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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COBRA GOLF INCORPORATED
(Name of Subject Company)
COBRA GOLF INCORPORATED
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
190907 10 5
(CUSIP Number of Class of Securities)
ROBERT K. BRUNING
1818 ASTON AVENUE
CARLSBAD, CALIFORNIA 92008
(619) 929-0377
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
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<S> <C>
NICK P. SAGGESE, ESQ.
JOSEPH J. GIUNTA, ESQ. EDWARD P. SMITH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM CHADBOURNE & PARKE LLP
300 SOUTH GRAND AVENUE 30 ROCKEFELLER PLAZA
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10112
(213) 687-5000 (212) 408-5100
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Cobra Golf Incorporated, a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 1818 Aston Avenue, Carlsbad, California 92008. The
title of the class of equity securities to which this statement relates is the
common stock, par value $.001 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by HCAC, Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of American
Brands, Inc., a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") dated December 22, 1995, to
purchase all outstanding Shares at $36.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated December 22, 1995 (the "Offer to Purchase") and the related
Letter of Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 18, 1995 (the "Merger Agreement"), among the Company, the
Purchaser and the Parent. The Merger Agreement provides, among other things,
that as soon as practicable after the consummation of the Offer and
satisfaction or waiver of all conditions to the Merger, Purchaser will be
merged with and into the Company (the "Merger"), with the Company as the
surviving corporation (the "Surviving Corporation").
Based on the information in the Schedule 14D-1, the principal executive
offices of each of the Purchaser and Parent are located at 1700 East Putnam
Avenue, Old Greenwich, Connecticut 06870-0811.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding between
the Company or its affiliates and its executive officers, directors or
affiliates is described in the attached Schedule I or set forth below.
Merger Agreement. A summary of the Merger Agreement is contained in Section
13 of the Offer to Purchase under the caption "The Merger Agreement; the Stock
Option and Tender Agreement" and is incorporated herein by reference. A copy
of the Merger Agreement is filed as Exhibit c(1) hereto and is incorporated
herein by reference.
Stock Option and Tender Agreement. Simultaneously with the execution and
delivery of the Merger Agreement, certain stockholders, all of whom are
Company directors or their affiliates (collectively, the "Selling
Stockholders"), have entered into a Stock Option and Tender Agreement, dated
as of December 18, 1995 (the "Stock Option and Tender Agreement"), pursuant to
which the Selling Stockholders have given Parent options to purchase, upon the
terms and subject to the conditions set forth in the Stock Option and Tender
Agreement, any and all Shares (i) beneficially owned by them as of December
18, 1995, representing in the aggregate approximately 26% of the outstanding
Shares, and (ii) thereafter acquired by such Selling Stockholders
(collectively, the "Subject Shares") at a purchase price of $36.00 per Share
subject to adjustment if the Offer price is increased. The Stock Option and
Tender Agreement further provides, among other things, that each Selling
Stockholder will tender all of its Subject Shares in the Offer, and not
withdraw them, except that the Selling Stockholders will be required to
withdraw such Subject Shares under certain circumstances and, if such Subject
Shares are withdrawn, to retender such Subject Shares if requested by Parent.
If any Shares are purchased in the Offer the Subject Shares will be purchased
either in the Offer or pursuant to the exercise of the options under the Stock
Option and Tender Agreement. Pursuant to the Stock Option and Tender
Agreement, the Selling Stockholders have also granted Parent, or any nominee
of Parent, irrevocable proxies with respect to their Subject Shares to vote
such Subject Shares on certain matters at any annual, special or adjourned
meeting of stockholders of the Company or to execute a written consent with
respect to such matters on their behalf in lieu of a meeting. Further
information with respect to the Stock Option and Tender Agreement set forth in
Section 13 of the Offer to Purchase under the caption "Stock Option and Tender
Agreement" is incorporated herein by reference.
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Stock Options. In connection with the Merger and pursuant to the terms of
the Company's 1993 Stock Option Plan (the "Plan"), a copy of which is filed
hereto as Exhibit c(9) and incorporated herein by reference, the
Compensation/Stock Option Committee of the Company intends to exercise its
discretion to terminate the Plan and all outstanding options as of the
Effective Time (as defined below) of the Merger by delivering a notice of
termination to each option holder, in which event all outstanding stock
options under the Plan, whether or not such stock options would otherwise then
be exercisable, will become immediately exercisable for the 20-day period
following the date of such notice (or for such longer period as such committee
may determine). Pursuant to the Merger Agreement, all stock options
outstanding immediately prior to the time the Merger becomes effective (the
"Effective Time") will be converted solely into the right to receive from the
Company an amount in cash equal to the excess, if any, of $36.00 (or any other
higher price per Share paid in the Offer) over the applicable exercise price
per Share of such stock option, multiplied by the number of Shares subject to
such stock option, subject to any required withholding of taxes.
Executive Employment Agreements. In connection with the Merger, the Company
has entered into employment/consulting/non-compete agreements with Gary E.
Biszantz, Thomas L. Crow, Mark C. McClure and David A. Schaefer, which will be
effective as of the Effective Time of the Merger. The Company also intends to
enter into employment/consulting/non-compete agreements with certain vice-
presidents of the Company. Copies of such Executive Employment Agreements and
the form of the employment agreements expected to be entered into with certain
vice-presidents of the Company are filed hereto as Exhibits c(3) through c(8),
inclusive, and incorporated herein by reference. The material terms of such
agreements are described below.
Gary E. Biszantz
Mr. Biszantz has entered into a five-year exclusive consulting non-compete
agreement with the Company during which time Mr. Biszantz will be available as
a consultant with respect to policy or strategic planning issues. Mr. Biszantz
will receive $550,000 per year for such services. Mr. Biszantz will not
participate in bonus plans, stock options or other benefits of the Company.
Thomas L. Crow
Mr. Crow has entered into a three-year employment arrangement with the
Company pursuant to which he will receive an annual salary of $350,000. Mr.
Crow will be recommended as Vice Chairman Emeritus of the Company. Mr. Crow
will be eligible for medical and life insurance plans on the same terms and
conditions as other similarly situated employees of the Company, but will not
participate in bonus plans or stock options of the Company.
If the Company terminates Mr. Crow for reasons other than disability or
cause, or Mr. Crow terminates his employment for Good Reason (as defined in
the agreement), Mr. Crow will receive two years' salary and coverage under
medical and life insurance plans and will agree to an exclusive consulting
non-compete arrangement for such period. The Company will have the option at
the end of the severance period to enter into an exclusive consulting non-
compete arrangement with Mr. Crow for up to three additional years during
which time Mr. Crow will receive an annual payment of $200,000 and coverage
under medical and life insurance plans.
If Mr. Crow voluntarily terminates his employment, the Company will have the
option to enter into an exclusive consulting non-compete arrangement with Mr.
Crow for up to three years pursuant to which Mr. Crow will receive an annual
consulting non-compete fee ranging from $100,000 (if Mr. Crow terminates his
employment during the first year of employment) to $300,000 (if Mr. Crow
terminates his employment during the third year of employment). If Mr. Crow
continues in employment for the three-year term, the Company has the option at
the end of such term to enter into an exclusive consulting non-compete
arrangement with Mr. Crow for up to three years with an annual payment of
$200,000. To the extent that any amount payable as severance pay under this
agreement would result in the imposition of an excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), such amounts
shall be adjusted so as to prevent the imposition of such excise taxes.
Mark C. McClure
Mr. McClure has entered into a three-year employment arrangement with the
Company, pursuant to which Mr. McClure will serve as President and Chief
Executive Officer of the Company and will receive an annual
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salary of $350,000. The employment arrangement may be terminated by the
Company after the first anniversary of the Closing Date (as defined in the
Merger Agreement) but only upon two years' prior written notice.
Mr. McClure will receive a stay bonus of $200,000, $100,000 of which will be
payable if Mr. McClure continues in employment for 30 days after the Merger
and $100,000 of which will be payable if Mr. McClure continues in employment
through the first anniversary of the Merger. The stay bonus will also be
payable if the Company terminates Mr. McClure's employment for reasons other
than disability or cause or if Mr. McClure terminates his employment for Good
Reason, as defined in the agreement, prior to the date such stay bonus would
otherwise be payable.
Mr. McClure will receive an annual incentive award for 1996 based on a
target bonus of 50% of annual base salary with an opportunity to earn a
maximum of 100% of annual base salary if operating company contribution
(defined as the Company's operating profit exclusive of amortization of
intangibles) falls within certain ranges. Mr. McClure will also be eligible to
participate in an annual incentive compensation program in 1997 and 1998. In
addition, Mr. McClure will be eligible to receive stock options under the
American Brands, Inc. Long Term Incentive Plan and participate in a new three-
year (1996 through 1998) long term incentive plan, which provides for the
payment of a bonus in early 1999 based upon Company performance during the
1996 through 1998 performance period.
If the Company terminates Mr. McClure's employment for reasons other than
disability or cause or Mr. McClure terminates his employment for Good Reason,
Mr. McClure will receive two years' salary, two times his target bonus for the
year of termination (or, if greater, two times the bonus paid to Mr. McClure
with respect to calendar year 1995), his target bonus for the year of
termination prorated through the date of termination and continued coverage
under medical and life insurance plans for two years and will agree to an
exclusive consulting non-compete arrangement for the period during which such
severance benefits are payable. If the Company terminates Mr. McClure's
employment for reasons other than disability or cause or Mr. McClure
terminates his employment for Good Reason prior to the first anniversary of
the Merger, the severance period and multiplier would be three.
If Mr. McClure voluntarily terminates his employment other than for Good
Reason, the Company has the option to enter into an exclusive consulting non-
compete arrangement with Mr. McClure for up to two years after termination of
employment (unless Mr. McClure voluntarily terminates his employment prior to
the first anniversary of the Merger, in which event, the Company has the
option to enter into an exclusive consulting non-compete arrangement with Mr.
McClure for up to three years) pursuant to which Mr. McClure will receive an
annual consulting fee of $350,000 plus Mr. McClure's target bonus for the year
of voluntary termination (or the amount of Mr. McClure's 1995 bonus if
greater). To the extent that any amount payable as severance pay under this
agreement would result in the imposition of an excise tax under Section 4999
of the Code, such amounts shall be adjusted so as to prevent the imposition of
such excise taxes.
David A. Schaefer
Mr. Schaefer has entered into a three-year employment arrangement with the
Company, pursuant to which Mr. Schaefer will serve as Senior Vice President
and Chief Operating Officer of the Company and will receive an annual salary
of $200,000. The employment arrangement may be terminated by the Company after
the first anniversary of the Closing Date but only upon two years' prior
written notice.
Mr. Schaefer will receive a stay bonus of $100,000, $50,000 of which will be
payable if Mr. Schaefer continues in employment for 30 days after the Merger
and $50,000 of which will be payable if Mr. Schaefer continues in employment
through the first anniversary of the Merger. The stay bonus will also be
payable if the Company terminates Mr. Schaefer's employment for reasons other
than disability or cause or if Mr. Schaefer terminates his employment for Good
Reason, as defined in the agreement, prior to the date such stay bonus would
otherwise be payable.
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Mr. Schaefer will receive an annual incentive award for 1996 based on a
target bonus of 40% of annual base salary with an opportunity to earn a
maximum of 100% of annual base salary if operating company contribution
(defined as the Company's operating profit exclusive of amortization of
intangibles) falls within certain ranges. Mr. Schaefer will also be eligible
to participate in an annual incentive compensation program in 1997 and 1998.
In addition, Mr. Schaefer will be eligible to receive stock options under the
American Brands, Inc. Long Term Incentive Plan and participate in a new three-
year (1996 through 1998) long term incentive plan, which provides for the
payment of a bonus in early 1999 based upon Company performance during the
1996 through 1998 performance period.
If the Company terminates Mr. Schaefer's employment for reason other than
disability or cause orMr. Schaefer terminates his employment for Good Reason,
Mr. Schaefer will receive two years' salary, two times his target bonus for
the year of termination (or, if greater, two times the bonus paid to Mr.
Schaefer with respect to calendar year 1995), his target bonus for the year of
termination prorated through the date of termination and continued coverage
under medical and life insurance plans for two years and will agree to an
exclusive consulting non-compete arrangement for the period during which such
severance benefits are payable. If the Company terminates Mr. Schaefer's
employment for reasons other than disability or cause or Mr. Schaefer
terminates his employment for Good Reason prior to the first anniversary of
the Merger, the severance period and multiplier would be three.
If Mr. Schaefer voluntarily terminates his employment other than for Good
Reason, the Company has the option to enter into an exclusive consulting non-
compete arrangement with Mr. Schaefer for up to two years after termination of
his employment (unless Mr. Schaefer voluntarily terminates his employment
prior to the first anniversary of the Merger, in which event, the Company has
the option to enter into an exclusive consulting non-compete arrangement with
Mr. Schaefer for up to three years) pursuant to which Mr. Schaefer will
receive an annual consulting fee of $200,000 plus Mr. Schaefer's target bonus
for the year of voluntary termination (or the amount of Mr. Schaefer's 1995
bonus if greater). To the extent that any amount payable as severance pay
under this agreement would result in the imposition of an excise tax under
Section 4999 of the Code, such amounts shall be adjusted so as to prevent the
imposition of such excise taxes.
Thomas W. McGinnis and James S. Vincent
Prior to the Effective Time, each of Messrs. McGinnis and Vincent is
expected to enter into a two-year employment arrangement with the Company.
Each executive will be eligible to receive a stay bonus of $75,000, $37,500 of
which is payable if employment continues for 30 days after the Merger and
$37,500 of which is payable if employment continues through the first
anniversary of the Merger. The stay bonus will also be payable if the Company
terminates his employment for reasons other than disability or cause or if the
executive terminates his employment for Good Reason, as defined in the
agreement, prior to the date such stay bonus would otherwise be payable.
Messrs. McGinnis and Vincent will each receive an annual incentive award for
1996 based on targets of 35% of base annual salary with maximum bonus equal to
52.5% of base salary payable based on Company performance. In addition,
Messrs. McGinnis and Vincent will be eligible to participate in an annual
incentive compensation program in 1997 and 1998. Messrs. McGinnis and Vincent
will be eligible to receive stock options under the American Brands, Inc. Long
Term Incentive Plan and participate in a new three-year (1996-1998) long term
incentive plan, which provides for the payment of a bonus in early 1999 based
upon Company performance during the 1996 through 1998 performance period.
Each agreement provides that if the Company terminates the executive's
employment within two years of the Merger for reasons other than disability or
cause or if the executive terminates his employment for Good Reason, the
Company will pay such executive 12 months' salary, his target bonus for the
year of termination, his target bonus for the year of termination prorated
through the date of termination and will provide continued coverage under the
medical and life insurance plans for one year. In addition, such executive
will render exclusive consulting services to the Company during the period for
which the executive is receiving severance payments under the agreement.
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If the executive voluntarily terminates his employment, the Company has the
option to enter into an exclusive consulting non-compete arrangement with the
executive for 12 months with 12 months' salary.
Other Vice Presidents
Prior to the Effective Time, certain Vice Presidents of the Company are
expected to enter into two-year employment arrangements with the Company.
Pursuant to such agreements, such executives will receive a stay bonus of
$50,000, $25,000 of which is payable if employment continues for 30 days after
the Merger and $25,000 of which is payable if employment continues through the
first anniversary of the Merger. The stay bonus will also be payable if the
Company terminates employment for reasons other than disability or cause or if
the executive terminates for Good Reason, as defined in the agreement, prior
to the date such stay bonus would otherwise be payable.
Each of the agreements is expected to provide that the executive will
receive an annual incentive award for 1996 based on targets ranging from 30%
to 45%, or 35% to 52.5% in the case of certain executives, of base annual
salary paid according to Company performance. The executives will be eligible
to participate in an annual incentive compensation program in 1997 and 1998.
In addition, the executives will be eligible to receive stock options under
the American Brands, Inc. Long Term Incentive Plan and participate in a new
three-year (1996-1998) long term incentive plan, which provides for the
payment of a bonus in early 1999 based upon Company performance during the
1996 through 1998 performance period.
If the Company terminates the executive's employment within two years of the
Merger for reasons other than disability or cause or if the executive
terminates for Good Reason, the Company will pay such executive 12 months'
salary, the target bonus for the year of termination, regardless of whether
goals have been met, the target bonus for the year of termination prorated
through the date of termination and continued coverage under the medical and
life insurance plans for one year. In addition, such executive will render
exclusive consulting services to the Company during the period for which the
executive is receiving severance payments under the agreement.
If a Vice President voluntarily terminates his employment, the Company has
the option to enter into an exclusive consulting non-compete arrangement for
12 months with 12 months' salary.
Confidentiality Agreement. Parent entered into a Confidentiality and
Standstill Agreement, dated June 19, 1995 and supplemented on June 26, 1995
and November 6, 1995, with the Company (the "Confidentiality Agreement"),
pursuant to which Parent has agreed, among other things, to keep confidential
certain non-public confidential or proprietary information of the Company
furnished to Parent by or on behalf of the Company. The Confidentiality
Agreement also provides that for a period of two years from the date of such
agreement, Parent will not seek, offer or propose to acquire more than 5% of
the Shares or engage in certain other transactions without the Company's prior
written consent. A copy of the Confidentiality Agreement is filed as Exhibit
c(10) hereto and incorporated herein by reference.
Estoppel Certificate. In the Merger Agreement, the Company has agreed to use
its reasonable best efforts to obtain from certain owners and/or lessors of
leased real property used by the Company an estoppel certificate with respect
to certain matters, including certain environmental liabilities.
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
Stock Option and Tender Agreement. See above for information relating to the
Stock Option and Tender Agreement.
Director Liability and Indemnification. Section 145 of the Delaware General
Corporation Law (the "DGCL") provides that a director or officer of a
corporation (a) shall be indemnified by the corporation for all expenses of
litigation or other legal proceedings when he is successful on the merits, (b)
may be indemnified by the corporation for the expenses, judgments, fines and
amounts paid in settlement of litigation (other than a derivative suit) even
if he is not successful on the merits if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the corporation (and, in the case of a criminal
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proceeding, had no reasonable cause to believe his conduct was unlawful), and
(c) may be indemnified by the corporation for expenses of a derivative suit (a
suit by a stockholder alleging a breach by a director or officer of a duty
owed to the corporation), even if he is not successful on the merits, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, provided that no such
indemnification may be made in accordance with clause (c) if the director or
officer is determined liable to the corporation, unless a court determines
that, despite such adjudication but in view of all of the circumstances, he is
entitled to indemnification for expenses. The indemnification described in
clauses (b) and (c) above shall be made only upon a determination, by (x) a
majority vote of a quorum of disinterested directors, (y) independent legal
counsel or (z) the stockholders, that indemnification is proper because the
applicable standard of conduct is met. Expenses incurred by a director or
officer in defending an action may be advanced by the corporation prior to the
final disposition of such action upon receipt of an undertaking by the
director or officer to repay the advance if it is ultimately determined that
he is not entitled to be indemnified in connection with the proceeding to
which the expenses relate.
Section 102(b)(7) of the DGCL permits a corporation organized under Delaware
law to eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. The certificate of incorporation of the Company includes
the following provision relating to the elimination and limitation of personal
liability of the Company's directors and indemnification for expenses and
liabilities:
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit. The Corporation
shall, to the fullest extent permitted by Section 145 of the DGCL, as
the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters
referred to in or covered by said section and, as provided in said
section, shall advance expenses, including reasonable attorneys' fees,
of any and all such persons, and the indemnification and advancement
of expenses provided for herein shall not be deemed exclusive of any
other rights to which a person seeking indemnification or advancement
of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
such person.
The Company has obtained directors' and officers' liability insurance.
The Merger Agreement provides that Parent will cause the Surviving
Corporation to maintain without any reduction in scope or coverage the
indemnification provisions for present and former officers and directors of
the Company contained in the Company's certificate of incorporation in effect
on the date thereof (and Parent acknowledges in the Merger Agreement that the
Company's certificate of incorporation requires, to the fullest extent
permitted by Section 145 of the DGCL, that the Company indemnify any and all
persons whom it shall have the power to indemnify under said section and, as
provided in said section, requires that the Company advance expenses incurred
upon receipt of an undertaking required by said section). The Merger Agreement
also provides that Parent cause the Surviving Corporation to maintain in
effect until at least six years after the Effective Time the current policies
of the directors' and officers' liability insurance maintained by the Company
with respect to matters occurring prior to, and including, the Effective Time,
provided, that the Surviving Corporation may substitute therefor policies of
at least the same coverage containing terms and conditions which are no less
advantageous so long as such substitution does not result in any lapse in
coverage, and provided that
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Parent shall not be obligated to cause the Surviving Corporation to pay
premiums in excess of 150% of the annual premiums currently paid by the
Company for such insurance. In the event Parent and the Surviving Corporation
cannot maintain policies for such coverage for such annual premium amount,
Parent and the Surviving Corporation will maintain as much coverage as is
available for such amount. Parent will cause the Surviving Corporation to
provide coverage under the directors' and officers' liability insurance policy
maintained by Parent to directors and officers of the Company and its
Subsidiaries to the same extent as provided to directors and officers of other
operating companies of Parent with respect to matters occurring after the
Effective Time.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors, by a unanimous vote of those members present, has
determined that the Merger Agreement and the transactions contemplated
thereby, including without limitation the Offer and the Merger, are fair to
and in the best interests of the stockholders of the Company, has approved the
Merger Agreement and the transactions contemplated thereby, and recommends
that the Company stockholders approve and adopt the Merger Agreement and
accept the Offer and tender their Shares pursuant to the Offer.
(B) BACKGROUND OF THE TRANSACTION.
In 1993, prior to the Company's initial public offering, the Company had
informal exploratory discussions with a number of potential strategic and
financial buyers regarding the possibility of a business combination or
acquisition transaction. In connection with such contacts, Acushnet Company, a
wholly-owned subsidiary of Parent ("Acushnet"), and the Company had
preliminary discussions concerning a possible business combination of the
Company with the Titleist and Foot-Joy businesses of Acushnet. At the time no
transaction developed with any party, and the Company decided to engage in an
initial public offering which was consummated onSeptember 28, 1993.
Beginning in the late spring and early summer of 1995, and periodically
thereafter, a number of press reports appeared about market speculation as to
potential business combination or acquisition transactions involving various
companies in the golf industry, including speculation about whether the
Company was an acquisition candidate. While there were informal contacts
concerning this possibility with the Company and other parties, such contacts
never advanced beyond the preliminary stage and the Company never received any
proposal regarding any such potential transaction.
In May 1995, Charles H. McGill, Vice President--Corporate Development of
Parent, telephoned Gary E. Biszantz, Chairman of the Board of Directors of the
Company, to discuss the possibility of a transaction with Parent. Mr. Biszantz
said that the Company was not seeking to be acquired or enter into any
business combination transaction and that any unsolicited contacts received by
Parent had not been authorized by the Company, but that if a proposal were
presented the Company might consider it.
At meetings held June 1 and 2, 1995, in Carlsbad, California, Mr. McGill and
Walter R. Uihlein, President and Chief Executive Officer of Acushnet, met with
Mr. Biszantz and other members of senior management of the Company and had
broad discussions about the Company's business and possible transactions.
On June 19, 1995, Parent and the Company entered into the Confidentiality
Agreement with respect to nonpublic information about the Company that might
be made available to Parent to enable it to conduct due diligence regarding
the Company to determine whether to make an acquisition proposal. At this
time, the Company determined to retain special outside legal counsel to advise
the Company's Board of Directors on its rights and obligations regarding the
consideration of any indications of interest or proposals it might receive, as
well as on certain strategic planning issues generally, and on June 26, 1995,
Parent and the Company supplemented the Confidentiality Agreement to, among
other things, provide for a two-year standstill arrangement pursuant to which
no Shares could be purchased and no proposal could be made by Parent without
the Company's consent.
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Initial due diligence meetings were conducted on June 26 and 27, 1995 in
Denver, Colorado by Mr. McGill and other representatives of Parent with Mr.
Biszantz and other officers of the Company. Thereafter,Mr. Uihlein had further
discussions with Thomas L. Crow, Vice Chairman of the Company, and Parent also
began its due diligence review. At the meetings, the parties discussed the
synergies that could be realized in a possible combination of the two
companies and the form of consideration that any possible transaction might
involve. During those conversations, Parent's representatives indicated that
Parent would only be interested in a transaction involving cash consideration.
During the course of discussions, Parent's representatives further indicated
that Parent would not be interested in participating in any auction or similar
process with respect to the Company if one were to develop. Mr. Biszantz
indicated that, while the Company was not seeking to be acquired or to enter
into any business combination, and was not actively considering the purchase
of any unit of Parent related to the Company's business, the Company would be
willing to consider any reasonable proposal that Parent might choose to make.
On July 25, 1995, the Company's Board of Directors, at a regularly scheduled
meeting, discussed general corporate matters, including a discussion of the
Audit Committee's review of the Company's financial statements (including
budgets) and projections. At the meeting the Company's Board of Directors also
discussed certain long-range planning issues, particularly involving
consolidations in the golf industry which had been predicted and rumored by
persons in the industry and others.
At the meeting Mr. Biszantz briefly reported on the interest previously
expressed by Parent. The directors discussed generally certain issues and
insights on merger, acquisition and business combination issues and the
directors' duties and responsibilities with respect to the consideration of
such matters. The Company's Board of Directors also generally discussed
whether to entertain the possibility of actively pursuing a sale of the
Company. The general consensus of the members present was that, while the
Company was not interested in actively seeking a strategic partner or buyer at
that time, management should remain receptive to the receipt and consideration
of any proposals that might arise and should continue to engage in exploratory
discussions with any parties that expressed interest in a possible transaction
with the Company. After the meeting Mr. Biszantz informally apprised
individual directors of developments concerning such discussions and undertook
to report to the Company's Board of Directors if and when any firm proposals
for any such transaction materialized.
The following week Mr. McGill contacted Mr. Biszantz to arrange another
meeting between the parties. On August 2 and 3, 1995, Mr. McGill and John T.
Ludes, President and Chief Operating Officer of Parent, met with Mr. Biszantz
in Carlsbad, California, to discuss the possibility of a cash tender offer for
the Shares. While a price range of $33 to $37 per Share was discussed, the
parties understood that the discussions were preliminary and subject to the
completion to the satisfaction of Parent of a due diligence review, the
satisfactory resolution of other key matters, negotiation of an agreement and
appropriate board approvals.
On August 9, 1995, Mr. McGill telephoned Mr. Biszantz to arrange for
additional due diligence sessions and to reaffirm Parent's interest in
proceeding with a cash acquisition of the Company within the $33 to $37 price
range. Mr. Biszantz stated that the Company had no interest in going forward
with discussions at that time in the price range being considered.
On August 21, 1995, Mr. Crow telephoned Mr. Uihlein and stated that the
Company might consider a proposed transaction at a price range of $35 to $38
per Share if the parties were to resume discussions. Thereafter, Mr. Ludes
telephoned Mr. Biszantz to indicate that a price range of $35 to $37 per Share
was possible and invited the Company to meet with Parent's representatives to
discuss the matter further. On August 24 and 25, 1995, Messrs. Biszantz and
Crow and other members of the Company's management met in Old Greenwich,
Connecticut, with Thomas C. Hays, Chairman and Chief Executive Officer of
Parent, Messrs. Ludes, McGill and Uihlein and Robert S. Dubiel, Executive Vice
President of Acushnet, to discuss the respective businesses of Acushnet and
the Company.
8
<PAGE>
From September 5 through 7, 1995, various representatives of Parent and its
financial advisors and legal counsel conducted a business and legal due
diligence investigation of the Company at the offices of the Company's counsel
in Los Angeles, California. Thereafter, various telephone discussions were
held between representatives of Parent and the Company with respect to a
possible acquisition price range for the Shares, and Parent continued its due
diligence review of the Company.
During the second week of September 1995, while Parent was still conducting
its due diligence review and the parties were attempting to resolve the many
open issues, in light of published rumors of a possible transaction between
Parent and the Company and the trading price of the Shares exceeding the price
ranges previously discussed, it was determined that there would be no further
consideration of any possible transaction and discussions were terminated. In
connection therewith on September 12, 1995, the Company's counsel requested
the return of all confidential written material furnished to Parent and its
representatives by or on behalf of the Company and such material was returned
shortly thereafter.
On October 25, 1995, the Company's Board of Directors held a regularly
scheduled meeting in Tulsa, Oklahoma, at which, among other things, it
reviewed the Company's results for the third quarter of fiscal 1995, the
Company's projected fourth quarter financial information and the Company's
revised projected 1996 financial information, together with related
assumptions and methodology. While in Tulsa, Mr. Biszantz also informally
discussed with individual directors the status of contacts with Parent and
confirmed that management continued to be receptive to any expressions of
interest or proposals that might be received from Parent or any other party.
On October 26, 1995, to determine whether the Company might have an interest
in resuming discussions, Gilbert L. Klemann, II, Senior Vice President and
General Counsel of Parent, telephoned the Company's counsel to discuss the
Company's interest in resuming negotiations and the possibility of Parent
resuming its due diligence review. On October 28, 1995, Mr. McGill met with
Mr. Biszantz in New York City to reinstitute discussions regarding a possible
acquisition of the Company by Parent. On October 30, 1995, the Company engaged
Lehman Brothers Inc. ("Lehman Brothers") to act as independent financial
advisor to the Company. On the same day, Messrs. Ludes, Klemann and McGill had
a telephone conference with counsel for the Company in which they outlined an
extensive list of due diligence issues that needed to be addressed for
meaningful discussions to proceed. On October 31, 1995, Parent provided the
Company and its legal representatives with a draft Merger Agreement and draft
Stock Option and Tender Agreement.
Over the course of the next several weeks, various telephone discussions
were held among representatives of Parent and its legal counsel and
representatives of the Company and its legal counsel with respect to
negotiations on the drafts of the Merger Agreement and the Stock Option and
Tender Agreement and Parent's continuing due diligence investigation of the
Company. On November 8, 1995, the Company's counsel provided comments to the
drafts of the agreements circulated by Parent, and from November 8 through 11,
1995, Messrs. Ludes, McGill and Uihlein and other representatives of Parent
met with Mark C. McClure, President and Chief Executive Officer of the
Company, David A. Schaefer, Senior Vice President and Chief Operating Officer
of the Company, and the Company's financial and legal advisors, and conducted
further due diligence with respect to the Company. Parent's financial and
legal advisors discussed valuation and other issues with respect to the
Company at a meeting of the Board of Directors of Parent held on November 17,
1995.
During the course of the negotiations, representatives of Parent and
representatives of the Company held a number of discussions concerning due
diligence issues and the importance to Parent of retaining certain key
employees of the Company, including a meeting held in Palm Springs,
California, on November 21, 1995, between Mr. Ludes and other representatives
of Parent and Messrs. Crow, McClure and Schaefer.
On November 22, 1995, Messrs. Klemann and McGill telephoned the Company's
counsel and indicated that Parent was prepared to proceed with an acquisition
of the Company at $35 per Share, subject to the completion of due diligence,
the satisfactory resolution of several key open issues and the negotiation of
definitive agreements. Parent also provided the Company and its
representatives with revised drafts of the Merger Agreement and the Stock
Option and Tender Agreement.
9
<PAGE>
On November 30, 1995, the Company's counsel, after conferring with Mr.
Biszantz, advised Messrs. Klemann and McGill that, as a stockholder of the
Company with approximately 9.5% of the outstanding Shares, Mr. Biszantz would
neither be prepared to sell his Shares nor recommend a transaction to the
Company's Board of Directors at that price. Discussions ended with Messrs.
Klemann and McGill reaffirming that Parent could not offer any more than $35
per Share and that there were a number of significant diligence and other
issues still unresolved.
On December 2, 1995, Mr. Biszantz spoke with Mr. Uihlein by telephone and
discussed the business prospects of the Company. Mr. Biszantz expressed his
position concerning certain business and legal issues regarding the proposed
transaction, including the valuation of the Company, and suggested that an
offer price of at or near $37 per Share might be considered by the Company.
Mr. Uihlein replied that these matters would be taken into consideration.
On December 5, 1995, Messrs. Klemann and McGill spoke by telephone with the
Company's counsel and discussed valuation issues, stating that Parent was
still committed to a transaction at a price of $35 per Share. The following
day, Mr. Klemann and the Company's counsel had further discussions concerning
the impasse on the valuation issue, and the Company's counsel suggested that
the parties' financial advisors meet to discuss the valuation issue. Mr.
Klemann agreed provided that the Company and Parent simultaneously resume the
due diligence process and endeavor to resolve several key open issues and that
their respective counsel resume contract negotiations. On December 7, 1995,
Messrs. Klemann and McGill had a further telephone call with the Company's
counsel to identify some of the remaining open issues and thereafter the
Company's counsel provided the Parent and its representatives with comments to
the draft Merger Agreement and Stock Option and Tender Agreement. On December
12, 1995, Mr. Schaefer, Robert K. Bruning, Chief Financial Officer of the
Company, and representatives of the Company's legal and financial advisors had
a lengthy conference call with Messrs. Ludes, Klemann, McGill, Uihlein and
other representatives of Parent and its financial advisor with respect to the
remaining key business diligence issues.
On December 13, 1995, Parent's and the Company's financial advisors met to
discuss valuation issues. The following day, Mr. Hays telephoned Mr. Biszantz
and indicated that Parent was prepared to raise the proposed offer price to
$36 per Share, subject to the Company's management supporting the transaction,
the satisfactory completion of due diligence and resolution of other key open
issues and the negotiation of a definitive Merger Agreement and Stock Option
and Tender Agreement. Mr. Biszantz stated that he would submit this proposal
to the Company's Board of Directors for its consideration and thereafter Mr.
Biszantz began to contact the members of the Board of Directors to apprise
them of the most recent developments and to schedule a meeting to consider
Parent's proposal. Subsequently, on December 16, 1995, Messrs. Hays and
Biszantz had a further conversation with respect to the open issues that
remained without reaching resolution thereon.
On December 15 and 16, 1995, Messrs. Ludes and Uihlein met in Carlsbad,
California, with Messrs. Biszantz, McClure, Crow and Schaefer for further
discussions about the Company and its prospects. During that time,
negotiations of the terms of the Merger Agreement and the Stock Option and
Tender Agreement continued, including discussions with respect to an
appropriate "fiduciary out" and a more limited termination fee provision than
was requested by Parent as well as a minimum condition in the tender offer
that at least a majority of the Shares not owned by the Company's directors or
officers be tendered into the offer. Such minimum condition was requested by
the Company's representatives in light of the significant percentage of Shares
required by Parent to be subject to the Stock Option and Tender Agreement in
order to ensure that the Company would have the right not to proceed with the
transaction in the event that a majority of the non-director and officer
stockholders did not tender into the Offer. The discussions ultimately
culminated in the Company and Parent agreeing upon a form of definitive Merger
Agreement and Stock Option and Tender Agreement.
On the morning of December 17, 1995, eleven of the twelve members of the
Company's Board of Directors met (with one director participating by
telephone) to consider Parent's offer and the terms of the Merger Agreement,
the Stock Option and Tender Agreement and the employment and consulting/non-
compete agreements proposed for certain of the Company's officers. The terms
of the proposed transaction were presented to and
10
<PAGE>
reviewed and discussed in detail by the Company's Board of Directors. The
Company's legal advisors reviewed the duties of the Board of Directors, and
Lehman Brothers, the Company's financial advisors, gave a detailed financial
presentation regarding Parent's proposal and the Company's prospects and
financial position. The directors who were not offered employment or
consulting/non-compete agreements by Parent then met separately to discuss
Parent's proposal. The Company's Board of Directors then took the proposed
transaction under advisement and agreed to reconvene later that evening after
having had an opportunity to review in greater detail the draft definitive
agreements and the presentation by the Company's financial advisors.
That evening the Company's Board of Directors reconvened and received the
oral opinion of Lehman Brothers, later confirmed in writing, that, as of
December 17, 1995, the $36.00 per Share cash consideration to be received by
the stockholders of the Company pursuant to the Offer and the Merger was fair
to such stockholders from a financial point of view. In addition, the
Company's legal advisors reviewed with the Company's Board of Directors the
proposed resolutions, and responded to questions, regarding the proposed
transaction. The Company's Board of Directors decided to proceed with the sale
of the Company and to accept Parent's proposal, approving the Merger Agreement
and the transactions contemplated thereby, including without limitation the
acquisition of Shares pursuant to the Stock Option and Tender Agreement. The
Company's Board of Directors also recommended that the stockholders of the
Company accept the Offer and tender their Shares pursuant thereto. All eleven
directors present voted unanimously in favor of the foregoing matters. See
"(c) Reasons for the Recommendation" below. Counsel to the parties then
proceeded to finalize the various agreements.
On the morning of December 18, 1995, the Merger Agreement and Stock Option
and Tender Agreement were executed and the transaction was publicly announced
that morning. The Purchaser commenced the Offer on December 22, 1995.
(C) REASONS FOR THE RECOMMENDATION.
In reaching its conclusions and recommendations described above, the
Company's Board of Directors considered the following factors:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) the financial condition, results of operations, business and
prospects of the Company, and the risks related to whether the Company
would be able to meet its projections, particularly in light of the
increasingly competitive nature of the golf industry;
(iii) the oral opinion of Lehman Brothers, which was later confirmed in a
written opinion, dated December 18, 1995, to the effect that, as of the
date of the opinion, the consideration to be offered to the Company's
stockholders pursuant to the Offer and the Merger is fair from a financial
point of view to such stockholders. The full text of Lehman Brothers'
written opinion which sets forth the procedures followed, the factors
considered and the assumptions made by Lehman Brothers is attached hereto
and filed as Exhibit a(7) hereto and incorporated herein by reference.
STOCKHOLDERS ARE URGED TO READ THE OPINION OF LEHMAN BROTHERS CAREFULLY AND
IN ITS ENTIRETY;
(iv) the trading history of the Shares since September 21, 1993, and a
comparison of that trading history with those of other companies that were
deemed relevant;
(v) a comparison of the historical financial results and present
financial condition of the Company with those of other companies that were
deemed relevant;
(vi) a comparison of the financial terms of the Offer and the Merger with
the financial terms of certain other transactions that were deemed
relevant;
(vii) the fact that the Merger Agreement, while prohibiting the Company
from actively soliciting any competitive proposal, does permit the Company
to furnish information concerning its business, properties or assets to,
and enter into discussions or negotiations with, any third party that makes
a bona fide
11
<PAGE>
unsolicited expression of interest, offer or proposal concerning any
Competing Transaction (as such term is defined in the Merger Agreement);
provided that the Company's Board of Directors, after consultation with its
outside legal counsel, determines in good faith that the failure to so act
would be inconsistent with its fiduciary duties;
(viii) the representation of Parent and the Purchaser that they have
sufficient funds available to them to consummate the Offer and the Merger
and the fact that the Offer is not subject to a financing condition;
(ix) the scope and detail of the negotiating process that led to the
finalization of the Merger Agreement;
(x) the fact that Parent had indicated that it would not be willing to
participate in any auction process and that, in management's view, an
auction of the Company prior to a decision to sell the Company could cause
harm to the Company and would cause significant disruption in existing
operations;
(xi) the provisions in the Merger Agreement that require the Company to
pay to Parent a termination fee of $15 million and reimburse Parent for its
documented out-of-pocket expenses not to exceed $4 million if the Merger
Agreement is terminated under certain circumstances, which the Company's
Board of Directors recognized would potentially foreclose competing offers
at approximately the same price level as, or at slightly higher levels
than, the Offer, but, based in part on the advice of the Company's
financial advisors, was well within the range of termination fees payable
in transactions of similar size and should not be a deterrent to competing
offers at price levels somewhat higher than the Offer;
(xii) the fact that Parent seemed highly motivated to complete the
transaction, and that, despite long-time and wide-spread market speculation
that the Company was an attractive acquisition candidate, no other parties
had made any firm proposals seeking to acquire or engage in any business
combination transaction with the Company; and
(xiii) the fact that the Offer will have a minimum condition requiring
the tender of at least a majority of (i) the outstanding Shares (determined
on a fully diluted basis) not owned by the Company and (ii) the outstanding
Shares (determined on a fully diluted basis) not owned by the Company's
directors or officers, thereby providing an independent means for assessing
the transaction for the Company's stockholders who will have no
relationship with Parent following the consummation of the transaction.
The Company's Board of Directors did not assign relative weights to the
foregoing factors or determine that any factor was of particular importance.
Rather, the Company's Board of Directors viewed their position and
recommendations as being based on the totality of the information presented to
and considered by them.
The Company's Board of Directors recognized that, while the consummation of
the Offer gives the stockholders the opportunity to realize a significant
premium over the prices at which the Shares were traded prior to the public
announcement of the Merger and Offer, tendering in the Offer would eliminate
the opportunity for stockholders to participate in the future growth and
profits of the Company.
It is expected that, if the Shares were not to be purchased by the Purchaser
in accordance with the terms of the Offer or if the Merger were not to be
consummated, the Company's current management, under the general direction of
the Company's Board of Directors, will continue to manage the Company as an
ongoing business in accordance with the Company's current long-term strategic
plan.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Lehman Brothers has been retained by the Company to act as independent
financial advisor to the Company with respect to the Offer, the Merger and
matters arising in connection therewith. Pursuant to an engagement letter
agreement dated October 30, 1995 (the "Engagement Letter"), Lehman Brothers
agreed to render an opinion and a bring down opinion, if requested by the
Company (collectively, the "Opinion"), with respect to the fairness or
inadequacy, from a financial point of view, to the Company's stockholders of
the consideration to be offered to such stockholders in connection with the
Offer and the Merger. Lehman Brothers also agreed to perform, if requested by
the Company, additional financial advisory services in connection with the
Offer and
12
<PAGE>
the Merger that are not traditionally rendered in connection with issuance of
the Opinion. As compensation for services rendered by Lehman Brothers in
connection with the Opinion, the Company agreed to pay Lehman Brothers a fee
of approximately $1,000,000 on issuance of the Opinion. As compensation for
any additional financial services rendered by Lehman Brothers pursuant to the
Engagement Letter, Lehman Brothers and the Company agreed to negotiate in good
faith to determine the appropriate fee based upon a variety of factors
including the scope and complexity of such services, Lehman Brothers' role in
transaction structuring and negotiating and the consummation of the Offer and
the Merger. In light of Lehman Brothers' assistance in negotiating the terms
of the Offer, including the final price terms for the Offer and the Merger,
monitoring the Offer and responding to any inquiries which may be received and
for their assistance in helping the Company's Board of Directors analyze
certain other financial terms of the transaction (including the reasonableness
of the termination fees proposed), the Company determined on December 22, 1995
to pay Lehman Brothers an additional fee of $1,300,000 (including all
expenses) for such services. The Company has also agreed to indemnify Lehman
Brothers against certain liabilities to which Lehman Brothers may become
subject in connection with the rendering of services by Lehman Brothers under
the Engagement Letter.
Lehman Brothers has provided certain investment banking services to the
Company from time to time, including acting as lead manager in the Company's
initial public offering and as lead manager in a secondary offering of the
Company's Shares, for which they have received customary compensation. In the
ordinary course of its business, Lehman Brothers actively trades the equity
securities of the Company and Parent for its own account and for the accounts
of its customers and Lehman Brothers may, therefore, at any time hold a long
or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, except for Shares the sale of
which may trigger liability for the holder(s) under Section 16(b) of the
Exchange Act, each executive officer, director and affiliate of the Company
currently intends to tender all Shares over which he or she has sole
dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described above or in Item 3(b) or 4(b) above, there are no
transactions, Board of Directors' resolutions, agreements in principle or
signed contracts in response to the Offer that relate to or would result in
one or more of the events referred to in Item 7(a) above.
13
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
During the course of negotiations with Parent, the Company provided to
Parent and its financial advisor certain non-public information relating to
the Company's business plan for the years ending December 31, 1995 through
1998 prepared by the Company's management. A summary of certain projected
financial information derived from the non-public information is included in
Section 8 of the Offer to Purchase under the caption "Certain Information
Concerning the Company -- Certain Company Projections" and is incorporated
herein by reference.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT
NO.
Exhibit a(1) Offer to Purchase, dated December 22, 1995.*
Exhibit a(2) Letter of Transmittal.*
Exhibit a(3) Summary advertisement published in The Wall Street Journal on
December 22, 1995.
Exhibit a(4) Press Release issued by the Company, dated December 18, 1995.
Exhibit a(5) Press Release issued by Parent, dated December 18, 1995.
Exhibit a(6) Letter to Stockholders of the Company dated December 22, 1995.*
Exhibit a(7) Opinion of Lehman Brothers, dated December 18, 1995.*
Exhibit c(1) Agreement and Plan of Merger, dated as of December 18, 1995,
among the Company, HCAC, Inc. and Parent.
Exhibit c(2) Stock Option and Tender Agreement, dated as of December 18, 1995,
among Parent and certain stockholders named therein.
Exhibit c(3) Consulting Non-compete Agreement between the Company and Gary E.
Biszantz.
Exhibit c(4) Executive Employment Agreement between the Company and Thomas L.
Crow.
Exhibit c(5) Executive Employment Agreement between the Company and Mark C.
McClure.
Exhibit c(6) Executive Employment Agreement between the Company and David A.
Schaefer.
Exhibit c(7) Form of Executive Employment Agreement proposed to be entered
into between the Company and Thomas W. McGinnis and James S.
Vincent.
Exhibit c(8) Form of Executive Employment Agreement proposed to be entered
into between the Company and certain vice presidents.
Exhibit c(9) The Company 1993 Stock Option Plan.
Exhibit c(10) Confidentiality and Standstill Agreement, dated June 19, 1995
and supplemented on June 26, 1995 and November 6, 1995, between
the Company and Parent.
- --------
* Included in copies mailed to stockholders.
14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 22, 1995 COBRA GOLF INCORPORATED
/s/ Robert K. Bruning
By __________________________________
Name: Robert K. Bruning
Title: Chief Financial Officer
15
<PAGE>
SCHEDULE I
COBRA GOLF INCORPORATED
1818 ASTON AVENUE
CARLSBAD, CALIFORNIA 92008
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
----------------
This Information Statement is being mailed on or about December 22, 1995 as
a part of the Company's Solicitation/Recommendation Statement on Schedule 14D-
9 (the "Schedule 14D-9") to the holders of record of the Shares at the close
of business on or about December 15, 1995. You are receiving this Information
Statement in connection with the possible election of persons designated by
the Purchaser to at least a majority of the seats on the Board of Directors of
the Company. The Merger Agreement requires the Company, at the request of the
Purchaser, to take all action necessary to cause the Purchaser's designees to
be elected to the Board of Directors under the circumstances described
therein. This Information Statement is required by Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 thereunder. See "Board of Directors and Executive Officers -- Right to
Designate Directors; The Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-
9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 22, 1995. The Offer is scheduled to expire at 12:00 midnight, New
York City time, on January 23, 1996 unless the Offer is extended.
The information contained in this Information Statement concerning the
Purchaser has been furnished to the Company by the Purchaser, and the Company
assumes no responsibility for the accuracy or completeness of such
information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of December 19, 1995, there were
18,623,618 Shares outstanding. The Board of Directors currently consists of
twelve members and there are currently no vacancies on the Board of Directors.
Each director holds office until such director's successor is duly elected and
qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of a majority of (x) the outstanding Shares (determined on a fully
diluted basis) and (y) the outstanding Shares (determined on a fully diluted
basis) not owned beneficially or of record by the Company's directors or
officers, the Purchaser will be entitled to designate such number of directors
(the "Purchaser Designees"), rounded up to the next whole number, on the
Company's Board of Directors (which shall be reduced to 10 members) that
equals the product of (i) 10 and (ii) the percentage that the number of Shares
owned by the Purchaser and its affiliates (including Shares so purchased)
bears to the total number of Shares outstanding. The Company has also agreed
to use its reasonable best efforts to cause the Purchaser Designees to
constitute the minimum number of directors necessary to constitute a simple
majority of each committee of the Company's Board of Directors, the board of
each subsidiary and each committee of each such board.
<PAGE>
Notwithstanding the Company's obligations outlined above, the Company's
Board of Directors shall have at least three members who were directors on the
date of the Merger Agreement and who are not officers or employees of the
Company.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule II to
the Offer to Purchase, a copy of which is being mailed to the Company's
stockholders together with this Schedule 14D-9. The Purchaser has informed the
Company that each of the directors and executive officers listed in Schedule
II to the Offer to Purchase has consented to act as a director, if so
designated. The information on such Schedule II to the Offer to Purchase is
incorporated herein by reference.
It is expected that the Purchaser Designees may assume office at any time
following the Purchaser's acceptance for payment of, and payment for, Shares
pursuant to the Offer, which purchase cannot be earlier than January 23, 1995,
and that, upon assuming office, the Purchaser Designees will thereafter
constitute at least a simple majority of the Board of Directors.
SECTION 16 COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who beneficially own more than 10 percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Executive officers, directors and greater than 10-percent
beneficial owners are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the Company's
1995 fiscal year all Section 16(a) filing requirements applicable to its
executive officers, directors, and greater than 10-percent beneficial owners
were complied with.
I-2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and the notes thereto set forth information as of
December 19, 1995, except as indicated in the accompanying notes, relating to
beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of the
equity securities of the Company by (i) each person known by the Company to
own beneficially more than five-percent of the outstanding shares of the
voting stock of the Company, (ii) each director, (iii) each of the executive
officers named in the Summary Compensation Table and (iv) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK OF THE
COMPANY BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (1)(2) OWNERSHIP
- ------------------------ -------------------- ----------
<S> <C> <C>
Gary E. Biszantz (3)**......................... 1,771,358 9.5%
Thomas L. Crow (4)**........................... 1,214,684 6.5%
George D. Bjurman & Associates (5)............. 1,007,928 5.4%
10100 Santa Monica Blvd., Suite 1200
Los Angeles, CA 90067
Donald C. Sherman (6).......................... 774,778 4.2%
Greg J. Norman (7)............................. 762,578 4.1%
Arthur B. Schultz (8).......................... 484,642 2.6%
Gary S. Vandeweghe (9)......................... 484,642 2.6%
John L. Schroeder (10)......................... 321,474 1.7%
Mark C. McClure (11)........................... 179,128 *
David A. Schaefer (12)......................... 42,500 *
Thomas W. McGinnis (13)........................ 22,000 *
Robert A. Lurie (14)........................... 12,826 *
Charles W. Elliott............................. 1,000 *
All directors and executive officers as a group
(20 persons)
(3)(4)(6)(7)(8)(9)(10)(11)(12)(13)(14)(15).... 6,171,310 33.1%
</TABLE>
- --------
* Less than 1%.
** The address for these beneficial holders is Cobra Golf Incorporated, 1818
Aston Avenue, Carlsbad, California 92008.
(1) The Shares are the only class of equity securities of the Company
outstanding.
(2) Except as otherwise noted, all persons listed in the table have sole
voting and investment power with respect to their Shares, subject to the
rights of their spouses under applicable community property laws.
(3) Includes (i) 1,216,890 Shares owned by the Gary E. Biszantz Living Trust,
of which Gary E. Biszantz is the sole Trustee, (ii) 252,468 Shares owned
by the Biszantz Children's Trust, of which Mr. Biszantz is the sole
Trustee, (iii) 300,000 Shares owned by the Gary E. Biszantz and Frances B.
Biszantz Charitable Remainder Trust, of which Mr. Biszantz and Mrs.
Biszantz are co-Trustees sharing voting and dispositive power, and (iv)
2,000 Shares owned directly by Gary E. Biszantz.
(4) Includes (i) 166,333 Shares owned by the Crow Community Property Trust, of
which Thomas L. Crow and Carol Ann Crow, husband and wife, are co-Trustees
sharing voting and dispositive power, (ii) 362,333 Shares owned by the
three Thomas L. Crow Charitable Remainder Trusts, of which Mr. Crow and
Mrs. Crow are co-Trustees sharing voting and dispositive power, (iii)
250,000 Shares owned by the Crow Family Limited Partnership, of which Mr.
Crow is the General Partner and Mr. and Mrs. Crow share voting and
dispositive power, and (iv) 436,018 Shares owned by the TLC/CGC Trust, of
which James E. Moeller is trustee for the benefit of Mr. Crow.
I-3
<PAGE>
(5) Based on a Schedule 13G dated as of December 31, 1994 filed by George D.
Bjurman & Associates with the Commission which states that the shares are
held with shared voting and dispositive power. The Schedule 13G discloses
that Mr. George A. Bjurman and Mr. Owen T. Barry III may be deemed to be
indirect beneficial owners of the equity securities held by the firm named
in the table.
(6) Includes (i) 662,889 Shares owned by the Donald C. Sherman Living Trust,
of whichDonald C. Sherman is the sole Trustee and (ii) 111,889 shares
owned by the Starr Charitable Remainder Unitrust, of which Mr. Sherman and
Diane Sherman, husband and wife, are co-Trustees.
(7) Includes (i) 37,981 Shares owned by the Norman Family Charitable
Foundation Trust, of which Greg J. Norman, Laura Norman and Bessemer Trust
Company of Florida are co-Trustees sharing voting and dispositive power
and (ii) 62,500 Shares covered by stock options that are currently
exercisable.
(8) Includes (i) 409,642 Shares owned by Arthur B. Schultz Living Trust, of
which Arthur B. Schultz is the sole Trustee, (ii) 50,000 Shares owned by
the Arthur B. Schultz Charitable Foundation, of which Mr. Schultz is the
sole Trustee and (iii) 25,000 Shares owned by the Arthur B. Schultz
Charitable Remainder Trust, of which Mr. Schultz is the sole Trustee.
(9) Includes (i) 338,352 Shares owned by the Vandeweghe Living Trust, of which
Gary S. Vandeweghe and Barbara M. Vandeweghe, husband and wife, are co-
Trustees sharing voting and dispositive power, (ii) 71,290 Shares owned by
the TAV Trust for the benefit of Mr. and Mrs. Vandeweghe's children, of
which Mr. and Mrs. Vandeweghe are co-Trustees sharing voting and
dispositive power, (iii) 50,000 Shares owned by the Greenside Charitable
Remainder Unitrust, of which Mr. and Mrs. Vandeweghe are co-Trustees
sharing voting and dispositive power and (iv) 25,000 Shares owned by the
Greenside Foundation of which Mr. and Mrs. Vandeweghe and their children
are co-Trustees sharing voting power.
(10) Includes (i) 298,782 Shares owned by The John L. Schroeder and Kathleen
A. Schroeder Living Trust, of which John L. Schroeder is the sole
Trustee, (ii) 15,192 Shares owned by the John L. Schroeder and Kathleen
A. Schroeder Charitable Remainder Trust, of which Mr. Schroeder is the
sole Trustee, (iii) 2,500 Shares held by Mr. Schroeder as custodian for
his daughter, Jennifer Kelly Schroeder, (iv) 2,500 Shares held by Mr.
Schroeder as custodian for his daughter, Molly Elizabeth Schroeder and
(v) 2,500 Shares owned by Mr. Schroeder as the sole Trustee under
Declaration of Trust dated 12/13/93.
(11) Includes (i) 129,128 Shares beneficially owned by Mark C. McClure which
are owned by a trust of which Mr. McClure and Doren E. McClure, husband
and wife, are co-Trustees sharing voting and dispositive power and (ii)
50,000 Shares covered by stock options that are currently exercisable.
(12) Includes 37,500 Shares covered by stock options that are currently
exercisable.
(13) Includes 20,000 Shares covered by stock options that are currently
exercisable.
(14) Includes 7,500 Shares covered by stock options that are currently
exercisable.
(15) Includes 87,000 Shares covered by stock options that are currently
exercisable.
I-4
<PAGE>
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The name, principal occupation, business experience and age of each director
and named executive officer and his or her term of office and period of
previous service as a director (where applicable) of the Company are set forth
below. There are no family relationships among any of the named individuals,
and no individual was selected as a director pursuant to any arrangement or
understanding with any other person.
<TABLE>
<CAPTION>
YEARS
WITH THE
NAME AGE POSITION(S) HELD COMPANY
---- --- ---------------- --------
<S> <C> <C> <C>
Gary E. Biszantz (1).... 61 Chairman of the Board and Director 17
Thomas L. Crow (1)...... 64 Vice Chairman, Chief Designer and Director 17
Mark C. McClure (1)..... 45 President, Chief Executive Officer and Director 16
David A. Schaefer (1)... 36 Senior Vice President, Chief Operating Officer and Director 5
Gary S. Vandeweghe
(1)(2)................. 56 Secretary and Director 17
John L. Schroeder (2)... 50 Director 17
Arthur B. Schultz (3)... 69 Director 11
Donald C. Sherman (2)... 62 Director 9
Robert A. Lurie (3)..... 66 Director 3
Greg J. Norman.......... 40 Director 4
Charles W. Elliott
(2)(3)................. 63 Director 1
Ogden M. Phipps (2)..... 55 Director 1
</TABLE>
- --------
(1) Member of Executive Committee
(2) Member of Compensation/Stock Option Committee
(3) Member of Audit Committee
Gary E. Biszantz was one of the principal founders and organizers of the
Company in 1978 and has been a director of the Company since its organization.
He has served as Chairman of the Board of Directors and has provided strategic
planning and general management services to the Company pursuant to an
agreement between the Company and Biszantz Consulting, Inc. since the Company
was incorporated.
Thomas L. Crow has been an executive officer and director of the Company
since its formation in 1978 and served as its President until May 1993. Mr.
Crow was a director of Precision Golf Forging, a golf equipment manufacturer
in Australia, before immigrating to America in 1973. He is a former Australian
Amateur golf champion and has been active in golf club design for over 20
years.
Mark C. McClure has been the Company's Chief Executive Officer since April
1990, its President since May 1993 and a director since July 1993. Mr. McClure
joined the Company in 1979 and previously served as National Sales Manager
and, from 1988 until April 1990, as the Company's Vice President--Sales.
David A. Schaefer has served as Senior Vice President and Chief Operating
Officer since October 1994 and as a director since July 1993. Mr. Schaefer
joined the Company in February 1990 and served as its Chief Financial Officer
from that time until May 1995. Prior to joining the Company, Mr. Schaefer was
a Senior Manager, Entrepreneurial Services, Audit Division for the accounting
firm of Ernst & Young LLP and had a total of nine years of service with that
firm.
Gary S. Vandeweghe has been Secretary and a director of the Company since
its formation in 1978. Mr. Vandeweghe is an attorney in private practice with
the firm of Rankin, Luckhardt, Vandeweghe, Landsness & Lahde in San Jose,
California, and has served as counsel to the Company since its formation. Mr.
Vandeweghe currently serves as a director of the San Jose National Bank, SJNB
Financial Corp., Krause's Furniture, Inc., and the Northern California Golf
Association.
John L. Schroeder, a private investor, has been a director since 1978. He
was a professional golfer on the PGA Tour from 1969 through 1982 and the
Director of Golf at the Rancho Santa Fe Farms Golf Club from 1988 through
April 1994.
I-5
<PAGE>
Arthur B. Schultz, a certified public accountant and private investor, has
been a director of the Company since 1984. Mr. Schultz has served since 1983
as Secretary, Treasurer and a director of Penta Engineering Corp. and of Aqua
Measure Instrument Co. (AMICO), both of which are involved in electronics
engineering, manufacturing and distribution.
Donald C. Sherman, a private investor, has been a director of the Company
since 1986.
Robert A. Lurie is President of The Lurie Company, a San Francisco and
Chicago-based real estate investment company. Mr. Lurie, until January 1993,
was the owner of the San Francisco Giants professional baseball team and has
been a director of the Company since 1992. He is currently a director of Par
Business Systems, Inc., which is involved in the sale of hardware and software
for tee time reservation management.
Greg J. Norman, a two-time British Open Champion and one of golf's premier
touring professionals, has been a director since August 1994.
Charles W. Elliott has been a director of the Company since July 1995. Mr.
Elliot currently serves as Senior Advisor to the President of Western Michigan
University. Mr. Elliott recently retired from the Kellogg Company (1987-1995)
as Executive Vice President--Administration and Chief Financial Officer.
Previously, he held various executive positions during his 30-year career
(1957-1987) with Price Waterhouse LLP. He currently serves as a director of
the Kellogg Company, Stanhome, Inc. and Steelcase Financial Services, Inc. He
is also Chairman of the Board of the Ambassador Fund.
Ogden M. Phipps has been a director of the Company since July 1995. Until
1994, Mr. Phipps served as Chairman of the Board of the Bessemer Group, Inc.,
Bessemer Securities Corporation, Bessemer Trust Company and Bessemer Trust
Company N.A. Mr. Phipps currently serves as a director of several Bessemer
Group companies, the Overhead Door Corporation and the Stant Corporation.
LEGAL PROCEEDING
There are no material proceedings to which any director, officer or
affiliate of the Company, any owner of record or beneficially of more than
five percent of the Shares, or any associate of any such director, officer,
affiliate of the Company, or security holder is a party adverse to the Company
or any of its subsidiaries or has a material interest adverse to the Company
or any of its subsidiaries.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held seven meetings in 1994. The Board of
Directors has a standing Executive Committee, Audit Committee and,
Compensation/Stock Option Committee.
The function of the Executive Committee is generally to review the strategic
business direction of the Company. The Executive Committee did not formally
meet during 1994.
As directed by the Board of Directors, the functions of the Audit Committee
include (a) annually recommending to the Board of Directors independent
auditors; (b) reviewing the scope of audits made by the independent auditors;
(c) receiving and reviewing reports submitted by the independent auditors and
taking such action in respect of such reports as the Audit Committee may deem
appropriate; (d) reviewing all major accounting policy matters; and (e) making
recommendations to the Board of Directors with respect to auditing policies
and procedures and the scope and extent of audits. During 1994, the Audit
Committee held three meetings.
The functions of the Compensation/Stock Option Committee generally are to
determine and oversee the Company's policies with respect to the compensation
and benefits of the employees, including the executive officers, of the
Company. In addition, the Compensation/Stock Option Committee administers the
Company's 1993 Stock Option Plan. During 1994, the Compensation/Stock Option
Committee held nine meetings.
