SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) May 31, 1997
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
Item 2. Acquisition or Disposition of Assets.
On June 4, 1997, Quadrax Corporation (the"Company") completed its
disposition of Lion Golf of Oregon, Inc., an Oregon corporation ("Lion
Golf"), pursuant to the terms of an Agreement for the sale of common
stock dated as of May 31, 1997.
Pursuant to the Lion Golf Stock Disposition Agreement, the Company
sold all of the outstanding stock of Lion Golf of Oregon, Inc. and
McManis Sports Associates, Inc. to Lion Golf's former principal
stockholder, Robert K. Cole. In connection therewith Mr. Robert Cole
and Lion Golf assumed the responsibility for approximately $1,200,000
of Lion Golf's indebtedness including the Bank of Cascades accounts
receivable/inventory working capital line with Lion Golf which had an
outstanding balance due of $449,838 at May 31, 1997. As additional
consideration, the Company's unrecorded unsecured promissory note
payable to Mr. Cole was canceled along with the Company's five year
employment agreements with Mr. Robert K. Cole as Chief Executive
Officer of Lion Golf and Mr. James Cole as President of Lion Golf and
the Company and Mr. Robert K. Cole agreed to mutual general releases.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not Required
(b) Pro Forma Financial Information.
Not Required
(c) Exhibits.
2.1 Stock Disposition Agreement dated May 31, 1997 between
Robert K Cole, the Chief Executive Officer of Lion Golf of Oregon,
Inc. and the Company.
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, a Delaware Corporation
By: /s/ James J. Palermo
James J. Palermo, Chairman and
Chief Executive Officer
By: /s/ Edward A. Stoltenberg
Edward A. Stoltenberg, Senior Vice President -
Chief Financial Officer and Principal Accounting Officer
Date: June 12, 1997
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of the
30th day of May, 1997, is made by and between Quadrax Corporation
("Quadrax"), a Delaware corporation, located at 300 High Point Avenue,
Portsmouth, Rhode Island, and Robert K. Cole ("Cole"), an individual
residing at 63025 O.B. Riley Road #20, Bend, Oregon 97701.
WITNESSETH:
WHEREAS, Quadrax owns all of the outstanding shares (the
"Shares") of common stock of Lion Golf of Oregon, Inc. ("Lion") and of
McManis Sports Associates, Inc. ("McManis"); and
WHEREAS, based upon the representations, agreements and
warranties herein made by Quadrax and subject to the terms and
conditions contained in this Agreement, Cole wishes to acquire all of
the Shares from Quadrax; and
WHEREAS, based upon the representations, agreements and
warranties herein made by Cole and subject to the terms and conditions
contained in this Agreement, Quadrax wishes to sell all of the Shares
to Cole;
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 THE SHARES
1.1 Purchase and Sale of the Shares. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date (as
hereinafter defined), Cole will purchase and Quadrax will sell,
convey, transfer, make available to, assign and deliver to Cole all of
the Shares.
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, 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 and 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 (as hereinafter defined),
the Purchase Price for the Shares shall consist of the following:
(a) Assumption and Indemnification of Debts and Liabilities.
Cole shall cause any debts or liabilities of Lion which Quadrax was
liable for prior to the Closing or may become liable for following the
Closing, including, without limitation, any guarantee by Quadrax of
any Lion indebtedness to Bank of the Cascades, to be assumed by Lion
and Cole shall cause Lion to fully indemnify and hold harmless Quadrax
for any debts or liabilities attributable to Lion for which Quadrax
may be held liable following the Closing. Quadrax shall indemnify and
hold harmless Cole, Lion and McManis from and against any of the
following potential liabilities of McManis: (A) any sums due Rob
Campbell pursuant to the settlement of the Campbell v. Quadrax and
McManis lawsuit, (B) any sums due Ronald Hess on account of this
ownership of redeemable preferred stock of McManis and (C) any sums
due Pitney Bowes in respect of an allegedly missing postage meter.
Cole shall assume all risk of amounts due Richard Gipe in connection
with the liquidation of former McManis inventory up to a maximum of
$25,000.
