had an opportunity to file any objection thereto. Furthermore, the sale has been advertised in the manner required by the Bidding Procedures Order. D. No qualifying Competing Bids (as defined in the Bidding Procedures Order) have been timely submitted with respect to the sale or purchase of the Assets. E. The Stock Purchase Agreement was negotiated and executed in good faith and at arm's length after extensive negotiations between Empire, the Purchaser, the Banks, and the Committee. The Purchase Agreement represents the highest and best offer for the Assets. There has been no self-dealing, bad faith, fraud or unfair dealing relative to the negotiation of the Stock Purchase Agreement. F. The terms and conditions of the Stock Purchase Agreement, including, among others, the consideration to be paid, are fair and reasonable and execution and performance of the Stock Purchase Agreement is in the best interests of the estates. The Purchaser is a bona fide, good faith purchaser for value within the meaning Section 363(m) of the Bankruptcy Code, and is entitled to all protections afforded thereunder. G. The purchase price of the Assets was not controlled by any agreement among potential bidders for the Assets, and the provisions of Section 363(n) of the Bankruptcy Code have not otherwise been violated. The purchase price is fair and reasonable based upon the current financial condition of the Apple Subsidiaries and the Debtors. H. The Mongoose License shall be assigned to Purchaser pursuant to Section 365(f)(2) of the Bankruptcy Code, and any and all approvals that are required of Pacific Cycle LLC (the "Licensor") have been obtained. 2 I. Any and all amounts due the Licensor under the Mongoose License shall be "cured" and paid by the Purchaser in the ordinary course of business of DSA following the Closing Date, as and to the extent provided for in the Stock Purchase Agreement, and has been consented to by the Licensor which shall have no claim in these estates on account of any "cure" obligations. The Purchaser's acceptance of an assignment of the Mongoose License pursuant to the Stock Purchase Agreement shall be adequate assurance of future performance as required by Section 365(f)(2) of the Bankruptcy Code. J. The Wilson License is not property of these estates and need not be assigned to and assumed by the Purchaser as part of the transaction(s) approved by this Order. Notwithstanding the foregoing, this Order shall constitute the Court's approval of the transfer of any right, title or interest the Debtors' may have in and to the Wilson License pursuant to Section 363(b) of the Bankruptcy Code. Further, Wilson's consent to the transaction(s) approved herein is a requirement of the Wilson License and a condition of the Purchaser, and in connection therewith, the Court finds that Wilson would not have consented to an indirect assignment of the Wilson License through any transaction(s) involving the sale of the stock of the Apple Subsidiaries to any person other than the Purchaser. All royalty payments and other amounts which may be due Wilson in connection with the Wilson License to the extent provided for in the Stock Purchase Agreement are obligations of the Apple Subsidiaries which the Purchaser shall cause to be paid in the ordinary course of business following the occurrence of the Closing. K. The Banks have consented to the sale of the Assets and the appropriate release of their guaranties, cross-guaranties and liens related thereto pursuant to the terms in the Stock Purchase Agreement. L. Since the date of the Stock Purchase Agreement, no event has occurred that can reasonably be expected to result in any material adverse change in the business, prospects or assets, or in the condition, financial or otherwise, of the Apple Subsidiaries. IT IS, THEREFORE, ORDERED and ADJUDGED as follows: 1. The Sale Motion is GRANTED. 2. Pursuant to Sections 363(b) and (f) of the Bankruptcy Code, all of the terms and provisions of the Stock Purchase Agreement are APPROVED and AUTHORIZED in all respects and the Debtors are directed to perform their obligations thereunder. The sale of the Assets shall be consummated pursuant to the terms and provisions of the Stock Purchase Agreement and shall occur no later than January 19, 2001. Pursuant to Section 10.1 of the Stock Purchase Agreement, the Purchaser shall have the right, but not the obligation, to terminate the Stock Purchase Agreement at any time after January 19, 2001 if the conditions to Purchaser's obligations listed in Article VII of the Stock Purchase Agreement have not been satisfied on or prior to January 19, 2001. 3. The sale of the Assets to the Purchaser shall be free and clear of any interest in such property and of any and all liens, claims and encumbrances in these estates pursuant to Section 363(b) and (f) of the Bankruptcy Code. 3 4. Upon the occurrence of the Closing, the Empire Continuing Unconditional Guaranty of the Bank Debt, and the Acquired Companies' obligations with respect to the Guaranteed Indebtedness, shall be released. Any liens in and to the assets of the Acquired Companies granted by them to secure the Guaranteed Indebtedness shall also be released by the Banks upon their receipt of the Purchase Price. The Purchase Price in excess of the Loan Value shall be paid to the Banks and applied to and reduce the Guaranteed Indebtedness. 5. Pursuant to Bankruptcy Code Section 365(b) and (f), the assumption and assignment of the Mongoose License is APPROVED, but shall not become binding on Empire or the Purchaser, and the Purchaser shall have no obligation thereunder, until consummation of the Stock Purchase Agreement upon the Closing Date. The Purchaser shall be responsible for payment of all "cure" amounts to the Licensor as addressed in Paragraph I of this Order. 6. Any and all right, title and interest the Debtors may have in the Wilson License shall be transferred to the Purchaser upon the occurrence of the Closing pursuant to Section 363(b) of the Bankruptcy Code. All royalty payments and other amounts due or to become due Wilson in connection with the Wilson License or the operation of the Apple Subsidiaries are obligations of the Apple Subsidiaries which the Purchaser shall cause to be paid in the ordinary course of business following the occurrence of the Closing as addressed in paragraph J of this Order. 7. The Court shall retain jurisdiction over any claims or causes of action arising out of or in any way relating to this Order and the Stock Purchase Agreement. 8. This Order and the Stock Purchase Agreement shall be binding on any trustee appointed in the Debtors' Chapter 11 cases and on any trustee appointed or elected in any Chapter 7 case to which the Debtors' Chapter 11 cases may be converted. 9. Empire is authorized and directed to take all actions necessary to consummate the Stock Purchase Agreement, including but not limited to, execution and delivery of all additional instruments and documents that may be reasonably necessary or desirable to implement the Stock Purchase Agreement, and otherwise perform under, consummate, and implement the Stock Purchase Agreement. 10. The acquisition by Purchaser under the Stock Purchase Agreement constitutes a purchase in good faith and for fair value within the meaning of section 363(m) of the Bankruptcy Code and Purchaser is entitled to the protections of section 363(m) of the Bankruptcy Code. 11. The sale approved by this Order is not subject to avoidance under section 363(n) of the Bankruptcy Code. 12. The notice provided by the Debtors to all persons entitled to receive such notice was adequate and in compliance with this Court's order of January 3, 2001, the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and this Court's Local Bankruptcy Rules. 13. As allowed by Federal Rules of Bankruptcy Procedure 6004(g) and 8005, and notwithstanding Federal Rule of Bankruptcy Procedure 7062, this Order shall be effective and enforceable immediately upon entry. 