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) June 19, 1996
QUADRAX CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 0-16052 05-0420158
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
300 High Point Avenue, Portsmouth, RI 02871
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (401) 683-6600
Not Applicable
(Former Name or Former Address, If Changed Since Last Report.)
ITEM 2. Acquisition or Disposition of Assets.
On June 19, 1996, Quadrax Corporation's 80% owned subsidiary Quadrax V, Inc.,
(the "Company"), completed its acquisition of certain assets of Vega, U.S.A.,
Inc., ("Vega"), pursuant to the terms of an Asset Purchase Agreement.
Pursuant to this purchase agreement, the Company acquired various fixed
assets, technological development rights and prospective customers
for the manufacture and distribution of hockey sticks, snow boards and
in-line skates. As consideration for these assets, Quadrax Corporation
paid $200,000 in cash and also agreed to pay additional cash to Vega on
certain production and performance benchmarks being achieved by the
Company.
Quadrax Corporation also entered into a five-year consulting agreement
with Sam Rabinowitz, the founder of Vega, pursuant to which Mr. Rabinowitz
will assist the Company in commercializing and marketing the product
lines purchased from Vega. As consideration for the Consulting
Agreement (which includes non-competition provisions) Quadrax Corporation
issued Mr. Rabinowitz 300,000 shares of Common Stock, and may issue Mr.
Rabinowitz up to an additional 400,000 shares of Common Stock and
warrants to purchase up to 250,000 shares of Common Stock at the market
price at the time of the grant of the warrant, upon certain production and
performance benchmarks being achieved by the Company.
This acquisition is being accounted for as a purchase for accounting
purposes.
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 Asset Purchase Agreement dated June 19, 1996 between
Quadrax Corporation and Vega, U.S.A. Inc.
2.2 Consulting Agreement dated June 19, 1996 between
Quadrax Corporation and Sam Rabinowitz.
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
July 02, 1996 /s/ James J. Palermo
(Date) James J. Palermo, Chairman
and Chief Executive Officer
July 02, 1996 /s/ Edward A. Stoltenberg
(Date) Edward A. Stoltenberg,
Chief Financial Officer
and Principal Accounting
Officer
QUADRAX/VEGA ASSET PURCHASE AGREEMENT
AGREEMENT made as of the 14th day of June, 1996 by and among
Quadrax Corporation, a Delaware corporation having its principal
place of business at 300 High Point Avenue, Portsmouth, Rhode
Island 02871 ("Quadrax"), Quadrax V, Inc., a subsidiary of
Quadrax incorporated under the laws of the State of Delaware
("Newco"), VEGA U.S.A. Inc., a New York corporation having its
principal place of business at 3922 16th Avenue, Brooklyn, New
York 11218 ("Seller"), and Sam Rabinowitz, a citizen and resident
of Canada having his primary residence address at 29 Frontenac
Avenue, Toronto, M5M 1Z4 Canada (the "Stockholder"), who is the
holder of 100% of the shares of the issued and outstanding
capital stock of Seller.
W I T N E S S E T H:
WHEREAS, based upon the representations, agreements and
warranties herein made by Seller and the Stockholder and subject
to the terms and conditions contained in this Agreement, Quadrax
wishes to purchase substantially all of the assets of Seller, as
hereinafter described, by means of a sale to Newco; and
WHEREAS, based upon the representations, agreements and
warranties herein made by Quadrax and Newco and subject to the
terms and conditions contained in this Agreement, the Stockholder
wishes to cause Seller to sell substantially all of its assets to
Newco;
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
PURCHASE AND SALE OF ASSETS
1.1 Sale and Purchase. Subject to the terms and
conditions set forth in this Agreement, at the Closing (as
defined in Article 9 hereof), Newco will purchase, and Seller
will sell, convey, transfer, assign, make available to and
deliver to Newco the following particular assets (together, the
"Assets"):
(a) Seller's entire right, title and interest in
and to those items of machinery and equipment specified on
Schedule 1.1 hereto.
(b) Seller's entire right, title and interest in
and to all other assets, tangible and intangible, licenses,
permits, tradenames, trademarks, knowhow, trade secrets,
laboratory, engineering and other books, records and methods,
which are utilized in the conduct of the business of Seller
and/or Power Sports Inc. and Express Line Inc. in the production
of pultruded fiberglass hockey sticks ("Sticks"), snowboards
("Snowboards") and flexible spring mounted in line roller skates
("Skates"), and which are specified on Schedule 1.1 hereto or in
any attachment thereto. Schedule 1.1 includes as an attachment a
written description and technical drawings in sufficient detail
such that Quadrax personnel can manufacture Sticks, Snowboards
and Skates to Seller's designs and specifications without the
personal presence of Stockholder at Quadrax's plant.
1.2 Excluded Assets. Specifically excluded from the
sale to Quadrax are the following assets of Seller which shall
remain the property of Seller after Closing:
Office furniture, general office equipment and
supplies or real property interests.
1.3 No Assumption of Any Liabilities. At the Closing
Quadrax shall purchase and Seller shall sell unencumbered title
to all of the Assets (other than any encumbrances created by
Quadrax), and the Seller shall remain solely liable for all
liabilities of Seller, current or long-term, matured or
contingent, including, by way of example only and not of
limitation, all of Seller's accounts payable, accrued payroll as
of the Closing Date, accrued payroll and income taxes, customer
deposits, accrued interest, leases payable, institutional lender
debt, employment agreements or arrangements, and liabilities
arising under or related to any applicable federal, state or
local law, regulation or ordinances and Seller and Stockholder
shall indemnify and hold harmless Quadrax for any such
liabilities for which Quadrax shall nevertheless become liable to
third parties. The parties hereto waive compliance with the New
York bulk sale law in reliance upon this Section 1.3.
1.4 Purchase Price and Payment.
As the purchase price for the Assets at Closing, Quadrax
will deliver to the Seller (or as directed in writing by the
Seller) at the Closing the sum of Two Hundred Thousand Dollars
U.S. ($200,000), payable by wire transfer or certified check.
1.5 Contingent Payments After Closing.
(a) First Additional Cash to Seller. As additional
consideration to Seller, Quadrax shall pay to Seller Fifty
Thousand Dollars ($50,000) immediately upon receipt by Quadrax of
a written purchase order for at least Ten Thousand (10,000)
Snowboards from Nissho Iwai America Corporation or an affiliate
thereof (together, "NIAC") and NIAC's written acceptance of an
actual production sample Snowboard, on terms reasonably
commercially acceptable to Quadrax. Such terms shall provide for
a gross margin (as defined herein) to Quadrax of at least 30%,
and the Snowboards shall have been produced to the point of such
purchase order within the Budget for the Snowboards. The purchase
order from NIAC need not require delivery of all 10,000
Snowboards at one time or one place, and NIAC's commitment to
purchase the entire 10,000 Snowboards may be contingent upon
Quadrax's ability to deliver a lesser quantity meeting NIAC's
quality requirements. The Budget is attached hereto as Exhibit
1.5, and includes separate sub-budgets for Snowboards, Sticks and
Skates.