(b) Cancellation of Promissory Note. On the Closing Date,
Cole shall cancel any and all right, title and interest he has in that
certain unsecured non-interest bearing earn-out note by Quadrax in
favor of Cole in the aggregate amount of One Million Two Hundred Fifty
Thousand Dollars ($1,250,000), dated December 29, 1995, relating to
profits in Lion.
(c) Release from Certain Obligations. Cole shall cause Lion
to release Quadrax from any obligation to pay Lion for $21,673.50
worth of goods Quadrax purchased from Lion referenced in Lion invoice
numbers 43065, 43115, 43115, 43066 and 43486, which is the entire
aggregate amount of such invoices.
(d) Royalties. Cole shall cause Lion and McManis to pay to
Quadrax a royalty of $.01 per golf club component or finished club in
Lion's inventory as of the Closing Date other than the putter heads
and golf clubs described in Section 1.3(e) which bears Quadrax' design
or trademark, including the trademarks "Quadrax" and "Quad-Force"
(collectively, the "Trademarks"). Such Trademarks shall always be
clearly identified as "Trademarks of Quadrax Corporation". Such
royalty will be due and payable on the tenth day following the end of
the applicable quarter in which such inventory is actually sold. Cole
also agrees that Lion and McManis:
(i) will not reorder any items from and after the Closing Date
which bear the Trademarks;
(ii) will sell clubs or component parts bearing the Trademarks
only to other resellers; and
(iii) will inform its customers of the proper marking of the
Trademarks of Quadrax Corporation and will use its best efforts to
enforce its customers' compliance with such proper marking.
(e) Inventory from Lion. Cole shall cause Lion to deliver to
Quadrax the following items from Lion within 10 days after the Closing
Date at shipping expense to be shared equally by Cole and Quadrax:
(i) One thousand thirty-eight (1,038) putter heads;
(ii) One hundred (100) Quadrax staff bags;
(iii) Sixty (60) sets (3 through sand wedge) Quadrax finished
irons;
(iv) Sixty-five (65) sets (2 through pitching wedge) Quadrax
finished irons; and
(v) Five (5) sets (3 through pitching wedge) Quadrax finished
irons.
Upon receipt of the foregoing items, Quadrax shall make no
further claims against Lion for money otherwise owed to Quadrax as of
the Closing Date.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF QUADRAX
Quadrax represents and warrants that Quadrax owns all of the
Shares, free and clear of all agreements, charges, options, liens,
security interests, pledges, claims, restrictions and encumbrances of
any nature whatsoever created or suffered by Quadrax. Quadrax
represents and warrants that it is authorized to sell or otherwise
transfer the Shares to Cole. Quadrax represents and warrants that
while it owned the Shares, no liabilities or obligations not reflected
in the income statement and balance sheet of each of Lion and McManis
at April 30, 1997, which are attached hereto as Exhibit A, were
incurred and that any obligation or liability incurred since the date
of such financial statements were incurred in the ordinary scope of
Lion's and McManis' business, other than as expressly stated in
Section 1.3(a).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COLE
Cole represents and warrants that Cole has knowledge of the
businesses of both Lion and McManis as a result of Cole's having been
the Chief Executive Officer of Lion and McManis continuously since
December 1995 and he has sufficient experience in business and
financial matters generally to meaningfully evaluate the merits and
risks of the purchase and acquisition of the Shares for the
consideration as contemplated hereby. Cole acknowledges that the
Shares he will acquire from Quadrax were issued by Lion and McManis
without registration or qualification or other filings being made
under the Securities Act of 1933, as amended, or the securities or
"Blue Sky" laws of any state, in reliance upon specific exemptions
therefrom, and in furtherance thereof Cole represents that the Shares
to be received by him will be taken for his own account for
investment, with no present intention of a distribution or disposition
thereof to others.
