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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act Of 1934
Date of Report (Date of earliest event reported) December 29, 1995
--------------------------------
QUADRAX CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-16052 05-0420158
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(State or Other Jurisdiction (Commission File Number) (IRS Employer of
of Incorporation) Identification No.)
300 High Point Avenue, Portsmouth, RI 02871
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (401) 683-6600
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Not Applicable
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(Former Name or Former Address, If Changed Since Last Report.)
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Item 2. Acquisition Or Disposition Of Assets
On December 29, 1995, Quadrax Corporation (the "Company") completed its
acquisition of Lion Golf of Oregon, Inc., an Oregon corporation ("Lion Golf"),
pursuant to the terms of a Stock Purchase Agreement for the purchase and sale
of common stock dated as of November 15, 1995 (see Exhibit 2.1).
Pursuant to the Lion Golf Stock Purchase Agreement, the Company acquired all of
the outstanding stock from its principal stockholder, Robert Cole, and 5
minority stockholders. As consideration for this stock, the Company issued Mr.
Cole an Unsecured Promissory Note of $1.25 million (see Exhibit 2.2) and
issued to the remaining minority stockholders an aggregate of 50,000 shares of
common stock restricted.
The Unsecured Promissory Note issued to Mr. Cole is payable only out of profits
generated by Lion Golf, which will be merged with the Company's existing
McManis Sports Associates golf business, as well as the Wimbledon tennis
operations. The Note is payable in five years in equal annual installments,
not to exceed 30% of profits in any year. Mr. Cole also converted a demand note
for $270,000 into a subordinated term note payable out of 20% of pre-tax
profits after payment of installments due on the Unsecured Promissory Note (see
Exhibit 2.3). Mr. Cole and his son, Jim, have agreed to remain as Chief
Executive Officer and President, respectively, for five-year terms, pursuant to
Employment Agreements (see Exhibits 2.4 and 2.5). Also, in connection with the
acquisition, the Company also agreed to guarantee a $1,000,000 accounts
receivables/inventory financing line extended to Lion Golf by its bank. The
Quadrax guarantee is subordinate to Mr. Cole's continuing guaranty of the line.
As of the closing, the outstanding balance due under the line was approximately
$830,000.
Lion Golf is a privately-held brand marketer of value priced golf clubs and
related equipment. Revenues for 1995 fiscal year are expected in the aggregate
of $3.0 million.
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ITEM 7. Financial Statements Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not required.
(b) Pro Forma Financial Information.
Not required.
(c) Exhibits.
2.1 Stock Purchase Agreement dated November 15, 1995 between the
Selling Stockholders of Lion Golf of Oregon, Inc. named therein
and the Company.
2.2 Unsecured Promissory Note dated December 29, 1995 between the
Company and Robert K. Cole.
2.3 Debt Repayment Note dated December 29, 1995 between Lion Golf of
Oregon, Inc. and Robert K. Cole.
2.4 Employment Agreement dated December 29, 1995 between Lion Golf
of Oregon, Inc. and Robert K. Cole.
2.5 Employment Agreement dated December 29, 1995 between Lion Golf
of Oregon, Inc. and James Cole.
2.6 Press Release dated January 3, 1996.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Quadrax Corporation
January 15, 1995 /s/ James J. Palermo
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(Date) James J. Palermo, Chairman and
Chief Executive Officer
January 15, 1995 /s/ Edward A. Stoltenberg
- ------------------------------- --------------------------------------
(Date) Edward A. Stoltenberg, Chief
Financial Officer and Principal
Accounting Officer
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<TABLE>
Exhibits Index
<CAPTION>
Page Number in
Exhibit Sequentially
Number Description Numbered Copy
------- ----------- --------------
<S> <C> <C>
2.1 Stock Purchase Agreement dated November 15, 1995
between the Selling Stockholders of Lion Golf of
Oregon, Inc. named therein and the Company.
2.2 Unsecured Promissory Note dated December 29, 1995
between the Company and Robert K. Cole.
2.3 Debt Repayment Note dated December 29, 1995 between
Lion Golf of Oregon, Inc. and Robert K. Cole
2.4 Employment Agreement dated December 29, 1995 between
Lion Golf of Oregon, Inc. and Robert K. Cole.
2.5 Employment Agreement dated December 29, 1995 between
Lion Golf of Oregon, Inc. and James Cole.
2.6 Press Release dated January 3, 1996.
</TABLE>
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STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 15, 1995
BY AND BETWEEN
QUADRAX CORPORATION AND
THE STOCKHOLDERS OF LION GOLF OF OREGON, INC.
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STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT made as of the 15th day of November, 1995 by and
between Quadrax Corporation, a Delaware corporation having its principal place
of business at 300 High Point Avenue, Portsmouth, Rhode Island 02871
("Quadrax"), and the persons named on the signature pages of this Agreement,
who are the holders of, in the aggregate, 100% of the shares of the issued and
outstanding common stock of Lion Golf of Oregon, Inc. ("Lion Golf"), an Oregon
corporation, c/o Robert K. Cole, 63025 O.B. Riley Road #20, Bend, Oregon 97701
(collectively, the "Stockholders," and individually, a "Stockholder").
W I T N E S S E T H:
WHEREAS, based upon the representations, agreements and warranties herein
made by the Stockholders and subject to the terms and conditions contained in
this Agreement, Quadrax wishes to acquire 100% of the issued and outstanding
common stock of Lion Golf;
WHEREAS, based upon the representations, agreements and warranties herein
made by Quadrax and subject to the terms and conditions contained in this
Agreement, the Stockholders wish to sell 100% of the issued and outstanding
common stock of Lion Golf to Quadrax; and
WHEREAS, Robert Cole and Jim Cole shall key employees of Lion Golf after
the stock purchase by Quadrax has been consummated;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE 1
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PURCHASE AND SALE OF STOCK
--------------------------
1.1 PURCHASE AND SALE. Subject to the terms and conditions set forth in
this Agreement, on the Closing Date (as hereinafter defined), Quadrax will
purchase and the Stockholders will sell, convey, transfer, make available to,
assign and deliver to Quadrax 100% of the issued and outstanding common stock
of Lion Golf.
1.2 FURTHER ASSURANCES. The parties hereto each agree that at any time, or
from time to time, as and when requested by any other party, or by its
successors or assigns, it will execute and deliver, or cause to be executed and
delivered, in its name by its last acting officers, all such conveyances,
assignments, transfers, deeds and other instruments, and will take or cause to
be taken such further or other action as the requesting party, or
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its successors or assigns, may reasonably deem necessary or desirable in order
to carry out the vesting, perfecting, confirming, assignment, devolution or
other transfer of the interests, property, privileges, powers, immunities,
franchises and other rights referred to in this Article 1, or otherwise to
carry out the intent and purposes of any of the transactions contemplated by
this Agreement.
1.3 PURCHASE PRICE. At the Closing, the Purchase Price shall consist of the
following:
(a) GUARANTEE OF COLLECTION. A guarantee of collection by Quadrax to
Bank of the Cascades, the bank lender to Lion Golf, secondary to the existing
guarantee of Robert K. Cole of the same obligation, for Lion Golf's bank debt
to Bank of the Cascades. Quadrax agrees for the benefit of Robert K. Cole to
use reasonable commercial efforts to cause Lion Golf to continue to comply with
all covenants and conditions of such line of credit following closing of the
transactions contemplated hereby. Quadrax further agrees that as part of the
Purchase Price it shall unconditionally guarantee and hold Robert K. Cole
harmless from and against any and all obligations, liabilities and/or damages
to him arising from or related to the line of credit with Bank of the Cascades.
(b) EARN-OUT NOTE. An unsecured non-interest bearing earn-out note by
Lion Golf in favor of Robert K. Cole (the "Principal Stockholder") in the
aggregate amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000)
(the "Earn-Out Note") in the form of Exhibit 1.3(b) attached hereto. The
Earn-Out Note will be paid to the Principal Stockholder in installments of
$1,000 for each $3,000 of annual pre-tax profits of Lion Golf (including the
operations of McManis Sports Associates, Inc., currently a subsidiary of
Quadrax) until December 31, 2001. The sole recourse for payment of the Earn-Out
Note shall be from the annual pre-tax profits of Lion Golf until December 31,
2001.
(c) QUADRAX COMMON STOCK. Quadrax shall transfer to the Stockholders,
with the exception of the Principal Stockholder (the "Other Stockholders"),
collectively, Fifty Thousand (50,000) shares of the common stock of Quadrax, to
be divided among the Other Stockholders on a pro-rata basis.
(d) PURCHASE PRICE. The guarantee of collection, Earn-Out Note and
shares of the common stock of Quadrax paid to the Other Stockholders together
are referred to as the "Purchase Price".
(e) ADDITIONAL CONSIDERATION. As additional consideration to the
Principal Stockholder for his continuing personal guarantee of the Bank of the
Cascades debt, at Closing, Quadrax shall cause Lion Golf to execute and deliver
to the Principal Stockholder a promissory note equal to $270,000, or such
lesser amount as may be
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owing to the Principal Stockholder on the Closing Date ("Debt Repayment Note")
in the form of Exhibit 1.3(e) attached hereto.
ARTICLE 2
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REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER
-----------------------------------------------------------
The Principal Stockholder, individually, represents and warrants that:
2.1 ORGANIZATION AND STANDING. Lion Golf is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Oregon has full corporate power to carry on its business as it is now being
conducted and to own or hold under lease the properties and assets it now owns
or holds under lease. Lion Golf is qualified to do business in all states where
the failure to qualify would have a material and adverse effect on its
properties or business. Lion Golf has offices or business operations in
Oregon only. Schedule 2.1 hereto sets forth a complete listing of all of Lion
Golf's (i) corporate officers and (ii) members of its Board of Directors.
Copies of the charter documents, bylaws and minutes of each meeting of the
Stockholders and Board of Directors of Lion Golf have been delivered to
Quadrax, and such copies are complete, correct and in full force and effect.
Lion Golf is fully in compliance with, and is not in default under, any terms
of such documents, bylaws or minutes.
2.2 CAPITALIZATION OF LION GOLF. Lion Golf's authorized capital
stock consists of [ ] shares of common stock, no par value, of which [ ]
shares are issued and outstanding, and no other class of stock is authorized.
All such issued and outstanding shares of Lion Golf common stock have been duly
and validly issued, are fully paid and non-assessable and are free of any
preemptive rights. Except as set forth on Schedule 2.2 hereto, there are no
voting trust agreements or other contracts, agreements or arrangements
restricting voting or dividend rights or transferability with respect to Lion
Golf's capital stock. There are no outstanding warrants, options, conversion
privileges, preemptive rights, or other rights or agreements to purchase or
otherwise acquire or issue any equity securities of Lion Golf. Schedule 2.2
contains a list of all stockholders of Lion Golf together with the number of
shares of Lion Golf owned by each of them.
2.3 SUBSIDIARIES AND INVESTMENTS. Lion Golf has no debt or equity
interest or other interest in any corporation, partnership, joint venture or
other entity. Lion Golf is not subject to any obligation or requirement to
provide funds, or make any investment (in the form of a loan, capital
contribution or otherwise) in any entity.
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2.4 FINANCIAL STATEMENTS. Attached as Schedule 2.4 hereto are Lion
Golf's unaudited balance sheet as of September 30, 1995, and audited balance
sheets as of December 31, 1994 and December 31, 1993 and its related statements
of changes in retained earnings, and cash flows for the nine months ended
September 30, 1995 and the years ended December 31, 1994 and 1993. Such
financial statements, together with the notes thereto, are complete and correct
in all material respects, are in accordance with the books and records of Lion
Golf, and present fairly the financial condition of Lion Golf and the results
of its operations and changes in its financial position as of the dates and for
the periods indicated, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered by such statements, except as set forth in such financial
statements. Such financial statements and the financial records upon which
they are based are in auditable condition.
2.5 NO UNDISCLOSED LIABILITIES. Except as described in Schedule 2.5
hereto, Lion Golf has no liabilities or obligations (whether absolute, accrued,
contingent or otherwise and whether due or to become due, including any reserve
for warranty claims), except liabilities and obligations (a) fully reflected or
reserved against in the September 30, 1995 balance sheet or disclosed in the
notes thereto or (b) incurred since the date of the September 30, 1995 balance
sheet in the ordinary course of business.
2.6 CONDUCT OF BUSINESS. Except as set forth in Schedule 2.6
hereto, since September 30, 1995, Lion Golf has not:
(a) issued or reissued any capital stock (including without
limitation, treasury stock), bonds, notes, warrants, options or other
securities or become subject to any obligation to issue or pledge any such
securities;
(b) incurred any liability or obligation (absolute or contingent),
including, without limitation, purchases on a credit or installment basis,
other than current liabilities incurred in the ordinary course of business;
(c) failed to pay or discharge any material current liability when
it became due and payable;
(d) sold, transferred or otherwise disposed of, mortgaged, pledged
or subjected to lien or any other encumbrance, any of its material assets,
whether real or personal (tangible or intangible) property, except inventory
items and other similar items of personal property in the ordinary course of
business;
(e) declared or made any dividend payment or any other payment or
distribution to any of its stockholders; or redeemed or purchased or otherwise
acquired any of its capital
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stock;
(f) incurred any additional indebtedness for money borrowed or
amended the terms of, or extended the time for payment of, any existing
indebtedness or guaranty, or mortgaged, pledged or subjected to lien, charge,
security interest or any other encumbrance any of its assets, real or personal,
tangible or intangible, or made any loans, advances or guarantees to any person
or entity, including, without limitation, salary advances to any employee or
officer;
(g) sold, assigned, transferred or licensed any patents,
trademarks, trade names, copyrights, franchises, licenses or other intangible
assets or its interest in any such asset;
(h) had any material adverse changes in the assets, properties,
operations, personnel, equipment, supply arrangements, financial condition or,
to the knowledge of Lion Golf, the prospects of Lion Golf, and no event has
occurred which could be reasonably expected to have a materially adverse effect
upon the business of Lion Golf;
(i) taken any action, or failed to take any action, outside of
reasonable business judgment at the time of such action or failure to act,
which could materially adversely affect the condition, financial or otherwise,
of Lion Golf, which has not been discussed with Quadrax;
(j) increased by more than 5% the annual compensation,
commissions and/or other benefits of any officer or employee or granted any
bonuses or made any loans or advances to any officer or employee;
(k) amended its Articles of Incorporation or Bylaws;
(l) made any changes in any method of accounting or accounting
practice of Lion Golf;
(m) made, or committed to make, any capital expenditures for
additions to property, plant or equipment in excess of $10,000;
(n) made any claims under any insurance policy for any loss; or
(o) agreed, orally or in writing, or granted any other person or
entity an option, to do any of the things specified in subsections (a) through
(n) above.
