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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________________________________________________
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from ___________ to ____________
Commission File Number 1-12532
RENAISSANCE GOLF PRODUCTS, INC.
(Name of Small Business issuer in its charter)
DELAWARE 86-0664849
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12187 SOUTH BUSINESS PARK DRIVE, SUITE 100,
Draper, Utah 84020
(Address of Principal Executive Office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (801) 501-0200
_________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered:
------------------- --------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK -- $.001 PAR VALUE
(Title of Class)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ___
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Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-K contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-KSB. X
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PART I
All statements, other than statements of historical fact, included in this
Form 10-KSB, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," are, or may be deemed to be, "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). Such forward-looking statements involve assumptions, known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Renaissance Golf Products, Inc. (the
"Company") to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements contained
in this Form 10-KSB. Such potential risks and uncertainties include, without
limitation, competitive pricing and other pressures from other golf equipment
manufacturers, economic conditions generally and in the Company's primary
markets, consumer spending patterns, perceived quality and value of the
Company's products, availability of capital, cost of labor (foreign and
domestic), cost of raw materials, occupancy costs, and other risk factors
detailed herein and in other of the Company's filings with the Securities and
Exchange Commission. The forward-looking statements are made as of the date of
this Form 10-KSB and the Company assumes no obligation to update the forward-
looking statements or to update the reasons actual results could differ from
those projected in such forward-looking statements. Therefore, readers are
cautioned not to place undue reliance on these forward-looking statements.
ITEM 1. BUSINESS
Overview
The Company designs, develops, assembles, and distributes high-quality golf
products and golf accessories in North and South America, Europe, the Middle
East, and Africa (the "Licensed Territory") utilizing the Fila trademark and
logo under license from Fila Sport S.p.A. of Biella, Italy ("Fila Sport"), a
subsidiary of Fila Holding, S.p.A. The Fila brand name is recognized worldwide
and is associated with high-quality, high-performance products with a high-
fashion design concept. Fila Sport has cultivated this image for its athletic
footwear, active sportswear, and leisure and casual wear, and the Company
capitalizes on the worldwide identification with other products bearing the Fila
trademark. The Company believes that the technical and design specifications of
its products support the high-quality, high-performance, high-fashion concept
fostered by Fila Sport.
The Company's products include golf clubs, bags, balls, gloves, head wear,
headcovers, travel covers, umbrellas, and towels. The Company offers full lines
of both men's and women's woods and irons. The Company also sells putters,
wedges, utility woods, and oversized woods. Golf club components are
manufactured by independent suppliers, primarily in the United States and the
Far East, and are assembled and distributed by the Company. Other golf products
are manufactured by suppliers and distributed by the Company. The Company's
products, distinguished by their appearance and quality of workmanship, command
premium prices but are competitive in price with other premium-quality golf
products. The Company has the exclusive right to market golf products bearing
the Fila trademark in the Licensed Territory with the exception of head wear and
towels, which are marketed on a non-exclusive basis in the Licensed Territory.
The Company has also recently acquired the assets of two companies; The Ball
Marketing Company LLC. ("BMC"), and the World Golf Federation ("WGF"). With the
acquisition of BMC and WGF, the Company intends to launch into the golf ball and
golf tour markets. Through the business acquired from WGF, the Company will
market and conduct golf tour events throughout the country. WGF has developed a
handicapping system for golf which assists in leveling the playing field for
golfers of all handicaps. WGF, now knows as the "Fila World Golf Tour," is
dedicated to fostering honesty and integrity within the game of golf. Marketing
of golf tour events occurs principally through word-of-mouth. Participants
invite friends and golfing acquaintances to participate in tour events.
Individuals pay monthly dues which entitle them to play in tour events. As tour
participants bring in other players, such participants become entitled to
receive a distributor's commission for new tour registrants. Each tour event
utilizes the Company's proprietary handicapping system to determine event
winners who receive cash, prizes, or both.
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In conjunction with the Fila World Golf Tour, the Company, through the
acquisition of BMC's assets, is positioned to market golf balls at its tour
events. The line of "World Tour" golf balls are USGA approved and available
exclusively through the Company. Network marketing provides the primary means
of distribution for the World Tour balls. Interested individuals are encouraged
to become independent distributors of the golf balls. The Company provides a
number of programs whereby participants can subscribe to receive golf balls each
month on an auto-ship basis. The Company believes the businesses of BMC and WGF
can be effectively combined to create a novel marketing vehicle in the golfing
industry to increase golf tournament participation and to distribute golf balls
and other golfing products.
The Company was originally incorporated in Arizona in July 1990 and commenced
sales in January 1991. In September 1993, the Company was reincorporated in
Delaware. In November 1993, the Company completed an initial public offering
(the "Offering") of 1,400,000 shares of its Common Stock and 1,400,000 Class A
Common Stock Purchase Warrants ("Class A Warrants"). See "Description of
Securities." The Company's Common Stock and Class A Warrants were included on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") Small Cap market until November 1995 when the Company failed to meet
minimum requirements to remain on NASDAQ. Since November 1995, the Company's
securities have been traded on the OTC Electronic Bulletin Board under the
symbols "FGLF" and "FGLF-W," respectively.
In October 1996, the Company, through a private placement (the "Financing"),
offered up to a maximum of 100 "Units" at an issue price of $25,000 per Unit,
each Unit consisted of a convertible Debenture; and 15,625 Unit Shares at a
price of $.80 per share for a total of $12,500 for the Unit Shares. The Unit
Shares were ultimately subject to a 4:1 reverse stock split ("Reverse Split"),
approved by the stockholders at the annual meeting of stockholders held on
October 24, 1997 and effectuated on November 12, 1997. The Debentures were
ultimately converted pursuant to their conversion provision on December 15, 1997
at the rate of $.50 per share after the closing price of the Company's Common
Stock exceeded $1.50 per share for 20 consecutive trading days.
In conjunction with the Financing, the Company experienced a change of control
which included the Company appointing a new Chairman of the Board, and the Board
of Directors acting to fill two vacancies created by the resignations of Michael
B. Orr and J. Arthur Wright, and two other existing vacancies, by electing John
B. Hewlett, Kenneth W. Craig, Dennis L. Crockett, and Wade M. Mitchell as
Directors to serve until the 1997 annual meeting of stockholders. All of these
appointed Directors were re-elected at the October 1997 stockholders meeting.
John B. Hewlett, who was primarily responsible for bringing the new capital into
the Company through the Financing, provided a $400,000 line of credit to secure
future minimum royalties to Fila Sport, and personally guaranteed a $1,000,000
revolving loan agreement and subsequently a $5,000,000 revolving loan
agreement, obtained to provide working capital for the Company was appointed as
the Chairman of the Board of Directors.
Mr. Hewlett, who maintains his principal place of business at 2919 East
Granite Hollow Street, Sandy, Utah 84092, is President of Hewlett Financial
Corporation which engages primarily in strategic asset, insurance, and tax
planning for individuals and businesses.
All 100 Units offered through the Financing were subscribed, which resulted in
a capital investment to the Company of nearly $2,500,000. The change of control
facilitated attracting new investors and securing new lines of credit totaling
an additional $1,900,000. This $4,400,000 increase in capital available to the
Company through mid-1997 enabled the Company to continue operations. At the
time of the Financing, the Company was insolvent, struggling to remain viable,
and had severely decreasing sales due to a lack of working capital. All of the
new capital invested in the Company resulted directly and indirectly from the
personal efforts of Mr. Hewlett, the new members of the Board of Directors, and
the contacts of Mr. Hewlett's affiliated companies. If capital had not been
raised from the outside investors, the Company would likely have been forced to
discontinue operations and liquidate its remaining assets.
Before pursuing the Financing, the Board considered various options to keep
the Company operating, including the possibility of private and public
financings; however, the previous Board was unsuccessful in its attempts to
raise capital due to the poor financial condition of the Company. The
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Company received limited financing from Mr. Doody, the Chief Executive Officer
at the time, but was able to obtain only small amounts of capital for short-term
purposes.
Recognizing the limitations on the Company's ability to raise capital through
a public or private financing because of the Company insolvency and the pending
termination of the Company's license agreement with Fila Sport, the Company's
Board of Directors determined it would explore financing alternatives to restore
the Company to viability before winding down its operations. After nearly one
year of unsuccessful searching for new funding for the Company, the Board was
introduced to John B. Hewlett by the Secretary of the Company, Bruce H. Haglund.
After the introduction, Mr. Hewlett evaluated the Company's financial condition
and requirements, including the conditions to reinstate the license agreement
with Fila Sport, and proposed the structure of the Financing for Board approval.
The percentage of ownership required by Mr. Hewlett for an offering to new
investors, post-Financing and post-Reverse Split, were determined through
negotiations with Mr. Hewlett and the Board. In the negotiations, the parties
agreed on the percentages for existing stockholders, post-Financing, while
providing sufficient ownership for potential investors to attract their
investment into the insolvent Company which needed to immediately repay past due
royalties to Fila Sport to continue its business.
The change of control which occurred as part of the Financing upon Board
approval, provided the investors introduced to the Company by Mr. Hewlett with
the level of confidence in management necessary to secure new investment
proceeds. The reconstituted Board planned to decrease the number of outstanding
shares and thereby increase the Company's stock price as part of a long-term
plan to qualify the Company's stock for trading on the Nasdaq Small Cap Market,
one criterion of which requires a minimum bid price of $4.00 per share. In
order to increase the bid price, the Board resolved to propose the 4:1 Reverse
Split after the additional investment brought in through the Financing was in
place.
A bid price of $4.00 per share is only one of the entry standards the Company
must meet in order to regain the right to have its stock traded on the Nasdaq
Small Cap Market. The Company will also need to meet other entry standards to
have its stock listed on the Small Cap Market, including having (i) 300
stockholders, (ii) three market makers, (iii) $4,000,000 in net tangible assets,
or a $50,000,000 market capitalization, or $750,000 in net income, (iv) a Public
Float of at least 1,000,000 shares having a market value of at least $5,000,000,
and (v) at least a one-year operating history or a $50,000,000 market
capitalization. The 4:1 Reverse Split approved by the stockholders and
effectuated in November 1997, has served to help increase the stock price bid to
the $4.00 per share range in recent trading.
Since the time of the Financing, the Company has entered into a series of
Loan and Credit Agreements with the AKA Charitable Remainder Unitrust #1. The
first line of credit was for a maximum amount of up to $1,000,000, and the
second line of credit provides for the Company to draw the maximum aggregate
principal amount of the lesser of $5,000,000, or 80% of the Company's current
assets. The Company was not in compliance with one condition of the Loan and
Credit Agreement on December 31, 1997 by having drawn on the credit line beyond
80% of the Company's current assets. In the event the Company is not able to
comply with this condition within 10 days of receiving written notice from the
Lender, the maturity date on the borrowings could be accelerated. Such
acceleration could have a materially adverse effect on the Company's operations.
The Company have not received written notice and believes it could comply upon
receipt of such notice.
In addition to the credit lines secured by the Company last year, a private
placement of the Company's shares of Common Stock was recently undertaken on
March 2, 1998 to raise up to $2,400,000. The Company intends to close the
offering at the end of April 1998. To date a total of approximately 430,000
units have been subscribed for a total of $1,300,000 raised. Through the
private placement the Company offered for sale up to a maximum of 550,000 units,
with an over-allotment of 250,000 units, each unit consisting of one share of
its Common Stock, par value $.001 per share, and a warrant to purchase one
share of Common Stock. The purchase price was $3.00 per unit. The Company
offered a minimum of 5,000 units per investor. The Warrants are immediately
exercisable and transferable separately from the shares of Common Stock. Each
Warrant entitles its holder to purchase one share of Common Stock at an
exercise price of $5.00 per share, subject to adjustment in certain events. The
Warrants may be exercised at any time and from time to time until December 31,
2002. The Company has the right to redeem the Warrants at $0.01 per Warrant
upon not less than 30 days' notice if the
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Closing Price of the Common Stock for a period of 20 consecutive trading days,
ending not earlier than 10 days prior to the date of such redemption notice,
equals or exceeds $7.00 per share, subject to adjustment in certain events.
During April 1998, the Company extended an offer to the holders of the
Company's Class A Warrants (the "Warrants") to modify the terms of such
warrants. The Company issued 1,400,000 Warrants in connection with its initial
public offering in November 1993. The initial exercise price of $6.50 per share
and the number of Warrants were subject to adjustment on certain events,
including stock splits and the issuance of securities by the Company at prices
less than the exercise price. Based on required adjustments, the exercise price
at December 31, 1997 and the date of this report were $10.62 and $9.68,
respectively. The adjusted number of Warrants outstanding at December 31, 1997
and the date of the report were 852,060 and 941,843, respectively.
The Warrants are also redeemable by the Company for $.01 per Warrant if the
Company's Common Stock trades at a price in excess of $9.00 for 10-consecutive
trading days, subject to the holders' rights to exercise their Warrants during
the 10-day period following the redemption notice.
The Company's offer to modify the terms of the Warrants included an agreement
to reduce the exercise price of the Warrants from $9.61 to $5.50 per share and
waive the adjustments of the number of Warrants on the condition that the
Warrant holders agree to reduce the redemption price from $9.00 to $7.00 and
waive further price adjustments. The November 15, 1988 expiration date has not
been changed.
In conjunction with the change of control and recent financing activities, the
Company moved its offices from Huntington Beach, California, to 12187 South
Business Park Drive, Suite 100, Draper, Utah 84020, during the first quarter of
1998. The move has enabled the corporate and warehousing offices to be
consolidated in proximity to the Directors and Officers of the Company.
BUSINESS STRATEGY
In 1996, the Company was unable to fill orders because of a lack of working
capital. With the infusion of capital as a result of the private placements and
loans, the Company was able to secure the Fila License, repay debts, and
reposition itself to manufacture its products in 1998 through purchase order
financing. During 1997, the Company determined to re-focus its business strategy
and marketing efforts to place greater emphasis on market niches which had been
the most consistently productive for the Company and which were the most closely
aligned with Fila Sport's interests and marketing emphasis--high-fashion design
and value. The areas of renewed marketing emphasis within the golf industry and
the order of attention were as follows: (i) golf bags and accessories; (ii)
men's bags, clubs, and accessories; (iii) women's clubs and accessories; and
(iv) junior's bags, clubs, and accessories. The Company determined to take its
product lines into the mass merchandise channels in addition to the golf
specialty shops which were historically the Company's focus.
During 1997, the Company successfully re-focused it attention on product lines
and entered the mass merchandise market. The Company intends to continue its
renewed focus while continuing with its general business strategy of providing
unique, innovative, quality products which utilize and promote the Fila Sport
image.
Management of the Company, based on its evaluation of various studies of the
golf industry, believes that golfers are individuals whose education and mean
annual income are above average, that the number of golfers and golf-related
spending is increasing, that a significant portion of the golfing public has
sufficient disposable income to be able to afford golf products such as those
sold by the Company, and that such individuals are attracted to quality products
and brands such as the products sold bearing the Fila trademark. Management of
the Company also believes because of the high-fashion image associated with the
Fila brand name and the design of the Company's products, the Company is
positioned to capture a measurable percentage of the women's market.
The Company concentrates its business strategy on developing and manufacturing
innovative, technically-superior golf equipment and bags identified as premium
products by the Fila trademark. The Company markets its product lines through a
network of qualified sales representatives and distributors in golf specialty
shops and more recently in mass merchandise retail outlets. Some of the
elements of the Company's marketing strategy include:
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.Product Innovation. The Company designs and markets golf equipment intended
to appeal to both average and skilled golfers by approaching the design function
with a focus on (i) the fundamental objectives a particular product is intended
to perform; (ii) innovations that enable the equipment to work for the golfer in
better accomplishing the tasks for which the equipment is intended; (iii)
examination of successful equipment approaches from the past and present; (iv)
advances in materials and components that enhance the equipment's performance;
(v) consumer demand for product; (vi) utilizing distinct design criteria for
men's and women's products, and (vii) affordability in mass merchandise
products.
.Manufacturing Quality. The Company believes that the best approach to
customer service is to deliver a superior product. The Company has experienced
minimal returns of its products because of its attention to the manufacture,
assembly, and shipment of its products. The Company maintains close working
relationships with its suppliers to achieve and maintain the quality of its
products by (i) carefully selecting suppliers with whom management has had
successful relationships in the past and working closely with new vendors on a
limited basis before committing to expanded relationships; (ii) involving the
suppliers in the product development process; (iii) periodically inspecting and
evaluating the manufacturing process on-site; (iv) developing specialized
techniques that help to ensure the efficient utilization of the high-quality raw
materials that are used to manufacture the Company's products; and (v)
performing extensive testing, inspection, and quality control checks during the
manufacturing and assembly process.
.Utilizing and Promoting the Fila Image. Because of the success of Fila Sport
in developing a worldwide, premium brand franchise in its athletic footwear,
active sportswear, and leisure and casual wear, the Company was able to have its
products immediately identified with a high-quality, high-performance, high-
fashion image. Identification with the Fila Sport image has enabled the Company
to command the premium prices that management believes the quality of its
products justifies. The Company is working to enhance this image by advertising
and promoting its products and sponsoring events. The Company believes that it
has successfully extended, and will further extend, the Fila brand name into the
golf industry and that Fila Sport and the Company continue to foster a closer
working relationship to the mutual advantage of both parties.
.Protection of Proprietary Rights. As the licensee of Fila Sport, the Company
aggressively seeks to protect the mutual interests of the Company and Fila Sport
in the value of the Fila trademark. The Company believes that its golf club
designs, manufacturing processes, and trade names represent valuable
intellectual property rights. The Company will seek to protect its proprietary
interests in licenses, trademarks, trade secrets, trade dress, patents (if any
are obtained), and other intellectual property rights.
Company management has determined that its recent move into the mass
merchandise retail provides the Company with a distribution network that will
permit, not only the distribution of golf products, but also general fitness
related products. Entry into the general fitness products market will permit
the Company to begin moving beyond marketing only products bearing the Fila
brand name.
In an initial effort to distribute general fitness equipment, the Company
entered into an exclusive agreement with Stilson & Stilson ("Stilson"), a direct
marketing production company, to distribute a product called the "ABDoer"
throughout the world. Stilson, which most notably produced programming for the
"Healthrider" personal fitness machine, has produced a 22 minute infomercial
presenting the ABDoer. Through the agreement with Stilson, the Company will
provide direct response order fulfillment and establish retail distribution for
the product. Many fitness products have been successfully introduced and sold
directly to the market through the airing of infomercials. Retail sales
distribution then follows. The Company through its established distribution
contacts, has successfully built a fitness distribution network to move the
ABDoer into the retail market; although, the date for Stilson's general release
of the ABDoer infomercial has not yet been set. Small scale market tests
indicate the ABDoer should perform well in the market place; however, the
Company can provide no assurance of the widespread release of the infomercial,
the level of direct sales, or the level of sales through retail outlets.
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As innovative marketing has become a primary focus of the Company, management
has been actively pursuing new marketing avenues and new products. The
acquisition of BMC and WGF's assets and businesses represent a new marketing
approach being seized upon by the Company. Historically golf balls have been
marketed using expensive professional golfer endorsements and industry specific
advertising. The businesses of BMC and WGF combined, provide the Company with
the opportunity to market tournament play, golf balls, and other products by
word-of-mouth through golfers as independent network distributors on and off the
golf course. Funds which the Company would typically spend on endorsements and
advertising to market products, provide the means for the Company to pay
commissions to independent distributors for their marketing efforts while
keeping the price of products competitive with highly endorsed and advertised
products. The Fila Golf Tour also provides the Company with a cost-effective
marketing vehicle to have the Fila name seen on golf courses throughout the
country to help raise the awareness of the Fila brand name in the golf industry.
GOLF PRODUCTS
The Company currently offers a variety of golf products including golf clubs,
bags, balls, gloves, head wear, headcovers, travel covers, umbrellas, and
towels. All golf products are distinguished by the Fila name and logo, unique
styling, innovative design and high-quality workmanship. The Fila brand
provides a name the sports industry associates with fashion, high-quality, and
active participation. The Company believes this combination appeals to the
quality conscious consumer, as well as the golf enthusiast. During 1997, the
Company continued to market its professional line through specialty shops and
began to market its mass merchandise line through mass retailers.
The Company has been successful in the past designing fresh and innovative
product which has created demand far exceeding the Company's ability to deliver
because of a lack of working capital. With the recent capital infusions, the
Company anticipates having the ability to meet more of the existing demand for
its products.
.Golf Bags. The Company believes its golf bags complement the current core
business and marketing efforts of Fila Sport and are a demand item strongly
associated with the fashion and function design concept of Fila Sport. The
Company's golf bags are technically innovative and fashion oriented. Golf bag
models feature full-length club dividers, fur lined tops, four to seven pocket
configurations, deluxe harnesses with padded slings, bottom assist handles,
hidden umbrella wells, towel clips, and matching rain hoods.
The Company will continue to design and manufacture an in-depth line of
fashionable yet functional golf bags. The Company's bag line includes a
selection from light weight golf bags to cart size golf bags. The 1997 and 1998
models include the following:
Professional Series:
Lite Carry and Lite Stand golf bags are offered in five color combinations
with a suggested retail price range of $125.00 to $130.00.
Allegra golf bags for women come in five color combinations and feature
fur-lined, graphite-safe top and three full length dividers with a
suggested retail price of $155.00.
Biella Series golf bags for men come in eight color combinations. This
series has historically been the Company's best seller and is offered at a
suggested retail of $190.00.
Biella II Series 8 1/2" model features men's and women's styles in cordura
and textured nylon fabric, solid core construction, with a hidden valuables
pouch. This bag is a modified version of the Biella model with a hidden
shoe pocket, a very popular feature of the Company's bags. The suggested
retail price is $205.00.
Renaissance Series bags have a very stylish design featuring a built-in
shoe pocket that keeps golf shoes separate from the clothing pocket. This
series is offered in seven color combinations for men and five color
combinations for women with a suggested retail of $180.00.
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M.D. Series is a men's bag in 720-D nylon fabric offering oversize pockets
to keep shoes and clothing separate. The Suggested retail price is $240.00.
Mass Merchandise Series:
C Series and Lite Stand golf bags are offered in five color combinations
with a suggested retail price range of $78.00 to $128.00.
Tour Series golf bags for both men and women come in six color combinations
with a suggested retail price of $139.00.
Divider model features men's and women's styles in fade and water resistant
polyester fabric, one full-length garment compartment, and one oversized
utility pocket. The suggested retail price is $129.00.
MD Deluxe bags have a very stylish design featuring a solid core
construction, a heavy weave cordura fabric, and a built-in shoe pocket that
keeps golf shoes separate from the clothing pocket. This series is offered
in three color combinations with a suggested retail of $166.00.
.Clubs Many of the Company's lines of golf clubs include innovations and
refinements developed by management and independent equipment designers, from
whom the Company obtains licenses. Clubs, priced from $340 to $1,500 for a set
of eleven clubs, include the following:
Professional Series:
F-2000 Titanium Drivers made with varying degrees of loft are constructed
from cast 6AL4V titanium. Three flexes of shafts are available with the
drivers and the Four Plus fairway wood.
Men's Tour Oversize Irons are investment cast 4-31 stainless steel and
feature a progressive offset, cavity back radiused sole, and a beveled
leading edge. The irons are available in steel and graphite shafts.
Retail pricing for irons is $850.00 for steel and $1,120.00 for graphite,
and for woods is $240.00 and $375.00 for steel and graphite receptively.
Men's Avatar Oversize Irons and Woods feature woods made from investment
cast 15-5 and 17-4 stainless steel and irons made from investment cast 4-31
stainless steel. The irons are constructed with a modified sole design
which promote smooth take-a-ways and greater playability from the fairway
and rough. Retail pricing for irons is $480.00 for steel and $680.00 for
graphite, and for woods is $240.00 and $375.00 for steel and graphite
respectively.
Men's Oversize Irons and Woods feature woods made from investment cast 15-5
and 17-4 stainless steel and irons made from investment cast 4-31 stainless
steel. The irons are constructed with optimum perimeter weighting for a
larger sweet spot and progressive offset U-grooves for more consistent ball
control. Retail pricing for irons is $440.00 for steel and $656.00 for
graphite, and for woods is $234.00 and $360.00 for steel and graphite
receptively.
Ladies Oversize Irons and Woods feature woods made from investment cast 15-
5 and 17-4 stainless steel and irons made from investment cast 4-31
stainless steel. The irons are constructed with optimum perimeter
weighting for a larger sweet spot and progressive offset U-grooves for more
consistent ball control. Retail pricing for irons is $440.00 for steel and
$656.00 for graphite, and for woods is $234.00 and $360.00 for steel and
graphite respectively.
Ladies Milano Irons and Woods feature woods constructed from composition
alloy and irons from cast Z-alloy. Retail pricing for irons is $330.00 for
steel and $450.00 for graphite, and for woods is $150.00 and $210.00 for
steel and graphite respectively.
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Mass Merchandise Series:
F-100 Oversize for men, recently introduced, include three woods and eight
irons. The oversize woods are manufactured from titanium alloy for maximum
impact response and feature perimeter weighting and an expanded sweet spot.
The oversize irons are investment cast with 4-31 stainless steel with a
cavity-back design. Shafts are available in steel and graphite. The
suggested retail price is $499.00.
Volt for men, introduced in 1997, include three woods and eight irons. The
woods are manufactured from titanium alloy for maximum impact response.
The oversize irons are investment cast with 4-31 stainless steel. Shafts
are available in steel and graphite. The suggested retail price is
$549.00.
Lady Modello, introduced in 1997, include three woods and eight irons. The
oversize woods are manufactured from 17-4 stainless steel and feature
perimeter weighting and an expanded sweet spot. The oversize irons are
investment cast with 4-31 stainless steel with a cavity-back design.
Shafts are available in steel and graphite. The suggested retail price is
$549.00.
Lady Volt, introduced in 1997, include three woods and eight irons. The
set features oversized TI Matrix metal woods. The oversize irons are
investment cast with 17-4 stainless steel. Shafts are available in steel
and graphite. The suggested retail price is $499.00.
Junior Series feature four to seven clubs and a lightweight nylon golf bag.
The suggested retail price is from $129.00 to $179.00.
.Golf Balls. With the acquisition of BMC, the Company intends to move more
aggressively into the golf ball market. Historically the golf ball market has
been dominated by companies with substantial marketing budgets utilizing
professional golfer endorsements and mass advertising to raise consumer
awareness and sell product. The Company believes it can effectively capture a
portion of the golf ball market through a grass roots campaign to market and
sell golf balls. This marketing effort will take place at the grass roots on
golf courses across the country in conjunction with the Fila World Golf Tour.
Although the Company believes its efforts to market golf balls will be
successful, it can provide no assurance that it will be able to successfully
enter the golf ball market.
.Tournaments. Dedicated to honesty and integrity in the game of golf, the
Company through its acquisition of WGF offers golfers an opportunity to
participate in tournaments on a level playing field through the use of the
Company's proprietary handicapping system. The Company believes its tour will
experience increasing participation as golfers are exposed to the tournaments
through fellow golfers who enjoy honest competition with an opportunity to win
prizes and money. The tour represents a new line of product for the Company to
market and sell, while at the same time providing the Company with "on-course"
advertising of the Fila name. Management believes the Fila Golf Tour will enjoy
financial success; however, the Company can provide no assurance that the
concept will be accepted by a sufficient number of golfers or be run efficiently
enough to be a financial success.
.Tournaments Division. During 1997, the Company began to actively pursue the
professional tournament market to supply tournament officials and volunteers
with apparel and other accessory needs. Through an agreement with Fila U.S.A.,
the official licensee of Fila Sport to use the Fila trademark and logo on
fitness apparel, the Company can offer Fila clothing and footwear, along with
its hats and accessories, to tournament personnel. As a provider of apparel to
tournaments, the Company in most cases can offer its products for sale at the
golf course during the tournament. The Company believes that tournament
involvement can greatly increase the recognizability of the Fila name in the
golf industry.
Other golf products include various utility wedges, putters, and a variety of
accessory packs. Accessories include travel covers, headcovers, umbrellas, golf
gloves, caps, visors, and straw golf hats. Through constant research and
development and market planning, the Company plans to continually develop new
products and enhance existing product lines.
8
<PAGE>
FITNESS PRODUCTS
In addition to its traditional golf product lines bearing the Fila brand
trademark, the Company has recently acted to move into the distribution of
general fitness equipment. The ABDoer represents the Company's first attempt to
utilize its existing distribution network to sell general fitness products. The
ABDoer is a abdominal exercise machine which when used properly, in conjunction
with a proper diet, can effectively reduce fat and increase muscle in the
abdominal area of the body. Stilson, a direct marketing production company,
plans to release the ABDoer infomercial into the national market place during
the current year. The Company has signed an exclusive agreement to perform
order fulfillment functions for Stilson and to distribute the product through
the retail market. Management believes the ABDoer product will be successfully
sold into the market place, but the Company can provide no assurance that
Stilson will release the infomercial on a national basis or that the ABDoer will
be accepted by consumers.
MARKET SEGMENTS
.Men's Golf Products. By offering a full line of clubs suited for men of all
playing abilities, the Company anticipates capturing a growing percentage of the
men's market segment.
.Women's Golf Products. One of the Company's ongoing objectives is to address
the growing women's market by offering distinct product lines designed for them.
The women's lines are designed so that the graphics and coloration of the clubs
are coordinated in every respect, including the color of the shafts, shaft
designs, and paint fill on the club heads. Exclusive programs for the women's
market include a full package of coordinated bag, headcovers, and equipment in
various color categories focusing on fashion and function. Market research has
led the Company to believe that women want products that are (i) manufactured
with the same detail, playability, and consideration for performance as men's
products; (ii) value priced; and (iii) fashionable and attractive to women and
readily display the fact that the product was made for the women such as color
and product coordination to look good on the course.
.Junior Golf Products. The Company introduced equipment for children and
teenage golfers during 1997 to capture a portion of this growing market segment.
The Company offers junior sets consisting of a 5-wood, 4-iron, 6-iron, 8-iron,
pitching wedge, and putter, designed for the five to nine year old, and a
package suited in weight and length for the ten to 13 year olds including a 3-
wood, 3-iron, 5-iron, 7-iron, 9 iron, mid-wedge or sand wedge, and a putter.
Both sets include a bag that is smaller in size and lighter in weight than
standard golf bags to accommodate the junior golfer.
.Golf Tournament Market. The Company believes tournament players represent
a market segment made up primarily of men who enjoy honest competition and an
opportunity to win prizes and money. This market segment represents a highly
qualified target market for golf products where the Company intends to advertise
its name and sell golf ball and other golf products. The Company hopes to bring
all market segments men, women, and junior golfers into this specific segment
through participation in Fila World Golf Tour events.
.General Fitness Products. In addition to traditional golf industry market
segments, the Company has entered into the vast fitness products industry with
the ABDoer product. Success with the ABDoer product will help solidify the
Company's general fitness market segment accessible through its current and
recently expanded lines of distribution. The Company is now in position to
continue to feed additional and varied fitness products to the general fitness
market. Management believes the general fitness industry may provide the
Company with a substantial additional source of revenues beyond its golf
products bearing the Fila brand name; although, the Company can provide no
assurance that it will be able to successfully enter the fitness market.
MARKETING AND DISTRIBUTION STRATEGY
Along with the renewed marketing emphasis, the Company's historical focus on
sales to retail outlets located at golf courses and golf retail shops
specializing in golf products is being redirected to include the retail sporting
goods market. The addition of the retail sporting goods market as a target will
allow the Company to better serve customers in the rapidly expending youth,
women's, and public
9
<PAGE>
course markets. The sporting goods retail market segment already has an acute
awareness of the Fila brand because of clothing and shoe sales. The Company will
continue to produce and supply specialty accounts with a product line of
superior quality, fashion, and technology designed to maintain the image of the
Fila brand in these prestige accounts.
.Domestic Market. The Company targets golf shops, pro shops, various
specialty shops, and the golf departments of mass merchants for the sale of its
products. Distribution in the domestic market is coordinated through
manufacturer's representative firms and independent sales representatives who
are assigned individual territories and compensated with a commission of 2% to
10% at the time of shipment. The existing territories cover all of the major
golf markets in the United States. The performance of these manufacturer's
representative firms and independent sales representatives is regularly reviewed
and those that do not perform at an acceptable level are replaced. Generally,
the Company appoints manufacturer representative firms and independent sales
representatives that do not carry product lines which directly compete with the
product lines offered by the Company; although, some exceptions are made based
on individual representatives and their related territory.
In addition to independent representation, telemarketing representatives call
on and work jointly with the independent representatives in expanding the
customer base and increasing volume. Management of the Company is also involved
directly in specific accounts, either individually or in coordination with the
independent representatives if the situation so merits.
.International Market. Distributors are responsible for market penetration
in their respective countries. Distributors are sold company product at U.S.
wholesale prices at a specified discount. This discount is designed to allow
foreign distributors to sell product at competitive pricing. Foreign
distributors advertise, promote, and are responsible for their own accounts
receivable. The Company anticipates that certain product lines will continue to
be designed specifically for introduction into foreign markets. Approximately
2% in 1997, 28% in 1996, 30% in 1995, 22% in 1994 and 31% in 1993 of the
Company's sales have resulted from international distribution. However, because
the Company no longer is marketing in Asia and Australia, it is anticipated that
the domestic market will account for a higher percentage of the Company's sales.
Quotas are given the first year and sales levels are monitored to judge
distributor performance and to evaluate the potential of the territory. Second
year minimum sales requirements are determined by the Company after evaluating
the first year's operating results. Advertising of the Company's products
outside the United States is typically handled by distributors of the products
within their particular territory.
.Direct Marketing. With the additional of the ABDoer, the Company has
entered the direct marketing industry. Initially, the Company will rely on
Stilson to prepare and distribute direct marketing productions, and the Company
will perform order fulfillment for products ordered through Stilson's direct
marketing efforts and pursue retail sales.
.Network Marketing. The Company has entered the network marketing industry
through its recent acquisition of BMC and WGT. Network marketing consists of
establishing a network of individuals through word-of-mouth who have an interest
in becoming independent distributors for a company's products. The distributors
are then paid a sales commission on products they sell and products sold by
other individuals who sign on with the company to become independent
distributors through the efforts of the initial individual distributor (a
"downline"). Commissions are paid to distributors for up to nine levels of
distributors in a downline. The Company believes it can effectively market
tournament participation, golf balls, and other related products through a
network marketing structure by providing a high quality product at a price which
is competitive with traditional outlets. The Company will be able to pay
commissions to independent sales representatives from the profit margin built
into products which traditional companies pay out in advertising and endorsement
expenses.
DESIGN AND PRODUCT DEVELOPMENT
.Golf Products. The Company attempts to foster the development of innovative
golf club and golf bag designs and believes that its efforts have resulted in
the development of a complete product line of high-quality golf products. The
Company's management and staff perform substantially all of the research and
development activities of the Company and conduct regular product development
10
<PAGE>
meetings to discuss market openings and niches, potential benefits of equipment
concepts, production feasibility, and potential market acceptance. The Company
also utilizes consultants to assist in the development of equipment design and
obtains licenses to commercialize the designs of independent golf club
designers. The Company believes this collaborative style, which includes members
of the executive management of the Company from all phases of the Company's
operations, enhances the Company's ability to manufacture innovative, premium
products while keeping research and development costs to a minimum.
Historically, research and development costs have not been material.
When a new golf club idea is determined to merit further development, the
Company works with independent equipment designers and tool makers to create
soft shell tooling, initiate samples, and manufacture test models. New equipment
is then tested extensively to determine the trajectory, distance, dispersion,
and roll characteristics, as well as the optimum loft and lie. Upon completion
of testing, the Company proceeds to manufacture the final tooling required for
mass production of the equipment. Extensive weight checking is performed to
confirm that the tooling produces equipment within acceptable tolerance ranges.
The design and development of new equipment is accomplished with reference to
the rules and interpretations of the USGA and in coordination with USGA staff to
insure that the Company's products comply with the standards established by the
USGA for its sponsored events.
.Fitness Products. In January 1998, the Company entered into a consulting
agreement with Stilson & Stilson, a producer of direct response television
promotions for fitness equipment, whereby the Company acquired the exclusive
right to sell Stilson's "ABDoer" fitness product within the United States and
throughout the world. The Company intends to further expand into the fitness
products industry through relationships such as that with Stilson to take
advantage of the Company's existing lines of distribution while relying on
outside innovators to provide the Company with product.
.Golf Ball Marketing. The Company through its recent acquisition of BMC
has an exclusive agreement Cayman Golf, a golf ball manufacturer, to market and
distribute its golf balls. Cayman currently produces four types of golf balls,
including an innovative 4-piece golf ball, all of which appear on the United
States Golf Association's and St. Andrew's approved golf ball lists. The Company
intends to utilize the expertise of Cayman to supply new and innovative golf
ball products to the Company for distribution.
FILA LICENSE
In November 1990, the Company entered into a license agreement (the
"Original License") with Fila Sport pursuant to which Fila Sport granted the
Company the right to design, manufacture, and market certain golf-related
products under the Fila brand name. The initial term of the agreement originally
expired December 31, 1995, but had been extended by Fila Sport to December 31,
2000. The agreement was terminated on June 30, 1996 because the Company was in
default under the agreement. In October 1996, the Company entered into a new
license agreement with Fila Sport (the "License Agreement") which provides that
the Company has the exclusive right to manufacture golf clubs, balls,
headcovers, travel covers, gloves, bags, and umbrellas for sale in North and
South America, Europe, the Middle East, and Africa. The Company has a non-
exclusive right to market golf head wear and towels in the Territory. The terms
of the License Agreement do not limit Fila Sport from manufacturing and
marketing articles for active sport, such as jackets, women's tops, sweaters,
all styles of hats, all styles of towels, sports bags, some of which items may
compete with the Company's products. The initial term of the License Agreement
extends through December 31, 2000 with an option to renew the license for an
additional five-year period. The License Agreement also required that the
Company pay to Fila Sport $675,000 in past due royalties on or before November
21, 1996. As of December 31, 1997, all past due royalties to Fila Sport were
paid in full.
In consideration for the trademark license, the Company pays Fila Sport a
royalty on net sales. The royalty is 6% of annual net sales up to $7,500,000,
5.5% of annual net sales from $7,500,000 up to $15,000,000, and 5% of annual net
sales in excess of $15,000,000. Annual minimum royalties are due and payable in
installments of 25% of the annual minimum on the 15th day prior to the end of
each calendar quarter. Royalties of $400,000 were paid during 1997. Future
minimum annual royalties are as follows: $500,000 in 1998; $600,000 in 1999; and
$700,000 in 2000. During the renewal period, minimum annual
11
<PAGE>
royalties are as follows: $800,000 in 2001; $900,000 in 2002; and $1,000,000 in
each year from 2003 through 2005.
The Company is required to obtain an irrevocable letter of credit in favor
of Fila Sport each year equal to the amount of the applicable minimum royalty.
The license is terminable by Fila Sport if, among other things, the Company
fails to meet its obligations under the License Agreement, fails to meet certain
agreed upon product introduction dates in the Licensed Territory, fails to
maintain product liability insurance, or fails to properly utilize the
trademark. The Company also is required to expend in each year for the duration
of the License Agreement an amount equal to 5% of net sales on advertising the
Company's products and 3% of net sales on promotions.
The License Agreement also requires the submission to Fila Sport of
quarterly royalty reports, sample advertising, sample products, price lists, and
an annual marketing and advertising plan. New product design plans and
prototypes must also be submitted to Fila Sport for approval prior to marketing
Fila Sport has the right to withhold approval of marketing approaches or
products if it determines that such new product or promotion would reflect
adversely on Fila Sport or impair the quality or image of the Fila trademark.
The License Agreement may be terminated by Fila Sport in whole, or in part,
upon the occurrence of certain events, including the following: failure to
perform or any material breach of the obligations under the agreement where
there is no remedy within 30 days of the receipt of written notice of intent to
terminate the License Agreement; failure to make timely royalty payments, use
best efforts to meet established product introduction dates, maintain required
levels of product liability insurance, or meet established guidelines for
quality control; failure to meet advertising, promotional, and sales targets
within a country included in the Territory; and sale or disposal of
substantially all of the Company's business or assets to a third party, transfer
of control of the company to a third party, or the cessation of the Company's
relationship with Miles T. Doody.
Further, Fila Sport may terminate the License Agreement if the Company's
financial condition becomes unstable, as evidenced by, among other matters,
insolvency or the Company's inability to pay its debts as they become due.
Currently, the Company is not on notice to cure any breach under the License
Agreement. The Company is currently not in compliance with the letter of credit
provision of the License Agreement. In the event the Company is not able to
come into compliance within 30 days of receiving written notice from Fila Sport,
the License Agreement could be terminated. Such termination would have a
materially adverse effect on the Company's operations. The Company is not
currently on notice of non-compliance and believes it could comply within the
notice period.
There can be no assurance that the Company will be able to obtain a
sufficient level of sales to meet the licensing fee requirements or to achieve
profit margins necessary to enable the Company to operate profitably. The loss
of the license would have a material adverse effect on the Company's operations.
EXCLUSIVE GOLF BALL AGREEMENT
An exclusive agreement with Cayman to purchase golf balls requires the
Company to initially purchase $210,000 in inventory and rights and place orders
for a minimum of 5,000 balls per month thereafter. Although the Company believes
it will be able to maintain the minimum order through the current year, the
Company can provide no assurance that such levels will be able to be maintained.
The loss of the exclusive arrangement with Cayman could have a material adverse
effect on the Company's ability to enter the golf ball market and its ongoing
operations.
COMPETITION
The golf products business is intensely competitive and the Company
competes with numerous companies providing similar products. The Company
believes that there are over 50 companies manufacturing and marketing golf
equipment which each have annual golf equipment sales in excess of $1,000,000.
The Company also believes that the 10 largest golf equipment manufacturers
account for a substantial majority of wholesale golf equipment sales. Most of
the Company's competitors have substantially greater capital resources, depth of
management, and brand name identification in the golf business than the Company.
In addition, there are several golf equipment manufacturers not currently
producing premium quality products which could affect sales if they did so.
12
<PAGE>
A company's ability to compete is in part dependent upon its ability to
satisfy various subjective requirements of golfers, including the look and
"feel" of the equipment and its level of acceptance among professional and other
golfers. Equipment designs and concepts developed by one manufacturer which
gain popularity have been widely imitated by other manufacturers. The
subjective preferences of consumers may also be subject to rapid and
unanticipated changes. There can be no assurances as to the Company's ability
to achieve or maintain market acceptance sufficient to enable the Company to
operate profitably. A decline in the size of the golf equipment market, whether
from a decrease in the popularity of particular equipment or otherwise, could
have a material adverse effect on the Company's business.
MANUFACTURE AND ASSEMBLY
The components of the Company's golf clubs, primarily club heads, shafts,
and grips, are manufactured by suppliers in the United States and the Far East.
Suppliers are carefully selected and continuously evaluated by the Company on
the basis of the quality of raw materials utilized, quality of the workmanship,
and attention to quality control. The Company works closely with its suppliers
in the development of golf clubs and tooling to maintain the high standards of
quality consistent with management's commitment for the Company's product line
and with the image associated with the Fila trademark. Although the Company's
operating history is short, management of the Company has had long-term
relationships with its independent vendors. The Company believes that its
relationships with suppliers are excellent; however, there are numerous
suppliers of high-quality components and management believes that the loss of a
supplier may result in production delays, but would not have a material adverse
impact on the Company's long-term business.
The Company assembles its golf clubs at its facility in Huntington Beach,
California. During the assembly process, the equipment is spot checked and
tested extensively to assure a quality product. Completed inventory is also
stored at the Company's facility prior to shipment. Bags, gloves, and other
golf accessories sold by the Company are manufactured by independent vendors,
primarily in the Far East. Products are either shipped to the Company's
facilities or drop shipped directly to distributors in the case of international
sales. The Company anticipates that some of its club lines will continue to be
manufactured and assembled in the Far East in an effort to reduce certain
expenses while maintaining a high-quality product. In addition, the Company
anticipates the development of a subcontracting relationship to assemble clubs
in Southern California.
The Company intends to continue to use Cayman for golf balls for the
foreseeable future in an effort to maintain low production costs. Management
believes the relationship with Cayman is good, but the loss of the existing
manufacturer could result in substantial delays in receiving golf balls, but
would not have a material adverse impact on the Company's overall business.
WARRANTY
The Company currently supports all of its golf clubs with a five year
warranty to the original consumer against any defects in workmanship or
material, provided that the product has not been subject to abuse or alteration.
Golf bags are covered by a limited warranty covering manufacturing defects only.
The Company has experienced minimal problems with respect to its products and
the warranty granted.
YEAR 2000 MATTERS
The inability of computers, software, and other equipment utilizing
microprocessors to recognize and properly process date fields containing a two
digit year reference such as "00" for the year 2000 is commonly referred to as
the Year 2000 issue. Any of the Company's computer programs that utilize two
digit years may recognize "00" as the year 1900 rather than the year 2000. Such
recognition problems could cause disruptions of operations, including the
inability to process transactions, send invoices, or engage in similar essential
business activities.
The Company has identified all significant applications that will require
modification to address the Year 2000 issue. Internal and external resources
are being used to make the required modifications and test Company systems for
the year 2000. The modifications process of all significant
13
<PAGE>
applications is substantially complete, and the Company intends to complete
modifications and conduct testing by the end of 1998.
The Company is also communicating with third party vendors to determine
their compliance with the Year 2000 issue. The Company can provide no assurance
that the systems of third parties will be in compliance by the turn of the
century. The inability of the Company to complete modifications and the failure
of third party vendors to complete compliance with the Year 2000 issue, or both,
could have a material adverse effect on the Company's ability to perform
essential business tasks which could have a material adverse effect on the
Company's business.
EMPLOYEES
As of December 31, 1997, the Company employed 20 employees, including five
salaried employees on a full-time basis who are considered executive personnel,
13 salaried full-time employees in administrative, supervisory, and clerical
positions, two part-time employee. None of the Company's employees are covered
by a collective bargaining agreement, the Company has never experienced a work
stoppage, and the Company considers its labor relations to be excellent.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently occupies approximately 15,000 square feet of office,
manufacturing, and warehouse space located at 12187 South Business Park Drive,
Suite 100, Draper, Utah 84020. The lease provides for rent of $94,636.00 per
year and expires in January 2000. The Company leases an additional 12,000
square feet of space at 5812 Machine Drive, Huntington Beach, California, for
$6,355.00 per month. The lease is month to month.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, and the Company is not
aware of any threatened legal proceedings to which the Company may be a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
REVERSE STOCK SPLIT
During the fourth quarter of 1997, the Company held its Annual Meeting of
Stockholders on Friday, October 24, 1997 at the Willow Creek Country Club,
located at 8300 South, 2700 East, Sandy, Utah at 11:00 a.m. local time.
Stockholders were asked to vote on five Items as follows: 1) election of
Directors, 2) 4 for 1 Reverse Split, 3) an increase in the authorized number of
shares, 4) appointment of auditors, and 5) adjournment, if necessary. The
results of the various items voted upon are summarized as follows:
Proposal 1: Election
<TABLE>
<CAPTION>
Total For Abstain
--------- -------
<S> <C> <C>
JOHN B HEWLETT 7,805,438 29,836
KENNETH W. CRAIG 7,805,438 29,836
MILES T. DOODY 7,075,688 759,586
DENNIS L. CROCKETT 7,805,438 29,836
WADE M. MITCHELL 7,764,188 71,986
</TABLE>
Each of the sitting Directors of the Company were re-elected at the
Stockholders Meeting.
Proposal 2: 4 for 1 Reverse Split
<TABLE>
<CAPTION>
Total For Against Abstain
<S> <C> <C>
7,645,593 108,161 81,520
</TABLE>
14
<PAGE>
The Board of Directors of the Company adopted the resolution recommending
the Reverse Split of one Share for every four Shares of outstanding common stock
without amending the Company's Certificate of Incorporation to reduce the number
of authorized Shares or to modify the par value of the Shares. A reverse stock
split is the opposite of a conventional stock split. Instead of a corporation
splitting its outstanding shares to provide for more shares outstanding, the
corporation consolidates its outstanding stock into a lesser number of shares.
Upon the stockholder approval, the Reverse Split took effect on November 12,
1997. A total of 5,461,163 shares outstanding as of October 31, 1997 were
combined into 1,365,291 shares.
The Board considered the proposed Reverse Split to be in the best interest
of all stockholders based upon its belief that if the Company will benefit by
having its stock traded on the Nasdaq Small Cap Market within the next several
years, and upon the Board's belief the valuation of the Company will increase
and permit the Company to attract additional new capital into the Company at a
higher stock price. Effective November 3, 1995, the Company's stock was delisted
from the Nasdaq Small Cap Market, on which it had been traded since November 12,
1993, for failure to meet the minimum bid price and capital and surplus
requirements. Although the Board of Directors has determined that it would be
advantageous to the Company and its Stockholders to again have the Shares listed
on the Nasdaq Small Cap Market, the Shares cannot be so listed unless the
Company re-qualifies for listing. Re-qualification will require the Company to
meet all of the current listing standards which include, in substantial part
that the Company have, (i) shares with a bid price of over $4.00 per share, (ii)
300 stockholders, (iii) three market makers, (iv) $4,000,000 in net tangible
assets, or a $50,000,000 market capitalization, or $750,000 in net income, (v) a
public float of at least 1,000,000 shares having a market value of at least
$5,000,000, and (vi) at least a one year operating history or a $50,000,000
market capitalization.
The Company's Shares are currently traded in the over-the-counter market on
the OTC Electronic Bulletin Board. Accordingly, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Shares than if the Shares were listed on a national securities exchange
or the Nasdaq Small Cap Market.
Proposal 3: Increase Authorized Shares
<TABLE>
<CAPTION>
Total For Against Abstain
<S> <C> <C>
7,755,518 73,856 5,900
</TABLE>
During 1997, the Board of Directors recommended approving an increase in
the authorized number of Shares of the Company. The Company's Certificate of
Incorporation authorized 20,150,000 Shares. As of July 31, 1997, there were
10,961,250 issued and outstanding Shares. Of the unissued Shares, a total of
approximately 9,000,000 were reserved for issuance upon completion of the
Financing, the conversion of the Debentures, and the exercise of options for the
purchase of Shares pursuant to the Company's various stock option plans and
other stock option agreements. Consequently, the Company had few additional
Shares available for issuance as currently authorized under the Certificate of
Incorporation, as amended. The Company proposed to increase its authorized
Shares to 40,150,000, which would then be available for issuance from time to
time, for such purposes and such consideration, and on such terms, as the Board
of Directors may approve.
The Board of Directors believed that it was in the best interest of the
Company to increase the number of authorized Shares to 40,150,000 during 1997 in
light of the limited availability of Shares. The stockholders approved an
amendment of paragraph 4 of the Company's Certificate of Incorporation, as
previously amended, to read in full as follows:
4. The total number of shares of stock which the Corporation
shall have authority to issue is 40,150,000 of which stock
40,000,000 shares of the par value of $.001 each, amounting in
the aggregate to $40,000.00 shall be common stock and of which
150,000 shares of the par value of $.01 each, amounting in the
aggregate to $1,500 shall be Preferred Stock.
15
<PAGE>
Proposal 4: Corbin & Wertz as Company Auditor
<TABLE>
<CAPTION>
Total For Against Abstain
<S> <C> <C>
7,816,521 15,553 3,200
</TABLE>
Corbin & Wertz were again approved as the auditors for the Company for
1997.
Proposal 5: Adjournment
A vote was not necessary on adjournment.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From November 12, 1993 to November 2, 1995, the Company's Common Stock was
quoted on the Nasdaq Small Cap Market under the symbol "FGLF." Effective
February 24, 1995, the Company's securities were delisted from the Nasdaq Small
Cap Market based on a failure to comply with a minimum bid price of $1.00, and
failure to maintain capital and surplus of $2,000,000. The Company's request
for the grant of an exception to the minimum bid price requirement was denied by
the NASD Listing Qualifications Committee.