4 14. Unless otherwise defined herein, all capitalized terms used in this order shall have the same meaning and definitions assigned to such terms in the Sale Motion and the Stock Purchase Agreement. DONE AND ORDERED in West Palm Beach, Florida on January 17, 2001. /s/Paul G. Hyman ------------------------------ HONORABLE PAUL G. HYMAN UNITED STATES BANKRUPTCY JUDGE Copies furnished to: Brian K. Gart, Esq. (Attorney Gart is directed to serve conformed copies of this Order upon all parties on the Master Service List immediately upon receipt thereof, and to file a Certificate of Service with the Court confirming such service.) EX-99.2 3 0003.txt STOCK PURCHASE AGREEMENT EXHIBIT 99.2 STOCK PURCHASE AGREEMENT Dated as of January , 2001 By and Among EMPIRE OF CAROLINA, INC., as Seller and APPLE SPORTS ACQUISITION, INC., DORSON SPORTS ACQUISITION, INC., and APPLE SHOES ACQUISITION, INC., as Buyers STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT dated this 18TH day of January, 2001, by and between EMPIRE OF CAROLINA, Inc. a Florida corporation, with offices at 5150 Linton Boulevard, Delray Beach, Fla. 33484 ("Seller"); and APPLE SPORTS ACQUISITION, INC. ("Apple Acquisition"), DORSON SPORTS ACQUISITION, INC. ("Dorson Acquisition"); and APPLE SHOES ACQUISITION, INC. ("Golf Acquisition") each a New York corporation, with offices at 1 Roebling Court, Ronkonkoma, New York 11797. Apple Acquisition and Dorson Acquisition and Golf Acquisition are herein sometimes collectively referred to as "Buyer". RECITALS -------- A. On November 17, 2000, Seller and Empire Industries, Inc. filed a voluntary petition pursuant to Chapter 11 of 11 U.S.C.ss.101 et seq. (the "Bankruptcy Code") with the United States Bankruptcy Court for the Southern District of Florida ("Bankruptcy Court"), which case bears the case numbers 00-35179 and 00-35180 - BKC- PGH (collectively, the "Cases"). B. Seller represents and warrants that it is the beneficial and record owner of all of the issued and outstanding shares of capital stock of each of the following New York corporations: (1) Apple Sports, Inc. ("Apple Sports") , Dorson Sports, Inc. ("Dorson Sports") and Apple Golf Shoes, Inc.("Apple Golf") (Apple Sports, Dorson Sports and Apple Golf are herein collectively referred to as the "Acquired Companies", and each as an "Acquired Company"). C. Seller is the licensee under certain Trademark Licensing Agreement between Pacific Cycle, LLC and Seller for the use of the Mongoose (R) trademark (the"Mongoose License") pursuant to which Dorson Sports, Inc. sells and distributes snowboards, skateboards and related products bearing the Mongoose(R) trademark. D. Apple Sports Inc. and Apple Golf Shoes, Inc. are parties to a Trademark License Agreement between Wilson Sporting Goods Co. and Apple Sports Inc. and Apple Golf Shoes, Inc pursuant to which each of the foregoing entities are entitled to, inter alia, manufacture and distribute golf shoes and accessories bearing the Wilson(R)trademark. (the"Wilson License") (the "Mongoose License" and the "Wilson License" are hereinafter referred to as the "Licenses"). E. Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, in a contemporaneous single transaction pursuant to Sections 363(b) and (f) of the Bankruptcy Code, all of the issued and outstanding shares of capital stock of the Acquired Companies as well as Seller's interests in the Licenses as follows: (i) Seller shall convey to Apple Acquisition to all of the issued and outstanding shares of Apple Sports: (ii) Seller shall convey to Dorson Acquisition all of the issued and outstanding shares of Dorson Sports; (iii) Seller shall convey to Apple Golf Acquisition all of the issued and outstanding shares of capital stock of Apple Golf; (iv) Seller shall obtain, in writing, all necessary consents from Wilson Sporting Goods Co. to the assignment of the Wilson License to the corporations constituting Buyer as they may request prior to Closing and (v) Seller shall, pursuant to Section 365 of the Bankruptcy Code, assign to the corporations constituting Buyer as they may request prior to Closing, all of Seller's rights and interests under the Mongoose License, all as hereinafter more particularly set forth. F. Congress Financial Corporation (Central) ("Congress"), Finova Capital Corporation ("Finova") and LaSalle National Bank ("LaSalle") ("Congress", "Finova" and "LaSalle" are collectively referred to hereinafter as the "Banks") hold security interests in the Assets to be acquired hereunder as well as continuing unconditional guaranties made by Apple Sports, Inc., Apple Shoes, Inc. and Dorson Sports, Inc. with respect to the obligations of Seller to the Banks. The Banks also hold a guaranty from Empire Industries, Inc., with respect to the obligations of the Acquired Companies to the Banks. G. In accordance with the Interim Order (as hereinafter defined) dated January 3, 2001, the Bankruptcy Court scheduled a hearing to consider the motion of Seller to sell all of the outstanding stock of Dorson Sports Inc., Apple Sports, Inc. and Apple Golf Shoes, Inc. to Buyer free and clear of all liens, claims and encumbrances, to assume and assign certain executory contracts, establish bidding and sales procedures and approve a break-up fee in favor of Buyer all on the terms set forth in the Interim Order. H. At the election of Buyer, subsequent to the Closing (hereinafter referred to), the Buyer is contemplating the following merger transactions pursuant to the provisions of a separate agreement(s), (i) Apple Sports, Inc. may be merged into Apple Acquisition, Inc.; (ii) Dorson Sports, Inc. may be merged into Dorson Acquisition, Inc. and (iii) Apple Golf Shoes, Inc. may be merged into Apple Shoes Acquisitions, Inc. NOW, THEREFORE, in consideration of the foregoing recitals, the mutual representations, warranties, covenants and agreements herein set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I --------- DEFINITIONS ----------- 1.1 Definitions: For all purposes of this Agreement, except as otherwise expressly provided, all accounting terms shall have the meanings assigned under generally accepted accounting principles, (iii) all references in this Agreement to designated "Articles," "Sections," "Subsections" and other subdivisions are to the designated Articles, Sections, Subsections and other subdivisions of the body of this Agreement, (iv) all references in this Agreement to "Exhibits" are to the Exhibits attached to this Agreement, (v) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, and (vi) unless the context requires otherwise, the words "herein," "hereof" and "hereunder," and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Subsection or other subdivision. As used in this Agreement and Exhibits, the following additional definitions shall apply: "Agreement" means this Stock Purchase Agreement by and between Buyer and Seller, as the same may be amended or supplemented in a writing signed by duly authorized representatives of both parties, together with the Exhibits hereto. "Apple Golf Stock" means all of the issued and outstanding shares of capital stock of Apple golf Shoes, Inc. "Apple Sports Stock" means all of the issued and outstanding shares of capital stock of Apple Sports, Inc. "Assets" means the Stock and Licenses. "Bank Debt" shall mean all of the indebtedness of the Acquired Companies to the Banks evidenced by that certain Amended, Restated and Consolidated Loan and Security Agreement, dated March 24, 1999 by and among the Acquired Companies and the Banks together with all other loan documents executed by the Acquired Companies in connection with such indebtedness, together with all liens and security interests security such indebtedness, except that Bank Debt shall expressly exclude the Guaranteed Indebtedness. "Bank Liens" means all liens and encumbrances securing the Bank Debt. "Banks" shall mean the collective reference to LaSalle National Bank, Congress Financial Corporation (Central) and Finovia Capital Corporation. "Break up Fee" shall mean the "Break up Fee" referred to in the Order. "Closing" means the consummation of the purchase and sale transaction contemplated by this Agreement and shall be deemed to have occurred effective as of 12:01 a.m. on the Closing Date. "Closing Date" means the day on which the Closing actually occurs. "Dorson Sports Stock" means all of the issued and outstanding shares of capital stock of Dorson Sports, Inc. "Empire Continuing Unconditional Guaranty" means the Continuing Unconditional Guaranty dated March 24, 1999 executed by Empire Industries, Inc. in favor of the Bank Group which guarantees the Bank Debt. "Final Sale Order" shall mean that final order to be entered in the Chapter 11 case of Seller authorizing Seller to sell the Assets to Buyer pursuant to the provisions of Sections 365 and 363(b) and (f) of the Bankruptcy Code complying with the provisions of clause (ii) of Section 7.1 hereof. Financing Loan" shall mean a loan in the principal amount of not less $10,000,000 made to Buyers by an institutional lender (the "Financing Banks")on terms satisfactory to Buyer in its sole discretion, for the purpose of providing purchase money financing of the Purchase of the Assets pursuant to this Agreement and working capital. "Guaranteed Indebtedness" means the indebtedness of Empire Industries, Inc. to the Bank Group guarantied by the