2.7 ACCOUNTS RECEIVABLE. Schedule 2.7 hereto presents an accurate and
complete listing of the accounts receivable
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reflected in the September 30, 1995 balance sheet. Except as set forth on
Schedule 2.7, all such accounts receivable represent sales actually made in the
ordinary course of business for goods delivered or services rendered and, to
the best of Lion Golf's knowledge, are not subject to any valid defense,
counterclaims or right of setoff and are current and valid claims and are
expected to be collected in full within ninety days after they arose. Except as
disclosed on Schedule 2.7, there are no outstanding "rights to return" granted
to obligors existing on any current accounts receivable, nor does Lion Golf
have any obligations to accept returns or restock inventory related to such
accounts receivable, nor does Lion Golf have any contractual obligations
relating to such accounts receivable, or the inventory which was the subject
thereof, which cannot be fully performed within one year of the generation of
each such account receivable.
2.8 INVENTORY. Schedule 2.8 hereto presents an accurate and complete
list of all inventory by type reflected in the September 30, 1995 balance sheet
and describes the method or methods of valuation for such inventory. To the
knowledge of Lion Golf, after due inquiry, all such inventory is and will be of
a quality useable and saleable in the ordinary course of business, except for
items of obsolete materials and materials of below standard quality, all of
which have been written down to a fair or realizable market value or have been
adequately reserved against in the September 30, 1995 balance sheet.
2.9 NO LITIGATION. Except as shown on Schedule 2.9, Lion Golf is not
engaged in or threatened with or aware of any situation which could subject
Lion Golf to any litigation, arbitration, claim, challenge or other legal
proceedings or governmental or other investigations relating to the affairs of
Lion Golf, including, without limiting the generality of the foregoing, any
such action or proceeding by or before contracting officers, arbitrators,
administrative or regulatory agencies.
2.10 EXISTENCE OF NECESSARY ASSETS. There are no significant assets
which Lion Golf uses in its business (as heretofore conducted) which are not
either owned by Lion Golf or the use of which are otherwise authorized under
one of the agreements, licenses or leases listed in one of the Schedules
delivered pursuant to this Agreement, except for supplies and raw materials
purchased from time to time relating to the operations of Lion Golf.
2.11 INTANGIBLE PROPERTY. Schedule 2.11 hereto presents an accurate and
complete list and brief description of all patents, licenses, trademarks
(either registered or common law), trade names and copyrights (and all
applications and licenses therefor) owned by Lion Golf or in which it has any
interest. Except as provided in Schedule 2.11, Lion Golf owns, or has the
irrevocable right to use, all patents, licenses, trademarks, trade names,
copyrights, trade secrets, technology, know-how and processes used in or
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necessary for the conduct of its existing business as heretofore conducted, and
the consummation of the transactions contemplated hereby will not alter or
impair any such rights. Except as provided in Schedule 2.11, (i) no claims
are pending or overtly threatened in writing by any person for the use of any
such patents, licenses, trademarks, trade names, copyrights, technology, know-
how or processes or challenging or questioning the validity or effectiveness of
any license or agreement relating to the same, (ii) there is no valid basis for
any such claim, challenge or question, and (iii) use of such patents, licenses,
trademarks, trade names, copyrights, technology, knowhow or processes by Lion
Golf does not infringe on the rights of any person.
2.12 CERTAIN EMPLOYEE MATTERS. Except as set forth on Schedule 2.12
hereto, Lion Golf is in compliance with all applicable laws, rules and
regulations relating to employment practices which could have an adverse effect
on its business, assets or condition, financial or otherwise, including without
limitation those relating to wages, hours, collective bargaining, age and sex
discrimination and the payment and withholding of taxes, and Lion Golf does not
have any unaccrued liability for any arrears of wages (including vacation pay)
or any taxes or penalties for failure to comply with any of the foregoing.
Except as set forth on Schedule 2.12, Lion Golf has (i) no employment,
consultant or similar contracts with any person currently in force or in which
Lion Golf retains any liability, or (ii) no controversies pending, threatened
or reasonably anticipated between Lion Golf and any employee, or any labor
union or other collective bargaining unit representing any of its employees. No
union or other collective bargaining unit has been certified or recognized by
Lion Golf as representing any employee.
2.13 NO CONFLICT WITH OTHER DOCUMENTS. Except as described in
Schedule 2.13 hereto, neither the execution and delivery of this Agreement nor
the carrying out of the transactions contemplated hereby will result in any
violation, termination or modification of, be in conflict with, or constitute a
default under (or an event which, with notice or lapse of time or both, would
constitute a default under), the charter documents or bylaws of Lion Golf, or
the minutes of any Board of Directors meeting of Lion Golf, or any terms of any
contract or instrument to which Lion Golf is a party, or any judgment, decree
or order applicable to Lion Golf or result in the creation of any lien, charge
or encumbrance upon any of the properties or assets of Lion Golf.
2.14 AUTHORIZATION, POWER. This Agreement has been duly executed and
delivered by each Stockholder and constitutes a valid and binding obligation of
each Stockholder enforceable in accordance with its terms. Each Stockholder
has all requisite power and authority to enter into, and perform this Agreement.
2.15 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except as
described in Schedule 2.15 hereto, no permit, consent,
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approval or authorization of, or declaration, filing or registration with, any
public body or authority is necessary in connection with the execution and
delivery by each Stockholder of this Agreement and the transactions
contemplated hereby or thereby, including, without limitation, any consents or
filings which may be required in connection with any of the contracts listed in
Schedule 2.19(a) .
2.16 CORPORATE RECORDS. The books of account and other financial records
of Lion Golf are true, correct and complete, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis Except as
otherwise disclosed in its financial statements, in accordance with applicable
contractual requirements, and accurately reflect the operations of Lion Golf and
the value of its properties. All other significant corporate records of Lion
Golf, including without limitation, the corporate minute book and those relating
to employees of Lion Golf are true, correct and complete in all material
respects.
2.17 POWERS OF ATTORNEY. No person holds any tax or other power of
attorney from Lion Golf with respect to any matter.
2.18 INFORMATION. Lion Golf has provided, and, upon 24 hours prior
notice, shall provide Quadrax and its respective officers, accountants, counsel
and other representatives full access, during working hours on business days, to
the plants, warehouses, properties, books, contracts, commitments, records and
accounts of every kind relating to Lion Golf, and has furnished them with such
financial and operating data, documents and other information with respect to
the business, operations, personnel, licenses, contracts and properties of Lion
Golf as may be required herein or as Quadrax or its representatives have
requested or shall from time to time request, and Quadrax or its representatives
have been and will be entitled to consult with the representatives, officers,
employees and agents of Lion Golf. No investigations made by Quadrax and its
representatives shall affect the representations, warranties and/or agreements
made by Lion Golf herein and each such representation, warranty and/or agreement
shall survive any such investigation as set forth in Article 10 hereof.
2.19 AGREEMENTS, BACKLOG, INSURANCE, AUTHORIZATIONS, ACCOUNTS,
COMMITMENTS, PROPERTIES AND ASSETS.
(a) Schedule 2.19(a) hereto accurately lists, as of October 31, 1995,
all current contracts, including purchase orders, with customers and suppliers,
and for each agreement specifies the total amount of the contract, the amounts
yet to be paid, the anticipated delivery dates, a brief description of the
product or service to be provided and a brief description of the termination
provisions. Lion Golf's products and services satisfy the specifications of
such contracts and Lion Golf is not in default of
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any of its obligations thereunder, nor as of the date of such Schedule is Lion
Golf aware of any facts or circumstances that have occurred which, with the
giving of notice or passage of time or both, would give rise to a default by
Lion Golf of any of the obligations. Except as set forth on Schedule 2.19(a),
Lion Golf has provided sufficient reserves for all work to be performed
pursuant to such agreements, which Lion Golf has agreed or is obligated to
perform.
(b) Schedule 2.19(b) hereto accurately lists, as of October 31, 1995,
all insurance policies, including, without limitation, workers' compensation,
now in force relating to Lion Golf and its assets, including in each instance
the name of the carrier, the term of the policy, the periods for which it has
been continuously in effect, the annual premium and the scope of coverage.
Except as set forth on Schedule 2.19(b), the premiums for such insurance
policies are, as of the date of such Schedule, and at the Closing Date will be,
fully paid or current and there are no loans outstanding against any of such
policies.
(c) Schedule 2.19(c) hereto accurately lists, as of October 31, 1995,
(i) all real property owned by Lion Golf, together with a description of the
location of such property, and (ii) all leases and agreements for the rental of
real property to which Lion Golf is a party (as the lessor or the lessee) or by
which the properties or assets owned by Lion Golf or used in its business may
be bound, together with the location of all such property and specifying the
rent and term of each such lease and agreement under which it is leased.
Except as set forth in Schedule 2.19(c), as of the date of such Schedule, all
rents and charges due and payable for current or prior periods under each such
lease have been, and at the Closing Date will be, paid.
(d) Schedule 2.19(d) hereto accurately lists, as of October 31, 1995,
(i) all of the equipment, machinery, vehicles, furniture, furnishings and
fixtures, and leasehold improvements owned or leased by Lion Golf, (ii) all
other material items of tangible personal property (excluding inventories)
owned by or leased by Lion Golf, and (iii) all equipment, machinery, vehicles,
furniture, furnishings and fixtures and leasehold improvements used by Lion
Golf and leased from any third party. Such Schedule also shows, as of such
date, the location of the items listed thereon, the accumulated depreciation
with respect thereto and, where applicable, the principal terms of any lease
pursuant to which any of such property is being leased or loaned to a third
party.
(e) Schedule 2.19(e) hereto accurately lists, as of October 31, 1995,
all loan agreements, bonds, notes, debentures, undertakings, guarantees, deeds
of trust, mortgages, instruments of indebtedness, security interests and other
material obligations and agreements, including, without limitation, accounts
with overdraft
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facilities, to which Lion Golf is a party or by which its properties or assets
may be bound, together with the principal terms and outstanding balance of
each. Lion Golf is not, as of the date of such Schedule, and at the Closing
Date will not be, in default of any of its obligations thereunder, nor as of
the date of such Schedule is any Stockholder aware of any facts or
circumstances that have occurred which, with the giving of notice or passage of
time or both, would give rise to a default by Lion Golf of any of the
obligations included in such Schedule, except as set forth on Schedule 2.19(e).
(f) Except as attached as Schedule 2.19(f) hereto, Lion Golf does not
have, nor is it subject to, any (i) employment, collective bargaining,
consulting, agency or other agreements calling for the rendering of services or
advice, including, without limitation, labor contracts, retainer agreements,
and health and accident policies, or (ii) written or oral policies, agreements
or understandings regarding employee matters generally, such as vacation and/or
severance pay requirements.
(g) Schedule 2.19(g) hereto accurately lists, as of October 31, 1995,
all certificates, permits, licenses and similar authorizations relating to the
business of Lion Golf (the "Authorizations") issued by any governmental
authority to Lion Golf, together with a description of each, including the
terms under which each is held. To the best of each Stockholder's knowledge, as
of October 31, 1995, all of the Authorizations are valid and outstanding and,
to the knowledge of each Stockholder, Lion Golf is in compliance in all
respects with all of the terms and conditions under which each respective
permit is held, and there are no other permits required to conduct the business
presently conducted by Lion Golf, except as specified in Schedule 2.19(g). As
of the date of such Schedule, Lion Golf is not in violation of any law, rule,
regulation, order or governmental decree, federal, state or local, which
violation would have a material adverse effect on Lion Golf or its operations,
nor is it in violation of any court order, decree or injunction.
(h) Except as set forth in Schedule 2.19(h), Lion Golf has no
indenture, agreement, contract or commitment which contains (i) any
restrictions on payment of dividends or other distributions to stockholders,
(ii) any covenant restricting the nature, type of or geographic area in which
business can be conducted by Lion Golf or any Stockholder or the persons with
whom Lion Golf or any Stockholder may compete or (iii) any provision relating
to the acquisition, or restrictions regarding the acquisition, of any business
or enterprise.
(i) Schedule 2.19(i) hereto lists with reasonable accuracy and
reflects as of October 31, 1995 all accounts payable known to be owed by Lion
Golf as of such date, whether or not billed or invoiced. Schedule 2.19(i) also
lists any outstanding
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and unsatisfied judgments against Lion Golf.
(j) Schedule 2.19(j) accurately lists, as of October 31, 1995,
all cash on hand, the name, number and bank location of each of Lion Golf's
bank accounts, the balance in each such account and the name of each person
authorized to draw thereon or withdraw therefrom.
(k) There are no other material agreements, commitments,
undertakings or guarantees, whether absolute or contingent, written or oral,
not otherwise disclosed in the Schedules attached hereto, to which Lion Golf is
a party or by which it or its properties may be bound upon the happening of any
act, condition or event.
(l) Except as set forth on Schedule 2.19(1) hereto, none of the
contracts, leases, Authorizations or other obligations of Lion Golf would
preclude the transfer of ownership of Lion Golf as contemplated by this
Agreement; after such transfer of ownership, such contracts, leases,
Authorizations and obligations will continue without any change in the terms or
provisions thereof and without penalty; and none of Lion Golf's rights under
any such contract, lease or obligation is being contested. Lion Golf has
performed all the obligations required to be performed as of the date hereof by
it under any material contract, agreement, commitment, Authorization or other
instrument disclosed pursuant to this Section 2.19 and there is not, with
respect to any such contract, agreement, commitment, Authorization or other
instrument, (i) any notice of violation or default, or (ii) any existing
violation or default (or event which, with or without due notice or lapse of
time, or both, would constitute a default) on the part of Lion Golf or on the
part of any other party thereto, which violation or default would have an
adverse effect on Lion Golf's business, operations, properties, assets or
financial condition, and no Stockholder has any knowledge of any facts or
circumstances which would reasonably indicate that Lion Golf will be or may be
in default under any such contract, agreement, Authorization or other
instrument subsequent to the date hereof which would have an adverse effect on
its business, operations, properties, assets or financial condition.