The following table sets forth, for the period from January 1996 to March
1998, the high and low bid quotations for the Common Stock during the three most
recent fiscal years as reported by the OTC Bulletin Board from November 4, 1995,
to the date of this Annual Report, and the NASDAQ Small Cap Market prior to
November 4, 1995. The prices represent quotations between dealers, without
adjustment for retail markup, mark down or commission, and do not necessarily
represent actual transactions. The table also sets forth the Common Stock price
for the same period with an adjustment to reflect what the price may have
effectively been after giving effect to the 1997 4:1 Reverse Split.
COMMON STOCK PRICE ACTUAL AND ADJUSTED
<TABLE>
<CAPTION>
Before Split After Split(1)
------------ --------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1998
----
1st Quarter - - 4.687 2.937
1997
----
1st Quarter .6562 .2813 2.625 1.248
2nd Quarter .5313 .2813 2.125 1.124
3rd Quarter .656 .25 2.624 1.00
4th Quarter - - 4.375 1.50
1996
----
1st Quarter .25 .1875 1.00 .75
2nd Quarter .5385 .1250 2.154 .50
3rd Quarter .5625 .1250 2.25 .50
4th Quarter .3750 .2187 1.50 8.75
</TABLE>
______________________
(1) Prices represent the pre-Reverse Split price quote multiplied by four for
periods before the third quarter of 1997 during which quarter the price as
quoted on the Bulletin Board began reflecting the Reverse Split. The figures
do not take any other factors into account in determining the stock price.
The Company has not paid any cash dividends on its Common Stock since its
incorporation and anticipates that, for the foreseeable future, earnings, if
any, will continue to be retained for use in its business. As of December 31,
1997, the approximate number of record holders of the Company's Common Stock
was 255.
16
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW AND COMPANY BACKGROUND
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this report.
The Company designs, develops, assembles, and distributes high-quality golf
products and golf accessories in North and South America, Europe, the Middle
East, and Africa utilizing the Fila trademark and logo under license from Fila
Sport S.p.A. of Biella, Italy, a subsidiary of Fila Holding, S.p.A. The Fila
brand name is recognized worldwide and is associated with high-quality, high-
performance products with a high-fashion design concept. Fila Sport has
cultivated this image for its athletic footwear, active sportswear, and leisure
and casual wear, and the Company capitalizes on the worldwide identification
with other products bearing the Fila trademark. The Company believes that the
technical and design specifications of its products support the high-quality,
high-performance, high-fashion concept fostered by Fila Sport.
The Company's products include golf clubs, bags, balls, gloves, head wear,
headcovers, travel covers, umbrellas, and towels. The Company offers full lines
of both men's and women's woods and irons. The Company also sells putters,
wedges, utility woods, and oversized woods. Golf club components are
manufactured by independent suppliers, primarily in the United States and the
Far East, and are assembled and distributed by the Company. Other golf products
are manufactured by suppliers and distributed by the Company. The Company's
products, distinguished by their appearance and quality of workmanship, command
premium prices but are competitive in price with other premium-quality golf
products. The Company has the exclusive right to market golf products bearing
the Fila trademark in the Licensed Territory with the exception of head wear and
towels, which are marketed on a non-exclusive basis in the Licensed Territory.
The Company has also recently acquired the assets of BMC and WGF. With the
acquisition of BMC and WGF, the Company intends to launch into the golf ball and
golf tour markets. Through the business acquired from WGF, the Company will
market and conduct golf tour events throughout the country. WGF has developed a
handicapping system for golf which assists in leveling the playing field for
golfers of all handicaps. WGF, now known as the "Fila World Golf Tour," is
dedicated to fostering honesty and integrity within the game of golf. Marketing
of golf tour events occurs principally through word-of-mouth. Participants
invite friends and golfing acquaintances to participate in tour events.
Individuals pay monthly dues which entitle them to play in tour events. As tour
participants bring in other players, such participants become entitled to
receive a distributor's commission for new tour registrants. Each tour event
utilizes the Company's proprietary handicapping system to determine event
winners who receive cash, prizes, or both.
In conjunction with the Fila World Golf Tour, the Company through the
acquisition of BMC's assets is positioned to market golf balls at its tour
events. The line of "World Tour" golf balls are USGA approved and available
exclusively through the Company. Network marketing provides the means of
primary distribution for the World Tour balls. Interested individuals are
encouraged to become independent distributors of the golf balls. The Company
provides a number of programs whereby participants can subscribe to receive golf
balls each month on a auto-ship basis. The Company believes the businesses of
BMC and WGF can be effectively combined to create a novel marketing vehicle in
the golfing industry to increase golf tournament participation and to distribute
golf balls and other golfing products.
RESULTS OF OPERATIONS
The Company's successful efforts to raise funding for working capital needs
and move into the mass merchandise retail market during 1997 resulted in
substantial sales increases over 1996. The Company anticipates that that the
trend of increasing sales will continue during 1998. The Company believes the
mass retail market will continue to provide the best opportunity for the Company
to enjoy sales growth; accordingly, continued and increased efforts are being
made to expand into this market
17
<PAGE>
place. Management also believes the Company will benefit from continued efforts
to focus on and find new marketing avenues for existing products and new
products to distribute through existing and expanded distribution lines.
The Company's expansion has required additional access to working capital.
To help fund growth, the Company has entered into a series Loan and Credit
Agreements with the AKA Charitable Remainder Unitrust #1. The first line of
credit was for a maximum amount of up to $1,000,000, and the second line of
credit, currently being utilized by the Company, provides for the Company to
draw the maximum aggregate principal amount of the lesser of $5,000,000, or 80%
of the Company's current assets. As of December 31, 1997, the Company had
borrowed $3,764,000 on this credit line. The Company was not in compliance with
one condition of the Loan and Credit Agreement on December 31, 1997 by having
drawn on the credit line beyond 80% of the Company's current assets. In the
event the Company is not able to comply with this condition within 10 days of
receiving written notice from the Lender, the maturity date on the borrowings
could be accelerated. Such acceleration could have a materially adverse effect
on the Company's operations. The Company has not received written notice and
believes it could comply upon receipt of such notice.
As a result of the Company's current and ongoing capital requirements, the
Company's auditors, Cobin & Wertz, has issued a going concern opinion in
conjunction with its annual audit. The Company's Management believes current
sales growth and capital raising activities will provide adequate working
capital to fund operations through the current year and into next year.
Comparison of Year Ended December 31, 1997 to the Year ended December 31,
1996. Net sales for the year ended December 31, 1997 were $5,375,000 compared
to $2,403,000 for the comparable period in 1996, an increase of $2,972,000 or
124%. This increase is attributable to the Company's re-focused business
strategy and improved working capital. The Company has re-focused its business
strategy and marketing efforts to place greater emphasis on market niches which
have been the most consistently productive since the Company's inception and
which are the most closely aligned with Fila Sport's interests and marketing
emphasis; high-fashion design and value.
Cost of sales increased from $2,488,000 for the year ended December 31,
1996 to $4,822,000 for the comparable period in 1997, an increase of $2,334,000
or 94%. The gross profit margin increased from (4)% during 1996 to 10% for
the comparable period in 1997. The increase in cost of sales and increase in
gross profit margin is due primarily to the increased sales volume during the
year.
Selling, general, and administrative costs were $2,392,000, during 1997
compared to $2,425,000 for the comparable period in 1996, a decrease of $33,000
or 1%. The Company receives lower margins on mass retail sales than on specialty
shop sales due to the reciprocal increase in volume traditionally enjoyed on
mass retail accounts. This decrease in selling, general, and administrative
costs, while increasing sales by 124%, is due mainly to the continuing efforts
of the company to reduce operating expenses throughout the restructuring
process.
The Company experienced a net loss of $1,845,000 during 1997 compared to a
net loss of $2,541,000 for the comparable period in 1996, a decrease in losses
of $696,000. The increase in sales volume, particularly to mass retailers during
1997, accounts for the decrease in losses.
The Company's inventory increased substantially from $340,000 at December
31, 1996 to $758,000 at December 31, 1997 as a result of the Company having
sufficient working capital from newly invested capital and borrowed funds to
fund operations and meet inventory purchase requirements.
Virtually all of the line item financial changes which occurred during 1997
resulted from the Company's expansion into the mass merchandise market which
resulted in increased sales and related cost of sales. The Company intends to
continue to focus on new markets and product lines to increase sales and
revenues during 1998.
Comparison of the Year Ended December 31, 1996 to the Year ended December
31, 1995. Net sales for the year ended December 31, 1996 decreased 52% to
$2,403,000 compared to $5,007,000 for the year ended December 31, 1995. The
decrease was due primarily to a shortage of working capital to fund inventory
purchase requirements.
Management believes golf bags represent a product segment which supports
the major market lines of Fila Sport. Management plans to focus on the
continued strength of the bag and accessory line while continuing to pursue the
club market and product innovation. The Company's business is seasonal in
nature. Therefore, operating results for one or more quarters may not be
indicative of future trends or operating results for the full fiscal year.
18
<PAGE>
Cost of sales decreased from $4,061,000 for the year ended December 31,
1995 to $2,488,000 for the comparable period in 1996, a decrease of $1,573,000
or 39%. The gross profit margin decreased from 19% for the year ended December
31, 1995 to 4% for the comparable period in 1996. This decrease was due
primarily to lower margins and discounts given on certain product lines. In
addition, lower margins can be attributed to an increased in the reserve for
obsolete inventory to $730,000 as of December 31, 1996 as compared to $409,000
for the comparable period in 1995.
Variations in the selling, general, and administrative costs during 1996
resulted from depleted working capital. The Company cut its operating expenses
in an effort to maintain operations until capital could be obtained to fund
continuing operations. Additionally, the Company's lower sales volume resulted
in lower expenses, such as commissions, which are directly related to sales
levels.
Selling, general, and administrative costs were $2,425,000 for the year
ended December 31, 1996 compared to $3,332,000 for the comparable period in
1995, a decrease of $907,000 or 27%. The decrease resulted primarily from lower
sales and marketing expenses ($656,000 for the year ended December 31, 1996 as
compared to $1,734,000 for the same period in 1995), mainly consisting of
advertising, athletic endorsements, demo program, outbound freight expenses,
sales promotion, tour promotion, and sales commissions; a decrease in finance
and administrative expenses ($263,000 for the year ended December 31, 1996 as
compared to $406,000 for the same period in 1995), mainly consisting of
insurance, office expense, and telephone expenses; a decrease in salaries and
staff costs ($520,000 for the year ended December 31, 1996 as compared to
$678,000 for the same period in 1995.) These decreases were offset by an
increase in professional costs ($627,000 for the year ended December 31, 1996 as
compared to $157,000 for the same period in 1995), mainly consisting of
consulting expense. In addition, the Company expensed $178,000 related to a
write-down of impaired assets.
Other income and expense items decreased to a net expense of $43,000 for
the year ended December 31, 1996 as compared to a net expense of $133,000 for
the same period in 1995. This net decrease resulted primarily from a decrease
of $96,000 in interest expense ($44,000 for the year ended December 31, 1996 as
compared to $140,000 for the same period in 1995), as a result of decreased
debt in 1996.
The Company experienced a net loss of $2,541,000 for the year ended
December 31, 1996 compared to $2,520,000 for the comparable period in 1995, an
increase of $21,000 or 1%.
PLAN OF OPERATION - LIQUIDITY AND CAPITAL RESOURCES
Since the time of the Financing, the Company has entered into a series of
credit lines with the AKA Charitable Remainder Unitrust #1. The first line of
credit was for a maximum amount of up to $1,000,000 and the second line of
credit, still being utilized by the Company, is for a maximum amount of up to
$5,000,000. The lines of credit have provided the Company with an indispensable
cash resource to utilize as the Company has come back from insolvency. Each
line of credit bearing interest at 12%, has been made possible through the
personal guaranty of the credit line by John B. Hewlett, the Company's Chairman
of the Board and Chief Executive Officer. John B. Hewlett's financial support
and vision for the Company combined with marketing appeal of the Fila brand name
have salvaged the Company.
In addition to the credit lines secured by the Company last year, a private
placement of the Company's shares of Common Stock was recently undertaken on
March 2, 1998 to raise up to $2,400,000. The Company intends to close the
offering at the end of April 1998. To date a total of approximately 430,000
units have been subscribed for a total of $1,300,000 raised. Through the private
placement the Company offered for sale up to a maximum of 550,000 Units, each
Unit consisting of one share of its Common Stock, par value $.001 per share, and
a warrant to purchase one share of Common Stock. The purchase price was $3.00
per Unit. The Company offered a minimum of 5,000 Units per investor. The
Warrants are immediately exercisable and transferable separately from the shares
of Common Stock. Each Warrant entitles its holder to purchase one share of
Common Stock at an exercise price of $5.00 per share, subject to adjustment in
certain events. The Warrants may be exercised at any time and from time to time
until December 31, 2002. The Company has the right to redeem the Warrants at
$0.01 per Warrant upon not less than 30 days' notice if the Closing Price of the
Common Stock for a period of 20 consecutive Trading Days, ending not earlier
than
19
<PAGE>
10 days prior to the date of such redemption notice, equals or exceeds $7.00 per
share, subject to adjustment in certain events.
During April 1998, the Company extended an offer to the holders of the
Company's Class A Warrants (the "Warrants") to modify the terms of such
warrants. The Company issued 1,400,000 Warrants in connection with its initial
public offering in November 1993. The initial exercise price of $6.50 per share
and the number of Warrants were subject to adjustment on certain events,
including stock splits and the issuance of securities by the Company at prices
less than the exercise price. Based on required adjustments, the exercise price
at December 31, 1997 and the date of this report were $10.62 and $9.68,
respectively. The adjusted number of Warrants outstanding at December 31, 1997
and the date of the report were 852,060 and 941,843, respectively.
The Warrants are also redeemable by the Company for $.01 per Warrant if the
Company's Common Stock trades at a price in excess of $9.00 for 10-consecutive
trading days, subject to the holders' rights to exercise their Warrants during
the 10-day period following the redemption notice.
The Company's offer to modify the terms of the Warrants included an agreement
to reduce the exercise price of the Warrants from $9.61 to $5.50 per share and
waive the adjustments of the number of Warrants on the condition that the
Warrant holders agree to reduce the redemption price from $9.00 to $7.00 and
waive further price adjustments. The November 15, 1988 expiration date has not
been changed.
The Company's cash from operations is generated by sales of golf products
to distributors at wholesale prices. Sales to domestic accounts are typically
due 30 to 90 days after shipment while sales to international distributors are
paid by letter of credit facilities or by wire transfer upon shipment.
Net cash used in operating activities for 1997, 1996, and 1995 was
$4,738,000, $1,000,000 and $323,000, respectively. Working capital at the end of
1997, 1996, and 1995 was $(810,000), $(502,000) and ($12,000), respectively.
Cash and cash equivalents at December 31, 1997 were $776,000 compared to
$276,000 at December 31, 1996. Inventories, net of reserves at December 31, 1997
were $758,000 compared to $349,000 at December 31, 1996, an increase of
$409,000. Also, accounts receivable increased $844,000 from $143,000 at December
31, 1996 to $987,000 at December 31, 1997. Notes payable for $425,000 were
outstanding at December 31, 1997. Accounts payable and accrued liabilities
decreased by $200,000 from December 31, 1996 to December 31, 1997. Accrued
royalties decreased by $66,000 from December 31, 1996 to December 31, 1997.
The Company strives to maintain a sufficient inventory of golf club
components, bags, and accessories to fulfill orders. Generally, the Company
does not maintain a substantial finished product inventory. Management believes
that all of the golf club components and other products manufactured for the
Company by suppliers are readily available from a variety of sources.
In November 1993, the Company issued 1,400,000 units consisting of one
share of Common Stock and one Common Stock Purchase Warrant at $5.50 per unit,
realizing net proceeds of $6,318,000 from the Offering. Approximately $977,000
of the proceeds of the Offering were utilized to repay the outstanding short-
term borrowing and accrued interest thereon.
In January 1995, the Company undertook a private offering to sell between
one and 15,000 units consisting of one share of preferred stock and five Common
Stock purchase warrants. The Company raised $25,000 before the offering was
terminated.
In March 1995 the Company obtained a $1,000,000 borrowing facility with a
national asset-based lender to assist in funding its domestic and international
operations. The availability of this line was contingent upon the Company's
amount of eligible accounts receivable. This asset-based lending agreement was
terminated as of June 4, 1996.
In October 1996, the Company, through the Financing, offered up to a
maximum of 100 Units at an issue price of $25,000 per Unit, each Unit consisting
of (i) a Debenture; and (ii) 15,625 Unit Shares at a price of $0.80 per share
for a total of $12,500 for the Unit Shares. The Debentures were converted into
20
<PAGE>
Common Stock on December 15, 1997 at the rate of $0.50 per share after the
closing price of the Company's Common Stock exceeded $1.50 per share for 20
consecutive trading days.
The Financing resulted in the infusion of approximately $2,500,000 into the
Company. The Financing permitted the Company to pay off accrued royalties to
Fila Sport and certain other outstanding liabilities, while also adding to
working capital. Additionally, the infusion of capital resulted in the Company
being able to obtain a revolving loan from a private trust of up to $1,000,000
based upon open customer sales orders. The proceeds provided by the Financing
and the loan permitted the Company to experience a positive cash flow sufficient
to purchase inventory and increase sales.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on October 29, 1997 to
provide the Company the maximum aggregate principal amount of the lesser of
$5,000,000, or 80% of the Company's current assets. The amount outstanding on
the loan and revolving promissory note is adjusted upward or downward on a
monthly basis, throughout the term of the note, based on total current assets,
which for purposes of the agreement mean cash, accounts receivable aged less
than 90 days, and inventory. The revolving promissory note executed pursuant to
this agreement bears an interest rate of 12% and expires December 31, 1999. As
further consideration for this loan and security agreement, warrants to purchase
400,000 shares of the Company's Common Stock were issued which are exercisable
200,000 at $1.50; 100,000 at $2.00; and 100,000 at $3.00 and which expire
December 31, 2002. Amounts outstanding under the agreement are collateralized
by the Company's inventory, open orders, accounts, and other assets of the
Company. As of December 31, 1997, the Company had borrowed on this
revolving promissory note.
During 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," which defines a fair value based method of
accounting for stock-based compensation. However, SFAS 123 allows an entity to
continue to measure compensation cost related to stock and stock options issued
to employees using the intrinsic method of accounting prescribed by Accounting
Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting method of APB 25
must make pro forma disclosures of net income and earnings per share, as if the
fair value method of accounting defined in SFAS 123 had been applied. The
Company has elected to account for its stock-based compensation to employees
under APB 25.
In February 1997, FASB issued SFAS No. 128, "Earning Per Share" ("EPS").
SFAS No. 128 requires dual presentation of basic EPS and diluted EPS on the face
of all income statements issued after December 15, 1997 for all entities with
complex capital structures. Basic EPS is computed as net income divided by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through stock options, warrants, and other convertible securities. There was no
effect on EPS upon the adoption of the provisions of SFAS No. 128 for all years
presented. Loss per common share has been computed on the weighted average
number of common and equivalent shares outstanding. Basic and diluted net loss
per share are approximately the same.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
and SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 130 requires that an enterprise report, by major
components and as a single total, the change in its net assets during the period
from nonowner sources; and SFAS No. 131 establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas, and major customers. Adoption of
these statements will not impact the Company's financial position, results of
operations, or cash flows and any effect will be limited to the form and content
of its disclosures. Both statements are effective for fiscal years beginning
after December 15, 1997, with earlier application permitted.
ITEM 7. FINANCIAL STATEMENTS
The financial statements listed in the accompanying Index to Financial
Statements are attached hereto and filed as a part of this Report under Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
During the Company's two most recent fiscal years there has been no
change in accountant and there were no disagreements with the Accountant on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
21
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than 10% 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"),
NASDAQ, and the Boston Stock Exchange. Officers, directors, and greater than 10%
beneficial owners are required by SEC regulation to furnish the Company with
copies of all Section 16 (a) forms they file. The Company believes that all
filing requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with.
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The names, ages and positions of the Company's Directors and executive
officers as of January 1, 1998 are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY FIRST ELECTED
<S> <C> <C> <C>
John B. Hewlett 45 Chairman of the Board, CEO, Director 1996
Miles T. Doody 70 Vice Chairman 1993
Kenneth W. Craig 43 Vice President of Product Design 1996
Ralph W. Rasmussen 52 Director 1998
Mont E. Warren 36 Vice President, Chief Financial Officer 1993
Dennis L. Crockett 46 Director 1996
Wade M. Mitchell 33 Vice President of Finance, Director 1996
Kurt A. Moore 40 Executive Vice President 1997
Bruce H. Haglund 46 Secretary 1994
Edward B. Paulsen 34 Assistant Secretary 1997
</TABLE>
John B. Hewlett has served as Chairman of the Board of the Company since
October 1996 and as Chief Executive Officer since September 1997. Mr. Hewlett
is President of Hewlett Financial Corporation. He has 22 years of experience in
the insurance field, specializing in sales and long and short-term planning.
From 1985 to the present, Mr. Hewlett has been a nationally recognized
consultant and seminar leader on closely held business succession and financial
planning. He is a member of the Million Dollar Round Table, Court of the Table,
and one of three Top of the Table members in the Intermountain West with career
insurance sales approaching $640,000,000. Mr. Hewlett is a member of the
National Basketball Association Utah Jazz 100 Club and Advisory Board.
Miles T. Doody served as Chief Executive Officer of the Company from
January 1993 through December 1996, served as President from 1990 to 1996, and
currently serves as Vice Chairman and a Director. From 1986 to 1990, Mr. Doody
operated a golf industry consulting service, advising such companies as Callaway
Golf and Bullet/Cougar Golf Company. From 1971 through 1986, Mr. Doody was
employed with Lynx Precision Golf Company, where he was involved in specific
club designs, various manufacturing procedures, and set-up, and where he served
eventually as General Manager and Executive Vice President. Mr. Doody negotiated
the acquisition by Lynx of Lilly Dache, a leading leisure sportswear company,
whereupon he became the General Manager of Lilly Dache, working with overseas
and domestic soft goods suppliers. From 1967 to 1971, Mr. Doody was employed by
P.G.A. Golf Co., serving as National Accounts Executive and National Sales
Manager.
Kenneth W. Craig has served as either President or Vice President of
Product Design since October 1996 and served as a Director from October 1996 to
January 1998. Mr. Craig has been a private investor since June 1993. He began
his career as an attorney in Houston, Texas and practiced law from 1980 to 1989,
specializing in contracts, tax, mergers, and acquisitions. In the early 1980's,
he participated in the growth of Telecommunications Specialist Inc. ("TSI"), a
telephone system rental company which became the largest distributor for TIE
Communications ("TIE"). In 1987, he founded TIE National Rental Company, Inc.
("TNR") to prove a pilot program for TIE's national telephone rental
22
<PAGE>
system. In 1991, he sold his interest in TNR to TIE to pursue the acquisition of
Centel Business Systems ("Centel") by the Williams Companies. Upon the
acquisition, Centel became Wiltel Communications Systems, Inc. and Mr. Craig
serves as President of the Finance/Marketing Divisions until May 1993. Mr. Craig
has also been actively involved in golfing in various capacities including coach
of the University of Mississippi golf team and as a buyer, director, and
president of numerous golf and country clubs. He is a graduate of Stetson
University and the University of Mississippi School of Law.
Ralph W. Rasmussen Jr. has served as a Director of the Company since
January 1998. Mr. Rasmussen graduated from Brigham Young University with a
Bachelor of Science degree in 1969 and a law degree in 1989. From 1969 to 1986,
he provided accounting and business management services for several large
farming operations in southern Idaho. From 1989 to 1996, Mr. Rasmussen practiced
law with the firm of Bradford and Brady in Provo, Utah. In September 1996, Mr.
Rasmussen sold his law practice and began working full time for one of his
clients, the Alan Ashton family and their businesses.
Mont E. Warren has served as Chief Financial Officer of the Company since
January 1993 and as the Company's Controller since February 1991. In December
1987, Mr. Warren began his PGA apprenticeship at Desert Highlands Golf Club in
Scottsdale, Arizona where he served as assistant Golf Professional through
October 1990. From 1986 to 1987, Mr. Warren was employed by American Capital
Financial Services where he eventually served as a District Manager. Mr. Warren
is also the President and a member of the Board of Directors of Villavante
Maintenance Corporation. Mr. Warren obtained a B. S. degree in Accounting from
Brigham Young University in 1986.
Dennis L. Crockett has been a Director of the Company since October 1996.
He is co-founder and Chief Operations Officer of Broadcast International, Inc.,
a communications firm specializing in the delivery of business information via
satellite, FM wireless and cable television technologies, which recently merged
with Data Broadcasting Corporation. Further, Mr. Crockett co-founded the Instore
Satellite Network, one of the nation's largest private satellite communications
networks providing private audio, video, voice, and data broadcasts to retail
clients including Safeway Stores, Osco/Savon Drug, Lucky Stores, and RE/MAX
Reality. Mr. Crockett is a nationally published composer, arranger, vocalist,
and keyboardist as well as a respected musical producer of both record, radio,
and television entertainment. Mr. Crockett attended Brigham Young University in
Provo, Utah.
Wade M. Mitchell has been a Director since October 1996 and Vice President
of Finance since October 1997. He has been employed as a business consultant
through Mitchell & Associates, a professional corporation specializing in
mergers, acquisitions, and corporate turn-arounds since 1989. Mitchell &
Associates is owned and controlled by Mr. Mitchell. From 1993 to 1995, he was a
special consultant and member of the Board of Directors of Environmental
Safeguards, Inc., of Springville, Utah, and a member of the Board of Directors
of National Fuel & Energy, Inc., a wholly-owned subsidiary of Environmental
Safeguards, Inc. From 1991 to 1993, he was the Chief Operating Officer for Enpak
Surgical Products, Inc., Salt Lake City, Utah. During 1989, he was a marketing
consultant for Novations Group, Inc., Provo, Utah, and from 1985 to 1988, he was
the Director of Marketing for Great Wave Software, Inc., Scotts Valley,
California. Mr. Mitchell also serves as a director of Mitchell's Nursery &
Gifts, Inc., a member of the advisory board of GT Travel, Inc., and, a director
of Paradise Optical, Park City, Utah. Mr. Mitchell graduated from Brigham Young
University in April 1988 with a B.S. degree in science, and received an MBA
degree from Brigham Young University's Marriott School of Management in April
1990.
Kurt A. Moore has served as the Executive Vice President since September
1997. Mr. Moore worked with Carbon Fiber Products ("CFP"), a publicly traded
company, as a sales manager from 1983 to 1993, and as the company's President
from 1993 to 1995. He also served as a director for CFP from 1992 to 1995.
During 1996, Mr. Moore worked as a mortgage loan officer with Zions Bank and
Bank of Utah. Mr. Moore attended Weber State University from 1975 to 1979, where
he was a marketing major.
Bruce H. Haglund has served as Secretary of the Company since January 1994.
Since April 1994, Mr. Haglund has been a partner in the law firm of Gibson,
Haglund & Johnson. From February 1991 to April 1994, Mr. Haglund was a
principal in the law firm of Phillips, Haglund, Haddan & Jeffers. From 1984 to
February 1991, he was a partner in the law firm of Gibson & Haglund. Mr.
Haglund is also the Secretary and a member of the Board of Directors of GB Foods
Corporation, a public company whose
23
<PAGE>
stock is traded on the NASDAQ Small Cap Market. He is a graduate of the
University of Utah College of Law.
Edward B. Paulsen has served as Assistant Secretary of the Company since
October 1997. Since February 1996, Mr. Paulsen has been an associate with the
law firm of Gibson, Haglund & Johnson. From April 1995 to February 1996, Mr.
Paulsen was an associate with the law firm of Taylor, Ennenga, Adams & Lowe in
Salt Lake City, Utah, and from August 1996 to March 1995 he was as associate
with the law firm of Chapman, Fuller & Bollard in Irvine, California. Mr.
Paulsen received a B.S. degree in accounting from Brigham Young University and a
J.D. degree from the University of Utah College of Law.
BOARD OF DIRECTORS
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company.
However, in accordance with corporate governance principles, the Board is not
involved in day-to-day operating details. Members of the Board of Directors are
kept informed of the Company's business through discussions with the Chairman
and other officers, by reviewing analyses and reports sent to them, and by
participating in Board and committee meetings.
In October 1996, Michael B. Orr and J. Arthur Wright resigned as Directors
of the Company to permit new Directors to be appointed in conjunction with the
Financing and a restructuring of the Board. The Board acted to fill these two
vacancies and two other vacancies on the Board by electing John B. Hewlett,
Kenneth W. Craig, Dennis L. Crockett, and Wade M. Mitchell as Directors to serve
until the next Annual Meeting of the Company. All directors were subsequently
re-elected at the October 1997 stockholders meeting.
All Directors attended more than 75% of the Meetings held during their
tenures as Directors.
COMMITTEES OF THE BOARD
In November 1996, the Board of Directors established a number of
committees, including a Finance Committee, an Audit Committee, and a
Compensation Committee, each of which is briefly described below.
The Finance Committee was established to oversee Company expenditures and
approve contracts entered into by the Company. The committee must, by majority
vote, approve all contracts and negotiated debt obligations on behalf of the
Company whereby the obligation of the Company will exceed $2,500. The committee
consists of two outside Directors, John B. Hewlett and Wade M. Mitchell, one
employee Director, Kenneth W. Craig, and Mont Warren, the Company's Chief
Financial Officer as an ex officio member.
The Audit Committee was established to meet with management to consider the
adequacy of the internal controls and the objectivity of financial reporting;
the committee meets with the independent auditors and with appropriate Company
financial personnel about these matters. The committee recommends to the Board
of Directors the appointment of the independent auditors, subject to
ratification by the Stockholders at the Annual Meeting. Both the internal
auditors and the independent auditors periodically meet alone with the committee
and always have unrestricted access to the committee. The committee consists of
two non-employee, Directors Dennis L. Crockett and Wade B. Mitchell, one
employee Director, Kenneth W. Craig, and Mont Warren, the Company's Chief
Financial Officer as an ex officio member.
The Compensation Committee negotiates employment contracts, recommends to
the Board of Directors compensation for officers, Directors, and employees, and
administers management incentive compensation plans, including stock option
plans. The committee consists of two non-employee Directors, John B. Hewlett and
Dennis L. Crockett, one employee Director Miles T. Doody, and Bruce H. Haglund,
Secretary and General Counsel to the Company, as an ex officio member, having no
vote.
24
<PAGE>
COMPENSATION OF DIRECTORS
The Company's policy is not to pay cash compensation to directors who are
employees or consultants of the Company for their services as directors, but
reimburses reasonable out-of-pocket expenses of directors for attendance at
meetings.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary
damages for breach of their fiduciary duties as directors, except liability for
(i) any breach of their duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (iv) any transaction from which the
director derived an improper personal benefit. Such limitation of liability does
not apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers and employees and
other agents to the fullest extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. The Company's Bylaws also permit it to
secure insurance on behalf of any officer, director, employee, or other reagent
for any liability arising out of his or her actions in such capacity, regardless
of whether the Bylaws permit such indemnification.
The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Bylaws. These agreements, among other things, indemnify the Company's directors
and executive officers for certain expenses (including attorneys' fees),
judgments, fines, and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or executive officer of the
Company, any subsidiary of the Company or any other Company or enterprise to
which the person provides services at the request of the Company.
At present, there is no pending litigation or proceeding involving any
director, officer, employee, or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
ITEM 10. EXECUTIVE COMPENSATION
The Company incorporates herein by reference the information concerning
security ownership of certain beneficial owners and management contained in the
1998 Proxy Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company incorporates herein by reference the information concerning
security ownership of certain beneficial owners and management contained in the
1998 Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates herein by reference the information concerning
security ownership of certain beneficial owners and management contained in the
1998 Proxy Statement.
25
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report on Form 10-KSB:
1. Financial Statements for the periods ended December 31, 1996 And 1997:
Independent Auditors' Reports
Balance Sheet
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
2. Exhibits
The following exhibits are being filed with this Annual Report on Form
10-KSB and/or are incorporated by reference therein in accordance with the
designated footnote references:
3.1 Certificate of Incorporation, Restated Certificate of Incorporation and
Bylaws of the Company(1)
3.2 1997 Amendment to the Certificate of Incorporation
4.1 Form of Class A Warrant Agreement and Certificate(1)
4.2 Form of Amendment to Class A Warrant Agreement
4.3 Form of Underwriters' Warrants(1)
4.4 Form of Common Stock Certificate(1)
4.5 Form of Warrant for 1998 Warrants
10.1 Purchase and Sale Agreement between the Company and Fidelity Funding of
California, Inc. dated March 13, 1995(2)
10.2 License Agreement between the Company and Fila sport, S.p.A. dated October
1, 1996(3)
10.3 Loan and Security Agreement between the Company, John B. Hewlett and AKA
Charitable Remainder Unit Trust Number 1(3)
10.4 Revolving Promissory Note between the Company, John B. Hewlett and AKA
Charitable Remainder Unit Trust Number 1(3)
10.5 UCC-1 filings for the state of Utah and California related to the Loan and
Security Agreement between the Company, John B. Hewlett, and AKA
Charitable Remainder Unit Trust Number 1(3)
10.6 Loan and Security Agreement dated October 29, 1997 between the Company,
John B. Hewlett, and AKA Charitable Remainder Unit Trust Number 1
10.7 Revolving Promissory Note dated October 29, 1997 between the Company, John
B. Hewlett, and AKA Charitable Remainder Unit Trust Number 1
10.8 UCC-1 filings for the states of Utah and California related to the Loan
and Security Agreement dated October 29, 1997 between the Company, John B.
Hewlett and AKA Charitable Remainder Unit Trust Number 1
26
<PAGE>
10.9 Registration Rights Agreement dated October 29, 1997 between the Company,
John B. Hewlett, and AKA Charitable Remainder Unit Trust Number 1
10.10 Warrant Agreement dated October 29, 1997 between the Company, John B.
Hewlett, and AKA Charitable Remainder Unit Trust Number 1
10.40 Warrant Certificate for the AKA Charitable Remainder Unit Trust Number 1
at $1.50 per share
10.12 Warrant Certificate for the AKA Charitable Remainder Unit Trust Number 1
at $2.00 per share
10.13 Warrant Certificate for the AKA Charitable Remainder Unit Trust Number 1
at $3.00 per share
10.14 Non-qualified Stock Option Agreement and Promissory Note for Bruce H.
Haglund(3)
10.15 Non-qualified Stock Option Agreement for Kenneth W. Craig(3)
10.16 Non-qualified Stock Option Agreement and Promissory Note for Miles T.
Doody(3)
10.17 Non-qualified Stock Option Agreement for James T. Doody(3)
10.18 Non-qualified Stock Option Agreement for Pine Valley Ltd.(3)
10.19 Non-qualified Stock Option Agreement for Mont E. Warren(3)
10.20 Non-qualified Stock Option Agreement for John B. Hewlett(3)
10.21 Non-qualified Stock Option Agreement for John B. Hewlett
10.22 Non-qualified Stock Option Agreement for Wade M. Mitchell(3)
10.23 Non-qualified Stock Option Agreement for Granite Hollow Insurance
Agency(3)
10.24 Non-qualified Stock Option Agreement dated November 27, 1997 for Bruce H.
Haglund(4)
10.25 Non-qualified Stock Option Agreement dated November 27, 1997 for Kenneth
W. Craig(4)
10.26 Non-qualified Stock Option Agreement dated November 27, 1997 for John B.
Hewlett(4)
10.27 Non-qualified Stock Option Agreement dated November 27, 1997 for Wade M.
Mitchell(4)
10.28 Non-qualified Stock Option Agreement dated November 27, 1997 for Kurt A.
Moore(4)
10.29 Non-qualified Stock Option Agreement dated September 15, 1997 for Kurt A.
Moore
10.37 Non-qualified Stock Option Agreement dated September 15, 1997 for Edward
B. Paulsen
10.31 Form S-8 for the registration of 500,000 shares of common stock issuable
upon conversion of 500,000 options granted to officers of the Company
during 1997(4)
10.32 Lease between the Company and Ortho Development Corp. dated January 1,
1998
10.33 Asset Purchase Agreement between the Company and The Ball Marketing
Company, LLC
10.34 Non-Compete and Non-Disclosure Agreement between the Company and The Ball
Marketing Company, LLC and its Principals
27
<PAGE>
10.35 Asset Purchase Agreement between the Company and World Golf Federation,
Inc.
10.36 Non-Compete and Non-Disclosure Agreement between the Company and World
Golf Federation, Inc. and its Principals
10.37 Exclusive Agreement between the Company and Stilson & Stilson
23.1 Independent Auditors' Consent - Corbin & Wertz
_________________
(1) Filed with the Company's Registration Statement on Form SB-2 dated
November 12, 1993 and incorporated by reference.
(2) Filed with the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995.
(3) Filed with the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
(4) Filed with the Company's S-8 on February 11, 1998.
(b) Reports on Form 8-K.
Change of Principal Business Office filed on February 11, 1998.
28
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Draper, State of Utah, on the 15th day of April 1998.
By: /s/John B. Hewlett
----------------------------------------
John B. Hewlett, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
/s/ John B. Hewlett Chairman of the Board April 15, 1998
- - ------------------- Chief Executive Officer
John B. Hewlett (Principal Executive Officer)
/s/ Miles T. Doody Vice Chairman, Director April 15, 1998
- - ------------------
Miles T. Doody
/s/ Wade Mitchell Director April 15, 1998
- - -----------------
Wade Mitchell
/s/ Dennis Crockett Director April 15, 1998
- - -------------------
Dennis Crockett
/s/ Kenneth W. Craig Vice President, Director April 15, 1998
- - --------------------
Kenneth W. Craig
/s/ Ralph Rasmussen Director April 15, 1998
- - -------------------
Ralph Rasmussen
Vice President, Chief
Financial Officer,
/s/ Mont E. Warren (Principal Accounting Officer) April 15, 1998
- - ------------------
Mont E. Warren
29
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
FINANCIAL STATEMENTS
For The Years Ended December 31, 1997 and 1996
with
INDEPENDENT AUDITORS' REPORT THEREON
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Renaissance Golf Products, Inc.
We have audited the accompanying balance sheet of Renaissance Golf Products,
Inc. (the "Company") as of December 31, 1997, and the related statements of
operations, stockholders' equity (deficit) and cash flows for each of the years
in the two-year period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Golf Products, Inc.
as of December 31, 1997, and the results of its operations and its cash flows
for each of the years in the two-year period then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Renaissance Golf Products, Inc. will continue as a going concern. As discussed
in Note 1 to the financial statements, certain conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans concerning these matters are also discussed in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ CORBIN & WERTZ
Irvine, California
February 20, 1998, except as to Note 12,
which is as of April 1, 1998
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
BALANCE SHEET
December 31, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents $ 775,854
Accounts receivable, net of allowance for doubtful
accounts of $397,971 987,321
Inventories, net 757,957
Deposits made on inventory 1,167,026
Prepaid expenses and other current assets 57,510
----------
Total current assets 3,745,668
Property and equipment, net 53,586
Other assets 34,199
----------
$3,833,453
==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C>
Revolving line of credit, net of discount $ 3,637,487
Current portion of notes payable 225,000
Accounts payable 460,226
Accrued liabilities 114,673
Accrued royalties 118,355
------------
Total current liabilities 4,555,741
Notes payable, less current portion 200,000
------------
Total liabilities 4,755,741
------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.01 par value, 150,000 shares authorized;
250 shares issued and outstanding 3
Common stock, $.001 par value, 40,000,000 shares
authorized; 4,613,662 shares issued and outstanding 4,614
Common stock subscribed, 1,496,276 shares 1,496
Additional paid-in capital 14,795,509
Accumulated deficit (15,723,910)
------------
Total stockholders' deficit (922,288)
------------
$ 3,833,453
============
</TABLE>
See accompanying independent auditors' report
and notes to financial statements
F-2
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 5,375,160 $ 2,403,414
Cost of sales 4,821,704 2,487,947
----------- -----------
Gross profit (loss) 553,456 (84,533)
Selling, general and administrative expenses 2,391,659 2,424,791
----------- -----------
Operating loss (1,838,203) (2,509,324)
Other income (expense):
Interest income 8,111 1,114
Interest expense (332,467) (43,747)
----------- -----------
Total other income (expense) (324,356) (42,633)
----------- -----------
Loss before provision for income taxes and
extraordinary item (2,162,559) (2,551,957)
Provision for income taxes (800) (800)
----------- -----------
Loss before extraordinary item (2,163,359) (2,552,757)
Extraordinary gain from forgiveness of debt
(net of income taxes of $0) 318,228 11,325
----------- -----------
Net loss $(1,845,131) $(2,541,432)
=========== ===========
Net loss per common share $(.65) $(1.75)
=========== ===========
Weighed average common shares outstanding 2,855,538 1,454,547
=========== ===========
</TABLE>
See accompanying independent auditors' report
and notes to financial statements
F-3
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For The Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON STOCK SUBSCRIBED ADDITIONAL TOTAL
----------------- ---------------- ------------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
-------- -------- --------- ------- ---------- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 250 $ 3 1,365,291 $1,365 - $ - $11,442,837 $(11,337,347) $ 106,858
Common stock subscribed
for cash - - - - 953,125 953 761,547 - 762,500
Issuance of stock options - - - - - - 320,000 - 320,000
Net loss - - - - - - - (2,541,432) (2,541,432)
--- --- --------- ------ -------- ------ ---------- ---------- ----------
Balance, December 31, 1996 250 3 1,365,291 1,365 953,125 953 12,524,384 (13,878,779) (1,352,074)
Issuance of common stock,
previously subscribed - - 953,125 953 (953,125) (953) - - -
Issuance of common stock
for cash - - 703,125 703 - - 561,797 - 562,500
Issuance of common stock upon
conversion of debt - - 1,607,816 1,608 - - 802,300 - 803,908
Common stock subscribed upon
conversion of debt - - - - 1,096,276 1,096 547,038 - 548,134
Common stock subscribed upon
exercise of stock options - - - - 400,000 400 199,600 - 200,000
Issuance of stock options and
warrants - - - - - - 160,375 - 160,375
Fractional share adjustment as a
result of reverse split - - (15,695) (15) - - 15 - -
Net loss - - - - - - - (1,845,131) (1,845,131)
--- --- --------- ------ -------- ------ ---------- ----------- -----------
Balance, December 31, 1997 250 $ 3 4,613,662 $4,614 1,496,276 $1,496 $14,795,509 $(15,723,910) $ (922,288)
=== === ========= ====== ========= ====== =========== ============= ===========
</TABLE>
See accompanying independent auditors' report
and notes to financial statements
F-4
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,845,131) $(2,541,432)
Adjustments to reconcile net loss to
net cash used
in operating activities:
Depreciation and amortization 28,081 82,636
Provision for doubtful accounts 307,971 (110,000)
Provision for allowance for 177,000 321,000
inventory obsolescence
Loss (gain) on sale of property and - 689
equipment
Loss on write-down of impaired assets - 177,861
Loss on write-off of intangible asset - 6,925
Gain on forgiveness of debt (318,228) (11,325)
Expense recorded in connection with
non-employee options 23,375 278,000
Expense recorded in connection with 52,538 -
discount amortization
Changes in operating assets and
liabilities:
Accounts receivable (1,152,753) 701,827
Inventories (586,317) 276,415
Deposits on Inventory (1,167,026) -
Prepaid expenses and other current (47,195) 34,891
assets
Other assets (13,056) 1,799
Accounts payable and accrued (130,971) 138,108
liabilities
Accrued royalties (65,791) (403,356)
Deferred revenue - 46,095
----------- -----------
Net cash used in operating activities (4,737,503) (999,867)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (32,460) -
----------- -----------
Cash flows from financing activities:
Net proceeds on lines of credit 3,763,949 (287,901)
Net payments on long-term debt (44,144) (108,147)
Proceeds from issuance of long-term
debt to an officer
of the Company 225,000 50,000
Proceeds from issuance of subordinated
convertible
debentures 562,500 762,500
Proceeds from issuance of common stock 562,500 -
for cash
Proceeds from issuance of common stock - 762,500
subscriptions
Proceeds from exercise of stock options 200,000 -
----------- -----------
Net cash provided by financing 5,269,805 1,178,952
activities ----------- -----------
</TABLE>
Continued
F-5
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
For The Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net change in cash and cash equivalents 499,842 179,085
Cash and cash equivalents, beginning of year 276,012 96,927
-------- --------
Cash and cash equivalents, end of year $775,854 $276,012
======== ========
Supplemental disclosures of cash flow information -
Cash paid during the year for:
Interest $227,857 $ 27,199
======== ========
Income taxes $ 800 $ 800
======== ========
</TABLE>
Supplemental schedules of non-cash investing and
financing activities:
During fiscal 1997, the Company converted $1,325,000 of convertible debt and
$27,042 of related accrued interest into common stock and common stock
subscribed. During 1997, $8,791 of notes payable, $41,714 of accounts payable
and $267, 723 of accrued royalties were forgiven.
During fiscal 1996, the Company converted $150,000 of accounts payable into a
note payable.
During fiscal 1996, the Company reclassed $8,418 of principal due on a note
payable to accrued interest.
See accompanying independent auditors' report
and notes to financial statements
F-6
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
For The Years Ended December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - ---------------------------------------------------
Nature of Operations
- - --------------------
Renaissance Golf Products, Inc. (the "Company") assembles and distributes golf
clubs and accessories. The Company's products are sold domestically and
internationally under a license agreement with FILA Sport S.p.A. ("FILA").
Basis of Presentation
- - ---------------------
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has suffered
substantial recurring losses from operations and has a stockholders' deficit at
December 31, 1997. These matters, among others, raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent on its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional debt and/or equity financing
as may be required, to satisfy its debt and license covenants (see Notes 4 and
7) and ultimately to attain profitable operations. Management's plans to
address these matters are as follows:
. Obtain additional financing through third party investors (see Note 12);
. Utilize its revolving loan to borrow to fund sales growth (see Note 4);
. Focus current marketing strategy on strength of bag and accessory product
lines;
. Increase the marketing efforts of the ladies product lines;
. Refocus on historically profitable product lines; and
. Continue restructuring the operations of the Company.
Management of the Company believes that the proceeds from the additional
financing as discussed in Note 12 and the revolving loan as discussed in Note 4
will enable the Company to fund operations through the end of fiscal 1998,
although there can be no assurance that it will. The Company will likely
require additional capital for future development and the marketing of existing
and future product lines. In the event the Company cannot fund operations
through sales after the initial infusion of capital from the aforementioned
sources, resolve its current debt and license covenant violations, and if the
Company is unable to secure additional financing in the future, its ability to
pursue its business strategy, its financial position, and its results of
operations for future periods may be adversely impacted.
F-7
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
- - --------------------------------------------------------------
Concentrations of Credit Risk
- - -----------------------------
On occasion, the Company maintains cash balances at certain financial
institutions in excess of amounts insured by Federal agencies.
The accounts receivable are from a diverse customer base. The Company provides
credit in the normal course of business to customers throughout the United
States and foreign markets. Accounts deemed uncollectible have been charged
against the allowance. The Company does not obtain collateral with which to
secure its accounts receivable. The Company performs ongoing credit evaluations
on its customers and maintains reserves for potential credit losses based on
experience and any unusual circumstances that may affect the ability of its
customers to meet their obligations.
One customer accounted for 14% and 11% of net sales for the years ended
December 31, 1997 and 1996, respectively. As of December 31, 1997, the Company
had accounts receivable from two customers which represented 51% and 22%,
respectively, of net accounts receivable.
Four vendors accounted for 19%, 17%, 15% and 14% of inventory purchases for the
year ended December 31, 1997, respectively, and four vendors accounted for 22%,
20%, 11% and 10% of inventory purchases for the year ended December 31, 1996,
respectively. No other vendor accounted for 10% or more of inventory purchases
for these periods. As of December 31, 1997, the Company had accounts payable to
one vendor which represented 25% of accounts payable. The Company believes that
it could purchase such inventory from other vendors without a material adverse
effect to the Company.
The Company had sales to foreign markets of approximately $103,000 (2%) and
$679,000 (28%) for the years ended December 31, 1997 and 1996, respectively.
Use of Estimates in the Preparation of Financial Statements
- - -----------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reported periods.
Significant estimates made by the Company's management include, but are not
limited to, allowances for trade receivables and the net realizable value of
inventories. Actual results could materially differ from those estimates.
F-8
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
- - --------------------------------------------------------------
Fair Value of Financial Instruments
- - -----------------------------------
The Company has financial instruments whereby the fair market value of the
financial instruments could be different than that recorded on a historical
basis. The Company's financial instruments consist of its cash and cash
equivalents, accounts receivable, revolving line of credit, notes payable and
accounts payable. The carrying amounts of the Company's financial instruments
generally approximate their fair values at December 31, 1997.
Cash Equivalents
- - ----------------
For the purpose of the statements of cash flows, the Company considers cash
equivalents to be highly liquid investments with remaining maturities when
purchased of three months or less.
Inventories
- - -----------
Inventories are stated at the lower of cost or market, and consist primarily of
golf clubs, golf bags, golf accessories and related components. Cost is
determined on the first-in, first-out method. Cost includes materials, direct
labor and an allocable portion of direct and indirect manufacturing overhead
based on estimates derived from historical trends and experience factors.
Market is determined by comparison with recent purchases or net realizable
value.
Management evaluates the net realizable value of its inventories on a quarterly
basis based on its forecasted sales, current backlog, anticipated demand and
existing competition and provides a reserve accordingly. The Company increased
its reserves by $177,000 and $321,000 for the years ended December 31, 1997 and
1996, respectively, based upon the Company's evaluations performed during those
periods of the net realizable value of its inventories. Should an adverse
change in the attributes which affect the carrying value of its inventories
become known to management, management may consider alternative uses of the
inventories or dispose of such inventories in such a manner to minimize the risk
of financial loss to the Company.
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the related assets,
ranging from five to seven years. Leasehold improvements are amortized over the
lesser of the estimated useful lives of the improvements or the related lease
term. Depreciation expense relating to property and equipment for the years
ended December 31, 1997 and 1996 amounted to $28,081 and $82,636, respectively,
of which $6,549 and $25,500, respectively, is included in cost of sales in the
accompanying statements of operations.
Maintenance and repairs are charged to expense as incurred. Renewals and
improvements of a major nature are capitalized. Gains or losses are recognized
upon sale or disposal of assets.
F-9
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
- - --------------------------------------------------------------
Management of the Company assesses the impairment of property and equipment by
comparing the future undiscounted net cash flows (without interest charges) from
the use and ultimate disposition of such assets with their carrying amounts.
The amount of impairment, if any, is measured based on fair value and is charged
to operations in the period in which such impairment is determined by
management. There was no impairment of property and equipment identified during
fiscal 1997. In fiscal 1996, management identified the impairment of certain
property and equipment which resulted in a loss of $177,861, which was charged
to selling, general and administrative expenses in the accompanying 1996
statement of operations.
Revenue Recognition
- - -------------------
Revenues on product sales are recognized upon shipment of the merchandise.
Stock-Based Compensation
- - ------------------------
During 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which defines a fair value based method of accounting for stock-
based compensation. However, SFAS 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to employees using
the intrinsic method of accounting prescribed by Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Entities
electing to remain with the accounting method of APB 25 must make pro forma
disclosures of net income and earnings per share, as if the fair value method of
accounting defined in SFAS 123 had been applied. The Company has elected to
account for its stock-based compensation to employees under APB 25.