(b) Second Additional Cash to Seller. At the
completion of six months' reasonably satisfactory production of
Snowboards, following receipt of the purchase order described in
Section 1.5(a), Quadrax shall pay Seller a further $50,000 cash.
(c) Royalties. Quadrax shall pay, or shall cause
Newco to pay to Seller, royalties on aggregate net sales of the
Snowboards, Sticks and Skates, as follows:
Gross Margin on Net Sales Percentage of Net Sales
>50% 10%
>40% but <=50% 8%
>30% but <=40% 6%
>20% but <=30% 4%
>10% but <=20% 2%
<=10% 0%
Such royalties shall be payable monthly, beginning at the end of
the first full calendar month following Closing, based upon the
prior calendar month's sales, and shall be adjusted at the end of
each twelve-month period following the Closing Date to account
for gross margin on an annualized basis. If Quadrax has overpaid
royalties as of such annual determination, then such overpayment
shall be offset from the next royalties due until fully recouped,
or, if such overpayment occurs at the end of the royalty period,
the Seller shall immediately refund the difference to Quadrax.
Such royalties shall cease accruing on the seventh anniversary of
the Closing Date. In addition to the foregoing, sales to
customers first introduced to Quadrax by Stockholder (other than
NIAC) shall continue to accrue royalties pursuant to the
foregoing terms for a period of seven years from the date of the
first purchase order received from such customer.
The royalties set forth above shall be subject to prior
setoff by Quadrax for all direct development costs of the
Snowboards, Skates and Sticks commercially reasonably incurred by
Quadrax which are in excess of the combined Budget for all three
such products.
No royalties shall be paid or payable with respect to any
sales by Quadrax or Newco of hockey sticks, snowboards or in-line
roller skates which are not made from or substantially based upon
designs and specifications included in the Assets.
For purposes of this Agreement, "gross margin" shall mean
sales net of returns and uncollectible accounts, less (i) all
direct material costs, (ii) all direct labor costs (including
Quadrax's standard allocation for fringe benefits), (iii) direct
overhead, (iv) book depreciation of machinery employed, and (v)
an allocation of Quadrax corporate overhead which shall equal 20%
of net sales of Sticks and Snowboards and 5% of net sales of
Skates.
1.6 Consulting and Non-Competition Agreement. At the
Closing, Quadrax and Stockholder shall enter into a five-year
consulting and non-competition agreement in the form of Exhibit
1.6 hereto (the "Consulting Agreement").
1.7 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 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 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 Section 1, or otherwise to carry out
the intent and purposes of any of the transactions contemplated
by this Agreement.
1.8 Allocation of Purchase Price. The Purchase Price
shall be allocated as agreed by Quadrax and Seller at Closing,
and reported to the IRS on Form 8594.
1.9 Organization of Newco. At Closing, Newco shall have
an authorized and outstanding capitalization of 1,000 shares of
common stock, which shall be owned 801 shares by Quadrax and 199
shares by the Stockholder or his nominee, which nominee must be
controlled by Stockholder. Newco shall have one director, appointed
by Quadrax, and officers as appointed by Quadrax. Stockholder
shall have access upon demand, during normal business hours, to
all books and records of Newco, for any purpose rationally
related to the purposes of this Agreement, and shall have the
right to have the same inspected by his attorneys and accountants
and to make copies of or extracts therefrom. Quadrax shall also
notify Stockholder of any dividends proposed to be paid by Newco,
without demand therefor.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER AND STOCKHOLDER
Seller and Stockholder, jointly and severally, represent and
warrant, to the extent applicable to the Assets of Seller:
2.1 Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the state of New York and 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. Seller is qualified to do business in all
states where the failure to qualify would subject Seller to any
material and adverse effect on its properties or business.
Seller has offices or business operations in New York only.
Seller is fully in compliance with, and is not in default under,
any terms of its charter, bylaws or minutes of any meeting of its
board of directors or stockholders.
2.2 [NOT USED]
2.3 No Undisclosed Liabilities. Except as described
in Schedule 2.3 hereto, Seller has no liabilities or obligations
(whether absolute, accrued, contingent or otherwise and whether
due or to become due), which will not be discharged at or before
Closing and which will continue to encumber the Assets after
Closing or otherwise subject Quadrax or Newco to any claim by any
person whatsoever.
2.4 Accounts Receivable. Schedule 2.4 hereto presents
an accurate and complete listing of any accounts receivable of
Seller as of June 1, 1996 which constitute Assets. Except as set
forth on Schedule 2.4, 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 Seller'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.
There are no outstanding "rights to return" granted to obligors
existing on any current accounts receivable, nor does Seller have
any obligations to accept returns or restock inventory related to
such accounts receivable, nor does Seller 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.
2.5 Inventory. Schedule 2.5 hereto presents an
accurate and complete list of all inventory by division and type
in existence on June 1, 1996. To the knowledge of Seller, after
diligent inquiry, substantially all such inventory is and will be
of a quality usable and saleable in the ordinary course of
business.
2.6 No Litigation. Except as disclosed in Schedule
2.6 hereto, neither Seller nor Stockholder is engaged in or
threatened with or aware of any situation which could subject
Seller to any litigation, arbitration, claim, challenge or other
legal proceedings or governmental or other investigations
relating to the affairs of Seller or Stockholder, including,
without limiting the generality of the foregoing, any such action
or proceeding by or before contracting officers, arbitrators,
administrative or regulatory agencies.
2.7 Existence of Necessary Assets. There are no
significant assets which Seller uses in the business being
purchased hereunder which are not either owned by Seller 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 from multiple available
vendors.
2.8 Intangible Property. Schedule 2.8 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 Seller or in which it has any interest.
Except as provided in Schedule 2.8, Seller 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 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 2.8, (i) no claims
are pending or overtly threatened 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, know-
how or processes by Seller does not infringe on the rights of any
person.
2.9 Certain Employee Matters. Except as set forth on
Schedule 2.9 hereto, to Seller's knowledge after diligent
inquiry, Seller is in compliance with all applicable laws, rules
and regulations relating to employment practices which could have
an adverse effect on the Assets, Newco or Quadrax, including
without limitation those relating to wages, hours, collective
bargaining, age and sex discrimination and the payment and
withholding of taxes. Except as set forth on Schedule 2.9, Seller
has (i) no employment, consultant or similar contracts with any
person currently in force or in which Seller retains any
liability, and (ii) no controversies pending, threatened or
reasonably anticipated between Seller and any employee, or any
labor union or other collective bargaining unit representing any
of its employees.
