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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 29, 1997
TEARDROP GOLF COMPANY
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(Exact name of Registrant as specified in its Charter)
DELAWARE 0-29014 52-105660
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(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification Number)
1080 LOUSONS ROAD, UNION, NEW JERSEY 07083
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(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code: (908) 688-4445
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NOT APPLICABLE
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(Former name and former address, as changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 29, 1997 (the "Closing Date"), TearDrop Golf Company, a
Delaware corporation (the "Company"), through its newly formed, wholly-owned
subsidiary then known as TearDrop Ram Golf Company (now known as Ram Golf
Corporation) ("RGC"), acquired substantially all of the assets (the
"Acquisition") of Ram Golf Corporation, a Delaware corporation (currently named
JRH Golf Corporation ) ("JRH") including the stock of Ram Golf UK, Ltd., a UK
corporation ("Ram UK"). The Company acquired the assets for a purchase price
consisting of (i) $2,668,009 in cash (the "Cash Payment"), (ii) 83,007 shares of
the Company's common stock, par value $.01 per share ("Common Stock") to be held
in escrow for disposition by the escrow agent in accordance with a certain
Inventory Escrow Agreement dated as of December 29, 1997 and subject to an audit
of JRH to be conducted within 60 days of the Closing Date, (iii) 100,000 shares
of the Common Stock to the escrow agent to be disposed in accordance with a
Delivery Escrow Agreement dated as of December 29, 1997 and subject to the
satisfaction of certain product delivery obligations for April 1998, (iv) 4,350
shares of Common Stock and (v) a Warrant to purchase 50,000 shares of Common
Stock (the Warrant"). A copy of the Asset Purchase Agreement (the "Asset
Purchase Agreement") dated as of December 23, 1997 by and among the Company,
RGC, JRH, Ram UK and James R. Hansberger, the principal shareholder of JRH
("Hansberger"; JRH, Ram UK and Hansberger are sometimes collectively referred to
herein as the "Selling Parties") is incorporated herein by reference as Exhibit
10.25. The Company intends to continue to use the acquired assets in connection
with the manufacturing, marketing and distributing of Ram(R) line of golf clubs
and golf-related equipment. The Company has not acquired from JRH golf clubs
using putter insert technology.
The Company obtained funds for the Cash Payment pursuant to a Loan and
Security Agreement among the Company, TearDrop Acquisition Corp. (now known as
Tommy Armour Golf Company) ("Tommy Armour") and CoreStates Bank, N.A.
("CoreStates"), as amended by First Amendment to Loan and Security Agreement
dated as of January 9, 1998 among the Company, Tommy Armour, RGC, and CoreStates
(as amended, the "Loan Agreement"), copies of which are incorporated herein by
reference as Exhibits 10.27 and 10.28, respectively. Pursuant to the Loan
Agreement, CoreStates has provided a revolving credit facility equal to the
lesser of (i) the sum of 65% of the Company's eligible accounts plus 65% of the
Company's eligible inventory or (ii) $25 million (the "Credit Facility") to the
Company to finance the Acquisition and the Company's working capital and general
corporate expenditures. The Company drew down an additional $2,668,009 under the
Credit Facility to fund the Cash Payment. Funds extended pursuant to the Credit
Facility accrue interest at the prime rate minus 1/2% or LIBOR plus 2% per
annum. The Credit Facility is secured by substantially all of the assets of the
Company, including the assets acquired in connection with the Acquisition. The
Loan Agreement contains restrictions on certain of the Company's activities,
including, but not limited to, the payment of dividends, redemption of
securities and the sale of assets outside the ordinary course of the Company's
business.
The Warrant entitles JRH to purchase from the Company 50,000 shares of
Common Stock at a price of $6.625 per share at any time or from time to time
during the period from
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December 29, 1997 to December 29, 2002. A copy of the Warrant is attached hereto
as Exhibit 10.29 and is incorporated herein by reference.
The Company also entered into a Registration Agreement (the "Registration
Agreement") pursuant to which the Company agreed to file a registration
statement on Form S-3 with the Securities and Exchange Commission registering
the sale of the Common Stock and use its best efforts to have the Registration
Statement declared effective no later than June 30, 1998. A copy of the
Registration Agreement is attached hereto as Exhibit 10.26 and is incorporated
herein by reference.
The foregoing summary does not purport to be complete and is qualified in
its entirety by reference to the full text of the Asset Purchase Agreement, the
Registration Agreement, the Loan Agreement and the Warrant, copies of which are
attached hereto as Exhibits 10.25, 10.26, 10.27, 10.28 and 10.29, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The historical financial statements of the business acquired will be filed
by amendment as soon as practicable, but not later than 60 days after this
report is required to be filed.
(b) Pro Forma Financial Information.
The pro-forma financial information for the business acquired will be filed
by amendment as soon as practicable, but not later than 60 days after this
report is required to be filed.
(c) Exhibits.
Exhibit No. Description
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10.25 Asset Purchase Agreement
10.26 Registration Agreement
10.27 Loan and Security Agreement*
10.28 First Amendment to Loan and Security
Agreement
10.29 Warrant
* Incorporated herein by reference from Exhibit 10.27 on Form 8-K Current
Report of the Company, filed with the Securities and Exchange Commission on
November 26, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
TEARDROP GOLF COMPANY
Dated: January 13, 1998 By: /s/ RUDY A. SLUCKER
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Name: Rudy A. Slucker
Title: President and Chief Executive
Officer
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EXHIBIT INDEX
Exhibit No. Description
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10.25 Asset Purchase Agreement
10.26 Registration Agreement
10.27 Loan and Security Agreement
Incorporated herein by reference from
Exhibit 10.27 on Form 8-K Current Report
of the Company, filed with the
Securities and Exchange Commission on
November 26, 1997
10.28 First Amendment to Loan and Security
Agreement
10.29 Warrant
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ASSET PURCHASE AGREEMENT
dated as of December 23, 1997
among
TEARDROP GOLF COMPANY
a Delaware corporation,
TEARDROP RAM GOLF COMPANY
a Delaware corporation,
RAM GOLF CORPORATION
a Delaware corporation,
RAM GOLF UK, LTD.
a UK corporation
and
James R. Hansberger
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.................................................1
ARTICLE II. THE SALE OF THE ASSETS......................................8
2.1. Equipment...................................................8
2.2. Inventory...................................................8
2.3. Intellectual Property; Intangibles; Contract Rights.........8
2.4. Books and Records...........................................8
2.5. Prepaid Expenses............................................9
2.6. Permits, etc................................................9
2.7. All Property Not Elsewhere Described........................9
ARTICLE III. CONSIDERATION FOR THE ASSETS..............................9
3.1. Purchase Price..............................................9
3.2. Payment of Purchase Price...................................9
3.3. Closing Date Audit..........................................10
3.4. Assumption of Liabilities and Obligations...................10
3.5. Employee Benefit Plans......................................11
3.6. No Other Liabilities........................................11
3.7. Non-Assignable Rights.......................................11
3.8. Excise and Property Taxes...................................12
3.9. Allocation of Purchase Price................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
OF THE SELLING PARTIES.....................................12
4.1. Organization and Good Standing..............................12
4.2. Authority; No Conflict......................................13
4.3. Shareholders................................................14
4.4. Financial Statements........................................14
4.5. Title to Properties; Encumbrances...........................14
4.6. Condition and Sufficiency of Assets.........................14
4.7. Taxes.......................................................15
4.8. No Material Adverse Change..................................16
4.9. Intellectual Property.......................................16
4.10. Accounts Payable............................................16
4.11. Real Property...............................................16
4.12. Customers...................................................16
4.13. Employee Benefit Plans......................................16
4.14. Insurance...................................................20
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4.15. Compliance with Legal Requirements;
Governmental Authorizations.................................21
4.16. Legal Proceedings...........................................22
4.17. Absence of Certain Changes and Events.......................23
4.18. Contracts; No Default.......................................24
4.19. Employees...................................................27
4.20. Labor Relations; Compliance.................................27
4.21. Certain Payments............................................27
4.22. Disclosure..................................................28
4.23. Relationships with Related Persons..........................28
4.24. Brokers or Finders..........................................28
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER
AND TEARDROP................................................28
5.1. Organization and Good Standing..............................28
5.2. Authority; No Conflict......................................29
5.3. Disclosure..................................................29
5.4. Legal Proceedings...........................................29
5.5. Brokers or Finders..........................................29
ARTICLE VI THE CLOSING AND CLOSING CONDITIONS..........................29
6.1. Closing Date................................................29
6.2. Conditions to Each Party's Obligations
Under this Agreement......................................30
6.3. Additional Conditions to Buyer's Obligations
Under this Agreement......................................31
6.4. Additional Conditions to Selling Parties' Obligations
Under this Agreement......................................32
ARTICLE VII COVENANTS OF SELLING PARTIES...............................33
7.1. Access to Information and Records...........................33
7.2. Conduct of Business Pending Closing.........................33
7.3. Consents....................................................34
7.4. Schedules...................................................34
7.5. Obligations After the Closing...............................35
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ARTICLE VIII COVENANTS OF BUYER AND PARENT CORPORATION.................36
8.1. Zebra Insert Putter.........................................36
8.2. Seller's Employees..........................................36
8.3. Cooperation in Collection of Seller's Accounts Receivable...36
8.4. Post Closing Rental.........................................36
8.5. Access to Records; Further Cooperation......................37
ARTICLE IX. TERMINATION................................................37
9.1. Termination Events..........................................37
9.2. Effect of Termination.......................................37
ARTICLE X. INDEMNIFICATION; REMEDIES...................................38
10.1. Indemnification by Selling Parties..........................38
10.2. Indemnification by Buyer....................................38
10.3. Notice and Defense of Third-Party Claims....................39
10.4. Survival of Representations and Warranties..................39
ARTICLE XI. MISCELLANEOUS..............................................40
11.1. Exhibits and Schedules......................................40
11.2. Publicity...................................................40
11.3. Notices.....................................................40
11.4. Entire Agreement............................................41
11.5. Waivers and Amendments......................................41
11.6. Expenses....................................................41
11.7. Governing Law...............................................41
11.8. Assignment..................................................41
11.9. Variations in Pronouns......................................42
11.10. Counterparts..............................................42
INDEX TO EXHIBITS
Exhibit A Escrow Agreements
Exhibit B Warrant
Exhibit C Non-Competition Agreements
Exhibit D Bill of Sale and Assumption of Liabilities
Exhibit E Registration Rights Agreement
Exhibit F License Agreement
Exhibit G Opinion of Counsel to Seller
Exhibit H Opinion of Counsel to Buyer and TearDrop
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 23, 1997, by and among
TEARDROP RAM GOLF COMPANY, a Delaware corporation ("Buyer"), TEARDROP GOLF
COMPANY, a Delaware corporation ("TearDrop"), RAM GOLF CORPORATION, a Delaware
corporation ("Seller"), RAM GOLF UK, LTD., a UK corporation ("RAM UK") and JAMES
R. HANSBERGER, being the principal shareholder of Seller (the "Shareholder").
Seller, Shareholder and RAM UK are sometimes collectively referred to herein as
the "Selling Parties".
RECITALS:
A. Seller and RAM UK own and operate a business which is engaged in
manufacturing, distributing, promoting, marketing and selling golf clubs, golf
equipment and other related products (the "Business").
B. The Shareholder is the principal shareholder of Seller.
C. RAM UK is a wholly owned subsidiary of Seller.
D. Buyer desires to acquire the business of the Business as a going concern
and the Selling Parties desire to cause the sale of the Business to Buyer, on
the terms and conditions of this Agreement.
NOW, THEREFORE, the parties intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"Affiliate" shall mean with respect to any Person, (i) each Person that
controls, is controlled by or is under common control with any such Person or
any Affiliate of such Person, (ii) each of such Person's officers, directors,
joint ventures, members and partners and (iii) such Person's spouse, children,
siblings and parents. For purposes of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management of policies, whether through the ownership
of voting interests, by contract or otherwise.
"Agreement" shall mean this Asset Purchase Agreement, as amended or
supplemented from time to time.
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"Ancillary Agreements" shall mean, collectively, the Escrow Agreement, the
Employment Agreement, the Non-Competition Agreements, the Registration
Agreement and the License Agreement.
"Assets" shall have the meaning assigned to that term in the introductory
language of Article II of this Agreement.
"Balance Sheets" shall have the meaning assigned to that term in Section
4.4 of this Agreement.
"Business" shall mean the manufacturing, distribution, promotion, marketing
and sale of golf clubs, golf equipment and other related products as conducted
by Seller and RAM UK.
"Buyer" shall have the meaning assigned to that term in the preamble to
this Agreement.
"Closing" shall mean the closing of the sale and purchase of the Assets and
the other transactions contemplated by this Agreement.
"Closing Date" shall mean the date upon which the Closing actually occurs.
"Closing Date Balance Sheet" shall have the meaning assigned to that term
in Section 3.3(a) of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Common Stock, par value $.01, of the Parent
Corporation.
"Distributor" shall mean each Person with whom Seller or RAM UK has a
written or oral agreement for the distribution of products of the Business.
"Employee Benefit Plan" shall include all pension, retirement, disability,
medical, dental or other health insurance plans, life insurance or other death
benefit plans, profit sharing, deferred compensation, stock option, bonus or
other incentive plans, vacation benefit plans, severance plans or other employee
benefit plans or arrangements, including, without limitation, any pension plan
as defined in Section 3(2) of ERISA and any welfare plan as defined in Section
3(1) of ERISA, whether or not funded, covering any Subject Employee, to which
Seller is a party or bound or makes or has made any contribution or by which
Seller may have any liability to any Subject Employee (including any such plan
formerly maintained by or in connection with which Seller may have any liability
to any Subject Employee, and any such plan which is a multiemployer plan as
defined in Section 3(37) (A) of ERISA).
"Employment Agreement" shall mean the Employment Agreement with C. Ronald
Schram, in substantially the form of Exhibit A hereto, as the same may be
amended or supplemented from time to time.
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"Encumbrance" shall mean any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Environment" shall mean soil, land surface or subsurface strata, surface
waters, groundwaters, drinking water supply, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural resource.
"Environmental Law" shall mean any Legal Requirement that requires action
with respect to the Environment.
"Equipment" shall have the meaning assigned to that term in Section 2.2 of
this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall have the meaning assigned to that term in the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement to be executed and
delivered by Buyer, the Selling Parties and the Escrow Agent on the Closing
Date, substantially in the form of Exhibit B hereto, as the same may be amended
or supplemented from time to time.
"Escrow Funds" shall have the meaning assigned to that term in Section
3.2(a) of this Agreement.
