EXHIBIT 10.7 LEASE MODIFICATION, EXTENSION ASSIGNMENT, ASSUMPTION, AND CONSENT This Lease Modification, Extension, Assignment, Assumption, and Consent ("Agreement") is entered into as of December 29, 2000, by JOEL LEVY, AS SUCCESSOR LAND TRUSTEE OF TRUST NUMBER ONE UNDER UNRECORDED LAND TRUST AGREEMENT DATED AS OF NOVEMBER 29, 1999 ("Landlord"), LADIES GOLF EQUIPMENT COMPANY, INC., ("Assignor") and S2 GOLF ACQUISITION CORP., ("Assignee"). WHEREAS, Bradywine Southwest, as Landlord, and Assignor, as Tenant, executed a lease dated NOVEMBER 30, 1995, for commercial space located at 3803 Corporex Park Drive, Suite 400, Tampa, Florida, which lease was: a. amended by letter dated March 20, 1996; b. amended to expand the premises to include 3803 Corporex Park Drive, Suite 500, Tampa, Florida by Amendment to Lease No. I dated January 22, 1997; c. amended to expand the premises to include 3803 Corporex Park Drive, Suite 150, Tampa, Florida by Amendment to Lease No. II dated September 9, 1997; d. amended to reduce the premises to exclude 3803 Corporex Park Drive, Suite 150, Tampa, Florida by Letter dated March 31, 1999; e. assigned by Bradywine Southwest to and assumed by Landlord upon sale of the property on which the Premises is located; and which lease, as amended, (collectively, the "Lease") exists in full force and effect as to 3803 CORPOREX PARK DRIVE, SUITES 400 AND 500, TAMPA, FLORIDA (the "Premises"); and WHEREAS, Assignor wants to assign its rights under the Lease to Assignee and Assignee wants to accept assignment of the Lease and assume all obligations under the Lease; WHEREAS, all parties to this Agreement want to further amend the Lease to extend the term and modify other provisions. NOW, THEREFORE, Landlord, Assignor, and Assignee, in consideration of the following mutual covenants, agree: 1. EXTENDED TERM. The term of the Lease shall be extended for an additional period of nine (9) months, beginning April 1, 2001, and ending December 31, 2001 (the "Extended Term"). 2. BASE RENT. Base Rent for the Extended Term shall be payable in equal installments on the first day of each month as follows:
----------------------------------------------------------------PERIOD TOTAL EXTEND MONTHLY TERM BASE RENT BASE RENT ----------------------------------------------------------------4/01/01-12/31/01 $45,752.94 $5,083.66 -----------------------------------------------------------------
Base Rent, plus applicable sales tax, shall be due on the first day of each month without deduction or setoff. Payments of all sums due under this lease shall be made to PINELLAS FLEXXSPACE, LTD., C/O ADLER MANAGEMENT SERVICES, INC., 7205 BRYAN DAIRY ROAD, LARGO, FLORIDA 33777, or at any other place designated by Landlord. All notices required or authorized under the Lease shall be sent to the Landlord, C/O ADLER MANAGEMENT SERVICES, INC., 7205 BRYAN DAIRY ROAD, LARGO, FLORIDA 33777, with a mandatory copy to PINELLAS FLEXXSPACE, LTD., C/O ADLER MANAGEMENT SERVICES, INC., 1400 N.W. 107TH AVENUE, FIFTH FLOOR, MIAMI, FLORIDA 33172.
3. PRO RATA SHARE. The pro rata share shall remain the same, which is 14.58%. In addition to the base rent, Tenant shall pay Landlord additional rent for expenses described in Sections 9, 10, and 11 of the Lease, currently estimated to be $2,322.24 per month, plus applicable sales tax. 4. PROJECT AREA OPERATING EXPENSES. Project Area Operating Expenses shall include operation and fair market rental expenses for Flexxspace(SM) accommodations of any kind and nature. 5. ASSIGNMENT. Effective January 1, 2001, Assignor assigns to Assignee all of Assignor's rights, powers, and interest as tenant under the Lease and to the Premises. 6. ASSUMPTION. Assignee accepts the assignment and effective January 1, 2001, assumes all rights, liabilities and obligations of Assignor under the Lease and agrees to indemnify and hold Assignor harmless for all obligations incurred thereafter. 7. TENANT. Effective January 1, 2001, Assignee shall be the "Tenant" under the Lease. 8. TERMS OF LEASE. Assignee has reviewed the Lease and is fully aware of its terms and conditions. Assignee has reviewed the Park Rules and Regulations, a copy of which is attached to this Agreement as Exhibit A, and is fully aware of the terms and conditions. 9. CONSENT. Landlord consents to the assignment to and assumption by Assignee. 10. NOT A RELEASE. This Agreement is not a release of Assignor from any obligation under the Lease. Assignor shall continue to be liable under the Lease in all respect. Assignor waives all notice of default of Assignee under the terms of the Lease. Assignor consents to the granting by Landlord to Assignee of any waiver, indulgence or extension of time without notice to Assignor, and to any amendment of the lease. 11. AS IS CONDITION. Tenant has possession of the Premises and shall accept the Premises in "as is" condition. 12. AUTOMATIC RENEWAL. If the Lease has not been terminated, Tenant is current in the payment of all sums due and performance of all other obligations of the Lease, and neither party to this Lease notifies the other in writing on or before sixty (60) days prior to the expiration of the Extended Term or any additional extended term that the notifying party does not elect to extend this Lease, this Lease shall automatically extend for an additional term of one (1) year. The rent for each renewal term shall increase by three percent (3%) over the immediately preceding lease year. 13. FLEXXSPACE(SM). The Property is part of the Flexxspace(SM) network (the "Network").The Landlord, through the Network, from time to time, may, but is not required to provide access to services, benefits and/or ACCOMMODATIONS to Tenants within the System. Tenant understands and agrees that Landlord is under no legal obligation to maintain, continue or make available the Network or any part thereof and the Network and/or use thereof is not a condition of or consideration for Tenant entering into this Lease. Further, Landlord makes no warranties or representations whatsoever as to any services or products obtained through the System and Tenant agrees and acknowledges that any claim, complaint or remedy shall be against the ultimate provider of the services or products and not against the Landlord. 14. BROKER'S COMMISSIONS. Each of the parties represents and warrants that it has dealt with no broker or brokers in connection with the execution of the Lease or this Agreement, except ADLER MANAGEMENT SERVICES, INC., and each of the parties agrees to indemnify the other against, and hold it harmless from, all liabilities arising from any claim for brokerage commissions or finder's fee resulting from the indemnitor's acts including, without limitation, the cost of counsel fees in connection therewith) except for the persons or entities set forth above. 2
15. LEASE IN EFFECT. Except as amended by this Modification and Extension Agreement, the terms and provisions of the Lease are in full force and effect. The terms of the Lease shall apply to the extended term, and as such, are made a part of this Agreement to the extent that they are not in conflict. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. END OF AGREEMENT IN WITNESS WHEREOF, the parties have set their hands and seals the day and year written above.
Witness as to Landlord: Sign: /s/ Kay L. Lilly -------------------------------------Print: Kay l. Lilly -------------------------------------Sign: /s/ Sandra Rendon -------------------------------------Print: Sandra Rendon -------------------------------------/s/ Joel Levy ---------------------------------------------JOEL LEVY, AS SUCCESSOR LAND TRUSTEE OF TRUST NUMBER ONE UNDER UNRECORDED LAND TRUST AGREEMENT DATED AS O NOVEMBER 29, 1999 12/29/00 --------------------------------------Assignee: S2 GOLF ACQUISITION CORP. Date: Landlord:
Witnesses as to Assignee: Sign: /s/ Lynn C. Buffington -------------------------------------Print: Lynn C. Buffington -------------------------------------Sign: /s/ T. Matthew Buffington -------------------------------------Print: T. Matthew Buffington --------------------------------------
By: /s/ Douglas A. Buffington -----------------------------------------Date: 12/29/00 ----------------------------------------Assignor: LADIES GOLF EQUIPMENT COMPANY, INC.
Witnesses as to Assignor: Sign: /s/ E. Michael Serbanos -------------------------------------Print: E. Michael Serbanos -------------------------------------Sign: -------------------------------------Print --------------------------------------
/s/ James E. Jones ------------------------------------------
Date: 12-28-00 ------------------------------------------
EXHIBIT "A" PARK RULES AND REGULATIONS 1. Sidewalks, doorways, vestibules, halls, stairways and similar areas shall not be obstructed by tenants of used for any purpose other than access to and from the leased premises and for going from one to another part of the building. 2. Plumbing fixtures and appliances shall be used only for purposes constructed, and no sweeping, rubbish, rags or other unsuitable material shall be thrown or placed within the premises. Any damage resulting from such misuse of the premises shall be paid by Tenant, and Landlord shall not in any case be responsible for such. 3. No signs, advertisements or notices shall be painted or affixed on or to any windows or doors or other part of the building, except of such color, size and style and in such places as shall be first approved in writing by Landlord. No nails, hooks or screws shall be driven or inserted in any part of the building, after Tenant's improvements are completed, except by the building maintenance personnel; nor shall any part of the building be defaced by tenants. 4. A directory will be placed by Landlord, at its expense, in a conspicuous place in the building. No other directories will be permitted, unless previously authorized by Landlord in writing. 5. Tenants shall not do, or permit anything to be done, in or about the building, or bring or keep anything there, that will in any way increase the rate of fire or other insurance on the building, or on property kept there, or obstruct or interfere with the rights of, or otherwise injure or annoy other tenants, or do anything in conflict with the valid pertinent laws, rules or regulations of Landlord or any governmental authority. 6. Tenant shall notify the building manager when safes or other heavy equipment are to be taken in or out of the building and the moving shall be done under the supervision of the building manager, after written permission from the Landlord. Persons employed to move such property must be acceptable to Landlord. 7. Tenants shall not make or permit any improper noises in the building, or otherwise interfere in any way with other tenants, or persons having business with them. 8. Nothing shall be swept or thrown into the corridors, halls, elevator shafts or stairways. No birds or animals shall be brought into or kept in or about the building. 9. No machinery of any kind (other than normal office equipment) shall be operated on leased premises without the prior written consent of Landlord, who may condition such consent upon the payment by Tenant of additional rent as compensation for excess consumption of water or electricity, or both, occasioned by the operation of the machinery; not shall Tenant use or keep in the building any flammable or explosive fluid or substance, or any illuminating material, except candles. 10. Movement in or out of the building of furniture or office equipment, or dispatch or receipt by tenant of any merchandise or materials which requires the use of elevators or stairways, or movement through building entrances, such as the lobby, shall be restricted to hours designated by Landlord. All such movement shall be under supervision of the building manager, by prearrangement. Such prearrangement must be initiated by Tenant and will be by determination of Landlord and subject to his decision and control, of the time, method and routing of movement, and limitations imposed by safety or other concerns which may prohibit any article, equipment or any other item from being brought into the building. Tenant is to assume all risks of damage to articles moved and injury to persons or public engaged or not engaged in such movement, including equipment, property and personnel of Landlord, if damaged or injured as a result of acts in connection with providing this service to Tenant, from time of the beginning through the completion of the moving or delivery; and Landlord shall not be liable for acts of any persons engaged in, or any damage or loss to any of said property or persons resulting from, any act in connections with such. 4
11. No draperies, shutters, or other window coverings shall be installed on exterior windows, walls or doors facing public corridors without Landlord's prior written approval. Landlord shall have the right to require installation and use of uniform draperies. 12. No portion of Tenant's area or any other part of the building shall at any time be used or occupied as sleeping or lodging quarters. 13. Landlord will not be responsible for lost or stolen property, equipment, money, or jewelry from Tenant's area or public rooms, regardless of whether such loss occurs when the area is locked against entry. 14. Landlord reserves the right to rescind and of these Rules and make such other further reasonable rules and regulations that Landlord shall from time to time believe conducive to the safety, protection, care and cleanliness of the building, its operation, the preservation of good order, and the protection and comfort of its tenants, their agents, employees and invitees, which Rules, when made and notice of them given to Tenant, shall be binding upon Tenant as if originally prescribed. 5
EXHIBIT 10.10 LICENSING AGREEMENT THIS LICENSING AGREEMENT (this "Agreement"), made and entered into as of this 31st day of July, 2000, by and between NANCY LOPEZ ENTERPRISES, INC. having an address at IMG Center, Suite 100, 1360 East 9th Street, Cleveland, Ohio 44114 (hereinafter referred to as "Licensor"), and S2 GOLF, INC., 18 Gloria Lane, Fairfield, New Jersey 07004 (hereinafter referred to as "Company"); WITNESSETH: WHEREAS, the Company desires to obtain the right to use the name, likeness and endorsement of Nancy Lopez (hereinafter called "Golfer") in connection with the advertisement, promotion and sale of "Licensed Products" (hereinafter defined); WHEREAS, Golfer has, pursuant to EXHIBIT C hereto, granted such exclusive rights to Licensor together with the right to sublicense such rights; NOW, THEREFORE, for and in consideration of the premises and of the mutual promises and conditions herein contained, the parties do hereby agree as follows: 1. DEFINITIONS. As used herein, the following terms shall be defined as set forth below: (a) "Golfer Identification" shall mean the full name NANCY LOPEZ, the facsimile signature of Nancy Lopez, and the image, likeness, photograph and endorsement of Golfer, the Golfer Trademarks, and any combination thereof as may be approved in advance by Licensor. (b) "Company Trademarks" shall mean those trademark registrations owned or controlled by the Company in any country or territory of the world including product names. (c) "Golfer Trademarks" shall mean those trademarks listed in Section 15(g) hereof. (d) "Products" as used herein shall mean golf clubs and components thereof (heads, shafts and grips), golf caddy bags and golf caddy bag accessories (travel covers, etc.), golf gloves, golf shoes, golf balls, golf practice and training devices, and golf headwear. (e) "Licensed Products" shall mean all Products of Company which have any part of the Golfer Identification affixed or attached thereto in any permanent, non-removable manner or which are sold in packages which bear the Golfer Identification.
