NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of the 22nd day of February, 2002, by and between SPORTSNUTS, INC., a Delaware
corporation (the "Company"), and XXXXX XXXXXX ("Purchaser"), collectively,
referred to hereinafter as the "Parties."
W I T N E S S E T H :
WHEREAS, the Company desires to sell a Note to Purchaser, and Purchaser
desires to lend to the Company One Hundred Fifty Thousand Dollars ($150,000.00),
in the aggregate, pursuant to the terms and conditions contained herein;
NOW THEREFORE, in consideration of the mutual covenants, agreements,
conditions, representations, and warranties contained in this Agreement, the
Company and Purchaser hereby each agree as follows:
1. PURCHASE AND SALE OF THE PROMISSORY NOTE
1.1. Purchase and Sale of Note. Subject to the terms and conditions of this
Agreement, upon execution of this Agreement, the Company hereby agrees to issue
to Purchaser and Purchaser hereby agrees to acquire from the Company a Line of
Credit Promissory Note ("Note") in the principal amount of One Hundred Fifty
Thousand Dollars ($150,000), in the aggregate, a copy of which is attached
hereto as Exhibit "A." The Note shall bear interest at the rate of eight percent
(8%) per annum and shall have a term of one (1) year, commencing on the Closing
Date as defined below. Interest shall be payable in arrears in cash as more
particularly set forth in the Note.
1.2. Warrants. In conjunction with the issuance of the Note, the Company
shall issue to Purchaser or its permitted assigns warrants ("Warrants") to
acquire Fifteen Million (15,000,000) shares of the Company's Common Stock at an
exercise price equal to $0.01 per share, more particularly described in the
Warrant attached hereto as Exhibit "B." The Warrants shall be exercisable at any
time from the date hereof and shall expire if not exercised within two (2) years
from the Closing Date as defined below.
1.3. Closing. The purchase and sale of the Note and the issuance of the
Warrants shall take place at the offices of the Company on or before February
22, 2002, or at such other location or locations as mutually agreed between the
Parties (this event is hereafter referred to as the "Closing" and the date of
the Closing is hereafter referred to as the "Closing Date").
1.4. Assignment of Interest in Sports and Recreation Events. In conjunction
with the issuance of the Note, so long as the Note bears an outstanding
principal balance, the Company hereby assigns to Purchaser an undivided Five
Percent (5%) interest in all net profits received in connection with certain
sports and recreation events operated by the Company that have been
financed by the proceeds of the Note ("Financed Events"). Separate records shall
be maintained by the Company for all Financed Events. For purposes of this
paragraph, "net profit" shall mean all revenues received by the Company in
connection with a Financed Event less: (i) facilities, utilities and insurance
costs for such Financed Event, (ii) credit card processing fees equal to three
percent (3%) of the fees charged for admission or participation, (iii)
chargebacks, sales returns, and allowances, (iv) payroll and related employment
expenses for all Company personnel utilized in connection with a Financed Event,
(v) advertising and sponsorship fees, and (vi) all other items normally included
in determining cost of goods sold of similar transactions under generally
accepted accounting principles.
1.5. Security. As security for the issuance of the Note, Company assigns to
Purchaser all of its right, title and interest in all copyrights, trademarks,
intellectual property, goodwill, cash proceeds, and all accounts receivable in
which Debtor now has or hereafter acquires an interest and which relate to any
Financed Event, as more particularly described in the Security Agreement
attached hereto as Exhibit "C."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. As a material inducement to Purchaser to enter into this Agreement,
the Company makes the following representations and warranties to Purchaser:
2.2. Organization, Standing, and Qualification. The Company is a
corporation that is duly organized, validly existing, and in good standing under
the laws of the State of Delaware, has all necessary corporate power and
authority to own properties owned by it and carry on its business as now owned
and operated by it, and is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which failure to so
qualify would have a materially adverse effect upon its operations or financial
condition.