2.10 No Conflict With Other Documents. Except as
described in Schedule 2.10 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), the charter
documents or bylaws of Seller, or the minutes of any Board of
Directors meeting of Seller, or any terms of any contract or
instrument to which Seller or Stockholder is a party, or any
judgment, decree or order applicable to Seller or Stockholder or
result in the creation of any lien, charge or encumbrance upon
any of the Assets.
2.11 Authorization, Power. The execution, delivery and
performance of this Agreement by Seller have been duly authorized
by all necessary corporate action on the part of Seller, and the
Stockholder of Seller. This Agreement and the transactions
contemplated hereby, have been approved by a resolution adopted
at a duly constituted meeting of the Board of Directors and
Stockholder of Seller and this Agreement has been duly executed
and delivered by Seller and constitutes a valid and binding
obligation of Seller enforceable in accordance with its terms.
Seller has all requisite corporate power and authority to enter
into, and perform this Agreement.
2.12 Powers of Attorney. No person holds any tax or
other power of attorney from Seller with respect to any matter
affecting the Assets.
2.13 Information. Seller has provided and 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 Seller, and has made available to them such
financial and operating data, documents and other information
with respect to the business, operations, personnel, licenses,
contracts and properties of Seller 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 Seller. No investigations made
by Quadrax and its representatives shall affect the
representations, warranties and/or agreements made by Seller
herein and each such representation, warranty and/or agreement
shall survive any such investigation as set forth in Article 10
hereof.
2.14 Agreements, Backlog, Insurance, Authorizations,
Accounts, Commitments, Properties and Assets. Insofar as any of
the Assets are concerned:
(a) Schedule 2.14(a) hereto accurately lists, as
of June 1, 1996, all current contracts, including purchase
orders, with customers 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. Seller's products and services satisfy the
specifications of such contracts and Seller is not in default of
any of its obligations thereunder, nor as of the date of such
Schedule is Seller 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 Seller of any of the
obligations.
(b) Schedule 2.14(b) hereto accurately lists, as
of June 1, 1996, all insurance policies, including, without
limitation, workers' compensation, now in force relating to
Seller 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 2.14(b), the premiums
for such insurance policies are, as of the date of such Schedule,
and at the Effective Date will be, fully paid or current and
there are no loans outstanding against any of such policies.
(c) Schedule 2.14(c) hereto accurately lists, as
of June 1, 1996, (i) all of the equipment, machinery, vehicles,
furniture, furnishings and fixtures, and leasehold improvements
owned or leased by Seller, (ii) all other items of tangible
personal property (excluding inventories) owned by or leased by
Seller, and (iii) all equipment, machinery, vehicles, furniture,
furnishings and fixtures, leasehold improvements and all other
items of tangible personal property used by Seller 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.
(d) Schedule 2.14(d) hereto accurately lists,
as of June 1, 1996, 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 facilities, to which Seller
is a party or by which its properties or assets may be bound,
together with the principal terms and outstanding balance of
each. Seller 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 Seller 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 Seller of any of the obligations included in such
Schedule, except as set forth on Schedule 2.14(d).
(e) Schedule 2.14(e) hereto accurately lists, as
of June 1, 1996, all certificates, permits, licenses and similar
authorizations relating to the business of Seller (the
"Authorizations") issued by any governmental authority to Seller,
together with a description of each, including the terms under
which each is held. To the best of Seller's knowledge, as of
June 1, 1996, all of the Authorizations are valid and outstanding
and Seller 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 Seller, except as specified in Schedule
2.14(e). As of the date of such Schedule, Seller is not in
violation of any law, rule, regulation, order or governmental
decree, federal, state or local, which would have any adverse
effect on Seller or its operations, nor is it in violation of any
court order, decree or injunction.
(f) Except as set forth in Schedule 2.14(f), as
of June 1, 1996, Seller has no indenture, agreement, contract or
commitment which contains any covenant restricting the nature,
type of or geographic area in which business can be conducted by
Seller or the persons with whom Seller may compete.
(g) As of June 1, 1996, 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 Seller or
Stockholder is a party by which any of the Assets are or may be
bound upon the happening of any act, condition or event.
(h) Except as set forth on Schedule 2.14(h)
hereto, as of June 1, 1996, none of the contracts, leases,
Authorizations or other obligations of Seller would preclude the
transfer of ownership of the Assets 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 Seller's rights under any such contract, lease or
obligation is being contested. Seller 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 2.14 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 Seller or on the
part of any other party thereto, which violation or default would
have an adverse effect on Seller's business, operations,
properties or assets, and Seller has no knowledge of any facts or
circumstances which would reasonably indicate that Seller 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 or assets.
(i) Except as set forth on Schedule 2.14(i),
there are no sales or marketing distribution, representation or
similar contracts or arrangements, whether oral or written,
formal or informal, in effect.
(j) Schedule 2.14 (j) lists all licenses from
third parties held by Seller, all of which such licenses are in
full force and effect, and which licenses will remain in full
force and effect following the change of ownership of Seller's
assets contemplated hereby.
2.15 Taxes. Seller 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 on or before the Closing Date. Such returns and reports
are true, correct and complete in all material respects. Seller
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. There are no tax liens upon any
properties or assets of Seller. Except to the extent set forth in
the Schedule 2.15, 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. Seller is not a party to any tax-sharing or tax
allocation agreement.
2.16 Title to Assets; Condition. Except as set forth
on Schedule 2.16 hereto, Seller has good, valid and marketable
title to the Assets, including any Assets acquired by Seller from
Power Sports, Inc. and/or Express Line, Inc., free and clear of
any liens, claims, charges, pledges, security interests, options
to purchase, encumbrances or equitable interests of any nature
whatsoever, and on the Closing, Quadrax shall receive good,
marketable and absolute title to the Assets, free and clear of
all pledges, liens, claims, charges, encumbrances, restrictions
and assessments whatsoever created or suffered by or through
Seller. Except as set forth in Schedule 2.16, all of the items of
tangible personal property of Seller constituting Assets are, as
of the date of such Schedule, in overall good operating condition
for items of equipment of their type and age. Each of the leases
pursuant to which Seller leases personal property is in good
standing, valid and effective and enforceable by Seller 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 Seller's obligations thereunder.
2.17 Employee Benefit Plans. Seller has no employee
benefit plans of any description in place.
2.18 Absence of Questionable Payments. Neither Seller
nor any director, officer, stockholder, agent, employee,
consultant, or any other person associated with or acting on
behalf of Seller, 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.