"Excluded Assets" shall mean, collectively:
(i) all cash, bank balances, money in possession of banks and other
depositories, term or time deposits and similar cash items of, owned or
held by or for the account of Seller and RAM UK;
(ii) all shares of stock, notes, bonds, debentures or other securities
of or issued by any Person and held by Seller for investment purposes;
(iii) the corporate, financial, taxation and other records of Seller
not pertaining to the Business or the Division and the originals or copies
of all records and information appropriate for the preparation or audit of
such information;
(iv) prepaid taxes of the Seller.
(v) all accounts receivable and other receivables of the Seller and
RAM UK.
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(vi) all Real Property.
(vii) inventory, work in process, tooling, fixtures and equipment set
forth on Schedule 2.1 and goodwill relating to putters using any insert
technology.
(viii) the following trademarks: Golden Pro; Laser; Pro Spin;
Sportsman; and Wizard.
(ix) personal articles and memorabilia of the Shareholder and vehicles
owned by Seller.
(x) the contract with Tom Watson, if not previously terminated.
"GAAP" shall mean generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheets and the
other financial statements referred to in Section 4.4(a) and (b) were prepared.
"Governmental Authorization" shall mean any approval, consent, license,
permit, waiver or other authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"Intellectual Property" shall have the meaning assigned to that term in
Section 2.3 of this Agreement.
"Inventory" shall have the meaning assigned to that term in Section 2.2 of
this Agreement.
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"Legal Requirement" shall mean any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"Market Value" shall mean $6.625 per share.
"Net Assets" shall have the meaning assigned to that term in Section 3.3(c)
of this Agreement.
"Non-Assignable Rights" shall mean any Governmental Authorization or
contractual right of Seller related to or in connection with the Business (i)
which as a matter of law or by its terms is not assignable by Seller to Buyer or
(ii) which is not assignable by Seller to Buyer without the consent of a third
Person, which consent has not been obtained prior to the Closing Date.
"Non-Competition Agreements" shall mean, collectively, the Non-Competition
Agreements to be executed and delivered by the Seller and the Shareholder on the
Closing Date, in substantially the form of Exhibit C hereto, as the same may be
amended or supplemented from time to time.
"Order" shall have the meaning assigned to that term in Section 4.18(b) of
this Agreement.
"Organizational Documents" shall mean the articles or certificate of
incorporation and the bylaws of a corporation and any amendment or restatement
thereof.
"Parent Corporation" shall mean TearDrop Golf Company, a corporation
organized under the laws of Delaware, owning all of the outstanding capital
stock of Buyer.
"Person" shall mean any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
"Proceeding" shall have the meaning assigned to that term in Section
4.18(a) of this Agreement.
"Purchase Price" shall have the meaning assigned to that term in Section
3.1 of this Agreement.
"Seller" shall have the meaning assigned to that term in the preamble of
this Agreement.
"Selling Parties" shall have the meaning assigned to that term in the
preamble of this Agreement.
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"Shareholder" shall have the meaning assigned to that term in the preamble
of this Agreement.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by such Person or one or more of its Subsidiaries.
"Tax" shall mean any tax (including any payroll tax, employment tax, income
tax, franchise tax, gross receipt tax, license tax, capital gains tax,
value-added tax, excise tax, sales or use tax, withholding tax, property tax,
gift tax, or estate tax), levy, assessment, tariff, duty (including any customs
duty), deficiency or other fee, and any related share or amount (including any
fine, penalty, interest, or addition to tax), imposed, assessed, or collected by
or under the authority of any Governmental Body or payable pursuant to any
tax-sharing agreement or any other Governmental Body or payable pursuant to any
tax-sharing agreement or any other contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency, or fee.
ARTICLE II
THE SALE OF THE ASSETS
Subject to the terms and conditions set forth in this Agreement, Seller
agrees to sell, convey, transfer, assign and deliver to Buyer, and Buyer agrees
to purchase from Seller, at the Closing described in Article VI hereof, all the
assets, property and business of the Business of every kind, character and
description, whether tangible, intangible, real, personal or mixed, and wherever
located (but excluding the Excluded Assets), all of which are sometimes
collectively referred to in this Agreement as the "Assets," including, but not
limited to, the following:
2.1. EQUIPMENT. All the machinery, tools, appliances, furniture (including
without limitation essential replacement parts), personal computers, trucks and
other field vehicles and equipment and other tangible personal property of every
kind and description other than tooling and other equipment specifically related
to the assembly and manufacture of the insert putters (the "Equipment") which
are owned or held by Seller and are utilized in connection with the Business, a
current list of the material items of which is contained in Schedule 4.5;
2.2. INVENTORY. All of the inventories of goods and products of every kind
and nature, wherever situated, owned by Seller and relating to the Business
including, without limitation, all raw materials, work-in-progress, finished
goods, operating supplies and packaging materials excluding all putters using
insert technology or raw materials, work in process or other materials relating
to such putter (the "Inventory");
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2.3. INTELLECTUAL PROPERTY; INTANGIBLES; CONTRACT RIGHTS. (i) Except as
provided under Excluded Assets, all trade names (including but not limited to
"RAM" and "Zebra"), trademarks, service marks, copyrights, patents, patent
rights, licenses, brand names, and trade secrets, a current list of which is
contained in Schedule 4.9 and which is true and correct in all material
respects, (ii) tort or insurance proceeds arising out of any damage or
destruction of any of the Assets between the date of this Agreement and the
Closing Date, (iii) the rights of Seller under any non-competition agreements
relating to the Business, and (iv) all right, title and interest of Seller in
the leases, contracts and agreements to be assumed by Buyer pursuant to Section
3.4, or designated by Buyer within 60 days of the Closing, used by Seller in the
operation of the Business but excluding contracts and other liabilities not to
be specifically assumed by Buyer pursuant to Section 3.6, and subject to the
provisions of Section 3.7 concerning Non-Assignable Rights; (v) any equity or
other ownership or profit-sharing interest of Selling Parties in any subsidiary
or other golf-related venture and (vi) with the exception of the Excluded
Assets, technical know-how, goodwill and other intangibles or proprietary
information that are necessary and material to the Business; The "Intellectual
Property" under this Agreeemnt shall constitute the property contained in
subparagraph (i) above as well as the intangible property set forth in
subparagraph (vi);
2.4. BOOKS AND RECORDS. Except as provided under Excluded Assets, all
papers, computerized databases and records in Seller's care, custody or control
relating to any or all of the above described Assets and the operation thereof,
including, but not limited to, all blueprints and specifications and testing
records, personnel and labor relations records, sales records, marketing
materials, accounting and financial records, maintenance and production records,
and plans and designs of buildings, structures, fixtures and equipment;
2.5. PREPAID EXPENSES. All prepaid expenses, including but not limited to
prepaid advertising costs, employee wages, benefits and insurance that are
allocable to the Business and transferable by Seller;
2.6. PERMITS. ETC. All Governmental Authorizations issued by, and all
registrations and filings with, any Governmental Body in connection with the
Assets to be sold, whenever issued or filed, the material items of which are set
forth in Schedule 4.15, but subject to the provisions of Section 3.7 concerning
Non-Assignable Rights;
2.7. ALL PROPERTY NOT ELSEWHERE DESCRIBED. All other property of Seller of
every kind, character or description owned, used or held for use (whether or not
exclusively) in connection with the Business, wherever located and whether or
not similar to the things set forth elsewhere in this Article II.
ARTICLE III
CONSIDERATION FOR THE ASSETS
3.1. PURCHASE PRICE. The purchase price payable for the Assets and the
Ancillary Agreements (the "Purchase Price"), shall be paid as set forth in
Section 3.2 below, subject to
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increase or reduction upon the completion of the audit of the Closing Date
Balance Sheet provided for in Section 3.3 below.
3.2. PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price shall be paid as follows:
(i) by wire transfer of immediately available funds in the amount of
$2,668,009, intended to equal the value of the Inventory after giving
effect to reserves on the Closing Date;
(ii) 83,007 shares of Common Stock (the "Inventory Escrow Shares") to
the Escrow Agent for disposition in accordance with the Inventory Escrow
Agreement and Section 3.3(b); and
(iii) 100,000 shares of Common Stock (the "Delivery Escrow Shares") to
the Escrow Agent for disposition in accordance with the Delivery Escrow
Agreement and Section 7.5(b).
(iv) 4,350 shares of common stock to the Seller.
(v) the grant of a warrant to purchase 50,000 shares of Common Stock
at the Market Price as of the Closing Date in the form attached as Exhibit
D.
(b) If, in accordance with Section 3.3(b) below, Seller is entitled to an
increase in the Purchase Price, the increased amount shall be paid by Buyer to
Seller, by the issuance of an additional number of shares of Common Stock having
a Market Value equal to the amount of the increase to which Seller is entitled
following the completion.
3.3. CLOSING DATE AUDIT.
(a) Seller shall cause the preparation of a balance sheet (the "Closing
Date Balance Sheet"), as at the Closing Date, in accordance with GAAP and
consistent with the procedures and principles followed in the preparation of the
Balance Sheets. The Closing Date Balance Sheet shall be subject to audit by Wolf
& Co. Seller shall bear up to $15,000 of the cost and expense of such audit and
shall cause same to be conducted as soon as practicable following the
availability of the Closing Date Balance Sheet but in no event later than 60
days from the Closing Date. Any cost of such audit in excess of $15,000 shall be
split evenly between the Buyer and the Seller. Buyer may retain an accounting
firm to review the audit completed by Wolf & Co., at its own expense, and may
submit to the Seller not later than 30 days from the receipt of the report from
the Seller, a list of any figures appearing on the report with which the Buyer
disagrees. If the parties cannot agree within 10 days thereafter, any items of
dispute shall thereafter be submitted to a nationally recognized firm of
certified public accountants mutually acceptable to Seller and Buyer, the
expenses of which shall be shared equally by Seller and
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Buyer. The determination of such firm shall be conclusive and binding upon all
parties. Seller shall cooperate fully with the Buyer and any accounting firms
retained to review the report in their review of the financial and other data of
the Seller.
(b) If, following the audit referred to in Section 3.3(a), the inventory is
equal to or greater than $2,727,452, the Escrow Agent shall release the Escrow
Property, in full, to Seller. If the inventory is less than $2,727,452, the
Escrow Agent shall pay to Buyer from the Escrow Shares, valued at $6.625 per
share, the shortage amount, and pay the balance of the Escrow Shares, if any, to
Seller; provided that Seller, at its option, may deliver cash in lieu of shares
as to part or all of the shortfall. If the inventory is greater than $2,727,452,
the Company shall issue to Seller additional shares having a value equal to the
difference between the value of the Inventory and $2,727,452, such shares to be
valued at $6.625 per share.
3.4. ASSUMPTION OF LIABILITIES AND OBLIGATIONS. At the Closing, as further
consideration for the sale and transfer of the Assets, Buyer shall assume and
agree to pay, perform, fulfill and discharge only the following specified
liabilities and obligations of the Seller in connection with the Business, and
no others: (i) the accounts payable of the Business set forth in Schedule
3.4(a), and those arising after the date of this Agreement and prior to the
Closing Date in the ordinary course of business; (ii) the other liabilities of
the Business identified in Schedule 3.4(a), and such other liabilities consented
to in writing by Buyer which may be incurred prior to the Closing Date; and
(iii) the obligations of the Seller under the contracts and agreements described
in Schedule 3.4(b), to the extent such obligations accrue after the Closing
Date, and under the other contracts and agreements relating to the Business
arising after the date of this Agreement and prior to the Closing Date in the
ordinary course of business; provided, however, that Buyer shall not assume any
liability for any debt for money borrowed or any capital leases or any debt,
liability or obligation not specifically described or identified in Schedule
3.4.
3.5. EMPLOYEE BENEFIT PLANS. Buyer is not assuming any obligations of
Seller relating to any Employee Benefit Plan, except those which are listed in
Schedule 3.4; provided, however, that Buyer assumes no obligations with respect
to any complete or partial withdrawal liability, if any, resulting from the
transactions contemplated by this Agreement or attributable to any periods prior
to the Closing Date.
3.6. NO OTHER LIABILITIES. It is expressly agreed and understood that,
except as provided in Sections 3.4 and 3.5 above, Buyer is not assuming any
liability or obligation of Seller, or the Business of any kind or nature,
whether known or unknown as of the Closing Date, whether fixed or contingent,
including but not limited to any debt for money borrowed or any capital leases
however arising, any claims or liabilities arising under any Environmental Law,
any claims or liabilities against the Seller for infringement of the
intellectual property of another including but not limited to patents and
trademarks and the transfer of the Assets pursuant to this Agreement shall be
free and clear of all other liabilities, Encumbrances or other obligations of
Seller, or the Business. Selling Parties agree to indemnify and hold Buyer
harmless against the debts, claims, liabilities and obligations of the Business
not expressly assumed by Buyer
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hereunder, and to pay any and all attorneys' fees and legal costs incurred by
Buyer, its successors and assigns in connection therewith.
3.7. NON-ASSIGNABLE RIGHTS. Nothing in this Agreement shall be construed as
an assignment of, or an attempt to assign to Buyer, any Non-Assignable Right. In
connection with such Non-Assignable Rights:
(i) the Selling Parties shall apply for and use their best efforts,
both prior to and following the Closing Date, in order to obtain for Buyer
the required consent of any third Person in a form reasonably satisfactory
to Buyer to allow for the transfer thereof;
(ii) the Selling Parties and Buyer shall cooperate in making
reasonable and lawful arrangements acceptable to Buyer designed to provide
to Buyer the benefits of any Non-Assignable Right;
(iii) the Selling Parties and Buyer shall cooperate in enforcing any
rights of Seller arising from such Non-Assignable Rights against the issuer
thereof or the Person or Persons thereto;
(iv) the Selling Parties and Buyer shall take all such actions and do,
or cause to be done, all such things as shall be reasonably be necessary
and proper in order that the value of any Non-Assignable Rights shall be
preserved and shall inure to the benefit of Buyer; and
(v) the Selling Parties shall pay over to Buyer all monies collected
by or paid to Seller in respect of such Non-Assignable Rights.
If the Selling Parties are unable to provide lawfully the benefit of any
Governmental Authorization to Buyer, they shall not, at any time, use such
Governmental Authorization for their own purposes or assign or provide the
benefit of such Governmental Authorization to any other party.
3.8. EXCISE AND PROPERTY TAXES. Selling Parties shall pay all sales, use
and transfer taxes, if any, arising out of the transfer of the Assets, and all
or any state, local or federal income taxes arising from the transfer of the
Assets or related to any period before the Closing Date. Buyer shall not be
responsible for any business, occupation, withholding or similar tax, or for any
taxes of any kind related to any period before the Closing Date not set forth in
Schedule 3.4.