Advertising
- - -----------
The Company expenses advertising costs as incurred. Advertising expense for the
years ended December 31, 1997 and 1996 was $224,282 and $33,686, respectively.
Warranty Costs
- - --------------
Warranty expense for the years ended December 31, 1997 and 1996 was not
significant.
Research and Development Expense
- - --------------------------------
Research and development costs are expensed as incurred and were not material
for either of the years ended December 31, 1997 and 1996.
F-10
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
- - --------------------------------------------------------------
Income Taxes
- - ------------
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
SFAS 109, the asset and liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and the tax basis of assets and
liabilities and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
Limitations on Dividends
- - ------------------------
Pursuant to state laws, the Company is currently restricted, and may be
restricted for the foreseeable future, from making dividends to its stockholders
as a result of its accumulated deficit as of December 31, 1997.
Loss Per Common Share
- - ---------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No.128"), "Earnings
Per Share" ("EPS"). SFAS No. 128 requires dual presentation of basic EPS and
diluted EPS on the face of all income statements issued after December 15, 1997
for all entities with complex capital structures. Basic EPS is computed as net
income divided by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur from
common shares issuable through stock options, warrants and other convertible
securities. There was no effect on EPS upon the adoption of the provisions of
SFAS No. 128 for all years presented. Loss per common share has been computed
on the weighted average number of common and equivalent shares outstanding.
Basic and diluted net loss per share are approximately the same.
New Accounting Pronouncements
- - -----------------------------
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, and
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 130 requires that an enterprise report, by major
components and as a single total, the change in its net assets during the period
from nonowner sources; and SFAS No. 131 establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas and major customers. Adoption of these
statements will not impact the Company's financial position, results of
operations or cash flows and any effect will be limited to the form and content
of its disclosures. Both statements are effective for fiscal years beginning
after December 15, 1997, with earlier application permitted.
F-11
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
- - --------------------------------------------------------------
Reverse Stock Split and Change in Authorized Shares
- - ---------------------------------------------------
During November 1997, the Company effected a 4:1 reverse stock split. All share
information has been adjusted to reflect the reverse stock split for both
periods presented. The Company, during 1997, also amended its articles of
incorporation to change its total authorized shares to 40,150,000 from
20,150,000.
Reclassifications
- - -----------------
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
NOTE 2 - INVENTORIES
- - --------------------
Inventories consist of the following at December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Component parts $ 639,265
Finished goods - clubs 385,337
Finished goods - bags and accessories 546,851
Consigned inventories 93,504
----------
1,664,957
Less inventory reserve (907,000)
----------
$ 757,957
==========
</TABLE>
As of December 31, 1997, the Company has made cash deposits on inventory to be
received in 1998 totaling $1,167,026.
NOTE 3 - PROPERTY AND EQUIPMENT
- - -------------------------------
Property and equipment consists of the following at December 31, 1997:
Manufacturing equipment and tooling $ 62,963
Office furniture and equipment 47,382
Computer equipment and software 139,873
Automotive equipment 6,942
Leasehold improvements 32,884
----------
290,044
Less accumulated depreciation (236,458)
----------
$ 53,586
==========
F-12
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 4 - LINES OF CREDIT
- - --------------------------------------------------------------------------------
In February 1995, the Company entered into a line of credit agreement with a
bank whereby the Company could borrow up to $300,000 for working capital and/or
letters of credit. The line bore interest at the prime rate, as defined, and
expired in April 1996. The line was collateralized by certificates of deposit
purchased by the Company from the bank.
In March 1995, the Company executed an agreement with a financial institution to
borrow funds based on eligible accounts receivable, as defined, up to the lesser
of $1,000,000 or 80% of eligible accounts receivable. The financial institution
had full recourse against the Company for any of the receivables which were
deemed uncollectible. The line of credit bore interest at the prime rate, as
defined, plus 2.5%. Advances were collateralized by substantially all of the
Company's assets. The agreement was terminated on June 4, 1996.
In January 1997, the Company entered into a line of credit agreement with a bank
in which the Company could borrow up to $400,000 in connection with the a letter
of credit established in accordance with the FILA license agreement (see below).
The line bore interest at the bank's prime rate plus 1.5% and was collateralized
by essentially all of the Company's assets and was guaranteed by the Chairman of
the Board of Directors. The line expired January 31, 1998.
In connection with the FILA license, the Company established a letter of credit
with an accredited bank in the amount of $400,000. The letter of credit was
secured by the line of credit discussed above. The letter of credit expired
January 31, 1998.
The FILA license agreement requires that a letter of credit is maintained
annually in the amount of the minimum royalty payments outlined therein.
Subsequent to year end, the Company had not received the letter of credit for
the 1998 minimum royalty payments thereby placing them in default of the FILA
Agreement (see Note 7).
The Company and the Company's Chairman of the Board of Directors jointly entered
into a loan and security agreement with a lender on October 29, 1997 to provide
the Company the maximum aggregate principal amount of the lesser of $5,000,000,
or 80% of the Company's current assets. The amount outstanding on the loan and
revolving promissory note is adjusted upward or downward on a monthly basis,
throughout the term of the note, based on total current assets, which for
purposes of the agreement mean cash, accounts receivable aged less than 90 days,
and inventory. The revolving promissory note executed pursuant to this
agreement bears an interest rate of 12% and expires December 31, 1999. As
further consideration for this loan and security agreement, warrants to purchase
400,000 shares of the Company's common stock were issued to the lender (see Note
9). Amounts outstanding under the agreement are collateralized by the
Company's inventory, open orders, accounts, and other assets of the Company. As
of December 31, 1997, the Company had borrowed $3,763,949 on this revolving
promissory note. The revolving credit line is shown net of the discount of
$126,462 as discussed in Note 9. The line provides for
F-13
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 4 - LINES OF CREDIT, CONTINUED
- - -----------------------------------
various warranties, covenants and restrictions and other financial and non-
financial matters requiring compliance on a continuing basis. Default on any
warranty, covenant or restriction could effect the lender's commitment to lend,
and if not waived or corrected, could accelerate the maturity of any borrowings
outstanding under the line. As of December 31, 1997, the Company was in default
of certain warranties, covenants and restrictions, including the borrowing of
funds substantially in excess of qualifying collateral.
NOTE 5 - LONG-TERM DEBT
- - -----------------------
Notes payable at December 31, 1997 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Unsecured note payable to an officer of the Company, bearing interest at
10% per annum, all unpaid interest and principal due June 30, 1999 $ 50,000
Unsecured note payable to a vendor/related party bearing interest at 10%
per annum, all unpaid interest and principal due June 30, 1999. 150,000
Unsecured note payable to a stockholder bearing interest at 12% per annum,
all unpaid interest and principal due June 30, 1998. 225,000
---------
425,000
Less: current maturities (225,000)
---------
$ 200,000
=========
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
-------------
<S> <C>
1998 $ 225,000
1999 200,000
2000 -
2001 -
2002 -
--------
$425,000
========
</TABLE>
Total interest expense incurred in connection with the related party debt was
$35,750 and $7,674 for the year ended December 31, 1997 and 1996, respectively.
F-14
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 6 - EXTRAORDINARY GAINS ON FORGIVENESS OF DEBT
- - ---------------------------------------------------
During 1995, the Company entered into a royalty agreement with a Japanese
distributor who designs clubs for Asian markets and distributes using the FILA
name and trademark. Royalties due to the Company related to such agreement are
9% on sales of bags, head covers and gloves designed and distributed by the
Japanese distributor. In connection with the royalty agreement, the distributor
agreed to prepay $280,048 which will be credited against future royalty payments
due to the Company from the distributor. During fiscal 1996, the distributor
advanced the Company additional amounts of $94,274. In fiscal 1997, the third
party released the Company from any obligation to repay the prepaid royalties
and required no additional services from the Company. The Company recorded an
extraordinary gain on forgiveness of debt in the amount of $267,723 in the 1997
statement of operations related thereto.
In addition, during 1997 and 1996, certain other vendors forgave certain
payables. The Company recorded $50,505 and $11,325 as extraordinary gains on
forgiveness of debt for the years ended December 31, 1997 and 1996,
respectively.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
- - --------------------------------------
Operating Leases
- - ----------------
The Company leases its office and certain equipment under several non-cancelable
lease agreements accounted for as operating leases expiring through November
2001. Real estate taxes, insurance and maintenance expenses are obligations of
the Company.
Minimum rental payments under non-cancelable operating leases on certain
equipment are as follows:
YEARS ENDING
DECEMBER 31,
1998 $103,542
1999 103,542
2000 2,772
2001 1,842
--------
$211,698
========
Rent expense totaled approximately $98,000 and $91,000 for the years ended
December 31, 1997 and 1996, respectively. It is expected that expiring leases
will be renewed in the ordinary course of business.
F-15
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 7 - COMMITMENTS AND CONTINGENCIES, CONTINUED
- - -------------------------------------------------
Royalty and Licensing Agreements
- - --------------------------------
FILA License
- - ------------
The Company had an exclusive licensing agreement with FILA to use the FILA name
and trademark for the Company's golf clubs, bags and various other golf
accessories for sale in the United States, Japan and certain other countries.
The initial term of the agreement originally expired December 31, 1995, but had
been extended by FILA to December 31, 2000. The agreement was terminated on
June 30, 1996, as the Company was in default of the obligations under the
agreement. In October 1996, the Company entered into a new licensing agreement
which granted the Company the exclusive license to use the FILA name and
trademark for hard products, as defined, for sale in the United States and
foreign countries, excluding Asia and a non-exclusive license to use the FILA
name and trademark for soft products, as defined, for sale in the United States
and foreign countries, excluding Asia. The new license agreement expires
December 31, 2000 and can be renewed for an additional five-year period provided
that the Company is not in default of any obligation under the agreement. The
FILA licensing agreement was not impacted by the change of control as a result
of the equity transactions discussed in Notes 8 through 10. Royalty expense
under this agreement was $400,000 and $429,167 for the years ended December 31,
1997 and 1996, respectively. There were no royalties due to FILA at December
31, 1997.
The terms of the revised licensing agreement include, among others, the
following:
Minimum royalty payments during the remainder of the initial term are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 500,000
1999 600,000
2000 700,000
----------
$1,800,000
==========
</TABLE>
Percentage royalty payments are due if such amounts exceed the minimum royalty
payments and are based on annual sales as follows:
Sales up to $7,500,000 6.0%
Sales from $7,500,001 to $15,000,000 5.5%
Sales over $15,000,000 5.0%
F-16
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 7 - COMMITMENTS AND CONTINGENCIES, CONTINUED
- - -------------------------------------------------
FILA can terminate the license if the Company does not have annual sales of
licensed product equal to or exceeding the following amounts for the respective
years:
<TABLE>
<CAPTION>
<S> <C>
1998 $6,250,000
1999 7,500,000
2000 8,333,333
</TABLE>
The Company must expend annually not less than five percent of net sales for
advertising and not less than three percent of net sales for promotions. The
Company was not in compliance with this covenant for the year ended December 31,
1997.
The Company shall not offer discounts on current products greater than twenty-
five percent (25%) without first obtaining approval from FILA. The Company
shall not sell discontinued product lines at a discount exceeding fifty percent
(50%).
The Company must establish an irrevocable letter of credit for the minimum
annual royalty for each contract year which shall be renewed annually for the
minimum annual royalty for each subsequent contract year. The Company has not
renewed its letter of credit that expired January 31, 1998 and, therefore, is
not in compliance with this covenant as of the issuance of these financial
statements. The Company shall pay one fourth ( 1/4) of the minimum annual
royalty to FILA fifteen (15) days prior to the end of each quarter. If the
Company fails to make the required payment, FILA may draw the required payment
amount from the letter of credit on the last day of the quarter.
The Company must submit a prototype of each product, as defined, for FILA's
approval prior to the manufacture, distribution or sale of such product. The
Company must submit to FILA for approval the Company's price lists and a
description of any plans to offer discounted prices (to eliminate overstock or
otherwise).
FILA may terminate the agreement in whole, or in part, upon the occurrence of
certain events, including the following:
. Failure to perform or otherwise materially breach any of the obligations
under the agreement and there is no remedy within 30 days of the receipt of
written notice of intent to terminate the agreement from FILA.
. Failure to make timely royalty payments, use best efforts to meet
established product introduction dates, maintain required levels of product
liability insurance or meet established guidelines for quality control.
. Failure to meet advertising, promotional and/or sales targets within a
country included in the territory, as defined.
F-17
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 7 - COMMITMENTS AND CONTINGENCIES, CONTINUED
- - -------------------------------------------------
. Sale or disposal of substantially all of the Company's business or assets
to a third party or transfer of control of the Company to a third party or
the cessation of an employment relationship with Miles Doody.
Further, FILA may terminate the license agreement if the Company's financial
condition becomes unstable, as evidenced by, among other matters, insolvency or
the Company's inability to pay its debts as they become due.
As discussed above, the Company is currently not in compliance with certain of
its covenants pursuant to the FILA license. FILA currently has the right to
terminate the agreement. The loss of the license would have a material adverse
effect on the Company's operations. These financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Japanese Sublicense
- - -------------------
FILA granted an exclusive licensing agreement to Kanebo, Ltd. ("Kanebo")
covering Japan, prior to granting the Company its licensing agreement. This
licensing agreement gave Kanebo an exclusive right and license to use FILA
trademarks in connection with the manufacture and sale of certain items
including golf bags, head covers and gloves sold in Japan, but not including
golf clubs or balls. Accordingly, the Company entered into a sublicensing
agreement with Kanebo giving the Company a non-exclusive right to sell golf
bags, head covers and gloves in Japan. The sublicensing agreement was
terminated as of June 30, 1996 upon the termination of the Company's license
agreement with FILA. Royalty expense in connection with this sublicense was
zero and $26,766 for the years ended December 31, 1997 and 1996, respectively.
Past due royalties related to the sublicense agreement totaled $118,355 at
December 31, 1997.
License Agreement for Latitude Irons
- - ------------------------------------
The Company had a licensing agreement with a third party for the sale of certain
golf club heads. The Company was obligated to pay a $2.00 royalty on sales of
licensed club heads. The term of the agreement was an initial period of three
years ending on October 31, 1996, which was extendible at the option of the
Company in one year increments. The Company did not exercise its option to
renew therefore, the agreement expired on October 31, 1996. The third party has
released the Company from any obligations and requires no additional services
from the Company.
PGA of Europe License
- - ---------------------
The Company had a license agreement with the PGA of Europe in which the Company
was granted the exclusive, worldwide right to use the PGA of Europe trademark
and logo on all printed material and equipment related to golf clubs, putters,
golf bags, and certain other related golf accessories. In consideration for the
license grant, the Company agreed to pay a royalty to the PGA of Europe equal to
5% of the net sales price of products bearing the PGA of Europe trademark sold
by the Company, with a minimum annual royalty of (Pounds)30,000 (approximately
$49,500 at current exchange rates). Royalty expense in connection with this
license agreement was $11,648 for the year ended December 31, 1996. The PGA of
Europe license expired on March 31, 1996.
F-18
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 7 - COMMITMENTS AND CONTINGENCIES, CONTINUED
- - -------------------------------------------------
Employment Agreement
- - --------------------
In October 1996, the Company entered into an employment agreement with a certain
officer which calls for a base salary of $48,000 and a commission equal to one
percent (1%) of adjusted gross sales, as defined, for a three-year period with a
one-year renewal option. In addition, the agreement provided for the issuance
of stock options (see Note 8). During 1997, the employment agreement was
verbally amended to delete the commission provisions.
Letters of Credit
- - -----------------
In connection with the FILA license discussed above, the Company is required to
establish a letter of credit with an accredited Italian bank in the amount of
$500,000, the minimum royalty for fiscal 1998. As of the date of this report,
the Company has not established the required letter of credit and is in
violation of the provisions of the FILA license agreement.
NOTE 8 - STOCK OPTIONS
- - ----------------------
In July 1993, the Board of Directors adopted, and the stockholders approved, the
1993 Omnibus Stock Option Plan ("1993 Plan") which is intended to provide
incentives to key employees, directors, consultants and others. Pursuant to the
1993 Plan, up to 150,000 shares may be granted on a discretionary basis by the
Board of Directors in the form of incentive stock options for full-time
employees and directors and non-statutory stock options for non-employees.
In July 1993, incentive stock options were granted to certain officers and
directors for the purchase of 100,000 shares of the Company's common stock at
$16.00 per share. Of these options, 40,000 were canceled in October 1996. The
remaining 60,000 options are fully vested as of December 31, 1997, and expire
July 12, 1998, or upon termination of employment.
In January 1994, non-statutory stock options were granted outside of the 1993
Plan to professional golfers for the purchase of 6,375 shares of the Company's
common stock at $13.00 per share. Of these options, 3,875 vested on issuance
and 2,500 were to vest based on the golfers achieving certain performance goals
(the 2,500 were canceled). The remaining 3,875 options expire at various dates
from January 1, 1998 through January 1, 1999. No non-statutory stock options
expired during the year ended December 31, 1997.
F-19
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 8 - STOCK OPTIONS, CONTINUED
- - ---------------------------------
In June 1994, incentive stock options were granted outside of the 1993 Plan to
certain employees for the purchase of 9,625 shares of the Company's common stock
at $10.00 per share. These options vested ratably on October 15, 1994, 1995 and
1996 and expire June 14, 1999, or upon termination of employment. Of these
options, 2,500 were canceled during fiscal 1995 and 6,250 expired during 1997.
In May 1995, non-statutory stock options were granted outside of the 1993 Plan
for various consulting services provided to the Company for the purchase of
110,250 shares of the Company's common stock at prices ranging from $4.00 to
$10.00 per share, the estimated fair market value (or greater) of the Company's
common stock at the date of grant. These options expire at various dates from
December 31, 1995 to March 31, 2000 and vested immediately. During the year
ended December 31, 1995, 25,000 of such options expired and 11,500 of such
options were exercised. During the year ended December 31, 1996, non-statutory
stock options totaling 61,250 expired and 12,500 were canceled. None of these
non-statutory stock options were outstanding as of December 31, 1996.
In August 1995, non-statutory stock options were granted to non-employee members
of the Company's Board of Directors for services rendered during 1995 and
previous years for the purchase of 50,000 shares of the Company's common stock
at $4.00 per share, the estimated fair market value of the Company's stock at
the date of grant. These options expired on December 31, 1996.
In October 1996, non-statutory stock options were granted outside of the 1993
Plan to non-employee members of the Company's Board of Directors and various
consultants for services provided to the Company for the purchase of 1,700,000
shares of the Company's common stock at $0.50 per share. These options expire
on December 31, 2006. These options were assumed to be vested as of December
31, 1996 as a result of the successful completion of the private placement
memorandum as discussed in Note 10. These options were not subject to
adjustment as a result of the split of the Company's stock. Because the Company
anticipated the 4:1 reverse stock split, the fair market value of the Company's
common stock was assumed to be $0.50 per share, the trading price of the
Company's common stock ($.125) prior to the private placement discussions, times
four. The Company expensed $14,000 and $203,000 during the years ended December
31, 1997 and 1996, respectively, in connection with the issuance of these
options. An additional $14,000 of expense will be recorded during the year
ending December 31, 1998 in connection therewith. During 1997, 400,000 of such
options were exercised for cash. An additional 1,050,000 options were granted
to non-employees in connection with the 1996 private placement. Because the
private placement consisted of 50% debt and 50% equity, one-half of the
1,050,000 options were attached to the debt piece and an original issue discount
was recorded. Accordingly, the Company recorded $42,000 of debt issuance costs,
which was being amortized over the life of the related debt. Because the debt
was converted to equity during 1997, the $42,000 was amortized in its entirety
to interest expense during 1997.
F-20
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 8 - STOCK OPTIONS, CONTINUED
- - ---------------------------------
In October 1996, incentive stock options were granted outside of the 1993 Plan
to certain officers and key employees for the purchase of 1,377,000 shares of
the Company's common stock at $0.50 per share. Of these options, 717,000 vest
upon the earlier of achieving certain performance goals or ratably over ten
years and 660,000 were assumed to be vested as of December 31, 1996 as a result
of the successful completion of the private placement memorandum as discussed in
Note 10. These options were not subject to adjustment as a result of the split
of the Company's stock. Because the Company anticipated the 4:1 reverse stock
split, the fair market value of the Company's common stock was assumed to be
$0.50 per share, the trading price of the Company's common stock ($.125) prior
to the private placement discussions, times four. These options expire on
December 31, 2006. During 1997, 6,000 of such options were canceled.
In October 1996, the Company granted to a director an option to acquire 200,000
shares of common stock at an exercise price of $0.50 per share and an option to
acquire 150,000 shares of common stock at an exercise price of $1.00 per share
in connection with the director's services performed in 1996. The Company also
granted to another director an option to acquire 1,000,000 shares of common
stock at an exercise price of $1.00 per share in connection with the director's
services performed in 1996. The options vested immediately and expire December
31, 2006. These options were not subject to adjustment as a result of the split
of the Company's stock. Because the Company anticipated the 4:1 reverse stock
split, the fair market value of the Company's common stock was assumed to be
$.50 per share, the trading price of the Company's common stock ($.125) prior to
the private placement discussions, times four. The Company expensed $75,000
during 1996 in connection with the issuance of these options.
In September 1997, the Company granted non-qualified options outside of the 1993
Plan to acquire 281,000 shares of common stock at $1.25 per share to employees
of the Company and 18,750 shares of common stock at $1.25 per share to non-
employees of the Company. Of the employee options, 195,000 vest upon the
earlier of achieving certain performance goals or ratably over ten years, 56,000
vested immediately, and 30,000 vest ratably over a three-year period. The non-
employee options vested immediately. None of these options were subject to
adjustment as a result of the split of the Company's stock. Because the Company
anticipated the 4:1 reverse stock split, the fair market value of the Company's
common stock was assumed to be $1.25 per share, the trading price of the
Company's common stock ($0.3125) at the date of grant, times four. The
aforementioned options expire September 15, 2007. The Company recorded $9,375
in consulting expense during 1997 as a result of the issuance of the non-
employee options.
In October 1997, the Company granted non-qualified options outside of the 1993
Plan to acquire 500,000 shares of common stock at $3.00 per share to employees
of the Company. None of these options were subject to adjustment as a result of
the split of the Company's stock. Because the Company anticipated the 4:1
reverse stock split, the fair market value of the Company's common stock was
assumed to be $2.63 per share, the trading price of the Company's common stock
($0.65625) at the date of grant, times four. The aforementioned options all
vested immediately and expire October 27, 2007.
F-21
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 8 - STOCK OPTIONS, CONTINUED
- - ---------------------------------
A summary of stock option activity for 1997 and 1996 follows:
<TABLE>
<CAPTION>
1993 PLAN OUTSIDE PLAN PRICE
---------------- ---------------- -----------------
<S> <C> <C> <C>
Balance at January 1, 1996 150,000 84,750 $4.00-16.00
Granted - 5,477,000 .50-1.00
Expired/canceled (90,000) (73,750) 4.00-16.00
Exercised - - -
------- --------- -----------
Balance at December 31, 1996 60,000 5,488,000 .50-16.00
Granted - 799,750 1.25-3.00
Expired/canceled - (12,250) .50-10.00
Exercised - (400,000) .50
------- --------- -----------
Balance at December 31, 1997 60,000 5,875,500 $ .50-16.00
======= ========= ===========
Exercisable at December 31, 1997 60,000 5,010,600 $ .50-16.00
======= ========= ===========
</TABLE>
Pro Forma Stock Option Information
- - ----------------------------------
Pro forma information regarding net income (loss) is required by SFAS 123 and
has been determined as if the Company had accounted for its employee stock
options under the fair value method pursuant to SFAS 123, rather than the method
pursuant to APB 25 as discussed herein. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following assumptions: stock price, as determined by the Board of Directors,
of between $.50 and $2.63 per share; a risk-free interest rate of 6.5%; dividend
yields of 0.0%; volatility factors of the expected market price of the Company's
common stock of between 40.0% and 72.0%; and expected term of two and one-half
years.
The Black-Scholes valuation model was developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-22
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 8 - STOCK OPTIONS, CONTINUED
- - ---------------------------------
For purposes of pro forma disclosure, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's pro forma
information follows.
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net loss:
As reported $(1,845,131) $(2,541,432)
Pro forma $(2,459,507) $(2,647,032)
Net loss per share:
As reported $ (0.65) $ (1.75)
Pro forma $ (0.86) $ (1.82)
</TABLE>
NOTE 9 - STOCK WARRANTS
- - -----------------------
The Company is authorized to issue Class A, B, C, D, E, F and G warrants. In
connection with the offering of convertible debentures, bridge financing
arrangements and the initial public offering completed prior to 1995, the
Company issued warrants which expire between November 15, 1996 and November 15,
1998. The only warrants that remain outstanding as of December 31, 1997 are the
Class A as discussed below. The terms of the warrants are summarized as
follows:
. Class A warrants entitle the holder to purchase one share of common stock
at a price of $10.70 (as adjusted) per share. The warrants are exercisable
for five years from the date of issuance and may be redeemed by the Company
at $.01 per warrant if the closing bid price of the common stock exceeds
$9.00 for 10 consecutive trading days. As of December 31, 1997, 852,060
(as adjusted) Class A warrants are outstanding which expire November 15,
1998.
. Class B warrants entitle the holder to purchase one share of common stock
at a price of $16.00 per share. The warrants are exercisable for three
years beginning one year from the date of issuance. During 1996, 211,063
Class B warrants expired.
. Class C warrants entitle the holder to purchase one share of common stock
for $34.00 per share. The warrants are exercisable beginning January 1,
1995 for two years unless extended by the Board of Directors.
. Class D warrants entitle the holder to purchase one share of common stock
for $18.00 per share. The warrants are exercisable for one year from the
date of issuance.
. Class E warrants entitle the holder to purchase one share of common stock
for $22.00 per share. The warrants are exercisable for one year from the
date of issuance.
F-23
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 9 - STOCK WARRANTS, CONTINUED
- - ----------------------------------
. Class F warrants entitle the holder to purchase one share of common stock
for $14.00 per share. The warrants are exercisable from the date of
issuance and expire December 31, 1997.
. Class G warrants were issued with a private placement memorandum in January
1995 and entitle the holder to purchase one share of common stock for
$10.00 per share. The warrants are exercisable for 18 months from the date
of issuance. During 1995, in connection with a private placement
memorandum, the Company issued 313 Class G warrants. All of these warrants
expired as of October 6, 1996.
During 1997, the Company granted 400,000 warrants to acquire shares of the
Company's common stock at exercise prices ranging from $1.50 to $3.00 to a
lender (see Note 5). The warrants are not subject to adjustment as a result of
the split of the Company's stock. Because the Company anticipated the 4:1
reverse stock split, the fair market value of the Company's common stock was
assumed to be $2.63 per share, the trading price of the Company's common stock
($0.65625) at the date of grant, times four. The warrants expire December 31,
2002, are immediately exercisable and carry piggy-back registration rights. The
Company recorded an original issue discount of $137,000 as a result of the
issuance of these warrants which will be amortized over the twenty-six month
life of the debt. During 1997, approximately $11,000 of the discount was
amortized to interest expense.
NOTE 10 - STOCKHOLDER'S DEFICIT
- - -------------------------------
In January 1995, the Company issued a private placement memorandum offering
15,000 units at $100 per unit, each unit consisting of one share of Series A
preferred stock and five Class G warrants. Each share of the Series A preferred
stock is convertible into 12.5 shares of common stock. The offering originally
terminated on April 30, 1995, but was extended by the Company through December
31, 1995. A total of 250 units were sold for proceeds totaling $25,001.
In October 1996, the Company issued a private placement memorandum offering 100
units at $25,000 per unit, each unit consisting of 15,625 shares of common stock
and a subordinated convertible debenture with a face value of $12,500. During
1996, the Company had sold 61 units and raised $762,500 from the private
placement memorandum offering relating to the sale of common stock. An
equivalent amount was raised in the form of subordinated convertible debentures.
During 1997, the Company sold the remaining units, plus an additional 6 units,
for proceeds totaling $562,500 and an equivalent amount of subordinated
convertible debentures. On December 15, 1997, the debt, plus accrued interest,
totaling $1,352,042, was converted into 2,704,092 shares of common stock. As of
December 31, 1997, 1,096,276 of such shares were not yet issued and have been
reflected as subscribed in the accompanying 1997 statement of stockholders'
equity (deficit).
F-24
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 11 - PROVISION FOR INCOME TAXES
- - ------------------------------------
The provision for income taxes for the years ended December 31, 1997 and 1996
consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
---------------- --------------- ----------------
Year ended December 31, 1997:
<S> <C> <C> <C>
U.S. Federal $ - $ - $ -
State and local 800 - 800
---------------- --------------- ---------------
$ 800 $ - $ 800
================ =============== ===============
Year ended December 31, 1996:
U.S. Federal $ - $ - $ -
State and local 800 - 800
---------------- --------------- ---------------
$ 800 $ - $ 800
================ =============== ===============
</TABLE>
Income tax expense was $800 for each of the years ended December 31, 1997 and
1996, and differed from the amounts computed by applying the U.S. Federal income
tax rate of 34 percent to loss from operations before provision for income taxes
and extraordinary item as a result of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Computed "expected" benefit $ (735,270) $ (867,665)
Increase (reduction) in income taxes resulting from
Change in valuation allowance for deferred tax assets 728,559 1,041,364
Non-deductible expenses 2,590 52,635
Change in deferred tax assets 4,393 (229,911)
Other - 3,849
State taxes, net of benefit 528 528
----------- -----------
$ 800 $ 800
========== ===========
</TABLE>
F-25
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 11 - PROVISION FOR INCOME TAXES, CONTINUED
- - -----------------------------------------------
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 31, 1997 are presented below:
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Accounts receivable, principally due to allowance for doubtful accounts $ 158,530
Inventories, principally due to allowance for obsolete inventory 361,243
Compensated absences, principally due to accrual for financial reporting
purposes -
Property, primarily due to differences in depreciation methods 1,610
Compensation expense relating to options granted to employees and
consultants not currently deductible 115,484
State taxes, net of benefit 272
Other 22,735
Net operating loss carryforwards 4,385,049
-----------
Total gross deferred tax assets 5,044,923
Less valuation allowance (5,044,923)
-----------
Net deferred tax assets $ -
===========
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1997 was
$4,316,364. The net change in the total valuation allowance for the year ended
December 31, 1997 was an increase of $728,559.
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $11,878,289 and $5,937,733 available to offset future taxable
Federal and state income, respectively. The Company's utilization of California
state operating loss carryforwards is unlikely due to the Company's move to Utah
in early 1998. The carryforward amounts expire in varying amounts between 1998
and 2012.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carryforwards for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net
operating loss carryforwards may be limited as to use in future years.
F-26
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 12 - SUBSEQUENT EVENTS
- - ---------------------------
Consulting Agreement
- - --------------------
In January 1998, the Company entered into a consulting agreement with a producer
of direct response television promotions for fitness equipment, whereby the
Company acquired the exclusive right to sell a fitness product within the United
States and throughout the world. The consulting arrangement calls for the
Company to pay commissions of up to 8% of net sales, as defined, related to
sales of a certain product line.
Private Placement
- - -----------------
Effective March 2, 1998, the Company initiated a private placement offering of
up to 550,000 units with an over-allotment provision of up to an additional
250,000 units. Each unit consists of one share of the Company's common stock
and a warrant to acquire one share of the Company's common stock at an exercise
price of $5.00 per share. The offering price per unit is $3.00. The warrants
are exercisable at any time until December 31, 2002 and are subject to
redemption by the Company at $.01 per warrant if the Company's common stock
trades for a period of 20 consecutive days at or above $7.00 per share. As of
March 31, 1998, the Company had raised $900,000 upon the sale or subscription of
300,000 units (300,000 shares of common stock at $3.00 per share and 300,000
warrants). An additional $390,000 (130,000 units) had been subscribed for as of
April 15, 1998 (unaudited).
Employee Stock Options
- - ----------------------
On March 17, 1998, the Board of Directors granted an employee 500,000 options at
an exercise price of $4.25 for the employee's efforts during the past year in
securing adequate financing for the Company to permit ongoing operations and
efforts in guiding the growth of the Company. The options are exercisable at
any time on or before March 17, 2008 and are not subject to price adjustment.
Rights Agreement
- - ----------------
On March 27, 1998, the Company entered into an agreement to purchase certain
golf ball inventory and exclusive rights to sell a line of golf balls in
exchange for a payment of $210,000. The Company must buy a minimum number of
golf balls per month to maintain its rights.
Business Acquisitions
- - ---------------------
The World Golf Federation, Inc.
Effective April 1, 1998, the Company entered into an asset purchase agreement
(the "Agreement") with The World Golf Federation, Inc. ("WGFI"). Pursuant to
the Agreement, the Company will acquire certain assets, properties and rights,
as defined, of WGFI in exchange for the issuance by the Company of 175,000
shares of its common stock and contingent consideration in the form of 50,000
additional shares and 50,000 options (with an exercise price of $5.00 per share)
based upon achievement of certain revenue milestones, as defined.
F-27
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
For The Years Ended December 31, 1997 and 1996
NOTE 12 - SUBSEQUENT EVENTS, CONTINUED
- - --------------------------------------
The Ball Marketing Co. L.L.C.
Effective April 1, 1998, the Company entered into an asset purchase agreement
(the "Agreement") with The Ball Marketing Co. L.L.C. ("BMC"). Pursuant to the
Agreement, the Company will acquire certain assets, properties and rights, as
defined, of BMC in exchange for the issuance by the Company of 75,000 shares of
its common stock and contingent consideration in the form of 50,000 additional
shares and 50,000 options (with an exercise price of $5.00 per share) based upon
achievement of certain revenue milestones, as defined.
Class A Warrants
- - ----------------
On April 3, 1998, the Company sent notice to the existing Class A warrantholders
that for each warrantholder who agrees to amend their warrant agreement to
provide for a redemption price of $7.00 per share, down from $9.00 per share,
and waive any further price adjustments to the warrant, the Company will reduce
the warrant exercise price to $5.50 per share. Other than as agreed, no other
modifications to the warrant agreement will be made and the expiration date will
remain November 15, 1998.
F-28
<PAGE>
RESTATED
--------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
RENAISSANCE GOLF PRODUCTS, INC.
-------------------------------
(Pursuant to Sections 242 and 245)
KENNETH W. CRAIG and BRUCE H. HAGLUND certify that:
1. They are the President and Secretary, respectively, of RENAISSANCE GOLF
PRODUCTS, INC., a Delaware corporation, incorporated on June 21, 1993.
2. The Certificate of Incorporation of this corporation is amended and
restated to read as follows:
"FIRST: The name of the corporation (hereinafter called the
-----
"Corporation") is:
RENAISSANCE GOLF PRODUCTS, INC.
SECOND: The address, including street, number, city, and county, of
------
the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle;
and the name of the registered agent of the Corporation in the State of
Delaware at such address is The Corporation Trust Company.
THIRD:
-----
3.1 The nature of the business and the purposes to be conducted and
promoted by the Corporation, which shall be in addition to the
authority of the Corporation to conduct any lawful business, to
promote any lawful purpose, and to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of the State of Delaware, are as
follows:
3.1.1 To engage in all aspects of insulation contracting and
hazardous waste treatment and to provide all services
incidental thereto.
3.1.2 To purchase, receive, take by grant, gift, devise,
bequest, or otherwise, lease, or otherwise acquire,
own, hold, improve, employ, use and otherwise deal in
and with real or personal property, or any interest
therein, wherever situated, and to sell, convey, lease,
exchange, transfer, or otherwise dispose of, or
mortgage or pledge, all or any of its property and
assets, or any interest therein, wherever situated.
3.1.3 To make, enter into, perform, and carry out contracts
of every kind and description with any person, firm,
association, corporation, or government or agency or
instrumentality thereof. To acquire by purchase,
exchange, or otherwise, all, or any part of, or any
interest in, the properties, assets, business, and
goodwill of any one or more persons, firms,
associations, or corporations heretofore or hereafter
engaged in any business for which a corporation may now
or hereafter be organized under the laws of the State
of Delaware; to pay for the same in cash, property, or
its own or other securities; to hold, operate,
reorganize,
1
<PAGE>
liquidate, sell, or in any manner dispose of the whole
or any part thereof; and in connection therewith, to
assume or guarantee performance of any liabilities,
obligations, or contracts of such persons, firms,
associations, or corporations, and to conduct the whole
or any part of any business thus acquired.
3.1.4 To lend money in furtherance of its corporate purposes
and to invest and reinvest its funds from time to time
to such extent, to such persons, firms, associations,
corporations, governments or agencies or
instrumentalities thereof, and on such terms and on
such security, if any, as the Board of Directors the
Corporation may determine.
3.1.5 To borrow money without limit as to amount and at such
rates of interest as it may determine; from time to
time to issue and sell its own securities, including
its shares of stock, notes, bonds, debentures, and
other obligations, in such amounts, on such terms and
conditions, for such purposes and for such prices, now
or hereafter permitted by the laws of the State of
Delaware and by this certificate of incorporation, as
the Board of Directors of the Corporation may
determine; and to secure any of its obligations buy
mortgage, pledge, or other encumbrance of all or any of
its property, franchises, and income.
3.1.6 To be a promoter or manager of other corporations of
any type or kind; and to participate with others in any
corporation, partnership, limited partnership, joint
venture, or other association of any kind, or in any
transaction, undertaking, or arrangement which the
Corporation would have power to conduct by itself,
whether or not such participate involves sharing or
delegation of control with or to others.
3.1.7 To draw, make, accept, endorse, discount, execute, and
issue promissory notes, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or
transferable instruments and evidences of indebtedness
whether secured by mortgage or otherwise, as well as to
secure the same by mortgage or otherwise, as far as may
be permitted by laws of the State of Delaware.
3.1.8 To purchase, receive, take, require, or otherwise
acquire, own and hold, sell, lend, exchange, reissue,
transfer, or otherwise dispose of, pledge, use, cancel,
and otherwise deal in and with its own shares and its
other securities from time to time to such an extent
and in such manner and upon such terms as the Board of
Directors of the Corporation shall determine; provided
that the Corporation shall not use its funds or
property for the purchase of its own shares of capital
stock when its capital is impaired or when such use
would cause any impairment of its capital, except to
the extent permitted by law.
3.1.9 To organize, as an incorporator, or cause to be
organized under the laws of the State of Delaware, or
of any other State of the United States of America, or
of the District of Colombia, or of any commonwealth,
territory, dependency, colony, possession, agency, or
instrumentality of the United States of America, or of
any foreign country, a corporation or corporations
2
<PAGE>
for the purpose of conducting and promoting any
business or purpose for which corporations may be
organized, and to dissolve, wind up, liquidate, merge
or consolidate any such corporation or corporations or
to cause the same to be dissolved, wound up,
liquidated, merged, or consolidated.
3.1.10 To conduct its business, promote its purposes, and
carry on its operations in any and all of its branches
and maintain offices both within and without the State
of Delaware, in any and all States of the United States
of America, in the District of Colombia, and in any or
all commonwealths, territories, dependencies, colonies,
possessions, agencies, or instrumentalities of the
United States of America and of foreign governments.
3.1.11 To promote and exercise all or any part of the
foregoing purposes and powers in any and all parts of
the world, and to conduct its business at all or any of
its branches as principal, agent, broker, factor,
contractor, and in any other lawful capacity, either
alone or through or in conjunction with any
corporations, associations, partnerships, firms,
trustee, syndicates, individuals, organizations, and
other entities in any part of the world, and, in
conducting its business and promoting any of its
purposes, to maintain offices, branches, and agencies
in any part of the world, to make and perform any
contracts and to do any acts and things, and to carry
on any business, and to exercise any powers and
privileges suitable, convenient, or proper for the
conduct, promotion, and attainment of any of the
business and purposes herein specified or which at any
time may be incidental thereto or may appear conducive
to or expedient for the accomplishment of any of such
business and purposes and which might be engaged in or
carried on by a corporation incorporated or organized
under the General Corporation Law of the State of
Delaware, and to have and exercise all of the powers
conferred by the laws of the State of Delaware upon
corporations incorporated or organized under the
General Corporations Law of the State of Delaware.
3.2 The foregoing provisions of this Article THIRD shall be construed both
as purposes and powers and each as an independent purpose and power.
The foregoing enumeration of specific purposes and powers shall not be
held to limit or restrict in any manner the purposes and powers of the
Corporation, and the purposes and powers herein specified shall,
except when otherwise provided in this Article THIRD, be in no way
limited or restricted by reference to, or inference from, the terms of
any provision of this or any other Article of this certificate of
incorporation; provided, that the Corporation shall not conduct any
business, promote any purpose, or exercise any power or privilege
within or without the State of Delaware which, under the laws thereof,
the Corporation may not lawfully conduct, promote, or exercise.
FOURTH:
------
4.1 The total number of shares of stock which the Corporation shall have
authority to issue is Forty Million One Hundred Fifty Thousand
(40,150,000), of which Forty Million (40,000,000) shares of the par
value of $.001 each, amounting in the aggregate to Forty Thousand
Dollars ($40,000.00), are to be of a class designated Common Stock,
and One Hundred Fifty Thousand (150,000) shares of the par value of
$.01 each, amounting in the aggregate to One Thousand Five Hundred
Dollars ($1,500.00), are to be of a class designated Preferred Stock.
3
<PAGE>
Ten (10) days after the date of filing hereof (the "Effective Date"),
each four (4) issued and outstanding shares of stock of this
Corporation shall be combined, reconstituted, and converted into one
(1) share of common stock (the "Reverse Stock Split"), and each person
at that time holding of record any issued and outstanding shares of
stock of this Corporation shall be entitled to receive a stock
certificate or certificates to evidence and represent the shares of
Common Stock of this Corporation to which he becomes entitled by
reason of such Reverse Stock Split on the basis of one (1) share in
exchange for every four (4) shares of Common Stock so held of record.
No fractional Shares will be issued as a result of the Reverse Stock
Split. In lieu of receiving fractional Shares, any Stockholder who
holds any number of Shares not evenly divisible by four (4)
immediately prior to the Reverse Stock Split will be entitled to
receive cash in the sum of such stockholder's fractional interest
multiplied by the fair value of the Shares (as determined by the Board
of Directors) on the Effective Date of the Reverse Stock Split.
4.2 Shares of stock of any class now or hereafter authorized may be issued
by the Corporation from time to time for such consideration not less
than the par value thereof as shall be fixed from time to time by the
Board of Directors of the Corporation. Any and all shares of stock so
issued for which the consideration so fixed has been paid or delivered
to the Corporation shall be declared and taken to be fully paid stock
and shall not be liable to any further call or assessments thereon,
and the holders of such shares shall not be liable for any further
payments in respect to such shares. Subscriptions to, or the purchase
price of, shares of stock of the Corporation may be paid for, wholly
or partly, by cash, by labor done, by personal property, or by real
property or leases thereof. In the absence of actual fraud in the
transaction, the judgment of the Directors as to the value of such
labor, property, real estate or leases thereof shall be conclusive.
4.3 The voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the classes of
stock of the Corporation which are fixed by this Certificate of
Incorporation, and the authority vested in the Board of Directors to
fix by resolution or resolutions providing for the issue of Preferred
Stock the voting powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the share of
Preferred Stock which are not fixed by this Certificate of
Incorporation, are as follows:
4.3.1 The Preferred Stock may be issued from time to time in one or
more series of any number of shares; provided that the
aggregate number of shares issued and not cancelled of any and
all such series shall not exceed the total number of shares of
Preferred Stock hereinabove authorized. Each series of
Preferred Stock shall be distinctly identified by letter or
descriptive words. All series of Preferred Stock shall rank
equally and be identical in all respects except as permitted by
the provisions of Section 4.2 hereof.
4.3.2 Authority is hereby vested in the Board of Directors from time
to time to issue the Preferred Stock as Preferred Stock of any
series and in connection with the creation of each such series
to fix by resolution or
4
<PAGE>
resolutions providing for the issue of shares thereof the
voting powers, if any, the designation, preferences and
relative, participating, optional or other special right,
and the qualifications, limitations or restriction thereof,
of such series to the full extent now or hereafter permitted
by this Certificate of Incorporation and the laws of the
State of Delaware, in respect of the matters set forth in
the following paragraphs (a) through (h), inclusive:
(a) The distinctive designation of such series and the
number of shares which shall constitute such series,
which number may be increased or decreased (but not
below the number of shares thereof then outstanding)
from time to time by action of the Board of Directors;
(b) The dividend rate of such series and any limitations,
restrictions or conditions on the payment of dividends,
including whether dividends shall be cumulative and, if
so, form which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares
of that series;
(c) The price or prices at which, and the terms and
conditions on which, the shares of such series may be
redeemed by the Corporation;
(d) The amount or amounts payable upon the shares of such
series in the event of any liquidation, dissolution or
winding up of the Corporation and the relative rights
or priority, if any, of payment of shares of such
series;
(e) Whether or not the shares of such series shall be
entitled to the benefit of a sinking fund to be applied
to the purchase or redemption of shares of such series
and, if so entitled, the amount of such fund and the
manner of its application;
(f) Whether or not the shares of such series shall be made
convertible into, or exchangeable for, shares of any
other class or classes of stock of the Corporation or
shares of any other series of Preferred Stock, and, if
made so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and
the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(g) Whether or not the shares of such series shall have any
voting powers and, if voting powers are so granted, the
extent of such voting powers; and
(h) Whether or not the issue of any additional shares of
such series or of any future series in addition to such
series shall be subject to restrictions in addition to
the restrictions, if any, on the issue of additional
shares imposed in the resolution or resolutions fixing
the terms of any outstanding series of Preferred Stock
theretofore issued pursuant to this Section and, if
subject to
5
<PAGE>
additional restrictions, the extent of such additional
restrictions.
4.3.3 Before any sum or sums shall be set aside for or applied
to the purchase of Common Stock and before any dividends
shall be declared or paid or any distribution ordered or
made upon the Common Stock (other than a dividend payable
in Common Stock), the Corporation shall comply with the
dividend and sinking fund provisions, if any, of any
resolution or resolutions providing for the issue of any
series of Preferred Stock any shares of which shall at the
time be outstanding.
4.3.4 Subject to the provisions of Section 4.3.3 hereof, the
holders of Common Stock shall be entitled, to the
exclusion of the holders of Preferred Stock of any and all
series, to receive such dividends as from time to time may
be declared by the Board of Directors.
4.3.5 In the event of any liquidation, dissolution or winding up
of the Corporation, the holders of Preferred Stock of each
series then outstanding shall be entitled to be paid out
of the asses of the Corporation available for distribution
to its stockholders, whether from capital, surplus or
earnings, before any payment shall be made to the holders
of Common Stock, an amount determined as provided in
Section 4.3.2 hereof for every share of their holdings of
Preferred Stock of such series. If upon any liquidation,
dissolution or winding up of the Corporation, the assets
of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of
Preferred Stock of all series the full amounts to which
they respectively shall be entitled, the holders of
Preferred Stock of all series shall shares ratably in any
distribution of Preferred Stock held by them upon such
distribution if all amounts payable on or with respect to
Preferred Stock of all series were paid in full. In the
event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after
payment shall have been made to the holders of Preferred
Stock of the full amount to which they shall be entitled
as aforesaid, the holders of Common Stock shall be
entitled, to the exclusion of the holders of Preferred
Stock of any and all series, to share, ratably according
to the number of shares of Common Stock held by them, in
all remaining assets of the Corporation available for
distribution to its stockholders. Neither the merger or
consolidation of the Corporation into or with another
corporation nor the merger or consolidation of any other
corporation into or with the Corporation, not the sale,
transfer or lease of all or substantially all the assets
of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation.
4.3.6 Except as otherwise provided by law or by the resolution
or resolutions providing for the issue of any series of
Preferred Stock, the holders of shares of Preferred Stock,
as such holders, (i) shall not have any right to vote, and
are hereby specifically excluded from the right to vote,
in the election of directors or for any other purpose and
(ii) shall not be entitled to notice of any meeting of
stockholders.
6
<PAGE>
4.3.7 Subject to the provisions of any applicable law, or of the
Bylaws of the Corporation as from time to time amended,
with respect to the closing of the transfer books or the
fixing of a record date of the determination of
stockholders entitled to vote and except as otherwise
provided by law or by the resolution or resolutions
providing for the issue of any series of Preferred Stock,
the holders of outstanding shares of Common Stock shall
exclusively possess voting power for the election of
directors and for all other purposes, each holder of
record of shares of Common Stock being entitled to one
vote for each share of Common Stock standing in his name
on the books of the Corporation.
4.3.8 Scrip Certificates of Cash Equivalent. No fractional
shares of stock of any class of the Corporation now or
hereafter authorized shall be issuable upon or in
connection with any conversion, split-up, merger,
consolidation, reclassification, stock dividend or
otherwise. In lieu of any such fractional share, the
person entitled to an interest in respect of such a
fractional share shall be entitled, as determined from
time to time by the Board of Directors of the Corporation,
to the cash equivalent of any such fractional share based
upon the market value thereof at the date upon which
rights in respect of any such fractional share shall
accrue.
4.3.9 Unclaimed Dividends. Anything herein to the contrary
notwith-standing, any and all right, titled, interest and
claim in or to any dividends declared, or other
distributions made, by the Corporation, whether in cash,
stock or otherwise, which are unclaimed by the stockholder
entitled thereto for a period of six years after the close
of business on the payment date, shall be and be deemed to
be extinguished and abandoned; and such unclaimed
dividends or other distributions in the possession of the
Corporation, its transfer agents or other agents or
depositories, shall at such time become the absolute
property of the Corporation, free and clear of any and all
claims of any persons whatsoever.
FIFTH: The name and the mailing address of each incorporator is
-----
as follows:
NAME MAILING ADDRESS
---- ---------------
M.A. Brzoska Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
K.A. Widdoes Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
L.J. Vitalo Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
SIXTH: Whenever a compromise or arrangement is proposed between
-----
this Corporation and its creditors, or any class of them, and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
this
7
<PAGE>
Corporation under Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under Section 279 of Title 8 of the Delaware
Code, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class or
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
SEVENTH: For the management of the business and for the conduct of
-------
the affairs of Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further
provided:
7.1 The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the
Bylaws. The phrase "whole Board" and the phrase "total number of
directors" shall be deemed to have the same meaning, to wit, the
total number of directors which the Corporation would have if
there were no vacancies. No election of directors need be by
written ballot.
7.2 At all elections of the directors of this Corporation, each
holder of stock possessing voting power shall be entitled to as
many votes as shall equal the number of his shares of stock,
multiplied by the number of directors to be elected. He may cast
all such votes, in person or by proxy, for a single director or
may distribute them among the number to be voted for or any two
or more of them as he may see fit. Elections of directors need
not be by ballot unless otherwise provided in the Bylaws.
7.3 After the original or other Bylaws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance
with the provisions of Section 109 of the General Corporation Law
of the State of Delaware, and, after the Corporation has received
any payment for any of its stock, the power to adopt, amend, or
repeal the Bylaws of the Corporation may be exercised by the
Board of Directors of the Corporation; provided, however, that
any provision for the classification of directors of the
Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of
the State of Delaware shall be set forth in an initial Bylaw or
in a Bylaw adopted by the stockholders entitled to vote of the
Corporation unless provisions for such classification shall be
set forth in the certificate of incorporation.
7.4 Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder
thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the Corporation shall be authorized to
issue more than one class of stock, no outstanding share of any
class of stock which is denied voting power under the provisions
of the certificate of incorporation shall entitle the holder
thereof to the right to vote at any meeting of stockholders
except as the provisions of paragraph (2) of
8
<PAGE>
subsection (b) of Section 242 of the General Corporation Law of
the State of Delaware shall otherwise require; provided, that no
share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
EIGHTH: The personal liability of the directors of the corporation
------
is hereby eliminated to the fullest extent permitted by paragraph (7) of
subsection (b) of Section 102 of the General Corporation Law of the State
of Delaware, as the same may be amended and supplemented.