2.19 No Pending Transactions. Except for the
transactions contemplated by this Agreement, neither Seller nor
Stockholder is a party to or bound by or the subject of any
agreement, undertaking or commitment (i) which provides for
Seller 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 Seller to sell,
lease or exchange all or substantially all of its property and
assets to any other corporation or person.
2.20 Brokers. No broker or finder, or other party or
agent performing similar functions, has been retained by Seller
or is entitled to be paid based upon any agreements,
arrangements, or understandings made by Seller in connection with
the transactions contemplated by this Agreement, and no brokerage
fee or other commission has been agreed to be paid by Seller on
account of the transactions contemplated hereby.
2.21 The Stockholder. The Stockholder owns all of the
issued and outstanding shares of Seller's capital stock, free and
clear of all agreements, charges, options, liens, security
interests, pledges, claims, restrictions and encumbrances of any
nature whatsoever except marital property interests of
Stockholder's spouse and except as stated in this Section 2.21.
There are outstanding no rights to purchase of any kind affecting
any shares of the capital stock of Seller, whether or not
outstanding except as stated in this Section 2.21.
The Stockholder has full right, power and authority to
execute, deliver and perform his obligations under this Agreement
and the Consulting and Non-Competition Agreement to which he is a
party. This Agreement has been duly executed and delivered by
the Stockholder and constitutes, and the Consulting and Non-
Competition Agreement to be signed by Stockholder when executed
and delivered will constitute, the valid and legally binding
obligation of Stockholder, 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF QUADRAX
Quadrax represents and warrants to Seller and 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 not subject to any material and
adverse effect on its properties, business, prospects and
financial condition for failure to be qualified in any other
jurisdiction.
3.2 Capitalization. The authorized capital stock of
Quadrax consists of 90,000,000 shares of Common Stock, $0.000009
par value, and 10,001,172 shares of Preferred Stock, $0.01 par
value. As of April 1, 1996, there were issued and outstanding
21,737,842 shares of Common Stock. All of such outstanding
shares of Quadrax Common Stock are validly issued, fully paid and
non-assessable and are free of any preemptive rights. As of June
13, 1996, there were issued and outstanding 3,500 shares of Class
A Preferred Stock - Series B, which entitle the holder to convert
each share into common stock at a discount of 25% to the market
price of the Common Stock, subject to a floor price of $.75 and a
ceiling price of $1.50. Each share of Series B stock has a
conversion value of $1,000. At June 13, 1996, Quadrax also has
outstanding $1,250,000 of convertible debentures which are
convertible into Common Stock at a discount of 30% to the market
price of the Common Stock.
3.3 Subsidiaries and Investments.
(a) Quadrax has no other equity interest or other
interest in any corporation, partnership, joint venture or other
entity other than Newco, Quadrax Advanced Materials, Inc. and
Lion Golf of Oregon, Inc. (the "Subsidiaries").
3.4 Disclosure Documents. Quadrax has delivered to
Stockholder its Form 10-KSB for the year ended December 31, 1996
and Form 10-QSB for the quarter ended March 31, 1996. The
information contained in such reports, 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 the report of Livingston & Haynes which
accompanies such financial statements. There have been no
material adverse changes in the operating or financial condition
of Quadrax since March 31, 1996.
3.5 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, the charter documents or bylaws of Quadrax or Newco, or any
terms of any contract or instrument to which Quadrax or Newco is
a party or by which it is bound, or any judgment, decree or order
applicable to Quadrax or Newco, or result in the creation of any
lien, charge or encumbrance upon any of the properties or assets
of any of Quadrax or Newco.
3.6 Authorization, Power. The execution, delivery and
performance of this Agreement by Quadrax and Newco have been duly
authorized by all necessary corporate action on the part of
Newco, Quadrax and Quadrax in its capacity as the majority
stockholder of Newco. This Agreement and the transactions
contemplated hereby, have been approved by a resolution adopted
at duly constituted meetings of the Board of Directors of each of
Quadrax and Newco and this Agreement has been duly executed and
delivered by Quadrax and Newco and constitutes a valid and
binding obligation of Quadrax and Newco enforceable in accordance
with its terms. Quadrax and Newco each have all requisite
corporate power and authority to enter into, and perform this
Agreement. No approval of the stockholders of Quadrax is required
to authorize Quadrax to enter into or perform its obligations
pursuant to this Agreement or any Exhibit hereto.
3.7 Information. Quadrax has provided and shall
provide Seller 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 Quadrax, 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 Quadrax as may be required herein or as Seller or
its representatives have requested or shall from time to time
request, and Seller or its representatives have been and will be
entitled to consult with the representatives, officers, employees
and agents of Quadrax. No investigations made by Seller and its
representatives shall affect the representations, warranties
and/or agreements made by Quadrax herein and each such
representation, warranty and/or agreement shall survive any such
investigation as set forth in Article 10 hereof.
3.8 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.
3.9 Brokers. No broker or finder, or other party or
agent performing similar functions, has been retained by Quadrax
or is entitled to be paid based upon any agreements,
arrangements, or understandings made by Quadrax in connection
with the transactions contemplated by this Agreement, and no
brokerage fee or other commission has been agreed to be paid by
Quadrax on account of the transactions contemplated hereby.
3.10 Approval of Board of Directors. The Board of
Directors of Quadrax and of Newco have approved the Agreement and
the transactions contemplated hereby.
ARTICLE 4
COVENANTS OF SELLER AND STOCKHOLDER
Seller and Stockholder, jointly and severally, 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: (a) Seller's business will be conducted only in the
ordinary course; (b) it shall not incur any liability for
borrowed money, encumber any of the Assets or enter into any
agreements relating to the incurrence of additional debt; (c) 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; (d) 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; (e) 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 Seller is a party or
by which any of the Assets may be bound.
4.2 Information. Seller will provide to Quadrax, and
to its respective officers, accountants, counsel and other
representatives full access, during normal business hours
throughout the period prior to the Effective Date, to all the
plants, warehouses, properties, books, contracts, commitments,
records and accounts of Seller. Seller will furnish to Quadrax
during such period all such information concerning Seller and its
business and properties as Quadrax may reasonably request.
4.3 Consents. Seller 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 2.14 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. Seller will provide written
notice to Quadrax of any litigation, judicial or administrative
proceeding or governmental investigation which arises, or to the
knowledge of Seller, is threatened or in prospect, after the date
of this Agreement and prior to the Closing Date, against or
specifically relating to Seller or its properties or businesses,
or the transactions contemplated by this Agreement, setting forth
in such notice the facts and circumstances currently available to
Seller with respect to such litigation, proceeding or
investigation.