3.9. ALLOCATION OF PURCHASE PRICE. The parties agree that the Purchase
Price shall be allocated in accordance with the priorities and in the relative
amounts as set forth on Schedule 3.9 and that such allocation will be used by
the parties in reporting the transaction contemplated by this Agreement for
federal and state tax purposes. Seller and Buyer shall determine and agree upon
the dollar values of the amounts to be allocated among the categories included
in Schedule 3.9 within 60 days of the Closing Date. Seller and Buyer shall file
IRS Form 8594 for their 1997
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taxable years in such form as shall be agreed upon by the parties within 60 days
of the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE SELLING PARTIES
The Selling Parties, jointly and severally, represent and warrant to Buyer
as follows:
4.1. ORGANIZATION AND GOOD STANDING
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted and to own or use the properties and assets that it purports to own or
use.
(b) Seller has no Subsidiaries that conduct any activities related directly
or indirectly to the Business other than "Ram Golf UK, Ltd". Each representation
and warranty contained in this Article IV shall be true, correct and applicable
to RAM UK as they are to Seller and shall be made hereby as if made by RAM UK as
if it they were the Seller.
(c) Seller has delivered to Buyer copies of its Organizational Documents,
as currently in effect.
4.2. AUTHORITY; NO CONFLICT
(a) This Agreement and the Ancillary Agreements constitute the legal, valid
and binding obligation of each of the Selling Parties, enforceable against each
of them in accordance with their respective terms, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights of
creditors generally. Each of the Selling Parties has the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and the Ancillary Agreements and to perform its, his or her respective
obligations hereunder or thereunder.
(b) Except as set forth in Schedule 4.2, neither the execution and delivery
of this Agreement and the Ancillary Agreements nor the consummation or
performance of the transactions contemplated hereby or thereby will, directly or
indirectly:
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Seller or RAM UK, or (B) any
resolution adopted by the board of directors or the shareholders of Seller
or RAM UK;
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(ii) give any Governmental Body or other Person the right to challenge
the transactions contemplated hereby;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify any Governmental
Authorization that is held by Seller or RAM UK or that otherwise relates to
the Business, or any of the assets owned or used by Seller or RAM UK;
(iv) cause Buyer to become subject to, or to become liable for the
payment of, any Tax;
(v) contravene, conflict with, or result in a violation or breach of
any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, any of the contracts or agreements
described in Schedule 4.18; or
(vi) result in the imposition or creation of any Encumbrance upon or
with respect to any of the assets owned or used by Seller or RAM UK in
connection with the Business.
(c) Except as set forth in Schedule 4.2, Seller is not required to give any
notice to or obtain any approval or consent from any Person in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
4.3. SHAREHOLDERS. The Shareholder is and will be on the Closing Date the
record and beneficial owners of the number of the issued and outstanding shares
of capital stock of Seller, as the manner set forth in Schedule 4.3. Schedule
4.3 also sets forth a list of all other shareholders of the Seller and the
number of shares owned by each. The Shareholder has the sole voting power with
respect to the shares of common stock so owned by him. Except as set forth on
Schedule 4.3, none of the shares of stock of Seller is held in escrow by, or for
the benefit of or is in the possession of, any other person. Seller is the sole
shareholder of RAM UK and has the sole voting power with respect to the
securities of RAM UK. No other securities of RAM UK are outstanding or held in
escrow by, or for the benefit of or is in the possession of any other person.
4.4. FINANCIAL STATEMENTS. Seller has delivered to Buyer the following
financial statements, including in each case, as applicable, the notes thereto:
(a) the balance sheet of Seller as at each of December 31, 1996 and
1995, audited by Wolf & Co., certified public accountants and the related
audited statements of operations, shareholders' equity and cash flows for
the fiscal year then ended (the balance sheet contained in the December 31,
1996 financial statements is hereinafter referred to as the "Year End
Balance Sheet"); and
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(b) the unaudited balance sheet of Seller as at September 30, 1997
(the "Interim Balance Sheet"; together with the Year End Balance Sheet, the
"Balance Sheets"), the related unaudited statement of operations for
Seller, and statement of shareholders' equity and cash flows for Seller for
the period then ended.
Such financial statements and notes fairly present the financial condition and
the results of operations, changes in stockholders' equity and cash flow of
Seller and RAM UK as at the respective dates of and for the periods referred to
in such financial statements, all in accordance with GAAP; provided, however,
the unaudited statements do not include appropriate footnotes for GAAP
presentation and are subject to normal year-end adjustments.
4.5. TITLE TO PROPERTIES; ENCUMBRANCES. Schedule 4.5 contains a complete
and accurate list of the material items of Equipment owned by Seller and RAM UK
and used in connection with the Business and a description and amounts of
Inventory owned by Seller and RAM UK and used in connection with the Business as
of September 30, 1997. Each of Seller and RAM UK owns all the properties and
assets (whether real, personal or mixed and whether tangible or intangible) that
it purports to own, including all of the properties and assets reflected in the
Interim Balance Sheet. All material properties and assets reflected in the
Interim Balance Sheet are free and clear of all Encumbrances, except as
disclosed in Schedule 4.5. Except as set forth in Schedule 4.5, neither any
officer, director or employee of Seller or the Shareholder, nor any spouse,
child or other relative of any of these persons, owns, or has any interest in,
directly or indirectly, any of the personal property owned by or leased to
Seller or RAM UK or any copyrights, patents, trademarks, trade names or trade
secrets licensed by Seller or RAM UK. Except as disclosed in Schedule 4.5, all
of the Assets are located in Melrose Park, Illinois.
4.6. CONDITION AND SUFFICIENCY OF ASSETS. Except as set forth in Schedule
4.6, the Equipment used in connection with the Business is, in all material
respects, structurally sound, is in good operating condition and repair, and is
adequate for the uses to which it is being put, and none of such equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. All Inventory is carried on the
books and records of Seller and RAM UK at the lower of cost, using the first in
first out method, or market value. All Inventory of finished products is
merchantable and salable in the ordinary course of business.
4.7. TAXES. Each of Seller and RAM UK has filed or caused to be filed all
federal, state and local tax returns and reports that are or were required to be
filed by or with respect to Seller and RAM UK, pursuant to applicable law. All
such returns were correct and complete in all respects. Seller has delivered to
Buyer copies of, and Schedule 4.7 contains a complete and accurate list of, all
such tax returns relating to income, franchise taxes, sales taxes and payroll
taxes filed since September 30, 1997. Each of Seller and RAM UK has paid, or has
provided for the payment of, all Taxes that have or may have become due pursuant
to those tax returns or otherwise, or pursuant to any assessment received by
Seller and RAM UK, except such Taxes, if any, as are listed in Schedule 4.7 and
are being contested in good faith and as to which adequate reserves (determined
in accordance with GAAP) have been provided in the Balance Sheets. Except as set
forth in Schedule 4.7, no audit of any tax return of Seller or RAM UK is in
progress
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or, to the knowledge of Seller, threatened; no director, officer or employee of
Seller responsible for Tax matters expects any Governmental Body to assess any
additional Taxes for any period for which tax returns have been filed; and no
waiver or agreement by Seller or RAM UK is in force for the extension of time
for the assessment or payment of any Tax. To Seller's knowledge, no claim has
ever been made by any Governmental Body in a jurisdiction where Seller or RAM UK
does not file tax returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of Seller or
RAM UK that arose in connection with any failure (or alleged failure) to pay any
tax.
Each of Seller and RAM UK has withheld and paid or collected and remitted
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, supplier, vendor,
creditor, stockholder or other third party. There is no dispute or claim
concerning any Tax liability of Seller or RAM UK (i) claimed or raised by any
Governmental Body in writing or (ii) as to which Seller or RAM UK or the
directors and officers of Seller or RAM UK has knowledge. Each of Seller and RAM
UK has not waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency.
4.8. NO MATERIAL ADVERSE CHANGE. Since the date of the Year End Balance
Sheets, there has not been any material adverse change in the business,
operations, properties, prospects, assets or condition of Seller or RAM UK, and
no event has occurred or circumstance exists that may result in such a material
adverse change.
4.9. INTELLECTUAL PROPERTY. Each of Seller and RAM UK owns or is licensed
to use, in each case free and clear of any Encumbrance, all Intellectual
Property rights that are necessary and material to the Business as currently
conducted other than any Encumbrance that would not have a material adverse
effect upon the Buyer or the Assets. Schedule 4.9 lists all patents, trademarks,
trade names, service marks, copyrights and applications included in the
Intellectual Property. Except as set forth in Schedule 4.9, Seller has no
knowledge and received no notice of any claims by any Person (i) to the effect
that the manufacture, sale or use of any product or process as now used or
offered by Seller infringes on any patents, (ii) against the use by Seller or
RAM UK of any trademarks, trade names, technology, know-how or process necessary
and material for the operation of the Business as currently conducted or
presently contemplated, or (iii) challenging or questioning the validity or
effectiveness of any of the Intellectual Property of Seller.
4.10. ACCOUNTS PAYABLE. Except as set forth in the schedule of accounts
payable which is contained in Schedule 3.4, there are no accounts payable of
Seller or RAM UK relating to the Business in excess of $25,000 which have been
past due and payable in accordance with their terms for more than 60 days.
4.11. REAL PROPERTY. Except as set forth on Schedule 4.11, all the
buildings, fixtures and improvements used by Seller or RAM UK in connection with
the Business are located on the Real Property.
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4.12. CUSTOMERS. The relationships of Seller and RAM UK with the suppliers
and customers in connection with the Business are reasonably good commercial or
other working relationships and, except as set forth in Schedule 4.12, no
customers who accounted for more than $25,000 individually of the Business'
sales of products during the nine month period ended September 30, 1997 has
canceled or otherwise terminated, or threatened in writing or otherwise to
cancel or otherwise terminate, its relationship with the Seller or RAM UK or
materially alter the amount of business that they are presently doing with
Seller or RAM UK relating to the Business.
4.13. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.13 sets forth a true and complete list of all written and
oral Employee Benefit Plans and other programs, commitments or funding
arrangements maintained by Seller and RAM UK to which Seller or RAM UK is a
party, or under which Seller or RAM UK has any obligations, present or future
(other than obligations to pay current wages, salaries or sales commissions
terminable on notice of 30 days or less) in respect of, or which otherwise cover
or benefit, any Subject Employees or their beneficiaries.
(b) Except for the Employee Benefit Plans identified in Schedule 4.13,
there is no "employee pension benefit plan", "employee welfare benefit plan" or
"employee benefit plan" within the meaning of Sections 3(1), 3(2) and 3(3) of
the ERISA. No Employee Benefit Plan to which Seller or any ERISA Affiliate (as
hereinafter defined) has maintained or contributed to is subject to Title IV of
ERISA or Section 412 of the Code. For purposes of this Section 4.13, the term
"ERISA Affiliate" shall mean a trade or business (whether or not incorporated)
which is under common control with Seller within the meaning of Sections 414(b)
and 414(c) of the Code or the regulations promulgated thereunder.
4.14. INSURANCE. Schedule 4.14 lists all material policies or binders of
fire, liability (including product liability), worker's compensation, vehicular,
casualty, held by or on behalf of Seller and RAM UK (specifying the insurer, the
policy number or covering note number with respect to binders, the amount of
coverage thereunder and describing each pending claim thereunder other than
routine claims for coverage under a group medical plan insurance policy). Such
policies and binders are in full force and effect. Seller has at all times
maintained and now maintains (i) insurance on all the Assets of a type
customarily covered, and (ii) adequate insurance protection against all
liabilities, claims, and risks against which it is customary to insure. Each of
Seller and RAM UK has not failed to give any material notice or present any
material claim under any such policy or binder in a due and timely fashion.
Except for claims set forth in Schedule 4.14 and routine medical claims, there
are no outstanding unpaid claims under any such policy or binder. Each of Seller
and RAM UK has not received a notice of cancellation or non-renewal of any such
policy or binder and, there is no material inaccuracy in any application for any
such policy or binder, failure to pay premiums when due or other similar state
of facts which would form the basis for termination of any such insurance.
Schedule 4.16 contains a brief description of the general liability loss history
under the policies of insurance therein listed.
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4.15. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Schedule 4.15:
(i) Seller is, and at all times has been, in compliance with each
Legal Requirement that is or was applicable to it or to the conduct or
operation of the Business or the ownership or use of any of the Assets to
be sold; including but not limited to ERISA and laws relating to
occupational safety and health;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by Seller or RAM UK of, or a failure on the part of Seller or RAM
UK to comply with, any Legal Requirement, or (B) may give rise to any
obligation on the part of Seller or RAM UK to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature; and
(iii) Neither Seller nor RAM UK has received, at any time, any notice
or other communication (whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual, alleged, possible or
potential violation of, or failure to comply with, any Legal Requirement,
or (B) any actual, alleged, possible or potential obligation on the part of
Seller to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Schedule 4.15 contains a complete and accurate list of each
Governmental Authorization that is held by Seller and RAM UK and that relates to
the Assets to be sold. Each Governmental Authorization listed or required to be
listed in Schedule 4.15 is valid and in full force and effect. Except as set
forth in Schedule 4.15:
(i) Each of Seller and RAM UK is, and at all times has been, in full
compliance in all material respects with all of the terms and requirements
of each Governmental Authorization identified or required to be identified
in Schedule 4.15;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or
indirectly in a material violation of or a failure to comply with any term
or requirement of any Governmental Authorization listed or required to be
listed in Schedule 4.15, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental Authority listed or required to be listed
in Schedule 4.15;
(iii) Neither Seller nor RAM UK has received any notice or other
communication (whether oral or written) from any Governmental Body or any
other Person regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible or
potential revocation, withdrawal, suspension, cancellation, termination of
or modification to any Governmental Authorization; and
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(iv) all material applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed
in Schedule 4.15 have been duly filed on a timely basis with the
appropriate Governmental Bodies, and all other material filings required to
have been made with respect to each Governmental Authorization have been
duly made on a timely basis with the appropriate Governmental Bodies.
(c) The Governmental Authorizations listed in Schedule 4.15 collectively
constitute all of the Governmental Authorizations necessary to permit each of
Seller and RAM UK to lawfully conduct and operate the Business in the manner it
currently conducts and operates such business and to permit Seller to own and
use its assets in the manner in which it currently owns and uses such assets.