(f) "Contract Period" shall mean that period which shall commence August 1, 2000 and continue until December 31, 2007, unless terminated earlier pursuant to the terms hereof, and the Renewal Period (as defined herein), if any. (g) "Contract Year" shall mean a period of twelve (12) successive months commencing on any first day of January and ending on the last day of December during the Contract Period, provided, however, the first Contract Year shall commence August 1, 2000 and end December 31, 2000. (h) "Contract Territory" shall mean the world. 2. GRANT OF RIGHTS. Licensor hereby grants to Company, subject to all of the terms and conditions of this Agreement, the exclusive right and license to use the Golfer Identification during the term of the Contract Period throughout the Contract Territory in connection with the manufacture, advertisement, distribution and sale of Licensed Products. Licensor has the exclusive right to grant the license described herein, and will not grant the right to use the Golfer Identification to any third party (any party other than Company) for use anywhere in the Contract Territory during the Contract Period in connection with the advertisement, promotion, distribution or sale of Products. The foregoing exclusive rights to distribute and sell Licensed Products shall include the right to make catalogue sales of Licensed Products, and the right to distribute Licensed Products by direct sales to consumers. Company shall be solely responsible for ensuring that all uses of Golfer Identification and the manufacture, advertisement, distribution and sale of the Licensed Products comply with applicable law. Upon twelve months' prior written notice, the Company shall have the right on every other January 1st during the Contract Period beginning January 1, 2002 (e.g., January 1, 2004, January 1, 2006, etc.) to include, in the definition of "Products," golf apparel, including golf rainwear, to the extent the Company begins to produce a line of such products. Until the Company so includes golf apparel in the definition of "Products," Golfer shall be permitted to endorse (by a patch on her clothing or otherwise) and use golf apparel manufactured and/or distributed by third parties, except that Licensor may not permit Golfer and Golfer may not endorse the products of or contract for endorsement or promotional services with the companies involved in the manufacture, distribution or sale of articles of the same generic type as the Licensed Products (each, a "Competitor," collectively, the "Competitors"). 3. MARKETING EFFORTS. Company agrees that, during the Contract Period, it will use its good and commercially reasonable efforts to actively and aggressively promote the sale of Licensed Products throughout the Contract Territory. Licensor recognizes that Company may manufacture, import, market and sell Products bearing the personal identification and endorsement of Company or third parties and that notwithstanding the preceding sentence, Company may exercise independent business judgment in marketing, advertising and promoting Products of Company that is in the best interest of its shareholders. 4. SUBCONTRACT MANUFACTURERS; SUBLICENSES. (a) Upon the prior written consent of Licensor, which consent shall not be unreasonably withheld, Company shall have the right to make arrangements for the subcontract manufacture, finishing, packaging and storing of Licensed Products, provided that Company shall ensure that no such subcontractor shall take any -2-
action contrary to or inconsistent with the terms and conditions set forth in this Agreement and that Licensor is acknowledged as an intended third party creditor beneficiary with respect to any such arrangement, and further provided that no corporate name, trade name or brand name other than Company's may be used on or in connection with Licensed Products. (b) Licensor agrees that Company shall have the right, with the prior written consent of Licensor which consent shall not be unreasonably withheld, to sublicense any of the rights herein granted to Company including the right to subcontract as provided in Section 4(a) above provided that any such sublicensee agrees to be bound by the terms hereof and any such sublicense shall be co-terminus with the term hereof and provided Licensor shall be permitted to withhold its consent in its sole discretion with respect to any proposed sublicense that will pay Company a royalty of less than 6% of such sublicensee's revenue. Company agrees to use good and commercially reasonable efforts to monitor and enforce such compliance. 5. APPROVED SUBLICENSEES. (a) Licensor hereby agrees that during the Contract Period, Company shall have the right (pursuant to Section 4(b) hereof) to designate those one or more third parties (if any) which shall be granted the right to use the Golfer Identification in connection with the manufacture, advertisement, packaging, promotion, distribution and sale of one or more items of Licensed Products within the Contract Territory. Each sublicensee appointed by Company hereunder is referred to as an "Approved Sublicensee." Each sublicense agreement by which a third party is designated an Approved Sublicensee is hereinafter referred to as an "Approved Sublicense." (b) Each Approved Sublicense shall terminate or expire on or prior to the last day of the Contract Period (or shall include a provision giving to Licensor the option to terminate such Approved Sublicense as of the last day of the Contract Period). (c) Company shall, from time to time, at the request of Licensor, deliver to Licensor a list of all then-current Approved Sublicensees including the address of each Approved Sublicensee, a list of the Licensed Products distributed and sold by each such Approved Sublicensee, and a list of all retailers distributing and selling Licensed Products produced by each such Approved Sublicensee. (d) All compensation of whatever nature paid by or on behalf of each Approved Sublicensee in connection with each Approved Sublicense shall be paid to and collected by Company. Company shall require each Approved Sublicensee to prepare and submit to Company reasonably detailed sales reports with respect to all sales of Licensed Products setting forth sales separately according to the particular category of Licensed Product. (e) Company shall pay Licensor twenty-five percent (25%) of any and all amounts received by Company (whether as percentage royalty or fixed amount) from an Approved Sublicense during the relevant sales reporting period (the "Sublicense Royalty"). (f) The following sublicense agreements are hereby approved by Licensor: -3-
(i) Amended and Restated Sub-License Agreement dated July 1, 1998 by and between Tournament Sports, Inc. and the Arnold Palmer Golf Company. (ii) Sub-License Agreement dated October 1, 1998 by and between Tournament Sports, Inc. and the Arnold Palmer Golf Company. (iii) Trademark Sub-License Agreement dated January 1, 2000 by and between Mortex Limited and the Arnold Palmer Golf Company. 6. ANCILLARY MARKETING SERVICES OF GOLFER. (a) To facilitate Company's usage of the exclusive right and license to the Golfer Identification, as provided herein, Licensor agrees, at the request of Company and upon adequate notice provided Company is not in default hereunder and subject always to Golfer's personal and professional schedule, to use good and commercially reasonable efforts to cause Golfer to provide the ancillary marketing services as set forth below. Licensor shall cause Golfer to attend four half-day sessions (each such session referred to hereafter as a "Service Day") per Contract Year one of which will be the annual PGA Show in each of the first three full Contract Years. (b) All such Service Days shall be at a mutually convenient location selected by Licensor and the Company and on such dates and times as are mutually convenient. Service Days shall not exceed four (4) hours of Golfer's time (excluding lunch or break time and providing that transportation time for such day does not exceed four hours). In addition, unused Service Days may not be carried forward or backward from one Contract Year to another unless such unused Service Days arise due to failure of Licensor or Golfer to, after reasonable advance notice from the Company in each case, agree to or schedule Service Days requested by the Company; provided, however, in no event shall Golfer be required to attend more than six Service Days in any Contract Year. Failure to utilize any or all of the ancillary services as provided above shall not result in any reduction in remuneration payable to Licensor in accordance with this Agreement. (c) With respect to the ancillary marketing services provided by Golfer, Company agrees to provide Golfer and one (1) traveling companion with reasonable first class travel expenses, hotel, meals and local ground transportation required in connection with the foregoing services. (d) If Licensor confirms Golfer's availability for any Service Day, and an illness, injury or other emergency beyond the reasonable control of Golfer prevents Golfer from appearing on that date, Licensor shall so notify Company immediately and then the parties will attempt in good faith to reschedule for another mutually agreed upon date, subject always to prior bona fide commitments. Golfer's non-appearance for the foregoing reasons is not a breach of this Agreement; and neither Licensor nor Golfer is responsible for any expenses incurred by Company in connection with such non-appearance. -4-
(e) It is understood that neither Licensor nor Golfer shall have any liability at all to Company or any third party with respect to such development or review input provided hereunder. (f) In addition to and separate from any other remuneration, if Company uses any performance or service of Golfer hereunder in any way that is subject to the jurisdiction of any applicable artists' union, guild or other organization (including, without limitation, SAG, ACTRA and AFTRA), Company shall pay directly to such organization all payments, dues and/or fees (for benefit plans or otherwise) required by such entity to be made with respect to Golfer' performance or services. Without limiting the foregoing, the parties agree for the purposes of this subparagraph that the value of Company's use of Golfer's appearance in any television commercial(s) shall be an amount equal to the then-existing minimum or scale payments required to be paid to principal performers appearing in a commercial shot and used in accordance with applicable provisions of the applicable ACTRA, AFTRA or SAG contracts or other collective bargaining agreement. Any such minimum or scale payments so required to be paid (and actually paid) to Golfer shall be credited against amounts otherwise payable to Golfer hereunder. This provision shall survive any expiration or termination of this Agreement. 7. USE OF LICENSED PRODUCTS. (a) Company acknowledges that Licensor has developed a valuable right in the Golfer Identification which is an integral part of this Agreement and subject to an exclusive license to Company as provided herein. In an effort to maintain and enhance the goodwill associated with the Golfer Identification and to assist Company in the usage of the Golfer Identification, and provided that Company is not in default of any of its obligations hereunder, and provided further that Company shall supply Golfer at no cost or expense with sufficient quantities of Licensed Products (including, as to golf clubs, irons, driver and woods) which are fully acceptable to Golfer for her use in tournament play, then Licensor agrees that, except as otherwise provided herein, Golfer will use Licensed Products (except golf headwear) exclusively whenever she participates publicly in any golf tournament, exhibition, clinic, or other similar golf-related event in which she participates publicly anywhere in the world. Company shall have the right to have those Licensed Products used by Golfer hereunder identified with the Golfer Identification in the same manner such Licensed Products are identified when distributed and sold to consumers. It is understood, however, that any such identification must be of a size, shape and location not in conflict with LPGA rules or the rules governing any professional golf tournament in which Golfer participates. Company further acknowledges that Licensor shall have the right to display one third party advertising patch on the golf caddy bag (which shall be a Product of Company) used by Golfer and one third party advertising patch on the shirt and/or any outerwear worn by Golfer during her participation in golf tournaments, exhibitions and other golf related events in which she participates anywhere in the world during the Contract Period. Licensor shall use reasonable efforts to cause Golfer to place a Company advertising patch on the chest of the shirt, vest and rainwear jacket. If Golfer does not place such advertising patch on the chest of the shirt for any reason including but not limited to other sponsorship obligations, Licensor shall cause Golfer to place the patch on another visible location on the shirt (it being understood that such location shall be on the left sleeve, if available, and if not available, the right sleeve or right chest of the shirt and rainwear jacket). In addition to this patch, Licensor shall cause Golfer to place a Company advertising patch on the collar of Golfer's shirt. It is understood, however, that any third party advertising -5-
patch shall not incorporate any name, logo or identification of any Competitor. It is further understood by the parties hereto that Golfer has a separate agreement with Sara Lee Corporation ("Sara Lee") to wear a Sara Lee visor whenever she participates publicly in any golf tournament, exhibition, clinic or other similar golf-related event. Upon the expiration or termination of such agreement, Licensor agrees to negotiate in good faith with Company prior to negotiating with any third party (other than Sara Lee) with respect to Golfer's headwear. If the parties are unable to reach agreement within thirty days after the start of such negotiations, Licensor shall be permitted to enter into negotiations and contract with third parties (who are not Competitors) with respect to Golfer's headwear; provided, however, during the Contract Period, Company shall have the right to match any offer by a third party that is less than the final written offer submitted to Licensor by Company during the thirtyday negotiation period. If the Company desires to match such third party's offer it must provide written notice thereof within ten days after receiving notice of such third party offer and must enter into an amendment of this Agreement within thirty days thereafter incorporating the terms of such offer. (b) Notwithstanding the foregoing, it is understood and agreed that if Golfer shall find in her sincere good faith judgment that any Licensed Products as previously supplied by Company are not satisfactory for her use, then Licensor shall immediately so notify Company, and Company shall use good and commercially reasonable efforts to supply Golfer with Licensed Products which are fully satisfactory to Golfer. In no event shall Golfer be required to use Licensed Products which are unsatisfactory, including during any period in which Company is attempting to replace such Licensed Products with satisfactory ones. 8. REMUNERATION. (a) FIXED ROYALTY. In consideration of the rights herein granted and the ancillary marketing services to be provided hereunder, Company shall pay to Licensor, with respect to each Contract Year during the Contract Period, an annual non-refundable amount of Two Hundred Thousand U.S. Dollars (US$200,000) ("Fixed Royalty"), provided, however, the Fixed Royalty for the 2000 Contract Year shall be pro rated from the date hereof. Each such Fixed Royalty amount shall be payable in four (4) equal quarterly installments due on or before the final day of each fiscal quarter during the relevant Contract Year; provided, however, a payment of $33,333.33 for the third quarter of 2000 shall be payable one-half on or before August 1, 2000 and the remainder on or before October 1, 2000. (b) ROYALTY ON LICENSED PRODUCTS. In consideration of the rights herein granted and the ancillary marketing services to be provided hereunder, Company shall pay to Licensor a royalty on sales of Licensed Products ("Percentage Royalty," and with Fixed Royalty, the "Royalty" or "Royalties"), with respect to each Contract Year, in an amount equal to the following percentages of the "Revenue for Licensed Products" (as defined below):
Revenue for Licensed Products ----------------------------Up to $10 Million Greater than $10 Million Percentage Royalty -----------------3% 3.5%
Such Percentage Royalty on Licensed Products shall be payable within forty-five (45) days after the end of each Contract Year. "Revenue for Licensed Products" shall mean the number of -6-
Licensed Products distributed to third parties multiplied by the Net Sales Price (as defined below). "Net Sales Price" for Licensed Products shall mean the invoiced billing price to customers or distributors, less only shipping charges, freight, duties, insurance, sales taxes, value-added taxes, customary discounts and credits allowed for returned or defective merchandise (but no reserve for returns). All Percentage Royalties due Licensor shall accrue upon the sale of the Licensed Products regardless of the time of collection by Company. Licensed Products shall be considered "sold" as of the date on which said Licensed Products are invoiced, shipped or paid for, whichever first occurs. If sales are made to any party affiliated with or related to Company, Percentage Royalties shall be computed based upon the regular price for such Licensed Products charged to unrelated third parties. There shall be no deduction from "Net Sales Price" for uncollectable accounts. For purposes of calculating Percentage Royalties, Products that are the same as Licensed Products, except for the labeling or packaging, shall be considered Licensed Products. (c) The aggregate Percentage Royalty and Sublicense Royalty payable to Licensor in any Contract Year shall be reduced by the amount of the Fixed Royalty actually paid to Licensor with respect to such Contract Year. (d) BONUSES. In recognition of the increased value of the Golfer Identification resulting from any of the following achievements, Company shall pay to Licensor the following bonuses ("Bonuses") during each Contract Year: (i) U.S. OPEN, NABISCO CHAMPIONSHIP, LPGA CHAMPIONSHIP, DU MAURIER CLASSIC AND THE MAJOR CHAMPIONSHIP(S) THAT REPLACE ANY OF THESE CHAMPIONSHIPS:
Achievement ----------Winner Runner Up (or tie) Third-Fifth (or tie) Bonus ----US$30,000 US$10,000 US$5,000
(ii) ANY LPGA TOURNAMENT OR SANCTIONED EVENT (OTHER THAN THE ABOVE) THAT IS TELEVISED (INCLUDING BUT NOT LIMITED TO THE SKINS GAME, DINERS CLUB AND WENDY'S
THREE TOUR CHALLENGE AND THEIR SUCCESSORS): Achievement ----------Winner Runner Up (or tie) Third-Fifth (or tie) Bonus ----US$10,000 US$ 5,000 US$ 2,000
(iii) NAMED U.S. LPGA PLAYER OF THE YEAR: Bonus in the amount of US$25,000. (iv) AWARDED VARE TROPHY: Bonus in the amount of US$25,000. -7-
If any one or more of the above-named tournaments or awards are canceled, Licensor and Company shall agree in good faith upon an appropriate replacement. All Bonuses payable under this section shall be in addition to amounts otherwise payable hereunder to Licensor. All Bonuses due for each tournament shall be paid within thirty (30) days after the conclusion of the tournament or the date of the achievement concerned (or thirty (30) days after Company has received verification of the achievement and an invoice with respect to such amount, if later) and shall be payable as provided in Section 10 hereof. (e) STOCK OPTIONS. In consideration of the rights herein granted and the ancillary marketing services to be provided hereunder, at the end of each Contract Year, Company shall grant to Licensor, subject to the terms and conditions of a Stock Option Agreement in form and substance substantially similar to EXHIBIT A hereto, options to purchase shares of the Company's common stock ("Options") in accordance with the following schedule:
Revenue for Licensed Products ----------------------------Greater than $6,500,000 $7,000,000-$7,499,999 $7,500,000-$7,999,999 $8,000,000-$8,499,999 $8,500,000-$8,999,999 $9,000,000-$9,499,999 $9,500,000-$9,999,999 Greater than $10,000,000 Number of Options to be Granted ------------------------------2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
The Options shall vest and become exercisable on the date of grant and the exercise price shall be equal to the fair market value of a share of the Company's common stock as of the date of grant. (f) The parties agree to renegotiate in good faith the fees payable to Licensor or add additional Service Days under this Agreement if Golfer does not participate in at least ten LPGA Tour events in each of the first three full Contract Years. 9. BOOKS AND RECORDS. (a) Company shall supply Licensor with a sales report with respect to all sales of Licensed Products sold by Company during each calendar year quarter during each Contract Year, said sales reports are to be delivered to Licensor within forty-five (45) days following the conclusion of each such quarterly period. Such sales report shall indicate, separately for each category of Licensed Products, the number of each item of Licensed Products sold during each month and the Net Sales Price of each such item. (b) Company shall keep and maintain accurate books and records with respect to all sales of Licensed Products and the computation of remuneration earned or accrued with respect thereto, which books and records shall be available for inspection and copying by Licensor or its authorized agents or representatives upon reasonable advance notice during ordinary business hours within two years after the conclusion of the relevant quarterly period. In the event that an -8-
error is discovered in the calculation of the amount or amounts payable to Licensor, the party that received the benefit of the error shall promptly thereafter pay to the other the amount of overpayment or underpayment, as the case may be. An underpayment by Company based on an error in such calculation shall not be deemed to be a breach of this Agreement so long as the calculation was made in good faith. If any underpayment by Company for a period examined by Licensor is 3% or more, Company shall pay Licensor's reasonable out-of-pocket costs with respect to such examination and the next subsequent reexamination. Receipt or acceptance by Licensor of any statement, or any of the sums paid hereunder, shall not preclude Licensor from challenging the correctness of a royalty statement, or any part or portion thereof, at any time. 10. PAYMENTS. All payments to Licensor pursuant to this Agreement shall be made by wire transfer as follows: Huntington National Bank 917 Euclid Avenue Cleveland, Ohio 44115 Name: Nancy Lopez Enterprises, Inc. ABA Route No. 044-000024 Account No. 03668644096 (Please note the name of the payee and the purpose of the payment.) Past due payments hereunder shall bear interest at the rate of (i) one and one-half percent (1.5%) per month, or (ii) the maximum interest rate permissible under law, whichever is less. All payments hereunder shall be subject to deduction of the relevant governmental withholding tax, but shall otherwise be paid without deduction of any cable charges, bank charges, remittance charges, or any other fees or expenses. 11. APPROVAL OF LICENSED PRODUCTS. (a) Company agrees that Licensor shall have the right, in advance of sale, to approve or disapprove, in good faith, the quality, style, colors, appearance, material and/or workmanship of all Licensed Products and the packaging therefor, and to approve or disapprove any and all endorsements, trademarks, trade names, designs and logos (whether using Golfer Identification or not) used in connection with Licensed Products. Company shall not distribute or sell any such Product which has not been approved by Licensor or which is, at any time, disapproved by Licensor in accordance with the provisions hereinbelow. It is agreed that the grounds for rejection or disapproval by Licensor shall be limited to substantial concerns expressed by Golfer. (b) Before selling or distributing any Licensed Products hereunder, Company shall submit to Licensor, at the address set forth herein, for its examination and approval or disapproval, a production sample thereof together with its containers, labels and the like. Licensor agrees that it will promptly examine and either approve or disapprove such samples, and that Licensor will promptly notify Company of its approval or disapproval. Licensor agrees that if it disapproves of any item it will advise Company of the specific reasons in each case. Licensor agrees that any item submitted for approval hereunder at the address set forth herein may be deemed by Company to have been approved hereunder if the same is not disapproved in -9-
writing within ten (10) days after receipt thereof. In all instances, Licensor's approval shall not be unreasonably withheld. 12. APPROVAL OF USE OF GOLFER IDENTIFICATION. (a) Company agrees that Licensor shall have the right to approve or disapprove in advance the contents, appearance and presentation of any and all materials which incorporate the Golfer Identification. Company agrees that it will not produce, publish or in any manner distribute any such materials which have not been approved in advance by Licensor or which are, at any time, disapproved by Licensor in accordance with the provisions hereinbelow. In all instances, Licensor's approval shall not be unreasonably withheld. (b) Before producing, publishing or distributing any materials hereunder, Company shall submit to Licensor, at the address set forth herein, for its examination and approval or disapproval, a sample thereof together with text, coloring and a copy of any photograph proposed to be used. Licensor agrees that it will promptly examine and either approve or disapprove such sample material, and that Licensor will promptly notify Company of its approval or disapproval. Licensor agrees that it will not unreasonably disapprove any sample material and, if any is disapproved, that Company will be advised of the specific reasons in each case. Licensor agrees that any item submitted for approval hereunder at the address set forth herein may be deemed by Company to have been approved hereunder if the same is not disapproved in writing within ten (10) days after receipt thereof. 13. NOTICES AND SUBMISSIONS. (a) All notices or submissions to be made or delivered by Company to Licensor pursuant to this agreement shall be delivered to the address of Licensor as follows: Nancy Lopez Enterprises, Inc. c/o International Management, Inc. IMG Center, Suite 100 1360 East 9th Street Cleveland, Ohio 44114-1782 Attention: Sherry Whay All such materials shall be delivered to Licensor free of all charges such as, for example, shipping charges or customs charges. In the event that any such charges are paid by Licensor, Company agrees to make prompt reimbursement. (b) All notices or submissions to be made or delivered by Licensor to Company pursuant to this Agreement shall be delivered to the address of Company as follows: S2 Golf, Inc. 18 Gloria Lane Fairfield, New Jersey 07004 Attention: Douglas Buffington -10-
14. PRODUCTS FOR THE USE OF GOLFER. During the Contract Period, Company shall supply Licensor, at no charge, with such amounts of Licensed Products as Licensor may reasonably request for Golfer's and Golfer's family's personal use as and when Licensor so requests up to a maximum aggregate value of $5,000 per Contract Year based on Net Sales Price. 15. TRADEMARKS. (a) Licensor represents and warrants that there is set forth in subparagraph (g) immediately below a full and complete list of all trademark registrations and applications owned or controlled by Licensor and/or Golfer, anywhere in the world in those trademark classes which relate to the Licensed Products (not including those registrations and applications, if any, filed on behalf of Licensor or Golfer by the Company). Licensor agrees that it will use its diligent efforts, at its own expense, to maintain in effect those registrations set forth in subparagraph (g) immediately below. (b) If, at any time during the Contract Period, Company should intend or desire to create and use in connection with Licensed Products any new or additional names, words, logos, designs or devices which include any part of the Golfer Identification (such a newly-created mark being hereinafter referred to as a "Golfer Logo"), then and in such event Company may at its election and at its cost and expense create one or more sample proposed Golfer Logos and submit the same to Licensor. Licensor shall have the right to approve or disapprove any such proposed Golfer Logo in its sole discretion within 30 days after receiving Company's request for such approval, and Company agrees it will not make any use of any proposed Golfer Logo until the same shall have been approved in writing by Licensor. If Licensor fails to respond within such 30-day period, Licensor shall be deemed to have approved such use of the proposed Golfer Logo. (c) Following approval by Licensor of the Golfer Logo, as described immediately above, Licensor agrees that Company shall have the right to undertake procedures to apply for and seek registration of such Golfer Logo in the name of Golfer (or such other name as Licensor may from time-to-time notify Company) in any one or more countries or territories of the world (as Company may select) in any trademark class or classes which relate to Licensed Products. Company agrees to use its diligent efforts to obtain final registration of such applications, but the parties hereto acknowledge that the Golfer Logo may or may not be capable of registration in one or more countries of the world in one or more trademark categories. (d) All costs and expenses of Licensor in filing those trademark applications, and in applying for and seeking the registrations, referred to in the subparagraph immediately above, including, without limitation, trademark search fees, trademark filing fees, the fees and expenses of local trademark attorneys (which will be retained in consultation with Licensor's trademark counsel) and all other fees, costs and expenses related thereto, shall be paid by Company, and Company shall record such expenses in an account referred to as the "Trademark Account." Company agrees to maintain receipts and other evidence of payment of all expenses recorded in the Trademark Account. All costs and expenses set forth in the Trademark Account shall be solely for the account of Company, provided, however, that if Licensor requires Company to transfer such Licensed Trademarks or Company Trademarks to Licensor pursuant to Section 15(n) hereof, Licensor shall reimburse Company for all reasonable expenses recorded in the Trademark Account that are directly related to filing such trademark applications and applying -11-
for and seeking such registrations. Such reimbursement shall be made within thirty (30) days following such transfer. (e) Upon the registration of the Golfer Logo in any trademark class in any country or territory of the world (each such registration being hereinafter referred to as a "Licensed Trademark"), Licensor agrees to grant and does hereby grant to Company the exclusive right to use such Licensed Trademark within the relevant trademark class within the relevant jurisdiction on or in connection with Licensed Products, which right shall be coextensive and coterminous with the rights hereinbefore granted to Company for the use of the Golfer Identification. Upon the prior consent of the Company (which consent shall not be unreasonably withheld), Licensor shall be permitted to use any Golfer Logo in connection with any company affiliated with Licensor or any item, class of items of provision of services, provided such items or services are not Products, as defined herein. (f) Any other provisions herein to the contrary notwithstanding, if Company shall intend or desire to manufacture, advertise, distribute or sell Licensed Products with the use of any one or more of the Golfer Logos in any one or more countries or territories of the world in any trademark class or classes whether or not the relevant mark has theretofore been registered, such use shall be at the sole risk and liability of Company. (g) Licensor represents that Golfer is the owner of U.S. trademark registration No. 2,254,421 registered June 15, 1999, in International Class 28 for the spirit symbol and Japanese trademark registration No. 1,571,425, registered March 28, 1993, in Japanese Class 17 (apparel) for the mark NANCY LOPEZ. (h) Company agrees that it will not, during the Contract Period, sanction any other party to use any mark identical with or confusingly similar to any part of the Golfer Identification, except to the extent permitted by the license herein granted or sublicenses permitted hereunder. (i) Company agrees that nothing herein contained shall give to Company any right, title or interest in any Golfer Logo, or any other part of the Golfer Identification (except the licensed rights in accordance with this Agreement), and that each and every part of the Golfer Identification and any mark registered pursuant to this paragraph is the sole property of Licensor and that any and all use by Company of any part of the Golfer Identification, and the goodwill arising therefrom, shall inure to the benefit of Licensor. (j) Company agrees never to raise or to cause to be raised any question concerning, or objection to the validity of, the Golfer Identification or the right of Licensor thereto, on any grounds whatsoever. (k) Company agrees that it will not, during the Contract Period or thereafter, file any application for any mark (other than in the name of Licensor or Golfer as provided herein), or obtain or attempt to obtain ownership of any mark or trade name, in any country of the world, which refers to or is suggestive of the name Nancy Lopez, any other part of the Golfer Identification, or any mark, design or logo intended to identify Golfer. -12-
(l) In the event that Licensor makes application for trademark registration of any part of the Golfer Identification, Company agrees to provide Licensor all reasonable assistance towards obtaining such registration, including the execution of documents deemed necessary or desirable by Licensor. (m) In no event shall a Golfer Logo, or any other part of the Golfer Identification, be commingled with any Company Trademarks, or elements thereof, in such a manner as to create a separate logo or trademark. (n) The Company represents and warrants that a full and complete list of all Company Trademarks which relate to the Licensed Products is attached as EXHIBIT B hereto. The Company agrees that it will use its diligent efforts, at its own expense, to maintain in effect such registrations and any Licensed Trademarks or Company Trademarks related to the Licensed Products registered after the date hereof. Upon termination or expiration of this Agreement, the Company shall promptly transfer to Golfer all Licensed Trademarks and Company Trademarks related to the Licensed Products. In the event the Company is not able to so transfer the Licensed Trademark and Company Trademarks under applicable law, the Company shall grant Golfer an exclusive license in such Licensed Trademarks and Company Trademarks for so long as Golfer requests at no cost to Golfer; provided, however, if (i) this Agreement is terminated pursuant to Section 19 hereof as a result of Licensor's failure to observe or perform any of the covenants, agreements or obligations hereunder, or (2) Licensor elects not to renew for the Renewal Period pursuant to Section 24 hereof, then Licensor shall pay Company twenty-five percent (25%) of all amounts received by Licensor in connection with Products sold under such Company Trademarks for the remainder of the Contract Period and the Renewal Period. 16. TRADEMARK INDEMNITY. (a) In the event a third party should make or file against Company any claim or action in which it is alleged that use by Company of the Golfer Identification (other than the Golfer Trademarks) in compliance with this Agreement (and not together with any other intellectual property) infringes the trademark rights of such claimant, then Company shall promptly notify Licensor of such claim, and thereafter Licensor shall undertake diligent efforts to have such claim withdrawn, compromised, or defended. In this connection, Company shall cooperate with Licensor's efforts (for example, by providing Licensor at Licensor's request with evidence of Company's use of the Golfer Identification in advertising, labels, packaging and otherwise). (b) Licensor shall, at its sole expense and in accordance with its own reasonable business judgment, take whatever steps it deems necessary or appropriate to finally dispose of such claim (including, at Licensor's election, defending any legal action to final judgment). If such claim is disposed of by the payment of money to the claimant, Licensor shall be solely responsible for such payment. If such claim is disposed of by an agreed suspension in the sales of Licensed Products or limitation on the items of merchandise on which the Golfer Identification may be used (or if any court shall direct such suspension or limitation), then Company shall, upon notice from Licensor to that effect, so suspend or limit its sales of Licensed Products. Licensor shall not agree to any such suspension without first consulting with -13-