Acquired Companies whether pursuant to that certain Continuing Unconditional Guaranty, dated March 9, 1999, executed by each of the Acquired Companies, or otherwise, together with all liens securing any such guaranty. "Interim Order" shall mean the Order Establishing Bidding Procedures, Approving Break-up Fee and Fixing Date for Final Hearing on Debtor's Motion to Sell All Outstanding Stock of the Apple Subsidiaries and Assume and Assign Executory Contract, as well as the related Notice of Sale, each dated January 3, 2001, issued by the Bankruptcy Court in the Chapter 11 case of Seller authorizing the sale of the Assets to Buyer in accordance with the provisions of the Agreement, subject to higher offers, if any, at a sale to be held on January 17, 2001. "Licenses" shall mean the Licenses referred to in the preamble to this Agreement. "Loan Value" shall mean the line balance as of the Closing Date with respect to the Bank Debt, plus the principal amount of all open Letters of Credit issued by the Banks for the benefit of the Acquired Companies, as defined the Order (computed consistently with prior practice). "Purchase Price" has the meaning set forth in Section 3.1. "Stock" means all of the issued and outstanding shares of capital stock of all of the Acquired Companies. ARTICLE II ---------- SALE AND PURCHASE ----------------- 2.1 Sale of Stock and Licenses: Subject to the terms and provisions of this Agreement, in a single contemporaneous transaction, Seller shall, at the Closing, (A) sell, assign, transfer and convey the Stock to Buyer, and Buyer shall then purchase and acquire the Stock from Seller, as follows: (i) Apple Acquisition shall acquire the Apple Sports Stock; (ii) Dorson Acquisition shall acquire the Dorson Sports Stock (iii) Apple Golf Acquisition shall acquire the Apple Golf Stock, (B)Seller shall obtain, in writing, all necessary consents from Wilson Sporting Goods Co. to the assignment of the Wilson License to the corporations constituting Buyer at Closing and (C) Seller shall assign to the Buyer, all of Sellers rights, as licensee under the Mongoose License pursuant to the provisions of Sections 363 (b) and (f) of the Bankruptcy Code and the Stock and the rights of Seller under the Licenses (collectively, the "Assets") shall on the Closing be free and clear of any liens, charges, taxes, encumbrances, equities, claims, pledges, security interests and options of whatever nature, other than liens securing the Bank Debt. ARTICLE III ----------- PURCHASE PRICE -------------- 3.1 Purchase Price: The purchase price for the Assets (the "Purchase Price") shall be equal to the sum of (A) the Loan Value as of the Closing Date plus and (B) $2,000,000. The Purchase Price shall be paid by Buyer as follows: (i) $150,000 (including any accrued interest thereon, the "Deposit"), which shall be placed in escrow with Seller's counsel, as "Escrowee," at such time as Buyers shall have received a commitment (the "Commitment") acceptable to Buyers in their sole discretion for bank financing of the transactions contemplated hereby and working capital (the "Bank Financing") in amount not lower than $10,000,000 and (ii) the balance of the Purchase Price shall be paid at Closing via wire transfer in immediately available funds to the account designated in writing by Seller to the Buyer; provided, however, that if the Banks shall be providing the financing for the transactions contemplated hereby, the balance of the Purchase Price shall be paid at closing as follows: (i) the portion of the Purchase price equal to the Loan Value shall be paid by Buyer, consummating the transaction without release of the Bank Debt and (ii) the payment of $2,000,000 less any Deposit at Closing via wire transfer in immediately available funds to the account designated in writing by Seller to Buyer. The Escrowee shall hold the Deposit in escrow until Closing or earlier termination of this Agreement. At Closing, the Deposit shall be delivered to Seller and if this Agreement shall be terminated prior to Closing, the Escrowee shall remit the Deposit in accordance with Section 8.2 hereof. 3.2 Allocation of Purchase Price: The Purchase Price shall be allocated by Buyer and Seller among the Assets in accordance with the following percentages: (i) 60% for the Apple Sports Stock; (ii) 20 % for the Dorson Sports Stock (iii) 5% for the Apple Golf Stock and (iv) 15% for the Mongoose License. Such allocation shall be conclusive and binding for all purposes, and the parties shall file all income or other tax returns in a manner consistent with such allocation. 3.3 Tax Election: The parties hereto agree that upon the written request of Buyer, they will each make the election permitted by Section 338 (h)(10) of the Internal Revenue Code of 1986, as amended, in connection with the transactions contemplated by this Agreement and to take all necessary actions to implement such election. ARTICLE IV ---------- CLOSING ------- 4.1 Closing Date: The Closing under this Agreement (the "Closing) shall be at the offices of Berger, Davis & Singerman, 350 East Las Olas Boulevard, Suite 1000, Fort Lauderdale, Florida, at 10:00 a.m. one Business day after the Final Sale Order is entered in the docket of the Bankruptcy Court. Buyer shall have the right to terminate this Agreement by written notice to Seller given at any time after January 19, 2001 if the Closing shall not have theretofore been consummated. At the Closing, Seller shall execute and deliver or cause to be executed and delivered to Buyers, at Seller's cost and expense, the following: The Original Stock Certificates evidencing all of the issued and outstanding shares of the capital stock of the Acquired Companies, with appropriate stock powers duly executed and notarized and, in the reasonable opinion of Buyer's counsel, in proper form for transfer (or, if such Original Stock Certificates can not be located, lost stock affidavits in form and substance reasonably acceptable to Buyer; such bills of sale, assignments, (in recordable form) and other instruments of transfer as shall be necessary or required in the reasonable opinion of Buyers Counsel, to sell, assign and transfer to Buyer all Seller's rights, and interests in and to the Licenses; A Certified Copy of the Final Sale Order complying with the provisions of subdivision (ii) of Section 7.1 hereof; The written consent of the Licensor under each of the Wilson License and the Mongoose License to the consummation of the assignment thereof contemplated by this Agreement, in form reasonably satisfactory to Buyer's counsel; A satisfaction and release of liens with respect to the Guaranteed Debt; A release of the Unconditional Guaranty Agreement evidencing the Guaranteed Debt; A good standing certificate and certified articles of incorporation issued by the Secretary of State of the State of Incorporation for Seller; An incumbency certificate for Seller; A corporate resolution certified by an authorized officer of Seller; authorizing the consummation of the transactions described in this Agreement; and The Empire Continuing Unconditional Guaranty shall be released. such other termination statements, instruments of transfer, agreements, certificates and other documents as Buyer shall reasonably request. 4.2 Buyer Closing Documents: At the Closing, the Buyer shall execute and deliver to Seller: (i) the payment of the remaining portion of the Purchase Price via wire transfer as provided in Section 3.1(ii) hereof; (ii) A good standing certificate and certified articles of incorporation issued by the Secretary of State of the State of incorporation for each corporation comprising the Buyer; (iii) An incumbency certificate for each corporation comprising the Buyer; (iv) A corporate resolution certified by an authorized officer of each corporation comprising the Buyer authorizing the consummation of the transaction described in this Agreement; (v) Such other stock delivery receipts, certificates and other documents as Seller shall reasonably request. 4.3 Proceedings: All proceedings taken and all documents executed and delivered by the parties on the Closing Date shall be deemed to have been taken and executed simultaneously, and no proceeding shall be deemed taken nor any document executed or delivered until all have been taken, executed and delivered, it being expressly agreed that this transaction is an all or none transaction involving the purchase by Buyer of all of the Assets, if any of the Assets are to be purchased. 