Xxxxxxx Xxxxxxx
000 Xxxxxxxx Xxxxx
00-000 Xxxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
(000)000-0000
March 7, 2002
Board of Directors
GolfGear International, Inc.
00000 Xxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
SUBSCRIPTION AGREEMENT
Gentlemen:
The undersigned, Wyngate Limited, a Jersey Limited Company, hereby agrees
to purchase fifteen million (15,000,000) shares ("Shares") of the common stock
of GolfGear International, Inc., a Nevada corporation (the "Company") on the
following terms and conditions:
1. The purchaser of the Shares will be Wyngate Limited, a Jersey
Limited Company ("Wyngate").
2. The purchase price for the purchase of the Shares shall be Seven and
One-Half Cents ($0.075) per share (the last available traded price as of the
date of this offer), subject to adjustment in the event of an adjustment event
or default as hereinafter defined, or a total of One Million One Hundred
Twenty-Five Thousand Dollars ($1,125,000.00).
2.1 The purchase price ("Purchase Price") shall be paid by a (i) cash
payment of Two Hundred Thousand Twenty-Five Dollars ($200,025.00)
concurrently with the issuance of the Shares; and (ii) Wyngate's
promissory note ("Promissory Note") in the amount of Nine Hundred
Twenty-Four Thousand Nine Hundred Seventy-Five Dollars
($924,975.00) with interest thereon at the Federal Short Term
Rate determined under Section 1274(d) of the Internal Revenue
Code as of the date of the Promissory Note, principal and
interest all due and payable eighteen (18) months from the date
of the Promissory Note. The Shares shall be represented by two
(2) stock certificates, one (1) for two million six hundred
sixty-seven thousand (2,667,000) shares and one (1) for twelve
million three thirty-three thousand (12,333,000) shares. Wyngate
shall grant to the Company a security interest in the certificate
representing the twelve million three thirty-three thousand
(12,333,000) shares which shall be pledged as security for
payment of the Promissory Note ("Pledged Shares").
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2.2. The Purchase Price shall be paid and the Shares issued within ten
(10) days after execution of this Agreement by the Company,
subject to the provisions of Paragraph 3. below.
2.3. In the event of default, the purchase price of the Pledged Shares
(defined below) shall be adjusted from Seven and One-Half Cents
($0.075) per share to Twenty Five Cents ($0.25) per share
retroactively by the cancellation of any certificate or
certificates representing the Pledged Shares issued and
re-issuance of a new certificate reflecting the adjustment. An
event of default ("Default") shall be defined as follows: (i)
failure to pay the Promissory Note when due; (ii) failure to
provide Two Million Dollars ($2,000,000.00) of financing within
ninety (90) days of execution of this Agreement as contemplated
under Paragraph 4 below.
2.4 The Company is currently in litigation with one of its investors,
M.C. Corporation, a Japanese company, whereby M.C. Corporation
alleges to be owed approximately eight million five hundred
thousand (8,500,000) shares of the Company's common stock. The
Company denies this allegation. Any settlement of this litigation
shall require the approval of a majority of the Board of
Directors plus two (2).
3. For a period of ten (10) days commencing with the date of execution
of this Agreement by the Company, Wyngate shall have the right to conduct a due
diligence review of the Company and its financial records including without
limitation corporate records, minute books, stock books, pending or threatened
litigation, patents and intellectual property, financial statements. On or
before the end of such ten (10) day period Wyngate shall either pay the Purchase
Price described in Paragraph 1. above or terminate this Agreement in writing.
If this Agreement is terminated neither party shall have any further obligation
or liability to the other.
4. Concurrently with the purchase of the Shares, Wyngate and its
President, Xxxxx X. Xxxxxxxxxxx, shall have the exclusive right to implement a
financing for the Company ("Financing") through a sale of the Company's
convertible debentures ("Debentures") in the minimum amount of Two Million
Dollars ($2,000,000.00) and the maximum amount of Three Million Dollars
($3,000,000.00) with the following terms:
(A) The Debentures shall be issued in minimum amounts of One Hundred
Thousand Dollars ($100,000.00) and would be sold to accredited
investors only as that term is defined under the applicable
Securities Act of 1933, as amended (the "Act").
(B) If Wyngate is successful in obtaining Two Million Dollars
($2,000,000.00) or more through the Financing, the Company, in
its sole discretion, shall have the right to accept additional
amounts raised by the Company from third parties, if offered, to
bring the total sale of Debentures to Four Million Dollars
($4,000,000.00).
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(C) The Debentures shall bear interest at seven percent (7%) per
annum and would be secured by a security interest in the
intellectual property and patents owned by the Company on all of
its products. Interest shall accrue and be due on the earlier of
the conversion date or the due date which would be eighteen (18)
months from the date of the closing of the Financing.
(D) An escrow account ("Escrow Account") shall be established for
deposit of the funds collected from the Financing and a minimum
of Two Million Dollars ($2,000,000.00) must be received by the
Company before any proceeds of the Financing may be disbursed
from the Escrow Account to the Company. Upon receipt of Two
Million Dollars ($2,000,000.00) into the Escrow Account, funds
shall be released to the Company unless there has been a material
adverse change in the financial condition of the Company as
existing on the date of this Agreement.
(E) The holders of the Debenture shall have an option, commencing six
(6) months after the issuance date, to convert the Debentures
(including accrued interest) to shares of common stock at a price
of Twenty-Five Cents ($0.25) per share in increments of not less
than Twenty-Five Thousand Dollars ($25,000.00).