Company and attempting to secure an adequate sell-off period for inventory on hand and in process. (c) If Company is required to so suspend or limit its sales of Licensed Products, then the Fixed Royalty which would otherwise have been payable during the period after the occurrence of such event shall be suspended or reduced pro-rata by the proportion of Company's sales of Licensed Products made in such territory, but Licensor shall not otherwise be responsible for any damages suffered by Company as a result of such suspension or limitation, and such suspension or limitation shall not terminate or constitute a default by Licensor of this Agreement. If as a result of suspension or limitation upon Company's sales of Licensed Products, Company shall reasonably determine that its efforts to advertise, promote and sell Licensed Products is no longer commercially feasible, Company shall have the right, at its election, by written notice to Licensor, to elect to terminate this Agreement. Upon such termination, if Company's losses as a result of such suspension or reduction exceed the amounts that would have been due Licensor, Licensor shall reimburse Company for such excess, subject to the limit on liability contained in Section 28 hereof; provided, however, Licensor shall not be required to reimburse Company to the extent such losses relate to the Golfer Trademarks. (d) Neither Licensor nor Golfer is responsible for initiating action against, enjoining or otherwise attempting to dissuade any person or entity not licensed by Licensor or Golfer, including without limitation, any former licensee of Licensor or Golfer, the media or any advertiser, promoter or other entity, which in contravention of this Agreement or otherwise makes unauthorized use of anything, including without limitation, any unauthorized use of the Golfer Identification, in promoting or advertising any product (or products) or services whatsoever, including without limitation, any products which are the same as or similar to or directly competitive with the Company Products. Neither Licensor nor Golfer shall incur any liability to Company or any third party arising out of any such activity by any such person or entity. If there should occur any infringement of the Golfer Identification by third parties, Licensor shall have the right in the first instance to take action at its sole expense in response to any such infringing activities. In the event that Licensor fails to file suit to seek injunctive relief and/or damages for such infringing activities within thirty (30) days of learning of such activities, Company shall have the right to file such a suit at its sole expense. Each party agrees to consult with the other with regard to any suits filed pursuant to this Section, and to execute such consents or other documents as may be reasonably necessary for the other party to file or pursue a suit (for example, a consent for Company to file suit in Licensor's or Golfer's name) pursuant to this Section. Any monetary proceeds of any enforcement action taken pursuant to this Section shall be retained by, and be the sole property of, the party taking the enforcement action or, if both parties participate in such action, the proceeds shall be divided pro rata based on the amounts expended by each party in pursuing the action. 17. LABELS. Company agrees that each Licensed Product advertised, promoted, distributed and sold by Company shall have affixed thereto a permanent label or imprint stamped on the container or packaging for Licensed Products which includes some element of the Golfer Identification. It is understood that each unit of Licensed Products shall have affixed thereto, either on the product itself, or on the packaging therefor, a trademark which identifies Company. -14-
18. COMPANY INDEMNITY INSURANCE. (a) Company agrees to protect, indemnify and save harmless Licensor and Golfer, or either of them, from and against any and all expenses, damages, claims, suits, actions, judgments and costs whatsoever, including reasonable attorneys' fees, arising out of, or in any way connected with, any claim or action for personal injury, death or property damage resulting from actual or alleged defects in Licensed Products, or any breach by Company of any statutory or regulatory obligation; any actual or alleged infringement by Company of the patent rights, copyrights, trademarks, design rights, personal or proprietary rights of any third party (not including any claim falling within the scope of Licensor's indemnity set forth above); any use of the Golfer Identification; or any services of Golfer hereunder. (b) Company shall provide and maintain, at its own expense, commercial general liability insurance, including product liability and advertising injury coverage, with limits of not less than Five Million Dollars ($5,000,000.00), and shall cause such policy to be endorsed to state that Licensor and Golfer are additional named insureds thereunder. A certificate of insurance evidencing such coverage shall be furnished to Licensor within thirty (30) days of the full execution of this Agreement. Such insurance policy shall provide that the insurer shall not terminate or materially modify such policy or remove Licensor or Golfer as additional named insured without prior written notice to Licensor at least twenty (20) days in advance thereof. 19. TERMINATION. (a) If either party at any time during the Contract Period shall fail to observe or perform any of the covenants, agreements, or obligations hereunder, the non-defaulting party may terminate this Agreement as follows: (i) upon a monetary default, ten (10) days after the defaulting party shall have received written notice of such failure to make payment, or (ii) upon a non-monetary default, thirty (30) days after the defaulting party shall have received written notice specifying such default if such default has not been cured within such thirty-day notice period. (b) Licensor may terminate this Agreement upon thirty (30) days' prior notice to the Company, if at any time during the Contract Period Licensor disapproves Licensed Products submitted to Licensor pursuant to Section 11, and Company does not remedy the reasons for such disapproval within six (6) months after Licensor's notice to the Company of such disapproval. (c) Company may terminate this Agreement if Golfer (i) dies, or (ii) commits any act of moral turpitude resulting in a conviction under applicable foreign, federal, state or local law and which, in the Company's good faith opinion destroys or significantly lessens the value of the Golfer Identification for purposes contemplated hereunder. (d) Failure to terminate this Agreement pursuant to this section shall not effect or constitute a waiver of any remedies the non-defaulting party would have been entitled to demand in the absence of this section, whether by way of damages, termination or otherwise. Termination of this Agreement for whatever reason shall be without prejudice to the rights and liabilities of either party to the other in respect of any matter arising under this agreement. -15-
20. CHANGE IN CONTROL. Company shall give Licensor prior written notice of any proposed change in control (as defined below) in the Company and Licensor shall have thirty (30) days to consent to such change in control, which consent shall not be unreasonably withheld. In the event Licensor does not consent to such change in control, Licensor may terminate this Agreement upon thirty (30) days' prior notice to the Company. For purposes of this Agreement, a "change in control" shall be deemed to occur if any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934) other than Mr. Richard M. Maurer, Mr. Robert L. Ross or Wesmar Partners Limited Partnership, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities in a single transaction or a series of related transactions. 21. PROHIBITION ON PREMIUM SALES. Company agrees that Licensed Products will not be sold or otherwise supplied to any third party if such Licensed Products are intended to be given away free of charge or sold at a substantial discount by such third party as a part of any plan intended to promote the products, services or business of any third party, provided, however, with the prior written consent of Licensor in each case, Company shall be permitted to supply Licensed Products to charities and other not-for-profit groups at no cost to such charities or groups. 22. CINDY DAVIS. Unless specifically prohibited by the terms of a subsequent employment agreement entered into by Cindy Davis ("Davis") and a third party, Davis shall be involved with Licensor and Golfer in a consulting capacity on behalf of the Company for a period of not less than six months after the date hereof. 23. PRODUCTION STANDARDS. In connection with the manufacture and production of the Licensed Products, Company: (a) will comply with all applicable laws and regulations regarding occupational safety and health, compensation, hours of work and benefits; (b) will not use forced labor in any form, whether imprisoned, indentured, bonded or otherwise; (c) will not employ any person under the age of 15 or the age prescribed by applicable local laws and regulations, whichever is higher; and (d) will not pay its employees less than the applicable minimum wage or, if there is no applicable minimum wage, the prevailing industry wage. 24. OPTION TO EXTEND. Provided neither party is then in default under the terms and conditions of this Agreement (or if in default, such default has been specifically waived in writing by the non-defaulting party), this Agreement shall be extended automatically for an additional three-year period (the "Renewal Period") commencing January 1, 2008, unless one of the parties hereto provides, not less than 180 days prior to the end of the then current Contract Period, written notice to the other that it does not want this Agreement to so extend. The Renewal Period shall be subject to all of the terms and conditions of this Agreement. 25. FORCE MAJEURE. If at any time during the term of this Agreement, a party is prevented from or hampered or interrupted or interfered with in any manner whatever in fully performing its duties hereunder (other than the delivery of remuneration), by reason of any present or future statute, law, ordinance, regulation, order, judgment or decree, whether -16-
legislative, executive or judicial (whether or not later repealed or determined to be invalid), act of God, earthquake, flood, fire, epidemic, accident, explosion, casualty, lockout, boycott, strike, labor controversy (including but not limited to threat of lockout, boycott or strike), riot, civil disturbance, war or armed conflict (whether or not there has been an official declaration of war or official statement as to the existence of a state of war), invasion, occupation, intervention of military forces, act of public enemy, embargo, delay of a common carrier, inability without fault to obtain sufficient material, labor, transportation, power or other essential commodity required in the conduct of its business; or by reason of any other cause or causes of any similar nature (all of the foregoing being herein referred to as an "event of force majeure"), then obligations of the party affected by the incident of force majeure (other than the delivery of remuneration) shall be suspended as often as any such event of force majeure occurs and during such periods of time as such event exists and such nonperformance shall not be deemed to be a breach of this Agreement. 26. USE OF GOLFER IDENTIFICATION AFTER TERMINATION. It is understood and agreed by Company that from and after the termination or expiration of the Contract Period, all of the rights of Company to the use of the Golfer Identification shall, except as hereinafter expressly provided in the paragraph next following, cease absolutely, and Company shall not thereafter manufacture or sell any item whatsoever with the use of the Golfer Identification or use the Golfer Identification in any way whatsoever. 27. INVENTORY OF LICENSED PRODUCTS ON TERMINATION. Any Licensed Products that have been manufactured by or for Company or which were in the process of manufacture by Company prior to the early termination or expiration of the Contract Period, may be sold by Company during the two hundred seventy (270) day period next following the date of termination, provided that: (a) Company is not in default of any term or condition of this Agreement; (b) the quantity of such Licensed Products in inventory at the time of such termination is not in excess of a reasonable quantity taking into account Company's sales requirements for Licensed Products; (c) Company shall furnish to Licensor within thirty (30) days after the effective date of the termination of the Contract Period a written statement of the number and description of such Licensed Products in inventory as of the effective date of termination; (d) Company shall continue to pay to Licensor with respect to such Percentage Royalty payments at the rate specified in Paragraph 8(b) hereof without credit or set-off of any other amounts; and (e) earned Percentage Royalty amounts payable pursuant to this Paragraph shall be paid within thirty (30) days following the end of said sell-off period. -17-
28. LIMIT OF LIABILITY. Notwithstanding anything to the contrary contained herein, in the event Company incurs any expenses, damages or other liabilities (including, without limitation, reasonable attorneys' fees) in connection herewith, Licensor's liability to Company hereunder (including, but not limited to, pursuant to the indemnification provisions hereof) shall not exceed cash fees, excluding reimbursement of expenses, actually paid to Licensor by Company hereunder during the Contract Period and the Renewal Period, if any. In no event shall Licensor be liable for any consequential, punitive, indirect, incidental, reliance, or special damages, whether or not Licensor has been advised about the possibility thereof. It is understood Golfer is not a party hereto and has no liability hereunder but is an intended specific third party creditor beneficiary hereof. 29. WAIVER. The failure of either party at any time or times to demand strict performance by the other of any of the terms, covenants or conditions set forth herein shall not be construed as a continuing waiver or relinquishment thereof and each may at any time demand strict and complete performance by the other of said terms, covenants and conditions. 30. BANKRUPTCY. If Company shall become bankrupt or insolvent, or if Company's business shall be placed in the hands of a receiver, assignee or trustee, whether by voluntary act of Company or otherwise, the Contract Period shall, at the election of Licensor, immediately terminate. 31. ASSIGNMENT. This Agreement shall bind and inure to the benefit of Licensor, and the successors and assigns of Licensor. The rights granted Company hereunder shall be personal to it and shall not, without the prior written consent of Licensor, be transferred or assigned (by operation of law or otherwise) to any other party, which consent shall not be unreasonably withheld. Likewise, Licensor may not assign its rights or obligations hereunder to any third party other than Golfer or another entity controlled by Golfer without the Company's prior written consent, which consent shall not be unreasonably withheld. In the event of the merger or consolidation of Company with any other entity, and in the event that Company is not the surviving entity, Licensor shall have the right to terminate the Contract Period by so notifying Company in writing on or before sixty (60) days after Licensor has received notice of such merger or consolidation. 32. SIGNIFICANCE OF HEADINGS. Section headings contained herein are solely for the purpose of aiding in speedy location of subject matter and are not in any sense to be given weight in the construction of this agreement. Accordingly, in case of any question with respect to the construction of this agreement, it is to be construed as though such section headings had been omitted. 33. ENTIRE AGREEMENT. This writing constitutes the entire agreement between the parties hereto and may not be changed or modified except by a writing signed by the party or parties to be charged thereby. 34. GOVERNING LAW; ARBITRATION. This agreement shall be governed and construed according to the laws of the State of Ohio without regard to conflict of laws. The parties agree to submit to arbitration any dispute related to this Agreement and agree that the arbitration process -18-