(m) Except as set forth on Schedule 2.19(m), Lion Golf has no sales
or marketing, distribution, representation or similar contracts or
arrangements, whether oral or written, formal or informal, in effect.
(n) Schedule 2.19 (n) lists all licenses from third parties held by
Lion Golf, all of which licenses are in full force and effect, and which
licenses will be transferred unimpaired to Quadrax at the Closing Date.
2.20 CUSTOMERS. Schedule 2.20 lists all of Lion Golf's
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customers from which Lion Golf derived over $10,000 in revenues during Lion
Golf's 1994 fiscal year and period ending September 30, 1995. Except as
disclosed in writing to Quadrax, Lion Golf has not been informed that any such
customer will not continue to do business with Lion Golf subsequent to the
Closing Date at volumes reasonably consistent with past practices.
2.21 TAXES. All accrued but unpaid taxes as of September 30, 1995 are
reflected on Lion Golf's September 30, 1995 balance sheet. Lion Golf has timely
filed in accordance with applicable law all Federal, state, local and foreign
tax returns and tax reports required to be filed by it under applicable law on
or before the Closing Date with respect to all fiscal periods ended before the
Closing Date. Such returns and reports are true, correct and complete in all
material respects. Lion Golf has timely paid all income, profits, franchise,
sales, use, occupation, property, excise, withholding and all other taxes, fees
and governmental charges (including interest and penalties, if any) with respect
to present and prior periods to the extent they have become due, except such as
are being contested in good faith by appropriate proceedings and for which
adequate reserves to fully cover such liability have been provided on the
September 30, 1995, balance sheet. There are no tax liens upon any properties
or assets of Lion Golf. Except as set forth on Schedule 2.21, none of the
Federal income tax returns of Lion Golf have been examined by the Internal
Revenue Service ("IRS"). All deficiencies and assessments resulting from
examination of state, local and foreign tax returns and reports of Lion Golf
have been paid, except such as are being contested in good faith by appropriate
proceedings. Except to the extent set forth in the Schedule 2.21, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Federal, state, local or foreign tax return or report for any
period. Lion Golf is not a party to any tax-sharing or tax allocation agreement.
2.22 TITLE TO PROPERTIES; CONDITION. Except as set forth on Schedules
2.19(c) and (d) hereto, Lion Golf, as of the date of such Schedules, has good,
valid and marketable title to all of its properties and assets, real and
personal (tangible and intangible), free and clear of any liens, claims,
charges, pledges, security interests, options to purchase, encumbrances or
equitable interests of any nature whatsoever. Except as set forth in Schedule
2.19(c), all of the improvements on land owned by Lion Golf, as of the date of
such Schedule, are in overall good condition and repair for buildings and
improvements of their type and age and comply with all applicable ordinances and
regulations, including without limitation, building, zoning and other laws.
Except as set forth in Schedule 2.19(d), all of the items of tangible personal
property of Lion Golf are, as of the date of such Schedule, in overall operating
condition for items of equipment of their type and age. Each of the leases
pursuant to which Lion Golf leases real or personal property is in good
standing, valid and effective and
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enforceable by Lion Golf in accordance with its terms, and there is not, under
any of such leases, any known existing default, waiver, indulgence or
postponement of any of Lion Golf's obligations thereunder, except as set forth
on Schedule 2.19(c), as of the date of such Schedule.
2.23 EMPLOYEE BENEFIT PLANS. Schedule 2.23 hereto lists all incentive
compensation, bonus, deferred compensation, medical, stock purchase, stock
option, insurance, employee welfare pension, profit-sharing, retirement and
other employee benefit plans, funds, programs or arrangements which have been
maintained, established or contributed to by Lion Golf or to which Lion Golf is,
or has been, either required to contribute to or a signatory to (collectively
the "Employee Benefit Plans"), including but not limited to each Employee
Benefit Plan which constitutes (i) an "employee pension benefit plan" ("Pension
Plan"), as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") , (ii) an "employee welfare
benefit plan" ("Welfare Plan"), as such term is defined in Section 3(1) of
ERISA, and (iii) a "multiemployer plan" ("Multiemployer Plan"), as such term is
defined in Section 4001 of ERISA. With respect to such Employee Benefit Plans:
(a) Lion Golf is in substantial compliance with the requirements
prescribed by any and all statutes, orders, or governmental rules or
regulations currently in effect, including, but not limited to, ERISA, and the
Internal Revenue Code ("the Code"), applicable to such Employee Benefit Plans.
(b) Lion Golf has in all respects performed all obligations required
to be performed by it under any of such Employee Benefit Plans and, to the best
of Lion Golf's knowledge, it is not in violation in any respect of, and it has
no knowledge of any default or violation by any other party to, any of such
Employee Benefit Plans.
(c) There are no material claims threatened or pending with
respect to any of such Employee Benefit Plans.
(d) None of the Employee Benefit Plans is subject to Title IV of
ERISA.
(e) Except as described in Schedule 2.23, every Employee Benefit
Plan is now and has always been established in writing. With respect to any
Employee Benefit Plan not established in writing, a true and complete
description of such Plan is set out in Schedule 2.23.
(f) All actuarial and financial reports and statements with
respect to each Employee Benefit Plan state and have always stated fully and
fairly the financial condition of such Plan. No actuarial or financial report
or statement with respect to any Employee Benefit Plan has been qualified by
the person who issued the report or statement.
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(g) Schedule 2.23 hereto sets forth (i) the name of each participant
in each Employee Benefit Plan, (ii) the vested and unvested portion of each
participant's interest in each Employee Benefit Plan, and (iii) with respect to
each outstanding option, warrant or other right under any Employee Benefit Plan
calling for or permitting the issue, transfer, sale or delivery of any security
of Lion Golf, (A) the name of the holder thereof, (B) the date of grant or
issue, (C) the number or amount and type of securities subject thereto, (D) the
exercise price thereof, (E) the date or dates when exercisable and, (F) whether
exercisable presently.
2.24 ABSENCE OF QUESTIONABLE PAYMENTS. Neither Lion Golf nor any
director, officer, agent, employee, consultant, or any other person associated
with or acting on behalf of Lion Golf, has engaged or is engaged in any course
of conduct, or is a party to any agreements or involved in any transactions,
which has or would give rise to a violation of any statute or regulation
regarding improper payments to government officials (foreign or domestic) or
others.
2.25 INSURANCE. Lion Golf is insured by insurers authorized to do
business in Oregon, under valid, outstanding, and enforceable policies with
respect to its property and the conduct of its business in such amounts and
against such risks as are set forth in Schedule 2.25, and will continue to
maintain such insurance in force at least through the Closing Date.
2.26 NO PENDING TRANSACTIONS. Except for the transactions
contemplated by this Agreement, neither Lion Golf nor any of its Stockholders is
a party to or bound by or the subject of any agreement, undertaking or
commitment (i) which provides for Lion Golf to merge or consolidate with, or
acquire all or substantially all of the property and assets of, any other
corporation or person, or (ii) which provides for Lion Golf to sell, lease or
exchange all or substantially all of its property and assets to any other
corporation or person.
2.27 DISCLOSURE. No representation or warranty made by the Principal
Stockholder in this Agreement and no statement contained in a certificate,
schedule, list, whether heretofore furnished to Quadrax or hereafter required to
be furnished to Quadrax, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading, to the knowledge of
each Stockholder. There are no material facts relating to the business,
operations, properties, assets, liabilities (contingent or otherwise) or
financial condition of Lion Golf which have not been disclosed to Quadrax prior
to the date hereof or in or pursuant to this Agreement, which facts are or
should be known with reasonable diligence by the Principal Stockholder and would
be adverse to Lion Golf.
2.28 ENVIRONMENTAL MATTERS.
(a) Lion Golf has not caused or allowed the
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generation, treatment, storage, handling or disposal of Hazardous Substances
(as hereinafter defined) at its owned or leased real properties ("Facilities")
other than in full compliance with all applicable federal, state and local
laws, regulations and ordinances. No Stockholder is aware of the presence
and/or release or spill of any Hazardous Substances at, upon or beneath any
property(ies) proximate to or abutting the Facilities that is known presently
to impact or that may impact the Facilities except as identified in Schedule
2.28. Lion Golf has not caused or allowed the release, discharge or spill of
any Hazardous Substances onto, at, or near the Facilities. The Principal
Stockholder represents that Lion Golf is, and, throughout the period of time
that the Facilities have been owned or used by Lion Golf, has been, in material
compliance with all applicable federal, state and local, laws, regulations,
rules, ordinances and orders regarding the generation, recycling, use, sale,
storage, handling, transfer and disposal of Hazardous Substances. The
Principal Stockholder represents that Lion Golf has secured and continuously
maintained in force all permits, licenses and approvals necessary for the
lawful operation of the Facilities and that Lion Golf is in material compliance
with all such permits, licenses and approvals. The Principal Stockholder
represents that all applicable permits, licenses and approvals are listed on
the attached Schedule 2.28, with the corresponding dates of issuance and dates
of expiration. Full and complete copies of all such permits, licenses and
approvals have been furnished to Quadrax. The Principal Stockholder represents
that Lion Golf has not received notice, formal or informal, of any inquiries,
proceedings, claims, lawsuits or actions, potential or extant, regarding any of
the Facilities. As used herein, "Hazardous Substances" shall mean any material
or substance that may pose a present or potential hazard to human health or the
environment when improperly disposed of, treated, stored, transported, or
otherwise managed, including, without limitation, any material or substance
that is (i) designated as a "hazardous substance" pursuant to Section 311 of
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), (ii)
defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), (iii) defined
as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
ET SEQ.), (iv) oil, waste oil or petroleum products, (v) asbestos, or (vi)
defined as a "hazardous substance" or "hazardous waste" under any law or
regulation of the State where such Facility is located.
(b) The Principal Stockholder represents to the best of his knowledge
that there are not asbestos containing materials or other Hazardous Substances
or conditions in or at the Facilities capable of creating or causing indoor
pollution and posing a threat to worker, community or individual health and
safety.
(c) The Principal Stockholder represents that since commencement of
occupation of the Facilities by Lion Golf there has been no material emission,
spill, release or discharge into or upon
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(i) the air, (ii) soils or any improvements located thereon, (iii) surface
water or ground water, or (iv) the sewer, septic system or waste treatment,
storage or disposal system servicing the Facilities (any of which is hereafter
referred to as a "Hazardous Discharge").
(d) The Principal Stockholder represents that since commencement of
occupation of the Facilities by Lion Golf, there has been no, nor is there
threatened any, complaint, order, directive, claim, citation or notice by any
federal, state or local governmental authority or any other person or entity
regarding the Facilities or the business conducted thereon with respect to (i)
air emissions, (ii) spills, releases or discharges to soils or any improvements
located thereon, surface water, ground water or the sewer, septic system or
waste treatment, storage or disposal systems servicing the Facilities, (iii)
noise emissions, (iv) solid or liquid waste, handling or disposal, (v) the
generation, collection, storage, use, transportation or disposal of Hazardous
Substances or wastes, (vi) occupational safety and health violations or
(vii) other environmental matters affecting Lion Golf, (any of which is
hereafter referred to as an "Environmental Complaint").
2.29 THE STOCKHOLDERS.
(a) The Stockholders own all of the issued and outstanding shares
of Lion Golf's capital stock, free and clear of all agreements, charges,
options, liens, security interests, pledges, claims, restrictions and
encumbrances of any nature whatsoever. There are outstanding no rights to
purchase of any kind affecting any shares of the capital stock of Lion Golf,
whether or not outstanding from Lion Golf or any Stockholder.
(b) The Stockholders each have full right, power and authority to
execute, deliver and perform this Agreement and each agreement which is an
Exhibit to this Agreement (each a "Related Agreement") to which they are
parties. This Agreement has been duly executed and delivered by the
Stockholders and constitutes, and each Related Agreement to be signed by a
Stockholder when executed and delivered will constitute, the valid and legally
binding obligation of each of them, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, reorganization and other laws
affecting the enforcement of creditors' rights generally from time to time in
effect and to judicial discretion in accordance with general equitable
principles. Each Stockholder is acquiring his or her shares of Quadrax common
stock for investment only, without any present intention to participate in any
distribution thereof, and each Stockholder further understands and agrees that
they will be unable to sell such shares for a period of two years, and then
only subject to the volume limitations and filing requirements of Rule 144 of
the Securities Act of 1933, as amended (the "Act").
ARTICLE 3
---------
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REPRESENTATIONS AND WARRANTIES OF QUADRAX
-----------------------------------------
Quadrax represents and warrants to each Stockholder as follows:
3.1 ORGANIZATION AND STANDING. Quadrax is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has full corporate power to conduct its business as it is now being
conducted and to own or hold under lease the properties and assets it now owns
or holds under lease. Quadrax is qualified to do business in all states where
the failure to qualify would have a material and adverse effect on its
properties or business. Copies of the charter documents and bylaws, as
amended and restated, of Quadrax have been delivered to Lion Golf, and such
copies are complete, correct and in full force and effect. Quadrax is fully in
compliance with, and is not in default under, any terms of such documents,
bylaws or minutes.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Quadrax consists of
90,000,000 shares of Common Stock, $0.000009 par value, 1,172 shares of Voting
Preferred Stock, without par value, 10,000,000 shares of Class A Preferred
Stock, .01 par value per share and 300,000 shares of Class A Preferred Stock -
First Series. As of [Sept 30], 1995, there were issued and outstanding
[16,362,084] shares of Common Stock, [318] shares of Voting Preferred Stock,
[0] shares of Class A Convertible Preferred Stock and [0] shares of Class A
Preferred Stock - First Series. All of such outstanding shares of Quadrax
Common Stock are validly issued, fully paid and non-assessable and are free of
any preemptive rights. Quadrax has duly and validly reserved (i) up to
1,468,477 shares of Common Stock for issuance upon the exercise of options
grantable under its Stock Option Plan, (ii) 2,021,850 shares for issuance upon
exercise of warrants, and (iii) sufficient shares to issue to the Stockholders
upon the Closing hereunder. Except as set forth herein, there are at the date
hereof no outstanding options, warrants, rights, privileges or other
arrangements, preemptive or contractual, to acquire any shares of capital stock
of Quadrax from Quadrax.