4.4 Cure Costs. Buyer shall be responsible for payment, in the ordinary course of its business, for the license fees, if any, due with respect to the Mongoose and Wilson Licenses for the fourth quarter of the calendar year 2000. ARTICLE V --------- REPRESENTATIONS AND WARRANTIES OF SELLER ---------------------------------------- Seller represents and warrants to Buyer, with the understanding that Buyer is relying on these representations and warranties in entering into this Agreement, as follows: 5.1 Organization and Good Standing: Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. All of the authorized capital stock of each of the Acquired Companies, which consists solely of common stock, is owned beneficially and of record by Seller. There is outstanding no security or instrument convertible into or exchangeable for capital stock of any Acquired Companies. 5.2 Authority Relative to Agreements, etc.: The Seller has the requisite power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance by Seller of this Agreement and each such agreement, document, certificate or instrument, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action and (i) do not require the consent, waiver, approval, license or authorization of any person, entity, or public authority (provided however, that no representation or warranty is given with respect to the right of Seller to assign the Mongoose License or any consent required with respect to such assignment), (ii) do not violate, with or without the giving of notice and/or the passage of time, any material law, rule, or regulation, and (iii) will not conflict (in any material respect) with or result in a material breach or termination of any provision of, or constitute a material default or give rise to a right of termination or acceleration under, or pursuant to any corporate charter, by-law, mortgage, deed of trust, indenture, written or oral, or agreement, written or oral, or instrument, or any Order, law, rule, regulation or any other restriction of any kind or character, to which Seller is a party or by which Seller, or any of the Acquired Companies or any of its assets may be bound, or result in the creation of any lien, charge or encumbrance upon the Stock (provided however, that no representation or warranty is given with respect to the right of Seller to assign the Mongoose License or any consent required with respect thereto). 5.3 Effect of Agreement: This Agreement has been duly executed and delivered by Seller and constitutes, and each other agreement, document, certificate or instrument contemplated by this Agreement when executed and delivered hereunder shall constitute, a legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, amortization or similar laws affecting the enforcement of creditors' rights generally, and by general equity principles (whether enforcement is sought in proceedings in equity or at law). 5.4 Title: Subject to the proviso set forth at the end of Section 2.1 hereof, the Acquired Companies have good, valid and marketable title to the their respective assets, free and clear of all mortgages, liens, pledges, security interests, charges, claims, restrictions and other encumbrances and defects of title of any nature whatsoever except for the Bank Debt (if the provision in Section 3.1 shall be applicable); however all of the agreements of the Acquired Companies, as well as all of the liens and encumbrances evidencing or securing the Guaranteed Debt shall be released prior to Closing. 5.5 No Outstanding Decrees: There are no Orders of any federal, state, county, municipal, foreign or other government or of any court, department, commission, board, bureau, agency or other instrumentality thereof outstanding against, or relating or applicable to Seller or to any of the Acquired Companies or the Assets, other than the Cases (in the case of Seller) and the Final Sale Order. 5.6 Litigation and Claims: There is no action, suit, legal or administrative proceeding, arbitration, investigation or other proceeding or claim pending or, to the knowledge of Seller, threatened against, or affecting Seller or Seller's assets that, if adversely determined, might reasonably be expected to have a material adverse effect on the Stock, or Seller's ability to perform this Agreement or any aspect of the transactions contemplated by this Agreement. 5.7 Taxes: To Seller's knowledge, there are no unpaid federal, state or local Taxes and there are no known or proposed deficiency assessments in respect of any federal, state, county, municipal or other tax that might affect any Acquired Company. 5.8 No Brokers or Finders: Neither Seller nor any of its directors, officers, employees or agents have retained, employed or used any broker or finder in connection with the transactions provided for herein or the negotiation thereof. 5.9 AS IS, WHERE IS, WITH ALL FAULTS: EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE FINAL SALE ORDER OR ANY DOCUMENTS OR CERTIFICATES EXECUTED BY SELLER IN CONNECTION WITH THE CLOSING HEREUNDER (COLLECTIVELY, THE "TRANSACTION DOCUMENTS"), SELLER HEREBY SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (I) THE NATURE AND CONDITION OF ANY OF THE ASSETS, OR ANY OF THE ASSETS OR BUSINESS OF THE ACQUIRED COMPANIES AND THE SUITABILITY THEREOF FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY ELECT TO CONDUCT THEREON, AND (II) THE COMPLIANCE OF THE ASSETS, OR ANY OF THE BUSINESS OR ASSETS OF THE ACQUIRED COMPANIES OR THEIR RESPECTIVE OPERATION WITH ANY LAWS OR ANY ENVIRONMENTAL LAWS. BUYER ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN THE TRANSACTION DOCUMENTS, BUYER IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE ASSETS, THE BUSINESS OF THE ACQUIRED COMPANIES AND THE ASSETS OF THE ACQUIRED COMPANIES AND HAVING FULLY INSPECTED THE ASSETS, THE BUSINESS OF THE ACQUIRED COMPANIES AND THE ASSETS OF THE ACQUIRED COMPANIES, IS THOROUGHLY FAMILIAR WITH THE CONDITION OF THE ASSETS, THE BUSINESS OF THE ACQUIRED COMPANIES AND THE ASSETS OF THE ACQUIRED COMPANIES AND HEREBY ACCEPTS THE STOCK, THE LICENSES, AND THE ACQUIRED COMPANIES IN THEIR "AS IS, WHERE IS, WITH ALL FAULTS CONDITION." EXCEPT AS SET FORTH IN THE TRANSACTION DOCUMENTS, BUYER EXPRESSLY ACKNOWLEDGES THAT SELLER HAS NOT MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, WHATSOEVER WITH RESPECT TO ANY OF THE ASSETS, THE BUSINESS OF THE ACQUIRED COMPANIES OR THE ASSETS OF THE ACQUIRED COMPANIES, INCLUDING WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY REGARDING CONDITION, HABITABILITY, SUITABILITY, QUALITY OF CONSTRUCTION, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. ARTICLE VI ------------------- REPRESENTATIONS AND WARRANTIES OF BUYER --------------------------------------- Buyer hereby represents and warrants to Seller as follows: 6.1 Organization and Good Standing: Each corporation constituting Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the State of New York. 6.2 Authority Relative to Agreement, etc.: Buyer has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and each agreement, document or instrument required to be delivered hereby. The execution, delivery and the performance by Buyer of this Agreement have been authorized by all necessary action and (I) do not require the consent, waiver, approval, license or authorization of any person, entity, or public authority, (ii) do not violate, with or without the giving of notice and/or the passage of time, any provision of law, and (iii) will not conflict with or result in a breach or termination of any provision of, or constitute a default or give rise to a right of termination or acceleration under, any corporate charter, by-law, mortgage, deed of trust, indenture or other agreement or instrument or any order, judgment, decree, statute, regulation or any other restriction of any kind or character, to which Buyer is a party or by which any of its assets or properties may be bound, or result in the creation of any lien, charge or encumbrance upon any of the properties or assets of Buyer. 