shall be the exclusive means for resolving disputes which the parties cannot resolve. Any arbitration hereunder shall be conducted under the Dispute Resolution Rules of the American Arbitration Association ("AAA") as modified herein. Arbitration proceedings shall take place in Cleveland, Ohio, before a single arbitrator who shall be a lawyer. All arbitration proceedings shall be confidential. Neither party shall disclose any information about the evidence produced by the other party in the arbitration proceedings, except in the course of judicial, regulatory, or arbitration proceeding, or as may be demanded by government authority. Before making any disclosure permitted by the preceding sentence, a party shall give the other party reasonable advance written notice of the intended disclosure and an opportunity to prevent disclosure. In connection with any arbitration provisions hereunder, each party shall have the right to take the deposition of one individual and any expert witness retained by the other party. Additional discovery may be had only where the arbitrator so orders, upon a showing of substantial need. Only evidence that is directly relevant to the issues may be obtained in discovery. Each party bears the burden of persuasion of any claim or counterclaim raised by that party. The arbitration provisions of this Agreement shall not prevent any party from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations for which such party may obtain provisional relief pending a decision on the merits by the arbitrator. Each of the parties hereby consents to the jurisdiction of Ohio courts for such purpose. The arbitrator shall have authority to award any remedy or relief that a court of the State of Ohio could grant in conformity to applicable law, except that the arbitrator shall have no authority to award attorneys' fees or punitive damages. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The arbitrator's award shall be final and judgment may be entered upon such award by any court. 35. RESERVATION OF RIGHTS. All rights not herein specifically granted to Company shall remain the property of Licensor to be used in any manner Licensor deems appropriate. Company understands that Licensor has reserved the right to authorize others to use Golfer Identification during the Contract Period in connection with all tangible and intangible items and services other than Products themselves. Likewise, Licensor understands that the Company has and will have the right, during the Contract Period and thereafter to contract with others for and in connection with endorsement, marketing and sale of all tangible and intangible items, including Products. Further, Licensor agrees neither to authorize nor permit any caddie or other support staff person of Golfer to display any logo, trademark or provide an endorsement for any Competitor while performing duties for Golfer at any golf tournament, exhibition, clinic or similar golf-related event in which Golfer is participating publicly. 36. NO PARTNERSHIP. This Agreement does not constitute and shall not be construed as constituting a partnership or joint venture between Licensor and Company. Neither party shall have any right to obligate or bind the other party in any manner whatsoever, and nothing herein contained shall give, or is intended to give, any rights of any kind to any third person. -19-
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representative to execute this agreement to be executed as of the date first above written. S2 GOLF, INC. NANCY LOPEZ ENTERPRISES, INC.
By /s/ Douglas A. Buffington -----------------------------------------Name: Douglas A. Buffington Title: President and Chief Operating Officer By /s/ Nancy Lopez --------------Name: Nancy Lopez Title: President
EXHIBIT A S2 GOLF INC. STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT, is made as of this ____ day of___________ (being the date this option is granted) by and between S2 GOLF INC. (hereinafter called the "Company") and Nancy Lopez Enterprises, Inc. (hereinafter called the "Optionee"), a consultant to the Company. The Company and the Consultant are hereinafter sometimes referred to individually as a "Party" and collectively as the "Parties". WHEREAS, pursuant to a certain Licensing Agreement, made and entered into as of this ___ day of July, 2000, by and between the Optionee and the Company (the "Licensing Agreement"), the Optionee has, among others, agreed to grant certain rights and provide certain services on a consulting basis to the Company; and WHEREAS, in accordance with Section 7(d) of the Licensing Agreement and in partial consideration for such grant of rights and the performance of such services, the Company desires to grant to the Optionee an option to purchase ___ shares of the Company's common stock ("Shares") on the terms and conditions contained herein; NOW, THEREFORE, the Parties do agree as follows: Section 1. GRANT OF OPTION. The Company hereby grants to the Optionee the option of purchasing Shares, at the price and subject to the terms and conditions as hereinafter set forth. The option rights granted hereunder are hereinafter called the "Option Rights." Section 2. OPTION PRICE. The option price per share is the fair market value of a share of the Company's common stock on the date hereof (the "Option Price"), with fair market value determined as provided in Section 2.03 of the S2 Golf Inc. 1998 Employee Stock Plan (the "Plan"). Section 3. VESTING. The Option Rights shall be exercisable by the Optionee as of the date hereof. Notwithstanding any other provision hereof, this option shall not be exercisable after the expiration of ten (10) years from the date this option is granted, or upon such earlier expiration date as may be provided by Sections 4 and 8. Section 4. TRANSFERABILITY. Neither the Option nor the Option Rights shall be sold, transferred, assigned, pledged or otherwise encumbered or disposed of, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process. Any attempted sale, transfer, pledge, assignment or other encumbrance or disposition of the Option or the Option Rights or the levy of any execution, attachment or similar process shall be null and void and without effect.
Section 5. TERM: MANNER OF EXERCISE. Subject to the terms and conditions hereof, the Option Rights may be exercised from time to time in whole or in part prior to the tenth (10th) anniversary of the date hereof by delivering to the Company at its principal place of business a written notice, signed by the person entitled to exercise the Option Rights, stating the Optionee's election to exercise the Option Rights and stating the number of Option Rights to be exercised. Such notice shall, as an essential part thereof, be accompanied by the payment of the full Option Price of the Shares then to be purchased and the amount, if any, required to be withheld for Federal, state and local tax purposes on account of the exercise of the Option Rights; provided that, at Optionee's election, the Company may withhold Shares pursuant to Section 15 for such purpose. The Option Rights shall be deemed exercised as of the date that the Company receives such notice and payment. Payment of the full Option Price may be made in cash, certified check, or shares of capital stock the Company having a fair market value (as defined in the Plan) on the date of exercise equal to the full Option Price, or by any combination of cash and shares of such capital stock. Upon the proper exercise of an Option Right, the Company or its transfer agent shall issue to the Optionee certificates for the Shares purchased. As holder of the Option Rights, the Optionee shall have no rights as Shareholder or otherwise in respect of any of the Shares as to which the Option Rights shall not have effectively been exercised. Section 6. COMPLIANCE WITH SECURITIES LAWS; LEGEND ON SHARE CERTIFICATE. (a) The Company will use its best efforts to maintain in effect a registration statement on Form S-8 with respect to the Shares. Neither the Option nor the Shares have been registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any applicable state securities laws (the Securities Act and such state laws being hereinafter sometimes referred to as the "Securities Laws"). The Shares shall not be transferable except pursuant to the provisions of the Securities Laws. The Optionee represents that, if and to the extent the Optionee exercises the Option, the Optionee (i) is acquiring the Shares for the Optionee's own account and not with a view to reselling, splitting, sharing or otherwise participating in a distribution thereof in violation of any Securities Laws, (ii) understands that the effect of such representation is that the Shares must be held indefinitely unless subsequently registered under the Securities Laws or an exemption from such registration is available at the time of any proposed sale or other transfer thereof, (iii) understands that the Corporation is under no obligation to register the Shares for resale, and (iv) is fully familiar with the circumstances under which the Optionee is required to hold the Shares and the limitations upon transfer or other disposition thereof. (b) The Optionee agrees that each certificate for Shares issued upon the exercise of the Option shall be stamped or otherwise imprinted with a legend in substantially the following form: The shares represented hereby have not been registered under the Securities Act of 1933, as amended (the "Act"), or under the state securities or blue sky laws of any state. Such shares may not be sold or transferred except pursuant to an effective registration statement under the Act or an opinion of counsel satisfactory to the Company that such registration is not required. Further, the sale or -22-
other transfer of such shares is subject to certain restrictions, options and rights contained in a certain Stock Option Agreement by and between the registered owner and S2 Golf Inc., as the same may be amended from time to time, to which reference is hereby made for a full statement of the provisions thereof. A copy of said Agreement will be furnished to any stockholder on request in writing and without charge. Section 7. RECAPITALIZATION; REORGANIZATION. In the event that at any time prior to the expiration of this option each of the outstanding Shares (except Shares held by dissenting shareholders) shall be changed to or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, then for all purposes of this option (i) there shall be substituted for each Share purchasable hereunder the number and kind of shares of stock or other securities into which each such Share shall be so changed, or for which each such Share shall be so exchanged, (ii) the option price shall be appropriately adjusted (if necessary) by the Company's Board of Directors to reflect such transaction, and (iii) the shares or securities so substituted for each such Share shall be subject to purchase at the option price, as adjusted. In the event that the Company shall issue a stock dividend in Common Shares with respect to the Shares, the number of Shares then purchasable hereunder shall be adjusted by adding to each such Share the number of Shares which would have been distributed as a stock dividend thereon had such Share been outstanding on the record date for payment of the stock dividend, and each such Share together with said additional Common Shares shall be purchasable at the option price, adjusted if necessary to reflect such dividend. In the event that there shall be any other change in the number or kind of outstanding Shares or other securities of the Company, or of any shares of stock or other securities into which Shares shall have been changed or for which they shall have been exchanged, then the Board of Directors may make such adjustment in the number or kind of shares of stock or other securities subject to purchase, and the option price, as above provided, as the Board, in its sole discretion, may determine is equitably required by such change, and such adjustments so made shall be effective and binding for all purposes of this option. Anything to the contrary herein notwithstanding, the Optionee shall not be entitled to purchase a fraction of a Share under this option. Section 8. LIQUIDATION OR DISSOLUTION. If the Company shall liquidate or dissolve, the Company shall give written notice thereof to the Optionee at least thirty (30) days prior thereto, and the Optionee shall have the right within said thirty(30)-day period (but within the term specified in Section 7) to exercise the Option Rights in full to the extent not previously exercised or terminated. To the extent that the Option Rights shall not have been exercised on or prior to the effective date of such liquidation or dissolution, the Option Rights shall terminate on said date, unless they are assumed by another corporation. Section 9. NO CONTINUED EMPLOYMENT. Nothing herein shall be deemed to limit in any way either Party's right to terminate the Licensing Agreement in accordance with its terms at any time. -23-
Section 10. MODIFICATIONS AND WAIVERS. No provisions of this Stock Option Agreement may be modified or discharged unless such modification or discharge is authorized by the Board of Directors and is agreed to in writing, and signed by the Optionee and by an executive officer of the Company. No waiver by either Party of any breach by the other Party or any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Section 11. ENTIRE AGREEMENT. This Stock Option Agreement constitutes the entire agreement of the Parties relating to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those contained herein. Section 12. STOCK OPTION PLAN. The Board of Directors shall have authority, subject to the express provisions of the Plan and this Agreement, to establish, amend and rescind rules and regulations relating to the Plan, and to make all other determinations in the judgment of the Board necessary or desirable for the administration of the Plan. The Board may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Stock Option Agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All actions by the Board under the provisions of this paragraph shall be conclusive for all purposes. The Optionee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by its terms, all of which are incorporated herein by reference. Notwithstanding any provisions hereof, this Agreement shall be subject to all of the provisions of the Plan as from time to time in force consistently with the provisions thereof. Section 13. NOTICES. Any notice hereunder shall be in writing, and delivered or sent by first-class U.S. mail, postage prepaid, addressed to: (i) if to the Company, at:
S2 Golf Inc. 16 Gloria Lane Fairfield, NJ 07004 Attn: Douglas Buffington, President (ii) if to Optionee, at:
Nancy Lopez Enterprises, Inc. IMG Center, Suite 100 1360 East 9th Street Cleveland, Ohio 44114 Attn: Sherry Whay subject to the right of either Party, by written notice hereunder, to designate at any time hereafter some other address. Section 14. COMPLIANCE WITH LAW AND REGULATIONS. The Option Rights and the obligation of the Company to sell and deliver Shares hereunder shall be subject to all applicable Federal and state laws, rules and regulations and to such approvals by any government or -24-
regulatory agency as may be required. Notwithstanding any other provision of this Agreement, the Option may not be exercised if its exercise, or the receipt of Shares pursuant thereto, would be contrary to applicable law. Section 15. WITHHOLDING. The Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Optionee any Federal, state and local taxes required by law to be withheld or collected with respect to the Option. Section 16. CHOICE OF LAW. This Agreement shall be construed in accordance with and be governed by the laws of the State of New Jersey. Section 17. DISPUTES. The Parties agree to submit to arbitration any dispute related to this Agreement and agree that the arbitration process shall be the exclusive means for resolving disputes which the Parties cannot resolve. Any arbitration hereunder shall be conducted under the Dispute Resolution Rules of the American Arbitration Association ("AAA") as modified herein. Arbitration proceedings shall take place in Cleveland, Ohio, before a single arbitrator who shall be a lawyer. All arbitration proceedings shall be confidential. Neither Party shall disclose any information about the evidence produced by the other Party in the arbitration proceedings, except in the course of judicial, regulatory, or arbitration proceeding, or as may be demanded by government authority. Before making any disclosure permitted by the preceding sentence, a Party shall give the other Party reasonable advance written notice of the intended disclosure and an opportunity to prevent disclosure. In connection with any arbitration provisions hereunder, each Party shall have the right to take the deposition of one individual and any expert witness retained by the other Party. Additional discovery may be had only where the arbitrator so orders, upon a showing of substantial need. Only evidence that is directly relevant to the issues may be obtained in discovery. Each Party bears the burden of persuasion of any claim or counterclaim raised by that Party. The arbitration provisions of this Agreement shall not prevent any Party from obtaining injunctive relief from a court of competent jurisdiction to enforce the obligations for which such Party may obtain provisional relief pending a decision on the merits by the arbitrator. Each of the Parties hereby consents to the jurisdiction of Ohio courts for such purpose. The arbitrator shall have authority to award any remedy or relief that a court of the State of Ohio could grant in conformity to applicable law, except that the arbitrator shall have no authority to award attorneys' fees or punitive damages. Any arbitration award shall be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The arbitrator's award shall be final and judgment may be entered upon such award by any court. Section 18. COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument. -25-
IN WITNESS WHEREOF, the Parties have executed this Stock Option Agreement as of the day and year first above written. S2 GOLF INC. By: NANCY LOPEZ ENTERPRISES, INC. By: -26-
EXHIBIT B Company Trademarks None.