4.16. LEGAL PROCEEDINGS.
(a) Except as set forth in Schedule 4.16, there is no pending
litigation or judicial, administration or arbitration proceeding or
investigation (each a "Proceeding"):
(i) that has been commenced by or against Seller or RAM UK that
otherwise relates to or may affect the business of, or any of the Assets to
be sold; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with the transactions
contemplated by this Agreement.
To the knowledge of the Selling Parties, (1) no such Proceeding has been
threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding. Each of
Seller and RAM UK has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Schedule 4.16. The Proceedings listed in Schedule 4.16, if decided adversely to
Seller, would not have a material adverse effect on the Business or the
operations, assets, condition or prospects of the Business.
(b) Except as set forth in Schedule 4.16:
(i) there is no decision, injunction, judgment, order, or ruling by
any Court, administrative agency, other Governmental Body or by any
arbitrator (each, an "Order") to which Seller or RAM UK, or any of the
assets owned or used by Seller or RAM UK, is subject;
(ii) none of Selling Parties is subject to any Order that relates to
the business of, or any of the assets owned or used by, Seller or RAM UK;
and
(iii) no officer, director, agent or employee of Seller or RAM UK is
subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Seller.
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(c) Except as set forth in Schedule 4.16:
(i) Each of Seller and RAM UK is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which
it, or any of the assets owned or used by it, has been subject;
(ii) no event has occurred or circumstance exists that may constitute
or result in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order to which Seller
or RAM UK, or any of the assets owned or used by Seller or RAM UK, is
subject; and
(iii) Neither Seller nor RAM UK has received, any notice or other
communication (whether oral or written) from any Governmental Body or any
other Person regarding any actual, alleged, possible or potential violation
of, or failure to comply with, any term or requirement of any Order to
which Seller, or any of the assets owned or used by Seller or RAM UK, is or
has been subject.
(d) Except as set forth in Schedule 4.16, neither Seller nor RAM UK is
presently engaged in any legal action to recover monies due to it or damages
sustained by it.
4.17. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 4.17, since September 30, 1997, each of Seller and RAM UK has conducted
its business only in the ordinary course of business and there has not been any:
(a) amendment to the Organizational Documents of the Seller or RAM UK;
(b) payment or increase by the Seller or RAM UK of any bonuses, salaries or
other compensation to any stockholder, director, officer or (except in the
ordinary course of business) employee, or entry into any employment, severance
or similar contract with any director, officer or employee, relating to the
Business;
(c) adoption of, or increase in the payments to or benefits under, any
Employee Benefit Plan for or with any employees of Seller or RAM UK;
(d) damage to or destruction or loss of any asset or property of Seller,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition or prospects of Seller and RAM
UK, taken as a whole:
(e) entry into, termination of, or receipt of notice of termination of,
except in the ordinary course of business, (i) any license, distributorship,
dealer, sales representative, joint venture, credit or similar agreement, or
(ii) any contract or transaction involving a total remaining commitment by or to
the Seller or RAM UK in connection with the Business of at least $50,000, other
than any such act that would not have a material adverse effect upon the Buyer;
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(f) sale (other than sales of inventory in the ordinary course of
business), lease or other disposition of any material asset or property of
Seller or RAM UK or mortgage, pledge or imposition of any lien or other
Encumbrance on any material asset or property of Seller;
(g) cancellation or waiver of any claims or rights with a value to the
Seller or RAM UK in connection with the Business in excess of $50,000;
(h) material change in the accounting methods or practices used by Seller
(including, without limitation, any change in depreciation or amortization
policies or rates);
(i) loan by Seller or RAM UK to any Person of any amount, or guaranty by
Seller or RAM UK of any loan;
(j) capital expenditure by the Seller or RAM UK in connection with the
Business exceeding $50,000;
(k) labor trouble or other event or condition of any character adversely
affecting the financial condition, business, assets or prospects of the
Business; or
(l) agreement, whether oral or written, by Seller or RAM UK to do any of
the foregoing.
4.18. CONTRACTS; NO DEFAULTS.
(a) Schedule 4.18(a) contains a complete and accurate list, and Seller has
delivered to Buyer true and complete copies (if in writing), of:
(i) each contract to which Seller or RAM UK is party involving the
Business directly or indirectly that involves performance of services or
delivery of goods or materials by Seller or RAM UK of an amount or value in
excess of $25,000 including, without limitation, each contract with a
Distributor;
(ii) each contract to which Seller or RAM UK is party that involves
performance of services or delivery of goods or materials to Seller or RAM
UK in connection with the Business in an amount or value in excess of
$25,000;
(iii) each contract to which Seller or RAM UK is party involving the
Business directly or indirectly that was not entered into in the ordinary
course of business and that involves expenditures or receipts of Seller or
RAM UK in excess of $25,000;
(iv) each licensing agreement or other contract to which Seller or RAM
UK is party with respect to patents, trademarks, copyrights or other
intellectual property, including agreements with current or former
employees, consultants or contractors regarding the appropriation or the
non-disclosure of Intellectual Property rights;
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(v) each collective bargaining agreement and other contract to which
Seller or RAM UK is party with any labor union or other employee
representative of a group of employees;
(vi) each joint venture, partnership and other contract (however
named) to which Seller is party involving a sharing of profits, losses,
costs or liabilities by Seller or RAM UK with any other Person;
(vii) each contract to which Seller or RAM UK is party containing
covenants that in any way purport to restrict the business activity of
Seller, RAM UK or any Affiliate of Seller or limit the freedom of Seller,
RAM UK or any Affiliate of Seller to engage in any line of business or to
compete with any Person;
(viii) each contract to which Seller or RAM UK is party providing for
payments to or by any Person based on sales, purchases or profits, other
than direct payments for goods;
(ix) each power of attorney to which Seller or RAM UK is party that is
currently effective and outstanding;
(x) each contract to which Seller or RAM UK is party for capital
expenditures in excess of $10,000 relating to the Business; and
(xi) each written warranty, guaranty or other similar undertaking with
respect to contractual performance extended by Seller or RAM UK involving
the Business directly or indirectly other than in the ordinary course of
business.
(b) Except as set forth in Schedule 4.18(b), each contract identified or
required to be identified in Schedule 4.18(a) is in full force and effect and is
valid and enforceable in accordance with its terms.
(c) Except as set forth in Schedule 4.18(c), no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with or result in a violation or breach of, or give Seller
or RAM UK or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate
or modify any contract identified in Schedule 4.18(a). Neither Seller nor RAM UK
has received notice that any party to any of the agreements listed in Schedule
4.18(a) intends to cancel or terminate any of these agreements or to exercise or
not exercise any options under any of these agreements.
(d) Except as set forth in Schedule 4.18(d), no Distributor or customer of
Seller or RAM UK is entitled to or customarily receives discounts, allowances,
volume rebates or similar reductions in price or trade terms relating to the
Business.
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(e) Schedule 4.18(e) sets forth a description of all marketing and pricing
policies, including promotions and trade allowances relating to the Business,
which are presently in effect or which have been in effect at any time during
the period 1995 to the present.
4.19. EMPLOYEES.
(a) Schedule 4.19 contains a complete and accurate list of the following
information for each employee of the Seller and RAM UK: employee; name; job
title; job classification; current compensation paid or payable and any change
in compensation since September 30 1997; vacation and sick leave accrued; and
service credited for purposes of vesting and eligibility to participate under
any of the Employee Benefit Plans or Seller or RAM UK. No other Person, except
accountants, attorneys and consultants, regularly performs compensable services
for the Seller or RAM UK or relating to the Business.
(b) Schedule 4.19(b) lists all employment contracts with employees of the
Seller and RAM UK or by which Seller or RAM UK is bound. All of these contracts
are in full force and effect, and neither Seller, RAM UK nor any other party is
in default under them. There have been no claims of defaults and, to the
knowledge of Selling Parties, there are no facts or conditions which if
continued, or on notice, will result in a default under these contracts.
(c) No employee or director of Seller or RAM UK is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition or proprietary rights agreement, between such employee or
director and any other Person that in any way adversely effects or will affect
(i) the performance of his duties as an employee of Seller or RAM UK, or (ii)
the ability of Seller to conduct its business.
4.20. LABOR RELATIONS; COMPLIANCE. Schedule 4.20 sets forth all collective
bargaining or other labor contracts to which Seller or RAM UK is a party or by
which Seller or RAM UK is bound. Except as set forth on Schedule 4.20, since
December 31, 1995, there has not been, there is not presently pending or
existing, and to the knowledge of the Selling Parties there is not threatened,
(a) any strike, slowdown, picketing, work stoppage or employee grievance
process, (b) any proceeding against or affecting Seller or RAM UK relating to
the alleged violation of any requirement of law pertaining to labor relations or
employment matters, including any charge or complaint filed by any employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organization activity, or other
labor or employment dispute against or affecting Seller, RAM UK or their
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the basis
for any work stoppage or other labor dispute. There is no lockout of any
employees by Seller or RAM UK, and no such action is contemplated by Seller or
RAM UK. Seller has complied in all material respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. Neither Seller nor RAM UK is liable for the payment of any
compensation, damages, taxes, fines, penalties or other amounts, however
designated, for failure to comply with any for the foregoing Legal Requirements.
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4.21. CERTAIN PAYMENTS. To the best of the knowledge of Selling Parties,
neither Seller, RAM UK nor any director, officer, agent or employee of Seller,
nor any other Person associated with or acting for or on behalf of Seller or RAM
UK, has directly or indirectly, the effect of which would have a material
adverse effect on the Business, (a) made any contribution, gift, bribe, rebate,
payoff, influence, payment, kickback or other payment to any Person, private or
public, regardless of form, whether in money, property or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of Seller, RAM UK or any
Affiliate of Seller or RAM UK, or (iv) in violation of any Legal Requirement; or
(b) established or maintained any fund or asset that has not been recorded in
the books and records of Seller.
4.22 DISCLOSURE. No representation or warranty of Selling Parties made in
this Agreement or in any letter, certificate or memorandum furnished or to be
furnished by Selling Parties or on their behalf, and no statement in the
Schedules, contains or will contain any untrue statement of a material fact or
omits to state a material fact concerning the Seller specifically necessary to
make the statements herein or therein, in light of the circumstances in which
they were made, not misleading. There is no fact known to Selling Parties which
materially adversely affects, or in the future may (so far as Selling Parties
can now reasonably foresee) materially adversely affect, the condition, Assets,
liabilities, business, operations or prospects of Seller or the Business that
has not been set forth herein or heretofore communicated to Buyer.
4.23. RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in Schedule
4.23, no Affiliate of the Selling Parties has had any interest in any property
(whether real, personal, or mixed and whether tangible or intangible), used in
or pertaining to the business of Seller or RAM UK. No Affiliate of the Selling
Parties is, owns (of record or as a beneficial owner) an equity interest or any
other financial or other profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with Seller or RAM
UK (other than business dealings or transactions conducted in the ordinary
course of business with Seller or RAM UK at substantially prevailing market
prices and on substantially prevailing market terms), or (ii) engaged in
competition with Seller or RAM UK with respect to any line of the products or
services of Seller or RAM UK (a "Competing Business") in any market presently
served by such Seller or RAM UK except for less than one percent of the
outstanding capital stock of any Competing Business that is publicly traded on
any recognized exchange or in the over-the-counter market. Except as set forth
in Schedule 4.23, no Affiliate of the Selling Parties is a party to any contract
with, or has any claim or right against Seller or RAM UK.
4.24. BROKERS OR FINDERS. Neither Selling Party nor their respective agents
have incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents; commissions or other similar payment in
connection with this Agreement other than Duff & Phelps, Inc. for which the
Selling Parties will be solely responsible.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND TEARDROP
Buyer and TearDrop represent and warrant to Selling Parties as follows:
5.1. ORGANIZATION AND GOOD STANDING. Each of Buyer and TearDrop is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, with full corporate power an authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.
5.2. AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid and binding obligation of
each of Buyer and TearDrop and is enforceable against each of Buyer and TearDrop
in accordance with its terms, except as limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors generally. Buyer has
the absolute and unrestricted right, power, authority and capacity to execute
and deliver this Agreement and to perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, directly or
indirectly:
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of Buyer or TearDrop, (B) any
resolution adopted by the board of directors or the stockholders of Buyer
or (c) any other agreement or commitment applicable to it; or
(ii) give any Governmental Body or other Person the right to challenge
the transactions contemplated by this Agreement.
5.3. DISCLOSURE. No representation or warranty of Buyer or TearDrop made in
this Agreement or in any letter, certificate or memorandum furnished or to be
furnished by Buyer or TearDrop or on its behalf, contains or will contain any
untrue statement or omits to state a material fact necessary to make the
statements herein, or therein, in light of the circumstances in which they were
made, not misleading. TearDrop has made all filings required by the Securities
and Exchange Commission under the Securities Exchange Act of 1934 on a timely
basis.
5.4. LEGAL PROCEEDINGS. There is no Proceeding that has been commenced by
or against Buyer or that otherwise relates to or may affect the business of
Buyer or that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the transactions contemplated by
this Agreement.
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5.5. BROKERS OR FINDERS. Neither Buyer nor any Affiliate of Buyer has
incurred an obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the Agreement.
ARTICLE VI
THE CLOSING AND
CLOSING CONDITIONS
6.1. CLOSING DATE. The closing of the purchase and sale of the Assets (the
"Closing") shall take place at the offices of Jones, Day, Reavis & Pogue,
Chicago, Illinois at 10:00 a.m. local time prior to December 31, 1997, at such
place and time as the parties may agree (the "Closing Date").
6.2. CONDITIONS TO EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of each party under this Agreement to close the
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Closing of the following conditions:
(a) Non-Competition Agreements. Buyer and each of Seller and
Shareholder shall have executed and delivered the Non-Competition
Agreements.
(b) Employment Agreement. Parent Corporation and C. Ronald Schram
shall have executed and delivered the Employment Agreement.
(c) Escrow Agreements. Buyer, the Selling Parties and the Escrow Agent
shall have executed and delivered the Escrow Agreements.
(d) Transfer and Assumption Document. Seller and Buyer shall have
executed and delivered a Bill of Sale and Assumption of Obligations and
Assignments of intellectual property substantially in the form of Exhibit D
hereto.
(e) Suits and Proceedings. Neither Buyer nor any Selling Party shall
be prohibited by any order, ruling, consent, decree, judgment or injunction
of a court or regulatory agency of competent jurisdiction from closing the
transactions contemplated by this Agreement.
(f) Absence of Litigation. No Proceeding pertaining to the
transactions contemplated by this Agreement or its consummation shall have
been instituted or threatened on or before the Closing Date.
(g) Condition of Assets. The Assets shall not have been materially or
adversely affected in any way as a result of any fire, accident, storm or
other casualty or labor or civil disturbance or act of God or the public
enemy.