6.3 No Brokers or Finders: Neither Buyer nor any of their respective, directors, officers, employees or agents have retained, employed or used any broker or finder in connection with the transactions provided for herein or the negotiation thereof. ARTICLE VII ----------- CONDITIONS OF CLOSING --------------------- 7.1 The obligation of Buyer to consummate the transactions contemplated hereby are subject, at the option of Buyer, to the following conditions: (1) All representations and warranties of Seller contained in this Agreement shall be accurate when made, in all material respects, and, in addition, shall be accurate, in all material respects, as of the Closing as if made and given on and as of the Closing Date, and the Seller shall not have theretofore defaulted in the performance of any of its obligations hereunder. (2) The Bankruptcy Court shall have delivered the Final Sale Order reasonably satisfactory to Buyer, which shall inter alia (1) approve all of the terms and provisions of this Agreement (2) provide that the sale of the Stock and transfer of the Mongoose License shall be free and clear of any and all liens, clauses and encumbrances pursuant to Section 363(b) and (f) of the Bankruptcy Code; (3) provide that, except as may be expressly provided for in the proviso at the end of Section 2.1 hereof, all obligations of the Acquired Companies, as well as all liens on any of their respective assets relating to or securing the Bank Debt shall be released upon payment of the balance of the Purchase Price.; (4) provide that the Mongoose License has been assigned to Buyer pursuant to Section 365(b) of the Bankruptcy Code, that any necessary approvals of the Licensor(s) have been obtained, and that any and all defaults under the Mongoose License has been cured through and including the Closing Date and (5) that the Buyer is a "good faith" purchaser entitled to the protections of Section 363(m) of the Bankruptcy Code; (6) that Seller has complied with all applicable provisions of the Bankruptcy Code and all of the local rules of this Bankruptcy Court, and (or) that all creditors and that all parties in interest and all parties that have an interest in the Assets have been notified of the sale and had an opportunity to file objection thereto. (3) The Financing Bank shall have closed on the disbursement of the Financing Loan. (4) Upon payment of the balance of the Purchase Price at Closing the Acquired Companies shall have been fully released from any and all obligations relating to the Guaranteed Indebtedness and all liens or security interests encumbering the Stock or any Assets thereto for securing the Guaranteed Indebtedness shall have been released, and the Empire Continuing Unconditional Guaranty shall be released. (5) La Salle Bank, as administrative agent for the Banks, shall have certified the Loan Balance to the Buyer as of the Closing Date. (6) Since the date of this Agreement, no event shall have occurred which can be reasonably expected to result in any materially adverse change in the business, properties, operations, prospects or assets, or in the condition, financial or otherwise of the Acquired Companies. (7) The Seller shall have delivered the other Closing Documents referred to in Section 4.1 hereof. ARTICLE VIII ------------ COVENANTS AND AGREEMENTS OF SELLER ---------------------------------- 8.1 The Seller covenants and agrees that prior to Closing: During the period prior to the Closing, Seller shall give to Buyer, its counsel, accountants and other representatives (a) access during normal business hours to all of the properties, books, records, contracts and documents of Acquired Companies for the purpose of such inspection, investigation and testing as Buyer deems appropriate (and Seller shall furnish or cause to be furnished to Buyer and its representatives all information with respect to the business and affairs of Acquired Companies as Buyer may request); (b) access to employees, agents and representatives for the purposes of such meetings and communications as Buyer reasonably desires; and (c) with the prior consent of Seller in each instance (which consent shall not be unreasonably withheld), access to vendors, customers, manufacturers of its machinery and equipment, and others having business dealings with the Acquired Companies. Buyer shall indemnify and hold Seller, each of the Acquired Companies, and their respective shareholders, directors, officers and agents (collectively, the "Seller Group") harmless from and against any and all claims, demands, causes of action, losses, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees and disbursements), suffered or incurred by the Seller Group and arising out of or in connection with (i) Buyer or its representatives entry upon the property or business of the Acquired Companies, (ii) any investigations or other activities conducted thereon by Buyer or Buyer's representatives, (iii) any liens or other encumbrances filed or recorded against any asset of Seller or the Acquired Companies as a consequence of the investigations or any and all other activities undertaken by Buyer or Buyer's representatives, and/or (iv) any and all other activities undertaken by Buyer or Buyer's representatives with respect to the business or assets of the Acquired Companies. The foregoing indemnification by Buyer shall survive the Closing for all purposes. Seller will conduct the business of the Acquired Companies only in the ordinary course as theretofore conducted and use commercially reasonable efforts to maintain and preserve the business operations of the Acquired Companies and to conduct their affairs as heretofore conducted so as to preserve the accuracy of the representations and warranties. Seller will use all commercially reasonable efforts to obtain satisfaction if the conditions of closing set forth in Article VII hereof. Seller will not permit the Loan Balance by the Acquired Companies to increase beyond the Loan Balance in existence on the date hereof. 8.2 Break up Fee and Deposit. If Buyer shall have theretofore made payment of the Deposit to Escrowee, and if for any reason the Assets are sold to an entity other than Buyer, the Seller (in addition to Escrowee's returning the Deposit to Buyer) shall immediately make payment of the Break up Fee to Buyer, as a liquidated amount in reimbursement of Buyer's expenses. Upon any termination of this Agreement prior to Closing, the Deposit shall be remitted to Buyer, unless Agreement shall be terminated by reason of the failure of Buyer to consummate the sale of the Assets where all of the conditions precedent to such obligation of Buyer shall have been satisfied, in which circumstances Seller may retain the Deposit as liquidated damages hereunder. ARTICLE IX ---------- SURVIVAL OF REPRESENTATIONS AND FURTHER ASSURANCES -------------------------------------------------- 9.1 General Survival: ---------------- Notwithstanding any investigation or audit conducted before or after the Closing Date, each party shall be entitled to rely upon the representations and warranties in this Agreement to the extent hereinafter set forth. Each of the parties hereto agree that the representations and warranties of the other contained herein shall survive for the period of time represented by three months following the expiration of applicable statute of limitations to claims asserted by a party concerning such matters. 9.2 Further Assurances: ------------------ If, at any time after the Closing, Buyer shall consider or be advised that any further assignments, conveyances, certificates, filings, instruments or documents or any other things are necessary or desirable to vest, perfect or confirm in Buyer title to the Assets, or to consummate any of the transactions contemplated by this Agreement, Seller shall, upon request and at Buyer's expense, promptly execute and deliver all such proper deeds, assignments, certificates, filings, instruments and documents and do all things reasonably necessary and proper to vest, perfect or confirm title in Buyer and to otherwise carry out the purposes of this Agreement. ARTICLE X --------- TERMINATION ----------- 10.1. Right of Termination Without Breach: Subject to the provisions of Section 10.3, if applicable, this Agreement may be terminated without further liability of any party at any time prior to the Closing, except the return of the Deposit to Buyer: 1. by mutual written agreement of Buyer and Seller; or 2. by Buyer, if the Final Sale Order has not entered in the docket of the Bankruptcy Court on or before January 19, 2001; or 3. by Buyer, if all conditions to Buyer's obligations listed in Article VII have not been satisfied on or prior to January 19, 2001, or 4. by Buyer or Seller, if the Final Sale Order provides for a competing bidder to purchase the Assets and such bidder acquires the Assets pursuant to such Final Sale Order; or 5. by Seller, if the conditions listed in Article VII shall have been satisfied and Buyer fails to consummate the Closing under this Agreement on or prior to January 19, 2001. 