Mr. Lurie attended fewer than 75 percent of the aggregate of (1) the total
number of meetings of the Board of Directors held during the period for which
he was a director and (2) the total number of meetings held by all committees
of the Board of Directors on which he served (during the period that he
served).
I-6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
Information is set forth below concerning the compensation received by the
Company's Chief Executive Officer and the other four most highly compensated
executive officers ("Named Executive Officers") of the Company during the
fiscal years ended December 31, 1994, 1993 and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------
ANNUAL COMPENSATION AWARDS
---------------------- ----------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS OPTIONS/SARS (1) COMPENSATION (2)
POSITIONS YEAR ($) ($) (#) ($)
------------------ ---- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Mark C. McClure (3)..... 1994 $300,000 $249,000 -- $1,000
President and Chief 1993 240,000 169,600 200,000 1,000
Executive Officer 1992 200,000 120,000 -- 1,000
Gary E. Biszantz (3)(4). 1994 480,000 369,000 -- --
Chairman of the Board 1993 480,000 84,800 -- --
1992 420,000 90,000 -- --
Thomas L. Crow (3)...... 1994 300,000 249,000 -- --
Vice Chairman and Chief 1993 300,000 56,500 -- --
Designer 1992 260,000 65,000 -- --
David A. Schaefer (3)... 1994 150,000 139,000 -- 1,000
Senior Vice President, 1993 120,000 70,650 150,000 1,000
Chief Operating 1992 100,000 50,000 -- 1,000
Officer and Chief
Financial Officer (5)
Thomas W. McGinnis (3).. 1994 135,000 70,000 -- 1,000
Vice President--Sales 1993 110,000 42,400 80,000 1,000
Operations 1992 100,000 25,000 -- 1,000
</TABLE>
- --------
(1) Amounts reflect the effect of the Company's two-for-one stock split in
September 1994.
(2) The amounts disclosed in this column reflect the Company's contributions
under its 401(k) Savings Plan.
(3) During the fiscal year ending 1995 the Company expects to pay salaries of
$350,000, $550,000, $350,000, $175,000 and $150,000 and bonuses of
$325,000, $480,000, $320,000, $175,000 and $80,000 to Messrs. McClure,
Biszantz, Crow, Schaefer and McGinnis, respectively.
(4) The amounts paid to Mr. Biszantz were paid as consulting fees to his
wholly owned corporation, Biszantz Consulting, Inc., for his full-time
consulting services to the Company.
(5) In May 1995 the Board of Directors of the Company approved Mr. Schaefer's
new title of Senior Vice President and Chief Operating Officer.
I-7
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1994 AND VALUE OF OPTIONS AT END OF
FISCAL 1994
The following table sets forth information with respect to the exercise of
options during the fiscal year ended December 31, 1994 by each of the named
executive officers, options held at the end of the fiscal year and the value
of the Named Executive Officers' unexercised options at the end of the fiscal
year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SAR(S) AT SARS AT FISCAL
FISCAL YEAR-END(#) YEAR-END($)(1)
---------------------- -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark C. McClure......... -- -- 50,000 150,000 1,262,500 3,787,500
Gary E. Biszantz........ -- -- -- -- -- --
Thomas L. Crow.......... -- -- -- -- -- --
David A. Schaefer....... 37,500 935,625 -- 112,500 -- 2,840,625
Thomas W. McGinnis...... 20,000 548,897 -- 60,000 -- 1,515,000
</TABLE>
- --------
(1) The closing price of the Shares on December 31, 1994 as reported on The
Nasdaq Stock Market was $35.75 per share.
EMPLOYMENT AGREEMENTS
Mr. Biszantz renders full-time management services to the Company and serves
as Chairman under a Consulting Agreement with his wholly owned corporation,
Biszantz Consulting, Inc. The Consulting Agreement has been in effect since
1981 and has been renewed annually. Under the current renewal, effective April
1, 1995, Mr. Biszantz receives $45,833.33 per month for his services. In
addition, if Mr. Biszantz' Consulting Agreement terminates for any reason
other than his death or permanent disability, Mr. Biszantz has agreed to
provide full-time exclusive consulting services to the Company for two years
and part-time exclusive consulting services to the Company for the next three
years, for which he is entitled to receive $300,000 per year during such five-
year period.
Mr. Crow serves as the Company's Vice Chairman and Chief Designer under an
Employment Agreement. The Employment Agreement has been in effect since 1978,
and has been renewed annually. Mr. Crow may terminate the agreement upon
ninety days written notice to the Company, and the Company may terminate the
agreement for good cause. Under the current renewal, effective April 1, 1995,
Mr. Crow receives $29,166.67 per month for his services. In addition, if Mr.
Crow's Employment Agreement terminates for any reason other than his death or
permanent disability, Mr. Crow has agreed to provide full-time exclusive
consulting services to the Company for two years and part-time exclusive
consulting services to the Company for the next three years, for which he is
entitled to receive $200,000 per year during such five-year period.
The Company has also entered into employment agreements with Messrs. McClure
and Schaefer. These agreements provide for salaries for the year commencing
January 1, 1995 of $350,000 for Mr. McClure and $175,000 for Mr. Schaefer,
plus bonuses or increases as the Board of Directors shall determine. Each
agreement is for a three-year term expiring June 30, 1997, and is
automatically extended each year for an additional year unless either party
provides written notice to the contrary. Mr. McClure and Mr. Schaefer each has
agreed to devote all of his working time and effort exclusively and to the
best of his ability to the Company during the employment period.
If the Merger is consummated, the above-described employment agreements will
be superseded by the employment agreements described in Item 3 of the Schedule
14D-9.
I-8
<PAGE>
COMPENSATION OF DIRECTORS
The Company pays Directors' fees of $5,000 per year and a merchandise
allowance of up to $3,500 per year to the eight outside directors. Directors
who are also employees or consultants receive no additional compensation as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the period from January 1, 1994 through December 31, 1994, the
executive compensation program of the Company was administered by the
Compensation/Stock Option Committee of the Board of Directors, with Mr.
Sherman as its Chairman and Mr. Schroeder and Mr. Vandeweghe as its other
members. Mr. Vandeweghe was appointed to the Compensation/Stock Option
Committee on January 26, 1994. During the period from January 1, 1994 through
December 31, 1994, Messrs. Sherman, Schroeder and Vandeweghe were partners of
the partnership from which the Company leased its corporate headquarters, were
tenants in common of the entity which owns the graphite manufacturing facility
leased by the Company and were partners of the partnership with which the
Company entered into a lease in December 1994 for assembly, research and
development and administrative offices space. In addition, Messrs. Sherman and
Vandeweghe were partners of the partnership from which the Company leased
warehouse, distribution and manufacturing space in February 1994.
Transactions Involving Corporate Headquarters in Carlsbad, California. The
Company leases its 70,000 square foot administrative, research and development
and manufacturing facility in Carlsbad, California from Cobra-Blackmore, a
California general partnership ("Cobra-Blackmore"). The lease is for a period
of 15 years, beginning July 1, 1991 and ending June 30, 2006, at a current
monthly rental payment of approximately $50,000. The rent is to be increased
annually by a percentage equal to the annual increase in the consumer price
index, not to exceed an annual increase of 6%. Rent is also subject to
adjustment, at Cobra-Blackmore's option, in the sixth and 11th years of the
lease term if the fair market rental value of the premises, as determined by
Cobra-Blackmore or, if the Company does not concur, by arbitration under the
provisions of the American Arbitration Association, is greater than the rent
as otherwise adjusted. The Company has the obligation to maintain the
property, provide insurance coverage on the property and its business, pay all
real property and personal property taxes and utilities, and pay all other
operating expenses. Seven of the eight general partners of Cobra-Blackmore--
Mr. Biszantz (as Trustee), Mr. Crow (as Trustee), Mr. Schultz, Mr. Vandeweghe
(as Trustee), Mr. Schroeder (as Trustee), Mr. Sherman (as Trustee) and GWS
Holdings, Inc. (an affiliate of Mr. Norman)--are stockholders, or affiliates
of stockholders, and/or officers or directors of the Company. In 1994 and
1995, the Company's rental payments to Cobra-Blackmore totalled approximately
$589,000 and will total approximately $599,000, respectively.
Transactions Involving the Company's Graphite Shaft Manufacturing Facility.
The Company leases its 53,000 square foot graphite shaft manufacturing
facility in Carlsbad, California near the Company's corporate headquarters,
from Cobra Golf Associates ("Cobra Golf Associates"), a group of tenants in
common. The tenants in common of Cobra Golf Associates--Mr. Biszantz (as
Trustee), Ralph V. Biszantz, Mr. Crow and Mrs. Crow (as Trustees), Mr.
Schultz, Mr. Vandeweghe and Mrs. Vandeweghe (as Trustees), Mr. Schroeder and
Mrs. Schroeder (as Trustees), Mr. Sherman (as Trustee), Mr. McClure and Mrs.
McClure (as Trustees),Mr. Schaefer and GWS Holdings, Inc. (an affiliate of Mr.
Norman)-- are all stockholders, or affiliates of stockholders, and/or officers
or directors of the Company. The lease is for a period of 15 years, beginning
February 1, 1993 and ending January 31, 2008, at a current monthly rent
payment of $27,000. The rent is to be increased annually by a percentage equal
to the annual increase in the consumer price index, not to exceed an annual
increase of 6%, and not less than a 2.5% increase over the monthly rental base
rate. Rent is also subject to adjustment, at Cobra Golf Associates' option, in
the sixth and 11th years of the lease term if the fair market rental value of
the premises, as determined by Cobra Golf Associates or, if the Company does
not concur, by arbitration as the parties shall agree or under the provisions
of the American Arbitration Association, is greater than the rent as otherwise
adjusted. The Company has the obligation to maintain the property, provide
insurance coverage on the property and its business, pay all real property and
personal property taxes and utilities, and pay all other operating expenses.
In 1994 and 1995, the Company's rental payments to Cobra Golf Associates
totalled approximately $307,000 and will total approximately $322,000,
respectively.
I-9
<PAGE>
Transactions Involving the Company's Warehouse and Distribution Facility. In
February 1994, the Company entered into a lease for a 51,000 square foot
warehouse, distribution and manufacturing facility in Carlsbad, California
from Ridgecrest Properties, R and B Properties and Hindry West Development,
all California limited partnerships (collectively, the "Ridgecrest
Partnerships"). The lease is for a period of five years, beginning April 1,
1994 and ending March 31, 1999, at a current monthly rental payment of
approximately $22,000. In addition, the Company has the option to extend the
lease for a five-year period. The rent is to be increased annually by a
percentage equal to the annual increase in the consumer price index, not to
exceed an annual increase of 6%. Rent may also be subject to adjustment, at
the Lessor's option, at the beginning of the sixth year of the lease term if
the fair market rental value of the premises, as determined by the Lessor or,
if the Company does not concur, by arbitration under the provisions of the
American Arbitration Association, is greater than the rent as otherwise
adjusted. The Company has the obligation to maintain the property, provide
insurance coverage on the property and its business, pay all real property and
personal property taxes and utilities, and pay all other operating expenses.
Mr. Vandeweghe and Mrs. Vandeweghe (as Trustees) and Mr. Sherman (as Trustee)
are stockholders, or affiliates of stockholders, and/or officers or directors
of the Company, and are limited partners collectively owning approximately
7.1% of the Ridgecrest Partnerships. In 1994 and 1995, the Company's rental
payments to Ridgecrest Partnerships totalled approximately $198,000 and will
total approximately $267,000, respectively.
Transactions Involving the Company's Assembly, Research and Development and
Administrative Offices Facility. In December 1994, the Company entered into a
lease for a 57,000 square foot assembly, research and development and
administrative offices facility in Carlsbad, California from Blackmore
Parkview Associates, a California limited partnership ("Blackmore Parkview").
The lease is for a period of 15 years, beginning May 1, 1995 and ending April
30, 2010, with an initial monthly rental payment of approximately $33,000. In
addition, the Company has the option to extend the lease for a five-year
period. The rent is to be increased annually by a percentage equal to the
annual increase in the consumer price index, not to exceed an annual increase
of 6%. Rent may also be subject to adjustment, at the Lessor's option, at the
beginning of the seventh year of the lease term if the fair market rental
value of the premises, as determined by the Lessor or, if the Company does not
concur, by arbitration under the provisions of the American Arbitration
Association, is greater than the rent as otherwise adjusted. The Company has
the obligation to maintain the property, provide insurance coverage on the
property and its business, pay all real property and personal property taxes
and utilities, and pay all other operating expenses. Mr. Biszantz (as
Trustee), Mr. Crow (as Trustee), Mr. Schultz (as Trustee), Mr. Vandeweghe and
Mrs. Vandeweghe (as Trustees), Mr. Schroeder (as Trustee), Mr. Sherman (as
Trustee), Mr. McClure and Mrs. McClure (as Trustees) and the Robert A. Lurie
Revocable Trust are all stockholders, or affiliates of stockholders, and/or
officers or directors of the Company, and are limited partners collectively
owning approximately 29.7% of Blackmore Parkview. In 1995, the Company's
rental payments to Blackmore Parkview Associates will total approximately
$197,000.
With respect to certain transactions between Mr. Norman and certain of his
affiliates and the Company, see "Certain Transactions" immediately below.
I-10
<PAGE>
CERTAIN TRANSACTIONS
Agreements with Mr. Norman and Great White Shark Enterprises, Inc. Effective
January 1, 1995, the Company entered into a new seven-year representation and
licensing agreement with Great White Shark Enterprises, Inc. ("Great White
Shark") and its controlling stockholder, Mr. Norman. This agreement replaced
the representation and licensing agreement between the Company and Great White
Shark dated January 1, 1992 (the "Old Agreement"). Pursuant to this agreement,
Mr. Norman agreed to endorse exclusively the Company's golf clubs and to use
Cobra Golf bags, head covers and other accessories, and to refrain from
endorsing other golf equipment. The agreement also requires Mr. Norman to
compete in a minimum number of televised professional golf tournaments each
year, as well as certain prominent golf events held worldwide, and to
participate in the national PGA show and the Company's annual sales meeting
each year, to the extent not inconsistent with his professional tour golf
schedule. The agreement further confers an exclusive license upon the Company
to use Greg Norman's name and likeness in connection with the advertisement,
promotion and sale of Cobra Golf products throughout the world. In return, the
Company is to pay Mr. Norman $10.5 million over the term of the agreement,
reimburse him for certain expenses and provide him with certain golf clubs and
supplies. Mr. Norman qualifies for performance bonuses of $100,000 each by
winning any of the four "major" golf tournaments (the U.S. Open, the British
Open, the PGA Championship or the Masters) during the term of the agreement.
In 1994 and 1995, the Company paid Great White Shark $900,000 and will pay
$2,400,000, respectively, pursuant to this agreement and the Old Agreement.
Effective July 1, 1992, the Company entered into an Exclusive Manufacturing,
Licensing and Distribution Agreement appointing Great White Shark (Pty)
Limited, known as Cobra Golf Australia Pty. Limited ("Cobra Golf Australia"),
an Australian corporation 50% of which is owned by Mr. Norman, as its
exclusive licensee for the assembly, marketing and sales of the Company's golf
clubs and accessories in Australia, New Zealand, Papua New Guinea and the
South Pacific Islands. Under the terms of the agreement, Cobra Golf Australia
is entitled on an exclusive basis to use the Company's designs, proprietary
know-how and trademarks to assemble clubs of the Company's design and sell
them within Cobra Golf Australia's territory. Cobra Golf Australia may also
design clubs which, if approved by the Company, may be sold under the
Company's trademark. Cobra Golf Australia is required to buy from the Company
components manufactured by Cobra, including principally graphite shafts, and
Cobra Golf Australia is entitled to obtain the other necessary components from
the Company's own suppliers, generally on the same terms as extended to the
Company. In addition to revenues generated through the sale by it of
components to Cobra Golf Australia, the Company is to receive royalties equal
to 10.0% of the net sales revenues of Cobra Golf Australia from the sale of
the first $1 million of the Company's clubs each year, 7.5% of the next $1
million of the Company's clubs each year, and 5.0% of all sales of the
Company's clubs in excess of $2 million each year. Cobra Golf Australia is
also required to pay royalties equal to 5% of its FOB cost for all of the
Company's golf accessories bearing the Company's trademark, other than the
Company's golf clubs. Cobra Golf Australia is committed to the payment of
minimum annual royalty payments during the remaining term of the agreement in
the amount of $250,000. In 1994 and 1995, the Company received payments
amounting to $345,000 and will receive payments amounting to $333,000,
respectively, under the agreement.
Cobra Golf Australia's appointment as an exclusive licensee of the Company's
products remains in effect for a term of ten years, through June 30, 2002, and
shall automatically be renewed for up to two successive five-year periods on
the same basis, unless either party serves at least three months' advance
written notification of termination upon the other upon expiration of the then
current term. However, the Company does not have the right to terminate the
agreement, and it shall automatically renew as set forth above, unless Cobra
Golf Australia, during the last year of the agreement's then current term, has
not made royalty payments to the Company which equal or exceed the then
current minimum royalty requirement.
I-11
<PAGE>
EXHIBIT 99(a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Cobra Golf Incorporated
at
$36.00 Net Per Share
by
HCAC, Inc.
a wholly-owned subsidiary of
American Brands, Inc.
---------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 23,
1996, UNLESS EXTENDED.
---------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER
OF SHARES OF COMMON STOCK WHICH WOULD CONSTITUTE A MAJORITY OF (X) THE
OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS) AND (Y) THE
OUTSTANDING SHARES OF COMMON STOCK (DETERMINED ON A FULLY DILUTED
BASIS) NOT OWNED BENEFICIALLY OR OF RECORD BY THE COMPANY'S DIRECTORS
OR OFFICERS, (ii) THE EXPIRATION OR TERMINATION OF ALL WAITING
PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED, APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO
THE OFFER AND (iii) THE OTHER CONDITIONS DESCRIBED HEREIN.
---------------
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER,
DATED AS OF DECEMBER 18, 1995, AMONG AMERICAN BRANDS, INC., HCAC, INC. AND
COBRA GOLF INCORPORATED. THE BOARD OF DIRECTORS OF COBRA GOLF INCORPORATED HAS
UNANIMOUSLY APPROVED THE OFFER, THE MERGER (AS HEREINAFTER DEFINED) AND THE
MERGER AGREEMENT (AS HEREINAFTER DEFINED), HAS DETERMINED THAT THE TERMS OF
THE MERGER AGREEMENT, AND THE OFFER AND THE MERGER CONTEMPLATED THEREBY, ARE
FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY (AS
HEREINAFTER DEFINED) AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as hereinafter defined) should either (1) complete and sign the Letter
of Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal, have such stockholder's signature thereon
guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or
deliver the Letter of Transmittal or such facsimile and any other required
documents to the Depositary, and either deliver the certificates for such
Shares to the Depositary along with the Letter of Transmittal or facsimile or
deliver such Shares pursuant to the procedures for book-entry transfer set
forth in Section 2 or (2) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. A stockholder whose Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if such
stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply
with the procedures for book-entry transfer on a timely basis, or who cannot
deliver all required documents to the Depositary prior to the expiration of
the Offer, may tender such Shares by following the procedure for guaranteed
delivery set forth in Section 2.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase.
---------------
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
December 22, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.............................................................. 3
1.Terms of the Offer..................................................... 5
2.Procedures for Accepting the Offer and Tendering Shares................ 7
3.Withdrawal Rights...................................................... 10
4.Acceptance for Payment and Payment..................................... 10
5.Certain Tax Consequences............................................... 11
6.Price Range of the Shares; Dividends................................... 12
7. Possible Effects of the Offer on the Market for the Shares; Stock
Quotation; Exchange Act Registration; Margin Regulations.............. 13
8.Certain Information Concerning the Company............................. 14
9.Certain Information Concerning the Parent and the Purchaser............ 18
10.Source and Amount of Funds............................................. 21
11.Background of the Offer; Contacts with the Company..................... 21
12.Purpose of the Offer and the Proposed Merger; Plans for the Company.... 24
13.The Merger Agreement; the Stock Option and Tender Agreement............ 27
14.Dividends and Distributions............................................ 38
15.Certain Conditions to the Offer........................................ 38
16.Certain Legal Matters; Required Regulatory Approvals................... 40
17.Certain Fees and Expenses.............................................. 43
18.Miscellaneous.......................................................... 43
Schedule I--Directors and Executive Officers of the Parent and the
Purchaser................................................................ S-1
Schedule II--Parent's Designees to the Board of Directors of the Company.. S-4
</TABLE>
2
<PAGE>
To: All Holders of Shares of Common Stock
of Cobra Golf Incorporated:
INTRODUCTION
HCAC, Inc., a Delaware corporation (the "Purchaser") and a wholly-owned
subsidiary of American Brands, Inc., a Delaware corporation (the "Parent"),
hereby offers to purchase all the issued and outstanding shares of Common
Stock, $.001 par value per share (the "Shares"), of Cobra Golf Incorporated, a
Delaware corporation (the "Company"), at a purchase price of $36.00 per Share
(the "Offer Price"), net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. However, any tendering stockholder or other payee who
fails to complete and sign the Substitute Form W-9 that is included in the
Letter of Transmittal may be subject to a required backup federal income tax
withholding of 31% of the gross proceeds payable to such stockholder or other
payee pursuant to the Offer. See Section 2. The Purchaser will pay all charges
and expenses of Morgan Stanley & Co. Incorporated, as Dealer Manager (the
"Dealer Manager"), First Chicago Trust Company of New York, as Depositary (the
"Depositary"), and Kissel-Blake Inc., as Information Agent (the "Information
Agent"), incurred in connection with the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER (AS HEREINAFTER DEFINED) AND THE MERGER AGREEMENT (AS HEREINAFTER
DEFINED), HAS DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT, AND THE OFFER
AND THE MERGER CONTEMPLATED THEREBY, ARE FAIR TO AND IN THE BEST INTERESTS OF
THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Offer is subject to the fulfillment of certain conditions, including (i)
there being validly tendered and not withdrawn prior to the Expiration Date (as
defined in Section 1) such number of Shares which would constitute a majority
(x) of the outstanding Shares (determined on a fully diluted basis) and (y) the
outstanding Shares (determined on a fully diluted basis) not owned beneficially
or of record by the Company's directors or officers (the "Minimum Condition")
and (ii) the expiration or termination of all waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
applicable to the purchase of Shares pursuant to the Offer. Certain other
conditions to the consummation of the Offer are described in Section 15. The
Purchaser expressly reserves the right (subject to the applicable rules and
regulations of the Securities and Exchange Commission (the "Commission") and
the provisions of the Merger Agreement) to waive any one or more of the
conditions to the Offer, provided, however, that the Purchaser shall not,
without the written consent of the Company, waive the Minimum Condition. See
Sections 1, 13, 15 and 16.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 18, 1995 (the "Merger Agreement"), among the Parent, the
Purchaser and the Company, which has been unanimously approved by the Board of
Directors of the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to this
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the General
Corporation Law of the State of Delaware (the "DGCL"), the Purchaser will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation (the "Surviving
Corporation") and will be a wholly-owned subsidiary of the Parent.
3
<PAGE>
At the effective time of the Merger (the "Effective Time"), each issued and
outstanding Share (other than Shares owned by the Company as treasury stock,
Shares owned by any subsidiary of the Company, Shares owned by the Parent, the
Purchaser or any other direct or indirect subsidiary of the Parent, or Shares
with respect to which appraisal rights are properly exercised under the DGCL
("Dissenting Shares")), will be converted into and represent the right to
receive $36.00 (or any higher price that may be paid for each Share pursuant to
the Offer) in cash, without interest thereon, subject to any applicable
withholding tax (the "Merger Consideration").
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer, and from time to time thereafter,
the Parent will be entitled to designate such number of directors, rounded up
to the next whole number, on the Board of Directors of the Company as will give
the Parent representation on the Board equal to the product of the total number
of directors on the Board (which shall be reduced to 10 members) multiplied by
the percentage that the aggregate number of Shares beneficially owned by the
Parent and the Purchaser bears to the total number of Shares outstanding,
provided, however, that the Board shall have no less than three members who
were directors at the time the Merger Agreement was signed and who are not
officers or employees of the Company (the "Disinterested Directors"). In the
Merger Agreement, the Company, subject to certain limitations, has agreed to
take all action necessary to cause the Parent's designees to be elected or
appointed to the Company's Board of Directors.
Lehman Brothers Inc. ("Lehman"), the Company's financial advisor, has
delivered to the Company's Board of Directors its opinion that the
consideration to be received by the stockholders of the Company pursuant to the
Offer and the Merger is fair to such stockholders from a financial point of
view. The Purchaser has been advised by the Company that a copy of such opinion
will be set forth in full as an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which is being distributed to the Company's stockholders. Stockholders are
urged to read the opinion in its entirety for a description of the assumptions
made, matters considered and limitations of the review undertaken by Lehman.
Simultaneously with the execution and delivery of the Merger Agreement,
certain stockholders, all of whom are Company directors or their affiliates
(collectively, the "Selling Stockholders"), have entered into a Stock Option
and Tender Agreement, dated as of December 18, 1995 (the "Stock Option and
Tender Agreement"), pursuant to which the Selling Stockholders have given the
Parent options to purchase, upon the terms and subject to the conditions set
forth in the Stock Option and Tender Agreement, any and all Shares (i)
beneficially owned by them as of December 18, 1995, representing in the
aggregate approximately 26% of the outstanding Shares, and (ii) thereafter
acquired by such Selling Stockholders (collectively, the "Subject Shares") at a
purchase price of $36.00 per Share subject to adjustment if the Offer Price is
increased. The Stock Option and Tender Agreement further provides, among other
things, that each Selling Stockholder will tender all of its Subject Shares in
the Offer, not withdraw them, except that the Selling Stockholders will be
required to withdraw such Subject Shares under certain circumstances and, if
such Subject Shares are withdrawn, to retender such Subject Shares if requested
by the Parent. If any Shares are purchased in the Offer, the Subject Shares
will be purchased either in the Offer or pursuant to the exercise of the
options. Pursuant to the Stock Option and Tender Agreement, the Selling
Stockholders have also granted the Parent, or any nominee of the Parent,
irrevocable proxies with respect to their Subject Shares to vote such Subject
Shares on certain matters at any annual, special or adjourned meeting of
stockholders of the Company or to execute a written consent with respect to
such matters on their behalf in lieu of a meeting. See Section 13.
The Company has represented to the Purchaser that as of the close of business
on December 15, 1995, there were (i) 18,623,368 Shares issued and outstanding,
(ii) no Shares held in the treasury of the Company, (iii) 1,900,000 Shares
reserved for issuance upon exercise of outstanding stock options pursuant to
the Company's stock option plans and (iv) stock options to purchase 1,343,980
Shares outstanding (all of which had exercise prices less than the Offer
Price). As of the date hereof, neither the Purchaser nor the Parent
beneficially owns any Shares (other than as a result of the Stock Option and
Tender Agreement). If the Purchaser acquires the number of Shares required to
satisfy the Minimum Condition, it will control a
4
<PAGE>
majority of the outstanding Shares on a fully diluted basis. Accordingly, the
Purchaser would have sufficient voting power to approve the Merger at a meeting
of stockholders to vote thereon or by written consent without the affirmative
vote or written consent of any other stockholder. In the event the Purchaser
acquires 90% or more of the outstanding Shares through the Offer, the Purchaser
and the Parent would be able to effect the Merger pursuant to the short form
merger provisions of the DGCL, without prior notice to, or any action by, any
other stockholder of the Company.
The Merger Agreement and the Stock Option and Tender Agreement are more fully
described in Section 13. Certain tax consequences of the Offer and the Merger
are described in Section 5.
THE OFFER IS CONDITIONED UPON THE FULFILLMENT OF CERTAIN CONDITIONS DESCRIBED
IN SECTION 15. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
TUESDAY, JANUARY 23, 1996, UNLESS THE OFFER IS EXTENDED.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OR A
SOLICITATION OF CALLS FOR A SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS. ANY
SUCH SOLICITATION WHICH THE PARENT OR THE PURCHASER MIGHT MAKE WOULD BE MADE
ONLY PURSUANT TO SEPARATE PROXY OR SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and thereby purchase all
Shares validly tendered and not withdrawn in accordance with the procedures set
forth in Section 3 on or prior to the Expiration Date (as hereinafter defined).
The term "Expiration Date" means 12:00 midnight, New York City time, on
Tuesday, January 23, 1996, unless and until the Purchaser, subject to the terms
of the Merger Agreement, shall have extended the period of time for which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by the Purchaser, shall
expire. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition, the expiration or termination of all waiting periods under the HSR
Act applicable to the purchase of Shares pursuant to the Offer and the other
conditions set forth in Section 15.
Subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, whether or not any of
the events specified in Section 15 shall have occurred or shall have been
determined by the Purchaser to have occurred, to (i) extend the period of time
during which the Offer is open, and thereby delay acceptance for payment of and
the payment for any Shares, and (ii) amend the Offer in any other respect, in
either case, by giving oral or written notice of such extension or amendment to
the Depositary. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON
THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES
ITS RIGHT TO EXTEND THE OFFER.
If by the Expiration Date any or all conditions to the Offer have not been
satisfied or waived, the Purchaser reserves the right (but shall not be
obligated), subject to the terms of the Merger Agreement and
5
<PAGE>
the applicable rules and regulations of the Commission, (i) to extend the Offer
and, subject to applicable withdrawal rights of tendering stockholders, retain
all tendered Shares until the expiration of the Offer, as extended, (ii) to
waive all of the unsatisfied conditions and accept for payment and pay for all
Shares validly tendered and not properly withdrawn prior to the Expiration Date
and not extend the Offer, (iii) to terminate the Offer and not accept for
payment any Shares and return all tendered Shares to tendering stockholders or
(iv) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, delay, termination or amendment will be
followed as promptly as practicable by public announcement thereof. Such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rule
14d-4(c) and Rule 14e-1(d) under the Exchange Act. Without limiting the manner
in which the Purchaser may choose to make any public announcement, subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to holders of
Shares), the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
press release to the Dow Jones News Service.
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right to waive any condition to the Offer set forth in Section 15,
to increase the price per Share payable in the Offer, and to make any other
change in the terms and conditions of the Offer; provided, however, that,
without the written consent of the Company, the Purchaser may not (i) decrease
the price per Share payable in the Offer, (ii) reduce the maximum number of
Shares subject to the Offer, (iii) impose conditions to the Offer in addition
to those set forth in Section 15, (iv) amend or change the terms or conditions
of the Offer in any manner adverse to the Company's stockholders, (v) change or
waive the Minimum Condition, (vi) change the consideration payable in the Offer
to anything other than all cash, (vii) reduce the time period during which the
Offer will remain open or (viii) except as provided in the next sentence,
extend the time period during which the Offer will remain open. Notwithstanding
the foregoing, the Purchaser may, without the consent of the Company, (x)
extend the Offer beyond the initial Expiration Date and any subsequent
Expiration Date, if at such date any of the conditions to Purchaser's
obligation to accept for payment, and pay for, Shares are not satisfied or
waived, until such time as such conditions are satisfied or waived, and (y)
extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment for any Shares tendered pursuant to the
Offer, or the Purchaser is unable to accept for payment or pay for Shares
tendered pursuant to the Offer, then, without prejudice to the Purchaser's
rights under the Offer, the Depositary may, nevertheless, retain tendered
Shares on behalf of the Purchaser, and such Shares may not be withdrawn except
to the extent that the tendering stockholder is entitled to withdrawal rights
as described in Section 3. However, the ability of the Purchaser to delay the
payment for Shares that the Purchaser has accepted for payment is limited by
Rule 14e-1 under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities tendered promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or waives a material condition to the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the Offer or the information
concerning the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality of the changed terms or information. In the Commission's view, an
offer should remain open for a minimum of five business days from the date the
material change is first published, sent or given to stockholders, and, if
material changes are made with respect to information that approaches the
significance of a change in price
6
<PAGE>
or a change in the percentage of Shares sought, a minimum of ten business days
may be required to allow for adequate dissemination and investor response. With
respect to a change in price or, subject to certain limitations, a change in
the percentage of securities sought, a minimum ten business day period from the
date of such change is generally required to allow for adequate dissemination
to stockholders and investor response. Accordingly, if prior to the Expiration
Date, the Purchaser changes the price offered or the percentage of securities
sought pursuant to the Offer, and if the Offer is scheduled to expire at any
time earlier than the period ending on the tenth business day from the date
that notice of such change is first published, sent or given to holders of
Shares, the Offer will be extended at least until the expiration of such ten
business day period.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and, if required, other relevant materials will be mailed by the Purchaser to
record holders of Shares and will be furnished by the Purchaser to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the stockholder list, or if applicable,
who are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares.
2. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender Of Shares. Except as set forth below, in order for Shares to be
validly tendered pursuant to the Offer, (i) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message (as defined below) in
connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase on or
prior to the Expiration Date and either certificates representing tendered
Shares ("Share Certificates") must be received by the Depositary, or such
Shares must be tendered pursuant to the procedure for book-entry transfer set
forth below and a confirmation of the book-entry transfer (a "Book-Entry
Confirmation") must be received by the Depositary, in each case on or prior to
the Expiration Date, or (ii) the guaranteed delivery procedures set forth below
must be complied with.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH ANY BOOK-ENTRY TRANSFER FACILITY (AS
DEFINED BELOW), IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will make a request to establish accounts
with respect to the Shares at each of The Depositary Trust Company, Midwest
Securities Trust Company and Philadelphia Depositary Trust Company
(collectively, the "Book-Entry Transfer Facilities") for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the system of any Book-Entry
Transfer Facility may make book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility, the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other required documents must, in any case, be transmitted to
and received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
7
<PAGE>
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the
Securities Transfer Association's Medallion Program (an "Eligible
Institution"), unless the Shares tendered thereby are tendered (i) by a
registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 1 of the Letter of Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or Share
Certificates for unpurchased Shares are to be issued or returned, to a person
other than the registered holder, then the tendered Share Certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on the Share Certificates,
with the signatures on the Share Certificates or stock powers guaranteed by an
Eligible Institution as provided in the Letter of Transmittal. See Instructions
1 and 5 of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date, or the procedures for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless be
tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Purchaser, is
received by the Depositary, as provided below, on or prior to the
Expiration Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation) representing
all tendered Shares, in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees, or, in the case of a book-entry
transfer of Shares, an Agent's Message and any other documents required by
the Letter of Transmittal are received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed
Delivery. For the purposes of this Offer, a "trading day" is any day on
which the New York Stock Exchange, Inc. ("NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery and a representation that the stockholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act.
8
<PAGE>
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) Share Certificates for, or Book-Entry
Confirmation with respect to, such Shares, (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees, or, in the case of a book-entry transfer of
Shares, an Agent's Message and (iii) any other documents required by the Letter
of Transmittal. Accordingly, payment might not be made to all tendering
stockholders at the same time, and will depend upon when Share Certificates are
received by the Depositary or Book-Entry Confirmations of such Shares are
received into the Depositary's account at a Book-Entry Transfer Facility.
Backup Federal Income Tax Withholding. UNDER THE BACKUP FEDERAL INCOME TAX
LAWS APPLICABLE TO CERTAIN STOCKHOLDERS (OTHER THAN CERTAIN EXEMPT
STOCKHOLDERS, INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN
INDIVIDUALS), THE DEPOSITARY MAY BE REQUIRED TO WITHHOLD 31% OF THE AMOUNT OF
ANY PAYMENTS MADE TO SUCH STOCKHOLDERS PURSUANT TO THE OFFER OR THE MERGER. IN
ORDER TO AVOID BACKUP FEDERAL INCOME TAX WITHHOLDING, EACH SUCH STOCKHOLDER
MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL. SEE SECTION 5.
Appointment As Proxy. By executing a Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser, and each of them,
as such stockholder's attorneys-in-fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after December 18, 1995. All such powers of
attorney and proxies shall be considered irrevocable and coupled with an
interest in the tendered Shares. Such appointment will be effective upon the
acceptance for payment of such Shares by the Purchaser in accordance with the
terms of the Offer. Upon such acceptance for payment, all other powers of
attorney and proxies given by such stockholder with respect to such Shares, and
such other securities or rights, prior to such payment will be revoked, without
further action, and no subsequent powers of attorney and proxies may be given
by such stockholder (and, if given, will not be deemed effective). The
designees of the Purchaser will, with respect to Shares, and other securities
or rights, for which such appointment is effective, be empowered to exercise
all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders, or any adjournment or postponement thereof, or by consent in lieu
of any such meeting or otherwise. In order for Shares to be deemed validly
tendered, immediately upon the payment for such Shares the Purchaser or its
designee must be able to exercise full voting rights with respect to such
Shares and other securities or rights, including voting at any meeting of
stockholders.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment of
any tender of Shares will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders of Shares
determined by it not to be in proper form or the acceptance of or payment for
tendered Shares which may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of Shares of any particular stockholder whether or
not similar defects or irregularities are waived in the case of other
stockholders.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of Shares will be deemed to
9
<PAGE>
have been validly made until all defects and irregularities with respect to
such tender have been cured or waived by the Purchaser. None of the Parent, the
Purchaser or any of their respective affiliates or assigns, the Dealer Manager,
the Depositary, the Information Agent or any other person or entity will be
under any duty to give any notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
3. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 3, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment as provided herein, may also be withdrawn at
any time after February 19, 1996 (or such later date as may apply in case the
Offer is extended).
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and the name of
the registered holder of the Shares to be withdrawn, if different from that of
the person who tendered such Shares. If Share Certificates evidencing Shares to
be withdrawn have been delivered or otherwise identified to the Depositary,
then prior to the physical release of such Share Certificates, the tendering
stockholder must submit the serial numbers shown on the particular certificates
evidencing the Shares to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution, except in the case of
Shares tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer set forth in
Section 2, the notice of withdrawal must specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of Shares may not be rescinded. Any
Shares properly withdrawn will be deemed not validly tendered for purposes of
the Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in Section 2.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the Parent,
the Purchaser or any of their respective affiliates or assigns, the Dealer
Manager, the Depositary, the Information Agent or any other person or entity
will be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchaser will purchase, by accepting for payment,
and will pay for, all Shares validly tendered and not properly withdrawn (as
permitted by Section 3) prior to the Expiration Date promptly after the later
to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions to the Offer set forth in Section 15. Any determination concerning
the satisfaction of such terms and conditions will be within the reasonable
discretion of the Purchaser, and such determination will be final and binding
on all tendering stockholders. In addition, subject to the terms of the Merger
Agreement and applicable rules and regulations of the Commission, the Purchaser
expressly reserves the right to delay acceptance for payment of, or payment
for, any Shares pending receipt of any regulatory or governmental approvals
specified in Section 16. Any such delay will be effected in compliance with
Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to
pay for or return tendered Shares promptly after the termination or withdrawal
of the Offer).
10
<PAGE>
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including under the HSR Act, see Section 16.
In all cases, payment for Shares purchased pursuant to the Offer will be made
only after timely receipt by the Depositary of Share Certificates representing
such Shares or timely Book-Entry Confirmation of such Shares into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 2, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer of the Shares, an Agent's
Message and any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn prior to the Expiration Date as, if and when the Purchaser gives oral
or written notice to the Depositary of the Purchaser's acceptance of such
Shares for payment pursuant to the Offer. In all cases, upon the terms and
subject to the conditions of the Offer, payment for Shares purchased pursuant
to the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from the Purchaser and transmitting payment to validly
tendering stockholders. If the Purchaser is delayed in its acceptance for
payment or payment for Shares or is unable to accept for payment or pay for
Shares tendered pursuant to the Offer for any reason, then, without prejudice
to the Purchaser's rights set forth herein (but subject to compliance with Rule
14e-1(c) under the Exchange Act), the Depositary may retain tendered Shares and
such Shares may not be withdrawn, except to the extent that the tendering
stockholder is entitled to and duly exercises withdrawal rights as described in
Section 3 and subject to Rule 14e-1(c) under the Exchange Act.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID
BY THE PURCHASER, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Share Certificates are submitted representing more Shares than
are tendered, Share Certificates representing unpurchased or untendered Shares
will be returned (or, in the case of Shares delivered by book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 2, such Shares will be credited to an account
maintained within such Book-Entry Transfer Facility), without expense to the
tendering stockholder, as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH
INCREASED CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE
PURCHASED PURSUANT TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR
TO SUCH INCREASE IN CONSIDERATION.
The Purchaser reserves the right to transfer or assign, in whole at any time
or from time to time in part, to the Parent or to one or more of the
Purchaser's subsidiaries or affiliates the right to purchase all or any portion
of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve the Purchaser of its obligations under the Offer or
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
5. CERTAIN TAX CONSEQUENCES.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. For
federal income tax purposes, each selling or exchanging stockholder would
generally recognize gain or loss in an amount equal to the difference between
the amount of cash received and such stockholder's
11
<PAGE>
tax basis for the sold or exchanged Shares. Such gain or loss will be capital
gain or loss (assuming the Shares are held as a capital asset) and any such
capital gain or loss will be long term if, as of the date of sale or exchange,
the Shares were held for more than one year or will be short term if, as of
such date, the Shares were held for one year or less.
The foregoing discussion may not be applicable to certain types of
stockholders, including stockholders who acquired Shares pursuant to the
exercise of stock options or otherwise as compensation, individuals who are not
citizens or residents of the United States and foreign corporations, or
entities that are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (such as life insurance companies, tax-exempt
entities and regulated investment companies).
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE SPECIFIC CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER
AND MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS.
According to the Company's 1994 Annual Report, the Shares are traded on and
quoted on The Nasdaq National Market and have been so traded and quoted since
September 21, 1993 under the symbol "CBRA." The following table sets forth, for
the periods indicated, the reported high and low sale prices per Share as
reported on The Nasdaq National Market System, as reported in the Company's
1994 Annual Report with respect to periods occurring in 1993 and 1994, and as
reported thereafter by published financial sources, with respect to periods
occurring in 1995.
COBRA GOLF INCORPORATED
<TABLE>
<CAPTION>
SALES PRICE
-----------------
HIGH LOW
-------- --------
<S> <C> <C>
1993
Third Quarter (beginning September 21, 1993)................. $ 18 $ 14-5/8
Fourth Quarter............................................... 15-1/4 12-7/8
1994
First Quarter................................................ 17-7/16 12-1/2
Second Quarter............................................... 18-1/8 13-3/8
Third Quarter................................................ 27-7/8 17
Fourth Quarter............................................... 41-1/2 24
1995
First Quarter................................................ 39-1/4 25-1/2
Second Quarter............................................... 33 20
Third Quarter................................................ 38-3/8 26-1/4
Fourth Quarter (through December 15, 1995)................... 30-1/4 25
</TABLE>
On December 15, 1995, the last full day of trading prior to the announcement
of the execution of the Merger Agreement and of Purchaser's intention to
commence the Offer, according to published sources, the reported last sale
price for the Shares, as quoted on The Nasdaq National Market System, was
$27.625 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE SHARES.
12
<PAGE>
According to the Company's 1994 Annual Report, the Company has never paid any
dividends on the Shares. The Merger Agreement provides that, without the prior
written consent of the Purchaser, the Company will not declare, set aside or
pay any dividend on, or make any other distribution in respect of, any of its
outstanding capital stock. See Section 13.
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
Possible Effects of the Offer on the Market for the Shares. If all of the
conditions to the Offer are satisfied or waived, the Purchaser will be able to
consummate the Offer and effect the Merger thereafter, in which event all
outstanding Shares will be owned by the Purchaser and there will cease to be
any market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and could
adversely affect the liquidity and market value of the remaining Shares held by
the public. The purchase of Shares pursuant to the Offer can also be expected
to reduce the number of holders of Shares. The Purchaser cannot predict whether
the reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for or marketability
of the Shares or whether it would cause future market prices to be greater or
less than the Offer Price therefor.
Stock Quotation. Depending on the number of Shares purchased pursuant to the
Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in
The Nasdaq National Market (the top tier market of The Nasdaq Stock Market),
which require that an issuer have at least 200,000 publicly held shares, held
by at least 400 stockholders or 300 stockholders of round lots, with a market
value of $1,000,000, and have net tangible assets of at least either $2,000,000
or $4,000,000, depending on profitability levels during the issuer's four most
recent fiscal years. If these standards are not met, the Shares might
nevertheless continue to be included in The Nasdaq Stock Market with quotations
published in the Nasdaq over-the-counter "additional list" or in one of the
"local lists", but if the number of holders of the Shares were to fall below
300, or if the number of publicly held Shares were to fall below 100,000 or
there were not at least two registered and active market makers for the Shares,
the NASD's rules provide that the Shares would no longer be "qualified" for
Nasdaq reporting and Nasdaq would cease to provide any quotations. Shares held
directly or indirectly by directors, officers or beneficial owners of more than
10% of the Shares are not considered as being publicly held for this purpose.
If, as a result of the purchase of Shares pursuant to the Offer, the Shares no
longer meet the requirements of the NASD for continued inclusion in The Nasdaq
Stock Market or The Nasdaq National Market, as the case may be, the market for
Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
quotation through Nasdaq and the Shares are no longer included in The Nasdaq
Stock Market, it is possible that the Shares would continue to trade in the
over-the-counter market and that price quotations would be reported by other
sources. The extent of the public market for the Shares and the availability of
such quotations would, however, depend upon the number of holders of Shares
remaining at such time, the interests in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of the
Shares under the Exchange Act, as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in
the Shares becoming eligible for deregistration under the Exchange Act.
Registration of the Shares may be terminated upon application by the Company to
the Commission if the Shares are not listed on a "national securities exchange"
and there are fewer than 300 record holders of Shares. Termination of
registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders and
the Commission and would make certain provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b) and the
requirements of furnishing a proxy statement in connection with stockholders'
meetings pursuant to Section 14(a) or 14(c) and the related requirement of an
annual report,
13
<PAGE>
no longer applicable to the Company. If the Shares are no longer registered
under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions would no longer be applicable to
the Company. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or Rule 144A promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), may be impaired or, with
respect to certain persons, eliminated. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or eligible for stock exchange listing or Nasdaq reporting. The Purchaser
believes that the purchase of the Shares pursuant to the Offer may result in
the Shares becoming eligible for deregistration under the Exchange Act and it
would be the intention of the Purchaser to cause the Company to make an
application for termination of registration of the Shares as soon as possible
after successful completion of the Offer, if the Shares are then eligible for
such termination.
If registration of the Shares under the Exchange Act is not terminated prior
to the Merger, then the Shares will cease to be reported on The Nasdaq Stock
Market and the registration of the Shares under the Exchange Act will be
terminated following the consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which have the effect, among other things, of
allowing brokers to extend credit on the collateral of such Shares for the
purpose of buying, carrying or trading in securities ("Purpose Loans").
Depending upon factors such as the number of record holders of the Shares and
the number and market value of publicly held Shares, following the purchase of
Shares pursuant to the Offer, the Shares might no longer constitute "margin
securities" for purposes of the Federal Reserve Board's margin regulations and,
therefore, could no longer be used as collateral for Purpose Loans made by
brokers. In addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities" or be
eligible for Nasdaq reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive offices
located at 1818 Aston Avenue, Carlsbad, California 92008-7306. The following
description of the Company's business has been taken from the Company's 1994
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the
"Form 10-K") and 1994 Annual Report to stockholders:
The Company designs, manufactures and markets high-quality golf clubs,
principally for the premium-priced game-improvement segment of the golf
equipment market. The Company's primary focus is on oversize and graphite-
shafted golf clubs marketed and sold under the King Cobra brand name. The King
Cobra and Tour King Cobra lines for men collectively accounted for
approximately 54% of the Company's gross sales in 1994. The Lady Cobra oversize
line for women and Senior King Cobra line for seniors collectively accounted
for 36% of the Company's gross sales in 1994. Gross sales of oversize clubs
accounted for approximately 90% of gross sales in 1994. Management believes
that the Company is one of the first golf club manufacturers to design and
market full sets of oversize clubs specifically for the men's, women's, seniors
and low handicap markets. The Company also designs, manufactures and markets
specialty clubs such as the Baffler utility woods, the Greg Norman Signature
Series of wedges and line of computer-milled and King Cobra Mallet putters.
Greg Norman, a two-time British Open champion, is currently playing a full set
of King Cobra clubs. In addition, several PGA Tour players under contract with
the Company, including three-time U.S. Open champion Hale Irwin, former U.S.
and British Open champion Tony Jacklin and former Masters champion Ben
Crenshaw, are currently playing either a King Cobra driver and fairway woods or
full sets of King Cobra clubs. Cobra golf clubs are available with Autoclave
graphite shafts, substantially all of which are manufactured by West Coast
Composites, the Company's graphite shaft manufacturing division.
The selected financial information of the Company and its consolidated
subsidiaries set forth below has been excerpted and derived from the Company's
Form 10-K and the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1995. More comprehensive financial and other
14
<PAGE>
information is included in such reports (including management's discussion and
analysis of results of operations and financial position) and in other reports
and documents filed by the Company with the Commission and the financial
information set forth below is qualified in its entirety by reference to such
reports and documents filed with the Commission and all of the financial
statements and related notes contained therein. These reports and other
documents may be examined and copies thereof may be obtained in the manner set
forth below under "Available Information."
COBRA GOLF INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
------------------------- -------------------
1994 1993 1992 1995 1994
-------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales........................ $124,057 $56,045 $35,307 $ 152,279 $ 95,030
Cost of sales.................... 50,546 25,965 18,284 63,770 38,656
-------- ------- ------- --------- --------
Gross profit..................... 73,511 30,080 17,023 88,509 56,374
Operating expenses............... 36,045 17,328 11,918 41,984 27,180
Operating income................. 37,466 12,752 5,105 46,525 29,194
Other income (expense)
Interest expense............... -- (479) (659) (90) --
Interest income................ 594 129 -- 350 401
Royalty income................. 962 657 370 770 656
Licensing fees................. -- -- 750 -- --
-------- ------- ------- --------- --------
Income before taxes.............. 39,022 13,059 5,566 47,555 30,251
Provision for income taxes(1).... 16,042 5,354 2,226 19,498 12,446
-------- ------- ------- --------- --------
Net income(1).................... $ 22,980 $ 7,705 $ 3,340 $ 28,057 $ 17,805
======== ======= ======= ========= ========
Net income per common share(1)... $1.21 $0.50 $0.23 $1.45 $0.95
======== ======= ======= ========= ========
</TABLE>
- --------
(1) The Company was an S Corporation for federal and state income tax purposes
prior to the Company's initial public offering in September 1993. Provisions
for income taxes, net income and net income per common share reflect the pro
forma effect of income taxes as if the Company had been taxed as a C
Corporation for all periods prior to the initial public offering. These pro
forma numbers are unaudited.
15
<PAGE>
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER DECEMBER SEPTEMBER
31, 1994 31, 1993 30, 1995
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 5,706 $ 8,115 $ 27,110
Short-term investments, available for sale...... 11,012 10,718 --
Accounts receivable, net........................ 29,846 15,268 40,778
Inventories..................................... 21,542 9,916 26,302
Deferred income taxes........................... 2,494 915 2,863
Prepaid expenses and other current assets....... 633 913 1,954
------- -------- --------
Total current assets.............................. 71,233 45,845 99,007
Property, plant and equipment, net................ 4,994 3,338 9,129
Other assets...................................... 1,847 - 5,218
------- -------- --------
Total assets...................................... $78,074 $ 49,183 $113,354
======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued expenses..... $ 6,986 $ 3,724 $ 9,789
Income taxes payable............................ 135 829 2,866
------- -------- --------
Total current liabilities......................... 7,121 4,553 12,655
Stockholders' equity:
Common stock ($.001 par value): 18 18 19
Additional paid-in capital........................ 45,695 42,352 47,193
Retained earnings................................. 25,240 2,260 53,487
------- -------- --------
Total stockholders' equity.................... 70,953 44,630 100,699
------- -------- --------
Total liabilities and stockholders' equity.... $78,074 $ 49,183 $113,354
======= ======== ========
</TABLE>
Certain Company Projections. Prior to entering into the Merger Agreement, the
Parent conducted a due diligence review of the Company and in connection with
such review received certain non-public information from the Company. The non-
public information included, among other things, the Company's business plan
for the years ending December 31, 1995-1998, which was prepared by the
Company's management based on numerous assumptions, including among others, the
current business base, the ability to recapture, achieve and/or maintain
significant market shares in various categories, international growth
opportunities, possession of manufacturing capabilities yet to be commercially
validated in the Company's business, wage and benefit increases and the general
business climate for the Company's operations. Set forth below is a summary of
certain projected information derived from the non-public information. None of
the assumptions set forth in the Plan give effect to the Offer, the Merger or
the financing thereof or the potential combined operations of the Parent and
the Company after consummation of such transactions.
16
<PAGE>
COBRA GOLF INCORPORATED
PROJECTED FINANCIAL INFORMATION
PROVIDED IN NOVEMBER 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
BASE CASE WITHOUT
NON-RECURRING
BASE CASE WITHOUT CHARGES AND WITH
NON-RECURRING PROJECTED COST
BASE CASE CHARGES REDUCTIONS
1996(1) 1996 1996(2) 1997(2) 1998(2)
--------- ----------------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales............... $285,125 $291,120 $291,120 $361,600 $433,000
Gross Profit............ 148,020 157,415 171,416 213,400 255,500
Operating Income(1)..... 77,542 86,548 100,548 124,756 149,382
Net Income.............. 44,752 49,800 57,612 72,900 87,300
</TABLE>
- --------
(1) 1996 Base Case projections include charges which in the opinion of the
Company's management are non-recurring. As a result of such charges,
operating income will be reduced by approximately $9.0 million in the 1996
Base Case. Operating income for all projections is before goodwill
amortization and bonus expense.
(2) These projections include cost reductions projected to result from certain
manufacturing process improvements and the increased use of vertical
integration. At the time of the Offer, it is uncertain whether the
manufacturing process improvements can be achieved, or if achieved, when any
benefit might be realized and, the Company's management has advised the
Parent and the Purchaser that the projected cost reductions from the
increased integration is not expected to be realized in 1996.
The following information was provided by the Company to the Parent in June
1995 and according to the Company (i) was prepared by the Company (x) with
regard to the 1995 data, in late 1994 and (y) with regard to the 1996 through
1998 data, in early June 1995, and (ii) did not contemplate (x) the early 1996
introduction of the Company's new titanium product line and (y) the full impact
of the Company's acquisition of Cobra Europe in January 1995 or Cobra Japan
scheduled to close in January 1996.
COBRA GOLF INCORPORATED
PROJECTED FINANCIAL INFORMATION
PROVIDED IN JUNE 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales................................... $185,000 $231,000 $289,000 $361,000
Operating Income (3)........................ 60,487 76,260 96,940 127,060
Net income.................................. 34,857 44,537 57,020 75,443
</TABLE>
- --------
(3) Operating income for all projections is before goodwill amortization and
bonus expense.
In reaching its decision to acquire the Company, the Parent gave
consideration to such projections, but also made certain assumptions of its own
with regard to revenues and operations of the Company's businesses as a wholly-
owned subsidiary within the Parent's golf and leisure products business
segment.
FURTHER, THE COMPANY HAS ADVISED THAT THE FOREGOING PROJECTIONS WERE NOT
PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED
GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS. THE
PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE THEY WERE
PROVIDED TO THE PARENT. NONE OF THE PARENT, THE PURCHASER, THE COMPANY OR ANY
OF THEIR RESPECTIVE ADVISORS OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION
ASSUMES
17
<PAGE>
ANY RESPONSIBILITY FOR THE ACCURACY OF THESE PROJECTIONS. ALTHOUGH PRESENTED
WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A VARIETY OF
ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY WHICH MAY NOT BE REALIZED
AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH
ARE BEYOND THE CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS SET FORTH ABOVE WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED
BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS
THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THERE CAN BE NO ASSURANCE
THAT SUCH PROJECTIONS WILL BE REALIZED, OR THAT ACTUAL RESULTS WILL NOT DIFFER
FROM THOSE ESTIMATED. THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE
REGARDED AS AN INDICATION THAT THE PARENT, THE PURCHASER, THE COMPANY, ANY OF
THEIR RESPECTIVE ADVISORS OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION
CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and in accordance therewith is
required to file periodic reports, proxy statements and other information with
the Commission relating to its business, financial condition and other matters.
Certain information, as of particular dates, concerning the Company's business,
principal physical properties, capital structure, material pending legal
proceedings, operating results, financial condition, directors and officers
(including their remuneration and the stock options granted to them), the
principal holders of the Company's securities, any material interests of such
persons in transactions with the Company and certain other matters is required
to be disclosed in proxy statements and annual reports distributed to the
Company's stockholders and filed with the Commission. Such reports, proxy
statements and other information may be inspected and copied at the
Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and should also be available for inspection at
the following regional offices of the Commission: 7 World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies may be obtained by mail at
prescribed rates from the principal office of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other
information concerning the Company also should be available for inspection at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although neither the Parent nor the Purchaser has any
knowledge that any such information is untrue, neither the Parent nor the
Purchaser takes responsibility for the accuracy or completeness of information
contained in this Offer to Purchase with respect to the Company or any of its
subsidiaries or affiliates or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information.
9. CERTAIN INFORMATION CONCERNING THE PARENT AND THE PURCHASER.
The Parent is a Delaware corporation with its principal executive offices
located at 1700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811.
The Parent is a holding company with subsidiaries engaged in various
businesses. Subsidiaries of the Parent are engaged in the distilled spirits
business, the manufacture and sale of various types of hardware and home
improvement products, office products, supplies and accessories and golf
products and the manufacture and sale of cigarettes, cigars and smoking
tobaccos, principally in the United Kingdom ("U.K.").
The Parent's golf products business is conducted through its wholly-owned
subsidiary, Acushnet Company. Acushnet is comprised of the Titleist and Foot-
Joy Worldwide Division and the Acushnet Golf Division. The Titleist and Foot-
Joy Worldwide Division is a leading manufacturer and distributor of golf
18
<PAGE>
balls, golf shoes, golf clubs and golf gloves. Other products include bags,
carts, dress and athletic shoes as well as socks and accessories. Acushnet's
leading brands are Titleist and Pinnacle golf balls, DCI and Bulls Eye golf
clubs, Classics and DryJoys golf shoes and Sta-Sof and Weather-Sof golf gloves.
Acushnet's products are sold primarily to golf pro shops throughout the U.S. by
the Titleist and Foot-Joy Worldwide sales force and to sporting goods stores
and mass merchants through the Acushnet Golf Division. Sales are made in the
U.K., Canada, Germany, Austria, Denmark, France, Sweden and The Netherlands
through subsidiaries, in Japan through a majority-owned joint venture, in
Ireland through a U.K. branch and outside these areas through distributors or
agents.
The Purchaser's principal executive offices are located at 1700 East Putnam
Avenue, Old Greenwich, Connecticut 06870-0811. The Purchaser is a newly formed
Delaware corporation and a wholly-owned subsidiary of the Parent. The Purchaser
has not conducted any business other than in connection with the Offer and the
Merger.
The name, business address, citizenship, present principal occupation and
employment history for the past five years of each of the directors and
executive officers of the Parent and the Purchaser are set forth in Schedule I
of this Offer to Purchase.
The Parent is subject to the information and reporting requirements of the
Exchange Act and in accordance therewith is required to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. Certain information, as of
particular dates, concerning the Parent's business, principal physical
properties, capital structure, material pending legal proceedings, operating
results, financial condition, directors and officers (including their
remuneration and stock options granted to them), the principal holders of the
Parent's securities, any material interests of such persons in transactions
with the Parent and certain other matters is required to be disclosed in proxy
statements and annual reports distributed to the Parent's stockholders and
filed with the Commission. Such reports, proxy statements and other information
may be inspected and copied at the Commission's public reference facilities in
the manner set forth in Section 8 under "Available Information" with respect to
information concerning the Company and should also be available for inspection
at the library of the NYSE, 20 Broad Street, New York, New York 10005.
Set forth below is certain consolidated financial information with respect to
the Parent and its consolidated subsidiaries for its fiscal years ended and as
of December 31, 1994, 1993 and 1992, which has been excerpted or derived from
financial statements presented in the Parent's Annual Reports on Form 10-K for
the fiscal years ended December 31, 1994 and December 31, 1993, and for the
nine months ended and as of September 30, 1995 and 1994, which has been
excerpted or derived from financial statements presented in the Parent's
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
1995. More comprehensive financial and other information is included in such
reports (including management's discussion and analysis of results of
operations and financial position) and in other reports and documents filed by
the Parent with the Commission and the financial information set forth below is
qualified in its entirety by reference to such reports and documents filed with
the Commission, which are incorporated herein by reference, and all the
financial statements and related notes contained therein. These reports and
other documents may be examined and copies thereof may be obtained in the
manner set forth above. Information as of September 30, 1995 and 1994 and for
the nine-month periods then ended is unaudited, but in the opinion of the
management of the Parent includes all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for such interim period. The results of operations for the nine-
month period ended September 30, 1995 are not necessarily indicative of the
operating results that may be expected for the fiscal year ending December 31,
1995.
19
<PAGE>
AMERICAN BRANDS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In millions, except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
FOR YEARS ENDED DECEMBER 31, (UNAUDITED)
-------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1995 1994
--------- --------- --------- -------- ---------
<CAPTION>
(RESTATED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................. $13,146.5 $12,630.5 $13,658.1 $8,282.5 $ 9,396.4
Operating income from
continuing operations..... 1,312.4 1,180.6 1,589.7 778.9 898.2
Income from continuing
operations before
extraordinary item and
cumulative effect of
accounting changes........ 885.1(1) 541.2 786.9 389.0 413.2
Net income................. $ 734.1(1) $ 469.8 $ 883.8 $ 386.3 $ 465.0
Earnings per Common share
Primary.................. $ 3.63(1) $ 2.32 $ 4.29 $ 2.04 $ 2.30
Fully diluted............ $ 3.53(1) $ 2.29 $ 4.13 $ 2.00 $ 2.25
BALANCE SHEET DATA:
Working capital.......... $ 1,555.4(2) $ 575.4 $ 664.4 $ 968.5 $ 507.8
Total assets............. 9,794.4 10,566.5 9,868.8 8,191.1 10,140.8
Short-term debt.......... 705.8 1,182.9 824.7 193.4 772.1
Long-term debt........... 1,512.1 2,492.4 2,406.8 1,382.9 2,120.5
Common stockholders'
equity.................. $ 4,621.8 $ 4,254.3 $ 4,282.5 $3,906.1 $ 4,470.0
</TABLE>
- --------
(1) Net income and primary and fully diluted earnings per Common share in 1994,
include $267 million (net of taxes), $1.32 and $1.25, respectively on the net
gain on disposal of businesses.