4.5 Cause Conditions to Be Satisfied. Seller and
Stockholder will use their best efforts to cause all of the
conditions described in Article 7 of this Agreement to be
satisfied.
ARTICLE 5
COVENANTS OF QUADRAX
Quadrax covenants to Seller that, except as otherwise
consented to in writing by Seller 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
business as it has been heretofore conducted.
5.2 Information. Quadrax shall provide Seller,
Stockholder, its counsel and other representatives full access,
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 Quadrax. Quadrax
will furnish to Seller during such period all such information
concerning Quadrax and its business and properties as Seller may
reasonably request.
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.
5.4 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.
5.5 Notice of Litigation. Quadrax will provide
written notice to Seller of any 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 or its
properties or businesses, 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.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Set-Off. Any amount or amounts acknowledged in
writing or adjudicated to final judgement to be due Quadrax from
the Seller or Stockholder as Indemnifying Parties under Article
10 hereof may be recovered by Quadrax, at Quadrax's option, by
set-off against amounts due to the Seller or the Stockholder
under the post-closing payments to be made to the Seller or the
Stockholder hereunder.
6.2 Tax Matters.
The Parties agree that from and after the date hereof:
(a) Refunds. The Seller shall have the right to
receive any tax refunds or adjustments in revenues, income and
expenses relating to periods prior to the Closing Date.
(b) Tax Returns. The parties hereto shall cooperate
with one another to prepare and file all requisite federal, state
and local tax returns disclosing the consummation of the
transactions contemplated hereunder in a consistent manner and as
a taxable transaction under the Code, and Seller shall remain
liable for its pre-closing tax liabilities.
(c) Taxes on Sale. All income taxes payable by Seller
or the Stockholder by reason of the sale of the Assets to Quadrax
hereunder shall be paid by the Seller, and Quadrax shall be
liable for any sales, use, transfer or excise taxes payable by
reason of such sale.
6.3 Stock Repurchase Option. Quadrax shall have the right to
purchase all shares of Newco common stock owned by the
Stockholder (or his successors or assigns) at any time. Such
repurchase shall be automatically effective upon the tender by
Quadrax to Stockholder of Fifty Thousand (50,000) shares of
Quadrax Common Stock and a warrant to purchase Two Hundred Fifty
Thousand (250,000) shares of Quadrax Common Stock, in the form
attached hereto as Exhibit 1.5, except that the exercise price
shall be the lesser of $4.00 per share or 85% of the fair market
value of the Common Stock on the date of issuance.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS
OF QUADRAX
Unless waived by Quadrax in writing in its sole
discretion, all obligations of Quadrax and Newco 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 Seller and the Stockholder
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 and be true as so made again; Seller and the
Stockholder 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 Quadrax shall
have received from Stockholder a certificate or certificates in
such reasonable detail as Quadrax may reasonably request, dated
the date of the Closing, to the foregoing effect.
7.2 Corporate Authority. All corporate and other
proceedings, including director and stockholder approval,
required to be taken by, or on the part of, Seller to authorize
it to execute, deliver and carry out this Agreement shall have
been duly and properly taken.
7.3 Approvals of Governmental Authorities. All
governmental approvals necessary in the opinion of Quadrax's
counsel to consummate the transactions contemplated by this
Agreement shall have been received and shall not contain any
provision which, in the reasonable judgment of Quadrax, is
unduly burdensome.
7.4 Legal Proceedings. No suit, action or other
proceeding against Quadrax or Seller or their respective officers
or directors, 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 contem-
plated herein, or (ii) which, in the opinion of Quadrax
materially adversely affects the Assets.
7.5 Consents; Contracts. All requisite consents of
any third parties, the absence of any of which consents would
materially and adversely impact Quadrax or the Assets or the
transactions contemplated by this Agreement, shall have been
obtained. All Assets including, without limitation, all
contracts and agreements listed on the Schedules attached hereto,
shall be in full force and effect and shall not be affected by
the consummation of the transactions contemplated hereby.
7.6 Opinion of Counsel. Quadrax shall have received
at Closing the opinion of Jack Weiss, counsel for Seller and the
Stockholder, dated the date of Closing, in form and substance
satisfactory to Quadrax and its counsel, to the effect that (a)
Seller is a corporation duly organized, validly existing and in
good standing under the laws of New York 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) Seller and Stockholder
each have all requisite power and authority to enter into and
perform this Agreement; (c) this Agreement has been duly
authorized, executed and delivered by Seller and Stockholder and
is a valid and binding obligation of Seller and Stockholder, each
Exhibit attached hereto has been duly authorized and executed by
Seller, or the Stockholder, as applicable, and each such
agreement is a valid and binding obligation of Seller or
Stockholder, as applicable, 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
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 Seller or any Stockholder,
(ii) conflict with any of the terms, conditions or provisions of
the charter or bylaws of Seller, 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, lease, license
other debt instrument or any other material instrument or
agreement to which Seller or Stockholder is a party or to which
any of the Assets is subject; (e) except as set forth in any
Schedule hereto, there are no pending legal proceedings to which
Seller is a party or of which any of the Assets are subject and,
insofar as is known to such counsel, no such proceeding is
threatened; and (f) Stockholder is the sole stockholder of
Seller. In rendering such opinion, such counsel may reasonably
rely on certificates of officers of Seller, opinions of other
counsel and such other evidence as they may deem necessary or
desirable, provided that counsel for Seller shall state that such
certificates and opinions are satisfactory in form and substance
for such purpose.
7.10 Due Diligence, Adverse Developments. As of the
Closing, there shall not have been any material adverse changes
in the Assets, and no event has occurred which could be
reasonably expected to have a materially adverse effect upon the
business of Seller being purchased hereby. Quadrax shall be
satisfied in its sole discretion with the results of its due
diligence investigation of the Seller, the Assets, the proposed
business of Seller and the markets in which its present and
proposed products are to be sold.
7.11 Other Evidence. Quadrax shall have received from
Seller and the Stockholder such further certificates and
documents evidencing due action in accordance with this
Agreement, including certified copies of proceedings of the Board
of Directors and Stockholder of Seller, as Quadrax reasonably
shall request.
7.12 Consulting and Non-Competition Agreement.
Stockholder shall have executed the Consulting and Non-
Competition Agreement with Quadrax in substantially the form of
Exhibit 1.6 hereto.
7.13 Bill of Sale. Seller shall have executed and
delivered to Quadrax such bills of sale, assignments, quitclaims
and other documents as Quadrax may reasonably require in order to
transfer ownership of the Assets.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLER AND STOCKHOLDER
Unless waived by Seller and Stockholder in writing in
their sole discretion, all obligations of Seller and Stockholder
under this Agreement are subject to the fulfillment, prior to or
at the Closing, of each of the 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 Seller shall have received from Quadrax a
certificate or certificates in such reasonable detail as Seller
may reasonably request, signed by the Chief Executive Officer 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 and Newco to
authorize it to execute, deliver and carry out this Agreement
shall have been duly and properly taken.