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(h) Registration Rights. The parties shall have entered into a
Registration Agreement in the form attached hereto as Exhibit E.
6.3. ADDITIONAL CONDITIONS TO BUYER'S OBLIGATIONS UNDER THIS AGREEMENT. In
addition to the conditions set forth in Section 6.2 above, the obligation of
Buyer to close the transactions provided for under this Agreement shall be
subject to the satisfaction or waiver at or prior to the Closing of the
following conditions:
(a) Third-Party Consents. Seller shall have furnished to Buyer all
material consents of third parties referred to in Schedule 4.2.
(b) Governmental Permits and Approvals. Any and all material permits,
licenses and approvals from any Governmental Body required for the lawful
transfer of all of Seller's Governmental Authorizations to Buyer shall have
been obtained.
(c) Opinion of Counsel. Buyer shall have received the favorable
opinion of Jones, Day, Reaves & Pogue, counsel to the Selling Parties, in
the form attached hereto as Exhibit G.
(d) Representations and Covenants. The representations and warranties
of the Selling Parties contained in this Agreement shall be true and
complete in all material respects, except for changes in the ordinary
course of business and as contemplated by this Agreement, on and as of the
Closing Date with the same force and effect as though made on and as of
such date. The Selling Parties shall have performed and complied with all
covenants and agreements required by this Agreement to be performed or
complied with by them on or prior to such date, and the Selling Parties
shall have delivered to Buyer a certificate dated such date to the
foregoing effect.
(e) Release of Encumbrances. Seller or Seller's bank shall deliver to
Buyer UCC-3 termination statements and evidence of the release of each
other Encumbrance on the Assets identified in Schedule 4.5, if any, so that
good and marketable title to the Assets is conveyed to Buyer, free and
clear of all Encumbrances.
(f) Certifications. Seller shall deliver to Buyer a certificate, dated
the Closing Date, signed by Seller's president, certifying, in such detail
as Buyer and its counsel may reasonably request, that all representations
and warranties of Selling Parties made in Article IV are true and correct
as of the Closing Date and that the conditions specified in Section 6.2(d)
have been fulfilled.
(g) Corporate Approval. The execution and delivery of this Agreement
by Seller, and the performance of its covenants and obligations hereunder,
shall have been duly authorized by all necessary corporate action, and
Buyer shall have received copies of all resolutions of directors and
shareholders pertaining to that authorization, certified by the Secretary
of Seller.
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(h) Good Standing Certificates. Buyer shall have received certificates
of good standing, dated as close as practicable to the Closing Date, from
the Secretary of State of the State of Delaware.
(i) Tax Clearances; Bulk Sales. Seller shall have complied with all
applicable bulk sales laws and received all applicable tax and other
clearances from the State of Illinois in order to engage in the
transactions contemplated by this Agreement.
(j) Subsidiaries. Seller shall have delivered an executed stock power
effectively transferring all shares of equity securities of all
subsidiaries of Seller to the Buyer and shall have delivered the minute
books and all corporate records of all such subsidiaries.
(k) Other Actions. All actions to be taken by Seller in connection
with the transactions contemplated hereby and all certificates, opinions
and other documents required to effect the transactions contemplated hereby
will be satisfactory in form and substance to Buyer and its counsel.
6.4. ADDITIONAL CONDITIONS TO THE SELLING PARTIES' OBLIGATIONS UNDER THIS
AGREEMENT. In addition to the conditions set forth in Section 6.2 above, the
obligation of the Selling Parties to close the transactions contemplated hereby
shall be subject to the satisfaction or waiver at or prior to the Closing of the
following conditions:
(a) Representations and Covenants. The representations and warranties
of Buyer and TearDrop contained in this Agreement shall be true and
complete in all material respects, except for changes in the ordinary
course of business and as contemplated by this Agreement, on and as of the
Closing Date with the same force and effect as though made on and as of
such date. Buyer shall have performed and complied with all covenants and
agreements required by this Agreement to be performed or complied with by
it on or prior to such date, and Buyer and TearDrop shall have delivered to
Seller a certificate dated such date to the foregoing effect.
(b) Corporate Approval. The execution and delivery of this Agreement
by Buyer and TearDrop, and the performance of their covenants and
obligations hereunder, shall have been duly authorized by all necessary
corporate action, and Seller shall have received copies of all resolutions
of directors and shareholders pertaining to that authorization, certified
by the Secretary of Buyer and TearDrop.
(c) Delivery of Purchase Consideration. Buyer shall have paid, by or
wire transfer, component (A) of the Purchase Price in accordance with
Section 3.2(a) of this Agreement.
(d) Resale Certificate. Buyer shall have provided to Seller a resale
certificate in respect of the transfer of the Inventory to Buyer pursuant
to the sales and use tax law of the State of Illinois.
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(e) Opinion of Counsel. Seller shall have received the favorable
opinion of Crummy, Del Deo, Dolan, Griffinger & Vecchione, P.C., counsel to
Buyer and TearDrop, in the form attached hereto as Exhibit H.
ARTICLE VII
COVENANTS OF SELLING PARTIES
Selling Parties covenant and agree to comply with the following:
7.1. ACCESS TO INFORMATION AND RECORDS.
(a) During the period from the date hereof to the Closing Date, Selling
Parties shall give Buyer, its counsel, accountants and other authorized
representatives, reasonable access during normal business hours to all of
Seller's properties, books, records, contracts and other documents and, with the
prior consent of Seller (which shall not be unreasonably withheld), to the
salaried personnel of Seller; and Seller shall furnish or cause to be furnished
to Buyer and its representatives all information with respect to the business
and affairs of Seller as Buyer may reasonably request.
(b) Any investigation conducted by Buyer pursuant to this Section 7.1 shall
be so conducted as not to interfere unreasonably with the business operations of
Seller and the relationships of Seller with its employees, customers and
suppliers. No such investigation by Buyer shall affect or be deemed to modify
any representation or warranty made by the Selling Parties.
7.2. CONDUCT OF BUSINESS PENDING CLOSING. Selling Parties agree that from
the date hereof until the Closing Date, except as otherwise approved in writing
by Buyer:
(a) Maintain Business and Organization. Each of Seller and RAM UK will
carry on its business in the ordinary course consistent with past practice
and, to the extent consistent therewith, will use its reasonable best
efforts to maintain and preserve its business organization intact and to
maintain its current relationships with Distributors and other customers,
suppliers, employees and others having business relationships with Seller
and RAM UK.
(b) Compensation. Neither Seller nor RAM UK will (i) enter into any
employment or severance agreement with any director, officer or other
employee of Seller or RAM UK; (ii) establish, adopt, enter into or make any
new grants or awards under, or amend, any collective bargaining, bonus,
profit sharing, thrift, compensation or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or
employees, except to comply with ERISA, the Code and the collective
bargaining agreement currently in effect; or (iii) give any increases in
the rates of salary or other compensation payable to employees.
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(c) No Material Contracts. No contract or commitment will be entered
into, and no purchase of supplies and no sale of assets (real, personal, or
mixed, tangible or intangible) will be made by or on behalf of the Seller
or RAM UK, except (i) contracts or commitments for the purchase of
Inventory made in the ordinary course of business consistent with past
practice, (ii) contracts or commitments for the sale of Inventory in the
ordinary course of business consistent with past practice, and (iii) other
contracts, commitments, purchases or sales in the ordinary course of
business consistent with past practice which are not material to Seller.
(d) Capital Expenditures. Neither Seller nor RAM UK will make any
capital expenditures or commitments therefor, for additions to property,
plant or equipment in connection with or for use in the Business, or agree
to make any such expenditures or commitments, except pursuant to existing
expenditure or commitment programs in a manner consistent with the
performance of such programs to date.
(e) Issuance of Stock. Neither Seller nor RAM UK will grant any stock
options or other rights to acquire the stock of Seller or RAM UK and will
not issue or in any way dispose of any shares of Seller's stock or the
stock of RAM UK.
(f) No Corporate Changes. Neither Seller or RAM UK will amend its
Organizational Documents or make any changes in its authorized or issued
capital stock.
(g) Indebtedness. Neither Seller nor RAM UK will create any
indebtedness, other than short-term indebtedness incurred in the ordinary
course of business consistent with past practices pursuant to existing
contracts disclosed in Schedule 4.18.
(h) Maintenance of Insurance. Each of Seller will use its best
efforts, consistent with past practice and prudent business judgment, to
maintain all of the insurance held by Seller and RAM UK in effect as of the
date hereof.
(i) Maintenance of Property. Each of Seller and RAM UK will use,
operate, maintain and repair all property of the Seller and RAM UK in a
normal business manner consistent with past practice.
(j) Loans and Advances. Neither Seller nor RAM UK will make any loan
or advance to any Person, including, without limitation, any officer,
director or employee of Seller or RAM UK.
(k) No Negotiations. Selling Parties will not directly or indirectly
(through a representative or otherwise) solicit or furnish any information
to any prospective buyer, or commence or conduct presently ongoing
negotiations with any other party, or enter into any agreement with any
other Person concerning the sale of Seller or its assets or business, or
any part thereof (an "Acquisition Proposal"); and Seller shall promptly
notify Buyer of the receipt of any Acquisition Proposal.
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7.3. CONSENTS. Each Selling Party will use its reasonable best efforts
prior to the Closing Date to obtain all consents identified in Schedule 4.2
necessary for the consummation of the transactions contemplated hereby.
7.4. SCHEDULES. Selling Parties shall have a continuing obligation to
promptly notify Buyer in writing with respect to any matter arising or
discovered after the date of execution of this Agreement, which matter, if
existing or known at the date hereof, would have been required to be set forth
or described in any Schedule to this Agreement.
7.5 OBLIGATIONS AFTER THE CLOSING. Selling Parties agree that, following
the Closing Date:
(a) Access to Records. From and after the Closing, Selling Parties
shall allow Buyer, and its counsel, accountants and other representatives,
such access to records which after the Closing are in the custody or
control of Selling Parties as Buyer reasonably requires in order to comply
with its obligations under the law or under contracts assumed by Buyer
pursuant to this Agreement.
(b) Nonsolicitation of Employees. None of the Selling Parties shall,
prior to the third anniversary of the Closing, retain as an employee,
consultant or otherwise, or hire or offer employment to, any person whom
Buyer or any direct or indirect subsidiary of Buyer engages as an employee,
consultant or otherwise at the closing.
(c) Change of Name. Seller will change its corporate name immediately
upon the Closing.
(d) Restrictions on Sale of Stock. Selling Parties agree that for the
period beginning on the Closing Date and ending 120 days thereafter,
Selling Parties will not directly or indirectly sell, hypothecate, pledge
or otherwise transfer the Stock.
(e) Financial Statements. Sellers shall cooperate with Buyer in
connection with the preparation of audited financial statements of the
Business that are required to be included in Buyer's filing on Form 8-K and
Form 10-K under the Securities Exchange Act of 1934 or any Registration
Statement or post-effective amendment to a Registration Statement, prior to
the expiration of applicable time periods for which such filings must be
made. Seller shall use its reasonable best efforts to cause all work that
Wolf & Co. has done to date relating to the periods prior to the Closing
Date on Seller's behalf to be provided to Buyer for its and its
accountant's use at no cost to Buyer. Buyer and Selling Parties shall each
be responsible for one-half of any additional accounting fees incurred in
connection with the preparation of such additional audited financial
statements.
(f) Location of Assets. Prior to the closing, Selling Parties shall
generally identify to Buyer where the Assets are located.
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(g) Delivery Escrow. With respect to Ram products ordered from vendors
located outside of the United States, based on Seller's current inventory
and sales forecast, which has been previously delivered to Buyer, Seller
guarantees (subject to the terms of this Section) to Buyer that the dollar
amount of such inventory that is necessary to satisfy 75% of the forecasted
sales for April 1998, will be delivered to the Buyer no later than March
19, 1998. The following procedures will be followed in this process:
Promptly after receipt of requests from either C. Ronald Schram or Lou
Pardini (the "Seller's Representatives"), Buyer will place the requested
orders with vendors designated by the Seller's Representatives which
vendors are the vendors that have been used in the last six months to
satisfy the requirements for the Seller. The order and delivery process
will follow the procedures previously followed by Seller, including such
matters as inspection, quality standards, tooling and designs utilized,
shipping practices and similar matters. Buyer will promptly pay the vendors
in accordance with normal commercial practices no less favorable than those
that have been available to the Seller during the last six months. If Buyer
places other casting orders with such vendors (unless Buyer previously
utilized such vendors, and then only to the extent of previous quantities
as to such practices) which result in the delay of the shipments under this
Section and the order would have otherwise been delivered by March 19,
1998, then the guarantee will be deemed to have been satisfied. In
consideration of the above, 100,000 shares of Common Stock due to Seller,
will be held in escrow by the Escrow Agent under the terms of the Delivery
Escrow Agreement attached as Exhibit A.
ARTICLE VIII
COVENANTS OF BUYER AND PARENT CORPORATION
8.1. ZEBRA INSERT PUTTER. It is understood under the terms of this
Agreement and the Ancilliary Agreements that for a period commencing on the
Closing Date and ending on June 30, 1998, Seller will market and sell under the
Ram and Zebra trademarks using the patented technology contained in patents
assigned to Buyer, the trademarks and patents as set forth more fully in
Schedule 8.1, for putters using insert technology that are excluded assets
hereunder for the purposes of filling orders and selling the Zebra Insert
Putters in the ordinary course of business through June 30, 1998. In doing so,
Buyer agrees that it will not assert its intellectual property rights, with
respect to the trademarks and patents listed in Schedule 8.1, against Seller
during such period as long as the use of the trademarks and patented technology
by the Seller is for the aforementioned period and express purposes set forth in
this section. When using the trademarks, Buyer agrees to undertake and comply
substantially with all laws pertaining to the trademarks in force in the
jurisdiction of use, including but not limited to marking requirements. During
the subject period, Buyer will monitor the quality of the goods produced by
Seller under the trademarks to ensure compliance with acceptable quality
standards to be determined unilaterally by Buyer but subject to the following
sentence. Buyer agrees that if the same quality of Zebra Insert Putter products
shown to exist during the three months prior to the Closing Date is maintained,
Seller shall meet and satisfy Buyer's quality control standards in all respects.