NINTH: The Corporation shall, to the fullest extent permitted by
-----
Section 145 of the General Corporation Law of the State of Delaware, 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 the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified may
be entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his 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 a person.
TENTH: From time to time any of the provisions of this certificate of
-----
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the
Corporation by this Certificate of Incorporation are granted subject to the
provisions of this Article TENTH.
3. The foregoing amendment and restatement of Certificate of Incorporation has
been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of Certificate of Incorporation has
been duly approved by the required vote of shareholders in accordance with
(S)228 of the General Corporation Law of the State of Delaware. The total
number of outstanding shares of the corporation is 10,961,250. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than 50%.
DATED and signed on October 31, 1997.
/s/ Kenneth W. Craig
______________________________
Kenneth W. Craig, President
/s/ Bruce H. Haglund
ATTEST: ______________________________
Bruce H. Haglund, Secretary
9
<PAGE>
April 2, 1998
Class A Warrantholder
Renaissance Golf Products, Inc.
Re: Renaissance Golf Products, Inc. Class A Warrant Agreement Amendment
Dear Class A Warrantholder:
As you may know, Renaissance Golf Products, Inc. has recently experienced a
change in control and a move from Huntington Beach, California, to Draper, Utah.
John B. Hewlett is the new Chief Executive Officer and Chairman of the Board of
Directors of the Company. The management team has been reconstituted as has the
Board of Directors.
Since the change, sales have more than doubled to just under $6,000,000, up
from $2,600,000 in 1996. This year, sales during the first two quarters should
exceed total sales for 1997. Management is extremely excited about the new life
breathed into the Company.
As sales grow so do capital requirements. The Company is just completing a
private stock offering to raise up to $2,400,000 and intends to raise additional
capital to permit continued growth. As part of the Company's financing plan,
and in an effort to bring more immediate value to the outstanding Class A
Warrants ("Warrants"), currently out-of-the-money, the Company's Board of
Directors has resolved to offer a change in pricing on the outstanding
Warrant(s) which are set to expire on November 15, 1998.
The Warrants were originally exercisable at $6.50 per share, subject to
adjustment in the event of additional stock issuances and stock splits. As a
result of additional stock being issued and the 4:1 reverse split effectuated on
November 12, 1997, the current exercise price of the Warrants stands at $10.62
per share. Assuming full subscription of the current private placement, the
price of the Warrants will again be adjusted, this time to a price of $9.61.
The Board has determined to offer you, as a current Warrantholder, the
opportunity to have the exercise price of your Warrant(s) reduced to $5.50 per
share, to be effective April 15, 1998, conditioned upon your agreeing to an
Amendment of your Warrant Agreement reducing the Warrant redemption price from
$9.00 to $7.00 and eliminating any further possibility of price adjustments to
the Warrant exercise price.
If you choose to agree to this Board approved Amendment of your Warrant
Agreement to reduce the exercise price of your Warrant(s), please sign the
Acknowledgment and Consent on the bottom of this letter which shall serve as the
"Amendment" to the Warrant Agreement. Please keep a copy for your records and
return the original to the Company at 12187 South Business Park Drive, Suite
100, Draper, Utah 84020.
<PAGE>
Class A Warrantholder
April 2, 1998
Page 2
When the Company receives your signed Amendment, we will notify the
transfer agent of the exercise price change. You will then have until November
15, 1998 to exercise the Warrants, unless the price of the stock traded in the
market exceeds $7.00 for 10 consecutive trading days and the Company chooses to
redeem the Warrants prior to November 15th.
We appreciate your involvement with Renaissance, and look forward to the
continuing success of the Company.
In the event you have any questions, please contact either Wade M.
Mitchell, Vice President of Finance, or Ted B. Paulsen, the Company's Assistant
Secretary at (800) 325-4399.
Very truly yours,
John B. Hewlett,
Chairman of the Board
JBH/tbp
ACKNOWLEDGMENT AND CONSENT
I,_________________________________, as a holder of Class A Warrants of
Renaissance Golf Products, Inc., hereby acknowledge receipt of this proposed
Amendment to my Warrant Agreement and consent to the Amendment, (1) to reduce
the Warrant exercise price from its current level of over $9.00 per share, as
stated on the face of the Warrant and as adjusted pursuant to Section 9 of the
Warrant Agreement, to $5.50 per share, (2) to reduce the Warrant redemption
price from $9.00 per share, pursuant to Section 8 of the Warrant Agreement, to
$7.00 per share, and (3) to eliminate any further price adjustments to my
Warrant(s) pursuant to Section 9 or any other section of the Warrant Agreement.
I further acknowledge that the remainder of my Warrant Agreement, other
than the Amendments expressly agreed to herein, remains effective as drafted.
"WARRANTHOLDER"
Dated:__________________ ______________________________
(Signature)
______________________________
(Print Name)
<PAGE>
EXHIBIT "F"
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH, OR
APPROVED OR DISAPPROVED BY, THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE. NO SUCH COMMISSION OR
AUTHORITY HAS PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF THESE
SECURITIES OR THE ACCURACY OR ADEQUACY OF THE SUBSCRIPTION AGREEMENT PURSUANT TO
WHICH THESE SECURITIES ARE OFFERED, NOR IS IT INTENDED THAT THEY WILL. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED, SOLD, OR TRANSFERRED UNLESS THE COMPANY RECEIVES A
WRITTEN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY TO
EFFECT THAT SUCH OFFER, SALE, AND TRANSFER ARE EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED.
CERTIFICATE AND WARRANT AGREEMENT FOR PURCHASE OF COMMON STOCK
RENAISSANCE GOLF PRODUCTS, INC.
a California corporation
INITIAL ISSUANCE ON _______, 1998
VOID AFTER DECEMBER 31, 2002
This certifies that for value received __________________ or registered
assigns (the "Registered Holder") is the owner of the number of Common Stock
Purchase Warrants ("Warrants") specified above. Each Warrant entitles the
Registered Holder to purchase, subject to the terms and conditions set forth in
this Warrant Agreement, ________ fully paid and nonassessable shares of Common
Stock, no par value of RENAISSANCE GOLF PRODUCTS, INC., a California corporation
(the "Company"), at any time after issuance and prior to the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Agreement with the Subscription Form on the reverse hereof duly executed, at the
Company's office, or its successor or agent (the "Warrant Agent") accompanied by
payment of $5.00 per share (the "Purchase Price") in lawful money of the United
States of America in cash or by official bank or certified check made payable to
the Company. The Company will act as Warrant Agent until further notice to the
Registered Holder.
In the event of certain contingencies provided for in the Warrant Agreement,
the Purchase Price or the number of shares of Common Stock subject to purchase
upon the exercise of each Warrant represented hereby are subject to modification
or adjustment.
Each Warrant represented hereby is exercisable at the option of the Registered
Holder, but no fractional shares of Common Stock will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel the Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M., Utah time, on December 31,
2002. If such date shall in the State of Utah be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall mean 5:00 P.M.,
Utah time, the next following day which in the State of Utah is not a holiday or
a day on which banks are authorized to close.
RENAISSANCE GOLF PRODUCTS, INC.
12187 South Business Park Drive, Suite 100
Draper, Utah 84020
This Warrant shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful. This Warrant Certificate is exchangeable,
upon the surrender hereof by the Registered Holder at the corporate office of
the Warrant Agent, for a new Warrant Certificate or
Exhibit "F" - 1
<PAGE>
Warrant Certificates of like tenor representing an equal aggregate number of
Warrants, each of such new Warrant Certificates to represent such number of
Warrants as shall be designated by such Registered Holder at the time of such
surrender. Upon due presentment with any tax or other governmental charge
imposed in connection therewith, for registration of transfer of this Warrant
Certificate at such office, a new Warrant Certificate or Warrant Certificates
representing an equal aggregate number of Warrants will be issued to the
transferee in exchange thereof, subject to the limitations provided in the
Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered Holder
shall not be entitled to any rights of a stockholder of the Company, including,
without limitation, the right to vote or to receive any notice of any
proceedings of the Company. This Warrant shall not entitle the holder hereof to
any rights as a stockholder of the Company, or to any other rights whatsoever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until or unless, and
except to the extent that, this Warrant shall be exercised.
This Warrant Certificate shall be governed by and construed in accordance with
the laws of the State of Utah.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent. The Company agrees at all times to reserve or hold available a sufficient
number of Common Shares to cover the number of shares issuable upon the exercise
of this and all other Warrants or like tenor then outstanding.
Except as otherwise above provided, this Warrant and all rights hereunder are
transferable by the Registered Holder hereof in person or by duly authorized
attorney on the books of the Company upon surrender of this Warrant, properly
endorsed to the Company, only after approval by the Board of Directors. The
Company may deem and treat the registered owner of this Warrant at any time as
the absolute owner hereof for all purposes and shall not be affected by any
notice to the contrary.
Further Terms and Conditions
----------------------------
The issuance of this Warrant is subject to the following conditions:
1. If at any time or from time to time the Company shall by subdivision,
consolidation, or reclassification of shares, or otherwise, change as a whole
the outstanding Common Shares into a different number of class of shares, the
number and class of shares so changed shall, for the purposes of this Warrant
and the terms and conditions hereof, replace the shares outstanding immediately
prior to such change, and the Warrant purchase price in effect, and the number
of shares purchasable under this Warrant, immediately prior to the date upon
which such change shall become effective, shall be proportionately adjusted.
Irrespective of any adjustment or change in the Warrant purchase price or the
number of Common Shares actually purchasable under this or any other Warrant of
like tenor, the Warrants theretofore and thereafter issued may continue to
express the Warrant purchase price per share and the number of shares
purchasable thereunder as the Warrant purchase price per share and the number of
shares purchasable were expressed upon the Warrants when initially issued.
2. If at any time while this Warrant is outstanding the Company shall
consolidate with or merge into another corporation, the Registered Holder shall
thereafter be entitled upon exercise hereof to purchase, with respect to each
share of Common Shares purchasable hereunder immediately prior to the date upon
which such consolidation or merger shall become effective, the securities or
property to which a holder of one share of Common Shares would have been
entitled upon such consolidation or merger, without any change in, or payment in
addition to, the Warrant purchase price in effect immediately prior to such
merger or consolidation, and the Company shall take such steps in connection
with such consolidation or merger as may be necessary to assure that all of the
provisions of this Warrant shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or property thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect any
Exhibit "F" - 2
<PAGE>
such consolidation or merger unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting therefrom shall
assume by written instrument executed and mailed to the Registered Holder at the
address of such holder shown on the books of the Company, the obligation to
deliver to such holder such securities or property as in accordance with the
foregoing provisions such holder shall be entitled to purchase. A sale of all or
substantially all of the assets of the Company for a consideration (apart from
the assumption of obligations) consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
3. Upon the happening of any event requiring an adjustment of the Warrant
purchase price hereunder, the Company shall forthwith give written notice
thereof to the Registered Holder stating the adjusted Warrant purchase price and
the adjusted number of Common Shares purchasable upon the exercise hereof
resulting from such event and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based, The Board of
Directors of the Company shall determine the computation made hereunder. In case
any voluntary or involuntary dissolution, liquidation, or winding up of the
Company shall at any time be proposed, the Company shall give at least 20 days'
prior written notice thereof to the Registered Holder stating the date on which
such event is to take place and the date (which shall be at least 20 days after
the giving of such notice) as of which the holders of Common Shares of record
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such dissolution, liquidation, or winding up (on which
date, in the event such dissolution, liquidation, or winding up shall actually
take place, this Warrant and all rights with respect hereto shall terminate).
Notices pursuant to this paragraph shall be given by first class mail, postage
prepaid, addressed to the registered holder of this Warrant at the address of
such holder appearing in the records of the Company.
4. At any time during the period the Warrants are exercisable, the Company
may redeem the Warrants at $.01 per Warrant upon 30 days' prior written notice
if the closing bid price of the Common Stock exceeds $7.00 for 10 consecutive
trading days ending not more than 10 days prior to the mailing of the notice of
redemption.
5. For the purposes of the foregoing paragraphs (1) through (3), the term
"Common Shares" shall include the aggregate number of shares that the Company,
by its Articles of Incorporation, as from time to time amended, is authorized to
issue, which are not limited to a fixed sum or percentage of the par value in
respect of the rights of the holders thereof to participate in dividends or in
distribution of assets upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be duly
executed by two of its officers thereunto duly authorized and its corporate seal
to be imprinted hereon.
DATED:_____________________ RENAISSANCE GOLF PRODUCTS, INC.
By: ________________________________________
John B. Hewlett, Chief Executive Officer
COUNTERSIGNED:
RENAISSANCE GOLF PRODUCTS, INC., as Warrant Agent
By: _____________________________ (Corporate Seal)
Bruce H. Haglund, Secretary
Exhibit "F" - 3
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated as of October 29,
1997, by and between Renaissance Golf Products, Inc., a Delaware corporation
("RGPI"), and John B. Hewlett, an individual, jointly and severally
(collectively referred to as the "Borrower"), and AKA Charitable Remainder
Unitrust # 1 ( "Lender"). This Agreement and the Revolving Promissory Note
attached as Exhibit "A" replace any and all previously executed loan agreements
and promissory notes executed between the parties hereto.
1. DEFINITIONS. As used herein, the following terms have the meanings
indicated:
1.1 "ACCOUNT," "ACCOUNTS" OR "OPEN ACCOUNTS" shall mean any right to
payment on Open Orders.
1.2 "ACCOUNT DEBTOR" shall mean the Person or entity obligated on an
Account.
1.3 "AFFILIATE," as applied to any Person, shall mean any other
Person directly or indirectly controlling, controlled by, or under common
control with, that Person.
1.4 "CODE" shall mean the Utah Uniform Commercial Code, except where the
Uniform Commercial Code of another state governs the perfection of a security
interest in Collateral located in that state.
1.5 "COLLATERAL" shall mean all Inventory, Open Orders, Accounts and
all other assets of the Borrower securing the Obligations as described herein.
1.6 "DEBT" shall mean, at any date, the aggregate amount of, without
duplication, all obligations of Borrower for borrowed money.
1.7 "EVENT OF DEFAULT" shall mean an event described in Section 8 of this
Agreement.
1.8 "INVENTORY" shall mean goods held for sale or lease in the ordinary
course of business, work in process and any and all raw materials used in
connection with operations.
1.9 "LOAN" OR "LOANS" shall mean one or more of the Loans extended by
Lender to Borrower.
1.10 "NOTE" shall mean any Note required of Borrower by Lender.
1.11 "OBLIGATIONS" shall mean all present and future liabilities and
obligations of Borrower to Lender hereunder and all other liabilities and
obligations of Borrower to Lender of every kind and description, now existing or
hereafter owing, matured or unmatured, direct or indirect, absolute or
contingent, joint or several, including any extensions and renewals thereof and
substitutions therefor.
1.12 "OPEN ORDER" OR "OPEN ORDERS" shall mean each order for the purchase
of goods from RGPI which have arisen, have been conformed from, or will arise at
any time through the term of this Agreement and which have not been filled.
1.13 "OPEN PURCHASE ORDER" shall mean each purchase order issued by RGPI
for Open Orders.
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1.14 "PERSON" shall mean and include natural persons, corporations,
limited partnerships, general partnerships, joint ventures, associations, joint
stock companies, companies, trusts, banks, trust companies, business trusts or
other organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
1.15 "POTENTIAL EVENT OF DEFAULT" shall mean any condition that with the
giving of notice or passage of time or both would, unless cured or waived,
become an Event of Default.
1.16 "REVOLVING CREDIT LOANS" shall mean loans from Lender to Borrower
under the terms of this Agreement.
1.17 "REVOLVING LOAN COMMITMENT" shall mean, Lender's commitment, in
accordance with the terms of this Agreement, to make Revolving Credit Loans up
to the maximum aggregate principal amount of $5,000,000.00.
1.18 "REVOLVING PROMISSORY NOTE" shall mean a promissory note executed by
Borrower payable to Lender pursuant to this Agreement.
1.19 "TERMINATION DATE" shall mean December 31, 1999, unless
terminated earlier pursuant to Section 8 hereof, extended pursuant to Section 8
hereof, or as mutually modified in writing by the parties.
2. LOANS.
2.1 REVOLVING CREDIT LOANS. Subject to the terms and conditions of this
Agreement and the Revolving Promissory Note entered into between the parties,
Lender agrees to make Revolving Credit Loans to Borrower from time to time from
the date of this Agreement to, but not including, the Termination Date, up to
the maximum aggregate principal amount of $5,000,000, which Revolving Credit
Loans may be repaid and reborrowed at any time up to the Termination Date. The
aggregate unpaid principal amount of the Revolving Credit Loans shall be paid by
Borrower to Lender on the Termination Date or upon terms as agreed in writing by
the parties. The Revolving Credit Loans shall be evidenced by a Revolving
Promissory Note in the form attached hereto as Exhibit "A."
2.1.1 INTEREST ON REVOLVING CREDIT LOANS. Each advance of a Revolving
Credit Loan shall bear interest from the date of disbursement on the unpaid
principal amount thereof until repaid in full, at an annual interest rate equal
to 12% per annum. Interest on each advance shall be payable monthly in arrears
on or before the 10th day of the month for each advance received during the
previous month, commencing on November 10, 1997 and on the date all Revolving
Credit Loans are paid in full.
2.1.2 AVAILABILITY OF REVOLVING CREDIT LOANS. Borrower shall be
entitled to borrow on the Revolving Credit Loan at any time so long as the
Revolving Credit Loans outstanding do not exceed the Revolving Loan Commitment
in an amount equal to the lesser of $5,000,000 or 80% of RGPI's current assets,
which for purposes of this Agreement shall mean cash, accounts receivable aged
less than 90 days, and inventory.
2.1.3 OVERADVANCE. The total balance of Revolving Credit Loans
outstanding from time to time, shall not at any time exceed the Revolving Loan
Commitment. Any amount held by Borrower in excess of the Revolving Loan
Commitment shall be repaid by Borrower no later than the 10th day of the month
the excess was created.
2.2 PAYMENTS. All payments hereunder shall be in United States
Dollars and in immediately available funds. All interest shall be computed on
the basis of a 360-day year and actual
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days elapsed. All payments of principal, interest, fees and other charges on the
Revolving Credit Loan shall be made to AKA Charitable Remainder Unitrust # 1 and
delivered personally, by registered mail or by overnight carrier to the
attention of Ralph W. Rasmussen, Esq., Trustee, at 261 East, 1200 South, Orem,
Utah 84059. Lender is hereby authorized to note the date, amount and interest
rate of the Loan and each payment of principal and interest with respect thereto
on Lender's books and records, which notations shall constitute presumptive
evidence of the accuracy of the information noted.
2.3 OVERDUE PAYMENT CHARGE. Overdue payments of principal (and of
interest to the extent permitted by law) on the Loan shall be subject to an
additional payment equal to 4% per month of the total overdue payment amount
from and after the due date, until such overdue amount has been paid in full.
3. CONDITIONS TO EACH EXTENSION OF ALL LOANS. The obligation of Lender to
make any Loan hereunder shall be subject to the fulfillment of each of the
following conditions to Lender's satisfaction:
3.1 EXECUTED NOTE. Lender shall have received the Note duly executed and
delivered by Borrower;
3.2 FINANCING STATEMENTS. Lender shall have received (a) executed copies
of financing statements (Form UCC-1), in form and substance satisfactory to
Lender, duly filed under the Uniform Commercial Code in all such jurisdictions
as may be necessary, or in Lender's opinion desirable, to perfect Lender's
security interests in the Collateral; and (b) evidence, in form and substance
acceptable to Lender, that all filings, recordings and other actions that are
necessary or advisable, in the opinion of Lender, in order to establish,
protect, preserve and perfect Lender's security interests and liens as legal,
valid and enforceable first security interests and liens in the Collateral have
been effected;
3.3 WARRANTIES. The representations and warranties of Borrower as set
forth herein shall be true and correct on the date of the making of each Loan
with the same effect as though such representations and warranties had been made
on and as of such date;
3.4 NO DEFAULT. There shall have occurred no Event of Default or
Potential Event.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Agreement, RGPI makes the following representations and warranties which shall
survive the making and repayment of the Loans:
4.1 CORPORATE EXISTENCE. RGPI is duly organized, validly existing and in
good standing under the laws of Delaware, and is duly qualified to conduct
business as a foreign corporation in all jurisdictions where the failure to do
so would have a material adverse effect on its business.
4.2 REQUISITE POWER. RGPI has all requisite corporate power to borrow the
sums provided for in this Agreement, and to execute and deliver this Agreement
and each other document, contract and instrument delivered to Lender in
connection with this Agreement to which RGPI is required hereunder to be a
party. The execution, delivery and performance of this Agreement have been duly
authorized by the Board of Directors of RGPI and does not require any consent or
approval of the stockholders of RGPI.
4.3 BINDING AGREEMENT. This Agreement and the Note when delivered pursuant
hereto, will constitute the valid and legally binding obligations of Borrower,
enforceable against Borrower in accordance with their terms, except as the
enforceability thereof may be affected by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
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4.4 OTHER AGREEMENTS. The execution, delivery and performance of this
Agreement and the Note will not violate any provision of law or regulation or
any order of any governmental authority, court, arbitration board or tribunal or
the Articles of Incorporation or Bylaws of RGPI, or result in the breach of,
constitute a default under, contravene any provisions of, or result in the
creation of any security interest, lien, charge or encumbrance upon any of the
property or assets of Borrower pursuant to any indenture or agreement to which
Borrower or any of its properties is bound.
4.5 LITIGATION. There is no litigation, investigation or proceeding in any
court or before any arbitrator or regulatory commission, agency or other
governmental authority pending, or threatened against or affecting Borrower or
any of their respective properties, which, if adversely determined would have a
material adverse effect on the business, operation or condition, financial or
otherwise, of Borrower.
4.6 FINANCIAL CONDITION. RGPI's most recent financial statements, copies
of which have heretofore been delivered to Lender, are true, complete and
correct and fairly present the financial condition of RGPI, including operating
results, as of the accounting period referenced therein. The financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied. There has been no material adverse change in
the business, operations or conditions, financial or otherwise, of RGPI since
the date of such financial statements. RGPI does not have any material
liabilities for taxes, long-term leases or long-term commitments, except as
disclosed in the aforementioned financial statements.
4.7 COLLATERAL.
4.7.1 RGPI owns and has the right and power to grant a security
interest in the Collateral;
4.7.2 The Collateral is genuine and free from liens, adverse claims,
set-offs, defaults, prepayments, defenses and encumbrances except those in favor
of AKA Charitable Remainder Unitrust #2 ("AKA #2) in connection with
indebtedness of Borrower to AKA #2, which indebtedness Lender has agreed will be
repaid out of the proceeds of the Loan;
4.7.3 No bills of lading, warehouse receipts or other documents or
instruments of title are outstanding with respect to the Collateral or any
portion of the Collateral in favor of a person other than RGPI; and
4.7.4 The principal place of business and chief office of Borrower is
at the address specified in Section 9 herein.
4.8 CONSENTS. No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration, filing or declaration with,
any governmental authority or agency is required in connection with the
execution, delivery and performance by Borrower of this Agreement or the Note or
the transactions contemplated hereby or thereby.
5. AFFIRMATIVE COVENANTS. RGPI agrees that until payment in full of all
Obligations, RGPI shall comply with the following covenants:
5.1 BOOKS AND RECORDS. RGPI shall maintain, in accordance with sound
accounting practices, accurate records and books of account showing, among other
things, all Inventory and Accounts, the proceeds of the sale or other
disposition thereof and the collections therefrom. RGPI shall not change the
accounting method used to determine RGPI's Inventory cost without notification
to Lender. RGPI shall permit any representative of Lender, at any reasonable
time, to inspect, audit, examine and make extracts from or copies of all books,
records and other data, to inspect any of RGPI's properties and to
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confirm balances due on Accounts by direct inquiry to Account Debtors, and shall
furnish Lender with all information regarding the business or finances of RGPI
promptly upon Lender's request.
5.2 COLLATERAL. RGPI shall execute and deliver to Lender any
instrument, document, financing statement, assignment or other writing which
Lender may deem necessary or desirable to carry out the terms of this Agreement,
to perfect Lender's security interest in any Collateral for the Obligations, or
to enable Lender to enforce its security interest in any of the foregoing.
5.3 FINANCIAL STATEMENTS. RGPI shall furnish to Lender:
5.3.1 Upon Lender's request and as soon as available, all 10-KSB, 10-
QSB, and any and all other documents prepared and filed by RGPI with the
Securities and Exchange Commission;
5.3.2 Upon Lender's request and as soon as available, a copy of its
annual, year-end, audited financial statement consisting of at least a balance
sheet and income statement, prepared according to generally accepted accounting
principles consistently applied, and compiled by an independent certified public
accountant satisfactory to Lender;
5.3.3 A copy of its monthly, unaudited financial statement consisting
of at least a balance sheet and income statement, prepared according to
generally accepted accounting principles consistently applied, which monthly
financial statement shall be delivered to Lender on or before the close of the
next calendar month to which the monthly financial statement relates; and
5.3.4 Upon Lender's request such additional information, reports
and/or statements as Lender may from time to time, reasonably request.
5.4 TAXES AND PREMIUMS. RGPI shall pay and discharge all taxes,
assessments, governmental charges and real and personal property taxes,
including, but not limited to, federal and state income taxes, employee
withholding taxes and payroll taxes, and all premiums for insurance required
hereunder prior to the date upon which penalties are attached thereto.
5.5 INSURANCE. RGPI shall maintain and keep in force insurance of the
types and in amounts customarily carried in its lines of business, including,
but not limited to, fire, public liability, property damage, business
interruption and worker's compensation, such insurance to be carried with
companies and in amounts reasonably satisfactory to Lender, and shall deliver to
Lender from time to time, as Lender may request, schedules setting forth all
insurance then in effect. RGPI shall obtain, within 30 days of the execution of
this Agreement, and maintain during the term of the Note life insurance on the
life of John B. Hewlett, its Chairman of the Board and one of the Borrowers, in
the amount of $5,000,000 naming the Lender as the beneficiary under such policy.
RGPI shall provide a copy of such policy to Lender as soon as practicable after
the policy is obtained.
5.6 NOTICE. RGPI shall promptly advise Lender in writing of (a) each
location at which Inventory or other assets are or will be kept, and of the
change of RGPI's name, trade name or other name under which it does business or
of any such new or additional name; (b) the occurrence of any Event of Default
or Potential Event of Default; (c) any litigation pending or threatened against
RGPI where the amount or amounts in controversy exceed $50,000.00; (d) any
unpaid taxes of RGPI which are more than 15 days delinquent; and (e) any other
matter that might materially or adversely affect RGPI's financial condition,
operations, property or business.
5.7 CHANGE IN MANAGEMENT. RGPI shall provide Lender written notice, as
soon as possible, but in no event less than 10 days before, any planned material
changes in its general or financial management.
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5.8 BOARD OF DIRECTORS SEAT. RGPI agrees to nominate and elect Ralph W.
Rasmussen, Esq. to serve as a member of the Board of Directors of RGPI during
the term of the Note as a condition subsequent to this Agreement. Failure to
elect Mr. Rasmussen as a member of the Board of Directors prior to October 31,
1997 shall be deemed an Event of Default.
5.9 STOCK PURCHASE WARRANTS. As additional consideration for the Loan,
RGPI agrees to grant Lender stock purchase warrants to purchase 200,000 shares
of the Common Stock of RGPI at an exercise price of $1.50, 100,000 shares of the
Common Stock of RGPI at an exercise price of $2.00, and 100,000 shares of the
Common Stock of RGPI at an exercise price of $3.00 (the "Warrants"). The
Warrants shall be exercisable immediately and shall expire on December 31, 2002.
A copy of the Warrant Agreement is attached hereto as Exhibit "B." The Loan
shall be convertible into shares of Common Stock in exercise of the Warrants at
the election of Lender. RGPI agrees to grant "piggy-back" registration rights
on the shares issuable upon exercise of the Options in accordance with the terms
of the Warrant Agreement.
6. NEGATIVE COVENANTS. RGPI agrees that during the term of this Agreement or
until payment in full of all Obligations, RGPI shall not do any of the following
without Lender's prior written consent:
6.1 LOANS. Make loans or advances to any Person except credit extended to
employees or to customers in the ordinary course of its business.
6.2 CONTINGENT LIABILITIES. Assume, guarantee, endorse, contingently agree
to purchase or otherwise become liable for the obligation of any Person
including RGPI or Affiliate, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, and (b) contingent liabilities in favor of Lender.
6.3 MORTGAGES, LIENS, ETC. Mortgage, pledge, hypothecate, grant or
contract to grant any security interest of any kind in the Collateral, to anyone
except Lender.
6.4 INVOLUNTARY LIENS. Permit any involuntary liens to arise with respect
to any property or assets including but not limited to those arising from the
levy of a writ of attachment or execution, or the levy of any state or federal
tax lien which lien shall not be removed within a period of 30 days.
6.5 SALE AND LEASEBACK. Enter into any sale-leaseback transaction.
6.6 MERGERS AND ACQUISITIONS. Enter into any merger or consolidation, or,
acquire all or substantially all the assets of any Person.
6.7 REDEMPTIONS, DIVIDENDS AND DISTRIBUTIONS. Redeem or repurchase stock
or partnership interests, declare or pay any dividends or make any other
distribution, whether of capital, income or otherwise, and whether in cash or
other property.
6.8 EVENT OF DEFAULT. Permit a default to occur under any document or
instrument evidencing Debt incurred under any indenture, agreement or other
instrument under which such Debt may be issued, or any event to occur under any
of the foregoing which would permit any holder of the Debt outstanding
thereunder to declare the same due and payable before its stated maturity,
whether or not such acceleration occurs or such default be waived.
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7. SECURITY AGREEMENT.
7.1 GRANT OF SECURITY INTEREST. To secure all of RGPI's Obligations
hereunder as well as other Obligations to Lender, RGPI hereby grants and
transfers to Lender a continuing security interest in the following whether now
owned or hereafter acquired:
7.1.1 All of RGPI's Open Accounts, Open Orders, Inventory and other
assets;
7.1.2 All other Collateral which Lender and RGPI may designate as
additional security from time to time by separate instruments.
7.2 LENDER'S RIGHTS. Lender shall have the right to notify any Account
Debtor to make payments thereon directly to Lender, to take control of the cash
and non-cash proceeds of any Account and to settle any Account, which right
Lender may exercise at any time in the Event of Default.
8. TERM OF AGREEMENT.
8.1 INITIAL TERM. The initial term of this Agreement shall be from October
29, 1997 until December 31, 1999, the Termination Date.
8.2 EXTENSION OF TERM. This Agreement shall automatically renew each
calendar year for one additional calendar year term if neither party provides
notice of termination to the other party on or before 60 days before the end of
the then current calendar year.
9. EVENTS OF DEFAULT.
9.1 EVENTS OF DEFAULT. The following shall constitute Events of Default
for purposes of this Agreement:
9.1.1 Borrower shall fail to pay when due any installment of
principal or interest or any other payment payable hereunder or under the Note;
9.1.2 Borrower shall fail to perform or observe any of the terms,
provisions, covenants, conditions, agreements or obligations contained in this
Agreement;
9.1.3 There shall occur the entry of an order for relief or the
filing of an involuntary petition with respect to Borrower under the United
States Bankruptcy Code; there shall occur the appointment of a receiver,
trustee, custodian or liquidator of or for any part of the assets or property of
Borrower; or Borrower shall make any general assignment for the benefit of
creditors.
9.1.4 Any financial statement, representation or warranty made or
furnished by Borrower in connection with this Agreement should prove to be in
any material respect incorrect;
9.1.5 Lender's security interest in or lien on any portion of the
Collateral shall become impaired or otherwise unenforceable;
9.1.6 Any person shall obtain an order or decree in any court of
competent jurisdiction enjoining or prohibiting Borrower or Lender or either of
them from performing this Agreement, and such proceedings shall not be dismissed
or such decree shall not be vacated within 10 days after the granting thereof;
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9.1.7 Borrower shall neglect, fail or refuse to keep in full force
and effect any governmental permit or approval which is necessary to the
operation of its business;
9.1.8 All or substantially all of the property of Borrower shall be
condemned, seized or otherwise appropriated;
9.2 NOTICE OF DEFAULT AND CURE OF POTENTIAL EVENTS OF DEFAULT. Lender
shall give Borrower at least 10 days' written notice of any event which
constitutes or, with the lapse of time would become an Event of Default, during
which time Borrower shall be entitled to cure such Default.
9.3 LENDER'S REMEDIES. Upon the occurrence of an Event of Default and
failure to timely cure such Event of Default, at the sole and exclusive option
of Lender, and upon written notice to Borrower, Lender may (a) declare the
principal of and accrued interest on the Loans immediately due and payable in
full, whereupon the same shall immediately become due and payable; (b) terminate
this Agreement as to any future liability or obligation of Lender, but without
affecting Lender's rights and security interest in the Collateral and without
affecting the Obligations owing by Borrower to Lender; and/or (c) exercise its
rights and remedies hereunder and under the Note, or any security agreement or
deed of trust securing the Obligations, and in addition to the rights and
remedies given it by this Agreement, all of the rights and remedies of a secured
party under the Code and other applicable laws with respect to all of the
Collateral.
9.4 ADDITIONAL REMEDIES. Notwithstanding any other provision of this
Agreement, upon the occurrence of any event, action or in action by Borrower, or
in the event any action or inaction is threatened which Lender reasonably
believes will materially affect the value of the Collateral, Lender may take
such legal actions as it deems reasonably necessary under the circumstances to
protect the Collateral, including but not limited to, seeking injunctive relief
and the appointment of a receiver, irrespective of whether an Event of Default
or Potential Event of Default has occurred under this Agreement.
10. MISCELLANEOUS.
10.1 COSTS AND EXPENSES. Borrower shall reimburse Lender for all costs
and expenses, including reasonable attorney fees, expended or incurred by Lender
in collecting any sum which becomes due Lender under this Agreement, the Note,
or any other agreement delivered hereunder or in connection herewith,
irrespective of whether suit is filed, or in the protection, perfection,
preservation or enforcement of any and all rights of Lender in connection with
this Agreement, the Note, or any other agreements delivered hereunder or in
connection herewith, including, without limitation, the fees and costs incurred
in any out-of-court work-out or a bankruptcy or reorganization proceeding.
10.2 CUMULATIVE RIGHTS AND NO WAIVER. Each and every right and remedy
granted to Lender hereunder or under any other document delivered hereunder or
in connection herewith, shall be cumulative and no one such right or remedy
shall be exclusive of any other. No failure on the part of Lender to exercise,
and no delay in exercising, any right or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver by Lender of any
right or remedy preclude any other or future exercise thereof or the exercise of
any other right or remedy.
10.3 APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and interpreted and construed in
accordance with the laws of the State of Utah and venue and jurisdiction with
respect hereto shall be with any court of competent jurisdiction located in Salt
Lake County, State of Utah.
10.4 LIEN AND RIGHT OF SETOFF. Borrower hereby grants to Lender a
continuing lien for all Obligations of Borrower to Lender upon any and all Open
Accounts and the proceeds thereof, now or
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hereafter held or received by or in transit to Lender from or for Borrower,
whether for safekeeping, custody, pledge, transmission, collection or otherwise,
and also upon any and all deposits (general or special) and credits of Borrower
with, and any and all claims of Borrower against Lender at any time existing.
Upon the occurrence of any Event of Default, Lender is hereby authorized at any
time and from time to time, without notice to Borrower or any other person, to
setoff, appropriate and apply any or all items hereinabove referred to against
all Obligations of Borrower whether under this Agreement or otherwise, and
whether now existing or hereafter arising.
10.5 NOTICES. Any notice required or permitted to be given shall be given
in writing and shall be deemed to have been given when deposited in the United
States mail certified, return receipt requested, with first-class postage
prepaid and properly addressed or with a commercial express mail service (e.g.
Federal Express, Airborne, etc.) for next day delivery to the address of the
party receiving the notice as set forth in this Section 10.5. For the purposes
hereof, the addresses of the parties hereto shall, until further notice given as
herein provided, be as follows:
Lender: AKA Charitable Remainder Unitrust #1
Attention: Ralph W. Rasmussen, Esq.
261 East 1200 South
Orem, Utah 84058
Borrower: Renaissance Golf Products, Inc.
Attention John B. Hewlett
2919 East Granite Hollow Street
Sandy, Utah 84092
Copy to: Bruce H. Haglund, Esq.
Gibson, Haglund & Johnson
2010 Main Street, Suite 400
Irvine, California 92614
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
10.7 INDEMNIFICATION. Borrower shall, at all times, defend and indemnify
and hold Lender harmless from and against any and all liabilities, claims,
demands, causes of action, losses, damages, expenses, attorney fees, costs,
settlements, judgments or recoveries arising out of or resulting from (a) any
breach of the representations, warranties, agreements or covenants made by
Borrower herein; (b) any suit or proceeding of any kind or nature whatsoever
against Lender arising from or connected with the transactions contemplated by
this Agreement or any of the documents, instruments or agreements to be executed
pursuant hereto or any of the rights and properties assigned to Lender
hereunder; and/or (c) any suit or proceeding that Lender may deem necessary or
advisable to institute, in the name of Lender, Borrower or both, against any
other person, company or entity, for any reason whatsoever to protect the rights
of Lender hereunder or under any of the documents, instruments or agreements
executed or to be executed pursuant hereto. Any obligation or liability of
Borrower to Lender under this Section 10.7 shall survive the expiration or
termination of this Agreement and the repayment of all Loans and the payment or
performance of all other Obligations of Borrower to Lender.
10.8 ASSIGNMENTS. The provisions of this Agreement are hereby made
applicable to and shall inure to the benefit of Lender's successors and assigns
and Borrower's successors and assigns; provided, however, that Borrower may not
assign or transfer its rights or Obligations under this Agreement without the
prior written consent of Lender.
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10.9 HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of the Agreement for any purpose or be given any substantive effect.
10.10 DEFINITIONS. Any of the terms defined in this Agreement may,
unless the context otherwise requires, be used in the singular or the plural
depending on the reference.
10.11 ACCOUNTING TERMS. All accounting terms not specifically defined in
this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
generally accepted accounting principles applied on a consistent basis, as in
effect on the date hereof, except as otherwise specifically prescribed herein.
10.12 SEVERABILITY. Any provision of this Agreement and the Note which is
prohibited or unenforceable in any jurisdiction, shall be, only as to such
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of this Agreement and the Note shall remain
valid.
10.13 DISPUTE RESOLUTION. Any dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance or breach of
this Agreement shall be resolved through arbitration to be presided over by a
mutually agreeable arbitrator. If the parties cannot agree upon a specific
arbitrator, one shall be appointed by the presiding judge in the county in which
the matter is to be heard, provided that the arbitrator so appointed shall not
be currently or formerly associated with the Borrower or Lender.
10.14 COMPLETE AGREEMENT. This written Agreement, together with the
exhibits is intended by Lender and Borrower as a final expression of their
agreement and is intended as a complete statement of the terms and conditions of
their agreement.
(end of page)
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IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to be
executed on the day and year first written at the head of this Agreement.
"Borrower" RENAISSANCE GOLF PRODUCTS, INC.
a Delaware Corporation
By: /s/ John B. Hewlett
_________________________________
John B. Hewlett,
Chairman of the Board
ATTEST:
/s/ Bruce H. Haglund
_____________________________
Bruce H. Haglund, Secretary
/s/ John B. Hewlett
"Borrower" ____________________________________
JOHN B. HEWLETT
"Lender" AKA CHARITABLE REMAINDER
UNITRUST #1
By: /s/ Ralph W. Rasmussen
_________________________________
Ralph W. Rasmussen,
Trustee
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REVOLVING PROMISSORY NOTE
(FIXED 12% INTEREST)
Up to $5,000,000.00 October 29, 1997
Salt Lake City, Utah
On December 31, 1999, the undersigned, Renaissance Golf Products, Inc., a
Delaware corporation, and John B. Hewlett, an individual, jointly and severally
(collectively referred to as "Borrower"), promise to pay to the order of AKA
Charitable Remainder Unitrust #1 ("Lender"), in lawful money of the United
States of America and in immediately available funds, the principal sum of Five
Million Dollars ($5,000,000.00), or so much thereof as may be advanced and
outstanding, in accordance with the terms of the Loan Agreement between Borrower
and Lender dated October 29, 1997, with interest thereon to be computed on each
advance from the date of its disbursement at a rate computed on the basis of a
360-day year, actual days elapsed, equal to twelve percent (12%) per year.
All or any portion of the principal of this Note may be borrowed, repaid
and reborrowed from time to time prior to maturity, provided at the time of any
borrowing no Event of Default (as herein defined) exists, and provided further
that the total borrowings outstanding at any one time shall not exceed the
principal amount stated above. Each borrowing and repayment hereunder shall be
noted in the books and records of Lender. The excess of borrowings over
repayments shall evidence the principal balance due hereon from time to time and
at any time. Borrowings hereunder shall be conclusively presumed to have been
made to or for the benefit of Borrower when made as noted in such books and
records.
Interest accrued on this Note shall be payable in arrears on the tenth
(10th) day of each month, commencing November 10, 1997.
The occurrence of any of the following with respect to Borrower shall
constitute an "Event of Default" hereunder:
1. The failure to make any payment of principal or interest when due under
this Note;
2. The filing of a petition by or against any of such parties under any
provisions of the Bankruptcy Code;
3. The appointment of a receiver or an assignee for the benefit of creditors;
4. The commencement of dissolution or liquidation proceedings or the
disqualification of any such parties which is a corporation, partnership,
joint venture or any other type of entity;
5. The death or incapacity of any of such parties who is an individual;
6. Any financial statement provided by or on behalf any such parties to Lender
is false or misleading;
7. Any material default in the payment or performance of any obligation, or
any default under any provisions of any contract or instrument pursuant to which
any of such parties has incurred any obligation for borrowed money, any purchase
obligation or any other liability of any kind to any person or entity, including
Lender;
Page 1 of Two
<PAGE>
8. Any sale or transfer of all or a substantial or material part of the assets
of any of such parties other than in the ordinary course of business; or
9. Any violation, breach or default under any letter agreement, security
agreement, or any other contract or instrument executed in connection with
this Note or securing this Note.
Upon the occurrence of any Event of Default and upon ten (10) days written
notice thereof to Borrower without cure of the Event of Default within ten (10)
days of such notice, Lender, at its option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, protest or notice of dishonor all of which are expressly
waived by Borrower, and Lender shall have no obligation to make any further
advances hereunder. Borrower agrees to pay all costs and expenses, including
reasonable attorneys' fees, expended or incurred by Lender in connection with
the enforcement of this Note or the collection of any sums due hereunder and
irrespective of whether suit is filed. Any principal or interest not paid when
due hereunder shall bear an additional cost equal to four percent (4%) per
month of the total overdue payment amount from and after the due date, until
such overdue amount has been paid in full.
This Note and all matters relating thereto, shall be governed by the laws
of the State of Utah.
"BORROWER"
RENAISSANCE GOLF PRODUCTS, INC.
By: /s/ John B. Hewlett
____________________________
JOHN B. HEWLETT, CHAIRMAN
/s/ John B. Hewlett
_______________________________
JOHN B. HEWLETT
Page 2 of Two
<PAGE>
This FINANCING STATEMENT is presented for filing and will remain effective with
certain exception ????????????????????????????????????????????
<TABLE>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------------
1. DEBTOR 1A. Federal Tax No.
RENAISSANCE GOLF PRODUCTS, INC. 86-06648949
- - ------------------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1.D ZIP CODE
5812 Machine Drive Huntington Beach, CA 92649
- - ------------------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) SOC. SEC. #
John B. HEWLETT 528-80-92
- - ------------------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
2919 East Granite Hollow Street Sandy, Utah 84092
- - ------------------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO.
NAME AKA Charitable Remainder Unitrust # 1
MAILING ADDRESS 261 East 1200 South
CITY OREN STATE UTAH ZIP CODE 84058
- - ------------------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- - ------------------------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (includes description of real property on which
?????????????????????????????????????????????????.
All assets of the Company currently held or obtained by the Company while this financing statement remains effective.
- - ------------------------------------------------------------------------------------------------------------------------------------
7. CHECK [X] 7A. [_] PRODUCTS OF COLLATERAL 7B. DEBTOR (S)SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE ARE ALSO COVERED INSTRUCTION (o) (7EM:
[_](1) [_](2) [_](3) [_](4)
- - ------------------------------------------------------------------------------------------------------------------------------------
8. CHECK [X] [_] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC (s) 105 (1) (n)
IF APPLICABLE
- - ------------------------------------------------------------------------------------------------------------------------------------
9. DATE) C 10. THIS SPACE FOR USE OF FILING OFFICER
RENAISSANCE GOLF PRODUCT, INC. O (DATE, TIME, FILE NUMBER
D AND FILING OFFICER)
SIGNATURE OF DEBTOR (91 BRUCE H. HAGLUND October 31, 1997 E
- - ----------------------------------------------------------------------------------------
BRUCE H. HAGLUND 1
_________________________
JOHN B. HEWLETT
TYPE OR PRINT NAME(S) OF DEBTOR (S) 2
- - ----------------------------------------------------------------------------------------
3
SIGNATURE(S) OF SECURED PARTY(IES) 4
- - ----------------------------------------------------------------------------------------
5
========================================================================================
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6
========================================================================================
11. Return copy to: 7
NAME Bruce H. Haglund 8
ADDRESS 2010 Main Street, Suite 400
CITY Irvine 9
STATE California 0
ZIP CODE 92614
- - ----------------------------------------------------------------------------------------
FORM UCC: 1
APPROVED BY THE SECRETARY OF STATE
- - ------------------------------------------------------------------------------------------------------------------------------------
(1) FILING OFFICER COPY
</TABLE>
<PAGE>
EXHIBIT "C"
RENAISSANCE GOLF PRODUCTS, INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made and entered into as of the 24th
day of October, 1997, by and between RENAISSANCE GOLF PRODUCTS, INC., a Delaware
corporation, and AKA Charitable Remainder Unit Trust Number 1 (the "Holder"), a
holder of certain options (as hereinafter defined) to purchase shares of Common
Stock of the Company. In consideration of the mutual covenants set forth
herein, the parties agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
(a) "Commission" shall mean the Securities and Exchange Commission.
(b) "Company" shall mean RENAISSANCE GOLF PRODUCTS, INC., a Delaware
corporation.
(c) "Demand Registration" shall mean a registration of Registrable Shares
requested by a Holder or Holders under Section 2(a) below.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
of the Commission promulgated thereunder.
(e) "Holder" shall mean AKA Charitable Remainder Unit Trust Number 1 or
any record holder of all or part of the of the Options on the Company's books.
(f) "Options" shall mean stock options to purchase 200,000 shares of the
Common Stock of RGPI at an exercise price of $1.50, 100,000 shares of the Common
Stock of RGPI at an exercise price of $2.00, and 100,000 shares of the Common
Stock of RGPI at an exercise price of $3.00, all of which are evidenced by Non-
Qualified Stock Option Agreements dated October 24, 1997.
(g) "Options Shares" shall mean shares of Common Stock of the Company
issuable upon exercise of the Options.
(h) "Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other political subdivision thereof.
(i) "Registrable Shares" shall mean any Option Shares and any shares of
Common Stock of the Company issued as a dividend or other distribution with
respect to, in exchange for or in replacement of Option Shares; provided,
however, that Registrable Shares shall not include any shares which (i) have
been previously registered and sold in a public distribution or previously sold
pursuant to Rule 144, or (ii) in the opinion of counsel to the Company, are
determined to be available for sale by their current Holder to the public in
"broker's transactions" or transactions directly with a market maker (as those
terms are used in Rule 144(f)), pursuant to Rule 144 or otherwise, in a single
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive legends
(not relating to a buyer being an affiliate of the Company) with respect to that
Act are or may be removed upon the consummation of such sale.
Exhibit "C" - 1
<PAGE>
(j) The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(k) "Registration Expenses" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include Selling Expenses. Registration
Expenses shall include the reasonable fees and expenses of one special counsel
(who is reasonably acceptable to the Company) for all participating Holders.
Registration Expenses shall exclude the compensation of regular employees of the
Company which shall be paid in any event by the Company.
(l) "Rule 144" shall mean Rule 144 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule or provision then in force that may be promulgated by the
Commission.
(m) "Rule 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule or provision then in force that may be promulgated by the
Commission.
(n) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute, and the rules and regulations promulgated
by the Commission thereunder.
(o) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares and, except as included
in the definition of "Registration Expenses," all fees and disbursements of
counsel for any Holder.
(p) "Shares" shall mean the shares of the Company's Common Stock which are
issuable upon conversion of the Preferred Shares.
2. PARTICIPATION REGISTRATION
(a) Registration Right. If, after the date of this Agreement, the Company
shall determine to register any of its securities either for its own account or
the account of a security holder or holders, except for a registration relating
solely to employee benefit plans, a registration relating solely to a Rule 145
transaction, a registration on any registration form that would not permit
secondary sales of Registrable Shares or a registration filed more than six (6)
months after the exercise of fifty percent (50%) or more of the Options, the
Company will:
(i) Promptly give to each Holder written notice thereof; and
(ii) Use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), except as set
forth in Section 2(b) below, and in any underwriting involved therein, all the
Registrable Shares specified in a written request or requests made by any Holder
within fifteen (15) days after the written notice from the Company described in
clause (i) above is given to that Holder. Such written request may specify all
or a part of a Holder's Registrable Shares.
(b) Underwritten Offering. If the registration of which the Company
gives notice under Section 3(a) is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 3(a)(i). In such event, the right of
Exhibit "C" - 2
<PAGE>
any Holder to registration pursuant to this Section 3 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Shares in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through the underwriting
shall (together with the Company and any other persons proposing to distribute
their securities through the underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter(s) selected by the
Company. Notwithstanding any other provision of this Section 3, if the
representative of the underwriter(s) advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) limit the number of Registrable Shares to be included in the registration
and underwriting; provided that the value of the included Registrable Shares
shall be at least twenty percent (20%) of the total value of the securities
included in the registration. The Company shall so advise all Holders requesting
to participate in the registration and the number of shares that may be included
in the registration and underwriting shall be allocated: first, to the Company
for securities being sold for its own account; second, among Registrable Shares
held by all Holders who have requested inclusion in the registration in
proportion, as nearly as practicable, to the respective amounts of Registrable
Shares held by such Holders and properly requested to be included at the time of
filing the registration statement; and then to shares being sold for the
accounts of other Persons. Any Registrable Shares so excluded from the
underwriting by reason of the representative's limitation shall be withdrawn
from such registration. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the representative of underwriter(s)
may round the number of shares allocated to any Holder or other shareholder to
the nearest one hundred (100) shares. If a Holder who has requested inclusion in
the registration does not agree to the terms of the underwriting, that Holder's
shares may be excluded from the underwriting by written notice from the Company
or the representative of the underwriter(s) and the shares so excluded shall be
withdrawn from the registration. If shares are so excluded from the underwriting
because of a failure to agree to its terms and the number of shares of
Registrable Shares to be included in the underwriting was previously reduced as
a result of marketing factors pursuant to this Section 3(b), then, with the
permission of the representative of the underwriter(s) the Company shall offer
to all Holders who have retained rights to include Registrable Shares in the
underwriting the right to include additional Registrable Shares in an aggregate
amount equal to the number of shares so excluded. The registration of such
additional Registrable Shares shall be allocated among the Holders requesting
the additional inclusion pro rata in accordance with the numbers of their
Registrable Shares which are otherwise to be included in the registration.
(c) Right to Terminate Registration. The Company shall have the right to
terminate or withdraw any registration initiated by it under this Section 3
prior to the registration's effectiveness, whether or not any Holder has elected
under this Section 3 to include shares in the registration.
