EXHIBIT 10.2
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TRANSITIONAL ASSEMBLY SERVICES AGREEMENT
This Transitional Assembly Services Agreement (this "Agreement") is made
and entered into as of the 8th day of August 1997, by Callaway Acquisition, a
California corporation ("Callaway Acquisition"), and Tommy Armour Golf Company,
a Delaware corporation ("Armour").
W I T N E S S E T H :
WHEREAS, on the date of this Agreement, Callaway Acquisition has purchased
certain inventory machinery and equipment and other assets including certain
machinery and equipment (the "Machinery") located at the Armour facility in
Morton Grove, Illinois (the "Plant") pursuant to the terms of that certain Asset
Purchase Agreement, dated as of July 20, 1997 (the "Purchase Agreement") between
Callaway Golf Company ("Callaway Golf"), a California corporation, U.S.
Industries, Inc. ("U.S. Industries"), a Delaware corporation and Odyssey Sports,
Inc. ("Odyssey"), a California corporation.
WHEREAS, Armour is the indirect wholly owned subsidiary of U.S. Industries,
Callaway Acquisition is the wholly owned subsidiary of Callaway Golf, and
Odyssey is the direct subsidiary of Armour.
WHEREAS, Callaway Acquisition desires to obtain certain transitional
assembly services utilizing the Machinery for certain golf clubs of a type
heretofore assembled at the Plant and to make certain other transitional
arrangements.
WHEREAS, Armour is willing to provide such transitional assembly services
and to make such other transitional arrangements under the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions set forth herein, the parties hereto agree as follows:
1. Services Covered. This Agreement relates to assembly services for golf
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clubs of the types listed on Exhibit A ("Clubs") using the components listed on
Exhibit B ("Components").
2. Assembly. Subject to the terms and conditions hereof, Armour will use
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commercially reasonable efforts during the Term of this Agreement to provide its
employees to utilize the Equipment to assemble for Callaway Acquisition at the
Plant each month during the Term (defined below), the quantities of the various
types of Clubs set forth on Exhibit C.
3. Cooperation. The parties recognize that Armour's provision of the
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assembly
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services contemplated by this Agreement will require a high level of cooperation
by and coordination with Callaway Acquisition. Callaway Acquisition agrees
that, during the Term, Armour may use the Machinery at the Plant in connection
with the provision of services under this Agreement. During the Term, Callaway
Acquisition shall not take any actions which will impact Armour's employees nor
make any changes in the Machinery which will make it more difficult or increase
the cost to Armour of providing the services contemplated hereunder. Armour
agrees to continue all routine maintenance of the Machinery during the Term in
accordance with past practice. Armour shall not be required to make any capital
expenditures in connection with the Machinery.
4. Components. Callaway Acquisition shall provide all necessary Components
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at its own expense and arrange for them to be delivered to the Plant at such
times and in such quantities as shall be required to enable Armour to provide
the assembly services required hereunder. Title to the Components work in
process and to the assembled Clubs shall at all times remain in Callaway
Acquisition.
5. Method of Assembly. Armour shall assemble the Clubs in a manner
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consistent with Armour's current standards on the date hereof using the
Components. Armour will provide the supplies set forth on Exhibit D required in
the assembly process. Armour shall not make any material changes in its
assembly methods for the Clubs without the prior consent of Callaway Acquisition
(which shall not be unreasonably withheld or delayed).
6. Schedule. The schedule for any month shall not include a number of
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Clubs or mix of types of Clubs which will adversely affect the cost to Armour of
assembling the Clubs requested. Exhibit C sets forth the number and types of
Clubs to be assembled in the first month of the Term. Callaway Acquisition and
Armour shall meet 15 days prior to each subsequent month in the Term to agree on
the number and types of Clubs to be assembled in such subsequent month.
Consistent with this objective, Armour will attempt to accommodate any
reasonable schedule proposed by Callaway Acquisition which is not materially
different from the schedule followed by Armour in accordance with past practice.