(2) Includes $1,170 million of net assets of discounted operations.
Except as set forth in this Offer to Purchase: (i) none of the Parent or the
Purchaser (together, the "Corporate Entities") nor, to the knowledge of the
Corporate Entities, any of the persons listed in Schedule I hereto or any
associate or majority-owned subsidiary of the Corporate Entities or any of the
persons so listed, beneficially owns or has a right to acquire any Shares or
any other equity securities of the Company; (ii) none of the Corporate Entities
nor, to the knowledge of the Corporate Entities, any of the persons or entities
referred to in clause (i) above or any of the executive officers, directors or
subsidiaries of the persons or entities referred to in clause (i) above has
effected any transaction in the Shares or any other equity securities of the
Company during the past 60 days; (iii) none of the Corporate Entities nor, to
the knowledge of the Corporate Entities, any of the persons listed in Schedule
I hereto, has any contract, arrangement, understanding or relationship with any
other person with respect to any securities of the Company (including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss or the giving or withholding of proxies, consents or authorizations); (iv)
since January 1, 1992, there have been no present or proposed contracts,
arrangements, understandings or relationships or transactions which would
require reporting under the rules and regulations of the Commission between the
Corporate Entities or any of their respective subsidiaries or, to the knowledge
of the Corporate Entities, any of the persons listed in Schedule I hereto, on
the one hand, and the Company or any of its executive officers, directors or
affiliates, on the other hand; and (v) since January 1, 1992, there have been
no contacts, negotiations or transactions between the Corporate Entities or any
of their respective subsidiaries or, to the knowledge of the Corporate
Entities, any of the persons listed in Schedule I hereto, on the one hand, and
the Company or any of its subsidiaries or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
20
<PAGE>
Except as set forth in this Offer to Purchase, during the last five years,
none of the Corporate Entities nor, to the knowledge of the Corporate Entities,
any of the persons listed on Schedule I (i) has been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors) or (ii) was
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, Federal or state securities laws or finding any
violation of such laws.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related
to the Offer and the Merger is estimated to be approximately $700 million. The
Purchaser will obtain these funds by capital contributions and/or loans from
the Parent. The Parent intends to obtain these funds primarily through private
placements of its commercial paper notes with financial institutions. Notes
issued pursuant to the Parent's commercial paper program either are issued at a
discount or at par and bear interest at a rate agreed upon by the buyer and the
Parent. Such notes are unsecured and have maturities of up to 270 days.
It is anticipated that the borrowings described above will be repaid from
funds generated internally by the Parent (including, after the Merger, if
consummated, funds generated by the Company) and from other sources which may
include the proceeds of the sale of private or public debt or equity
securities. No final decisions have been made concerning the repayment of such
borrowings and decisions will be made based on the Parent's review from time to
time of the advisability of particular actions, as well as on prevailing
interest rates and financial and other economic conditions. The Offer is not
conditioned on obtaining financing.
11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
During 1993, Acushnet Company, a wholly-owned subsidiary of the Parent, and
the Company had preliminary discussions concerning a possible business
combination of the Company with the Titleist and Foot-Joy businesses of
Acushnet Company. Such discussions were terminated prior to the Company's
initial public offering in September 1993.
In April and May 1995, the Parent received unsolicited contacts from third
parties, including Lehman Brothers, indicating that a transaction with the
Company might be beneficial for both the Parent and the Company and that the
Company might be interested in having discussions. Later in May 1995, Charles
H. McGill, Vice President--Corporate Development of the Parent, telephoned Gary
E. Biszantz, Chairman of the Board of the Company, to discuss the possibility
of a transaction with the Parent. Mr. Biszantz said that the Company was not
seeking to be acquired or to enter into any business combination transaction
and that any unsolicited contacts received by the Parent had not been
authorized by the Company, but that if a proposal were presented the Company
might consider it.
At meetings held June 1 and 2, 1995 in Carlsbad, California, Mr. McGill and
Walter R. Uihlein, President and Chief Executive Officer of Acushnet Company,
met with Mr. Biszantz and other members of senior management of the Company and
had broad discussions about the Company's business and possible transactions.
On June 19, 1995, the Parent and the Company entered into a Confidentiality
Agreement with respect to non-public information about the Company that might
be made available to the Parent to enable it to conduct due diligence regarding
the Company to determine whether to make an acquisition proposal. On June 26,
1995, the Parent and the Company supplemented the Confidentiality Agreement to,
among other things, provide for a two-year standstill arrangement pursuant to
which no Shares could be purchased and no proposal could be made by the Parent
without the Company's consent.
Initial due diligence meetings were conducted on June 26 and 27, 1995 in
Denver, Colorado by Mr. McGill and other representatives of the Parent with Mr.
Biszantz and other officers of the Company.
21
<PAGE>
Thereafter, Mr. Uihlein had further discussions with Thomas L. Crow, Vice
Chairman of the Company, and the Parent also began its due diligence review. At
the meetings, the parties discussed the synergies that could be realized in a
possible combination of the two companies and the form of consideration that
any possible transaction might involve. During those conversations, the
Parent's representatives indicated that the Parent would only be interested in
a transaction involving cash consideration. During the course of discussions,
the Parent's representatives further indicated that the Parent would not be
interested in participating in any auction or similar process with respect to
the Company if one were to develop. Mr. Biszantz indicated that, while the
Company was not seeking to be acquired or to enter into any business
combination, and was not actively considering the purchase of any unit of the
Parent related to the Company's business, the Company would be willing to
consider any reasonable proposal that the Parent might choose to make. On
August 2 and 3, 1995, Mr. McGill and John T. Ludes, President and Chief
Operating Officer of the Parent, met with Mr. Biszantz in Carlsbad, California
to discuss a cash offer for the Shares. While a price range of $33 to $37 per
Share was discussed, the parties understood that the discussions were
preliminary and subject to the completion to the satisfaction of the Parent of
due diligence review, the satisfactory resolution of other key matters,
negotiation of an agreement and appropriate Board approvals.
On August 9, 1995, Mr. McGill telephoned Mr. Biszantz to arrange for
additional due diligence sessions and to reaffirm the Parent's interest in
proceeding with a cash acquisition of the Company within the $33 to $37 price
range. Mr. Biszantz stated that the Company had no interest in going forward
with discussions at that time in the price range being considered.
On August 21, 1995, Mr. Crow telephoned Mr. Uihlein and stated that the
Company might consider a proposed transaction at a price range of $35 to $38
per Share if the parties were to resume discussions. Thereafter, Mr. Ludes
telephoned Mr. Biszantz to indicate that a price range of $35 to $37 per Share
was possible and invited the Company to meet with the Parent's representatives
to discuss the matter further. On August 24 and 25, 1995, Messrs. Biszantz and
Crow and other members of the Company's management met in Old Greenwich,
Connecticut with Thomas C. Hays, Chairman and Chief Executive Officer of the
Parent, Messrs. Ludes, McGill and Uihlein and Robert S. Dubiel, Executive Vice
President of Acushnet Company, to discuss the respective businesses of Acushnet
and the Company.
From September 5 through 7, 1995, various representatives of the Parent and
its financial advisors and legal counsel conducted a business and legal due
diligence investigation of the Company at the offices of the Company's counsel
in Los Angeles. Thereafter, various telephone discussions were held between
representatives of the Parent and the Company with respect to a possible
acquisition price range for the Shares, and the Parent continued its due
diligence review of the Company.
During the second week of September 1995, while the Parent was still
conducting its due diligence review and the parties were attempting to resolve
the many open issues, in light of published rumors of a possible transaction
between the Parent and the Company and the trading price of the Shares
exceeding the price ranges previously discussed, it was determined that there
would be no further consideration of any possible transaction and discussions
were terminated. In connection therewith, on September 12, 1995, the Company's
counsel requested the return of all confidential written material furnished to
Parent and its representatives by or on behalf of the Company and such material
was returned shortly thereafter.
On October 26, 1995, to determine whether the Company might have an interest
in resuming discussions, Gilbert L. Klemann, II, Senior Vice President and
General Counsel of the Parent, telephoned the Company's counsel to discuss the
Company's interest in resuming negotiations and the possibility of the Parent
resuming its due diligence review. On October 28, 1995, Mr. McGill met with Mr.
Biszantz in New York City to reinstitute discussions regarding a possible
acquisition of the Company by the Parent. On October 30, 1995, Messrs. Ludes,
Klemann and McGill had a telephone conference with counsel for the Company in
which they outlined an extensive list of due diligence issues that needed to be
addressed for meaningful discussions
22
<PAGE>
to proceed. On October 31, 1995, the Parent provided the Company and its legal
representatives with a draft Merger Agreement and draft Stock Option and Tender
Agreement.
Over the course of the next several weeks, various telephone discussions were
held among representatives of the Parent and its legal counsel and
representatives of the Company and its legal counsel with respect to
negotiations on the drafts of the Merger Agreement and the Stock Option and
Tender Agreement and the Parent's continuing due diligence investigation of the
Company. On November 8, 1995, the Company's counsel provided comments on the
drafts of the agreements circulated by the Parent, and from November 8 through
11, 1995, Messrs. Ludes, McGill and Uihlein and other representatives of the
Parent met with Mark C. McClure, President and Chief Executive Officer of the
Company, and David A. Schaefer, Senior Vice President and Chief Operating
Officer of the Company, and the Company's financial and legal advisors, and
conducted further due diligence with respect to the Company. The Parent's
financial and legal advisors discussed valuation and other issues with respect
to the Company at a meeting of the Board of Directors of the Parent held on
November 17, 1995.
During the course of the negotiations, representatives of the Parent and
representatives of the Company held a number of discussions concerning due
diligence issues and the importance to the Parent of retaining certain key
employees of the Company, including a meeting held in Palm Springs, California,
on November 21, 1995, between Mr. Ludes and other representatives of the Parent
and Messrs. Crow, McClure and Schaefer.
On November 22, 1995, Messrs. Klemann and McGill telephoned the Company's
counsel and indicated that the Parent was prepared to proceed with an
acquisition of the Company at $35 per Share, subject to the completion of due
diligence, the satisfactory resolution of several key open issues and the
negotiation of definitive agreements. The Parent also provided the Company and
its representatives with revised drafts of the Merger Agreement and the Stock
Option and Tender Agreement.
On November 30, 1995, the Company's counsel, after conferring with Mr.
Biszantz, advised Messrs. Klemann and McGill that, as a stockholder of the
Company with approximately 9.5% of the outstanding shares, Mr. Biszantz would
neither be prepared to sell his shares nor recommend a transaction to the Board
of Directors of the Company at that price. Discussions ended with Messrs.
Klemann and McGill reaffirming that the Parent would not offer any more than
$35 per Share and that there were a number of significant due diligence and
other issues still unresolved.
On December 2, 1995, Mr. Biszantz spoke with Mr. Uihlein by telephone and
discussed the business prospects of the Company. Mr. Biszantz expressed his
position concerning certain business and legal issues regarding the proposed
transaction, including the valuation of the Company, and suggested that an
offer price of at or near $37 per Share might be considered by the Company. Mr.
Uihlein replied that these matters would be taken into consideration.
On December 5, 1995, Messrs. Klemann and McGill spoke by telephone with the
Company's counsel and discussed valuation issues, stating that the Parent was
still committed to a transaction at a price of $35 per Share. The following
day, Mr. Klemann and the Company's counsel had further discussions concerning
the impasse on the valuation issue, and the Company's counsel suggested that
the parties' financial advisors meet to discuss the valuation issue. Mr.
Klemann agreed provided that the Company and the Parent simultaneously resume
the due diligence process and endeavor to resolve several key open issues and
that their respective counsel resume contract negotiations. On December 7,
1995, Messrs. Klemann and McGill had a further telephone call with the
Company's counsel to identify some of the remaining open issues and thereafter
the Company's counsel provided the Parent and its representatives with comments
to the draft Merger Agreement and Stock Option and Tender Agreement. On
December 12, 1995, Mr. Schaefer, Robert K. Bruning, Chief Financial Officer of
the Company, and representatives of the Company's legal and financial advisors
had a lengthy conference call with Messrs. Ludes, Klemann, McGill, Uihlein and
other
23
<PAGE>
representatives of the Parent and its financial advisor with respect to the
remaining key business and due diligence issues.
On December 13, 1995, the Parent's and the Company's financial advisors met
to discuss valuation issues. The following day, Mr. Hays telephoned Mr.
Biszantz and indicated that the Parent was prepared to raise the proposed offer
price to $36 per Share, subject to the Company's management supporting the
transaction, the satisfactory completion of due diligence and resolution of
other key open issues and the negotiation of a definitive Merger Agreement and
Stock Option and Tender Agreement. Mr. Biszantz stated that he would submit
this proposal to the Company's Board of Directors for its consideration.
Subsequently, on December 16, 1995, Messrs. Hays and Biszantz had a further
conversation with respect to the open issues that remained without reaching
resolution thereon.
On December 15 and 16, 1995, Messrs. Ludes and Uihlein met in Carlsbad,
California with Messrs. Biszantz, McClure, Crow and Schaefer for further
discussions about the Company and its prospects. During that time, negotiations
of the terms of the Merger Agreement and the Stock Option and Tender Agreement
continued, including discussions with respect to an appropriate "fiduciary out"
and a more limited termination fee provision than requested by the Parent as
well as a minimum condition in the tender offer that at least a majority of the
Shares not owned by the Company's directors or officers be tendered into the
Offer. The negotiations ultimately culminated in the Company's and the Parent's
agreeing upon a form of definitive Merger Agreement and Stock Option and Tender
Agreement. On December 17, 1995, the Board of Directors of the Company and the
Executive Committee of the Board of Directors of the Parent, at their
respective meetings, each unanimously approved the form of definitive Merger
Agreement and Stock Option and Tender Agreement (although one director of the
Company was absent from the meeting and did not vote). On the morning of
December 18, 1995, the Merger Agreement and Stock Option and Tender Agreement
were executed and the transaction was publicly announced that morning. The
Purchaser commenced the Offer on December 22, 1995.
12. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY.
Purpose of the Offer and the Proposed Merger. The purpose of the Offer and
the Merger is to acquire control of, and the entire equity interest in, the
Company. The purpose of the Merger is to acquire all Shares not tendered and
purchased pursuant to the Offer or otherwise. Pursuant to the Merger, each then
outstanding Share (other than Shares owned by the Parent, the Purchaser or any
other direct or indirect subsidiary of the Parent, Shares held in the treasury
of the Company, Shares owned by subsidiaries of the Company and Shares held by
stockholders who perfect appraisal rights under the DGCL) would be converted
into the right to receive cash in the same amount as received per Share in the
Offer, and the Company would become a wholly-owned subsidiary of the Purchaser.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OR A
SOLICITATION OF CALLS FOR A SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS. ANY
SUCH SOLICITATION WHICH THE PARENT OR THE PURCHASER MIGHT MAKE WOULD BE MADE
ONLY PURSUANT TO SEPARATE PROXY OR SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that initially following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted. The directors of the
Purchaser will be the directors of the Surviving Corporation and the officers
of the Company immediately prior to the Effective Time will be the officers of
the Surviving Corporation.
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The Parent will continue to evaluate the business and operations of the
Company during the pendency of the Offer and after the consummation of the
Offer and the Merger, and will take such actions as it deems appropriate under
the circumstances then existing. The Parent intends to seek additional
information about the Company during this period. Thereafter, the Parent
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing the Company's potential in conjunction with the business of the
Parent.
Except as described in this Offer to Purchase, neither the Parent nor the
Purchaser has any present plans or proposals that would relate to or would
result in (i) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries, (ii) a sale or transfer of a material amount of assets of the
Company or any of its subsidiaries, (iii) any change in the present Board of
Directors or management of the Company, (iv) any material changes in the
present capitalization or dividend policy of the Company, (v) any other
material change in the Company's corporate structure or business, (vi) causing
a class of securities of the Company to be delisted from a national securities
exchange or to cease to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association or (vii) a class of
equity securities of the Company becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act.
Statutory Requirements. In general, under the DGCL, a merger of two Delaware
corporations requires the adoption of a resolution by the Board of Directors of
each of the corporations desiring to merge approving an agreement of merger
containing provisions with respect to certain statutorily specified matters and
the approval of such agreement of merger by the stockholders of each
corporation by the affirmative vote of the holders of a majority of all the
outstanding shares of stock entitled to vote on such merger. Section 228 of the
DGCL and the Certificate of Incorporation of the Company permit any action
required or permitted to be taken at any meeting of stockholders to be taken
without a meeting, without prior notice and without a vote, by a written
consent or consents signed by the holders of outstanding shares having at least
the number of votes that would be necessary to authorize the action at a
meeting. The DGCL also provides that if a parent company owns at least 90% of
each class of stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders of the
subsidiary.
The Board of Directors of the Company has by a unanimous vote of those
members present approved the Merger, the Merger Agreement and the Stock Option
and Tender Agreement. Assuming that the Offer is consummated and that the
Purchaser acquires a majority of the outstanding Shares (determined on a fully
diluted basis) and the conditions to the Offer are satisfied or waived, the
Purchaser will hold sufficient Shares to enable it to satisfy the stockholder
approval requirement to approve the Merger either at a meeting of stockholders
to vote thereon or by written consent without the affirmative vote or written
consent of any other stockholder. If, as a result of the Offer or otherwise,
the Purchaser acquires or controls the voting power of at least 90% of the
Shares, the Purchaser could, and intends to, effect the Merger without prior
notice to, or any action by, any other stockholder of the Company.
Delaware Business Combination Law. In general, Section 203 of the DGCL
provides that a Delaware corporation such as the Company may not engage in any
Business Combination (defined to include a variety of transactions, including a
merger) with any Interested Stockholder (defined generally as a person who is
the owner of 15% or more of the corporation's outstanding voting stock), or any
affiliate of an Interested Stockholder, for three years after the date on which
the Interested Stockholder becomes an Interested Stockholder. The three-year
prohibition on Business Combinations with Interested Stockholders (the
"Business Combination Prohibition") does not apply if certain conditions,
described below, are satisfied. Section 203 of the DGCL provides that an
"owner" of voting stock includes any person who, individually or together with
any of its affiliates or associates, (i) directly or indirectly, beneficially
owns such voting stock, (ii) has the right to acquire voting stock (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options or otherwise, (iii) has
the right to vote such stock pursuant to any agreement, arrangement or
understanding, or (iv) has any agreement, arrangement or understanding for
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the purposes of acquiring, holding, voting or disposing of such stock with any
other person who beneficially owns, directly or indirectly, such stock.
The Business Combination Prohibition does not apply to a particular Business
Combination between a corporation and a particular Interested Stockholder if
(i) prior to the date such Interested Stockholder became an Interested
Stockholder, the board of directors of such corporation approved either the
Business Combination or the transaction which resulted in the stockholder
becoming an Interested Stockholder, or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares held
by (x) persons who are directors and also officers of the corporation and (y)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to the date
the stockholder becomes an Interested Stockholder, the Business Combination is
(a) approved by the board of directors of the corporation and (b) authorized at
an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock of the corporation which is not
owned by the Interested Stockholder.
Section 203(b)(6) of the DGCL provides that the restrictions contained in
Section 203 of the DGCL do not apply to a Business Combination that is proposed
prior to the consummation or abandonment of and following the announcement or
notification of one of certain extraordinary transactions (including a merger)
involving the corporation which transaction (i) is with or by a person who
either was not an Interested Stockholder during the previous three years or who
became an Interested Stockholder with the approval of the corporation's board
of directors and (ii) has been approved or has not been opposed by a majority
of the members of the board of directors then in office who were directors
prior to any person becoming an Interested Stockholder during the previous
three years or were recommended for election or elected to succeed such
directors by a majority of such directors.
The foregoing summary of Section 203 of the DGCL does not purport to be
complete and is qualified in its entirety by reference to the provisions of
Section 203 of the DGCL.
The Company's Board of Directors has by a unanimous vote of those members
present approved the Merger, the Merger Agreement and the Stock Option and
Tender Agreement and the Purchaser's acquisition of Shares pursuant to the
Offer and, therefore, Section 203 of the DGCL is inapplicable to the Company
and the Purchaser in connection with the Offer and the Merger.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company will
have certain rights under Section 262 of the DGCL to dissent and demand
appraisal of, and payment in cash of the fair value of, their Shares. Such
rights, if the statutory procedures were complied with, could lead to a
judicial determination of the fair value (excluding any element of value
arising from the accomplishment or expectation of the Merger) required to be
paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than, or in addition to, the price paid in the Offer and the market value
of the Shares, including asset values and the investment value of the Shares.
The value so determined could be more or less than the purchase price per the
applicable Share pursuant to the Offer or the consideration per the applicable
Share to be paid in the Merger.
In addition, several decisions by Delaware courts have held that, in certain
instances, a controlling stockholder of a corporation involved in a merger has
a fiduciary duty to the other stockholders that requires the merger to be fair
to such other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the type
and amount of consideration to be received by the stockholders and whether
there were fair dealings among the parties. Although the remedies of rescission
or other damages are possible in an action challenging a merger as a breach of
fiduciary
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duty, decisions of the Delaware courts have indicated that in most cases the
remedy available in a merger that is found not to be "fair" to minority
stockholders is a damages remedy based on essentially the same principles as an
appraisal.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. The
preservation and exercise of dissenters' rights require strict adherence to the
applicable provisions of the DGCL.
"Going Private" Transactions. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger or other
transactions following the purchase of Shares pursuant to the Offer in which
the Purchaser seeks to acquire the remaining Shares not held by it. However,
Rule 13e-3 would be inapplicable if (i) the Shares are deregistered under the
Exchange Act prior to the Merger or other transactions or (ii) the Merger or
other business combination is consummated within one year after the purchase of
the Shares pursuant to the Offer and the amount paid per Share for each class
of Share in the Merger or other business combination is at least equal to the
amount paid per Share for such class of Share in the Offer. If applicable, Rule
13e-3 requires, among other things, that certain financial information
concerning the fairness of the proposed transaction and the consideration
offered to minority stockholders in such transaction be filed with the
Commission and disclosed to stockholders prior to the consummation of the
transaction.
13. THE MERGER AGREEMENT; THE STOCK OPTION AND TENDER AGREEMENT.
The following summary of certain provisions of the Merger Agreement and the
Stock Option and Tender Agreement, copies of which are filed as exhibits to the
Schedule 14D-1, is qualified in its entirety by reference to the text of the
Merger Agreement and Stock Option and Tender Agreement, which are incorporated
herein by reference.
THE MERGER AGREEMENT
The Offer. The Merger Agreement provides that the Parent will cause the
Purchaser to commence the Offer and that, upon the terms and subject to the
prior satisfaction or waiver of the conditions of the Offer, the Purchaser will
purchase all Shares validly tendered pursuant to the Offer. The Merger
Agreement provides that, without the written consent of the Company, the
Purchaser may not decrease the Offer Price, reduce the maximum number of Shares
to be purchased in the Offer, impose conditions to the Offer in addition to
those set forth in Annex A thereto, amend or change the terms and conditions of
the Offer in any manner adverse to the holders of Shares (except for the
Purchaser and the Parent), change or waive the Minimum Condition, change the
consideration payable in the Offer to anything other than all cash, or reduce
the time period during which the Offer will remain open, except as provided in
the next sentence, extend the time period during which the Offer shall remain
open. Notwithstanding the foregoing, the Purchaser may, without the consent of
the Company, extend the Offer beyond the initial Expiration Date or any
subsequent Expiration Date if at such date any of the conditions to the Offer
will not have been satisfied or waived, until such time as such conditions are
satisfied or waived. In addition, the Merger Agreement provides that, without
the consent of the Company, the Offer may be extended for any period required
by any rule, regulation, interpretation or position of the Commission.
The Merger. The Merger Agreement provides that, upon the terms and subject to
the conditions thereof and in accordance with the DGCL, the Purchaser will be
merged with and into the Company. Following the Merger, the separate corporate
existence of the Purchaser will cease and the Company shall continue as the
Surviving Corporation under the name "Cobra Golf Incorporated." The Certificate
of Incorporation and By-laws of the Purchaser shall become the Certificate of
Incorporation and By-laws of the Surviving Corporation. The directors of the
Purchaser shall become the directors of the Surviving Corporation and the
officers of the Company shall become the officers of the Surviving Corporation.
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At the Effective Time, each issued and outstanding Share (other than Shares
held by the Company as treasury stock, Shares owned by any subsidiary of the
Company, Shares owned by the Parent, the Purchaser or any other direct or
indirect subsidiary of the Parent, or Dissenting Shares) will be converted into
the right to receive the Merger Consideration. Shares held by the Company as
treasury stock, Shares owned by any subsidiary of the Company and Shares owned
by the Parent, the Purchaser or any other direct or indirect subsidiary of the
Parent will be canceled at the Effective Time. Dissenting Shares held by
holders who have properly exercised appraisal rights with respect thereto in
accordance with Section 262 of the DGCL will not be converted into the right to
receive the Merger Consideration but instead will be entitled to only such
rights as are provided by the DGCL, unless such holder fails to perfect or
withdraws or loses their right to appraisal and payment under the DGCL, in
which case, each such Share will cease to be a Dissenting Share and will be
deemed converted into and represent only the right to receive the Merger
Consideration. At the Effective Time, each issued and outstanding share of
common stock of the Purchaser will be converted into one newly issued share of
common stock of the Surviving Corporation. See "Appraisal Rights" in Section 12
above.
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction of certain conditions, including the following: (i)
the Merger and the Merger Agreement having been approved and adopted by the
affirmative vote of the stockholders of the Company to the extent required by
the DGCL, (ii) the expiration or early termination of all applicable waiting
periods under the HSR Act, (iii) no statute, law, rule, regulation, decree,
temporary restraining order, injunction or other order having been issued by
any court of competent jurisdiction or any other federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity") or other legal restraint or prohibition preventing the consummation of
the Merger being in effect, provided, however, that each of the Company, the
Parent and the Purchaser will have used reasonable efforts to prevent the entry
of any such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered and (iv) the Parent and the
Purchaser having purchased all Shares validly tendered and not properly
withdrawn in the Offer and exercise all outstanding options under the Stock
Option and Tender Agreement not otherwise purchased in the Offer.
Approval of Stockholders. The Merger Agreement provides that the Company will
take all action necessary to convene and hold a special meeting of its
stockholders if such meeting is required by applicable law to approve the
Merger and the Merger Agreement and use its reasonable best efforts to obtain
such approval. In connection with such special meeting, the Company will
prepare and file with the Commission a proxy statement for such special
meeting, if required by law, and an information statement, for use if the
special meeting is not required, and disseminate to its stockholders the proxy
statement or information statement as appropriate.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger abandoned at any time prior to the Effective Time, whether
before or after approval by the stockholders of the Company:
(i) by the mutual written agreement of the Parent and the Company;
(ii) by either the Parent or the Company, if (a) the Purchaser has not
accepted for payment any Shares pursuant to the Offer by March 21, 1996
(the "Outside Termination Date"), provided, however, that if (1) the
condition to the Offer that all waiting periods under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have
expired or been terminated is not satisfied as of the Outside Termination
Date or (2) an expression of interest, offer or proposal is made with
respect to a Competing Transaction (as defined below under "Competing
Transaction") and the Company has not taken any of the actions with respect
thereto described in clauses (a) or (b) in paragraph (iii) below prior to
the Outside Termination Date or (3) the Parent or the Company is litigating
or contesting any suit, action or proceeding with respect to any of the
conditions to the Offer set forth in paragraphs (a) and (b) in Section 15
as of the Outside Termination Date, the Purchaser may elect to extend the
Outside Termination Date from time to time to the extent any such
circumstance referred to in clauses (1), (2)
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and (3) above continues to exist, provided further that the Outside
Termination Date as extended will not be later than July 19, 1996 (an
"Outside Termination Date Event"), (b) there is any statute, law, rule or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any court of competent jurisdiction or other Governmental
Entity has issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the acceptance
for payment of or payment for the Shares pursuant to the Offer or
consummation of the Merger, and such order, decree, ruling or other action
is not subject to appeal or has become final and unappealable (a "Legal
Prohibition Event");
(iii) by the Parent, if (a) the Board of Directors of the Company or any
committee thereof has withdrawn or modified its approval or recommendation
of the Offer, the Merger Agreement or the Merger in a manner adverse to the
Parent, or has approved or recommended any Competing Transaction, (b) the
Company has entered into a definitive agreement with respect to a Superior
Transaction (as defined below under "Competing Transactions"), (c) any of
the representations and warranties of the Company set forth in the Merger
Agreement that are qualified as to materiality are not true and correct and
any such representations and warranties that are not so qualified are not
true and correct in any material respect, in each case as of the date of
the Merger Agreement and as of the expiration of the Offer, or there has
been a failure to perform in any material respect or comply in any material
respect with any covenant or agreement of the Company set forth in the
Merger Agreement, and such breach of the representations and warranties of
the Company or failure cannot be or has not been cured within 30 days after
the giving of written notice to the Company, and the Purchaser has not
accepted for payment any Shares pursuant to the Offer (a "Company Breach
Event"), or (d) due to the failure, occurrence or existence of any of the
conditions described in Section 15, the Purchaser has (1) not commenced the
Offer within five business days following the date of the Merger Agreement,
or (2) terminated the Offer, or the Offer has expired, pursuant to its
terms, without the Purchaser having accepted for payment any Shares
thereunder, provided that such failure, occurrence or existence is not the
result of the Parent's or the Purchaser's failure to perform any of its
obligations under the Merger Agreement (a "Parent Offer Condition Failure
Event"); or
(iv) by the Company, (a) in connection with entering into a definitive
agreement with respect to a Superior Transaction in accordance with the
provisions of the Merger Agreement described under "Competing
Transactions", (b) if, due to the failure, occurrence or existence of any
of the conditions described in Section 15, the Purchaser has (1) not
commenced the Offer within five business days following the date of the
Merger Agreement or (2) terminated the Offer, or the Offer has expired,
pursuant to its terms, without the Purchaser having accepted for payment
any Shares thereunder, provided that the failure, occurrence or existence
of any such condition is not the result of the Company's failure to perform
any of its obligations under the Merger Agreement (a "Company Offer
Condition Failure Event"), or (c) there has been a breach in any material
respect of any representation, warranty, covenant or agreement of the
Parent or the Purchaser set forth in the Merger Agreement, which failure to
perform cannot be or has not been cured within 30 days after the giving of
written notice to the Parent or the Purchaser, as applicable, except such
failures which are not reasonably likely to affect adversely the Parent's
or the Purchaser's ability to complete the Offer or the Merger.
Competing Transactions. The Merger Agreement provides that the Company, its
subsidiaries and their respective officers, directors, employees,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of its
subsidiaries) (collectively, the "Company's Representatives") will immediately
cease any discussions or negotiations with any party that may be ongoing with
respect to any Competing Transaction (as defined below). Prior to the Effective
Time, the Company will not, nor will it permit any of its subsidiaries or any
of the Company's Representatives to (i) solicit or initiate, or encourage the
submission of, any proposal or (ii) participate in, directly or indirectly, any
discussions or negotiations, or furnish to any person any information, or take
any other action to facilitate any inquiries or the making of any proposal,
that might reasonably be expected to lead to any Competing
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Transaction. If, prior to the acceptance for payment and payment for Shares
pursuant to the Offer, the Board of Directors of the Company, after
consultation with its outside legal counsel, determines in good faith that the
failure to take such action would be inconsistent with its fiduciary duties to
the stockholders of the Company under applicable law, the Company may, in
response to a bona fide unsolicited expression of interest, offer or proposal
concerning any Competing Transaction made after the date of the Merger
Agreement and subject to compliance with the notification provisions discussed
below, furnish information concerning its business, properties or assets to any
person or enter into discussions or negotiations with such person regarding a
Competing Transaction.
The Merger Agreement provides that prior to taking any action described above
with respect to a Competing Transaction, the Company will (i) provide
reasonable notice to the Parent, orally and in writing, stating that it is
taking such action, specifying the material terms and conditions of the
expression of interest, offer or proposal, and identifying the person making
it, and (ii) receive from such person an executed confidentiality agreement in
reasonably customary form. The Company is further required under the terms of
the Merger Agreement to keep the Parent fully informed of the status and
details (including amendments and proposed amendments) of any such expression
of interest, offer or proposal.
For purposes of the Merger Agreement, "Competing Transaction" means any of
the following (other than the transactions between the Company, the Parent or
the Purchaser or their affiliates contemplated by the Merger Agreement)
involving the Company or its subsidiaries: (A) any merger, consolidation,
business combination, share exchange, sale of substantially all assets,
recapitalization, liquidation, dissolution or other similar transaction; (B)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of a
substantial amount of the assets of the Company and its subsidiaries, taken as
a whole, in a single transaction or series of transactions; (C) any tender
offer or exchange offer for 20% or more of the outstanding shares of capital
stock of the Company; (D) any acquisition or purchase, directly or indirectly,
in a single transaction or series of transactions, by any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership or the right to acquire beneficial
ownership of 20% or more of the then outstanding shares of capital stock of the
Company; or (E) any other transaction, the consummation of which would
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer and the Merger or which would reasonably be expected to dilute
materially the benefits to the Parent and the Purchaser of the transactions
contemplated by the Merger Agreement (but would not include any transaction
that would be permitted pursuant to the provisions relating to the conduct of
business by the Company prior to the Effective Time, and which would not
otherwise be a breach of any other provision of the Merger Agreement).
The Merger Agreement provides further that except as set forth therein,
neither the Board of Directors of the Company nor any committee thereof shall
(A) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to the Parent or the Purchaser, the approval or recommendation by such Board of
Directors or committee, of the Offer, the Merger Agreement or the Merger, or
(B) approve, recommend, or propose to approve or recommend, or cause the
Company to enter into any agreement with respect to, any Competing Transaction.
Notwithstanding the foregoing, in the event prior to the time of acceptance for
payment of the Shares in the Offer the Board of Directors of the Company, after
consultation with its outside legal counsel, determines in good faith that the
failure to take such action would be inconsistent with its fiduciary duties to
the stockholders of the Company under applicable law, the Board of Directors
may withdraw or modify its approval or recommendation of the Offer, the Merger
Agreement or the Merger, or approve or recommend, or cause the Company to enter
into any agreement with respect to, a bona fide offer by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the Shares then outstanding on a fully diluted
basis or all or substantially all of the assets of the Company on terms which
the Board of Directors of the Company determines in its good faith judgment
(based on the advice of a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Offer
and the Merger (a "Superior Transaction"), provided that the Company provides
the Parent and the Purchaser one business day's written notice that the Board
of Directors
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of the Company has received such other offer, specifying the material terms and
conditions of such offer and identifying the person making such offer.
The Merger Agreement also provides that nothing contained therein shall be
construed to prohibit the Board of Directors of the Company from taking and
disclosing to the stockholders of the Company a position as contemplated by
Rules 14e-2(a) and 14d-9 under the Exchange Act, or from making such other
disclosure to stockholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with its outside legal counsel,
failure to do so would be inconsistent with its fiduciary duties to the
stockholders of the Company, provided that the Company will not, except as
permitted by the preceding paragraph, withdraw or modify, or propose to
withdraw or modify, its position with respect to the Offer or the Merger or
approve or recommend, or propose to approve or recommend, any expression of
interest, offer or proposal with respect to a Competing Transaction.
Fees and Expenses. Except as described below, the Merger Agreement provides
that whether or not the Offer or the Merger is consummated, each of the parties
to the Merger Agreement will pay all costs incurred by it incident to the
performance of its obligations under the Merger Agreement.
The Merger Agreement further provides that if:
(i) the Parent terminates the Merger Agreement by reason of (A) the Board
of Directors of the Company or any committee thereof having withdrawn or
modified its approval or recommendation of the Offer, the Merger Agreement
or the Merger in a manner adverse to the Parent or having approved or
recommended any Competing Transaction or (B) the Company having entered
into a definitive agreement with respect to a Superior Transaction;
(ii) the Company terminates the Merger Agreement in connection with
entering into a definitive agreement with respect to any Superior
Transaction in accordance with the provisions of the Merger Agreement
described under "Competing Transactions" above; or
(iii) (A) the Merger Agreement is terminated as a result of an Outside
Termination Date Event, Parent Offer Condition Failure Event or Company
Offer Condition Failure Event (each described under "Termination of the
Merger Agreement" above) and (B) prior to such termination, a proposal or
offer with respect to a Competing Transaction has been received by the
Company or publicly disclosed and within 180 days after termination of the
Merger Agreement, the Company enters into an agreement with respect to, or
approves or recommends, a Superior Transaction related thereto; or
(iv) (A) the Parent terminates the Merger Agreement as a result of a
Company Breach Event and (B) prior to such termination, a proposal or offer
with respect to a Competing Transaction has been received by the Company or
publicly disclosed and within 180 days after termination of the Merger
Agreement, the Company enters into an agreement with respect to, or
approves or recommends, such Competing Transaction, then
the Company will (x) pay to the Parent $15,000,000 (the "Termination Fee") and
(y) assume and pay, or reimburse Parent for, all reasonable, documented out-of-
pocket fees and expenses incurred by the Parent or the Purchaser specifically
related to the Merger Agreement and the transactions contemplated thereby up to
$4,000,000 (the "Expense Reimbursement"). The Company has further agreed that
if the Merger Agreement has been terminated (x) as a result of an Outside
Termination Date Event, Legal Prohibition Event, Parent Offer Condition Failure
Event or Company Offer Condition Failure Event, and if prior to such
termination a proposal or offer with respect to a Competing Transaction has
been received by the Company or publicly disclosed and within 180 days after
such termination the Company enters into an agreement with respect to, or
approves or recommends, such Competing Transaction, or (y) as a result of a
Parent Offer Condition Failure Event or Company Offer Condition Failure Event
because the Offer has expired with the Purchaser not having accepted for
payment any Shares due to there not having been validly tendered and not
withdrawn
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prior to the expiration of the Offer such number of Shares which would
constitute a majority of the outstanding Shares (determined on a fully diluted
basis) not owned beneficially or of record by the Company's directors or
officers, then the Company shall pay to the Parent the Expense Reimbursement
but not the Termination Fee (if not otherwise payable pursuant to paragraph
(iii) above). The amount of fees and expenses so payable shall be the amount
set forth in a good faith written estimate delivered by the Parent, subject to
later upward or downward adjustment upon delivery of reasonable documentation
therefor.
Conduct of Business by the Company. The Merger Agreement provides that prior
to the Effective Time, subject to certain exceptions, the Company shall
conduct, and shall cause its subsidiaries to conduct, their respective
businesses in the ordinary course and use reasonable best efforts consistent
with past practice and policies to maintain in effect all existing
qualifications, licenses, permits, approvals and other authorizations, to
preserve their business organizations intact, and consistent with efficient and
economical management, to retain the services of their present officers,
employees and agents to the end that they may preserve their good will and
their respective business relationships with customers, suppliers and others.
Except as otherwise expressly contemplated by the Merger Agreement, prior to
the Effective Time the Company shall not, and shall not permit any of its
subsidiaries to (without the prior written approval of the Parent and the
Purchaser): (i) issue or sell (except pursuant to the exercise of outstanding
Stock Options (as defined below under "Stock Options")) any shares of its
capital stock or any of its other securities, issue any securities convertible
into or exchangeable for, or options, warrants to purchase, scrip, rights to
subscribe for, calls or commitments of any character relating to, or enter into
any contract, understanding or arrangement with respect to the issuance of, any
shares of its capital stock or any of its other securities, enter into any
arrangement or contract with respect to the purchase or voting of shares of its
capital stock, adjust, split, reacquire, redeem, combine or reclassify any of
its securities or make any other change in its capital structure; (ii)(a) incur
any debt or other obligation to pay money borrowed except in the ordinary
course of business or enter into any guarantee of such obligation of another
person or mortgage, pledge or subject to any lien, charge or other encumbrance
their respective assets, properties or business or (b) make any loans, advances
or capital contributions to, or investments in, any other person; (iii) enter
into, amend or affirmatively renew any material contract, commitment, lease or
other transaction (whether of real or personal property) except those that are
not material or are in the ordinary course of business and do not involve
affiliates of the Company; (iv)(a) sell or otherwise dispose of or lease any
part of their respective properties or assets or purchase, or otherwise acquire
or lease properties or assets except sales or purchases of inventory and
purchases of capital equipment in the ordinary course of business or (b)
acquire or agree to acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof; (v)(a) grant any general increase in wage or
salary rates or in employee benefits (except in the ordinary course of business
consistent with past practice), (b) grant any increase in salary or in
employment, retirement, severance or termination or other benefits or pay any
bonus to any officer or director (except as required by existing agreements,
plans or arrangements), (c) enter into any employment contract with any person
which the Company or the relevant subsidiary does not have the unconditional
right to terminate without material liability, (d) cause to be exercisable any
otherwise unexercisable Stock Option under the Stock Option Plan (as defined
below under "Stock Options") (except to the extent described under "Stock
Options" below) or (e) adopt, or amend in any manner which would, individually
or in the aggregate, materially increase the benefits under any bonus, profit
sharing, compensation, termination, stock option, stock appreciation right,
restricted stock, performance unit, pension, retirement, deferred compensation,
employment, severance, termination pay, welfare or other employee benefit plan,
agreement, trust, plan fund or other arrangement for the benefit or welfare of
any employee of the Company or its subsidiaries; or (vi) make any material
changes in the type or amount of its insurance coverage. The Merger Agreement
further provides that prior to the Effective Time, (i) the Company shall not,
and shall not permit any of its subsidiaries to, (a) amend their respective
charter documents, by-laws or other organizational documents or (b) take or
agree or commit to take any action which would result in any of the Company's
representations or warranties in the Merger Agreement qualified as to
materiality being untrue and such representations and
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warranties that are not so qualified being untrue in any material respect or
any of the conditions to the Offer described in Section 15 not being satisfied
and promptly give notice to the Parent and the Purchaser upon becoming aware of
any such circumstances, (ii) the Company shall (a) not declare, set aside or
pay any dividends on, or make any distributions in respect of, its shares of
outstanding capital stock, (b) except as otherwise expressly contemplated by
the Merger Agreement, not make any material tax election (unless required by
law) or settle or compromise any material income tax liability of the Company
or any of its subsidiaries (except if such action is taken in the ordinary
course of business and the Parent and the Purchaser shall have been provided
reasonable prior notice thereof) and the Company shall consult with the Parent
and the Purchaser before filing or causing to be filed any material tax return
of the Company or any of its subsidiaries or before executing or causing to be
executed any agreement or waiver extending the period for assessment or
collection of any taxes of the Company or any of its subsidiaries and (iii) the
Company shall notify the Company's transfer agent that it may not register the
transfer of any certificate representing any Subject Shares, unless such
transfer is made in accordance with the terms of the Merger Agreement and the
Stock Option and Tender Agreement.
Board of Directors. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, any Shares by the Purchaser
pursuant to the Offer, and from time to time thereafter, the Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Board of Directors of the Company as will give the Parent
representation on the Board (which shall be reduced to 10 members) equal to the
product of 10 multiplied by the percentage that the aggregate number of Shares
purchased by the Parent bears to the total number of Shares outstanding,
provided, however, that the Board shall have no less than three Disinterested
Directors, subject to compliance with Section 14(f) of the Exchange Act. The
Company, subject to applicable law, has agreed to take all such action needed
to cause the Parent's designees to be elected or appointed to the Company's
Board of Directors and to use its reasonable best efforts to cause such
individuals designated by the Parent to constitute (x) the minimum number of
members necessary to constitute a simple majority of each committee of the
Company's Board of Directors, (y) the minimum number of members necessary to
constitute a simple majority of each board of directors of each subsidiary of
the Company and (z) the minimum number of members necessary to constitute a
simple majority of each committee of each such board. The Company has agreed to
take all action required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder to fulfill its obligations described in this paragraph and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as required by Section 14(f) and Rule 14f-1.
Stock Options. The Merger Agreement provides that at or immediately prior to
the Effective Time, each holder of a then outstanding option to purchase Shares
under the Cobra Golf Incorporated 1993 Stock Option Plan (the "Stock Option
Plan"), whether or not then vested or exercisable (the "Stock Options"), will
receive from the Company, in settlement thereof, for each share such holder
could have purchased had such Stock Option been fully vested immediately prior
to the Effective Time and had such holder exercised such Stock Options in full
immediately prior to the Effective Time, an amount (subject to any applicable
withholding tax) in cash equal to the excess of the Offer Price over the per
share exercise price of such Stock Option, and thereafter such Stock Option
will be cancelled. The surrender of a Stock Option in exchange for the
settlement amount will be deemed a release of any and all rights the holder had
or may have had in respect of such Stock Option and the payment of the
settlement amount with respect to all Stock Options held by such holder with
respect to which the settlement amount is payable shall be conditioned on such
holder acknowledging the cancellation of all such Stock Options held by such
holder together with any Stock Options held by such holder as to which the
exercise price equals or exceeds the Offer Price. Prior to the Effective Time,
the Company shall use its best efforts to take any lawful action necessary to
effect the foregoing transactions (other than action requiring approval of the
Company's stockholders).
The Merger Agreement provides further that except as otherwise agreed to by
the parties, the Stock Option Plan shall terminate as of the Effective Time and
the provisions in any other plan, program or arrangement of the Company
providing for the issuance or grant of any other interest in respect of the
capital stock of the
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Company or any subsidiary thereof shall be canceled as of the Effective Time,
and the Company shall take all action necessary to ensure that following the
Effective Time no participant in the Stock Option Plan or other plans, programs
or arrangements shall have any right thereunder to acquire any capital stock of
the Company, the Parent, the Surviving Corporation or any subsidiary thereof
and to terminate all such plans.
Estoppel Certificate. In the Merger Agreement, the Company has agreed to use
reasonable best efforts to obtain from certain owners and/or lessors of leased
real property used by the Company, an estoppel certificate with respect to
certain matters, including certain environmental liabilities.
Employee Benefit Plans. The Parent has agreed in the Merger Agreement to
cause the Surviving Corporation to maintain for a period of one year following
the Effective Time employee benefit plans (other than plans based on equity
securities or any equivalent thereof and other than the Company's annual
incentive bonus program) for employees of the Company and its subsidiaries
generally that are substantially comparable in the aggregate to those provided
under the employee benefit plans of the Company and its subsidiaries in effect
on the date of the Merger Agreement (including, but not limited to, any
severance pay or arrangements but not including any plans based on equity
securities or any equivalent thereof and other than the Company's annual
incentive bonus program), provided, however, that following the Effective Time,
the Surviving Corporation and its subsidiaries shall have the right (i) to
transfer the participation of any employee of the Company or its subsidiaries
who becomes an employee of the Parent or any of its affiliates to one or more
employee benefit plans maintained by the Parent or any of its affiliates which
are, in the aggregate, substantially comparable to the plans of the Company and
its subsidiaries, (ii) to change the compensation, benefits or other terms of
employment for individual employees, (iii) to terminate the employment of any
employee (subject to the payment of any severance benefit payable with respect
to such termination) and (iv) to amend the terms of any compensation or
employee benefit plan with the consent of the affected employee.
The Merger Agreement further provides that the Parent will provide employees
(including officers) of the Company and its subsidiaries who are currently
participating in the Stock Option Plan, the opportunity, for at least one year
after the Effective Time, to receive grants of stock options under the Parent's
stock option plan on a comparable basis to similarly situated employees of the
Parent and its affiliates.
Officers' and Directors' Insurance; Indemnification. The Parent has agreed in
the Merger Agreement that for at least six years after the Effective Time, it
will (i) cause the Surviving Corporation to maintain without any reduction in
scope or coverage the indemnification provisions for present and former
officers and directors of the Company and its subsidiaries contained in the
Company's or any of its subsidiary's Certificate of Incorporation in effect on
the date of the Merger Agreement (Parent acknowledges in the Merger Agreement
that the Company's certificate of incorporation requires, to the fullest extent
permitted by Section 145 of the DGCL, that the Company indemnify any and all
persons whom it shall have the power to indemnify under said section and, as
provided in said section, requires that the Company advance expenses incurred
upon receipt of an undertaking required by said section) and (ii) cause the
Surviving Corporation to maintain in effect the current policies of directors'
and officers' liability insurance maintained by the Company or any of its
subsidiaries with respect to matters occurring prior to and including the
Effective Time, provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage for the same acts or occurrences in the
same period containing terms and conditions which are no less advantageous so
long as no lapse in coverage occurs as a result of such substitution, provided
further that in no event will the Parent or the Surviving Corporation be
required to expend in any one year an amount in excess of 150% of the annual
premiums currently paid by the Company for such insurance (which the Company
represents to be $430,000 for 1995). The Merger Agreement provides that, in the
event the Parent and the Surviving Corporation cannot maintain policies for
such coverage for such annual premium amount, the Parent and the Surviving
Corporation shall maintain as much coverage as is available for such amount,
provided, further, that the Parent will cause the Surviving Corporation to
provide coverage under the directors' and officers' liability insurance policy
maintained by the Parent to directors and officers of the Company and its
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subsidiaries to the same extent as provided to directors and officers of other
operating companies of the Parent with respect to matters occurring after the
Effective Time.
Further Action. The Merger Agreement provides that, subject to the terms and
conditions of the Merger Agreement, each of the parties will use all reasonable
efforts to take, or cause to be taken by the Company, the Purchaser or the
Parent, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the Offer and the Merger
and the other transactions contemplated by the Merger Agreement and the Stock
Option and Tender Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties made by the Company to the Parent and
the Purchaser, including, but not limited to, representations and warranties
relating to the Company's organization and qualification, its capitalization,
its authority to enter into Merger Agreement and to carry out the related
transactions, the absence of conflicts with applicable laws and existing
obligations of the Company, its subsidiaries, financial statements of the
Company, tax matters, capital stock transactions, indebtedness and guarantees,
material contracts, powers of attorney, employee benefit plans and termination
and severance agreements, employees and labor matters, proprietary rights,
litigation, environmental matters, governmental approvals, permits and
compliance with applicable law, filings made by the Company with the Commission
under the Securities Act or the Exchange Act, disclosures by the Company,
disclosure documents filed with the Commission in connection with the Offer and
the Merger and state takeover statutes.
The Merger Agreement contains various customary representations and
warranties made by the Parent and the Purchaser to the Company, including, but
not limited to, representations and warranties relating to the Parent's and the
Purchaser's organization and qualification, their authority to enter into the
Merger Agreement and carry out the related transactions, the lack of conflicts
with applicable laws and existing obligations of the Parent and the Purchaser,
governmental approvals, certain information provided to the Company by the
Parent and the Purchaser for inclusion in disclosure documents filed with the
Commission in connection with the Offer and the Merger and financing of the
Offer and Merger.
STOCK OPTION AND TENDER AGREEMENT
The Stock Option and Tender Agreement provides that each Selling Stockholder
irrevocably grants to the Parent a pledge and security interest in such Selling
Stockholder's Subject Shares and each Selling Stockholder has agreed severally,
but not jointly, to validly tender all its Subject Shares pursuant to the Offer
and agrees not to withdraw such Subject Shares tendered without the Parent's
consent; provided, however, that if the Offer Price is for any reason increased
above the initial Offer Price of $36.00, then each Selling Stockholder has
agreed to promptly (no later than three Business Days after the first public
announcement of such increase) properly withdraw all such Shares, and provided
further that following any such withdrawal each Selling Stockholder shall, only
upon the written direction of the Parent, validly tender all of such Selling
Stockholder's Subject Shares pursuant to the Offer. In order to protect the
Parent's security interest in each Selling Stockholder's Subject Shares, each
Selling Stockholder has agreed to deliver to the Parent any and all stock
certificates evidencing such Stockholder's (i) existing shares within five
business days following the date of the Stock Option and Tender Agreement and
(ii) after-acquired shares within three business days following the acquisition
thereof. Each Selling Stockholder further agreed that the Parent shall have all
the rights and remedies of a secured party provided or permitted under the
Uniform Commercial Code. Each Selling Stockholder has also granted to the
Parent, an irrevocable option (the "Option") to purchase all such Stockholder's
Subject Shares at a price per Share equal to (i) the initial Offer Price of
$36.00 or (ii) in the event the Offer Price is increased and the Purchaser has
accepted for payment, and paid for, any Shares pursuant to the Offer, the
initial Offer Price plus an amount equal to one-half of the excess of the final
Offer Price paid by the Purchaser for any Shares pursuant to the Offer over
such initial Offer Price. The Parent agreed it will have no rights of ownership
in any Selling Stockholder's Subject Shares unless and until such
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Subject Shares are purchased pursuant to the Option or the Offer but the Parent
shall otherwise be permitted to exercise its rights hereunder.
The Stock Option and Tender Agreement also provides that if any Shares are
acquired pursuant to the Offer, Parent will cause all but not part of each
Selling Stockholder's Subject Shares to be acquired either pursuant to (i) the
Offer or (ii) the exercise of the Options. If the Parent exercises the Options
and purchases all the Subject Shares, the closing of such acquisition shall
take place within two business days after shares are accepted for payment
pursuant to the Offer. Provided that prior to any exercise (i) all waiting
periods under the HSR Act applicable to such exercise of the Options shall have
expired or been terminated, (ii) the Purchaser shall have accepted Shares for
payment pursuant to the Offer and (iii) no preliminary or permanent injunction
or other order, ruling or decree issued by any court or governmental or
regulatory authority of competent jurisdiction prohibiting the exercise of an
Option or the delivery of the Subject Shares shall be in effect. Parent may
exercise the Options, in whole but not in part, at any time and from time to
time, until the termination of the Stock Option and Tender Agreement.
Except as provided in the Stock Option and Tender Agreement, the Selling
Stockholders have also agreed, during the term of the Stock Option and Tender
Agreement, not to: (i) sell, pledge or otherwise dispose of, the Subject
Shares, (ii) deposit the Subject Shares into a voting trust or enter into a
voting agreement or arrangement with respect to any Subject Shares, (iii) grant
any proxy, power-of-attorney or other authorization in or with respect to any
Subject Shares or (iv) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect sale, assignment, transfer
or other disposition of any Subject Shares.
The Stock Option and Tender Agreement provides that each Selling Stockholder
grants the Parent, or any nominee of the Parent, an irrevocable proxy, during
and only for the term of the Stock Option and Tender Agreement, with respect to
the Subject Shares owned by such Selling Stockholder to vote such shares at
every annual, special or adjourned meeting of the stockholders of the Company
or to execute a written consent on such Selling Stockholder's behalf in lieu of
a meeting as follows: (i) in favor of approval and adoption of the Merger
Agreement and all related matters, (ii) against any action or agreement that
would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement, and (iii) against any action or agreement (other
than the Merger Agreement or the transactions contemplated thereby) that would
impede, interfere with, delay, postpone or attempt to discourage the Merger
(together with subparagraphs (i) and (ii) above, the "Permitted Matters"). Each
such proxy is intended to be irrevocable and coupled with an interest in the
Subject Shares and supported by the pledge of the Subject Shares as provided in
the Stock Option and Tender Agreement. The Stock Option and Tender Agreement
also provides that each Selling Stockholder thereby revokes any proxy
previously granted with respect to Subject Shares owned of record or
beneficially by such Selling Stockholder. Each Selling Stockholder also agrees
to refrain from taking any action contrary to or in any manner inconsistent
with the terms of the Stock Option and Tender Agreement, including, with
respect to the Permitted Matters only, (a) voting at any annual, special or
adjourned meeting of the stockholders of the Company, (b) executing any written
consent in lieu of a meeting of the stockholders of the Company, (c) exercising
any rights of dissent with respect to the Subject Shares and (d) granting any
proxy or authorization to any person with respect to the voting of the Subject
Shares, except pursuant to the Stock Option and Tender Agreement.
In the Stock Option and Tender Agreement, each Selling Stockholder severally,
but not jointly, makes certain representations and warranties, including those
relating to (a) its organization, valid existence and good standing (if it is a
corporation, partnership or other legal entity) and its authority to execute,
deliver and perform its obligations under the Stock Option and Tender
Agreement, (b) the enforceability of the Stock Option and Tender Agreement
against the Selling Stockholder, (c) the absence of conflict with the
organizational documents (if it is a corporation, partnership, trust or other
legal entity), applicable laws and existing obligations of such Selling
Stockholder, (d) the absence of any required consents and approvals, (e)
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title to such Subject Shares, (f) the absence of broker's, finder's or similar
fees and (g) the consideration for the proxy.
The Stock Option and Tender Agreement (including the right to exercise the
Options) will terminate upon the earliest to occur of (i) the termination of
the Merger Agreement or (ii) the Effective Time of the Merger.
EMPLOYMENT AND CONSULTING AGREEMENTS
Pursuant to executive employment agreements which the Surviving Corporation
will honor as of the Effective Time, the Surviving Corporation will establish
an incentive compensation plan for its key management employees for the three
year performance period 1996 through 1998. An amount of approximately $5.5
million will be allocated among these employees if cumulative operating company
contribution (defined as operating profit exclusive of amortization of
intangibles) of the Surviving Corporation for the performance period reaches
$300 million. No benefit will be paid if cumulative operating company
contribution for the performance period does not reach $225 million. An amount
of between $1 million and $5 million will be allocated if cumulative operating
company contribution for the performance period is between $225 million and
$300 million. The employee must remain in employment throughout the 1996-1998
performance period in order to be entitled to the payment.
The Surviving Corporation will honor employment agreements between the
Company and Messrs. McClure and Schaefer. These agreements provide for
continued employment through 1998 at a current annual salary of $350,000 for
Mr. McClure ($200,000 for Mr. Schaefer), an annual incentive compensation
program with a target bonus of 50% of salary for Mr. McClure (40% for Mr.
Schaefer) and an initial bonus for continuing in employment with the Surviving
Corporation of $200,000 for Mr. McClure ($100,000 for Mr. Schaefer). The
agreements also provide that, if the executive is terminated by the Surviving
Corporation for reasons other than disability or cause, or the executive
terminates for good reason (as defined in the agreements), the executive will
receive two years of salary and benefits and twice his target bonus or, if
greater, two times the bonus paid to such executive with respect to calendar
year 1995 (with a severance period and multiplier of three if terminated in the
first year following the Effective Time), subject to an exclusive consulting
non-compete agreement. If the executive voluntarily terminates employment for
other than good reason, the Surviving Corporation has the option to enter into
an exclusive consulting non-compete arrangement with him for up to two years
after termination of employment (unless termination occurs in the first year
after the Effective Time, in which event the period is for up to three years)
pursuant to which the executive will receive during the consulting period an
annual consulting fee of his base salary and target bonus for the year of
termination, or the amount of 1995 bonus, if greater, which will be prorated
for any part of the consulting period less than a full year.
The Surviving Corporation has agreed to enter into employment agreements with
other officers which will also provide for the continuation of current salary,
an initial bonus and participation in an annual incentive bonus program. The
agreements also provide that, if such officers are terminated by the Surviving
Corporation for reasons other than disability or cause or if such officers
terminate for good reason (as defined in the agreements), such officers will
receive salary and benefits and their target bonus, subject to their exclusive
consulting non-compete agreements. If the officers voluntarily terminate
employment, the Surviving Corporation has the option to enter into an exclusive
consulting non-compete arrangement with the officers for up to 12 months with
salary and pro rata target bonus during the period.
Mr. Biszantz has agreed through his consulting company to continue to consult
exclusively with the Surviving Corporation for a five year period for an annual
consulting fee of $550,000. The Surviving Corporation will also honor the
employment agreement with Mr. Crow under which he agrees to remain in
employment for three years at an annual salary of $350,000 but with no other
bonus or benefits except for medical and life insurance coverage. If the
employment of Mr. Crow is terminated for reasons other than disability or cause
or Mr. Crow terminates his employment for good reason (as defined in the
agreement), he
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will receive two years of salary and medical and life insurance coverage
subject to an exclusive consulting non-compete agreement. In the event Mr. Crow
terminates employment for other reasons, the Surviving Corporation has the
option to retain him as an exclusive consultant for up to three years following
termination of employment, and he will receive an annual consulting non-compete
fee ranging from $100,000 (if Mr. Crow terminates during the first year of
employment) to $300,000 (if Mr. Crow terminates during the third year of
employment). At the end of the severance period, or if Mr. Crow continues in
employment for the three year term, the Company has the option at the end of
such term to enter into an exclusive consulting non-compete arrangement with
Mr. Crow for up to three years with an annual payment of $200,000.
14. DIVIDENDS AND DISTRIBUTIONS.
Pursuant to the terms of the Merger Agreement, the Company is prohibited from
taking any of the actions described in the two succeeding paragraphs, and
nothing herein shall constitute a waiver by the Purchaser or the Parent of any
of its rights under the Merger Agreement or a limitation of remedies available
to the Purchaser or the Parent for any breach of the Merger Agreement,
including termination thereof.
If, on or after the date of the Merger Agreement, the Company (i) splits,
combines or otherwise changes the Shares or its capitalization, (ii) acquires
Shares or otherwise causes a reduction in the number of Shares, (iii) issues or
sells additional Shares (except pursuant to the exercise of options under the
Stock Option Plan that are outstanding on the date of the Merger Agreement) or
any shares of any other class of capital stock, other voting securities or any
securities convertible into or exchangeable for, or rights, warrants or
options, conditional or otherwise, to acquire, any of the foregoing or (iv)
discloses that it has taken such action, then, without prejudice to the
Purchaser's rights under Section 15, the Purchaser, in its sole discretion, may
make such adjustments in the Offer Price and other terms of the Offer and the
Merger as it deems appropriate to reflect such split, combination or other
change or action, including, without limitation, the Minimum Condition or the
number or type of securities offered to be purchased.