EXHIBIT C NANCY LOPEZ ENTERPRISES, INC. IMG Center, Suite 100 1360 East 9th Street Cleveland, Ohio 44114 July 31, 2000 S2 Golf, Inc. 18 Gloria Lane Fairfield, New Jersey 07004 Re: LETTER OF INDUCEMENT Gentlemen and Ladies: In order to induce your company, S2 Golf, Inc. ("Company"), to enter into a certain proposed Agreement dated July 31, 2000 (the "Agreement," copy attached) with Nancy Lopez Enterprises, Inc. ("Enterprises"), in accordance with which Enterprises has agreed to supply to Company certain of my services and certain rights to the use of my name, likeness, image and trademarks, the undersigned hereby warrants, represents and confirms to Company the following (terms not otherwise defined herein shall have the meanings set forth in the Agreement): 1. I have agreed with Enterprises to provide to Company all of my services as are described in the Agreement, 2. I have granted to Enterprises the right to grant to Company the right to use my name, likeness, image and endorsement in accordance with the terms of the Agreement and have not granted and will not grant for the duration of the Contract Period rights to any other party inconsistent with Company's rights under the Agreement with respect to the Licensed Products, 3. I have no commitment, express or implied, with any third party which is in conflict with the terms, conditions and understandings set forth in the Agreement, 4. I shall not, during the term of the Agreement, withdraw the authorization provided to Enterprises as set forth above, or take any action contrary to or inconsistent (a) with such rights and authority granted to Enterprises or (b) the Agreement or the rights of Company therein and I will neither authorize nor permit any caddie or other support staff person working for me to display any logo, trademark or provide an endorsement for any Competitor while performing duties for me at any golf tournament, exhibition, clinic or other similar golf-related event in which I am participating publicly, and
S2 Golf, Inc. July 31, 2000 Page 2 5. I am the sole shareholder of Enterprises and shall remain so during the term of the Agreement. The representations, warranties and obligations hereinbefore set forth shall be binding upon my heirs, assigns and personal representatives in favor of Company, its successors and permitted assigns. It is understood that in the event of a breach of this letter of Inducement, Company's sole remedy shall be to terminate the Agreement pursuant to the terms thereof. I hereby acknowledge and agree that the foregoing representations, warranties and obligations undertaken by me for the benefit of Company were a substantial material inducement to Company to enter into the aforesaid Agreement with Enterprises. Sincerely,
/s/ Nancy Lopez Nancy Lopez
EXHIBIT 10.15 S2 GOLF INC. 1998 EMPLOYEE STOCK PLAN ARTICLE 1 GENERAL 1.01. PURPOSE. The purposes of this 1998 Employee Stock Plan (the "Plan") are to: (1) provide awardees, including certain employees and consultants of S2 Golf Inc. (the "Company"), with an equity ownership in the Company commensurate with Company performance, as reflected in increased stockholder value; (2) maintain competitive compensation levels; and (3) provide an incentive to employees for continuous employment with the Company. 1.02. EFFECTIVE DATE AND TERM OF PLAN. (a) The Plan shall become effective as of June 30, 1998. (b) No awards shall be made under the Plan after June 30, 2008; provided, however, that the Plan and all awards made under the Plan prior to that date shall remain in effect until those awards have been satisfied or terminated in accordance with the Plan and the terms of the awards. 1.03. ADMINISTRATION. (a) ADMINISTRATOR. Except as further provided in this Section 1.02(a), the Plan shall be administered by the full membership of the Board of Directors of the Company (the "Board") or a subcommittee of the Board (the "Committee") composed of at least two members who shall be appointed by, and serve at the pleasure of, the Board. The Board and the Committee are each alternatively called the "Administrator." If a Committee is appointed, each member of the Committee must be a "non-employee director" within the meaning of Rule 16b-3 ("Rule l6b-3"), as amended from time to time, under the Securities Exchange Act of 1934, as amended. (b) COMMITTEE ACTION. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members present at a meeting at which a quorum is present, or which is authorized in writing by all members, shall be the action of the Committee. A member participating in a meeting by telephone or similar communications equipment shall be deemed present for this purpose if the member or members who are present in person can hear him and he can hear them. (c) AUTHORITY OF THE ADMINISTRATOR. The Administrator shall have the power: (1) to determine and designate in its sole and absolute discretion from time to time those employees of the Company and nonemployees who are eligible to participate in the Plan and to whom awards are to be granted; (2) to authorize the granting of options; (3) to determine the
number of shares granted under an option award, subject to limitations provided under Section 1.05; (4) to determine the time or times and the manner when each award shall be exercisable and the duration of the exercise period, subject to limits provided under Section 2.04; and (5) impose limitations, restrictions and conditions upon any award as the Administrator shall deem appropriate. The Administrator may interpret the Plan, prescribe, amend and rescind any rules and regulations necessary or appropriate for the implementation or administration of the Plan, any grants hereunder and any agreement relating to any grant and may make other determinations and take other action as it deems necessary or advisable. An interpretation, determination or other action made or taken by the Administrator shall be final, binding and conclusive. (d) INDEMNIFICATION OF ADMINISTRATOR. In addition to other rights that they may have as members of the Board, the members of the Committee shall be indemnified by the Company against the reasonable expenses, including attorney's fees actually and reasonably incurred in connection with the defense of any action, suit or proceeding (a "Proceeding"), or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any award granted thereunder, and against all amounts paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such Proceeding, except in relation to matters as to which it shall be adjudged in the Proceeding that the action or failure to act by the member of the Administrator constituted self-dealing, willful misconduct or recklessness; provided that the member of the Administrator shall in writing offer the Company the opportunity, at its own expense, to handle and defend the Proceeding within 60 days after institution thereof. 1.04. ELIGIBILITY FOR PARTICIPATION. Participants in the Plan shall be selected by the Administrator from the Company's employees, including executive officers of the Company, whom the Administrator deems capable of making a contribution to the success of the Company. In addition, non-employee consultants and agents who have the capability of making a contribution to the success of the Company may also participate in the Plan. In making this selection and in determining the form and amount of awards, the Administrator shall consider any factors deemed relevant, including the individual's functions, responsibilities, value of services to the Company and past and potential contributions to the Company's profitability and sound growth. 1.05. LIMITATION ON AWARDS. (a) Shares of stock which may be issued under the Plan shall be authorized and unissued or treasury shares of Common Stock of the Company ("Common Stock"). The maximum number of shares of Common Stock which may be issued under the Plan shall be 500,000. The Administrator may not grant options exercisable for more than 125,000 shares of Common Stock under the Plan in any calendar year. (b) For purposes of calculating the maximum number of shares of Common Stock which may be issued under the Plan: -2-
(i) all the shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when cash is used as full payment for shares issued upon exercise of a Stock Option; and (ii) only the net shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when shares of Common Stock are used as full or partial payment for shares issued upon exercise of a Stock Option, if payment of the exercise price in such manner is permitted under the terms of the award. (c) Shares tendered by a participant as payment for shares issued upon exercise of a Stock Option shall be available for issuance under the Plan, if payment of the exercise price in such manner is permitted under the terms of the award. Any shares of Common Stock subject to a Stock Option which for any reason is terminated unexercised, or expires, shall again be available for issuance under the Plan. ARTICLE 2 STOCK OPTIONS 2.01. AWARD OF STOCK OPTIONS. The Administrator may from time to time, and subject to the provisions of the Plan and other terms and conditions as the Administrator may prescribe, grant to any participant in the Plan one or more options to purchase the number of shares of Common Stock ("Stock Options") allotted by the Administrator. The exercise price for such Stock Options shall be payable in cash, or, if the Administrator shall so specify, shares of previously owned Common Stock or Common Stock issuable on exercise of the Stock Option. The date a Stock Option is granted is the date selected by the Administrator as of which the Administrator allots a specific number of shares to a participant pursuant to the Plan. 2.02. STOCK OPTION AGREEMENTS. The grant of a Stock Option shall be evidenced by a written Stock Option Agreement, executed by the Company and the holder of a Stock Option, stating the number of shares of Common Stock subject to the Stock Option evidenced thereby, and in the form as the Administrator may from time to time determine. 2.03. STOCK OPTION PRICE. Except in the case of an exchange of a Stock Option granted under this Plan for a stock option granted outside this Plan, the option price per share of Common Stock deliverable upon the exercise of a Stock Option shall be 100% of the fair market value of a share of Common Stock on the date the Stock Option is granted. The "fair market value of a share of Common Stock on the date the Option is granted" means the average of the high and low prices of the Common Stock as reported on the Nasdaq Small Cap System on the last trading day prior to the time the Stock Option is granted, or if the Common Stock ceases to be traded on the Nasdaq Small Cap System, the last -3-
determinable market price or value as reasonably determined by the Administrator in accordance with customarily accepted practices for determining the price or value of stock traded in a like manner as the Common Stock is then traded. If a Stock Option is granted under this Plan in exchange for a stock option granted outside this Plan, the per share exercise price of the Stock Option issued under this Plan may, at the election of the Administrator, be the same price as that of the stock option granted outside this Plan which is being exchanged. 2.04. TERM AND EXERCISE. Each Stock Option shall first be exercisable and/or become exercisable according to the vesting schedule as is determined by the Administrator and provided in the Stock Option Agreement. Each Stock Option shall be for a term of ten years, subject to earlier termination as provided in Section 2.07, unless the Stock Option Agreement expressly provides for a different term, not in excess of ten years, and/or expressly provides that any or all of the provisions of Section 2.07 shall not apply. No Stock Option shall be exercisable after the expiration of its option term. 2.05. MANNER OF PAYMENT. Each Stock Option Agreement shall set forth the procedure governing the exercise of the Stock Option granted thereunder, and shall provide that, upon exercise in respect of any shares of Common Stock subject thereto, the optionee shall pay to the Company, in full, the option price for the shares with cash or, if the terms of the award so permit, with previously owned Common Stock or Common Stock issuable on exercise of the Stock Option. 2.06. CERTIFICATES. As soon as practicable after receipt of payment for shares of Common Stock purchased upon the exercise of a Stock Option, the Company shall deliver to the optionee a certificate or certificates for the shares of Common Stock. The optionee shall become a stockholder of the Company with respect to Common Stock represented by share certificates so issued and as such shall be fully entitled to receive dividends, to vote and to exercise all other rights of a stockholder. 2.07. TERMINATION OF EMPLOYMENT. (a) DEATH OF OPTIONEE. Upon the death of the optionee, any rights exercisable on the date of death may be exercised by the optionee's estate, or by a person who acquires the right to exercise the Stock Option by bequest or inheritance or by reason of the death of the optionee, provided that the exercise occurs prior to the earlier of (i) the end of the remaining term of the Stock Option and (ii) one year after the optionee's death. The provisions of this Section shall apply notwithstanding the fact that the optionee's employment may have terminated prior to death, but only to the extent of any rights exercisable on the date of death. (b) RETIREMENT OR DISABILITY. Upon termination of the optionee's employment by reason of retirement or permanent disability (as each is determined by the Administrator), the -4-