8.3 Approvals of Governmental Authorities. All
governmental approvals necessary in the opinion of Seller's
counsel to consummate the transactions contemplated by this
Agreement shall have been received and shall not contain any
provision which, in the reasonable judgment of Seller, is unduly
burdensome.
8.4 Legal Proceedings. No suit, action or other
proceeding against Quadrax or Seller or Stockholder, or their
respective officers or directors, 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
reasonable opinion of Seller or Stockholder materially adversely
affects the business, properties, or assets of Quadrax.
8.5 Consents; Contracts. All requisite consents of
any third parties, the absence of any of which consents would
adversely impact Quadrax or Seller or the transactions
contemplated by this Agreement, shall have been obtained.
8.6 Opinion of Counsel to Quadrax and Newco. Quadrax
and Newco shall have delivered to Seller and the Stockholder an
opinion of their counsel, dated the date of the Closing, in form
and substance satisfactory to Seller and its counsel, to the
effect that (a) Quadrax and Newco are each 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 and Newco each have the
corporate power 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 and Newco
has been duly authorized and approved by all requisite corporate
action and this Agreement has been duly executed and delivered by
Quadrax and Newco and constitutes valid and legally binding
obligations of Quadrax and Newco, and the execution and
performance of each agreement which is an Exhibit to this
Agreement have each been duly authorized and approved by all
requisite corporate action, and each such Exhibit has been duly
executed and delivered by Quadrax and Newco and constitutes valid
and legally binding obligations of Quadrax and Newco, as
applicable, 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 them in a factual
certificate from Quadrax, the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) violate any judicial or
administrative order, judgment or decree entered against Quadrax,
(ii) conflict with any of the terms, conditions or provisions of
the charter or bylaws of Quadrax, 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 Quadrax is a party or to which any of its
assets is subject; 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 opinion, 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.
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, and no event has occurred
which could be reasonably expected to have a materially adverse
effect upon the business of Quadrax.
8.8 Other Evidence. Seller shall have received from
Quadrax such further certificates and documents evidencing due
action in accordance with this Agreement, including certified
copies of proceedings of the Board of Directors of Quadrax and
Stockholder as Seller shall reasonably request.
8.9 Consulting and Non-Competition Agreement. Quadrax
shall have executed the Consulting and Non-Competition Agreement
with Stockholder in substantially the form of Exhibit 1.6
hereto.
ARTICLE 9
CLOSING
The "Closing" and payment of the consideration under
this Agreement shall be held in the offices of Campbell &
Fleming, P.C., 250 Park Avenue, 12th Floor, New York, NY 10177,
or at such other place as Quadrax and Seller may agree.
ARTICLE 10
SURVIVAL AND INDEMNIFICATION
10.1 Survival. The representations, warranties and
covenants 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; provided, that any liabilities arising under the
tax representations of the Seller shall survive for six 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 Seller and the Stockholder, jointly and
severally, shall indemnify, defend and hold harmless Quadrax and
Newco, and their respective 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 any breach
of or failure by the Stockholder or the Seller to perform any of
the representations, warranties, covenants or agreements of the
Stockholder or the Seller set forth in this Agreement or in any
Schedule(s) furnished by or on behalf of the Stockholder or the
Seller under this Agreement. 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 Seller, Stockholder and their respective agents,
heirs and assigns from and against and in respect of any Section
10.2 Losses arising out of any breach of, or failure by Quadrax
and Newco to perform any of the representations, warranties,
covenants or agreements of Quadrax and Newco contained in this
Agreement or any Exhibits hereto.
(iii) Notwithstanding any other provision of this
Agreement to the contrary, neither party shall be liable to the
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 Five Thousand ($5,000)
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, Seller and 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 survival period specified in Section 10.1.
(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 fifteen
(15) 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 fifteen (15) 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. In the
event the claim for indemnity is a first party claim by a party
hereto against another party hereto, during a thirty (30) day
period from and after the giving of any notice under this Section
10.2, the parties shall in good faith attempt to settle and/or
compromise the subject matter of the subject claim, and in the
event that the parties are unable to effect any such settlement
or compromise within such thirty (30) day period, then such
dispute 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.
(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 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.
ARTICLE 11
EXPENSES
Whether or not the Closing occurs and 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 or in consummating the transactions contemplated
hereby (including, without limitation, disbursements and expenses
of its attorneys, accountants and advisors). The Seller and
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 fees from or through the Seller or the Stockholder
in connection with the transactions contemplated hereby,
provided, however, neither the Seller nor the Stockholder shall
bear the fees or costs of any financial institution, underwriter,
broker or finder who was introduced to either of them by Quadrax
or its affiliates. In addition, 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
under or in connection with this Agreement shall be in writing,
and (a) if to Quadrax, shall be addressed to James J. Palermo,
Chief Executive Officer, Quadrax Corporation, 300 High Point
Avenue, Portsmouth, Rhode Island 02871, with a copy to Joseph A.
Smith, Campbell & Fleming, P.C., 250 Park Avenue, 12th Floor, New
York, NY 10171; and (b) if to Seller, to Sam Rabinowitz at 29
Frontenac Avenue, Toronto M5M 1Z4 Canada, with a copy to Jack
Weiss, 17 East 45th Street, Suite 614, New York, NY 10017. 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:
(a) by mutual written consent of Quadrax and the
Stockholder; or
(b) by Quadrax or the Stockholder, if the Closing
shall not have occurred on or prior to July 15, 1996, 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.
13.2 Effect of Termination. In the event of
termination of this Agreement by either Quadrax or the
Stockholder as provided in Sections 13.1(a) or (b) above, this
Agreement shall forthwith become void and there shall be no
further liability on the part of Quadrax, the Stockholder, or
Seller or their respective officers or directors (except 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
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 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, Seller, the Stockholder and Quadrax
may (i) amend this Agreement, (ii) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (iii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto, and (iv) waive compliance
with any of the agreements or conditions contained herein. 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 internal 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. Jurisdiction and venue
for any disputes hereunder shall be in federal or state court
having jurisdiction over Newport County, Rhode Island.
[signature page to Vega U.S.A. Inc. Asset Purchase Agreement]
IN WITNESS WHEREOF, Quadrax, Quadrax V, Inc., Seller
and Seller's Stockholder 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,
Chief Executive Officer
Quadrax V, Inc.