2.3. Authorization. All corporate action on the part of the Company
necessary for (i) the authorization, execution, delivery, and performance of all
the obligations of the Company under this Agreement and the consummation of the
transactions contemplated herein, (ii) the authorization, issuance, execution,
and delivery of the Note by the Company hereunder, (iii) the authorization,
issuance, execution, and delivery of the Warrants by the Company hereunder, and
(iv) the authorization and issuance of the Common Stock issuable from the
exercise of the Warrants, has been duly taken and this Agreement constitutes a
valid and binding obligation of the Company. The Company has provided Purchaser
with true and accurate copies of the appropriate resolutions (where requested)
of its Board of Directors and shareholders (if necessary) relating to this
transaction, certified by the Secretary of the Company as true, accurate, and
effective as of the Closing Date.
2.4. Articles of Incorporation and Bylaws. The Company is not currently in
violation of any provision of its Articles of Incorporation or Bylaws, as
amended and in effect on the Closing Date. There is no default or event that,
with notice or lapse of time, or both, would conflict with or constitute a
breach of the Company's Articles of Incorporation or Bylaws. The Company has
provided Purchaser with copies of the Certificate of Incorporation and Bylaws
(or
other comparable documents) of the Company certified by the Secretary of the
Company as true, accurate, and effective as of the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.1. Authorization. Purchaser represents and warrants that all action on
the part of Purchaser necessary for the authorization, execution, delivery, and
performance of all the obligations of Purchaser under this Agreement has been
taken prior to the Closing Date and that this Agreement constitutes a valid and
legally binding obligation of Purchaser enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, and
moratorium laws and other laws of general application affecting enforcement of
creditors' rights generally and to general equitable principles.
3.2. Information. Purchaser represents that, prior to the execution of this
Agreement, Purchaser has had access to all information regarding the Company and
its present and prospective business, assets, liabilities and financial
condition that the Purchaser considers important to making the decision to enter
into the transactions contemplated by this Agreement. Purchaser has had ample
opportunity to ask questions of and receive answers from the Company's
representatives concerning this investment and to obtain any and all documents
requested without unreasonable effort or expense by the Company in order to
supplement or verify any of the information supplied.
3.3. Contemporaneous Transactions. Purchaser represents and acknowledges to
the Company that it is aware of other transactions contemplated or entered into
by the Company with other parties to receive capital from sources other than
Purchaser and that such transactions may be on terms substantially different and
more favorable to such other parties than the terms granted to the Purchaser as
set forth in this Agreement, the Note, or the Warrants.
3.4. Purchase Entirely for Own Account. Purchaser represents to the Company
that the Note and the Warrants, where applicable are being acquired by Purchaser
for Purchaser's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same.
3.5. Restricted Securities. Purchaser understands that the Note, the
Warrants, and the shares of the Company's Common Stock issuable from the
exercise thereof (collectively, the "Securities") are characterized as
"restricted securities" under federal securities laws inasmuch as the Securities
are being acquired from the Company in a transaction not involving a public
offering and/or in an "offshore transaction" as defined under rules and
regulations of the SEC, and that such Securities may not be resold without
registration or the availability of an exemption (such as Rules 144 or 903)
under the Securities Act of 1933 ("Securities Act"). In this connection,
Purchaser represents that it is familiar with Rules 144 and 903 promulgated by
the SEC, as presently in effect, which allows for the resale of "restricted
securities" in certain instances, and that it understands that Rule 144 is not
presently available for resale of any of the Securities. The Company does not
contemplate filing a registration statement under the Securities Act of 1933
with respect to the Securities
3.6. Further Limitations on Disposition. Without in any way limiting the
representations set forth above, Purchaser further agrees not to make any
disposition of all or any portion of the Note, the Warrants, or the Common Stock
obtainable upon exercise of the Warrants within the United States unless and
until:
i. there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
ii. Purchaser or each of them shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition, and (b) if
reasonably requested by the Company, Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under
the Securities Act.
3.7. Legends and Stop-Transfer Orders. Purchaser understand that the Note,
Warrants, and the certificates evidencing the shares of Common Stock issuable
from the exercise thereof, may bear the following legend (or similar legend):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE LAW
AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED,
OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
STATE LAW OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SECURITIES, SUCH OFFER, SALE,
OR TRANSFER, PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
The Note, Warrants, and the certificates for the Common Stock issuable from the
exercise thereof may also bear any legend required by any applicable state
securities law. In addition to these legends, the Company shall make a notation
of these restrictions on transfer in its stock records and shall issue
appropriate stop-transfer orders to its transfer agent in the event these
securities are attempted to be sold without compliance with the requirements of
this Section.