optionee may, within 36 months from the date of termination, exercise any Stock Options to the extent the options are exercisable during the 36-month period. (c) Termination for Other Reasons. Except as provided in Sections 2.07(a) or (b), or except as otherwise determined by the Administrator, all Stock Options shall terminate three months after the termination of the optionee's employment. ARTICLE 3 MISCELLANEOUS 3.01. GENERAL RESTRICTION. Each award under the Plan shall be subject to the requirement that, if at any time the Administrator shall determine that (i) the listing, registration or qualification of the shares of Common Stock subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the grantee of an award with respect to the disposition of shares of Common Stock is necessary or desirable as a condition of, or in connection with, the granting of the award or the issue or purchase of shares of Common Stock thereunder, the award may not be consummated in whole or in part unless the listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Administrator. 3.02. NON-ASSIGNABILITY. No award under the Plan shall be assignable or transferable by the recipient thereof, except by will or by the laws of descent and distribution. During the life of the recipient, the award shall be exercisable only by that person or by that person's guardian or legal representative. 3.03. WITHHOLDING TAXES. Whenever the Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to require the grantee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for the shares. Alternatively, the Company may issue or transfer the shares of Common Stock net of the number of shares sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of Common Stock shall be valued on the date the withholding obligation is incurred. 3.04. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any participant the right to continue in the employment of the Company or affect any right which the Company may have to terminate the employment of the participant. -5-
3.05. NON-UNIFORM DETERMINATIONS. The Administrator's determinations under the Plan (including without limitation determination of the persons to receive awards, the form, amount and timing of the awards, the terms and provisions of the awards and the agreements evidencing them) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not the persons are similarly situated. 3.06. RIGHTS AS A STOCKHOLDER. The recipient of any award under the Plan shall have no rights as a stockholder with respect thereto unless and until certificates for shares of Common Stock are issued to the recipient. 3.07. LEAVES OF ABSENCE. The Administrator shall be entitled to make rules, regulations and determinations as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any award. Without limiting the generality of the foregoing, the Administrator shall be entitled to determine (i) whether or not any leave of absence shall constitute a termination of employment within the meaning of the Plan and (ii) the impact, if any, of any leave of absence on awards under the Plan previously made to any recipient who takes a leave of absence. 3.08. NEWLY ELIGIBLE EMPLOYEES. The Administrator shall be entitled to make rules, regulations, determinations and awards as it deems appropriate in respect of any employee who becomes eligible to participate in the Plan or any portion thereof after the commencement of an award or incentive period. 3.09. ADJUSTMENTS. In any event of any change in the outstanding Common Stock by reason of a stock dividend or distribution, recapitalization, merger, consolidation, split-up, combination, exchange of shares or the like, the Administrator may appropriately adjust the number of shares of Common Stock which may be issued under the Plan, the number of shares of Common Stock subject to awards previously granted under the Plan, the exercise price of awards previously granted under the Plan and any and all other matters deemed appropriate by the Administrator. 3.10. AMENDMENT OF THE PLAN. The Board may terminate this Plan, and may, without action by the stockholders and without receiving further consideration from the participants, amend this Plan or condition or modify awards under this Plan, including, without limitation, amendments, conditions or modifications in response to changes in securities or other laws or rules, regulations or regulatory interpretations thereof applicable to this Plan or to comply with stock exchange rules or requirements. -6-
EXHIBIT 10.18 CONSULTING SERVICES AGREEMENT This CONSULTING SERVICES AGREEMENT (this "Agreement") is made and entered into this 15th day of December, 2000 and is effective the 1st day of January 2000 by and between MR & Associates, a Pennsylvania limited partnership ("M&R"), and S2 Golf Inc., a New Jersey corporation ("S2"). WHEREAS, S2 is engaged in the business of manufacturing and selling men's and women's golf equipment through a nationwide dealer network; and WHEREAS, in connection with such business, S2 desires to retain M&R to provide administrative and financial consulting assistance as may be necessary to enable S2 to conduct its business (the "Consulting Assistance"); and WHEREAS, S2 desires to contract with M&R, and M&R desires to accept such engagement from S2, for the provision of the Consulting Assistance upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein and other good and valuable consideration, and intending to be legally bound hereby, M&R and S2 agree as follows: 1. ADMINISTRATIVE AND OPERATING SERVICES. (a) For the period of time extending from January 1, 2000 until December 31, 2001, and as shall be renewed on an annual basis unless either party provides the other with at least thirty (30) days' written notice prior to any such annual renewal that this Agreement will not be so renewed, M&R hereby accepts such engagement to provide the Consulting Assistance, subject to the prevailing conditions affecting S2's business and subject to the terms and conditions of this Agreement. Such Consulting Assistance shall include, but not necessarily be limited to, the following: i) financial counseling, including negotiation and placement of bank financings and refinancings; (ii) making available certain legal services; (iii) assisting in investment decisions: (iv) assisting in procuring insurance coverages; ii) assisting in employee benefit plan implementation;
(vi) assistin g in finding, negotiating and closing any and all acquisitions to be made by S2; and (vii) assisting in any sale or divestiture of a substantial portion or all of S2. (b) As compensation for its efforts under this Agreement, S2 shall pay to M&R a consulting fee of (i) $60,000 (for calendar year 2000 services rendered) on or before December 31, 2000 and (ii) $5,000 per month, payable in advance each month beginning January 1, 2001. 2. INDEMNITY. (a) S2 shall indemnify and hold M&R, its employees, officers, directors, shareholders, agents and servants harmless from any and all claims, suits, demands, losses and liability, except as may arise from the gross negligence or willful act of M&R, its employees, officers, directors, shareholders, agents or servants, whether based in contract, tort (including strict liability), or otherwise, asserted by any and all persons and organizations whatsoever, including S2 employees, arising from, related to, or as a consequence of any act or omission by M&R or its employees or representatives in providing any service hereunder. (b) M&R shall indemnify and hold S2 harmless from any and all claims, suits, demands, losses and liability, asserted by any and all persons and organizations whatsoever arising from the gross negligence or willful misconduct of M&R, its employees, officers, directors, shareholders, agents or servants. 3. CONSEQUENTIAL AND OTHER DAMAGES. M&R shall not be liable to S2 for any special, indirect, incidental or consequential damages whatsoever which in any way arise out of, relate to, or are a consequence of, M&R's or its employees' performance or nonperformance under this Agreement. 4. RELATIONSHIP. M&R and S2 shall in no event be construed as joint venturers or partners of each other as a consequence of the relationship contemplated under this Agreement. Neither M&R nor S2 shall have the power to bind or obligate the other. 5. ASSIGNMENT. M&R may sell, assign or otherwise transfer its right, title and interest in and under this Agreement, in whole or in part (i) to any entity controlled, directly or indirectly, by Richard M. Maurer or Robert L. Ross or both of them, or (ii) upon the prior written consent of S2, which consent shall not be unreasonably withheld, to any entity not controlled, directly or indirectly, by Richard M. Maurer or Robert L. Ross or both of them. S2 may sell, assign or otherwise transfer its right, title and interest in and under this Agreement, in whole or in part, to any entity controlling, controlled by or under common control with S2 or any entity that purchases all or substantially all of S2's assets. Any assignment under this paragraph shall be of no force and effect unless and until the -2-
assignee thereunder shall assume, in writing, any and all obligations (or in the event of a partial assignment, such obligations as are reasonably appropriate) of the assignor arising under this Agreement. 6. GENERAL MATTERS. (a) CAPTIONS. The captions utilized in this Agreement are for the purposes of identification only and shall not control or affect the meaning or construction of any of the provisions hereof. (b) INTEGRATION. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and will supersede all previous negotiations, representations, commitments and writing. (c) MODIFICATION AND WAIVER. This Agreement may not be amended, released, discharged, rescinded or abandoned, except by a written agreement duly executed by each of the parties hereto. The failure of any party hereto at any time to enforce any of the provisions of this Agreement will in no way constitute or be construed as a waiver of such provision or of any other provision hereof, nor in any way affect the validity of, or the right thereafter to enforce, each and every provision of this Agreement. (d) GOVERNING LAW. This Agreement and its validity, construction, administration and all rights hereunder, will be governed by the laws of the Commonwealth of Pennsylvania without regard to its conflict of laws provisions. Any suit or proceeding arising out of, relating to or mentioning this Agreement shall be commenced only in a state or Federal court located in Pittsburgh, Pennsylvania, and each party to this Agreement hereby consents to the jurisdiction and venue of such court. (e) SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. (f) NOTICES. Wherever provision is made in this Agreement for the giving, service or delivery of any notice, statement or other instrument, such notice shall be in writing and shall be deemed to have been duly given, served and delivered, if delivered by hand or mailed by United States registered or certified mail, addressed as follows: S2 Golf Inc. 18 Gloria Lane Fairfield, NJ 07006 Attention: Douglas A. Buffington -3-
MR & Associates Three Gateway Center Suite 16 South Pittsburgh, PA 15222 Attention: Richard M. Maurer Each party hereto may change its mailing address by giving to the other, by hand delivery or United States registered or certified mail, written notice of election to change such address and of such new address. (g) COUNTERPARTS. This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, and intending to be legally bound hereby, the Parties have executed this Agreement as of the date first above written. MR & ASSOCIATES By: Maurer Ross & Co., Incorporated, a Pennsylvania corporation, its sole general partner
By: /S/ RICHARD M. MAURER -------------------------------Richard M. Maurer, President
S2 GOLF INC.
By: /S/ DOUGLAS A. BUFFINGTON -------------------------------Douglas A. Buffington, President
EXHIBIT 10.19 EMPLOYMENT AGREEMENT Made as of the 1st day of January, 2001 by and between S2 Golf Acquisition Corp. d/b/a Lady Fairway ("Lady Fairway"), a wholly owned subsidiary of S2 Golf Inc., a New Jersey corporation with its principal place of business in Fairfield, New Jersey ("S2 Golf"), S2 Golf, and James E. Jones of Tampa, Florida ("JEJ") as follows: WHEREAS, the parties desire to: (i) provide for the employment of JEJ in the management of Lady Fairway and S2 Golf, and (ii) provide for a valid and enforceable covenant by JEJ not to compete with Lady Fairway and/or S2 Golf in the conduct of their businesses and in the geographical area described in Exhibit A hereto ("Business") for the period herein described; and (iii) fix the compensation of JEJ for such services and covenant; NOW THEREFORE, in mutual consideration of the covenants and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows: 1. TERM. S2 Golf and Lady Fairway hereby hire and employ JEJ for a period beginning on the effective date of this Agreement, and terminating on the close of business on December 31, 2005 unless the Agreement is terminated sooner as provided herein (the "Employment Period"). 2. DUTIES. During the Employment Period, JEJ shall devote his full business time and attention to the business of Lady Fairway and S2 Golf and to such activities as may be assigned to him from time to time by Lady Fairway and S2 Golf. JEJ will report to the President of S2 Golf and have the titles and responsibilities of President of Lady Fairway and Vice President of Marketing of S2 Golf and will serve Lady Fairway and S2 Golf diligently and faithfully in the Business and use his best endeavors to promote the interests of Lady Fairway and S2 Golf and will perform such services at such reasonable times and places as Lady Fairway and S2 Golf may direct in connection with the Business. Such services shall include, but not be limited to, overseeing the business affairs of Lady Fairway, coordinating S2 Golf's clothing line and managing the marketing efforts of S2 Golf. 3. SALARY. In consideration of the services to be performed by JEJ, he will receive an annual gross salary of $100,000 (the "Base Salary"). The Base Salary shall be paid in accordance with S2 Golf's regular payroll policies. 4. BONUS PLAN. (a) S2 Golf may, during the Employment Period, grant to JEJ common stock options for certain numbers of shares of S2 Golf's common stock (the "Stock Options"). (b) The exercise price and the number of shares exercisable under any Stock Option shall be adjusted accordingly for any subsequent common stock splits, reverse common stock splits, recapitalizations, etc.