4. EXPENSES OF REGISTRATION
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Sections 2 and 3 shall be borne by the
Company. All Registration Expenses incurred in connection with the registration
of Registrable Shares under Section 5 shall be borne by the Holders
participating in the registration pro rata on the basis of the numbers of
Registrable Shares so registered on their behalf, provided that, if other shares
are included in the registration, the Registration Expenses shall be reasonably
allocated among the Holders, the Company and other participating shareholders
based on the numbers of their shares that are registered. A Holder or Holders
may elect to bear without reimbursement by the Company the Registration Expenses
for a Demand Registration proceeding begun by them pursuant to Section 2 and
subsequently withdrawn by them. In such a case, the registration proceeding
shall not be counted for purposes of Section 2(b)(ii). If a withdrawal of a
Demand Registration by a Holder is based upon material adverse information
relating to the Company that is different from the information known or
available (upon request from the Company or otherwise) to the Holder requesting
the registration at the time of a request for registration under Section 2, such
registration shall not be treated as a counted registration for purposes
Exhibit "C" - 3
<PAGE>
of Section 2(b)(i), even though the requesting Holder does not bear the
Registration Expenses for the registration. All Selling Expenses relating to
shares of Holders registered under Sections 2, 3 and 5 shall be borne by such
Holders pro rata on the basis of the numbers of shares so registered on their
behalf.
5. REGISTRATION ON FORM S-3
(a) If the Company has qualified for the use of Form S-3 under the
Securities Act (which for purposes of this Section 5 shall be deemed to include
any comparable or successor form or forms), in addition to the rights contained
in the foregoing provisions of this Agreement, the Holders shall have the right
to request registrations of their Registrable Shares on Form S-3. Such requests
must be in writing and must state the number of shares of Registrable Shares to
be disposed of and the intended methods of disposition of such shares by the
requesting Holder or Holders. The Company shall not be obligated to effect any
such registration: (i) if the Holders propose to sell less than 200,000
Registrable Shares; or (ii) if the Company shall furnish the certification
described in Section 2(c) (but subject to the limitations set forth therein); or
(iii) after the Company has previously effected one (1) such registration in any
twelve-month period; or (iv) if the request is made more than twelve (12) months
after the date of this Agreement.
(b) If a request complying with the requirements of Section 5(a) is
delivered to the Company, the Company shall use its best efforts to cause the
Registrable Shares requested to be included in the registration to be registered
on Form S-3 and to cause such Registrable Shares to be registered or qualified
under applicable blue sky laws in such jurisdictions as the requesting Holders
may reasonably request. The substantive provisions of Sections 2(a)(i),
2(a)(ii), and 2(c) shall apply to such registration. If the registration is for
an underwritten offering, the substantive provisions of Section 2(e) shall also
apply to such registration.
6. REGISTRATION PROCEDURES
In the case of each registration of Registrable Shares effected by the
Company pursuant to this Agreement, the Company will keep each participating
Holder advised in writing as to the initiation of the registration and as to the
completion thereof. The Company will use its best efforts to:
(a) Keep the registration effective for a period of ninety (90) days or
until the participating Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such ninety- (90-) day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of the securities of the Company; and (ii) in the case of any
registration of Registrable Shares on Form S-3 which are intended to be offered
on a continuous or delayed basis, such ninety- (90-) day period shall be
extended, if necessary, to keep the registration statement effective until all
such Registrable Shares are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (A) includes any prospectus required by Section
10(a)(3) of the Securities Act or (B) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (A) and (B) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and supplements
to the registration statement and the prospectus used in connection with the
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
registration statement;
Exhibit "C" - 4
<PAGE>
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
participating Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Shares covered by the registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in the registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or incomplete in the light of the circumstances then existing,
and at the request of any such seller prepare and furnish to the seller a
reasonable number of copies of a supplement to or an amendment of the prospectus
as may be necessary so that, as thereafter delivered to the purchasers of such
shares, the prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all Registrable Shares registered pursuant to the provisions of
this Agreement to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable Shares
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Shares, in each case not later than the effective date of the
registration; and
(g) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission.
7. INDEMNIFICATION
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel and accountants and each person who
controls such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages and liabilities (or
actions, proceedings or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel and accountants, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any actual or alleged untrue statement or omission that is made in reliance upon
and in conformity with written information furnished to the Company by such
Holder, controlling person or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
7(a) shall not apply to amounts paid in settlement of any such loss claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
Exhibit "C" - 5
<PAGE>
(b) Each Holder will, if Registrable Shares held by such Holder are
included in the securities to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel and accountants, each underwriter, if any, of
the Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter within the meaning of Section 15 of
the Securities Act, each other such Holder and other stockholder, each of their
officers, directors and partners, and each person controlling such Holder or
other stockholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and such Holders, other stockholders, directors, officers, partners,
legal counsel, accountants, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein. The obligations of such Holder
under this Section 7(b) shall not apply to amounts paid in settlement of any
such claims, losses, damages or liabilities (or actions in respect thereof) if
such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and provided further that the Indemnifying Party
shall not assume the defense for matters as to which there is a conflict of
interest, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 7, to the extent such failure is not materially
prejudicial. The Indemnified Party may participate in such defense at such
party's expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand, and of the Indemnified Party on the other, in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the and Parties' relative intent, knowledge, information opportunity
to correct or prevent such statement or omission.
Exhibit "C" - 6
<PAGE>
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with an underwritten public offering of securities registered
under this Agreement are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
8. INFORMATION BY HOLDER
Each Holder of Registrable Shares shall furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
9. LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES
From and after the date of this Agreement, the Company shall not, without
the prior written consent of [3], enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder any registration rights the terms of which are more favorable
than the registration rights granted to the Holders hereunder.
10. RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission that may permit the sale of the Registrable Shares
to the public without registration, the Company agrees to use its best efforts
to:
(a) Make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
(c) So long as a Holder owns any Registrable Shares, furnish to the Holder
forthwith upon written request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company filed with the Commission, and such other reports and documents of the
Company and information in its possession as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
11. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS
The rights to cause the Company to register securities granted to a Holder
by the Company under this Agreement may be transferred or assigned by the Holder
only to a transferee or assignee of not less than [8] shares of Registrable
Shares (subject to appropriate adjustments for stock splits, stock dividends,
reverse stock splits and the like), provided that the Company is given written
notice at the time of or within a reasonable time after the transfer or
assignment stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights are
being transferred or assigned, and provided further that before or concurrently
with his or her exercise of any such rights the transferee or assignee of such
rights assumes in a writing given to the Company the obligations of such Holder
under this Agreement.
12. DELAY OF REGISTRATION
Exhibit "C" - 7
<PAGE>
No Holder shall have any right to take any action to restrain, enjoin or
otherwise delay any registration as the result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
13. MISCELLANEOUS
(a) No Inconsistent Agreements. The Company shall not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders of the Registrable
Shares in this Agreement or otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless by a written instrument signed by an officer of the Company and by
the Holders of at least a majority of the then outstanding Registrable Shares.
Notwithstanding the foregoing: (i) in no event shall the obligations of any
Holder under this Agreement be materially increased without the written consent
of that Holder; and (ii) a waiver or consent to depart from the provisions of
this Agreement with respect to a matter which relates exclusively to the rights
of Holders of Registrable Shares whose securities are being sold pursuant to a
registration statement and which does not directly or indirectly affect the
rights of Holders of Registrable Shares whose securities are not being sold
pursuant to the registration statement, may be given by either (A) Holders of at
least a majority of the then outstanding Registrable Shares or (B) Holders of a
majority of the Registrable Shares being sold by such Holders; provided,
however, that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and sent by hand delivery,
registered first-class mail, courier, telex or telecopier: (i) if to a Holder of
Registrable Shares, to the most current address of the Holder on the books of
the Company; and (ii) if to the Company, to the attention of its President at
the address of its principal executive office. All such notices and
communications shall be deemed to have been given: when delivered at the proper
address, if personally delivered or delivered by courier; five (5) business days
after being deposited in the mail, postage prepaid, if mailed by registered
first-class mail; and when answered back, if telexed, telecopied or sent by
similar facsimile transmission.
(d) Successors and Assigns. Subject to Sections 7 and 11, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings and Section References. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. Unless otherwise indicated, each reference to a Section shall
refer to a Section of this Agreement.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, as applied to contracts
made and performed in California, without regard to principles of conflict of
laws.
(h) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find
Exhibit "C" - 8
<PAGE>
and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
(i) Entire Aqreement. This Agreement is intended by the parties as a
complete and final expression of their agreement with respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(j) Attorneys Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party shall be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other available
remedy.
This Agreement has been executed as of the date set forth in the first
paragraph above.
RENAISSANCE GOLF PRODUCTS, INC.,
a Delaware corporation
By: /s/ John B. Hewlett
-----------------------
__________________________
Exhibit "C" - 9
<PAGE>
RENAISSANCE GOLF PRODUCTS, INC.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT dated as of October 29, 1997, is entered into by and
among RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation, (the "Company"),
and AKA Charitable Remainder Unitrust #1 (the "Purchaser").
The Company proposes to issue to the Purchaser warrants as hereinafter
described (the "Warrants") to purchase up to an aggregate of four hundred
thousand (400,000) shares, subject to adjustment as provided in Section 8 hereof
(such 400,000 shares, as adjusted, being hereinafter referred to as the "Warrant
Shares") of the Company's Common Stock (the "Common Stock"), each Warrant
entitling the holder ("Holder") thereof to purchase one share of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth and for other good and valuable consideration, the parties
hereto agree as follows:
1. ISSUANCE OF WARRANTS: FORM OF WARRANT. On the date hereof (the "Closing
--------------------------------------
Date"), the Company hereby issues, sells and delivers the Warrants to the
Purchaser, in consideration for the Purchaser's agreement to loan the Company
Five Million Dollars ($5,000,000) in accordance with the terms of that certain
Loan and Security Agreement dated October 29, 1997 (the "Loan"), to purchase two
hundred thousand (200,000) shares of the Common Stock of RGPI at an exercise
price of One Dollar and Fifty Cents ($1.50) per share, one hundred thousand
(100,000) shares of the Common Stock of RGPI at an exercise price of Two Dollars
($2.00) per share, and one hundred thousand (100,000) shares of the Common Stock
of RGPI at an exercise price of Three Dollars ($3.00) per share. The form of
the Warrants and the form of election to purchase Shares to be attached thereto
shall be substantially as set forth on Exhibits "A," "B," and "C," each of which
is entitled "Warrant Certificate." The Warrants shall be executed on behalf of
the Company by the manual or facsimile signature of the then present Chairman or
Co-Chairman, Chief Executive Officer, President or any Vice President of the
Company, under its corporate seal, affixed or in facsimile, and attested by the
manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
2. REGISTRATION. The Warrants shall be numbered and shall be registered in a
------------
Warrant register (the "Warrant Register"). Subject to the provisions of Section
3, the Company shall be entitled to treat the registered holder of any Warrant
on the Warrant Register as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such
Warrant on the part of any other person, and shall not be liable for any
registration of transfer of Warrants which are registered or are to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with such knowledge of
such facts that its participation therein amounts to bad faith. The Warrants
shall be registered initially in the name of the Purchaser.
3. WARRANTS TRANSFERABILITY LIMITED. The Warrants are expressly hereby made
--------------------------------
non-transferable and shall not be sold, transferred, assigned or hypothecated,
in part or in whole, except upon the liquidation and dissolution of the
Purchaser or the prior written consent of the Company. Any permitted transfer
will be allowed only upon delivery of the Warrant Certificate duly endorsed by
the Holder or by his duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment or authority to transfer and
contingent upon approval by the Board of Directors of the Company. Such
permitted transfer, of the Warrants shall be effective as of the date of such
endorsement or other proper evidence. In all cases of transfer by an attorney,
the original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with the Company. Such permitted transfer of the
Warrants shall be effective as of the date of such endorsement or other proper
evidence. In all cases of transfer by an attorney, the original power of
Page 1 of Eight
<PAGE>
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited with the Company. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced, and may be required to be deposited with the
Company in its discretion. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the person entitled thereto. The Warrants
may be exchanged at the option of the Holder thereof for other Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Common Stock upon surrender to the
Company or its duly authorized agent. The Company may require payment of the
sum sufficient to cover all applicable taxes and other governmental charges that
may be imposed in connection with any voluntary transfer, exchange or other
disposition of the Warrants. Notwithstanding the foregoing, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person, if such transfer would violate the registration provisions of Securities
Act of 1933, as amended (the "Act"), unless an exemption under the Act is
available therefor.
4. TERM OF WARRANTS; EXERCISE OF WARRANTS.
--------------------------------------
(a) Subject to Paragraph 4(d) below, the Warrants entitle the registered
owner thereof to purchase two hundred thousand (200,000) shares of the Common
Stock of RGPI at an exercise price of One Dollar and Fifty Cents ($1.50) per
share, one hundred thousand (100,000) shares of the Common Stock of RGPI at an
exercise price of Two Dollars ($2.00) per share, and one hundred thousand
(100,000) shares of the Common Stock of RGPI at an exercise price of Three
Dollars ($3.00) per share, (as adjusted from time to time pursuant to the
provisions hereof, the "Exercise Price") at any time or from time to time from
and after the Closing Date until 5:00 p.m., California time, on December 31,
2002 (the "Warrant Expiration Date"). The Exercise Price and the Shares
issuable upon exercise of Warrants are calculated after the Company's four-to-
one (4:1) reverse stock split approved by the stockholders of the Company on the
Closing Date, but are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 8 of this Agreement. Subject to
the provisions of the Agreement, the Purchaser or a permitted Holder shall have
the right, which may be exercised as set forth in such Warrants, to purchase
from the Company and the Company shall issue and sell to the Purchaser or such
Holder the number of fully paid and nonassessable Shares of Common Stock
specified in such Warrants, upon surrender to the Company, or its duly
authorized agent, of such Warrants, with the form of election to purchase
attached thereto duly completed and signed, and upon payment to the Company of
the Exercise Price, as adjusted in accordance with the provisions of Section 8
of this Agreement, for the number of Shares in respect of which such Warrants
are then exercised.
(b) The Exercise Price may be paid (i) in cash or by cashier's check
payable to the Company, or (ii) by conversion of a portion of the principal of
or interest on the Loan into shares of Common Stock at the Exercise Price.
(c) No adjustment shall be made for any dividends on any Shares issuable
upon exercise of a Warrant. Upon each surrender of Warrants and payment of the
Exercise Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Purchaser or
the permitted Holder of such Warrants and in such name or names as the Purchaser
or such Holder may designate, a certificate or certificates for the number of
full Shares so purchased upon the exercise of such Warrants, together with cash,
as provided in Section 9 of this Agreement, in respect of any fractional Shares
otherwise issuable upon such surrender. Such certificate or certificates shall
be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Shares as of the date
of the surrender of Warrants and payment of the Exercise Price as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
- - -------- -------
payment of such Exercise Price, the transfer books for the Common Stock or other
class of securities issuable upon the exercise of such Warrants shall be closed,
the certificates for the Shares shall be issuable as of the date on which such
books shall next be opened (whether before, on or after the Warrant Expiration
Date) and until such date the Company shall be under no duty to deliver any
certificate for such Shares; provided, further, however, that the transfer books
-------- ------- -------
of
Page 2 of Eight
<PAGE>
record, unless otherwise required by law, shall not be closed at any one time
for a period longer than five (5) days. The rights of purchase represented by
the Warrants shall be exercisable, at the election of the Holder(s) thereof,
either in full or from time to time in part and, in the event that any Warrant
is exercised in respect of less than all of the Shares issuable upon such
exercise at any time prior to the Warrant Expiration Date, a new Warrant or
Warrants will be issued for the remaining number of Shares specified in the
Warrant so surrendered.
5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if
----------------
any, attributable to the issuance of Shares upon the exercise of Warrants;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable solely in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Purchaser or a permitted Holder of Warrants in respect of which such Shares
are issued.
6. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall be
-----------------------------
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right of interest, but only
upon receipt of evidence reasonably satisfactory to the Company of such
mutilation, loss, theft or destruction of such Warrant and indemnity, if
requested, reasonably satisfactory to the Company. An applicant for such
substitute Warrants shall also comply with such other reasonable regulations and
pay such other reasonable charges and expenses as the Company may prescribe.
7. RESERVATION OF SHARES, ETC. There have been reserved, and the Company
---------------------------
shall at all times keep reserved, out of the authorized and unissued Common
Stock, a number of shares of Common Stock sufficient to provide for the exercise
of the rights of purchase represented by the outstanding Warrants. American
Securities Transfer, Incorporated, transfer agent for the Common Stock (the
"Transfer Agent"), and every subsequent transfer agent, if any, for the
Company's securities issuable upon the exercise of the Warrants will be
irrevocably authorized and directed at all times until the Warrant Expiration
Date to reserve such number of authorized and unissued shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent and with every subsequent transfer agent for any
shares of the Company's securities issuable upon the exercise of the Warrants.
The Company will supply the Transfer Agent or any subsequent transfer agent with
duly executed certificates for such purpose and will itself provide or otherwise
make available any cash which may be distributable as provided in Section 9 of
this Agreement. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be canceled, and such canceled Warrants shall constitute
sufficient evidence of the number of Shares that have been issued upon the
exercise of such Warrants. No shares of Common Stock shall be subject to
reservation in respect of unexercised Warrants subsequent to the Warrant
Expiration Date.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise Price and
--------------------------------------------------
the number and kind of securities issuable upon exercise of each Warrant shall
be subject to adjustment from time to time upon the happening of certain events,
as follows:
(a) In case the Company shall (i) declare a dividend on its Common Stock in
shares of Common Stock or make a distribution in shares of Common Stock (other
than an issuance of Common Stock for valuable consideration), (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock in to a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Company
(including any such reclassification in connection with the consolidation or
merger in which the Company is the continuing corporation), the number of Shares
purchasable upon exercise of each Warrant immediately prior thereto shall be
adjusted so that the Purchaser and any permitted Holder of each Warrant shall be
entitled to receive the kind and number of Shares or other securities of the
Company which he would have owned or have been entitled to receive after the
happening of any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record date
Page 3 of Eight
<PAGE>
with respect thereto. An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event retroactive
to immediately after the record date, if any, for such event.
(b) No adjustment in the number of Shares purchasable hereunder shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of Shares purchasable upon the exercise of
each Warrant; provided, however, that any adjustments which by reason of this
paragraph (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment but not later than five (5) years
after the happening of the specified event or events. All calculations shall be
made to the nearest one thousandth of a share.
(c) Whenever the number of Shares purchasable upon the exercise of each
Warrant is adjusted, as herein provided, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such adjustment by
a fraction, of which the numerator shall be the number of Shares purchasable
upon the exercise of each Warrant immediately prior to such adjustment, and of
which the denominator shall be the number of Shares so purchasable immediately
thereafter.
(d) For the purpose of this Section 8, the term "shares of Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the Company
at the date of this Agreement or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares consisting solely of
changes in par value, or from no par value to par value, or from par value to no
par value.
(e) Whenever the number of Shares issuable upon the exercise of each
Warrant or the Exercise price of such Shares is adjusted, as herein provided,
the Company shall promptly mail by first class mail, postage prepaid, to the
Purchaser and/or each permitted Holder notice of such adjustment or adjustments.
The Company shall retain a firm of independent public accountants (who may be
the regular accountants employed by the Company) to make any computation
required by this Section 8 and shall cause such accountants to prepare a
certificate setting forth the number of Shares issuable upon the exercise of
each Warrant and the Exercise Price of such Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made. Such
certificate shall be conclusive as to the correctness of such adjustment and the
Purchaser and/or each permitted Holder shall have the right to inspect such
certificate during reasonable business hours.
(f) Except as provided in this Section 8, no adjustment in respect of any
dividends shall be made during the term of a Warrant or upon the exercise of a
Warrant.
(g) If any capital reorganization, recapitalization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of the Company's
assets to another person or entity, or any other transaction (collectively, an
"Organic Change") shall be effected in such a way that holders of shares of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for shares of Common Stock (such stock, securities or
assets being hereinafter referred to as "substitute property"), then, as a
condition of such Organic Change, lawful and adequate provision shall be made
whereby the Purchaser and the permitted Holder shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of the Warrants, such
substituted property as may be issued or payable with respect to or in exchange
for a number of outstanding shares of Common Stock equal to the number of shares
of Common Stock immediately theretofore purchasable and receivable upon the
exercise of the Warrants had such Organic Change not taken place. Further, in
any such case appropriate provision shall be made with respect to the rights and
interests of the Purchaser and the permitted Holder to the end that the
provision hereof (including without limitation provisions for adjustments of the
Exercise Price and of the number of shares purchasable and receivable upon the
exercise of the Warrants) shall thereafter be applicable, as
Page 4 of Eight
<PAGE>
nearly as may be, in relation to any substituted property thereafter purchasable
and receivable upon the exercise of the Warrants. The Company shall not effect
any such Organic Change, unless prior to the consummation thereof the successor
entity (if other than the Company) resulting from such consolidation or merger
or the corporation purchasing the assets shall assume by written instrument
approved by the board of directors of the Company the obligation to deliver to
the Holders such substituted property as, in accordance with the foregoing
provisions, the Holders may be entitled to purchase and receive.
(h) Notwithstanding any adjustment in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants pursuant to this
Agreement, certificates for Warrants issued prior or subsequent to such
adjustment may continue to express the same price and number and kind of Shares
as are initially issuable pursuant to this Agreement.
9. FRACTIONAL INTERESTS. The Company shall not be required to issue fractions
--------------------
of Shares on the exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the Purchaser or the same
permitted Holder, the number of Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Shares
issuable on exercise of the Warrants so presented. If any fraction of a Share
would, except for the provisions of this Section 9, be issuable on the exercise
of any Warrant (or specified portions thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the current market
price per share of Common Stock (determined as provided in Section 8(d) of this
Agreement) on the date of exercise.
10. REGISTRATION RIGHTS.
-------------------
(a) PIGGYBACK REGISTRATION RIGHTS. The Company covenants and agrees with
-----------------------------
the Purchaser and any subsequent Holders of the Registrable Securities (as
defined in paragraph (d) of this Section 10) that if, at any time after the
Warrants become exercisable, it proposes to file a Registration Statement with
respect to any class of equity or equity-related security under the Act in a
primary registration on behalf of the Company and/or in a secondary registration
on behalf of holders of such securities and the registration form to be used may
be used for registration of the Registrable Securities, the Company will give
prompt written notice to the Holders of Registrable Securities at the addresses
appearing on the records of the Company of its intention to file a registration
statement and will offer to include in such registration statement to the
maximum extent possible, subject to paragraphs (i) and (ii) of this paragraph
(a), such number of Registrable Securities with respect to which the Company has
received written requests for inclusion therein within ten (10) business days
after the Holder(s) receive notice from the Company. All registrations
requested pursuant to this paragraph (a) are referred to herein as "Piggyback
Registrations." This paragraph is not applicable to a registration statement
filed by the Company with the Commission on Forms S-4 or S-8 or any successor
forms thereto.
(i) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration
---------------------------------
includes an underwritten primary registration on behalf of such Company and the
underwriter(s) for such offering determines in good faith and advises the
Company in writing that in its/their opinion the number of Registrable
Securities requested to be included in such registration exceeds the number that
can be sold in such offering without materially adversely affecting the
distribution of such securities by the Company, the Company will include in such
registration (A) first, the securities that the Company proposed to sell and (B)
second, the Registrable Securities requested to be included in such
registration, apportioned pro rata among the Holders of Registrable Securities
and (C) third, securities of the holders of other securities requesting
registration.
(ii) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
-----------------------------------
consists only of an underwritten secondary registration on behalf of holders of
securities of the Company, and the underwriter(s) for such offering advises the
Company in writing that in its/their opinion the number of Registrable
Securities requested to be included in such registration exceeds the number
which can be sold in such offering without materially adversely affecting the
distribution of such securities by the
Page 5 of Eight
<PAGE>
Company, the Company will include in such registration (A) first, the securities
requested to be included therein by the holders requesting such registration and
the Registrable Securities requested to be included in such registration, pro
rata among all such holders on the basis of the number of shares requested to be
included by each such holder and (B) second, other securities requested to be
included in such registration.
(b) OTHER REGISTRATION RIGHTS. In addition to the rights above-provided,
-------------------------
the Company agrees to file and use its best efforts to diligently pursue a
separate registration statement or statements on Form S-3 within 30 days of the
exercise of all of the Warrants represented by Exhibits "A," "B," or "C,"
respectively, in order to permit the Holders to sell or transfer the Registrable
Securities covered by each such registration statement at the Company's cost and
expense.
(c) All registration expenses (as hereinafter defined) in connection with
a Piggyback Registration or a registration statement on Form S-3 shall be borne
by the Company and all selling expenses (as hereinafter defined) in connection
with a Piggyback Registration or a registration statement on Form S-3 shall be
borne by the Holders. The term "registration expenses" shall mean all expenses,
except selling expenses, incurred by the Company in complying with the
registration rights granted in this Section 10, including all registration,
qualification, and filing expenses; printing expenses; escrow fees; fees and
disbursements of counsel for the Company, blue sky fees and expenses; and fees
and disbursements of the Company's independent auditors. The term "selling
expenses" shall mean all underwriting discounts and selling commissions, if any,
applicable to the Registrable Securities and expenses of counsel for the
Holders. All selling expenses shall be borne by the Holders in an amount equal
to their pro rata share of the Registrable Securities included in the
Registration Statement.
(f) For purposes of this Section 10, (i) the term "Holder" shall be
holders of Shares, and (ii) the term "Registrable Securities" shall mean the
Shares, if issued.
11. VOTING RIGHTS. Nothing contained in this Agreement or in any of the
-------------
Warrants shall be construed as conferring upon the Holders thereof the right to
vote or to receive dividends or to consent or to receive notice as shareholders
in respect of the meetings of shareholders or the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company.
12. NOTICES.
-------
(a) Any notice pursuant to this Agreement to be given or made by the
Holder of any Warrant and/or the holder of any Share to or on the Company shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows or to such other address as the Company may designate by
notice given in accordance with this Section 12, to the Purchaser and any
permitted Holders of Warrants and/or the holders of Shares:
AKA Charitable Remainder Unitrust #1
Attention: Ralph W. Rasmussen, Esq.
261 East 1200 South
Orem, Utah 84058
Renaissance Golf Products, Inc.
Attention John B. Hewlett
2919 East Granite Hollow Street
Sandy, Utah 84092
Bruce H. Haglund, Esq.
Gibson, Haglund & Johnson
2010 Main Street, Suite 400
Irvine, California 92614
Page 6 of Eight
<PAGE>
Notices or demands authorized by this Agreement to be given or made by the
Company to or on the Purchaser and any permitted Holder of any Warrant and/or
the holder of any share shall be sufficiently given or made (except as otherwise
provided in this Agreement) if sent by first-class mail, postage prepaid,
addressed to the Purchaser or such Holder or such holder of Shares at the
address of the Purchaser or such Holder or such holder of Shares as shown on the
Warrant Register or the books of the Company, as the case may be.
(b) If at any time prior to the expiration of the Warrants and their
exercise, any of the following events shall occur:
(i) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(ii) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefore; or
(iii) a dissolution, liquidation or winding-up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; or
(iv) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another entity;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such divided or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding-up or sale.
13. GOVERNING LAW. This Agreement and each Warrant issued hereunder shall be
-------------
governed by and construed in accordance with the substantive laws of the State
of Delaware. The Company hereby agrees to accept service of process by notice
given to it pursuant to the provisions of Section 12.
14. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
(End of Page)
Page 7 of Eight
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
RENAISSANCE GOLF PRODUCTS, INC.
a Delaware Corporation
By: /s/ John B. Hewlett
_______________________________
John B. Hewlett,
Chairman of the Board
ATTEST:
/s/ Bruce H. Haglund
_______________________________
Bruce H. Haglund, Secretary
AKA CHARITABLE REMAINDER
UNITRUST #1
By: /s/ Ralph W. Rasmussen
_______________________________
Ralph W. Rasmussen,
Trustee
Page 8 of Eight
<PAGE>
THE WARRANTS AND THE SHARES OF COMMON STOCK REFERRED TO HEREIN HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR QUALIFIED UNDER APPLICABLE
STATE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS THEREFROM. THESE WARRANTS MAY
BE ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR OFFERED TO BE SO TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH WARRANTS UNDER THE SECURITIES ACT OF 1933 AND THE REGULATIONS
PROMULGATED PURSUANT THERETO (UNLESS EXEMPT THEREFROM), AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT ANY SUCH TRANSACTION SHALL NOT VIOLATE ANY
FEDERAL OR STATE SECURITIES LAWS, OR THE WRITTEN CONSENT OF THE COMPANY.
WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK
200,000 Warrants @ $1.50 Per Share
RENAISSANCE GOLF PRODUCTS, INC.
a Delaware corporation
Initial Issuance on October 29, 1997
Void after 5:00 p.m. California Time, December 31, 2002
This certifies that for value received AKA Charitable Remainder Unitrust
#1, or registered assigns (the "Registered Holder"), is the owner of 200,000
Common Stock Purchase Warrants (the "Warrants") specified above issued in
accordance with that certain Warrant Agreement dated October 29, 1997 by and
between RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (the "Company")
and AKA Charitable Remainder Unitrust #1 (the "Warrant Agreement"). Each Warrant
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in the Warrant Agreement, one fully paid and nonassessable share of
Common Stock, no par value, of the Company, at any time prior to 5:00 P.M.,
California time, on December 31, 2002 (the "Expiration Date"), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the Company's office, or its
successor or agent (the "Warrant Agent") accompanied by payment of $1.50 per
share (the "Purchase Price") in lawful money of the United States of America in
cash or by official bank or certified check made payable to the Company at 2919
East Granite Hollow Street, Sandy, Utah 84092 or otherwise in accordance with
the payment provisions of the Warrant Agreement. At the option of the Registered
Holder, the Warrants may be exercised by surrender of this Warrant Certificate
for the Warrant Value (as defined in the Warrant Agreement). The Company will
act as Warrant Agent until further notice to the Registered Holder.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
If the Expiration Date shall in the State of California be a holiday or a
day on which the banks are authorized to close, then the Expiration Date shall
mean 5:00 P.M., California time, the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close.
RENAISSANCE GOLF PRODUCTS, INC.
2919 East Granite Hollow Street
Sandy, Utah 84092
1
<PAGE>
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel the Warrant Certificate upon the surrender hereof and shall
execute and deliver a new Warrant Certificate or Warrant Certificates of like
tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
This Warrant shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Warrant Agreement.
The Company has agreed to register the shares issuable upon exercise of the
Warrants under certain conditions as set forth in the Warrant Agreement.
The Company agrees at all times to reserve or hold available a sufficient
number of Common Shares to cover the number of shares issuable upon the exercise
of this and all other Warrants or like tenor then outstanding.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a shareholder of the Company,
including, without limitation, the right to vote or to receive any notice of any
proceedings of the Company. No dividends shall be payable or accrue in respect
of this Warrant or the interest represented hereby or the shares purchasable
hereunder until or unless, and except to the extent that, this Warrant shall be
exercised.
Except as otherwise above provided, this Warrant and all rights hereunder
are transferable by the Registered Holder hereof in person or by duly authorized
attorney on the books of the Company upon surrender of this Warrant, properly
endorsed to the Company, only after approval by the Board of Directors of the
Company.
The Company may deem and treat the registered owner of this Warrant at any
time as the absolute owner hereof for all purposes and shall not be affected by
any notice to the contrary.
If at any time or from time to time the Company shall declare a stock
dividend or, by subdivision, consolidation, or reclassification of shares, or
otherwise, change as a whole the outstanding Common Shares into a different
number of a class of shares, the number and class of shares so changed shall,
for the purposes of this Warrant and the terms and conditions hereof, replace
the shares outstanding immediately prior to such change, and the Warrant
purchase price in effect, and the number of shares purchasable under this
Warrant, immediately prior to the date upon which such change shall become
effective, shall be proportionately adjusted. Irrespective of any adjustment or
change in the Warrant purchase price or the number of Common Shares actually
purchasable under this or any other Warrant of like tenor, the Warrants
theretofore and thereafter issued may continue to express the Warrant purchase
price per share and the number of shares purchasable thereunder as the Warrant
purchase price per share and the number of shares purchasable were expressed
upon the Warrants when initially issued.
Upon the happening of any event requiring an adjustment of the Warrant
purchase price hereunder, the Company shall forthwith give written notice
thereof to the Registered Holder stating the adjusted
2
<PAGE>
Warrant purchase price and the adjusted number of Common Shares purchasable upon
the exercise hereof resulting from such event and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based, The Board of Directors of the Company shall determine the computation
made hereunder. In case any voluntary or involuntary dissolution, liquidation,
or winding up of the Company shall at any time be proposed, the Company shall
give at least 20 days' prior written notice thereof to the Registered Holder
stating the date on which such event is to take place and the date (which shall
be at least 20 days after the giving of such notice) as of which the holders of
Common Shares of record shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such dissolution, liquidation, or
winding up (on which date, in the event such dissolution, liquidation, or
winding up shall actually take place, this Warrant and all rights with respect
hereto shall terminate). Notices pursuant to this paragraph shall be given by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder appearing in the records of the Company.
For the purposes of the foregoing paragraphs, the term "Common Shares"
shall include the aggregate number of shares that the Company, by its Articles
of Incorporation, as from time to time amended, is authorized to issue, which
are not limited to a fixed sum or percentage of the par value in respect of the
rights of the holders thereof to participate in dividends or in distribution of
assets upon the voluntary or involuntary liquidation, dissolution, or winding up
of the Company.
Any conflict in the terms of this Warrant Certificate and the terms of the
Warrant Agreement shall be resolved with reference to the terms of the Warrant
Agreement. This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed by its duly authorized officer and its corporate seal to be
imprinted hereon this 29th day of October, 1997.
RENAISSANCE GOLF PRODUCTS, INC.
By: /s/ John B. Hewlett
--------------------------
John B. Hewlett,
Chairman of the Board
By: /s/ Bruce H. Haglund
--------------------------
Bruce H. Haglund,
Secretary
CORPORATE SEAL
3
<PAGE>
ASSIGNMENT
RENAISSANCE GOLF PRODUCTS, INC.
(To be executed by the Registered Holder to effect a transfer of the
Warrant. No transfer or assignment shall be valid unless countersigned by the
Secretary of RENAISSANCE GOLF PRODUCTS, INC., which signature shall evidence
approval by the Board of Directors.)
For value received __________________ hereby sells, assigns, and transfers
unto ___________________________________________________________________________
this Warrant and the rights represented thereby to purchase Common Shares in
accordance with the terms and conditions thereof, and does hereby irrevocably
constitute and appoint the duly elected and acting Secretary of RENAISSANCE GOLF
PRODUCTS, INC. as attorney-in-fact to transfer this Warrant on the books of
RENAISSANCE GOLF PRODUCTS, INC., with full power of substitution.
Dated: _________ Signed:______________________________
, Registered Holder
Countersigned:
RENAISSANCE GOLF PRODUCTS, INC.
By:____________________
Its Secretary
4
<PAGE>
SUBSCRIPTION FORM
RENAISSANCE GOLF PRODUCTS, INC.
(To be Executed by the Registered Holder in Order to Exercise Warrants)
The undersigned Registered Holder hereby irrevocably elects to exercise
__________________ Warrants represented by the attached Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Warrants, tenders
$ _________ as payment therefor and requests that certificates for such
securities shall be issued in the name of
[PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER]
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or type name and address]
and be delivered to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:__________ ________________________________
Signature of Registered Holder
________________________________
________________________________
Address
________________________________
Taxpayer Identification Number
________________________________
Signature Guaranteed
ACCEPTED:
RENAISSANCE GOLF PRODUCTS, INC.
By:_____________________________
, Authorized Officer
5
<PAGE>
THE WARRANTS AND THE SHARES OF COMMON STOCK REFERRED TO HEREIN HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS THEREFROM. THESE
WARRANTS MAY BE ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR OFFERED TO BE SO TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH WARRANTS UNDER THE SECURITIES ACT OF 1933 AND
THE REGULATIONS PROMULGATED PURSUANT THERETO (UNLESS EXEMPT THEREFROM), AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT ANY SUCH TRANSACTION SHALL
NOT VIOLATE ANY FEDERAL OR STATE SECURITIES LAWS, OR THE WRITTEN CONSENT OF THE
COMPANY.
WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK
100,000 Warrants @ $2.00 Per Share
RENAISSANCE GOLF PRODUCTS, INC.
a Delaware corporation
Initial Issuance on October 29, 1997
Void after 5:00 p.m. California Time, December 31, 2002
This certifies that for value received AKA Charitable Remainder Unitrust #1,
or registered assigns (the "Registered Holder"), is the owner of 100,000 Common
Stock Purchase Warrants (the "Warrants") specified above issued in accordance
with that certain Warrant Agreement dated October 29, 1997 by and between
RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (the "Company") and AKA
Charitable Remainder Unitrust #1 (the "Warrant Agreement"). Each Warrant
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in the Warrant Agreement, one fully paid and nonassessable share of
Common Stock, no par value, of the Company, at any time prior to 5:00 P.M.,
California time, on December 31, 2002 (the "Expiration Date"), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the Company's office, or its
successor or agent (the "Warrant Agent") accompanied by payment of $2.00 per
share (the "Purchase Price") in lawful money of the United States of America in
cash or by official bank or certified check made payable to the Company at 2919
East Granite Hollow Street, Sandy, Utah 84092 or otherwise in accordance with
the payment provisions of the Warrant Agreement. At the option of the Registered
Holder, the Warrants may be exercised by surrender of this Warrant Certificate
for the Warrant Value (as defined in the Warrant Agreement). The Company will
act as Warrant Agent until further notice to the Registered Holder.
In the event of certain contingencies provided for in the Warrant Agreement,
the Purchase Price or the number of shares of Common Stock subject to purchase
upon the exercise of each Warrant represented hereby are subject to modification
or adjustment.
If the Expiration Date shall in the State of California be a holiday or a day
on which the banks are authorized to close, then the Expiration Date shall mean
5:00 P.M., California time, the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close.
RENAISSANCE GOLF PRODUCTS, INC.
2919 East Granite Hollow Street
Sandy, Utah 84092
1
<PAGE>
Each Warrant represented hereby is exercisable at the option of the Registered
Holder, but no fractional shares of Common Stock will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel the Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
This Warrant shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Warrant Agreement.
The Company has agreed to register the shares issuable upon exercise of the
Warrants under certain conditions as set forth in the Warrant Agreement.
The Company agrees at all times to reserve or hold available a sufficient
number of Common Shares to cover the number of shares issuable upon the exercise
of this and all other Warrants or like tenor then outstanding.
Prior to the exercise of any Warrant represented hereby, the Registered Holder
shall not be entitled to any rights of a shareholder of the Company, including,
without limitation, the right to vote or to receive any notice of any
proceedings of the Company. No dividends shall be payable or accrue in respect
of this Warrant or the interest represented hereby or the shares purchasable
hereunder until or unless, and except to the extent that, this Warrant shall be
exercised.
Except as otherwise above provided, this Warrant and all rights hereunder are
transferable by the Registered Holder hereof in person or by duly authorized
attorney on the books of the Company upon surrender of this Warrant, properly
endorsed to the Company, only after approval by the Board of Directors of the
Company.
The Company may deem and treat the registered owner of this Warrant at any
time as the absolute owner hereof for all purposes and shall not be affected by
any notice to the contrary.
If at any time or from time to time the Company shall declare a stock dividend
or, by subdivision, consolidation, or reclassification of shares, or otherwise,
change as a whole the outstanding Common Shares into a different number of a
class of shares, the number and class of shares so changed shall, for the
purposes of this Warrant and the terms and conditions hereof, replace the shares
outstanding immediately prior to such change, and the Warrant purchase price in
effect, and the number of shares purchasable under this Warrant, immediately
prior to the date upon which such change shall become effective, shall be
proportionately adjusted. Irrespective of any adjustment or change in the
Warrant purchase price or the number of Common Shares actually purchasable under
this or any other Warrant of like tenor, the Warrants theretofore and thereafter
issued may continue to express the Warrant purchase price per share and the
number of shares purchasable thereunder as the Warrant purchase price per share
and the number of shares purchasable were expressed upon the Warrants when
initially issued.
Upon the happening of any event requiring an adjustment of the Warrant
purchase price hereunder, the Company shall forthwith give written notice
thereof to the Registered Holder stating the adjusted
2
<PAGE>
Warrant purchase price and the adjusted number of Common Shares purchasable upon
the exercise hereof resulting from such event and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based, The Board of Directors of the Company shall determine the computation
made hereunder. In case any voluntary or involuntary dissolution, liquidation,
or winding up of the Company shall at any time be proposed, the Company shall
give at least 20 days' prior written notice thereof to the Registered Holder
stating the date on which such event is to take place and the date (which shall
be at least 20 days after the giving of such notice) as of which the holders of
Common Shares of record shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such dissolution, liquidation, or
winding up (on which date, in the event such dissolution, liquidation, or
winding up shall actually take place, this Warrant and all rights with respect
hereto shall terminate). Notices pursuant to this paragraph shall be given by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder appearing in the records of the Company.
For the purposes of the foregoing paragraphs, the term "Common Shares" shall
include the aggregate number of shares that the Company, by its Articles of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited to a fixed sum or percentage of the par value in respect of the
rights of the holders thereof to participate in dividends or in distribution of
assets upon the voluntary or involuntary liquidation, dissolution, or winding up
of the Company.
Any conflict in the terms of this Warrant Certificate and the terms of the
Warrant Agreement shall be resolved with reference to the terms of the Warrant
Agreement. This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed by its duly authorized officer and its corporate seal to be imprinted
hereon this 29th day of October, 1997.
RENAISSANCE GOLF PRODUCTS, INC.
By: /s/ John B. Hewlett
----------------------------
John B. Hewlett,
Chairman of the Board
By: /s/ Bruce H. Haglund
----------------------------
Bruce H. Haglund,
Secretary
CORPORATE SEAL
3
<PAGE>
ASSIGNMENT
RENAISSANCE GOLF PRODUCTS, INC.
(To be executed by the Registered Holder to effect a transfer of the Warrant.
No transfer or assignment shall be valid unless countersigned by the Secretary
of RENAISSANCE GOLF PRODUCTS, INC., which signature shall evidence approval by
the Board of Directors.)
For value received __________________ hereby sells, assigns, and transfers
unto ______________________________________________________________ this Warrant
and the rights represented thereby to purchase Common Shares in accordance with
the terms and conditions thereof, and does hereby irrevocably constitute and
appoint the duly elected and acting Secretary of RENAISSANCE GOLF PRODUCTS, INC.
as attorney-in-fact to transfer this Warrant on the books of RENAISSANCE GOLF
PRODUCTS, INC., with full power of substitution.
Dated:_____________ Signed:_________________________________
, Registered Holder
Countersigned:
RENAISSANCE GOLF PRODUCTS, INC.
By:____________________________
Its Secretary
4
<PAGE>
SUBSCRIPTION FORM
RENAISSANCE GOLF PRODUCTS, INC.
(To be Executed by the Registered Holder in Order to Exercise Warrants)
The undersigned Registered Holder hereby irrevocably elects to exercise
_____________________________ Warrants represented by the attached Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Warrants, tenders $ __________________ as payment therefor and requests that
certificates for such securities shall be issued in the name of
[PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER]
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or type name and address]
and be delivered to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:__________________ ___________________________________
Signature of Registered Holder
___________________________________
___________________________________
Address
___________________________________
Taxpayer Identification Number
___________________________________
Signature Guaranteed
ACCEPTED:
RENAISSANCE GOLF PRODUCTS, INC.
By:_______________________________
, Authorized Officer
5
<PAGE>
THE WARRANTS AND THE SHARES OF COMMON STOCK REFERRED TO HEREIN HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS THEREFROM. THESE WARRANTS MAY BE
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR OFFERED TO BE SO TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH WARRANTS UNDER THE SECURITIES ACT OF 1933 AND THE REGULATIONS
PROMULGATED PURSUANT THERETO (UNLESS EXEMPT THEREFROM), AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT ANY SUCH TRANSACTION SHALL NOT VIOLATE ANY
FEDERAL OR STATE SECURITIES LAWS, OR THE WRITTEN CONSENT OF THE COMPANY.
WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK
100,000 Warrants @ $3.00 Per Share
RENAISSANCE GOLF PRODUCTS, INC.
a Delaware corporation
Initial Issuance on October 29, 1997
Void after 5:00 p.m. California Time, December 31, 2002
This certifies that for value received AKA Charitable Remainder Unitrust #1,
or registered assigns (the "Registered Holder"), is the owner of 100,000 Common
Stock Purchase Warrants (the "Warrants") specified above issued in accordance
with that certain Warrant Agreement dated October 29, 1997 by and between
RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (the "Company") and AKA
Charitable Remainder Unitrust #1 (the "Warrant Agreement"). Each Warrant
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in the Warrant Agreement, one fully paid and nonassessable share of
Common Stock, no par value, of the Company, at any time prior to 5:00 P.M.,
California time, on December 31, 2002 (the "Expiration Date"), upon the
presentation and surrender of this Warrant Certificate with the Subscription
Form on the reverse hereof duly executed, at the Company's office, or its
successor or agent (the "Warrant Agent") accompanied by payment of $3.00 per
share (the "Purchase Price") in lawful money of the United States of America in
cash or by official bank or certified check made payable to the Company at 2919
East Granite Hollow Street, Sandy, Utah 84092 or otherwise in accordance with
the payment provisions of the Warrant Agreement. At the option of the
Registered Holder, the Warrants may be exercised by surrender of this Warrant
Certificate for the Warrant Value (as defined in the Warrant Agreement). The
Company will act as Warrant Agent until further notice to the Registered Holder.
In the event of certain contingencies provided for in the Warrant Agreement,
the Purchase Price or the number of shares of Common Stock subject to purchase
upon the exercise of each Warrant represented hereby are subject to modification
or adjustment.
If the Expiration Date shall in the State of California be a holiday or a day
on which the banks are authorized to close, then the Expiration Date shall mean
5:00 P.M., California time, the next following day which in the State of
California is not a holiday or a day on which banks are authorized to close.
RENAISSANCE GOLF PRODUCTS, INC.
2919 East Granite Hollow Street
Sandy, Utah 84092
1
<PAGE>
Each Warrant represented hereby is exercisable at the option of the Registered
Holder, but no fractional shares of Common Stock will be issued. In the case of
the exercise of less than all the Warrants represented hereby, the Company shall
cancel the Warrant Certificate upon the surrender hereof and shall execute and
deliver a new Warrant Certificate or Warrant Certificates of like tenor, which
the Warrant Agent shall countersign, for the balance of such Warrants.
This Warrant shall not be exercisable by a Registered Holder in any state
where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment with any tax or other governmental
charge imposed in connection therewith, for registration of transfer of this
Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange thereof, subject to the limitations provided in
the Warrant Agreement.
The Company has agreed to register the shares issuable upon exercise of the
Warrants under certain conditions as set forth in the Warrant Agreement.
The Company agrees at all times to reserve or hold available a sufficient
number of Common Shares to cover the number of shares issuable upon the exercise
of this and all other Warrants or like tenor then outstanding.
Prior to the exercise of any Warrant represented hereby, the Registered Holder
shall not be entitled to any rights of a shareholder of the Company, including,
without limitation, the right to vote or to receive any notice of any
proceedings of the Company. No dividends shall be payable or accrue in respect
of this Warrant or the interest represented hereby or the shares purchasable
hereunder until or unless, and except to the extent that, this Warrant shall be
exercised.
Except as otherwise above provided, this Warrant and all rights hereunder are
transferable by the Registered Holder hereof in person or by duly authorized
attorney on the books of the Company upon surrender of this Warrant, properly
endorsed to the Company, only after approval by the Board of Directors of the
Company.
The Company may deem and treat the registered owner of this Warrant at any
time as the absolute owner hereof for all purposes and shall not be affected by
any notice to the contrary.
If at any time or from time to time the Company shall declare a stock dividend
or, by subdivision, consolidation, or reclassification of shares, or otherwise,
change as a whole the outstanding Common Shares into a different number of a
class of shares, the number and class of shares so changed shall, for the
purposes of this Warrant and the terms and conditions hereof, replace the shares
outstanding immediately prior to such change, and the Warrant purchase price in
effect, and the number of shares purchasable under this Warrant, immediately
prior to the date upon which such change shall become effective, shall be
proportionately adjusted. Irrespective of any adjustment or change in the
Warrant purchase price or the number of Common Shares actually purchasable under
this or any other Warrant of like tenor, the Warrants theretofore and thereafter
issued may continue to express the Warrant purchase price per share and the
number of shares purchasable thereunder as the Warrant purchase price per share
and the number of shares purchasable were expressed upon the Warrants when
initially issued.
Upon the happening of any event requiring an adjustment of the Warrant
purchase price hereunder, the Company shall forthwith give written notice
thereof to the Registered Holder stating the adjusted
2
<PAGE>
Warrant purchase price and the adjusted number of Common Shares purchasable upon
the exercise hereof resulting from such event and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based, The Board of Directors of the Company shall determine the computation
made hereunder. In case any voluntary or involuntary dissolution, liquidation,
or winding up of the Company shall at any time be proposed, the Company shall
give at least 20 days' prior written notice thereof to the Registered Holder
stating the date on which such event is to take place and the date (which shall
be at least 20 days after the giving of such notice) as of which the holders of
Common Shares of record shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such dissolution, liquidation, or
winding up (on which date, in the event such dissolution, liquidation, or
winding up shall actually take place, this Warrant and all rights with respect
hereto shall terminate). Notices pursuant to this paragraph shall be given by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder appearing in the records of the Company.
For the purposes of the foregoing paragraphs, the term "Common Shares" shall
include the aggregate number of shares that the Company, by its Articles of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited to a fixed sum or percentage of the par value in respect of the
rights of the holders thereof to participate in dividends or in distribution of
assets upon the voluntary or involuntary liquidation, dissolution, or winding up
of the Company.
Any conflict in the terms of this Warrant Certificate and the terms of the
Warrant Agreement shall be resolved with reference to the terms of the Warrant
Agreement. This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed by its duly authorized officer and its corporate seal to be imprinted
hereon this 29th day of October, 1997.
RENAISSANCE GOLF PRODUCTS, INC.
By: /s/ John B. Hewlett
------------------------
John B. Hewlett,
Chairman of the Board
By: /s/ Bruce H. Haglund
------------------------
Bruce H. Haglund,
Secretary
CORPORATE SEAL
3
<PAGE>
ASSIGNMENT
RENAISSANCE GOLF PRODUCTS, INC.
(To be executed by the Registered Holder to effect a transfer of the Warrant.
No transfer or assignment shall be valid unless countersigned by the Secretary
of RENAISSANCE GOLF PRODUCTS, INC., which signature shall evidence approval by
the Board of Directors.)
For value received____________________hereby sells, assigns, and transfers
unto_________________________________________________________________________
this Warrant and the rights represented thereby to purchase Common Shares in
accordance with the terms and conditions thereof, and does hereby irrevocably
constitute and appoint the duly elected and acting Secretary of RENAISSANCE GOLF
PRODUCTS, INC. as attorney-in-fact to transfer this Warrant on the books of
RENAISSANCE GOLF PRODUCTS, INC., with full power of substitution.
Dated:_________________ Signed:__________________________
, Registered Holder
Countersigned:
RENAISSANCE GOLF PRODUCTS, INC.
By:____________________
Its Secretary
4
<PAGE>
SUBSCRIPTION FORM
RENAISSANCE GOLF PRODUCTS, INC.