If on or after the date of the Merger Agreement, the Company declares or pays
any dividend on the Shares or any distribution (including, without limitation,
the issuance of additional Shares pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer into the name of the
Purchaser or its nominees or transferees on the Company's stock transfer
records of the Shares purchased pursuant to the Offer, and if Shares are
purchased in the Offer, then, without prejudice to the Purchaser's rights under
Section 15, (i) the Offer Price payable by the Purchaser pursuant to the Offer
shall be reduced by the amount of any such cash dividend or cash distribution
and (ii) any such non-cash dividend, distribution, issuance, proceeds or rights
to be received by the tendering stockholders shall (a) be received and held by
the tendering stockholders for the account of the Purchaser and will be
required to be promptly remitted and transferred by each tendering stockholder
to the Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer or (b) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance
and subject to applicable law, the Purchaser will be entitled to all rights and
privileges as owner of any such non-cash dividend, distribution, issuance,
proceeds or rights and may withhold the entire Offer Price or deduct from the
Offer Price the amount or value thereof, as determined by the Purchaser in its
sole discretion.
15. CERTAIN CONDITIONS TO THE OFFER.
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to
pay for any Shares tendered pursuant to the Offer unless, (i) the Minimum
Condition has been satisfied and (ii) all waiting periods under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have expired
or been terminated.
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Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, the Purchaser shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate the Offer if, at any time on or after
the date of the Merger Agreement and before the acceptance of such shares for
payment or the payment therefor, any of the following conditions exists (other
than as a result of any action or inaction of the Parent or any of its
subsidiaries that constitutes a breach of the Merger Agreement):
(a) there shall be threatened, instituted or pending any suit, action
or proceeding by or before any court of competent jurisdiction or other
Governmental Entity, (i) challenging the acquisition by the Parent or the
Purchaser of any Shares under the Offer or pursuant to the Stock Option
and Tender Agreement or seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by the Merger Agreement or the Stock
Option and Tender Agreement (including the voting provisions thereunder),
or seeking to obtain from the Company, the Parent or the Purchaser any
damages relating to the Offer or the Merger or any of the other
transactions contemplated by the Merger Agreement or the Stock Option and
Tender Agreement that are material in relation to the Company and its
subsidiaries, taken as a whole, (ii) seeking to prohibit or limit the
ownership or operation by the Company, the Parent or any of their
respective subsidiaries of a material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or the Parent and
its subsidiaries, taken as a whole, or to compel the Company or the
Parent to dispose of or hold separate any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole,
or the Parent and its subsidiaries, taken as a whole, as a result of the
Offer or any of the other transactions contemplated by the Merger
Agreement or the Stock Option and Tender Agreement, (iii) seeking to
impose limitations on the ability of the Parent or the Purchaser to
acquire or hold, or exercise full rights of ownership of, any shares of
Common Stock accepted for payment pursuant to the Offer or purchased
under the Stock Option and Tender Agreement including, without
limitation, the right to vote such shares of Common Stock on all matters
properly presented to the stockholders of the Company, (iv) seeking to
prohibit the Parent or any of its subsidiaries from effectively
controlling the business or operations of the Company and its
subsidiaries or (v) which otherwise is reasonably likely to have a
material adverse effect on the business, prospects, financial condition,
assets, properties or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect");
(b) there shall be any statute, law, rule, regulation, judgment, order
or injunction proposed, enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken
by any Governmental Entity or court, other than the application to the
Offer or the Merger of applicable waiting periods under the HSR Act, that
could result, directly or indirectly, in any of the consequences referred
to in clauses (i) through (v) of paragraph (a) above;
(c) (i) the Board of Directors of the Company or any committee thereof
shall (A) have withdrawn or modified its approval or recommendation of
the Offer, the Merger Agreement or the Merger in a manner adverse to the
Parent or (B) have approved or recommended any Competing Transaction, or
(ii) the Company shall have entered into a definitive agreement with
respect to a Superior Transaction in accordance with the provisions of
the Merger Agreement described under "Competing Transactions" above;
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in
each case as of the date of this Agreement and as of the expiration of
the Offer; provided, however, that all references in the Merger Agreement
to the phrases "to the knowledge of the Company" or "to the Company's
knowledge" or words to that effect shall be disregarded for purposes of
determining whether this condition exists;
39
<PAGE>
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(f) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or
in the Nasdaq over-the-counter market in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index and suspensions or limitations resulting
solely from physical damage or interference with such exchanges not
related to market conditions), (ii) a general declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States, (iii) any general limitation (whether or not mandatory) by
any Governmental Entity on, or other event that materially adversely
affects, the extension of credit by banks or other lending institutions
or (iv) in case of any of the foregoing existing on the date of the
Merger Agreement, material acceleration or worsening thereof;
(g) any change shall have occurred or been threatened (or any
development shall have occurred or been threatened involving a
prospective change) that would have a Material Adverse Effect;
(h) the Merger Agreement shall have been terminated in accordance with
its terms;
(i) the Company shall not have entered into employment agreements with
the executives listed in Exhibit A to the Merger Agreement that are
contemplated by Section 6.1(q) thereof;
(j) the Parent and the Purchaser shall not have received the estoppel
certificates contemplated by Section 6.1(r) of the Merger Agreement.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser and may be asserted by the Parent and the Purchaser regardless of
the circumstances (other than as a result of any action or inaction of the
Parent or the Purchaser or any of their subsidiaries which constitutes a
breach of the Merger Agreement) giving rise to such condition or may be waived
by the Parent and the Purchaser in whole or in part at any time and from time
to time in their sole discretion. The failure by the Parent or the Purchaser
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right, the waiver of any such right with respect to
particular facts and circumstances shall not be deemed to be a waiver with
respect to any other facts and circumstances and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time. Any reasonable determination by the Parent or the Purchaser concerning
the events described above shall be final and binding upon all parties.
16. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.
Except as set forth in this Offer to Purchase, based on its review of
publicly available filings by the Company with the Commission and other
publicly available information regarding the Company, neither the Parent nor
the Purchaser is aware of any licenses or regulatory permits that appear to be
material to the business of the Company and its subsidiaries, taken as a
whole, and that might be adversely affected by the Purchaser's acquisition of
Shares (and the indirect acquisition of the stock of the Company's
subsidiaries) as contemplated herein, or any filings, approvals or other
actions by or with any Governmental Entity that would be required for the
acquisition or ownership of the Shares (or the indirect acquisition of the
stock of the Company's subsidiaries) by the Purchaser pursuant to the Offer as
contemplated herein. Should any such approval or other action be required, it
is presently contemplated that such approval or action would be sought except
as described below under "State Takeover Laws." Should any such approval or
other action be required, there can be no
40
<PAGE>
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result
to the Company's or its subsidiaries' businesses, or that certain parts of the
Company's and its subsidiaries' businesses might not have to be disposed of or
held separate or other substantial conditions complied with in order to obtain
such approval or action or in the event that such approvals were not obtained
or such actions were not taken. The Purchaser's obligation to purchase and pay
for Shares is subject to certain conditions, including conditions with respect
to litigation and governmental actions. See the Introduction and Section 15
for a description thereof.
State Takeover Laws. A number of states (including Delaware, where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire
securities of corporations which are incorporated in such states or which have
substantial assets, stockholders, principal executive offices or principal
places of business therein. To the extent that certain provisions of certain
of these state takeover statutes purport to apply to the Offer or the Merger,
the Purchaser believes that such laws conflict with federal law and constitute
an unconstitutional burden on interstate commerce. In 1982, the Supreme Court
of the United States, in Edgar v. MITE Corp., held that the Illinois Business
Takeovers Statute, which as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court
of the United States held that the State of Indiana could, as a matter of
corporate law and, in particular, those aspects of corporate law concerning
corporate governance, constitutionally disqualify a potential acquiror from
voting on the affairs of a target corporation without the prior approval of
the remaining stockholders, provided that such laws were applicable only under
certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a
Federal district court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal district
court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. For a description of the Delaware Business Combination Law, contained
in Section 203 of the DGCL, see Section 12.
The Purchaser has not attempted to comply with any state takeover statutes
in connection with the Offer or the Merger. The Purchaser reserves the right
to challenge the validity or applicability of any state law allegedly
applicable to the Offer or the Merger and nothing in this Offer to Purchase
nor any action taken in connection herewith is intended as a waiver of that
right. In the event that it is asserted that one or more takeover statutes
apply to the Offer or the Merger, and it is not determined by an appropriate
court that such statute or statutes do not apply or are invalid as applied to
the Offer or the Merger, as applicable, the Purchaser may be required to file
certain documents with, or receive approvals from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or pay
for Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for payment, or pay for, any Shares tendered. See Section 15.
Antitrust. Under the HSR Act, and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division
of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer and the Merger is subject to such requirements.
Under the provisions of the HSR Act applicable to the Offer and the Merger,
the purchase of Shares pursuant to the Offer and the Merger may not be
consummated until the expiration of a 15-calendar-day waiting period following
the filing of certain required information and documentary material with
respect to the Offer with the FTC and the Antitrust Division, unless such
waiting period is earlier terminated by the
41
<PAGE>
FTC and the Antitrust Division. The Purchaser has filed, and the Company
expects to file promptly, the Premerger Notification and Report Form with the
Antitrust Division and the FTC in connection with the purchase of Shares
pursuant to the Offer and the Merger under the HSR Act, and the required
waiting period with respect to the Offer and the Merger will expire at 11:59
p.m., New York City time, on January 4, 1996, unless earlier terminated by the
Antitrust Division and the FTC or the Purchaser or the Company receive a
request for additional information or documentary material prior thereto. If,
within such 15-calendar-day waiting period, either the FTC or the Antitrust
Division were to request additional information or documentary material from
the Purchaser or the Company, the waiting period with respect to the Offer and
the Merger would be extended for an additional period of ten calendar days
following the date of substantial compliance with such request by the Purchaser
and the Company. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the rules promulgated under the HSR
Act. Thereafter, the waiting period could be extended only by court order or
with the consent of the Purchaser. The additional 10-calendar-day waiting
period may be terminated sooner by the FTC or the Antitrust Division. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the Antitrust Division or
the FTC raises substantive issues in connection with a proposed transaction,
the parties frequently engage in negotiations with the relevant governmental
agency concerning possible means of addressing those issues and may agree to
delay consummation of the transaction while such negotiations continue.
Although the Company is required to file certain information and documentary
material with the Antitrust Division and the FTC in connection with the Offer
and the Merger, neither the Company's failure to make such filings nor a
request made to the Company from the Antitrust Division or the FTC for
additional information or documentary material will extend the Offer period
with respect to the purchase of Shares pursuant to the Offer and the Merger.
The Merger would not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated. No separate HSR Act
requirements with respect to the Merger, the Merger Agreement or the Stock
Option and Tender Agreement will apply if the 15-calendar-day waiting period
relating to the Offer (as described above) has expired or been terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Merger. At any time before or after the
Purchaser's purchase of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer and the Merger, the divestiture of Shares purchased
pursuant to the Offer or the divestiture of substantial assets of the Parent,
the Purchaser, the Company or any of their respective subsidiaries or
affiliates. Private parties as well as state attorneys general may also bring
legal actions under the antitrust laws under certain circumstances. See Section
15.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer and the Merger should not violate
the applicable antitrust laws. Nevertheless, there can be no assurance that a
challenge to the Offer and the Merger on antitrust grounds will not be made,
or, if such challenge is made, what the result will be. See Section 15.
Other Foreign Approvals. According to publicly available information, the
Company also owns property and conducts business in a number of other foreign
countries and jurisdictions. In connection with the acquisition of the Shares
pursuant to the Offer or the Merger, the laws of certain of those foreign
countries and jurisdictions may require the filing of information with, or the
obtaining of the approval of, governmental authorities in such countries and
jurisdictions. The governments in such countries and jurisdictions might
attempt to impose additional conditions on the Company's operations conducted
in such countries and jurisdictions as a result of the acquisition of the
Shares pursuant to the Offer or the Merger. There can be no assurance that the
Purchaser will be able to cause the Company or its subsidiaries to satisfy or
comply with
42
<PAGE>
such laws or that compliance or noncompliance will not have adverse
consequences for the Company or any subsidiary after purchase of the Shares
pursuant to the Offer or the Merger.
17. CERTAIN FEES AND EXPENSES.
Morgan Stanley & Co. Incorporated is acting as Dealer Manager in connection
with the Offer and as financial advisor to the Parent and the Purchaser in
connection with the proposed acquisition of the Company. The Dealer Manager
will receive from the Parent reasonable and customary compensation for all such
services. In addition, the Parent has agreed to reimburse the Dealer Manager
for its reasonable expenses, including reasonable fees and disbursements of its
counsel, incurred in rendering its services under its engagement agreement with
the Parent and has agreed to indemnify the Dealer Manager against certain
liabilities and expenses in connection with the Offer and the Merger, including
certain liabilities under the federal securities laws. The Dealer Manager from
time to time renders various investment banking and financing services to the
Parent and its affiliates and the Company for which it is paid customary fees.
In the ordinary course of its business, Morgan Stanley may from time to time
effect transactions and hold positions in the securities of the Parent and the
Company.
Kissel-Blake Inc. has been retained by the Parent and the Purchaser as
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward material relating to the Offer and the Merger to beneficial owners of
Shares. The Purchaser will pay the Information Agent reasonable and customary
compensation for all such services in addition to reimbursing the Information
Agent for reasonable out-of-pocket expenses in connection therewith. The Parent
and the Purchaser have agreed to indemnify the Information Agent against
certain liabilities and expenses in connection with the Offer and the Merger,
including certain liabilities under the federal securities laws.
In addition, First Chicago Trust Company of New York has been retained as the
Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer and the Merger, will
reimburse the Depositary for its reasonable out-of-pocket expenses in
connection therewith and will indemnify the Depositary against certain
liabilities and expenses in connection therewith, including certain liabilities
under the federal securities laws.
Except as set forth above, neither the Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person (other than the
Information Agent and the Dealer Manager) for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by the Parent or the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
18. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, the Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers that are licensed under the laws of such jurisdiction.
The Parent and the Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. In addition, the
Company will file with the Commission a Schedule 14D-9 together with exhibits,
pursuant to Rule 14d-9 under the
43
<PAGE>
Exchange Act, setting forth its recommendation with respect to the Offer and
the reasons for such recommendation and furnishing certain additional related
information. Such Schedule 14D-1, Schedule 14D-9 and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the office
of the Commission in the same manner as described under "Available Information"
in Section 8 with respect to information concerning the Company, except that
they will not be available at the regional offices of the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PARENT OR THE PURCHASER NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Neither the delivery of the Offer to Purchase nor any purchase pursuant to
the Offer shall, under any circumstances, create any implication that there has
been no change in the affairs of the Parent, the Purchaser, the Company or any
of their respective subsidiaries since the date as of which information is
furnished or the date of this Offer to Purchase.
HCAC, INC.
December 22, 1995
44
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
THE PARENT AND THE PURCHASER
THE PARENT
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
the Parent. The business address of each such person is American Brands, Inc.,
1700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811, and each such
person is a United States citizen. In addition, except as otherwise noted, each
director and executive officer of the Parent has been employed in his or her
present principal occupation listed below during the last five years. Directors
of the Parent are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupation and Material Occupations, Positions,
Name and Business Address Offices or Employments for the Past Five Years
- ------------------------- ---------------------------------------------------------
<S> <C>
William J. Alley* Retired since 1994; Chairman of the Board and Chief
Executive Officer of the Parent prior thereto
Eugene R. Anderson* Partner, Anderson Kill Olick & Oshinsky, P.C. (law firm)
Patricia O. Ewers* President, Pace University, since 1990; Vice President,
Dean of Faculties, DePaul University prior thereto
Thomas C. Hays* Chairman of the Board and Chief Executive Officer of the
Parent since January 1995; President and Chief Operating
Officer of the Parent prior thereto
John W. Johnstone, Jr.* Chairman and Chief Executive Officer of Olin Corporation
(chemical, metal and defense-related products) since
1994; Chairman, President and Chief Executive Officer of
Olin Corporation prior thereto
Wendell J. Kelley* Retired since 1991; Chairman and Chief Executive Officer
of Illinois Power Company prior thereto
Sidney Kirschner* President and Chief Executive Officer of Northside
Hospital, Inc. since 1992; Chairman of the Board,
President and Chief Executive Officer of National Service
Industries, Inc. (lighting equipment, textile rentals and
specialty chemicals) from 1991 to 1992; President and
Chief Executive Officer of National Service Industries,
Inc. prior thereto
Gordon R. Lohman* President and Chief Executive Officer of AMSTED
Industries Incorporated (products for the railroad,
construction and building markets) since 1990; President
and Chief Operating Officer of AMSTED Industries
Incorporated prior thereto
John T. Ludes* President and Chief Operating Officer of the Parent since
January 1995; Group Vice President of the Parent from
1988 to 1994; President and Chief Executive Officer of
Acushnet Company prior thereto
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C>
Charles H. Pistor* Vice Chair of Southern Methodist University since 1991;
Chairman and Chief Executive Officer of NorthPark
National Bank prior thereto
Peter M. Wilson* Chairman and Chief Executive Officer of Gallaher Limited
(tobacco products and distilled spirits), a subsidiary of
the Parent, since February 1994; Deputy Chairman of
Gallaher Limited from 1989 to 1994; Chairman and Chief
Executive Officer of Gallaher Tobacco Limited (tobacco
products), a subsidiary of Gallaher Limited, since 1987;
Mr. Wilson is a citizen of the United Kingdom
Robert L. Plancher Senior Vice President and Chief Accounting Officer of the
Parent
Robert J. Rukeyser Senior Vice President -- Corporate Affairs of the Parent
Gilbert L. Klemann, II Senior Vice President and General Counsel of the Parent
since 1991; Vice President and Associate General Counsel
of the Parent during 1991; Partner, Chadbourne & Parke
(law firm) prior thereto
Dudley L. Bauerlein, Jr. Senior Vice President and Chief Financial Officer of the
Parent since January 1995; Vice President and Treasurer
of the Parent prior thereto
Steven C. Mendenhall Senior Vice President and Chief Administrative Officer of
the Parent since January 1995; Vice President and Chief
Administrative Officer of the Parent from 1993 through
1994; Vice President -- Human Resources of the Parent
prior thereto
Randall W. Larrimore Vice President -- Hardware and Home Improvement Products
of the Parent; President and Chief Executive Officer of
MasterBrand Industries, Inc. (hardware and home
improvement products), a subsidiary of the Parent
Barry M. Berish Vice President -- Distilled Spirits of the Parent since
1990; Chairman of the Board and Chief Executive Officer
of Jim Beam Brands Co. (distilled spirits), a subsidiary
of the Parent, since 1993; President and Chief Executive
Officer of Jim Beam Brands Co. prior thereto
Norman H. Wesley Vice President -- Office Products of the Parent since
1990; President and Chief Executive Officer of ACCO World
Corporation (office products, supplies and accessories),
a subsidiary of the Parent, since 1990; President and
Chief Operating Officer of ACCO World Corporation prior
thereto
Charles H. McGill Vice President -- Corporate Development of the Parent
since February 1995; Corporate Vice President --
Acquisitions of The Dun and Bradstreet Corporation prior
thereto
</TABLE>
S-2
<PAGE>
THE PURCHASER
Set forth below are the name, business address and present position with the
Purchaser, principal occupation or employment, and material occupations,
positions, offices or employments for the past five years of each director and
executive officer of the Purchaser. The business address of each such person is
c/o American Brands, Inc., 1700 East Putnam Avenue, Old Greenwich, Connecticut
06870-0811, and each such person is a United States citizen. Except as
otherwise noted, each executive officer of the Purchaser has been employed in
his present principal occupation listed below during the last five years.
Directors of the Purchaser are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupation and Material Occupations, Positions,
Name and Business Address Offices or Employments for the Past Five Years
- ------------------------- ---------------------------------------------------------
<S> <C>
John T. Ludes* President of the Purchaser; President and Chief Operating
Officer of the Parent since January 1995; Group Vice
President of the Parent from 1988 to 1994; President and
Chief Executive Officer of Acushnet Company prior thereto
Robert L. Plancher* Vice President of the Purchaser; Senior Vice President
and Chief Accounting Officer of the Parent
Dudley L. Bauerlein, Jr.* Vice President of the Purchaser; Senior Vice President
and Chief Financial Officer of the Parent since January
1995; Vice President and Treasurer of the Parent prior
thereto
Steven C. Mendenhall* Senior Vice President and Chief Administrative Officer of
the Parent since January 1995; Vice President and Chief
Administrative Officer of the Parent from 1993 through
1994; Vice President -- Human Resources of the Parent
prior thereto
Charles H. McGill Vice President of the Purchaser; Vice President --
Corporate Development of the Parent since February 1995;
Corporate Vice President -- Acquisitions of The Dun and
Bradstreet Corporation prior thereto
</TABLE>
S-3
<PAGE>
SCHEDULE II
PARENT'S DESIGNEES TO THE
BOARD OF DIRECTORS OF THE COMPANY
Set forth below are the name, business address, age and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each of the designees of the Parent to
the Board of Directors of the Company. Except as otherwise noted, the business
address of each such person is American Brands, Inc., 1700 East Putnam Avenue,
Old Greenwich, Connecticut 06870-0811. In addition, except as otherwise noted,
each person listed below has been employed in his or her present principal
occupation listed below during the last five years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND MATERIAL
OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND BUSINESS ADDRESS AGE EMPLOYMENTS FOR THE PAST FIVE YEARS
- ------------------------- --- -------------------------------------------
<S> <C> <C>
Walter R. Uihlein 46 President and Chief Executive Officer of
Acushnet Company Acushnet Company and Chairman and Chief
333 Bridge Street Executive Officer--Titleist and Foot-Joy
P.O. Box 965 Worldwide since January 1995; Senior Vice
Fairhaven, Massachusetts 02719 President of Acushnet Company and President
and Chief Executive Officer--Titleist and
Foot-Joy Worldwide from 1992 to 1994; Vice
President of Acushnet Company and President
and Chief Executive Officer--Titleist and
Foot-Joy Worldwide from 1991 to 1992; Vice
President of Acushnet Company and President
and Chief Executive Officer--Titleist
Division prior thereto
Robert S. Dubiel 55 Executive Vice President and Chief
Acushnet Company Operating Officer of Acushnet Company and
333 Bridge Street President and Chief Operating Officer--
P.O. Box 965 Titleist and Foot-Joy Worldwide since
Fairhaven, Massachusetts 02719 January 1995; Vice President of Acushnet
Company and Executive Vice President--Sales
and Marketing--Titleist and Foot-Joy
Worldwide from 1992 to 1994; Vice President
of Acushnet Company and President and Chief
Executive Officer--Rubber Division prior
thereto
Dale M. Shenk 52 Vice President--Finance and Controller of
Acushnet Company Acushnet Company and Senior Vice
333 Bridge Street President--Finance--Titleist and Foot-Joy
P.O. Box 965 Worldwide since 1993; Vice President--
Fairhaven, Massachusetts 02719 Finance and Controller of Acushnet Company
and Senior Vice President--Finance and
Controller--Titleist and Foot-Joy Worldwide
from June to August 1993; Vice President
and Controller of Acushnet Company and
Senior Vice President--Titleist and Foot-
Joy Worldwide from 1991 to 1993; Vice
President and Controller of Acushnet
Company prior thereto
John T. Ludes 59 President and Chief Operating Officer of
the Parent since January 1995; Group Vice
President of the Parent from 1988 to 1994;
President and Chief Executive Officer of
Acushnet Company prior thereto
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND MATERIAL
OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND BUSINESS ADDRESS AGE EMPLOYMENTS FOR THE PAST FIVE YEARS
- ------------------------- --- -------------------------------------------
<S> <C> <C>
Dudley L. Bauerlein, Jr. 49 Senior Vice President and Chief Financial
Officer of the Parent since January 1995;
Vice President and Treasurer of the Parent
prior thereto
Robert L. Plancher 63 Senior Vice President and Chief Accounting
Officer of the Parent
Robert J. Rukeyser 53 Senior Vice President--Corporate Affairs of
the Parent
</TABLE>
S-5
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary at one of its addresses set forth
below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Hand or Overnight
Transmission Delivery:
Tenders & Exchanges (201) 222-4720 Tenders & Exchanges
P.O. Box 2559 or 14 Wall Street
Suite 4660-COB (201) 222-4721
8th Floor
Jersey City, New Jersey Confirm Facsimile Suite 4680-COB
07303-2559 by Telephone: New York, New York
10005
(201) 222-4707
Questions and requests for assistance and additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth below. You may also contact your
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
KISSEL BLAKE INC.
110 Wall Street
New York, NY 10005
Call Toll-Free (800) 554-7733
Banks and Brokers Call (212) 344-6733
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1585 Broadway
New York, New York 10036
(212) 761-4699
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
Cobra Golf Incorporated
Pursuant to the Offer to Purchase
dated December 22, 1995
by
HCAC, Inc.
a wholly-owned subsidiary of
American Brands, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JANUARY 23, 1996, UNLESS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Hand or Overnight
Tenders & Exchanges Transmission: Delivery:
P.O. Box 2559 (201) 222-4720 Tenders & Exchanges
Suite 4660-COB or 14 Wall Street
Jersey City, New (201) 222-4721 8th Floor
Jersey Confirm Facsimile by Suite 4680-COB
07303-2559 Telephone: New York, New York
(201) 222-4707 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders if certificates
for Shares (as defined in the Offer to Purchase, dated December 22, 1995 (the
"Offer to Purchase")) are to be forwarded herewith or, unless an Agent's
Message (as defined in the Offer to Purchase) is utilized, if tenders of Shares
are to be made by book-entry transfer to an account maintained by First Chicago
Trust Company of New York (the "Depositary") at The Depository Trust Company
("DTC"), the Midwest Securities Trust Company ("MSTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively referred to as the "Book-Entry Transfer Facilities"), pursuant to
the procedures set forth in Section 2 of the Offer to Purchase. Stockholders
who tender Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date (as defined in the Offer to Purchase) or who cannot
complete the procedures for book-entry transfer on a timely basis, must tender
their Shares according to the guaranteed delivery procedures set forth in
Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER. PLEASE
READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Box of Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company
Account Number:
Transaction Code Number:
[_] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED
DELIVERY.
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS AND SHARE(S) TENDERED
NAME(S) APPEAR(S) ON SHARE CERTIFICATE(S) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHARE TOTAL NUMBER OF NUMBER
CERTIFICATE SHARES REPRESENTED OF SHARES
NUMBER(S)* BY SHARE CERTIFICATE(S)* TENDERED**
------------------ ------------------------ -------------------
------------------ ------------------------ -------------------
------------------ ------------------------ -------------------
------------------ ------------------------ -------------------
------------------ ------------------------ -------------------
------------------ ------------------------ -------------------
TOTAL SHARES
------------------ ------------------------ -------------------
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by book-entry stockholders.
** Unless otherwise indicated, it will be assumed that all Shares
represented by certificates delivered to the depositary are being
tendered. See Instruction 4.
- -------------------------------------------------------------------------------
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to HCAC, Inc. (the "Purchaser"), a Delaware
corporation and a wholly-owned subsidiary of American Brands, Inc., a Delaware
corporation (the "Parent"), the above described shares of Common Stock, par
value $.001 per share (the "Shares"), of Cobra Golf Incorporated, a Delaware
corporation (the "Company"), pursuant to the Purchaser's offer to purchase all
outstanding Shares at a price of $36.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated December 22, 1995 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended from time to time, together with the Offer to
Purchase, constitute the "Offer"). The undersigned understands that the
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its subsidiaries or affiliates the right to
purchase all or any portion of the Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for the
Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the undersigned hereby
sells, assigns, and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all dividends on the Shares or any distribution (including,
without limitation, the issuance of additional Shares pursuant to a stock
dividend or stock split, the issuance of other securities or the issuance of
rights for the purchase of any securities) with respect to the Shares that is
declared or paid by the Company on or after December 18, 1995 and is payable or
distributable to stockholders of record on a date prior to the transfer into
the name of the Purchaser or its nominees or transferees on the Company's stock
transfer records of the Shares purchased pursuant to the Offer (a
"Distribution"), and constitutes and irrevocably appoints the Depositary the
true and lawful agent, attorney-in-fact and proxy of the undersigned to the
full extent of the undersigned's rights with respect to such Shares (and any
Distributions) with full power of substitution (such power of attorney and
proxy being deemed to be an irrevocable power coupled with an interest), to (a)
deliver Share Certificates (and any Distributions), or transfer ownership of
such Shares on the account books maintained by the Book-Entry Transfer
Facilities, together in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of the Purchaser upon receipt
by the Depositary, as the undersigned's agent, of the purchase price, (b)
present such Shares (and any Distributions) for transfer on the books of the
Company and (c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares (and any Distributions), all in accordance
with the terms of the Offer.
Subject to and on the terms and conditions set forth in this paragraph, the
undersigned hereby irrevocably appoints Gilbert L. Klemann, II, Esq. and Edward
P. Smith, Esq., and each of them, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper, and otherwise act (including pursuant to written consent) with
respect to all of the Shares tendered hereby which have been accepted for
payment by the Purchaser prior to the time of such vote or action (and any
Distributions) which the undersigned is entitled to vote at any meeting of
stockholders of the Company (whether annual or special and whether or not an
adjourned meeting), including, by way of illustration and not limitation, any
meeting at which the Merger (as defined in the Offer) is submitted for approval
by stockholders of the Company or by written consent in lieu of such meeting,
or otherwise. This power of attorney and proxy is coupled with an interest in
the Company and in the Shares and is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Purchaser in accordance with the terms of the Offer. Such
acceptance for payment shall revoke, without further action, any other power of
attorney or proxy granted by the undersigned at any time with respect to such
Shares (and any Distributions) and no subsequent powers of attorney or proxies
will be given (and if given will be deemed not to be effective) with respect
thereto by the undersigned. The undersigned understands that the Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser is able to exercise full voting rights with respect to
such Shares and other securities, including voting at any meeting of
stockholders.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that when the same are accepted for payment
by the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title thereto and all voting entitlements of such Shares, free and clear of all
liens, restrictions, charges, irrevocable proxies (except as granted herein)
and
3
<PAGE>
encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
any Distributions). In addition, the undersigned shall promptly remit and
transfer to the Depositary for the account of the Purchaser any and all other
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer and, pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of any such Distributions, and may withhold the entire
purchase price or deduct from the purchase price of Shares tendered hereby the
amount or value thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or herein agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned. Tenders of Shares pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment
pursuant to the Offer, may also be withdrawn at any time after February 19,
1996. See Section 3 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any one of the
procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's binding acceptance of the
terms and conditions of the Offer. Purchaser's acceptance of such Shares for
payment shall constitute a binding agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions", please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please
issue the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Unless
otherwise indicated herein in the box "Special Payment Instructions", please
credit any shares tendered hereby and delivered by book-entry transfer, but
which are not purchased, by crediting the account at the Book-Entry Transfer
Facility designated above. The undersigned recognizes that the Purchaser has no
obligation pursuant to the "Special Payment Instructions" to transfer any
Shares from the name of the registered holder thereof if the Purchaser does not
accept for payment any of such Shares.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Share To be completed ONLY if Share
Certificates not tendered or not Certificates not tendered or not
purchased and/or the check for purchased and/or the check for
the purchase price of Shares pur- the purchase price of Shares pur-
chased are to be issued in the chased are to be sent to someone
name of someone other than the other than the undersigned, or to
undersigned. the undersigned at an address
other than that shown on the
front cover.
Issue check and/or certificates
to:
Mail check and/or certificates
Name: ____________________________ to:
(PLEASE PRINT) Name: ____________________________
Address: _________________________ (PLEASE PRINT)
__________________________________ Address: _________________________
(INCLUDE ZIP CODE) __________________________________
__________________________________ (INCLUDE ZIP CODE)
(TAXPAYER IDENTIFICATION OR __________________________________
SOCIAL SECURITY NUMBER) (TAXPAYER IDENTIFICATION OR
(SEE SUBSTITUTE FORM W-9 ON BACK SOCIAL SECURITY NUMBER)
COVER) (SEE SUBSTITUTE FORM W-9 ON BACK
COVER)
5
<PAGE>
IMPORTANT--SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
...........................................................................
...........................................................................
(SIGNATURE(S) OF OWNER(S))
Dated: ....................................................................
(Must be signed by the registered holder(s) exactly
as name(s) appear(s) on the Share Certificate(s) or
on a security position listing or by person(s)
authorized to become registered holder(s) by
certificates and documents transmitted herewith. If
signature is by trustees, executors,
administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a
fiduciary or representative capacity, please
provide the necessary information. See Instruction
5.)
Name(s):...................................................................
......................................................................
(PLEASE PRINT)
Capacity (full title):.....................................................
Address:...................................................................
......................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number:............................................
Tax Identification or
Social Security No.: ......................................................
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: .....................................................
Name (Please print): ......................................................
Name of Firm: .............................................................
Address: ..................................................................
...........................................................................
...........................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ...........................................
Dated: ....................................................................
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder(s) has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the inside front cover hereof or (ii) if such Shares are tendered for the
account of a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the
Securities Transfer Association's Medallion Signature Guarantee Program (an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth in Section 2 of the Offer to Purchase. Share
Certificates, or timely confirmation (a "Book-Entry Confirmation") of a book-
entry transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility, as well as this Letter of Transmittal (or a facsimile
hereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in the case of a book-entry delivery, and any
other documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth herein prior to the Expiration
Date. Stockholders whose Share Certificates are not immediately available or
who cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the Expiration Date or who cannot complete the
procedures for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth in Section 2
of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made
available by the Purchaser, must be received by the Depositary on or prior to
the Expiration Date; and (iii) the Share Certificates (or a Book-Entry
Confirmation) representing all tendered Shares, in proper form for transfer
together with a properly completed and duly executed Letter of Transmittal (or
a facsimile hereof), with any required signature guarantees (or, in the case of
a book-entry delivery, an Agent's Message) and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three New
York Stock Exchange ("NYSE") trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to
Purchase. If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
hereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal or facsimile hereof, waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in
the box entitled "Number of Shares Tendered". In such case, new certificate(s)
for the remainder of the Shares that were
7
<PAGE>
evidenced by your old certificate(s) will be sent to you, unless otherwise
provided in the appropriate box marked "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal, as soon as
practicable after the Expiration Date. All Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTERS OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or purchased are to be issued in the name
of a person other than the registered owner(s), in which case, the certificates
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered owner(s) appear(s) on such certificates. Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered
owner(s) of the Shares listed, the certificates must be endorsed or accompanied
by appropriate stock powers, in either case signed exactly as the name or names
of the registered owner(s) appear(s) on the certificates. Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder(s), or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder(s) or such person) payable on account
of the transfer to such person will be deducted from the purchase price
received by such holder(s) pursuant to the Offer (i.e., such purchase price
will be reduced) unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If (i) a check is to be issued
in the name of and/or (ii) certificates for unpurchased Shares are to be
returned to a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such certificates are to be returned to someone
other than the signer of this Letter of Transmittal or to an address other than
that shown on the front cover hereof, the appropriate boxes on this Letter of
Transmittal should be completed. See Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to the Information Agent at its addresses set forth below. Requests
for additional copies of the Offer to Purchase and this Letter of Transmittal
may be directed to the Information Agent or to brokers, dealers, commercial
banks or trust companies.
8
<PAGE>
9. 31% BACKUP WITHHOLDING, SUBSTITUTE FORM W-9. Under U.S. Federal income tax
law, a stockholder whose tendered Shares are accepted for payment is required
to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary
is not provided with the correct TIN, the Internal Revenue Service may subject
the stockholder or other payee to a $50 penalty. In addition, payments that are
made to such stockholder or other payee with respect to Shares purchased
pursuant to the Offer may be subject to 31% backup withholding. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
Certain stockholders that are exempt recipients (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. To prevent possible erroneous backup
withholding, such exempt recipient must enter its correct TIN in Part 1 in the
Substitute W-9, write "Exempt" in Part 2 of such Form, and sign and date the
form. In order for a foreign individual to qualify as an exempt recipient, the
stockholder must submit a Form W-8, "Certificate of Foreign Status", signed
under penalties of perjury, attesting to that individual's exempt status. A
Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
To prevent backup withholding on payments that are made to a stockholder with
respect to Shares purchased pursuant to the Offer, the stockholder is required
to notify the Depositary of such stockholder's correct TIN by completing the
Substitute Form W-9 certifying (i) that the TIN provided on Substitute Form W-9
is correct (or that such stockholder is awaiting a TIN) and (ii) that (a) such
stockholder has not been notified by the Internal Revenue Service that such
stockholder is subject to backup withholding as a result of a failure to report
all interest or dividends or (b) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
The box in Part 3 of the Substitute Form W-9 should be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, if the stockholder or
other payee does not provide a properly certified TIN to the Depositary within
60 days, the Depositary will withhold 31% of all payments made prior to the
time a properly certified TIN is provided.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost or destroyed certificates have been followed.
11. WAIVER OR CONDITIONS. Subject to the terms of the Offer, the Purchaser
reserves the absolute right in its sole discretion to waive any of the
specified conditions to the Offer, in whole or in part, in the case of any
Shares tendered.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF) OR AN
AGENT'S MESSAGE TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY ON
OR PRIOR TO THE EXPIRATION DATE.
9
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
PART 1--PLEASE PROVIDE YOUR Social security number
TIN IN THE BOX AT RIGHT AND or Employer
CERTIFY BY SIGNING AND identification number
DATING BELOW.
---------------------
SUBSTITUTE
FORM W-9 PART 2--CERTIFICATIONS--Under penalties of perjury, I
certify that:
DEPARTMENT OF
THE TREASURY --------------------------------------------------------
INTERNAL (1) The number shown on this form is my correct
REVENUE SERVICE Taxpayer Identification Number (or I am waiting
for a number to be issued to me and have checked
the box in Part 3) and
(2) I am not subject to backup withholding because:
(a) I am exempt from backup withholding, or (b) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION CERTIFICATION INSTRUCTIONS--You must PART 3--
NUMBER ("TIN") cross out item (2) above if you have
been notified by the IRS that you are Awaiting
currently subject to backup withhold- TIN [_]
ing because of underreporting inter-
est or dividends on your tax return.
However, if after being notified by
the IRS that you were subject to
backup withholding you received an-
other notification from the IRS that
you are no longer subject to backup
withholding, do not cross out such
item (2).
SIGNATURE ______________ DATE _______
- ------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a Taxpayer
Identification Number within sixty (60) days.
Signature: ___________________________________________ Date: _________________
10
<PAGE>
FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY
EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES
AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH
STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH
BELOW:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Hand or Overnight
Tenders & Exchanges Transmission: Delivery:
P.O. Box 2559 (201) 222-4720 Tenders & Exchanges
Suite 4660-COB or 14 Wall Street
Jersey City, New (201) 222-4721 8th Floor
Jersey Confirm Facsimile by Suite 4680-COB
07303-2559 Telephone: New York, New York
(201) 222-4707 10005
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
"KISSEL BLAKE INC."
110 Wall Street
New York, New York 10005
(212) 344-6733 (Collect)
(800) 554-7733 (Toll Free)
BANKS AND BROKERS CALL
(212) 344-6733
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
Incorporated
1585 Broadway
New York, New York 10036
(212) 761-4699
11
<PAGE>
EXHIBIT 99(a)(3)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated December 22, 1995 and the related Letter of
Transmittal, and is being made to all holders of Shares. Purchaser (as defined
below) is not aware of any state where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good
faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of Purchaser by Morgan Stanley & Co.
Incorporated or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
COBRA GOLF INCORPORATED
AT
$36.00 NET PER SHARE
BY
HCAC, INC.
A WHOLLY-OWNED SUBSIDIARY OF
AMERICAN BRANDS, INC.
HCAC, Inc., a Delaware corporation ("Purchaser") and a wholly-owned
subsidiary of American Brands, Inc., a Delaware corporation ("Parent"), is
offering to purchase all outstanding shares of Common Stock, par value $.001 per
share (the "Shares"), of Cobra Golf Incorporated, a Delaware corporation (the
"Company"), at a price of $36.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated December 22, 1995 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer").
Following the Offer, Purchaser intends to effect the Merger described below.
<PAGE>
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JANUARY 23, 1996, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF
SHARES WHICH WOULD CONSTITUTE A MAJORITY OF (1) THE OUTSTANDING SHARES
(DETERMINED ON A FULLY DILUTED BASIS) AND (2) THE OUTSTANDING SHARES
(DETERMINED ON A FULLY DILUTED BASIS) NOT OWNED BENEFICIALLY OR OF RECORD BY THE
COMPANY'S DIRECTORS OR OFFICERS AND (ii) THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE ANTITRUST WAITING PERIODS.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 18, 1995 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law"), Purchaser will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will be
a wholly-owned subsidiary of Parent. At the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares owned by
the Company as treasury stock, Shares owned by Purchaser, Parent or any
subsidiary of Parent, or Shares with respect to which appraisal rights are
properly exercised under Delaware Law) will be converted into and represent the
right to receive $36.00 (or any higher price that may be paid per Share pursuant
to the Offer) in cash without interest thereon.
THE BOARD OF DIRECTORS OF THE COMPANY HAS BY A UNANIMOUS VOTE OF THOSE
MEMBERS PRESENT APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT,
DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT, AND THE OFFER AND THE MERGER
CONTEMPLATED THEREBY, ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
Simultaneously with the execution and delivery of the Merger
Agreement, certain stockholders, all of whom are Company directors or affiliates
thereof (collectively, the "Selling Stockholders"), have entered into a Stock
Option and Tender Agreement, dated as of December 18, 1995 (the "Stock Option
and Tender Agreement"), pursuant to which the Selling Stockholders have given
the Parent options to purchase, upon the terms and subject to the conditions set
forth in the Stock Option and Tender Agreement, any and all Shares (i)
beneficially owned by them as of December 18, 1995, representing in the
aggregate approximately 26% of the outstanding Shares, and (ii) thereafter
acquired by such Selling Stockholders (collectively, the "Subject Shares") at a
purchase price of $36.00 per Share subject to adjustment if the Offer Price is
increased. The Stock Option and Tender Agreement further provides, among other
things, that each Selling Stockholder will tender all of its Shares in the
Offer, not withdraw them, except that the Selling Stockholders will be required
to withdraw such Shares under certain circumstances and, if such Shares are
withdrawn to retender such Shares if requested by the
2
<PAGE>
Parent. If any Shares are purchased in the Offer, the Subject Shares will be
purchased either in the Offer or pursuant to the exercise of the options.
Pursuant to the Stock Option and Tender Agreement, the Selling Stockholders have
also granted the Parent, or any nominee of the Parent, irrevocable proxies with
respect to their Subject Shares to vote such Shares on certain matters at any
annual, special or adjourned meeting of stockholders of the Company or to
execute a written consent with respect to such matters on their behalf in lieu
of a meeting.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to First
Chicago Trust Company of New York (the "Depositary") of Purchaser's acceptance
of such Shares for payment pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares purchased pursuant to the Offer
will be made by deposit of the purchase price therefor with the Depositary,
which will act as agent for tendering stockholders for the purpose of receiving
payments from Purchaser and transmitting such payments to validly tendering
stockholders. Under no circumstances will interest on the purchase price for
Shares be paid by Purchaser by reason of any delay in making such payment. In
all cases, payment for Shares purchased pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) the certificates evidencing such
Shares (the "Share Certificates") or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility (as defined in Section 2 under "THE TENDER OFFER" in the Offer to
Purchase) pursuant to the procedures set forth in Section 2 under "THE TENDER
OFFER" in the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message (as defined in Section 2 under "THE TENDER
OFFER" in the Offer to Purchase) and (iii) any other documents required by the
Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, whether or not any of the events specified in Section 15 under "THE TENDER
OFFER" in the Offer to Purchase shall have occurred or shall have been
determined by Purchaser to have occurred, and amend the Offer in any other
respect, in either case by giving oral or written notice of such extension or
amendment to the Depositary. Any such extension will be followed as promptly as
practicable by public announcement thereof, such announcement to be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date of the Offer. During any such extension,
all Shares previously tendered and not withdrawn will remain subject to the
Offer, subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Tuesday, January 23, 1996 (or the latest time and date at which the
Offer, if extended by Purchaser, shall expire) and, unless theretofore accepted
for payment by Purchaser
3
<PAGE>
pursuant to the Offer, may also be withdrawn at any time after February 19,
1996. In order for the withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of the Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in Section 2 under "THE TENDER OFFER" in the Offer to Purchase), except in the
case of Shares tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 2 under "THE TENDER OFFER" in the Offer to Purchase, any notice
of withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares. All questions as to
the form and validity (including the time of receipt) of any notice of
withdrawal will be determined by Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase and the related Letter of Transmittal, and if
required, other relevant materials will be mailed to record holders of Shares
whose names appear on the Company's stockholder list and will be furnished by
Purchaser to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below. No fees or commissions will be paid to brokers, dealers or other
persons (other than the Information Agent and the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer.
4
<PAGE>
The Information Agent for the Offer is:
KISSEL-BLAKE, INC.
_______________
110 Wall Street
New York, New York 10005
CALL TOLL FREE 1-800-554-7733
Banks and Brokers Call: (212) 344-6733
The Dealer Manager for the Offer is:
MORGAN STANLEY & CO.
INCORPORATED
1585 Broadway
New York, New York 10036
(212) 761-4699
December 22, 1995
5
<PAGE>
EXHIBIT a(4)
FOR IMMEDIATE RELEASE
CONTACT: David A. Schaefer - Senior Vice President and Chief Operating Officer
Robert K. Bruning - Chief Financial Officer
(619) 929-0377
COBRA GOLF TO BE ACQUIRED BY
AMERICAN BRANDS FOR $36.00 PER SHARE
Carlsbad, California - December 18, 1995 - Cobra Golf Incorporated
(NASDAQ/NMS:CBRA) today announced that it has signed a definitive agreement to
be acquired by American Brands, Inc. (NYSE - AMB) for $36 per share, or
approximately $700 million. Cobra said that the agreement contemplates a cash
tender offer by American Brands to commence no later than December 22nd for all
of Cobra's outstanding common shares, to be followed by a cash merger at the
same price. The Board of Directors of both companies have unanimously approved
the transaction.
Details of the offer will be included in an Offer to Purchase to be mailed to
all Cobra stockholders.
Cobra Chairman, Gary Biszantz, said, "We believe the American Brands offer
represents significant value for stockholders while at the same time enabling
these two outstanding companies to become the greatest organization in golf."
Thomas L. Crow, Cobra's Vice Chairman, added, "The potential is enormous and we
are extremely proud to be associated with this new powerhouse."
Mark C. McClure, President and Chief Executive Officer of Cobra, added, "All of
us at Cobra Golf are extremely pleased we are joining forces with Titleist and
Foot-Joy. We believe this is a winning situation for everyone including our
stockholders, customers, suppliers and employees, and we are extremely excited
by the opportunities presented by this combination."
Cobra designs, manufactures and markets high-quality golf clubs principally for
the premium-priced game improvement segment of the golf equipment market. The
Company's primary focus is on oversize and graphite shafted golf clubs marketed
and sold under the King Cobra brand name.
<PAGE>
EXHIBIT a(5)
[LETTERHEAD OF AMERICAN BRANDS, INC.]
December 18, 1995
Fellow Employees:
American Brands announced today a definitive agreement to acquire Cobra, one of
the world's premier golf brands. I am very excited about the tremendous benefits
this will bring to American Brands and wanted to take this opportunity to
communicate with you.
The acquisition of Cobra, which will become part of Acushnet and report to Wally
Uihlein along with the Titleist and Foot-Joy brands, will greatly strengthen our
position as No. 1, worldwide, in golf equipment. This is a $4+ billion a
year category (at wholesale) with great fundamentals, and these brands have been
among our fastest growing for many years.
Together, the Titleist and Cobra brands will be even more powerful, with an even
better growth outlook. Cobra has excellent market positioning, high
profitability, strong growth potential, and a lineup of products that uniquely
complements the Titleist brand's own great strengths. Acushnet's Titleist,
Pinnacle and Foot-Joy brands are already the clear leaders in quality golf
balls, shoes and gloves. Together, Titleist and Cobra will be No. 1 worldwide in
irons and No. 2, overall, in golf clubs, rounding out our leadership position in
the golf equipment category.
This is an exciting occasion for our Company and a strong step in growing the
"new" American Brands.
Most cordially,
/s/ Thomas C. Hays
Thomas C. Hays
<PAGE>
FOR IMMEDIATE RELEASE
[LETTERHEAD OF AMERICAN BRANDS, INC.]
- --------------------------------------------------------------------------------
PRESS RELEASE
- --------------------------------------------------------------------------------
Contact: Roger W. W. Baker
(203) 698-5148
Daniel A. Conforti
(203) 698-5132
AMERICAN BRANDS ACQUIRING COBRA GOLF
FOR APPROXIMATELY $700 MILLION IN CASH
Extends Worldwide Leadership Position in Golf
to Fast-Growing Golf Club Marketplace;
Nondilutive to Earnings in 1996;
Enhances Earnings Outlook in 1997 and Beyond
Old Greenwich, CT, December 18, 1995 - American Brands, Inc. (NYSE-AMB) today
announced that it has signed a definitive agreement to acquire Cobra Golf
Incorporated (Nasdaq-CBRA) for $36 per share, or approximately $700 million.
American Brands said that a cash tender offer will commence no later than
December 22 through an acquisition subsidiary to acquire all of Cobra's
outstanding common shares. The boards of directors of both companies have
unanimously approved the transaction.
Thomas C. Hays, Chairman and Chief Executive Officer of American Brands,
said: "This high-return acquisition fits exceptionally well with our strategy to
further enhance the value of our great brands. It represents a partnership
joining two of the premier brands in golf equipment. The Cobra brand has a
leadership position in golf
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 2
clubs and is number 1 in oversize irons. Cobra's great products, marketing and
outstanding growth profile complement our Titleist brand's presence
exceptionally well and bring an exciting new dimension to our number 1 worldwide
position in golf. Titleist has been achieving superb, sustained growth. Over the
three years through 1994, Titleist's operating company contribution has grown at
a 17% compounded growth rate, and Cobra's at about a 90% rate."
Enhanced Earnings Outlook
"Overall," Hays noted, "substantial synergies should accelerate the top-
and bottom-line growth outlook for both the Titleist and Cobra brands. As a
result of this strategic fit, we expect the acquisition to enhance American
Brands' earnings growth, with no dilution in 1996, an additive impact in 1997
and significant contributions thereafter."
With products sold under the King Cobra brand name, Cobra is a leader in
the rapidly-growing market for oversize and graphite-shafted golf clubs. Our
Titleist and Foot-Joy brands are the worldwide leaders in golf balls, gloves and
shoes. Cobra, which will continue to be based in Carlsbad, California, will
become part of American Brands' fast-growing golf group, reporting to Walter R.
Uihlein, the group's President and Chief Executive Officer.
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 3
Last year, Cobra had sales of $124 million and operating company
contribution of $38 million. Through the first three quarters of 1995, Cobra
reported sales of $152 million and contribution of $47 million, up 60% and 59%,
respectively. Cobra is debt free, has a strong balance sheet and positive cash
flow.
American Brands' golf products operations had 1994 sales of $507 million
and operating company contribution of $74 million. In the first nine months of
1995, sales and contribution were records, up 15% and 11%, respectively.
Worldwide Leadership in a Fast-Growing Category
"With the Titleist and Foot-Joy brands," Hays noted, "we are already
solidly established as the world leader in golf - a $4+ billion category at
wholesale with great fundamentals. For nearly two decades, Titleist has achieved
double-digit growth in profits, becoming an increasingly significant contributor
to American Brands' overall growth.
"The Cobra brand will bring substantial new luster to that presence,
including strong leadership in the $2+ billion worldwide golf club
marketplace, which has achieved strong double-digit growth over the past several
years. Together, the Cobra and Titleist brands will be the powerful worldwide
leader in irons - a $1 billion category
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 4
in which Cobra leads the fast-growing trend towards oversize irons - and a
solid number 2, overall, in clubs.
"Substantial synergies should enhance both of these powerful brands. We
believe Titleist's extensive international distribution resources will further
strengthen the Cobra brand's outstanding growth profile. In turn, margins on the
Titleist brand will benefit from Cobra's in-house graphite shaft manufacturing
facility. Both Cobra and Titleist have strong, state-of-the-art technological
capabilities that could lead to innovative, higher performance golf clubs in the
future.
"While materially strengthening our presence in this very attractive
category, the acquisition of the Cobra brand also enhances our overall earnings
prospects. To achieve our long-range goal of E.P.S. growth in the range of 10%,
we have many options. With our very strong balance sheet and enormous cash flow,
also enhanced by the addition of Cobra, we have tremendous flexibility to
consider further acquisitions and to repurchase additional shares. In fact, we
have invested over $1 billion during 1995 to reduce fully diluted shares, and by
year-end, we may well have reduced fully diluted shares by as many as 30 million
shares, or 14%. As an excellent cash generator in its own right, Cobra further
strengthens our financial position," Hays added.
Cobra Chairman Gary E. Biszantz said, "These two outstanding companies
will, together, be the greatest organization in golf. The potential is enormous,
and we are extremely proud to be associated with this new powerhouse."
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 5
Window of Opportunity
Walter R. Uihlein, President and Chief Executive Officer of American
Brands' golf group, said: "The acquisition of the Cobra brand greatly
accelerates our ability to capitalize on golfers' fast-growing preference for
oversize irons, a major replacement cycle still in its early stages. Cobra is
also very well positioned to take a leading role in golf's next major
replacement cycle - the move from stainless steel metal woods to titanium woods.
The introduction next January of the new King Cobra line of lighter, more
user-friendly titanium oversize metalwoods will offer golfers the enticing
prospect of longer, more accurate drives.
Thomas L. Crow, Vice Chairman and Chief Designer at Cobra, noted that late
last month, Greg Norman used a prototype King Cobra Ti titanium driver to win
the 1995 Australian Open. For Norman, who is one of Cobra's tour staff currently
testing the King Cobra Ti oversize woods, the victory came during just his
second week using the new driver. Norman commented: "I drove my King Cobra Ti
driver as well as a ball could be driven. It performs exceptionally well."
Commenting on today's announcement, Mark C. McClure, President and Chief
Executive Officer of Cobra, said that "all of us at Cobra Golf are extremely
pleased to be joining forces with Titleist and Foot-Joy. Titleist's worldwide
distribution and its
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 6
technological capabilities, along with the tremendous financial strength of
American Brands, should accelerate Cobra's development and even further enhance
our prospects. We are excited by the opportunities."
Uihlein noted that "the alliance of Cobra with the Titleist and Foot-Joy
brands rounds out our leadership position in golf, complementing our number 1
positions in golf balls, shoes and gloves with a significantly enhanced presence
in golf clubs. Golf clubs represent about 55% of worldwide golf equipment sales.
Worldwide, there are now some 44 million golfers, their number is growing and
their investment in the game is growing even faster.
"Cobra manufactures an outstanding product, backed by strong manufacturing
and marketing capability and innovative development," Uihlein added. He noted
that, in addition to Greg Norman, such well-known professionals as Hale Irwin,
Ben Crenshaw, Tony Jacklin and Beth Daniel play and win with them on tour.
"Cobra, with its phenomenal brand strengths and highly capable executives and
associates, is a great complement to our Titleist line of golf clubs, which have
achieved compounded annual sales growth of 38% since 1991. The Titleist DCI now
ranks as the number 1 iron among club professionals and has also achieved strong
acceptance by serious amateur players.
"We are especially pleased that Greg Norman has committed to continue
playing the King Cobra clubs into the next century. Norman, the all-time money
winner on the
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 7
tour and the number 1 ranked player in the world, has called the King Cobra
oversize driver 'the best driver I have ever played.'"
Cobra Positioned to Lead Next Two Replacement Cycles
The golf club market is driven by replacement business, as innovative
technology stimulates sales. Sales have increased rapidly when golfers, seeking
to take advantage of new products that deliver longer, more accurate shots,
upgrade the equipment in their bags. Over the past 15 years, there have been
five major "replacement" cycles, or waves, and the fourth and fifth are still in
the early stages. Through each cycle, the innovator has achieved sharp growth.
1. Metalwoods (1980-85)
Metalwoods were introduced in 1980, and by 1985, wood-wood construction had
been delivered a knockout punch.
2. Perimeter-weighted irons (1983-88)
Perimeter-weighted irons were introduced in the early 1980s and dominated
the category by the late-80s.
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<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 8
3. Oversize steel metalwoods (1991-95)
Oversize steel metalwoods were introduced in 1991 and have now found a
place in many avid golfers' bags.
4. Oversize irons (1993- )
In 1993, Cobra introduced the revolutionary King Cobra oversize iron and is
driving this replacement cycle, which is still in its early stages. With
oversize irons just now starting to sweep the market, Cobra's share of the
overall iron category has already more than doubled to 13% from 5% in 1993.
5. Oversize titanium metalwoods (1995- )
The next wave, still in its infancy, is the shift to oversize titanium
metalwoods, where Cobra will be strongly positioned to be a leader with its King
Cobra Ti titanium line.
* * * *
Headquartered in Old Greenwich, Connecticut, American Brands is an
international consumer products holding company. Its operating companies have
powerhouse brands and leading market positions. Major distilled spirits brands
sold by Jim Beam Brands Co. include Jim Beam and Old Grand-Dad bourbons and
DeKuyper
(more)
<PAGE>
[LOGO OF AMERICAN BRANDS, INC.]
American Brands Acquires Cobra Golf
Page 9
cordials. MasterBrand Industries, Inc.'s leading hardware and home improvement
brands include Moen faucets, Master locks and Aristokraft cabinets. ACCO World
Corporation's major office product brands include Day-Timer and Swingline.
Acushnet Company's golf brands include Titleist, Pinnacle and Foot-Joy. Gallaher
Limited sells tobacco products, principally in Europe, where its major brands
include Benson and Hedges and Silk Cut.
# # #
<PAGE>
EXHIBIT a(6)
[LOGO OF COBRA GOLF INCORPORATED]
Cobra Golf Incorporated
1818 Aston Avenue
Carlsbad, California 92008
Dear Fellow Stockholder:
I am pleased to inform you that, on December 18, 1995, Cobra Golf
Incorporated (the "Company") entered into an Agreement and Plan of Merger with
American Brands, Inc. and HCAC, Inc., a wholly owned subsidiary of American
Brands, pursuant to which HCAC has commenced a cash tender offer to purchase
all of the outstanding shares of the Company's common stock for $36.00 per
share. Under the Agreement, the Offer will be followed by a Merger in which
any remaining shares of the Company's common stock will be converted into the
right to receive $36.00 per share in cash or any higher price per share that
may be paid in the Offer.
YOUR BOARD OF DIRECTORS, BY A UNANIMOUS VOTE OF THOSE MEMBERS PRESENT, HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER,
AND RECOMMENDS THAT ALL HOLDERS TENDER THEIR SHARES OF THE COMPANY'S COMMON
STOCK PURSUANT TO THE OFFER.
In arriving at its decision, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission. Among
other things, the Board of Directors retained Lehman Brothers Inc. to act as
financial advisor to the Company. The Board of Directors considered the
opinion of Lehman Brothers that the cash consideration to be received by the
holders of the Company's common stock in the Offer and the Merger is fair to
such holders.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated December 22, 1995, of HCAC, together
with related materials including a Letter of Transmittal to be used for
tendering your shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
shares. I urge you to read the enclosed material carefully.
Sincerely,
Gary E. Biszantz
Chairman of the Board
<PAGE>
EXHIBIT a(7)
[LETTERHEAD OF LEHMAN BROTHERS]
December 18, 1995
Board of Directors
Cobra Golf Incorporated
1812 Aston Avenue
Carlsbad, California 92008
Members of the Board:
We understand that American Brands, Inc. ("American Brands"), HCAC, Inc., a
wholly owned subsidiary of American Brands ("Sub") and Cobra Golf Incorporated
(the "Company") have entered into an Agreement and Plan of Merger dated as of
December 18, 1995 (the "Agreement") regarding the acquisition of the Company by
American Brands. The Agreement provides that Sub will make a tender offer to
purchase all of the currently issued and outstanding shares of common stock of
the Company at $36.00 per share in cash (the "Offer"). Any shares not purchased
in the Offer will be acquired for the same price in cash in a second-step merger
of Sub with and into the Company (the "Merger", which, together with the Offer,
the "Proposed Transaction"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) publicly available
information concerning the Company that we believe to be relevant to our
inquiry, including, without limitation, the Company's Annual Reports on Form
10-K for the fiscal years ended December 31, 1994 and December 31, 1993 and the
Company's Quarterly Reports on Form 10-Q for each quarter or quarterly period
since September 30, 1993, (3) financial and operating information with respect
to the business, operations and prospects of the Company furnished to us by the
Company, (4) the trading history of the Company's common stock since September
21, 1993 and a comparison of that trading history with those of other companies
that we deemed relevant, (5) a comparison of the historical financial results
and present financial condition of the Company with those of other companies
that we deemed relevant, and (6) a comparison of the financial terms of the
Proposed Transaction with the financial terms of certain other transactions that
we deemed relevant. In addition, we have had discussions with the management of
the Company concerning its business, operations, assets, financial condition and
prospects and undertook such other studies, analyses and investigations as we
deemed appropriate.
<PAGE>
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading in any material respect. With respect to the financial forecasts of
the Company, upon advice of the Company we have assumed that such forecasts have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
financial performance of the Company and we have relied upon such forecasts in
arriving at our opinion. In arriving at our opinion, we have conducted only a
limited physical inspection of the properties and facilities of the Company and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company. In addition, you have not authorized us to solicit,
and we have not solicited, any proposals or offers from any third party with
respect to the purchase of all or a part of the Company's business. Our opinion
necessarily is based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction, will receive a fee upon delivery of this opinion, and may
receive an additional fee for our services based upon a variety of factors,
including the scope and complexity of such services, our role in transaction
structuring and negotiating and the consummation of the Proposed Transaction.