Notwithstanding the foregoing, if the quality of the goods sold by Seller varies
materially from those quality control standards demonstrated to be acceptable to
Buyer, then Buyer shall have the right, upon notice to the Seller, to
immediately terminate the covenant
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granted under this section. Buyer shall further have the right to immediately
terminate this covenant, upon notice to the Seller, in the event that Seller
becomes or is declared insolvent or bankrupt, whether voluntarily or
involuntarily, is the subject of any proceedings relating to its liquidation,
insolvency or for the appointment of a receiver or similar officer for it, makes
an assignment for the benefit of all or substantially all of its creditors, or
enters into an agreement for the composition, extension, or readjustment of all
or substantially all of its obligations. Seller shall have no right to license,
sub-license or transfer in any manner its ability to use the trademarks or
technology as set forth in this section. The parties to this Agreement
acknowledge Buyer's exclusive right, title and interest in and to the trademarks
and patents listed in Schedule 8.1 and any registrations that have issued or may
issue thereon. The covenant set forth in this section does not constitute any
party the agent of another, nor create a partnership or joint venture between
the parties, and Seller shall have no power to obligate or bind the Buyer with
respect to the trademarks and patents listed in Schedule 8.1. Nothing herein
shall be deemed to grant a license to the Seller to use any of the trade names
or trademarks transferred to the Buyer for any purpose, particularly in the name
of any successor business entity to the Seller. The Buyer agrees that at any
time that it uses the trademarks referred to above, whether in advertising,
sales, marketing or any other manner that it will display clearly and
prominantly the name of its corporation which will not contain the words "Ram"
or "Zebra" and that it will clearly indicate that it is not related to or
affilited with the Buyer or any Affiliate of the Buyer.
8.2. SELLER'S EMPLOYEES. Within 60 days after the Closing, Buyer will
notify Seller as to which employees of Seller, if any, it proposes to offer
employment. During such 60 day period, Seller shall make available to Buyer the
services of all of its employees. Buyer shall reimburse Seller for all costs
relating to the employment of such employees other than those Buyer designates
specifically in writing and those employees who are engaged at all in the
business of manufacturing, marketing or distributing insert technology putters
designated by Buyers during such period, excluding any accrued but unpaid
expenses, including but not limited to, vacation pay, any costs, relating to
insurance, reimbursement or benefits plans that are in excess of the average
costs of such items during the six months prior to Closing and any termination
expenses. Any employees hired by Buyer or TearDrop will be allowed, to the
fullest extent permissable under law and under its plans, to participate in all
employee benefit plans available to employees of Buyer or TearDrop,in accordance
with the terms of such plans. Any such offers will be made promptly after the
Closing, will count the employee's service with Seller as service with Buyer for
purposes of eligibility or vesting under benefit plans, will accept preexisting
medical conditions for purposes of medical insurance and will honor Seller's
prior accrued vacation commitments.
8.3 COOPERATION IN COLLECTION OF SELLER'S ACCOUNTS RECEIVABLE. Buyer and
TearDrop agree to cooperate, as reasonably requested by Seller and without
charge, in the collection by Seller of its accounts receivable outstanding on
the Closing Date and not sold by Seller. Such cooperation may include assistance
from appropriate former Seller employees, if hired by Buyer, provided it does
not materially interfere with their other duties.
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8.4 POST CLOSING RENTAL. The Seller shall grant access to the Buyer to use
the facilities currently used by the Seller through February 28, 1998 at no cost
to the Buyer (unless the facilities are sold). If the facilities are sold, the
Seller will split the costs relating to the facilities evenly with Buyer after
such sale. Buyer may vacate the premises at any time, after which time, it will
have no obligation to Seller or the owner of the premises. Any sale by the
Selling Parties of the premises, shall be subject to the right of Buyer to
occupy the premises under this Agreement. Buyer shall have all rights of a
tenant hereunder including but not limited to full and complete access and quite
enjoyment of the premises. The area to be occupied by Buyer shall be clearly
marked and delineated and Seller shall refrain from making use of or storing any
of Seller's possessions in any of such areas.
8.5 ACCESS TO RECORDS; FURTHER COOPERATION. Buyer shall maintain and make
Seller and its agents any and all records or other information necessary for
Seller to file tax returns, respond to governmental and employee inquiries,
defend claims and liabilities, collect of accounts receivable and repair or
replace returned products.
8.6 TOM WATSON AGREEMENT. The Buyer will take no action that will cause a
breach by the Company of the Agreement between the Seller and Tom Watson dated
July 3, 1997 listed on Schedule 4.18(a).
8.7 RETURN OF EXCLUDED TOOLING, FIXTURES AND EQUIPMENT. On the sooner of
such time that the Seller leases to manufacture putters using insert technology
or December 31, 1998, Seller will return to Buyer, in good working order, all
Equipment, tooling and fixtures listed on Schedule 2.1. Seller will cooperate
with Buyer in taking such action as Buyer deems necessary to provide notice to
all third parties with respect to its rights hereunder.
8.8 RETURNED INVENTORY. For a period of 12 months from the Closing, Buyer
will purchase from Seller any merchandise sold to third parties prior to the
Closing and returned to Seller, at a price equal to the current pricing schedule
in effect less 15%. The aforementioned shall only apply to such merchandise that
is offered for sale by the Buyer at the time that it is offered to the Buyer by
the Seller and is in a condition so that it may be resold as new merchandise.
Buyer shall not be required to purchase from Seller more than $200,000 in
merchandise pursuant to this provision. Any returned merchandise that is
rejected by the Buyer because it is no longer sold by the Buyer may be resold by
the Seller without regard to the non-competition agreement attached as
Exhibit C.
8.9 BOOTH. Seller shall and hereby does assign to Buyer the right to occupy
the trade show booth reserved in the name of the Seller at the Orlando PGA of
America Trade Show to be held in January 1998. Seller shall have the right to
use a portion of Buyer's display booth of between 300 and 400 square feet for no
cost. Such space may only be used by Seller to promote its insert putter lines.
The Seller's display booth shall be prominantly separated from the Buyer's
booth.
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ARTICLE IX
TERMINATION
9.1. TERMINATION EVENTS. This Agreement may be terminated as follows:
(a) by either Buyer or Seller if any representation or warranty of the
other party is or becomes untrue or breached in any material respect and
such breach has not been waived;
(b) (i) by Buyer if any of the conditions in Sections 6.2 and 6.3 has
not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer
to comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Seller, if
any of the conditions in Section 6.2 and 6.4 has not been satisfied as of
the Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition
on or before the Closing Date;
(c) by mutual consent of Buyer and Seller; or
(d) by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement
to comply fully with its obligations under this Agreement) on or before
December 31, 1997, or such later date as the parties may agree upon.
9.2. EFFECT OF TERMINATION. In the event that this Agreement is terminated
pursuant to Section 8.1(a) due to the intentional breach of a representation,
warranty, covenant or condition by the breaching party, then the non-breaching
party shall be entitled to pursue, exercise and enforce any and all remedies,
rights, powers and other privileges available at law or in equity. In the event
that this Agreement is terminated for any other reason, then no party shall have
any right to pursue, exercise or enforce any remedy.
ARTICLE X
INDEMNIFICATION; REMEDIES
10.1. INDEMNIFICATION BY SELLING PARTIES. The Selling Parties shall defend,
indemnify and hold harmless Buyer and each of Buyer's Affiliates, employees,
successors and assigns (Buyer and such persons, collectively, "Buyer's
Indemnified Persons"), and shall reimburse Buyer's Indemnified Persons, for,
from and against each and every demand, claim, loss (which shall include any
diminution in value), liability, judgment, damage, cost and expense (including,
without limitation, interest, penalties, costs of preparation and investigation,
and the reasonable fees, disbursements and expenses of attorneys, accountants
and other professional advisors) (collectively, "Losses") imposed on or incurred
by Buyer's Indemnified Persons, directly or
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indirectly, relating to, resulting from or arising out of: (a) any inaccuracy in
any representation or warranty in any respect, whether or not Buyer's
Indemnified Persons relied thereon or had knowledge thereof, or any breach or
nonfulfillment of any covenant, agreement or other obligation of the Selling
Parties under this Agreement, the Schedules hereto or any certificate or other
document delivered or to be delivered pursuant hereto; (b) any breach by a
Selling Party of any covenant or obligation of such Selling Party under this
Agreement; (c) any product shipped or manufactured by Seller prior to the
Closing Date; (d) any liability of the Seller not assumed under Section 3.4
including, but not limited to, any liabilities relating to legal proceedings
either pending at the time of the Closing or relating to actions of the Selling
Parties that occurred prior to the Closing; (e) any Tax liability incurred by
Selling Parties as a result of the transactions contemplated by this Agreement
or as a result of a breach of the representations and warranties of Selling
Parties in Section 4.9; (f) any claim by any Person for a brokerage or finder's
fee based upon any arrangement allegedly made by such Person with a Selling
Party; and (g) any claim arising under Environmental Law and/or events, acts or
omissions which occur prior to the Closing, provided, however, that the Selling
Parties shall have no liability under this Section 10.1 unless and until the
aggregate of all Losses exceeds $50,000 (the "Buyer's Minimum Amount"), in which
event the Selling Parties shall be liable for the aggregate of all Losses in
excess of $50,000. In no event shall the aggregate indemnification by the
Selling Parties exceed the amount of $5,499,257, provided, however, that the
limitation shall not apply to liabilities pursuant to subparagraphs (d), (e)
above or matters related to the Environment.
10.2. INDEMNIFICATION BY BUYER. Buyer shall defend, indemnify and hold
harmless the Selling Parties, their Affiliates and successors and assigns (the
Selling Parties and such persons, collectively, "Sellers' Indemnified Persons"),
and shall reimburse Sellers' Indemnified Persons, for, from and against all
Losses imposed on or incurred by Sellers' Indemnified Persons, directly or
indirectly, relating to, resulting from or arising out of: (a) any inaccuracy in
any representation or warranty in any respect, whether or not Seller's
Indemnified Persons relied thereon or had knowledge thereof, or any breach or
nonfulfillment of any covenant, agreement or other obligation of Buyer under
this Agreement or any certificate or other document delivered or to be delivered
pursuant hereto; (b) any liabilities of Seller expressly assumed by Buyer under
the terms of Section 3.4 and 3.5 of this Agreement and (c) any products sold by
Buyer following the Closing Date.
10.3. NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. If any action, claim or
proceeding shall be brought or asserted under this Article IX against an
indemnified party or any successor thereto (the "Indemnified Person") in respect
of which indemnity may be sought under this Article IX from an indemnifying
person or any successor thereto (the "Indemnifying Person"), the Indemnified
Person shall give prompt written notice of such action or claim to the
Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all expenses; except that any delay or failure to so notify the
Indemnifying Person shall relieve the Indemnifying Person of its obligations
hereunder only to the extent, if at all, that it is prejudiced by reason of such
delay or failure. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both
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the Indemnified Person and the Indemnifying Person are named as parties and the
Indemnified Person shall in good faith determine that representation by the same
counsel is inappropriate. In the event that the Indemnifying Person, within ten
days after notice of any such action or claim, fails to assume the defense
thereof, the Indemnified Person shall have the right to undertake the defense,
compromise or settlement of such action, claim or proceeding for the account of
the Indemnifying Person, subject to the right of the Indemnifying Person to
assume to the defense of such action, claim or proceeding with counsel
reasonably satisfactory to the Indemnified Person at any time prior to the
settlement, compromise or final determination thereof. Anything in this Article
IX to the contrary notwithstanding, the Indemnifying Person shall not, without
the Indemnified Person's prior written consent, settle or compromise any action
or claim or proceeding or consent to entry of any judgment with respect to any
such action or claim that requires solely the payment of money damages by the
Indemnifying Person and that includes as an unconditional term thereof the
release by the claimant or the plaintiff of the Indemnified Person from all
liability in respect of such action, claim or proceeding. As a condition to
asserting any rights under this Article IX each Buyer's Indemnified Person must
appoint Buyer, and Seller's Indemnified Person must appoint the Shareholder, as
its sole agent for all matters relating to any claim hereunder.
10.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants and obligations in this Agreement, the Schedules and any
other certificate or document delivered pursuant to this Agreement will survive
for a period of one year following the Closing. The rights to indemnification or
other remedy based on such representations, warranties, covenants and
obligations will not be affected by any investigation conducted with respect to
or any knowledge acquired at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
obligation.
ARTICLE XI
MISCELLANEOUS
11.1. EXHIBITS AND SCHEDULES. The Exhibits and Schedules to this Agreement
are a part of this Agreement as if set forth in full herein.
11.2. PUBLICITY. Prior to the Closing Date, no publicity, press release or
announcement concerning this Agreement or the transactions contemplated hereby
shall be issued without advance approval of the form and substance thereof by
both Buyer and Seller. Following the Closing, all parties announcements shall be
made exclusively by Buyer. However, for a period of 30 days after the Closing,
Buyer will provide advance copies of any such releases to Seller.
11.3. NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid,
and shall be deemed given when so delivered personally, or telecopied or if
mailed, two days after the date of mailing, as follows (or to such
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other address as any party may from time to time specify in writing pursuant to
the notice provisions hereof):
(i) if to the Selling Parties to:
James R. Hansberger
809 Red Stable Way
Oakbrook, Illinois
Telephone:
Fax:
with a copy to:
James, Day, Reaves & Pogue
77 West Wacker
Chicago, Illinois 60601
Attention: Douglas H. Walter
Telephone: 312-782-3939
Fax: 312-782-8585
if to Buyer to:
TearDrop RAM Golf Company
1080 Lousons Road
Union, New Jersey 07083
Attention: Rudy Slucker, President
Telephone: 800-829-7888
Fax: (908) 688-5444
with a copy to:
Crummy, Del Deo, Dolan, Griffinger & Vecchione, P.C.
One Riverfront Plaza
Newark, New Jersey 07102-5497
Attention: Jeffrey A. Baumel, Esq.
Telephone: (973) 596-4500
Fax: (973) 596-0545
11.4. ENTIRE AGREEMENT. This Agreement (including all Exhibits and the
Schedules hereto and all agreements or covenants therein) contained the entire
agreement among the parties with respect to the sale and transfer of the Assets
to Buyer, and all transactions related thereto, and supersedes all prior
agreements or understandings, written or oral, with respect thereto.
11.5. WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived
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only by a written instrument signed by all parties or, in the case of a waiver,
signed by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity.
11.6. EXPENSES. Except as provided in Section 3.3, all expenses (including,
without limitation, legal fees and expenses, fees of brokers and advisors and
investment bankers and fees and expenses of accountants) incurred in connection
with the transactions contemplated hereby will be borne by the party incurring
such expenses.
11.7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to the
choice of law principles thereof.
11.8. ASSIGNMENT. This Agreement is not assignable except by operation of
law; provided, however, Buyer may assign this Agreement to TearDrop or a
wholly-owned subsidiary of TearDrop. Subject to the foregoing, this Agreement
shall inure to the benefit of and be binding upon the parties and their
respective successors and assigns.