(To be Executed by the Registered Holder in Order to Exercise Warrants)
The undersigned Registered Holder hereby irrevocably elects to exercise ______
_______________ Warrants represented by the attached Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Warrants, tenders
$_________________ as payment therefor and requests that certificates for such
securities shall be issued in the name of
[PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER]
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Please print or type name and address]
and be delivered to
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:_______________ _______________________________
Signature of Registered Holder
_______________________________
_______________________________
Address
_______________________________
Taxpayer Identification Number
_______________________________
Signature Guaranteed
ACCEPTED:
RENAISSANCE GOLF PRODUCTS, INC.
By:_______________________________
, Authorized Officer
5
<PAGE>
NON-QUALIFIED
STOCK OPTION AGREEMENT
OF
RENAISSANCE GOLF PRODUCTS, INC.
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, hereinafter referred to as the
"Option" or the "Agreement," is made as of the 17th day of March 1998, between
RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (hereinafter referred to
as the "COMPANY"), and JOHN B. HEWLETT (the "OPTIONEE"), at 12187 S. Business
Park Drive, #100, Draper, Utah 84020.
The Board of Directors of the COMPANY hereby grants an option on 500,000
shares of common stock of the COMPANY ("Common Stock") to the OPTIONEE at the
price and in all respects subject to the terms, definitions and provisions of
the Agreement.
1. OPTION PRICE. The option price is $4.25 per share.
2. EXERCISE OF OPTION.
2.1 Right to Exercise. The options shall be exercisable (i) by the
OPTIONEE, his personal representative, or his assignee, in whole or in part in
accordance with the terms of this Agreement, (ii) is exercisable from the date
hereof and on or before March 17, 2008, and, (iii) shall not be subject to
adjustment in terms of the exercise price or the number of shares issuable
hereunder.
2.2 Method of Exercise. This Option shall be exercisable by a written
notice which shall:
(a) State the election to exercise the Option, the number of
shares in respect of which it is being exercised, the person in whose name the
shares are to be issued (if the shares are issued to individuals), the names,
addresses and Social Security Numbers of such persons; and
(b) Contain such representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as are
required by law or as may be satisfactory to the COMPANY's counsel; and
(c) Be signed by the person or persons entitled to exercise the
Option and, if the Option is being exercised by any person or persons other than
the OPTIONEE, be accompanied by proof, satisfactory to counsel for the COMPANY,
of the right of such person or persons to exercise the Option; and
(d) Be accompanied by a payment for the purchase price of those
shares with respect to which the Option is being exercised in the form of cash
or check. The certificate or certificates for shares of Common Stock as to which
the Option shall be exercised shall be registered in the name of the person or
persons exercising the Option.
2.3 Restrictions on Exercise. As a condition to his exercise of this
Option, the COMPANY may require the person exercising this Option to comply with
applicable laws or regulations.
3. TRANSFERABILITY OF OPTION. This Option may be transferred in any
manner by will or the laws of descent or distribution and may be exercised
during the lifetime of the OPTIONEE by an assignee of the OPTIONEE.
1
<PAGE>
4. STOCK SUBJECT TO THE OPTION. The COMPANY shall set aside shares of
Common Stock, which it now holds as authorized and unissued shares, in an amount
equal to the number of shares which will be issued upon the exercise of this
Option. If the Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares which were subject
thereto shall be free from any restrictions occasioned by this Option Agreement.
If the COMPANY has been listed on a stock exchange, the COMPANY will not be
required to issue or deliver any certificate or certificates for shares to be
issued hereunder until such shares have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange on which outstanding
shares of the same class may then be listed and until the COMPANY has taken such
steps as may, in the opinion of counsel for the CORPORATION, be required by law
and applicable regulations, including the rules and regulations of the
Securities and Exchange Commission, and state blue sky laws and regulations, in
connection with the issuance or sale of such shares, and the listing of such
shares on each such exchange. The COMPANY will use its best efforts to comply
with any such requirements forthwith upon the exercise of the Option.
5. NO ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The Option price shall
not be subject to mandatory adjustment upon a change in capitalization or under
any other circumstances.
6. NOTICES. Each notice relating to this Agreement shall be in writing
and delivered in person or by certified mail to the proper address. Each notice
shall be deemed to have been given on the date it is received. Each notice to
the COMPANY shall be addressed to it at its principal office at12187 S. Business
Park Drive, #100, Draper, Utah 84020, or to its then primary business address,
to the attention of the Secretary of the COMPANY. Each notice to the OPTIONEE or
other person or persons then entitled to exercise the Option shall be addressed
to the OPTIONEE or such other person or persons at the OPTIONEE's address set
forth in the heading of this Agreement. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to that effect.
7. BENEFITS OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon each successor of the COMPANY. All obligations imposed upon
the OPTIONEE and all rights granted to the COMPANY under this Agreement shall be
binding upon the OPTIONEE's heirs, legal representatives, and successors. This
Agreement shall be the sole and exclusive source of any and all rights which the
OPTIONEE, his heirs, legal representatives, or successors may have in respect to
the Plan or any options or Common Stock granted or issued thereunder, whether to
him, or herself, or to any other person.
8. RESOLUTION OF DISPUTES. Any dispute or disagreement which should
arise under, or as a result of, or in any way relate to, the interpretation,
construction or application of this Agreement will be determined by the Board of
Directors of the COMPANY. Any determination made hereunder shall be final,
binding, and conclusive for all purposes.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have caused this Agreement
to be executed as of the day, month and year first above-written.
/s/ John B. Hewlett
COMPANY: OPTIONEE:________________________________
RENAISSANCE GOLF PRODUCTS, INC. JOHN B. HEWLETT
a Delaware corporation
/s/ John B. Hewlett
By:___________________________ (CORPORATE SEAL)
JOHN B. HEWLETT,
Chief Executive Officer
2
<PAGE>
NON-QUALIFIED
STOCK OPTION AGREEMENT
OF
RENAISSANCE GOLF PRODUCTS, INC.
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, hereinafter referred to as the
"Option" or the "Agreement," is made as of September 15, 1997, between
RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (hereinafter referred to
as the "COMPANY"), and KURT A. MOORE (the "OPTIONEE"), at 12187 South Business
Park Drive, Draper, Utah 84020.
The Board of Directors of the COMPANY hereby grants an option on 150,000
shares of Common Stock of the COMPANY ("Common Stock") to the OPTIONEE at the
price and in all respects subject to the terms, definitions and provisions of
the Agreement.
1. OPTION PRICE. The option price is $1.25 per share.
2. EXERCISE OF OPTION.
2.1 Right to Exercise. The Options shall be exercisable by the
OPTIONEE, his personal representative, or his assignee, in whole or in part in
accordance with the terms of this Agreement and is exercisable from on or after
six months before the date 10 years from the date of grant through the date 10
years from the date of grant, (the later being the "Terminal Date"), subject to
early termination as provided in Section 4. However, portions of such Options
shall be exercisable earlier if the following conditions are satisfied: (i)
50,000 of the Options shall be exercisable after March 31, 1999 on the condition
that the Company's sales, as reported in its quarterly and annual filings with
the Securities and Exchange Commission total at least $8,000,000 during the
period from January 1, 1998 through December 31, 1998; (ii) 50,000 of the
Options shall be exercisable after March 31, 2000 on the condition that the
Company's sales, as reported in its quarterly and annual filings with the
Securities and Exchange Commission total at least $12,000,000 during the period
from January 1, 1999 through December 31, 1999; and (iii) 50,000 of the Options
shall be exercisable after March 31, 2001 on the condition that the Company's
sales, as reported in its quarterly and annual filings with the Securities and
Exchange Commission total at least $18,000,000 during the period from January 1,
2000 through December 31, 2000.
2.2 Method of Exercise. This Option shall be exercisable by a
written notice which shall:
(a) State the election to exercise the Option, the number of
shares in respect of which it is being exercised, the person in whose name the
shares are to be issued (if the shares are issued to individuals), the names,
addresses and Social Security Numbers of such persons; and
(b) Contain such representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as are
required by law or as may be satisfactory to the COMPANY's counsel; and
(c) Be signed by the person or persons entitled to exercise the
Option and, if the Option is being exercised by any person or persons other than
the OPTIONEE, be accompanied by proof, satisfactory to counsel for the COMPANY,
of the right of such person or persons to exercise the Option; and
(d) Be accompanied by a payment for the purchase price of those
shares with respect to which the Option is being exercised in the form of cash
or check. The certificate or
1
<PAGE>
certificates for shares of Common Stock as to which the Option shall be
exercised shall be registered in the name of the person or persons exercising
the Option.
2.3 Restrictions on Exercise. As a condition to his exercise of this
Option, the COMPANY may require the person exercising this Option to comply with
applicable laws or regulations.
3. TRANSFERABILITY OF OPTION. This Option may be transferred in any
manner by will or the laws of descent or distribution and may be exercised
during the lifetime of the OPTIONEE by an assignee of the OPTIONEE.
4. TERMINATION OF OPTION.
4.1 Early Termination. The Option and all rights granted hereunder to
the extent such rights shall not have been exercised, shall terminate and become
null and void on the Terminal Date or sooner if OPTIONEE ceases to be in the
continuous employ of the COMPANY (whether by resignation, retirement, dismissal,
or otherwise), except that: (a) in the event of termination of employment for
any reason other than as provided in Section 4(b), OPTIONEE may at any time
within a period of three months after the options become exercisable, exercise
the Option granted hereunder to the extent such Option was exercisable by
OPTIONEE on the date of the termination of such employment or the date of option
becomes exercisable pursuant to Provision 4.2; and (b) in the event of the
permanent disability of OPTIONEE while in the employ of the COMPANY, the Option
granted hereunder, to the extent that OPTIONEE was entitled to exercise such
Option on the date of OPTIONEE's disability, may be exercised within one year
after such termination as a result of disability by OPTIONEE or the person or
persons to whom OPTIONEE's rights under the Option granted hereby shall pass by
will or by the applicable laws of descent and distribution. Notwithstanding
anything herein to the contrary, however, the Option and all rights herein
granted shall in all events terminate and become null and void 10 years from the
date of this Agreement.
4.2 Pro-rata Exercise. In the event OPTIONEE's Terminal Date occurs
in the last quarter of a calendar year during which a portion of the Option may
become exercisable upon the achievement of annual sales goals, OPTIONEE shall
receive an early exercise right as to the pro-rata portion of the Option
representing the portion of the year worked by OPTIONEE before the Terminal
Date, based upon a 365 day year, provided the annual sales goal is achieved. The
exercise right as to the pro-rata portion of the Option must be exercised within
90 days of April 1 following the year of OPTIONEE's Terminal Date. In the event
OPTIONEE's Terminal Date occurs in any of the first three quarters of any
calendar year during which a portion of the Option may become exercisable upon
the achievement of annual sales goals, OPTIONEE shall not be entitled to an
early exercise right on any portion of the Option for the Terminal Date year.
5. STOCK SUBJECT TO THE OPTION. The COMPANY shall set aside shares of
Common Stock, which it now holds as authorized and unissued shares, in an
amount equal to the number of shares which will be issued upon the exercise of
this Option. If the Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares which were subject
thereto shall be free from any restrictions occasioned by this Option Agreement.
If the COMPANY has been listed on a stock exchange, the COMPANY will not be
required to issue or deliver any certificate or certificates for shares to be
issued hereunder until such shares have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange on which outstanding
shares of the same class may then be listed and until the COMPANY has taken such
steps as may, in the opinion of counsel for the CORPORATION, be required by law
and applicable regulations, including the rules and regulations of the
Securities and Exchange Commission, and state blue sky laws and regulations, in
connection with the issuance or sale of such shares, and the listing of such
shares on each such exchange. The COMPANY will use its best efforts to comply
with any such requirements forthwith upon the exercise of the Option.
2
<PAGE>
6. NO ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR STOCK SPLITS. Neither
the number of shares subject to the Option nor the exercise price shall be
subject to adjustment upon a change in capitalization, stock split, or under any
other circumstances.
7. NOTICES. Each notice relating to this Agreement shall be in writing
and delivered in person or by certified mail to the proper address. Each notice
shall be deemed to have been given on the date it is received. Each notice to
the COMPANY shall be addressed to it at its principal office at 12187 South
Business Park Drive, Suite 100, Draper, Utah 84020, or to its then primary
business address, to the attention of the Secretary of the COMPANY. Each notice
to the OPTIONEE or other person or persons then entitled to exercise the Option
shall be addressed to the OPTIONEE or such other person or persons at the
OPTIONEE's address set forth in the heading of this Agreement. Anyone to whom a
notice may be given under this Agreement may designate a new address by notice
to that effect.
8. BENEFITS OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon each successor of the COMPANY. All obligations imposed upon
the OPTIONEE and all rights granted to the COMPANY under this Agreement shall be
binding upon the OPTIONEE's heirs, legal representatives, and successors. This
Agreement shall be the sole and exclusive source of any and all rights which the
OPTIONEE, his heirs, legal representatives, or successors may have in respect to
the Plan or any options or Common Stock granted or issued thereunder, whether
to him, or herself, or to any other person.
9. RESOLUTION OF DISPUTES. Any dispute or disagreement which should
arise under, or as a result of, or in any way relate to, the interpretation,
construction or application of this Agreement will be determined by the Board of
Directors of the COMPANY. Any determination made hereunder shall be final,
binding, and conclusive for all purposes.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have caused this Agreement
to be executed as of the day, month and year first above-written.
COMPANY: OPTIONEE: /s/ Kurt A. Moore
------------------------------
RENAISSANCE GOLF PRODUCTS, INC. KURT A. MOORE
a Delaware corporation
By: /s/ John B. Hewlett (CORPORATE SEAL)
---------------------------
JOHN B. HEWLETT,
Chief Executive Officer
3
<PAGE>
NON-QUALIFIED
STOCK OPTION AGREEMENT
OF
RENAISSANCE GOLF PRODUCTS, INC.
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, hereinafter referred to as the
"Option" or the "Agreement," is made as of September 15, 1997, between
RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation (hereinafter referred to
as the "COMPANY"), and EDWARD B. PAULSEN (the "OPTIONEE"), at 12187 South
Business Park Drive, Draper, Utah 84020.
The Board of Directors of the COMPANY hereby grants an option on 30,000
shares of common stock of the COMPANY ("Common Stock") to the OPTIONEE at the
price and in all respects subject to the terms, definitions and provisions of
the Agreement.
1. OPTION PRICE. The option price is $1.25 per share.
2. EXERCISE OF OPTION.
2.1 Right to Exercise. The options shall be exercisable (i) by the
OPTIONEE, his personal representative, or his assignee, in whole or in part in
accordance with the terms of this Agreement, (ii) is exercisable as follows:
10,000 from on or after January 1, 1998, an additional 10,000 from on or after
January 1, 1999, and an additional 10,000 from on or after January 1, 2000, and
all 30,000 before 10 years from the date of grant, and, (iii) shall not be
subject to adjustment in terms of the exercise price or the number of shares
issuable hereunder.
2.2 Method of Exercise. This Option shall be exercisable by a written
notice which shall:
(a) State the election to exercise the Option, the number of
shares in respect of which it is being exercised, the person in whose name the
shares are to be issued (if the shares are issued to individuals), the names,
addresses and Social Security Numbers of such persons; and
(b) Contain such representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as are
required by law or as may be satisfactory to the COMPANY's counsel; and
(c) Be signed by the person or persons entitled to exercise the
Option and, if the Option is being exercised by any person or persons other than
the OPTIONEE, be accompanied by proof, satisfactory to counsel for the COMPANY,
of the right of such person or persons to exercise the Option; and
(d) Be accompanied by a payment for the purchase price of those
shares with respect to which the Option is being exercised in the form of cash
or check. The certificate or certificates for shares of Common Stock as to which
the Option shall be exercised shall be registered in the name of the person or
persons exercising the Option.
2.3 Restrictions on Exercise. As a condition to his exercise of this
Option, the COMPANY may require the person exercising this Option to comply with
applicable laws or regulations.
3. TRANSFERABILITY OF OPTION. This Option may be transferred in any
manner by will or the laws of descent or distribution and may be exercised
during the lifetime of the OPTIONEE by an assignee of the OPTIONEE.
1
<PAGE>
4. STOCK SUBJECT TO THE OPTION. The COMPANY shall set aside shares of
Common Stock, which it now holds as authorized and unissued shares, in an amount
equal to the number of shares which will be issued upon the exercise of this
Option. If the Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares which were subject
thereto shall be free from any restrictions occasioned by this Option Agreement.
If the COMPANY has been listed on a stock exchange, the COMPANY will not be
required to issue or deliver any certificate or certificates for shares to be
issued hereunder until such shares have been listed (or authorized for listing
upon official notice of issuance) upon each stock exchange on which outstanding
shares of the same class may then be listed and until the COMPANY has taken such
steps as may, in the opinion of counsel for the CORPORATION, be required by law
and applicable regulations, including the rules and regulations of the
Securities and Exchange Commission, and state blue sky laws and regulations, in
connection with the issuance or sale of such shares, and the listing of such
shares on each such exchange. The COMPANY will use its best efforts to comply
with any such requirements forthwith upon the exercise of the Option.
5. NO ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The Option price shall
not be subject to mandatory adjustment upon a change in capitalization or under
any other circumstances.
6. NOTICES. Each notice relating to this Agreement shall be in writing
and delivered in person or by certified mail to the proper address. Each notice
shall be deemed to have been given on the date it is received. Each notice to
the COMPANY shall be addressed to it at its principal office at 12187 S.
Business Park Drive, #100, Draper, Utah 84020, or to its then primary business
address, to the attention of the Secretary of the COMPANY. Each notice to the
OPTIONEE or other person or persons then entitled to exercise the Option shall
be addressed to the OPTIONEE or such other person or persons at the OPTIONEE's
address set forth in the heading of this Agreement. Anyone to whom a notice may
be given under this Agreement may designate a new address by notice to that
effect.
7. BENEFITS OF AGREEMENT. This Agreement shall inure to the benefit of
and be binding upon each successor of the COMPANY. All obligations imposed upon
the OPTIONEE and all rights granted to the COMPANY under this Agreement shall be
binding upon the OPTIONEE's heirs, legal representatives, and successors. This
Agreement shall be the sole and exclusive source of any and all rights which the
OPTIONEE, his heirs, legal representatives, or successors may have in respect to
the Plan or any options or Common Stock granted or issued thereunder, whether to
him, or herself, or to any other person.
8. RESOLUTION OF DISPUTES. Any dispute or disagreement which should arise
under, or as a result of, or in any way relate to, the interpretation,
construction or application of this Agreement will be determined by the Board of
Directors of the COMPANY. Any determination made hereunder shall be final,
binding, and conclusive for all purposes.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have caused this Agreement
to be executed as of the day, month and year first above-written.
COMPANY: OPTIONEE: /s/ Edward B. Paulsen
------------------------------
RENAISSANCE GOLF PRODUCTS, INC. EDWARD B. PAULSEN
a Delaware corporation
By: /s/ John B. Hewlett (CORPORATE SEAL)
------------------------
JOHN B. HEWLETT,
Chief Executive Officer
2
<PAGE>
COMMERCIAL LEASE AGREEMENT
--------------------------
THIS LEASE AGREEMENT is made and entered into this 1st day of January 1998,
by and between Ortho Development Corp. whose address is 106 West 12200
South, Draper, Utah 84020 (hereinafter referred to as "Landlord"), and
Renaissance Golf Products Inc. whose address is 2919 Granite Hollow St.
Sandy, Utah, 84092, (herein after referred to as "Tenant").
ARTICLE I - GRANT OF LEASE
--------------------------
Landlord, in consideration of the rents to be paid and the covenants and
agreements to be performed and observed by the Tenant, does hereby lease to the
Tenant and the Tenant does hereby lease and take from the Landlord the property
described in Exhibit "A" attached hereto and by reference made a part hereof
(the "Leased Premises"), together with, as part of the parcel, all improvements
located thereon.
ARTICLE II - LEASE TERM
-----------------------
Section 1. Total Term of Lease. The term of this Lease shall begin on the
-------------------
Commencement date, as defined in Section 2 of this Article 11, and shall
terminate on the 31 day of December 1999.
Section 2. Commencement Date. The "Commencement Date" shall mean the date, on
-----------------
which the Tenant shall commence to conduct business on the Leased Premised, so
long as such date is not in excess of sixty (60) days subsequent to execution
hereof.
ARTICLE III - EXTENSIONS
------------------------
The parties hereto may elect to extend this Agreement upon such terms and
conditions a may be agreed upon in writing and signed by the parties at the time
of any such extension.
ARTICLE IV - DETERMINATION OF RENT
----------------------------------
The Tenant agrees to pay the Landlord and the Landlord agrees to accept, during
the term hereof, at such place as the Landlord shall from time to time direct by
notice to the Tenant, rent at the following rates and times:
Section 1. Annual Rent. Annual rent for the term of the Lease shall be Ten
-----------
Dollars and Eighty Cents ($10.80) per square foot for office and Four Dollars
and Eighty Cents ($4.80 )per square foot for of warehouse , plus applicable
sales tax. At such time as the warehouse space rented is in excess of 5,000
square feet, the annual rent of the warehouse space in excess of 5,000 square
feet shall be Four Dollars and Twenty Cents per square foot. At such time as
the square footage leased of Warehouse space is equal to or greater than 16,000
the annual rent for all Warehouse
1
<PAGE>
space shall be Four Dollars and Twenty Cents per square foot. Office space
approved by landlord and built out at tenants expense shall be rent-free
including triple net charges, for 24. All rents are triple net.
Section 2. Payment of Yearly Rent. The annual rent shall be payable in advance
----------------------
in equal monthly installments of one-twelfth (1/12th) of the total yearly rent,
which shall be paid on the first day of each and every calendar month during the
term hereof, and prorata for the fractional portion of any month, except that on
the first day of the calendar month immediately following the Commencement Date,
the Tenant shall also pay to the Landlord rent at the said rate for any portion
of the preceding calendar month included in the term of this Lease. Reference
to yearly rent hereunder shall not be implied or construed to the effect that
this Lease or the obligation to pay rent hereunder is from year to year, or for
any term shorter than the existing Lease term, plus any extensions as may be
agreed upon.
A late fee in the amount of $150.00 be assessed if Landlord does not receive
payment on or before the tenth day of each month.
ARTICLE V - SECURITY DEPOSIT
----------------------------
The Tenant has deposited with the Landlord the sum of Four Thousand Dollars
($4,000.00), as security for the full and faithful performance by the Tenant of
all the terms of this lease required to be performed by the Tenant. Such sum
shall be returned to the Tenant after the expiration of this lease, provided the
Tenant has fully and faithfully carried out all of its terms. In the event of a
bona fide sale of the property of which the leased premises are a part, the
Landlord shall have the right to transfer the security to the purchaser to be
held under the terms of this lease, and the Landlord shall be released from all
liability for the return of such security to the Tenant.
ARTICLE VI - TAXES
------------------
Section 1. Personal Property Taxes. The Tenant shall be liable for all taxes
-----------------------
levied against any leasehold interest of the Tenant or personal property and
trade fixtures owned or placed by the Tenant in the Leased Premises.
Section 2. Real Estate Taxes. During the continuance of this lease Landlord
-----------------
shall deliver to Tenant a copy of any real estate taxes and assessments against
the Leased Property. From and after the Commencement Date, the Tenant shall pay
to Landlord not later than twenty-one (21) days after the day on which the same
may become initially due, all real estate taxes and assessments applicable to
the Leased Premises, together with any interest and penalties lawfully imposed
thereon as a result of Tenant's late payment thereof, which shall be levied upon
the Leased Premises during the term of this Lease.
Section 3. Contest of Taxes. The Tenant, at its own cost and expense, may, if
----------------
it shall in good faith so desire, contest by appropriate proceedings the amount
of any personal or real property tax. The Tenant may, if it shall so desire,
endeavor at any time or times, by appropriate proceedings, to obtain a reduction
in the assessed valuation of the Leased Premises for tax purposes. In any such
event, if the Landlord agrees, at the request of the Tenant, to join with the
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Tenant at Tenant's expense in said proceedings and the Landlord agrees to sign
and deliver such papers and instruments as may be necessary to prosecute such
proceedings, the Tenant shall have the right to contest the amount of any such
tax and the Tenant shall have the right to withhold payment of any such tax, if
the statute under which the Tenant is contesting such tax so permits.
Section 4. Payment of Ordinary Assessments. The Tenant shall pay all
-------------------------------
assessments, ordinary and extraordinary, attributable to or against the Leased
Premises not later than twenty-one (21) days after the day on which the same
became initially due. The Tenant may take the benefit of any law allowing
assessments to be paid in installments and in such event the Tenant shall only
be liable for such installments of assessments due during the term hereof.
Section 5. Changes in Method of Taxation. Landlord and Tenant further agree
-----------------------------
that if at any time during the term of this Lease, the present method of
taxation or assessment of real estate shall be changed so that the whole or any
part of the real estate taxes, assessment or governmental impositions now
levied, assessed or imposed on the Leased Premises shall, in lieu thereof, be
assessed, levied, or imposed wholly or in part, as a capital levy or otherwise
upon the rents reserved herein or any part thereof, or as a tax, corporation
franchise tax, assessment, levy or charge, or any part thereof, measured by or
based, in whole or in part, upon the Leased Premises or on the rents derived
therefrom and imposed upon the Landlord, then the Tenant shall pay all such
taxes, assessments, levies, impositions, or charges. Nothing contained in this
Lease shall require the Tenant to pay an estate, inheritance, succession,
capital levy, corporate franchise, gross receipts, transfer or income tax of the
Landlord, nor shall any of the same be deemed real estate taxes as defined
herein unless the same be imposed in lieu of the real estate taxes.
ARTICLE VII - CONSTRUCTION AND COMPLETION
-----------------------------------------
Section 1. Improvements by TENANT. Tenant may have prepared plans and
----------------------
specifications for the construction of improvements, and, if so, such plans and
specifications are attached hereto as Exhibit "B" and incorporated herein by
reference or shall be subject to reasonable approval of Landlord prior to
commencement of work. Tenant shall obtain all certificates, permits, licenses
and other authorizations of governmental bodies or authorities which are
necessary to permit the construction of the improvements on the demised premises
and shall keep the same in full force and effect at Tenant's cost.
Tenant shall negotiate, let and supervise all contracts for the furnishing of
services, labor, and materials for the construction of the improvements on the
demised premises at its cost. All such contracts shall require the contracting
party to guarantee performance and all workmanship and materials installed by it
for a period of one-year following the date of completion of construction.
Tenant shall cause all contracts to be fully and completely performed in a good
and workmanlike manner, all to the effect that the improvements shall be fully
and completely constructed and installed in accordance with good engineering and
construction practice.
During the course of construction, Tenant shall, at its cost, keep in full
force and effect a policy of builder's risk and liability insurance in a sum
equal, from time to time, an amount approved by
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Landlord. All risk of loss or damage to the improvements during the course of
construction shall be on Tenant with the proceeds from insurance thereon payable
to Landlord.
Upon completion of construction, Tenant shall, at its cost, obtain an occupancy
permit and all other permits or licenses necessary for the occupancy of the
improvements and the operation of the same as set out herein and shall keep the
same in force. Nothing herein shall alter the intent of the parties that Tenant
shall be fully and completely responsible for all aspects pertaining to the
construction of the improvements of the demised premises and for the payment of
all costs associated therewith. Landlord shall be under no duty to investigate
or verify Tenant's compliance with the provision herein. Moreover, neither
Tenant nor any third party may construe the permission granted Tenant hereunder
to create any responsibility on the part of the Landlord to pay for any
improvements, alterations or repairs occasioned by the Tenant. The Tenant shall
keep the property free and clear of all liens and, should the Tenant fall to do
so, or to have any liens removed from the property within fourteen (14) days of
notification to do so by the Landlord, in addition to all other remedies
available to the Landlord, the Tenant shall indemnify and hold the Landlord
harmless for all costs and expenses, including attorney's fees, occasioned by
the Landlord in having said lien removed from the property; and, such costs and
expenses shall be billed to the Tenant monthly and shall be payable by the
Tenant with that month's regular monthly rental as additional reimbursable
expenses to the Landlord by the Tenant.
Section 2. Utilities. Tenant shall pay its prorata share based on square
---------
footage for all water, sanitation, sewer, electricity, light, heat, gas, power,
fuel, janitorial, CAM charges and other services incident to Tenant's use of the
Leased Premises, whether or not the cost thereof be a charge or imposition
against the Leased Premises.
All Charges to and for Tenant shall be prorated on square footage by Landlord
and presented monthly to Tenant for payment.
ARTICLE VIII - OBLIGATIONS FOR REPAIRS
--------------------------------------
Section 1. LANDLORD'S Repairs. Subject to any provisions herein to the
------------------
contrary, and except for maintenance or replacement necessitated as the result
of the act or indecision of subleases, licensees or contractors, the Landlord
shall repair any defects, deficiencies, deviations or failures of materials or
workmanship in the building. The Landlord shall keep the Leased Premises free
of such defects, deficiencies, deviations or failures during the first twelve
(12) months of the term hereof.
Section 2. TENANT'S Repairs. The Tenant shall repair and maintain the Leased
----------------
premises in good order and condition, except for reasonable wear and tear, the
repairs required of Landlord pursuant hereto, and maintenance or replacement
necessitated as the result of the act or omission or negligence of the Landlord,
its employees, agents, or contractors.
Section 3. Obligations of the LANDLORD. Throughout the term hereof, the
---------------------------
Landlord shall, except for repairs necessitated as a result of the act or
omission or negligence of the Tenant, its employees, agents or contractors, make
all repairs:
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(a) To the roof and the structural portions of the Leased Premises, including,
without limitation, the floor slabs, the bearing walls of the foundations;
or
(b) Required because of the settling of the Leased Premises.
Section 4. Requirements of the Law. The Tenant agrees that if any federal,
-----------------------
state or municipal government or any department or division thereof shall
condemn the Leased Premises or any part thereof as not in conformity with the
laws and regulations relating to the construction thereof as of the commencement
date with respect to conditions latent or otherwise which existed on the
Commencement Date, or, with respect to items which are the Landlord's duty to
repair pursuant to Section 1 and 3 of this Article; and such federal state or
municipal government or any other department or division thereof, has ordered or
required, or shall hereafter order or require, any alterations or repairs
thereof or installations and repairs as may be necessary to comply with such
laws, orders or requirements (the validity of which the Tenant shall be entitled
to contest); and if by reason of such laws, orders or the work done by the
Landlord in connection therewith, the Tenant is deprived of the use of the
Leased Premises, the rent shall be abated or adjusted, as the case may be, in
proportion to that time during which, and to that portion of the Leased Premises
of which, the Tenant shall be deprived as a result thereof, and the Landlord
shall be obligated to make such repairs, alterations or modifications at
Landlord's expense.
All such rebuilding, altering, installing and repairing shall be done in
accordance with Plans and Specifications approved by the Tenant, which approval
shall not be unreasonably withheld. If, however, such condemnation, law, order
or requirement, as in this Article set forth, shall be with respect to an item
which shall be the Tenant's obligation to repair pursuant to Section 2 of this
Article VII or with respect to Tenant's own costs and expenses, no abatement or
adjustment of rent shall be granted; provided, however, that Tenant shall also
be entitled to contest the validity thereof.
Section 5. Tenants Alterations. The Tenant shall have the right, at its sole
--------------------
expense, from time to time, to redecorate the Leased Premises and to make such
nonstructural alterations and changes in such parts thereof as the Tenant shall
deem expedient or necessary for its purposes; provided, however, that such
alterations and changes shall neither impair the structural soundness nor
diminish the value of the Leased Premises. The Tenant may make structural
alterations and additions to the Leased Premises provided that Tenant has first
obtained the consent thereto of the Landlord in writing. The Landlord agrees
that it shall not withhold such consent unreasonably. The Landlord shall
execute and deliver upon the request of the Tenant such instrument or
instruments embodying the approval of the Landlord which may be required by the
public or quasi public authority for the purpose of obtaining any licenses or
permits for the making of such alterations, changes and/or installations in, to
or upon the Leased Premises and the Tenant agrees to pay for such licenses or
permits.
Section 6. Permits and Expenses. Each party agrees that it will procure all
--------------------
necessary permits for making any repairs, alterations, or other improvements for
installations, when applicable. Each Party hereto shall give written notice to
the other party of any repairs required of the other pursuant to the provisions
of this Article and the party responsible for said repairs agrees
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promptly to commence such repairs and to prosecute the same to completion
diligently, subject, however, to the delays occasioned by events beyond the
control of such party. Each party agrees to pay promptly when due the entire
cost of any work done by it upon the Leased Premises so that the Leased Premises
at all times shall be free of liens for labor and materials. Each party further
agrees to hold harmless and indemnify the other party from and against any and
all injury, loss, claims or damage to any person or property occasioned by or
arising out of the doing of any such work by such party or its employees, agents
or contractors. Each party further agrees that in doing such work that it will
employ materials of good quality and comply with all governmental requirements,
and perform such work in a good and workmanlike manner.
ARTICLE IX - TENANT'S COVENANTS
-------------------------------
Section 1. Tenants Covenants. Tenant covenants and agrees as follows:
-----------------
(a.) To procure any licenses and permits required for any use made of the Leased
Premises by Tenant, and upon the expiration or termination of this Lease,
to remove its goods and effects and those of all persons claiming under it,
and to yield up peaceably to Landlord the Leased Premises in good order,
repair and condition in all respects; excepting only damage by fire and
casualty covered by Tenant's insurance coverage, structural repairs (unless
Tenant is obligated to make such repairs hereunder) and reasonable wear and
tear;
(b.) To permit Landlord and its agents to examine the Leased Premises at
reasonable times, with reasonable notice and to show the Leased Premises to
prospective purchasers of the Building and to provide Landlord, if not
already available, with a set of keys for the purpose of said examination,
provided that Landlord shall not thereby unreasonably interfere with the
conduct of Tenant's business;
(c.) To permit Landlord to enter the Leased Premises to inspect such repairs,
improvements, alterations or additions thereto as may be required under the
provisions of this Lease. If, as a result of such repairs, improvements,
alterations, or additions, Tenant is deprived of the use of the Leased
Premises, the rent shall be abated or adjusted, as the case may be, in
proportion to that time during which, and to that portion of the Leased
Premises of which, Tenant shall be deprived as a result thereof.
ARTICLE X - INDEMNITY BY TENANT
-------------------------------
Section 1. Indemnity and Public Liability. The Tenant shall save Landlord
------------------------------
harmless and indemnify Landlord from all injury, loss, claims or damage to any
person or property while on the Leased Premises, unless caused by the willful
acts or omissions or gross negligence of Landlord, its employees, agents,
licensees or contractors. Tenant shall maintain, with respect to the Leased
Premises, public liability insurance with limits of not less than one million
dollars for injury or death from one accident and $250,000.00 property damage
insurance, insuring Landlord and Tenant against injury to persons or damage to
property on or about the Leased Premises. A copy of the policy or a certificate
of insurance shall be delivered to Landlord on or before the commencement date
and no such policy shall be cancelable without ten (10) days prior written
notice to Landlord.
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ARTICLE XI - USE OF PROPERTY BY TENANT
--------------------------------------
Section 1. Tenant agrees to limit use of the property to distribution of
sporting goods, light assembly thereof and the attendant office usage and other
usage as agreed in writing by Landlord.
ARTICLE XII - SIGNAGE
---------------------
Section 1. Exterior Signs. Tenant shall have the right, at its sole risk and
--------------
expense and in conformity with applicable laws and ordinances and CC&Rs, to
erect and thereafter, to repair or replace, if it shall so elect signs on any
portion of the Leased Premises, providing that Tenant shall remove any such
signs upon termination of this lease, and repair all damage occasioned thereby
to the Leased Premises.
Section 2. Interior Signs. Tenant shall have the right, at its sole risk and
--------------
expense and in conformity with applicable laws and ordinances, to erect,
maintain, place and install its usual and customary signs and fixtures in the
interior of the Leased Premises.
ARTICLE XIII - INSURANCE
------------------------
Section 1. Insurance Proceeds. In the event of any damage to or destruction of
------------------
the Leased Premises, Tenant shall adjust the loss and settle all claims with the
insurance companies issuing such policies. The parties hereto do irrevocably
assign the proceeds from such insurance policies for the purposes hereinafter
stated to any institutional first mortgagee or to Landlord and Tenant jointly,
if no institutional first mortgagee then holds an interest in the Leased
Premises. All proceeds of said insurance shall be paid into a trust fund under
the control of any institutional first mortgagee, or of Landlord and Tenant if
no institutional first mortgagee then holds an interest in the Leased Premises,
for repair, restoration, rebuilding or replacement, or any combination thereof,
of the Leased Premises or of the improvements in the Leased Premises. In case
of such damage or destruction, Landlord shall be entitled to make withdrawals
from such trust fund, from time to time, upon presentation of:
(a.) Bills for labor and materials expended in repair, restoration, rebuilding
or replacement, or any combination thereof-,
(b.) Landlord's sworn statement that such labor and materials for which payment
is being made have been furnished or delivered on site; and
(c.) The certificate of a supervising architect (selected by Landlord and Tenant
and approved by an institutional first mortgagee, if any, whose fees will
be paid out of said insurance proceeds) certifying that the work being paid
for has been completed in accordance with the Plans and Specifications
previously approved by Landlord, Tenant and any institutional first
mortgagee in a first class, good and workmanlike manner and in accordance
with all pertinent governmental requirements.
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Any insurance proceeds in excess of such proceeds as shall be necessary
for such repair, restoration, rebuilding, replacement or any combination
thereof shall be the sole property of Landlord subject to any rights
therein of Landlord's mortgagee, and if the proceeds necessary for such
repair, restoration, rebuilding or replacement, or any combination
thereof shall be inadequate to pay the cost thereof, Tenant shall suffer
the deficiency.
Section 2. Subrogation. Landlord and Tenant hereby release each other, to the
-----------
extent of the insurance coverage provided hereunder, from any and all liability
or responsibility (to the other or anyone claiming through or under the other by
way of subrogation or otherwise) for any loss to or damage of property covered
by the fire and extended coverage insurance policies insuring the Leased
Premises and any of Tenant's property, even if such loss or damage shall have
been caused by the fault or negligence of the other party.
Section 3. Contribution. Tenant shall reimburse Landlord prorata for all
------------
insurance premiums connected with or applicable to the Leased Premises for
whatever insurance policy the Landlord, at its sole and exclusive option, should
select. A copy of the policy shall be provided Tenant.
ARTICLE XIV - DAMAGE TO DEMISED PREMISES
----------------------------------------
Section 1. Abatement or Adjustment of Rent. If the whole or any part of the
--------------------------
Leased Premises shall be damaged or destroyed by fire or other casualty after
the execution of this Lease and before the termination hereof, then in every
case the rent reserved in Article IV herein and other charges, if any, shall be
abated or adjusted, as the case may be, in proportion to that portion of the
Leased Premises of which Tenant shall be deprived on account of such damage or
destruction and the work of repair, restoration, rebuilding, or replacement or
any combination thereof, of the improvements so damaged or destroyed, shall in
no way be construed by any person to effect any reduction of sums or proceeds
payable under any rent insurance policy.
Section 2. Repairs and Restoration. Landlord agrees that in the event of the
-----------------------
damage or destruction of the Leased Premises, Landlord forthwith shall proceed
to repair, restore, replace or rebuild the Leased Premises (excluding Tenant's
leasehold improvements), to substantially the condition in which the same were
immediately prior to such damage or destruction. The Landlord thereafter shall
diligently prosecute said work to completion without delay or interruption
except for events beyond the reasonable control of Landlord. Notwithstanding
the foregoing, if Landlord does not either obtain a building permit within
ninety (90) days of the date of such damage or destruction, or complete such
repairs, rebuilding or restoration and comply with conditions (a), (b) and (c)
in Section I of Article XIII within nine (9) months of such damage or
destruction, then Tenant may at any time thereafter cancel and terminate this
Lease by sending ninety (90) days written notice thereof to Landlord, or, in the
alternative, Tenant may, during said ninety (90) day period, apply for the same
and Landlord shall cooperate with Tenant in Tenant's application.
Notwithstanding the foregoing, if such damage or destruction shall occur during
the last year of the term of this Lease, or during any renewal term, and shall
amount to twenty-five (25%) percent or more of the replacement cost, (exclusive
of the land and foundations), this Lease, except as hereinafter provided in
Section 3 of Article XV, may be terminated at the election of either Landlord or
Tenant, provided that notice of such election shall be sent by the party so
electing to the other within thirty (30) days after the occurrence of such
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damage or destruction. Upon termination, as aforesaid, by either party hereto,
this Lease and the term thereof shall cease and come to an end, any unearned
rent or other charges paid in advance by Tenant shall be refunded to Tenant, and
the parties shall be released hereunder, each to the other, from all liability
and obligations hereunder thereafter arising.
ARTICLE XV - CONDEMNATION
-------------------------
Section 1. Total Taking. If, after the execution of this Lease and prior to the
------------
expiration of the term hereof, the whole of the Leased Premises shall be taken
under power of eminent domain by any public or private authority, or conveyed by
Landlord to said authority in lieu of such taking, then this Lease and the term
hereof shall cease and terminate as of the date when possession of the Leased
Premises shall be taken by the taking authority and any unearned rent or other
charges, if any, paid in advance, shall be refunded to Tenant.
Section 2. Partial Taking. If, after the execution of this Lease and prior to
--------------
the expiration of the term hereof, any public or private authority shall, under
the power of eminent domain, take, or Landlord shall convey to said authority in
lieu of such taking, property which results in a reduction by fifteen (15%)
percent or more of the area in the Leased Premises, or of a portion of the
Leased Premises that substantially interrupts or substantially obstructs the
conducting of business on the Leased Premises; then Tenant may, at its election,
terminate this Lease by giving Landlord notice of the exercise of Tenant's
election within thirty (30) days after Tenant shall receive notice of such
taking. In the event of termination by Tenant under the provisions of Section I
of this Article XV, this Lease and the term hereof shall cease and terminate as
of the date when possession shall be taken by the appropriate authority of that
portion of the Entire Property that results in one of the above takings, and any
unearned rent or other charges, if any, paid in advance by Tenant shall be
refunded to Tenant.
Section 3. Restoration. In the event of a taking in respect of which Tenant
-----------
shall not have the right to elect to terminate this Lease or, having such right,
shall not elect to terminate this Lease, this Lease and the tenure thereof shall
continue in full force and effect and Landlord, at Landlord's sole cost and
expense, forthwith shall restore the remaining portions of the Leased Premises,
including any and all improvements made theretofore to an architectural whole in
substantially the same condition that the same were in prior to such taking. A
just proportion of the rent reserved herein and any other charges payable by
Tenant hereunder, according to the nature and extent of the injury to the Leased
Premises and to Tenant's business, shall be suspended or abated until the
completion of such restoration and thereafter the rent and any other charges
shall be reduced in proportion to the square footage of the Leased Premises
remaining after such taking.
Section 4. The Award. All compensation awarded for any taking, whether for the
---------
whole or a portion of the Leased Premises, shall be the sole property of the
Landlord whether such compensation shall be awarded for diminution in the value
of, or loss of, the leasehold or for diminution in the value of, or loss of, the
fee in the Leased Premises, or otherwise. The Tenant hereby assigns to Landlord
all of Tenant's right and title to and interest in any and all such
compensation. However, the Landlord shall not be entitled to and Tenant shall
have the sole
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right to make its independent claim for and retain any portion of any award made
by the appropriating authority directly to Tenant for loss of business, or
damage to or depreciation of, and cost of removal of fixtures, personalty and
improvements installed in the Leased Premises by, or at the expense of Tenant,
and to any other award made by the appropriating authority directly to Tenant.
Section 5. Release. In the event of any termination of this Lease as the result
-------
of the provisions of this Article XV, the parties, effective as of such
termination, shall be released, each to the other, from all liability and
obligations thereafter arising under this lease.
ARTICLE XVI - DEFAULT
---------------------
Section 1. LANDLORD'S REMEDIES. In the event that:
-------------------
(a.) Tenant shall on three or more consecutive months be in default in the
payment of rent or other charges herein required to be paid by Tenant
(default herein being defined as payment received by Landlord ten or more
days subsequent to the due date).
(b.) Tenant has caused a lien to be filed against the Landlord's property and
said lien is not removed within thirty (30) days of recordation thereof, or
(c.) Tenant shall default in the observance or performance of any of the
covenants and agreements required to be performed and observed by Tenant
hereunder for a period of thirty (30) days after notice to Tenant in
writing of such default (or if such default shall reasonably take more than
thirty (30) days to cure, Tenant shall not have commenced the same within
the thirty (30) days and diligently prosecuted the same to completion); or
(d.) Sixty (60) days have elapsed after the commencement of any proceeding by or
against Tenant, whether by the filing of a petition or otherwise, seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or future Federal
Bankruptcy Act or any other present or future applicable federal, state or
other statute or law, whereby such proceeding shall not have been dismissed
(provided, however, that the non-dismissal of any such proceeding shall not
be a default hereunder so long as all of Tenant's covenants and obligations
hereunder are being performed by or on behalf of Tenant); then Landlord
shall be entitled to its election (unless Tenant shall cure such default
prior to such election), to exercise concurrently or successively, any one
or more of the following rights:
i. Terminate this Lease by giving Tenant notice of termination, in which
event this Lease shall expire and terminate on the date specified in such
notice of termination, with the same force and effect as though the date
so specified were the date herein originally fixed as the termination
date of the term of this Lease, and all rights of Tenant under this Lease
and in and to the Premises shall expire and terminate, and Tenant shall
remain liable for all obligations under this Lease arising up to the date
of such
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termination, and Tenant shall surrender the Premises to Landlord on the
date specified in such notice; or
ii. Terminate this Lease as provided herein and recover from Tenant all
damages Landlord may incur by reason of Tenant's default, including,
without limitation, a sum which, at the date of such termination,
represents the then value of the excess, if any, of (a) the Minimum Rent,
Percentage Rent, Taxes and all other sums which would have been payable
hereunder by Tenant for the period commencing with the day following the
date of such termination and ending with the date herein before set for
the expiration of the full term hereby granted, over (b) the aggregate
reasonable rental value of the Premises for the same period, all of which
excess sum shall be deemed immediately due and payable; or
iii. Without terminating this Lease, declare immediately due and payable all
Minimum Rent, Taxes, and other rents and amounts due and coming due under
this Lease for the entire remaining term hereof, together with all other
amounts previously due, at once; provided, however, that such payment
shall not be deemed a penalty or liquidated damages but shall merely
constitute payment in advance of rent for the remainder of said term.
Upon making such payment, Tenant shall be entitled to receive from
Landlord all rents received by Landlord from other assignees, tenants,
and subtenants on account of said Premises during the term of this Lease,
provided that the monies to which tenant shall so become entitled shall
in no event exceed the entire amount actually paid by Tenant to Landlord
pursuant to the preceding sentence less all costs, expenses and
attorney's fees of Landlord incurred in connection with the reletting of
the Premises; or
iv. Without terminating this Lease, and with or without notice to Tenant,
Landlord may in its own name but as agent for Tenant enter into and upon
and take possession of the Premises or any part thereof, and, at
landlord's option, remove persons and property therefrom, and such
property, if any, may be removed and stored in a warehouse or elsewhere
at the cost of, and for the account of Tenant, all without being deemed
guilty of trespass or becoming liable for any loss or damage which may be
occasioned thereby, and Landlord may rent the Premises or any portion
thereof as the agent of Tenant with or without advertisement, and by
private negotiations and for any term upon such terms and conditions as
Landlord may deem necessary or desirable in order to relet the Premises.
Landlord shall in no way be responsible or liable for any rental
concessions or any failure to rent the Premises or any part thereof, or
for any failure to collect any rent due upon such reletting. Upon such
reletting, all rentals received by Landlord from such reletting shall be
applied: first, to the payment of any indebtedness (other than any rent
due hereunder) from Tenant to Landlord; second, to the payment of any
costs and expenses of such reletting, including, without limitation,
brokerage fees and attorney's fees and costs of alterations and repairs;
third, to the payment of rent and other charges then due and unpaid
hereunder; and the residue, if any shall be held by Landlord to the
extent of and for application in payment of future rent as the same may
become due and payable hereunder. In reletting the Premises as
aforesaid, Landlord may grant rent concessions and Tenant shall not be
credited
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therefor. If such rentals received from such reletting shall at
any time or from time to time be less than sufficient to pay to Landlord
the entire sums then due from Tenant hereunder, Tenant shall pay any such
deficiency to Landlord. Such deficiency shall, at Landlord's option, be
calculated and paid monthly. No such reletting shall be construed as an
election by Landlord to terminate this Lease unless Landlord has given a
written notice of such election to Tenant. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect
to terminate this Lease for any such previous default provided same has
not been cured; or
v. Without liability to Tenant or any other party and without constituting a
constructive or actual eviction, suspend or discontinue furnishing or
rendering to Tenant any property, material, labor, utilities or other
service, whether Landlord is obligated to furnish or render the same, so
long as Tenant is in default under this Lease; or
viii. Pursue such other remedies as are available at law or equity.
(e.) Landlord's pursuit of any remedy of remedies, including without limitation,
any one or more of the remedies stated herein shall not (1) constitute an
election of remedies or preclude pursuit of any other remedy or remedies
provided in this Lease or any other remedy or remedies provided by law or
in equity, separately or concurrently or in any combination, or (2) sever
as the basis for any claim of constructive eviction, or allow Tenant to
withhold any payments under this Lease.
Section 2. LANDLORD'S SELF HELP. If in the performance or observance of any
--------------------
agreement or condition in this Lease contained on its part to be performed or
observed and shall not cure such default within thirty (30) days after notice
from Landlord specifying the default (or if such default shall reasonably take
more than thirty (30) days to cure, shall diligently prosecuted the same to
completion), Landlord may, at its option, without waiving any claim for damages
for breach of agreement, at any time thereafter cure such default for the
account of Tenant, and any amount paid or contractual liability incurred by
Landlord in so doing shall be deemed paid or incurred for the account of Tenant
and Tenant agrees to reimburse Landlord therefor and save Landlord harmless
therefrom. Provided, however, that Landlord may cure any such default as
aforesaid prior to the expiration of said waiting period, without notice to
Tenant if any emergency situation exists, or after notice to Tenant, if the
curing of such default prior to the expiration of said waiting period is
reasonably necessary to protect the Leased Premises or Landlord's interest
therein, or to prevent injury or damage to persons or property. If Tenant shall
fail to reimburse Landlord upon demand for any amount paid for the account of
Tenant hereunder, said amount shall be added to and become due as a part of the
next payment of rent due and shall for all purposes be deemed and treated as
rent hereunder.
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Section 3. TENANT'S SELF HELP. If Landlord shall default in the performance or
------------------
observance of any agreement or condition in this Lease contained on its part to
be performed or observed, and if Landlord shall not cure such default within
thirty (30) days after notice from Tenant specifying the default (or, if such
default shall reasonably take more than thirty (30) days to cure, and Landlord
shall not have commenced the same within the thirty (30) days and diligently
prosecuted the same to completion), Tenant may, at its option, without waiving
any claim for damages for breach of agreement, at any time thereafter cure such
default for the account of Landlord and any amount paid or any contractual
liability incurred by Tenant in so doing shall be deemed paid or incurred for
the account of Landlord and Landlord shall reimburse Tenant therefor and save
Tenant harmless therefrom. Provided, however, that Tenant may cure any such
default as aforesaid prior to the expiration of said waiting period, without
notice to Landlord if an emergency situation exists, or after notice to
Landlord, if the curing of such default prior to the expiration of said waiting
period is reasonably necessary to protect the Leased Premises or Tenant's
interest therein or to prevent injury or damage to persons or property. If
Landlord shall fail to reimburse Tenant upon demand for any amount paid or
liability incurred for the account of Landlord hereunder, said amount or
liability may be deducted by Tenant from the next or any succeeding payments of
rent due hereunder; provided, however, that should said amount or the liability
therefor be disputed by Landlord, Landlord may contest its liability or the
amount thereof, through arbitration or through a declaratory judgment action and
Landlord shall bear the cost of the filing fees therefor.
