EXHIBIT B
THE PREFERRED STOCK OFFERED HEREBY AND THE SHARES OF COMMON STOCK OF MASTER
XXXXXXX'X KARATE INTERNATIONAL, INC. TO BE ISSUED UPON ANY CONVERSION OF THE
PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE OFFERED OR SOLD
UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.
CONVERTIBLE PREFERRED STOCK SUBSCRIPTION AGREEMENT
This Convertible Preferred Stock Subscription Agreement (the
"Agreement") is executed by Xxxx Xxxxxxx, Fair Lane, LLC, Xxxxxxxx Xxxxx, Euro
Translation Group and CRC Partners, Ltd. (the "Subscribers") in connection with
the offer and the subscription of the undersigned to purchase at par an
aggregate of 750,000 shares of Convertible Preferred Stock, par value $1.20 per
share (the "Stock") issued by Master Xxxxxxx'x Karate International, Inc., a
Delaware corporation (the "Company"). The terms and provisions of the Stock are
attached hereto as Exhibit A. This Agreement and the offer and sale of the
Stock contemplated hereby are being made in reliance upon the provisions of
Regulation D ("Regulation D") under the Securities Act. The Subscribers, in
order to induce the Company to enter into the transaction contemplated hereby
and acknowledging that the Company will rely thereon, represent, warrant and
agree as follows:
1. Subscription; Purchase Price. The Subscribers hereby purchase and
subscribe for the Stock for an aggregate price of $900,000. The closing of the
transactions contemplated hereby shall take place on October 18, 1996. The date
on which the closing occurs is hereby referred to as the "Closing Date." At the
closing of the transactions hereunder (the "Closing") payment shall be made by
wire transfer or certified check against delivery of the Stock to Biltmore
Securities, Inc., as agent and custodian for the Subscribers.
2. Subscriber Representations. Each Subscriber hereby
represents, warrants, covenants and agrees as follows:
(a) Accredited Investor Status. Each Subscriber represents
and warrants to the Company that (i) Subscriber is an "accredited
investor" as that term is defined in Rule 501 of Regulation D; and
(ii) the true and correct principal address, telephone number and
social security number of the Subscriber is set forth on Exhibit B
attached hereto. The Subscriber acknowledges that all offering
documents received by the Subscriber with respect to the offering of
the Stock include statements to the effect that the Stock have not
been registered under the Securities Act and may not be offered or
sold unless said securities are registered under the Securities Act or
an exemption from the registration requirements of the Securities Act
is available. The
Subscriber has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of, and
protecting his interests in connection with, an investment in the
Stock. The Subscriber is acquiring the Stock for his own account for
investment, and not for the benefit or account of any other person,
without the present intent to distribute such securities. The
Subscriber is fully aware of the risks involved in purchasing the
Stock, and understands and acknowledges that the Stock offered hereby
represents a speculative investment. Each Subscriber is financially
able to hold the Stock for an indefinite period. The net worth of each
Subscriber (or each of its members) is equal to or greater than
$1,000,000.
(b) Independent Investigation. Each Subscriber in electing to
subscribe for the Stock hereunder has relied solely upon the
representations and warranties of the Company set forth in this
Agreement, on the reports filed by the Company with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act'), and on independent
investigation made by him or his representatives, if any, and
Subscriber has been given no oral or written representations or
assurance from the Company or any representative of the Company other
than as set forth in this Agreement or in a document executed by a
duly authorized representative of the Company. The Subscriber is not
relying on the Company with respect to the tax or other economic
considerations of any investment in the Stock and the Subscriber has
relied on the advice of, or consulted with, only his own advisors.
(c) No Government Recommendation or Approval.
Subscriber understands that no United States federal or state
agency, or similar agency has passed on or made any
recommendation or endorsement of the Company, this transaction
or the purchase of the Stock.