3.3 FINANCIAL STATEMENTS. Quadrax has provided Lion Golf with copies
of its Annual Report on Form 10-KSB for the year ended December 31, 1994 and of
its Quarterly Report on Form 10-QSB for the nine months ended September 30,
1995. Such reports and the financial statements contained therein, together
with the notes thereto, are complete and correct in all material respects, are
in accordance with the books and records of Quadrax, and present fairly the
consolidated financial condition of Quadrax and the results of its operations
and changes in its financial position as of the dates and for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered by such statements, except as set forth in such financial statements or
in
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the report of Livingston & Haynes, P.C. which accompanies such annual financial
statements.
3.4 NO UNDISCLOSED LIABILITIES. Except as described in Schedule 3.4
hereto or as contemplated by this Agreement, Quadrax has no material liabilities
or obligations (whether or as contemplated by this agreement, absolute, accrued,
contingent or otherwise and whether due or to become due), except liabilities
and obligations (a) fully reflected or reserved against in the September 30,
1995 consolidated balance sheet or disclosed in the notes thereto or (b)
incurred since the date of the September 30, 1995 balance sheet in the ordinary
course of business.
3.5 CONDUCT OF BUSINESS. Except as contemplated under this Agreement or
as set forth in Schedule 3.5 hereto, since September 30, 1995, Quadrax has not:
(a) issued or reissued any capital stock (including without
limitation, treasury stock), bonds, notes, warrants, options or other
securities or become subject to any obligation to issue or pledge any such
securities;
(b) incurred any material liability or obligation (absolute or
contingent), including, without limitation, purchases on a credit or
installment basis, except in the ordinary course of business;
(c) failed to pay or discharge any current liability when it
became due and payable;
(d) sold, transferred or otherwise disposed of, mortgaged, pledged
or subjected to lien or any other encumbrance, any of its assets, whether real
or personal (tangible or intangible) property, except inventory items and other
similar items of personal property in the ordinary course of business;
(e) declared or made any dividend payment or any other payment or
distribution to any of its stockholders or redeemed or Purchased or otherwise
acquired (i) any of its capital stock or (ii) obligations of Quadrax to any of
its stockholders;
(f) had any material adverse changes in the assets, properties,
operations, personnel, equipment, supply arrangements, financial condition or
prospects of Quadrax, and no event has occurred which could be reasonably
expected to have a materially adverse effect upon the business of Quadrax;
(g) taken any action, or failed to take any action, which would
materially adversely affect the condition, financial or otherwise, of Quadrax;
or
(h) agreed, orally or in writing, or granted any other person or
entity an option, to do any of the things specified in subsections (a) through
(g) above.
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3.7 NO LITIGATION. Quadrax is not engaged in or threatened with or
aware of any situation which could subject it to any material litigation,
arbitration, claim, challenge or other legal proceedings or governmental or
other investigations relating to its affairs, including, without limiting the
generality of the foregoing, any such action or proceeding by or before
contracting officers, administrative or regulatory agencies which could
materially impair the business of Quadrax.
3.8 EXISTENCE OF NECESSARY ASSETS. There are no significant assets which
Quadrax uses in its business (as heretofore conducted) which are not either
owned by it or licensed or leased to it or the use of which are otherwise
authorized under one of the agreements, licenses or leases listed in one of the
Schedules delivered pursuant to this Agreement.
3.9 NO CONFLICT WITH OTHER DOCUMENTS. Neither the execution and
delivery of this Agreement, nor the carrying out of the transactions
contemplated hereby will result in any violation, termination or modification
of, or be in conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under the charter
documents or bylaws of Quadrax, or any terms of any contract or instrument to
which Quadrax is a party or by which it is bound, or any judgment, decree or
order applicable to Quadrax, or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of any of Quadrax.
3.10 AUTHORIZATION, POWER. The execution, delivery and performance of
this Agreement by Quadrax has been duly authorized by all necessary corporate
action on the part of Quadrax and the stockholders of Quadrax. This Agreement
and the transactions contemplated hereby, have been approved by a resolution
adopted at duly constituted meetings of the Board of Directors of Quadrax and
this Agreement has been duly executed and delivered by Quadrax and constitutes a
valid and binding obligation of Quadrax enforceable in accordance with its
terms. Quadrax has all requisite corporate power and authority to enter into,
and perform this Agreement.
3.11 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. Except as
described in Schedule 3.11 hereto, no permit, consent, approval or authorization
of, or declaration, filing or registration with, any public body or authority is
necessary in connection with the execution and delivery by Quadrax of this
Agreement and the other transactions contemplated hereby.
3.12 CORPORATE RECORDS. The books of account and other financial records
of Quadrax are true, correct and complete, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis, in
accordance with applicable contractual requirements and government regulations
regarding accounting methods and practices, and accurately reflect the
consolidated operations of Quadrax and the value of its properties. All other
significant corporate records of Quadrax, including without limitation, the
corporate minute books and those
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relating to employees of Quadrax are true, correct and complete in all material
respects.
3.13 TAXES. Quadrax has timely filed in accordance with applicable law
all Federal, state, local and foreign tax returns and tax reports required to be
filed by them under applicable law on or before the Closing Date with respect to
all fiscal periods ended on or before the Closing Date. Such returns and reports
are true, correct and complete in all material respects. Quadrax has timely paid
all income, profits, franchise, sales, use, occupation, property, excise,
withholding and all other taxes, fees and governmental charges (including
interest and penalties, if any, with respect to present and prior periods to the
extent they have become due, except such as are being contested in good faith by
appropriate proceedings and for which adequate reserves to fully cover such
liability have been provided on the September 30, 1995 balance sheet. There
are no tax liens upon any properties or assets of Quadrax. The consolidated
Federal income tax returns of Quadrax have never been examined by the IRS. All
deficiencies and assessments resulting from examination of state, local and
foreign tax returns and reports of Quadrax have been paid. There are no
outstanding agreement or waivers extending the statutory period of limitation
applicable to any Federal, state, local or foreign tax return or report for any
period.
3.14 ABSENCE OF QUESTIONABLE PAYMENTS. Neither Quadrax nor any director,
officer, agent, employee, consultant, or any other person associated with or
acting on behalf of Quadrax has engaged or is engaged in any course of conduct,
or is a party to any agreements or involved in any transactions, which has or
would give rise to a violation of any statute or regulation regarding improper
payments to government officials (foreign or domestic) or others.
ARTICLE 4
---------
COVENANTS OF THE STOCKHOLDERS
-----------------------------
The Principal Stockholder, individually, on behalf of Lion Golf,
covenant with Quadrax that, except as otherwise consented to in writing by
Quadrax after the date of this Agreement:
4.1 CONDUCT OF BUSINESS. On or prior to the Closing Date, with respect
to Lion Golf (a) its business will be conducted only in the ordinary course; (b)
it will not enter into, adopt or amend any employee pension, profit-sharing,
retirement, insurance, incentive compensation, severance or similar plan,
agreement or arrangement, enter into or amend any employment contracts, or
increase the salaries or compensation of any employee, other than ordinary
increases in salaries in accordance with past practices;
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(c) it will have no debt on its books, records or financial statements other
than approximately $1,450,000 for borrowed money of which no more than $500,000
shall be due to shareholders and $900,000 classified as current indebtedness;
(d) it will use its best efforts to preserve its business organization intact,
to keep available the services of its officers and employees and to preserve
the goodwill of suppliers, clients, customers and others doing business with
it, nor shall it dispose of any asset except in the ordinary course of
business; (e) it will not acquire or agree to acquire by merging or
consolidating with, purchasing substantially all of the assets of, or
otherwise, any business or any corporation, partnership, association or other
business organization or division thereof; (f) it will not enter into or amend
any contract or agreement with any labor union or any lease of real estate or
personal property other than leases entered into or amended in the ordinary
course of business in a manner consistent with past practices calling for
yearly lease payments not in excess of $10,000; (g) it will not enter into any
contract or incur any expenditures not entered into or incurred in the ordinary
course of business and in accordance with past practices; (h) it will not
compromise any account receivable in an amount larger than $5,000 or $25,000 in
the aggregate; (i) it will not make any change in its charter documents or
Bylaws; (j) it will not make any change in the number of shares or in the terms
of its authorized, issued or outstanding capital stock, nor shall it enter into
or grant any options, calls, contracts or commitment of any character relating
to any issued or unissued capital stock; (k) it will not declare or pay any
dividend or other distribution in respect of its capital stock; (1) it will not
do any act or omit to do any act, which will cause a breach of any material
contract, commitment or obligation to which Lion Golf is a party or by which
any of its properties or assets may be bound; (m) it will maintain its existing
insurance in such amounts and against such risks as are usually insured against
by persons operating similar properties and businesses; and (n) it will
maintain all Authorizations and make all filings and registrations which are
necessary in order to enable it to conduct its business, it will remain in
compliance with all applicable laws, regulations and ordinances relating to its
business and will take all steps necessary to obtain all further Authorizations
as may be required in the conduct of its future business as currently
contemplated.
4.2 INFORMATION. Lion Golf will provide to Quadrax, and to its
respective officers, accountants, counsel and other representatives full access,
following prior notice, during normal business hours throughout the period prior
to the Closing Date, to all the plants, warehouses, properties, books,
contracts, commitments, records and accounts of Lion Golf. Lion Golf will
furnish to Quadrax during such period all such information concerning Lion Golf
and its business and properties as Quadrax may reasonably request, and without
additional specific request therefor, Lion Golf's monthly and quarterly
financial statements
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prepared by Lion Golf in the ordinary course of business from and after
September 30, 1995, and all communications with any tax authorities. If
requested by Quadrax, Lion Golf will cause to be made available to Quadrax and
Quadrax's accountants the work papers and other information in respect of Lion
Golf utilized by Lion Golf's accountants in the preparation of Lion Golf's
financial statements.
4.3 CONSENTS. Lion Golf will take all necessary corporate or other
action and will use its best efforts to complete all filings and obtain all
governmental and other consents and approvals required for consummation of the
transactions contemplated by this Agreement, including, without limitation, the
obtaining of any requisite consents or approvals required or which may be
required of third parties pursuant to the agreements, leases and contracts
disclosed to Quadrax pursuant to Section 2.19 or any others requiring the same,
and will promptly notify Quadrax in writing of any information relating to the
status of the possible denial of such requested consents or approvals.
4.4 NOTICE OF LITIGATION. Lion Golf will provide written notice to
Quadrax of any litigation, judicial or administrative proceeding or governmental
investigation which arises, or to the knowledge of Lion Golf, is threatened or
in prospect, after the date of this Agreement and prior to the Closing Date,
against or specifically relating to Lion Golf, or their respective properties or
businesses, or the transactions contemplated by this Agreement, setting forth
in such notice the facts and circumstances currently available to Lion Golf with
respect to such litigation, proceeding or investigation.
4.5 CORPORATE TRANSACTIONS. Prior to the earlier of the termination of
this Agreement pursuant to Article 13 or December 31, 1995, neither the
Stockholders nor Lion Golf will not seek to sell Lion Golf or merge Lion Golf
with any entity and Lion Golf will not negotiate or entertain any offer with
respect to the sale of part or all of the capital stock of Lion Golf or any
material portion of Lion Golf's assets, nor will Lion Golf, nor will it
authorize or permit any officer, director or employee of, or any investment
banker, attorney, accountant or other representative retained by Lion Golf to,
solicit or encourage (including by way of furnishing information) the making of
any proposals that are reasonably expected to lead to the acquisition of part or
all of Lion Golf's capital stock or a material portion of Lion Golf's assets by
any person other than Quadrax or an affiliate of Quadrax. Lion Golf promptly
will advise Quadrax orally, followed by written confirmation, of any such
proposals.
4.6 CAUSE CONDITIONS TO BE SATISFIED. The Principal Stockholder and
Lion Golf will use their best efforts to cause all of the conditions described
in Article 7 of this Agreement to be satisfied.
22
<PAGE> 24
4.7 COMPLIANCE WITH LAWS. Lion Golf will duly comply with all applicable
laws as may be required for the valid and effective performance of this
Agreement.
4.8 NOTICE OF BREACH. The Principal Stockholder, in the event of, and
promptly after, the impending or threatened occurrence of any action (whether by
Lion Golf or otherwise) or event of which such Principal Stockholder has
knowledge, the taking or occurrence of which will constitute or result in a
breach, or would, if it had occurred prior to the date hereof, have caused or
constituted a breach, of any of his or its representations, warranties,
covenants or agreements set forth herein, will promptly give detailed written
notice thereof to Quadrax.
4.9 UPDATE OF SCHEDULES. The Principal Stockholder hereby agrees to
update, prior to the Closing Date, all Schedules to this Agreement prepared by
it to reflect any changes therein from the "as of" date of such Schedules to and
including the day immediately preceding the Closing Date (or such other date as
shall be agreed to by Quadrax) so that such Schedules, including the Closing
Date balance sheet, shall be true, complete and correct in all respects as of
the Closing Date (or such other date as shall be agreed to by Quadrax).
4.10 PUBLICITY. Neither the Stockholders nor Lion Golf shall not
disclose the Purchase Price or other principal terms of this transaction prior
to Closing, except as such disclosure may be required by law, or to professional
advisors and representatives of the parties hereto. The Stockholders and Lion
Golf shall be responsible for its advisors and representatives.
4.11 NO CHANGE IN OWNERSHIP. The Stockholders will continue to be the
only stockholders of Lion Golf through the Closing Date.
4.13 BROKER'S OR FINDER'S FEES. The Principal Stockholder shall be
responsible for and shall pay any broker's or finder's fees due and payable to
any third party claiming a right to such fee from or through the Lion Golf or
the Stockholders in connection with the transactions contemplated by this
Agreement.