ARTICLE 4
COVENANTS OF QUADRAX
Quadrax covenants with Cole that, except as otherwise consented
to in writing by Cole after the date of this Agreement:
4.1 Release. If all of the covenants under this Agreement to
be performed by Cole are performed, all of the conditions set forth in
Article 6 to this Agreement are satisfied, and Cole's representations
and warranties contained herein are not breached, Quadrax, its
directors, officers, employees, affiliates, successors, assigns and
administrators, and their respective successors and assigns, as the
case may be, shall release Cole, his immediate family members, heirs,
executors, administrators, successors and assigns, Lion and McManis
and their respective successors and assigns, as the case may be, from
any and all actions, causes of action, claims, potential claims,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents,
executions, claims, and demands whatsoever, known or unknown,
liquidated or unliquidated, whether presently in existence or which
may arise in the future, in law, admiralty or equity, either ex
contract or ex delicto, which against Cole, Lion or McManis Quadrax
ever had, now has or hereafter can, shall or may have, for, upon, or
by reason of any matter, cause or thing whatsoever from the beginning
of the world to the date of this Agreement.
4.2 Cause Conditions to be Satisfied. Quadrax will use its
best efforts to cause all of the conditions described in Article 7 to
be satisfied.
4.3 Compliance with Laws. Quadrax will duly comply with all
applicable laws as may be required for the valid and effective
performance of this Agreement.
4.4 Lion Employees. Quadrax shall permit all Lion employees,
with the exception of Cole, that hold vested options to purchase
shares of Quadrax Common Stock at an exercise price of $.68 per share
to exercise such options within six (6) months following the Closing
Date, at which time such options will be cancelled. Lion employees
that exercise options shall be required to pay the purchase price for
the shares of Quadrax Common Stock by certified check only.
4.5 401(k) Employee Benefit Plan. Lion employees that are
participants in the Quadrax 401(k) Employee Benefit Plan (the "Plan")
will no longer be eligible to make further contributions to the Plan
from and after the Closing Date, but that they may continue to have
their present balances administrated under the Plan, and will not be
required to rollover existing balances to any other plan or account.
ARTICLE 5
COVENANTS OF COLE
Cole covenants with Quadrax that, except as otherwise consented
to in writing by Quadrax after the date of this Agreement:
5.1 Release. If all of the covenants under this Agreement to
be performed by Quadrax are performed, all of the conditions set forth
in Article 7 to this Agreement are satisfied, and Quadrax'
representations and warranties contained herein are not breached,
Cole, his immediate family members, heirs, executors, administrators,
successors and assigns, and their respective successors and assigns,
as the case may be, shall release Quadrax, its directors, officers,
employees, affiliates, shareholders, successors, assigns and
administrators and their successors and assigns, as the case may be,
from any and all actions, causes of action, claims, potential claims,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents,
executions, claims, and demands whatsoever, known or unknown,
liquidated or unliquidated, whether presently in existence or which
may arise in the future, in law, admiralty or equity, either ex
contract or ex delicto, which against Quadrax, Cole ever had, now has
or hereafter can, shall or may have, for, upon, or by reason of any
matter, cause or thing whatsoever from the beginning of the world to
the date of this Agreement.
5.2 Cancellation of Cole Options. Cole shall return or cancel
the vested stock options he holds to purchase 100,000 shares of
Quadrax Common Stock on the Closing Date. Such return or cancellation
shall constitute the repayment in full as between Cole and Quadrax of
the $90,000.00 Quadrax advanced to Lion on February 19, 1997 for the
purpose of reducing the Bank of the Cascades loan principal balance.
5.3 Cause Conditions to be Satisfied. Cole will use his best
efforts to cause all of the conditions described in Article 6 to be
satisfied.
5.4 Compliance with Laws. Cole will duly comply with all
applicable laws as may be required for the valid and effective
performance of this Agreement.
5.5 Publicity. Cole agrees that he, Lion and McManis each
will not communicate or disclose the purchase price or other principal
terms of this transaction to anyone unless Quadrax has given its prior
written consent to such communication or disclosure, except as
required by court order or to Cole's counsel or accountant for the
purpose of preparing tax returns for Cole, Lion or McManis.
5.6 Audit and Financial Statements. Cole agrees that he will
cause Lion and McManis to effect a complete financial closing (the
"Financial Closings") of each of their accounting records as of May
31, 1997. The Financial Closings shall yield a complete Statement of
Operations, Balance Sheet and detailed Trial Balance for both Lion and
McManis as of May 31, 1997. The Financial Closings shall be completed
in three to five business days and reported on the same basis as
current practice and to the reasonable satisfaction of Quadrax'
Finance Department in accordance with current practice. Cole will not
include any of the costs, expenses or liabilities he incurred in his
purchase of the Shares pursuant to this Agreement in the Financial
Closings.