11.9. VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer
to the masculine, feminine or neither singular or plural, as the identity of the
person or persons may require.
11.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
each of the parties by duly authorized representatives, on the date first above
written.
TEARDROP RAM GOLF COMPANY
By: /s/ RUDY A. SLUCKER
-----------------------------------
Name: Rudy A. Slucker
Title: President
TEARDROP GOLF COMPANY
By: /s/ RUDY A. SLUCKER
------------------------------------
Name: Rudy A. Slucker
Title: President
RAM GOLF CORPORATION
By: /s/ JAMES R. HANSBERGER
------------------------------------
Name: James R. Hansberger
Title: President
RAM GOLF UK, LTD.
By: /s/ JAMES R. HANSBERGER
-------------------------------------
Name: James R. Hansberger
Title: President
By: /s/ JAMES R. HANSBERGER
-------------------------------------
Name: James R. Hansberger
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REGISTRATION AGREEMENT
AGREEMENT made as of December 29, 1997, between TEARDROP GOLF COMPANY, a
Delaware corporation (the "Company), and RAM GOLF CORPORATION, a Delaware
corporation ("Holder").
The Parties to this Agreement are Parties to an Asset Purchase Agreement
dated December 23, 1997 (the "Purchase Agreement"). In order to induce the
Holder to enter into the Purchase Agreement, the Company has executed this
Agreement in connection with the registration of securities issued by the
Company under the Purchase Agreement. The execution and delivery of this
Agreement is a condition to the Closing under the Purchase Agreement.
The parties have agreed as follows:
1. Registration Under Securities Act.
(a) Filing of Shelf Registration Statement. The Company shall cause
to be filed within 120 calendar days of the date hereof a shelf
Registration Statement under the Securities Act of 1933, as amended (the
"Act") providing for the registration of the sale of the Registrable
Securities on a continuous basis on Form S-3 or any successor thereto
providing for the sale by the Holder of all of its Registrable Securities
and will use its best efforts to have such shelf Registration Statement
declared effective by the Commission within 160 days from the date
hereof, except that there shall be permitted an additional 30 days for
the Company to have the Registration Statement declared effective where
the regulations of the Securities and Exchange Commission (the
"Commission") render the ability of the Company to satisfy the 160 day
requirement impracticable.
(b) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to this Agreement.
2. Registration Procedures.
(a) When the Company is required to effect the registration of the
Registrable Securities under the Securities Act as provided in Section 1,
the Company shall, as expeditiously as possible (and in all events
subject to Section 1):
(i) prepare and file with the Commission the requisite
registration statement to effect such registration (including such
audited financial statements as may be required by the Securities
Act or the rules and regulations promulgated thereunder) and
thereafter cause such registration statement to become and remain
effective, provided however, that before filing such registration
statement or any amendments thereto, the Company will furnish to the
Holder copies of all such documents proposed to be filed, which
documents will be subject to its review in accordance with Section
2(b);
<PAGE>
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such registration statement until the sooner
of (i) such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition
by the Holder set forth in such registration statement or (ii) two
years from the date of the Closing as defined in the Purchase
Agreement;
(iii) furnish to the Holder (or underwriter, if any, of the
securities being sold by the Holder) such number of conformed copies
of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the
Securities Act, and such other documents as, the Holder (and each
such underwriter, if any) may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as the Holder (and any underwriter of the
Registrable Securities being sold) shall reasonably request, to keep
such registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action
which may be necessary or advisable to enable the Holder (and
underwriter, if any) to consummate the disposition in such
jurisdictions of the Registrable Securities except that the Company
shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subdivision (iv) be
obligated to be so qualified or to consent to general service of
process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may
be necessary to enable the Holder to consummate the disposition of
such Registrable Securities;
(vi) notify the Holder (and the managing underwriter or
underwriters, if any) promptly and confirm such advice in writing
promptly thereafter:
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<PAGE>
(A) when the registration statement, the prospectus or
any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed, and,
with respect to the registration statement or any
post-effective amendment thereto, when the same has become
effective:
(B) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or
for additional information;
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings by any Person for that
purpose;
(D) if at any time the representations and warranties of
the Company cease to be true and correct;
(E) of the receipt by the Company of any notification
with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue
sky laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose;
(vii) notify the Holder, at any time when a prospectus
relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at
the request of the Holder promptly prepare and furnish to the Holder
(and each underwriter, if any) a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(viii) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the registration
statement at the earliest possible moment;
(ix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and will furnish
to the Holder at least five business days prior to the filing
thereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any thereof to which the
Holder shall have reasonably objected on the grounds that such
amendment or
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<PAGE>
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder;
(x) make available for inspection by the Holder, any
underwriter participating in any disposition pursuant to the
registration statement and any attorney or accountant retained by
the Holder or such underwriter (each, an Inspector), all financial
and other records, pertinent corporate documents and properties of
the Company (the "Records"), and cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such Inspector in connection with such registration
in order to permit a reasonable investigation within the meaning of
Section 11 of the Securities Act;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement;
(xii) enter into such agreements and take such other actions
as the Holder shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xiii) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the securities of the same class as the Registrable
Securities are then listed; and
(xiv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration statement.
(b) The Company will not file any registration statement or
amendment hereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after
the initial filing of the registration statement) to which the Holder (or
the underwriter or underwriters, if any) shall reasonably object. The
Holder agrees that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (viii) of
this Section, the Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until the Holder's receipt of the copies of
the supplemented or amended prospectus contemplated by subdivision (viii)
of this Section.
3. Indemnification by the Company.
(a) General Rights.
(i) In the event of any registration of any securities of the
Company under the Securities Act, the Company will, and hereby does
agree to, indemnify and hold harmless in the case of any
registration statement of the Company, the Holder and any
underwriter including the respective directors, officers, agents and
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controlling persons (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), if any, of each
of the Holder and such underwriters against any losses, claims,
damages, liabilities or expense, joint or several, to which the
Holder (or any underwriter) or any such director, officer, agent or
controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or based upon any
untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which securities were
registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Company will reimburse the Holder (or any underwriter) and each such
director, officer, agent and controlling person for any legal or any
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability,
action or proceeding, provided that the Company shall not be liable
in such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement exclusively in reliance
upon and in conformity with information furnished to the Company
through an instrument duly executed by the Holder, specifically
stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Holder (or underwriter, if
any) or any such director, officer, agent or controlling person and
shall survive the transfer of such securities by the Holder.
(ii) The Holder will, and hereby does agree to indemnify and
hold harmless the Company and the directors, officers, agents and
controlling persons, if any, of the Company against any losses,
claims, damages, liabilities or expense to which the Company and the
directors, officers, agents and controlling persons, if any, of the
Company may become subject under the Securities Act insofar as such
losses, claims, damages, liabilities or expense arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which
the Registrable Securities were registered under the Securities Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent (and only to the
extent) that such loss, claim, damage, liability or expense occurs
in exclusive reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection
with such registration; provided that the Holder shall be liable
under this paragraph for only
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that amount of losses, claims, damages, liabilities or expense as
does not exceed the proceeds to such Holder as a result of the
sale of Registrable Securities pursuant to such registration.
Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any
such director, officer, agent or controlling person.
(b) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving
a claim referred to in the preceding subdivisions of this Section, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section,
except to the extent that the indemnifying party is actually prejudiced in
a material manner by such failure to give notice. In case any such action
is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that the indemnifying party may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability, or a covenant not to
sue, in respect to such claim or litigation. No indemnified party shall
consent to entry of any judgment or enter into any settlement of any such
action the defense of which has been assumed by an indemnifying party
without the consent of such indemnifying party.
(c) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section (with appropriate
modifications) shall be given by the Company and the Holder with respect
to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority,
other than the Securities Act.
(d) Indemnification Payments. The indemnification required by this
Section shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in the
preceding subdivisions of this Section is unavailable to an indemnified
party in respect of any loss,
6
<PAGE>
claim, damage, liability or expense referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or expense (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Holder or underwriter, as the case may
be, on the other from the distribution of the Registrable Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Holder or
underwriter, as the case may be, on the other in connection with the
statements or omissions which resulted in such loss, claim, damage,
liability or expense, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of
the Holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission to state a
material fact relates to information supplied by the Company, by the
Holder or by the underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission, provided that the foregoing contribution agreement shall not
inure to the benefit of any indemnified party if indemnification would be
unavailable to such indemnified party by reason of the provisions
contained in the first sentence of subdivision (a) of this Section and in
no event shall the obligation of any indemnifying party to contribute
under this subdivision (e) exceed the amount that such indemnifying party
would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this Section
had been available under the circumstances. Notwithstanding the provisions
of this subdivision (e), neither the Holder nor the underwriter shall be
required to contribute any amount in excess of the amount by which (i) in
the case of the Holder, the net proceeds received by the Holder from the
sale of Registrable Securities or (ii) in the case of an underwriter, the
total price at which the Registrable Securities purchased by it and
distributed to the public were offered by the public exceeds, in either
such case, the amount of any damages that the Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11 the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
4. Definitions.
(a) The term "Registrable Securities" means (i) the Common Stock
issued to Holder pursuant to the Purchase Agreement, (ii) the common
stock issued or issuable upon the exercise of Warrants issued to the
Holder in accordance with the Purchase Agreement or with respect to
securities which previously became Registrable Securities pursuant to
this clause by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or
other reorganization. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a)
a registration statement with respect to the sale of such
7
<PAGE>
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such
registration statement, (b) such securities shall have been distributed
to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (c) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration
or qualification of such securities under the Securities Act or any
similar state law then in force, or (d) such securities shall have ceased
to be outstanding.
(b) The term "Registration Expenses" means all expenses incident to
the Company's performance of or compliance with this Agreement,
including, without limitation, all registration, filing and NASD fees,
all stock exchange listing fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold
comfort letters" required by or incident to such performance and
compliance, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of the Holder's Registrable
Securities pursuant to the shelf Registration Statement and the expenses
of any separate fees for counsel for the Holder, provided that, in any
case where Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of the Company's personnel or general
overhead expenses of the Company, premiums or other expenses relating to
liability insurance required by underwriters of the Company or other
expenses for the preparation of financial statements or other data
normally prepared by the Company in the ordinary course of its business
or which the Company would have incurred in any event.
(c) For purposes of this Agreement, a Person will be deemed to be a
holder of Registrable Securities whenever such Person has the right to
acquire such Registrable Securities (by conversion or otherwise, but
disregarding any legal or other restrictions upon the exercise of such
right), whether or not such acquisition has actually been effected.
(d) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
5. Certain Rights of the Holder.
The Company will not file any registration statement under the Securities
Act, unless it shall first have given to the Holder, at least 30 days prior
written notice thereof. If any such registration statement refers to the Holder
by name or otherwise as the holder of any securities of
8
<PAGE>
the Company, then the Holder shall have the right within such 30 day period to
require (a) the insertion therein of language, in form and substance
satisfactory to the Holder to the effect that the holding by the Holder of such
securities does not necessarily make the Holder a "controlling person" of the
Company within the meaning of the Securities Act and is not to be construed as a
recommendation by the Holder of the investment quality of the Company's debt or
equity securities covered thereby and that the Holder will assist in meeting any
future financial requirements of the Company or (b) in the event that such
reference to the Holder by name or otherwise is not required by the Securities
Act or any rules and regulations promulgated thereunder, the deletion of the
reference to the Holder. If the Holder does not respond within such 30 day
period, the Company may proceed with the filing.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the Holders to
include Registrable Securities in a registration statement undertaken
pursuant to this Agreement or which would adversely affect the ability of
the Holder to sell such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination
of shares).
(c) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company has obtained the written
consent of the Holder or, if such securities are held by more than one
holder and where such amendment would not adversely affect the rights of
any holder by written consent of a majority in interest of the Preferred
Stock.
(d) Successors and Assigns. This Agreement may be assigned by the
Holder to any of the stockholders of the Holder who become transferees of
the Registrable Securities and for purposes hereof they will be treated as
a Holder. All covenants and agreements in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has
been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit
of, and enforceable by, any subsequent holder of Registrable Securities.
(e) Jurisdiction and Governing Law. The Company and the Holder each
hereby consent to personal jurisdiction in any action brought with respect
to this
9
<PAGE>
Agreement and the transactions contemplated hereunder in any federal or
state court within the State of Illinois . This Agreement shall be
governed by and construed in accordance with the law of the State of
Illinois without giving effect to conflicts of law principles thereof.
(f) Construction. Section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction
or interpretation of this Agreement.
(g) Severability. In the event that any provision hereof would,
under applicable law, be invalid or enforceable in any respect, such
provision shall be construed by modifying or limiting it so as to be valid
and enforceable to the maximum extent compatible with, and permissible
under, applicable law. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement which shall remain in full force and
effect.
(h) Joint Agreement. The provisions of this Agreement and each
document delivered pursuant hereto shall be deemed to be the joint effort
of each of the parties hereto and shall not be construed more severely or
strictly against any one or more parties.
(i) Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications shall be in writing and shall
be given to the Holder addressed to it in the manner set forth in the
Stock Purchase Agreement or at such other address as the Holder shall have
furnished to the Company in writing, and to the Company, to the attention
of its President, or at such other address, or to the attention of such
other officer, as the Company shall have furnished to the Holder. Each
such notice, request or other communication shall be effective (i) if
given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (ii) if given
by any other means (including, without limitation, by air courier), when
delivered at the address specified above, provided that any such notice,
request or communication shall not be effective until received.
(j) Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
(k) Underwriter Holdback. The Holder agrees that if the Company
proposes to offer securities pursuant to a Registration Statement under
the Securities Act pursuant to a firm commitment underwritten public
offering, then the Holder will, if requested by the Underwriter of such
proposed public offering, enter into such agreement that may be
requested, agreeing not to sell, pledge, hypothecate or otherwise dispose
of any Registrable Securities for the same period of time that is
requested of officers, directors and principal stockholders of the
Company.
10
<PAGE>
(l) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of
its other obligations hereunder, and accordingly agree that each party, in
addition to any other remedy to which it may be entitled at law or in
equity, shall be entitled to compel specific performance of the
obligations of any other party under this Agreement in accordance with the
terms and conditions of this Agreement in any court of the United States
or any State thereof having jurisdiction. Any remedy hereunder is subject
to certain equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought.