ARTICLE 5
---------
COVENANTS OF QUADRAX
--------------------
Quadrax covenants to the Stockholders that, except as otherwise
consented to in writing by the Stockholders after the date of this Agreement:
5.1 CONDUCT OF BUSINESS. On or prior to the Closing Date, Quadrax shall
not make any fundamental alteration of its or
23
<PAGE> 25
any subsidiary's business as it has been heretofore conducted except as
contemplated by this Agreement.
5.2 INFORMATION. Quadrax will furnish to Lion Golf such information
concerning Quadrax and its business and properties as Lion Golf may reasonably
request. Certain of such information may constitute non-public material
information concerning Quadrax, and accordingly, Lion Golf and Stockholders will
be precluded from trading in Quadrax common stock until such information becomes
publicly available or is no longer material to an investment decision.
5.3 CONSENTS. Quadrax will take all necessary corporate or other action
and will use its best efforts to complete all filings and obtain all
governmental and other consents and approvals required for consummation of the
transactions contemplated by this Agreement, including, without limitation, the
obtaining of any requisite consents or approvals required or which may be
required of third parties pursuant to any agreements, leases and contracts
requiring the same, and will promptly notify Lion Golf in writing of any
information relating to the status of the possible denial of such requested
consents or approvals.
5.4 NOTICE OF LITIGATION. Quadrax will provide written notice to Lion
Golf of any material litigation, judicial or administrative proceeding or
governmental investigation which arises, or to the knowledge of Quadrax, is
threatened or in prospect, after the date of this Agreement and prior to the
Closing Date, against or specifically relating to Quadrax, its properties or
businesses or subsidiaries, or the transactions contemplated by this Agreement,
setting forth in such notice the facts and circumstances currently available to
Quadrax with respect to such litigation, proceeding or investigation.
5.5 CAUSE CONDITIONS TO BE SATISFIED. Quadrax will use its best efforts
to cause all of the conditions described in Article 8 of this Agreement to be
satisfied.
5.6 COMPLIANCE WITH LAWS. Quadrax will duly comply with all applicable
laws as may be required for the valid and effective performance of this
Agreement.
5.7 NOTICE OF BREACH. Quadrax, in the event of, and promptly after, the
impending or threatened occurrence of any action (whether by Quadrax or
otherwise) or event of which Quadrax has knowledge, the taking or occurrence of
which will constitute or result in a breach, or would, if it had occurred prior
to the date hereof, have caused or constituted a breach, of any of its
representations, warranties, covenants or agreements set forth herein, will
promptly give detailed written notice thereof to Lion Golf. Quadrax will use its
best efforts to prevent or promptly remedy its breach.
24
<PAGE> 26
5.8 UPDATE OF SCHEDULES. Quadrax hereby agrees to update, prior to
the Closing Date, all Schedules to this Agreement prepared by it to reflect any
changes therein from the "as of" date of such Schedules to and including the day
immediately preceding the Closing Date (or such other date as shall be agreed to
by Lion Golf) so that such Schedules shall be true, complete and correct in all
respects as of the Closing Date (or such other date as shall be agreed to by
Lion Golf) with respect to Quadrax.
5.9 PUBLICITY. Quadrax shall not disclose the purchase price or other
principal terms of this transaction prior to Closing, except as such disclosure
may be required by law or by Quadrax' lenders, which the Stockholders are aware,
professional advisors and representatives of the parties hereto. Quadrax shall
be responsible for the actions of its advisors and representatives.
5.11 BROKER'S AND FINDER'S FEES. Quadrax shall be responsible for
and shall pay any broker's or finder's fees due and payable to any third party
claiming a right to such fee from or through Quadrax in connection with the
transactions contemplated by this Agreement.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 SET-OFF. Any amount or amounts acknowledged or adjudicated to be
due Quadrax from the Principal Stockholder as the Indemnifying Party under
Article 10 hereof may be recovered by Quadrax, at Quadrax's option, by set-off
against amounts due to the Principal Stockholder under the Earn-Out Note to the
extent such amounts are sufficient, without prejudice to the rights of such
Principal Stockholder to contribution from or indemnification by any other
Stockholder.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS
OF QUADRAX
Unless waived by Quadrax in writing in its sole discretion, all
obligations of Quadrax under this Agreement are subject to the fulfillment,
prior to or at the Closing (as defined in Article 9), of each of the following
conditions:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of the Stockholders contained in Article 2 of this Agreement
shall be true at and as of the date of the Closing, and shall be deemed made
again at and as of such date
25
<PAGE> 27
and be true as so made again; the Stockholders shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing; and Quadrax
shall have received from the Principal Stockholder a certificate or
certificates in such reasonable detail as Quadrax may reasonably request,
signed by the Principal Stockholder and dated the date of the Closing to the
foregoing effect.
7.2 CONSENTS. All required consents of third parties, the absence of any
of which consents would materially and adversely impact Quadrax or Lion Golf or
the transactions contemplated by this Agreement, shall have been obtained,
including, without limitation, that Bank of the Cascades shall have approved the
transactions contemplated herein and renewed Lion Golf's line of credit for at
least $1,000,000.
7.3 FILINGS, PERMITS OR ORDERS. All filings, permits or orders required
to carry out the transactions contemplated by this Agreement, shall have been
made or received and there shall have been imposed no term or condition in
respect thereof materially adverse to Quadrax.
7.4 LEGAL PROCEEDINGS. No suit, action or other proceeding against
Quadrax or Lion Golf or their respective officers or directors or any
Stockholder, shall be threatened or pending before any court or governmental
agency (i) in which it will be, or it is, sought to restrain or prohibit any of
the transactions contemplated by this Agreement or to obtain material damages or
other material relief in connection with this Agreement or the transactions
contemplated herein, or (ii) which, in the opinion of Quadrax materially
adversely affects the business, properties, or assets of Lion Golf.
7.5 FINANCIAL STATEMENTS. Quadrax shall have received financial
statements of Lion Golf, as set forth in Section 2.4 of this Agreement.
7.6 OPINION OF COUNSEL. Quadrax shall have received at the Closing the
opinion of counsel for the Stockholders, dated the date of Closing, in form and
substance satisfactory to Quadrax and its counsel, to the effect that (a) Lion
Golf is a corporation duly organized, validly existing and in good standing
under the laws of Oregon and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its properties or the
conduct of its business makes such qualification necessary; (b) the Stockholders
have all requisite power and authority to enter into and perform this Agreement;
(c) this Agreement has been duly authorized, executed and delivered by each
Stockholder, and is a valid and binding obligation of Lion Golf, and each
agreement attached hereto as an Exhibit has been duly authorized, executed and
delivered by the Stockholders, as applicable, and each such
26
<PAGE> 28
agreement is a valid and binding obligation of such Stockholder, subject to
general principles of equity and applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting the enforcement of creditors
rights generally from time to time in effect; (d) based solely upon an
examination of those documents identified to him in a factual certificate from
Lion Golf, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not and will not as of the Closing Date
(i) violate any judicial or administrative order, judgment or decree entered
against Lion Golf, (ii) conflict with any of the terms, conditions or
provisions of the charter or bylaws of Lion Golf, or (iii) conflict with,
result in a breach of, constitute a default under or accelerate or permit the
acceleration of the performance required by any material mortgage, indenture,
loan agreement, other debt instrument or any other material instrument or
agreement known to such counsel to which Lion Golf is a party or to which any
of its assets is subject, which restrict changes in ownership, and certain
supply agreements which restrict assignment thereof by Lion Golf; (e) to the
best of such counsel's knowledge there are no pending legal proceedings to
which Lion Golf is a party or of which property of Lion Golf is subject and,
insofar as is known to such counsel, no such proceeding is threatened; and (f)
the Stockholders are the only stockholders of Lion Golf. In rendering such
opinion, such counsel may reasonably rely on certificates of officers of Lion
Golf, opinions of other counsel and such other evidence as he may deem
necessary or desirable, provided that counsel for Lion Golf shall state that
such certificates and opinions are satisfactory in form and substance for such
purpose.
7.7 ADVERSE DEVELOPMENTS. As of the Closing, there shall not have
been any material adverse changes in the assets, properties, or operations of
Lion Golf, and no event shall have occurred which could be reasonably expected
to have a materially adverse effect upon the business of Lion Golf.
7.8 EMPLOYMENT AGREEMENT. Robert Cole and Jim Cole shall each have
executed Employment Agreements with Lion Golf in the form attached hereto as
Exhibit 7.8.
7.9 NON-COMPETITION AGREEMENT. Robert Cole and Jim Cole shall each have
executed Non-Competition Agreements in favor of Quadrax in the form attached
hereto as Exhibit 7.8.
7.10 DUE DILIGENCE REVIEW. Quadrax shall be satisfied with the results
of its due diligence review of Lion Golf, and its review of Lion Golf's
Schedules hereto.
7.11 FINANCIAL CONDITIONS. Lion Golf shall have at the Closing Date (i)
no debt on its books, records and financial statements for borrowed money other
than approximately $1,450,000
27
<PAGE> 29
for borrowed money, of which no more than $270,000 shall be due to the
Principal Stockholder and $900,000 classified as current indebtedness.
ARTICLE 8
---------
CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS
-------------------------------------------------
Unless waived by a majority in interest of the Stockholders in writing
in their sole discretion, all obligations of the Stockholders under this
Agreement are subject to the fulfillment, prior to or at the Closing, of each of
he following conditions:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Quadrax contained in Article 3 of this Agreement shall be true
at and as of the date of the Closing, and shall be deemed made again at and as
of such date and be true as so made again; Quadrax shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing; and the
Stockholders shall have received from Quadrax a certificate or certificates in
such reasonable detail as the Stockholders may reasonably request, signed by the
President of Quadrax and dated the date of the Closing, to the foregoing effect.
8.2 CORPORATE AUTHORITY. All corporate and other proceedings,
including director and stockholder approval, required to be taken by, or on the
part of, Quadrax to authorize it to execute, deliver and carry out this
Agreement shall have been duly and properly taken.
8.3 CONSENTS. All required consents of third parties, the absence of any
of which consents would materially and adversely impact Quadrax or Lion Golf or
the transactions contemplated by this Agreement, shall have been obtained.
8.4 FILINGS, PERMITS OR ORDERS. All filings, permits or orders required
to carry out the transactions contemplated by this Agreement shall have been
made or received and there shall have been imposed no term or condition in
respect thereof materially adverse to Lion Golf.
8.5 LEGAL PROCEEDINGS. No suit, action or other proceeding against
Quadrax or Lion Golf, or their respective officers or directors or any
Stockholder, shall be threatened or pending before any court or governmental
agency (i) in which it will be, or it is, sought to restrain or prohibit any of
the transactions contemplated by this Agreement or to obtain material damages or
other material relief in connection with this Agreement or the transactions
contemplated herein, or (ii) which, in the opinion of Lion Golf materially
adversely affects the business,
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<PAGE> 30
properties, or assets of Quadrax.
8.6 OPINION OF COUNSEL TO QUADRAX. Quadrax shall have delivered to the
Stockholders an opinion of their counsel, dated the date of Closing, in form and
substance satisfactory to the Stockholder and their counsel, to the effect that
(a) Quadrax is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its properties or the conduct of its business makes such qualification
necessary; (b) Quadrax has the corporate power and authority to enter into and
perform this Agreement and each other agreement which is an Exhibit hereto; (c)
the execution, delivery and performance of this Agreement by Quadrax has been
duly authorized and approved by all requisite corporate action and this
Agreement has been duly executed and delivered by Quadrax and the valid and
legally binding obligation of Quadrax subject to general principles of equity
and applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting the enforcement of creditors rights generally from time to time
in effect; (d) the execution, delivery and performance of each agreement which
is an Exhibit to this Agreement by Quadrax has been duly authorized and approved
by all requisite corporate action and each such Exhibit has been duly executed
and delivered by Quadrax and each constitutes valid and legally binding
obligation of Quadrax; and (e) the Quadrax common stock issued at Closing has
been duly authorized, validly issued and is fully paid and non-assessable. In
rendering such opinions, such counsel may reasonably rely on certificates of
officers of Quadrax, opinions of other counsel and such other evidence as they
may deem necessary or desirable; provided that counsel for Quadrax shall state
that such certificates and opinions are satisfactory in form and substance for
such purpose.
8.7 ADVERSE DEVELOPMENTS. As of the Closing, there shall not have
been any material adverse changes in the assets, properties or operations of
Quadrax or any of its Subsidiaries, and no event has occurred which could be
reasonably expected to have a materially adverse effect upon the business of
Quadrax.
ARTICLE 9
---------
CLOSING
-------
The "Closing" and payment of the consideration under this Agreement
shall be held on the Closing Date, which shall take place as soon as possible
after the execution of this Agreement, but no later than December 31, 1995,
subject to mutually agreed upon extensions. The Closing shall be held at
_________________________ , or at such other place as Quadrax and the
Stockholders may agree.
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<PAGE> 31
ARTICLE 10
----------
SURVIVAL AND INDEMNIFICATION
----------------------------
10.1 SURVIVAL. The representations, warranties and covenants and
agreements made by the parties in this Agreement and in any other certificates
and documents delivered in connection herewith shall survive the Closing and
shall apply for three years from the Closing Date, except for tax matters, for
which the survival period shall be the statute of limitations applicable thereto
and Environmental Claims, for which the survival period shall be five years. The
provisions of Section 13.3 and Article 11 of this Agreement shall survive any
termination of this Agreement prior to Closing.
10.2 INDEMNIFICATION.
(a) GENERAL
(i) The Principal Stockholder shall indemnify, defend and hold
harmless Quadrax, and its directors, officers, employees, agents, heirs and
assigns, from and against any and all damages, claims, liabilities,
losses, costs, response costs, expenses, obligations and deficiencies, including
interest, penalties, and reasonable attorney's and other fees, (hereinafter
collectively referred to as "Section 10.2 Losses"), arising out of or in any way
connected to any breach by the Stockholders of any of the representations,
warranties, covenants or agreements of the Stockholders set forth in this
Agreement or in any Schedule(s) furnished by or on behalf of the Stockholders
under this Agreement or any Exhibits hereto. Such duty of indemnification
shall include, but not be limited to, any and all damages, claims, liabilities,
losses, costs, expenses, obligations and deficiencies under
successor-in-interest theories of liability based on statutory or common law.