(F) For each common share received upon conversion, the holder shall
receive a warrant for the purchase of one (1) share of the
Company's common stock at a price of Ten Cents ($0.10) per share
exercisable for a period of eighteen (18) months. Warrants shall
contain standard anti-dilution provisions and will not provide
for any exercise provisions for consideration other than cash.
(G) While any warrants are outstanding, if the Company's common stock
should trade at One Dollar ($1.00) per share or above for twenty
(20) consecutive trading days, or if the Company's common stock
becomes listed on the NASDAQ SmallCap, National Market System, or
the American Stock Exchange, the Company shall have the right to
call the warrants upon thirty (30) days written notice by the
payment of One Cent ($0.01) per warrant, provided that during
such thirty (30) day period any holder of a warrant would have
the continuing right to exercise the option to purchase the
Company's common stock under such warrants as provided in
Paragraph 4.(D) above.
(H) Wyngate shall receive a finder's fee of seven percent (7%) of all
amounts raised through its efforts in the Financing and Wyngate
will pay from such fee all costs and fees of the Financing
including legal fees, printing costs, filing fees, postage and
similar expenses which finder's fees and expenses and costs will
be paid to Wyngate, and to others in Wyngate's discretion, by
issuance and delivery of shares of the Company's common stock.
The number of shares of common stock issued in payment of the
finder's fee shall be determined by using a value of Twenty-Five
Cents ($0.25) per share. Any costs of the Company, including
legal fees and accounting fees of the Company's attorney and
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accountants, incurred as part of the financing, shall be paid by
the Company. For each share of common stock, issued in payment of
the finder's fee, Wyngate shall be granted a warrant entitling it
to purchase one (1) share of the Company's common stock for a
price of Ten Cents ($.10) per share exercisable for a period of
eighteen (18) months. Warrants shall contain standard
anti-dilution provisions and will not provide for any exercise
provisions for consideration other than cash. Wyngate shall not
be entitled to a finder's fee for any amounts raised from third
parties as specified in Paragraph 4.(B) above solely through the
efforts of the Company.
(I) Upon receipt of the minium amount of Two Million Dollars
($2,000,000.00) by the Company under the Financing, Wyngate shall
use its best efforts to provide the Company with up to Two
Million Dollars ($2,000,000.00) of accounts receivable and
inventory financing.
5. The use of the proceeds from the purchase of the Shares and the
Financing shall be used to fund the production and distribution of an
infomercial, sales and marketing, tour promotion inventory purchases, repayment
of loans and advances, accounts payable, accrued expenses, product development,
patent development, litigation and general operating expenses all of which shall
be subject to the approval of the Board of Directors.
6. The Shares and any shares issued upon conversion of the Debentures
or upon exercise of warrants shall have piggyback registration rights.
7. The Shares, the Debentures and any shares issued upon a conversion
of the Debentures or exercise of warrants shall be considered restricted
securities as that term is defined by the Securities and Exchange Commission,
and issuance of all securities described herein shall be in compliance with all
applicable state and federal securities laws and regulations, and subject to
preparation and execution of appropriate legal documentation.
8. Prior to the Financing, the Company shall negotiate a new employment
agreement with Xxx Xxxxxxxx which will contain provisions mutually acceptable to
the Company and Wyngate. Additionally, compensation and/or settlement of
outstanding obligations to Board members, Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxxxx,
Xxxxx Xxxxxx and corporate counsel, Xxxx Wykidal and others, shall be agreed to
among the Company, Xxxxxxxxxx and such persons as a condition to the release of
funds from the Escrow Account.
9. As a condition to, and upon release of, funds from the Escrow
Account, the Company's Board of Directors shall consist of a number of Directors
agreed to between Wyngate and the Company provided that a majority of the Board
shall be appointees of Wyngate. Wyngate and the Company have agreed that
initially the Board shall consist of nine (9) members, five (5) of which shall
be appointees of Wyngate.
10. This offer shall be valid through 5:00 p.m. March 25, 2002 and
unless accepted by the Company's Board of Directors on or before that time and
date it shall expire unless extended by Wyngate.
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11. Upon the successful completion of the financing contemplated
herein, for a period of eighteen (18) months from closing, Xxxxx X. Xxxxxxxxxxx
shall have the right to have the Company acquire Meditron Medical, Inc., a
Canadian corporation engaged in the medical manufacturing and sales business
controlled by him, in a reverse merger transaction through the issuance of
shares of common stock of the Company only, with an agreed value of Twenty Five
Cents ($0.25) per share. The value of the medical products company shall be
determined by obtaining a fairness opinion from a reputable investment banking
firm.
12. All the provisions of this Agreement are subject to compliance with
applicable laws and regulations governing the Company and its securities and are
subject to preparation and execution of definitive legal documents approved by
counsel to the Company and Wyngate containing the terms and conditions of this
offer and reasonable terms and conditions required to carry out such terms and
conditions.
If the foregoing is acceptable please execute a copy of this Letter
Agreement as indicated and return the same to the undersigned on or before the
expiration date.
Very truly yours,
Wyngate Limited,
a Jersey Limited Company
By:
------------------------------------
Xxxxx X. Xxxxxxxxxxx, President
THE FOREGOING OFFER IS AGREED
TO AND ACCEPTED ON BEHALF OF
GOLFGEAR INTERNATIONAL, INC.
BY ITS BOARD OF DIRECTORS
THIS ___ DAY OF ______, 2002.
GolfGear International, Inc.
a Nevada corporation
By:
------------------------------
Its:
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