ARTICLE XVII - TITLE
--------------------
Section 1. Subordination. Tenant shall, upon the request of Landlord in
-------------
writing, subordinate this Lease to the lien of any present or future
institutional mortgage upon the Leased Premises irrespective of the time of
execution or the time of recording of any such mortgage. Provided, however,
that as a condition to such subordination, the holder of any such mortgage shall
enter first into a written agreement with Tenant in form suitable for recording
to the effect that:
(a.) In the event of foreclosure or other action taken under the mortgage by the
holder thereof, this Lease and the rights of Tenant hereunder shall not be
disturbed but shall continue in full force and effect so long as Tenant
shall not be in default hereunder, and
(b.) Such holder shall permit insurance proceeds and condemnation proceeds to be
used for any restoration and repair required by the provisions of Articles
XIII, XIV or XV, respectively. Tenant agrees that if the mortgagee or any
person claiming under the mortgagee shall succeed to the interest of
Landlord in this Lease, Tenant will recognize said mortgagee or person as
its Landlord under the terms of this Lease, provided that said mortgagee or
person for the period during which said mortgagee or person respectively
shall be in possession of the Leased Premises and thereafter their
respective successors in interest shall assume all of the obligations of
Landlord hereunder. The word "mortgage", as used herein includes
mortgages, deeds of trust or other similar instruments, and modifications,
and extensions thereof. The term "institutional mortgage" as used in this
Article XVII means a mortgage securing a loan from a bank (commercial or
savings) or trust company,
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insurance company or pension trust or any other lender institutional in
nature and constituting a lien upon the Leased Premises.
Section 2. Quiet Enjoyment. Landlord covenants and agrees that upon Tenant
---------------
paying the rent and observing and performing all of the terms, covenants and
conditions on Tenant's part to be observed and performed hereunder, that Tenant
may peaceably and quietly have, hold, occupy and enjoy the Leased Premises in
accordance with the terms of this Lease without hindrance or molestation from
Landlord or any persons lawfully claiming through Landlord.
Section 3. Zoning and Good Title. Landlord warrants and represents, upon which
---------------------
warranty and representation Tenant has relied in the execution of this Lease,
that Landlord is the owner of the Leased Premises, in fee simple absolute, free
and clear of all encumbrances, except for the easements, covenants and
restrictions of record as of the date of this Lease. Such exceptions shall not
impede or interfere with the quiet use and enjoyment of the Leased Premises by
Tenant. Landlord further warrants and covenants that this Lease is and shall be
a first lien on the Leased Premises, subject only to any Mortgage to which this
Lease is subordinate or may become subordinate pursuant to an agreement executed
by Tenant, and to such encumbrances as shall be caused by the acts or omissions
of Tenant; that Landlord has full right and lawful authority to execute this
Lease for the term, in the manner, and upon the conditions and provisions herein
contained; that there is no legal impediment to the use of the Leased Premises
as set out herein; that the Leased Premises are not subject to any easements,
restrictions, zoning ordinances or similar governmental regulations which
prevent their use as set out herein; that the Leased Premises presently are
zoned for the use contemplated herein and throughout the term of this lease may
continue to be so used therefor by virtue of said zoning, under the doctrine of
"non-conforming use", or valid and binding decision of appropriate authority,
except, however, that said representation and warranty by Landlord shall not be
applicable in the event that Tenant's act or omission shall invalidate the
application of said zoning, the doctrine of "non-conforming use" or the valid
and binding decision of the appropriate authority. Landlord shall furnish
without expense to Tenant, within thirty (30) days after written request
therefor by Tenant, a title report covering the Leased Premises showing the
condition of title as of the date of such certificate, provided, however, that
Landlord's obligation hereunder shall be limited to the furnishing of only one
such title report.
Section 4. Licenses. It shall be the Tenant's responsibility to obtain any and
--------
all necessary licenses and the Landlord shall bear no responsibility therefor;
the Tenant shall promptly notify Landlord of the fact that it has obtained the
necessary licenses in order to prevent any delay to Landlord in commencing
construction of the Leased Premises.
ARTICLE XVIII - EXTENSIONS/WAIVERS/DISPUTES
-------------------------------------------
Section 1. Extension Period. Any extension hereof shall be subject to the
----------------
provisions of Article III hereof.
Section 2. Holding Over. In the event that Tenant or anyone claiming under
------------
Tenant shall continue occupancy of the Leased Premises after the expiration of
the term of this Lease or any renewal or extension thereof without any agreement
in writing between Landlord and Tenant
14
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with respect thereto, such occupancy shall not be deemed to extend or renew the
term of the Lease, but such occupancy shall continue as a tenancy at will, from
month to month, upon the covenants, provisions and conditions herein contained.
The rental shall be the rental in effect during the term of this Lease as
extended or renewed, prorated and payable for the period of such occupancy.
Section 3. Waivers. Failure of either party to complain of any act or omission
-------
on the part of the other party, no matter how long the same may continue, shall
not be deemed to be a waiver by said party of any of its rights hereunder. No
waiver by either party at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other
provision of this Lease or a consent to any subsequent breach of the same or any
other provision. If any action by either party shall require the consent or
approval of the other party, the other party's consent to or approval of such
action on any one occasion shall not be deemed a consent to or approval of said
action on any subsequent occasion or a consent to or approval of any other
action on the same or any subsequent occasion. Any and all rights and remedies
which either party may have under this Lease or by operation of law, either at
law or in equity, upon any breach, shall be distinct, separate and cumulative
and shall not be deemed inconsistent with each other, and no one of them,
whether exercised by said party or not, shall be deemed to be an exclusion of
any other; and any two or more or all of such rights and remedies may be
exercised at the same time.
Section 4. Disputes. It is agreed that, if at any time a dispute shall arise
--------
as to any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of the said party to institute suit for the recovery of such sum.
If it shall be adjudged that there was no legal obligation on the part of said
party to pay such sum or any part thereof, said party shall be entitled to
recover such sum or so much thereof as it was not legally required to pay under
the provisions of this Lease. If at any time a dispute shall arise between the
parties hereto as to any work to be performed by either of them under the
provisions hereof, the party against whom the obligation to perform the work is
asserted may perform such work and pay the costs thereof "under protest" and the
performance of such work shall in no event be regarded as a voluntary
performance and shall survive the right on the part of the said party to
institute suit for the recovery of the costs of such work. If it shall be
adjudged that there was no legal obligation on the part of the said party to
perform the same or any part thereof, said party shall be entitled to recover
the costs of such work or the cost of so much thereof as said party was not
legally required to perform under the provisions of this Lease and the amount so
paid by Tenant may be withheld or deducted by Tenant from any rents herein
reserved.
Section 5. TENANT'S RIGHT TO CURE LANDLORD'S DEFAULT. In the event that
-----------------------------------------
Landlord shall fail, refuse or neglect to pay any mortgages, liens or
encumbrances, the judicial sale of which might affect the interest of Tenant
hereunder, or shall fail, refuse or neglect to pay any interest due or payable
on any such mortgage, lien or encumbrance, Tenant may pay said mortgages, liens
or encumbrances, or interest or perform said conditions and charge to Landlord
the amount so paid and withhold and deduct from any rents herein reserved such
amounts so
15
<PAGE>
paid, and any excess over and above the amounts of said rents shall be paid by
Landlord to Tenant.
Section 6. Notices. All notices and other communications authorized or
-------
required hereunder shall be in writing and shall be given by mailing the same by
certified mail, return receipt requested, postage prepaid, and any such notice
or other communication shall be deemed to have been given when received by the
party to whom such notice or other communication shall be addressed. If
intended for Landlord the same will be mailed to the address herein above set
forth or such other address as Landlord may hereafter designate by notice to
Tenant, and if intended for Tenant, the same shall be mailed to Tenant at the
address herein above set forth, or such other address or addresses as Tenant may
hereafter designate by notice to Landlord.
ARTICLE XIX - PROPERTY DAMAGE
-----------------------------
Section 1. Loss and Damage. Notwithstanding any contrary provisions of this
---------------
Lease, Landlord shall not be responsible for any loss of or damage to property
of Tenant or of others located on the Leased Premises, except where caused by
the willful act or omission or negligence of Landlord, or Landlord's agents,
employees or contractors, provided, however, that if Tenant shall notify
Landlord in writing of repairs which are the responsibility of Landlord under
Article VII hereof, and Landlord shall fail to commence and diligently prosecute
to completion said repairs promptly after such notice, and if after the giving
of such notice and the occurrence of such failure, loss of or damage to Tenant's
property shall result from the condition as to which Landlord has been notified,
Landlord shall indemnify and hold harmless Tenant from any loss, cost or expense
arising therefrom.
Section 2. Force Majeure. In the event that Landlord or Tenant shall be
-------------
delayed or hindered in or prevented from the performance of any act other than
Tenant's obligation to make payments of rent, additional rent, and other charges
required hereunder, by reason of strikes, lockouts, unavailability of materials,
failure of power, restrictive governmental laws or regulations, riots,
insurrections, the act, failure to act, or default of the other party, war or
other reason beyond its control, then performance of such act shall be excused
for the period of the delay and the period for the performance of such act shall
be extended for a period equivalent to the period of such delay.
Notwithstanding the foregoing, lack of funds shall not be deemed to be a cause
beyond control of either party.
ARTICLE XX - MISCELLANEOUS
--------------------------
Section 1. Assignment and Subletting. Under the terms and conditions
-------------------------
hereunder, Tenant shall have the absolute right to transfer and assign this
lease or to sublet all or any portion of the Leased Premises or to cease
operating Tenant's business on the Leased Premises provided that at the time of
such assignment or sublease Tenant shall not be in default in the performance
and observance of the obligations imposed upon Tenant hereunder, and in the
event that Tenant assigns or sublets this property for an amount in excess of
the rental amount then being paid, then Landlord shall require as further
consideration for the granting of the right to assign or sublet, a sum equal to
fifty (50%) percent of the difference between the amount of rental to be
16
<PAGE>
charged by Tenant to Tenant's sublessee or assignee and the amount provided for
herein, payable in a manner consistent with the method of payment by the
sublessee or assignee to the Tenant, and/or fifty (50%) percent of the
consideration paid or to be paid to Tenant by Tenant's sublessee or assignee.
Landlord must consent in writing to any such sublessee or assignee, although
such consent shall not be unreasonably withheld. The use of the Leased Premises
by such assignee or sublessee shall be expressly limited by and to the
provisions of this lease.
Section 2. Fixtures. All personal property, furnishings and equipment
--------
presently and all other trade fixtures installed in or hereafter by or at the
expense of Tenant and all additions and/or improvements, exclusive of
structural, mechanical, electrical, and plumbing, affixed to the Leased Premises
and used in the operation of the Tenant's business made to, in or on the Leased
Premises by and at the expense of Tenant and susceptible of being removed from
the Leased Premises without damage, unless such damage be repaired by Tenant,
shall remain the property of Tenant and Tenant may, but shall not be obligated
to, remove the same or any part thereof at any time or times during the term
hereof, provided that Tenant, at its sole cost and expense, shall make any
repairs occasioned by such removal.
Section 3. Estoppel Certificates. At any time and from time to time, Landlord
---------------------
and Tenant each agree, upon request in writing from the other, to execute,
acknowledge and deliver to the other or to any person designated by the other a
statement in writing certifying that the Lease is unmodified and is in full
force and effect, or if there have been modifications, that the same is in full
force and effect as modified (stating the modifications), that the other party
is not in default in the performance of its covenants hereunder, or if there
have been such defaults, specifying the same, and the dates to which the rent
and other charges have been paid.
Section 4. Invalidity of Particular Provision. If any term or provision of
----------------------------------
this Lease or the application hereof to any person or circumstance shall, to any
extent, be held invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
Section 5. Captions and Definitions of Parties. The captions of the Sections
-----------------------------------
of this Lease are for convenience only and are not a part of this Lease and do
not in any way emit or amplify the terms and provisions of this Lease. The word
"Landlord" and the pronouns referring thereto, shall mean, where the context so
admits or requires, the persons, firm or corporation named herein as Landlord or
the mortgagee in possession at any time, of the land and building comprising the
Leased Premises. If there is more than one Landlord, the covenants of Landlord
shall be the joint and several obligations of each of them, and if Landlord is a
partnership, the covenants of Landlord shall be the joint and several
obligations of each of the partners and the obligations of the firm. Any
pronoun shall be read in the singular or plural and in such gender as the
context may require. Except as in this Lease otherwise provided, the terms and
provisions of this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
17
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Nothing contained herein shall be deemed or construed by the parties hereto nor
by any third party as creating the relationship of principal and agent or of
partnership or of a joint venture between the parties hereto, it being
understood and agreed that neither any provision contained herein, nor any acts
of the parties hereto, shall be deemed to create any relationship between the
parties hereto other than the relationship of Landlord and Tenant.
Section 6. Brokerage. No party has acted as, by or through a broker in the
---------
effectuation of this Agreement, except as set out hereinafter.
Section 7. Entire Agreement. This instrument contains the entire and only
----------------
agreement between the parties, and no oral statements or representations or
prior written matter not contained in this instrument shall have any force and
effect. This Lease shall not be modified in any way except by a writing
executed by both parties.
Section 8. Waiver of Trial by Jury. In the event of any lawsuit of any sort in
-----------------------
connection with the terms of this Lease, both the Tenant and the Landlord hereby
waive the right of trial by jury and consent that any such lawsuit shall be
heard and tried by the judge of jurisdiction who shall act as the finder of fact
and shall decide questions of law.
Section 9. Applicable Law. All matters pertaining to this agreement (including
--------------
its interpretation, application, validity, performance and breach) in whatever
jurisdiction action may be brought, shall be governed by, construed and enforced
in accordance with the laws of the State of Utah. The parties herein waive trial
by jury and agree to submit to the personal jurisdiction and venue of a court of
subject matter jurisdiction located in Salt Lake County, State of Utah. In the
event that litigation results from or arises out of this Agreement or the
performance thereof, the parties agree to reimburse the prevailing party's
reasonable attorney's fees, court costs, and all other expenses, whether or not
taxable by the court as costs, in addition to any other relief to which the
prevailing party may be entitled. In such event, no action shall be entertained
by said court or any court of competent jurisdiction if filed more than one year
subsequent to the date the cause(s) of action actually accrued regardless of
whether damages were otherwise as of said time calculable.
Section 10. Contractual Procedures. Unless specifically disallowed by law,
----------------------
should litigation arise hereunder, service of process therefore may be obtained
through certified mail, return receipt requested; the parties hereto waiving any
and all rights they may have to object to the method by which service was
perfected.
Section 11. Extraordinary remedies. To the extent cognizable at law, the
----------------------
parties hereto, in the event of breach and in addition to any and all other
remedies available thereto, may obtain injunctive relief, regardless of whether
the injured party can demonstrate that no adequate remedy exists at law.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year
first above written or have caused this Lease to be executed by their respective
officers thereunto duly authorized.
/s/ Barry Hubbard /s/ John B. Hewlett
- - ------------------------ --------------------------
"LANDLORD "TENANT" CEO
19
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ADDENDUM
--------
SPECIAL USE. Landlord approves and agrees that for the term of the Lease
- - -----------
Tenant may sublet office space to its outside attorney and the attendant office
space necessary to perform that function.
20
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EXHIBIT "A"
-----------
LEGAL DESCRIPTION
The following described real property, together with all improvements thereon:
(To be attached)
which has a street address as follows:
12187 South Business Park Drive, Suite 100
LANDLORD Barry Hubbard
TENANT CEO John B. Hewlett
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EXHIBIT "B"
-----------
TENANT PLANS AND SPECIFICATIONS
(To be attached and approved prior to commencement of construction)
LANDLORD
TENANT
22
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of April 1,
1998, by and between RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation
("Purchaser"), and THE BALL MARKETING CO. L.L.C., a Georgia limited liability
company ("Seller"), and WILLIAM TURRENTINE, WILLIAM CLARKE, and HUGH MACAULAY
(the "Interestholders").
This Agreement is entered into with reference to the following facts:
A. Interestholders collectively own of record all of the issued and
outstanding interests of Seller.
B. Seller is engaged in the business of designing, developing, sourcing,
and distributing golf balls through a network of independent distributors (the
"Business").
C. Seller is the owner of all, and not less than all, of the assets of the
Business.
D. Seller and Purchaser have negotiated for the sale by Seller and
purchase by Purchaser of certain of the assets of Seller and the Business as a
going concern pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Seller and Purchaser agree as follows:
1. PURCHASE AND SALE OF ASSETS.
---------------------------
1.1 Sale of Assets. Subject to the provisions of this Agreement, Seller
--------------
agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, at
the Closing (as defined below), all right, title, and interest of Seller in and
to the following, and only the following, assets, properties, and rights of
Seller used in the Business (collectively "Assets"):
(a) the current assets of Seller, including but not limited to, cash,
accounts and notes receivable, and all accrued accounts receivable, customer
orders, prepaid expenses, inventories of raw materials, work-in-process,
finished goods, purchased parts, and any assets readily convertible into cash;
(b) the office equipment, computer equipment, software, and other
tangible personal properties and assets of Seller used in the Business
specifically listed on Schedule 1.1 (the "Equipment"); and
(c) the distributor network, sourcing contacts, customer lists, trade
secrets, licenses, trademarks, copyrights, and trade names specifically listed
on Schedule 1.1 (the "Intangible Assets").
1.2 Purchase Price and Manner of Payment; Allocation.
------------------------------------------------
(a) Purchase Price. The total purchase price for the Assets shall be
--------------
75,000 Restricted Shares of the Purchaser's Common Stock plus an additional
50,000 Restricted Shares of Common Stock and 50,000 Common Stock purchase
options payable only upon the achievement of certain Gross Revenue volumes. The
purchase price is payable as follows:
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(i) Purchaser shall issue to Seller 75,000 Restricted Shares
of its Common Stock as the initial payment.
(ii) In the event the Business generates $2,500,000 in Gross
Revenues from the Closing Date to on or before September 30, 1999, and each
Interestholder shall at such date be affiliated with the Business as an Active
Distributor, except for the reason of the death or permanent disability of an
Interestholder, Purchaser shall issue an additional 50,000 Restricted Shares of
its Common Stock to Seller within 60 days of the $2,500,000 in Gross Revenues
being achieved. If $2,500,000 in Gross Revenues have not been achieved on or
before September 30, 1999, Seller shall not be entitled to receive any portion
of the 50,000 Restricted Shares specified.
(iii) In the event the Business generates $5,000,000 in Gross
Revenues from the Closing Date to on or before September 30, 2000, and each
Interestholder shall at such date be affiliated with the Business as an Active
Distributor, except for the reason of the death or permanent disability of an
Interestholder, Purchaser shall issue options to purchase 50,000 Restricted
Shares of its Common Stock at $5.00 per share to Seller within 60 days of the
$5,000,000 in Gross Revenues being achieved. The options shall have an
expiration date of September 30, 2002. If $5,000,000 in Gross Revenues have not
been achieved on or before September 30, 2000, Seller shall not be entitled to
receive any portion of the 50,000 options specified.
(b) "Gross Revenues" shall include only those revenues attributable
to the downline of "CMT," consisting of the Interestholders, as determined by
the Purchaser in accounting for revenues for the Business.
(c) "Active Distributor" shall mean for each individual
Interestholder, that such Interestholder remains in the Business distribution
"down-line," and that such Interestholder's down-line has accounted for an
average of $1,000 in gross sales per month for the preceding 12 month period.
(d) The Purchase Price shall be allocated among the Assets as set
forth on Schedule 1.2 attached hereto. Seller and Purchaser each agree that they
will not take a position on any income tax return, before any governmental
agency, or in any judicial proceeding that is in any way inconsistent with this
Section 1.2. Purchaser shall be responsible for all sales taxes, to the extent
applicable.
(e) "Restricted Shares" means shares of Common Stock which have not
been registered under any federal or state securities laws and are subject to a
one year holding period pursuant to Rule 144 of the Securities Act of 1993. Any
Common Stock certificate issued pursuant to this Agreement shall bear the
following restrictive legend and such other restrictive legends as are required
or deemed advisable under the provisions of any applicable law:
THESE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN ISSUED
IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
THESE SHARES OR ANY INTEREST HEREIN MAY NOT, BE OFFERED, SOLD OR
TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE.
2
<PAGE>
(f) Seller may request that Purchaser issue any Restricted Shares or
stock options granted pursuant to this Agreement in the name of Seller or any of
the Interestholders.
2. LIABILITIES.
-----------
2.1 Assumed Liabilities. Purchaser shall assume only the following
-------------------
specific liabilities and obligations of Seller, to the extent relating to the
Business, and as such liabilities are constituted on the Closing Date:
(a) all down payments and unearned revenues in respect of customer
deposits which are reflected on Schedule 2.1;
(b) commissions payable to the Seller's distributors for products sold
during the month of the Closing Date up to a maximim of $5,000. No commission
payable to distributors which accrued for sales during any period before the
month prior to the Closing Date shall be assumed by Purchaser; and
2.2 Liabilities Excluded. Unless expressly assumed by the Purchaser
--------------------
pursuant to this Agreement, the Purchaser shall neither assume nor be liable
for, and the Seller shall retain, satisfy in full and defend and indemnify and
hold the Purchaser harmless against, all debts, liabilities, obligations,
claims, contingencies, causes of action, accounts or notes payable, accrued
expenses or related obligations, or any federal, state or local income,
property, sales, franchise, or other tax liabilities of the Seller, the
Interestholders, or any other of their affiliates, including but not limited to
any tax liabilities incurred as a result of this transaction. Excluded
liabilities shall be deemed to include, without limitation, all liabilities
other than those specifically stated in Section 2.1 as being assumed.
3. CLOSING.
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3.1 Closing Date. The Closing of the purchase and sale provided for in
------------
this Agreement (the "Closing") shall be held at the offices of Purchaser in
Draper, Utah at 10:00 a.m. on April 7, 1998 (the "Closing Date"), or at such
location, time, or date as the parties shall mutually agree upon. In the event
the Closing Date is delayed notwithstanding the best efforts of the parties as a
result of any circumstance beyond the reasonable control of the parties or as a
result of legitimate business reasons, the Closing Date shall be reasonably
extended, but in no event beyond April 30, 1998.
3.2 Conditions to Obligations of Purchaser and Seller. Neither Purchaser
-------------------------------------------------
nor Seller shall have any obligations, duties, or responsibilities hereunder
unless and until each of the following precedent conditions has been performed
on or before the Closing Date:
(a) all covenants of Purchaser to be performed on or before the
Closing Date shall have been so fulfilled and all instruments and documents
required to be delivered by Purchaser to Seller on or before the Closing Date
shall have been so delivered;
(b) all warranties and representations of Purchaser as set forth in
this Agreement are true and correct and remain true and correct as of the
Closing Date;
(c) all covenants of Seller to be performed on or before the Closing
Date shall have been so fulfilled and all instruments and documents required to
be delivered by Seller to Purchaser on or before the Closing Date shall have
been so delivered;
3
<PAGE>
(d) all warranties and representations of Seller as set forth in this
Agreement are true and correct and remain true and correct as of the Closing
Date; and
(e) no material adverse change in the Business has occurred to the
best knowledge of the management of Seller.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND INTERESTHOLDERS. Seller and
------------------------------------------------------------
Interestholders hereby represent and warrant as follows:
4.1 Organization. Seller is a limited liability company duly organized,
------------
validly existing, and in good standing under the laws of the State of Georgia
with full power and authority to sell the Assets.
4.2 Authority. Seller has full power and authority to enter into this
---------
Agreement and the documents and other agreements contemplated hereby and to
carry out the transactions contemplated. All necessary corporate action has
been taken by Seller to authorize the execution, delivery, and performance of
this Agreement, and each of the documents and other agreements contemplated
hereby to be executed by Seller.
4.3 Title to Assets. Seller has good and marketable title, legal and
---------------
equitable, to the Assets. As of the Closing, none of the Assets shall be
subject to any mortgage, pledge, lien, litigation, conditional sales agreement,
security interest, encumbrance, tax liability, or other charge.
4.4 Consents. The Interestholders have approved the sale of Assets, and no
--------
consents of third parties are required for the sale, conveyance, assignment, and
transfer from Seller to Purchaser of all Seller's right, title, and interest in
and to any of the Assets.
4.5 General Conditions. Seller and Interestholders agree to file the
------------------
appropriate documents under the laws of the State of Georgia stating that the
Seller has transferred substantially all of its assets to Purchaser including,
without limitation, bulk transfer filings. Seller will maintain its corporate
existence to accommodate the receipt of accounts receivable, additional issuance
of stock, options, or both, and for other corporate purposes. Seller agrees to
change its corporate name at the request of Purchaser.
4.6 Indemnity. Seller and Interestholders agree to defend and indemnify
---------
and hold harmless Purchaser and its respective directors, officers, employees,
affiliates, agents, and assigns from and against any and all direct losses of
Purchaser based upon or arising from:
(a) any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants, or agreements made by Seller or
Interestholders pursuant to this Agreement;
(b) any other matter as to which Seller or Interestholders in other
provisions of this Agreement has agreed to indemnify Purchaser;
(c) any liability or obligation of Seller or Interestholders not
expressly assumed by Purchaser pursuant to this Agreement hereof; or
(d) any third party or governmental claims against Seller or
Interestholders or regarding the conduct of Seller or Interestholders as a
result of the conduct of
4
<PAGE>
Seller or Interestholders occurring at any time before the Closing Date that has
been or may be asserted.
5. ADDITIONAL AGREEMENTS.
---------------------
5.1 Negative Covenants. Between the date hereof and the Closing Date,
------------------
Seller will not, without the prior written consent of Purchaser:
(a) sell, assign, lease, or otherwise transfer or dispose of any of
the Assets;
(b) take any action which would cause any of the representations and
warranties set forth in Section 3 to be untrue in any material respect at the
Closing Date; or
(c) subject any of the Assets to any lien, charge, or encumbrance.
5.2 Access to Operations. Between the date hereof and the Closing Date,
--------------------
Seller will permit Purchaser and its authorized representatives to inspect the
Assets during normal business hours as Purchaser may reasonably request.
5.3 Continuing Obligations to the Business. Seller and Interestholders
--------------------------------------
agree to assist in the transfer of assets and the transition of the Business as
follows:
(a) Seller shall continue to maintain an office, for a period not to
exceed 120 days from the Closing Date, for fulfillment purposes and perform
fulfillment obligations of Seller and the Business until the Business has been
transitioned, fulfillment functions moved, and assets transferred to Purchaser's
office in Utah; and
(b) Seller shall provide any assistance required with the transition
of the business, movement of the fulfillment functions, and transfer of assets
to Purchaser's office in Utah, including without limitation, providing technical
support for the Fax on Demand and the computer and software systems.
5.3 Confidentiality of Information. Seller agrees to regard and preserve
------------------------------
as confidential all information relating or pertaining to the Business, all
projects, products, customers, trade secrets, confidential information
(including business and financial information), or unpublished know-how, and to
all activities of Seller relating to the Business, and not to publish or
disclose any part of such information to others or use the same for its own
purposes or the purposes of others. Any information of Seller relating to the
Business which is not readily available to the public shall be considered by
Seller to be confidential information and therefore within the scope of this
Agreement, unless Purchaser advises Seller otherwise in writing.
5.4 Non-Competition. Interestholders agree that upon execution of this
---------------
Agreement, Purchaser shall be entitled to the goodwill and going concern value
of the Business and that Interestholders will do all that is necessary to
protect and preserve this intangible value to the maximum extent permitted by
law. Interestholders also acknowledges that their management contributions to
the Business have been uniquely valuable and involve proprietary information
that would be competitively unfair to make available to any competitor of the
Business, and as an inducement to Purchaser to enter into this Agreement,
Interestholders agrees that for so long as each of them remain Active
Distributors with the Business, and for two years after their termination as
Active Distributors, each will not, directly or indirectly, for its own benefit
or as an agent for another, carry on or participate in the ownership,
management, or control of, or the financing of, or be employed by, or consult
for or otherwise render services to, or allow their
5
<PAGE>
name or reputation to be used in or by any other present or future business
enterprises that competes with the Purchaser in activities similar to the
Business. Particularly, but without limitation, Interestholders agree to refrain
from the following acts:
(a) initiating contact with any employee, consultant, distributor, or
other independent contractor of Purchaser for the purpose of hiring away such
employee, consultant, or other independent contractor; and
(b) soliciting customers of Purchaser.
Notwithstanding this non-compete provision, which the parties intend
to be binding upon the Seller and each of the Interestholders, Seller and
Interestholders agree that they will execute the Non-Competition and Non-
Disclosure Agreement in conjunction herewith.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents
-------------------------------------------
and warrants as follows:
6.1 Organization. Purchaser is a corporation duly organized, validly
------------
existing, and in good standing under the laws of the State of Delaware, with
full power and authority to conduct its business in a manner approved by the
Board of Directors.
6.2 Authority. Purchaser has full power and authority to enter into this
---------
Agreement and the documents and other agreements contemplated hereby and assume
the rights and obligations of Purchaser, and to carry out the transaction
contemplated hereby. All necessary action has been taken by Purchaser to
authorize the execution, delivery, and performance of this Agreement and the
documents and other agreements contemplated hereby to be executed by the
Purchaser, and each of the same shall be the valid and binding obligation of the
Purchaser.
6.3 Absence of Litigation. There are no claims, actions, proceedings, or
---------------------
investigations pending which seek to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
6.4 Stock Option Plan. Purchaser shall initiate a stock option plan to
-----------------
have in place by the end of 1998 to allow for bonus grants to be made to
independent distributors at the sole discretion of the Purchaser's Board of
Directors.
7. CONDITIONS.
----------
7.1 Conditions Precedent to Obligations of Purchaser. The obligations of
------------------------------------------------
Purchaser to consummate this Agreement are subject to the fulfillment (or the
written waiver thereof by Purchaser), prior to or at the Closing, of each of the
following conditions precedent:
(a) each of the representations and warranties of the Seller contained
in Section 4 shall be true and correct in all respects, and Seller shall, on or
before the Closing Date, have performed all of its covenants and obligations
hereunder which by the terms hereof are to be performed on or before the Closing
Date; and
(b) all actions, proceedings, instruments, and documents required to
carry out this Agreement and documents and other agreements contemplated hereby
or any
6
<PAGE>
undertaking incidental thereto, and all other related legal matters shall be
reasonably satisfactory in form and substance to Purchaser and its counsel.
7.2 Conditions Precedent to Obligations to Seller. The Seller's
---------------------------------------------
obligation to consummate this Agreement is subject to the fulfillment prior to
or at the Closing of each of the following conditions precedent:
(a) each of the representations and warranties of Purchaser contained
in Section 6 shall be true and correct as though made on and as of the Closing
Date; Purchaser shall, on or before the Closing Date, have performed all of its
obligations hereunder which by the terms hereof are to be performed on or before
the Closing Date; and
(b) all actions, proceedings, instruments, and documents required to
carry out this Agreement and the documents and other agreements contemplated
hereby or any undertaking incidental thereto and all other related legal matters
shall be reasonably satisfactory in substance to Seller and its counsel.
8. CLOSING PROCEDURE.
-----------------
8.1 Items to be Delivered by Seller at Closing. At the Closing, Seller
------------------------------------------
shall deliver to Purchaser the following:
(a) an executed instrument of transfer in the form of Exhibit "A"
hereto transferring to Purchaser all of Seller's right, title, and interest in
and to the Assets (the "General Assignment and Bill of Sale"); and
(b) executed releases, consents, or approvals from the Board.
8.2 Items to be Delivered by Purchaser at Closing. At the Closing,
---------------------------------------------
Purchaser shall deliver to Seller the following:
(a) the initial 75,000 Restricted Shares of Purchaser's Common Stock;
and
(b) executed releases, consents, or approvals from the Board.
8.3 Actions Upon Closing. Upon the Closing, Seller shall take all steps
--------------------
as may be required to put Purchaser in actual possession and control of the
Assets at Seller's facility in Georgia. Purchaser shall pay all moving costs,
including costs of crating and loading of the Assets.
8.4 Further Assurances. Seller from time to time after the Closing, at
------------------
Purchaser's request, will execute, acknowledge, and deliver to Purchaser such
other instruments and documents and will take such other actions and execute and
deliver such other documents, certifications and further assurances as Purchaser
may reasonably require in order to vest more effectively in Purchaser, or to put
Purchaser more fully in possession of, any of the Assets. Each of the parties
hereto will cooperate with the other and execute and deliver to the other such
other instruments and documents and take such further actions as may be
reasonably requested from time to time by the other party to carry out,
evidence, and confirm the intended purposes of this Agreement.
7
<PAGE>
9. TERMINATION OF AGREEMENT.
------------------------
9.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated:
(a) by the mutual consent of Seller and Purchaser;
(b) by Purchaser if there has been a material misrepresentation,
breach of warranty, or breach of covenant by Seller in its representations,
warranties, and covenants set forth herein;
(c) by Seller if there has been a material misrepresentation, breach
of warranty, or breach of covenant by Purchaser in its representation,
warranties, and covenants set forth herein;
(d) by Purchaser if any one or more of the conditions stated in
Sections 7.1 or 8.1 hereof has not been satisfied at or prior to the Closing;
(e) by Seller if any one or more of the conditions stated in Sections
7.2 or 8.2 hereof have not been satisfied at or prior to the Closing; or
(f) by either party if the Closing has not occurred by April 30, 1998,
provided however, that such party is not in breach hereof.
9.2 Special Remedies and Enforcement. Purchaser and Seller recognize and
--------------------------------
agree that a breach by any party of any of the covenants set forth in this
Agreement could cause irreparable harm to each of the others that remedies at
law in the event of such breach would be inadequate, and that, accordingly, in
the event of such breach a restraining order or injunction or both may be issued
against the offending party, in addition to any other rights and remedies which
are available to each of the parties. If any non-compete provision is more
restrictive than permitted by the laws of any jurisdiction in which enforcement
is sought hereof, such subparagraphs shall be limited to the extent required to
permit enforcement under such laws. In particular, the parties intend that the
covenants contained in the preceding portions of such subparagraphs shall be
construed as a series of separate covenants. Except for geographic coverage,
each such separate covenant shall be deemed identical in terms. If, in any
judicial proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in such subparagraphs, then such unenforceable
covenant shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
10. MISCELLANEOUS.
-------------
10.1 Brokers, Commissions. Seller and Purchaser each represent that in
--------------------
connection with the sale and transfer contemplated by this Agreement, neither
has retained the services of a broker. Seller and Purchaser shall each hold the
other harmless, against any and all claims for brokerage commissions, finders
fees, or the like, arising from their respective actions.
10.2 Fees and Expenses. Each of the parties will bear its own expenses in
-----------------
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses in connection
with the negotiation and the consummation of the transactions contemplated by
this Agreement.
8
<PAGE>
10.3 Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of Utah without regard to any choice of law provisions.
10.4 Assignment. The benefits and obligations of any party to this
----------
Agreement may not be assigned, except upon the written consent of the other
party. This Agreement shall be binding upon, and shall be enforceable by and
inure to the benefit of, the parties named herein and their respective
successors and assigns.
10.5 Confidentiality. Purchaser agrees that unless and until the Closing
--------------
has been consummated, Purchaser will hold in strict confidence, and not use to
the detriment of Seller, all data and information obtained in connection with
this transaction or Agreement with respect to the business activities of Seller,
and that Purchaser will not disclose any of such information to any other party
whatsoever without written consent of Seller.
10.6 Entire Agreement. This Agreement and the documents and other
----------------
agreements referenced herein contain the entire Agreement between the parties
with respect to the subject matter hereof; all representations, promises, and
prior or contemporaneous understandings between the parties with respect to the
subject matter hereof, are merged into and expressed in this Agreement and such
documents and other agreements; and any and all prior agreements between the
parties with respect to the subject matter hereof are hereby canceled.
10.7 Amendment. This Agreement may be amended, modified, or supplemented
---------
only by an instrument in writing signed by the parties to this Agreement.
10.8 Publicity and Disclosure. No press releases or any public
------------------------
disclosure, or disclosures to any employees of Seller or Purchaser, either
written or oral, of the transactions contemplated by this Agreement shall be
made without the prior knowledge and consent of Seller. Seller shall provide
any public announcement of the execution of this Agreement or the sale and
purchase of the Assets as herein described to Purchaser for review prior to
release.
10.9 Survival of Warranties. All warranties, representations, covenants,
----------------------
and agreements made herein by either party hereto or incorporated herein by
reference shall be deemed to survive the Closing Date.
10.10 Notices. All notices, requests, demands, and other communications
-------
hereunder shall be deemed to have been duly given on the date received if
personally delivered, telecopied, or mailed by commercial express mail service:
TO SELLER: THE BALL MARKETING COMPANY LLC
2250 Newmarket Parkway, Suite 130
Marrietta, Georgia 30067
Attn: William Turrentine
TO INTERESTHOLDERS: William Turrentine
7235 Wynhill Drive
Atlanta, Georgia 30328
Hugh Macaulay
1331 Valley Reserve Drive
Kennesaw, Georgia 30152
William Clarke
2250 New Market Parkway, Suite 130
Marietta, Georgia 30067
9
<PAGE>
TO PURCHASER: RENAISSANCE GOLF PRODUCTS, INC.
12187 South Business Park Drive, Suite 100
Draper, Utah 84020
Attn: John Hewlett
or to such other address or telecopier number which either party may notify the
other party as provided above.
10.11 Headings. The headings of the Sections of this Agreement are for
--------
the convenience of reference only, and do not form a part hereof, and in no way
modify, interpret, or construe the meanings of the parties.
10.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement.
10.13 Waiver; Severability. The failure of any of the parties to this
--------------------
Agreement to require the performance of term or obligation under this Agreement
or the waiver by any of the parties to this Agreement of any breach hereunder
shall not prevent subsequent enforcement of such term or obligation or be deemed
a waiver of any subsequent breach hereunder. In case any one or more of the
provisions of this Agreement shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part of a provision had never been contained herein.
10.14 Sales, Transfer and Documentary Taxes, Etc. Seller shall pay all
-------------------------------------------
state and local taxes, documentary and other transfer taxes, if any, due as a
result of the purchase, sale, or transfer of the Assets.
10.15 Dispute Resolution. Any controversy, claim or dispute among the
------------------
parties hereto arising out of or related to this Agreement or the breach hereto,
which cannot be settled amicably by the parties, shall be submitted for
mediation in Salt Lake City, Utah. In the event mediation is unsuccessful, the
paries consent to the exclusive jurisdiction of an appropriate court within Salt
Lake County, State of Utah, to hear and decide any controversy, claim, or
dispute hereunder. The prevailing party in any legal action shall be entitled
to recover its reasonable attorneys' fees and costs, as determined by the trial
court.
10.16 Company Authority. The Interestholder signing on behalf of the LLC
-----------------
represents and warrants that he has the requisite company authority from the
LLC's management committee to execute this Agreement on behalf of the LLC, and
that such signature is intended to be and is binding upon the LLC.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
PURCHASER: SELLER:
RENAISSANCE GOLF PRODUCTS, INC. THE BALL MARKETING CO. L.L.C.
a Delaware corporation a Georgia limited liability company
By: /s/ John B. Hewlett By: /s/ William Turrentine
____________________________ _________________________________
John B. Hewlett, William Turrentine,
Chief Executive Officer Manager
INTERESTHOLDERS:
/s/ William Turrentine
_______________________________
WILLIAM TURRENTINE
/s/ William Clarke
_______________________________
WILLIAM CLARKE
/s/ Hugh Macaulay
_______________________________
HUGH MACAULAY
11
<PAGE>
TABLE OF SCHEDULES AND EXHIBITS
SCHEDULES:
1.1 List of Assets: Equipment and Intangible Assets
1.2 Purchase Price Allocation to Assets
2.1 Unearned Revenues and Customer Deposits
EXHIBITS:
Exhibit "A:" General Assignment and Bill of Sale
12
<PAGE>
SCHEDULE 1.1: ASSETS
EQUIPMENT: Software
Computers
Ball inventory
INTANGIBLE ASSETS: Customer Base
Cayman Golf Relationship
13
<PAGE>
SCHEDULE 1.2: PURCHASE PRICE ALLOCATION TO ASSETS
Allocation to be determined upon transfer of assets.
14
<PAGE>
SCHEDULE 2.1: UNEARNED REVENUES AND CUSTOMER DEPOSITS
None
15
<PAGE>
EXHIBIT "A"
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE is made as of April 1, 1998, by
and between RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation
("Purchaser"), and THE BALL MARKETING CO. L.L.C., a Georgia limited liability
company ("Seller").
THIS GENERAL ASSIGNMENT AND BILL OF SALE is made with reference to the
following facts:
A. Seller and Purchaser have entered into an Asset Purchase Agreement (the
"Purchase Agreement") dated as of April 1, 1998, pursuant to which Seller has
agreed to transfer to Purchaser this day, and Purchaser has agreed to acquire
from Seller this date, certain of the assets and business of Seller specified
therein.
B. For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by Seller, Seller desires to execute and deliver
this General Assignment and Bill of Sale for the purpose of affecting such
transfer and sale pursuant to the terms and conditions of the Purchase
Agreement.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound hereby, the Seller and Purchaser agree as follows:
1. Transfer of Subject Assets. Seller does hereby assign, transfer,
--------------------------
convey, and deliver to Purchaser, its successors and assigns, all rights,
interests, and titles of Seller in and to the Assets (as such term is defined in
the Purchase Agreement).
Seller represents and warrants to Purchaser that it is the lawful
owner of the Assets transferred hereby, that the Assets are free and clear of
all liens, restrictions, and other encumbrances (except as may otherwise be
disclosed in the Purchase Agreement), and that it has good rights to transfer
the same.
2. No Rights and Third Parties. Nothing expressed or implied in this
---------------------------
General Assignment and Bill of Sale is intended to confer upon any person, other
than Seller and Purchaser and their respective successors and assigns, any
rights, remedies, obligations, or liabilities under or by reason of this Bill of
Sale.
3. Successors and Assigns. This General Assignment and Bill of Sale is
----------------------
executed pursuant to the Purchase Agreement and shall be binding upon and inure
to the benefit of Seller and Purchaser, and their respective successors and
assigns. All rights, liabilities, and obligations of Seller and Purchaser under
the Purchase Agreement shall survive the executive and delivery thereof in
accordance with the terms of the Purchase Agreement, and are not integrated
hereby.
IN WITNESS WHEREOF, each of Seller and Purchaser has caused this
General Assignment and Bill of Sale to be executed by its duly authorized
representative on the date first above written.
1
<PAGE>
PURCHASER: SELLER:
RENAISSANCE GOLF PRODUCTS, INC. THE BALL MARKETING CO. L.L.C.
a Delaware corporation a Georgia limited liability company
By: /s/ John B. Hewlett By: /s/ William Turrentine
--------------------------- ---------------------------------
John B. Hewlett, William Turrentine,
Chief Executive Officer Manager
2
<PAGE>
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (this "Agreement") is
made as of April 1, 1998, by and between RENAISSANCE GOLF PRODUCTS, INC., a
Delaware Corporation ("Renaissance"), and THE BALL MARKETING COMPANY, LLC
("LLC"), a Georgia limited liability company, WILLIAM TURRENTINE, an individual,
WILLIAM CLARKE, an individual, and HUGH MACAULAY, an individual (collectively
referred to as the "Undersigneds").
This Agreement is entered into with reference to the following facts:
A. The LLC has been engaged in the business of designing, developing, and
distributing golf balls through a network of independent distributors (the
"Business").
B. Pursuant to the Asset Purchase Agreement of April 1, 1998, by and among
the LLC, certain Interestholders of the LLC, and the Purchaser (the "Purchase
Agreement"), the Purchaser is purchasing substantially all of the assets of the
LLC and the business of the LLC as a going concern.
C. The Undersigneds are the LLC and Interestholders of the LLC who will
derive substantial benefit from the transactions contemplated by the Purchase
Agreement.
D. As a result of the Undersigneds' prior business activities and prior
association with and/or employment by the LLC, the Undersigneds have detailed
knowledge and posses confidential information concerning the business and
operations of the LLC.
E. After the closing of the transaction contemplated in the Purchase
Agreement, the individual Undersigneds desire to continue to engage in the
Business, subject, however, to the terms, conditions, and limitations set forth
in this Agreement.
F. In order to induce the Purchaser to consummate the transactions
contemplated by the Purchase Agreement, the Undersigneds have agreed and the
Purchaser has required the Undersigneds to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. RESTRICTIVE COVENANTS.
---------------------
1.1 The Undersigneds acknowledge and agree that: (i) the business
contacts, customers, suppliers, technology, know-how, trade secrets, marketing
and distribution techniques, and other aspects of the business of the LLC have
been of value to the LLC, and have provided the LLC (and will hereafter provide
the Purchaser) with substantial competitive advantage in the operation of its
business, and (ii) by virtue of their previous relationships with the LLC as
officers, managers, Interestholders, employees, and/or affiliates, the
Undersigneds have detailed knowledge and possess confidential information
concerning the business and operations of the LLC.
1.2 It is hereby agreed that none of the Undersigneds shall, directly, or
indirectly, for itself or themselves, or through or on behalf of any other
person or entity including, without limitation, family members, trusts, or other
business or estate planning arrangements engage in the following:
(a) at any time, divulge, transmit, or otherwise disclose or cause to
be divulged, transmitted, or otherwise disclose, any business contacts, client,
distributor, or customer lists,
1
<PAGE>
technology, know-how, traded secrets, marketing techniques, supplier contacts,
contracts, or other confidential or proprietary information of the LLC of
whatever nature existing on or prior to the date hereof (provided, however, that
for purposes hereof, information shall not be considered to be confidential or
proprietary if (i) it is a matter of common knowledge or public record, (ii) it
is generally known in the industry in which the Business is engaged, or (iii)
the Undersigneds can demonstrate that such information was already known to the
recipient thereof other than by reason of any breach of any obligation under
this Agreement or any other confidentiality or non-disclosure agreement);
(b) at any time during the period of the Purchase Agreement and for
two years following the termination of the Purchase Agreement for any reason
(the "Restrictive Period"), invest, carry on, engage, or become involved, either
as an employee, agent, advisor, officer, director, stockholder (excluding
ownership of not more than 3% of the outstanding shares of a publicly held
Corporation if such ownership does not involve managerial or operational
responsibility), manager, partner, joint venture, participant, or consultant, in
any business enterprise (other than the Purchaser or any of its subsidiaries,
affiliates, successors, or assigns) which (i) is located or operating, or
soliciting customers located in the United States of America or any other
country in which Purchaser sells products, and (ii) is or becomes, at any time
during the Restrictive Period, engaged in the manufacture, assembly, sale,
marketing, advertising, and distribution of golf balls or any golf related
products. For purposes of this Agreement, golf related products shall mean
products that are marketed or sold by Purchaser; and
(c) at any time during the Restrictive Period initiate contact with
any employee, consultant, or independent contractor of Purchaser for the purpose
of hiring away such employee, consultant, or independent contractor from
Purchaser, or solicit customers of the Purchasers.
1.3 The parties acknowledge that Hugh Macaulay is currently working with
Admark Systems which has some involvement with the golfing industry. Mr.
Macaulay may continue to work with Admark for so long as the Company does not
directly compete with the Purchaser's business.
2. CORPORATE AND TRADE NAMES.
-------------------------
From and after the date hereof, the Undersigneds will not utilize the
names "The Ball Company," "The Ball Marketing Company," or any confusingly
similar names in connection with any business activities from and after the date
hereof.
3. CONSIDERATION.
-------------
In consideration for the covenants contained herein, the Purchaser has
agreed to enter into the Asset Purchase Agreement to be executed in conjunction
with this Agreement.
4. REMEDIES.
--------
4.1 In the event of a breach of this Agreement by any of the Undersigneds,
the precise amount of damages that may be suffered by the Purchaser of reason of
such breach may be difficult to ascertain; accordingly, the parties hereby agree
that, as liquidated damages (and not as a penalty) in respect of any such
breach, the Purchaser, in its sole discretion, may choose to demand the sum of
$20,000 as the sole and exclusive damages for the breach. The parties agree
that the foregoing provision for liquidated damages, if chosen by Purchaser,
constitutes a fair and reasonable estimate of the actual damages that might be
suffered by reason of a breach of this Agreement by the Undersigneds.
Alternatively, and in lieu of its right to demand liquidated damages as
aforesaid, the
2
<PAGE>
Purchaser may elect to pursue and recover all actual damages, incurred by the
Purchaser as a result of such breach, insofar as they can be determined.
4.2 The Undersigneds and the Purchaser hereby further acknowledge and
agree that any breach by any of the Undersigneds, directly or indirectly, of the
foregoing restrictive covenants will cause the Purchaser irreparable injury for
which there is not adequate remedy at law. Accordingly, each of the
Undersigneds expressly agrees that, in the event of any such breach or any
threatened breach hereunder by any of the Undersigneds, directly or indirectly,
the Purchaser shall be entitled, in addition to any and all other remedies
available (including but not limited to the damages provided for in paragraph
4.1 above), to seek and obtain injunctive and/or other equitable relief to
require specific performance of or prevent, restrain, and/or enjoin a breach
under the provisions of this Agreement.
5. MISCELLANEOUS.
-------------
5.1 Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of Utah without regard to any conflict of law
provisions.
5.2 Assignment. The benefits and obligations of any party to this
----------
Agreement may not be assigned, except upon the written consent of the other
party. This Agreement shall be binding upon, and shall be enforceable by and
inure to the benefit of, the parties named herein and their respective
successors and assigns.
5.3 Entire Agreement. This Agreement and the documents and other
----------------
agreements referenced herein contain the entire Agreement between the parties
with respect to the subject matter hereof; all representations, promises, and
prior or contemporaneous understandings between the parties with respect to the
subject matter hereof, are merged into and expressed in this Agreement and such
documents and other agreements; and any and all prior agreements between the
parties with respect to the subject matter hereof are hereby canceled.
5.4 Amendment. This Agreement may be amended, modified, or supplemented
---------
only by an instrument in writing signed by the parties to this Agreement.
5.5 Notices. All notices, requests, demands, and other communications
-------
hereunder shall be deemed to have been duly given on the date received if
personally delivered, telecopied, or mailed by commercial express mail service:
TO UNDERSIGNEDS: THE BALL MARKETING COMPANY LLC
2250 Newmarket Parkway, Suite 130
Marrietta, Georgia 30067
Attn: William Turrentine
William Turrentine
7235 Wynhill Drive
Atlanta, Georgia 30328
Hugh Macaulay
1331 Valley Reserve Drive
Kennesaw, Georgia 30152
William Clarke
2250 New Market Parkway, Suite 130
Marietta, Georgia 30067
3
<PAGE>
TO PURCHASER: RENAISSANCE GOLF PRODUCTS, INC.
12187 South Business Park Drive, Suite 100
Draper, Utah 84020
Attn: John Hewlett
or to such other address or telecopier number which either party may notify the
other party as provided above.
5.6 Headings. The headings of the Sections of this Agreement are for the
--------
convenience of reference only, and do not form a part hereof, and in no way
modify, interpret, or construe the meanings of the parties.
5.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement.
5.8 Waiver; Severability. The failure of any of the parties to this
--------------------
Agreement to require the performance of term or obligation under this Agreement
or the waiver by any of the parties to this Agreement of any breach hereunder
shall not prevent subsequent enforcement of such term or obligation or be deemed
a waiver of any subsequent breach hereunder. In case any one or more of the
provisions of this Agreement shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part of a provision had never been contained herein.