(ii) Quadrax shall indemnify, defend and hold harmless the
Stockholders and their agents, heirs and assigns from and against and in respect
of any Section 10.2 Losses arising out of or in any way connected to any breach
of, or failure by Quadrax to perform any of the representations, warranties,
covenants or agreements of Quadrax contained in this Agreement or any Schedules
furnished by or on behalf of Quadrax or any Exhibits hereto.
(iii) Notwithstanding any other provision of this Agreement to
the contrary, neither party shall be liable to the
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<PAGE> 32
other with respect to Section 10.2 Losses unless and until the aggregate amount
of all Section 10.2 Losses incurred by the indemnified party shall exceed the
sum of One Hundred Thousand ($100,000) Dollars (the "Indemnity Basket"). In the
event and to the extent that any such Section 10.2 Losses shall be in excess of
the Indemnity Basket, the Principal Stockholder on the one hand, and Quadrax on
the other hand, shall thereafter be liable in full for all Section 10.2 Losses
in excess of such Indemnity Basket.
(b) DURATION OF CERTAIN INDEMNITY.
The parties shall be entitled to indemnification for Section 10.2
Losses only in respect of claims for which notice of claim shall have been given
to the indemnifying party on or before the second (2nd) anniversary of the
Closing Date, except for tax and Environmental claims.
(c) CLAIMS FOR INDEMNITY.
Whenever a claim shall arise for which any party shall be entitled to
indemnification hereunder, the indemnified party shall notify the indemnifying
party in writing within thirty (30) days of the indemnified party's first
receipt of notice of, or the indemnified party's knowledge of, such claim, and
in any event within such shorter period as may be necessary for the indemnifying
party or parties to take appropriate action to resist such claim; PROVIDED
HOWEVER, that if notice is given after thirty (30) days and the late notice does
not in any way prejudice the rights of the other party hereto then this
indemnity shall nevertheless be enforceable. Such notice shall specify all facts
known to the indemnified party giving rise to such indemnity rights and shall
estimate (to extent reasonably possible) the amount of the liability arising
therefrom. During the thirty (30) day period from and after the giving of any
notice under this Section 10.2, the relevant parties shall in good faith attempt
to settle and/or compromise the subject matter of the subject claim, and in the
event that the relevant parties are unable to effect any such settlement or
compromise within such thirty (30) day period, then such dispute (unless same
relates to a third party claim) shall be promptly submitted by the relevant
parties to arbitration held in Rhode Island in accordance with the rules of the
Rhode Island American Arbitration Association then obtaining, the results of
which shall be binding upon all relevant parties, and any rights of
indemnification thereby established shall promptly thereafter be paid or
satisfied by the indemnifying parties in accordance with any pertinent
provisions of this Agreement. To the extent required, judgment upon any
arbitration award hereunder may be entered in any court having jurisdiction. In
the event that any arbitration shall be required hereunder, the parties hereby
agree that the same shall be conducted in good faith and with all reasonable
diligence.
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<PAGE> 33
(d) RIGHT TO DEFEND.
If the facts giving rise to any claim for indemnification shall
involve any actual or threatened action or demand by any third party against
the indemnified party or any of its affiliates, the indemnifying party or
parties shall be entitled (without prejudice to the indemnified party's right
to participate at its own expense through counsel of its own choosing), to
defend or prosecute such claim in the name of the indemnifying party or
parties, or any of them, or if necessary, in the name of the indemnified party.
In any event, the indemnified party shall give the indemnifying party advance
written notice of any proposed compromise or settlement of any such claim. If
the remedy sought in any such action or demand is solely money damages, the
indemnifying party shall have fifteen (15) days after receipt of such notice of
settlement to object to the proposed settlement, and if it does object, the
indemnifying party shall be obligated to undertake, conduct and control, though
counsel of its own choosing and at its sole expense, the settlement or defense
thereof, and the indemnified party shall cooperate with the indemnifying party
in connection therewith.
(e) NO RIGHT TO CONTRIBUTION.
The Stockholders shall have no right to claim or receive contribution
from the Company in respect of any payments made or required to be made by
Stockholders pursuant to this Article 10.
ARTICLE 11
----------
EXPENSES
--------
Regardless of whether this Agreement is terminated, each party hereto
shall pay all of the costs and expenses incurred by it in connection with this
Agreement in consummating the transactions contemplated hereby (including,
without limitation, disbursements and expenses of its attorneys, accountants and
advisors). The Stockholders shall be responsible for and shall pay any
broker's or finder's fees due and payable to any third party claiming a right to
such fees from or through the Stockholders in connection with the transactions
contemplated hereby. Quadrax shall be responsible for and shall pay any
broker's or finder's fees and costs due to any third party in connection with
these transactions except as provided in the preceding sentence.
ARTICLE 12
----------
NOTICES
-------
All notices, requests, demands and other communications
32
<PAGE> 34
under or in connection with this Agreement shall be in writing, and (a) if to
Quadrax, shall be addressed to James J. Palermo, Quadrax Corporation, 300 High
Point Avenue, Portsmouth, Rhode Island 02871, with a copy to Joseph A. Smith,
Campbell & Fleming, P.C., 420 Lexington Ave, 15th Floor, New York, NY 10170;
and (b) if to the Stockholders, to Robert K. Cole at 63025 O.B. Riley Road #20,
Bend, Oregon 97701, with a copy to David Veis, Long & Levit, 601 S. Figueroa
Street, Suite 2500, Los Angeles, CA 90017.
All such notices, requests, demands or communications shall be mailed
postage prepaid, certified mail, return receipt requested, or delivered by a
recognized overnight courier service, or personally, and shall be sufficient
and effective when delivered to or received at the address so specified. Any
party may change the address at which it is to receive notice by written notice
to the other.
ARTICLE 13
----------
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
13.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of Quadrax and the Stockholders; or
(b) by Quadrax or the Stockholders, if the Closing Date shall not have
occurred on or prior to December 31, 1995, except for mutually agreed upon
extensions, and unless the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
the covenants, agreements and conditions hereof to be performed or observed by
such party at or before the Closing Date, provided, that nothing in this
subsection 13.1 (b) shall be construed to require any person to make any
representation or certification as to any matter known to be false to such
person.
13.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Quadrax or the Stockholders as provided above, this Agreement shall
forthwith become void and there shall be no further liability on the part of
Quadrax or the Stockholders or their respective officers or directors (except
if such termination arises out of a material breach by the non-terminating
party of any of its representations, warranties, covenants or other agreements
herein, or based upon obligations set forth in Article 11 and Section 13.3
hereof).
13.3 RETURN OF INFORMATION. Upon termination of this Agreement, each party
shall return to the other all written materials furnished by such party to the
other, without retaining
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<PAGE> 35
any copies, except that counsel for each party may retain one copy for
evidentiary purposes until the expiration of all applicable statutes of
limitation with respect thereto. Prior to Closing, each party agrees not to
divulge or to use for its own benefit any information obtained regarding the
other (unless ascertainable from public or published information or trade
sources) to third parties.
13.4 AMENDMENT, EXTENSION AND WAIVER. At any time prior to the Closing
Date, the Stockholders and Quadrax may amend this Agreement to the extent
permitted by law. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. Any agreement on the
part of a party hereto to any extension or waiver shall be valid if set forth
in an instrument in writing signed on behalf of such party.
ARTICLE 14
----------
ENTIRE AGREEMENT
----------------
This Agreement (including the exhibits hereto and the lists, schedules
and documents delivered pursuant hereto, which are a part hereof) is intended by
the parties to and does constitute the entire agreement of the parties with
respect to the transactions contemplated by this Agreement and supersedes any
and all prior understandings, written or oral, between the parties, and this
Agreement may be amended, modified, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the
amendment, modification, waiver, discharge or termination is sought.
ARTICLE 15
----------
GENERAL
-------
The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. 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. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns, but
nothing herein, express or implied, is intended to or shall confer any rights,
remedies or benefits upon any person other than the parties hereto. This
Agreement may not be assigned by any party hereto without the consent of all
other parties hereto. This Agreement shall be construed in accordance with and
governed by, the laws of the State of Rhode Island. In the event of a dispute or
controversy under this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees. Venue for disputes hereunder not settled by
arbitration shall be in the
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<PAGE> 36
federal or state court having jurisdiction over Newport County, Rhode Island.
35
<PAGE> 37
IN WITNESS WHEREOF, Quadrax and the Stockholders have caused this
Agreement to be duly executed as of the date first above written.
Quadrax Corporation
By: /s/ James J. Palermo
---------------------------
James J. Palermo, President
Stockholders:
-------------------------
Robert K. Cole
-------------------------
-------------------------
-------------------------
36
<PAGE> 38
IN WITNESS WHEREOF, Quadrax and the Stockholders have caused this
Agreement to be duly executed as of the date first above written.
Quadrax Corporation
By:
---------------------------
James J. Palermo, President
Stockholders:
/s/ Robert K. Cole
-------------------------
Robert K. Cole
-------------------------
-------------------------
-------------------------
36
<PAGE> 1
UNSECURED PROMISSORY NOTE
-------------------------
December 29, 1995
QUADRAX CORPORATION, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to Robert K. Cole (the "Holder"),
residing at 63025 O. B. Riley Road #20, Bend, Oregon 97701, or order, upon the
terms and conditions of this Note, until December 31, 2001, up to the amount of
One Million Two Hundred Fifty Thousand Dollars ($1,250,000).
1. PAYMENT OF AMOUNTS DUE PURSUANT TO THE NOTE.
Payment of the amounts due on this Note shall be made in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
The amount due pursuant to this Note each year (up to an aggregate
maximum of One Million Two Hundred Fifty Thousand Dollars) shall be one-third
of the annual pre-tax profits of Lion Golf of Oregon, Inc., an Oregon
corporation, including the operations of McManis Sports Associates, Inc.
(together, "Lion Golf") for each year beginning with the year ending December
31, 1996 and ending with the year ending December 31, 2001. The payment of
each annual installment shall be due on March 31 of the year following the
calendar year in question.
"Pre-tax profits" shall mean the net income before taxes of Lion Golf
for each calendar year. In determining the pre-tax profits of Lion Golf for
purposes of determining Quadrax's obligations on this Note and Lion Golf's
obligation on the Debt Repayment Note, the following shall be excluded:
(a) Any liabilities and/or expenses of Lion Golf incurred
after the closing which are not approved by Robert Cole which approval shall
not be unreasonably withheld.
In accordance with the Debt Repayment Note, pre-tax profits shall be
paid first on this Unsecured Promissory Note.
Subject to the foregoing, pre-tax profits of Lion Golf for each
calendar year shall be determined by the Company's regular independent public
auditors, utilizing the same accounting principles which such auditors use in
the preparation of the Company's annual financial statements filed with the
Securities and Exchange Commission.
1.
<PAGE> 2
If any payment is not paid within ten (10) days of when due, the
Company shall pay Holder a late charge equal to four percent (4%) of such late
payment.
The Company will pay or cause to be paid all sums becoming due hereon
by check or checks as directed by Holder, sent to Holder's above address or to
such other address as Holder may designate for such purpose from time to time
by written notice to the Company, without any requirement for the presentation
of this Note or making any notation thereon except that the Holder thereof
agrees that payment of the final amount due shall be made only upon surrender
of this Note to the Company for cancellation.
2. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurence and continuation uncured of any of the following events:
(a) A default in the payment of any installment of this
Note, when and as the same shall become due and payable, and said default
continues uncured for a period of ten (10) days after the date fixed for the
making of such payment; or
(b) Default in the performance, or breach, of any covenant
of the Company in this Note.
3. REMEDIES UPON DEFAULT.
If an Event of Default occurs, the Holder may institute such actions of
proceedings in law or equity as it shall deem expedient for the protection and
enforcement of its rights, and shall be entitled to receive therefrom payment
of the amount due on this Note, plus interest at 10% per annum to the date of
payment plus reasonable expenses of collection, including attorneys' fees.
4. MISCELLANEOUS.
4.1 NOTICES. All communications provided hereunder shall be in
writing and, if to the Company, delivered or mailed by registered or certified
mail addressed to Quadrax Corporation, 300 High Point Avenue, Portsmouth, Rhode
Island 02871, Attn.: James J. Palermo, or, if to the Holder, at the address
shown for the Holder on the face of this Note or at such other address as
Holder shall provide by notice as provided in this section.
2.
<PAGE> 3
4.2 GOVERNING LAW. This Note shall be construed in accordance with
and governed by the laws of the State of Oregon without giving effect to
conflict of laws principles.
QUADRAX CORPORATION
Dated: By
-------------------------- ----------------------------
3.
<PAGE> 1
DEBT REPAYMENT NOTE
-------------------
December 29, 1995
LION GOLF OF OREGON, INC., an Oregon corporation (the "Company"), for
value received, hereby promises to pay to Robert K. Cole (the "Holder"),
residing at 63025 O. B. Riley Road #20, Bend, Oregon 97701, or order, upon the
terms and conditions of this Note, the amount of $270,000 ("Total Amount Due").
1. PAYMENT OF AMOUNTS DUE PURSUANT TO NOTE.
Payment of the amounts due on this Note shall be made in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
Interest shall accrue on the Total Amount Due at 8% per annum with
interest payments only made quarterly beginning on March 30, 1996 until payment
in full on the Total Amount Due.
The principal of the Total Amount Due shall be paid as follows:
(a) March 31, 1997 - One-fifth of the Total Amount Due.
(b) March 31, 1998 - One-fifth of the Total Amount Due.
(c) March 31, 1999 - One-fifth of the Total Amount Due.
(d) March 31, 2000 - One-fifth of the Total Amount Due.
(e) March 31, 2001 - One-fifth of the Total Amount Due.