5.7 Payment of Employee Related Expenses. On the Closing
Date, Cole shall provide evidence to Quadrax, such as bank statements
or cancelled checks, that up to and including the Closing Date, all
employee salaries, payroll taxes and payroll trust money has been paid
in full by both Lion and McManis.
5.8 Insurance. Cole agrees and acknowledges that Quadrax will
be removing Lion and McManis from its corporate property and liability
insurance packages as of the Closing Date. Cole agrees it is his sole
responsibility to ensure Lion and McManis have adequate insurance
coverage beginning on the Closing Date.
5.9 Information. Cole shall cause Lion and McManis to provide
Quadrax and its respective officers, accountants, counsel and other
representatives, including any governmental or regulatory agency which
wishes to inspect or audit the Lion or McManis financial records, full
access, during working hours on business days, to the records,
accounts, facilities and personnel of Lion and McManis which shall be
preserved for a period of six years from the Closing Date.
ARTICLE 6
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, of each of the following
conditions:
6.1 Representations, Warranties and Covenants. The
representations and warranties of Cole contained in Article 3 of this
Agreement shall be true at and as of the Closing Date, and shall be
deemed made again at and as of such date and be true as so made again;
Cole shall have perfumed all obligations and complied with all
covenants required by this Agreement to be performed or complied with
by him on or prior to the Closing, including those set forth in
Articles 1 and 5 of this Agreement; and Quadrax shall have received
from Cole a certificate signed by Cole and dated the date of the
Closing to the foregoing effect.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF COLE
Unless waived by Cole in writing in his sole discretion, all
obligations of Cole under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following
conditions:
7.1 Representations, Warranties and Covenants. The
representations and warranties of Quadrax contained in Article 2 of
this Agreement shall be true at and as of the Closing Date, and shall
be deemed made again at and as of such date and be true as so made
again; Quadrax shall have perfumed 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, including those set forth in
Article 4 of this Agreement; and Cole shall have received from Quadrax
a certificate signed by Quadrax and dated the date of the Closing to
the foregoing effect.
ARTICLE 8
CLOSING
The "Closing" 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 June 15, 1997, subject to mutually agreed on
extensions. The Closing shall be held at the offices of Robins,
Kaplan, Miller & Ciresi, L.L.P., or at such other place as Quadrax and
Cole may agree.
At the Closing, Quadrax shall deliver to Cole the following:
(i) Stock Certificates representing the Shares;
(ii) Closing Certificate as set forth in Section 7.1; and
(iii) Original minute books of Lion and McManis.
At the Closing, Cole shall deliver to Quadrax the following:
(i) Closing Certificate as set forth in Section 6.1;
(ii) The original Note referred to in Section 1.3(b);
(iii) Cole's Option Certificate described in Section 5.2; and
(iv) Evidence of payment of Employee Related Expenses described
in Section 5.7.
ARTICLE 9
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, Quadrax Corporation,
300 High Point Avenue, Portsmouth, Rhode Island 02871, with a copy to
Joseph A. Smith, Epstein Becker & Green, P.C., 250 Park Avenue, 12th
Floor, New York, New York 10177; and (b) if to Cole, to Robert K. Cole
at 63025 O.B. Riley Road #20, Bend, Oregon 97701, with a copy to David
C. Veis, Robins, Kaplan, Miller & Ciresi L.L.P., Suite 3700, 2049
Century Park East, Los Angeles, California 90067-3283.
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 10
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date by mutual written consent of Quadrax and
Cole.
10.2 Effect of Termination. In the event of termination of
this Agreement, this Agreement shall forthwith become void and there
shall be no further liability on the part of Quadrax or Cole or
Quadrax' officers and 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).
10.3 Amendment, Extension and Waiver. At any time prior to the
Closing Date, Quadrax and Cole 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 11
ENTIRE AGREEMENT
This Agreement (including 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 12
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
shall be in the federal or state court having jurisdiction over
Newport County, Rhode Island.
IN WITNESS WHEREOF, Quadrax and Cole 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
/s/ Robert K. Cole
Robert K. Cole