7. Quality Control Inspector. Callaway Acquisition shall cause a quality
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control inspector employed by Callaway Acquisition to be on site at the Plant at
all regular business hours of Armour for the purpose of inspection and quality
control of Clubs assembled pursuant to this Agreement. Callaway Acquisition's
quality control inspector shall immediately (and in any event within the same
day of each assembly run) state any objection to any assembly run or portion
thereof. If Callaway Acquisition's quality control inspector rejects all or
any portion of a run for good cause, the parties shall work together to cure the
defect which gave rise to the rejection and Armour shall bear the cost of
remediation; provided, however, that if the defect which gave rise to the
rejection is related to a Component, Callaway Acquisition shall bear the cost of
such remediation. If Armour is not so immediately advised through Callaway's
quality control inspector of Callaway Acquisition's objection of Clubs
assembled, then such Clubs shall be deemed accepted by Callaway Acquisition "AS
IS." Callaway Acquisition waives any contract or warranty claim or defense based
on the quality of the assembled Clubs; and Armour shall bear no liability or
responsibility whatsoever related to assembled Clubs sold hereunder other than
as
expressly provided in this paragraph.
8. Fees Payable.
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a. Assembly Fee. Callaway Acquisition shall pay Armour for Clubs
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assembled under this Agreement an assembly fee computed as provided on Exhibit
D. Armour shall invoice Callaway Acquisition for assembly fees, and other fees
payable under this Agreement on a weekly basis and invoices shall be payable
within 10 days.
b. Boxing of Clubs. At Callaway Acquisition's request, to the extent
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Callaway Acquisition has provided Armour with the boxes and other supplies to do
so, Armour will box Clubs assembled by Armour in sets or as otherwise directed
by Callaway Acquisition, in accordance with Armour's prior practice. Callaway
Acquisition shall pay Armour its actual cost (including without limitation, for
all labor) incurred in connection with boxing the Clubs, which amounts are set
forth on Exhibit E.
c. Shipping. At Callaway Acquisition's request, Armour shall pack,
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mark and ship the Clubs assembled hereunder by common carrier in accordance with
any reasonable instructions from Callaway Acquisition. Callaway Acquisition's
shipping orders may require that Clubs be shipped either to Callaway Acquisition
or to its customers; provided, however, that Armour assumes no risk of loss with
respect to such shipments. Callaway Acquisition hereby indemnifies and holds
harmless Armour for any and all claims from Callaway Acquisition, its customers,
or any commercial carrier so employed, arising under or pursuant to Callaway
Acquisition's shipping orders. Armour shall send Callaway Acquisition a "Notice
of Shipment" giving the number of the order, kind and amount of products and
route at or prior to time of shipment. These costs shall be billed to Callaway
Acquisition as incurred on the weekly invoice.
d. Receiving and Warehousing. Armour shall provide receiving and
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warehousing for all components. The cost of receiving and warehousing shall be
included in the assembly fee.
e. Warranty, Exchange and Repair. Armour shall provide warranty,
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exchange and repair services for Clubs during the term of this Agreement.
Armour shall be paid its actual cost for such services.
9. No Set-Offs. Amounts due under this Agreement shall not be subject to
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set-off or deduction of any kind, including, without limitation, for claims
arising under the Purchase Agreement. Callaway Acquisition shall not withhold
any amounts pending resolution of any disputes, but the parties agree to
negotiate promptly in good faith to resolve any dispute as soon as possible.
10. Term. The "Term" of this Agreement shall mean: initially the six (6)
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month
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period beginning on the date hereof, and shall continue from month to month
thereafter. Callaway Acquisition, at its option, may terminate this Agreement
at any time upon 15 days prior notice of its intent to terminate to Armour.
Armour may terminate this Agreement at anytime after the initial six (6) month
period upon notice to Callaway Acquisition.
11. Removal of Machinery and Other Assets. Callaway Acquisition shall
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remove the Machinery, assembled Clubs, Components, boxes and other shipping
materials owned by Callaway Acquisition and all other assets owned by Callaway
Acquisition and located at the Plant within 20 days after the end of the Term.
The removal shall be effected with riggers and other contractors approved by
Armour. In the event that removal results in any damage to the Plant, Callaway
Acquisition shall promptly repair or restore such damage. Any Machinery or
other assets of Callaway Acquisition not removed within such period shall be
deemed abandoned and become the property of Armour.