(f) In the event any yearly payment or portion thereof
cannot be made because there are insufficient pre-tax
profits to make the yearly payment as provided in (a) - (e)
above, the yearly payment or any portion thereof shall be
carried over to the next year to be paid in conjunction
with the payment due that year. In the event any portion
of the principal payments are not made by March 31, 2001,
Lion's obligation to pay principal and interest shall
continue from year to year until payment in full is made.
1.
<PAGE> 2
Each and every principal payment under (a) - (f) shall be payable only
to the extent of 20% of the Company's pre-tax profits as defined in the
Unsecured Promissory Note and after deducting any payment made to Robert K.
Cole under the Unsecured Promissory Note. By way of example, if Company has
pre-tax profits of $300,000 in a given year, $100,000 will be paid to Robert K.
Cole under the Unsecured Promissory Note. Of the remaining $200,000 in pre-tax
profits, Company would be obligated to pay Robert K. Cole 20% of $200,000
or $40,000 under this Debt Repayment Note.
If any payment on any interest payment or principal payment is not paid
within ten (10) days of when due, the Company shall pay Holder a late charge
equal to four percent (4%) of such late payment.
The Company will pay or cause to be paid all sums becoming due hereon
by check or checks as directed by Holder, sent to Holder's above address or to
such other address as Holder may designate for such purpose from time to time
by written notice to the Company, without any requirement for the presentation
of this Note or making any notation thereon except that the Holder thereof
agrees that payment of the final amount due shall be made only upon surrender
of this Note to the Company for cancellation.
2. EVENTS OF DEFAULT.
It shall be an Event of Default with respect to this Note upon the
occurrence of any of the following events:
(a) A default in the payment of any installment of this Note
(principal or interest), when and as the same shall become due and payable, and
said default continues uncured for a period of ten (10) days after the date
fixed for the making of such payment; or
(b) Default in the performance, or breach, of any covenant of
the Company on this Note.
3. REMEDIES UPON DEFAULT.
If an Event of Default occurs, the Company shall be immediately
obligated to pay Holder the balance of the Total Amount Due plus interest
thereon at 8% per annum until paid. The Holder may institute any such action or
proceeding in law or equity as it shall deem expedient for the protection
and/or enforcement of its rights, and shall be entitled to receive therefrom
payment of the Total Amount Due (less any yearly payments made under this Note)
plus interest at 8% per annum to the date of payment plus reasonable expenses
of collection, including attorneys' fees.
2.
<PAGE> 3
4. MISCELLANEOUS.
4.1 NOTICES. All communications provided hereunder shall be
in writing and, if to the Company, delivered or mailed by registered or
certified mail addressed to Quadrax Corporation, 300 High Point Avenue,
Portsmouth, Rhode Island 02871, Attn: James J. Palermo, or, if to the Holder,
at the address shown for the Holder on the face of this Note or at such other
address as Holder shall provide by notice as provided in this section.
4.2 GOVERNING LAW. This Note shall be construed in
accordance with and governed by the laws of the State of Oregon without giving
effect to conflict of laws principles.
LION GOLF OF OREGON, INC.
Dated: By:
----------------------------- -----------------------------------
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
Agreement, dated December 29, 1995, by and between Lion Golf of Oregon,
Inc., a Oregon corporation with offices at 63025 O.B. Riley Road #20, Bend,
Oregon 97701 and Robert K. Cole, an individual residing at
(hereinafter referred to as the "Employee"). --------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Employee mutually desire to enter into an
Employment Agreement with respect to the Employee's employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration the receipt of which is hereby
acknowledged, the Company and the Employee hereby agree as follows:
1. Term and Position.
-----------------
The Company agrees to employ the Employee as its Chief Executive Officer
for the period (the "Employment Period") commencing on the date hereof and
terminating five years from the date hereof, which term shall be subject to
renewal at the mutual agreement of the parties. The Employee accepts such
employment, agrees to perform the functions and duties incident to such
position, and further agrees to perform such other services consistent with his
position as shall from time to time be assigned to him by, or pursuant to
authorization of, the Board of Directors of the Company and agrees to devote
substantially all of his business time, skill and attention to such services.
2. Compensation and Benefits.
-------------------------
a. The Company shall pay to the Employee, and the Employee shall
accept from the Company, for the Employee's services hereunder during the
Employment Period, (i) a base salary of $96,000 per year, payable periodically
in accordance with the customary payroll practices of the Company, (ii) debt
service and operating costs for Employee's motor home and payments, when and as
payable, on Quadrax Corporation's Unsecured Promissary Note in favor of
Employee of even date herewith in the aggregate principal amount of $1,250,000;
and (iii) such bonus each year as shall be determined by the Board of Directors
of the Company or any
1
<PAGE> 2
appropriate committee thereof.
b. The Company agrees to reimburse the Employee for all reasonable
business expenses incurred by him during the Employment Period in connection
with the performance of his services hereunder, including expenses incurred in
connection with activities associated with promoting the business of the
Company that are authorized from time to time by the Board of Directors, upon
presentation by Employee of an accounting of such expenses in such detail as
may be required by then-applicable tax laws.
c. The Employee shall participate at the Company's expense on the
same basis, subject to the same qualifications, as other senior executives of
the Company in any pension, savings, life insurance, health insurance,
hospitalization, long-term disability, and other fringe benefit plans and
vacation policies (the "Fringe Benefits") in effect from time to time with
respect to senior executives of the Company.
d. Employee shall also receive options to purchase up to 100,000
shares of Quadrax Corporation Common Stock under Quadrax Corporation's stock
option plan, at an exercise price equal to the closing bid price of such Common
Stock on the date hereof. Such options shall all vest upon the first
anniversary date hereof provided that Employee is then an employee of the
Company.
3. Termination.
-----------
a. For Cause.
---------
This Agreement may be terminated immediately by the Company upon the
occurrence of any of the following events: (i) the death of Employee; (ii)
Employee's loss of legal capacity for any reason; (iii) any act committed by
the Employee against the Company, its subsidiaries or divisions constituting
(A) fraud, (B) misappropriation of corporate opportunity, (C) self-dealing
without the express prior approval of the Board of Directors of the Company,
(D) embezzlement of funds, or (E) felony conviction for conduct involving moral
turpitude or other criminal conduct materially and adversely affecting the
operations of the Company, its subsidiaries or divisions; (iv) the breach or
default by Employee in the performance of any material covenant on the part of
the Employee to be performed under this Agreement, which breach or default
shall continue for a period of fourteen (14) days after receipt of written
notice from the Company; (v) chronic alcoholism or any other form of drug
addiction which impairs the Employee's ability to perform his duties hereunder;
or (vi) disability of Employee, which prevents Employee from performing any
material amount of his duties hereunder, and such disability is expected, in
the opinion of a physician engaged by the Company for such purpose, to continue
in excess of 120 days. In the event of disability, Employee shall be entitled
to cause his own physician to make an
2
<PAGE> 3
examination of Employee, and if such personal physician disagrees with the
opinion of the Company's doctor, then the two doctors shall together appoint a
third physician to examine Employee, and the determination of such third
physician shall be final. The fees of such third physician shall be paid by
the Company.
b. Without Cause.
-------------
This Agreement may be terminated by the Company at any time without
cause, subject to the payments set forth in subsection 3.c below.
c. Compensation Upon Termination.
-----------------------------
In the event that Employee is terminated with cause, as set forth in
Section 3.a above, then the obligation of the Company to compensate Employee
shall cease with the payment of all amounts accrued (including reimbursement of
expenses properly incurred by Employee prior to termination) as of such date.
In the event that Employee is terminated without cause, as set forth in Section
3.b above, then the Company shall be obligated to pay Employee his regular
salary and benefits (but not including any discretionary bonuses in the event
termination occurs prior to the seventh month of any contract year) through the
normal term of this Agreement.
4. Breach, Notice.
--------------
The Company and the Employee agree that neither party shall have the right
to terminate this Employment Agreement by reason of any breach by the other
party of the provisions hereof unless written notice specifying such breach
shall have been given to the other party and unless the other party shall
continue such breach for at least fourteen days after the receipt of such
notice.
5. Non-Disclosure of Confidential Information.
------------------------------------------
a. The Employee acknowledges that it is the policy of the Company to
maintain as secret and confidential all valuable and unique information hereto-
fore or hereafter acquired, developed or used by the Company relating to the
business, operations employees and customers of the Company, which information
gives the Company a competitive advantage in its industry, and which
information includes technical knowledge, know-how or trade secrets and
information concerning the operations, sales, personnel, suppliers, customers,
costs, profits, markets, pricing policies, "Confidential Material" (as
hereinafter defined), and the results of any investigations or experiments of
the Company (such information is hereinafter referred to as "Confidential
Information", provided, that confidential Information shall not include any
foregoing items which are in the public domain or which are available from
third-party sources without any violation of this Agreement). The Employee
recognizes that the services to be performed by the
3
<PAGE> 4
Employee are special and unique, and that by reason of his duties he will
acquire Confidential Information. The Employee recognizes that all such
Confidential Information is the sole and exclusive property of the Company. In
consideration of the Company's entering into this Agreement, the Employee
agrees that:
i. he shall never for so long as such information is valuable
and unique (but in no case for longer than five years following the termination
of Employee's employment by the Company), directly or indirectly, use,
publish, disseminate or otherwise disclose any Confidential Information
obtained during his employment by the Company without the prior written
consent of the Company's Board of Directors, it being understood that this
subparagraph shall survive the term of this Agreement;
ii. the parties hereto agree that the Employee, during the
course of his employment, may be directed to perform services for the benefit
of a customer of the Company, such customer shall be deemed a third party
beneficiary of the provisions of this Agreement and, in addition to the
proscriptions contained in subparagraph (i) above, shall not disclose any
"confidential information" which relates to the customer (defined with respect
to such customer in the same manner as for the Company) to any person, firm or
enterprise without the prior written consent of the Company and such customer;
iii. during the term of his employment by the Company, he shall
exercise all due and diligent precautions to protect the integrity of the
Company's customer lists, mailing lists and sources thereof, statistical data
and compilations, Agreements, contracts, manuals or other documents and any and
all other materials embodying any Confidential Information (the "Confidential
Materials") and, upon termination of his employment hereunder, or at such
earlier time as the Company may so request, he shall immediately return to the
Company all such Confidential Materials (and copies thereof) then in his
possession or control;
iv. the Employee agrees that he will at all times comply with
all security regulations (a) in effect from time to time at the Company's or
its customers' premises and (b) in effect for materials belonging to the
Company or its customers; and
v. the Employee agrees that the provisions of this subsection
(a) are reasonably necessary to protect the proprietary rights of the Company
in the Confidential Information and its trade secrets, goodwill and reputation.
b. The Employee acknowledges that any breach of the provisions of
this Section 5 can cause irreparable harm to the Company for which the Company
would have no adequate remedy at law. In the event of a breach or threatened
breach by the Employee of any of such provisions, in addition to any and all
other rights and
4
<PAGE> 5
remedies it may have under this Agreement or otherwise, the Company may
immediately seek any judicial action deemed necessary, including, without
limitation, temporary and preliminary injuctive relief.
6. Arbitration.
-----------
Any controversy or claim arising out of or in connection with this
Employment Agreement or any breach of this Employment Agreement or any default
under this Employment Agreement shall be settled by arbitration in the State
of Oregon in accordance with the rules of the American Arbitration Association
and judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction.
7. Successors and Assigns.
----------------------
This Employment Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, administrators,
executors, successors and assigns; provided, however, that this Employment
Agreement may not be assigned by either party hereto.
8. Governing Law.
-------------
This Employment Agreement shall be governed by, and construed in
accordance with, the laws of the State of Oregon.
9. Notice.
------
Any notice required hereunder shall be delivered by hand, sent by
telecopy, or sent by registered or certified mail, addressed to the other party
hereto at its address set forth above or at such other address as notice thereof
shall have been given in accordance with the provisions of this Section 9. Any
such notice shall become effective (a) when mailed, three days after having
been deposited in the mails, postage prepaid, and (b) in the case of delivery
by hand or telecopy, upon delivery.
10. Agreement; Amendment.
--------------------
This Agreement supersedes any prior Agreements or understandings, oral or
written, between the parties hereto and represents their entire understanding
and Agreement with respect to the subject matter hereof, and this Agreement can
be amended, supplemented or changed, and any provision hereof can be waived,
only by written instrument making specific reference to this Agreement which is
signed by the party against whom enforcement of any such amendment, supplement,
modification or waiver is sought.
6
<PAGE> 6
11. Severability.
------------
In the event of the invalidity or unenforceability of any one or more
provisions of this Agreement, such illegality or unenforceability shall not
affect the validity or enforceability of the other provisions hereof and such
other provisions shall be deemed to remain in full force and effect. The
Emmployee specifically acknowledges and agrees that the provisions of Section 5
hereof are reasonable and valid in all respects. If any tribunal having
jurisdiction determines that any of the provisions of Section 5 or any part or
parts thereof, is invalid or unenforceable because of the duration or scope of
such provision, such tribunal shall have the power to reduce the duration or
scope of such provision, and in its reduced form, such provision shall then be
enforceable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Employment Agreement the day and year first above written.
LION GOLF OF OREGON, INC.
By:
-----------------------------
EMPLOYEE:
--------------------------------
7
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
Agreement, dated December 29, 1995, by and between Lion Golf of Oregon,
Inc., a Oregon corporation with offices at 63025 O.B. Riley Road #20, Bend,
Oregon 97701 and James Cole, an individual residing at ________________________
(hereinafter referred to as the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Employee mutually desire to enter into an
Employment Agreement with respect to the Employee's employment by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration the receipt of which
is hereby acknowledged, the Company and the Employee hereby agree as follows:
1. Term and Position.
------------------
The Company agrees to employ the Employee as its Chief Operating
Officer for the period (the "Employment Period") commencing on the date hereof
and terminating five years from the date hereof, which term shall be subject to
renewal at the mutual agreement of the parties. The Employee accepts such
employment, agrees to perform the functions and duties incident to such
position, and further agrees to perform such other services consistent with his
position as shall from time to time be assigned to him by, or pursuant to
authorization of, the Board of Directors of the Company and agrees to devote
substantially all of his business time, skill and attention to such services.