In addition, the Company has agreed to indemnify us for certain liabilities that
may arise out of the rendering of this opinion. We also have performed various
investment banking services for the Company in the past (including acting as
lead manager in the Company's initial public offering and as lead manager in a
secondary offering of the Company's common stock) and have received customary
fees for such services. In the ordinary course of our business, we actively
trade in the equity securities of the Company and American Brands for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. This opinion is not intended to be and does not constitute a
recommendation to any stockholder of the Company as to whether to accept the
consideration to be offered to such stockholder in connection with the Proposed
Transaction.
Very truly yours,
LEHMAN BROTHERS
<PAGE>
EXHIBIT c(1)
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
AMERICAN BRANDS, INC.
HCAC, INC.
AND
COBRA GOLF INCORPORATED
Dated as of December 18, 1995
================================================================================
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I THE OFFER................................................ 4
Section 1.1 The Offer................................................ 4
Section 1.2 Company Action........................................... 8
Section 1.3 Directors................................................ 11
ARTICLE II THE MERGER............................................... 13
Section 2.1 The Merger............................................... 13
Section 2.2 Closing.................................................. 13
Section 2.3 Effective Time of the Merger............................. 14
Section 2.4 Certificate of Incorporation............................. 15
Section 2.5 By-laws.................................................. 15
Section 2.6 Board of Directors and Officers.......................... 15
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES................................. 16
Section 3.1 Effect on Capital Stock.................................. 16
Section 3.2 Exchange of Certificates................................. 18
Section 3.3 Settlement of Stock Options.............................. 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.............................................. 24
Section 4.1 Organization and Standing;
Capitalization......................................... 24
Section 4.2 Authority................................................ 26
Section 4.3 No Breach................................................ 27
Section 4.4 Subsidiaries............................................. 28
Section 4.5 Financial Statements..................................... 30
Section 4.6 Taxes.................................................... 34
Section 4.7 No Capital Stock Transactions............................ 36
Section 4.8 Indebtedness and Guarantees.............................. 36
Section 4.9 Material Contracts....................................... 36
Section 4.10 Powers of Attorney....................................... 38
Section 4.11 Employee Benefit Plans; etc.............................. 38
Section 4.12 Employees; Labor Matters................................. 41
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.13 Proprietary Rights....................................... 42
Section 4.14 Litigation............................................... 44
Section 4.15 Environmental Matters.................................... 45
Section 4.16 Governmental Approvals................................... 46
Section 4.17 Permits, Compliance with Applicable Law.................. 47
Section 4.18 SEC Filings.............................................. 48
Section 4.19 Disclosures.............................................. 50
Section 4.20 Company Disclosure Documents............................. 50
Section 4.21 State Takeover Statutes.................................. 52
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER..................................... 53
Section 5.1 Organization and Standing; Share Ownership............... 53
Section 5.2 Authority................................................ 53
Section 5.3 No Breach................................................ 54
Section 5.4 Governmental Approvals................................... 55
Section 5.5 Information.............................................. 56
Section 5.6 Financing................................................ 58
ARTICLE VI COVENANTS................................................ 58
Section 6.1 Covenants of the Company................................. 58
Section 6.2 Hart-Scott-Rodino Act Filings............................ 72
Section 6.3 Public Announcements..................................... 72
Section 6.4 Access to Information.................................... 72
Section 6.5 Further Action........................................... 74
Section 6.6 Transfer Taxes........................................... 76
Section 6.7 Environmental Assessment................................. 76
Section 6.8 Covenants of Parent and Purchaser........................ 78
ARTICLE VII CONDITIONS TO THE MERGER................................. 81
Section 7.1 Conditions of Each Party
to the Merger......................................... 81
ARTICLE VIII TERMINATION.............................................. 83
Section 8.1 Termination.............................................. 83
Section 8.2 Effect of Termination.................................... 87
ARTICLE IX SURVIVAL................................................. 87
Section 9.1 Survival................................................. 87
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X ASSIGNMENT; PARTIES IN INTEREST;
AMENDMENT; WAIVER........................................ 88
Section 10.1 Assignment............................................... 88
Section 10.2 Parties in Interest...................................... 88
Section 10.3 Amendment................................................ 89
Section 10.4 Waiver................................................... 89
Section 10.5 Procedure for Termination, Amendment,
Extension or Waiver.................................... 90
ARTICLE XI GENERAL PROVISIONS....................................... 91
Section 11.1 Effect of Investigation.................................. 91
Section 11.2 Fees and Expenses........................................ 91
Section 11.3 Notices.................................................. 94
Section 11.4 Brokers; Fee Schedule.................................... 96
Section 11.5 Headings................................................. 97
Section 11.6 Entire Agreement......................................... 97
Section 11.7 Governing Law............................................ 97
Section 11.8 Counterparts............................................. 97
Section 11.9 Knowledge................................................ 97
</TABLE>
iii
<PAGE>
Glossary of Defined Terms
Defined Terms Defined in Section
<TABLE>
<CAPTION>
<S> <C>
Balance Sheet................................................................4.5
Certificate...............................................................3.2(b)
Certificate of Merger........................................................2.3
Closing Date.................................................................2.2
Code.....................................................................4.11(a)
Common Stock............................................................preamble
Company.................................................................preamble
Company Board...........................................................preamble
Company Disclosure Documents................................................4.20
Company Permits.............................................................4.17
Company Plan.............................................................4.11(a)
Company's Representatives..............................................6.1(l)(i)
Competing Transaction.................................................6.1(l)(ii)
Confidentiality Agreement....................................................6.4
December 17 Meeting.......................................................1.2(a)
DGCL....................................................................preamble
Disclosure Schedule...................................................Article IV
Disinterested Directors...................................................1.3(a)
Dissenting Shares.........................................................3.1(d)
Effective Time...............................................................2.3
Environmental Study..........................................................6.7
Environmental Laws.......................................................4.15(b)
Environmental Liabilities................................................4.15(b)
ERISA....................................................................4.11(a)
ERISA Affiliate..........................................................4.11(a)
ERISA Pension Plans......................................................4.11(a)
ERISA Plan...............................................................4.11(a)
ERISA Welfare Plan.......................................................4.11(a)
Exchange Act..............................................................1.3(b)
Expense Reimbursement....................................................11.2(b)
Governmental Entity.........................................................4.16
Hazardous Materials..........................................................6.7
HSR Act.....................................................................4.16
Information Statement........................................................2.2
Intellectual Property.......................................................4.13
IRS......................................................................4.11(a)
Knowledge...................................................................11.9
Lehman....................................................................1.2(a)
Material Adverse Effect......................................................4.3
Merger..................................................................preamble
Merger Consideration......................................................3.1(b)
Minimum Condition........................................................Annex A
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Defined Terms Defined in Section
<S> <C>
Offer...................................................................preamble
Offer Documents...........................................................1.1(b)
Offer to Purchase.........................................................1.1(b)
Option Consideration.........................................................3.3
Options......................................................................3.3
Out-of-the-Money Options.....................................................3.3
Outside Termination Date..................................................8.1(b)
Parent..................................................................preamble
Paying Agent..............................................................3.2(a)
Per Share Amount........................................................preamble
Plan..................................................................4.13(a)(i)
Properties...................................................................6.7
Proxy Statement...........................................................6.1(c)
Purchaser...............................................................preamble
Purchaser Stock.........................................................preamble
Schedule 14D-1............................................................1.1(b)
Schedule 14D-9............................................................1.2(b)
Scheduled Expiration Date.................................................1.1(a)
SEC.......................................................................1.1(a)
SEC Filings.................................................................4.18
Securities Act..............................................................4.18
Selling Stockholders....................................................preamble
Special Meeting...........................................................6.1(b)
Stock Option and Tender Agreement.......................................preamble
Stock Option Plan............................................................3.3
Superior Transaction.................................................6.1(l)(iii)
Subsidiary...................................................................4.4
Surviving Corporation........................................................2.1
Taxes.....................................................................4.6(d)
Tax Return................................................................4.6(d)
Termination Fee..........................................................11.2(b)
Transfer Taxes...............................................................6.6
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 18, 1995 among
AMERICAN BRANDS, INC., a Delaware corporation ("Parent"), HCAC, INC., a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of Parent, and COBRA
GOLF INCORPORATED, a Delaware corporation (the "Company"),
W I T N E S S E T H :
-------------------
WHEREAS, Purchaser is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on October 31, 1995
under the General Corporation Law of the State of Delaware (the "DGCL"), and has
authorized capital stock consisting of 1,000 shares of Common Stock, par value
$1.00 per share ("Purchaser Stock"), all of which are issued and outstanding and
owned by Parent; and
WHEREAS, the Company is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on August 5, 1993
under the DGCL, and has authorized capital stock consisting of 45,000,000
shares, divided into (i) 5,000,000 shares of Preferred Stock, par value $0.001
per share, none of which
<PAGE>
are issued and outstanding, and (ii) 40,000,000 shares of Common Stock, $0.001
par value per share ("Common Stock"), of which 18,623,368 shares are issued and
outstanding; and
WHEREAS, the respective Boards of Directors of Purchaser and the Company
and Parent as the sole stockholder of Purchaser have each determined that it is
in the best interest of their respective stockholders for Parent, through
Purchaser, to acquire the Company upon the terms and subject to the conditions
set forth herein; and
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Purchaser to make a cash tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to acquire all the issued and
outstanding shares of Common Stock for $36.00 per share (the "Per Share Amount")
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions of this Agreement and the Offer; and
WHEREAS, the Board of Directors of the Company (the "Company Board") has
unanimously approved the Offer and resolved and agreed, subject to the terms and
conditions contained herein, to recommend that holders of shares of
2
<PAGE>
Common Stock tender their shares of Common Stock pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Parent, Purchaser
and the Company have each approved this Agreement, the Offer and the merger of
Purchaser with and into the Company in accordance with the DGCL and upon the
terms and subject to the conditions set forth herein (the "Merger"); and
WHEREAS, (a) Parent and Purchaser are unwilling to enter into this
Agreement unless, simultaneously with the execution and delivery of this
Agreement, Parent and those selling stockholders listed on Schedule 1 attached
hereto (the "Selling Stockholders") have entered into a Stock Option and Tender
Agreement dated as of the date hereof (the "Stock Option and Tender Agreement")
providing, among other things, for the grant of options and proxies to Parent by
such Selling Stockholders in respect of the shares of Common Stock owned and
held by them and the agreement of the Selling Stockholders to tender pursuant to
the Offer all shares of Common Stock owned and held by them, subject to the
terms and conditions contained therein and (b) the Company Board has approved
Parent and Purchaser entering into the Stock Option
3
<PAGE>
and Tender Agreement, which is to be executed simultaneously with the execution
hereof;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter contained, the parties hereto do hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer. (a) Provided that this Agreement shall not
---------
have been terminated in accordance with Section 8.1 and none of the events set
forth in Annex A hereto shall have occurred or be existing (unless such event
shall have been waived by Purchaser), Parent shall cause Purchaser to commence,
and Purchaser shall commence, the Offer at the Per Share Amount as promptly as
reasonably practicable after the date hereof, but in no event later than five
business days after the public announcement of Purchaser's intention to commence
the Offer. The Offer shall remain open until the twentieth business day from
the commencement of the Offer (the "Scheduled Expiration Date"). The obligation
of Purchaser to accept for payment and pay for shares of Common Stock tendered
pursuant to the Offer shall be subject to the satisfaction or waiver of the
conditions
4
<PAGE>
set forth in Annex A hereto. Purchaser expressly reserves the right to waive any
such condition, to increase the price per share of Common Stock payable in the
Offer, and to make any other change in the terms and conditions of the Offer;
provided, however, that, without the written consent of the Company, no change
may be made which (A) decreases the price per share of Common Stock payable in
the Offer, (B) reduces the maximum number of shares of Common Stock to be
purchased in the Offer, (C) imposes conditions to the Offer in addition to those
set forth in Annex A hereto, (D) amends or changes the terms and conditions of
the Offer in any manner adverse to the holders of shares of Common Stock (other
than Parent and its subsidiaries), (E) changes or waives the Minimum Condition
(as defined in Annex A), (F) changes the consideration payable in the Offer to
anything other than all cash, (G) reduces the time period during which the Offer
shall remain open or (H) except as provided in the next sentence, extends the
time period during which the Offer shall remain open. Notwithstanding the
foregoing, Purchaser may, without the consent of the Company, (i) extend the
Offer beyond the Scheduled Expiration Date and any subsequent scheduled
expiration date, if at such date any of the conditions to Purchaser's obligation
to accept for payment, and pay for, shares of the Common Stock shall not be
5
<PAGE>
satisfied or waived, until such time as such conditions are satisfied or waived,
and (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the
"SEC"). The Per Share Amount shall be net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions of this Agreement
and the Offer. Purchaser covenants and agrees that, subject to the terms and
conditions of the Offer and this Agreement, including but not limited to the
conditions of the Offer set forth in Annex A hereto, it will accept for payment
and pay for shares of Common Stock validly tendered and not withdrawn pursuant
to the Offer as promptly as practicable after the expiration of the Offer.
(b) As soon as reasonably practicable on the date of commencement of the
Offer, Parent and Purchaser shall file with the SEC to the extent required by
law a Tender Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the Offer and the
other transactions contemplated hereby. The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and form of the related letter of transmittal, summary advertisement and the
related ancillary documents (the
6
<PAGE>
Schedule 14D-1 and the documents included therein pursuant to which the Offer
will be made, together with all supplements and amendments thereto, the "Offer
Documents"). Purchaser shall disseminate to holders of shares of Common Stock
the Offer Documents to the extent required by law. Parent, Purchaser and the
Company each agrees to correct promptly any information provided by it for use
in the Offer Documents which shall have become false or misleading in any
material respect, and Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
shares of Common Stock, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given an
opportunity to review and comment on the Offer Documents and any amendments
thereto prior to the filing thereof with the SEC. Parent and Purchaser will
provide the Company and its counsel with a copy of any written comments or
telephonic notification of any oral comments Parent or Purchaser may receive
from the SEC or its staff with respect to the Offer Documents promptly after the
receipt thereof and will provide the Company and its counsel with a copy of any
written responses and telephonic
7
<PAGE>
notification of any oral responses of Parent, Purchaser or their counsel.
SECTION 1.2. Company Action. (a) The Company hereby approves of and
--------------
consents to the Offer and the Merger and represents that (i) the Company Board,
at a meeting duly called and held on December 17, 1995 (the "December 17
Meeting"), has (A) duly and unanimously adopted resolutions (x) approving and
adopting this Agreement and the transactions contemplated hereby, (y)
determining that this Agreement and the transactions contemplated hereby,
including, without limitation, each of the Offer and the Merger, are fair to and
in the best interests of the stockholders of the Company and (z) recommending
that the stockholders of the Company approve and adopt this Agreement, and
accept the Offer and tender their shares pursuant to the Offer, and (B) taken
all other action necessary to render Section 203 of the DGCL inapplicable to
this Agreement, the Offer, the Merger, the Stock Option and Tender Agreement and
any purchase of shares of Common Stock by Parent or Purchaser pursuant to this
Agreement and the Stock Option and Tender Agreement; and (ii) Lehman Brothers
Inc. ("Lehman") has rendered to the Company Board its opinion, that the
consideration to be received by the holders of shares of Common Stock pursuant
to each of the Offer and the Merger is
8
<PAGE>
fair to such holders from a financial point of view, and a complete and correct
signed copy of such opinion promptly upon receipt will be delivered to Parent.
The Company has been authorized by Lehman, subject to prior review by such
financial advisor, to permit such fairness opinion (or references thereto) to be
included in the Offer Documents and in the Schedule 14D-9 (as defined in
paragraph (b) of this Section 1.2) and the Proxy Statement (as defined in
Section 6.1(c)) or the Information Statement (as defined in Section 2.2).
Subject to the Company Board's fiduciary duty under applicable law and the
provisions of this Agreement, the Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Company Board described above.
The Company has been advised by each of its directors that they intend to tender
all shares of Common Stock beneficially owned by them to Purchaser pursuant to
the Offer or, where applicable, otherwise sell such shares to Parent in
accordance with the Stock Option and Tender Agreement.
(b) As soon as reasonably practicable on or after the date the Offer is
commenced, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing,
9
<PAGE>
subject to the Company Board's fiduciary duties under applicable law and the
provisions of this Agreement, the recommendation of the Company Board described
in Section 1.2(a) and shall mail the Schedule 14D-9 to the stockholders of the
Company. The Company, Parent and Purchaser each agrees to correct promptly any
information provided by it for use in the Schedule 14D-9 which shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to holders of shares of Common Stock, in each case
as and to the extent required by applicable federal securities laws. Parent,
Purchaser and their counsel shall be given an opportunity to review and comment
on the Schedule 14D-9 and any amendments thereto prior to the filing thereof
with the SEC. The Company will provide Parent, Purchaser and their counsel with
a copy of any written comments or telephonic notification of any oral comments
the Company may receive from the SEC or its staff with respect to the Schedule
14D-9 promptly after the receipt thereof and will provide Parent, Purchaser and
their counsel with a copy of any written responses and telephonic notification
of any oral responses of the Company or its counsel.
10
<PAGE>
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of shares of Common
Stock as of the most recent date reasonably practicable and of those persons
becoming record holders subsequent to such date, together with copies of all
lists of stockholders and security position listings and shall furnish Purchaser
with such additional information, including, without limitation, updated lists
of stockholders, security position listings and computer files (if any), and
such other assistance as Parent, Purchaser or their agents may reasonably
request.
SECTION 1.3. Directors. (a) Promptly upon the acceptance for payment
---------
of, and payment for, shares of Common Stock pursuant to the Offer, and from time
to time thereafter, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company Board as will
give Parent representation on the Company Board (which shall be reduced to 10
members) equal to the product of (a) ten and (b) the percentage that the number
of shares of Common Stock purchased by Parent (including the shares of Common
Stock accepted for payment and paid for in the Offer and the shares of Common
Stock acquired pursuant to the Stock Option and Tender Agreement) bears to the
number of shares of Common Stock outstanding, and the Company shall
11
<PAGE>
take all action necessary to cause Parent's designees to be elected or appointed
to the Company Board, provided, however, that the Company Board shall have no
less than three members who are directors on the date hereof and who are not
officers or employees of the Company (the "Disinterested Directors"). At such
times, the Company will use its reasonable best efforts to cause such
individuals designated by Parent to constitute (x) the minimum number of members
necessary to constitute a simple majority of each committee of the Company
Board, (y) the minimum number of members necessary to constitute a simple
majority of each board of directors of each Subsidiary (as defined in Section
4.4) and (z) the minimum number of members necessary to constitute a simple
majority of each committee of each such board.
(b) The Company's obligations to appoint designees to the Company Board
shall be subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder. The
Company shall promptly take all actions required pursuant to Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.3 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill such obligations. Parent or Purchaser
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will supply to the Company in writing and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the conditions
----------
hereof, at the Effective Time (as defined in Section 2.3), the Merger shall
occur in accordance with the applicable provisions of the DGCL, the separate
corporate existence of Purchaser shall thereupon cease, and the Company, as the
surviving corporation in the Merger (the "Surviving Corporation") and wholly-
owned subsidiary of Parent, shall continue its separate corporate existence
under the name "Cobra Golf Incorporated" and in accordance with the DGCL, with
all its rights, privileges, immunities, powers and franchises continuing
unaffected by the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 2.2. Closing. The closing of the Merger will take place at
-------
10:00 a.m. on a date to be specified by Parent or Purchaser, which shall be no
later than the fifth business day after the later of (i) satisfaction or waiver
of
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the conditions set forth in Article VII hereof and (ii) the twentieth day
following the date on which an information statement in definitive form to be
furnished to the stockholders of the Company relating to the Merger (the
"Information Statement") has been sent to such stockholders (the "Closing
Date"), at the offices of Chadbourne & Parke LLP, 30 Rockefeller Plaza, New
York, New York 10112, unless another date or place is agreed to in writing by
the parties hereto.
SECTION 2.3. Effective Time of the Merger. Subject to the provisions
----------------------------
of this Agreement, as soon as practicable on or after the Closing Date,
Purchaser and the Company shall cause a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger"), executed
in accordance with the relevant provisions of the DGCL, to be filed and recorded
as required by the DGCL. The Merger shall become effective when the Certificate
of Merger is duly filed with the Secretary of State of the State of Delaware, or
at such other time as Purchaser and the Company shall agree should be specified
in the Certificate of Merger. When used in this Agreement, the term "Effective
Time" shall mean the time and date at which the Merger becomes effective.
14
<PAGE>
SECTION 2.4. Certificate of Incorporation. The Certificate of
----------------------------
Incorporation of Purchaser as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 2.5. By-laws. The By-laws of Purchaser as in effect
-------
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
SECTION 2.6. Board of Directors and Officers. At the Effective Time,
-------------------------------
the members of the Board of Directors of Purchaser immediately prior to the
Effective Time shall be the members of the Board of Directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
15
<PAGE>
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.1. Effect on Capital Stock. At the Effective Time, by virtue
-----------------------
of the Merger and without any action on the part of the holders thereof:
(a) Cancellation of Treasury Stock and Parent Owned Common Stock. Each
------------------------------------------------------------
share of Common Stock then owned by Parent or Purchaser or any other direct
or indirect subsidiary of Parent and each share of Common Stock then held in
the treasury of the Company or owned by any Subsidiary shall be canceled and
no consideration shall be payable therefor;
(b) Conversion of Common Stock. Each share of Common Stock issued and
--------------------------
outstanding immediately prior to the Effective Time (other than shares of
Common Stock being canceled pursuant to Section 3.1(a) and any Dissenting
Shares (as defined in Section 3.1(d))), shall be converted into the right to
receive from the Surviving Corporation the Per Share Amount, net to the
seller in cash, without interest thereon, subject to amounts required to be
withheld under applicable federal, state, local or foreign income tax laws
and regulations (the "Merger Consideration"), upon the
16
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surrender of the certificate representing such share in accordance with
Section 3.2; each share so converted shall at the Effective Time be canceled,
and each certificate which theretofore represented shares so converted and
canceled shall thereafter represent only the right to receive the Merger
Consideration multiplied by the number of such shares represented by such
certificate;
(c) Purchaser Stock. Each share of Purchaser Stock issued and
---------------
outstanding immediately prior to the Effective Time shall be converted into
one newly issued share of common stock of the Surviving Corporation; and
(d) Dissenting Shares. Any shares of Common Stock held by
-----------------
stockholders, if any, who shall have properly exercised appraisal rights with
respect thereto in accordance with Section 262 of the DGCL ("Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration pursuant to the Merger, but instead shall be entitled to only
such rights as are provided by the DGCL, except that any Dissenting Shares
held by a stockholder who shall thereafter withdraw his or her demand for
appraisal thereof or lose his or her right to such payment as provided in
such Section 262 shall cease to be Dissenting Shares hereunder and shall
17
<PAGE>
be deemed converted into and represent only the right to the Merger
Consideration such holder otherwise would have been entitled to receive as a
result of the Merger as provided in Section 3.1(b), upon surrender of the
certificate or certificates representing such shares in accordance with
Section 3.2. The Company shall give Parent (i) prompt notice of any demands
for appraisal of shares of Common Stock received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings
with respect to any such demands. The Company shall not, without the prior
written consent of Parent, make any payment with respect to, or settle, offer
to settle or otherwise negotiate, any such demands.
SECTION 3.2. Exchange of Certificates.
------------------------
(a) Paying Agent; Interest. Prior to the Effective Time, Parent shall
----------------------
designate a bank or trust company to act as paying agent in the Merger (the
"Paying Agent"), and, from time to time on, prior to or after the Effective
Time, Parent shall make available, or cause the Surviving Corporation to make
available, subject to Section 3.2(e), to the Paying Agent funds in amounts and
at the times necessary for the payment of the Merger Consideration upon
surrender of certificates representing shares of Common Stock
18
<PAGE>
as part of the Merger pursuant to Section 3.1, it being understood that any and
all interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be turned over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
------------------
Effective Time, the Paying Agent shall mail to each holder of record (other than
the Company or any Subsidiary, or Parent or Purchaser or any other direct or
indirect subsidiary of Parent) of a certificate or certificates which
immediately prior to the Effective Time represented shares of Common Stock (the
"Certificates"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in a
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange
19
<PAGE>
therefor the Merger Consideration payable in respect of the shares of Common
Stock represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares of
Common Stock that is not registered in the transfer records of the Company,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.2, each Certificate (other than Certificates representing shares of
Common Stock owned by Parent or Purchaser or any other direct or indirect
subsidiary of Parent, held in the treasury of the Company, owned by any
Subsidiary or any Dissenting Shares) shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration in respect of the shares of Common Stock theretofore
represented by such Certificate. No interest
20
<PAGE>
will be paid or will accrue on the cash payable upon the surrender of any
Certificate.
(c) No Further Ownership Rights in Common Stock. All cash paid upon
-------------------------------------------
the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Common Stock theretofore represented by such Certificates. At
the Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent for
any reason, they shall be canceled and exchanged as provided in this Article
III, except as otherwise provided by law.
(d) No Liability. None of Parent, Purchaser, the Company or the Paying
------------
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) Termination of Funds. Any portion of the funds which remain with
--------------------
the Paying Agent and which remain undistributed to the holders of the Common
Stock for six
21
<PAGE>
months after the Effective Time shall be delivered to Parent, on demand, and any
holders of the Common Stock who have not theretofore complied with this Article
III and the instructions set forth in the letter of transmittal mailed to such
holder after the Effective Time shall thereafter look only to Parent for payment
of the Merger Consideration to which they are entitled. Any portion of the
Merger Consideration made available to the Paying Agent pursuant to Section
3.2(a) hereof to pay for shares of Common Stock for which appraisal rights have
been perfected shall be returned to Parent on demand.
SECTION 3.3. Settlement of Stock Options. At or immediately prior to
---------------------------
the Effective Time, each holder of a then outstanding option to purchase shares
of Common Stock under the Cobra Golf Incorporated 1993 Stock Option Plan (as
amended from time to time prior to the date hereof, the "Stock Option Plan"),
whether or not then vested or exercisable (the "Options"), shall, in settlement
thereof, receive from the Company, for each share such holder could have
purchased had such Options been fully vested immediately prior to the Effective
Time and had such holder exercised such Options in full immediately prior to the
Effective Time, an amount (subject to any applicable withholding tax) in cash
equal to the excess, if any, of the Per Share Amount over the
22
<PAGE>
per share exercise price of such Option (such amount being hereinafter referred
to as the "Option Consideration"). Upon receipt of the Option Consideration, the
Option shall be canceled. The surrender of an Option to the Company in exchange
for the Option Consideration shall be deemed a release of any and all rights the
holder had or may have had in respect of such Option and the payment of the
Option Consideration with respect to all Options held by such holder with
respect to which the Option Consideration is payable shall be conditioned on
such holder acknowledging the cancellation of such Options together with any
Options held by such holder as to which the exercise price equals or exceeds the
Per Share Amount (the "Out-of-the-Money Options"). Prior to the Effective Time,
the Company shall use its reasonable best efforts to obtain releases from those
holders that hold only Out-of-the-Money Options under the Stock Option Plan and
take all such other lawful action as may be necessary to give effect to the
transactions contemplated by this Section 3.3 (except for such action that may
require the approval of the Company's stockholders). Except as otherwise agreed
to by the parties, (i) the Stock Option Plan shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement providing for
the issuance or grant of any other interest in
23
<PAGE>
respect of the capital stock of the Company or any subsidiary thereof, shall be
canceled as of the Effective Time, and (ii) the Company shall take all action
necessary to ensure that following the Effective Time no participant in the
Stock Option Plan or other plans, programs or arrangements shall have any right
thereunder to acquire equity securities of the Company, Parent, the Surviving
Corporation or any subsidiary thereof and to terminate all such plans.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule (the "Disclosure
Schedule") delivered to Parent prior to the execution of this Agreement, the
Company hereby represents and warrants to Parent and Purchaser as follows:
SECTION 4.1. Organization and Standing; Capitalization. (a) The
-----------------------------------------
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware with all requisite corporate power and
authority to own its properties and to carry on its business as presently
conducted. The Company is duly qualified and in good standing to transact
business as a foreign corporation in each jurisdiction in which the conduct
24
<PAGE>
or nature of its business or the ownership, leasing or holding of its properties
makes such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect (as defined below). A list of the
jurisdictions in which the Company is so qualified is set forth in Section 4.1
of the Disclosure Schedule. The Company has made available to Parent and
Purchaser true and complete copies of its Certificate of Incorporation, By-laws
and minute books.
(b) The authorized capital stock of the Company consists of 45,000,000
shares, divided into (i) 5,000,000 shares of Preferred Stock, par value $0.001
per share, none of which are issued and outstanding or held in the treasury of
the Company, and (ii) 40,000,000 shares of Common Stock, par value $0.001 per
share, of which 18,623,368 shares are issued and outstanding as of the close of
business December 15, 1995, none of which shares are held in the treasury of the
Company, an additional 1,900,000 shares are reserved for issuance upon exercise
of Options, and the remainder are unissued and not reserved. All the
outstanding shares of Common Stock are, and all shares which may be issued under
the Stock Option Plan will be, when issued, duly authorized, validly issued,
fully paid and nonassessable. Options granted by the Company to purchase
1,343,980 shares of Common
25
<PAGE>
Stock are outstanding as of the close of business December 15, 1995 under the
Stock Option Plan and Options to purchase 370,646 shares of Common Stock were
exercisable as of such time. Except for the Options, there are no outstanding
options or rights to acquire, or any outstanding securities or obligations
convertible into or exchangeable for, Common Stock or any other securities of
the Company and the Company is not obligated, now or in the future, contingently
or otherwise, to issue Common Stock or any other of its securities to any person
or entity.
SECTION 4.2. Authority. The Company has all requisite corporate power
---------
and authority to enter into this Agreement and, subject to approval of this
Agreement by the holders of a majority of the outstanding shares of Common
Stock, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company subject, in the case of this
Agreement, to approval of this Agreement by the holders of a majority of the
outstanding shares of Common Stock. This Agreement has been duly executed and
delivered by the Company and, assuming this Agreement constitutes the valid and
binding agreement of Parent and Purchaser, constitutes the
26
<PAGE>
valid and binding obligation of the Company enforceable in accordance with its
terms, subject to the qualification, however, that enforcement of the rights and
remedies created hereby may be limited by bankruptcy, insolvency, reorganization
and other similar laws of general application relating to or affecting the
rights and remedies of creditors and that the remedy of specific enforcement or
of injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 4.3. No Breach. The execution and delivery of this Agreement
---------
by the Company do not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof (assuming the approval of the
Merger and this Agreement by the Company's stockholders has been obtained and
the approvals specified in Section 4.16 hereof have been obtained) will not,
with or without the giving of notice or the lapse of time, or both, conflict
with, or result in a breach or violation of or a default under, or give rise to
a right of termination, cancellation or acceleration of any obligation or to a
loss of a benefit under (i) the Certificate of Incorporation or By-laws of the
Company or the certificates of incorporation or the by-laws (or the equivalent
thereof) of any of the Subsidiaries, or (ii) any covenant, agreement, indenture
or
27
<PAGE>
instrument to which the Company or any of the Subsidiaries is a party, or (iii)
any order, ruling, decree, judgment, arbitration award, statute, law, ordinance,
rule, regulation or stipulation to which the Company or any of the Subsidiaries
or their respective properties or assets is subject, or result in the creation
of any lien, charge or encumbrance upon any of the properties or assets of the
Company or any of the Subsidiaries, except, in the case of items (ii) and (iii)
above, for those which, individually or in the aggregate, would (x) not have a
material adverse effect on the business, prospects, financial condition, assets,
properties or results of operations of the Company and the Subsidiaries taken as
a whole (a "Material Adverse Effect"), (y) not materially impair the ability of
the Company to perform its obligations hereunder or (z) not prevent the
consummation of the transactions contemplated hereby.
SECTION 4.4. Subsidiaries. The only companies, partnerships or other
------------
organizations in which the Company directly or indirectly owns at least a
majority of the outstanding equity interests thereof (each a "Subsidiary" and
collectively, the "Subsidiaries") are listed below:
28
<PAGE>
Jurisdiction of Incorporation
Subsidiaries or Organization
------------ -----------------------------
Cobra (U.K.) Ltd. United Kingdom
Cobra Europe S.A. France
Cobra Export Incorporated Barbados
Cobra Golf-Japan Incorporated Delaware, U.S.A.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization
with all requisite corporate power and authority to own and operate its
business and properties and to carry on its business as presently conducted.
Each Subsidiary is duly qualified and in good standing to transact business as
a foreign corporation in each jurisdiction in which the conduct or nature of
its business or the ownership, leasing or holding of its properties makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. The Company has delivered to Parent and
Purchaser true and complete copies of the certificates of incorporation, by-
laws or other organizational documents, and has made available minute books,
of each of the Subsidiaries. The outstanding shares of capital stock of each
of the Subsidiaries are validly issued and fully paid and
29
<PAGE>
nonassessable and are owned beneficially and of record by the Company or a
wholly-owned Subsidiary free and clear of all liens, pledges, encumbrances,
charges, agreements or other claims. There are no outstanding options or rights
to acquire, or any outstanding securities or obligations convertible into or
exchangeable for, stock of any class or any other securities of any of the
Subsidiaries, and none of the Company nor any of the Subsidiaries is obligated,
now or in the future, contingently or otherwise, to issue stock of any class or
any other securities of any Subsidiary to any person or entity. The Company does
not own, directly or indirectly, any equity or debt securities of, or own any
other ownership interest in, any corporation, partnership, joint venture, or
other entity or organization other than the Subsidiaries.
SECTION 4.5. Financial Statements. The audited consolidated financial
--------------------
statements of the Company (such term for purposes of this Section 4.5, being
also a reference to Cobra Golf Incorporated II, a California corporation, in
respect of periods prior to September 16, 1993) and its subsidiaries at December
31, 1994, December 31, 1993, December 31, 1992, December 31, 1991 and December
31, 1990 and for the respective fiscal years then ended, and the notes thereto,
reported on by Ernst & Young LLP, and the unaudited
30
<PAGE>
consolidated financial statements of the Company and the Subsidiaries at March
31, 1995, June 30, 1995 and September 30, 1995 and for the three month, six
month and nine month periods then ended, which the Company has made available to
Parent and Purchaser, have been prepared in accordance with generally accepted
accounting principles applied (except as set forth in the notes contained
therein and subject, in the case of quarterly financial statements, to normal
and recurring year end adjustments) on a consistent basis, and present fairly
the consolidated financial position of the Company and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows (or changes in financial position) for each of the
fiscal years or three month, six month or nine month periods then ended (subject
to normal year-end adjustments in the case of any unaudited interim financial
statements). Except as and to the extent reflected or reserved against in the
consolidated balance sheet of the Company and its consolidated Subsidiaries at
September 30, 1995 (the "Balance Sheet"), at September 30, 1995 neither the
Company nor any of the Subsidiaries had any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be reflected on the Balance Sheet.
Since September 30, 1995,
31
<PAGE>
neither the Company nor any of the Subsidiaries has incurred any liabilities or
obligations (a) other than those arising from operations in the ordinary course
of business or (b) specifically disclosed in any document filed with the SEC
prior to the date hereof or (c) those which would not, individually or in the
aggregate, have a Material Adverse Effect and in any such case do not involve
transactions with affiliates of the Company. Except as set forth in the SEC
Filings or as otherwise contemplated by this Agreement, since September 30,
1995, the Company and the Subsidiaries have each operated only in the ordinary
course of business and there have been no changes in the business, prospects,
condition (financial or otherwise), assets, properties or results of operations
of the Company and the Subsidiaries that would, individually or in the
aggregate, have a Material Adverse Effect. Specifically, and without limiting
the generality of the foregoing, since September 30, 1995 (except as set forth
in the SEC Filings or as otherwise contemplated by this Agreement), (a) neither
the Company nor any of the Subsidiaries has (i) amended their charter documents,
by-laws or other organizational documents; (ii) issued or sold (except pursuant
to the exercise of Options under the Stock Option Plan that were outstanding on
September 30, 1995) any shares of its capital stock or any of its other
securities or
32
<PAGE>
issued any securities convertible into or exchangeable for, or options, warrants
to purchase, scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or entered into any contract, understanding or
arrangement with respect to the issuance of, any shares of its capital stock or
any of its other securities, or entered into any arrangement or contract with
respect to the purchase or voting of shares of its capital stock, or adjusted,
split, reacquired, redeemed, combined or reclassified any of its securities, or
made any other changes in its capital structure; (iii) sold or otherwise
disposed of or leased any part of their respective properties or assets or
purchased or otherwise acquired or leased properties or assets except sales or
purchases of inventory and purchases of capital equipment in the ordinary course
of business, or acquired or agreed to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof; (iv) declared, set aside or
paid any dividends on, or made any distributions in respect of, its shares of
outstanding capital stock; (v) (A) granted any general increase in wage or
salary rates or in employee benefits, except in the ordinary course of business
33
<PAGE>
consistent with past practice, or (B) granted any increase in salary or in
employment, retirement, severance or termination or other benefits or pay any
bonus to any officer or director (except as required by existing agreements,
plans or arrangements), (C) entered into any employment contract with any person
which the Company or the relevant Subsidiary does not have the unconditional
right to terminate without material liability, (D) taken any action to cause to
be exercisable any otherwise unexercisable Option under the Stock Option Plan,
or (E) adopted (or amended in any manner which would, individually or in the
aggregate, materially increase the benefits under) any Company Plan (as defined
in Section 4.11); (vi) made any material changes in the type or amount of their
insurance coverages; (vii) made any change in accounting methods, principles or
practices materially affecting assets, liabilities or business, except as may be
required by a change in generally accepted accounting principles; and (viii)
made any material tax election (unless required by law) or settled or
compromised any material income tax liability of the Company or any of the
Subsidiaries except if such action is taken in the ordinary course of business.
SECTION 4.6. Taxes. (a) The Company and each of the Subsidiaries have
-----
timely filed (or have had timely filed
34
<PAGE>
on their behalf) or will file or cause to be timely filed, all material Tax
Returns (as defined below) required by applicable law to be filed by any of them
prior to or as of the Closing Date. All such Tax Returns and amendments thereto
are or will be true, complete and correct in all material respects. There are no
liens for Taxes upon the assets of the Company except for liens for Taxes not
yet due.
(b) The Company and each of the Subsidiaries have paid (or have had paid
on their behalf), or where payment is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), or will
establish or cause to be established on or before the Closing Date, an adequate
accrual for the payment of all material Taxes (as defined below) due with
respect to any period ending prior to or as of the Closing Date.
(c) Prior to the date hereof, the Company and the Subsidiaries have
delivered to Parent all material Tax sharing, Tax indemnity, or similar
agreements to which the Company or any of the Subsidiaries is a party, is bound
by, or has any obligation or liability for Taxes.
(d) As used in this Agreement, (i) "Taxes" shall mean all Federal,
state, local and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including any interest,
additions to
35
<PAGE>
tax, or penalties applicable thereto; and (ii) "Tax Returns" shall mean all
Federal, state, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended Tax Return
relating to Taxes.
SECTION 4.7. No Capital Stock Transactions. There are no outstanding
-----------------------------
contractual obligations of the Company or any of the Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
the Subsidiaries.
SECTION 4.8. Indebtedness and Guarantees. Neither the Company nor any
---------------------------
of the Subsidiaries has any material obligations for money borrowed or under any
guarantees or has any agreements or arrangements to borrow money or to enter
into any such guarantee, except, in each case, such obligations entered into in
the ordinary course of business and not involving transactions with affiliates
of the Company.
SECTION 4.9. Material Contracts. Except as identified in the SEC
------------------
Filings (as defined in Section 4.18), neither the Company nor any of the
Subsidiaries is party to, nor is the Company or any of the Subsidiaries (or
their respective assets) bound by, any contract, indenture, lease or other
agreement which, individually or in the aggregate,
36
<PAGE>
is material to the Company and the Subsidiaries taken as a whole. Except as
identified in the SEC Filings, there are no contracts, indentures, leases or
other agreements between the Company or any Subsidiary, on the one hand, and any
current or former director, officer, employee or 5% or greater shareholder of
the Company or any of their affiliates or family members, on the other. All
contracts, indentures, leases and agreements to which the Company or any of the
Subsidiaries is a party or by which any of their respective assets is bound are
valid and binding, in full force and effect and enforceable against the parties
thereto in accordance with their respective terms, (i) other than such failures
to be so valid and binding, in full force and effect or enforceable which would
not, either individually or in the aggregate, have a Material Adverse Effect,
and (ii) subject to the qualification that enforcement of the rights and
remedies created thereby may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application relating to or
affecting the rights and remedies of creditors and that the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought. There is not under any such
contract, indenture or agreement any existing default, or event, which after
notice or lapse of
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time, or both, would constitute a default, by the Company or any of the
Subsidiaries, or to the Company's knowledge, any other party, except to the
extent any such defaults or events would not, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 4.10. Powers of Attorney. There are no outstanding powers of
------------------
attorney or similar authorizations (including, without limitation, with respect
to Taxes) given by the Company or any of the Subsidiaries, other than powers of
attorney that are terminable at will.
SECTION 4.11. Employee Benefit Plans; Etc. (a) The Company has
---------------------------
delivered to Parent or Purchaser full and complete copies, or full and complete
descriptions in the event any of the following is not in writing, of each bonus,
profit sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance, termination pay, welfare or other employee
benefit agreement, understanding or arrangement, labor agreement, trust plan,
fund or other arrangement maintained by or with respect to which the Company or
any Subsidiary or any trade or business (whether or not incorporated), that
together with the Company would be deemed a "single employer" within the meaning
of Sections 414(b), (c), (m) or (o) of the Internal
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Revenue Code of 1986, as amended (the "Code"), ("ERISA Affiliate") is required
to contribute for the benefit or welfare of any director, officer, employee or
former employee of the Company, any Subsidiary or any ERISA Affiliate (a
"Company Plan"). Each of the Company Plans is, and has been, in material
compliance with all applicable laws including the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Code. There are no actions,
suits or claims pending (other than routine claims for benefits) or any actions,
suits or claims (other than routine claims for benefits) which could reasonably
be expected to be asserted, against any Company Plan or the assets or
fiduciaries of any Company Plan sponsored or maintained by the Company or any of
the Subsidiaries or any "employee benefit plan" ("ERISA Plan") as defined in
Section 3(3) of ERISA established or maintained by an ERISA Affiliate which
would have a Material Adverse Effect on the Company or any of the Subsidiaries
or any of its or their assets. The Internal Revenue Service (the "IRS") has
determined that each Company Plan that is intended to be a qualified plan under
Section 401(a) of the Code is so qualified and the Company is aware of no event
or lack of compliance occurring after the date of such determination by the IRS
that would adversely affect such determination. Except as previously disclosed
to Parent or
39
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Purchaser, no condition exists that could subject the Company or any Subsidiary
to a material civil penalty under Section 502(i) of ERISA or material liability
under Section 4069 of ERISA or 4975 of the Code or the loss of a federal tax
deduction under Section 280G of the Code or other liability with respect to the
Company Plans that is not reflected on the Balance Sheet. None of the Company
Plans are, or have been, subject to Title IV of ERISA or to the minimum funding
requirements of the Code or ERISA. Neither the Company nor any Subsidiary is
subject to any actual or contingent, direct or indirect material liability under
Title IV of ERISA. Apart from benefits from "employee pension benefit plans"
("ERISA Pension Plans") as defined in Section 3(2) of ERISA and benefits
described under Section 4980 of the Code, neither the Company nor any of the
Subsidiaries has any obligation to provide benefits under any Plan except as to
its active employees. Each "employee welfare benefit plan" ("ERISA Welfare
Plan") as defined in Section 3(1) of ERISA of the Company or any ERISA Affiliate
that is a "group health plan" within the meaning of Section 4980B(g)(2)(B) of
the Code has been administered in accordance with Title I, Subtitle B, Part 6 of
ERISA and has met the requirements of Section 4980B of the Code.
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(b) The Company has heretofore made available to Parent and
Purchaser correct and complete copies of each of the following:
(i) the most recent IRS Form 5500 and all schedules thereto, if
any, with respect to each Company Plan;
(ii) the most recent determination letter issued by the IRS
regarding the qualified status of each such Company Plan that is an ERISA
Pension Plan;
(iii) the most recent accountant's report, if any, with respect to
each Company Plan; and
(iv) the most recent summary plan description, if any, with
respect to each Company Plan.
SECTION 4.12. Employees; Labor Matters.
------------------------
(a) Except as disclosed in the SEC Filings, no employee of the
Company or any of the Subsidiaries has a salary rate in excess of $100,000 per
annum.
(b) Neither the Company nor any of the Subsidiaries is a party to any
collective bargaining agreement or other contract with or commitment to any
labor union or association representing any employee of the Company or any of
the Subsidiaries, nor does any labor union or collective bargaining agent
represent any employees of the Company or any of the Subsidiaries. No such
agreement,
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contract or other commitment has been requested by, or is under discussion by
management of the Company or any of the Subsidiaries (or, to the knowledge of
the Company, any management group or association of which the Company or any of
the Subsidiaries is a member or otherwise a participant) with, any group of
employees or others, nor are there any other current activities known to the
Company or any of the Subsidiaries to organize any employees of the Company or
any of the Subsidiaries into a collective bargaining unit. There is no unfair
labor practice complaint pending or, to the Company's knowledge, threatened
against the Company or any of the Subsidiaries that, if resolved against the
Company, would have a Material Adverse Effect. Since January 1, 1990 there has
been no labor strike, slow-down, stoppage or other dispute involving the Company
or any of the Subsidiaries and no such dispute is now pending or, to the
Company's knowledge, threatened against the Company or any of the Subsidiaries.
SECTION 4.13. Proprietary Rights. (a) The Disclosure Schedule sets
------------------
forth a complete and accurate list of all issued and pending patents and service
marks, registered trademarks, trademarks for which there are pending
applications, trade names and applications and registrations for any of the
foregoing in the United States or elsewhere
42
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owned or licensed to the Company and the Subsidiaries in connection with the
conduct of their respective businesses. There are no copyrights that are
material to the business of the Company and the Subsidiaries as presently
conducted.
(b) To the Company's knowledge, except as would not individually or in
the aggregate have a Material Adverse Effect, the Company and the Subsidiaries
can enforce against third parties and have the right to use, free and clear of
any payment or encumbrance, the patents, trademarks and service marks
(registered or unregistered), trade names and copyrights (registered or
unregistered) and applications and registrations for any of the foregoing in the
United States or elsewhere referred to in the Disclosure Schedule and all other
confidential information, trade secrets, proprietary processes and know-how used
in the conduct of their respective businesses (collectively, the "Intellectual
Property"), and the consummation of the transactions contemplated hereby will
not alter or impair such rights or the ability of the Surviving Corporation to
exercise such rights in continuing to conduct the business of the Company in any
material respect. No claims are pending or, to the knowledge of the Company,
threatened by any person with respect to the ownership, validity, infringement,
enforceability or use of any such Intellectual Property,
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which claims, if successfully asserted, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. To the knowledge of
the Company, no Intellectual Property used by the Company or any of the
Subsidiaries in the conduct of their respective businesses, is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any court,
arbitrator or administrative agency or infringes the intellectual property
rights of others.
SECTION 4.14. Litigation. There are no claims, actions, suits,
----------
proceedings or investigations pending or, to the Company's knowledge, threatened
against the Company or any of the Subsidiaries, or any assets or properties
owned or, to the Company's knowledge, leased by the Company or any of the
Subsidiaries (including any such claims, actions, suits, proceedings or
investigations relating to environmental matters), before any court,
administrative, governmental or regulatory authority or body, arbitration panel
or other similar authority, domestic or foreign, except any such claims,
actions, suits, proceedings or investigations which, if adversely determined,
would not have, individually or in the aggregate, a Material Adverse Effect
(whether or not covered by insurance), and the Company knows of no reasonable
basis for any such claim, action,
44
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suit, proceeding or investigation. Neither the Company nor any of the
Subsidiaries nor any property owned or, to the Company's knowledge, leased by
them is subject to any order, judgment, injunction or decree having,
individually or in the aggregate, a Material Adverse Effect.
SECTION 4.15. Environmental Matters. (a) To the knowledge of the
---------------------
Company, there are no Environmental Liabilities of the Company or any Subsidiary
other than:
(i) Environmental Liabilities disclosed in the SEC Filings; and
(ii) Environmental Liabilities that have not had, and are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.
(b) The following terms as used in this Section shall have the
following meanings:
"Environmental Liabilities" means any and all liabilities, losses, costs
or expenses of the Company or any Subsidiary (including any entity which is a
predecessor of the Company or any Subsidiary), whether accrued, contingent,
absolute, determined, determinable, vested, potential or threatened and any
existing condition, situation or set of circumstances which could result in such
a liability, loss, cost or expense, which (i) arise under or relate to matters
covered by Environmental Laws and (ii) relate to actions
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occurring or conditions existing on or prior to the Effective Time, or which
relate to any current or reasonably anticipated requirements or restrictions
under Environmental Laws that may reasonably be expected to have a material
impact on the ability of the Company or any of the Subsidiaries to conduct its
presently contemplated operations.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, and governmental restrictions relating to human health,
safety or the environment, including, without limitation, those relating to
emissions, discharges or releases of pollutants, contaminants or other hazardous
substances or wastes into the environment, including without limitation ambient
air, surface water, ground water or land, or otherwise relating to the
treatment, storage, disposal, transport or handling of or exposure to
pollutants, contaminants or other hazardous substances or wastes or the clean-up
or other remediation thereof.
SECTION 4.16. Governmental Approvals. Except (a) for applicable
----------------------
requirements of the Exchange Act and the rules and regulations thereunder, (b)
the filings and recordation of appropriate merger documents required by the
DGCL, (c) the
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filings required under and compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), or (d) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not,
individually or in the aggregate, (i) have a Material Adverse Effect, (ii)
impair in any material respect the ability of the Company to perform its
obligations hereunder or (iii) prevent or delay consummation of the transactions
contemplated hereby, no approval, order or authorization of, or filing or
registration with, allowance by, or consent of or notification to any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required to be obtained or made by the Company or any
of the Subsidiaries in connection with the execution and delivery of this
Agreement, the performance of obligations of the Company hereunder or the
consummation by the Company of the transactions contemplated hereby.
SECTION 4.17. Permits, Compliance with Applicable Law. The Company and
---------------------------------------
the Subsidiaries hold, and at all required times have held, all permits,
licenses, approvals and other authorizations from all Governmental Entities
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necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except where the failure to hold such permits, licenses, approvals
and authorizations would not, individually or in the aggregate, have a Material
Adverse Effect. The Company and the Subsidiaries are, and at all times have
been, in compliance with the terms of the Company Permits, except where the
failure to comply would not, individually or in the aggregate, have a Material
Adverse Effect. The businesses of the Company and the Subsidiaries are not
being, and have not been, conducted in violation of any law, ordinance or
regulation of any Governmental Entity except for violations or possible
violations which are not and will not, individually or in the aggregate, have a
Material Adverse Effect. No investigation or review by any Governmental Entity
with respect to the Company or any of the Subsidiaries is pending or, to the
knowledge of the Company, threatened, nor, to the knowledge of the Company, has
any Governmental Entity indicated an intention to conduct the same, other than
those which the Company reasonably believes will not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.18. SEC Filings. The Company has made available to Parent
-----------
and Purchaser true and complete copies of (i) its Annual Reports on Form 10-K
for the fiscal years
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ended December 31, 1994 and December 31, 1993 as filed with the SEC, (ii) its
Quarterly Reports on Form 10-Q filed with the SEC for each quarter or quarterly
period since September 30, 1993, (iii) all definitive proxy statements filed
with the SEC relating to the Company's meetings of stockholders (whether annual
or special) during 1995, 1994 and 1993, (iv) all other forms, reports,
statements, documents and other filings required to be filed by the Company with
the SEC in connection with and since its initial public offering and (v) all
exhibits, schedules, documents incorporated by reference, amendments and
supplements to the foregoing (collectively, the "SEC Filings"). The SEC Filings
(i) were prepared in accordance with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as the case may
be, and the rules and regulations thereunder and (ii) did not, as of their
respective dates, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Except to the extent any information in an SEC Filing has
been revised, corrected or superseded by a later-filed SEC Filing filed and
publicly available prior to the date of this Agreement, none of the SEC Filings
contains
49
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any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Any filings made by the Company with the SEC between the date hereof
and the Effective Time (other than the Proxy Statement (as defined in Section
6.1(c)), the Information Statement and the Schedule 14D-9, each of which shall
meet the standards set forth in Section 4.20) will meet the standards set forth
in the preceding sentence.
SECTION 4.19. Disclosures. Neither this Agreement nor any certificate
-----------
or notice furnished by the Company or any of the Subsidiaries pursuant to this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to make such statement or certificate or the statements
contained herein or therein, in the light of the circumstances under which they
were made, not misleading. There are no facts which the Company has not
disclosed to Parent and Purchaser in writing which would have, or, so far as the
Company can now reasonably foresee, are likely to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 4.20. Company Disclosure Documents. Each document required to
----------------------------
be filed by the Company with the SEC in
50
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connection with the transactions contemplated hereby (the "Company Disclosure
Documents"), including, but not limited to, the Schedule 14D-9, the Proxy
Statement or the Information Statement, and any supplements or amendments
thereto will, when filed (a) comply in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder and
(b) contain no untrue statement of any material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they are made, not
misleading, except that no representation and warranty is made by the Company
pursuant to this Section 4.20 with respect to information furnished in writing
by Parent or Purchaser for inclusion in the Company Disclosure Documents, and
the Company will advise Parent and Purchaser in writing if prior to the
Effective Time it shall obtain knowledge of any facts with respect to itself,
any of the Subsidiaries or any of the Selling Stockholders that would make it
necessary to supplement or amend the Company Disclosure Documents in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading or to comply with applicable laws, rules and
regulations, and will promptly amend or supplement the Company Disclosure
Documents as required and distribute the same to its stockholders. In
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the event Parent or Purchaser shall advise the Company as to its obtaining
knowledge of any facts that would make it necessary to supplement or amend the
Company Disclosure Documents as provided in Section 5.5, the Company shall
promptly amend or supplement the Company Disclosure Documents as required and
distribute the same to its stockholders.
SECTION 4.21. State Takeover Statutes. The Company Board has approved
-----------------------
this Agreement and the transactions contemplated hereby, and the entering into,
and performance by Parent of the Stock Option and Tender Agreement, and such
approval is sufficient to render inapplicable to the Offer, the Merger, this
Agreement, the Stock Option and Tender Agreement and the other transactions
contemplated hereby and thereby, the provisions of Section 203 of the DGCL. To
the Company's knowledge no other "fair price", "moratorium", "control share
acquisition", or other anti-takeover statute or regulation, applies or purports
to apply to the Offer, the Merger, this Agreement, the Stock Option and Tender
Agreement and the other transactions contemplated hereby and thereby.
52
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser hereby represent and warrant as follows:
SECTION 5.1. Organization and Standing; Share Ownership. Each of
------------------------------------------
Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The only issued and
outstanding shares of capital stock of Purchaser are owned by Parent.
SECTION 5.2. Authority. Parent and Purchaser have all requisite
---------
corporate power and authority to enter into this Agreement and, in the case of
Parent, the Stock Option and Tender Agreement, and to consummate the
transactions contemplated by this Agreement and, in the case of Parent, the
Stock Option and Tender Agreement. The execution and delivery of this Agreement
by Parent and Purchaser and of the Stock Option and Tender Agreement by Parent,
and the consummation of the transactions contemplated by this Agreement and the
Stock Option and Tender Agreement, have been duly authorized by all necessary
corporate action on the part of Parent and Purchaser, as applicable. This
Agreement has been duly executed and delivered by Parent and Purchaser
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and, assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes the valid and binding obligation of Parent and Purchaser,
and the Stock Option and Tender Agreement has been duly executed and delivered
by Parent and, assuming that such agreement constitutes the valid and binding
obligation of the Selling Stockholders, constitutes the valid and binding
obligation of Parent, and each such agreement is enforceable in accordance with
their respective terms, subject, in each case, to the qualification, however,
that enforcement of the rights and remedies created hereby and thereby may be
limited by bankruptcy, insolvency, reorganization and other similar laws of
general application relating to or affecting the rights and remedies of
creditors and that the remedy of specific enforcement or of injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
SECTION 5.3. No Breach. The execution and delivery of this Agreement
---------
by Parent or Purchaser and of the Stock Option and Tender Agreement by Parent do
not, and consummation of the transactions contemplated hereby and thereby and
compliance with the provisions hereof and thereof (assuming the approval of the
Merger and this Agreement by the Company's stockholders has been obtained and
approvals
54
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specified in Section 5.4 hereof have been obtained) will not, with or
without the giving of notice or the lapse of time, or both, conflict with or
result in a breach or violation of or a default under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to a loss of a
benefit under, (i) the Certificate of Incorporation or By-laws of Parent or
Purchaser, as the case may be, or (ii) any covenant, agreement, indenture or
instrument to which it is a party, or (iii) any order, ruling, decree, judgment,
arbitration award, statute, law, ordinance, rule, regulation or stipulation to
which Parent or Purchaser or their respective properties or assets is subject,
or result in the creation of any lien, charge or encumbrance upon any of their
respective properties or assets, except, in the case of items (ii) and (iii)
above, for those which, individually or in the aggregate, would not materially
impair the ability of Parent or Purchaser to perform its obligations hereunder
or prevent the consummation of the transactions contemplated hereby.
SECTION 5.4. Governmental Approvals. Except (a) for the applicable
----------------------
requirements of the Exchange Act and the rules and regulations thereunder, (b)
the filings and recordation of appropriate merger documents required by the
DGCL, (c) the filings required under and compliance with the HSR Act, (d) the
filings or approvals required under the laws
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and regulations of various foreign jurisdictions in respect of the Merger, or
(e) where the failure to obtain such consent, approval, authorization or permit,
or to make such filing or notification would not individually or in the
aggregate (i) materially impair the ability of Parent or Purchaser to perform
its obligations hereunder or (ii) prevent the consummation of the transactions
contemplated hereby, no approval, order or authorization of, or filing or
registration with, allowance by, or consent of or notification to any
Governmental Entity is required to be obtained or made by Parent or Purchaser,
in connection with the execution and delivery of this Agreement or the Stock
Option and Tender Agreement, the performance of obligations of Parent and
Purchaser hereunder and thereunder or the consummation by Parent and Purchaser
of the transactions contemplated hereby or thereby.
SECTION 5.5. Information. The Company Disclosure Documents and any
-----------
amendments or supplements thereto, insofar as they contain information relating
to Parent and Purchaser that has been furnished in writing by Parent or
Purchaser for inclusion therein, will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder, and
each of Parent or Purchaser will promptly advise the Company in writing if prior
to the
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Effective Time it shall obtain knowledge of any facts with respect to itself,
the other of them or any affiliate of either of them that would make it
necessary to supplement or amend the Company Disclosure Documents in order to
make the statements therein in the light of the circumstances under which they
were made not misleading or to comply with applicable laws, rules and
regulations. No representation or warranty is made by Parent or Purchaser
pursuant to this Section 5.5 other than with respect to information in the
Company Disclosure Documents relating solely to Parent and Purchaser. The Offer
Documents and any supplement thereto will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, and the Offer Documents and any supplement thereto will not contain,
as of the date thereof, any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by Parent or
Purchaser with respect to the statements made or incorporated by reference
therein based on information supplied by the Company for inclusion or
incorporation therein.
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SECTION 5.6. Financing. Parent or Purchaser has the funds, or has
---------
binding written commitments from responsible financial institutions to provide
Purchaser with the funds, necessary to consummate the Offer and the Merger.
ARTICLE VI
COVENANTS
SECTION 6.1. Covenants of the Company.
------------------------
(a) Ordinary Course. Except as set forth on the Disclosure Schedule,
---------------
prior to the Effective Time, the Company shall conduct, and shall cause each of
the Subsidiaries to conduct, their respective businesses in the ordinary course
and shall use, and shall cause each of the Subsidiaries to use, reasonable best
efforts consistent with past practice and policies to maintain in effect all
existing qualifications, licenses, permits, approvals and other authorizations
referred to in Sections 4.1, 4.4 and 4.17, to preserve their respective business
organizations intact and, consistent with efficient and economical management,
to retain the services of their respective present officers, employees and
agents to the end that they may preserve their good will and their respective
business relationships with customers, suppliers and others.
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(b) Meeting of the Company's Stockholders. The Company will, as soon
-------------------------------------
as practicable after the expiration of the Offer, take all action necessary
under applicable law and its Certificate of Incorporation and By-laws to convene
and hold a special meeting of its stockholders (the "Special Meeting") if such
meeting is required by applicable law for the purpose of approving the Merger
and this Agreement. At any such Special Meeting, or if the Company shall obtain
approval of this Agreement and the Merger by written consent of the stockholders
of the Company, Parent and Purchaser shall vote or execute written consents with
respect to all shares of Common Stock owned by them in favor of approval and
adoption of this Agreement and the Merger. None of Parent, Purchaser or any
other direct or indirect subsidiary of Parent shall, prior to the Effective
Time, dispose of any shares of Common Stock; provided, however, that any such
shares may be (i) transferred to Purchaser by Parent or any other direct or
indirect subsidiary of Parent or (ii) disposed of in connection with any
Superior Transaction (as defined below) entered into by the Company pursuant to
Section 6.1(l)(iii). Subject to the fiduciary duties of the Company Board and
the terms of this Agreement, including the provisions of Section 6.1(l) hereof,
the Company shall use its reasonable best efforts to obtain at the Special
Meeting
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a favorable vote of its stockholders on the approval and adoption of the Merger
and this Agreement.