By: /s/James J. Palermo
James J. Palermo,
Chief Executive Officer
STOCKHOLDER Vega U.S.A. Inc.
/s/ Sam Rabinowitz By:/s/ Sam Rabinowitz
Sam Rabinowitz, personally Sam Rabinowitz,
President
CONSULTING AGREEMENT
AGREEMENT made this 19th day of June, 1996, by and between
Quadrax Corporation, a Delaware corporation having offices at 300
High Point Avenue, Portsmouth, Rhode Island 02871 (the "Company")
and Sam Rabinowitz, an individual having an address at 29
Frontenac Avenue, Toronto M5M 1Z4 Canada ("Consultant").
W I T N E S S E T H:
WHEREAS, Consultant has substantial experience and expertise
in the design, manufacture and marketing of various sporting
goods products; and
WHEREAS, in connection with the purchase of the assets of
Vega U.S.A. Inc. ("Seller"), a company owned by Consultant,
effective the date of this Agreement, the Company desires to
retain Consultant and the Consultant desires to render consulting
services to the Company pertaining to the management and
operations of the Company as hereinafter more particularly
described; and
WHEREAS, the Company is willing to engage the Consultant for
the purpose of rendering such services on, and in accordance
with, the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and other good and valuable considerations
hereinafter contained, the parties hereto agree as follows:
1. Engagement of the Consultant.
On the basis of the representations and warranties contained
in this Agreement, the Company hereby engages the Consultant to
serve the Company and the Consultant hereby accepts the
engagement as general advisor and consultant on matters
pertaining to the design, manufacture and marketing of
snowboards, hockey sticks and in-line skates which may be
manufactured by the Company in the future. This Agreement shall
terminate five years from the date hereof. The parties hereto
recognize that in performing his duties hereunder, the Consultant
shall be acting as an independent contractor, and nothing
contained in this Agreement shall be construed as meaning that
the Company and the Consultant are partners or joint venturers,
or that Consultant is an employee of the Company, any such intent
being hereby expressly disclaimed.
2. Obligations of the Consultant.
(a) The Consultant shall report to and be responsible to
James Palermo, Chief Executive Officer, and Michael Dorf, Vice
President and General Manager of the Company, respectively, and
when requested by either such officer of the Company, make
himself available to the extent necessary to perform the
Consultant's duties in advising on the management and operations
of the Company. The Company shall request particular services
from the Consultant no later than 10 days prior to when services
are requested to be rendered. The Company agrees that the
Consultant may be employed by others and engage in any other
business activities, except as precluded by the Non-Competition
provisions of this Agreement as set forth below.
(b) The Consultant shall not be required to provide services
to the Company more than seven (7) full business days (56 hours)
per month; provided that any unutilized time may be carried
forward by the Company to a future month; provided, however, that
Consultant shall not be obligated to provide more than fourteen
(14) full business days of services to the Company in any one
calendar month. Under no circumstances shall Consultant be
required to perform services on any Jewish holiday or sabbath.
3. Compensation.
(a) Initial Compensation. As the initial consideration
for the Consultant to enter into this Agreement, Quadrax will
deliver to Stockholder upon execution hereof 300,000 shares of
Quadrax's common stock, which Quadrax shall use best efforts to
cause to be registered with the Securities and Exchange
Commission on a Form S-8 Registration Statement (or other form
available for such purpose) within 40 days of the Closing Date,
such that Consultant will be able to freely re-sell such shares
in the open market, subject only to the requirement that a
reoffering prospectus be delivered to the purchaser, which
prospectus shall be included in the registration statement. In
the event that Quadrax shall fail to file such registration
statement within such 40 day period, then Quadrax shall be
obligated to repurchase $100,000 worth of such shares (valued at
the closing bid price on the date of demand) on the 41st day
after the Closing Date, and every thirty days thereafter, upon
written demand by Consultant. In connection with such
registration, Quadrax shall indemnify Consultant from and against
any liabilities suffered by him in his capacity as a selling
shareholder of Quadrax Common Stock arising out of any
misstatements or omissions contained in such registration
statement, as are customarily given by issuers of public
securities to selling shareholders thereof.
(b) Quadrax Stock Purchase Warrants. As additional
consideration to Consultant, Quadrax will execute and deliver to
Stockholder warrants in the form attached hereto, to purchase up
to 250,000 shares of Quadrax Common Stock at an exercise price
equal to the average of the average of the closing bid and asked
prices for the Company's Common Stock on the ten trading days
immediately preceding the date of grant, with a two-year term and
registration rights as set forth therein, contemporaneously with
receipt by Quadrax of a written purchase order for at least Ten
Thousand (10,000) Snowboards from Nissho Iwai America Corporation
or an affiliate thereof (together, "NIAC") and NIAC's written
acceptance of an actual production sample Snowboard, on terms
reasonably commercially acceptable to Quadrax. Such terms shall
provide for a gross margin (as defined herein) to Quadrax of at
least 30%. The purchase order from NIAC need not require delivery
of all 10,000 Snowboards at one time or one place, and NIAC's
commitment to purchase the entire 10,000 Snowboards may be
contingent upon Quadrax's ability to deliver a lesser quantity
meeting NIAC's quality requirements. In the event that Quadrax
shall fail to register the underlying shares within the period
specified therein, then Quadrax shall be obligated to repurchase
$100,000 worth of such underlying shares valued at the closing
bid price on the date such registration was required to be
effected, and every thirty days thereafter, upon written demand
by Consultant.
(c) First Additional Shares to Consultant. If the
Consultant shall become entitled to receive the warrants
described in Section 3.b above, and the Snowboards have been
developed to the point of receipt of such order within the Budget
(as defined in that certain Asset Purchase Agreement dated as of
June 14, 1996 between Quadrax and Vega U.S.A. Inc.), then
Consultant shall also receive a further 200,000 shares of Quadrax
Common Stock, to be registered as set forth in Section 3(a) or
subject to repurchase as set forth therein.
(d) Second Additional Shares to Consultant. At the
completion of six months' reasonably satisfactory production of
Snowboards, following receipt of the purchase order described in
Section 3.b, Quadrax shall deliver to Consultant a further
200,000 shares of Quadrax Common Stock, to be registered as set
forth in Section 3(a) or subject to repurchase as set forth
therein.
The Company shall also reimburse Consultant for all expenses
reasonably incurred by him in connection with the services to be
rendered hereunder including, but not limited to, travel, food,
lodging and telephone, upon receipt of documentation therefor.
4. Indemnification.
The Company shall indemnify, hold harmless, and defend with
counsel reasonably acceptable to Consultant, Consultant from and
against and compensate him for any and all liabilities, losses,
expenses, fees, judgments or deficiencies of any nature
whatsoever (including, without limitation, reasonable attorneys'
fees and expenses), received, incurred or sustained by Consultant
which shall arise or result from the performance of any of
Consultant's duties hereunder, excepting only such occurrences as
shall result from Consultant's willful misconduct or gross
negligence.