3. Company Representations. The Company hereby represents,
warrants, covenants and agrees as follows:
(a) Due Organization Reporting Company Status. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified as a
foreign corporation in all jurisdictions in which the failure to so
qualify would have a material adverse effect on the Company and its
subsidiaries, if any, taken as a whole. The Company has registered its
Common Stock pursuant to Section 12 of the Exchange Act and the Common
Stock is listed and trades on the NASDAQ SmallCap Stock Market. The
Company has filed all material required to be filed pursuant to all
reporting obligations under either Section 13(a) or 15(d) of the
Exchange Act for a period of at
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least twelve (12) months immediately preceding the offer or sale of
the Stock (or for such shorter period that the Company has been
required to file such material).
(b) Concerning the Stock. The issuance, sale and delivery of
the Stock is within the Company's corporate powers and have been duly
authorized by all required corporation action on the part of the
Company. The shares of Common Stock issuable upon conversion of the
Stock purchased under this Agreement, upon shareholder approval will
be duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Stock, shall be duly and validly
issued, fully paid and nonassessable.
(c) Subscription Agreement. This Agreement has been duly
authorized, validly executed and delivered on behalf of the Company
and is a valid and binding agreement enforceable against the Company
in accordance with its terms, subject to general principles of equity
and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally.
(d) Non-Contravention. The execution and delivery of this
Agreement and the consummation of the issuance of the Stock and the
transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms
or provisions of, or result in the creation or imposition of any lien
or charge upon the assets of the Company pursuant to the certificate
of incorporation or by-laws of the Company, or any material indenture,
mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties
or assets are bound, or any existing applicable law, rule or
regulation of the United States or of any state thereof or any
applicable decree, judgment or order of any Federal or state court,
Federal or state regulatory body, administrative agency or other
United States governmental body having jurisdiction over the Company
or any of its properties or assets.
(e) Litigation. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign,
or exchange or market where the securities of the Company are listed
for trading, now pending or, to the knowledge of the Company,
threatened, against or affecting the Company, or any of its
properties, which could result in any material adverse change in the
condition (financial or otherwise) or in the earnings, business
affairs or business prospects of the Company, or which could
materially and adversely affect the properties or assets thereof.
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(f) No Default. The Company is not in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any material indenture, mortgage,
deed of trust or other material instrument or agreement to which it is
a party or by which it or its property is bound.
(g) SEC Filings. None of the Company's filings with the SEC
since October 15, 1993, contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
has since October 15, 1993, filed all requisite forms, reports and
exhibits thereto with the SEC.
(h) Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally)
that has not been disclosed in writing to the Subscribers that (i)
could reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) and the earnings, business affairs,
business prospects, properties or assets of the Company or (ii) could
reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement.
4. Covenants of the Company. The Company covenants and
agrees with the Subscribers that:
(a) For so long as the Stock held by the Subscribers remains
outstanding, it will use its best efforts to maintain the listing of
its Common Stock, including Common Stock issuable upon conversion of
the Stock on the NASDAQ Stock Market;
(b) It will forthwith take appropriate action as may be
required under applicable corporate or securities laws or regulations
to secure the affirmative vote of the requisite number of shares of
capital stock to implement the transactions hereunder, including but
not limited to appropriate amendment of the Company's Certificate of
Incorporation;
(c) For so long as the Stock held by the Subscribers remains
outstanding, it will permit each Subscriber to exercise his right to
convert the Stock, in whole or in part, by facsimile transmission an
executed and completed Notice of Conversion to the Company and
delivering the original Notice of Conversion and the subject Stock to
the Company by express courier. Each date on which a Notice of
Conversion is sent by facsimile to and received by the Company in
accordance with
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the provisions hereof shall be deemed a "Conversion Date." The Company
will transmit the certificates representing shares of Common Stock
issuable upon conversion of the Stock (together with certificates
representing the Stock not so converted), if necessary, to the subject
Subscriber via express courier, by electronic transfer or otherwise,
within five (5) business days after the Conversion Date if the Company
has received the original Notice of Conversion and Stock being so
converted by such date. In addition to any other remedies which may be
available to the Subscribers, in the event that the Company fails for
any reason to effect delivery of such shares of Common Stock within
such five (5) business day period, the subject Subscriber will be
entitled to revoke the relevant Notice of Conversion by delivering a
notice to such effect to the Company whereupon the Company and the
Subscriber shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion; and
(d) If after ninety days following the Closing Date the
Company's Common Stock, including Common Stock issuable upon
conversion of the Stock, is not then listed for trading on the NASDAQ
Stock Market without qualification, then the Purchase Price paid under
Paragraph 1 above forthwith shall be returned to the Subscribers
without interest or deduction.