12. No Liability. Within 5 days after the date hereof, Callaway shall
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provide Armour with proof of Callaway Acquisition's policies of insurance
against product liability claims relating to the assembled Clubs in amounts and
with such carriers as shall be reasonably satisfactory to Armour and on which
policies Armour has been named as an additional insured and as to which the
carrier has agreed not to terminate such insurance without 90 days' prior notice
to Armour. Callaway Acquisition shall indemnify and hold Armour harmless from
and against any and all claims, suits, actions, proceedings (formal and
informal), investigations, judgements, deficiencies, damages, settlements,
liabilities, costs and expenses of any kind whatsoever (including, without
limitation, legal fees and expenses and costs of investigation and defense)
("Losses") as and when incurred arising out of or relating to the sale, purchase
or use of any assembled Clubs. Anything in this Agreement to the contrary
notwithstanding, no party hereto shall have any liability for any consequential
damages arising from any breach hereof or from any other matter or thing arising
out of or relating to the Agreement. Armour shall have no liability of any kind
whatsoever if, despite commercially reasonable efforts, it is unable to assemble
the total number of Clubs contemplated hereunder, whether or not due to an event
of force majeure. At the end of the Term, Armour shall have no obligation to
make any further efforts to assemble any Clubs. Notwithstanding anything to the
contrary contained herein, Armour shall indemnify, hold harmless and defend
Callaway Acquisition against any and all Losses arising out of the assembly of
Clubs, including by example and not by way of limitation, claims by employees
including claims for personal injury, property damages to Armour's employees
during assembly of the Clubs.
13. Assignment. This Agreement shall be binding upon and inure to the
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benefit of the parties and their respective successors and permitted assigns.
Nothing in this Agreement shall create or be deemed to create any third party
beneficiary rights in any person or entity not a party to this Agreement. No
assignment of this Agreement or of any rights or obligation hereunder may be
made by either party (by operation of law or otherwise) without the prior
written consent of the other, which consent may not be unreasonably withheld;
provided, however, that no such consent shall be required of either party to
assign part or all of its rights under this Agreement to one or more of its
subsidiaries or affiliates, but no such assignment by such party of its rights
or obligations hereunder shall relieve the party of any of its obligations under
this Agreement to the other.
14. Changes; Choice of Law. This Agreement shall not be subject to
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change, modification or discharge in whole or in part except by written
instrument signed by authorized representatives of the parties hereto. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois without giving effect to conflict of law rules.
15. No Waiver. The waiver of any breach, late or non-payment or failure
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to perform shall not be deemed a waiver of any other or subsequent breach or any
other provision of this Agreement.
16. Severability. If any provision of this Agreement is or becomes
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invalid or unenforceable, it shall be deemed amended to conform to applicable
laws so as to be valid and enforceable, and if it cannot be so amended without
materially altering the intent of the parties hereto, it shall be stricken and
the remainder of this Agreement shall remain in full force and effect.
17. Entire Agreement; Captions; Counterparts. The terms and conditions of
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this Agreement (together with the Purchase Agreement) constitute the sole and
entire agreement among the parties relating to the subject matter hereof.
Captions and section headings are for convenience of reference only and shall
not be deemed part of this Agreement or used in its interpretation or
construction. All representations, warranties, promises or statements whether
written or oral made prior to or contemporaneously with this Agreement are
superseded and replaced by this written document. This Agreement may be executed
in one or more counterpart copies each of which shall be deemed an original, but
all of which shall be deemed the same instrument.
18. Force Majeure. In addition to any excuse provided by applicable law
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or otherwise provided herein, Armour shall be excused from liability for
performance or delay in performance arising from any event beyond Armour's
reasonable control, whether or not foreseeable by either party, including, but
not limited to, litigation, labor disturbances, war, fire, accident, adverse
weather, labor disturbance, inability to secure transportation or qualified
labor, governmental act or regulation, unavailability of necessary materials,
and other causes or events beyond Armour's reasonable control whether or not
similar to those enumerated above.
19. Taxes. Prices for the services specified herein are exclusive of all
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federal, state, city and local taxes, including, without limitation, taxes on
manufacture, sales, value-added, receipts, gross income, occupation, use and
similar taxes; provided, however, in no event shall Callaway Acquisition be
responsible for any taxes associated with the employment by Armour of its
employees such as, and not by way of limitation, state and federal income,
disability and employment taxes or property tax associated with Armour's
facilities or equipment. Callaway Acquisition agrees to pay any taxes for which
it is responsible directly or to reimburse Armour for all such taxes whether
imposed on Callaway Acquisition, required to be collected by Armour, or
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imposed on the assembled Clubs or on Armour in connection with the provision of
the assembly services to Callaway Acquisition. Wherever applicable, such tax or
taxes shall be added to the weekly invoice as a separate charge or invoiced
separately.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
CALLAWAY ACQUISITION
By: /s/ DONALD H. DYE
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Name: Donald H. Dye
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Title: President and CEO
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TOMMY ARMOUR GOLF COMPANY
By: /s/ GEORGE H. MACLEAN
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Name: George H. MacLean
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Title: Vice President
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