10.2 Termination for Breach: i. Termination by Buyer. If there has been a material violation or breach by Seller of any of the agreements, representations or warranties contained in this Agreement which has not been waived in writing by Buyer, then Buyer may deliver written notice to Seller at any time prior to the Closing that such violation, breach, failure or wrongful termination attempt is continuing and may terminate this Agreement. In the event Buyer terminates this Agreement, then, in addition to any other liability of Seller to Buyer with respect to such termination, the Deposit shall be returned to Buyer. ii. Termination by Seller: If there has been a material violation or breach by Buyer of any of the agreements, representations or warranties contained in this Agreement which has not been waived in writing by Seller, then provided Seller shall not then be in default in the performance of any of its obligations hereunder, Seller may deliver written notice to Buyer at any time prior to the Closing that such violation, breach, failure or wrongful termination attempt is continuing and may terminate this Agreement. Upon termination of this Agreement by Seller as set forth above, the Deposit shall be nonrefundable and shall be retained by Seller as liquidated damages to compensate Seller for the damages caused by Buyer for Buyer's breach of this Agreement. 10.3 Break-Up Fee: In consideration of Buyer's entry into this Agreement, and in recognition of the benefits which it provides Seller in seeking to sell the business for the highest and best offer, Seller agrees (as Buyer's sole and exclusive remedy under this Agreement other than return of the Deposit) to pay Buyer the Break-Up Fee if the Final Sale Order provides for another bidder to purchase all or substantially all of the stock or assets of the Acquired Companies, which Break-Up Fee shall be paid to Buyer when and as provided for in the Final Sale Order, if and only if, the closing of the sale of the stock or assets (or a sale of substantially all of the stock or assets of the Acquired Companies) to such other bidder in a transaction that is approved by the Bankruptcy Court (such event, the "Other Sale Event"). In the event the Closing under this Agreement fails to occur for any reason other than an Other Sale Event, then, no Break-Up Fee whatsoever shall payable to Buyer by Seller. This Article 10 and Company's obligation to pay the Break-Up Fee shall survive the termination of this Agreement. Payment of the Break-Up Fee shall be considered a superiority administrative expense senior to all other administrative expense claims under Sections 503(b) and 507(a)(1) of the Bankruptcy Code. ARTICLE XI ---------- MISCELLANEOUS ------------- 11.1 Waivers and Amendments: ---------------------- This Agreement may be amended, modified or supplemented only by a written instrument executed by the parties hereto. The provisions of this Agreement may be waived only by an instrument in writing executed by the party granting the waiver. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. 11.2 Fees and Expenses: Except as otherwise expressly provided in this Agreement, Buyer shall be responsible for all its fees and expenses incurred in connection with this transaction, and Seller shall be responsible for all its fees and expenses incurred in connection with this transaction. 11.3 Notices: All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given or made: if by hand, immediately upon delivery; if by telex, telecopier or similar electronic device, two (2) hours after sending, provided it is sent on a business day between 9:00 a.m. and 4:00 p.m., but if not, then immediately upon the beginning of the first business day after being sent; if by Federal Express, Express Mail or any other overnight delivery service, on the first business day after dispatch; and if mailed by certified mail, return receipt requested, two (2) business days after delivery or the return of the notice to sender marked "unclaimed". All notices, requests, and demands are to be given or made to the parties at the following addresses (or to such other address as either party may designate by notice in accordance with the provisions of this paragraph): If to Buyer: Apple Sports Acquisition, Inc. Dorson Sports Acquisition Inc. Apple Shoes Acquisition Inc. c/o Apple Sports Inc. One Roebling Court Ronkonkoma, New York 11779 Attention: Tim Moran Telephone: (516) 585-5400 Telecopier: (516) 585-5778 with a copy to: Robinson Brog Leinwand Greene Genovese & Gluck P.C. 1345 Avenue of the Americas New York, New York 10105 Attention: Harvey Feldschreiber, Esq Telephone: (212) 603-0481 Telecopier: (212) 956-2164 If to Seller: Empire of Carolina, Inc. 4731 West Atlantic Avenue Suite B-1 Delray Beach, Florida 333945 Attention: President Telephone: (516) 498-4000 Telecopier: With a copy to: Greenberg Traurig, PA 515 East Las Olas Boulevard Fort Lauderdale, Florida 33301 Attention: Brian Gart, Esq. Telephone: (954) 768-8212 Telecopier: (954) 765-1477 11.4 Entire Agreement: The Letter Agreement and this Agreement and the schedules and exhibits hereto and the documents and instruments executed and delivered in connection herewith set forth the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede any prior negotiations, agreements, letters of intent, understandings or arrangements between the parties hereto with respect to the subject matter hereof. The Letter Agreement dated as of December 28, 2000 from Buyer to Seller is hereby terminated and is null and voice for all purposes. 11.5 Binding Effect; Benefits: This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto, or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 11.6 Non-Assignability: This Agreement and any rights and obligations pursuant hereto shall not be assignable by any party hereto without the prior written consent of the other party, except that the rights of Buyer hereunder shall inure to the benefit of the survivor corporation, as the case may be, with respect to the merger agreements referred to in recital "I" at the beginning of this Agreement. 11.7 Applicable Law; Venue; Jurisdiction: This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of New York, applicable to contracts made and to be enforced in such state. Seller and Buyer each hereby consent to the personal jurisdiction of the courts of the State of New York and the federal courts situated therein over any judicial proceeding under or that may otherwise arise out of this Agreement and agree not to contest venue for any such proceeding commenced in the courts of the State of New York in New York County or in the United States District Court for the Southern County District of New York. 11.8 No Benefit to Others: The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto, and their successors and assigns, and they shall not be construed as conferring any rights on any other persons. 11.9 Section and Other Headings: The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 11.10 Counterparts: This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.11 Joint and Several Liability of Buyer: Each of the corporations comprising "Buyer" shall be jointly and severally liable for all liabilities and obligations of Buyer under this Agreement for all purposes. The act of omission of any corporation comprising "Buyer" with respect to this Agreement shall legally bind each of the other corporations comprising "Buyer" for all purposes without the joinder of the other corporations. 11.12 Time is of Essence: Time if of the essence in the performance of this Agreement. This section may be waived only in a writing expressly referring hereto. 11.13 Conflict: To the extent a conflict exists between the Final Sale Order and this Agreement, the terms and provisions of the Final Sale Order shall control for all purposes. 