3.8. "Accredited Investor". Purchaser represents that they it is an
"accredited investor" as such term is defined in the SEC's Rule 501 under
Regulation D.
3.9. Permanent Residence. Purchaser represents that its principal office is
as set forth in Section 5.4.
4. COVENANTS OF THE COMPANY
4.1. Authorization and Reservation of Stock. The Company shall at all times
authorize and reserve that number of shares of its Common Series Stock that is
necessary or appropriate to accommodate the number of shares that may be
issuable to Purchaser pursuant to the exercise of the Warrants. If it is
necessary to increase the number of authorized shares for these purposes, the
Company will use its best efforts to obtain any required approval of this
increase by its shareholders.
5. MISCELLANEOUS PROVISIONS
5.1. Modifications and Waivers. This Agreement may not be amended or
modified, nor may the rights of any party hereunder be waived, except by a
written document that is executed by Purchaser and the Company.
5.2. Assignment. This Agreement is and shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that neither party may assign the Agreement to any third
party without the prior written consent of the other party, except that
Purchaser may freely assign this Agreement to any affiliate.
5.3. Rights and Obligations of Third Parties. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third parties to any party to this Agreement, nor shall any provision give any
third party any right of subrogation or action against any party to this
Agreement.
5.4. Notices. Any notice, request, consent, or other communication
hereunder shall be in writing, and shall be sent by one of the following means:
(i) by registered or certified first class mail, postage prepaid; (ii) by
facsimile transmission; (iii) by reputable overnight courier service; or (iv) by
personal delivery, and shall be properly addressed as follows:
If to the Company: SPORTSNUTS, INC.
10421 South 000 Xxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx, Chief Executive Officer
Tele: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser: XXXXX XXXXXX
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or to such other address or addresses as the Company or Purchaser shall
hereafter designate to the other party in writing. Notices sent by mail or by
courier shall be effective three (3) days after they are sent, and notices
delivered personally by facsimile shall be effective at the time of delivery
thereof.
5.5. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto in relation to the subject matter hereof. Any prior
written or oral negotiations, correspondence, or understandings relating to the
subject matter hereof, shall be superseded by this Agreement and shall have no
force or effect. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by Purchaser.
5.6. Severability. If any provision which is not essential to the
effectuation of the basic purpose of this Agreement is determined by a court of
competent jurisdiction to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of the remaining provisions of
this Agreement.
5.7. Headings. The headings of the Sections of this Agreement are inserted
for convenience of reference only and shall not affect the construction or
interpretation of any provisions hereof.
5.8. Exhibits. The exhibits attached hereto and referred to herein are a
part of this Agreement for all purposes. Terms which are defined in this
Agreement shall have the same meanings when used in such exhibits.
5.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.
5.10. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Utah (as applied to contracts entered
into wholly within such state).
5.11. Venue and Jurisdiction. Any action or proceeding arising out of or
relating to this Agreement, or exhibits thereto, shall be brought in the federal
or state courts in the State of Utah, and the Company and Purchaser each consent
to the jurisdiction of said courts.
5.12. Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to either party, upon any breach or default of the
other party under this Agreement, shall impair any such right, power, or remedy,
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent, or approval of any kind or character on the part of
either party of any breach or default by the other party under this Agreement,
or any waiver of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to either party, shall be cumulative and not alternative.
5.13. Attorneys' Fees. If either party elects to pursue legal action to
enforce its rights under this Agreement, and if a court of competent
jurisdiction adjudicates the matter, then the prevailing party in such action
shall be entitled to receive from the losing party all costs and expenses,
including but not limited to the reasonable fees of attorneys, accountants, and
other experts, incurred by the prevailing party in investigating and prosecuting
(or defending) such action at the initial trial and appellate levels.
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Signature Page to Note Purchase Agreement of
SportsNuts, Inc., dated February 22, 2002
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized representative, and Purchaser has caused this Agreement to
be executed by its duly authorized representative as of the day and year first
above written.
"COMPANY"
SPORTSNUTS, INC.,
a Delaware corporation:
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx,
Chief Executive Officer
"PURCHASER"
By: /s/ Xxxxx Xxxxxx
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XXXXX XXXXXX
EXHIBITS
A Promissory Note
B Warrant
C Security Agreement
D Subordination Agreement