(m) Entire Agreement. This Agreement embodies the entire agreement
between the parties and understanding between the Company and the Holder
relating to the subject matter hereof and supersedes all prior agreements
and understandings relating to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TEARDROP GOLF COMPANY
By: /s/ RUDY A. SLUCKER
-----------------------
Title: President
RAM GOLF CORPORATION
By: /s/ JAMES R. HANSBERGER
-----------------------
Title: President
11
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is made as of
this 9th day of January, 1998 among TEARDROP GOLF COMPANY ("TearDrop"), TOMMY
ARMOUR GOLF COMPANY (formerly known as TEARDROP ACQUISITION CORP.) ("TAC"),
TEARDROP RAM GOLF COMPANY ("Ram"; TearDrop, TAC and Ram shall be referred to
individually herein as a "Borrower" and collectively as "Borrowers") and
CORESTATES BANK, N.A. ("Lender"). All terms capitalized but not defined herein
shall have the meanings given to such terms in the Agreement (as such term is
hereinafter defined).
BACKGROUND
A. The Borrowers (excluding Ram) and Lender entered into a certain Loan and
Security Agreement dated as of November 10, 1997 (as amended herein and from
time to time hereafter, the "Agreement") pursuant to which Lender made available
to the Borrowers the revolving credit facility described therein. Pursuant to a
Consent and Joinder Agreement dated December 29, 1997 (the "Consent Agreement"),
Ram became a Borrower under and in accordance with the Agreement.
B. The Borrowers have requested that Lender increase the maximum amount
available under the Revolving Credit from Eighteen Million Dollars
($18,000,000.00) to Twenty-Five Million Dollars ($25,000,000.00). Subject to the
terms and conditions set forth herein, Lender is willing to increase the
maximum amount available under the Revolving Credit.
NOW, THEREFORE, the parties agree as follows, intending to be legally
bound.
1. The Agreement is hereby amended as follows:
(a) The following definition in Section 1.1 of the Agreement is
hereby amended to read as follows:
"Credit Limit" at any time means the lesser of (A) the Borrowing
Base, or (B) from the date of this Agreement through and
including January 8, 1998, Eighteen Million Dollars
($18,000,000.00) and, from and after January 9, 1998, Twenty-Five
Million Dollars ($25,000,000.00).
(b) Section 2.1(d) of the Agreement is hereby amended in its
entirety to read as follows:
(d) The joint and several obligation of Borrowers to repay the
Advances outstanding under the Revolving Credit shall be
evidenced, from the date of this Agreement through and including
January 8, 1998 by a promissory note, dated the date of this
Agreement, payable to the order of Lender, in the principal
amount
<PAGE>
of Eighteen Million Dollars ($18,000,000.00) and, from and after
January 9, 1998, by a promissory note, dated January 9, 1998,
payable to the order of Lender, in the principal amount of
Twenty-Five Million Dollars ($25,000,000.00), and otherwise
substantially in the form of Exhibit 2.1(D) attached hereto (the
"Note").
2. The obligations of Lender hereunder and the effectiveness of this
Amendment are subject to the satisfaction of each of the following conditions
precedent:
(a) The Borrowers shall have delivered or caused to be delivered
to Lender the following documents:
(1) this Amendment duly executed by the Borrowers;
(2) the amended and restated Revolving Credit Note
reflecting the new amount of the Revolving Credit duly
executed by the Borrowers;
(3) a copy, certified in writing as of a recent date by the
Secretary or an Assistant Secretary of each Borrower, of (i)
resolutions of the Board of Directors of such Borrower
evidencing approval of this Amendment and the other
documents to be executed by such Borrower pursuant to the
terms hereof, and other matters contemplated hereby and
thereby, and (ii) each document evidencing other necessary
action and governmental approvals, if any, with respect to
this Amendment and the other documents contemplated hereby;
(4) a certificate dated as of a recent date by the Secretary
or an Assistant Secretary of each Borrower stating that the
Articles and by-laws of have not been amended since November
10, 1997 (with respect to TAC and TearDrop) and December 29,
1997 (with respect to Ram);
(5) a written certificate by the Secretary or an Assistant
Secretary of each Borrower as to the names and signatures of
the officers of such Borrower authorized to sign this
Amendment and the other documents or certificates of such
Borrower to be executed and delivered pursuant thereto;
(6) evidence satisfactory to Lender and its counsel that the
holders of TearDrop's Class A Convertible Preferred Stock
have waived their right of Mandatory Redemption under
Section VI.(B) of the Certificate of Designation in
connection
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<PAGE>
with TearDrop's borrowings in excess of $20,000,000 from
Lender; and
(7) such other documentation as Lender may reasonably
request, including without limitation, and documentation
required to be delivered in connection with the Consent
Agreement.
(b) The representations and warranties set forth in Article V of
the Agreement are true and correct in all material respects as of the date
hereof;
(c) No Default or Event of Default has occurred or is continuing;
and
(d) The Borrowers shall pay all costs and out-of-pocket expenses
(including, without limitation reasonable attorneys' fees and costs) of Lender
in connection with the Loan Agreement (including without limitation this
Amendment), and the transactions contemplated thereby, which includes, among
other things, the preparation, review and negotiation of this Amendment, and all
costs and expenses incurred in connection with the above.
3. Borrowers represent and warrant to Lender that:
(a) The representations and warranties set forth in Article V of
the Agreement are true and correct in all material respects as of the date
hereof; and
(b) No Default or Event of Default has occurred or is continuing.
4. The indebtedness evidenced by the Agreement and the Note shall continue
to be secured as set forth in the Agreement. The Borrowers acknowledge that the
Loan Documents continue in full force and effect and that Borrowers have no
charge, lien, claim or offset against Lender, or defenses to enforcement of the
Loan Documents by Lender.
5. This Amendment contains all of the modifications to the Agreement. No
further modifications shall be deemed effective, unless in writing executed by
the parties hereto.
6. The executions, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Lender under the Agreement,
nor constitute a waiver of any Default or Event of Default or any provision of
the Agreement, except as specifically set forth herein.
7. This Amendment shall be construed and enforced in accordance with the
laws of the State of New Jersey.
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<PAGE>
8. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Amendment by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
caused this Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
TEARDROP GOLF COMPANY
BY: /s/ RUDY A. SLUCKER
-------------------------
Name: Rudy A. Slucker
Title: President
TOMMY ARMOUR GOLF COMPANY
BY: /s/ RUDY A. SLUCKER
--------------------------
Name: Rudy A. Slucker
Title: President
TEARDROP RAM GOLF COMPANY
BY: /s/ RUDY A. SLUCKER
--------------------------
Name: Rudy A. Slucker
Title: President
CORESTATES BANK, N.A.
BY: /s/ JOHN D. ROONEY
--------------------------
Name: John D. Rooney
Title: Vice President
-4-
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND NEITHER THIS WARRANT NOR ANY INTEREST HEREIN MAY BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND THE RULES AND
REGULATIONS THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS CERTIFICATE
REPRESENTS THAT IT IS ACQUIRING THE WARRANT FOR INVESTMENT AND AGREES TO COMPLY
IN ALL RESPECTS WITH PARAGRAPH (D) OF THIS WARRANT.
Void after 5:00 p.m. New York Time on December 29, 2002
Warrant to Purchase 50,000 Shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
OF
TEARDROP GOLF COMPANY
This is to Certify that, FOR VALUE RECEIVED, RAM GOLF CORPORATION, or its
registered assigns ("Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from TearDrop Golf Company, a Delaware corporation
(the "Company"), fifty thousand (50,000) fully paid, validly issued and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") at a price of $6.625 per share at any time or from time to time
during the period from December 29, 1997 to December 29, 2002, but not later
than 5:00 p.m. New York City Time, on December 29, 2002. The number of shares of
Common Stock to be received upon the exercise of this Warrant and the price to
be paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price."
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
at any time or from time to time on or after December 29, 1997 and until
December 29, 2002 (the "Exercise Period"), provided, however, that (i) if either
such day is a day on which banking institutions in the State of New York are
authorized by law to close, then on the next succeeding day which shall not be
such a day, and (ii) in the event of any merger, consolidation or sale of
substantially all the assets of the Company as an entirety, resulting in any
distribution to the Company's stockholders, prior to December 29, 2002, the
Holder shall have the right to exercise this Warrant commencing at such time
through December 29, 2002 into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
Warrant Shares specified in such form. As soon as practicable after each such
<PAGE>
exercise of the warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder a certificate
or certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt
by the Company of this Warrant at its office, or by the stock transfer agent of
the Company at its office, in proper form for exercise, the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Common
Stock shall not then be physically delivered to the Holder.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq National Market, the current
market value shall be the last reported sale price of the Common
Stock on such exchange or market on the last business day prior to
the date of exercise of this Warrant or if no such sale is made on
such day, the average closing bid and asked prices for such day on
such exchange or market; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq SmallCap
Market, the current Market Value shall be the average of the closing
bid and asked prices for such day on such market and if the Common
Stock is not so traded, the current market value shall be the mean
of the last reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount not less than
book value thereof as at the end of the most recent fiscal year of
the Company ending prior to the date of the exercise of the Warrant,
determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
-2-
<PAGE>
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
(1) Restrictions on Transfer. Neither this Warrant, the Warrant
Shares issuable upon the exercise hereof nor any interest herein or
therein shall be transferable except upon the conditions specified
in this paragraph (d), which conditions are intended to ensure
compliance with the provisions of the Securities Act of 1933, as
amended (the "Act"), in respect of any such transfer. The holder
hereof will cause any transferee of this Warrant, the Warrant Shares
or any interest herein or therein held by him to agree to take and
hold the Warrant, the Warrant Shares or an interest herein or
therein subject to the provisions and upon the conditions specified
in this paragraph (d).
2. Restrictive Legend. This Warrant and each Warrant Share
shall (unless otherwise permitted by the provisions of subparagraph
(d)(3)) include a legend in substantially the following form:
Warrant Legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND NEITHER THIS WARRANT NOR ANY INTEREST
HEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS
THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS
CERTIFICATE REPRESENTS THAT IT IS ACQUIRING THIS WARRANT FOR
INVESTMENT AND AGREES TO COMPLY IN ALL RESPECTS WITH PARAGRAPH
(D) OF THIS WARRANT.
Warrant Share Legend:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND NEITHER THESE SHARES NOR ANY INTEREST
HEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS
THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS
CERTIFICATE REPRESENTS THAT IT IS ACQUIRING THESE SHARES FOR
INVESTMENT AND
-3-
<PAGE>
AGREES TO COMPLY IN ALL RESPECT WITH PARAGRAPH
(D) OF THE WARRANT DATED AS OF DECEMBER 29, 1997 PURSUANT TO
WHICH THESE SHARES WERE ISSUED.
(3) Notice of Proposed Transfers. The holder of this Warrant
or any Warrant Shares by acceptance hereof or thereof agrees to
comply in all respect with the provisions of this paragraph (d).
Prior to any proposed transfer of this Warrant or any Warrant Shares
which transfer is not made pursuant to an effective registration
statement, the holder hereof or thereof shall give written notice to
the Company of such holder's intention to effect such transfer. Each
such notice shall describe the manner and circumstance of the
proposed transfer in reasonable detail, and shall be accompanied by
(a) a written opinion of counsel reasonably satisfactory to the
Company, addressed to the Company, to the effect that the proposed
transfer may be effected without registration under the Act or (b)
written assurance from the staff of the Securities and Exchange
Commission (the "Commission") that it will not recommend that any
action be taken by the Commission in the event such transfer is
effected without registration under the Act. Such proposed transfer
may be effected only if the Company shall have received such notice
and such opinion of counsel or written assurance, whereupon the
holder of this Warrant or the Warrant Shares shall be entitled to
transfer this Warrant or the Warrant Shares in accordance with the
terms of the notice delivered by the holder to the Company. Each
certificate evidencing this Warrant or the Warrant Shares
transferred as above provided shall bear the appropriate legend set
forth in subparagraph (d)(2), except that such certificate shall not
bear such legend if the option of counsel or written assurance
referred to above is to the further effect that neither such legend
nor the restriction on transfer in this Article are required to
ensure compliance with the Act.
(4) Termination of Conditions and Obligations. The conditions
precedent imposed by this paragraph (d) upon the transferability of
the Warrant Shares shall terminate as to any particular Warrant
Shares when such Warrant Shares shall have been effectively
registered under the Act and sold or otherwise disposed of in
accordance with the intended method of disposition by the seller or
sellers thereof set forth in the registration statement covering
such Warrant Shares or at such time as an opinion of counsel as
specified in subparagraph (3) shall have been rendered to the effect
set forth in the last sentence of subparagraph (3).
(5) Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and
(in the
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case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new
Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation
on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable
by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend
or distribution or of the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to such action. Such adjustment shall be made successively whenever
any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of Shares initially issuable upon exercise of
this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(3) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five
cents ($0.05) in such price; provided, however, that any adjustments which
by reason of this Subsection (3) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment
required to be made hereunder. All calculations under this Section (f)
shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be. Anything in this Section (f) to the contrary
notwithstanding, the Company shall be
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entitled, but shall not be required, to make such changes in the Exercise
Price, in addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order than any
dividend or distribution in shares of Common Stock or any subdivision,
reclassification or combination of Common Stock, hereafter made by the
Company shall not result in any Federal income tax liability to the holders
of Common Stock or securities convertible into Common Stock (including
Warrants).
(4) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 10 days after any request for
such an adjustment by the Holder, cause a notice setting forth the
adjusted Exercise Price and adjusted number of Shares issuable upon
exercise of each Warrant, and, if requested, information describing the
transactions giving rise to such adjustments, to be mailed to the Holders
at their last addresses appearing in the Warrant Register, and shall cause
a certified copy thereof to be mailed to its transfer agent, if any.
(5) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section (f)
above.
(6) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in the case of any consolidation or merger of
the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this
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<PAGE>
Warrant) or in the case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (h) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
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<PAGE>
IN WITNESS WHEREOF, this Warrant is executed this ____ day of December,
1997.
TEARDROP GOLF COMPANY
By: /s/ RUDY A. SLUCKER
--------------------------------
Title: President
[SEAL]
Dated As Of: December 29, 1997
Attest:
- --------------------------------
Secretary
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<PAGE>
PURCHASE FORM
Dated __________, 19___
The undersigned hereby irrevocably elects to exercise the within Warrant
to the extent of purchasing ____ shares of Common Stock and hereby makes payment
of ______ in payment of the actual price thereof.
------------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _______________________________________
(Please typewrite or print in block letters)
Address: ___________________________________
Signature __________________________________
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ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers
unto
Name _______________________________________
(Please typewrite or print in block letters)
Address ____________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
_____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ________ as attorney, to transfer the same on the books
of the Company with full power of substitution in the premises.
Date __________, 19___
Signature ____________