2. Compensation and Benefits.
-------------------------
a. The Company shall pay to the Employee, and the Employee
shall accept from the Company, for the Employee's services hereunder during the
Employment Period, (i) a base salary of $60,000 per year, payable periodically
in accordance with the customary payroll practices of the Company, and (ii)
such bonus each year as shall be determined by the Board of Directors of the
Company or any appropriate committee thereof.
b. The Company agrees to reimburse the Employee for all
reasonable business expenses incurred by him during the Employment
1
<PAGE> 2
Period in connection with the performance of his services hereunder, including
expenses incurred in connection with activities associated with promoting the
business of the Company that are authorized from time to time by the Board of
Directors, upon presentation by Employee of an accounting of such expenses in
such detail as may be required by then-applicable tax laws.
c. The Employee shal participate at the Company's expense on
the same basis, subject to the same qualifications, as other senior executives
of the Company in any pension, savings, life insurance, health insurance,
hospitalization, long-term disability, and other fringe benefit plans and
vacation policies (the "Fringe Benefits") in effect from time to time with
respect to senior executives of the Company.
d. Employee shall also receive options to purchase up to
10,000 shares of Quadrax Corporation Common Stock under Quadrax Corporation's
stock option plan, at an exercise price equal to the closing bid price of such
Common Stock on the date hereof. Such options shall all vest upon the first
anniversary date hereof provided that Employee is then an employee of the
Company.
3. Termination.
-----------
a. For Cause.
---------
This Agreement may be terminated immediately by the Company
upon the occurrence of any of the following events: (i) the death of Employee;
(ii) Employee's loss of legal capacity for any reason; (iii) any act committed
by the Employee against the Company, its subsidiaries or divisions constituting
(A) fraud, (B) misappropriation of corporate opportunity, (C) self-dealing
without the express prior approval of the Board of Directors of the Company,
(D) embezzlement of funds, or (E) felony conviction for conduct involving moral
turpitude or other criminal conduct materially and adversely affecting the
operations of the Company, its subsidiaries or divisions; (iv) the breach or
default by Employee in the performance of any material covenant on the part of
the Employee to be performed under this Agreement, which breach or default
shall continue for a period of fourteen (14) days after receipt of written
notice from the Company; (v) chronic alcoholism or any other form of drug
addiction which impairs the Employee's ability to perform his duties hereunder;
or (vi) disability of Employee, which prevents Employee from performing any
material amount of his duties hereunder, and such disability is expected, in
the opinion of a physician engaged by the Company for such purpose, to continue
in excess of 120 days. In the event of disability, Employee shall be entitled
to cause his own physician to make an examination of Employee, and if such
personal physician disagrees with the opinion of the Company's doctor, then the
two doctors shall together appoint a third physician to examine Employee, and
the determination of such third physician shall be final. The fees
2
<PAGE> 3
of such third physician shall be paid by the Company.
b. Without Cause.
-------------
This Agreement may be terminated by the Company at any time
without cause, subject to the payments set forth in subsection 3.c below.
c. Compensation Upon Termination.
-----------------------------
In the event that Employee is terminated with cause, as set
forth in Section 3.a above, then the obligation of the Company to compensate
Employee shall cease with the payment of all amounts accrued (including
reimbursement of expenses properly incurred by Employee prior to termination)
as of such date. In the event that Employee is terminated without cause, as
set forth in Section 3.b above, then the Company shall be obligated to pay
Employee his regular salary and benefits (but not including any discretionary
bonuses in the event termination occurs prior to the seventh month of any
contract year) through the normal term of this Agreement.
4. Breach, Notice.
--------------
The Company and the Employee agree that neither party shall have the
right to terminate this Employment Agreement by reason of any breach by the
other party of the provisions hereof unless written notice specifying such
breach shall have been given to the other party and unless the other party
shall continue such breach for at least fourteen days after the receipt of such
notice.
5. Non-Disclosure of Confidential Information.
------------------------------------------
a. The Employee acknowledges that it is the policy of the
Company to maintain as secret and confidential all valuable and unique
information heretofore or hereafter acquired, developed or used by the Company
relating to the business, operations employees and customers of the Company,
which information gives the Company a competitive advantage in its industry,
and which information includes technical knowledge, know-how or trade secrets
and information concerning the operations, sales, personnel, suppliers,
customers, costs, profits, markets, pricing policies, "Confidential Material"
(as hereinafter defined), and the results of any investigations or experiments
of the Company (such information is hereinafter referred to as "Confidential
Information", provided, that confidential Information shall not include any
foregoing items which are in the public domain or which are available from
third-party sources without any violation of this Agreement). The Employee
recognizes that the services to be performed by the Employee are special and
unique, and that by reason of his duties he will acquire Confidential
Information. The Employee recognizes that all such Confidential Information is
the sole and exclusive property of the Company. In consideration of the
Company's
3
<PAGE> 4
entering into this Agreement, the Employee agrees that:
i. he shall never for so long as such information is
valuable and unique (but in no case for longer than five years following the
termination of Employee's employment by the Company), directly of indirectly,
use, publish, disseminate or otherwise disclose any Confidential Information
obtained during his employment by the Company without the prior written consent
of the Company's Board of Directors, it being understood that this subparagraph
shall survive the term of this Agreement;
ii. the parties hereto agree that the Employee, during
the course of his employment, may be directed to perform services for the
benefit of a customer of the Company, such customer shall be deemed a third
party beneficiary of the provisions of this Agreement and, in addition to the
proscriptions contained in subparagraph (i) above, shall not disclose any
"confidential information" which relates to the customer (defined with respect
to such customer in the same manner as for the Company) to any person, firm or
enterprise without the prior written consent of the Company and such customer;
iii. during the term of his employment by the Company,
he shall exercise all due and diligent precautions to protect the integrity of
the Company's customer lists, mailing lists and sources thereof, statistical
data and compilations, Agreements, contracts, manuals or other documents and
any and all other materials embodying any Confidential Information (the
"Confidential Materials") and, upon termination of his employment hereunder, or
at such earlier time as the Company may so request, he shall immediately return
to the Company all such Confidential Materials (and copies therof) then in his
possession or control;
iv. the Employee agrees that he will at all times
comply with all security regulations (a) in effect from time to time at the
Company's or its customers' premises and (b) in effect for materials belonging
to the Company or its customers; and
v. the Employee agrees that the provisions of this
subsection (a) are reasonably necessary to protect the proprietary rights of
the Company in the Confidential Information and its trade secrets, goodwill and
reputation.
b. The Employee acknowledges that any breach of the
provisions of this Section 5 can cause irreparable harm to the Company for
which the Company would have no adequate remedy at law. In the event of a
breach or threatened breach by the Employee of any of such provisions, in
addition to any and all other rights and remedies it may have under this
Agreement or otherwise, the Company may immediately seek judicial action deemed
necessary, including, without limitation, temporary and preliminary injunctive
relief.
4
<PAGE> 5
6. Arbitration.
-----------
Any controversy or claim arising out of or in connection with this
Employment Agreement or any breach of this Employment Agreement or any default
under this Employment Agreement shall be settled by arbitration in the State of
Oregon in accordance with the rules of the American Arbitration Association and
judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction.
7. Successors and Assigns.
----------------------
This Employment Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, administrators,
executors, successors and assigns; provided, however, that this Employment
Agreement may not be assigned by either party hereto.
8. Governing Law.
-------------
This Employment Agreement shall be governed by, and construed in
accordance with, the laws of the State of Oregon.
9. Notice.
------
Any notice required hereunder shall be delivered by hand, sent by
telecopy, or sent by registered or certified mail, addressed to the other party
hereto at its address set forth above or at such other address as notice
thereof shall have been given in accordance with the provisions of this Section
9. Any such notice shall become effective (a) when mailed, three days after
having been deposited in the mails, postage prepaid, and (b) in the case of
delivery by hand or telecopy, upon delivery.
10. Agreement; Amendment.
--------------------
This Agreement supersedes any prior Agreements or understandings, oral
or written, between the parties hereto and represents their entire
understanding and Agreement with respect to the subject matter hereof, and this
Agreement can be amended, supplemented or changed, and any provision hereof can
be waived, only by written instrument making specific reference to this
Agreement which is signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought.
11. Severability.
------------
In the event of the invalidity or unenforceability of any one or more
provisions of this Agreement, such illegality or unenforceability shall not
affect the validity or enforeceability of
6
<PAGE> 6
the other provision hereof and such other provisions shall be deemed to remain
in full force and effect. The Employee specifically acknowledges and agrees
that the provisions of Section 5 hereof are reasonable and valid in all
respects. If any tribunal having jurisdiction determines that any of the
provisions of Section 5 or any part or parts thereof, is invalid or
unenforceable because of the duration or scope of such provision, such tribunal
shall have the power to reduce the duration or scope of such provision, and in
its reduced form, such provision shall then be enforceable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Employment Agreement the day and year first above written.
LION GOLF OF OREGON, INC.
By:
---------------------
EMPLOYEE:
-------------------------
7
<PAGE> 7
the other provision hereof and such other provisions shall be deemed to remain
in full force and effect. The Employee specifically acknowledges and agrees
that the provisions of Section 5 hereof are reasonable and valid in all
respects. If any tribunal having jurisdiction determines that any of the
provisions of Section 5 or any part or parts thereof, is invalid or
unenforceable because of the duration or scope of such provision, such tribunal
shall have the power to reduce the duration or scope of such provision, and in
its reduced form, such provision shall then be enforceable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Employment Agreement the day and year first above written.
LION GOLF OF OREGON, INC.
By:
---------------------
EMPLOYEE:
-------------------------
7
<PAGE> 1
QUADRAX
Advanced Materials Systems
For: Quadrax Corporation
Contact: Edward A. Stoltenberg
401-683-6600
FOR IMMEDIATE RELEASE
QUADRAX COMPLETES ACQUISITION OF LION GOLF OF OREGON, INC.
PORTSMOUTH, RI, January 3, 1996... Quadrax Corporation (NASDAQ:QDRX) announced
today the completion, on December 28, 1995, of its previously announced
acquisition of Lion Golf of Oregon, Inc. Lion Golf, formerly a privately-held
brand marketer of value priced golf putters, drivers, irons and accessories, is
expected to report revenues of approximately $3.5 Million for its 1995 fiscal
year just ended. This will bring 1995 revenues for the combined entities, when
reported on a pro forma basis, to over $7.5 Million. Terms of the acquisition
are favorable to Quadrax, since payment of the purchase price is directly
related to the profitability of the Lion Golf operations.
The Lion Golf operations will assume Quadrax's existing McManis Sports
Associates golf business, as well as the Wimbledon tennis operations, to form a
new Quadrax Sports Consumer Products Division. This new division will be headed
up by Kim Cole, founder and driving force behind the success of Lion Golf, who
will assume the role of Chief Executive Officer at Quadrax Sports. The combined
businesses will be headquartered at the facilities of Lion Golf in Bend,
Oregon.
Mr. Cole was quoted as saying, "I have enjoyed over 15 years of success as an
independent owner/operator in the golf club business, but the industry is
changing rapidly. Big names that were unheard of when I started in this
business have emerged as major national, and even international brands. At the
same time, national sporting goods chains are redefining the way sports
enthusiasts buy their equipment. Golf has become Big Business."
Mr. Cole continued, "I'm excited to be merging with Quadrax Corporation because
it will give Lion Golf the financial depth and the technology edge needed to
play and win by the new rules of national sporting goods distribution. The
addition of the existing quadForce club designs, together with the other new
designs planned for introduction later this year, will extend the Lion lines
into the premium and ultra-premium product categories. This expanded product
line, driven by cutting edge Quadrax materials technology, will enable us to
add new channels of distribution, as well as increase our presence in our
established markets."
Quadrax Corporation
300 High Point Avenue, Portsmouth, RI 02871
Tel: (401) 683-6600 - Fax: (401) 683-6606
<PAGE> 2
Mr. Cole further stated, "I will be introducing the new Quadrax Sports Consumer
Products Division to my friends and associates in the sporting goods industry
at the upcoming PGA Show in Orlando, and at the Supershow in Atlanta, where we
will also be unveiling three new additions to our CONQUEROR brand of quadrax
tennis racquets. Look also for a string of exciting new golf club designs to be
introduced throughout the 1996 playing season, as we position quadrax material
as the new force in golf...and tennis."
Jim Palermo, Chairman and Chief Executive of Quadrax Corporation was also
quoted as saying, "We are pleased to be adding the Cole family to our team at
the new Quadrax. Kim and his son, Jim, who will be serving as President of our
Quadrax Sports, have the kind of entrepreneurial spirit and specialized product
distribution expertise that will be key to our success at Quadrax as we move
aggressively to build shareholder value in 1996 and beyond".
Mr. Palermo continued, "The merger of Quadrax Sports and Lion Golf is important
to Quadrax and its shareholders for many reasons. First, it gives us a solid
base of recurring revenues upon which to build future growth. Second, it saves
us a minimum of $1.5 Million in captial that we would otherwise have to spend
to build our own distribution network for our quadForce products. Third, it
gives us instant presence, nationwide, that would otherwise have taken us many
months to build. Fourth, it not only gives us a marketing and distribution
solution for our proprietary golf products, but also gives us a distribution
solution for our Wimbledon CONQUEROR tennis racquets. We see signs that the
tennis industry is recovering and the Lion acquisition will help position us to
take advantage of the rebound."
Mr. Palermo concluded, "1996 is shaping up as an exciting year for Quadrax
Corporation. The investiture of our Quadrax Sports unit with an established
distribution network marks the consummation of initiatives into consumer brand
marketing that began in 1995. This new Consumer Products Division will parallel
ongoing efforts to introduce Quadrax material into high performance sporting
goods through strategic alliances with established brand marketers, such as
Brine (lacrosse and soccer) and Cannondale (bicycles). Through a carefully
coordinated program of internal initiatives and future strategic acquisitions,
some of which are presently under evaluation, we expect to establish Quadrax
Sports as a new force in sporting goods and position Quadrax Corporation for
rapid expansion into other markets."
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Quadrax Corporation is a 21st Century Materials Company that makes and markets
products made using its proprietary thermoplastic composite fabrication and
manufacturing processes.