(c) Proxy/Information Statement. As soon as practicable after the
---------------------------
execution of this Agreement, the Company shall prepare and file with the SEC
under the Exchange Act, and shall use its reasonable best efforts to have
cleared by the SEC both a proxy statement (the "Proxy Statement") for the
Special Meeting, if required by law, and the Information Statement, for use if a
Special Meeting is not so required, and as soon as possible thereafter
disseminate to its stockholders the Proxy Statement or the Information Statement
as appropriate. Parent and Purchaser shall provide such assistance, information
and cooperation to the Company as is reasonably required to describe Parent or
Purchaser for purposes of the Proxy Statement and Information Statement. The
Company will provide Parent, Purchaser and their counsel with a copy of any
written comments or telephonic notification of any oral comments the Company may
receive from the SEC or its staff with respect to the Proxy Statement or
Information Statement promptly after the receipt thereof and will provide
Parent, Purchaser and their counsel with a copy of any written responses and
telephonic notification of any oral responses of the Company or its counsel.
Parent, Purchaser and their counsel shall be given
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an opportunity to review and comment on the Proxy Statement and Information
Statement and any amendments or supplements thereto prior to the filing thereof
with the SEC. The Company will not mail any Proxy Statement or Information
Statement, or any amendment or supplement thereto, to which the Parent
reasonably objects.
(d) Governing Documents. Prior to the Effective Time, the Company
-------------------
shall not, nor shall it permit any of the Subsidiaries to, amend their
respective charter documents, by-laws or other organizational documents.
(e) Capital Structure. Except as set forth on the Disclosure Schedule,
-----------------
prior to the Effective Time, the Company shall not, nor shall it permit any of
the Subsidiaries (except with the prior written approval of Parent and
Purchaser) to, issue or sell (except pursuant to the exercise of Options under
the Stock Option Plan that are outstanding on the date hereof) any shares of its
capital stock or any of its other securities or issue any securities convertible
into or exchangeable for, or options, warrants to purchase, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to, or
enter into any contract, understanding or arrangement with respect to the
issuance of, any shares of its capital stock or any of its other securities, or
enter into any arrangement or contract with
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respect to the purchase or voting of shares of its capital stock, or adjust,
split, reacquire, redeem, combine or reclassify any of its securities, or make
any other changes in its capital structure.
(f) Indebtedness; Loans. Except as set forth on the Disclosure
-------------------
Schedule, prior to the Effective Time, the Company shall not, nor shall it
permit any of the Subsidiaries (except as disclosed on the Disclosure Schedule
or with the prior written approval of Parent and Purchaser) to, (i) incur
(contingently or otherwise) any debt or other obligation to pay money borrowed
except in the ordinary course of business or enter into any guarantee of any
such obligation of another person or mortgage, pledge or subject to any lien,
charge or other encumbrance their assets, properties or business, or (ii) make
any loans, advances or capital contributions to, or investments in, any other
person.
(g) Certain Commitments. Except as set forth on the Disclosure
-------------------
Schedule, prior to the Effective Time, the Company shall not, nor shall it
permit any of the Subsidiaries (except with the prior written approval of Parent
and Purchaser) to, enter into, amend or affirmatively renew any contract,
commitment, lease or other transaction (whether of real or personal property)
except such contracts,
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commitments, leases or other transactions that are not material or are in the
ordinary course of business and do not involve affiliates of the Company.
(h) No Dispositions or Acquisitions. Except as set forth on the
-------------------------------
Disclosure Schedule, prior to the Effective Time, the Company shall not, nor
shall it permit any of the Subsidiaries (except as disclosed on the Disclosure
Schedule or with the prior written approval of Parent and Purchaser) to, sell or
otherwise dispose of or lease any part of their respective properties or assets
or purchase or otherwise acquire or lease properties or assets except sales or
purchases of inventory and purchases of capital equipment in the ordinary course
of business, or acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof.
(i) Dividends; Distributions. Prior to the Effective Time, the Company
------------------------
shall not declare, set aside or pay any dividends on, or make any distributions
in respect of, its shares of outstanding capital stock.
(j) Certain Employee Matters. Except as set forth on the Disclosure
------------------------
Schedule, prior to the Effective Time, the
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Company shall not, nor shall it permit any of the Subsidiaries (except as
disclosed in the Disclosure Schedule or with the prior written approval of
Parent and Purchaser) to, (i) grant any general increase in wage or salary rates
or in employee benefits, except in the ordinary course of business consistent
with past practice, or (ii) grant any increase in salary or in employment,
retirement, severance or termination or other benefits or pay any bonus to any
officer or director (except as required by existing agreements, plans or
arrangements) or (iii) enter into any employment contract with any person which
the Company or the relevant Subsidiary does not have the unconditional right to
terminate without material liability other than as set forth in Section 6.1(q),
(iv) except to the extent permitted by Section 3.3 hereof, take any action to
cause to be exercisable any otherwise unexercisable Option under the Stock
Option Plan, or (v) adopt (or amend in any manner which would, individually or
in the aggregate, materially increase the benefits under) any Company Plan.
(k) Insurance. Prior to the Effective Time, the Company shall not, nor
---------
shall it permit any of the Subsidiaries (except with the prior written approval
of Parent and Purchaser) to, make any material changes in the type or amount of
their insurance coverages.
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(l) No Solicitation. (i) The Company, the Subsidiaries and their
---------------
respective officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of the Subsidiaries) (collectively, the
"Company's Representatives") shall immediately cease any discussions or
negotiations with any party that may be ongoing with respect to any Competing
Transaction (as defined below). From and after the date hereof and prior to the
Effective Time, the Company shall not, nor shall it permit any of the
Subsidiaries or any of the Company's Representatives to (a) solicit or initiate,
or encourage the submission of, any proposal, or (b) participate in, directly or
indirectly, any discussions or negotiations, or furnish to any person any
information, or take any other action to facilitate any inquiries or the making
of any proposal, that might reasonably be expected to lead to any Competing
Transaction. Notwithstanding the foregoing, prior to the acceptance for payment
and payment for shares of Common Stock pursuant to the Offer, the Company may
furnish information concerning its business, properties or assets to, or enter
into discussions or negotiations with, any corporation, partnership, person or
other entity or group that makes after the date hereof a bona fide unsolicited
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expression of interest, offer or proposal concerning any Competing Transaction,
if (A) the Company Board, after consultation with its outside legal counsel,
determines in good faith that failure to take such action would be inconsistent
with the Company Board's fiduciary duties to the stockholders of the Company
under applicable law and (B) prior to taking such action, the Company (x)
provides reasonable notice to Parent, orally and in writing, to the effect that
it is taking such action, which notice shall describe the material terms and
conditions of such expression of interest, offer or proposal, and the identity
of the person making it, and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form. The Company will keep
Parent fully informed of the status and details (including amendments and
proposed amendments) of any such expression of interest, offer or proposal.
Nothing contained herein shall be construed to prohibit the Company Board from
taking and disclosing to the stockholders of the Company a position as
contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act, or from making
such other disclosure to stockholders if, in the good faith judgment of the
Company Board, after consultation with the Company's outside legal counsel,
failure to do so would be inconsistent with its fiduciary duties to the
stockholders
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of the Company; provided that the Company will not, except as permitted by
Section 6.1(l)(iii), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend, any expression of interest, offer or proposal
with respect to a Competing Transaction.
(ii) For purposes of this Agreement, "Competing Transaction" shall mean
any of the following (other than transactions between the Company, Parent and
Purchaser or their affiliates contemplated hereunder) involving the Company or
the Subsidiaries: (A) any merger, consolidation, business combination, share
exchange, sale of substantially all assets, recapitalization, liquidation,
dissolution or other similar transaction; (B) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of a substantial amount of the
assets of the Company and the Subsidiaries, taken as a whole, in a single
transaction or series of transactions; (C) any tender offer or exchange offer
for 20% or more of the outstanding shares of capital stock of the Company; (D)
any acquisition or purchase, directly or indirectly, in a single transaction or
series of transactions, by any person or "group" (as such term is defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
beneficial ownership or the
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right to acquire beneficial ownership of 20% or more of the then outstanding
shares of capital stock of the Company; or (E) any other transaction, the
consummation of which would reasonably be expected to impede, interfere with,
prevent or materially delay the Offer or the Merger or which would reasonably be
expected to dilute materially the benefits to Parent and Purchaser of the
transactions contemplated hereby, except that any transaction that would be
permitted pursuant to Section 6.1(a) and not be a breach of any other provision
(including without limitation the provisions, together with the related
Disclosure Schedules, of Sections 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h),
6.1(i), 6.1(j), 6.1(k) and 6.1(o)) of this Agreement will not be considered a
Competing Transaction under clause (E) above.
(iii) Except as set forth in this Section 6.1(l), neither the Company
Board nor any committee thereof shall (A) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation by the Company Board or any such committee, of the Offer, this
Agreement or the Merger, or (B) approve, recommend, or propose to approve or
recommend, or cause the Company to enter into any agreement with respect to, any
Competing Transaction. Notwithstanding the foregoing, in the event prior to the
time of acceptance for payment of the
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shares of Common Stock in the Offer the Company Board, after consultation with
its outside legal counsel, determines in good faith that the failure to take
such action would be inconsistent with the Company Board's fiduciary duties to
the stockholders of the Company under applicable law, the Company Board may
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, or approve or recommend, or cause the Company to enter into any
agreement with respect to, a bona fide offer by a third party to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the shares of Common Stock then outstanding on a fully diluted
basis or all or substantially all of the assets of the Company on terms which
the Company Board determines in its good faith judgment (based on the advice of
a financial advisor of nationally recognized reputation) to be more favorable to
the Company's stockholders than the Offer and the Merger (a "Superior
Transaction"), but in any such case only after providing one business day's
written notice to Parent and Purchaser advising Parent and Purchaser that the
Company Board has received such other offer, specifying the material terms and
conditions of such offer and identifying the person making such offer.
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(m) Advice of Changes. The Company shall promptly give notice to
-----------------
Parent and Purchaser upon becoming aware of (i) any representation or warranty
of the Company contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect, or (ii) the failure by the Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement shall use its reasonable best efforts to
prevent or promptly remedy the same.
(n) Other Actions. Except as contemplated by this Agreement, the
-------------
Company will not nor will it permit any of the Subsidiaries to take or to agree
or commit to take any action that would result in (i) any of the Company's
representations or warranties hereunder qualified as to materiality being untrue
and any such representations and warranties that are not so qualified being
untrue in any material respect or (ii) any of the conditions to the Offer set
forth in Annex A not being satisfied.
(o) Tax Matters. Except as set forth on the Disclosure Schedule, the
-----------
Company will not make any material tax election (unless required by law) or
settle or compromise
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any material income tax liability of the Company or any of the Subsidiaries
except if such action is taken in the ordinary course of business and Parent and
Purchaser shall have been provided reasonable prior notice thereof. The Company
shall consult with Parent and Purchaser before filing or causing to be filed any
material Tax Return of the Company or any of the Subsidiaries or before
executing or causing to be executed any agreement or waiver extending the period
for assessment or collection of any Taxes of the Company or any of the
Subsidiaries.
(p) Stop Transfer. The Company agrees with, and covenants to, Parent
-------------
and Purchaser that the Company shall notify the Company's transfer agent that it
may not register the transfer of any certificate representing any Selling
Stockholder's Shares (as defined in the Stock Option and Tender Agreement),
unless such transfer is made in accordance with the terms of this Agreement and
the Stock Option and Tender Agreement.
(q) Employment and Consulting Agreements. Prior to the consummation of
------------------------------------
the Offer, the Company shall offer employment agreements to the executives
listed in Exhibit A hereto substantially in the form of Exhibit B and C hereto.
(r) Estoppel Certificate. The Company shall use reasonable best
--------------------
efforts to obtain from each owner and/or
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lessor of the leased real properties used by the Company and identified in the
Disclosure Schedule an estoppel certificate substantially in the form attached
hereto as Exhibit D.
SECTION 6.2. Hart-Scott-Rodino Act Filings. Parent and Purchaser shall
-----------------------------
promptly file an acquiring person's notification and report form required by the
HSR Act, and the Company shall promptly file an acquired person's notification
and report form required by the HSR Act, with respect to the transactions
contemplated by this Agreement and the Stock Option and Tender Agreement. Each
filing party shall seek early termination of the waiting period under the HSR
Act applicable to such transactions, and each shall respond promptly to any
request for additional information it shall receive from the Federal Trade
Commission or the Department of Justice.
SECTION 6.3. Public Announcements. Subject to applicable legal
--------------------
requirements or pursuant to any listing agreement with NASDAQ, each party agrees
that any press release or other public announcement regarding the transactions
contemplated by this Agreement and the Stock Option and Tender Agreement will be
made only after consultation with the other party hereto.
SECTION 6.4. Access to Information. Subject to any applicable legal
---------------------
requirement, the Company shall, upon
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reasonable notice, on and after the date of this Agreement, give, and shall
cause each of the Subsidiaries to give, Parent, Purchaser and the duly
authorized attorneys, accountants or other representatives of them full access
during normal business hours to make or cause to be made such investigation of
the properties and business of the Company and each of the Subsidiaries and of
its and their financial and legal condition as Parent and Purchaser deem
necessary or advisable to familiarize themselves with such properties, business
and other matters and to investigate the representations, warranties, covenants
and agreements of the Company set forth herein, provided that such investigation
shall not interfere unreasonably with normal operations, and the Company shall
furnish, and shall cause each of the Subsidiaries to furnish, such financial and
operating data and other information (including without limitation, Tax Returns
of the Company and the Subsidiaries) with respect to the business, properties
and condition of the Company and the Subsidiaries as Parent and Purchaser shall
from time to time reasonably request provided, that the foregoing shall not
require the Company to permit any inspection, or to disclose any information,
which in the reasonable judgment of the Company would result in the disclosure
of any trade secrets of third parties or violate any obligation of the Company
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with respect to confidentiality if the Company shall have used reasonable best
efforts to obtain the consent of such third party to such inspection or
disclosure. All requests for information made pursuant to this Section shall be
directed to the Chief Financial officer of the Company or such person as may be
designated by any such officer. The Confidentiality Agreement dated June 19,
1995, as amended through the date hereof, between Parent and the Company (the
"Confidentiality Agreement") shall apply with respect to the Evaluation
Materials (as defined in the Confidentiality Agreement).
SECTION 6.5. Further Action. Subject to the terms and conditions
--------------
herein provided, each of the parties hereto agrees to use reasonable efforts to
take or cause to be taken by the Company, Purchaser or Parent, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the Offer and the Merger and the other
transactions contemplated by this Agreement and the Stock Option and Tender
Agreement, including using reasonable efforts to obtain all necessary waivers,
consents and approvals, effecting all necessary registrations and filings, and
defending any lawsuits or other proceedings, whether
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judicial or administrative, challenging this Agreement or the consummation of
any of the transactions contemplated hereby, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, provided that none of Parent, Purchaser or the Company
shall be required to divest any business or assets. In connection with and
without limiting the foregoing, the Company shall (i) take all action reasonably
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger, this Agreement,
the Stock Option and Tender Agreement or any of the other transactions
contemplated by this Agreement or the Stock Option and Tender Agreement and (ii)
if any state takeover statute or similar statute or regulation becomes
applicable to the Offer, the Merger, this Agreement, the Stock Option and Tender
Agreement or any other transaction contemplated by this Agreement or the Stock
Option and Tender Agreement, take all action reasonably necessary to ensure that
the Offer, the Merger and the other transactions contemplated by this Agreement
and the Stock Option and Tender Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer, the Merger, this
Agreement, the
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Stock Option and Tender Agreement and the other transactions contemplated by
this Agreement or the Stock Option and Tender Agreement. Notwithstanding the
foregoing, the Company Board shall not be prohibited from taking any action
permitted by Section 6.1(l) hereof.
SECTION 6.6. Transfer Taxes. The Company and Parent shall cooperate in
--------------
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer, stamp, recording and any
similar taxes ("Transfer Taxes"). Parent shall pay or cause to be paid, without
withholding from the amounts payable to any holder of any shares of Common
Stock, all Transfer Taxes.
SECTION 6.7. Environmental Assessment. Purchaser may, at its sole
------------------------
expense, commence, and, if so, the Company shall cooperate with Purchaser to
facilitate, an environmental assessment of the Company (the "Environmental
Study"), including all real property, and to the extent possible, previously
owned or leased real property upon which the Company is conducting or has at any
time conducted operations (the "Properties"). The Environmental Study shall be
completed prior to acceptance for payment, and payment for, any shares of Common
Stock in the Offer and shall
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identify and assess the nature and extent of any liabilities relating to
Hazardous Materials or otherwise arising under applicable Environmental Laws. It
may include, at the sole discretion of Purchaser, any and all reasonable methods
technically available for such investigations, including visual examination of
the Properties, records reviews, interviews with current and, to the extent
possible, former employees, discussions with representatives of Governmental
Entities, and soil and groundwater sampling. Parent and Purchaser shall use
reasonable efforts not to interrupt the business activities of the Company or
the Subsidiaries in the conduct of the Environmental Study, including by
providing advance notice to the Company of any on-site visits which may be
required to be conducted, and completing such investigation in a timely manner.
As used in this Agreement, the term "Hazardous Materials" means those materials,
substances or wastes that are regulated by, or form the basis of liability
under, any Environmental Law, including PCBs, pollutants, solid wastes,
explosive or regulated radioactive materials or substances, hazardous or toxic
materials, substances, wastes or chemicals, petroleum (including crude oil or
any fraction thereof) or petroleum distillates, asbestos or asbestos containing
materials, materials listed in 49 C.F.R. Section 172.101 and materials defined
as
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hazardous substances pursuant to Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended to
the date hereof.
SECTION 6.8. Covenants of Parent and Purchaser.
---------------------------------
(a) Continuation of Employee Benefits. Parent shall cause the Company
---------------------------------
and the Subsidiaries to maintain, for a period of one year following the
Effective Time, employee benefit plans (other than any plans based on equity
securities or any equivalent thereof and other than the Company's annual
incentive bonus program) for employees of the Company and the Subsidiaries
generally that are substantially comparable in the aggregate to those provided
under the employee benefit plans of the Company and the Subsidiaries in effect
on the date of this Agreement (including, but not limited to, any severance pay
or arrangements but not including any plans based on equity securities or any
equivalent thereof and other than the Company's annual incentive bonus program).
Notwithstanding the above, the Company and the Subsidiaries shall have the right
following the Effective Time (i) to transfer to one or more employee benefit
plans maintained by Parent or any of its affiliates which are, in the aggregate,
substantially comparable to the plans of the Company and the Subsidiaries, the
participation of any employee of the Company or any
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Subsidiary who becomes an employee of Parent or any of its affiliates, (ii) to
make changes or cause changes to be made in compensation, benefits and other
terms of employment for individual employees, (iii) to terminate the employment
of any employee (subject to the payment of any severance benefit payable with
respect to such termination) and (iv) to amend the terms of any compensation or
employee benefit plan to the extent the consent of the affected employee has
been obtained. Nothing in this Section 6.8(a) shall be construed as (x) granting
any rights to continued employment, (y) an amendment to the terms of any
specific benefit under a compensation or employee benefit plan in effect on the
date of this Agreement or (z) restricting or otherwise limiting any benefit
provided to the parties to the employment and consulting arrangements
contemplated by Section 6.1(q) hereof under the terms thereof.
(b) Stock Options. Parent shall provide employees (including officers)
-------------
of the Company and the Subsidiaries who are currently participating in the Stock
Option Plan with the opportunity, at least until the first anniversary of the
Effective Time, to receive grants of stock options under Parent's stock option
plan on a comparable basis to similarly situated employees of the Parent and its
affiliates.
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(c) Officer's and Directors' Insurance; Indemnification. Parent agrees
---------------------------------------------------
that for the entire period from the Effective Time, until at least six years
after the Effective Time, (i) Parent will cause the Surviving Corporation to
maintain without any reduction in scope or coverage the indemnification
provisions for present and former officers and directors of the Company and the
Subsidiaries contained in the Company's or any of the Subsidiary's Certificate
of Incorporation in effect on the date hereof (and Parent acknowledges that the
Company's certificate of incorporation requires, to the fullest extent permitted
by Section 145 of the DGCL, that the Company indemnify any and all persons whom
it shall have the power to indemnify under said section and, as provided in said
section, requires that the Company advance expenses incurred upon receipt of an
undertaking required by said section); and (ii) Parent will cause the Surviving
Corporation to maintain in effect the current policies of directors' and
officers' liability insurance maintained by the Company or any of the
Subsidiaries with respect to matters occurring prior to, and including, the
Effective Time, provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage for the same acts or occurrences in the
same period containing terms and conditions which are no less
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advantageous so long as no lapse in coverage occurs as a result of such
substitution, and provided, further, that, in no event shall Parent or the
Surviving Corporation be required to expend in any one year an amount in excess
of 150% of the annual premiums currently paid by the Company for such insurance
which the Company represents to be $430,000 for 1995. In the event Parent and
the Surviving Corporation cannot maintain policies for such coverage for such
annual premium amount, Parent and the Surviving Corporation shall maintain as
much coverage as is available for such amount. Parent shall cause the Surviving
Corporation to provide coverage under the directors' and officers' liability
insurance policy maintained by Parent to directors and officers of the Company
and its Subsidiaries to the same extent as provided to directors and officers of
other operating companies of Parent with respect to matters occurring after the
Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.1. Conditions of Each Party to the Merger. The respective
--------------------------------------
obligation of each party to effect
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the Merger is subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) Company Stockholder Approval. This Agreement and the Merger shall
----------------------------
have been approved and adopted by the affirmative vote of the stockholders of
the Company to the extent required by the DGCL;
(b) HSR Act. The applicable waiting period under the HSR Act shall
-------
have expired or been earlier terminated;
(c) No Injunctions or Restraints. No statute, law, rule, regulation,
----------------------------
decree, temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that each
of the parties shall have used reasonable efforts to prevent the entry of any
such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered; and
(d) Offer. Parent and Purchaser shall have purchased all shares of
-----
Common Stock validly tendered and not withdrawn in the Offer and exercised
all options outstanding under the Stock Option and Tender Agreement.
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ARTICLE VIII
TERMINATION
SECTION 8.1. Termination. Notwithstanding approval hereof by the sole
-----------
stockholder of Purchaser or the stockholders of the Company, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by the mutual written agreement of Parent and the Company;
(b) by either Parent or the Company, if Purchaser shall not have
accepted for payment any shares of Common Stock pursuant to the Offer by
March 21, 1996 (the "Outside Termination Date"); provided, however, that if
(I) the condition in clause (ii) of the first paragraph of Annex A hereto is
not satisfied as of the Outside Termination Date or (II) an expression of
interest, offer or proposal is made with respect to a Competing Transaction
and the Company has not taken any of the actions with respect thereto
described in clauses (i) or (ii) in Section 8.1(d) below prior to the Outside
Termination Date or (III) Parent or the Company is litigating or contesting
any suit, action or proceeding with respect to any of the conditions set
forth in paragraphs (a) and (b) of Annex A as of the Outside
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Termination Date, Purchaser may elect to extend the Outside Termination Date
from time to time to the extent any such circumstance referred to in clauses
(I), (II) and (III) above continues to exist; provided further that the
Outside Termination Date as extended will not be later than July 19, 1996;
(c) by either Parent or the Company, (i) if there shall be any
statute, law, rule or regulation that makes consummation of the Merger
illegal or otherwise prohibited or (ii) if any court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the acceptance for payment of, or payment for, the
shares of Common Stock pursuant to the Offer, or the consummation of the
Merger, and such order, decree, ruling or other action shall not be subject
to appeal or shall have become final and unappealable;
(d) by Parent, if (i) the Company Board or any committee thereof shall
(A) have withdrawn or modified its approval or recommendation of the Offer,
this Agreement or the Merger in a manner adverse to Parent or (B) have
approved or recommended any Competing Transaction, or (ii) the Company shall
have entered into
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a definitive agreement with respect to a Superior Transaction in accordance
with Section 6.1(l);
(e) by Parent, if (i) there shall have been a breach of any
representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement, which (A) would give rise to the failure of a
condition set forth in paragraph (d) or paragraph (e) of Annex A, as the case
may be and (B) cannot be or has not been cured within 30 days after the
giving of written notice to the Company, and (ii) Purchaser has not accepted
for purchase any shares of Common Stock pursuant to the Offer;
(f) by Parent, if due to the failure, occurrence or existence of any of
the conditions set forth in Annex A hereto, Purchaser shall (a) not have
commenced the Offer within five business days following the date of this
Agreement or (b) have terminated the Offer or the Offer shall have expired,
in either case pursuant to its terms, without Purchaser having accepted for
payment any shares of Common Stock thereunder; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(f) shall not
be available to Parent if Parent's or Purchaser's failure to perform any of
its
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obligations under this Agreement results in the failure, occurrence or
existence of any such condition;
(g) by the Company, in connection with entering into a definitive
agreement with respect to a Superior Transaction in accordance with Section
6.1(l);
(h) by the Company, if due to the failure, occurrence or existence of
any of the conditions set forth in Annex A hereto Purchaser shall (a) not
have commenced the Offer within five business days following the date of this
Agreement or (b) have terminated the Offer or the Offer shall have expired,
in either case pursuant to its terms, without Purchaser having accepted for
payment any shares of Common Stock thereunder; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(h) shall not
be available to the Company if the Company's failure to perform any of its
obligations under this Agreement results in the failure, occurrence or
existence of any such condition; or
(i) by the Company, if there shall have been a breach in any material
respect of any representation, warranty, covenant or agreement on the part of
the Purchaser or Parent set forth in this Agreement, which failure to perform
can not be or has not been cured
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within 30 days after the giving of written notice to the Parent or Purchaser,
as applicable, except, in any case, such failures which are not reasonably
likely to affect adversely Parent's or Purchaser's ability to complete the
Offer or the Merger.
8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement as provided in Section 8.1 above, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void and there shall be no liability or obligation on the part
of Parent and Purchaser, or either of them, or the Company, or their respective
officers, directors or employees, except (a) for fraud or for willful material
breach by a party of any of its representations, warranties, covenants or
agreements set forth in this Agreement and (b) as set forth in this Section 8.2,
Section 11.2 and the last sentence of Section 6.4 hereof.
ARTICLE IX
SURVIVAL
SECTION 9.1. Survival. The representations and warranties in this
--------
Agreement or in any instrument or
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certificate delivered pursuant to this Agreement shall not survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement which by its
terms contemplates performance after the Effective Time.
ARTICLE X
ASSIGNMENT; PARTIES IN INTEREST; AMENDMENT; WAIVER
SECTION 10.1. Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations under this Agreement shall be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of Parent and Purchaser or the Company, as the case may be, except that
Parent or Purchaser may assign its rights, interests or obligations to any
direct or indirect wholly-owned subsidiary of Parent, but no such assignment
shall relieve Parent or Purchaser of its obligations hereunder. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
permitted assigns.
SECTION 10.2. Parties in Interest. This Agreement is not made for the
-------------------
benefit of any person, firm, corporation or association not a party hereto (or
their respective successors or permitted assigns), except for the officers and
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directors of the Company and its Subsidiaries referred to in Section 6.8(c), and
no person, firm, corporation or association (other than the parties hereto and
their respective successors or permitted assigns) shall acquire or have any
right under or by virtue of this Agreement.
SECTION 10.3. Amendment. This Agreement cannot be amended or modified
---------
except by a written agreement executed by the parties hereto; provided, however,
that subsequent to the adoption of this Agreement by the stockholders of the
Company, this Agreement may be so amended only as may be permitted by the DGCL.
SECTION 10.4. Waiver. At any time prior to the Effective Time, Parent
------
or Purchaser may extend the time for the performance of or waive compliance with
any of the obligations or other acts of the Company contained herein or waive
any inaccuracies in the representations and warranties of the Company contained
herein or in any document delivered pursuant hereto, and the Company may extend
the time for the performance of or waive compliance with any of the obligations
or other acts of Parent or Purchaser contained herein or waive any inaccuracies
in the representations and warranties of Parent or Purchaser contained herein or
in any document delivered pursuant hereto. Any such extension or waiver shall
be valid only if set forth in an instrument in
89
<PAGE>
writing signed by the party to be bound thereby. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
SECTION 10.5. Procedure for Termination, Amendment, Extension or
--------------------------------------------------
Waiver. A termination of this Agreement pursuant to Section 8.1, an amendment
of this Agreement pursuant to Section 10.3 or an extension or waiver pursuant to
Section 10.4 shall, in order to be effective, require in the case of Parent,
Purchaser or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors; provided, however, that in the
event that Parent's designees are appointed or elected to the Company Board as
provided in Section 1.3, after the acceptance for payment of shares of Common
Stock pursuant to the Offer and prior to the Effective Time, the affirmative
vote of a majority of the Disinterested Directors shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement, (iii)
extend the time for performance of Parent's and Purchaser's respective
obligations under this Agreement or (iv) take any action to amend or otherwise
modify the Company's Certificate of Incorporation or By-laws.
90
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. Effect of Investigation. All representations,
-----------------------
warranties, covenants and agreements made by the Company in this Agreement or in
any certificates, statements or other instruments delivered pursuant to this
Agreement shall be unaffected by any investigation made by Parent or Purchaser
or knowledge obtained as a result thereof or otherwise.
SECTION 11.2. Fees and Expenses. (a) Except as otherwise provided in
-----------------
this Section 11.2, each of the parties hereto agrees to pay, without right of
reimbursement from the other, the costs incurred by it incident to the
performance of its obligations hereunder, including, without limitation, the
fees and disbursements of counsel, accountants, financial advisors, experts and
consultants employed by the respective parties in connection with the
transactions contemplated hereby, whether or not the Offer or the Merger is
consummated.
(b) The Company agrees that if this Agreement shall be terminated
pursuant to
(i) Section 8.1(d); or
91
<PAGE>
(ii) Sections 8.1(b), 8.1(f) or 8.1(h), if prior to the termination
of this Agreement a proposal or offer with respect to a Competing Transaction
shall have been received by the Company or publicly disclosed and within 180
days after termination of this Agreement the Company enters into an agreement
with respect to, or approves or recommends, a Superior Transaction related
thereto; or
(iii) Section 8.1(g); or
(iv) Section 8.1(e), if prior to the termination of this Agreement a
proposal or offer with respect to a Competing Transaction shall be received
by the Company or publicly disclosed and within 180 days after termination of
this Agreement the Company enters into an agreement with respect to, or
approves or recommends, such Competing Transaction;
then the Company shall (A) pay to Parent an amount equal to $15,000,000 (the
"Termination Fee") and (B) assume and pay, or reimburse Parent for, all
reasonable, documented out-of-pocket fees and expenses incurred by Parent and
Purchaser (including, without limitation, the reasonable fees and expenses of
their counsel, commercial banks, accountants, financial advisors, experts and
consultants) which are specifically related to this Agreement and the
transactions contemplated hereby, provided, however, that the Company's
92
<PAGE>
obligation under this clause (B) shall in no event exceed $4,000,000 (the
"Expense Reimbursement"). The Company further agrees that if this Agreement
shall be terminated (x) pursuant to Section 8.1(b), 8.1(c), 8.1(f) or 8.1(h) and
if prior to such termination a proposal or offer with respect to a Competing
Transaction shall have been received by the Company or publicly disclosed and
within 180 days after such termination the Company enters into an agreement with
respect to, or approves or recommends, such Competing Transaction, or (y)
pursuant to Section 8.1(f)(b) or 8.1(h)(b) because the Offer shall have expired
with the Purchaser not having accepted for payment shares of Common Stock due to
the failure of clause (y) of the Minimum Condition, then the Company shall pay
to Parent the Expense Reimbursement but not the Termination Fee (if not
otherwise payable pursuant to (b)(ii) above). The payment and acceptance of the
Expense Reimbursement shall be in addition to any other rights or remedies
available to Parent or Purchaser in law or in equity and the payment and
acceptance of the Termination Fee and the Expense Reimbursement shall be in lieu
of any other rights or remedies available to Parent and Purchaser in law or in
equity.
(c) Any payment required to be made pursuant to Section 11.2(b) shall
be made as promptly as practicable but
93
<PAGE>
not later than five business days after the occurrence of the event giving rise
to such payment and, in the case of reimbursement of expenses, after receipt of
reasonable documentation by the Company with respect thereto, and shall be made
by wire transfer of immediately available funds to an account designated by
Parent, except that any payment to be made pursuant to Section 11.2(b)(iii)
shall be made not later than the termination of this Agreement by the Company
pursuant to Section 8.1(g), subject to the provisions of the following sentence.
The amount of fees and expenses so payable under clause (B) of Section 11.2(b)
shall be the amount set forth in a good faith written estimate delivered by
Parent, subject to later upward or downward adjustment upon delivery of
reasonable documentation therefor.
SECTION 11.3. Notices. Any notice, approval or other communication
-------
required or permitted under this Agreement shall be effective only if it is in
writing and delivered personally or sent by first class mail, postage prepaid,
addressed as follows:
94
<PAGE>
If to Parent or Purchaser, to:
HCAC, Inc.
c/o American Brands, Inc.
1700 East Putnam Avenue
Old Greenwich, CT 06870
Attention: Gilbert L. Klemann, II, Esq.
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Edward P. Smith, Esq.
If to the Company, to:
Cobra Golf Incorporated
1812 Aston Avenue
Carlsbad, CA 92008
Attention: Mark C. McClure
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angles, California 90071
Attention: Nick P. Saggese, Esq.
Joseph J. Giunta, Esq.
or such other address as such party may designate by notice to the other party,
and shall be deemed to have been given as of the date so personally delivered or
mailed except that
95
<PAGE>
notice of a change of address shall be effective only upon receipt.
SECTION 11.4. Brokers; Fee Schedule. The Company represents and
---------------------
warrants that there are no claims (or any basis for any claims) for brokerage
commissions, finder's fees or like payments in connection with this Agreement or
the Stock Option and Tender Agreement or the transactions contemplated hereby or
thereby resulting from any action taken by or on behalf of the Company or the
Selling Stockholders, except for fees payable by the Company to Lehman. The
estimated fees and expenses incurred and to be incurred by the Company in
connection with the Agreement and the transactions contemplated hereby
(including the fees of the Company's legal counsel) are set forth in Section
11.4 of the Disclosure Schedule. The Company has provided Parent full and
complete copies of all agreements between Lehman and the Company. Each of
Parent and Purchaser represents and warrants that there are no claims (or any
basis for any claims) for brokerage commissions, finder's fees or like payments
in connection with this Agreement or the Stock Option and Tender Agreement or
the transactions contemplated hereby or thereby resulting from any action taken
by or on behalf of Parent or Purchaser, except for fees payable by Parent to
Morgan Stanley & Co. Incorporated.
96
<PAGE>
SECTION 11.5. Headings. The headings in this Agreement are inserted
--------
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement.
SECTION 11.6. Entire Agreement. This Agreement supersedes any and all
----------------
oral or written agreements and understandings heretofore made relating to the
subject matter hereof and contains the entire agreement of the parties hereto
relating to the subject matter hereof, except for the agreements between Parent
and the Selling Stockholders in the Stock Option and Tender Agreement and the
Confidentiality Agreement referred to in Section 6.4.
SECTION 11.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
SECTION 11.8. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
SECTION 11.9. Knowledge. For purposes of this Agreement, unless
---------
otherwise stated herein, the terms "to the knowledge of the Company" or "to the
Company's knowledge" or
97
<PAGE>
words to that effect shall mean to the actual knowledge of any person holding
the office of vice president of the Company or senior thereto as of the date
hereof and, with respect to Section 4.13, the actual knowledge of the Company's
internal intellectual property counsel as of the date hereof.
98
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
AMERICAN BRANDS, INC.
Attest:
/s/ Mark S. Lyon By /s/ Gilbert L. Klemann II
- ------------------------- ----------------------
Name: Mark S. Lyon Name: Gilbert L. Klemann
Title: Assistant Secretary Title: Senior Vice President and General
Counsel
Attest: HCAC, INC.
/s/ Mark S. Lyon By /s/ Charles H. McGill
- ------------------------- ---------------------
Name: Mark S. Lyon Name: Charles H. McGill
Title: Secretary Title: Vice President
Attest: COBRA GOLF INCORPORATED
/s/ David A. Schaefer By /s/ Mark C. McClure
- ------------------------- ----------------------
Name: David A.Schaefer Name: Mark C. McClure
Title: Senior Vice President Title: President and
and Chief Operating Chief Executive
Officer Officer
<PAGE>
CONDITIONS TO THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
shares of Common Stock after the termination or withdrawal of the Offer), to pay
for any shares of Common Stock tendered pursuant to the Offer unless, (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer such number of shares of Common Stock which would constitute a
majority of (x) the outstanding shares (determined on a fully diluted basis) of
Common Stock and (y) the outstanding shares (determined on a fully diluted
basis) of Common Stock not owned beneficially or of record by the Company's
directors or officers (clauses (x) and (y) being collectively referred to as the
"Minimum Condition") and (ii) any waiting period under the HSR Act applicable to
the purchase of shares of Common Stock pursuant to the Offer shall have expired
or been terminated. Furthermore, notwithstanding any other term of the Offer or
this Agreement, Purchaser shall not be
A-1
<PAGE>
required to accept for payment or, subject as aforesaid, to pay for any shares
of Common Stock not theretofore accepted for payment or paid for, and may
terminate the Offer if, at any time on or after the date of this Agreement and
before the acceptance of such shares for payment or the payment therefor, any of
the following conditions exists (other than as a result of any action or
inaction of Parent or any of its subsidiaries that constitutes a breach of this
Agreement):
(a) there shall be threatened, instituted or pending any suit, action
or proceeding by or before any court of competent jurisdiction or other
Governmental Entity, (i) challenging the acquisition by Parent or Purchaser
of any shares of Common Stock under the Offer or pursuant to the Stock
Option and Tender Agreement or seeking to restrain or prohibit the making
or consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by this Agreement or the Stock Option and
Tender Agreement (including the voting provisions thereunder), or seeking
to obtain from the Company, Parent or Purchaser any damages relating to the
Offer or the Merger or any of the other transactions contemplated by this
Agreement or
A-2
<PAGE>
the Stock Option and Tender Agreement that are material in relation to the
Company and the Subsidiaries, taken as a whole, (ii) seeking to prohibit or
limit the ownership or operation by the Company, Parent or any of their
respective subsidiaries of a material portion of the business or assets of
the Company and the Subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or to compel the Company or Parent to
dispose of or hold separate any material portion of the business or assets
of the Company and the Subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Offer or any of the
other transactions contemplated by this Agreement or the Stock Option and
Tender Agreement, (iii) seeking to impose limitations on the ability of
Parent or Purchaser to acquire or hold, or exercise full rights of
ownership of, any shares of Common Stock accepted for payment pursuant to
the Offer or purchased under the Stock Option and Tender Agreement
including, without limitation, the right to vote such shares of Common
Stock on all matters properly presented to the stockholders of the
Company, (iv) seeking to prohibit Parent or any
A-3
<PAGE>
of its subsidiaries from effectively controlling the business or operations
of the Company and the Subsidiaries or (v) which otherwise is reasonably
likely to have a Material Adverse Effect;
(b) there shall be any statute, law, rule, regulation, judgment,
order or injunction proposed, enacted, entered, enforced, promulgated or
deemed applicable to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity or court, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that could result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c)(i) the Company Board or any committee thereof shall (A) have
withdrawn or modified its approval or recommendation of the Offer, this
Agreement or the Merger in a manner adverse to Parent or (B) have approved
or recommended any Competing Transaction, or (ii) the Company shall have
entered into a definitive agreement with respect to a Superior Transaction
in accordance with Section 6.1(l) of this Agreement;
A-4
<PAGE>
(d) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case as of the date of this Agreement and as of the expiration of the
Offer; provided, however, that all references in this Agreement to the
phrases "to the knowledge of the Company" or "to the Company's knowledge"
or words to that effect shall be disregarded for purposes of determining
whether this condition exists;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(f) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange
or in the NASDAQ over-the-counter market in the United States (excluding
any coordinated trading halt triggered solely as a result of a specified
decrease
A-5
<PAGE>
in a market index and suspensions or limitations resulting solely from
physical damage or interference with such exchanges not related to market
conditions), (ii) a general declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) any
general limitation (whether or not mandatory) by any Governmental Entity
on, or other event that materially adversely affects, the extension of
credit by banks or other lending institutions or (iv) in case of any of the
foregoing existing on the date of this Agreement, material acceleration or
worsening thereof;
(g) any change shall have occurred or been threatened (or any
development shall have occurred or been threatened involving a prospective
change) that would have a Material Adverse Effect;
(h) this Agreement shall have been terminated in accordance with its
terms;
(i) the Company shall not have entered into employment agreements
with the executives listed in Exhibit A hereto that are contemplated by
Section 6.1(q) hereof;
A-6
<PAGE>
(j) Parent and Purchaser shall not have received the estoppel
certificates contemplated by Section 6.1(r) hereof.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and may be asserted by Parent and Purchaser regardless of the
circumstances (other than as a result of any action or inaction of Parent or
Purchaser or any of their subsidiaries which constitutes a breach of this
Agreement) giving rise to such condition or may be waived by Parent and
Purchaser in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed to be a waiver with respect to any other facts and circumstances and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time. Any reasonable determination by Parent or Purchaser
concerning the events described above shall be final and binding upon all
parties.
A-7
<PAGE>
SCHEDULE 1
----------
<TABLE>
<CAPTION>
Number of
---------
Selling Stockholder Shares
- ------------------- ------
<S> <C>
Gary E. Biszantz Living Trust Dated 1,216,890
12-30-92
Gary E. Biszantz and Frances B. Biszantz 300,000
Charitable Remainder Trust Dated
11-22-94
Biszantz Children's Trust Dated 12-30-92 252,468
Crow 1990 Community Property Trust 602,351
Dated 6-8-90
Thomas L. Crow 9% Net Income With 279,721
Make-up Charitable Remainder Trust #1 Dated
12-17-94
Thomas L. Crow 20% Net Income With 55,945
Make-up Charitable Remainder Trust #2 Dated
12-17-94
Thomas L. Crow G.P. FBO Crow Family 250,000
Limited Partnership Account #1
Merrill Lynch (collateral account) 26,667
Vandeweghe Living Trust Dated 11-16-92 338,352
TAV Trust Dated 11-17-92 71,290
Greenside Unitrust A Charitable 50,000
Remainder Unitrust Dated 11-18-94
Greenside Foundation A Charitable 25,000
Foundation Dated 11-18-94
Donald C. Sherman Living Trust Dated 662,889
8-5-80
Starr Charitable Remainder Unitrust 11,889
Dated 8-3-94 (NIMCRUT #1)
The John L. Schroeder and Kathleen A. 300,582
Schroeder Living Trust Dated 1-4-80
John L. Schroeder and Kathleen A. 15,192
Schroeder Charitable Remainder Trust
Dated 12-13-93
John L. Schroeder as Custodian for 1,900
Jennifer Kelly Schroeder (Under
California Uniform Transfers to Minors
Act)
John L. Schroeder as Custodian for 1,900
Molly Elizabeth Schroeder (Under
California Uniform Transfers to Minors
Act)
John L. Schroeder as Trustee under 1,900
Declaration of Trust Dated 12-13-93
Arthur B. Schultz Living Trust Dated 409,642
6-8-94
Arthur B. Schultz Charitable Foundation 50,000
Dated 12-5-85
Arthur B. Schultz Charitable Remainder 25,000
Trust Dated 12-22-94
</TABLE>
<PAGE>
EXHIBIT A
NAME
----
Thomas W. McGinnis
James S. Vincent
Patrick P. McDougall
Richard J. Liesz
Christopher S. Merrill
James A. Pfeil
Robert D. Hirsch
Robert K. Bruning
<PAGE>
EXHIBIT B
[TWM and JSV]
COBRA GOLF INCORPORATED
, 1996
------------------
CONFIDENTIAL
- ------------
Mr.
[Insert Address]
Dear Mr. :
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Stay Bonus
- ----------
If you continue in employment with the Company through the effective
date of the merger (the "Closing Date") and for 30 days after the Closing Date,
you will be entitled to a stay bonus of $37,500 payable as soon as practicable
(but no later than 5 business days) thereafter. If you continue in employment
with the Company through the first anniversary of the Closing Date, you will be
entitled to an additional stay bonus of $37,500 payable as soon as practicable
(but no later than 5 business days) thereafter.
If the Company terminates your employment after the Closing Date for
reasons other than Disability or Cause (as hereinafter defined), or you
terminate your employment for "Good Reason" (as hereinafter defined), prior to
the date on which you would be entitled to either stay bonus, you shall be paid
the stay bonus upon your termination of employment. You will not be eligible
for the stay bonus if you terminate employment with the Company voluntarily, or
if your employment terminates by death or your employment is terminated by the
Company for Disability or
<PAGE>
Cause, prior to the date on which you would be entitled to the stay bonus.
Salary
- ------
Your salary shall continue at your current level and be subject to
annual review by the Board of Directors of the Company and possible adjustment.
Annual Incentive Bonus
- ----------------------
An annual incentive compensation program will be established
commencing for 1996 and continuing through 1997. The program will provide a
target bonus to you for 1996 equal to 35% of your base salary with an
opportunity to earn a maximum of 52.5% of your base salary, but only if
established operating company contribution goals are met. The operating company
contribution goals for 1996 will not be greater than as set forth on Schedule A.
Long Term Incentives
- --------------------
The Company will also establish an enhanced long-term incentive plan
for the performance period 1996 through 1998. You will be awarded 150 units
under this plan. If the Company achieves $220 million of operating company
contribution (generally operating profit exclusive of amortization of
intangibles) during this performance period, the value of each unit to be paid
in early 1999 will be $500. If the Company achieves $250 million of cumulative
operating company contribution during this performance period, the value of each
unit to be paid in early 1999 will be $1,000. If the Company achieves $300
million of cumulative operating company contribution during this performance
period, the value of each unit to be paid in early 1999 will be $2,500. For
performance between $225 million of cumulative operating company contribution
and $250 million of cumulative operating company contribution, the value of each
unit will be interpolated between $500 and $1,000 and, for performance between
$250 million and $300 million of cumulative operating company contribution, the
value of each unit will be interpolated between $1,000 and $2,500.
You will also be eligible for stock options under the American Brands,
Inc. Long-Term Incentive Plan. The Company will recommend that you be granted
options for 1996 with respect to at least 4,000 shares of American Brands, Inc.
common stock.
<PAGE>
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder and to serve in such positions with the Company as may be
reasonably assigned by its Board of Directors consistent with the status of an
executive officer and your position as a Vice President. You also agree to
serve, at the request of the Company, in director or officer positions with any
affiliate of the Company consistent with the status of an executive officer.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business and travel expenses incurred by you in furtherance of or in
connection with the Company's business. If any such expenses are paid by you in
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth. In
the event that the Company terminates your employment for reasons other than
Disability or Cause, or you terminate your employment for "Good Reason" (as
hereinafter defined), you shall receive the following severance in lieu of any
further compensation:
(i) salary payable for a period of 12 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) your target bonus for the calendar year in which the notice of
termination is given, (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved,
payable promptly following the calendar year in which the notice of
termination is given;
(iii) your target bonus for the calendar year in which the notice of
termination is given, whether or not performance goals are achieved,
multiplied by a fraction the
<PAGE>
numerator of which is the number of days in such calendar year through the
date that the notice of termination of employment is given and the
denominator of which is the number of days in such calendar year, payable
promptly following the calendar year in which the notice of termination is
given; and
(iv) coverage under the Company's medical and life insurance plans
for the 12 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage for a period of 18
months after termination of employment under COBRA rules shall be deemed
satisfied to the extent of the first 12 months thereof by the coverage
provided in this clause (iv).
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation other than to pay benefits
under the Company's disability plans. The term "Cause" shall mean any of the
following: embezzlement; fraud; dishonesty; breach of fiduciary duty to the
Company; deliberately disregarding the rules of the Company which results in a
material loss, damage or injury to the Company; unauthorized disclosure of any
of the secrets or confidential information of the Company; a material breach of
any agreement (including this Agreement) with the Company; inducement of any
representative that acts for the Company to terminate such relationship which
termination results in material damage to the Company; or engaging in any
conduct which constitutes unfair competition with the Company. In the event
that the Company terminates your employment for Cause, the Company shall have no
further obligations under this Agreement.
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean the
occurrence (without your express written consent) of any one of the following
acts by the Company:
(i) the assignment to you of any duties which would not be
commensurate with those of an executive officer or your removal from the
office of Vice President;
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations; or
(iii) the failure by the Company to afford you with an annual
incentive bonus program.
In order to be a termination of employment by you for "Good Reason", such
termination must occur within 60 calendar days of the date that you are notified
of the occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments hereunder, you shall render exclusive consulting services to the
Company as the Company shall reasonably request, that your consulting services
to the golf industry shall be exclusively to the Company and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry. Pursuant
to such executive consulting arrangement, you shall not be required to follow a
specified work schedule and shall not be under the control of the Company, but
shall be available on policy or strategic planning questions, either in person
or by telephone, at your discretion, for up to a maximum of twenty (20) hours a
month at such times as the Company may reasonably request during the consulting
period.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to 12 months
<PAGE>
following the date of your termination of employment, such period to be at the
sole election of the Company, which election shall be made within 30 calendar
days of such termination, that your consulting services shall be exclusively to
the Company, and that you will not, during such period, directly or indirectly,
for your own account or for the account of others, either as an officer,
director, stockholder, owner, partner, promoter, employee, consultant, adviser,
agent, manager, or in any other capacity, assist or provide services to any
person or entity that is then in competition with the Company or its affiliates
in the golf industry. You shall receive a monthly consulting fee for the period
that the Company elects that you render exclusive consulting services hereunder
at your base salary rate in effect on the date of your termination of employment
plus your target bonus for the one year in which you voluntarily terminate (or
the amount of your 1995 bonus if greater).
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your own benefit, either during the term of your employment
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
(ii) to deliver promptly to the Company at the termination of your
employment, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereof) relating to
the business of the Company or any of its subsidiaries or affiliates,
including but not limited to, Confidential Matters which you may then
possess or have under your control.
<PAGE>
Termination of Agreement
- ------------------------
This Agreement will terminate on the second anniversary of the Closing
Date.
Prior Agreements
- ----------------
This Agreement supersedes any existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate and is not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that the
Company will be entitled to, among other remedies, immediate injunctive relief
and may obtain without bond a temporary order restraining any threatened or
further breach of this Agreement. However, nothing in this paragraph shall be
deemed to limit the Company's remedies at law or in equity for any breach of
this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
<PAGE>
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
If this letter sets forth correctly our agreement on the subject
matter hereof, please sign and return to me the enclosed copy of this letter,
which will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By
-------------------------------------
Accepted and Agreed to
this ___ day of December, 1995
- ---------------------------
<PAGE>
ENHANCED LONG-TERM INCENTIVE PLAN ('96 - '98)
<TABLE>
<CAPTION>
AMERICAN BRANDS, INC. ====== PROPOSED (3 YR) LONG-TERM PLAN*======
OPTION GRANT
FEB '96 UNITS MIN MAX SPLIT
--------- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
MCM 18,000 425 $212,500 $1,062,500 100% COBRA
**$1,434,400
DAS 8,500 225 $112,500 $562,500 100% COBRA
**$759,400
9 REMAINING VPS 4,000 150 $75,000 $375,000 100% COBRA
TOTALS: $1,000,000 $5,000,000
**$5,568,800
<CAPTION>
PER UNIT CUMULATIVE
PERFORMANCE PAYOUT OCC ($M)
----------- ------ --------
<S> <C> <C>
MINIMUM $ 500 $225.0
$1,000 $250.0
MAXIMUM $2,500 $300.0
</TABLE>
[1996-98 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PER UNIT PAYOUT
PER CUMULATIVE OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN MILLIONS OF DOLLARS).]
VERTICAL AXIS: HORIZONTAL AXIS:
PER UNIT PAYOUT CUMULATIVE OCC ACHIEVED (IN $M)
--------------- -------------------------------
$500 $225.0
$1,000 $250.0
$2,500 $300.0
- ----------------
* LONG-TERM PLAN IS ENHANCED FOR THE 96-98 PERIOD; PRESENTLY INTEND FOR
STANDARD OVERLAPPING CYCLES TO BEGIN IN 1997.
** IF MAXIMUM IS ACHIEVED, MCM AND DAS WILL RECEIVE A 35% PREMIUM.
<PAGE>
SCHEDULE A
1996 EXECUTIVE INCENTIVE PLAN PERFORMANCE MATRIX
PERFORMANCE MEASUREMENT: OPERATING COMPANY CONTRIBUTION ($000)
1996 PROFIT PLAN $87,000
MINIMUM PAYOUT 60.0%
MAXIMUM PAYOUT 150.0%
AMOUNT % OF PROFIT % OF TARGET
(IN $000) PLAN PAID
--------- ---- ----
MINIMUM $56,500 65.0% 60.0%
ACCELERATION POINT $74,000 85.0% 100.0%
MAXIMUM $87,000 100.0% 150.0% **
[1996 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PERCENTAGE OF PAYOUT TARGET
PER OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN THOUSANDS).]
HORIZONTAL AXIS:
VERTICAL AXIS: OPERATING COMPANY
% OF TARGET PAYOUT CONTRIBUTION ACHIEVED
------------------ ---------------------
60.0% $56.5
100.0% $74.0
150.0% $87.0
- -------------
** IF MAXIMUM IS ACHIEVED (i.e. $87.0M), MCCLURE AND SCHAEFER WILL RECEIVE
BONUSES EQUAL TO THEIR RESPECTIVE BASE SALARIES.
<PAGE>
EXHIBIT C
[VPs other than TWM and JSV]
COBRA GOLF INCORPORATED
, 1996
------------------
CONFIDENTIAL
- ------------
Mr.
[Insert Address]
Dear Mr. :
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Stay Bonus
- ----------
If you continue in employment with the Company through the effective
date of the merger (the "Closing Date") and for 30 days after the Closing Date,
you will be entitled to a stay bonus of $25,000 payable as soon as practicable
(but no later than 5 business days) thereafter. If you continue in employment
with the Company through the first anniversary of the Closing Date, you will be
entitled to an additional stay bonus of $25,000 payable as soon as practicable
(but no later than 5 business days) thereafter.
If the Company terminates your employment after the Closing Date for
reasons other than Disability or Cause (as hereinafter defined), or you
terminate your employment for "Good Reason" (as hereinafter defined), prior to
the date on which you would be entitled to either stay bonus, you shall be paid
the stay bonus upon your termination of employment. You will not be eligible
for the stay bonus if you terminate employment with the Company voluntarily, or
if your employment terminates by death or your employment is terminated by the
Company for Disability or
<PAGE>
Cause, prior to the date on which you would be entitled to the stay bonus.
Salary
- ------
Your salary shall continue at your current level and be subject to
annual review by the Board of Directors of the Company and possible adjustment.
Annual Incentive Bonus
- ----------------------
An annual incentive compensation program will be established
commencing for 1996 and continuing through 1997. The program will provide a
target bonus to you for 1996 equal to [30-35%] of your base salary with an
opportunity to earn a maximum of [45-52.5%] of your base salary, but only if
established operating company contribution goals are met. The operating company
contribution goals for 1996 will not be greater than as set forth on Schedule A.
Long Term Incentives
- --------------------
The Company will also establish an enhanced long-term incentive plan
for the performance period 1996 through 1998. You will be awarded 150 units
under this plan. If the Company achieves $220 million of operating company
contribution (generally operating profit exclusive of amortization of
intangibles) during this performance period, the value of each unit to be paid
in early 1999 will be $500. If the Company achieves $250 million of cumulative
operating company contribution during this performance period, the value of each
unit to be paid in early 1999 will be $1,000. If the Company achieves $300
million of cumulative operating company contribution during this performance
period, the value of each unit to be paid in early 1999 will be $2,500. For
performance between $225 million of cumulative operating company contribution
and $250 million of cumulative operating company contribution, the value of each
unit will be interpolated between $500 and $1,000 and, for performance between
$250 million and $300 million of cumulative operating company contribution, the
value of each unit will be interpolated between $1,000 and $2,500.
You will also be eligible for stock options under the American Brands,
Inc. Long-Term Incentive Plan. The Company will recommend that you be granted
options for 1996 with respect to at least 4,000 shares of American Brands, Inc.
common stock.
<PAGE>
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder and to serve in such positions with the Company as may be
reasonably assigned by its Board of Directors consistent with the status of an
executive officer and your position as a Vice President. You also agree to
serve, at the request of the Company, in director or officer positions with any
affiliate of the Company consistent with the status of an executive officer.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business and travel expenses incurred by you in furtherance of or in
connection with the Company's business. If any such expenses are paid by you in
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth. In
the event that the Company terminates your employment for reasons other than
Disability or Cause, or you terminate your employment for "Good Reason" (as
hereinafter defined), you shall receive the following severance in lieu of any
further compensation:
(i) salary payable for a period of 12 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) your target bonus for the calendar year in which the notice of
termination is given, (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved,
payable promptly following the calendar year in which the notice of
termination is given;
(iii) your target bonus for the calendar year in which the notice of
termination is given, whether or not performance goals are achieved,
multiplied by a fraction the
<PAGE>
numerator of which is the number of days in such calendar year through the
date that the notice of termination of employment is given and the
denominator of which is the number of days in such calendar year, payable
promptly following the calendar year in which the notice of termination is
given; and
(iv) coverage under the Company's medical and life insurance plans
for the 12 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage for a period of 18
months after termination of employment under COBRA rules shall be deemed
satisfied to the extent of the first 12 months thereof by the coverage
provided in this clause (iv).
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation other than to pay benefits
under the Company's disability plans. The term "Cause" shall mean any of the
following: embezzlement; fraud; dishonesty; breach of fiduciary duty to the
Company; deliberately disregarding the rules of the Company which results in a
material loss, damage or injury to the Company; unauthorized disclosure of any
of the secrets or confidential information of the Company; a material breach of
any agreement (including this Agreement) with the Company; inducement of any
representative that acts for the Company to terminate such relationship which
termination results in material damage to the Company; or engaging in any
conduct which constitutes unfair competition with the Company. In the event
that the Company terminates your employment for Cause, the Company shall have no
further obligations under this Agreement.
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean the
occurrence (without your express written consent) of any one of the following
acts by the Company:
(i) the assignment to you of any duties which would not be
commensurate with those of an executive officer or your removal from the
office of Vice President;
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations; or
(iii) the failure by the Company to afford you with an annual
incentive bonus program.
In order to be a termination of employment by you for "Good Reason", such
termination must occur within 60 calendar days of the date that you are notified
of the occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments hereunder, you shall render exclusive consulting services to the
Company as the Company shall reasonably request, that your consulting services
to the golf industry shall be exclusively to the Company and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry. Pursuant
to such executive consulting arrangement, you shall not be required to follow a
specified work schedule and shall not be under the control of the Company, but
shall be available on policy or strategic planning questions, either in person
or by telephone, at your discretion, for up to a maximum of twenty (20) hours a
month at such times as the Company may reasonably request during the consulting
period.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to 12 months
<PAGE>
following the date of your termination of employment, such period to be at the
sole election of the Company, which election shall be made within 30 calendar
days of such termination, that your consulting services shall be exclusively to
the Company, and that you will not, during such period, directly or indirectly,
for your own account or for the account of others, either as an officer,
director, stockholder, owner, partner, promoter, employee, consultant, adviser,
agent, manager, or in any other capacity, assist or provide services to any
person or entity that is then in competition with the Company or its affiliates
in the golf industry. You shall receive a monthly consulting fee for the period
that the Company elects that you render exclusive consulting services hereunder
at your base salary rate in effect on the date of your termination of employment
plus your target bonus for the year in which you voluntarily terminate (or the
amount of your 1995 bonus if greater).
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your own benefit, either during the term of your employment
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
(ii) to deliver promptly to the Company at the termination of your
employment, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereof) relating to
the business of the Company or any of its subsidiaries or affiliates,
including but not limited to, Confidential Matters which you may then
possess or have under your control.
<PAGE>
Termination of Agreement
- ------------------------
This Agreement will terminate on the second anniversary of the Closing
Date.
Prior Agreements
- ----------------
This Agreement supersedes any existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate and is not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that the
Company will be entitled to, among other remedies, immediate injunctive relief
and may obtain without bond a temporary order restraining any threatened or
further breach of this Agreement. However, nothing in this paragraph shall be
deemed to limit the Company's remedies at law or in equity for any breach of
this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
<PAGE>
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
If this letter sets forth correctly our agreement on the subject
matter hereof, please sign and return to me the enclosed copy of this letter,
which will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By
----------------------------------------
Accepted and Agreed to
this ___ day of December, 1995
- -------------------------------
<PAGE>
ENHANCED LONG-TERM INCENTIVE PLAN ('96 - '98)
<TABLE>
<CAPTION>
AMERICAN BRANDS, INC. ====== PROPOSED (3 YR) LONG-TERM PLAN*======
OPTION GRANT
FEB '96 UNITS MIN MAX SPLIT
--------- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
MCM 18,000 425 $212,500 $1,062,500 100% COBRA
**$1,434,400
DAS 8,500 225 $112,500 $562,500 100% COBRA
**$759,400
9 REMAINING VPS 4,000 150 $75,000 $375,000 100% COBRA
TOTALS: $1,000,000 $5,000,000
**$5,568,800
<CAPTION>
PER UNIT CUMULATIVE
PERFORMANCE PAYOUT OCC ($M)
----------- ------ --------
<S> <C> <C>
MINIMUM $ 500 $225.0
$1,000 $250.0
MAXIMUM $2,500 $300.0
</TABLE>
[1996-98 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PER UNIT PAYOUT
PER CUMULATIVE OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN MILLIONS OF DOLLARS).]
VERTICAL AXIS: HORIZONTAL AXIS:
PER UNIT PAYOUT CUMULATIVE OCC ACHIEVED (IN $M)
--------------- -------------------------------
$500 $225.0
$1,000 $250.0
$2,500 $300.0
- ----------------
* LONG-TERM PLAN IS ENHANCED FOR THE 96-98 PERIOD; PRESENTLY INTEND FOR
STANDARD OVERLAPPING CYCLES TO BEGIN IN 1997.