11.14 Interim Agreements. In connection this Stock Purchase Agreement, Seller and Buyer hereby confirm the following understandings and agreements relating to the Acquired Companies providing, on an interim basis, certain services for Seller "Post- Closing" as follows: (A) Rose Ann Ferraro an employee of the Acquired Companies will continue to provide reasonable (not more than 3 hrs per day) clerical assistance to the Seller until not later than January 27, 2001. (B) File cabinets belonging to Seller that are currently stored in the warehouse of the Acquired Companies may be continued to be stored in such warehouse, at the sole risk of Seller, until not later than 120 days from the date hereof; provided that if not removed at or prior to end of 120 days, same may be placed in an independent warehouse under Seller's name with Buyer paying the first 30 days of the warehousing fee. (C) Office space in premises leased by the Acquired Companies heretofore used by Seller for such purposes, may continue to be used by the Accounts Receivable temp employed by and at the sole expense of Seller, until not later than February 28, 2001. Thereafter, at the sole cost of Seller, such use shall terminate and all paperwork not theretofore removed by Seller will be placed in one back office for storage, at Seller's risk. Although Buyer would appreciate removal of all such paperwork as soon as possible, it will permit storage in the back office to continue until not later than 120 days after the date hereof. (D) The EDI system benefiting Seller which is run by Jasmine Constantino, may remain on premises of the Acquired Companies until not later than February 28, 2001. (E) Buyer will, at no out of pocket cost to Seller or any Acquired Companies, permit the Buying Department of the Acquired Companies to render reasonable assistance with landed product to Seller's Florida offices until not later than 30 days after the date hereof; provided no out of pocket cost to the Acquired Companies shall be incurred as a result thereof. (F) Tom McDougall ("Tom") will continue after Closing as an employee of the Acquired Companies. In order to assist Seller during the transition, Buyer will permit Tom to render assistance to Seller (not more than 4 hours per day) at Seller's request for a period not to exceed 90 days from the date hereof. The services being provided by Tom will be without charge to Seller for the first 30 days after the date hereof , and at the rate of $100/hr. during the next 60 days, which shall be payable to Seller to the Acquired Companies on demand. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. EMPIRE OF CAROLINA, INC. By: /s/ James J. Pinto ------------------------------------ Name: James J. Pinto Title: Acting Executive Officer APPLE SPORTS ACQUISITION, INC. By: /s/ Timothy Moran ------------------------------------ Name: Timothy Moran Title: President DORSON SPORTS ACQUISITION, INC. By: /s/ Timothy Moran ------------------------------------ Name: Timothy Moran Title: President APPLE SHOES ACQUISITION, INC. By: /s/ Timothy Moran ------------------------------------ Name: Timothy Moran Title: President EX-99.3 4 0004.txt PRESS RELEASE EXHIBIT 99.3 FOR IMMEDIATE RELEASE EMPIRE OF CAROLINA ANNOUNCES COMPLETED SALE OF THREE SUBSIDIARIES Delray Beach, FL; February 2, 2001 - Empire of Carolina, Inc. announced today that on January 18, 2001, it consummated the sale of the outstanding stock of three of its non-debtor subsidiaries, Dorson Sports, Inc., Apple Golf Shoes, Inc. and Apple Sports, Inc., for a purchase price totaling approximately $8 million. The purchase price was comprised of payment to Empire of approximately $2 million in cash and the repayment of approximately $6 million in bank loans. As a condition to the sale, the stock and assets of the subsidiaries were required to be free of all liens.. The purchasers were Dorson Sports Acquisition, Inc., Apple Shoes Acquisition, Inc. and Apple Sports Acquisition, Inc. In connection with the sale, Empire assigned to the purchasers all rights under an executory license agreement with Pacific Cycles, LLC for the use of the Mongoose(R)trademark and all rights under a license agreement with Wilson Sporting Goods Co. for the use of the Wilson(R)trademark. Timothy Moran, Empire's former CEO, is a principal of the purchasers. Also, in connection with the sale transaction, LaSalle National Bank, as agent for the Empire's lenders, agreed to release each of Apple Golf Shoes, Inc., Apple Sports, Inc. and Dorson Sports, Inc. from its guaranty of Empire Industries, Inc.'s bank credit facility and to release Empire Industries, Inc. from its guaranty of the bank credit facility extended to Apple Golf Shoes, Inc., Apple Sports, Inc. and Dorson Sports, Inc. The sale was preliminarily approved by the U.S. Bankruptcy Court on January 3, 2001, contingent upon receipt of higher bids. No higher bid was received and on January 17, 2001, the Court entered its Final Order approving the sale. Empire of Carolina, Inc. which designs, develops, manufactures and markets a broad range of consumer products including children's toys, and its subsidiary, Empire Industries, Inc., filed for reorganization under Chapter 11 on November 17, 2000 and has continued operations on a debtor-in-possession basis. This release contains certain forward-looking statements and information that are based on management's beliefs, as well as assumptions made by and information currently available to management, including management's plans and objectives. Such statements are subject to various risks and uncertainties. The Company's liquidity, capital resources, and results of operations may be affected from time to time by a number of factors and risks, including, but not limited to, the factors described in the Company's filings with the Securities and Exchange Commission; the ability of the Company to continue operations under debtor-in-possession financing; operate successfully under a Chapter 11 proceeding; obtain shipments and negotiate terms with vendors and service providers for current orders; fund and execute a new operating plan for the Company; attract and retain key executives and associates; meet competitive pressures which may affect the nature and viability of the Company's business strategy; generate cash flow; attract and retain customers; and manage its business notwithstanding potential adverse publicity. Certain of these as well as other risks and uncertainties are stated in more detail in the Company's Annual Report on Form 10-K. The Company undertakes no obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. CONTACT: President, Empire of Carolina, Inc., 631-585-5400. EX-99.4 5 0005.txt RELEASE OF GUARANTY RELEASE OF GUARANTY (Empire Loans) Reference is made to the Loan And Security Agreement (the "Loan Agreement") dated May 29, 1996 by and among BT COMMERCIAL CORPORATION ("BTCC"), as a lender, and as administrative agent ("Administrative Agent") for all "Lenders" (as hereinafter defined), with an office at 233 South Wacker Drive, Chicago, Illinois 60606, LASALLE NATIONAL BANK, a national banking association, as a lender ("LASALLE") and as collateral agent ("Collateral Agent") for all lenders with an address at 135 South LaSalle Street, Chicago, Illinois 60674, and EMPIRE INDUSTRIES, INC., a North Carolina corporation ("Borrower") as the same has been amended from time to time (including amendments contemporaneous with the execution of this Release of Guaranty), pursuant to which the Lenders granted credit and made loans to Borrower. LASALLE, is now Agent for itself, and as Agent for all Lenders that are parties to the Loan Agreement, which currently are LASALLE, CONGRESS FINANCIAL CORPORATION (CENTRAL) ("Congress"), and FINOVA CAPITAL CORPORATION ("FINOVA"). Pursuant to the Eighth Amendment to the Loan Agreement, dated March 9, 1999, APPLE SPORTS, INC. ("Apple"), One Roebling Court, Ronkonkoma, New York 11779, APPLE GOLF SHOES, INC. ("Golf'), One Roebling Court, Ronkonkoma, New York 11779, and DORSON SPORTS, INC. ("Dorson"), One Roebling Court, Ronkonkoma, New York 11779, each individually as a ("Guarantor") and collectively the "Guarantors", each then an affiliate of Borrower, executed and delivered to the Lenders, it's Guaranty of the indebtedness of the Borrower pursuant to the Loan Agreement by a Guaranty dated March 9, 1999 (the "Guaranty"). In conjunction with the sale of the capital stock and certain Assets of Apple, Golf and Dorson by Empire Industries, Inc. to Apple Sports Acquisition, Inc., Dorson Sports Acquisition, Inc. and Apple Shoes Acquisition, Inc., as authorized by the Order of the United States Bankruptcy Court for the Southern District of Florida, in Case Numbers 00-35179 and 00-35180-BKC-PGH dated January 17,2001 and the restructuring of the loans pursuant to the Loan Agreement, LASALLE as Agent for itself, CONGRESS, and FINOVA and any and all Lenders, hereby releases and discharges Guarantors and their subsidiaries from (i) any and all liability or responsibility under the Guaranty and (ii) from any and all liabilities of Guarantors and their subsidiaries, to the Agent or any of the Lenders evidencing or securing any indebtedness of Borrower, Empire of Carolina, Inc., and/or any of their respective affiliates (other than Guarantors); and the same are completely and finally, without recourse, discharged, satisfied and terminated and any Collateral securing any of the foregoing released obligations is hereby released; provided, however, that this Release of Guaranty has no effect whatsoever on the obligations of the Guarantors in favor of the Lenders, under the Amended, Restated and Consolidated Loan and Security Agreement dated March 24, 1999 by and among Lenders and the Guarantors, as Borrowers, as amended. LASALLE represents, pursuant to the Loan Agreements and other related loan documents, that it is authorized to execute and deliver this Release of Guaranty on