(c) Notwithstanding any other provision of this paragraph 4 to the contrary, if a Change in Control (as defined below) of Lady Fairway or S2 Golf occurs, then: (i) all of the then "non-vested" shares of any Stock Option shall be and become exercisable immediately prior to such Change in Control (each, an "Accelerated Share"; combined, the "Accelerated Shares"); (ii) the exercise price for each Accelerated Share of any Stock Option shall be either (a) one (1) cent ($.01) or (b) the lowest greater exercise price per Accelerated Share which will not cause the value to JEJ of all the shares of any Stock Options exercised upon such Change in Control to be considered an "excess parachute payment" under Section 280G of the Internal Revenue Code of 1986, as amended; and (iii) the exercise price of the then "vested" shares of any Stock Option shall be the exercise price determined in clause (ii) above; provided, however, that in no event shall the exercise price of the then "vested" shares of any Stock Option be in excess of the Exercise Price originally determined upon the grant of such Stock Option. (d) A Change in Control shall be deemed to have occurred if (i) Lady Fairway or S2 Golf shall be merged or consolidated with any corporation (other than with any of its subsidiaries), (ii) Lady Fairway or S2 Golf shall sell all or substantially all of its operating properties and assets or (iii) any person (including any person, association, corporation or other entity) becomes a beneficial owner, directly or indirectly, of securities of Lady Fairway or S2 Golf representing more than 50% of the combined voting power of the then outstanding securities of Lady Fairway or S2 Golf. 5. BENEFITS. During the Employment Period, JEJ shall be entitled to receive all benefits listed on Exhibit B attached hereto. S2 Golf reserves the right to alter, abolish, change or improve any such benefit provided, however, JEJ shall, at all times, receive the same benefits as the benefits provided by Lady Fairway or S2 Golf to all other senior executives. Lady Fairway agrees to maintain, at Lady Fairway's expense, adequate insurance coverage for JEJ's use of the van owned by Lady Fairway. Lady Fairway's obligation to maintain such insurance pursuant to this paragraph 5 shall cease upon relocation of Lady Fairway's operations from Tampa, Florida to New Jersey. 6. TERMINATION. (a) S2 Golf may terminate JEJ's employment under this Agreement, and JEJ's Base Salary shall cease to accrue, if, and only if, any of the following shall occur: (i) JEJ dies; or (ii) in the event JEJ is determined to suffer from a Disability, 90 days after the onset of such Disability. The term "Disability" is defined as a medically determinable physical or mental impairment which renders JEJ incapable of performing his employment duties with S2 Golf or Lady Fairway and which can be expected to result in death or to be of long continued and indefinite duration. Lady Fairway shall select a physician to determine whether JEJ is Disabled, as hereinabove defined, and such determination shall be binding and conclusive; or (iii) S2 Golf and Lady Fairway have discharged JEJ for cause. Cause shall be determined by S2 Golf and shall mean JEJ's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, failure to perform his duties 2
described herein, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order, material breach of any provision of this Agreement or acceptance of employment other than with S2 Golf and Lady Fairway; or (iv) JEJ violates the provisions of this Agreement; or (v) JEJ voluntarily terminates his employment with S2 Golf or Lady Fairway; or (vi) there has been a Change in Control and in conjunction with such Change in Control JEJ's duties are modified, without JEJ's express written consent, so as to no longer include the title and responsibility of either (a) President of Lady Fairway or (b) Vice President of Marketing of S2 Golf. (b) If JEJ's employment is terminated, whether such termination be pursuant to the terms of this paragraph 6, by expiration of the Employment Period, or otherwise, all further obligations of Lady Fairway and S2 Golf to JEJ shall cease. Likewise, if JEJ's employment is terminated, all obligations owed by JEJ to Lady Fairway and S2 Golf shall cease provided, however, that JEJ shall continue to comply with the terms of the covenant not to compete contained in this Agreement unless JEJ's employment is terminated pursuant to paragraphs 6(a)(i) or 6 (a)(vi) and an agreeable employment agreement cannot be developed between all parties. In the event of termination, JEJ shall be entitled to any unpaid balance of JEJ's salary prorated and accrued to the date of termination. No provision of this Agreement shall be construed as to prejudice any right or remedy available to S2 Golf, Lady Fairway or JEJ in any case of termination. 7. CONFIDENTIALITY. JEJ will treat as confidential and will not, without written approval of Lady Fairway and/or S2 Golf, use, other than in the performance of his designated duties to Lady Fairway and S2 Golf, or publish, disclose, copyright or authorize anyone else to use, publish, disclose or copyright, during the term of employment under this Agreement any information relating to inventions, processes, formulas, systems, plans, programs, studies, techniques, "know-how", products, product development, product costing, product pricing, or trade secrets of Lady Fairway and S2 Golf, or any affiliated entities of Lady Fairway and S2 Golf, or any other information which Lady Fairway, S2 Golf or such entities might prefer or require to remain undisclosed including information relating to any of the activities, operations or affairs of Lady Fairway, S2 Golf or of such entities, it being understood that such confidential information does not include information that is publicly available or known. JEJ will diligently protect such confidential information against loss by inadvertent or unauthorized disclosure and will comply with any rules established by Lady Fairway and/or S2 Golf for the purpose of protecting such confidential information. 8. ASSIGNMENT. This Agreement is not assignable by JEJ but is assignable by S2 Golf to any affiliate or successor entity. As used in this Agreement, the term "S2 Golf" shall include any entity to which this Agreement shall have been assigned by S2 Golf. 9. PATENTS AND INVENTIONS. JEJ will promptly submit to S2 Golf written disclosures of all inventions, improvements and discoveries, relating to the Business, whether or not 3
patentable (hereinafter call "Inventions"), which are made or conceived by him, alone or jointly with others, while in its employ. Title to all such Inventions that shall be within the existing or contemplated scope of Lady Fairway's and S2 Golf's businesses at the time such inventions are made or conceived or which result from or are suggested by any work he or others may do for or on behalf of Lady Fairway and/or S2 Golf, together with such patent, patents or other legal protection as may be obtained thereon in the United States of America and all foreign countries, shall belong to Lady Fairway. JEJ will assign any rights or interest in such title to Lady Fairway, and, upon the request of Lady Fairway, will at any time during his employment with Lady Fairway and after its termination for any reason, execute all proper papers for use in applying for, obtaining, maintaining and enforcing such patents or other legal protection as Lady Fairway may desire and will execute and deliver all proper assignments thereof, when so requested, without remuneration but at the expense of Lady Fairway. 10. NON-COMPETITION. (a) During the term of this Agreement JEJ will not, directly or indirectly, engage in any activity similar to that of any part of the Business or otherwise in competition with the Business. (b) For one year after the termination of this Agreement (for any reason other than as a result of the event described in subparagraphs 6(a)(i) or (vi)) JEJ will not, directly or indirectly engage in any activity for any person or entity the purpose of which activity is to assist such person or entity in any manner in either: (i) soliciting or obtaining an endorsement of such person's or entity's products by the Ladies Professional Golf Association ("LPGA") for which Lady Fairway and/or S2 Golf has an exclusive or non-exclusive license from the LPGA or (ii) establishing a women's golf club or golf shoe product line where such person or entity had no such product line previously. (c) JEJ shall not engage in any activity described in subparagraphs 10(a) or 10(b) in any place in the United States of America involving sales to anyone who is or was, or any entity that is or was a customer of Lady Fairway and/or S2 Golf during the Employment Period. (d) JEJ shall be deemed to be engaged in the activities described in subparagraphs 10(a) or 10(b) directly or indirectly if he is an employee, officer, director, trustee, agent, representative or partner of, or a consultant or advisor to or for, any person, firm, corporation, association, trust or other entity (other than S2 Golf, Lady Fairway or any of their respective affiliates, subsidiaries, or successors) which is engaged in such business or if he owns, directly or indirectly, in excess of five percent (5%) of the outstanding stock or shares or has a beneficial or other financial interest exceeding five percent (5%) of the net assets of any such person, firm, corporation, association, trust or other entity. The foregoing shall not be construed to prohibit the mere ownership by JEJ of investments not representing a controlling interest in any securities traded in over-the-counter market or listed on any national securities exchange. (e) JEJ agrees that the remedy at law for any breach or threatened breach of the covenant contained in this paragraph 10 will be inadequate and that any breach or threatened breach would cause such immediate and permanent damage as would be impossible to ascertain, and, therefore, JEJ agrees and consents that in the event of any breach or threatened breach of 4
any provision of such covenant by him, in addition to any and all other legal and equitable remedies available to Lady Fairway and/or S2 Golf for such breach or threatened breach including a recovery of damages, Lady Fairway and/or S2 Golf shall be entitled to obtain preliminary or permanent injunctive relief without the necessity of proving actual damage by reason of such breach or threatened breach and, to the extent permitted by applicable statutes and rules of procedure, a temporary restraining order (or similar procedural device) may be granted immediately upon the commencement of such action. (f) To the extent that any obligation to refrain from competing within an area, for a period of time or with respect to a product or service, as provided in this paragraph 10 is invalid or unenforceable, it shall, to the extent that it is invalid or unenforceable, be deemed void AB INITIO, and the remaining obligations imposed by the provisions of this Agreement shall be fully enforceable as if such invalid or unenforceable provisions had not been included herein. The parties intend for this covenant to be enforceable to the maximum extent permitted by law, and if any reviewing court deems it overbroad, such court may reduce the time element by months, and the area by counties to achieve the intention of the parties. 11. INDEMNIFICATION. The parties acknowledge that as the result of JEJ's service as an officer of Lady Fairway and S2 Golf, JEJ exposes himself to risks of personal liability arising from, and pertaining to, JEJ's participation in the management of Lady Fairway and S2 Golf. Lady Fairway and S2 Golf shall defend, indemnify and hold harmless JEJ from any actual cost, loss, damages, attorneys fees, and liability suffered or incurred by JEJ arising out of, or connected to, JEJ's service as an officer of Lady Fairway and S2 Golf, to the extent allowed under New Jersey corporate law. Lady Fairway and S2 Golf shall not be obligated to indemnify JEJ if the cost, loss, damage, or liability results from JEJ's violation of the Securities Exchange Act of 1934, as amended, JEJ's violation of criminal law, a transaction from which JEJ received an improper personal benefit, JEJ's violation of Section 607.0834 of the Florida Business Corporation Act, or JEJ's willful misconduct or a conscious disregard for the best interests of Lady Fairway and S2 Golf. Lady Fairway and S2 Golf will not have any obligation to JEJ under this section for any loss suffered if JEJ voluntarily pays, settles, compromises, confesses judgment for, or admits liability with respect to without the approval of Lady Fairway and S2 Golf. Within thirty days after JEJ receives notice of any claim or action which may give rise to the application of this section, JEJ shall notify Lady Fairway or S2 Golf in writing of the claim or action. JEJ's failure to timely notify Lady Fairway or S2 Golf of the claim or action will relieve Lady Fairway and S2 Golf from any obligation to JEJ under this section. 12. NO RELOCATION. (a) S2 Golf and Lady Fairway acknowledge that (i) on the date of this Agreement, JEJ resides in Tampa, Florida; and (ii) the relocation of JEJ's residence outside of Tampa, Florida is not a condition of JEJ's employment by S2 Golf or Lady Fairway. (b) S2 Golf and Lady Fairway shall provide JEJ with an appropriately staffed office in Hillsborough County, Florida, which will enable JEJ to fulfill his duties and obligations under this Agreement. 5
(c) In the event of a breach of paragraphs 12(a) or 12(b) by either S2 Golf or Lady Fairway, JEJ will be entitled to terminate this Agreement immediately and will have no other obligations to Lady Fairway or S2 Golf arising out of this Agreement, including, without limitation, JEJ's obligations under paragraph 10; provided, however that JEJ's obligations to Lady Fairway and S2 Golf under paragraphs 7 and 9 will continue. 13. BINDING EFFECT. This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and permitted assigns. 14. GOVERNING LAW AND SELECTION OF FORUM. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New Jersey. 15. SOLE AGREEMENT. This Agreement supercedes all prior agreements and understandings between the parties with respect to the employment contemplated hereby and may not be changed or amended orally. No change, termination or attempted waiver of any of the provisions of this Agreement shall be of any effect unless the same is set forth in writing and duly executed by the party against which it is sought to be enforced. 16. ATTORNEY'S FEES. The prevailing party in any action brought to enforce the provisions of this Agreement shall be entitled, in addition to such other relief that may be granted, to a reasonable sum for attorney's fees and costs incurred by such party in enforcing this Agreement (including fees incurred on any appeal). 17. NOTICE. Any notice required or permitted to be given under this Agreement shall be sufficient if it is in writing and sent by hand delivery or by United States Express Mail service to the parties at the following addresses:
To Lady Fairway or to S2 Golf: 18 Gloria Lane Fairfield, New Jersey 07004 Attn: Robert L. Ross Chairman and CEO 3803 Corporex Park Drive Suite 400 Tampa, Florida 33619
18. AUTHORITY. S2 Golf and Lady Fairway possess the corporate power and authority necessary to execute this Agreement. 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. S2 GOLF INC.
/s/ Robert L. Ross -----------------------------------------Robert L. Ross Chairman and CEO
S2 GOLF ACQUISITION CORP. d/b/a Lady Fairway
/s/ Douglas A. Buffington -----------------------------------------Douglas A. Buffington President
/s/ James E. Jones -----------------------------------------James E. Jones
EXHIBIT A The ownership, management or operation of any business enterprise which is engaged in the manufacture, assembly, purchase for resale and/or wholesale distribution of golf clubs, golf bags, golf balls, golf shoes and/or golf apparel in the United States of America and/or Canada. All of the foregoing is collectively referred to herein as the "Business." 8
EXHIBIT B 1. Annual vacation in accordance with S2 Golf policy. 2. Health benefits in accordance with S2 Golf policy. 3. Long term disability insurance with benefits at 80% of Base Salary. 4. Reimbursement of all ordinary and necessary travel and entertainment expenses. 9