** IF MAXIMUM IS ACHIEVED, MCM AND DAS WILL RECEIVE A 35% PREMIUM.
<PAGE>
SCHEDULE A
1996 EXECUTIVE INCENTIVE PLAN PERFORMANCE MATRIX
PERFORMANCE MEASUREMENT: OPERATING COMPANY CONTRIBUTION ($000)
1996 PROFIT PLAN $87,000
MINIMUM PAYOUT 60.0%
MAXIMUM PAYOUT 150.0%
AMOUNT % OF PROFIT % OF TARGET
(IN $000) PLAN PAID
--------- ---- ----
MINIMUM $56,500 65.0% 60.0%
ACCELERATION POINT $74,000 85.0% 100.0%
MAXIMUM $87,000 100.0% 150.0% **
[1996 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PERCENTAGE OF PAYOUT TARGET
PER OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN THOUSANDS).]
HORIZONTAL AXIS:
VERTICAL AXIS: OPERATING COMPANY
% OF TARGET PAYOUT CONTRIBUTION ACHIEVED
------------------ ---------------------
60.0% $56.5
100.0% $74.0
150.0% $87.0
- -------------
** IF MAXIMUM IS ACHIEVED (i.e. $87.0M), MCCLURE AND SCHAEFER WILL RECEIVE
BONUSES EQUAL TO THEIR RESPECTIVE BASE SALARIES.
<PAGE>
EXHIBIT c(2)
STOCK OPTION AND TENDER AGREEMENT
STOCK OPTION AND TENDER AGREEMENT, dated as of December 18, 1995,
among AMERICAN BRANDS, INC., a Delaware corporation ("Parent"), and each other
party listed on the signature pages hereof (each, a "Stockholder"),
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Parent, HCAC, INC., a Delaware corporation wholly-owned by
Parent ("Purchaser"), and COBRA GOLF INCORPORATED, a Delaware corporation (the
"Company"), propose to enter into an Agreement and Plan of Merger, dated as of
the date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the acquisition by Purchaser of all the outstanding shares of
Common Stock, par value $0.001 per share, of the Company (the "Company Common
Stock") through (a) a tender offer (the "Offer") for all shares of Company
Common Stock for $36.00 per share net to the sellers thereof in cash without
interest thereon (the "Initial Offer Price", and as such price may be increased
from time to time pursuant to the terms of any amended Offer, the "Offer Price")
and (b) a second step merger pursuant to which Purchaser will merge with and
<PAGE>
into the Company (the "Merger") and all outstanding shares of Company Common
Stock (other than the shares held by Parent or Purchaser or any other direct or
indirect subsidiary of Parent and shares of Company Common Stock held in the
treasury of the Company or owned by any subsidiary of the Company) will be
converted into the right to receive the Offer Price in cash; and
WHEREAS, as of the date hereof each Stockholder is the record and
beneficial owner of, or is the trustee of a trust that is the record holder of,
and whose beneficiaries are the beneficial owners of, the number of shares of
Company Common Stock set forth opposite such Stockholder's name on Exhibit A
hereto (all such shares (the "Existing Shares") and any shares hereafter
acquired by the Stockholders prior to the termination of this Agreement (the
"After-Acquired Shares") being referred to herein as the "Shares");
WHEREAS, as a condition to the willingness of Parent and Purchaser to
enter into the Merger Agreement, Parent has required that each Stockholder
agree, and, in order to induce Parent and Purchaser to enter into the Merger
Agreement to acquire the Company, each Stockholder has agreed, severally, but
not jointly, to (i) tender all of such Stockholder's Shares pursuant to the
Offer, (ii)
2
<PAGE>
grant Parent the option to purchase such Stockholder's Shares and (iii) appoint
Parent as such Stockholder's proxy to vote its Shares;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter contained and contained in the Merger
Agreement, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
ARTICLE I
GRANT OF PLEDGE AND SECURITY INTEREST; TENDER
SECTION 1.01. Grant of Pledge and Security Interest. (a) For the
-------------------------------------
purpose of securing the due and prompt performance of all the obligations of
such Stockholders under this Agreement, subject to the provisions of Section
7.11 hereof each Stockholder hereby irrevocably grants to Parent a pledge and
security interest in such Stockholder's Shares, and (i) until delivery of the
Shares pursuant to the third sentence of this Section 1.01(a), all proceeds
thereof subject to the terms of this Agreement and dividends thereon and (ii)
thereafter, all dividends thereon. Notwithstanding the provisions of the
preceding sentence, subject to the provisions of Section 7.11 hereof unless and
until any
3
<PAGE>
Stockholder defaults in the performance of the obligation to deliver such
Stockholder's Shares or to sell such Stockholder's Shares under this Agreement,
Parent shall not have the right to receive and/or retain any such proceeds
and/or dividends contemplated by the immediately preceding sentence. In order to
perfect such security interests, each Stockholder shall deliver to Parent any
and all stock certificates evidencing such Stockholder's (i) Existing Shares,
not later than 5:00 p.m. New York time on the fifth Business Day (as defined
below) following the date of this Agreement, and (ii) After-Acquired Shares, not
later than 5 p.m. New York time on the third Business Day following the
acquisition thereof. Parent shall have all the rights and remedies of a secured
party provided or permitted under the Uniform Commercial Code. For the purposes
of this Agreement, the term "Business Day" shall mean any day (other than a
Saturday or Sunday) on which commercial banks are open for business in the City
of New York.
(b) Upon termination of the Merger Agreement, Parent automatically
releases any and all liens on all Shares of each Stockholder granted hereunder
and shall promptly (and in any event not later than two Business Days following
such termination) (i)(A) send any and all
4
<PAGE>
stock certificates in its possession evidencing a Stockholder's Shares to such
Stockholder by overnight courier to the address set forth below such
Stockholder's name on the signature page hereof (provided that if any such stock
certificates are not received by such Stockholder, Parent shall promptly put up
an indemnity bond required by the Company to issue new certificates to such
Stockholder, including, without limitation, any such bond required in accordance
with Section 8-405 of the Uniform Commercial Code of the applicable
jurisdiction) or (B) irrevocably direct the depositary for the Offer to properly
withdraw and deliver to each Stockholder the stock certificates evidencing such
Stockholder's Shares which were validly tendered pursuant to the Offer, if any,
and (ii) return any other documentation delivered to Parent by any such
Stockholder together with any dividends obtained or received by Parent in
respect of such Stockholder's Shares to such Stockholder by overnight courier to
the address set forth below such Stockholder's name on the signature page
hereof.
(c) Notwithstanding anything to the contrary in this Agreement,
Parent shall have no rights of ownership in any Stockholder's Shares unless and
until such Shares are sold pursuant to the Option or in the
5
<PAGE>
Offer pursuant to the terms of this Agreement, but Parent shall otherwise be
permitted to exercise its rights hereunder.
SECTION 1.02. Tender of Shares. Each Stockholder shall validly
----------------
tender all such Stockholder's Shares pursuant to the Offer and agrees not to
withdraw any Shares so tendered without Parent's consent, provided, however,
that if the Offer Price is for any reason increased above the Initial Offer
Price, then each Stockholder hereby agrees that such Stockholder shall promptly
(and in any event not later than three Business Days after the first public
announcement of such increase) properly withdraw all such Shares, and provided
further that following any such withdrawal each Stockholder validly shall tender
all of such Stockholder's Shares pursuant to the Offer but only upon the written
direction of Parent. The obligation of the Stockholders under this Section 1.02
shall be deemed satisfied, with respect to all Shares delivered pursuant to
Section 1.01, by the appointment and grant pursuant to Section 5.03.
6
<PAGE>
ARTICLE II
THE OPTIONS
SECTION 2.01. Grant of Options. Each Stockholder hereby grants to
----------------
Parent an irrevocable option (each, an "Option") to purchase such Stockholder's
Shares at a price per Share equal to (a) the Initial Offer Price or (b) in the
event that such Offer Price is increased and Purchaser has accepted for payment,
and paid for, any shares of Company Common Stock pursuant to the Offer, the
Initial Offer Price plus an amount equal to one-half of the excess of the final
Offer Price paid by Purchaser for any shares of Company Common Stock pursuant to
the Offer over such Initial Offer Price (in either event, the "Option Price").
SECTION 2.02. Exercise of Options. Provided that (a) to the extent
-------------------
necessary, any applicable waiting periods (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act") with respect to the
exercise of an Option shall have expired or been terminated, (b) Purchaser shall
have accepted shares of Company Common Stock for payment pursuant to the Offer
and (c) no preliminary or permanent injunction or other order, decree or ruling
7
<PAGE>
issued by any court or governmental or regulatory authority, domestic or
foreign, of competent jurisdiction prohibiting the exercise of an Option or the
delivery of shares of Common Stock shall be in effect, Parent may exercise the
Options, in whole but not in part, at any time, or from time to time, until the
termination of this Agreement (at which time each Option granted hereunder shall
terminate). Parent hereby acknowledges and agrees that if any shares of Company
Common Stock are accepted for payment pursuant to the Offer, Parent will cause
all but not part of each Stockholder's Shares subject to this Agreement to be
acquired either pursuant to (i) the Offer or (ii) the exercise of the Options.
In the event that Parent exercises the Options and purchases all of the Shares
from the Stockholders, the closing of such purchase (the "Stock Option Closing")
shall occur within two Business Days after Parent shall have accepted any shares
of Company Common Stock for payment pursuant to the Offer.
SECTION 2.03. Payment for and Delivery of Certificates. At the Stock
----------------------------------------
Option Closing, (a) each Stockholder shall deliver to Parent a certificate or
certificates evidencing the number of such Stockholder's Shares, and each such
certificate shall be duly endorsed
8
<PAGE>
in blank, or with appropriate stock powers, duly executed in blank, attached
thereto, in proper form for transfer, with the signature of such Stockholder
thereon guaranteed in a form acceptable to the Company's transfer agent, and
with all applicable taxes paid or provided for (provided, that in no event shall
a Stockholder be obligated to pay or provide for more taxes than if such
Stockholder's Shares were purchased in the Offer), together with such other
documents as may be necessary in Parent's judgment to effect the transfer
thereof to Parent (including, but not limited to, the consent of any spouse of
such Stockholder, if required for the transfer contemplated hereby) and (b)
Parent shall pay, by wire transfer in immediately available funds or by
certified or bank check payable in same day funds to such Stockholder, an amount
equal to the product of (i) the Option Price and (ii) the number of such
Stockholder's Shares for which certificates have been delivered to Parent
pursuant to this Agreement at the Stock Option Closing. The obligation of the
Stockholders under this Section 2.03 shall be deemed satisfied, with respect to
all Shares delivered pursuant to Section 1.01, by the appointment and grant
pursuant to Section 5.03.
9
<PAGE>
SECTION 2.04. Adjustments Upon Changes in Capitalization. In the
------------------------------------------
event of any change in the number of issued and outstanding shares of Company
Common Stock by reason of any stock dividend, subdivision, merger,
recapitalization, combination, conversion or exchange of shares, or any other
change in the corporate or capital structure of the Company (including, without
limitation, the declaration or payment of any extraordinary dividend of cash or
securities) which would have the effect of diluting or otherwise adversely
affecting Parent's rights and privileges under this Agreement, the number and
kind of the Shares and the consideration payable in respect of the Shares shall
be appropriately and equitably adjusted to restore to Parent its rights and
privileges under this Agreement. Without limiting the scope of the foregoing,
in any such event, at the option of Parent, each Option shall represent the
right to purchase, in addition to the number and kind of Shares which Parent
would be entitled to purchase pursuant to the immediately preceding sentence,
whatever securities, cash or other property the Shares subject to the Option
shall have been converted into or otherwise exchanged for, together with any
securities, cash or other property which shall have been distributed with
respect to such Shares.
10
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder hereby severally, but not jointly, represents and
warrants to Parent that:
SECTION 3.01. Organization. Such Stockholder (if it is a
------------
corporation, partnership or other legal entity) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization with all requisite power and authority (corporate
or otherwise) to execute, deliver and perform its obligations under this
Agreement.
SECTION 3.02. Authority; Enforceability. The execution and delivery
-------------------------
by such Stockholder of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action (corporate
or otherwise) on the part of such Stockholder. This Agreement has been duly
executed and delivered by or on behalf of such Stockholder, and if such
Stockholder is married and such Stockholder's Shares constitute community
property, by or on behalf of such Stockholder's spouse, and, assuming due
execution and delivery by Parent hereof, constitutes the legal, valid and
binding obligation of such Stockholder and such spouse enforceable against each
of them in accordance
11
<PAGE>
with its terms, subject to the qualification, however, that enforcement of the
rights and remedies created hereby may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general application relating to or
affecting the rights and remedies of creditors and that the remedy of specific
enforcement or of injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
SECTION 3.03. No Breach; Required Filings and Consents. (a) The
----------------------------------------
execution and delivery of this Agreement by such Stockholder does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, with or without the giving of notice or lapse of
time, or both, conflict with, or result in a breach or violation of, or a
default under the provisions of, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under (i) the Certificate of Incorporation or By-laws, trust agreement
or similar organizational documents of such Stockholder (in the case of a
Stockholder that is a corporation, partnership, trust or other legal entity), or
(ii) any covenant, agreement, indenture or instrument
12
<PAGE>
to which such Stockholder or (if such Stockholder purports to be a corporation)
any of its subsidiaries is a party or any order, ruling, decree, judgment,
arbitration award, statute, law, ordinance, rule, regulation or stipulation to
which such Stockholder or (if such Stockholder purports to be a corporation) any
of its subsidiaries or its or their respective properties or assets is subject,
or result in the creation of any lien, charge or encumbrance upon any of such
Stockholder's Shares. No trust of which such Stockholder is a trustee requires
the consent of any beneficiary to the execution and delivery of this Agreement,
to the compliance with the provisions hereof and to the consummation of the
transactions contemplated hereby that has not been previously obtained.
(b) The execution and delivery of this Agreement by such Stockholder
does not, and the performance of this Agreement by such Stockholder will not,
require any approval, order or authorization of, or filing or registration with,
or allowance by, or consent of or notification to any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign, except for
applicable
13
<PAGE>
requirements, if any, (A) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, (B) the HSR Act, and (C) as may be
required by any applicable state securities or takeover laws.
SECTION 3.04. Title to Shares; No Other Shares or Proxy. Such
-----------------------------------------
Stockholder is the record and beneficial owner of, or is a trustee of a trust
that is the record owner of, and whose beneficiaries are the beneficial owners
of, the number of Existing Shares set forth opposite such Stockholder's name on
Exhibit A, free and clear of any pledge, lien, security interest, charge, claim,
equity, option, proxy, voting restriction, right of first refusal or other
limitation on disposition or encumbrance of any kind, other than pursuant to
this Agreement and other than those Shares covered by Section 7.11 that are
pledged. The number of Existing Shares set forth opposite such Stockholder's
name on Exhibit A hereto represent the only Shares owned of record or
beneficially by such Stockholder as of the date hereof. Such Stockholder has
full right, power and authority to sell, pledge, transfer and deliver its
Existing Shares pursuant to this Agreement, except for those Shares covered by
Section 7.11 that are pledged, and upon the acquisition of any After-Acquired
Shares will have full
14
<PAGE>
right, power and authority to sell, pledge, transfer and deliver such After-
Acquired Shares pursuant to this Agreement. Upon delivery of the Shares
purchased from such Stockholder and payment of the Option Price therefor as
contemplated herein, Parent will receive good and valid title to such Shares,
free and clear of any pledge, lien, security interest, charge, claim, equity,
option, proxy, voting restriction or encumbrance of any kind. There are no
outstanding proxies with respect to Shares owned of record or beneficially by
such Stockholder.
SECTION 3.05. No Brokers. No broker, investment banker, financial
----------
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission from Parent, Purchaser or the
Company in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of such Stockholder, except as otherwise
specifically provided in the Merger Agreement or made by or on behalf of Parent
or Purchaser or its authorized representatives.
SECTION 3.06. Consideration for Proxy. Such Stockholder understands
-----------------------
and acknowledges that Parent is entering into, and causing Purchaser to enter
into, the Merger Agreement conditioned upon Stockholder's execution
15
<PAGE>
and delivery of this Agreement. Such Stockholder acknowledges that the
irrevocable proxy set forth in Section 5.02 is granted in consideration for the
execution and delivery of the Merger Agreement by Parent and Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby makes the same representations and warranties to each
Stockholder as Parent has made to the Company in Article V of the Merger
Agreement with the same effect as though such representations and warranties
were herein set forth in full.
ARTICLE V
TRANSFER AND VOTING OF SHARES; APPOINTMENTS;
NO SOLICITATION
SECTION 5.01. Transfer of Shares. During the term of this Agreement,
------------------
and except as otherwise provided herein or with the prior written consent of
Parent, each Stockholder shall not (a) sell, pledge or otherwise dispose of any
of its Shares, (b) deposit its Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares, (c) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares or
(d) enter into any
16
<PAGE>
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer or other disposition of any Shares.
SECTION 5.02. Voting of Shares; Further Assurances. (a) Each
------------------------------------
Stockholder, by this Agreement, does hereby constitute and appoint Parent, or
any nominee of Parent (the "Proxyholder"), with full power of substitution,
during and only for the term of this Agreement, as its true and lawful attorney
and proxy, for and in its name, place and stead, to vote each of such
Stockholder's Shares as its proxy, at every annual, special or adjourned meeting
of the stockholders of the Company (including the right to sign its name (as
stockholder) to any consent, certificate or other document relating to the
Company that the law of the State of Delaware may permit or require) as follows:
(i) in favor of approval and adoption of the Merger Agreement and all related
matters; (ii) against any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement; and (iii)
against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede,
17
<PAGE>
interfere with, delay, postpone or attempt to discourage the Merger (together
with (i) and (ii) above, the "Permitted Matters"). EACH STOCKHOLDER INTENDS THAT
PURSUANT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AND FOR SO LONG AS THIS
AGREEMENT IS IN EFFECT THIS PROXY BE IRREVOCABLE AND COUPLED WITH AN INTEREST IN
THE SHARES AND SUPPORTED BY THE PLEDGE OF THE SHARES AS PROVIDED HEREIN. Each
Stockholder hereby revokes any proxy previously granted with respect to Shares
owned of record or beneficially by such Stockholder. The proxy granted hereby
shall expire and have no further force or effect upon the termination of this
Agreement. Each Stockholder agrees to refrain from taking any action contrary to
or in any manner inconsistent with the terms of this Agreement, including, with
respect to the Permitted Matters only, (a) voting at any annual, special or
adjourned meeting of the stockholders of the Company, (b) executing any written
consent in lieu of a meeting of the stockholders of the Company, (c) exercising
any rights of dissent with respect to the Shares and (d) granting any proxy or
authorization to any person with respect to the voting of the Shares, except
pursuant to this Agreement. Each Stockholder acknowledges receipt of, and that
it has reviewed, a copy of the Merger Agreement.
18
<PAGE>
(b) Each Stockholder shall perform such further acts and execute such
further documents and instruments as may reasonably be required to vest in the
Proxyholder the power to carry out the provisions of this Agreement.
SECTION 5.03. Appointment of Attorney-in-Fact. Subject to the
-------------------------------
provisions of Section 7.11 hereof each Stockholder hereby irrevocably (a)
appoints each Proxyholder as such Stockholders' attorneys-in-fact, with an
irrevocable instruction to the Proxyholder (i) validly to tender such
Stockholder's Shares into the Offer, (ii) properly to withdraw such
Stockholder's Shares from the Offer, (iii) to transfer such Stockholder's Shares
at the Stock Option Closing, and (iv) to execute any instrument of transfer
and/or other documents and do all such other acts and things as may in the
opinion of the Proxyholder be necessary or expedient for the purpose of, or in
connection with, tendering or withdrawing such Shares into or from the Offer or
transferring such Shares at the Stock Option Closing and (b) agrees not to
exercise or attempt to exercise any rights pertaining to the Shares without the
prior written consent of Parent.
SECTION 5.04. No Solicitation. Each Stockholder agrees to abide by
---------------
the terms of Section
19
<PAGE>
6.1(l) of the Merger Agreement. Nothing contained in this Section 5.04 shall be
deemed to prevent any Stockholder in his capacity as an officer or director of
the Company from exercising his fiduciary duties.
SECTION 5.05. Other Actions. Each Stockholder serving as a trustee
-------------
of a revocable trust, and each beneficiary of such trust, shall not take any
action to revoke or terminate such trust or take any other action to restrict,
limit or frustrate in any way the transactions contemplated by this Agreement.
Each such beneficiary hereby acknowledges and agrees to be bound by the terms of
this Agreement applicable to it.
ARTICLE VI
TERMINATION
SECTION 6.01. Termination. This Agreement shall terminate upon the
-----------
earlier to occur of (i) the termination of the Merger Agreement or (ii) the
Effective Time of the Merger. Upon termination, this Agreement shall have no
further force or effect, except for Section 1.01(b) and Section 7.07 which shall
continue to apply to any case, action or proceeding relating to the enforcement
of this Agreement.
20
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like changes of address) or sent by electronic transmission to the telecopier
number specified below:
(a) If to Parent:
American Brands, Inc.
1700 East Putnam Avenue
Old Greenwich, Connecticut 06870
Attention: Gilbert L. Klemann, II, Esq.
Telecopier No.: 203-698-5172
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Edward P. Smith, Esq.
Telecopier No.: 212-541-5369
(b) If to a Stockholder, to the address set forth below such
Stockholder's name on the signature pages hereof:
21
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Nick P. Saggese, Esq.
Joseph J. Giunta, Esq.
Telecopier No.: 213-687-5600
SECTION 7.02. Headings. The headings in this Agreement are
--------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
SECTION 7.03. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
22
<PAGE>
SECTION 7.04. Entire Agreement. This Agreement supersedes any and
----------------
all oral or written agreements and understandings heretofore made relating to
the subject matter hereof and contains the entire agreement of the parties
hereto relating to the subject matter hereof.
SECTION 7.05. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise.
SECTION 7.06. Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 7.07. Specific Performance; Injunctions. The parties hereto
---------------------------------
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of, and injunctive relief to
prevent breaches of or non-compliance with, the terms hereof, in addition to any
other remedy at law or in equity.
23
<PAGE>
SECTION 7.08. Expenses. Each of the parties hereto shall pay,
--------
without right of reimbursement from any other party hereto, the costs incurred
by such party incident to the performance of such party's obligations hereunder,
whether or not the transactions contemplated hereby shall be consummated,
including, without limitation, the fees and disbursements of counsel,
accountants and consultants employed by the respective parties hereto in
connection with the transactions contemplated hereby.
SECTION 7.09. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware.
SECTION 7.10. Counterparts. This Agreement may be executed in
------------
several counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
SECTION 7.11. Previously Pledged, Lost or Stolen Shares. Solely with
-----------------------------------------
respect to the 300,582 Shares owned of record by The John L. Schroeder and
Kathleen A. Schroeder Living Trust Dated 1-4-80, the 26,667 Shares owned of
record by Merrill Lynch (collateral account) and 50,000 Shares of the 602,351
Shares owned of record by the Crow 1990 Community Property Trust Dated 6-8-90,
24
<PAGE>
which have been previously pledged, or as to which certificates have been lost
or stolen, such Stockholder shall not be obligated to grant the pledge or
security interest contemplated by Section 1.01 or the appointment of attorney-
in-fact contemplated by Section 5.03 with respect to such Shares but shall
instead tender such Shares into the Offer as promptly as reasonably practicable
in accordance with Section 1.02 and withdraw and retender such Shares to the
extent required by Section 1.02 and the terms hereof; provided, that if such
Shares are no longer pledged, or such lost or stolen certificates representing
such Shares are replaced, found or recovered, then with respect to such Shares
such Stockholder shall promptly arrange for the grant of the pledge and security
interest contemplated by Section 1.01 and the appointment of attorney-in-fact
contemplated by Section 5.03.
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMERICAN BRANDS, INC.
By: /s/ Gilbert L. Klemann II
---------------------------
Name: Gilbert L. Klemann II
Title: Senior Vice President
and General Counsel
GARY E. BISZANTZ LIVING TRUST
DATED 12-30-92
By: /s/ Gary E. Biszantz
---------------------------
Gary E. Biszantz, its
trustee
Address: 17639 Loma Linda
Rancho Santa Fe, CA 92067
GARY E. BISZANTZ AND FRANCES
B. BISZANTZ CHARITABLE
REMAINDER TRUST DATED 11-22-94
By: /s/ Gary E. Biszantz
---------------------------
Gary E. Biszantz, its
trustee
By: /s/ Frances B. Biszantz
---------------------------
Frances B. Biszantz, its
trustee
BISZANTZ CHILDREN'S TRUST
DATED 12-30-92
By: /s/ Gary E. Biszantz
---------------------------
Gary E. Biszantz, its
trustee
26
<PAGE>
CROW 1990 COMMUNITY PROPERTY
TRUST DATED 6-8-90
By: /s/ Thomas L. Crow
-----------------------------
Thomas L. Crow, its
trustee
Address: 2681 Idle Hour
Lane, La Jolla, CA 92037
By: /s/ Carol Ann Crow
-----------------------------
Carol A. Crow, its
trustee
THOMAS L. CROW 9% NET INCOME
WITH MAKE-UP CHARITABLE
REMAINDER TRUST #1
DATED 12-17-94
By: /s/ Thomas L. Crow
-----------------------------
Thomas L. Crow, its
trustee
By: /s/ Carol Ann Crow
-----------------------------
Carol A. Crow, its
trustee
THOMAS L. CROW 20% NET INCOME
WITH MAKE-UP CHARITABLE
REMAINDER TRUST #2
DATED 12-17-94
By: /s/ Thomas L. Crow
-----------------------------
Thomas L. Crow, its
trustee
By: /s/ Carol Ann Crow
-----------------------------
Carol A. Crow, its trustee
27
<PAGE>
THOMAS L. CROW G.P. FBO CROW
FAMILY LIMITED PARTNERSHIP
ACCOUNT #1
By: /s/ Thomas L. Crow
-----------------------------
Thomas L. Crow, its _____
By: /s/ Carol Ann Crow
-----------------------------
Carol A. Crow, its ______
MERRILL LYNCH (COLLATERAL
ACCOUNT)
By: /s/ Thomas L. Crow
-----------------------------
Thomas L. Crow, its _____
28
<PAGE>
VANDEWEGHE LIVING TRUST
DATED 11-16-92
By: /s/ Gary S. Vandeweghe
------------------------------
Gary S. Vandeweghe, its
trustee
Address: 5343 Greenside
Drive, San Jose, CA 95127
By: /s/ Barbara M. Vandeweghe
------------------------------
Barbara M. Vandeweghe, its
trustee
TAV TRUST DATED 11-17-92
By: /s/ Gary S. Vandeweghe
------------------------------
Gary S. Vandeweghe, its
trustee
By: /s/ Barbara M. Vandeweghe
------------------------------
Barbara M. Vandeweghe, its
trustee
29
<PAGE>
GREENSIDE UNITRUST A
CHARITABLE REMAINDER
UNITRUST DATED 11-18-94
By: /s/ Gary S. Vandeweghe
------------------------------
Gary S. Vandeweghe, its
trustee
By: /s/ Barbara M. Vandeweghe
------------------------------
Barbara M. Vandeweghe, its
trustee
GREENSIDE FOUNDATION A
CHARITABLE FOUNDATION
DATED 11-18-94
By: /s/ Gary S. Vandeweghe
------------------------------
Gary S. Vandeweghe, its
trustee
30
<PAGE>
DONALD C. SHERMAN LIVING TRUST
DATED 8-5-80
By: /s/ Donald C. Sherman
-----------------------------
Donald C. Sherman, its
trustee
Address: 655 E. Cloudveil
Road, Jackson, WY 83001
STARR CHARITABLE REMAINDER
UNITRUST DATED 8-3-94
(NIMCRUT #1)
By: /s/ Donald C. Sherman
-----------------------------
Donald C. Sherman, its
trustee
By: /s/ Diane Sherman
-----------------------------
Diane Sherman, its trustee
31
<PAGE>
THE JOHN L. SCHROEDER AND
KATHLEEN A. SCHROEDER
LIVING TRUST DATED 1-4-80
By: /s/ John L. Schroeder
-----------------------------
John L. Schroeder, its
trustee
Address: 336 W. Ocean
View Ave., Del Mar, CA
92014
JOHN L. SCHROEDER AND KATHLEEN
A. SCHROEDER CHARITABLE
REMAINDER TRUST DATED 12-13-93
By: /s/ John L. Schroeder
-----------------------------
John L. Schroeder, its
trustee
JENNIFER KELLY SCHROEDER
By: /s/ John L. Schroeder
-----------------------------
John L. Schroeder, as
custodian (Under
California Uniform
Transfers to Minors Act)
MOLLY ELIZABETH SCHROEDER
By: /s/ John L. Schroeder
-----------------------------
John L. Schroeder, as
custodian (Under
California Uniform
Transfers to Minors Act)
32
<PAGE>
DECLARATION OF TRUST DATED
12-13-93
By: /s/ John L. Schroeder
------------------------------
John L. Schroeder, as
trustee
33
<PAGE>
ARTHUR B. SCHULTZ LIVING TRUST
DATED 6-8-94
By: /s/ Arthur B. Schultz*
------------------------------
Arthur B. Schultz, as
trustee
Address: P.O. Box 7275,
Incline Village, NV 89450
ARTHUR B. SCHULTZ CHARITABLE
FOUNDATION DATED 12-5-85
By: /s/ Arthur B. Schultz*
------------------------------
Arthur B. Schultz, as
trustee
ARTHUR B. SCHULTZ CHARITABLE
REMAINDER TRUST DATED 12-22-94
By: /s/ Arthur B. Schultz*
------------------------------
Arthur B. Schultz, as
trustee
* All by Gary S. Vandeweghe
as attorney in fact
34
<PAGE>
Exhibit A
---------
<TABLE>
<CAPTION>
Number of
---------
Stockholder Shares
- ----------- ------
<S> <C>
Gary E. Biszantz Living Trust Dated 1,216,890
12-30-92
Gary E. Biszantz and Frances B. Biszantz 300,000
Charitable Remainder Trust Dated
11-22-94
Biszantz Children's Trust Dated 12-30-92 252,468
Crow 1990 Community Property Trust 602,351
Dated 6-8-90
Thomas L. Crow 9% Net Income With 279,721
Make-up Charitable Remainder Trust #1 Dated
12-17-94
Thomas L. Crow 20% Net Income With 55,945
Make-up Charitable Remainder Trust #2 Dated
12-17-94
Thomas L. Crow G.P. FBO Crow Family 250,000
Limited Partnership Account #1
Merrill Lynch (collateral account) 26,667
Vandeweghe Living Trust Dated 11-16-92 338,352
TAV Trust Dated 11-17-92 71,290
Greenside Unitrust A Charitable 50,000
Remainder Unitrust Dated 11-18-94
Greenside Foundation A Charitable 25,000
Foundation Dated 11-18-94
Donald C. Sherman Living Trust Dated 662,889
8-5-80
Starr Charitable Remainder Unitrust 11,889
Dated 8-3-94 (NIMCRUT #1)
The John L. Schroeder and Kathleen A. 300,582
Schroeder Living Trust Dated 1-4-80
John L. Schroeder and Kathleen A. 15,192
Schroeder Charitable Remainder Trust
Dated 12-13-93
John L. Schroeder as Custodian for 1,900
Jennifer Kelly Schroeder (Under
California Uniform Transfers to Minors
Act)
John L. Schroeder as Custodian for 1,900
Molly Elizabeth Schroeder (Under
California Uniform Transfers to Minors
Act)
John L. Schroeder as Trustee under 1,900
Declaration of Trust Dated 12-13-93
Arthur B. Schultz Living Trust Dated 409,642
6-8-94
Arthur B. Schultz Charitable Foundation 50,000
Dated 12-5-85
Arthur B. Schultz Charitable Remainder 25,000
Trust Dated 12-22-94
</TABLE>
35
<PAGE>
EXHIBIT c(3)
December 18, 1995
CONFIDENTIAL
- ------------
Biszantz Consulting, Inc.
P.O. Box 755
Rancho Santa Fe, CA 92067
Gentlemen:
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to provide exclusive consulting services to
the Company for a period of five years following the effective date of the
merger (the "Closing Date"), the Company agrees that, in the event the
contemplated merger is consummated, the Company retains you as consultant and
advisor for a period of five years following the Closing Date (the "Consulting
Period").
It is understood that the consulting and advisory services will be
provided through your President, Gary E. Biszantz ("Biszantz"). Biszantz shall
not be required to follow a specified work schedule and shall not be under the
control of the Company, but shall be available on policy or strategic planning
questions, either in person or by telephone, at his discretion, for up to a
maximum of twenty (20) hours a month at such times as the Company may reasonably
request during the Consulting Period. Biszantz shall not be considered an
employee of the Company and shall not be eligible for the Company's employee
benefits.
As compensation for the consulting services rendered under and the
agreement not to compete included in this Agreement, the Company shall pay to
you a monthly fee of $550,000 divided by 12 for the Consulting Period. During
the Consulting Period, the Company will pay all reasonable business and travel
expenses incurred in connection with the rendering of the exclusive consulting
services hereunder and will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
<PAGE>
You agree, and Biszantz by signing a copy of this Agreement
acknowledges and also agrees, that the consulting services being provided
hereunder shall be exclusively to the Company and that you and Biszantz will
not, during the consulting period hereunder, directly or indirectly, for your
own accounts or for the account of others, either as an officer, director,
stockholder, owner, partner, promoter, employee, consultant, adviser, agent,
manager, or in any other capacity, assist or provide services to any person or
entity that is in competition with the Company or its affiliates in the golf
industry.
In view of the fact that this consulting arrangement with the Company
will bring you and Biszantz into close contact with many confidential affairs of
the Company and its affiliates, including matters of a business nature such as
information about costs, profits, technology, markets, sales, trade secrets,
potential patents and other business ideas, customer lists, plans for future
developments and information of any other kind not known in the golf industry
generally, or industries in which other affiliates of the Company are engaged
(hereinafter, collectively, "Confidential Matters"), you agree and Biszantz, by
signing a copy of this agreement, acknowledges and also agrees:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your collective
knowledge of them for your benefit or the benefit of Biszantz, during the
five year period following the Closing Date; and
(ii) to deliver promptly to the Company at the termination of this
confidential arrangement, or at a time the Company may request, all
memoranda, notices, records, reports and other documents (and all copies
thereof) relating to the business of the Company or any of its subsidiaries
or affiliates, including, but not limited to, Confidential Matters which
you or Biszantz may then possess or have under your respective control.
This Agreement will terminate on the fifth anniversary of the Closing
Date. This Agreement supersedes your existing consulting agreement with the
Company and any other prior agreement or understanding relating to your or
Biszantz provision of services to the Company and all rights thereunder will
terminate. This Agreement may not be modified without prior written agreement
of the parties.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without
2
<PAGE>
giving effect to the principles of conflicts of laws. The parties hereto hereby
consent and submit to the jurisdiction of a state or federal court located in
California.
You hereby expressly agree, and Biszantz by signing a copy of this
Agreement acknowledges and also agrees, that the remedy at law for any breach of
this Agreement will be inadequate and is not readily susceptible to being
measured in monetary terms. Accordingly you, and Biszantz by signing a copy of
this Agreement acknowledges and also agrees, that the Company will be entitled
to, among other remedies, immediate injunctive relief and may obtain without
bond a temporary order restraining any threatened or further breach of this
Agreement. However, nothing in this paragraph shall be deemed to limit the
Company's remedies at law or in equity for any breach of this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceble because its scope is considered excessive, such
provision shall be modified so that the scope of the provision is reduced only
to the minimum extent necessary to render the modified provision valid. In no
event, however, shall the Company be required to pay any consulting compensation
under this Agreement if you do not comply with your exclusive consulting and
non-compete obligation.
If this letter sets forth correctly our agreement on the subject
matter hereof, please sign and return to me the enclosed copy of this letter,
and request Biszantz to acknowledge
3
<PAGE>
and agree to the terms hereof, which will then constitute our agreement on the
subject.
Very truly yours,
COBRA GOLF INCORPORATED
By /s/ David A. Schaefer
-----------------------------------------
Accepted and Agreed to
this 18th day of December, 1995
BISZANTZ CONSULTING, INC.
By /s/ Gary E. Biszantz
---------------------------------
Acknowledged and Agreed to
this 18th day of December, 1995
/s/ Gary E. Biszantz
- -----------------------------------
Gary E. Biszantz
4
<PAGE>
EXHIBIT c(4)
December 18, 1995
CONFIDENTIAL
- ------------
Mr. Thomas L. Crow
2681 Idle Hour Lane
La Jolla, CA 92037
Dear Mr. Crow:
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder, which will be for a three year period following the
effective date of the merger (the "Closing Date"). It is contemplated that you
will serve as Vice Chairman Emeritus of the Company. You also agree to serve in
such other positions with the Company as may be reasonably assigned by its Board
of Directors consistent with your status as a senior executive and, at the
request of the Company, in director or officer positions with any affiliate of
the Company consistent with your status as a senior executive.
Salary
- ------
Your salary for the years 1996, 1997 and 1998 shall be $350,000 per
annum. For each year after 1998, your salary shall be subject to review by the
Board of Directors of the Company and possible adjustment.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business, travel and entertainment expenses incurred by you in
furtherance of or in connection with the Company's business. If any such
expenses are paid by you in
<PAGE>
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Employee Plans
- --------------
You shall be eligible to participate in the Company's medical and life
insurance plans on the same terms and conditions as other similarly situated
employees, but you shall not be eligible to participate in other employee plans
for employees of the Company.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth. In
the event that the Company terminates your employment for reasons other than
Disability or Cause (as hereinafter defined), or you terminate your employment
for "Good Reason" (as hereinafter defined), you shall receive the following
severance in lieu of any further compensation:
(i) salary payable for a period of 24 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods; and
(ii) coverage under the Company's medical and life insurance plans
for the 24 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage after termination
of employment under COBRA rules shall be deemed satisfied by the coverage
provided in this clause (iv).
2
<PAGE>
In addition, you agree that, for a period of up to three years
following the aforesaid two year severance period, or for a period of up to
three years following the completion of the three year employment period, such
period of up to three years to be at the sole election of the Company, which
election shall be made within 30 calendar days after termination, you shall
render exclusive consulting services to the Company. You shall receive a
consulting fee for this additional period of exclusive consulting services
payable monthly at (i) an annual rate of $200,000, plus (ii) the amount not
otherwise payable in a previous year under this Agreement by reason of the
application of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code") but only to the extent the amount set forth in this (ii) is
determined not to be an "excess parachute payment" under Section 280G of the
Code. You shall also be covered under the Company's medical and life insurance
plans during this additional consulting period. This continued coverage shall
be on the same terms and conditions and subject to the same limitations as
medical and life insurance coverage available to employees of the Company at
your level during the consulting period. In the event that your continued
coverage is not permitted under the terms and provisions of such plans, the
Company shall arrange to provide you with benefits that are substantially
similar to those that you would have been entitled to receive if you had
remained covered during such period.
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation. The term "Cause" shall
mean any of the following: embezzlement; fraud; dishonesty; breach of fiduciary
duty to the Company; deliberately disregarding the rules of the Company which
results in a material loss, damage or injury to the Company; unauthorized
disclosure of any of the secrets or confidential information of the Company; a
material breach of any agreement (including this Agreement) with the Company;
inducement of any representative that acts for the Company to terminate such
relationship which termination results in material damage to the Company; or
engaging in any conduct which constitutes unfair competition with the Company.
In the event that the Company terminates your employment for Cause, the Company
shall have no further obligations under this Agreement. "Good Reason" shall
mean the occurrence (without your express written consent) of any one of the
following acts by the Company:
(i) the assignment to you of any duties which would not be
commensurate with those of a senior executive officer or any change in your
title of Vice Chairman Emeritus, or
3
<PAGE>
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations.
In order to be a termination of employment by you for "Good Reason," such
termination must occur within three years of the Closing Date and must also
occur within 60 calendar days of the date that you are notified of the
occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments or consulting payments hereunder, you shall render exclusive consulting
services to the Company as the Company shall reasonably request, that your
consulting services to the golf industry shall be exclusively to the Company and
that you will not, during such period, directly or indirectly, for your own
account or for the account of others, either as an officer, director,
stockholder, owner, partner, promoter, employee, consultant, adviser, agent,
manager, or in any other capacity, assist or provide services to any person or
entity that is then in competition with the Company or its affiliates in the
golf industry.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to three years following the date of your termination of
employment, such period to be at the sole election of the Company, that your
consulting services shall be exclusively to the Company, and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry other than
the Company. You shall receive a consulting fee for the period that the Company
elects that you render exclusive consulting services hereunder as follows:
monthly payments at an annual rate of $100,000 if you terminate employment prior
to the first anniversary of the Closing Date; monthly payments at an annual rate
of up to $200,000 if you terminate employment on or after the first anniversary
but prior
4
<PAGE>
to the second anniversary of the Closing Date; and monthly payments at an annual
rate of up to $300,000 if you terminate employment on or after the second
anniversary of the Closing Date and up to the third anniversary of the Closing
Date, plus the amount not otherwise payable in a previous year under this
Agreement by reason of the application of Section 280G of the Code, but only to
the extent the amount set forth in this clause is determined not to be an
"excess parachute payment" under Section 280G of the Code. You shall also be
covered under the Company's medical and life insurance plans for the consulting
period. This continued coverage shall be on the same terms and conditions and
subject to the same limitations as medical and life insurance coverage available
to employees of the Company at your level during the consulting period. In the
event that your continued coverage is not permitted under the terms and
provisions of such plans, the Company shall arrange to provide you with benefits
that are substantially similar to those that you would have been entitled to
receive if you had remained covered during such period. Your right to elect
continued medical coverage under COBRA rules shall be deemed satisfied by the
coverage provided hereby.
Any election by the Company that you provide exclusive consulting
services hereunder, shall be made within 30 calendar days of such termination.
Pursuant to such executive consulting arrangement, you shall not be required to
follow a specified work schedule and shall not be under the control of the
Company, but shall be available on policy or strategic planning questions,
either in person or by telephone, at your discretion, for up to a maximum of
twenty (20) hours a month at such times as the Company may reasonably request
during the consulting period.
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your
5
<PAGE>
own benefit, either during the term of your employment or consulting
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
(ii) to deliver promptly to the Company at the termination of your
employment or consulting period, or at any time the Company may request,
all memoranda, notices, records, reports and other documents (and all
copies thereof) relating to the business of the Company or any of its
subsidiaries or affiliates, including but not limited to, Confidential
Matters which you may then possess or have under your control.
Parachute Agreements
- --------------------
If any payments hereunder are determined to be "excess parachute
payments" under Section 280G of the Code, the payments will be reduced to the
extent that they will not constitute excess parachute payments.
Prior Agreements
- ----------------
This Agreement supersedes your existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate
6
<PAGE>
and is not readily susceptible to being measured in monetary terms. Accordingly,
it is acknowledged that the Company will be entitled to, among other remedies,
immediate injunctive relief and may obtain without bond a temporary order
restraining any threatened or further breach of this Agreement. However, nothing
in this paragraph shall be deemed to limit the Company's remedies at law or in
equity for any breach of this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
7
<PAGE>
If this letter sets forth correctly our agreement on the subject matter
hereof, please sign and return to me the enclosed copy of this letter, which
will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By /s/ David A. Schaefer
----------------------------------------
Accepted and Agreed to
this 17th day of December, 1995
/s/ Thomas L. Crow
- ---------------------------------
Thomas L. Crow
8
<PAGE>
EXHIBIT c(5)
December 18, 1995
CONFIDENTIAL
- ------------
Mr. Mark C. McClure
710 Obelsisco Circle
Carlsbad, CA 92009
Dear Mr. McClure:
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Stay Bonus
- ----------
If you continue in employment with the Company through the effective
date of the merger (the "Closing Date") and for 30 days after the Closing Date,
you will be entitled to a stay bonus of $100,000 payable as soon as practicable
(but not later than 5 business days) thereafter. If you continue in employment
with the Company through the first anniversary of the Closing Date, you will be
entitled to an additional stay bonus of $100,000 payable as soon as practicable
(but not later than 5 business days) thereafter.
If the Company terminates your employment after the Closing Date for
reasons other than Disability or Cause (as hereinafter defined), or you
terminate your employment for "Good Reason" (as hereinafter defined) prior to
the date on which you would be entitled to either stay bonus, you shall be paid
the stay bonus upon your termination of employment. You will not be eligible
for the stay bonus if you terminate employment with the Company voluntarily, or
if your employment terminates by death or your employment is terminated by the
Company for Disability or Cause, prior to the date on which you would be
entitled to the stay bonus.
<PAGE>
Salary
- ------
Your salary for the years 1996, 1997 and 1998 shall be $350,000 per
annum. For each year after 1998, your salary shall be subject to review by the
Board of Directors of the Company and possible adjustment.
Annual Incentive Bonus
- ----------------------
An annual incentive compensation program will be established
commencing for 1996 and continuing through 1998. The program will provide a
target bonus to you for 1996 equal to 50% of your base salary with an
opportunity to earn a maximum of 100% of your base salary, but only if
established operating company contribution goals are met. The operating company
contribution goals for 1996 will not be greater than as set forth on Schedule A.
Long Term Incentives
- --------------------
The Company will also establish an enhanced long-term incentive plan
for the performance period 1996 through 1998. You will be awarded 425 units
under this plan. If the Company achieves $225 million of cumulative operating
company contribution (generally, operating profit exclusive of amortization of
intangibles) during this performance period, the value of each unit to be paid
in early 1999 will be $500. If the Company achieves $250 million of cumulative
operating company contribution during this performance period, the value of each
unit to be paid in early 1999 will be $1,000. If the Company achieves $300
million of cumulative operating company contribution during this performance
period, the value of each unit to be paid in early 1999 will be $2,500. For
performance between $225 million of cumulative operating company contribution
and $250 million of cumulative operating company contribution, the value of each
unit will be interpolated between $500 and $1,000 and, for performance between
$250 million and $300 million of cumulative operating company contribution, the
value of each unit will be interpolated between $1,000 and $2,500. In the event
cumulative operating company contribution for the performance period achieves or
exceeds $300 million, you shall receive an additional cash bonus equal to $2,500
per unit multiplied by 35%. A matrix setting forth the payment schedule is
attached hereto as Schedule B.
You will also be eligible for stock options under the American Brands,
Inc. Long-Term Incentive Plan. The Company will recommend that you be granted
options for 1996 with respect to at least 18,000 shares of American Brands, Inc.
common stock.
2
<PAGE>
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder and to serve in such positions with the Company as may be
reasonably assigned by its Board of Directors consistent with your title as
President and Chief Executive Officer and the status of a senior executive. You
also agree to serve, at the request of the Company, in director or officer
positions with any affiliate of the Company consistent with the status of a
senior executive.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business and travel expenses incurred by you in furtherance of or in
connection with the Company's business. If any such expenses are paid by you in
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth.
Subject to the next following paragraph, in the event that the Company
terminates your employment for reasons other than Disability or Cause, or you
terminate your employment for "Good Reason" (as hereinafter defined) you shall
receive the following severance in lieu of any further compensation:
(i) salary payable for a period of 24 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) 2X your target bonus for the calendar year in which the notice
of termination is given (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved, the
first half of which shall be payable promptly following the calendar year
in which the notice of termination is given and the second half of which
shall be payable one year after the first half is paid;
3
<PAGE>
(iii) your target bonus for the calendar year in which the notice of
termination is given whether or not performance goals are achieved,
multiplied by a fraction the numerator of which is the number of days in
such calendar year through the date that the notice of termination of
employment is given and the denominator of which is the number of days in
such calendar year, payable promptly following such calendar year; and
(iv) coverage under the Company's medical and life insurance plans
for the 24 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage after termination
of employment under COBRA rules shall be deemed satisfied by the coverage
provided in this clause (iv).
In the event that the Company terminates your employment for reasons
other than for Disability or Cause or you terminate your employment for "Good
Reason" (as hereinafter defined) after the Closing Date but prior to the first
anniversary thereof, you shall receive the following severance in lieu of the
severance specified in the immediately preceding paragraph and in lieu of any
further compensation:
(i) salary payable for a period of 36 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) 3X your target bonus for the calendar year in which such notice
of termination is given (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved, the
first one-third of which shall be payable promptly following the calendar
year in which the notice of termination is given, the second one-third of
which shall be payable one year after the first one-third is paid and the
last one-third of which shall be payable one year after the second one-
third is paid;
4
<PAGE>
(iii) your target bonus for the calendar year in which such notice of
termination is given whether or not performance goals are achieved,
multiplied by a fraction the numerator of which is the number of days in
such calendar year through the date that the notice of termination of
employment is given and the denominator of which is the number of days in
such calendar year, payable promptly following such calendar year;
(iv) coverage under the Company's medical and life insurance plans
for the 36 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage after termination
of employment under COBRA rules shall be deemed satisfied by the coverage
provided by this clause (iv).
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation other than to pay benefits
under the Company's disability plans. The term "Cause" shall mean any of the
following: embezzlement; fraud; dishonesty; breach of fiduciary duty to the
Company; deliberately disregarding the rules of the Company which results in a
material loss, damage or injury to the Company; unauthorized disclosure of any
of the secrets or confidential information of the Company; a material breach of
any agreement (including this Agreement) with the Company; inducement of any
representative that acts for the Company to terminate such relationship which
termination results in material damage to the Company; or engaging in any
conduct which constitutes unfair competition with the Company. In the event
that the Company terminates your employment for Cause, the Company shall have no
further obligations under this Agreement. For purposes of this Agreement, "Good
Reason" shall mean the occurrence (without your express written consent) of any
one of the following acts by the Company:
5
<PAGE>
(i) the assignment to you of any duties which would not be
commensurate with those of a senior executive officer or any change in your
title of President and Chief Executive Officer;
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations; or
(iii) the failure by the Company to afford you with an annual
incentive bonus program.
In order to be a termination of employment by you for "Good Reason",
such termination must occur within three years of the Closing Date and must also
occur within 60 calendar days of the date that you are notified of the
occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments hereunder, you shall render exclusive consulting services to the
Company as the Company shall reasonably request, that your consulting services
to the golf industry shall be exclusively to the Company and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to two years following the date of your termination of employment,
such period to be at the sole election of the Company, which election shall be
made within 30 calendar days of such termination, that your consulting services
shall be exclusively to the Company, and that you will not, during such period
directly or indirectly, for your own account or for the account of others,
either as an officer, director, stockholder, owner, partner, promoter, employee,
consultant, adviser, agent, manager, or in any other capacity,
6
<PAGE>
assist or provide services to any person or entity that is then in competition
with the Company or its affiliates in the golf industry, provided, that, in the
event that you voluntarily terminate your employment prior to the first
anniversary of the Closing Date, the Company may elect that the exclusive
consulting arrangement be for a period of up to three years with such period to
be at the sole election of the Company, which election shall be made within 30
calendar days of such termination. Pursuant to such executive consulting
arrangement, you shall not be required to follow a specified work schedule and
shall not be under the control of the Company, but shall be available on policy
or strategic planning questions, either in person or by telephone, at your
discretion, for up to a maximum of twenty (20) hours a month at such times as
the Company may reasonably request, during the Consulting Period. As
compensation for such exclusive consulting services rendered and the agreement
not to compete included in such arrangement, the Company shall pay you a monthly
fee equal to the sum of (i) $350,000 plus your target bonus for the year in
which you voluntarily terminate (or the amount of your 1995 bonus if greater)
divided by 12 and (ii) the amount not otherwise payable in a previous year under
this Agreement by reason of the application of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") but only to the extent the amount
set forth in this (ii) is determined not to be an "excess parachute payment"
under Section 280G of the Code.
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your own benefit, either during the term of your employment
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
(ii) to deliver promptly to the Company at the termination of your
employment, or at any time the Company
7
<PAGE>
may request, all memoranda, notices, records, reports and other documents
(and all copies thereof) relating to the business of the Company or any of
its subsidiaries or affiliates, including but not limited to, Confidential
Matters which you may then possess or have under your control.
Parachute Payments
- ------------------
If any payments hereunder are determined to be "excess parachute
payments" under Section 280G of the Code, the payments will be reduced to the
extent that they will not constitute excess parachute payments.
Termination of Agreement
- ------------------------
This Agreement may be terminated by the Company after the first
anniversary of the Closing Date but only upon two years prior written notice to
you.
Prior Agreements
- ----------------
This Agreement supersedes your existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate
8
<PAGE>
and is not readily susceptible to being measured in monetary terms. Accordingly,
it is acknowledged that the Company will be entitled to, among other remedies,
immediate injunctive relief and may obtain without bond a temporary order
restraining any threatened or further breach of this Agreement. However, nothing
in this paragraph shall be deemed to limit the Company's remedies at law or in
equity for any breach of this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
If this letter sets forth correctly our agreement on the subject
matter hereof, please sign and return to me the enclosed copy of this letter,
which will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By /s/ David A. Schaefer
----------------------
Accepted and Agreed to
this 18th day of December, 1995
/s/ Mark C. McClure
- -------------------
Mark C. McClure
9
<PAGE>
ENHANCED LONG-TERM INCENTIVE PLAN ('96 - '98)
<TABLE>
<CAPTION>
AMERICAN BRANDS, INC. ====== PROPOSED (3 YR) LONG-TERM PLAN*======
OPTION GRANT
FEB '96 UNITS MIN MAX SPLIT
--------- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
MCM 18,000 425 $212,500 $1,062,500 100% COBRA
**$1,434,400
DAS 8,500 225 $112,500 $562,500 100% COBRA
**$759,400
9 REMAINING VPS 4,000 150 $75,000 $375,000 100% COBRA
TOTALS: $1,000,000 $5,000,000
**$5,568,800
<CAPTION>
PER UNIT CUMULATIVE
PERFORMANCE PAYOUT OCC ($M)
----------- ------ --------
<S> <C> <C>
MINIMUM $ 500 $225.0
$1,000 $250.0
MAXIMUM $2,500 $300.0
</TABLE>
[1996-98 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PER UNIT PAYOUT
PER CUMULATIVE OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN MILLIONS OF DOLLARS).]
VERTICAL AXIS: HORIZONTAL AXIS:
PER UNIT PAYOUT CUMULATIVE OCC ACHIEVED (IN $M)
--------------- -------------------------------
$500 $225.0
$1,000 $250.0
$2,500 $300.0
- ----------------
* LONG-TERM PLAN IS ENHANCED FOR THE 96-98 PERIOD; PRESENTLY INTEND FOR
STANDARD OVERLAPPING CYCLES TO BEGIN IN 1997.
** IF MAXIMUM IS ACHIEVED, MCM AND DAS WILL RECEIVE A 35% PREMIUM.
<PAGE>
SCHEDULE A
1996 EXECUTIVE INCENTIVE PLAN PERFORMANCE MATRIX
PERFORMANCE MEASUREMENT: OPERATING COMPANY CONTRIBUTION ($000)
1996 PROFIT PLAN $87,000
MINIMUM PAYOUT 60.0%
MAXIMUM PAYOUT 150.0%
AMOUNT % OF PROFIT % OF TARGET
(IN $000) PLAN PAID
--------- ---- ----
MINIMUM $56,500 65.0% 60.0%
ACCELERATION POINT $74,000 85.0% 100.0%
MAXIMUM $87,000 100.0% 150.0% **
[1996 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PERCENTAGE OF PAYOUT TARGET
PER OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN THOUSANDS).]
HORIZONTAL AXIS:
VERTICAL AXIS: OPERATING COMPANY
% OF TARGET PAYOUT CONTRIBUTION ACHIEVED
------------------ ---------------------
60.0% $56.5
100.0% $74.0
150.0% $87.0
- -------------
** IF MAXIMUM IS ACHIEVED (i.e. $87.0M), MCCLURE AND SCHAEFER WILL RECEIVE
BONUSES EQUAL TO THEIR RESPECTIVE BASE SALARIES.
<PAGE>
EXHIBIT c(6)
December 18, 1995
CONFIDENTIAL
- ------------
Mr. David A. Schaefer
1262 Quail Garden Court
Encinitas, CA 92024
Dear Mr. Schaefer:
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Stay Bonus
- ----------
If you continue in employment with the Company through the effective
date of the merger (the "Closing Date") and for 30 days after the Closing Date,
you will be entitled to a stay bonus of $50,000 payable as soon as practicable
(but not later than 5 business days) thereafter. If you continue in employment
with the Company through the first anniversary of the Closing Date, you will be
entitled to an additional stay bonus of $50,000 payable as soon as practicable
(but not later than 5 business days) thereafter.
If the Company terminates your employment after the Closing Date for
reasons other than Disability or Cause (as hereinafter defined), or you
terminate your employment for "Good Reason" (as hereinafter defined) prior to
the date on which you would be entitled to either stay bonus, you shall be paid
the stay bonus upon your termination of employment. You will not be eligible
for the stay bonus if you terminate employment with the Company voluntarily, or
if your employment terminates by death or your employment is terminated by the
Company for Disability or Cause, prior to the date on which you would be
entitled to the stay bonus.
<PAGE>
Salary
- ------
Your salary for the years 1996, 1997 and 1998 shall be $200,000 per
annum. For each year after 1998, your salary shall be subject to review by the
Board of Directors of the Company and possible adjustment.
Annual Incentive Bonus
- ----------------------
An annual incentive compensation program will be established
commencing for 1996 and continuing through 1998. The program will provide a
target bonus to you for 1996 equal to 40% of your base salary with an
opportunity to earn a maximum of 100% of your base salary, but only if
established operating company contribution goals are met. The operating company
contribution goals for 1996 will not be greater than as set forth on Schedule A.
Long Term Incentives
- --------------------
The Company will also establish an enhanced long-term incentive plan
for the performance period 1996 through 1998. You will be awarded 225 units
under this plan. If the Company achieves $225 million of cumulative operating
company contribution (generally, operating profit exclusive of amortization of
intangibles) during this performance period, the value of each unit to be paid
in early 1999 will be $500. If the Company achieves $250 million of cumulative
operating company contribution during this performance period, the value of each
unit to be paid in early 1999 will be $1,000. If the Company achieves $300
million of cumulative operating company contribution during this performance
period, the value of each unit to be paid in early 1999 will be $2,500. For
performance between $225 million of cumulative operating company contribution
and $250 million of cumulative operating company contribution, the value of each
unit will be interpolated between $500 and $1,000 and, for performance between
$250 million and $300 million of cumulative operating company contribution, the
value of each unit will be interpolated between $1,000 and $2,500. In the event
cumulative operating company contribution for the performance period achieves or
exceeds $300 million, you shall receive an additional cash bonus equal to $2,500
per unit multiplied by 35%. A matrix setting forth the payment schedule is
attached hereto as Schedule B.
You will also be eligible for stock options under the American Brands,
Inc. Long-Term Incentive Plan. The Company will recommend that you be granted
options for 1996 with respect to at least 8,500 shares of American Brands, Inc.
common stock.
2
<PAGE>
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder and to serve in such positions with the Company as may be
reasonably assigned by its Board of Directors consistent with your title as
Senior Vice President and Chief Operating Officer and the status of a senior
executive. You also agree to serve, at the request of the Company, in director
or officer positions with any affiliate of the Company consistent with the
status of a senior executive.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business and travel expenses incurred by you in furtherance of or in
connection with the Company's business. If any such expenses are paid by you in
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth.
Subject to the next following paragraph, in the event that the Company
terminates your employment for reasons other than Disability or Cause, or you
terminate your employment for "Good Reason" (as hereinafter defined) you shall
receive the following severance in lieu of any further compensation:
(i) salary payable for a period of 24 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) 2X your target bonus for the calendar year in which the notice
of termination is given (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved, the
first half of which shall be payable promptly following the calendar year
in which the notice of termination is given
3
<PAGE>
and the second half of which shall be payable one year after the first half
is paid;
(iii) your target bonus for the calendar year in which the notice of
termination is given whether or not performance goals are achieved,
multiplied by a fraction the numerator of which is the number of days in
such calendar year through the date that the notice of termination of
employment is given and the denominator of which is the number of days in
such calendar year, payable promptly following such calendar year; and
(iv) coverage under the Company's medical and life insurance plans
for the 24 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage after termination
of employment under COBRA rules shall be deemed satisfied by the coverage
provided in this clause (iv).
In the event that the Company terminates your employment for reasons
other than for Disability or Cause or you terminate your employment for "Good
Reason" (as hereinafter defined) after the Closing Date but prior to the first
anniversary thereof, you shall receive the following severance in lieu of the
severance specified in the immediately preceding paragraph and in lieu of any
further compensation:
(i) salary payable for a period of 36 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) 3X your target bonus for the calendar year in which such notice
of termination is given (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved, the
first one-third of which shall be payable promptly following the calendar
year in which the notice of termination is given, the second one-third of
4
<PAGE>
which shall be payable one year after the first one-third is paid and the
last one-third of which shall be payable one year after the second one-
third is paid;
(iii) your target bonus for the calendar year in which such notice of
termination is given whether or not performance goals are achieved,
multiplied by a fraction the numerator of which is the number of days in
such calendar year through the date that the notice of termination of
employment is given and the denominator of which is the number of days in
such calendar year, payable promptly following such calendar year;
(iv) coverage under the Company's medical and life insurance plans
for the 36 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage after termination
of employment under COBRA rules shall be deemed satisfied by the coverage
provided by this clause (iv).
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation other than to pay benefits
under the Company's disability plans. The term "Cause" shall mean any of the
following: embezzlement; fraud; dishonesty; breach of fiduciary duty to the
Company; deliberately disregarding the rules of the Company which results in a
material loss, damage or injury to the Company; unauthorized disclosure of any
of the secrets or confidential information of the Company; a material breach of
any agreement (including this Agreement) with the Company; inducement of any
representative that acts for the Company to terminate such relationship which
termination results in material damage to the Company; or engaging in any
conduct which constitutes unfair competition with the Company. In the event
that the Company terminates your employment for Cause, the Company shall have no
further obligations under this Agreement. For purposes of this Agreement, "Good
Reason" shall mean the
5
<PAGE>
occurrence (without your express written consent) of any one of the following
acts by the Company:
(i) the assignment to you of any duties which would not be
commensurate with those of a senior executive officer or any change in your
title of President and Chief Executive Officer;
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations; or
(iii) the failure by the Company to afford you with an annual
incentive bonus program.