behalf of all Lenders. IN WITNESS THEREOF, LASALLE has executed and delivered this Release of Guaranty on behalf of and as Agent for all Lenders. LASALLE NATIONAL BANK, N.A. By: /s/ Robert Corsentino --------------------- Robert Corsentino Name SVP - ------------------------ Title EX-99.5 6 0006.txt RELEASE OF GUARANTY RELEASE OF GUARANTY (Apple Group Loans) Reference is made to the Amended, Restated And Consolidated Loan And Security Agreement ("Loan Agreement") dated March 24, 1999, by and among CONGRESS FINANCIAL CORPORATION (CENTRAL) ("Congress"), as a Lender, with an office at 150 South Wacker Drive, Suite 2200, Chicago, Illinois 60606. FINOVA CAPITAL CORPORATION ("FINOVA"), as a Lender, with an office at 311 South Wacker Drive, Suite 4100, Chicago, Illinois 60606, LASALLE NATIONAL BANK, a national banking association (in its individual capacity, "LaSalle"), 135 South LaSalle Street, Chicago, Illinois 60603-4 105, for itself, and as Agent for all Lenders that are parties to the Loan Agreement, as the same has been amended from time to time, (including amendments contemporaneous with the execution of this Release of Guaranty), pursuant to which the Lenders granted credit and made loans to APPLE SPORTS, INC. ("Apple"), One Roebling Court, Ronkonkoma, New York 11779, APPLE GOLF SHOES, INC. ("Golf'), One Roebling Court, Ronkonkoma, New York 11779, and DORSON SPORTS, INC. ("Dorson"), One Roebling Court, Ronkonkoma, New York 11779. Apple, Golf and Dorson are sometimes referred to herein individually as a "Borrower" and collectively as "Borrowers". Pursuant to the Loan Agreement, EMPIRE INDUSTRIES, INC., a North Carolina corporation ("Guarantor"), then an affiliate of Borrowers, executed and delivered to the Lenders, a Guaranty of the indebtedness of the Borrowers pursuant to the Loan Agreement dated March 24, 1999 (the "Guaranty"). In conjunction with the sale of the capital stock and certain Assets of Apple, Golf and Dorson by Empire Industries, Inc. to Apple Sports Acquisition, Inc. Dorson Sports Acquisition, Inc. and Apple Shoes Acquisition, Inc., as authorized by the Order of the United States Bankruptcy Court for the Southern District of Florida, in Case Numbers 00-35 179 and 00-35 180 - BKC-PGH dated January 17, 2001 and the restructuring of the loans pursuant to the Loan Agreement, LaSalle as Agent for itself, CONGRESS, and FINOVA and any and all Lenders, hereby releases and discharges Guarantors (i) from any and all liability or responsibility under the Guaranty and (ii) from any and all other liabilities of Guarantors to the Agent or any of the Lenders evidencing or securing any indebtedness of Borrower, and/or any of the respective affiliates (other than Guarantors); and the same are completely and finally, without recourse, discharged, satisfied and terminated and any Collateral securing such of the foregoing released obligations is hereby released; provided, however, that this Release of Guaranty has no effect whatsoever on the other obligations of Empire Industries, Inc., in favor of the Lenders, including under the Loan and Security Agreement dated May 26, 1996, by and between BTCC, as a lender, and as administrative agent ("Administrative Agent") for all "Lenders" (as hereinafter defined), with an office at 233 South Wacker Drive, Chicago, Illinois 60606, LASALLE NATIONAL BANK, a national banking association, as a lender and as collateral agent ("Collateral Agent") for all lenders, and EMPIRE, a North Carolina corporation ("Borrower") as the same has been amended from time to time (including amendments contemporaneous with the execution of this Release of Guaranty. LASALLE represents, pursuant to the Loan Agreement and related loan documents, that it is authorized to execute and deliver this Release of Guaranty on behalf of all Lenders under the Loan Agreement. IN WITNESS THEREOF, LaSalle has executed and delivered this Release of Guaranty on behalf of and as Agent for all Lenders. LASALLE NATIONAL BANK, N.A. By: /s/ Robert Corsentino ------------------------ Robert Corsentino Name SVP - ------------------- Title EX-99.6 7 0007.txt CONSENT TO SALE TRANSACTION EXHIBIT 99.6 [WILSON LOGO] January 16, 2001 Via Facsimile: 954 765 1477 And Federal Express - ---------------------- Mr. Brian K. Gart Greenberg Traurig, P.A. 515 East Las Olas Blvd., Suite 1500 Ft. Lauderdale, FL 33301 Re: Wilson Sporting Goods Co.'s Consent to the Sale of Stock in Certain Wilson Licensees ------------------------------------------ Dear Mr. Gart: As counsel for Empire of Carolina, you have sent to me certain documents concerning the sale of stock of two Wilson Licensees (Apple Sports, Inc. and Apple Golf Shoes, Inc.) by Empire of Carolina, Inc. to Apple Sports Acquisition, Inc. and Apple Shoes Acquisition, Inc., respectively. I have attached to this Consent Letter (in the overnight package) a copy of the documents which Wilson received from you for its review. I understand that these documents are in substantially final form. Wilson consents to the following transactions as described in the documents: 1. The sale of all stock of Apple Sports, Inc. by Empire of Carolina, Inc. to Apple Sports Acquisition, Inc.; and 2. The sale of all stock of Apple Golf Shoes, Inc. by Empire of Carolina, Inc. to Apple Shoes Acquisition, Inc. Wilson's consent is based on the Final Order providing that all payments and other amounts which may be due Wilson in connection with the Wilson Licenses are obligations of Apple Sports, Inc. and Apple Golf Shoes, Inc., or their respective acquirors. Wilson expressly withholds its consent to any Competing Bid for the Wilson Licenses at the Final Sale Hearing. Very Truly yours, /s/Raymond M. Berens - --------------------- Raymond M. Berens WILSON SPORTING GOODS CO. 8700 W. BRYN MAWR AVENUE CHICAGO, IL 60631 TELL 773-714-6456 FAX 773-714-4557 EMAIL: RMBERENS@WILSONSPORTS.COM ONLINE: http://www.wilsonsports.com EX-99.7 8 0008.txt CONSENT TO ASSIGNMENT Exhibit 99.7 [PACIFIC CYCLE LOGO] - -------------------------------------------------------------------------------- 100 Fairway Drive, Suite 100, Vernon Hills, IL 847-573-3057 o Fax 847-573-0679 January 16, 2001 Dorson Sports Acquisition, Inc. 1 Roebling Court Ronkonkoma, new York 11797 Re: License Agreement Between Pacific Cycle, LLC ("Licensor") and Empire of Carolina (the "Seller"), dated august 26, 19099, as amended to date hereof (the "Mongoose License") Dear Sirs: Reference is made to the above referenced Mongoose License, pursuant to which Dorson Sports, Inc., a New York corporation ("Dorson") and heretofore, a wholly-owned subsidiary of Seller, sells and distributes snowboards, skateboards and related products bearing the Mongoose(R) trademark. We are advised that (i) Seller has filed a voluntary petition pursuant to chapter 11 of the Bankruptcy Code of the United States with the United States Bankruptcy court for the Southern District of Florida (the "Court"); (ii) all of the outstanding shares of capital stock of Dorson are being sold by Seller to you as buyer (the "Buyer") pursuant to the provision of a Stock Purchase agreement dated January 17, 2001 (the "Stock Purchase Agreement") in a transaction to be consummated with court approval; (iii) pursuant to he purchase Agreement, the rights and interest of Seller in and to the Mongoose License are being assigned to Dorson; and (iv_ the closing on the above transactions (the "Closing") is scheduled to occur on or about January 19, 2001 (the date on which such closing occurs in herein called the "Closing Date"). In connection with the above transactions, we hereby confirm to the Buyer and Licensee that as of the Closing Date: (1) the Mongoose License is in full force and effect and there is no existing default by seller or Dorson under the terms thereof; (2) Licensor hereby consents to the sale of the shares of Dorson stock to Buyer and the assignment of the rights and interests of Seller under the Mongoose License to Dorson. (3) From and after the Closing Date, the Licensor will continue to recognize Dorson as the Licensee under the Mongoose License, which, except for such substitution of Dorson for Seller, shall remain in full force and effect in accordance with its terms; and (4) Licensor will look to Seller for the payment of any unpaid fees an commissions owing pursuant to the Mongoose License which shall have accrued prior to the fourth calendar quarter of 2000, with Dorson to be responsible for payment of any such fees and commissions accruing from and after October 1, 2000. Very truly yours, PACIFIC CYCLE, LLC By: /s/ Paul G. Silver ------------------------------------ Paul G. Silver, General Counsel -----END PRIVACY-ENHANCED MESSAGE-----