5. Non- Competition Covenants.
(a) The Company and Consultant acknowledge and agree
that the business contacts, customers, suppliers, know-how, trade
secrets, marketing techniques and other aspects of the business
of Seller have been of value to Seller, and will provide the
Company with a substantial competitive advantage in the operation
of its business.
(b) For good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by Consultant,
Consultant hereby agrees that neither Stockholder nor any of his
Affiliates shall in any manner, directly or indirectly: (i) at
any time, divulge, transmit or otherwise disclose, or cause to be
divulged, transmitted or otherwise disclosed, to any person or
entity whatsoever, any confidential or proprietary information of
the Company, including business contacts, customer lists,
supplier lists, technology, know-how, trade secrets, marketing
techniques, manufacturing methods, contracts or other
confidential or proprietary information of the Company (including
such matters related to the business heretofore conducted by
Seller) of whatever nature; or (ii) at any time during the period
from the date hereof through and including the fifth (5th)
anniversary of the date hereof (the "Restrictive Period"),
engage, participate, or have any interest or be involved in any
capacity, whether as an owner, agent, stockholder (excluding
passive ownership of shares of a publicly held corporation if
such ownership does not involve, and neither Stockholder nor any
of his Affiliates otherwise has, any managerial or operational
responsibility in respect thereof), officer, director, manager,
partner, joint venturer, employee, consultant, advisor, agent or
otherwise, in any business enterprise which is, or shall at any
time during the Restrictive Period be, engaged in any manner in
the business of designing, developing, marketing, distributing,
retailing and/or manufacturing any Products (as such term is
hereinafter defined) anywhere in the world.
(c) As used herein, the term "Products" means hockey
sticks, snowboards and in-line roller skates, whether or not
branded or trademarked.
(d) For purposes hereof, information shall not be
deemed "confidential" or "proprietary" to the extent that it (i)
is a matter of common knowledge or of public record, or within
the public domain (other than as a result of any breach hereof by
Stockholder), (ii) is generally known throughout the industry or
was otherwise acquired from other legitimate sources, or (iii) is
required to be disclosed by law or by order of any court or
governmental authority.
(e) As used herein, the term "Affiliate" shall mean
Consultant; his spouse or children; his legal representative
(during his tenure as such); any trustee of a trust for the
benefit of any of the foregoing persons; any entity of which ten
percent (10%) or more of the voting interests are owned
beneficially by any one or more of the foregoing persons; or any
entity of which any of the foregoing persons is an employee,
director, officer, trustee, partner, or greater than ten percent
(10%) beneficial owner.
6. Specific Performance. Consultant hereby acknowledges
and agrees that any breach or default by Stockholder or any of
his Affiliates, singly or collectively, of any of the foregoing
restrictive covenants will cause the Company irreparable injury
for which there is no adequate remedy at law. Accordingly,
Stockholder expressly agrees that, in the event of any breach or
threatened breach or default of any such covenant or agreement by
Consultant or any of his Affiliates, the Company shall be
entitled, in addition to any and all other remedies available, to
seek and obtain injunctive and/or other equitable relief to
require specific performance or prevent a breach or default under
the provisions of this Agreement; and Consultant hereby consents
to each such application for an injunction.
7. Attorneys' Fees. In the event that either party hereto
shall at any time resort to litigation to enforce any of its
rights under the terms of this Agreement, the prevailing party
shall be reimbursed by such nonprevailing party for all costs and
expenses, including reasonable attorneys' fees and expenses,
incurred by the prevailing party in enforcing the terms of this
Agreement and/or recovering damages as a result of any such
breach.
8. Benefits and Obligations. This Agreement shall inure
to the benefit of and shall be enforceable by the Company, its
successors and assignees, and shall be binding upon Consultant
and his successors and assignees; provided; however, that the
obligations of Consultant and his Affiliates contained herein may
not be delegated or assigned.
9. Severability. It is acknowledged, understood and
agreed that the restrictions contained in this Agreement are (a)
made for good, valuable and adequate consideration received by
Consultant, and (b) are reasonable and necessary, in terms or the
time, geographic scope and nature of the restrictions, for the
protection of the Company and the business and good will thereof.
It is intended that said provisions be fully severable and that,
in the event that any of the foregoing restrictions, or any
portion of the foregoing restrictions, shall be deemed contrary
to law, invalid or unenforceable in any respect by any court or
tribunal of competent jurisdiction, then such restrictions shall
be deemed to be amended, modified and reduced in scope and
effect, as to that extent necessary to render same valid and
enforceable, and any other of the foregoing restrictions shall be
unaffected and shall remain in full force and effect.
10. Notices.
Any notices required hereunder shall be deemed to have been
given when delivered or when mailed by certified or registered
mail, return receipt requested, postage prepaid, or delivered by
recognized overnight courier service, to the intended party at
the address first above given, or at such other address as may be
substituted therefor by notice given in compliance with the
provisions of this Paragraph 9 signed by the parties hereto.
11. Miscellaneous.
(a) No Assignment. This Agreement shall not be assigned by
the Company or the Consultant without the prior written consent
of the other.
(b) Entire Agreement; Modification. This Agreement
represents the entire agreement of the parties with respect to
the subject matter hereof and supersedes any and all prior
agreements or understandings. This Agreement may not be
modified, amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by the parties sought to
be bound thereby.
(c) Section Headings. The section headings contained in
this Agreement are for convenience only and shall not affect in
any way the meaning or interpretation of this Agreement.
(d) Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective permitted successors and assigns, but nothing herein,
express or implied, is intended to or shall confer any rights,
remedies or benefits upon any person or entity other than the
parties hereto.
(e) Governing Law. This Agreement shall be construed and
performed in accordance with, and governed by, the laws of the
State of Rhode Island.
(f) Genders. As used in this Agreement, the singular shall
be deemed to include the plural and vice-versa; and the masculine
gender shall be deemed to include the feminine gender and the
neuter and vice-versa.
(g) Return of Books. In the event this Agreement is
terminated, the originals of all books, records and other
information developed or maintained by the Consultant in
connection with the Consultant's performance of his obligations
under this Agreement shall be returned or given to the Company on
the effective date or termination.
IN WITNESS WHEREOF, this Agreement is executed by the
parties hereto as of the date and year first above written.
QUADRAX CORPORATION
By:/s/ James J. Palermo
James J. Palermo, Chief
Executive Officer
CONSULTANT
/s/ Sam Rabinowitz
Sam Rabinowitz