5. Reliance on Representations. Each Subscriber understands that (i)
the offer and sale of the Stock is not being registered under the Securities
Act or any State or foreign securities law, (ii) the Company and each
Subscriber are relying on the rules governing offers and sales made pursuant to
Regulation D and (iii) the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Subscribers set forth herein in order to determine the applicability of
Regulation D and the suitability of the Subscriber to acquire the Stock. Each
Subscriber has full power and authority to execute and deliver the Agreement
and to perform his obligations hereunder and this Agreement is a legally
binding obligation of each Subscriber in accordance with its terms. Except as
set forth in Paragraph 8 hereof, each Subscriber understands that the Company
is under no obligation to register the Stock or the shares of Common Stock
issuable upon conversion of the Stock on his behalf, or to assist him in
complying with any exemption from registration under the Securities Act or
under the securities laws of any state of the United States or under any
foreign jurisdiction.
6. Resales. Each Subscriber acknowledges and agrees that
the Stock or the shares of Common Stock issuable upon conversion of
the Stock may only be resold (a) in compliance with Regulation D;
(b) under a Registration Statement under the Securities Act; or (c)
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in accordance with an exemption from registration under the Securities Act
other than Regulation D.
7. Indemnification. Each of the Company and each Subscriber agrees to
indemnify the other and hold the other harmless from and against any and all
losses, damages, liabilities, costs, expenses (including reasonable attorneys'
fees) and costs of investigation which the other may sustain or incur in
connection with the breach by the indemnifying party of any representation,
warranty or covenant made by it in this Agreement.
8. Registration. After the expiration of thirty days following the
Closing, the Company shall be required, at the request of any Subscriber and at
the Company's expense, to use its best efforts to effect the registration of
such shares of Common Stock as so registered under the Securities Act, and
relevant Blue Sky laws as promptly as is practicable. The Company and the
subject Subscriber shall cooperate in good faith in connection with the
furnishing of information required for such registration and the taking of such
other actions as may be legally or commercially necessary in order to effect
such registration. The subject Subscriber shall furnish such information as the
Company may reasonably request for inclusion in the registration statement
relating to the shares of Common Stock issuable upon conversion of the Stock.
The Company shall file a registration statement within thirty (30) days after
receipt of the Subscriber's written demand therefor and shall use its best
efforts to cause such registration statement to become effective within sixty
(60) days thereafter. Such best efforts shall include, but shall not be limited
to, responding to all comments received from the staff of the SEC and promptly
preparing and filing amendments to such registration statement which are
responsive to the comments received from the staff of the SEC within thirty
(30) days. Once declared effective by the SEC, the Company shall cause such
registration statement to remain effective until the earlier of (i) the sale by
the relevant Subscriber of all shares of Common Stock so registered or (ii) 180
days after the effective date of such registration statement. The Company shall
bear all registration expenses including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, reasonable fees and disbursements of one
counsel for all the selling holders of Common Stock, and accounting fees and
expenses incurred in connection with any registration, qualification or
compliance of the Common Stock pursuant to this Agreement.
9. Notices. Any notice to be given or to be served upon any
party to this Agreement in connection with this Agreement must be
in writing and will be deemed to have been given and received upon
confirmed receipt, if sent by facsimile, or two (2) days after it
has been submitted for delivery by Federal Express or any
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equivalent carrier, charges prepaid and addressed to the following addresses
with a confirmation of delivery:
If to the Company, to:
Master Xxxxxxx'x Karate International, Inc.