5.9 Dispute Resolution. Any controversy, claim, or dispute among the
------------------
parties hereto arising out of or related to this Agreement or the breach hereto,
which cannot be settled amicably by the parties, shall be submitted for
mediation in Salt Lake City, Utah. In the event mediation is unsuccessful, the
parties consent to the exclusive jurisdiction of an appropriate court within
Salt Lake County, State of Utah, to hear and decide any controversy, claim, or
dispute hereunder. The prevailing party in any legal action shall be entitled
to recover its reasonable attorneys' fees and costs, as determined by the trial
court.
5.10 Company Authority. The Undersigned signing on behalf of the LLC
-----------------
represents and warrants that he has the requisite company authority from the
LLC's management committee to execute this Agreement on behalf of the LLC, and
that such signature is intended to be and is binding upon the LLC.
Continued on the next page.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
PURCHASER: UNDERSIGNED:
RENAISSANCE GOLF PRODUCTS, INC. THE BALL MARKETING CO. L.L.C.
a Delaware corporation a Georgia limited liability company
By: /s/ John B. Hewlett By: /s/ William Turrentine
------------------------ ------------------------------
John B. Hewlett, William Turrentine,
Chief Executive Officer Manager
UNDERSIGNED INTERESTHOLDERS:
/s/ William Turrentine
- - -------------------------------
WILLIAM TURRENTINE
/s/ William Clarke
- - -------------------------------
WILLIAM CLARKE
/s/ Hugh Macaulay
- - -------------------------------
HUGH MACAULAY
5
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of April 1,
1998, by and between RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation
("Purchaser"), and THE WORLD GOLF FEDERATION, INC., a Texas corporation
("Seller"), and JOSEPH P. CONNORS, an individual, WILLIAM PETMECKY, an
individual, and KIP GUNDRY, an individual (collectively the "Shareholders").
This Agreement is entered into with reference to the following facts:
A. Shareholders own of record over 50% of the issued and outstanding
shares of Seller and represent shareholder and/or employees of or distributors
for the Corporation.
B. Seller is engaged in the business of designing, developing, organizing,
and managing golfing events as well as marketing its events through a network of
independent distributors (the "Business").
C. Seller is the owner of all, and not less than all, of the assets of the
Business.
D. Seller and Purchaser have negotiated for the sale by Seller and
purchase by Purchaser of certain of the assets of Seller and the Business as a
going concern pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Seller and Purchaser agree as follows:
1. PURCHASE AND SALE OF ASSETS.
---------------------------
1.1 Sale of Assets. Subject to the provisions of this Agreement, Seller
--------------
agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, at
the Closing (as defined below), all right, title, and interest of Seller in and
to the following, and only the following, assets, properties, and rights of
Seller used in the Business (collectively "Assets"):
(a) the current assets of Seller, including but not limited to, cash,
accounts and notes receivable, and all accrued accounts receivable, customer
orders, prepaid expenses, inventories of raw materials, work-in-process,
finished goods, and any assets readily convertible into cash;
(b) the office equipment, computer equipment, software, and other
tangible personal properties and assets of Seller used in the Business
specifically listed on Schedule 1.1 (the "Equipment"); and
(c) the distributor network, sourcing contacts, customer lists, trade
secrets, licenses, trademarks, copyrights, and trade names specifically listed
on Schedule 1.1 (the "Intangible Assets").
1.2 Purchase Price and Manner of Payment; Allocation.
------------------------------------------------
(a) Purchase Price. The total purchase price for the Assets shall be
--------------
175,000 Restricted Shares of the Purchaser's Common Stock plus an additional
50,000 Restricted Shares
1
<PAGE>
of Common Stock and 50,000 Common Stock purchase options payable only upon the
achievement of certain Gross Revenue volumes. The purchase price is payable as
follows:
(i) Purchaser shall issue to Seller 175,000 Restricted Shares
of its Common Stock as the initial payment.
(ii) In the event the Business generates $3,000,000 in Gross
Revenues from the Closing Date to on or before December 31, 1999, and CONNORS
shall at such date be affiliated with the Business as an Active Distributor,
except for the reason of the death or permanent disability, Purchaser shall
issue an additional 50,000 Restricted Shares of its Common Stock to Seller
within 60 days of the $3,000,000 in Gross Revenues being achieved. If $3,000,000
in Gross Revenues have not been achieved on or before December 31, 1999, Seller
shall not be entitled to receive any portion of the 50,000 Restricted Shares
specified.
(iii) In the event the Business generates $6,000,000 in Gross
Revenues from the Closing Date to on or before December 31, 2000, and CONNORS
shall at such date be affiliated with the Business as an Active Distributor,
except for the reason of the death or permanent disability, Purchaser shall
issue options to purchase 50,000 Restricted Shares of its Common Stock at $5.00
per share to Seller within 60 days of the $6,000,000 in Gross Revenues being
achieved. The options shall have an expiration date of December 31, 2002. If
$6,000,000 in Gross Revenues have not been achieved on or before September 30,
2000, Seller shall not be entitled to receive any portion of the 50,000 options
specified.
(b) "Gross Revenues" shall include all revenues attributable to the
Business as reported on the Purchaser's audited financial statements as filed
with the Securities and Exchange Commission.
(c) "Active Distributor" shall mean Shareholders remains in the
Business distribution "down-line," and that such Shareholder's down-line has
accounted for an average of $1,000 in gross sales per month for the preceding 12
month period.
(d) The Purchase Price shall be allocated among the Assets as set
forth on Schedule 1.2 attached hereto. Seller and Purchaser each agree that they
will not take a position on any income tax return, before any governmental
agency, or in any judicial proceeding that is in any way inconsistent with this
Section 1.2. Purchaser shall be responsible for all sales taxes, to the extent
applicable.
(e) "Restricted Shares" means shares of Common Stock which have not
been registered under any federal or state securities laws and are subject to a
one to two year holding period pursuant to Rule 144 of the Securities Act of
1993. Any Common Stock certificate issued pursuant to this Agreement shall bear
the following restrictive legend and such other restrictive legends as are
required or deemed advisable under the provisions of any applicable law:
THESE SHARES OF COMMON STOCK REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND HAVE
BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION
REQUIREMENTS. THESE SHARES OR ANY INTEREST HEREIN MAY NOT,
BE OFFERED, SOLD OR TRANSFERRED UNLESS REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE
STATE SECURITIES LAWS IS AVAILABLE.
2
<PAGE>
(f) Seller may request that Purchaser issue any Restricted Shares or
stock options granted pursuant to this Agreement in the name of Seller or any of
the Shareholders.
2. LIABILITIES.
-----------
2.1 Assumed Liabilities. Purchaser shall assume only the following
-------------------
specific liabilities and obligations of Seller, to the extent relating to the
Business, and as such liabilities are constituted on the Closing Date:
(a) all commissions payable to the Seller's distributors for products
sold during the month of March. No commission payable to distributors which
accrued for sales during any period before March 1998 shall be assumed by
Purchaser.
2.2 Liabilities Excluded. Unless expressly assumed by the Purchaser
--------------------
pursuant to this Agreement, the Purchaser shall neither assume nor be liable
for, and the Seller and the Shareholders shall retain, satisfy in full and
defend and indemnify and hold the Purchaser harmless against, all debts,
liabilities, obligations, claims, contingencies, causes of action, accounts or
notes payable, accrued expenses or related obligations, or any federal, state or
local income, property, sales, franchise, or other tax liabilities of the
Seller, the Shareholders, or any other of their affiliates, including but not
limited to any tax liabilities incurred as a result of this transaction.
Excluded liabilities shall be deemed to include, without limitation, all
liabilities other than those specifically stated in Section 2.1 as being
assumed.
3. CLOSING.
-------
3.1 Closing Date. The Closing of the purchase and sale provided for in
------------
this Agreement (the "Closing") shall be held at the offices of Purchaser in
Draper, Utah at 10:00 a.m. on April 2, 1998 (the "Closing Date"), or at such
location, time, or date as the parties shall mutually agree upon. In the event
the Closing Date is delayed notwithstanding the best efforts of the parties as a
result of any circumstance beyond the reasonable control of the parties or as a
result of legitimate business reasons, the Closing Date shall be reasonably
extended, but in no event beyond April 30, 1998.
3.2 Conditions to Obligations of Purchaser and Seller. Neither Purchaser
-------------------------------------------------
nor Seller shall have any obligations, duties, or responsibilities hereunder
unless and until each of the following precedent conditions has been performed
on or before the Closing Date:
(a) all covenants of Purchaser to be performed on or before the
Closing Date shall have been so fulfilled and all instruments and documents
required to be delivered by Purchaser to Seller on or before the Closing Date
shall have been so delivered;
(b) all warranties and representations of Purchaser as set forth in
this Agreement are true and correct and remain true and correct as of the
Closing Date;
(c) all covenants of Seller to be performed on or before the Closing
Date shall have been so fulfilled and all instruments and documents required to
be delivered by Seller to Purchaser on or before the Closing Date shall have
been so delivered;
(d) all warranties and representations of Seller as set forth in this
Agreement are true and correct and remain true and correct as of the Closing
Date; and
3
<PAGE>
(e) no material adverse change in the Business has occurred to the
best knowledge of the management of Seller.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and
---------------------------------------------------------
Shareholders hereby represent and warrant as follows:
4.1 Organization. Seller is a corporation duly organized, validly
------------
existing, and in good standing under the laws of the State of Texas with full
power and authority to sell the Assets.
4.2 Authority. Seller has full power and authority to enter into this
---------
Agreement and the documents and other agreements contemplated hereby and to
carry out the transactions contemplated. All necessary corporate action has
been taken by Seller to authorize the execution, delivery, and performance of
this Agreement, and each of the documents and other agreements contemplated
hereby to be executed by Seller.
4.3 Title to Assets. Seller has good and marketable title, legal and
---------------
equitable, to the Assets. As of the Closing, none of the Assets shall be
subject to any mortgage, pledge, lien, litigation, conditional sales agreement,
security interest, encumbrance, tax liability, or other charge.
4.4 Consents. The Shareholders have approved the sale of Assets, and no
--------
consents of third parties are required for the sale, conveyance, assignment, and
transfer from Seller to Purchaser of all Seller's right, title, and interest in
and to any of the Assets.
4.5 General Conditions. Seller and Shareholders agree to file the
------------------
appropriate documents under the laws of the State of Texas stating that the
Seller has transferred substantially all of its assets to Purchaser including,
without limitation, bulk transfer filings. Seller will maintain its corporate
existence to accommodate the receipt of accounts receivable, additional issuance
of stock, options, or both, and for other corporate purposes. Seller agrees to
change its corporate name at the request of Purchaser.
4.6 Indemnity. Seller and Shareholders agree to defend and indemnify and
---------
hold harmless Purchaser and its respective directors, officers, employees,
affiliates, agents, and assigns from and against any and all direct losses of
Purchaser based upon or arising from:
(a) any inaccuracy in or breach or nonperformance of any of the
representations, warranties, covenants, or agreements made by Seller or
Shareholders pursuant to this Agreement;
(b) any other matter as to which Seller or Shareholders in other
provisions of this Agreement has agreed to indemnify Purchaser;
(c) any liability or obligation of Seller or Shareholders not
expressly assumed by Purchaser pursuant to this Agreement hereof; or
(d) any third party or governmental claims against Seller or
Shareholders or regarding the conduct of Seller or Shareholders as a result of
the conduct of Seller or Shareholders occurring at any time before the Closing
Date that has been or may be asserted.
4
<PAGE>
5. ADDITIONAL AGREEMENTS.
---------------------
5.1 Negative Covenants. Between the date hereof and the Closing Date,
------------------
Seller will not, without the prior written consent of Purchaser:
(a) sell, assign, lease, or otherwise transfer or dispose of any of
the Assets;
(b) take any action which would cause any of the representations and
warranties set forth in Section 3 to be untrue in any material respect at the
Closing Date; or
(c) subject any of the Assets to any lien, charge, or encumbrance.
5.2 Access to Operations. Between the date hereof and the Closing Date,
--------------------
Seller will permit Purchaser and its authorized representatives to inspect the
Assets during normal business hours as Purchaser may reasonably request.
5.3 Continuing Obligations to the Business. Seller and Shareholders agree
--------------------------------------
to assist in the transfer of assets and the transition of the Business as
follows:
(a) Seller shall continue to maintain an office, for which Purchaser
shall pay $2,000 per month to maintain such office while it remains open, for a
period not to exceed 120 days from the Closing Date, for fulfillment purposes
and perform fulfillment obligations of Seller and the Business until the
Business has been transitioned, fulfillment functions moved, and assets
transferred to Purchaser's office in Utah; and
(b) Seller shall provide any assistance required with the transition
of the business, movement of the fulfillment functions, and transfer of assets
to Purchaser's office in Utah, including without limitation, providing technical
support for the Fax on Demand and the computer and software systems.
5.4 Confidentiality of Information. Seller agrees to regard and preserve
------------------------------
as confidential all information relating or pertaining to the Business, all
projects, products, customers, trade secrets, confidential information
(including business and financial information), or unpublished know-how, and to
all activities of Seller relating to the Business, and not to publish or
disclose any part of such information to others or use the same for its own
purposes or the purposes of others. Any information of Seller relating to the
Business which is not readily available to the public shall be considered by
Seller to be confidential information and therefore within the scope of this
Agreement, unless Purchaser advises Seller otherwise in writing.
5.5 Non-Competition. Shareholders agree that upon execution of this
---------------
Agreement, Purchaser shall be entitled to the goodwill and going concern value
of the Business and that Shareholders will do all that is necessary to protect
and preserve this intangible value to the maximum extent permitted by law.
Shareholders also acknowledges that their management contributions to the
Business have been uniquely valuable and involve proprietary information that
would be competitively unfair to make available to any competitor of the
Business, and as an inducement to Purchaser to enter into this Agreement,
Shareholders agree that for so long as he remains an Active Distributors with
the Business, and for two years after their termination as an Active
Distributor, he will not directly or indirectly, for their own benefit or as an
agent for another, carry on or participate in the ownership, management, or
control of, or the financing of, or be employed by, or consult for or otherwise
render services to, or allow their name or reputation to be used in or by any
other present or future business enterprises that competes with the Purchaser in
activities similar to the Business. Particularly, but without limitation,
Shareholders agree to refrain from the following acts:
5
<PAGE>
(a) initiating contact with any employee, consultant, distributor, or
other independent contractor of Purchaser for the purpose of hiring away such
employee, consultant, or other independent contractor; and
(b) soliciting customers of Purchaser.
Notwithstanding this non-compete provision, which the parties intend
to be binding upon the Seller and the Shareholders, Seller and Shareholders
agree that it and he will execute the Non-Competition and Non-Disclosure
Agreement in conjunction herewith.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents
-------------------------------------------
and warrants as follows:
6.1 Organization. Purchaser is a corporation duly organized, validly
------------
existing, and in good standing under the laws of the State of Delaware with full
power and authority to conduct its business in a manner approved by its Board of
Directors.
6.2 Authority. Purchaser has full power and authority to enter into this
---------
Agreement and the documents and other agreements contemplated hereby and assume
the rights and obligations of Purchaser, and to carry out the transaction
contemplated hereby. All necessary action has been taken by Purchaser to
authorize the execution, delivery, and performance of this Agreement and the
documents and other agreements contemplated hereby to be executed by the
Purchaser, and each of the same shall be the valid and binding obligation of the
Purchaser.
6.3 Absence of Litigation. There are no claims, actions, proceedings, or
---------------------
investigations pending which seek to delay or prevent the consummation of the
transactions contemplated hereby or which would be reasonably likely to
adversely affect or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
6.4 Stock Option Plan. Purchaser shall initiate a stock option plan to
-----------------
have in place by the end of 1998 to allow for bonus grants to be made to
independent distributors at the sole discretion of the Purchaser's Board of
Directors.
7. CONDITIONS.
----------
7.1 Conditions Precedent to Obligations of Purchaser. The obligations of
------------------------------------------------
Purchaser to consummate this Agreement are subject to the fulfillment (or the
written waiver thereof by Purchaser), prior to or at the Closing, of each of the
following conditions precedent:
(a) each of the representations and warranties of the Seller contained
in Section 4 shall be true and correct in all respects, and Seller shall, on or
before the Closing Date, have performed all of its covenants and obligations
hereunder which by the terms hereof are to be performed on or before the Closing
Date; and
(b) all actions, proceedings, instruments, and documents required to
carry out this Agreement and documents and other agreements contemplated hereby
or any undertaking incidental thereto, and all other related legal matters shall
be reasonably satisfactory in form and substance to Purchaser and its counsel.
6
<PAGE>
7.2 Conditions Precedent to Obligations to Seller. The Seller's
---------------------------------------------
obligation to consummate this Agreement is subject to the fulfillment prior to
or at the Closing of each of the following conditions precedent:
(a) each of the representations and warranties of Purchaser contained
in Section 6 shall be true and correct as though made on and as of the Closing
Date; Purchaser shall, on or before the Closing Date, have performed all of its
obligations hereunder which by the terms hereof are to be performed on or before
the Closing Date; and
(b) all actions, proceedings, instruments, and documents required to
carry out this Agreement and the documents and other agreements contemplated
hereby or any undertaking incidental thereto and all other related legal matters
shall be reasonably satisfactory in substance to Seller and its counsel.
8. CLOSING PROCEDURE.
-----------------
8.1 Items to be Delivered by Seller at Closing. At the Closing, Seller
------------------------------------------
shall deliver to Purchaser the following:
(a) an executed instrument of transfer in the form of Exhibit "A"
hereto transferring to Purchaser all of Seller's right, title, and interest in
and to the Assets (the "General Assignment and Bill of Sale"); and
(b) executed releases, consents, or approvals from the Board.
8.2 Items to be Delivered by Purchaser at Closing. At the Closing,
---------------------------------------------
Purchaser shall deliver to Seller the following:
(a) the initial 175,000 Restricted Shares of Purchaser's Common Stock;
and
(b) executed releases, consents, or approvals from the Board.
8.3 Actions Upon Closing. Upon the Closing, Seller shall take all steps
--------------------
as may be required to put Purchaser in actual possession and control of the
Assets at Seller's facility in Texas. Purchaser shall pay all moving costs,
including costs of crating and loading of the Assets.
8.4 Further Assurances. Seller from time to time after the Closing, at
------------------
Purchaser's request, will execute, acknowledge, and deliver to Purchaser such
other instruments and documents and will take such other actions and execute and
deliver such other documents, certifications and further assurances as Purchaser
may reasonably require in order to vest more effectively in Purchaser, or to put
Purchaser more fully in possession of, any of the Assets. Each of the parties
hereto will cooperate with the other and execute and deliver to the other such
other instruments and documents and take such further actions as may be
reasonably requested from time to time by the other party to carry out,
evidence, and confirm the intended purposes of this Agreement.
9. TERMINATION OF AGREEMENT.
------------------------
9.1 Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated:
7
<PAGE>
(a) by the mutual consent of Seller and Purchaser;
(b) by Purchaser if there has been a material misrepresentation,
breach of warranty, or breach of covenant by Seller in its representations,
warranties, and covenants set forth herein;
(c) by Seller if there has been a material misrepresentation, breach
of warranty, or breach of covenant by Purchaser in its representation,
warranties, and covenants set forth herein;
(d) by Purchaser if any one or more of the conditions stated in
Sections 7.1 or 8.1 hereof has not been satisfied at or prior to the Closing;
(e) by Seller if any one or more of the conditions stated in Sections
7.2 or 8.2 hereof have not been satisfied at or prior to the Closing; or
(f) by either party if the Closing has not occurred by April 30, 1998,
provided however, that such party is not in breach hereof.
9.2 Special Remedies and Enforcement. Purchaser and Seller recognize and
--------------------------------
agree that a breach by any party of any of the covenants set forth in this
Agreement could cause irreparable harm to each of the others that remedies at
law in the event of such breach would be inadequate, and that, accordingly, in
the event of such breach a restraining order or injunction or both may be issued
against the offending party, in addition to any other rights and remedies which
are available to each of the parties. If any non-compete provision is more
restrictive than permitted by the laws of any jurisdiction in which enforcement
is sought hereof, such subparagraphs shall be limited to the extent required to
permit enforcement under such laws. In particular, the parties intend that the
covenants contained in the preceding portions of such subparagraphs shall be
construed as a series of separate covenants. Except for geographic coverage,
each such separate covenant shall be deemed identical in terms. If, in any
judicial proceeding, a court shall refuse to enforce any of the separate
covenants deemed included in such subparagraphs, then such unenforceable
covenant shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.
10. MISCELLANEOUS.
-------------
10.1 Brokers, Commissions. Seller and Purchaser each represent that in
--------------------
connection with the sale and transfer contemplated by this Agreement, neither
has retained the services of a broker. Seller and Purchaser shall each hold the
other harmless, against any and all claims for brokerage commissions, finders
fees, or the like, arising from their respective actions.
10.2 Fees and Expenses. Each of the parties will bear its own expenses in
-----------------
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement. Each party shall be solely responsible for its
respective legal, accounting, and other out-of-pocket expenses in connection
with the negotiation and the consummation of the transactions contemplated by
this Agreement.
10.3 Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of Utah without regard to any choice of law provisions.
10.4 Assignment. The benefits and obligations of any party to this
----------
Agreement may not be assigned, except upon the written consent of the other
party. This Agreement shall be
8
<PAGE>
binding upon, and shall be enforceable by and inure to the benefit of, the
parties named herein and their respective successors and assigns.
10.5 Confidentiality. Purchaser agrees that unless and until the Closing
--------------
has been consummated, Purchaser will hold in strict confidence, and not use to
the detriment of Seller, all data and information obtained in connection with
this transaction or Agreement with respect to the business activities of Seller,
and that Purchaser will not disclose any of such information to any other party
whatsoever without written consent of Seller.
10.6 Entire Agreement. This Agreement and the documents and other
----------------
agreements referenced herein contain the entire Agreement between the parties
with respect to the subject matter hereof; all representations, promises, and
prior or contemporaneous understandings between the parties with respect to the
subject matter hereof, are merged into and expressed in this Agreement and such
documents and other agreements; and any and all prior agreements between the
parties with respect to the subject matter hereof are hereby canceled.
10.7 Amendment. This Agreement may be amended, modified, or supplemented
---------
only by an instrument in writing signed by the parties to this Agreement.
10.8 Publicity and Disclosure. No press releases or any public
------------------------
disclosure, or disclosures to any employees of Seller or Purchaser, either
written or oral, of the transactions contemplated by this Agreement shall be
made without the prior knowledge and consent of Seller. Seller shall provide
any public announcement of the execution of this Agreement or the sale and
purchase of the Assets as herein described to Purchaser for review prior to
release.
10.9 Survival of Warranties. All warranties, representations, covenants,
----------------------
and agreements made herein by either party hereto or incorporated herein by
reference shall be deemed to survive the Closing Date.
10.10 Notices. All notices, requests, demands, and other communications
-------
hereunder shall be deemed to have been duly given on the date received if
personally delivered, telecopied, or mailed by commercial express mail service:
TO SELLER: WORLD GOLF FEDERATION, INC.
5555 North Lamar Blvd., Suite L-137
Austin, Texas 78751
Attn: Joseph P. Connors
TO SHAREHOLDERS: Joseph P. Connors
William Petmecky
Kip Gundry
5555 North Lamar Blvd., Suite L-137
Austin, Texas 78751
TO PURCHASER: RENAISSANCE GOLF PRODUCTS, INC.
12187 South Business Park Drive, Suite 100
Draper, Utah 84020
Attn: John Hewlett
or to such other address or telecopier number which either party may notify the
other party as provided above.
9
<PAGE>
10.11 Headings. The headings of the Sections of this Agreement are for
--------
the convenience of reference only, and do not form a part hereof, and in no way
modify, interpret, or construe the meanings of the parties.
10.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement.
10.13 Waiver; Severability. The failure of any of the parties to this
--------------------
Agreement to require the performance of term or obligation under this Agreement
or the waiver by any of the parties to this Agreement of any breach hereunder
shall not prevent subsequent enforcement of such term or obligation or be deemed
a waiver of any subsequent breach hereunder. In case any one or more of the
provisions of this Agreement shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part of a provision had never been contained herein.
10.14 Sales, Transfer and Documentary Taxes, Etc. Seller shall pay all
-------------------------------------------
state and local taxes, documentary and other transfer taxes, if any, due as a
result of the purchase, sale, or transfer of the Assets.
10.15 Dispute Resolution. Any controversy, claim or dispute among the
------------------
parties hereto arising out of or related to this Agreement or the breach hereto,
which cannot be settled amicably by the parties, shall be submitted for
mediation in Salt Lake City, Utah. In the event mediation is unsuccessful, the
paries consent to the exclusive jurisdiction of an appropriate court within Salt
Lake County, State of Utah, to hear and decide any controversy, claim, or
dispute hereunder. The prevailing party in any legal action shall be entitled
to recover its reasonable attorneys' fees and costs, as determined by the trial
court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
PURCHASER: SELLER:
RENAISSANCE GOLF PRODUCTS, INC. WORLD GOLF FEDERATION, INC.
a Delaware corporation a Texas corporation
By: /s/ John B. Hewlett By: /s/ Joseph P. Connors
---------------------------- -----------------------------
John B. Hewlett, Joseph P. Connors,
Chief Executive Officer President
SHAREHOLDERS:
/s/ JOSEPH P. CONNORS /s/ WILLIAM PETMECKY
- - -------------------------------- ----------------------------------
JOSEPH P. CONNORS WILLIAM PETMECKY
/s/ KIP GUNDRY
- - --------------------------------
KIP GUNDRY
10
<PAGE>
TABLE OF SCHEDULES AND EXHIBITS
SCHEDULES:
1.1 List of Assets: Equipment and Intangible Assets
1.2 Purchase Price Allocation to Assets
2.1 Unearned Revenues and Customer Deposits
EXHIBITS:
Exhibit "A:" General Assignment and Bill of Sale
11
<PAGE>
SCHEDULE 1.1: ASSETS
EQUIPMENT:
To be specified upon transfer.
INTANGIBLE ASSETS:
12
<PAGE>
SCHEDULE 1.2: PURCHASE PRICE ALLOCATION TO ASSETS
To be specified on transfer.
13
<PAGE>
SCHEDULE 2.1: UNEARNED REVENUES AND CUSTOMER DEPOSITS
To be specified on transfer.
14
<PAGE>
EXHIBIT "A"
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE is made as of April 2, 1998, by and
between RENAISSANCE GOLF PRODUCTS, INC., a Delaware corporation ("Purchaser"),
and the WORLD GOLF FEDERATION, INC., a Texas corporation ("Seller").
THIS GENERAL ASSIGNMENT AND BILL OF SALE is made with reference to the
following facts:
A. Seller and Purchaser have entered into an Asset Purchase Agreement (the
"Purchase Agreement") dated as April 2, 1998, pursuant to which Seller has
agreed to transfer to Purchaser this day, and Purchaser has agreed to acquire
from Seller this date, certain of the assets and business of Seller specified
therein.
B. For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by Seller, Seller desires to execute and deliver this
General Assignment and Bill of Sale for the purpose of affecting such transfer
and sale pursuant to the terms and conditions of the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and intending to be legally
bound hereby, the Seller and Purchaser agree as follows:
1. Transfer of Subject Assets. Seller does hereby assign, transfer, convey,
--------------------------
and deliver to Purchaser, its successors and assigns, all rights, interests, and
titles of Seller in and to the Assets (as such term is defined in the Purchase
Agreement).
Seller represents and warrants to Purchaser that it is the lawful owner
of the Assets transferred hereby, that the Assets are free and clear of all
liens, restrictions, and other encumbrances (except as may otherwise be
disclosed in the Purchase Agreement), and that it has good rights to transfer
the same.
2. No Rights and Third Parties. Nothing expressed or implied in this
---------------------------
General Assignment and Bill of Sale is intended to confer upon any person, other
than Seller and Purchaser and their respective successors and assigns, any
rights, remedies, obligations, or liabilities under or by reason of this Bill of
Sale.
3. Successors and Assigns. This General Assignment and Bill of Sale is
----------------------
executed pursuant to the Purchase Agreement and shall be binding upon and inure
to the benefit of Seller and Purchaser, and their respective successors and
assigns. All rights, liabilities, and obligations of Seller and Purchaser under
the Purchase Agreement shall survive the executive and delivery thereof in
accordance with the terms of the Purchase Agreement, and are not integrated
hereby.
IN WITNESS WHEREOF, each of Seller and Purchaser has caused this General
Assignment and Bill of Sale to be executed by its duly authorized representative
on the date first above written.
1
<PAGE>
PURCHASER: SELLER:
RENAISSANCE GOLF PRODUCTS, INC. WORLD GOLF FEDERATION, INC.
a Delaware corporation a Texas corporation
By: /s/ John B. Hewlett By: /s/ Joseph P. Connors
__________________________ ________________________
John B. Hewlett, Joseph P. Connors,
Chief Executive Officer President
2
<PAGE>
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (this "Agreement") is
made as of April 2, 1998, by and between RENAISSANCE GOLF PRODUCTS, INC., a
Delaware Corporation ("Renaissance"), and the WORLD GOLF FEDERATION, INC.
("Corporation"), a Texas corporation, and JOSEPH P. CONNORS, an individual,
WILLIAM PETMECKY, an individual, KIP GUNDRY, an individual, and TROY HORTON, an
individual (collectively referred to as the "Undersigneds").
This Agreement is entered into with reference to the following facts:
A. The Corporation has been engaged in the business of designing,
developing, organizing, and managing golfing events as well as marketing its
events through a network of independent distributors (the "Business").
B. Pursuant to the Asset Purchase Agreement of April 2, 1998, by and among
the Corporation, Joseph P. Connors, William Petmecky, Kip Gundry, and Troy
Horton, shareholder and/or employees of or distributors for the Corporation, and
the Purchaser (the "Purchase Agreement"), the Purchaser is purchasing
substantially all of the assets of the Corporation and the business of the
Corporation as a going concern.
C. The Undersigneds the Corporation and a shareholder of the Corporation,
and will derive substantial benefit from the transactions contemplated by the
Purchase Agreement.
D. As a result of the Undersigneds' prior business activities and prior
association with and/or employment by the Corporation, the Undersigneds have
detailed knowledge and posses confidential information concerning the business
and operations of the Corporation.
E. After the closing of the transaction contemplated in the Purchase
Agreement, Connors, Petmecky, Gundry, and Horton desire to continue to engage in
the Business, subject, however, to the terms, conditions, and limitations set
forth in this Agreement.
F. In order to induce the Purchaser to consummate the transactions
contemplated by the Purchase Agreement, the Undersigneds have agreed and the
Purchaser has required the Undersigneds to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. RESTRICTIVE COVENANTS.
---------------------
1.1 The Undersigneds acknowledge and agree that: (i) the business
contacts, customers, suppliers, technology, know-how, trade secrets, marketing
and distribution techniques, and other aspects of the business of the
Corporation have been of value to the Corporation, and have provided the
Corporation (and will hereafter provide the Purchaser) with substantial
competitive advantage in the operation of its business, and (ii) by virtue of
their previous relationships with the Corporation as officers, managers,
Shareholders, employees, and/or affiliates, the Undersigneds have detailed
knowledge and possess confidential information concerning the business and
operations of the Corporation.
1
<PAGE>
1.2 It is hereby agreed that none of the Undersigneds shall, directly, or
indirectly, for itself or themselves, or through or on behalf of any other
person or entity including, without limitation, family members, trusts, or other
business or estate planning arrangements engage in the following:
(a) at any time, divulge, transmit, or otherwise disclose or cause to
be divulged, transmitted, or otherwise disclose, any business contacts, client,
distributor, or customer lists, technology, know-how, traded secrets, marketing
techniques, supplier contacts, contracts, or other confidential or proprietary
information of the Corporation of whatever nature existing on or prior to the
date hereof (provided, however, that for purposes hereof, information shall not
be considered to be confidential or proprietary if (i) it is a matter of common
knowledge or public record, (ii) it is generally known in the industry in which
the Business is engaged, or (iii) the Undersigneds can demonstrate that such
information was already known to the recipient thereof other than by reason of
any breach of any obligation under this Agreement or any other confidentiality
or non-disclosure agreement);
(b) at any time during the period of the Purchase Agreement and for
two years following the termination of the Purchase Agreement for any reason
(the "Restrictive Period"), invest, carry on, engage, or become involved, either
as an employee, agent, advisor, officer, director, stockholder (excluding
ownership of not more than 3% of the outstanding shares of a publicly held
Corporation if such ownership does not involve managerial or operational
responsibility), manager, partner, joint venture, participant, or consultant, in
any business enterprise (other than the Purchaser or any of its subsidiaries,
affiliates, successors, or assigns) which (i) is located or operating, or
soliciting customers located in the United States of America or any other
country in which Purchaser sells products, and (ii) is or becomes, at any time
during the Restrictive Period, engaged in the manufacture, assembly, sale,
marketing, advertising, and distribution of golf balls or any golf related
products. For purposes of this Agreement, golf related products shall mean
products that are marketed or sold by Purchaser; and
(c) at any time during the Restrictive Period initiate contact with
any employee, consultant, or independent contractor of Purchaser for the purpose
of hiring away such employee, consultant, or independent contractor from
Purchaser, or solicit customers of the Purchasers.
2. CORPORATE AND TRADE NAMES.
-------------------------
From and after the date hereof, the Undersigneds will not utilize the
name "The World Golf Tour," or any confusingly similar name in connection with
any business activities from and after the date hereof.
3. CONSIDERATION.
-------------
In consideration for the covenants contained herein, the Purchaser has
agreed to enter into the Asset Purchase Agreement to be executed in conjunction
with this Agreement.
4. REMEDIES.
--------
4.1 In the event of a breach of this Agreement by any either of the
Undersigneds, the precise amount of damages that may be suffered by the
Purchaser of reason of such breach may be difficult to ascertain; accordingly,
the parties hereby agree that, as liquidated damages (and not as a penalty) in
respect of any such breach, the Purchaser, in its sole discretion, may choose to
demand the sum of $20,000 as the sole and exclusive damages for the breach. The
parties agree that the foregoing provision for liquidated damages, if chosen by
Purchaser, constitutes a fair and reasonable estimate of the actual damages that
might be suffered by reason of a breach of this Agreement by the
2
<PAGE>
Undersigneds. Alternatively, and in lieu of its right to demand liquidated
damages as aforesaid, the Purchaser may elect to pursue and recover all actual
damages, incurred by the Purchaser as a result of such breach, insofar as they
can be determined.
4.2 The Undersigneds and the Purchaser hereby further acknowledge and
agree that any breach by either of the Undersigneds, directly or indirectly, of
the foregoing restrictive covenants will cause the Purchaser irreparable injury
for which there is not adequate remedy at law. Accordingly, each of the
Undersigneds expressly agrees that, in the event of any such breach or any
threatened breach hereunder by any of the Undersigneds, directly or indirectly,
the Purchaser shall be entitled, in addition to any and all other remedies
available (including but not limited to the damages provided for in paragraph
4.1 above), to seek and obtain injunctive and/or other equitable relief to
require specific performance of or prevent, restrain, and/or enjoin a breach
under the provisions of this Agreement.
5. MISCELLANEOUS.
-------------
5.1 Governing Law. This Agreement shall be construed under and governed
-------------
by the laws of the State of Utah without regard to any conflict of law
provisions.
5.2 Assignment. The benefits and obligations of any party to this
----------
Agreement may not be assigned, except upon the written consent of the other
party. This Agreement shall be binding upon, and shall be enforceable by and
inure to the benefit of, the parties named herein and their respective
successors and assigns.
5.3 Entire Agreement. This Agreement and the documents and other
----------------
agreements referenced herein contain the entire Agreement between the parties
with respect to the subject matter hereof; all representations, promises, and
prior or contemporaneous understandings between the parties with respect to the
subject matter hereof, are merged into and expressed in this Agreement and such
documents and other agreements; and any and all prior agreements between the
parties with respect to the subject matter hereof are hereby canceled.
5.4 Amendment. This Agreement may be amended, modified, or supplemented
---------
only by an instrument in writing signed by the parties to this Agreement.
5.5 Notices. All notices, requests, demands, and other communications
-------
hereunder shall be deemed to have been duly given on the date received if
personally delivered, telecopied, or mailed by commercial express mail service:
TO UNDERSIGNEDS: WORLD GOLF FEDERATION, INC.
5555 North Lamar Blvd., Suite L-137
Austin, Texas 78751
Attn: Joseph P. Connors
Joseph P. Connors, William Petmecky
Kip Gundry, Troy Horton
5555 North Lamar Blvd., Suite L-137
Austin, Texas 78751
TO PURCHASER: RENAISSANCE GOLF PRODUCTS, INC.
12187 South Business Park Drive, Suite 100
Draper, Utah 84020
Attn: John Hewlett
3
<PAGE>
or to such other address or telecopier number which either party may notify the
other party as provided above.
5.6 Headings. The headings of the Sections of this Agreement are for the
--------
convenience of reference only, and do not form a part hereof, and in no way
modify, interpret, or construe the meanings of the parties.
5.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute one Agreement.
5.8 Waiver; Severability. The failure of any of the parties to this
--------------------
Agreement to require the performance of term or obligation under this Agreement
or the waiver by any of the parties to this Agreement of any breach hereunder
shall not prevent subsequent enforcement of such term or obligation or be deemed
a waiver of any subsequent breach hereunder. In case any one or more of the
provisions of this Agreement shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part of a provision had never been contained herein.
5.9 Dispute Resolution. Any controversy, claim, or dispute among the
------------------
parties hereto arising out of or related to this Agreement or the breach hereto,
which cannot be settled amicably by the parties, shall be submitted for
mediation in Salt Lake City, Utah. In the event mediation is unsuccessful, the
parties consent to the exclusive jurisdiction of an appropriate court within
Salt Lake County, State of Utah, to hear and decide any controversy, claim, or
dispute hereunder. The prevailing party in any legal action shall be entitled
to recover its reasonable attorneys' fees and costs, as determined by the trial
court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
PURCHASER: UNDERSIGNED:
RENAISSANCE GOLF PRODUCTS, INC. WORLD GOLF TOUR, INC.
a Delaware corporation a Texas corporation
/s/ John B. Hewlett /s/ Joseph P. Connors
By:_______________________ By:_______________________
John B. Hewlett, Joseph P. Connors,
Chief Executive Officer President
UNDERSIGNED INDIVIDUALS:
/s/ Joseph P. Connors /s/ William Petmecky
___________________________ _______________________
JOSEPH P. CONNORS WILLIAM PETMECKY
/s/ Kip Gundry /s/ Troy Horton
___________________________ _______________________
KIP GUNDRY TROY HORTON
4
<PAGE>
NATIONAL CONSULTANT AGREEMENT
AGREEMENT made the 12 day of January, 1998 by and between STILSON &
STILSON, (the "Company") a UTAH corporation, and Renaissance Golf Products,
Inc., a Delaware corporation (the "Consultant").
WHEREAS, the Company sells ABDoer (the "Product"), for multi-channel
-------------
distribution
- - ------------
WHEREAS, the Company desires to appoint the Consultant as its exclusive the
Consultant to establish, develop and promote a national network for the multi
-----
channel sale of the Product, and the Consultant is willing to accept such
- - -------
appointment upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereby agree as follows:
1. Definitions.
-----------
(a.) "NET SALES PRICE" for the Product shall mean the wholesale price
of the Product charged by the Company from time to time, less any and all sales,
use and excise taxes, freight, insurance, packaging charges, discounts, returns,
and allowances.
(b.) "TERRITORY" shall mean the UNITED STATES.
(c.) "UNIT" shall mean a unit of the Product in its present or any
future form.
2. Appointment of Consultant. On the terms and subject to the conditions
-------------------------
hereinafter set forth, Company hereby grants to the Consultant the exclusive
right to represent Company as its Consultant to establish, develop and promote a
network of sales representatives; to establish distributors, retail dealers,
mail order, TV home shop, network marketing and mass merchants (the "Customers")
to sell the Product in the Territory.
(a.) The Consultant shall have exclusive international retail rights
to include; retail dealers, mail order, network marketing, and mass merchants.
This exclusivity is contingent on maintaining sales of 5,000 units for the first
six months, and then 10,000 units for each additional six month period
thereafter, from the date of this agreement.
3. Responsibilities of Consultant.
------------------------------
(a.) The responsibilities of the Consultant hereunder shall be to use
its reasonable best efforts to establish a nationwide network of sales
representatives acceptable to the Company;
<PAGE>
2
to establish the Customers for the sale and distribution of the Product, to
actively work through the Company to seek to promote the sale and distribution
of the Product throughout the Territory an to consult with the Company
concerning the marketing an pricing of the Product.
(b.) The Consultant shall designate sale representatives, to
establish the Customers in the Territory and shall use its reasonable best
efforts through the Company to cause such representatives and the Customers to
use their reasonable best efforts to seek to sell and distribute the Product and
to enter into the applicable the Company standard sales representative, or the
Customer agreement. This sales rep network will be agreeable to the Company and
formally established within 30 days of this Agreement. All communication and
contractual arrangements shall be between the Consultants and the individual
sales representatives. The sales representatives will be paid by the Consultant
and the Company shall in no way have financial obligations to the sales
representative.
(c.) The Consultant agrees to devote to the performance of its
obligations under this Agreement as much of the time and efforts of its
employees as are reasonably sufficient to promote the sale and distribution of
the Product. The Company acknowledges that the Consultant represents and has
similar responsibilities for other product lines. The Consultant will coordinate
sales activities including: reports, training and accompanying sales
representatives to major account appointments.
(d.) The Consultant will supply the Company with weekly reports and
generally keep Company informed as to acceptance of the Product in the
Territory. The weekly report will include but not be limited to a current
status/progress report of every sale representative's activity with the accounts
in his territory.
(e.) A "Top twenty-five" account list will be agreed upon by the
Company and the Consultant. These priority accounts will be called on by the
Consultant or its sales representatives within 90 days of execution of this
agreement. It is understood that this activity is crucial to the initial roll
out of the Product.
(f.) The Consultant will train sales representatives on the Product
through sales meetings, providing product sales manual/product sheets, traveling
with the sales representatives to his "key" accounts to help with the sale
effort, and routine phone follow up to give support.
<PAGE>
3
(g.) The Consultant will coordinate sales representatives staffing
for trade shows. Trade shows of primary interest are the NSGA show held in
Chicago each summer, and the Super Show held in Atlanta each February.
(h.) The Consultant will assign a "key" employee of the his company
to coordinate all activities related to the sale of Product. This "key" employee
will act as a communication "funnel" for the Company, sales representatives,
retail accounts, manufacturer and the Consultant and will have the Product
assigned to such persons as a primary responsibility.
4. Responsibilities of Company.
---------------------------
(a.) The Company shall use its reasonable best efforts to arrange to
obtain sufficient Units of the Product and shall use its reasonable best efforts
to promptly fill the orders forwarded to it by the representatives.
(b.) The Company will furnish the Consultant with current price
lists, sales terms and adequate quantities of sales materials prepared by it.
Price lists and sales terms are subject to change by the Company, after
consultation with the Consultant and will be binding upon prior notice to sales
representatives.
5. Orders.
------
(a.) The Consultant shall use its reasonable best efforts to cause
orders for the Product to be solicited by sales representatives to the Company
for acceptance.
(b.) All orders shall be subject to acceptance by the Company, in its
sole and absolute discretion, and the Consultant shall not have any authority to
accept or reject any order; provided, however, that Company shall not
unreasonably reject orders forwarded to it by the sales representatives. The
price and terms of the sale of the Products, if varying from the current price
and terms of sale, and the credit approval of any Customer shall be within the
sole and absolute discretion of the Company. If any order is not acceptable by
the Company for whatever reason pursuant to this Agreement, there will not be
any obligation for the Company to make any payments under this Agreement with
respect to such order.
6. Commissions. The Company agrees to pay the Consultant a commission
-----------
(the "Commissions") on all orders for Products in the Territory which are
accepted by the Company, at 7% (SEVEN PERCENT) of the Net Sales Price. There
will be an additional 1% (ONE
<PAGE>
4
PERCENT) commission of the Net Sales price paid retroactively upon the sale of
20,000 units of the Product. After the sale of the first 20,000 Units, the
Company shall pay to the Consultant a commission of 8% (EIGHT PERCENT) of the
Net Sales price of the Products thereafter.
7. Representations of Company. The Company represents and warrants that it
--------------------------
has all requisite corporate power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby. The execution and delivery of
this Agreement have been duly authorized by the Company.
8. Statements of Account. Commissions will be paid fifteen (15) days
---------------------
after receipt of payment of Purchase Order from the retail account. The
Consultant shall have the right from time to time during normal business hours,
but no more than three times in any twelve months, to examine the books of
account of Company to determine the accuracy of such statements of account with
written advance notice.
9. Term.
----
(a.) The term of this Agreement shall begin on the date hereof and
remain in full force and effect until the date one (1) year from the date of
this Agreement (the "Initial Term"), and shall thereafter be automatically
renewed for additional successive one (1) year terms, provided that this
Agreement is not otherwise terminated as set forth in this Section 9.
(b.) Either Company or the Consultant shall have the right to
terminate this Agreement for "cause", with immediate effect, by giving written
notice of termination to the other. Cause shall mean the following:
(i) the suspension or cessation of business by the other party
or the dissolution or liquidation of the other party;
(ii) insolvency of the other party or the voluntary institution
by the other party of any proceeding under any statute of any governmental
authority for the relief of debtors seeking the relief or readjustment of
indebtedness, either through reorganization, composition, extension or otherwise
or the involuntary institution against either party of any such proceeding which
is not vacated within ten (10) days from the institution thereof, or the
appointment of a receiver or other officer having similar powers for either
party or its business who is not removed within ten (10) days from such
appointment, or any levy under attachment, execution or similar process which is
not vacated or removed with ten (10) days by payment or bonding; or
<PAGE>
5
(iii) Any breach or violation by the other party of any material
obligation contained in this Agreement which breach or violation is not
corrected by the offending party within the sixty (60) day cure period
following receipt of written notice thereof from the other.
(iv) the Consultant's conduct involving the business affairs of
the Company constituting common law fraud, conviction of a felony, or other
willful or malicious unlawful conduct of a similar nature; any material breach
by Consultant of the provisions of this Agreement; or
(v) the Consultant has been negligent in the performance of its
duties, has substantially failed to meet reasonable standards established by the
Company for the performance of its duties, or has engaged in any material,
willful misconduct in the performance of its duties hereunder.
(c.) Any termination of this Agreement shall be in addition to and not
in lieu of any other rights and remedies at law or in equity. The expiration or
earlier termination of this Agreement shall not effect the obligations of the
parties which by the terms hereof continue after such expiration or termination.
Upon expiration or termination, the Consultant shall be entitled to receive
Commissions as provided in Section 6 hereof for (i) all Units sold by the
Consultant's sales representatives and accepted by the Company through the date
of termination, (ii) all Units sold to the Consultant's and its sales
representatives' Customers for a period of six (6) months from the effective
date of termination, and (iii) a Commission equal to one percent (1%) of the Net
Sales Price for all Units sold to Customers by others during the ____ month
period following the effective date of the termination.
10. Absence of Agency. Nothing contained in this Agreement shall create a
-----------------
joint venture or establish the relationship of co-partners, employer and
employee, master and servant or any other relationship of a similar nature
between the parties. Neither party shall be liable to any third party in any
way for any engagement, obligation, contract, representation or transaction, or
any negligent act or omission to act, of the other, except as expressly provided
herein the Company will not be liable for any expenditure made or incurred by
the consultant in connection with the consultant's performance of its
obligations hereunder. The Company shall indemnify and hold the Consultant
harmless from damages or claims suffered by the Consultant (a) based on product
liability and trademark and patent infringement in connection with the Products
or (b) which the Consultant may be subject to or incur as a result of its
activities in
<PAGE>
6
connection with this Agreement, except where such damages or claims arise from
the negligence of the Consultant shall indemnify and hold harmless the other
from any claims, losses or for property damages, personal injury or any other
liability arising from the negligence of it, its employees or agents.
11.) Force Majeure. The delivery of the Products hereunder are subject to
-------------
shortages of materials, strikes, lockouts, differences with employee, accidents,
fire, delays in manufacture, transportation or delivery of material, acts of
God, embargoes, inability to ship, inability to insure against war risks or
government actions or any other causes beyond the control of the Company, and
any of said causes shall absolutely absolve the Company from any liability to
the Consultant under the terms hereof caused by non-performance due to force
majeure.
12.) Assignment of Agreement. The Consultant shall not be able to
-----------------------
transfer, sell or assign, or attempt to transfer, sell or assign, this Agreement
or sell or transfer any right or delete any duty, obligation or responsibility
under this agreement (except for the designation of sales representatives, and
Customers), whether by operation of law or otherwise, without the prior written
consent of the Company.
13.) Proprietary Information. the Consultant acknowledges and agrees that
-----------------------
any and all proprietary information and other data furnished to the Consultant
shall be and remain the exclusive property of the Company and after the
termination of this Agreement shall not be used by the Consultant and, to the
extent available, shall be returned to the Company. The Consultant further
agrees, during the after the term of this Agreement to keep all such information
furnished to it by the Company confidential and secret and to use its reasonable
best efforts to cause its employees to keep such information confidential and
secret. The foregoing provisions shall not apply to any information (a) which
now or hereafter becomes part of the public domain through no fault of the
Consultant or (b) is disclosed to the Consultant in good faith by a third party
who has a right to make such disclosure.
14.) Non Competition. The Consultant agrees not to sell or represent any
---------------
product that will compete with the product as an abdominal exercise product.
15.) Governing Law. This Agreement shall be governed by the enforced in
-------------
accordance with the laws of the State of Utah, without giving effect to
principles of conflicts of law.
<PAGE>
7
16.) Entire Agreement. This Agreement sets forth the entire agreement and
----------------
understanding between the parties as to the subject matter hereof and supersedes
all prior discussions, agreements and understandings of any kind and nature
between them, and no party hereto shall be bound by any conditions, definitions,
warranty or representations other than as is expressly provided for herein or as
may be, on a date subsequent to the date hereof, duly set forth in writing and
signed by the party to be charged.
17.) Headings. The headings of the section hereof are inserted as a matter
--------
of convenience and for references only and in no way affect the construction,
interpretation or meaning of the text.
IN WITNESS WHEREOF, the undersigned have hereunto executed this Agreement
as of the day and year first above written.
THE COMPANY: THE CONSULTANT:
By: /s/ Andy Naud By: /s/ Kurt Moore
--------------------------- ----------------------------
Name: ANDY NAUD Name: KURT MOORE
Title: Exec. V.P. Title: Exec. V.P.
Date: 1-12-98 Date: 1/12/98
<PAGE>
CONSENT OF INDEPENDENT AUDITORS'
--------------------------------
Board of Directors
Renaissance Golf Products, Inc.
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (33-92586 and 333-46047) of our report dated February
20, 1998, appearing in the Annual Report on Form 10-KSB of Renaissance Golf
Products, Inc. for the year ended December 31, 1997.
CORBIN & WERTZ
Irvine, California
April 15, 1998
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<PAGE>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 775,854
<SECURITIES> 0
<RECEIVABLES> 987,321
<ALLOWANCES> 0
<INVENTORY> 1,924,983
<CURRENT-ASSETS> 3,745,668
<PP&E> 53,586
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,033,453
<CURRENT-LIABILITIES> 4,555,741
<BONDS> 0
0
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<COMMON> 4,614
<OTHER-SE> 1,496
<TOTAL-LIABILITY-AND-EQUITY> (922,288)
<SALES> 5,375,160
<TOTAL-REVENUES> 0
<CGS> 4,821,704
<TOTAL-COSTS> 2,391,659
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324,356
<INCOME-PRETAX> (2,162,559)
<INCOME-TAX> (800)
<INCOME-CONTINUING> (2,163,359)
<DISCONTINUED> 0
<EXTRAORDINARY> 318,228
<CHANGES> 0
<NET-INCOME> (1,845,131)
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