In order to be a termination of employment by you for "Good Reason",
such termination must occur within three years of the Closing Date and must also
occur within 60 calendar days of the date that you are notified of the
occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments hereunder, you shall render exclusive consulting services to the
Company as the Company shall reasonably request, that your consulting services
to the golf industry shall be exclusively to the Company and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to two years following the date of your termination of employment,
such period to be at the sole election of the Company, which election shall be
made within 30 calendar days of such termination, that your consulting services
shall be exclusively to the Company, and that you will not, during such period
directly or indirectly, for your
6
<PAGE>
own account or for the account of others, either as an officer, director,
stockholder, owner, partner, promoter, employee, consultant, adviser, agent,
manager, or in any other capacity, assist or provide services to any person or
entity that is then in competition with the Company or its affiliates in the
golf industry, provided, that, in the event that you voluntarily terminate your
employment prior to the first anniversary of the Closing Date, the Company may
elect that the exclusive consulting arrangement be for a period of up to three
years with such period to be at the sole election of the Company, which election
shall be made within 30 calendar days of such termination. Pursuant to such
executive consulting arrangement, you shall not be required to follow a
specified work schedule and shall not be under the control of the Company, but
shall be available on policy or strategic planning questions, either in person
or by telephone, at your discretion, for up to a maximum of twenty (20) hours a
month at such times as the Company may reasonably request, during the Consulting
Period. As compensation for such exclusive consulting services rendered and the
agreement not to compete included in such arrangement, the Company shall pay you
a monthly fee equal to the sum of (i) $200,000 plus your target bonus for the
year in which you voluntarily terminate (or the amount of your 1995 bonus if
greater) divided by 12 and (ii) the amount not otherwise payable in a previous
year under this Agreement by reason of the application of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") but only to the extent
the amount set forth in this (ii) is determined not to be an "excess parachute
payment" under Section 280G of the Code.
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your own benefit, either during the term of your employment
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
7
<PAGE>
(ii) to deliver promptly to the Company at the termination of your
employment, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereof) relating to
the business of the Company or any of its subsidiaries or affiliates,
including but not limited to, Confidential Matters which you may then
possess or have under your control.
Parachute Payments
- ------------------
If any payments hereunder are determined to be "excess parachute
payments" under Section 280G of the Code, the payments will be reduced to the
extent that they will not constitute excess parachute payments.
Termination of Agreement
- ------------------------
This Agreement may be terminated by the Company after the first
anniversary of the Closing Date but only upon two years prior written notice to
you.
Prior Agreements
- ----------------
This Agreement supersedes your existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
8
<PAGE>
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate and is not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that the
Company will be entitled to, among other remedies, immediate injunctive relief
and may obtain without bond a temporary order restraining any threatened or
further breach of this Agreement. However, nothing in this paragraph shall be
deemed to limit the Company's remedies at law or in equity for any breach of
this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
9
<PAGE>
If this letter sets forth correctly our agreement on the subject matter
hereof, please sign and return to me the enclosed copy of this letter, which
will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By /s/ Mark C. McClure
-----------------------------
Name:
Accepted and Agreed to
this ____ day of December, 1995
/s/ David A. Schaefer
- ----------------------------
David A. Schaefer
10
<PAGE>
ENHANCED LONG-TERM INCENTIVE PLAN ('96 - '98)
<TABLE>
<CAPTION>
AMERICAN BRANDS, INC. ====== PROPOSED (3 YR) LONG-TERM PLAN*======
OPTION GRANT
FEB '96 UNITS MIN MAX SPLIT
--------- -------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
MCM 18,000 425 $212,500 $1,062,500 100% COBRA
**$1,434,400
DAS 8,500 225 $112,500 $562,500 100% COBRA
**$759,400
9 REMAINING VPS 4,000 150 $75,000 $375,000 100% COBRA
TOTALS: $1,000,000 $5,000,000
**$5,568,800
<CAPTION>
PER UNIT CUMULATIVE
PERFORMANCE PAYOUT OCC ($M)
----------- ------ --------
<S> <C> <C>
MINIMUM $ 500 $225.0
$1,000 $250.0
MAXIMUM $2,500 $300.0
</TABLE>
[1996-98 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PER UNIT PAYOUT
PER CUMULATIVE OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN MILLIONS OF DOLLARS).]
VERTICAL AXIS: HORIZONTAL AXIS:
PER UNIT PAYOUT CUMULATIVE OCC ACHIEVED (IN $M)
--------------- -------------------------------
$500 $225.0
$1,000 $250.0
$2,500 $300.0
- --------------
* LONG-TERM PLAN IS ENHANCED FOR THE 96-98 PERIOD; PRESENTLY INTEND FOR
STANDARD OVERLAPPING CYCLES TO BEGIN IN 1997.
** IF MAXIMUM IS ACHIEVED, MCM AND DAS WILL RECEIVE A 35% PREMIUM.
<PAGE>
SCHEDULE A
1996 EXECUTIVE INCENTIVE PLAN PERFORMANCE MATRIX
PERFORMANCE MEASUREMENT: OPERATING COMPANY CONTRIBUTION ($000)
1996 PROFIT PLAN $87,000
MINIMUM PAYOUT 60.0%
MAXIMUM PAYOUT 150.0%
AMOUNT % OF PROFIT % OF TARGET
(IN $000) PLAN PAID
--------- ---- ----
MINIMUM $56,500 65.0% 60.0%
ACCELERATION POINT $74,000 85.0% 100.0%
MAXIMUM $87,000 100.0% 150.0% **
[1996 PAYOUT CURVE]
[LINE GRAPH APPEARS HERE
ILLUSTRATING THE PERCENTAGE OF PAYOUT TARGET
PER OPERATING COMPANY CONTRIBUTION ACHIEVED
(IN THOUSANDS).]
HORIZONTAL AXIS:
VERTICAL AXIS: OPERATING COMPANY
% OF TARGET PAYOUT CONTRIBUTION ACHIEVED
------------------ ---------------------
60.0% $56.5
100.0% $74.0
150.0% $87.0
- --------------
** IF MAXIMUM IS ACHIEVED (i.e. $87.0M), MCCLURE AND SCHAEFER WILL RECEIVE
BONUSES EQUAL TO THEIR RESPECTIVE BASE SALARIES.
<PAGE>
EXHIBIT c(7)
[TWM and JSV]
COBRA GOLF INCORPORATED
, 1996
------------------
CONFIDENTIAL
- ------------
Mr.
[Insert Address]
Dear Mr. :
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Stay Bonus
- ----------
If you continue in employment with the Company through the effective
date of the merger (the "Closing Date") and for 30 days after the Closing Date,
you will be entitled to a stay bonus of $37,500 payable as soon as practicable
(but no later than 5 business days) thereafter. If you continue in employment
with the Company through the first anniversary of the Closing Date, you will be
entitled to an additional stay bonus of $37,500 payable as soon as practicable
(but no later than 5 business days) thereafter.
If the Company terminates your employment after the Closing Date for
reasons other than Disability or Cause (as hereinafter defined), or you
terminate your employment for "Good Reason" (as hereinafter defined), prior to
the date on which you would be entitled to either stay bonus, you shall be paid
the stay bonus upon your termination of employment. You will not be eligible
for the stay bonus if you terminate employment with the Company voluntarily, or
if your employment terminates by death or your employment is terminated by the
Company for Disability or
<PAGE>
Cause, prior to the date on which you would be entitled to the stay bonus.
Salary
- ------
Your salary shall continue at your current level and be subject to
annual review by the Board of Directors of the Company and possible adjustment.
Annual Incentive Bonus
- ----------------------
An annual incentive compensation program will be established
commencing for 1996 and continuing through 1997. The program will provide a
target bonus to you for 1996 equal to 35% of your base salary with an
opportunity to earn a maximum of 52.5% of your base salary, but only if
established operating company contribution goals are met. The operating company
contribution goals for 1996 will not be greater than as set forth on Schedule A.
Long Term Incentives
- --------------------
The Company will also establish an enhanced long-term incentive plan
for the performance period 1996 through 1998. You will be awarded 150 units
under this plan. If the Company achieves $220 million of operating company
contribution (generally operating profit exclusive of amortization of
intangibles) during this performance period, the value of each unit to be paid
in early 1999 will be $500. If the Company achieves $250 million of cumulative
operating company contribution during this performance period, the value of each
unit to be paid in early 1999 will be $1,000. If the Company achieves $300
million of cumulative operating company contribution during this performance
period, the value of each unit to be paid in early 1999 will be $2,500. For
performance between $225 million of cumulative operating company contribution
and $250 million of cumulative operating company contribution, the value of each
unit will be interpolated between $500 and $1,000 and, for performance between
$250 million and $300 million of cumulative operating company contribution, the
value of each unit will be interpolated between $1,000 and $2,500.
You will also be eligible for stock options under the American Brands,
Inc. Long-Term Incentive Plan. The Company will recommend that you be granted
options for 1996 with respect to at least 4,000 shares of American Brands, Inc.
common stock.
2
<PAGE>
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder and to serve in such positions with the Company as may be
reasonably assigned by its Board of Directors consistent with the status of an
executive officer and your position as a Vice President. You also agree to
serve, at the request of the Company, in director or officer positions with any
affiliate of the Company consistent with the status of an executive officer.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business and travel expenses incurred by you in furtherance of or in
connection with the Company's business. If any such expenses are paid by you in
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth. In
the event that the Company terminates your employment for reasons other than
Disability or Cause, or you terminate your employment for "Good Reason" (as
hereinafter defined), you shall receive the following severance in lieu of any
further compensation:
(i) salary payable for a period of 12 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) your target bonus for the calendar year in which the notice of
termination is given, (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved,
payable promptly following the calendar year in which the notice of
termination is given;
(iii) your target bonus for the calendar year in which the notice of
termination is given, whether or not performance goals are achieved,
multiplied by a fraction the
3
<PAGE>
numerator of which is the number of days in such calendar year through the
date that the notice of termination of employment is given and the
denominator of which is the number of days in such calendar year, payable
promptly following the calendar year in which the notice of termination is
given; and
(iv) coverage under the Company's medical and life insurance plans
for the 12 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage for a period of 18
months after termination of employment under COBRA rules shall be deemed
satisfied to the extent of the first 12 months thereof by the coverage
provided in this clause (iv).
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation other than to pay benefits
under the Company's disability plans. The term "Cause" shall mean any of the
following: embezzlement; fraud; dishonesty; breach of fiduciary duty to the
Company; deliberately disregarding the rules of the Company which results in a
material loss, damage or injury to the Company; unauthorized disclosure of any
of the secrets or confidential information of the Company; a material breach of
any agreement (including this Agreement) with the Company; inducement of any
representative that acts for the Company to terminate such relationship which
termination results in material damage to the Company; or engaging in any
conduct which constitutes unfair competition with the Company. In the event
that the Company terminates your employment for Cause, the Company shall have no
further obligations under this Agreement.
4
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean the
occurrence (without your express written consent) of any one of the following
acts by the Company:
(i) the assignment to you of any duties which would not be
commensurate with those of an executive officer or your removal from the
office of Vice President;
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations; or
(iii) the failure by the Company to afford you with an annual
incentive bonus program.
In order to be a termination of employment by you for "Good Reason", such
termination must occur within 60 calendar days of the date that you are notified
of the occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments hereunder, you shall render exclusive consulting services to the
Company as the Company shall reasonably request, that your consulting services
to the golf industry shall be exclusively to the Company and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry. Pursuant
to such executive consulting arrangement, you shall not be required to follow a
specified work schedule and shall not be under the control of the Company, but
shall be available on policy or strategic planning questions, either in person
or by telephone, at your discretion, for up to a maximum of twenty (20) hours a
month at such times as the Company may reasonably request during the consulting
period.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to 12 months
5
<PAGE>
following the date of your termination of employment, such period to be at the
sole election of the Company, which election shall be made within 30 calendar
days of such termination, that your consulting services shall be exclusively to
the Company, and that you will not, during such period, directly or indirectly,
for your own account or for the account of others, either as an officer,
director, stockholder, owner, partner, promoter, employee, consultant, adviser,
agent, manager, or in any other capacity, assist or provide services to any
person or entity that is then in competition with the Company or its affiliates
in the golf industry. You shall receive a monthly consulting fee for the period
that the Company elects that you render exclusive consulting services hereunder
at your base salary rate in effect on the date of your termination of employment
plus your target bonus for the one year in which you voluntarily terminate (or
the amount of your 1995 bonus if greater).
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your own benefit, either during the term of your employment
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
(ii) to deliver promptly to the Company at the termination of your
employment, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereof) relating to
the business of the Company or any of its subsidiaries or affiliates,
including but not limited to, Confidential Matters which you may then
possess or have under your control.
6
<PAGE>
Termination of Agreement
- ------------------------
This Agreement will terminate on the second anniversary of the Closing
Date.
Prior Agreements
- ----------------
This Agreement supersedes any existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate and is not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that the
Company will be entitled to, among other remedies, immediate injunctive relief
and may obtain without bond a temporary order restraining any threatened or
further breach of this Agreement. However, nothing in this paragraph shall be
deemed to limit the Company's remedies at law or in equity for any breach of
this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
7
<PAGE>
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
If this letter sets forth correctly our agreement on the subject
matter hereof, please sign and return to me the enclosed copy of this letter,
which will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By
-------------------------------------
Accepted and Agreed to
this ___ day of December, 1995
- ---------------------------
8
<PAGE>
EXHIBIT c(8)
[VPs other than TWM and JSV]
COBRA GOLF INCORPORATED
, 1996
------------------
CONFIDENTIAL
- ------------
Mr.
[Insert Address]
Dear Mr. :
As you know, it is proposed that HCAC, Inc., a wholly-owned subsidiary
of American Brands, Inc., be merged with and into Cobra Golf Incorporated (the
"Company"). In order to induce you to remain in the employ of the Company
following the merger, the Company agrees that, in the event the contemplated
merger is consummated, the Company will provide you with the following
compensation subject to the terms and conditions hereof.
Stay Bonus
- ----------
If you continue in employment with the Company through the effective
date of the merger (the "Closing Date") and for 30 days after the Closing Date,
you will be entitled to a stay bonus of $25,000 payable as soon as practicable
(but no later than 5 business days) thereafter. If you continue in employment
with the Company through the first anniversary of the Closing Date, you will be
entitled to an additional stay bonus of $25,000 payable as soon as practicable
(but no later than 5 business days) thereafter.
If the Company terminates your employment after the Closing Date for
reasons other than Disability or Cause (as hereinafter defined), or you
terminate your employment for "Good Reason" (as hereinafter defined), prior to
the date on which you would be entitled to either stay bonus, you shall be paid
the stay bonus upon your termination of employment. You will not be eligible
for the stay bonus if you terminate employment with the Company voluntarily, or
if your employment terminates by death or your employment is terminated by the
Company for Disability or
<PAGE>
Cause, prior to the date on which you would be entitled to the stay bonus.
Salary
- ------
Your salary shall continue at your current level and be subject to
annual review by the Board of Directors of the Company and possible adjustment.
Annual Incentive Bonus
- ----------------------
An annual incentive compensation program will be established
commencing for 1996 and continuing through 1997. The program will provide a
target bonus to you for 1996 equal to [30-35%] of your base salary with an
opportunity to earn a maximum of [45-52.5%] of your base salary, but only if
established operating company contribution goals are met. The operating company
contribution goals for 1996 will not be greater than as set forth on Schedule A.
Long Term Incentives
- --------------------
The Company will also establish an enhanced long-term incentive plan
for the performance period 1996 through 1998. You will be awarded 150 units
under this plan. If the Company achieves $220 million of operating company
contribution (generally operating profit exclusive of amortization of
intangibles) during this performance period, the value of each unit to be paid
in early 1999 will be $500. If the Company achieves $250 million of cumulative
operating company contribution during this performance period, the value of each
unit to be paid in early 1999 will be $1,000. If the Company achieves $300
million of cumulative operating company contribution during this performance
period, the value of each unit to be paid in early 1999 will be $2,500. For
performance between $225 million of cumulative operating company contribution
and $250 million of cumulative operating company contribution, the value of each
unit will be interpolated between $500 and $1,000 and, for performance between
$250 million and $300 million of cumulative operating company contribution, the
value of each unit will be interpolated between $1,000 and $2,500.
You will also be eligible for stock options under the American Brands,
Inc. Long-Term Incentive Plan. The Company will recommend that you be granted
options for 1996 with respect to at least 4,000 shares of American Brands, Inc.
common stock.
2
<PAGE>
Services
- --------
You agree to devote all of your business time, skill and energies to
promote the interests of the Company and its affiliates during the term of your
employment hereunder and to serve in such positions with the Company as may be
reasonably assigned by its Board of Directors consistent with the status of an
executive officer and your position as a Vice President. You also agree to
serve, at the request of the Company, in director or officer positions with any
affiliate of the Company consistent with the status of an executive officer.
Expenses
- --------
During your period of employment hereunder, the Company will pay all
reasonable business and travel expenses incurred by you in furtherance of or in
connection with the Company's business. If any such expenses are paid by you in
the first instance, the Company will reimburse you promptly upon receipt of a
satisfactory accounting therefor. In the event any such expenses that have been
paid are determined by the Board of Directors of the Company not to be incurred
in the ordinary course of business, you shall repay to the Company the amount of
such expenses.
Severance
- ---------
Your employment may be terminated by the Company at any time provided
that you shall be entitled to the severance benefits hereinafter set forth. In
the event that the Company terminates your employment for reasons other than
Disability or Cause, or you terminate your employment for "Good Reason" (as
hereinafter defined), you shall receive the following severance in lieu of any
further compensation:
(i) salary payable for a period of 12 months after notice of
termination of employment is given to you by the Company payable at the
Company's regular payroll periods;
(ii) your target bonus for the calendar year in which the notice of
termination is given, (or, if greater, the bonus paid to you with respect
to calendar year 1995), whether or not performance goals are achieved,
payable promptly following the calendar year in which the notice of
termination is given;
(iii) your target bonus for the calendar year in which the notice of
termination is given, whether or not performance goals are achieved,
multiplied by a fraction the
3
<PAGE>
numerator of which is the number of days in such calendar year through the
date that the notice of termination of employment is given and the
denominator of which is the number of days in such calendar year, payable
promptly following the calendar year in which the notice of termination is
given; and
(iv) coverage under the Company's medical and life insurance plans
for the 12 month period following the date that a notice of termination of
employment is given or until you obtain new employment, whichever is
earlier. This continued coverage shall be on the same terms and conditions
and subject to the same limitations as medical and life insurance coverage
available to employees of the Company at your level at the date of
termination. In the event that your continued coverage is not permitted
under the terms and provisions of such plans, the Company shall arrange to
provide you with benefits that are substantially similar to those that you
would have been entitled to receive if you had remained covered during such
period. Your right to elect continued medical coverage for a period of 18
months after termination of employment under COBRA rules shall be deemed
satisfied to the extent of the first 12 months thereof by the coverage
provided in this clause (iv).
The term "Disability" means your physical or mental incapacity,
whether totally or partially, of performing the essential functions of your
position for a three consecutive month period. In such event, the Company may
terminate your employment with no further obligation other than to pay benefits
under the Company's disability plans. The term "Cause" shall mean any of the
following: embezzlement; fraud; dishonesty; breach of fiduciary duty to the
Company; deliberately disregarding the rules of the Company which results in a
material loss, damage or injury to the Company; unauthorized disclosure of any
of the secrets or confidential information of the Company; a material breach of
any agreement (including this Agreement) with the Company; inducement of any
representative that acts for the Company to terminate such relationship which
termination results in material damage to the Company; or engaging in any
conduct which constitutes unfair competition with the Company. In the event
that the Company terminates your employment for Cause, the Company shall have no
further obligations under this Agreement.
4
<PAGE>
For purposes of this Agreement, "Good Reason" shall mean the
occurrence (without your express written consent) of any one of the following
acts by the Company:
(i) the assignment to you of any duties which would not be
commensurate with those of an executive officer or your removal from the
office of Vice President;
(ii) relocation of the Company's principal executive offices to a
location outside the San Diego Metropolitan Area or the Company's requiring
you to be based anywhere other than the Company's principal executive
offices except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations; or
(iii) the failure by the Company to afford you with an annual
incentive bonus program.
In order to be a termination of employment by you for "Good Reason", such
termination must occur within 60 calendar days of the date that you are notified
of the occurrence giving rise to the "Good Reason."
You agree that during the period for which you are receiving severance
payments hereunder, you shall render exclusive consulting services to the
Company as the Company shall reasonably request, that your consulting services
to the golf industry shall be exclusively to the Company and that you will not,
during such period, directly or indirectly, for your own account or for the
account of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity, assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the golf industry. Pursuant
to such executive consulting arrangement, you shall not be required to follow a
specified work schedule and shall not be under the control of the Company, but
shall be available on policy or strategic planning questions, either in person
or by telephone, at your discretion, for up to a maximum of twenty (20) hours a
month at such times as the Company may reasonably request during the consulting
period.
Voluntary Termination
- ---------------------
If your employment is not terminated by the Company, but you
voluntarily terminate your employment, you agree that you shall render exclusive
consulting services to the Company as the Company shall reasonably request for a
period of up to 12 months
5
<PAGE>
following the date of your termination of employment, such period to be at the
sole election of the Company, which election shall be made within 30 calendar
days of such termination, that your consulting services shall be exclusively to
the Company, and that you will not, during such period, directly or indirectly,
for your own account or for the account of others, either as an officer,
director, stockholder, owner, partner, promoter, employee, consultant, adviser,
agent, manager, or in any other capacity, assist or provide services to any
person or entity that is then in competition with the Company or its affiliates
in the golf industry. You shall receive a monthly consulting fee for the period
that the Company elects that you render exclusive consulting services hereunder
at your base salary rate in effect on the date of your termination of employment
plus your target bonus for the year in which you voluntarily terminate (or the
amount of your 1995 bonus if greater).
Confidential Matters
- --------------------
In view of the fact that your employment or consulting arrangement
with the Company will bring you into close contact with many confidential
affairs of the Company and its affiliates, including matters of a business
nature such as information about costs, profits, technology, markets, sales,
trade secrets, potential patents and other business ideas, customer lists, plans
for future developments and information of any other kind not known in the golf
industry generally, or industries in which other affiliates of the Company are
engaged (hereinafter, collectively, "Confidential Matters"), you agree:
(i) to keep secret all Confidential Matters of the Company and
affiliates of the Company, and not to disclose them to anyone outside of
the Company or its affiliates, or otherwise use them or use your knowledge
of them for your own benefit, either during the term of your employment
hereunder or during the period while you are receiving severance or
consulting payments hereunder; and
(ii) to deliver promptly to the Company at the termination of your
employment, or at any time the Company may request, all memoranda, notices,
records, reports and other documents (and all copies thereof) relating to
the business of the Company or any of its subsidiaries or affiliates,
including but not limited to, Confidential Matters which you may then
possess or have under your control.
6
<PAGE>
Termination of Agreement
- ------------------------
This Agreement will terminate on the second anniversary of the Closing
Date.
Prior Agreements
- ----------------
This Agreement supersedes any existing employment agreement with the
Company and any other prior agreement or understanding relating to your
employment and all rights thereunder will terminate.
Modification
- ------------
This Agreement may not be modified without prior written agreement of
the parties.
Governing Law
- -------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California without giving effect to principles of
conflicts of law. The parties hereto hereby consent and submit to the
jurisdiction of a state or federal court located in California.
Tax Withholding
- ---------------
Any amounts payable hereunder shall be subject to applicable tax
withholding.
Specific Performance
- --------------------
You hereby expressly agree and understand that the remedy at law for
any breach of this Agreement will be inadequate and is not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that the
Company will be entitled to, among other remedies, immediate injunctive relief
and may obtain without bond a temporary order restraining any threatened or
further breach of this Agreement. However, nothing in this paragraph shall be
deemed to limit the Company's remedies at law or in equity for any breach of
this Agreement.
In the event that any party hereto reasonably retains counsel for the
purpose of enforcing or preventing the breach of any provision hereof, then, if
such matter is settled by judicial determination, the prevailing party shall be
entitled to recover all costs and expenses incurred thereby including, but not
limited to reasonable attorneys fees and costs associated with such litigation
as determined by the court.
7
<PAGE>
The invalidity or unenforceability of any term of this Agreement shall
not affect the validity or enforceability of any other term of the Agreement,
which shall remain in full force and effect. If any provision should be deemed
invalid, illegal or unenforceable because its scope is considered excessive,
such provision shall be modified so that the scope of the provision is reduced
only to the minimum extent necessary to render the modified provision valid. In
no event, however, shall the Company be required to pay any salary, bonus,
severance or consulting compensation under this Agreement if you do not comply
with your exclusive consulting or non-compete obligation.
If this letter sets forth correctly our agreement on the subject
matter hereof, please sign and return to me the enclosed copy of this letter,
which will then constitute our agreement on the subject.
Very truly yours,
COBRA GOLF INCORPORATED
By
----------------------------------------
Accepted and Agreed to
this ___ day of December, 1995
- -------------------------------
8
<PAGE>
EXHIBIT c(9)
COBRA GOLF INCORPORATED
1993 STOCK OPTION PLAN
(Amended March 22, 1995)/1//2/
1. Purpose.
-------
This 1993 Stock Option Plan (the "Plan") is intended to encourage
ownership of common stock of COBRA GOLF INCORPORATED, a Delaware corporation
(the "Company") by key employees, officers, directors, consultants and sales
representatives of the Company and any subsidiaries and selected professional
golfers who endorse the Company's products and consult with the Company
concerning its products, and to provide incentives for them to exert maximum
efforts for its success. The effective date of the Plan is August 5, 1993.
2. Incentive and Nonqualified Stock Options.
----------------------------------------
Two types of options (referred to herein as "options" without
distinction between such two types except as hereinafter provided) may be
granted under the Plan: options intended to qualify as incentive stock options
("incentive stock options") under Section 422 of the Internal Revenue Code, and
any successor statutes (the "Code"); and other options not specifically
authorized or qualified for special income tax treatment by the Code
("non-qualified stock options").
3. Administration.
--------------
The following provisions shall govern the administration of the Plan:
a. Administration. The Plan shall be administered by the Board of
--------------
Directors, each member of which shall be a "disinterested person" as defined in
Rule 16b-3 promulgated by the Securities and Exchange Commission, as amended
from time to time, who are not eligible to participate in the Plan or a
committee of directors composed of not less than three (3) directors, all of
whom shall be disinterested persons who are not eligible to participate in the
Plan (the Board or any such committee is referred to hereinafter as the
"Committee"). The Committee shall be authorized and directed to adopt such rules
and regulations for implementing the Plan so as to satisfy the requirements for
exemption under Rule 16b-3. The Board of Directors may from time to time remove
members from or add members to the Committee. Vacancies on the Committee,
- ---------------
/1/includes prior amendment
/2/ratified by Stockholders on May 23, 1995
<PAGE>
however caused, shall be filled by the Board of Directors. The Board of
Directors shall designate a Chairman of the Committee from among the Committee
members. Acts of the Committee taken at a duly constituted meeting or approved
in writing by a majority of the members of the Committee shall be the valid acts
of the Committee.
b. Powers. The Company shall effect the grant of options under the
------
Plan by execution of written stock option agreements in such form as shall be
approved by the Committee. Subject to the express terms and conditions of the
Plan and the terms of any option outstanding under the Plan, the Committee shall
have full power to construe the Plan and the terms of any option granted under
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan or such options and to make all other determinations necessary or advisable
for the administration of the Plan, including, without limitation, the power to:
(i) determine which persons meet the requirements of Paragraph 4 hereof for
selection as participants in the Plan (a "Participant"); (ii) determine to whom
of the eligible persons, if any, options shall be granted under the Plan (the
"Optionees"); (iii) establish the terms and conditions required or permitted to
be included in every option agreement or any amendments thereto; (iv) specify
the number of shares to be covered by each option; (v) determine and incorporate
such terms and provisions, as well as amendments thereto, as shall be required
in the judgment of the Committee, so as to provide for or conform such option to
any change in any law, regulation, ruling or interpretation applicable thereto;
and (vi) make all other determinations deemed necessary or advisable for
administering the Plan. The determination on the foregoing matters by the
Committee shall be conclusive.
The Committee shall not be bound to any standards of uniformity or
similarity of action, interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of the matters coming before
it. Its determination shall be binding on all parties.
4. Participants.
------------
Participants in the Plan shall be employees, officers, directors,
consultants or sales representatives of the Company or any subsidiary and
selected professional golfers who endorse the Company's products and consult
with the Company with respect to its products ("product endorsers") who at the
time the option is granted do not individually own stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
any of its parent or subsidiary corporations, and to whom options may be granted
from time to time.
A person's status as a Participant shall terminate upon the termination
of the employment or other relationship with the Company described above and the
rights of the Participant with
2
<PAGE>
respect to options granted hereunder on termination of status as a Participant
shall be as set forth in Section 6 hereof.
5. The Shares.
----------
The shares of stock subject to options authorized to be granted under
the Plan shall consist of One Million Nine Hundred Thousand (1,900,000) shares
of common stock of the Company, par value $.001 per share, as adjusted (the
"Shares") or the number and kind of shares of stock or other securities which
shall be substituted for such shares or to which such shares shall be adjusted
as provided in Paragraph 7 of the Plan.
The Shares subject to the Plan may be set aside out of the authorized
but unissued Shares of common stock of the Company not reserved for any other
purpose, from Shares reacquired by the Company, or out of Shares of common stock
subject to an option which, for any reason, terminates unexercised as to the
Shares.
6. Grant, Terms and Conditions of Options.
--------------------------------------
Options may be granted at any time prior to the termination of the Plan
to employees, officers, directors, consultants, sales representatives and
product endorsers of the Company who, in the judgment of the Committee,
contribute to the successful conduct of the operation of the Company through
their judgment, interest, ability and special efforts; provided, however, that:
(i) the aggregate fair market value (determined as of the date the Option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by an Optionee during any calendar year (under
all incentive stock option plans of the Company and any parent or subsidiary
corporations) shall not exceed $100,000, and (ii) except in the case of
termination by death or disability, as set forth in Paragraph 6c. below, and
except as otherwise provided in the written Stock Option Agreement of such
Optionee, the granted option must be exercised by the Optionee or shall lapse no
later than three (3) months after any termination of the Optionee's status as a
Participant and said status as a Participant must have been continuous since the
granting of the option. The maximum number of options which may be granted under
the Plan during any calendar year to any Participant shall not exceed 100,000
options; provided, however that if the Company grants to any Participant during
any calendar year less than 100,000 options or does not grant any option during
any calendar year to such Participant, then the amount of such shortfall shall
be carried forward and added to the maximum number of options which may be
granted in a subsequent year to such Participant.
In addition, options granted pursuant to the Plan shall be subject to
the following terms and conditions:
a. Option Price. The purchase price (the "option
------------
3
<PAGE>
price") under each option shall be not less than one hundred percent (100%) of
the fair market value of the Shares subject thereto on the date the option is
granted. For purposes of the Plan, the "fair market value" of any Share of
common stock of the Company at any date shall be (i) if the common stock is
listed on an established stock exchange or exchanges, the mean of the high and
low sales price per Share on such date on the principal exchange on which it is
traded, or if no sales were made on such day on such principal exchange, at the
respective prices on the most recent day on which a sale of Shares took place or
(ii) if the common stock is not then listed on an exchange, the average of the
closing bid and asked prices (or, if available, the high and low sales prices)
per share in the over-the-counter market as quoted on NASDAQ on such date, or
(iii) if the common stock is not then listed on an exchange or quoted on NASDAQ,
an amount determined in good faith by the Committee.
b. Duration And Exercise of Options.
--------------------------------
(i) Duration. Each option shall vest and shall be exercisable in such
--------
manner and at such time up to but not exceeding ten (10) years from the date the
option is granted as the Committee shall determine in its sole discretion. The
termination of the Plan shall not alter the maximum duration, the vesting
provisions, or any term or condition of any option granted prior to the
termination of the Plan.
If not previously exercised, each option shall expire upon the tenth
anniversary of the date of the grant thereof or upon the earlier termination of
the Optionee's status as a Participant, except as provided by Section 6c. below.
No incentive stock option shall be granted after ten (10) years following the
earlier of (i) the date the Plan is adopted and (ii) the date it is approved by
Stockholders. No incentive stock options shall be granted to any person who is
not an employee of the Company or a subsidiary.
(ii) Manner Of Payment. Stock purchased under the Plan shall be paid
-----------------
for as follows: (i) in cash or by certified check, bank draft or money order
payable to the order of the Company; or (ii) if so permitted by the Committee by
delivery of a promissory note of the option holder to the Company, such note to
be payable and secured on such terms as are specified by the Committee, or by a
combination of cash and the option holder's promissory note; provided that if
--------
the Stock delivered upon exercise of the option is an original issue of
authorized Stock, at least so much of the exercise price as represents the par
value of such Stock shall be paid in cash; or (iii) if so permitted by the
Committee by delivery of Shares of stock of the Company having a fair market
value (determined as provided in Section 6a.) equal to the option price or by
reduction in the number of Shares issuable upon such exercise.
4
<PAGE>
(iii) Manner of Exercise. The option price shall be accompanied by
------------------
written notice to the Secretary of the Company identifying the option or part
thereof being exercised and specifying the number of Shares for which payment is
being tendered. The Company shall deliver to the Optionee, which delivery shall
be as soon as practicable after the giving of such notice, without transfer nor
issue tax to the Optionee (or other person entitled to exercise the option) at
the principal office of the Company or such other place as shall be mutually
acceptable, a certificate or certificates for such Shares dated the date the
options were validly exercised; provided, however, that the time of such
delivery may be postponed by the Company for such period as may be required for
it with reasonable diligence to comply with any requirements of law.
c. Termination Of Status. Upon the termination of an Optionee's status as
---------------------
a Participant, and as otherwise provided in the written Stock Option Agreement
with respect to such Optionee, his or her rights to exercise an option then held
shall be only as follows:
(i) Disability. If an Optionee's status as a Participant is terminated
----------
by reason of the Participant's disability, such Optionee or such Optionee's
qualified representative (in the event of the Optionee's mental disability)
shall have the right for a period of twelve (12) months following the date of
such disability termination to exercise such option, provided the actual date of
exercise is in no event after the expiration of the term of the option.
For purposes of this Plan "disability" shall be defined by Section
22(e)(3) of the Code. Section 22(e)(3) defines "permanent and total disability"
as follows:
An individual is permanently and totally disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months. An individual shall not
be considered to be permanently and totally disabled unless he
furnished proof of the existence thereof in such form and manner, and
at such times, as the Secretary may require.
(ii) Death. If an Optionee shall die (i) while a Participant, or (ii)
-----
within three (3) months after termination of status as a Participant except for
cause, the Optionee's estate shall have the right for a period of twelve (12)
months following the date of death to exercise the option to the extent the
Optionee was entitled to exercise the option on the date of death, provided
5
<PAGE>
the actual date of exercise is in no event after the expiration of the term of
the option. Any interruption in continuous full-time employment status or
continuous officer, director, consultant, sales representative, or product
endorser status with the Company, its parent or any subsidiary, shall constitute
termination of the same under this Plan even if the Optionee is re-employed or
reinstated to such status after such interruption; provided, however, that a
leave duly approved by the Company or in accordance with law shall not
constitute an interruption hereunder.
An Optionee's "estate" shall mean the Optionee's legal representative
or any person who acquires the right to exercise an option by reason of the
Optionee's death.
(iii) Cause. If an Optionee's status as a Participant is terminated as
-----
the result of an act of embezzlement, fraud, dishonesty, breach of fiduciary
duty to the Company, or deliberately disregarding the rules of the Company which
resulted in loss, damage or injury to the Company, or is terminated because an
Optionee makes any unauthorized disclosure of any of the secrets or confidential
information of the Company, breaches any agreement with the Company, induces any
client or customer of the Company to break any contract with the Company or
induces any principal for whom the Company acts as agent to terminate such
agency relations, or engages in any conduct which constitutes unfair competition
with the Company, or if an Optionee is removed from any office of the Company by
any regulatory agency, neither the Optionee nor the Optionee's estate shall be
entitled to exercise any option with respect to any Shares whatsoever, whether
or not such option was granted before or after termination of status as a
Participant. The Optionee may receive payment from the Company for vacation pay,
for services rendered prior to termination, for services for the day on which
termination occurred, for salary in lieu of notice, or for other benefits. For
the purpose of this paragraph, termination of employment or status as a
Participant under the Plan shall be deemed to occur when the Company dispatches
notice or advice to the Optionee that the Optionee's employment or status as an
officer, director, sales representative or product endorser is terminated and
not at the time of Optionee's receipt thereof.
(iv) Other Reasons. If an Optionee's status as a Participant is
-------------
terminated for any reason other than those mentioned above under "Death",
"Disability" and "Cause", the Optionee may, within three (3) months following
such termination, exercise any vested option, provided the date of exercise is
in no event after the expiration of the term of the option.
d. Incentive Stock Options. With respect to incentive stock options, an
-----------------------
Optionee may not dispose of incentive stock option Shares within two (2) years
from the date of grant of the option or within one (1) year from the exercise of
the option and transfer of the Shares to the Optionee. All incentive stock
6
<PAGE>
options shall comply with the provisions of Section 422 of the Code.
e. Transferability of Option. Each option shall be transferable only
-------------------------
by will or the laws of descent and distribution and shall be exercisable during
the Optionee's lifetime only by the Optionee.
f. Other Terms And Conditions. Options may also contain such other
--------------------------
provisions, which shall not be inconsistent with any of the foregoing terms, as
the Committee shall deem appropriate. No option, however, nor anything contained
in the Plan, shall confer upon any Optionee any right to continue in the employ
or in the status as an officer, director, consultant, sales representative or
product endorser of the Company, nor limit in any way the right of the Company
to terminate an Optionee's employment or status as an officer, director,
consultant, sales representative or product endorser at any time.
g. Use Of Proceeds From Stock. Proceeds from the sale of Shares
--------------------------
pursuant to the exercise of options granted under the Plan shall constitute
general funds of the Company.
h. Rights As A Shareholder. The Optionee shall have no rights as a
-----------------------
shareholder with respect to any Shares until the date of issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends or other
rights for which the record date is prior to the date of such issuance, except
as provided in Paragraph 7 hereof.
i. Withholding. The Company shall have the right upon the grant or
-----------
exercise of an option or the sale or other disposition of Shares acquired by
exercise of an option to collect, deduct, withhold and pay over to any
governmental authority any sums required to be withheld under federal, state or
local tax laws or regulations. The Company shall condition the issuance of
Shares upon exercise of any option upon the payment by the Optionee of any sums
required to be withheld under applicable laws or regulations.
7. Adjustment Of And Changes In The Shares.
---------------------------------------
a. Stock Split or Recapitalization. The Shares with respect to which
-------------------------------
Options may be granted are Shares of Common Stock as presently constituted, but,
if and whenever, prior to the expiration of an Option theretofore granted, the
Company shall effect a subdivision, recapitalization or consolidation of Shares
or the payment of a stock dividend on shares without receipt of consideration,
the option price and the number and class of Shares and/or other securities with
respect to which such Option thereafter may be exercised and the total number
and class of Shares and/or other securities that may be issued under this Plan,
shall be similarly and proportionately adjusted.
7
<PAGE>
b. Merger or Consolidation.
-----------------------
(i) In the event of a consolidation or merger in which the Company is
not the surviving corporation or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Stock by a
single person or entity or by a group of persons and/or entities acting in
concert, or in the event of the sale or transfer of substantially all of the
Company's assets (all the foregoing being referred to as "Acquisition Events"),
then the Committee may in its discretion terminate all outstanding options by
delivering notice of termination to each option holder; provided, however, that
-------- -------
during the 20-day period following the date on which such notice of termination
is delivered, each option holder shall have the right to exercise in full all of
his options that are then outstanding (without regard to limitations on exercise
otherwise contained herein). If an Acquisition Event occurs and the Committee
does not terminate the outstanding options pursuant to the preceding sentence,
then the provisions of Section 7 (b) (ii) shall apply.
(ii) If the Company merges or consolidates with one or more
corporations, then from and after the effective date of such merger or
consolidation, upon exercise of an Option theretofore granted, the Participant
shall be entitled to purchase under such Option, in lieu of the number of Shares
as to which such Option shall then be exercisable, but on the same terms and
conditions of exercise set forth in such Option, the number and class of Shares
and/or other securities or property (including cash) to which the Participant
would have been entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, the
Participant had been the holder of record of the total number of Shares
receivable upon exercise of such Option (whether or not then exercisable) had
such merger or consolidation not occurred.
c. No Fractional Shares. An Optionee shall not have any right to purchase
--------------------
fractional Shares as the result of any adjustment in options or otherwise. In
case of any such adjustment, the Shares subject to the option shall be rounded
down to the nearest whole share. Notice of any adjustment shall be given by the
Company to each holder of an option which was in fact so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of the Plan.
d. Determination by Committee. To the extent the foregoing adjustments
--------------------------
relate to stock or securities of the Company, such adjustments shall be made by
the Committee, whose determination in that respect shall be final, binding and
conclusive.
e. No Additional Rights. Except as expressly provided in this Paragraph
--------------------
7, an Optionee shall have no rights by reason of any of the following events:
(1) subdivision or
8
<PAGE>
consolidation of Shares of stock of any class; (2) payment of any stock
dividend; (3) any other increase or decrease in the number of Shares of stock of
any class; (4) any dissolution, liquidation, merger, consolidation, spin-off of
assets or stock of another corporation. Any issuance by the Company of Shares of
stock of any class, or securities convertible into Shares of any Class, shall
not affect the number or price of Shares of Common Stock subject to the option,
and no adjustment by reason thereof shall be made. The grant of an option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or assets.
8. Listing Or Qualification Of Shares.
----------------------------------
All options granted under the Plan are subject to the requirement that
if at any time the Company shall determine in its discretion that the listing or
qualification of the Shares subject thereto on any securities exchange or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of or in connection with the
issuance of Shares under the option, the option may not be exercised in whole or
in part unless such listing, qualification, consent or approval shall have been
effected or obtained free of any condition not acceptable to the Company and the
Company shall be relieved from any liability for failure to issue and sell stock
to satisfy such options pending the time when such authority is obtainable in
accordance with the foregoing.
9. Binding Effect of Conditions.
----------------------------
The conditions and stipulations herein contained, or in any option
granted pursuant to the Plan shall be, and constitute, a covenant running with
all of the Shares acquired by the Optionee pursuant to this Plan, directly or
indirectly, whether the same have been issued or not, and those Shares owned by
the Optionee shall not be sold, assigned or transferred by any person save and
except in accordance with the terms and conditions herein provided, and the
Optionee shall agree to use the Optionee's best efforts to cause the officers of
the Company to refuse to record on the books of the Company any assignment or
transfer made or attempted to be made except as provided in the Plan and to
cause said officer to refuse to cancel old certificates or to issue or deliver
new certificates therefor when the purchaser or assignee has acquired
certificates or the Shares represented thereby, except strictly in accordance
with the provisions of the Plan.
9
<PAGE>
10. Amendment And Termination Of The Plan.
-------------------------------------
(a) The Board of Directors shall have complete power and authority to
terminate or amend the Plan; provided, however, that the Board of Directors or
the Committee shall not, without the approval of the stockholders of the
Company: (i) increase the maximum number of Shares for which options may be
granted under the Plan; (ii) change the computation as to minimum option prices
set forth in Paragraph 6.a; (iii) extend the period during which options may be
granted or exercised; or (iv) amend the requirements as to the class of
Participants eligible to receive options. Unless the Plan shall have been
terminated by action of the Board of Directors prior thereto, it shall terminate
ten (10) years from its effective date.
(b) Nothing contained in this Section 10 shall be deemed to prevent
the Board or the Committee from authorizing amendments of outstanding options of
Participants, including, without limitation, the reduction of the exercise price
specified therein (or the granting or issuance of new options at a lower
exercise price upon cancellation of outstanding options), so long as all options
outstanding at any one time shall not call for issuance of more Shares than the
remaining number provided for under the Plan and so long as the provisions of
any amended options would have been permissible under the Plan if such option
had been originally granted or issued as of the date of such amendment with such
amended terms.
(c) Notwithstanding any other provision of the Plan, neither the
Board nor the Committee may make any determination or interpretation or take any
other action which would cause any member of the Committee to cease to be a
"disinterested person" with regard to the Plan for purposes of Rule 16b-3, and
the Board may not effect any amendment that would require the approval of the
stockholders of the Company under Rule 16b-3 unless such approval is obtained.
11. Effectiveness Of The Plan.
-------------------------
This Plan shall become effective only upon adoption by the Board of
Directors and approval by the affirmative vote of a majority of the voting stock
of the Company represented at a duly called meeting of stockholders at which a
quorum is present, which approval must occur within one (1) year of the adoption
by the Board of Directors. The exercise of any options granted pursuant to the
Plan shall be conditioned upon the registration of the Shares with the
Securities and Exchange Commission and qualification of the offer and sale of
the Shares pursuant to the Plan with the Commissioner of Corporation of the
State of California, unless such registration or qualification is not
necessary.
10
<PAGE>
12. Privileges of Stock Ownership; Securities Law
---------------------------------------------
Compliance; Notice of Sale.
--------------------------
No Optionee shall be entitled to the privileges of stock ownership as
to any Shares not actually issued and delivered to the Optionee in accordance
with the provisions of the Plan. Optionees shall be entitled to such financial
information concerning the Company as may be made available to shareholders of
the Company from time to time. No Shares shall be purchased upon the exercise of
any option unless and until any then applicable requirements of any regulatory
agencies having jurisdiction and of any exchanges upon which the common stock of
the Company may be listed shall have been fully complied with. The Company shall
diligently endeavor to comply with all applicable securities laws before any
options are granted under the Plan and before any Shares are issued pursuant to
the exercise of such options. The Optionee shall give the Company notice of any
sale or other disposition of any such Shares not more than five (5) days after
such sale or other disposition.
13. Indemnification.
---------------
To the extent permitted by applicable law in effect from time to time,
no member of the Board of Directors or the Committee shall be liable for any
action or omission of any other member of the Board of Directors or Committee
nor for any act or omission on the member's own part, effected in good faith.
To the maximum extent permitted by applicable law, each member or
former member of the Board or of the Committee shall be indemnified and held
harmless by the Company against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Company) arising out of any act or omission to act in connection with the
Plan unless arising out of such member's or former member's own fraud or bad
faith. Such indemnification shall be in addition to any rights of
indemnification the members or former members may have as Directors under
applicable law or under the Certificate of Incorporation or Bylaws of the
Company.
14. Notices.
-------
Each Participant shall be responsible for furnishing the Committee
with the current and proper address for the mailing to him or her of notices and
the delivery to him or her of agreements, Shares and payments. Any notices
required or permitted to be given shall be deemed given if directed to the
person to whom addressed at such address and mailed by regular United States
mail, first-class and prepaid. If any item mailed to such address is returned as
undeliverable to the addressee, mailing will be suspended until the Participant
furnishes the proper address.
11
<PAGE>
15. Severability of Provisions.
--------------------------
If any provisions of the Plan shall be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such provisions had not
been included.
16. Headings and Captions.
---------------------
The headings and captions herein are provided for reference and
convenience only. They shall not be considered part of the Plan and shall not be
employed in the construction of the Plan.
17. Controlling Law.
---------------
The Plan shall be construed and enforced according to the laws of the
State of California.
IN WITNESS WHEREOF, the Company has caused this Option Plan to be
executed and adopted this 5th day of August, 1993, by its authorized
representatives.
12
<PAGE>
EXHIBIT c(10)
[LETTERHEAD OF COBRA GOLF INCORPORATED]
June __, 1995
CONFIDENTIAL
- ------------
American Brands, Inc.
1700 East Putnam Avenue
Old Greenwich, Connecticut 06870-0819
Attention: Charles H. McGill
Gentlemen:
We understand that you or one or more of your affiliates (which term, as
used herein, shall have the same meaning as in Rule 12b-2 under the United
States Securities Exchange Act of 1934, as amended) desire to conduct an
investigation of the business and properties of Cobra Golf Incorporated, a
[Delaware] corporation ("Cobra") in order to determine whether you or one of
your subsidiaries should pursue a possible transaction with Cobra. As a
condition to the furnishing of such information, you agree that you and your
affiliates will treat any information concerning Cobra or any of its direct or
indirect subsidiaries (Cobra and such other subsidiaries being herein
collectively referred to as the "Company"), whether prepared or presented by the
Company, its advisors or otherwise, which is furnished to you or any of your
affiliates by or on behalf of the Company (herein collectively referred to as
the "Evaluation Material") in accordance with the provisions of this letter and
will take or abstain from taking certain other actions as herein set forth. The
term "Evaluation Material" does not include information which (i) was or becomes
generally available to the public other than as a result of a disclosure by you,
your affiliates or any other directors, officers, employees, agents or advisors
of you or your affiliates, or (ii) was or becomes available to you on a
non-confidential basis from a source other than the Company or its advisors
provided that such source is not known by you to be bound by a confidentiality
agreement with or for the benefit of the Company, or (iii) has been acquired or
developed by you or your affiliates or any director, officer, employee,
<PAGE>
American Brands, Inc. 2 June , 1995
agent or advisor of you or your affiliates independently of, and not derived
from, any information received from the Company or any other person known by you
to be bound by a confidentiality agreement with or for the benefit of the
Company in respect thereof.
You also agree that the Evaluation Material will be used solely for the
purpose of evaluating and advancing a possible transaction concerning the
Company, and that unless and until you have completed a transaction concerning
the Company, the Evaluation Material will be kept confidential and without the
prior written consent of the Company will not be disclosed by you, your
affiliates and any advisors of you or your affiliates except as provided in this
letter. Disclosure of the Evaluation Material may only be made within your
internal organization (including that of your affiliates) and to third parties
serving as your advisors for a proposed transaction involving you or your
affiliates and the Company who you reasonably consider need to review and know
such Evaluation Material for the purpose of evaluating a possible transaction
concerning the Company; provided, however, that (i) you require each such party
-------- -------
to whom disclosure of any of the Evaluation Material is so made to agree for the
benefit of the Company to maintain the confidentiality of such Evaluation
Material in accordance with this letter and to restrict their use thereof solely
to the above purpose and (ii) you shall be liable for any breach of the terms of
this letter by them. The obligation of confidentiality set forth in this
paragraph shall cease 24 months from the date that either party advises the
other that it no longer has any intention to proceed with the possible
transaction in mutual contemplation.
You hereby acknowledge that you are aware, and that you will advise your
affiliates and any directors, officers, employees and representatives of you or
your affiliates who are informed as to the matters which are the subject of this
letter, that relevant securities laws prohibit any person who has material, non-
public information or other price sensitive information concerning a company
from purchasing or selling securities of such company or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
<PAGE>
American Brands, Inc. 3 June __, 1995
In the event that you or any other person subject to the confidentiality
provisions of this letter are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or other process) to disclose any Evaluation Material, it
is agreed that you will provide the Company with prompt notice of any such
request or requirement so that the Company may seek an appropriate protective
order or waive your compliance with the provisions of this letter. If failing
the entry of a protective order or the receipt of a waiver hereunder, you are,
in the opinion of your counsel, legally compelled to disclose Evaluation
Material, you may disclose that portion of the Evaluation Material which your
counsel advises that you are compelled to disclose. In any event, you will not
oppose reasonable action by and will cooperate with the Company to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Evaluation Material.
In addition, without the prior written consent of the Company, you will
not, and you will direct your affiliates and any directors, officers, employees
and representatives of you or your affiliates not to, disclose to any person
including any person or authority potentially having jurisdiction over the
transaction (other than as provided in this letter and other than as required by
law or by the rules of any stock exchange) either the fact that discussions or
negotiations are taking place concerning a possible transaction involving the
Company or any of the terms, conditions or other facts with respect to any such
possible transaction, including the status thereof. The term "person" as used in
this letter shall be broadly interpreted to include without limitation any
corporation, company, group, partnership, entity or individual.
In the event that you do not proceed with a transaction which is the
subject of this letter agreement within a reasonable time, upon our request you
and your affiliates and representatives shall promptly redeliver to the Company
all written material comprising Evaluation Material furnished to you or your
affiliates or representatives by or on behalf of the Company and, except as may
have been presented to your Board, Executive Committee or members thereof and
required to be retained for purposes of the records of your Board or Executive
Committee (which will also be kept confidential as required by this letter),
will not retain any copies, extracts or
<PAGE>
American Brands, Inc. 4 June ___, 1995
other reproductions in whole or in part of such written material and, in such
event, all documents, memoranda, notes and other writings whatsoever (including
all copies, extracts or other reproductions) prepared by you, your affiliates or
any advisors of you or your affiliates based on the information in the
Evaluation Material (except as provided above) shall be destroyed, and such
destruction shall be certified in writing to the Company by a responsible person
supervising such destruction. All obligations of confidentiality and
non-disclosure established by this letter shall survive any return or
destruction of the Evaluation Material by you, your affiliates or your or their
representatives or advisors.
Although the Company has endeavored to include in the Evaluation Material
information known to the Company which it believes to be relevant for the
purpose of the investigation by you or your affiliates, neither the Company nor
any of its representatives or advisors have made or make any representation or
warranty as to the accuracy or completeness of the Evaluation Material. It is
agreed that neither the Company nor its representatives and advisors shall have
any liability to you, your affiliates or any representatives or advisors of you
or your affiliates resulting from the use of the Evaluation Material or for any
errors, omissions and misstatements contained in the Evaluation Material or for
any other information or any opinions expressed by or on behalf of the Company
or its representatives or advisors. Only those representations and warranties
shall have legal effect as are made to you or your affiliates in or as provided
in a definitive agreement with the Company when, as and if such an agreement is
executed, and subject to such limitations and restrictions as may be specified
in such agreement.
It is further understood and agreed that no failure or delay by the Company
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
It is further understood and agreed that the Company shall be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any breach of the provisions of this letter, and you further agree to waive any
requirement for the securing or posting of any bond in connection with such
remedy. Such remedy
<PAGE>
American Brands, Inc. 5 June __, 1995
shall not be deemed to be the exclusive remedy for any such breach, but shall be
in addition to all other remedies available to the Company in equity or at law.
This agreement shall be binding upon your successors, assigns and
affiliates and shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to the conflict of laws provisions
thereof.
Kindly sign and return the enclosed copy of this letter to indicate that it
correctly sets forth the terms of our agreement. Upon execution this letter will
become a binding agreement between us as of the date hereof.
Very truly yours,
COBRA GOLF INCORPORATED
By /s/ Gary E. Biszantz
--------------------------------
Name:
Title:
Confirmed and agreed to as of
the date first-above written:
AMERICAN BRANDS, INC.
By /s/ Charles H. McGill
-----------------------------
Name: Charles H. McGill
Title: Vice President
<PAGE>
June 26, 1995
AMERICAN BRANDS, INC.
1700 East Putnam Avenue,
Post Office Box 811
Old Greenwich, Connecticut 06870-0811
Attention: Mr. Charles H. McGill
Vice President - Corporate Development
Re: Supplemental Confidentiality Agreement
--------------------------------------
Dear Mr. McGill:
Pursuant to our earlier conversation, the following provisions which were
mistakenly omitted from the confidentiality agreement between American Brands,
Inc. and Cobra Golf Incorporated (the "Company"), dated June 19, 1995 (the
"Confidentiality Agreement"), are hereby agreed to and acknowledged and shall
become a part of such Confidentiality Agreement as if they were included
therein.
You agree that you will not use the Evaluation Material to the detriment of
the Company. In particular you agree that for a period of two years from the
date of the signing of this agreement you and your affiliates will not (i) use
the Evaluation Materials to the competitive disadvantage of the Company nor
(ii)(a) employ or retain or attempt to employ or retain any executive officer of
the Company or (b) directly solicit for employment any non-executive officer of
the Company or any other employee or representative of the Company or any of its
affiliates or any officer of any of the Company's affiliates (other than in
connection with a combination or similar transaction involving American Brands,
Inc. and the Company). We acknowledge and agree that the restriction in clause
(ii)(b) of the immediately preceding sentence shall not apply to (i) employment
that results from a solicitation directed at the public in general by you in
publications available to the public in general or (ii) employment resulting
from contracts by officers, employees or representatives of their own initiative
or through search organizations.
You also understand and agree that all Evaluation Material disclosed to
American Brands, Inc. shall remain the sole property of the Company and nothing
shall be construed as a license or right to American Brands, Inc. to use any
such Evaluation Material for any purpose other than for the purpose of
evaluating and advancing a possible transaction with the Company.
<PAGE>
American Brands, Inc.
June 26, 1995
Page 2
You agree that, for a period of two years from the date of this agreement,
neither you nor any of your affiliates, unless you receive the Company's express
prior written permission, will in any manner, directly or indirectly, effect or
seek, offer or propose (whether publicly or otherwise) to effect, or cause or
participate in or in any way assist any other person to effect or seek, offer or
propose (whether publicly or otherwise) to effect or participate in, (i) any
acquisition which would result in American Brands, Inc. or its affiliates owning
in the aggregate more than 5% of any class of voting securities or direct or
indirect rights or options to acquire more than 5% of any class of voting
securities (or beneficial ownership thereof) of the Company or any of its
subsidiaries; (ii) any tender or exchange offer or merger or other business
combination involving the Company or any of its subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote any voting securities of
the Company.
Kindly sign and return the enclosed copy of this letter to indicate that it
correctly sets forth the additional terms of our agreement. Upon execution this
letter will become a binding agreement between us as of the date hereof and the
provisions hereof will amend and supplement the terms to the Confidentiality
Agreement which shall otherwise remain in force and effect.
Very truly yours,
COBRA GOLF INCORPORATED
By /s/ Gary E. Biszantz
----------------------------
Gary E. Biszantz
Chairman of the Board
Confirmed and agreed to as of
the date first-above-written:
AMERICAN BRANDS, INC.
By /s/ Charles H. McGill
------------------------------
Name: Charles H. McGill
Title: Vice President - Corporate Development
<PAGE>
COBRA GOLF INCORPORATED
1812 Aston Avenue
Carlsbad, California 92008
(619) 929-0377
November 6, 1995
American Brands, Inc.
1700 East Putnam Avenue
Old Greenwich,
Connecticut 06870-0811
Arthur D. Little Inc.
25 Acorn Park
Cambridge, MA 02140
Dear Ladies and Gentlemen:
Reference is hereby made to the Confidentiality Agreement, dated June 19,
1995, as amended through the date hereof (the "Confidentiality Agreement"),
between American Brands, Inc. ("American") and Cobra Golf Incorporated (the
"Company").
In connection with the currently proposed tour of the Company's facility
located in Wheeling, Illinois by representatives Arthur D. Little Inc., outside
consultant to American ("ADL"), the Company hereby consents to such visit on the
following terms:
1. ADL (a) acknowledges that any information or details acquired in
connection with the above-referenced tour, including without limitation about
the operations at the subject facility, are subject to the terms of the
Confidentiality Agreement and (b) agrees not to disclose to American or others
any such information or details, whether in summary form or otherwise, without
<PAGE>
American Brands, Inc.
November 6, 1995
Page 2
obtaining the Company's prior written consent and, if any such consent is
granted, providing a copy to the Company at the same time as it may be delivered
to American. Notwithstanding the foregoing clause (b), ADL is permitted to
disclose to American their oral summary conclusions with respect to the
following: (i) whether or not the process seen is feasible for the economic and
efficient manufacture of titanium golf clubs; (ii) when generally the process
might be operable on a production scale; (iii) whether or not the process is
unique or proprietary; and (iv) whether or not any patents or patent
applications relating to the process are in existence; provided, that ADL
--------
concurrently provide the Company with a summary of any such conclusions.
2. Neither ADL nor American shall use any information acquired by ADL in
connection with their tour in any way detrimental to the Company.
3. Except as modified hereby, the Confidentiality Agreement shall remain
in full force and effect.
<PAGE>
American Brands, Inc.
November 6, 1995
Page 3
Please confirm your agreement with the foregoing by signing and dating a
copy of this letter and returning it to us.
Very truly yours,
COBRA GOLF INCORPORATED
By: /s/ David A. Schaefer
-------------------------------------
Name: David A. Schaefer
Title: Sr. V.P. & COO
Agreed to and Acknowledged
as of the date first written above:
AMERICAN BRANDS, INC.
By:
----------------------------------
Name:
Title:
ARTHUR D. LITTLE INC.
By:
----------------------------------
Name:
Title:
<PAGE>
American Brands, Inc.
November 6, 1995
Page 3
Please confirm your agreement with the foregoing by signing and dating a
copy of this letter and returning it to us.
Very truly yours,
COBRA GOLF INCORPORATED
By:
---------------------------------
Name:
Title:
Agreed to and Acknowledged
as of the date first written above:
AMERICAN BRANDS, INC.
By: /s/ Gilbert L. Klemann, II
--------------------------------
Name: Gilbert L. Klemann, II
Title: Senior Vice President and
General Counsel
ARTHUR D. LITTLE INC.
By:
---------------------------------
Name:
Title:
<PAGE>
American Brands, Inc.
November 6, 1995
Page 3
Please confirm your agreement with the foregoing by signing and dating a
copy of this letter and returning it to us.
Very truly yours,
COBRA GOLF INCORPORATED
By:
---------------------------------
Name:
Title:
Agreed to and Acknowledged
as of the date first written above:
AMERICAN BRANDS, INC.
By:
---------------------------------
Name:
Title:
ARTHUR D. LITTLE INC.
By: /s/ Paul H. Granger
---------------------------------
Name: Paul H. Granger
Title: Director