Piscataway Center
000 Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxx Xxxxxxx
Phone No.: 000-000-0000
Fax No.: 000-000-0000
If to the Subscribers, to:
Xxxx Xxxxxxx
Fair Lane, LLC
Xxxxxxxx Xxxxx
Euro Translation Group
CRC Partners, Ltd.
c/o Biltmore Securities, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxxx
Phone No.: 000-000-0000
Fax No.: 000-000-0000
Any party may, at any time by giving notice to the other party, designate any
other address in substitution of an address established pursuant to the
foregoing to which such notice will be given.
10. Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original but all of
which will constitute one and the same instrument. However, in enforcing any
party's rights under this Agreement it will be necessary to produce only one
copy of this Agreement signed by the party to be charged.
11. Certain Agreements. The Company represents, warrants and covenants
that, except in accordance with this Paragraph 11, during the one year
following the Closing of this transaction, neither the Company, nor any
affiliate of the Company, nor any person acting on behalf of the Company shall
agree to enter, enter into, or consummate any subsequent securities offering
other than an offering registered under the Securities Act ("Future Offering").
In the event a Future Offering is entered into by the Company prior to the one
year anniversary of the Closing Date hereof, the Company shall give written
notice of such transaction to the Subscribers and shall place restrictions upon
the transfer, exercisability or convertibility, as the case may be, of the
securities issued in the
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Future Offering such that any future subscriber shall not have unrestricted,
freely tradeable common stock of the Company prior to such time as the Stock is
one hundred percent (100%) converted. The Company shall not engage in any
Regulation D transactions from the period commencing with Closing Date and
terminating on December 31, 1997, without first offering the Subscribers the
opportunity (which shall remain open for a period of five business days from
the date the Subscribers receive notice thereof) to purchase up to all of such
additional Regulation D securities (in the discretion of the Subscribers) on
the terms and provisions which the Company proposes to offer such additional
Regulation D securities to such third parties. The Company further covenants
and agrees to provide the Subscribers with prompt notice (in any event not
later than two business day after the fact) of the date of closing and the
substantive terms and provisions of any subsequent Regulation D transaction
with any third party which was the subject of the right of first offer
described in this Section 11.
12. Fees and Expenses. Each of the Subscribers and the
Company agrees to pay his or its own expenses incident to the
performance of its obligations hereunder including, but not limited
to, the fees and disbursements of such party's legal counsel.
13. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto, their respective successors and
assigns, and no other person shall have any right or obligation hereunder. This
Agreement shall not be assignable by any party without the prior written
consent of the other, and any assignment in violation hereof shall be void.
14. Entire Agreement. This Agreement delivered hereunder constitutes
the entire agreement of the parties with respect to the subject matter hereof
and supersedes all prior oral or written proposals or agreements related
thereto. This Agreement may not be amended or any provision hereof waived, in
whole or in part, except by a written amendment signed by all of the parties
hereto.
15. Governing Law. This Agreement will be construed and enforced in
accordance with and governed by the laws of the State of Florida, without
reference to principles of conflicts of law. Each party hereby agrees that if
another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any county having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to such party at its address set forth
herein. Nothing herein shall affect the right of any party to serve process in
any other manner permitted by law.
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16. Severability. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
The undersigned acknowledges that this Agreement shall not be
effective unless and until accepted by the Company as indicated below.
Dated as of this _____ day of October, 1996.
------------------------------- -------------------------------
Xxxxxxxx Xxxxx Xxxx Xxxxxxx
EURO TRANSLATION GROUP FAIR LANE, LLC
By:____________________________ By:____________________________
Xxxxxx Xxxxxxxxxxx, Manager
CRC PARTNERS, LTD.
By:____________________________
______________, Manager
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ___ DAY OF
OCTOBER, 1996.
MASTER XXXXXXX'X KARATE
INTERNATIONAL, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
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